<PAGE> 1
As filed with the Securities and Exchange Commission on March 31, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
ADVANCED ACCESSORY SYSTEMS, LLC
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
DELAWARE 3714
(State or Other Jurisdiction of (Primary Standard Industrial
Incorporation or Organization) Classification Code Number)
<CAPTION>
<S> <C>
DELAWARE 13-3848156
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
</TABLE>
-------------------------
12900 HALL ROAD, SUITE 200, STERLING HEIGHTS, MICHIGAN 48313
(810) 997-2900
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
-------------------------
AAS CAPITAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
DELAWARE 6719
(State or Other Jurisdiction of (Primary Standard Industrial
Incorporation or Organization) Classification Code Number)
<CAPTION>
<S> <C>
DELAWARE 13-3969422
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
</TABLE>
-------------------------
12900 HALL ROAD, SUITE 200, STERLING HEIGHTS, MICHIGAN 48313
(810) 997-2900
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
-------------------------
AAS HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
DELAWARE 6719
(State or Other Jurisdiction of (Primary Standard Industrial
Incorporation or Organization) Classification Code Number)
<CAPTION>
<S> <C>
DELAWARE 38-3319226
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
</TABLE>
-------------------------
12900 HALL ROAD, SUITE 200, STERLING HEIGHTS, MICHIGAN 48313
(810) 997-2900
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
-------------------------
SPORTRACK, LLC
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
DELAWARE 3714
(State or Other Jurisdiction of (Primary Standard Industrial
Incorporation or Organization) Classification Code Number)
<CAPTION>
<S> <C>
DELAWARE 13-3848154
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
</TABLE>
-------------------------
12900 HALL ROAD, SUITE 200, STERLING HEIGHTS, MICHIGAN 48313
(810) 997-2900
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
-------------------------
VALLEY INDUSTRIES, LLC
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
DELAWARE 3714
(State or Other Jurisdiction of (Primary Standard Industrial
Incorporation or Organization) Classification Code Number)
<CAPTION>
<S> <C>
DELAWARE 38-3363492
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
</TABLE>
-------------------------
12900 HALL ROAD, SUITE 200, STERLING HEIGHTS, MICHIGAN 48313
(810) 997-2900
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
-------------------------
MARSHALL D. GLADCHUN
CHIEF EXECUTIVE OFFICER
12900 HALL ROAD, SUITE 200
STERLING HEIGHTS, MICHIGAN 48313
(810) 997-2900
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
-------------------------
With a copy to:
JOHN J. SUYDAM
O'SULLIVAN GRAEV & KARABELL, LLP
30 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10112
(212) 408-2400
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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, 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(d)
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. [ ]
-------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 3/4% Series B Senior Subordinated Notes due 2007.... $125,000,000 100% $125,000,000 $36,875
- ---------------------------------------------------------------------------------------------------------------------------------
Guarantees of the 9 3/4% Series B Senior Subordinated
Notes............................................... $125,000,000 (1) (1) (1)
=================================================================================================================================
</TABLE>
(1) This Registration Statement covers the Guarantees to be issued by
subsidiaries of Advanced Accessory Systems, LLC of their obligations under
the 9 3/4% Series B Senior Subordinated Notes. Such Guarantees are to be
issued for no additional consideration, and therefore no registration fee is
required.
-------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
ADVANCED ACCESSORY SYSTEMS, LLC
AAS CAPITAL CORPORATION
------------------------
CROSS REFERENCE SHEET
PURSUANT TO REGULATION S-K, ITEM 501(B),
SHOWING LOCATION OF INFORMATION REQUIRED BY ITEMS OF FORM S-4
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION LOCATION OR CAPTION IN PROSPECTUS
-------------------------------- ---------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus..... Facing Page of Registration Statement;
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside Front and Outside Back Cover Pages
of Prospectus; Available Information
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.............. Prospectus Summary; Risk Factors; Selected
Consolidated Financial Information
4. Terms of the Transaction................... Prospectus Summary; The Exchange Offer;
Description of the Notes
5. Pro Forma Financial Information............ Unaudited Pro Forma Financial Information
6. Material Contracts with the Company Being
Acquired................................... *
7. Additional Information Required for
Reoffering by Persons and Parties Deemed to
be Underwriters............................ Plan of Distribution
8. Interests of Named Experts and Counsel..... *
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ *
10. Information With Respect to S-3
Registrants................................ *
11. Incorporation of Certain Information by
Reference.................................. *
12. Information With Respect to S-2 or S-3
Registrants................................ *
13. Incorporation of Certain Information by
Reference.................................. *
14. Information With Respect to Registrants
Other Than S-2 or S-3 Registrants.......... Prospectus Summary; Risk Factors; Selected
Consolidated Financial Information;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Description of The
Credit Facilities
15. Information With Respect to S-3
Companies..................................
16. Information With Respect to S-2 or S-3
Companies.................................. *
17. Information With Respect to Companies Other
Than S-2 or S-3 Companies.................. *
18. Information if Proxies, Consents or
Authorization Are to be Solicited.......... *
19. Information if Proxies, Consents or
Authorizations Are Not to be Solicited, or
in an Exchange Offer....................... Management; Ownership of Capital Stock;
Certain Transactions
</TABLE>
- -------------------------
* Not applicable or answer is in the negative.
<PAGE> 3
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 MARCH 31, 1998
PROSPECTUS
ADVANCED ACCESSORY SYSTEMS, LLC
AAS CAPITAL CORPORATION
OFFER TO EXCHANGE UP TO $125,000,000 OF THEIR
9 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
FOR ANY AND ALL OUTSTANDING
9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED
------------------------
Advanced Accessory Systems, LLC ("AAS" and, together with its subsidiaries,
the "Company") and AAS Capital Corporation ("Capital Corp." and, together with
AAS, the "Issuers") hereby offer, upon the terms and subject to the conditions
set forth in this Prospectus and the accompanying Letter of Transmittal (which
together constitute the "Exchange Offer") to exchange $1,000 principal amount of
9 3/4% Series B Senior Subordinated Notes due 2007 (the "New Notes") of the
Issuers for each $1,000 principal amount of the issued and outstanding 9 3/4%
Senior Subordinated Notes due 2007 (the "Old Notes," and the Old Notes and the
New Notes, collectively, the "Notes") of the Issuers from the Holders (as
defined herein) thereof. As of the date of this Prospectus, there is
$125,000,000 aggregate principal amount of the Old Notes outstanding. The terms
of the New Notes are identical in all material respects to the Old Notes, except
that the New Notes have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), and therefore will not bear legends restricting
their transfer and will not contain certain provisions providing for the payment
of liquidated damages to the holders of the Old Notes under certain
circumstances relating to the Registration Rights Agreement (as defined herein),
which provisions will terminate as to all of the Notes upon the consummation of
the Exchange Offer.
Interest on the New Notes will accrue from April 1, 1998 and will be payable
in cash semi-annually in arrears on April 1 and October 1 of each year
commencing October 1, 1998. Interest will be payable on the Old Notes accepted
for exchange to, but not including, April 1, 1998.
The New Notes will be unsecured and will be subordinated in right of payment
to all existing and future Senior Indebtedness (as defined) of the Issuers. The
New Notes will rank pari passu in right of payment with any future senior
subordinated Indebtedness (as defined) of the Issuers and will rank senior in
right of payment to all Subordinated Indebtedness (as defined) of the Issuers.
The New Notes will be guaranteed, on a senior subordinated basis, by each of the
Company's direct and indirect domestic subsidiaries (excluding Unrestricted
Subsidiaries (as defined)) (collectively, the "Guarantors"). See "Description of
the Notes." As of December 31, 1997, on a pro forma basis after giving effect to
the 1998 Transactions (as defined), the aggregate principal amount of the
Issuers' outstanding Senior Indebtedness would have been approximately $73.4
million (excluding unused commitments). In addition, the Indenture (as defined)
permits the Issuers to incur additional indebtedness, including Senior
Indebtedness, subject to certain limitations. See "Description of the
Notes -- Ranking" and "-- Subordination of the Notes -- Guarantees of the
Notes."
The Old Notes were not registered under the Securities Act in reliance upon
an exemption from the registration requirements thereof. In general, the Old
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act. The New Notes are being offered hereby in order to satisfy
certain obligations of the Issuers contained in the Registration Rights
Agreement. Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Issuers believe that the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold or otherwise
transferred by any holder thereof (other than any such holder that is an
"affiliate" of the Issuers within the meaning of Rule 405 promulgated under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holder's business, such holder has no arrangement
with any person to participate in the distribution of such New Notes and neither
such holder nor any such other person is engaging in or intends to engage in a
distribution of such New Notes. Notwithstanding the foregoing, each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with any resale of New Notes received in
exchange for such Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Issuers). The
Issuers have agreed that, for a period of 180 days after the date of this
Prospectus, it will make this Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution."
The Old Notes are designated for trading in the Private Offerings, Resales
and Trading through Automated Linkages ("PORTAL") market. There is no
established trading market for the New Notes. The Issuers do not currently
intend to list the New Notes on any securities exchange or to seek approval for
quotation through any automated quotations system. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New Notes.
The Issuers will not receive any proceeds from the Exchange Offer. The
Issuers will pay all of the expenses incident to the Exchange Offer. Tenders of
Old Notes pursuant to the Exchange Offer may be withdrawn as provided herein at
any time prior to the Expiration Date (as defined herein). The Exchange Offer is
subject to certain customary conditions.
This Prospectus has been prepared for use in connection with the Exchange
Offer and may be used by Chase Securities Inc. ("CSI") in connection with offers
and sales related to market-making transactions in the Notes. CSI may act as
principal or agent in such transactions. Such sales will be made at prices
related to prevailing market prices at the time of sale. See "Plan of
Distribution."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING OLD NOTES IN THE
EXCHANGE OFFER.
------------------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE COMMISSION NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
<PAGE> 4
MARKET DATA USED THROUGHOUT THIS PROSPECTUS WAS OBTAINED THROUGH COMPANY
RESEARCH, SURVEYS OR STUDIES PURCHASED BY THE COMPANY OR THE INITIAL PURCHASERS
(AS DEFINED) AND CONDUCTED BY THIRD PARTIES AND FROM INDUSTRY OR GENERAL
PUBLICATIONS. THE COMPANY HAS NOT INDEPENDENTLY VERIFIED MARKET DATA PROVIDED BY
THIRD PARTIES OR INDUSTRY OR GENERAL PUBLICATIONS. SIMILARLY, INTERNAL COMPANY
SURVEYS, WHILE BELIEVED BY THE COMPANY TO BE RELIABLE, HAVE NOT BEEN VERIFIED BY
ANY INDEPENDENT SOURCES.
------------------------
FORWARD LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO
THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF THE COMPANY,
INCLUDING STATEMENTS UNDER THE CAPTIONS "SUMMARY," "UNAUDITED PRO FORMA
FINANCIAL INFORMATION," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS." ALL OF THESE FORWARD
LOOKING STATEMENTS ARE BASED ON ESTIMATES AND ASSUMPTIONS MADE BY MANAGEMENT OF
THE COMPANY WHICH, ALTHOUGH BELIEVED TO BE REASONABLE, ARE INHERENTLY UNCERTAIN.
THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED UPON SUCH ESTIMATES AND
STATEMENTS. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH ESTIMATES WILL BE
REALIZED AND IT IS LIKELY THAT ACTUAL RESULTS WILL DIFFER MATERIALLY FROM THOSE
CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH
DIFFERENCES INCLUDE: (1) INCREASED COMPETITION; (2) INCREASED COSTS; (3) LOSS OR
RETIREMENT OF KEY MEMBERS OF MANAGEMENT; (4) INCREASES IN THE COMPANY'S COST OF
BORROWING OR UNAVAILABILITY OF ADDITIONAL DEBT OR EQUITY CAPITAL; (5) ADVERSE
STATE OR FEDERAL LEGISLATION OR REGULATION OR ADVERSE DETERMINATIONS BY
REGULATIONS; AND (6) CHANGES IN GENERAL ECONOMIC CONDITIONS AND/OR IN THE
MARKETS IN WHICH THE COMPANY MAY, FROM TIME TO TIME, COMPETE. MANY OF SUCH
FACTORS ARE BEYOND THE CONTROL OF THE COMPANY AND ITS MANAGEMENT. FOR FURTHER
INFORMATION OR OTHER FACTORS WHICH COULD AFFECT THE FINANCIAL RESULTS OF THE
COMPANY AND SUCH FORWARD LOOKING STATEMENTS, SEE "RISK FACTORS."
2
<PAGE> 5
AVAILABLE INFORMATION
The Issuers have filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the New
Notes being offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted pursuant to the rules and regulations promulgated by the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document are not necessarily complete. With respect
to each such contract, agreement or other document filed or incorporated by
reference as an exhibit to the Registration Statement, reference is made to such
exhibit for a more complete description of the matter involved, and each such
statement is qualified in its entirety by such reference.
The Registration Statement may be inspected by anyone without charge at the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material may also be obtained at the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of prescribed fees. Such
materials can also be inspected on the Internet at http://www.sec.gov.
Upon consummation of the Exchange Offer, AAS will become subject to the
informational reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith will file reports and
other information with the Commission. Such materials filed by AAS with the
Commission may be inspected, and copies thereof obtained, at the places, and in
the manner, set forth above.
In the event that AAS ceases to be subject to the informational reporting
requirements of the Exchange Act, AAS has agreed that, so long as the Notes
remain outstanding, it will file with the Commission and distribute to holders
of the Notes copies of the financial information that would have been contained
in annual reports and quarterly reports, including management's discussion and
analysis of financial condition and results of operations, that AAS would have
been required to file with the Commission pursuant to the Exchange Act. Such
financial information will include annual reports containing consolidated
financial statements and notes thereto, together with an opinion thereto
expressed by an independent public accounting firm, as well as quarterly reports
containing unaudited condensed consolidated financial statements for the first
three quarters of each fiscal year. AAS will also make such reports available to
prospective purchasers of the Notes, securities analysts and broker-dealers upon
their request. In addition, AAS has agreed that for so long as any of the Old
Notes remain outstanding it will make available to any prospective purchaser of
the Old Notes or beneficial owner of the Old Notes in connection with any sale
thereof the information required by Rule 144A(d)(4) under the Securities Act,
until such time as the Issuers have either exchanged the Old Notes for
securities identical in all material respects which have been registered under
the Securities Act or until such time as the holders thereof have disposed of
such Old Notes pursuant to an effective registration statement filed by the
Issuers.
3
<PAGE> 6
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information contained elsewhere in this
Prospectus. Unless the context otherwise requires, the term the "Company" refers
to Advanced Accessory Systems, LLC, a Delaware limited liability company, and
its subsidiaries, including SportRack, Brink and Valley. The term "SportRack"
refers to SportRack, LLC, a Delaware limited liability company, and its
subsidiaries; the term "Brink" refers to Brink International B.V., a private
company with limited liability incorporated under the laws of The Netherlands,
and its subsidiaries; the term "Valley" refers to Valley Industries, LLC, a
Delaware limited liability company; the term "SportRack International" refers to
SportRack International Inc., a Quebec corporation and a subsidiary of
SportRack; and the term "Ellebi" refers to Ellebi S.r.1., an Italian corporation
and a subsidiary of Brink. As used herein, the term "light vehicles" comprises
light trucks and passenger cars, and the term "light trucks" includes minivans,
standard size vans, sport utility vehicles ("SUVs") and pickup trucks.
THE COMPANY
GENERAL
The Company is one of the world's largest designers, manufacturers and
suppliers of towing and rack systems and related accessories for the automotive
original equipment manufacturer ("OEM") market and the automotive aftermarket.
The Company's products include a complete line of towing systems including
accessories such as trailer balls, ball mounts, electrical harnesses, safety
chains and locking hitch pins. The Company's broad offering of rack systems
includes fixed and detachable racks and accessories which can be installed on
vehicles to carry items such as bicycles, skis, luggage, surfboards and
sailboards. The Company's products are sold as standard accessories or options
for a variety of light vehicles. In 1997, on a pro forma basis, the Company
estimates that approximately 49% of its net sales were generated from products
sold for light trucks. The Company is the sole Tier 1 OEM supplier of towing or
rack systems for eight of the top ten light trucks produced in North America,
including the General Motors ("GM") C/K Pickup and Blazer, the Chrysler Grand
Cherokee (towing systems and rack systems), T-3000 Pickup and Caravan and the
Ford Explorer, Ranger and Windstar. On a pro forma basis for the year ended
December 31, 1997, the Company's net sales and EBITDA (as defined) would have
been $268.5 million and $36.3 million, respectively.
COMPETITIVE ADVANTAGES
Leading Global Market Position. The Company is the world's largest
designer, manufacturer and supplier of towing systems and one of the world's
largest designers, manufacturers and suppliers of rack systems. The Company is
the largest supplier of towing systems in Europe, the largest supplier of towing
systems to automotive OEMs in North America and the second largest supplier of
towing systems to the aftermarket in North America. The Company is also one of
the two largest suppliers of rack systems sold to automotive OEMs in North
America. The Company has 19 engineering, manufacturing and distribution
facilities strategically located in the United States, Canada, The Netherlands,
Denmark, Germany, the United Kingdom, Sweden, Italy and France. By virtue of its
size and global presence, the Company believes it benefits from several
competitive advantages, including the ability to (i) satisfy local design,
production, quality and timing requirements of global OEMs; (ii) provide
"one-stop shopping" for customers' product and service requirements; (iii)
optimize plant production; (iv) maximize its raw material purchasing power; (v)
spread its selling, administrative and product development expenses over a large
base of net sales; and (vi) develop and maintain state-of-the-art production
facilities.
Strong Relationships with Diverse Customer Base. The Company has an
established position as a Tier 1 supplier of towing and/or rack systems to most
of the OEMs manufacturing in North America and Europe including Chrysler,
General Motors, Toyota, Opel, Volvo, Isuzu, Ford, Mercedes, BMW, Subaru, Fiat,
Mitsubishi, Nissan, Volkswagen, SEAT, Skoda and Kia. The Company supplies
Chrysler with substantially all its towing systems and rack systems and
accessories. The Company also supplies approximately 50% of the towing and rack
system requirements of General Motors. Tier 1 status and strong customer
relationships are
4
<PAGE> 7
important elements in achieving continued profitable growth because, as OEMs
narrow their supplier bases, well regarded, existing suppliers have an advantage
in gaining new contracts. The evolution of OEM relationships into strategic
partnerships provides a significant advantage to Tier 1 suppliers with system
integration capabilities (such as the Company) in retaining existing contracts
as well as in participating during the design phase for new vehicles, which is
integral to becoming a supplier for such new platforms. The Company is also a
leading supplier of towing and rack systems to automotive aftermarket
wholesalers, retailers and installers, such as U-Haul, Pep Boys, Balkamp,
Advance Auto Parts, Coast Distribution Systems, Discount Auto Parts, Ace
Hardware and Canadian Tire.
Comprehensive Product Line. The Company continues to position itself as a
leading supplier to its customers for a growing range of products and services.
Through its offering of over 2,000 towing system models, the Company's products
fit virtually every light vehicle produced in North America and Europe. The
Company is one of a limited number of European manufacturers with such a broad
product line that also satisfies European Community ("EC") regulatory safety
standards, even though such standards have not yet been adopted by each EC
member country. Competitors whose products do not satisfy such standards face
substantial design and testing costs to offer a comparable product line that
meets these safety standards. The Company has provided OEMs with fixed rack
systems for approximately half of the light truck models produced in North
America that utilize vehicle-specific fixed racks. The Company's innovative
Mondial(R) product line of detachable rack systems, which consists of only 14
SKUs, is able to fit substantially all the light vehicles produced in North
America and Europe, while some competitors' comparable product lines consist of
more than 200 SKUs. The Company believes that its broad product offerings also
facilitate strategic partnerships with automotive aftermarket wholesalers,
retailers and installers.
Design and Engineering Expertise. The Company has an engineering and
research and development staff that develops new products and processing
technologies. The Company works directly with OEM designers to create innovative
solutions that simplify vehicle assembly and reduce vehicle cost and weight. For
example, the Company developed a roll formed, aluminum cross rail which
substantially reduced the weight of the Chrysler minivan rack at a competitive
cost. Additionally, the Company is responsible for many industry innovations,
including lighter, less obtrusive, round tube towing hitches as well as push
button and pull lever stanchions on fixed rack systems. The Company believes its
design and engineering capabilities provide significant value to its customers
by (i) shortening OEM new product development cycles; (ii) lowering OEM
manufacturing costs; (iii) providing technical expertise; and (iv) permitting
aftermarket customers to maintain lower inventory levels. The Company also
believes that its design innovations have created value for end users by
providing products that are durable and easy to install and that enhance vehicle
utility and appearance.
High Quality, Low Cost Manufacturing Position. The Company believes that it
is one of the highest quality, lowest cost suppliers of towing and rack systems
in North America and Europe. The Company has received numerous quality and
performance awards, including Chrysler's Gold Pentastar Award, Ford's Q-1 Award,
Toyota's Distinguished Supplier Award and Nissan's Superior Supplier Performance
Award. Supplier quality systems are currently being standardized across OEMs
through the ISO-9000 and QS-9000 programs. The Company has achieved ISO-9000 or
QS-9000 certification for ten of its 17 manufacturing and engineering facilities
and is in the process of obtaining certification for the rest of its facilities.
The Company's low cost position is a result of its strict cost controls and
continuous improvement programs designed to enhance productivity. OEMs typically
prefer stable suppliers who can generate productivity gains that can be shared
to reduce OEM costs. The Company's cost controls are closely integrated with its
quality driven manufacturing operations, thereby allowing it to profitably
deliver high quality, easy to install and competitively priced components on a
just-in-time basis. The Company's focus on low cost manufacturing also provides
benefits when selling products to the less price sensitive aftermarket.
BUSINESS STRATEGY
The Company's objective is to strengthen its position as a leading global
supplier of automotive exterior accessories, thereby increasing revenue and cash
flow. In order to accomplish its goal, the Company intends to pursue the
following strategies.
5
<PAGE> 8
Increase Global Market Share. The Company intends to capitalize on its
expanded presence in North America and Europe by marketing products to its
global automotive OEM customers. Through its past acquisitions of complementary
product lines, the Company is able to offer an expanded range of products and
services to its extended customer base. The Company also expects to secure new
customers by virtue of its expanded market presence and broad product and
service offerings. The Company believes its continued emphasis on new technology
(both product and process), will result in the development of more innovative,
high margin towing and rack system products which it expects to market to its
expanding customer base.
Maintain and Enhance Strong Customer Relationships. The Company intends to
strengthen and expand its relationships with global automotive OEMs and
aftermarket customers by (i) continuing its commitment to innovative design and
development of products during the early stages of vehicle design and redesign;
(ii) building on its position as a low cost supplier of quality accessory
products; (iii) offering new products in existing and new geographic areas by
taking advantage of existing OEM relationships; and (iv) working with
aftermarket customers to develop new products and marketing strategies. The
Company has recently obtained orders from Mercedes Benz, BMW, SEAT and Chrysler
to supply products for new SUVs.
Increase Operating Efficiencies. The Company believes there are significant
opportunities for improvement in margins and cash flow through intercompany
cooperation among its various acquired business units, including (i) realizing
economies of scale from the combined purchasing power of a larger company; (ii)
achieving production and other operating efficiencies through the implementation
of a "best practices" program; (iii) reducing certain selling, administrative
and product development expenses; and (iv) reducing capital and operating
expenditures from coordinated use of manufacturing resources.
Pursue Strategic Acquisitions. In response to the trend in the OEM market
toward systems suppliers, the Company is focused on making strategic
acquisitions that will enhance its ability to provide integrated systems (such
as a towing or rack system) or otherwise leverage its existing business by
providing additional product, manufacturing and service capabilities. The
Company also intends to pursue acquisitions which will expand its customer base
by providing an entree to new customers, including expansion into selected
geographic areas. The Company believes that such acquisitions should provide
additional opportunities for increased net sales and cash flow by enhancing the
Company's manufacturing and marketing capabilities.
INDUSTRY OVERVIEW
In 1996, the North American exterior accessories market for light vehicles
was approximately $3.3 billion. In 1996, in the first year of ownership, North
American consumers spent approximately $1.4 billion on exterior accessories for
their light trucks as compared to approximately $0.8 billion in 1986,
representing a compound annual growth rate of 5.9%. Growth in this market, and
in towing systems and rack systems in particular, resulted in large part from
the increased production and sale of light trucks, which in 1996 accounted for
approximately 46% of total light vehicle production in North America as compared
to 32% in 1986. According to DRI/McGraw-Hill Ward's Global Automotive Group,
production of light trucks in North America and Western Europe has outpaced
overall production in the light vehicle market (ten-year compound annual growth
rate of 1.3% in North America and 1.4% in Western Europe), resulting primarily
from the growth in minivans (ten-year compound annual growth rate of 8.6% in
North America and 30.8% in Western Europe) and SUVs (ten-year compound annual
growth rate of 11.6% in North America and 13.7% in Western Europe), although no
assurance can be given that such production rates of light trucks will continue
or will continue to outpace overall production.
The strong growth in production of light trucks is attributable to several
factors, including (i) the more sizable and comfortable interiors and
aesthetically pleasing modern designs offered by light trucks; (ii) the changing
lifestyle of the population, which is aging and therefore devoting more time to
recreational activities; (iii) the versatile product offerings targeted toward
both the luxury and economy market sectors; (iv) the increasing acceptance of
light truck use for everyday transportation; and (v) the durability and special
performance capabilities (e.g. four-wheel drive) of light trucks.
6
<PAGE> 9
As automobile and light truck manufacturers have faced increased global
competition, they have sought to significantly improve quality, reduce costs and
shorten the development time required for new vehicle models. These changes have
altered the OEM/supplier relationship and benefited larger suppliers that have
strong product engineering and development capabilities, superior quality
products, lower unit costs and the ability to deliver products on a timely
basis. As a result, the Company believes that it will continue to benefit from
the following automotive OEM and aftermarket trends: (i) consolidation of
supplier base by OEMs; (ii) emergence of EC safety standards; (iii) increased
levels of manufacturing in North America by transplants; and (iv) increased
outsourcing by OEMs.
MANAGEMENT AND OWNERSHIP
Chase Capital Partners ("CCP") and certain members of the Company's
management formed the Company in September 1995, to make strategic acquisitions
of automotive exterior accessory manufacturers and to integrate those
acquisitions into a global enterprise that would be a preferred supplier to the
automotive industry. The Company's senior management team has an average of over
20 years of experience in manufacturing and marketing automotive-related
products. The Company believes that members of its management team have strong
and successful track records in the operation of their respective businesses.
Members of the Company's senior management own, in the aggregate, approximately
23.2% of the issued and outstanding voting securities of the Company on a fully
diluted basis.
CCP is the private equity group of The Chase Manhattan Corporation, the
largest bank holding company in the United States, and is one of the largest
private equity organizations in the United States, with over $4.0 billion under
management. Through its affiliates, CCP invests in leveraged buyouts,
recapitalizations and venture capital opportunities by providing equity and
mezzanine debt capital. Since its inception in 1984, CCP has closed over 450
direct investments in a variety of industries. Affiliates of CCP own
approximately 47.7% of the issued and outstanding voting securities of the
Company on a fully diluted basis. See "Plan of Distribution."
ACQUISITION HISTORY
In September 1995, the Company, through its SportRack subsidiary, acquired
substantially all of the net assets of the MascoTech Accessories division (the
"MascoTech Division") of MascoTech, Inc. ("MascoTech"). The MascoTech Division
was a North American supplier of rack systems and accessories to the automotive
OEM market and aftermarket.
In October 1996, the Company acquired (the "Brink Acquisition") all of the
capital stock of Brink B.V., a private company with limited liability
incorporated under the laws of The Netherlands and a European supplier of towing
systems to the automotive OEM market and aftermarket. In December 1996,
ownership of Brink B.V. and its subsidiaries was transferred to a newly formed
subsidiary of the Company, Brink International B.V.
In August 1997, the Company formed Valley to acquire (the "Valley
Acquisition") the net assets of Valley Industries, Inc. ("Valley Industries"), a
North American supplier of towing systems to the automotive OEM market and
aftermarket.
Two smaller acquisitions were completed in July 1997 by a subsidiary of
SportRack, SportRack International. SportRack International acquired from Bell
Sports Corporation ("Bell") the net assets of its SportRack division, a Canadian
supplier of rack systems and accessories to the automotive aftermarket. CCP is a
significant equity investor in Bell. SportRack International also acquired the
capital stock of Nomadic Sports, Inc. ("Nomadic"), a Canadian supplier of rack
systems and accessories to the automotive OEM market and aftermarket. The
acquisitions of the SportRack division of Bell and Nomadic are collectively
referred to in this Prospectus as the "SportRack International Acquisition."
7
<PAGE> 10
In January 1998, the Company formed Ellebi to acquire the net assets of a
division of Ellebi S.p.A. (the "Ellebi Acquisition"). Ellebi is an Italian
manufacturer and distributor of towing systems to the European automotive OEM
market and aftermarket.
In February 1998, the Company through SportRack International, Inc.,
acquired the net assets of Transfo-Rakzs, Inc. (the "Transfo-Rakzs
Acquisition"), a designer, manufacturer and distributor of rear hitch rack
carrying systems and related products to Canada and the U.S.
The Ellebi Acquisition and the Transfo-Rakzs Acquisition are referred to
herein collectively as the "1998 Transactions."
------------------------
Capital Corp. is a newly formed Delaware corporation and is a wholly owned
subsidiary of the Company. The New Notes will be the joint and several
obligations of the Company and Capital Corp. Capital Corp. has no assets and
does not conduct any operations.
The principal executive offices of the Company are located at 12900 Hall
Road, Suite 200, Sterling Heights, Michigan 48313 and its telephone number is
(810) 997-2900.
8
<PAGE> 11
THE EXCHANGE OFFER
Registration Rights
Agreement..................... The Old Notes were sold by the Issuers on
September 25, 1997 to CSI and First Chicago
Capital Markets, Inc. (the "Initial
Purchasers"), who resold the Old Notes to
qualified institutional investors in reliance
on Rule 144A under the Securities Act. In
connection therewith, the Issuers, the
Guarantors and the Initial Purchasers executed
and delivered for the benefit of the holders of
the Old Notes a registration rights agreement
(the "Registration Rights Agreement")
providing, among other things, for the Exchange
Offer.
The Exchange Offer............ New Notes are being offered in exchange for a
like principal amount of Old Notes. As of the
date hereof, $125,000,000 aggregate principal
amount of Old Notes are outstanding. The
Issuers will issue the New Notes to Holders
promptly following the Expiration Date. See
"Risk Factors -- Consequences of Failure to
Exchange."
Expiration Date............... 5:00 p.m., New York City time, on ,
1998, unless the Exchange Offer is extended as
provided herein, in which case the term
"Expiration Date" means the latest date and
time to which the Exchange Offer is extended.
Interest...................... Each New Note will bear interest from April 1,
1998. Interest will be payable on the Old Notes
accepted for exchange to, but not including,
April 1, 1998.
Conditions to the Exchange
Offer......................... The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Issuers. The Issuers reserve the right to
amend, terminate or extend the Exchange Offer
at any time prior to the Expiration Date upon
the occurrence of any such condition. See "The
Exchange Offer -- Conditions."
Procedures for Tendering Old
Notes......................... Each Holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof,
in accordance with the instructions contained
herein and therein, and mail or otherwise
deliver such Letter of Transmittal, or such
facsimile, together with the Old Notes and any
other required documentation to the exchange
agent (the "Exchange Agent") at the address set
forth herein. By executing the Letter of
Transmittal, each Holder will represent to the
Issuers, among other things, that (i) the New
Notes acquired pursuant to the Exchange Offer
by the Holder and any beneficial owners of Old
Notes are being obtained in the ordinary course
of business of the person receiving such New
Notes, (ii) neither the Holder nor such
beneficial owner has an arrangement with any
person to participate in the distribution of
such New Notes, (iii) neither the Holder nor
such beneficial owner nor any such other person
is engaging in or intends to engage in a
distribution of such New Notes and (iv) neither
the Holder nor such beneficial owner is an
"affiliate," as defined under Rule 405
promulgated under the Securities Act, of the
Issuers. Each broker-dealer that receives New
Notes for its own account in exchange for Old
Notes, where such Old Notes
9
<PAGE> 12
were acquired by such broker-dealer as a result
of marketmaking activities or other trading
activities (other than Old Notes acquired
directly from the Issuers), may participate in
the Exchange Offer but may be deemed an
"underwriter" under the Securities Act and,
therefore, must acknowledge in the Letter of
Transmittal that it will deliver a prospectus
in connection with any resale of such New
Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the
meaning of the Securities Act. See "The
Exchange Offer - Procedures for Tendering" and
"Plan of Distribution."
Special Procedures for
Beneficial Owners............. Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender should contact such
registered Holder promptly and instruct such
registered Holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on such beneficial owner's own
behalf, such beneficial owner must, prior to
completing and executing the Letter of
Transmittal and delivering his Old Notes,
either make appropriate arrangements to
register ownership of the Old Notes in such
beneficial owner's name or obtain a properly
completed bond power from the registered
Holder. The transfer of registered ownership
may take considerable time. See "The Exchange
Offer -- Procedures for Tendering."
Guaranteed Delivery
Procedures.................... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Old Notes
according to the guaranteed delivery procedures
set forth in "The Exchange Offer -- Guaranteed
Delivery Procedures."
Withdrawal Rights............. Tenders may be withdrawn as provided herein at
any time prior to 5:00 p.m., New York City
time, on the Expiration Date. See "The Exchange
Offer -- Withdrawal of Tenders."
Acceptance of Old Notes and
Delivery of New Notes......... The Issuers will accept for exchange any and
all Old Notes which are properly tendered in
the Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The New
Notes issued pursuant to the Exchange Offer
will be delivered promptly following the
Expiration Date. See "The Exchange Offer --
Terms of the Exchange Offer."
Exchange Agent................ First Union National Bank is serving as
Exchange Agent in connection with the Exchange
Offer. See "The Exchange Offer -- Exchange
Agent."
Use of Proceeds............... There will be no cash proceeds to the Issuers
from the exchange pursuant to the Exchange
Offer.
10
<PAGE> 13
Consequences of Failure to
Exchange.................... Holders of Old Notes who do not exchange their
Old Notes for New Notes pursuant to the
Exchange Offer will continue to be subject to
the restrictions on transfer of such Old Notes
as set forth in the legend thereon as a
consequence of the issuance of the Old Notes
pursuant to exemptions from, or in transactions
not subject to, the registration requirements
of the Securities Act and applicable state
securities laws. In general, Old Notes may not
be offered or sold unless registered under the
Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the
Securities Act and applicable state securities
laws.
11
<PAGE> 14
SUMMARY DESCRIPTION OF THE NEW NOTES
The Exchange Offer applies to $125,000,000 aggregate principal amount of
Old Notes. The terms of the New Notes are identical in all material respects to
the Old Notes except that the New Notes have been registered under the
Securities Act and, therefore, will not bear legends restricting their transfer
and will not contain certain provisions providing for the payment of liquidated
damages to the holders of the Old Notes under certain circumstances relating to
the Registration Rights Agreement, which provisions will evidence the same debt
as the Old Notes and, except as set forth in the immediately preceding sentence,
will be entitled to the benefits of the Indenture, under which both the Old
Notes were, and the New Notes will be, issued. See "Description of Notes."
Securities Offered............ $125,000,000 aggregate principal amount of
9 3/4% Series B Senior Subordinated Notes due
2007.
Maturity...................... October 1, 2007.
Interest Payment Dates........ April 1 and October 1, commencing October 1,
1998.
Sinking Fund.................. None.
Optional Redemption........... Except as described below, the Issuers may not
redeem the Notes prior to October 1, 2002. On
or after such date, the Issuers may redeem the
Notes, in whole or in part, at the redemption
prices set forth herein, together with accrued
and unpaid interest, if any, to the date of
redemption. In addition, at any time and from
time to time on or prior to October 1, 2000,
the Issuers may redeem up to 35% of the
aggregate principal amount of the Notes with
the net cash proceeds of one or more Public
Equity Offerings by the Company, at a
redemption price equal to 109.750% of the
principal amount to be redeemed, together with
accrued and unpaid interest, if any, to the
date of redemption, provided that at least 65%
of the aggregate principal amount of the Notes
originally issued remain outstanding after each
such redemption. See "Description of the Notes
-- Optional Redemption."
Change of Control............. Upon the occurrence of a Change of Control, the
Issuers will be required to make an offer to
repurchase the Notes at a price equal to 101%
of the principal amount thereof, together with
accrued and unpaid interest, if any, to the
date of purchase. See "Description of the Notes
-- Change of Control."
Subsidiary Guarantees......... The New Notes will be guaranteed (the
"Guarantees"), jointly and severally on a
senior subordinated basis, by the Guarantors.
The Guarantors also guarantee all obligations
of the Company under the Amended and Restated
Credit Agreement. The obligations of each
Guarantor under its Guarantee will be
subordinated in right of payment to the prior
payment in full of all existing and future
Guarantor Senior Indebtedness (as defined) of
such Guarantor to substantially the same extent
as the Notes are subordinated to all existing
and future Senior Indebtedness of the Issuers.
See "Description of the Notes -- Guarantees of
the Notes."
Ranking....................... The New Notes will be unsecured and will be
subordinated in right of payment to all
existing and future Senior Indebtedness of the
Issuers. The New Notes will rank pari passu in
right of payment with any future senior
subordinated Indebtedness (as defined) of the
Issuers and will rank senior to all
Subordinated Indebtedness
12
<PAGE> 15
(as defined) of the Issuers. As of December 31,
1997, on a pro forma basis after giving effect
to the 1998 Transactions, the aggregate
principal amount of the Issuers' outstanding
Senior Indebtedness would have been
approximately $73.4 million (excluding unused
commitments). See "Description of the Notes --
Ranking" and "-- Subordination of the Notes."
Certain Covenants............. The indenture under which the Old Notes were,
and the New Notes will be, issued (the
"Indenture") contains certain covenants that,
among other things, limit (i) the incurrence of
additional indebtedness by the Company and its
Restricted Subsidiaries, (ii) the payment of
dividends on, and redemption of, capital stock
of the Company and its Restricted Subsidiaries
and the redemption of certain subordinated
obligations of the Company and its Restricted
Subsidiaries, (iii) investments, (iv) sales of
assets and Restricted Subsidiary stock, (v)
transactions with affiliates and (vi)
consolidations, mergers and transfers of all or
substantially all of the Company's assets. The
Indenture also prohibits certain restrictions
on distributions from Restricted Subsidiaries.
However, all of these limitations and
prohibitions are subject to a number of
important qualifications and exceptions. See
"Description of the Notes -- Certain
Covenants."
13
<PAGE> 16
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table presents summary historical financial data of the
MascoTech Division ("Predecessor") for the years ended December 31, 1993 and
1994 and the period from January 1, 1995 through September 27, 1995 (the period
prior to the acquisition of the net assets of the MascoTech Division by the
Company). The data as of and for the years ended December 31, 1993 and 1994 have
been derived from the unaudited financial statements of the MascoTech Division
and the data for the period from January 1, 1995 through September 27, 1995 have
been derived from the audited financial statements included elsewhere in this
Prospectus. The historical data as of and for the period from September 28, 1995
through December 31, 1995 and for the years ended December 31, 1996 and 1997
represent consolidated financial data of the Company subsequent to the
acquisition of the MascoTech Division, and include (i) the operations of Brink
subsequent to the Brink Acquisition on October 30, 1996; (ii) the operations of
Bell and Nomadic subsequent to the SportRack International Acquisition on July
2, 1997 and July 24, 1997, respectively, and (iii) the operations of Valley
subsequent to the Valley Acquisition on August 5, 1997. The historical data for
the Company have been derived from the audited financial statements of the
Company included elsewhere in this Prospectus. The summary pro forma statement
of operations data and other financial data for the year ended December 31, 1997
were prepared to illustrate the effect of (i) the offering of the Old Notes (the
"Offering"); (ii) the Valley Acquisition and the SportRack International
Acquisition; and (iii) the 1998 Transactions, as if all of such transactions had
occurred on January 1, 1997. The summary pro forma balance sheet data at
December 31, 1997 was prepared to illustrate the effect of the 1998 Transactions
as if each had occurred on December 31, 1997. The pro forma data do not purport
to be indicative of the results of operations or the financial position of the
Company that would have been obtained if the acquisitions and Offering had been
completed as of such dates or to project the results of operations or the
financial position of the Company for any future date or period. The following
table should be read in conjunction with the financial statements of the
Company, Valley Industries and Ellebi, "Selected Historical Financial Data,"
"Unaudited Pro Forma Financial Information" and, in each case, the related
notes, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
14
<PAGE> 17
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
<TABLE>
<CAPTION>
COMPANY
------------------------------------------------
PREDECESSOR HISTORICAL PRO FORMA
--------------------------------- ------------------------------------ ---------
YEAR ENDED PERIOD FROM PERIOD FROM YEAR ENDED
DECEMBER 31, JANUARY 1 TO SEPTEMBER 28 DECEMBER 31,
----------------- SEPTEMBER 27, TO DECEMBER 31, ------------------------------
1993 1994 1995 1995 1996(1) 1997(2) 1997
---- ---- ------------- --------------- ------- ------- ----
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................ $59,081 $60,882 $48,698 $16,299 $81,466 $188,678 $268,489
Cost of sales.................... 48,369 47,716 38,645 12,458 53,607 135,556 194,173
------- ------- ------- ------- ------- -------- --------
Gross profit................... 10,712 13,166 10,053 3,841 27,859 53,122 74,316
Selling, administrative and
product development expenses... 6,585 7,313 6,107 1,472 13,413 31,350 46,728
Amortization of intangible
assets......................... -- -- -- 546 2,475 2,336 3,448
------- ------- ------- ------- ------- -------- --------
Operating income............... 4,127 5,853 3,946 1,823 11,971 19,436 24,140
Other (income) expense
Interest expense(3)............ -- -- -- 975 4,312 12,627 19,627
Foreign currency loss(4)....... -- -- -- -- 1,330 6,097 6,097
Other, net..................... 665 (105) 65 (22) (80) -- 125
------- ------- ------- ------- ------- -------- --------
Income (loss) before minority
interest, extraordinary
charge and income taxes...... 3,462 5,958 3,881 870 6,409 712 (1,709)
Provision (benefit) for income
taxes(5)....................... 1,247 2,114 1,324 -- (491) (2,856) (2,561)
------- ------- ------- ------- ------- -------- --------
Income before minority interest
and extraordinary charge..... 2,215 3,844 2,557 870 6,900 3,568 852
Minority interest................ -- -- -- 9 69 97 97
------- ------- ------- ------- ------- -------- --------
Income before extraordinary
charge....................... 2,215 3,844 2,557 861 6,831 3,471 755
Extraordinary charge(6).......... -- -- -- -- 1,970 7,416 --
------- ------- ------- ------- ------- -------- --------
Net income (loss).............. $ 2,215 $ 3,844 $ 2,557 $ 861 $ 4,861 $ (3,945) $ 755
======= ======= ======= ======= ======= ======== ========
OTHER DATA:
Cash flows from operating
activities..................... $ 8,683 $ 1,165 $ 3,741 $ 1,390 $ 9,917 $ 6,982 $ 10,374
EBITDA(7)........................ 4,890 6,773 4,735 2,651 16,448 27,916 36,291
Depreciation..................... 763 920 789 282 2,002 6,144 8,703
Capital expenditures............. 2,213 1,392 2,079 491 3,124 7,751 10,272
Ratio of EBITDA to interest expense................................. 2.72x 3.81x 2.21x 1.85x
Ratio of earnings to fixed charges(8)............................... 1.89x 2.43x 1.06x --
BALANCE SHEET DATA (AT END OF PERIOD):
Cash................................................................ $ 1,637 $ 2,514 $ 27,348 $ 6,589
Working capital..................................................... 3,960 14,368 64,375 54,577
Total assets........................................................ 59,979 148,359 265,483 273,374
Total debt, including current maturities............................ 34,900 93,142 197,126 197,963
Mandatorily redeemable warrants..................................... 200 3,498 3,507 3,507
Members' equity..................................................... 14,221 18,463 16,193 16,193
</TABLE>
(footnotes on following page)
15
<PAGE> 18
- -------------------------
(1) In October 1996, the Company acquired Brink. The Brink Acquisition has been
accounted for in accordance with the purchase method of accounting.
Accordingly, the operating results of Brink are included in the consolidated
operating results of the Company subsequent to October 30, 1996.
(2) The Company acquired the SportRack division of Bell on July 2, 1997, Nomadic
on July 24, 1997, and Valley on August 5, 1997. The Valley Acquisition and
the SportRack International Acquisition have been accounted for in
accordance with the purchase method of accounting. Accordingly, the
operating results of Valley and SportRack International are included in the
consolidated operating results of the Company subsequent to the respective
acquisition dates.
(3) Prior to its acquisition by the Company on September 28, 1995, the
Predecessor was a division of MascoTech and, accordingly, had no outstanding
indebtedness.
(4) Represents net currency loss on indebtedness, incurred in connection with
the Brink Acquisition, which is currently denominated in U.S. dollars.
(5) The Predecessor, as a division of MascoTech, was allocated a portion of the
consolidated income tax provision, which approximated the division's federal
income tax provision on a stand alone basis. The Company is a limited
liability company and, as such, the earnings of the Company and its domestic
subsidiaries are included in the taxable income of the Company's unitholders
and no federal income tax provision is required. The Company's foreign
subsidiaries provide for income taxes on their results of operations.
(6) In connection with the indebtedness extinguished as a result of the Brink
Acquisition, a prepayment penalty of $220,000 and unamortized deferred debt
issuance costs of $1.8 million were charged to operations during 1996. In
connection with indebtedness extinguished as a result of issuing the Old
Notes, a prepayment penalty of $1.4 million, unamortized debt discount of
$3.1 million, and unamortized deferred debt issuance costs of $3.2 million
were charged to operations during 1997. The debt extinguishment charges in
1997 were reduced by $365,000 representing the income tax benefit recognized
by Brink.
(7) EBITDA is defined as operating income plus depreciation and amortization.
EBITDA is presented because it is generally accepted as providing useful
information regarding a company's ability to service and/or incur
indebtedness. However, EBITDA should not be considered in isolation from or
as an alternative to net income, cash flows from operating activities and
other consolidated income or cash flow statement data prepared in accordance
with generally accepted accounting principles or as a measure of
profitability or liquidity. See "Description of the Notes -- Certain
Definitions" for the definition of EBITDA for purposes of the Indenture.
(8) For purposes of determining the ratio of earnings to fixed charges,
"earnings" are defined as income (loss) before minority interest,
extraordinary charge and income taxes, plus fixed charges. "Fixed charges"
consist of interest expense on all indebtedness (including amortization of
deferred debt issuance costs) and the component of operating lease rental
expense that management believes is representative of the interest component
of rent expense. The Company's pro forma earnings were insufficient to cover
pro forma fixed charges by $452,000 for the year ended December 31, 1997.
16
<PAGE> 19
RISK FACTORS
In addition to the other matters set forth in this Prospectus, the
following factors should be considered carefully by holders of Old Notes before
making a decision to tender their Old Notes in the Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange the Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Old Notes under the Securities Act. Based on
interpretations by the staff of the Commission set forth in no-action letters
issued to third parties, the Company believes that the New Notes issued pursuant
to the Exchange Offer in exchange for Old Notes may be offered for resale,
resold or otherwise transferred by any holder thereof (other than any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
promulgated under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business, such holder
has no arrangement with any person to participate in the distribution of such
New Notes and neither such holder nor any such other person is engaging in or
intends to engage in a distribution of such New Notes. Notwithstanding the
foregoing, each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with any resale of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Issuers). The Issuers have agreed that, for a period of 180 days after
the date of this Prospectus, they will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution." However, the ability of any Holder to resell the New Notes is
subject to applicable state securities laws as described in "-- Blue Sky
Restrictions on Resale of New Notes" below.
NECESSITY TO COMPLY WITH EXCHANGE OFFER PROCEDURES
To participate in the Exchange Offer, and to avoid the restrictions on
transfer of the Old Notes, Holders of Old Notes must transmit a properly
completed Letter of Transmittal, including all other documents required by such
Letter of Transmittal, to the Exchange Agent at one of the addresses set forth
below under "The Exchange Offer -- Exchange Agent" on or prior to the Expiration
Date. In addition, either (i) certificates for such Old Notes must be received
by the Exchange Agent along with the Letter of Transmittal or (ii) a timely
confirmation of a book-entry transfer for such Old Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
pursuant to the procedure for book-entry transfer described herein, must be
received by the Exchange Agent prior to the Expiration Date or (iii) the Holder
must comply with the guaranteed delivery procedures described herein. See "The
Exchange Offer."
BLUE SKY RESTRICTIONS ON RESALE OF NEW NOTES
In order to comply with the securities laws of certain jurisdictions, the
New Notes may not be offered or resold by any Holder unless they have been
registered or qualified for sale in such jurisdictions or an exemption from
registration or qualification is available and the requirements of such
exemption have been satisfied. The Issuers do not currently intend to register
or qualify the resale of the New Notes in any such jurisdictions. However, an
exemption is generally available for sales to registered broker-dealers and
certain institutional buyers. Other exemptions under applicable state securities
laws may also be available.
17
<PAGE> 20
LEVERAGE AND LIQUIDITY
As a result of the Transactions, the Company is highly leveraged. On a pro
forma basis, the Company's indebtedness at December 31, 1997 was approximately
$198.0 million. In addition, subject to the restrictions in the Amended and
Restated Credit Agreement and the Indenture, the Company and its subsidiaries
may incur additional indebtedness (including additional Senior Indebtedness)
from time to time to finance acquisitions or capital expenditures or for other
purposes. See "Pro Forma Capitalization," "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources," "Description of the Credit Facilities" and "Description of the
Notes."
The Company's high degree of leverage may have important consequences for
the Company, including (i) the ability of the Company to obtain additional
financing for acquisitions, working capital, capital expenditures or other
purposes, if necessary, may be impaired or such financing may not be available
on terms favorable to the Company; (ii) a substantial portion of the Company's
cash flow will be used to pay the Company's interest expense and debt
amortization, which will reduce the funds that would otherwise be available to
the Company for its operations and future business opportunities; (iii) a
substantial decrease in net operating cash flows or an increase in expenses of
the Company could make it difficult for the Company to meet its debt service
requirements and force it to modify its operations; (iv) the Company may be more
highly leveraged than its competitors, which may place it at a competitive
disadvantage; and (v) the Company's high degree of leverage may make it more
vulnerable to a downturn in its business or the economy generally. Any inability
of the Company to service its indebtedness or obtain additional financing, as
needed, would have a material adverse effect on the Company.
The Company's ability to pay principal and interest on the Notes and to
satisfy its other debt obligations will depend upon its future operating
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, certain of which are beyond its control
as well as the availability of revolving credit borrowings under the Amended and
Restated Credit Agreement or a successor facility. The Company anticipates that,
based on current and expected levels of operations, its operating cash flow,
together with borrowings under the Amended and Restated Credit Agreement, should
be sufficient to meet its debt service, working capital and capital expenditure
requirements for the foreseeable future, although no assurances can be given in
this regard, including as to the ability to increase revenues or profit margins.
If the Company is unable to service its indebtedness, it will be forced to take
actions such as reducing or delaying acquisitions and/or capital expenditures,
selling assets, restructuring or refinancing its indebtedness (which could
include the Notes), or seeking additional equity capital. There is no assurance
that any of these remedies can be effected on satisfactory terms, if at all,
including, whether, and on what terms, the Company could raise equity capital.
RESTRICTIVE DEBT COVENANTS
The Amended and Restated Credit Agreement and the Indenture contain a
number of significant covenants that, among other things, restrict the ability
of the Company to (i) declare dividends or redeem or repurchase capital stock;
(ii) prepay, redeem or purchase debt, including the Notes; (iii) incur liens;
(iv) make loans and investments; (v) incur additional indebtedness; (vi) amend
or otherwise alter debt and other material agreements; (vii) make capital
expenditures; (viii) engage in mergers, acquisitions and asset sales; (ix) enter
into transactions with affiliates; and (x) alter the business it conducts. The
indebtedness outstanding under the Amended and Restated Credit Agreement is
guaranteed by all of the Company's domestic subsidiaries and is secured by a
first priority lien on substantially all of the properties and assets of the
Company and its respective domestic subsidiaries, now owned or acquired later,
including a pledge of all of the shares of the Company's respective existing and
future domestic subsidiaries, and up to 65% of the shares of the Company's
existing and future foreign subsidiaries which are owned by the Company or one
of its domestic subsidiaries and certain of the tangible and intangible assets
of the Company's existing and future foreign subsidiaries. In addition, under
the Amended and Restated Credit Agreement, the Company is required to comply
with financial covenants with respect to (i) a maximum leverage ratio; (ii) a
minimum fixed charge coverage ratio; (iii) a minimum net worth; (iv) capital
expenditures; and (v) rentals. If the Company were unable to borrow under the
Amended and Restated Credit Agreement due to a default or
18
<PAGE> 21
failure to meet certain specified borrowing base prerequisites for borrowing, it
could be left without sufficient liquidity.
SUBORDINATION OF NEW NOTES AND THE GUARANTEES; NON-GUARANTOR SUBSIDIARIES
The New Notes and the Guarantees will be unsecured and subordinated to the
prior payment in full of all Senior Indebtedness of the Company and the
Guarantors, respectively. As of December 31, 1997, on a pro forma basis, the
aggregate outstanding principal amount of all Senior Indebtedness was
approximately $73.4 million. In the event of a bankruptcy, liquidation or
reorganization of the Company, the assets of the Company or the Guarantors will
be available to pay obligations on the New Notes only after all Senior
Indebtedness of the Company or the Guarantors, as the case may be, has been paid
in full, and there may not be sufficient assets remaining to pay amounts due on
any or all of the New Notes. In addition, the Company may not pay principal or
premium, if any, or interest on the New Notes if any Senior Indebtedness is not
paid when due or any other default on any Senior Indebtedness occurs and the
maturity of such Senior Indebtedness is accelerated in accordance with its
terms, unless, in either case, such amount has been paid in full or the default
has been cured or waived and such acceleration has been rescinded. In addition,
if any default occurs with respect to certain Senior Indebtedness and certain
other conditions are satisfied, the Company may not make any payments on the New
Notes for a designated period of time. Finally, if any judicial proceeding is
pending with respect to any such default in payment on any Senior Indebtedness,
or other default with respect to certain Senior Indebtedness, or if the maturity
of the New Notes is accelerated because of a default under the Indenture and
such default constitutes a default with respect to any Senior Indebtedness, the
Company may not make any payment on the New Notes.
The New Notes will not be guaranteed by any of the Company's foreign
subsidiaries. See "Description of the Notes." On a pro forma basis,
approximately 35% of the Company's net sales were made by non-Guarantor
subsidiaries in 1997.
INTEREST RATE FLUCTUATIONS
A significant portion of the indebtedness of the Company to be outstanding
following the Offering will bear interest at variable rates. While the Company
may enter interest rate protection agreements to limit its exposure to increases
in such interest rates, such agreements will not eliminate the exposure to
variable rates. Any increase in the interest rates on the Company's indebtedness
will reduce funds available to the Company for its operations and future
business opportunities.
INTEGRATION OF ACQUISITIONS
The Company seeks to grow through acquisitions. No assurance can be given
that the integration of any future acquisitions will be successful or that the
anticipated strategic benefits of any such future acquisitions will be realized.
Acquisitions may involve a number of special risks, including, but not limited
to, adverse short-term effects on the Company's reported operating results,
diversion of management's attention, standardization of accounting systems,
dependence on retaining, hiring and training key personnel, and unanticipated
problems or legal liabilities. The ability of the Company to successfully
implement its acquisition strategy depends on a number of factors, some of which
are beyond the Company's control. There can be no assurance that the Company
will be able to consummate acquisitions in the future on terms acceptable to it.
POTENTIAL RISKS RELATED TO SIGNIFICANT OPERATIONS IN FOREIGN COUNTRIES
The Company manufactures and sells certain of its products in Europe,
Canada and Mexico. In 1997, on a pro forma basis, approximately 35% of the
Company's net sales were derived from operations conducted outside the United
States. Such sales are principally in currencies other than U.S. dollars.
Foreign operations are subject to certain risks that can materially affect the
sales, profits, cash flows and financial position of the Company, such as
currency exchange rate fluctuations, inflation, changes in import duties,
exchange controls and variable political conditions. In particular, currency
exchange rate fluctuations may impact the revenues
19
<PAGE> 22
and gross margins of the Company's foreign operations. Moreover, most of the
Company's indebtedness is denominated in U.S. dollars and exchange rate moves
and other factors may affect the amount and availability of dollars to service
such debt. In addition, a highly inflationary economy may also give rise to
increased production costs without correspondingly increased prices, especially
if products are exported to countries with low inflation rates.
OWNERSHIP OF THE COMPANY
CCP and its affiliates in the aggregate own approximately 47.7% of the
Company's issued and outstanding voting securities on a fully diluted basis. In
addition, pursuant to the Members' Agreement (as defined), affiliates of CCP
have the ability to appoint a majority of the members of the Company's Board of
Managers. See "Management -- Members' Agreement." Accordingly, CCP will be able
to exert substantial influence on the direction and future operations of the
Company. See "Security Ownership of Certain Beneficial Owners and Management"
and "Plan of Distribution."
THE OEM SUPPLIER INDUSTRY
The Company competes in the global OEM supplier industry which is
characterized by a small number of OEMs which are able to exert considerable
pressure on OEM suppliers, including the Company. On a pro forma basis, sales to
OEM customers were approximately 65% of the Company's aggregate net sales in
1997. In addition, on a pro forma basis, sales to Chrysler and General Motors
were approximately 27% and 16%, respectively, of the Company's aggregate net
sales in 1997. Sales to these customers consist of a large number of different
parts, tooling and other services, which are sold to separate divisions and
operating groups within each customer's organizations. Although the Company has
purchase orders from such customers, such purchase orders generally provide for
supplying the customer's requirements for a particular model or model year
rather than for manufacturing a specific quantity of products. The loss of
either of such customers or any of such purchase orders, or a significant
decrease in demand for certain models or a group of related models sold by any
of its major customers could have a material adverse effect on the Company. The
failure of the Company to obtain new business for new models or to retain or
increase business on redesigned existing models could adversely affect the
Company. OEM customers are also able to exert considerable pressure on component
and system suppliers to reduce costs, provide integrated systems (as opposed to
just parts), finance tooling, improve quality and provide additional design and
engineering capabilities. There can be no assurance that the additional costs of
increased quality standards, price reductions or additional engineering or
systems integration capabilities required by OEMs will not have a material
adverse effect on the financial condition or results of operations of the
Company. In addition, the Company may not be able to pass on increases in the
cost of raw materials to its OEM customers.
The OEM supplier industry is highly cyclical and, in large part, dependent
upon the overall strength of consumer demand for light trucks and passenger
cars. There can be no assurance that the automotive industry for which the
Company supplies components and systems, will not experience downturns in the
future. An economic recession typically impacts substantially leveraged
companies such as the Company more than similarly situated companies with less
leverage. A decrease in overall consumer demand for motor vehicles in general or
specific types of vehicles could have a material adverse effect on the Company's
financial condition and results of operations.
LABOR RELATIONS
Approximately 150 of the Company's employees in the United States at the
Company's Port Huron, Michigan facility are represented by the Teamsters Union.
Collective bargaining agreements with the Teamsters Union affecting these
employees expire in April 1999. As is common in many European jurisdictions,
substantially all of the Company's employees in Europe are covered by
country-wide collective bargaining agreements. While the Company believes that
its relations with its employees are satisfactory, a dispute between the Company
and its employees could have a material adverse effect on the Company.
20
<PAGE> 23
Many of the Company's OEM and other Tier 1 supplier customers, and other
suppliers to the Company's customers, are unionized, and work stoppages,
slowdowns or other labor disputes experienced by, and the labor relations
policies of, OEMs and other Tier 1 suppliers could have an adverse effect on the
Company's results of operations.
PURCHASE OF THE NOTES UPON CHANGE OF CONTROL
Upon a Change of Control, the Company is required to offer to purchase all
outstanding New Notes at 101% of the principal amount thereof plus accrued and
unpaid interest to the date of purchase. The source of funds for any such
purchase will be the Company's available cash or cash generated from operations
or other sources, including borrowing, sales of assets, sales of equity or funds
provided by a new controlling person. However, there can be no assurance that
sufficient funds will be available at the time of any Change of Control to make
any required repurchases of New Notes tendered, or that, if applicable,
restrictions in the Amended and Restated Credit Agreement will allow the Company
to make such required repurchases. See "Description of the Notes -- Change of
Control."
COMPETITION
The Company's industry is highly competitive. A large number of actual or
potential competitors exist, some of which are larger than the Company and have
substantially greater resources than the Company. See "Business -- Competition."
There can be no assurance that the Company's business will not be adversely
affected by increased competition in the markets in which it currently operates
or in markets in which it will operate in the future, or that the Company will
be able to improve or maintain its profit margins. In addition, 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 four years prior to the marketing
of such models to the public.
OEMs have increasingly stressed the need for suppliers with global
capabilities. There can be no assurance that by further expanding into
international markets the Company will be successful either in competing with
other suppliers, domestic or foreign, or in maintaining its relationship with
various OEMs, such that its international operations will be profitable.
ENVIRONMENTAL MATTERS
The Company's operations are subject to various foreign, federal, state and
local environmental laws, and regulations, including, but not limited to, those
governing discharges into the air and water, the storage, handling and disposal
of solid and hazardous wastes, the remediation of soil and groundwater
contaminated by petroleum products or hazardous substances or wastes, and the
health and safety of employees. Compliance with environmental laws, stricter
interpretations of or amendments to such laws, or more vigorous enforcement
policies by regulatory agencies may require material expenditures by the
Company. The nature of the Company's current and former operations and the
history of industrial uses at some of its facilities expose the Company to the
risk of liabilities or claims with respect to environmental and worker health
and safety matters.
In addition, under certain environmental laws, a current or previous owner
or operator of property may be jointly and severally liable for the costs of
investigation, removal or remediation of certain substances on, under or in such
property, without regard to negligence or fault. The presence of, or failure to
remediate properly such substances may adversely affect the ability to sell or
rent such property or to borrow using such property as collateral. In addition,
persons who generate, arrange for the disposal or treatment of, or dispose of
hazardous substances may be jointly and severally liable for the costs of
investigation, remediation or removal of such hazardous substances at or from
the disposal or treatment facility, regardless of whether the such facility is
owned or operated by such person. Responsible parties also may be subject to
common law claims by third parties based on damages and costs resulting from
environmental contamination emanating from a site. See
"Business -- Environmental Regulation."
21
<PAGE> 24
LACK OF A PUBLIC MARKET FOR THE NEW NOTES
The New Notes will constitute a new class of securities with no established
trading market. The Company does not intend to list the New Notes on any
national securities exchange or to seek the admission thereof to trading in the
Nasdaq National Market. The Old Notes are designated for trading in the Private
Offerings, Resale and Trading through Automatic Linkages ("PORTAL") market. The
Company has been advised by CSI that CSI currently intends to make a market in
the New Notes. CSI is not obligated to do so, however, and any market-making
activities with respect to the New Notes may be discontinued at any time without
notice. In addition, such market-making activity will be subject to the limits
imposed by the Securities Act and the Exchange Act, and may be limited during
the Exchange Offer and the pendency of any Shelf Registration Statement (as
defined). Accordingly, no assurance can be given that an active public or other
market will develop for the New Notes or as to the liquidity of the trading
market for the New Notes. If a trading market does not develop or is not
maintained, holders of the New Notes may experience difficulty in reselling the
New Notes or may be unable to sell them at all. If a market develops for the New
Notes, future trading prices of the New Notes will depend on many factors,
including among other things, prevailing interest rates, the Company's financial
condition and results of operations, and the market for similar notes. Depending
on those and other factors, the New Notes may trade at a discount from their
principal amount.
22
<PAGE> 25
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by the Issuers on September 25, 1997 to the Initial
Purchasers, who resold the Old Notes to qualified institutional investors in
reliance on Rule 144A under the Securities Act. In connection therewith, the
Issuers, the Guarantors and the Initial Purchasers entered into the Registration
Rights Agreement, which provides that (i) the Issuers will file an Exchange
Offer Registration Statement with the Commission within 210 days after the date
of the original issuance of the Old Notes (the "Issue Date"), (ii) the Issuers
will use their best efforts to have the Exchange Offer Registration Statement
declared effective by the Commission within 270 days after the Issue Date (the
"Target Effectiveness Date"), (iii) the Issuers will consummate the Exchange
Offer within 300 days after the Issue Date (the "Target Consummation Date") and
(iv) if obligated to file the Shelf Registration Statement (as described below),
the Issuers will use their best efforts to file the Shelf Registration Statement
with the Commission promptly after such filing obligation arises and to cause
the Shelf Registration to become effective by the Commission as promptly as
possible after such obligation arises. Promptly after the effectiveness of the
Registration Statement, the Issuers will offer, pursuant to this Prospectus, to
the Holders of the Old Notes the opportunity to exchange their Old Notes for a
like principal amount of New Notes, to be issued without a restrictive legend
and which may, generally, be reoffered and resold by the holder without
restrictions or limitations under the Securities Act. The term "Holder" with
respect to the Exchange Offer means any person in whose name Old Notes are
registered on the books of the Company or any other person who has obtained a
properly completed bond power from the registered holder.
The Issuers have not requested, and do not intend to request, an
interpretation by the staff of the Commission with respect to whether the New
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for sale, resold or otherwise transferred by any holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Instead, based on interpretations by the staff of the Commission
set forth in no-action letters issued to third parties, the Issuers believe that
New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by any holder of such New
Notes (other than any such holder that is an "affiliate" of the Issuers within
the meaning of Rule 405 promulgated under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
Holder's business, such Holder has no arrangement or understanding with any
person to participate in the distribution of such New Notes and neither such
Holder nor any other such person is engaging in or intends to engage in a
distribution of such New Notes. Because the Commission has not considered the
Exchange Offer in the context of a no-action letter, there can be no assurance
that the staff of the Commission would make a similar determination with respect
to the Exchange Offer. Any Holder who is an affiliate of the Issuers or who
tenders in the Exchange Offer for the purpose of participating in a distribution
of the New Notes cannot rely on such interpretations by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a resale transaction.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Issuers). The
Issuers have agreed that, for a period of 180 days after the date of this
Prospectus, they will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
If (i) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, the Company reasonably
determines in good faith, after consultation with counsel, that it is not
23
<PAGE> 26
permitted to effect the Exchange Offer, (ii) the Exchange Offer is not commenced
on or prior to the Target Effectiveness Date, (iii) the Exchange Offer is, for
any reason, not consummated on or prior to the fifth day after the Target
Consummation Date, (iv) any Holder of Private Exchange Securities (as defined)
so requests, or (v) in the case of any Holder that participates in the Exchange
Offer, such Holder does not receive New Notes on the date of the exchange that
may be sold without restriction under state and federal securities laws (the
occurrence of any such event set forth in the foregoing clauses (i) through (v),
a "Shelf Registration Event"), then, in the case of such events, the Company
shall promptly deliver to the Holders and the Trustee notice thereof (the "Shelf
Notice") and thereafter the Issuers shall file an Initial Shelf Registration
Statement (as defined) pursuant to the Registration Rights Agreement.
SHELF REGISTRATION. If a Shelf Registration Event has occurred (and whether
or not an Exchange Offer Registration Statement has been filed with the
Commission or has become effective, or the Exchange Offer has been consummated),
then:
Initial Shelf Registration Statement. The Issuers shall promptly
prepare and file with the Commission a Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all
of the Old Notes (the "Initial Shelf Registration Statement"). The Issuers
shall file with the Commission the Initial Shelf Registration Statement on
or prior to the Filing Date. The Initial Shelf Registration Statement shall
be on Form S-1 or another appropriate form, if available, permitting
registration of such Registrable Securities for resale by such holders in
the manner designated by them (including, without limitation, in one or
more underwritten offerings). The Issuers shall not permit any securities
other than the Registrable Securities to be included in the Initial Shelf
Registration Statement or any Subsequent Shelf Registration Statement (as
defined below). Each of the Issuers shall use their best efforts to cause
the Initial Shelf Registration Statement to be declared effective under the
Securities Act on or prior to the Effectiveness Date, and to keep the
Initial Shelf Registration Statement continuously effective under the
Securities Act until the date which is 24 months from the Closing Date, or
such shorter period ending when (i) all Registrable Securities covered by
the Initial Shelf Registration Statement have been sold in the manner set
forth and as contemplated in the Initial Shelf Registration Statement or
(ii) a Subsequent Shelf Registration Statement covering all of the
Registrable Securities has been declared effective under the Securities Act
(such 24 month or shorter period, the "Effectiveness Period").
Subsequent Shelf Registration Statements. If the Initial Shelf
Registration Statement or any Subsequent Shelf Registration Statement
ceases to be effective for any reason at any time during the Effectiveness
Period (other than because of the sale of all of the securities registered
thereunder), each of the Issuers shall use their best efforts to obtain the
prompt withdrawal of any order suspending the effectiveness thereof, and in
any event the Issuers shall within 30 days of such cessation of
effectiveness amend the Shelf Registration Statement in a manner reasonably
expected to obtain the withdrawal of the order suspending the effectiveness
thereof, or file an additional "shelf" Registration Statement pursuant to
Rule 415 covering all of the Registrable Securities (a "Subsequent Shelf
Registration Statement"). If a Subsequent Shelf Registration Statement is
filed, each of the Issuers shall use their best efforts to cause the
Subsequent Shelf Registration Statement to be declared effective as soon as
reasonably practicable after such filing and to keep such Registration
Statement continuously effective until the end of the Effectiveness Period.
As used herein the term "Shelf Registration Statement" means the Initial
Shelf Registration Statement and any Subsequent Shelf Registration
Statement.
Supplements and Amendments. The Issuers shall promptly supplement and
amend the Shelf Registration Statement if required by the rules,
regulations or instructions applicable to the registration form used for
such Shelf Registration Statement, if required by the Securities Act, or if
reasonably requested by the Holders of a majority in aggregate principal
amount of the Registrable Securities covered by such Registration Statement
or by any underwriter of such Registrable Securities.
24
<PAGE> 27
ADDITIONAL INTEREST
(a) The Issuers agree to pay, as liquidated damages, additional interest on
the Notes ("Additional Interest") under the circumstances and to the extent set
forth below (each of which shall be given independent effect): if either the
Exchange Offer Registration Statement or the Initial Shelf Registration
Statement has not been filed on or prior to the Filing Date (unless, with
respect to the Exchange Offer Registration Statement, a Shelf Registration Event
described in clause (i) of the last paragraph of "-- Purpose and Effect of the
Exchange Offer" shall have occurred prior to the Filing Date), Additional
Interest shall accrue on the Notes over and above the stated interest in an
amount equal to $0.192 per week (or any part thereof) per $1,000 principal
amount of Old Notes:
(i) if either the Exchange Offer Registration Statement or the Initial
Shelf Registration Statement is not declared effective by the Commission on
or prior to the Effectiveness Date (unless, with respect to the Exchange
Offer Registration Statement, a Shelf Registration Event described in
clause (i) of the last paragraph of "-- Purpose and Effect of the Exchange
Offer" shall have occurred), Additional Interest shall accrue on the Notes
over and above the stated interest in an amount equal to $0.192 per week
(or any part thereof) per $1,000 principal amount of Old Notes; and
(ii) if (A) the Issuers have not exchanged New Notes for all Old Notes
validly tendered and not withdrawn in accordance with the terms of the
Exchange Offer on or prior to the fifth day after the Expiration Date, or
(B) the Exchange Offer Registration Statement ceases to be effective at any
time prior to the Expiration Date, or (C) if applicable, any Shelf
Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time during the
Effectiveness Period, then Additional Interest shall accrue on the Old
Notes over and above the stated interest in an amount equal to $0.192 per
week (or any part thereof) per $1,000 principal amount of the Old Notes for
the first 90 days commencing on (x) the sixth day after the Expiration
Date, in the case of (A) above, or (y) the day the Exchange Offer
Registration Statement ceases to be effective in the case of (B) above, or
(z) the day such Shelf Registration Statement ceases to be effective in the
case of (C) above;
provided, however, that (1) upon the filing of the Exchange Offer Registration
Statement or a Shelf Registration Statement as required hereunder (in the case
of clause (i) of this paragraph), (2) upon the effectiveness of the Exchange
Offer Registration Statement or the Shelf Registration Statement as required
hereunder (in the case of clause (ii) of this paragraph) or (3) upon the
exchange of New Notes for all Old Notes validly tendered and not withdrawn (in
the case of clause (ii)(A) of this paragraph), or upon the effectiveness of the
Exchange Offer Registration Statement which had ceased to remain effective (in
the case of clause (ii)(B) of this paragraph), or upon the effectiveness of the
Shelf Registration Statement which had ceased to remain effective (in the case
of clause (ii)(C) of this paragraph, Additional Interest on the Old Notes as a
result of such clause (or the relevant subclause thereof), as the case may be,
shall cease to accrue (but any accrued amount shall be payable).
Holders of Old Notes will be required to make certain representations to
the Issuers (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and benefit from the provisions set forth
above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all of the provisions of the Registration Rights Agreement, a
copy of which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part.
The Old Notes are designated for trading in the PORTAL market. To the
extent Old Notes are tendered and accepted in the Exchange Offer, the principal
amount of outstanding Old Notes will decrease with a resulting decrease in the
liquidity in the market therefor. Following the consummation of the Exchange
Offer,
25
<PAGE> 28
Holders of Old Notes who were eligible to participate in the Exchange Offer but
who did not tender their Old Notes will not be entitled to certain rights under
the Registration Rights Agreement and such Old Notes will continue to be subject
to certain restrictions on transfer. Accordingly, the liquidity of the market
for the Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuers will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time on the
Expiration Date. The Issuers will issue $1,000 principal amount of New Notes in
exchange for each $1,000 principal amount of outstanding Old Notes accepted in
the Exchange Offer. Holders may tender some or all of their Old Notes pursuant
to the Exchange Offer. However, Old Notes may be tendered only in integral
multiples of $1,000.
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes, except that the New Notes have
been registered under the Securities Act and therefore will not bear legends
restricting their transfer and will not contain certain provisions providing for
the payment of additional interest on the Old Notes under certain circumstances
relating to the Registration Rights Agreement, which provisions will terminate
upon the consummation of the Exchange Offer. The New Notes will evidence the
same debt as the Old Notes and will be entitled to the benefits of the Indenture
under which the Old Notes were, and the New Notes will be, issued.
As of the date of this Prospectus, $125,000,000, aggregate principal amount
of the Old Notes are outstanding. The Issuers have fixed the close of business
on , 1998 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus, together with the Letter of
Transmittal, will initially be sent. As of such date, there were
registered Holders of the Old Notes.
Holders of the Old Notes do not have any appraisal or dissenters' rights
under the Delaware General Corporation Law (the "DGCL") or the Indenture in
connection with the Exchange Offer. The Issuers intend to conduct the Exchange
Offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the Commission promulgated thereunder.
The Issuers shall be deemed to have accepted validly tendered Old Notes
when, as and if the Issuers have given oral notice (confirmed in writing) or
written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering Holders for the purpose of the exchange of Old Notes.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, any such unaccepted Old Notes will be returned, without expense, to
the tendering Holder thereof as promptly as practicable after the Expiration
Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Issuers will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998 unless the Issuers, in their sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Issuers will notify the Exchange
Agent of any extension by oral notice (confirmed in writing) or written notice
and will make a public announcement thereof prior to 9:00 a.m., New York City
time, on the next business day after each previously scheduled expiration date.
The Issuers reserve the right, in their sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or, if any of the
conditions set forth below under "The Exchange Offer -- Conditions" shall not
have been satisfied, to terminate the Exchange Offer, by giving oral notice
(confirmed in writing) or
26
<PAGE> 29
written notice of such delay, extension or termination to the Exchange Agent or
(ii) to amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by a public announcement thereof. If the Exchange Offer is amended
in a manner determined by the Issuers to constitute a material change, the
Issuers will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered Holders, and the Issuers
will extend the Exchange Offer for a period of five to 10 business days,
depending upon the significance of the amendment and the manner of disclosure to
the registered Holders, if the Exchange Offer would otherwise expire during such
five- to 10-business-day period.
Without limiting the manner in which the Issuers may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offer, the Issuers shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from April 1, 1998. Interest will be paid
on the Old Notes accepted for exchange to, but not including, April 1, 1998.
PROCEDURES FOR TENDERING
The tender of Old Notes by a holder thereof pursuant to one of the
procedures set forth below and the acceptance thereof by the Issuers will
constitute a binding agreement between such Holder and the Issuers in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal. This Prospectus, together with the Letter of Transmittal, will
first be sent on or about , 1998, to all Holders of Old Notes known
to the Issuers and the Exchange Agent.
Only a Holder of the Old Notes may tender such Old Notes in the Exchange
Offer. A Holder who wishes to tender any Old Notes for exchange pursuant to the
Exchange Offer must transmit a properly completed and duly executed Letter of
Transmittal, or a facsimile thereof, including any other required documents, to
the Exchange Agent prior to 5:00 p.m, New York City time, on the Expiration
Date. In addition, either (i) certificates for such Old Notes must be received
by the Exchange Agent along with the Letter of Transmittal or (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the Holder must comply with
the guaranteed delivery procedures described below. To be tendered effectively,
the Old Notes, Letter of Transmittal and other required documents must be
received by the Exchange Agent at the address set forth below under "Exchange
Agent" prior to 5:00 p.m., New York City time, on the Expiration Date.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IF SENT BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED AND PROPER INSURANCE BE
OBTAINED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO
THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD
NOTES SHOULD BE SENT TO THE COMPANY.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered Holder promptly and instruct such
registered Holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such beneficial owner's own behalf, such
beneficial owner must, prior to completing and executing the Letter of
Transmittal and delivering such beneficial owner's Old Notes, either make
appropriate arrangements to register ownership of the Old Notes in such
beneficial owner's name or obtain a properly completed bond power from the
registered Holder. The transfer of registered ownership may take considerable
time.
27
<PAGE> 30
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined herein)
unless the Old Notes tendered pursuant thereto are tendered (i) by a registered
Holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 promulgated under the Exchange Act (an "Eligible
Institution").
If the Letter of Transmittal is signed by a person other than the
registered Holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered Holder as such registered Holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Issuers,
evidence satisfactory to the Issuers of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Issuers in their sole discretion, which determination will be final and
binding. The Issuers reserve the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Issuers' acceptance of which would,
in the opinion of counsel for the Issuers, be unlawful. The Issuers also reserve
the right to waive any defects, irregularities or conditions of tender as to
particular Old Notes. The interpretation by the Issuers of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Issuers shall determine. Although the Issuers intend to
notify Holders of defects or irregularities with respect to tenders of Old
Notes, neither the Issuers, the Exchange Agent nor any other person shall incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that the Issuers
determine are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
By tendering, each Holder will represent to the Issuers, among other
things, that (i) the New Notes acquired by the Holder and any beneficial owners
of Old Notes pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such New Notes, (ii) neither the
Holder nor such beneficial owner has an arrangement with any person to
participate in the distribution of such New Notes, (iii) neither the Holder nor
such beneficial owner nor any such other person is engaging in or intends to
engage in a distribution of such New Notes and (iv) neither the Holder nor any
such other person is an "affiliate," as defined under Rule 405 promulgated under
the Securities Act, of the Issuers. Each broker-dealer that receives New Notes
for its own account in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities (other than Old Notes acquired directly from the Issuers),
may participate in the Exchange Offer but may be deemed an "underwriter" under
the Securities Act and, therefore, must acknowledge in the Letter of Transmittal
that it will deliver a prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. See "Plan of
Distribution."
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of
28
<PAGE> 31
this Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility's system may make book-entry delivery of Old Notes
by causing the Book-Entry Transfer Facility to transfer such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "-- Exchange Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the Holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) together with the certificate(s)
representing the Old Notes, or a Book-Entry Confirmation, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer, or a Book-Entry Confirmation, as the
case may be, and all other documents required by the Letter of Transmittal
are received by the Exchange Agent within five New York Stock Exchange
trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) be signed by the Holder
in the same manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to have the Trustee with
respect to the Old Notes register the transfer of such Old Notes into the name
of the persons withdrawing the tender and (iv) specify the name in which any
such Old Notes are to be registered, if different from that of the Depositor. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates, the withdrawing
Holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such Holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Issuers in their sole discretion, which determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange
29
<PAGE> 32
Offer and no New Notes will be issued with respect thereto unless the Old Notes
so withdrawn are validly retendered. Properly withdrawn Old Notes may be
retendered by following one of the procedures described above under "--
Procedures for Tendering" at any time prior to the Expiration Date.
Any Old Notes which have been tendered but which are not accepted for
payment due to withdrawal, rejection of tender or termination of the Exchange
Offer will be returned as soon as practicable to the Holder thereof without cost
to such Holder (or, in the case of Old Notes tendered by book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry transfer procedures described above, such Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility for the
Old Notes).
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuers shall not
be required to accept for exchange, or exchange New Notes for, any Old Notes,
and may terminate the Exchange Offer as provided herein before the acceptance of
such Old Notes, if:
(a) the Exchange Offer shall violate applicable law or any applicable
interpretation of the staff of the Commission; or
(b) any action or proceeding is instituted or threatened in any court
or by any governmental agency that might materially impair the ability of
the Issuers to proceed with the Exchange Offer or any material adverse
development has occurred in any existing action or proceeding with respect
to the Issuers; or
(c) any governmental approval has not been obtained, which approval
the Issuers shall deem necessary for the consummation of the Exchange
Offer.
If the Issuers determine in their sole discretion that any of the
conditions are not satisfied, the Issuers may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering Holders (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility), (ii) extend the Exchange Offer and retain
all Old Notes tendered prior to the expiration of the Exchange Offer, subject,
however, to the rights of Holders to withdraw such Old Notes (see "-- Withdrawal
of Tenders") or (iii) waive such unsatisfied conditions with respect to the
Exchange Offer and accept all properly tendered Old Notes which have not been
withdrawn. If such waiver constitutes a material change to the Exchange Offer,
the Issuers will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered Holders, and the Issuers
will extend the Exchange Offer for a period of five to 10 business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered Holders, if the Exchange Offer would otherwise expire during such
five- to 10-business-day period.
EXCHANGE AGENT
First Union National Bank has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notices of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
First Union National Bank
230 S. Tryon Street, 9th Floor
Charlotte, North Carolina 28288-1179
Attention: Corporate Trust Administration
Telecopier: (704) 383-7316
30
<PAGE> 33
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuers. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Issuers and their affiliates.
The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuers. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
The Issuers will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
Holder or any other persons) will be payable by the tendering Holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering Holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value less unamortized discount, as reflected in the Company's
accounting records on the date of the exchange. Accordingly, no gain or loss for
accounting purposes will be recognized. The expenses of the Exchange Offer and
the unamortized expenses related to the issuance of the Old Notes will be
amortized over the term of the New Notes.
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer, as it
will be an even exchange of the Old Notes. The net proceeds to the Company from
the Old Notes were approximately $119.6 million, after deducting the Initial
Purchasers' discounts and fees and expenses of the Offering. The Company used
such net proceeds to (i) repay approximately $90.0 million outstanding under the
Amended and Restated Credit Agreement (the "Credit Agreement Debt"), (ii) repay
approximately $20.0 million of senior subordinated indebtedness (the "Senior
Subordinated Debt") incurred in connection with the Brink Acquisition and to
refinance then existing debt, (iii) repay approximately $6.3 million of
subordinated indebtedness incurred in connection with the Brink Acquisition (the
"Junior Subordinated Guilder Note"), (iv) pay approximately $1.9 of accrued
interest and (v) pay prepayment penalties of $1.4 million on the Senior
Subordinated Debt.
31
<PAGE> 34
PRO FORMA CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of December 31, 1997 and, as adjusted to give effect to the 1998 Transactions.
The information set forth below should be read in conjunction with the "Summary
Consolidated Historical and Pro Forma Financial Data," "Unaudited Pro Forma
Financial Information," "Management Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
of the Company, and the notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
--------------------------
AS ADJUSTED
FOR THE 1998
ACTUAL TRANSACTIONS
------ ------------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents(1)........................... $ 27,348 $ 6,589
======== ========
Long-term debt (including current maturities):
Amended and Restated Credit Agreement(2):
Revolving Credit Facility(3)...................... $ 1,900 $ 2,737
Tranche A Term Loan............................... 17,065 17,065
Tranche B Term Loan............................... 15,883 15,883
Acquisition Facility(1)........................... 21,000 21,000
Canadian Credit Agreement(2)(3)......................
Term Note......................................... 13,952 13,952
Revolving Note.................................... 2,790 2,790
Notes (4)............................................ 124,536 124,536
-------- --------
Total long-term debt.............................. 197,126 197,963
Mandatorily redeemable warrants(5)..................... 3,507 3,507
Members' equity........................................ 16,193 16,193
-------- --------
Total capitalization.............................. $216,826 $217,663
======== ========
</TABLE>
- -------------------------
(1) On December 31, 1997 the Company borrowed $21.0 million under its
Acquisition Facility, the proceeds of which are included in cash and cash
equivalents. On January 2, 1998 these proceeds were used to make the Ellebi
Acquisition.
(2) See "Description of the Credit Facilities."
(3) The Company has up to $25.0 million available under the Revolving Credit
Facility. Borrowings by SportRack International under the revolving note of
the Canadian Credit Agreement (as defined) are counted against availability
under the Revolving Credit Facility.
(4) The principal amount of the Notes is $125.0 million. The Notes are presented
net of unamortized discount of $464,000.
(5) Represents the value assigned to certain warrants associated with the Senior
Subordinated Debt. The Senior Subordinated Debt was repaid with proceeds
from the Notes. The warrants are being accreted to their redemption value
through periodic charges to members' equity.
32
<PAGE> 35
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information of the Company is
based on the audited financial statements of the Company, Valley Industries, and
Ellebi S.p.A. included elsewhere in this Prospectus, and the unaudited financial
statements of the Sport Rack division of Bell, Nomadic and Transfo-Rakzs. The
unaudited pro forma statement of operations for the year ended December 31, 1997
gives effect to the Valley Acquisition, the SportRack International Acquisition,
the 1998 Transactions and the Offering as if such transactions had occurred on
January 1, 1997. The pro forma balance sheet as of December 31, 1997 gives
effect to the Ellebi Acquisition and the Transfo-Rakzs Acquisition as if such
transactions had occurred at such date. The Exchange Offer has no effect on the
unaudited pro forma financial information.
The pro forma financial information gives effect to pro forma adjustments
that are based upon available information and certain assumptions that the
Company believes are reasonable. The Ellebi Acquisition and the Transfo-Rakzs
Acquisition have been accounted for using the purchase method of accounting. The
purchase price in excess of the fair value of net assets acquired for Ellebi and
Transfo-Rakzs has been allocated to goodwill. The pro forma financial
information should be read in conjunction with the historical financial
statements of the Company, Valley Industries, Ellebi S.p.A. and, in each case,
the related notes thereto, included elsewhere in this Prospectus.
The pro forma financial information does not purport to be indicative of
the results that would have been obtained had such transactions been completed
as of the assumed dates and for the periods presented or that may be obtained in
the future.
33
<PAGE> 36
ADVANCED ACCESSORY SYSTEMS, LLC
UNAUDITED PRO FORMA BALANCE SHEET
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
ELLEBI
AND
TRANSFO-RAKZS
ACQUISITIONS
AND PRO FORMA
COMPANY ADJUSTMENTS(1) PRO FORMA
------- -------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets
Cash................................................... $ 27,348 $(20,759)(2) $ 6,589
Accounts receivable, net............................... 43,523 4,229 47,752
Inventories............................................ 34,408 11,303 45,711
Other current assets................................... 6,469 378 6,847
-------- -------- --------
Total current assets................................ 111,748 (4,849) 106,899
Property and equipment, net.............................. 55,928 7,503 63,431
Goodwill, net............................................ 85,889 4,157 90,046
Intangible assets, net................................... 7,595 -- 7,595
Deferred income taxes and other noncurrent assets........ 4,323 1,080 5,403
-------- -------- --------
Total assets........................................ $265,483 $ 7,891 $273,374
======== ======== ========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities
Current maturities of long-term debt................... $ 3,746 $ -- $ 3,746
Accounts payable....................................... 23,479 2,329 25,808
Accrued liabilities.................................... 20,148 2,620 22,768
-------- -------- --------
Total current liabilities........................... 47,373 4,949 52,322
Deferred income taxes.................................... 3,545 830 4,375
Other noncurrent liabilities............................. 1,234 1,275 2,509
Long-term debt, less current maturities.................. 193,380 837(3) 194,217
Mandatorily redeemable warrants.......................... 3,507 -- 3,507
Minority interest........................................ 251 -- 251
Members' equity.......................................... 16,193 -- 16,193
-------- -------- --------
Total liabilities and members' equity............... $265,483 $ 7,891 $273,374
======== ======== ========
</TABLE>
See accompanying notes to Unaudited Pro Forma Balance Sheet.
34
<PAGE> 37
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(1) Historical balance sheet data of Ellebi and Transfo-Rakzs as of December 31,
1997 have been translated at the closing exchange rate on such date, or
1,686 and 1.43 Italian lira and Canadian dollars, respectively, to one
United States dollar. The balance sheets and the related acquisition
adjustments follow:
<TABLE>
<CAPTION>
HISTORICAL ELLEBI AND
------------------------ ACQUISITION TRANSFO-RAKZS
ELLEBI TRANSFO-RAKZS ADJUSTMENTS(A) ACQUISITIONS
------ ------------- -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash.............................. $ 6 $ -- $(20,765)(b) $(20,759)
Accounts receivable, net.......... 4,219 10 -- 4,229
Inventories....................... 9,446 127 1,730 11,303
Other current assets.............. 372 6 -- 378
------- ---- -------- --------
Total current assets........... 14,043 143 (19,035) (4,849)
Property and equipment, net......... 2,807 52 4,644 7,503
Goodwill, net....................... -- -- 4,157 4,157
Deferred income taxes and other
assets............................ 143 -- 937 1,080
------- ---- -------- --------
Total assets................... $16,993 $195 $ (9,297) $ 7,891
======= ==== ======== ========
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term
debt........................... $ -- $ -- $ -- $ --
Accounts payable.................. 2,299 30 -- 2,329
Accrued liabilities............... 2,544 26 50(c) 2,620
------- ---- -------- --------
Total current liabilities...... 4,843 56 50 4,949
Deferred income taxes............... -- -- 830 830
Other noncurrent liabilities........ 1,275 -- -- 1,275
Long-term debt, less current
maturities........................ -- -- 837 837
Equity.............................. 10,875 139 (11,014) --
------- ---- -------- --------
Total liabilities and equity... $16,993 $195 $ (9,297) $ 7,891
======= ==== ======== ========
</TABLE>
35
<PAGE> 38
- -------------------------
(a) Adjustment reflects management's preliminary allocation of purchase
price related to the Ellebi Acquisition and the Transfo-Rakzs
Acquisition in accordance with the purchase method of accounting,
summarized as follows:
<TABLE>
<CAPTION>
ACQUISITION
ELLEBI TRANSFO-RAKZS ADJUSTMENTS
------ ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Purchase price:
Cash consideration...................... $ 20,759 $ 837 $21,596
Estimated fees and expenses............. 365 -- 365
Obligations to sellers.................. 1,000 210 1,210(i)
-------- ------ -------
Total purchase price................. $ 22,124 $1,047 $23,171
======== ====== =======
Allocated as follows:
Historical book value of net assets..... $ 10,875 $ 139 $11,014
Excluded (assets) and liabilities:
Cash................................. (6) -- (6)
Accrued liabilities.................. 1,525 -- 1,525
-------- ------ -------
Historical book value of net assets
acquired............................. 12,394 139 12,533
Estimated increase (decrease):
Inventory............................ 1,730 -- 1,730(ii)
Property and equipment............... 4,644 -- 4,644
Goodwill............................. 3,249 908 4,157
Deferred income taxes and other...... 937 -- 937
Deferred income taxes................ (830) -- (830)
-------- ------ -------
Total..................................... $ 22,124 $1,047 $23,171
======== ====== =======
</TABLE>
(i) Represents additional purchase price resulting from an increase in
net assets determined at the closing date.
(ii) The reversal of the increase in inventory is not reflected in the
Unaudited Pro Forma Statement of Operations.
- -------------------------
(b) Adjustment reflects:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Cash used to purchase Ellebi S.p.A.
assets.............................. $(20,759)
Excluded cash at Ellebi S.p.A......... (6)
--------
$(20,765)
========
</TABLE>
(c) Adjustment reflects:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Estimated fees and expenses........... $ 365
Obligations to sellers................ 1,210
Excluded accrued liabilities.......... (1,525)
--------
$ 50
========
</TABLE>
(2) Adjustment represents cash used to finance the Ellebi Acquisition. The
acquisition was financed with the borrowing of $21.0 million under the
Company's Acquisition Facility. The borrowing and related debt issuance
costs of $330,000 are recorded in the Company's balance sheet at December
31, 1997.
(3) Adjustment reflects the Company's borrowings under its U.S. Revolving Credit
Facility used to finance the Transfo-Rakzs Acquisition.
36
<PAGE> 39
ADVANCED ACCESSORY SYSTEMS, LLC
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
ADJUSTMENTS
------------------------------------------------
VALLEY
AND ELLEBI
SPORTRACK INITIAL AND
INTERNATIONAL OFFERING OF TRANSFO-RAKZS
COMPANY ACQUISITIONS(1) OLD NOTES(2) ACQUISITIONS(3) PRO FORMA
------- --------------- ------------ --------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales.......................... $188,678 $57,991 $ -- $21,820 $268,489
Cost of sales...................... 135,556 45,003 -- 13,614 194,173
-------- ------- ------- ------- --------
Gross profit..................... 53,122 12,988 -- 8,206 74,316
Selling, administrative and product
development expenses............. 31,350 11,169 -- 4,209 46,728
Amortization of intangible
assets........................... 2,336 973 -- 139 3,448
-------- ------- ------- ------- --------
Operating income................. 19,436 846 -- 3,858 24,140
Interest expense................... 12,627 3,570 1,160 2,270 19,627
Foreign currency loss.............. 6,097 -- -- -- 6,097
Other (income) expense, net........ -- 103 -- 22 125
-------- ------- ------- ------- --------
Income (loss) before minority
interest and income taxes..... 712 (2,827) (1,160) 1,566 (1,709)
Provision (benefit) for income
taxes............................ (2,856) (575) -- 870 (2,561)
-------- ------- ------- ------- --------
Income (loss) before minority
interest...................... 3,568 (2,252) (1,160) 696 852
Minority interest.................. 97 -- -- -- 97
-------- ------- ------- ------- --------
Net income (loss)................ $ 3,471 $(2,252) $(1,160) $ 696 $ 755
======== ======= ======= ======= ========
EBITDA............................. $ 27,916 $ 2,928 $ -- $ 5,447 $ 36,291
======== ======= ======= ======= ========
</TABLE>
See accompanying notes to Unaudited Pro Forma Statement of Operations.
37
<PAGE> 40
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(1) Pro forma adjustments to reflect the operations of Valley for the seven
month period ended August 5, 1997 and SportRack International for the six
month period through July 2, 1997. Subsequent to August 5, 1997, the
operating results of Valley are included in the Company's historical
results. Subsequent to July 2, 1997, the operating results of SportRack
International are included in the Company's historical results.
<TABLE>
<CAPTION>
HISTORICAL
------------------------
SPORTRACK
VALLEY INTERNATIONAL ADJUSTMENTS PRO FORMA
------ ------------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales................................... $53,510 $4,481 $ -- $57,991
Cost of sales............................... 41,630 3,225 148(a) 45,003
------- ------ ------- -------
Gross profit.............................. 11,880 1,256 (148) 12,988
Selling, administrative and product
development expenses...................... 9,598 1,571 -- 11,169
Amortization of intangible assets........... -- 171 802(a) 973
------- ------ ------- -------
Operating income (loss)................... 2,282 (486) (950) 846
Interest expense............................ 587 25 2,958(b) 3,570
Foreign currency loss....................... -- -- -- --
Other (income) expense, net................. 125 (22) -- 103
------- ------ ------- -------
Income (loss) before minority interest and
income taxes........................... 1,570 (489) (3,908) (2,827)
Provision (benefit) for income taxes........ (11) -- (564)(c) (575)
------- ------ ------- -------
Income (loss) before minority interest.... 1,581 (489) (3,344) (2,252)
Minority interest........................... -- -- -- --
------- ------ ------- -------
Net income (loss)......................... $ 1,581 $ (489) $(3,344) $(2,252)
======= ====== ======= =======
</TABLE>
- -------------------------
(a) Adjustments reflect the estimated increase in depreciation expense
after giving effect to an approximate $2.5 million increase in fair
value over historical cost and differences in useful lives of property
and equipment, amortization expense related to approximately $34.5
million of goodwill (over 30 years) and approximately $3.3 million of
other intangible assets (over 5-10 years) for the Valley Acquisition
and the SportRack International Acquisition. The estimated increases
are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Depreciation of property and equipment...................... $148
====
Amortization of goodwill.................................... $660
Amortization of other intangible assets..................... 142
----
Amortization of intangible assets........................... $802
====
</TABLE>
38
<PAGE> 41
(b) Adjustment reflects the increase in interest expense for borrowings
outstanding under the Tranche B Term Loan and the Canadian Term Note
after completion of the Valley Acquisition and the SportRack
International Acquisition as if the borrowings had been outstanding at
the beginning of the period. Historical and pro forma interest expense
are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Tranche B Term Loan -- $55.0 million at 8.90% (7 months).... $2,855
Canadian Term Note -- $14.5 million at 7.25% (6 months)..... 523
Amortization of debt issuance costs......................... 192
------
3,570
Elimination of historical interest expense.................. (612)
------
Net increase in interest expense............................ $2,958
======
</TABLE>
(c) Adjustment reflects the pro forma income tax benefit of adjustments
made above. No benefit for federal income tax has been included for
Valley because, for federal income tax purposes, Valley's results of
operations accrue to the unitholders.
(2) Adjustment reflects the net impact on interest expense as if the issuance of
the Old Notes had been consummated on January 1, 1997:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Issuance of Old Notes(a) -- $124.5 million at 9.75%......... $ 9,141
Repayment of:
Revolving Credit Facility -- $7.5 million at 6.10%........ (341)
Tranche A Term Loan(b) -- $43.5 million at 8.00%.......... (2,682)
Tranche B Term Loan(b) -- $39.0 million at 8.87%.......... (2,656)
Senior Subordinated Debt(c) -- $16.8 million at 12.50%.... (2,210)
Junior Subordinated Guilder Note -- $6.4 million at
7.00%.................................................. (336)
Amortization of discount and debt issuance cost (over 10
years)(d)................................................. 244
-------
Net increase in interest expense............................ $ 1,160
=======
</TABLE>
- -------------------------
(a) The Notes are reflected net of discount of $471,000. Interest is
calculated on the principal amount of $125.0 million.
(b) Includes amortization of debt issuance cost for Tranche A Term Loan and
Tranche B Term Loan of $76,000 and $62,000, respectively.
(c) The Senior Subordinated Debt is reflected net of discount of
approximately $3.2 million and pro forma interest includes $335,000 of
amortization. Interest is calculated on the principal amount of $20.0
million.
(d) Adjustment reflects the amortization of discount and deferred debt
issuance costs associated with the Old Notes as if the Offering had
been consummated as of the beginning of the period. These costs are
amortized over the term of the Old Notes using the effective interest
method.
39
<PAGE> 42
(3) Pro forma adjustments to reflect the operations of Ellebi and Transfo-Rakzs
for the year ended December 31, 1997 translated at the average month end
exchange rate for the year, or 1,706 and 1.37 Italian lira and Canadian
dollars, respectively, to one United States dollar. Ellebi was acquired on
January 2, 1998 and Transfo-Rakzs was acquired on February 7, 1998.
<TABLE>
<CAPTION>
HISTORICAL
-----------------------
ELLEBI TRANSFO-RAKZS ADJUSTMENTS PRO FORMA
------ ------------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales..................................... $21,322 $498 $ -- $21,820
Cost of sales................................. 12,414 239 961(a) 13,614
------- ---- ------- -------
Gross profit................................ 8,908 259 (961) 8,206
Selling, administrative and product
development expenses........................ 4,096 113 -- 4,209
Amortization of intangible assets............. -- -- 139(a) 139
------- ---- ------- -------
Operating income (loss)..................... 4,812 146 (1,100) 3,858
Interest expense.............................. -- 8 2,262(b) 2,270
Foreign currency loss......................... -- -- -- --
Other (income) expense, net................... 22 -- -- 22
------- ---- ------- -------
Income (loss) before minority interest and
income taxes............................. 4,790 138 (3,362) 1,566
Provision (benefit) for income taxes.......... 2,614 24 (1,768)(c) 870
------- ---- ------- -------
Income (loss) before minority interest...... 2,176 114 (1,594) 696
Minority interest............................. -- -- -- --
------- ---- ------- -------
Net income (loss)........................... $ 2,176 $114 $(1,594) $ 696
======= ==== ======= =======
</TABLE>
- -------------------------
(a) Adjustments reflect the estimated increase in depreciation expense
after giving effect to an approximate $4.6 million increase in fair
value over historical cost and differences in useful lives of property
and equipment, amortization expense related to approximately $4.2
million of goodwill (over 30 years) assuming the Ellebi Acquisition
and Transfo-Rakzs Acquisition had been consummated on January 1, 1997.
The estimated increases are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Depreciation of property and equipment...................... $961
====
Amortization of goodwill.................................... $139
====
</TABLE>
(b) Adjustment reflects the increase in interest expense for borrowings
outstanding under the Acquisition Facility and the increase in the
Canadian revolving line of credit note after completion of the Ellebi
Acquisition and the Transfo-Rakzs Acquisition as if the borrowings had
been outstanding at the beginning of the period. Historical and pro
forma interest expense are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Acquisition Facility -- $21.0 million at 10.25%............. $2,153
Canadian revolving line of credit -- $.8 million at 7.50%... 62
Amortization of debt issuance costs......................... 55
------
2,270
Elimination of historical interest expense.................. (8)
------
Net increase in interest expense............................ $2,262
======
</TABLE>
(c) Adjustment reflects the pro forma income tax benefit of adjustments
made above.
40
<PAGE> 43
SELECTED HISTORICAL FINANCIAL DATA
The information below presents historical financial data of the MascoTech
Division ("Predecessor") for the years ended December 31, 1993 and 1994 and the
period from January 1, 1995 through September 27, 1995 (the period prior to the
acquisition of the net assets of MascoTech Division by the Company). The data as
of and for the years ended December 31, 1993 and 1994 have been derived from the
unaudited financial statements of the MascoTech Division and the data for the
period from January 1, 1995 through September 27, 1995 have been derived from
the audited financial statements included elsewhere in this Prospectus. The data
as of and for the period from September 28, 1995 through December 31, 1995 and
for the years ended December 31, 1996 and 1997 represent consolidated financial
data of the Company subsequent to the acquisition of the MascoTech Division, and
include (i) the operations of Brink subsequent to the Brink Acquisition on
October 30, 1996; (ii) the operations of the SportRack division of Bell and
Nomadic subsequent to the SportRack International Acquisition on July 2, 1997
and July 24, 1997, respectively, (iii) the operations of Valley subsequent to
the Valley Acquisition on August 5, 1997, and have been derived from the audited
financial statements included elsewhere in this Prospectus. The following table
should be read in conjunction with the financial statements of the Company and
notes thereto, "Unaudited Pro Forma Financial Information", and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
--------------------------------- --------------------------------------
YEAR ENDED PERIOD FROM PERIOD FROM YEAR ENDED
DECEMBER 31, JANUARY 1 TO SEPTEMBER 28, TO DECEMBER 31,
----------------- SEPTEMBER 27, DECEMBER 31, -------------------
1993 1994 1995 1995 1996(1) 1997(2)
---- ---- ------------- ---------------- ------- -------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................. $59,081 $60,882 $48,698 $16,299 $ 81,466 $188,678
Cost of sales.......................... 48,369 47,716 38,645 12,458 53,607 135,556
------- ------- ------- ------- -------- --------
Gross profit......................... 10,712 13,166 10,053 3,841 27,859 53,122
Selling, administrative and product
development expenses................. 6,585 7,313 6,107 1,472 13,413 31,350
Amortization of intangible assets...... -- -- -- 546 2,475 2,336
------- ------- ------- ------- -------- --------
Operating income..................... 4,127 5,853 3,946 1,823 11,971 19,436
Other (income) expense
Interest expense(3).................. -- -- -- 975 4,312 12,627
Foreign currency loss(4)............. -- -- -- -- 1,330 6,097
Other, net........................... 665 (105) 65 (22) (80) --
------- ------- ------- ------- -------- --------
Income before minority interest,
extraordinary charge and income
taxes.............................. 3,462 5,958 3,881 870 6,409 712
Provision (benefit) for income
taxes(5)............................. 1,247 2,114 1,324 -- (491) (2,856)
------- ------- ------- ------- -------- --------
Income before minority interest and
extraordinary charge............... 2,215 3,844 2,557 870 6,900 3,568
Minority interest...................... -- -- -- 9 69 97
------- ------- ------- ------- -------- --------
Income before extraordinary
charge............................. 2,215 3,844 2,557 861 6,831 3,471
Extraordinary charge(6)................ -- -- -- -- 1,970 7,416
------- ------- ------- ------- -------- --------
Net income (loss).................... $ 2,215 $ 3,844 $ 2,557 $ 861 $ 4,861 $ (3,945)
======= ======= ======= ======= ======== ========
OTHER DATA:
Cash flows from operating activities... $ 8,683 $ 1,165 $ 3,741 $ 1,390 $ 9,917 $ 6,982
EBITDA(7).............................. 4,890 6,773 4,735 2,651 16,448 27,916
Depreciation........................... 763 920 789 282 2,002 6,144
Capital expenditures................... 2,213 1,392 2,079 491 3,124 7,751
Ratio of EBITDA to interest expense....................................... 2.72x 3.81x 2.21x
Ratio of earnings to fixed charges(8)..................................... 1.89x 2.43x 1.06x
BALANCE SHEET DATA (AT END OF PERIOD):
Cash...................................................................... $ 1,637 $ 2,514 $ 27,348
Working capital........................................................... 3,960 14,368 64,375
Total assets.............................................................. 59,979 148,359 265,483
Total debt, including current maturities.................................. 34,900 93,142 197,126
Mandatorily redeemable warrants........................................... 200 3,498 3,507
Members' equity........................................................... 14,221 18,463 16,193
</TABLE>
(footnotes on following page)
41
<PAGE> 44
- -------------------------
(1) In October 1996, the Company acquired Brink. The Brink Acquisition has been
accounted for in accordance with the purchase method of accounting.
Accordingly, the operating results of Brink are included in the consolidated
operating results of the Company subsequent to October 30, 1996.
(2) The Company acquired Bell on July 2, 1997, Nomadic on July 24, 1997, and
Valley on August 5, 1997. The SportRack International Acquisition and Valley
Acquisition have been accounted for in accordance with the purchase method
of accounting. Accordingly, the operating results of SportRack International
and Valley are included in the consolidated operating results of the Company
subsequent to the respective acquisition dates.
(3) Prior to its acquisition by the Company on September 28, 1995, the
Predecessor was a division of MascoTech and, accordingly, had no outstanding
indebtedness.
(4) Represents net currency loss on indebtedness, incurred in connection with
the Brink Acquisition, which is currently denominated in U.S. dollars.
(5) The Predecessor, as a division of MascoTech, was allocated a portion of the
consolidated income tax provision, which approximated the division's federal
income tax provision on a stand-alone basis. The Company is a limited
liability corporation and, as such, the earnings of the Company and its
domestic subsidiaries are included in the taxable income of the Company's
unitholders and no federal income tax provision is required. The Company's
foreign subsidiaries provide for income taxes on their results of
operations.
(6) In connection with the indebtedness extinguished as a result of the Brink
Acquisition, a prepayment penalty of $220,000 and unamortized deferred debt
issuance costs of $1.8 million were charged to operations during 1996. In
connection with indebtedness extinguished as a result of issuing the Old
Notes, a prepayment penalty of $1.4 million, $3.1 million of unamortized
debt discount, and unamortized deferred debt issuance costs of $3.2 million
were charged to operations during 1997. The debt extinguishment charges in
1997 were reduced by $365,000 representing the income tax benefit recognized
by Brink.
(7) EBITDA is defined as operating income plus depreciation and amortization.
EBITDA is presented because it is generally accepted as providing useful
information regarding a company's ability to service and/or incur
indebtedness. However, EBITDA should not be considered in isolation from or
as an alternative to net income, cash flows from operating activities and
other consolidated income or cash flow statement data prepared in accordance
with generally accepted accounting principles or as a measure of
profitability or liquidity. See "Description of the Notes -- Certain
Definitions" for the definition of EBITDA for purposes of the Indenture.
(8) For purposes of determining the ratio of earnings to fixed charges,
"earnings" are defined as income (loss) before minority interest,
extraordinary charge and income taxes, plus fixed charges. "Fixed charges"
consist of interest expense on all indebtedness (including amortization of
deferred debt issuance costs) and the component of operating lease rental
expense that management believes is representative of the interest component
of rent expense.
42
<PAGE> 45
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
CCP and certain members of the Company's management formed the Company in
September 1995 to make strategic acquisitions of automotive exterior accessory
manufacturers and to integrate those acquisitions into a global enterprise that
would be a preferred supplier to the automotive industry. In September 1995, the
Company, through its SportRack subsidiary, acquired substantially all of the net
assets of the MascoTech Division, a North American supplier of rack systems and
accessories to the automotive OEM market and aftermarket. The MascoTech Division
was a division of MascoTech. For comparative purposes, the financial information
for the year ended December 31, 1995 represents the combination of the results
of operations of the MascoTech Division for the period from January 1, 1995 to
September 27, 1995 together with the results of operations of the Company from
September 28, 1995 to December 31, 1995 (the period subsequent to the
acquisition of the MascoTech Division by the Company). The financial statements
of the MascoTech Division and the Company in the two combined periods are not
comparable in certain respects due to differences between the cost bases of
certain assets held by the Company versus that of the MascoTech Division,
changes in accounting policies at the acquisition date, and certain incremental
costs, such as interest expense, that the Company incurred as a stand-alone
company subsequent to September 27, 1995.
ACQUISITIONS
In October 1996, the Company consummated the Brink Acquisition by acquiring
the outstanding capital stock of Brink B.V., a European supplier of towing
systems to the automotive OEM and aftermarket.
In July 1997, the Company consummated the SportRack International
Acquisition by acquiring from Bell substantially all of the net assets of its
SportRack division, a Canadian supplier of rack systems and accessories to the
automotive aftermarket, and acquiring the capital stock of Nomadic, a Canadian
supplier of rack systems and accessories to the automotive OEM and aftermarket.
In August 1997, the Company consummated the Valley Acquisition by acquiring
substantially all of the net assets of Valley Industries, Inc., a North American
supplier of towing systems to the automotive OEM market and aftermarket.
In each instance, the acquisition was accounted for in accordance with the
purchase method of accounting and the operating results of the acquired company
have been included in the Company's consolidated financial statements since the
date of the respective acquisition.
43
<PAGE> 46
SUMMARY RESULTS OF OPERATIONS
The following table presents the major components of the statement of
operations together with percentages of each component as a percentage of net
sales.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1995(1) 1996 1997
------- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net sales................................ $64,997 100.0% $81,466 100.0% $188,678 100.0%
Gross profit........................... 13,894 21.4% 27,859 34.2% 53,122 28.2%
Selling, administrative and product
development expenses................... 7,579 11.7% 13,413 16.5% 31,350 16.6%
Amortization of intangible assets........ 546 .8% 2,475 3.0% 2,336 1.2%
Operating income....................... 5,769 8.9% 11,971 14.7% 19,436 10.3%
Interest expense......................... 975 1.5% 4,312 5.3% 12,627 6.7%
Foreign currency loss.................... -- -- 1,330 1.6% 6,097 3.2%
Income before minority interest,
extraordinary charge and income
taxes.................................. 4,751 7.3% 6,409 7.9% 712 .4%
</TABLE>
- -------------------------
(1) Represents the combination of the historical results of operations for the
MascoTech Division for the period January 1, 1995 to September 27, 1995
together with the results of operations of the Company from September 28,
1995 to December 31, 1995 (the period subsequent to the acquisition of the
MascoTech Division by the Company).
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
Net sales. Net sales for 1997 were $188.7 million, representing an increase
of $107.2 million, or 131.6% over net sales for 1996. The increase was due
primarily to the Valley Acquisition in August 1997 ($37.9 million), the
SportRack International Acquisition in July 1997 ($2.5 million), and the full
year sales of Brink in 1997 as compared to two months in 1996 ($54.8 million).
In addition, sales for SportRack increased $12.0 million because of increased
sales of rack systems to OEM's for installation on new light truck models and
increased OEM production of certain light truck models which use SportRack's
systems. On a pro forma basis, if the net sales of Valley and Sportrack
International were included with those of the Company for 1996 and 1997, and
Brink sales were included with those of the Company for 1996, net sales for 1997
would have been $246.7 million, as compared to net sales of $233.5 million for
1996, an increase of $13.2 million, or 5.7%.
Gross profit. Gross profit for 1997 was $53.1 million, representing an
increase of $25.3 million, or 90.7%, over the gross profit for 1996. This
increase resulted from the increase in net sales offset by a decrease in the
gross margin. Gross profit as a percentage of net sales was 28.2% in 1997
compared to 34.2% in 1996. The decrease in gross margin resulted from a lower
gross margin on sales contributed by Valley and a lower gross margin on sales of
rack systems to the OEM's due to (i) launch costs related to new programs, (ii)
lower margins on certain newly launched programs, and (iii) price givebacks on
certain OEM programs.
Selling, administrative and product development expenses. Selling,
administrative and product development expenses for 1997 were $31.4 million,
representing an increase of $17.9 million, or 133.7% over selling,
administrative and product development expenses for 1996, reflecting the
increase in net sales. Selling, administrative and product development expenses
as a percentage of net sales increased to 16.6% in 1997 from 16.5% in 1996.
Certain selling, administrative and product development expenses are relatively
fixed and do not increase proportionately with sales. The effect of these fixed
expenses has been offset by higher expenses associated with the Company's
European expansion and new corporate headquarters. In addition, selling,
administrative and product development expenses are higher as a percentage of
net sales for Brink, which was acquired in October 1996, and SportRack
International, which was acquired in July 1997, than for the Company.
44
<PAGE> 47
Operating income. Operating income for 1997 was $19.4 million, an increase
of $7.5 million, or 62.4%, over operating income for 1996. The increase was due
primarily to inclusion of Brink operating results for the full year in 1997 as
compared to two months in 1996 together with the increases from the SportRack
International and Valley Acquisitions in July and August of 1997, respectively.
Operating income as a percentage of net sales decreased to 10.3% in 1997 from
14.7% in 1996 reflecting a decrease in gross margins offset by reduced
amortization of intangible assets as a result of changing the goodwill
amortization period from 15 years to 30 years in 1997.
Interest expense. Interest expense for 1997 was $12.6 million, an increase
of $8.3 million, or 192.8%, over interest expense for 1996. The increase was
primarily due to additional borrowings to finance (i) the Brink Acquisition in
October 1996, (ii) the Sportrack International Acquisition in July 1997, (iii)
the Valley Acquisition in August 1997, and (iv) the effect of the issuance of
the Old Notes, of which a portion of the proceeds were used to repay debt from
the Valley Acquisition and the Brink Acquisition.
Foreign currency loss. Foreign currency loss in 1997 was $6.1 million. The
Company acquired Brink in October 1996 and the related Brink Acquisition
indebtedness is denominated in U.S. dollars. During 1997, the U.S. dollar
strengthened significantly in relation to the Dutch Guilder, the functional
currency of Brink. At December 31, 1996, the exchange rate of the Dutch Guilder
to the U.S. dollar was 1.75:1, whereas at December 31, 1997 the exchange rate
was 2.02:1, or a 15.4% decline in the relative value of the Dutch Guilder.
1996 COMPARED TO 1995
Net sales. Net sales for 1996 were $81.5 million, representing an increase
of $16.5 million, or 25.3% over net sales for 1995. The increase was due to the
Brink Acquisition in October 1996 ($7.6 million) and increased sales of rack
systems to OEM's for installation on new light truck models and increased OEM
production of certain light truck models which use the Company's rack systems.
Gross profit. Gross profit for 1996 was $27.9 million, representing an
increase of $14.0 million, or 100.5% over gross profit for 1995. This increase
resulted from the increase in net sales and an increase in the gross margin.
Gross profit as a percentage of net sales was 34.2% in 1996 compared to 21.4% in
1995. The increase was primarily a result of (i) increased sales of higher
margin rack systems for installation on new light truck models, (ii) expanded
margins on certain rack systems resulting from engineering changes and
manufacturing improvements, and (iii) the effect of higher net sales on fixed
overhead costs.
Selling, administrative and product development costs. Selling,
administrative and product development expenses for 1996 were $13.4 million,
representing an increase of $5.8 million, or 77.0%, over selling, administrative
and product development costs for 1995. Selling, administrative and product
development costs as a percentage of net sales increased to 16.5% in 1996
compared to 11.7% in 1995. These increases resulted primarily from the Brink
Acquisition in October 1996 and increased costs associated with the MascoTech
Division becoming a stand-alone company in September 1995.
Operating income. Operating income for 1996 was $12.0 million, an increase
of $6.2 million, or 107.5%, over operating income for 1995. Operating income as
a percentage of net sales increased to 14.7% in 1996 from 8.9% in 1995 primarily
as a result of higher gross margins partially offset, as a percentage of net
sales, by increased selling, administrative and product development costs and
increased amortization of intangible assets.
Interest expense. Interest expense for 1996 was $4.3 million, an increase
of $3.3 million, or 342.3%, over interest expense for 1995 representing, in
1996, a full year of interest cost associated with the acquisition of the
MascoTech Division in September 1995. The MascoTech Division, as a matter of
policy, was not charged interest on intercompany balances by MascoTech, Inc.
during 1995.
Foreign currency loss. Foreign currency loss in 1996 was $1.3 million. The
Company acquired Brink in October 1996 and the related Brink Acquisition debt
($65.0 million) was denominated in U.S. dollars whereas the functional currency
of Brink is the Dutch Guilder. During 1996, the U.S. dollar strengthened in
relation to the Dutch Guilder, the functional currency of Brink. On October 31,
1996 (the Brink Acquisition date) the
45
<PAGE> 48
exchange rate of the Dutch Guilder to the U.S. dollar was 1.70:1, whereas, at
December 31, 1996 the exchange rate was 1.75:1 or a 2.9% decline in the relative
value of the Dutch Guilder.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal liquidity requirements are to service its debt
under the Amended and Restated Credit Agreement, the Canadian Credit Agreement
and the Notes and working capital needs and capital expenditures. The Company's
indebtedness at December 31, 1997 was $197.1 million.
Borrowings under the Amended and Restated Credit Agreement and the Canadian
Credit Agreement bear interest at floating rates which require interest payments
on varying dates depending on the interest rate option selected by the Company.
Under the terms of the Amended and Restated Credit Agreement and the Canadian
Credit Agreement, the Company will be required to make principal payments
totaling approximately $3.7 million in 1998, $4.7 million in 1999, $11.2 million
in 2000, and $11.9 million in 2001. Also under the terms of the Amended and
Restated Credit Agreement, the Company is required to purchase and maintain
interest rate protection with respect to a portion of the term loans for three
years.
The Notes bear interest at 9.75% which is payable semiannually in arrears.
The Company's capital expenditures were $.5 million, $3.1 million, and $7.8
million for the years ended December 31, 1995, 1996, and 1997, respectively. On
a pro forma basis for 1997, capital expenditures were $10.3 million. Capital
expenditures for 1998 are limited to $10.0 million under the Terms of the
Amended and Restated Credit Agreement. The Company estimates that capital
expenditures for 1998 will be primarily for the expansion of capacity,
productivity and process improvements and maintenance. The Company's 1998
capital expenditures are anticipated to include approximately $4.0 million for
replacing and upgrading existing equipment. The Company's ability to make
capital expenditures is subject to restrictions in the Amended and Restated
Credit Agreement. See "Description of the Credit Facilities."
The Company's European and Canadian subsidiaries have income tax net
operating loss carryforwards ("NOLs") of approximately $8.0 million and $1.1
million, respectively, at December 31, 1997. The European NOLs have no
expiration date and the Canadian NOLs expire primarily in 2004.
The Company expects that its primary sources of cash will be from operating
activities and borrowings under the Revolving Credit Facility. As of December
31, 1997, the Company has $4.7 million borrowed under its U.S. Revolving Credit
Facility and Canadian Revolving Note and has $20.3 million available borrowing
capacity. As part of the Amended and Restated Credit Agreement, Chase and NBD
(as defined) committed to provide the $22.0 million Acquisition Facility to
finance acquisitions. On December 31, 1997, the Company borrowed $21.0 million
under the revolving credit facility and used such proceeds to acquire the net
operating assets of the towbar segment of Ellebi S.p.A. on January 2, 1998.
Future acquisitions, if any, may require additional third party financing and
there can be no assurances that such funds would be available on terms
satisfactory to the Company, if at all.
The Company's ability to pay principal and interest on the Notes and to
satisfy its other debt obligations will depend upon its future operating
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, certain of which are beyond its control,
as well as the availability of revolving credit borrowings under the Amended and
Restated Credit Agreement or a successor facility. The Company anticipates that,
based on current and expected levels of operations, its operating cash flow,
together with borrowings under the Amended and Restated Credit Agreement, should
be sufficient to meet its debt service, working capital and capital expenditure
requirements for the foreseeable future, although no assurances can be given in
this regard, including as to the ability to increase revenues or profit margins.
If the Company is unable to service its indebtedness, it will be forced to take
actions such as reducing or delaying acquisitions and/or capital expenditures,
selling assets, restructuring or refinancing its indebtedness (which could
include the Notes), or seeking additional equity capital. There is no assurance
that any of these remedies can be effected on satisfactory terms, if at all,
including, whether, and on what terms, the Company could raise equity capital.
See "Forward Looking Statements" and "Risk Factors" for more information that
may effect the Company's results of operations.
46
<PAGE> 49
INTERNATIONAL OPERATIONS
The Company conducts operations in several foreign countries including
Canada, The Netherlands, Denmark, the United Kingdom, Sweden, France, Germany,
and, with the Ellebi Acquisition in January 1998, Italy. On a pro forma basis,
net sales from international operations during 1997 were approximately $92.7
million, or 34.5% of the Company's net sales. At December 31, 1997, on a pro
forma basis, assets associated with these operations were approximately 44.8% of
total assets, and the Company had indebtedness denominated in currencies other
than the U.S. dollar of approximately $16.7 million.
The Company's international operations may be subject to volatility because
of currency fluctuations, inflation and changes in political and economic
conditions in these countries. Most of the revenues and costs and expenses of
the Company's operations in these countries are denominated in the local
currencies. The financial position and results of operations of the Company's
foreign subsidiaries are measured using the local currency as the functional
currency.
The Company may periodically use foreign currency forward option contracts
to offset the effects of exchange rate fluctuations on cash flows denominated in
foreign currencies. The balance of these contracts as of December 31, 1997 was
not material, and the Company does not use derivative financial instruments for
trading or speculative purposes.
47
<PAGE> 50
BUSINESS
THE COMPANY
The Company is one of the world's largest designers, manufacturers and
suppliers of towing and rack systems and related accessories for the automotive
original equipment manufacturer ("OEM") market and the automotive aftermarket.
The Company's products include a complete line of towing systems including
accessories such as trailer balls, ball mounts, electrical harnesses, safety
chains and locking hitch pins. The Company's broad offering of rack systems
includes fixed and detachable racks and accessories which can be installed on
vehicles to carry items such as bicycles, skis, luggage, surfboards and
sailboards. The Company's products are sold as standard accessories or options
for a variety of light vehicles. In 1997, on a pro forma basis, the Company
estimates that approximately 49% of its net sales were generated from products
sold for light trucks. The Company is the sole Tier 1 OEM supplier of towing or
rack systems for eight of the top ten light trucks produced in North America,
including the GM C/K Pickup and Blazer, the Chrysler Grand Cherokee (towing
systems and rack systems), T-3000 Pickup and Caravan and the Ford Explorer,
Ranger and Windstar. On a pro forma basis for the year ended December 31, 1997,
the Company's net sales and EBITDA would have been $268.5 million and $36.3
million, respectively.
COMPETITIVE ADVANTAGES
Leading Global Market Position. The Company is the world's largest
designer, manufacturer and supplier of towing systems and one of the world's
largest designers, manufacturers and suppliers of rack systems. The Company is
the largest supplier of towing systems in Europe, the largest supplier of towing
systems to automotive OEMs in North America and the second largest supplier of
towing systems to the aftermarket in North America. The Company is also one of
the two largest suppliers of rack systems sold to automotive OEMs in the North
America. The Company has 19 engineering, manufacturing and distribution
facilities strategically located in the United States, Canada, The Netherlands,
Denmark, Germany, the United Kingdom, Sweden, Italy and France. By virtue of its
size and global presence, the Company believes it benefits from several
competitive advantages, including the ability to (i) satisfy local design,
production, quality and timing requirements of global OEMs; (ii) provide
"one-stop shopping" for customers' product and service requirements; (iii)
optimize plant production; (iv) maximize its raw material purchasing power; (v)
spread its selling, administrative and product development expenses over a large
base of net sales; and (vi) develop and maintain state-of-the-art production
facilities.
Strong Relationships with Diverse Customer Base. The Company has an
established position as a Tier 1 supplier of towing and/or rack systems to most
of the OEMs manufacturing in North America and Europe including Chrysler,
General Motors, Toyota, Opel, Volvo, Isuzu, Ford, Mercedes, BMW, Subaru, Fiat,
Mitsubishi, Nissan, Volkswagen, SEAT, Skoda and Kia. The Company supplies
Chrysler with substantially all its towing systems and rack systems and
accessories. The Company also supplies approximately 50% of the towing and rack
system requirements of General Motors. Tier 1 status and strong customer
relationships are important elements in achieving continued profitable growth
because, as OEMs narrow their supplier bases, well regarded, existing suppliers
have an advantage in gaining new contracts. The evolution of OEM relationships
into strategic partnerships provides a significant advantage to Tier 1 suppliers
with system integration capabilities (such as the Company) in retaining existing
contracts as well as in participating during the design phase for new vehicles,
which is integral to becoming a supplier for such new platforms. The Company is
also a leading supplier of towing and rack systems to automotive aftermarket
wholesalers, retailers and installers, such as U-Haul, Pep Boys, Balkamp,
Advance Auto Parts, Coast Distribution System, Discount Auto Parts, Ace Hardware
and Canadian Tire.
Comprehensive Product Line. The Company continues to position itself as a
leading supplier to its customers for a growing range of products and services.
Through its offering of over 2,000 towing system models, the Company's products
fit virtually every light vehicle produced in North America and Europe. The
Company is one of a limited number of European manufacturers with such a broad
product line that also satisfies European Community ("EC") regulatory safety
standards, even though such standards have not yet been adopted by each EC
member country. Competitors whose products do not satisfy such standards face
48
<PAGE> 51
substantial design and testing costs to offer a comparable product line that
meets these safety standards. The Company has provided OEMs with fixed rack
systems for approximately half of the light truck models produced in North
America that utilize vehicle-specific fixed racks. The Company's innovative
Mondial(R) product line of detachable rack systems, which consists of only 14
SKUs, is able to fit substantially all the light vehicles produced in North
America and Europe, while some competitors' comparable product lines consist of
more than 200 SKUs. The Company believes that its broad product offerings also
facilitate strategic partnerships with automotive aftermarket wholesalers,
retailers and installers.
Design and Engineering Expertise. The Company has an engineering and
research and development staff that develops new products and processing
technologies. The Company works directly with OEM designers to create innovative
solutions that simplify vehicle assembly and reduce vehicle cost and weight. For
example, the Company developed a roll formed, aluminum cross rail which
substantially reduced the weight of the Chrysler minivan rack at a competitive
cost. Additionally, the Company is responsible for many industry innovations,
including lighter, less obtrusive, round tube towing hitches as well as push
button and pull lever stanchions on fixed rack systems. The Company believes its
design and engineering capabilities provide significant value to its customers
by (i) shortening OEM new product development cycles; (ii) lowering OEM
manufacturing costs; (iii) providing technical expertise; and (iv) permitting
aftermarket customers to maintain lower inventory levels. The Company also
believes that its design innovations have created value for end users by
providing products that are durable and easy to install and that enhance vehicle
utility and appearance.
High Quality, Low Cost Manufacturing Position. The Company believes that it
is one of the highest quality, lowest cost suppliers of towing and rack systems
in North America and Europe. The Company has received numerous quality and
performance awards, including Chrysler's Gold Pentastar Award, Ford's Q-1 Award,
Toyota's Distinguished Supplier Award and Nissan's Superior Supplier Performance
Award. Supplier quality systems are currently being standardized across OEMs
through the ISO-9000 and QS-9000 programs. The Company has achieved ISO-9000 or
QS-9000 certification for ten of its 17 manufacturing and engineering facilities
and is in the process of obtaining certification for the rest of its facilities.
The Company's low cost position is a result of its strict cost controls and
continuous improvement programs designed to enhance productivity. OEMs typically
prefer stable suppliers who can generate productivity gains that can be shared
to reduce OEM costs. The Company's cost controls are closely integrated with its
quality driven manufacturing operations, thereby allowing it to profitably
deliver high quality, easy to install and competitively-priced components on a
just-in-time basis. The Company's focus on low cost manufacturing also provides
benefits when selling products to the less price sensitive aftermarket.
BUSINESS STRATEGY
The Company's objective is to strengthen its position as a leading global
supplier of automotive exterior accessories, thereby increasing revenue and cash
flow. In order to accomplish its goal, the Company intends to pursue the
following strategies.
Increase Global Market Share. The Company intends to capitalize on its
expanded presence in North America and Europe by marketing products to its
global automotive OEM customers. Through its past acquisitions of complementary
product lines, the Company is able to offer an expanded range of products and
services to its extended customer base. The Company also expects to secure new
customers by virtue of its expanded market presence and broad product and
service offerings. The Company believes its continued emphasis on new technology
(both product and process), will result in the development of more innovative,
high margin towing and rack system products which it expects to market to its
expanding customer base.
Maintain and Enhance Strong Customer Relationships. The Company intends to
strengthen and expand its relationships with global automotive OEMs and
aftermarket customers by (i) continuing its commitment to innovative design and
development of products during the early stages of vehicle design and redesign;
(ii) building on its position as a low cost supplier of quality accessory
products; (iii) offering new products in existing and new geographic areas by
taking advantage of existing OEM relationships; and (iv) working with
49
<PAGE> 52
aftermarket customers to develop new products and marketing strategies. The
Company has recently obtained orders from Mercedes Benz, BMW, SEAT and Chrysler
to supply products for new SUVs.
Increase Operating Efficiencies. The Company believes there are significant
opportunities for improvement in margins and cash flow through intercompany
cooperation among its various acquired business units, including (i) realizing
economies of scale from the combined purchasing power of a larger company; (ii)
achieving production and other operating efficiencies through the implementation
of a "best practices" program; (iii) reducing certain selling, general and
administrative and product development expenses; and (iv) reducing capital and
operating expenditures from coordinated use of manufacturing resources.
Pursue Strategic Acquisitions. In response to the trend in the OEM market
toward systems suppliers, the Company is focused on making strategic
acquisitions that will enhance its ability to provide integrated systems (such
as a towing or rack system) or otherwise leverage its existing business by
providing additional product, manufacturing and service capabilities. The
Company also intends to pursue acquisitions which will expand its customer base
by providing an entree to new customers, including expansion into selected
geographic areas. The Company believes that such acquisitions should provide
additional opportunities for increased net sales and cash flow by enhancing the
Company's manufacturing and marketing capabilities.
INDUSTRY OVERVIEW
In 1996, the North American exterior accessories market for light vehicles
was approximately $3.3 billion. In 1996, in the first year of ownership, North
American consumers spent approximately $1.4 billion on exterior accessories for
their light trucks as compared to approximately $0.8 billion in 1986,
representing a compound annual growth rate of 5.9%. Growth in this market, and
in towing systems and rack systems in particular, resulted in large part from
the increased production and sale of light trucks, which in 1996 accounted for
approximately 46% of total light vehicle production in North America as compared
to 32% in 1986. According to DRI/McGraw-Hill Ward's Global Automotive Group,
production of light trucks in North America and Western Europe has outpaced
overall production in the light vehicle market (ten-year compound annual growth
rate of 1.3% in North America and 1.4% in Western Europe), resulting primarily
from the growth in minivans (ten-year compound annual growth rate of 8.6% in
North America and 30.8% in Western Europe) and SUVs (ten-year compound annual
growth rate of 11.6% in North America and 13.7% in Western Europe), although no
assurance can be given that such production rates of light trucks will continue
or will continue to outpace overall production.
Strong growth in production of light trucks is attributable to several
factors, including (i) the more sizable and comfortable interiors and
aesthetically pleasing modern designs offered by light trucks; (ii) the changing
lifestyle of the population, which is aging and therefore devoting more time to
recreational activities; (iii) the versatile product offerings targeted toward
both the luxury and economy market sectors; (iv) the increasing acceptance of
light truck use for everyday transportation; and (v) the durability and special
performance capabilities (e.g. four-wheel drive) of light trucks.
Automotive OEM and Aftermarket Trends
As automobile and light truck manufacturers have faced increased global
competition, they have sought to significantly improve quality, reduce costs and
shorten the development time required for new vehicle models. These changes have
altered the OEM/supplier relationship and benefited larger suppliers that have
strong product engineering and development capabilities, superior quality
products, lower unit costs and the ability to deliver products on a timely
basis. As a result, the Company believes that it has benefited and will continue
to benefit from the following automotive OEM and aftermarket trends:
Consolidation of Supplier Base by OEMs. Since the 1980's, OEMs have
significantly consolidated their supplier base in an effort to reduce their
procurement-related costs, ensure high quality and accelerate new model
development. As a result, many smaller, poorly capitalized suppliers with
limited product lines and engineering and design capabilities have either been
eliminated as suppliers to OEMs or tiered (i.e., they supply other suppliers).
Consequently, larger suppliers with broad product lines, in-house design and
50
<PAGE> 53
engineering capabilities and the ability to effectively manage their own
supplier bases, have been able to significantly increase their market share.
The consolidation by OEMs has altered the typical structure of supplier
contracts. In the past, OEMs supplied all design, development and manufacturing
expertise for accessory parts and were responsible for consistency of quality
and reliability of delivery. On newer models, however, there has been a trend
toward involving potential suppliers earlier in the design and development
process to encourage suppliers to share design and development responsibility.
In some cases, sole-source supply contracts which cover the life of a vehicle or
platform are awarded. Both OEMs and suppliers benefit from the consolidation
trend. Suppliers are able to devote the resources necessary for proprietary
product development with the expectation that they will have the opportunity to
profit on such investment over the multi-year life of a contract. OEMs benefit
from shared manufacturing cost savings attributable to long, multi-year
production runs at high capacity utilization levels.
Emergence of European Community Safety Standards. Trends within the
European towing systems market result primarily from emerging EC safety
standards and the corresponding legislative framework. Such standards provide
that a towing system must fit all the vehicle manufacturer's recommended fitting
points, must not interfere with the vision of the number plate when not in use
and must meet strict testing criteria for durability and safety. These standards
have been adopted by The Netherlands, Germany, Sweden, Italy and Scandinavia.
Other EC countries are expected to adopt the legislation within two years. All
of the Company's approximately 2,000 towing systems sold in Europe currently
undergo rigorous safety testing in order to satisfy these EC regulatory
standards. In addition, all of the Company's detachable roof rack systems are
designed and tested to meet and exceed strict German standards.
Increased Levels of Manufacturing in North America by Transplants. As a
result of the relative cost advantage of producing vehicles in North America,
many transplants have increased their share of North American vehicle production
from approximately 6% in 1986 to approximately 20% in 1996. Industry sources
forecast that this trend will continue. For example, both Mercedes Benz and BMW
commenced manufacturing in the U.S. in 1996. In addition, Toyota has announced
plans to build its T-100 pickup truck in Indiana by 1998, Honda has announced
plans to build its Odyssey minivan in North America by 1999, and BMW has
announced plans to build its E-53 SUV in North America by 1999. The Company
believes that increased levels of manufacturing of light trucks in North America
by transplants will benefit full service, high quality suppliers with North
American operations such as the Company.
Outsourcing by OEMs. In an effort to facilitate and enhance product design,
reduce costs and simplify manufacturing processes, automotive OEMs are
increasingly outsourcing the manufacture of many components that were previously
manufactured internally. This trend results from independent suppliers being
generally able to design, manufacture and deliver components at a lower cost
than OEMs as a result of (i) their significantly lower direct labor, fringe
benefit and overhead costs; (ii) their ability to spread research and
development and engineering costs over products provided to multiple OEMs; and
(iii) the economies of scale inherent in product specialization. Independent
suppliers such as the Company have benefited from outsourcing because the
aggregate number, complexity and value of components that they manufacture have
increased dramatically. OEMs, in turn, have benefited because outsourcing has
allowed them to reduce costs and to focus on overall vehicle design and consumer
marketing.
PRODUCTS
The principal product lines of the Company are towing systems and rack
systems and accessories. On a pro forma basis in 1997, towing systems
constituted approximately 62% and rack systems and accessories constituted
approximately 38% of the Company's net sales, respectively. The Company believes
it offers a more comprehensive product line than any of its competitors. The
Company has devoted considerable resources to the engineering and designing of
its products and, as a result, considers itself a market leader in the research
and new product development of towing systems and rack systems.
Towing Systems. The Company designs, manufactures and supplies towing
systems to automotive OEMs and the automotive aftermarket which fit virtually
every light vehicle produced in North America and Europe.
51
<PAGE> 54
In the aggregate, the Company supplies over 2,000 different towing systems,
including a complete line of towing accessories.
The Company's towing systems sold in Europe are installed primarily on
passenger cars. The Company's primary product within the European market is the
fixed ball towbar that is specifically designed to be mounted on a particular
car model in accordance with the OEM's specified mounting points. The Company
also markets sophisticated detachable ball systems which are popular with owners
of more expensive cars or cars on which the license plate would otherwise be
blocked by a fixed ball towbar. All of the Company's towing system products sold
in Europe currently undergo rigorous safety testing in order to satisfy EC
regulatory standards. Competitors whose products do not satisfy such standards
face substantial design and testing costs to offer a comparable product line
that meets the safety standards.
The Company's towing systems sold in North America are installed primarily
on light trucks. Two of the Company's most innovative product designs have been
the tubular trailer hitch which is lighter in weight, less obtrusive and
stronger than the conventional hitch, and a device which ensures secure
attachment of a towing product to the vehicle. These product innovations have
enabled the Company to improve the functionality and safety of towing systems
while, at the same time, enhancing the overall appearance of vehicles utilizing
these towing products.
The Company offers a complete line of towing accessories, including trailer
balls, ball mounts, electrical harnesses, safety chains and locking hitch pins.
To capitalize on the strong growth trend in light trucks, the Company has
recently expanded its product line to include other products designed
specifically for this market, such as grille guards, brush guards and tire
carriers.
Fixed Rack Systems. The Company designs, manufactures and supplies fixed
roof rack systems for individual vehicle models that are generally sold to the
automotive OEMs for installation at the factory or dealership. These rack
systems typically remain on a model for the life of its design, which generally
ranges from four to six years. The Company has been an industry leader in
developing designs which not only complement the styling themes of a particular
vehicle, but also increase the utility and functionality of the rack system.
Most of the fixed rack systems sold by the Company are composed of side rails
which run along both sides of the vehicle's roof, feet which mount the side
rails to the vehicle's roof, and cross rails which run between the side rails.
Cross rails, which are attached to the side rails with stanchions, are typically
movable and can be used to carry a load. The Company uses advanced materials
such as lightweight, high strength plastics and roll formed aluminum to develop
durable rack systems that optimize vehicle performance. Many of these products
incorporate innovative features such as push button and pull lever stanchions,
which allow easy movement of the cross rails to accommodate various size loads.
These rack systems are utilized on a large number of light trucks, including
Jeep Grand Cherokee and Cherokee, Chrysler minivans, GM Suburban, Tahoe and
Yukon and Mercedes Benz ML320.
Detachable Rack Systems. The Company designs, manufactures and supplies
detachable roof and rear mount rack systems for distribution in both the
automotive and sporting accessory aftermarkets. A detachable rack system
typically consists of cross rails which are attached to the roof of a vehicle by
removable mounting clips. The Company offers a full line of detachable rack
systems, including the SportRack(R), SnapRack(TM) and Mondial(R) rack systems.
The Company's innovative Mondial(R) product line of detachable rack systems
consists of only 14 SKUs that are able to fit substantially all passenger
vehicles sold in North America and Europe while some competitors' comparable
product lines consist of more than 200 SKUs. In addition, the Mondial(R) line of
detachable rack systems is designed to meet and exceed strict international
performance standards, and is noted for its flexibility, ease of attachment and
minimal SKU requirements.
Rack System Accessories. The Company designs and manufactures lifestyle
accessories for distribution in both the automotive and sporting accessory
aftermarkets. These accessories typically attach to the Company's rack systems
and are used for carrying items such as bicycles, skis, luggage, surfboards and
sailboards.
52
<PAGE> 55
CUSTOMERS AND MARKETING
Management believes that the Company's strong and diverse industry
relationships are based on its reputation for high service levels, strong
technical support, innovative product development, high quality and competitive
pricing. On a pro forma basis, sales to OEM and aftermarket customers
represented approximately 65% and 35% of the Company's net sales, respectively,
in 1997.
Automotive OEMs. The Company obtains most of its new orders through a
presourcing process by which the customer invites one or a few preferred
suppliers to manufacture and design a component or system that meets certain
price, timing, functional and aesthetic parameters. Upon selection at the
development stage, the Company and the customer typically agree to cooperate in
developing the product to meet the specified parameters. Upon completion of the
development stage and the award of the manufacturing business, the Company
receives a purchase order that covers parts to be supplied for a particular car
model. Such supply arrangements typically involve annual renewals of the
purchase order over the life of the model, which is generally four to six years.
In addition, the Company enters into long-term contracts with certain OEM
customers which require the Company to make annual price reductions. The Company
also competes to supply parts for successor models even though the Company may
currently supply parts on the predecessor model. Sales to OEMs and Tier 1
suppliers are made directly by the Company's internal sales staff of 29
individuals and 23 outside sales representatives.
The Company sells its products to most of the automotive OEMs selling light
vehicles in North America and Europe, including Chrysler, General Motors,
Toyota, Opel, Volvo, Isuzu, Ford, Mercedes, BMW, Subaru, Fiat, Mitsubishi,
Nissan, Volkswagen, SEAT, Skoda and Kia. The Company supplies Chrysler with
substantially all of its towing systems and rack systems and accessories. The
Company also supplies approximately 50% of the towing system and rack system
requirements of General Motors, for which it has been a supplier for over 20
years. The following chart sets forth information regarding vehicle models on
which the Company's automotive products are used or for which the Company has
been awarded business (including Ellebi, which was acquired on January 2, 1998).
<TABLE>
<CAPTION>
AWARDED BUSINESS ON
PRODUCT OEM CUSTOMER 1997 PRODUCTION(A) FUTURE PRODUCTION(B)
------- ------------ ------------------ --------------------
<S> <C> <C> <C>
Towing Systems Chrysler Cherokee, Grand Cherokee, Caravan, Cherokee, Grand Cherokee, Plymouth
Voyager, Town & Country, Ram Pick-up, Prowler, Ram Van
Dakota, Wrangler, Durango
General Motors Suburban, Yukon, Tahoe, Astro, Frontera, Corsa, Arena (van)
Safari, CK Pick-up, ML Van, S-10
Blazer, APV Vans, Bravada Jimmy, Geo
Tracker, Blazer, Corsa, Astra
(hatchback), Astra (Sedan), Astra
(Station wagon), Calibra, Vectra
(Hatchback), Vectra (Sedan), Vectra
(Station wagon), Omega (Sedan), Omega
(Station wagon), Campo, Frontera,
Monterey, Zafira
Ford Expedition, Explorer, Ranger, Escort, Explorer
Aerostar Minivan, Mercury Villager,
Windstar Minivan, Navigator, Fiesta,
Escort (all models), Mondeo, Mondeo
(Wagon), Scorpio (Sedan), Scorpio
(Wagon), Maverick, Transit
Renault Laguna (Station wagon), Laguna, Twingo, Laguna, Clio
Megane, Twingo, Espace
Isuzu Rodeo, Trooper
Toyota 4-Runner, Land Cruiser, RAV4, Lexus, Corolla, Lexus LS200, Carina,
646T, 477T, 860T, Corolla, Carina, Carina Wagon, Yaris
Camry, Hi-Lux, Picnic, Previa,
Hi-Ace, Celica
Nissan Pathfinder, Pick-up, Quest, Infiniti Almera, Primera Wagon, Micra,
vehicle, QW Truck, Micra, Sunny, Patrol
Almera, Primera, Maxima, King Cab,
Terrano, Patrol
Mazda 121, MPV, Xedos-9, Xedos-6, 626, 323 626 Wagon, 323
</TABLE>
53
<PAGE> 56
<TABLE>
<CAPTION>
AWARDED BUSINESS ON
PRODUCT OEM CUSTOMER 1997 PRODUCTION(A) FUTURE PRODUCTION(B)
------- ------------ ------------------ --------------------
<S> <C> <C> <C>
Towing Systems
(cont.)
Honda Passport PF Van, CRV
Mitsubishi Montero Spacestar, Challenger
FIAT Almost all models
Alpha Romeo Almost all models
Lancia Almost all models
Subaru Outback 79V
Range Rover Range Rover, Land Rover
Volvo 900 series (Sedan), 900 series 900 series, S/V 70 series
(Station wagon), 850 (Sedan), 850
(Station wagon)
SAAB 9000 series, 900 series 900 series, 9000 series, 9000
station wagon, small car 9-3,
small car 9-5, small station wagon
Peugeot 106, 306, 406 (Sedan), 406 (Station 206 Sport, 306 Break
wagon), 406 (Coupe), 605, 806, J5
(Van), Boxer (Van)
Suzuki Wagon R. Grand Vitara
Daihatsu Sirion, More, Charade
SEAT Toledo
Skoda SK240
Volkswagen Gold Combi, Vento
Daewoo LD100
Rack Systems Chrysler Cherokee, Grand Cherokee, Caravan, Cherokee, Grand Cherokee, Caravan,
Voyager, Town & Country, Durango Voyager, Town & Country, Neon PT,
BW 72
General Motors Suburban, Yukon, Tahoe, Astro, Safari Suburban, Yukon, Tahoe, Jimmy,
Blazer, Bravada
Honda Accord
Mitsubishi Montero
Mercedes ML320
Subaru Outback, Impreza, Legacy
KIA Sportage
SEAT Vario GP99
Opel Astra
BMW E-53 (SUV)
</TABLE>
- -------------------------
(a) Represents models for which the Company produced products in 1997.
(b) The amount of products produced under these awards is dependent on the
number of vehicles manufactured by the OEMs. Many of the models are versions
of vehicles not yet in production. See "Risk Factors -- The OEM Supplier
Industry." There can be no assurance that any of these vehicles will be
produced or that the Company will generate certain revenues under these
awards even if the models are produced.
Automotive Aftermarket. The Company sells its products directly into the
automotive aftermarket through a number of channels, including wholesalers,
retailers and installers, through its internal sales force and outside sales
representatives. The largest of the Company's aftermarket customers include
U-Haul, Pep Boys, Balkamp, Advance Auto Parts, Coast Distribution System,
Discount Auto Parts, Ace Hardware and Canadian Tire. The Company believes that
it has established a reputation as a highly reliable aftermarket supplier able
to meet its customers' requirements for on-time deliveries while minimizing the
carrying levels of inventory. For example, the Company began supplying towing
systems to U-Haul (the largest installer of towing systems in the United States)
in 1994 and for the year ended December 31, 1997, supplied approximately 50% of
U-Haul's towing system requirements. The Company believes aftermarket customers
such as U-Haul represent opportunities to cross-sell existing products such as
rack systems and accessories.
54
<PAGE> 57
MANUFACTURING PROCESS
The Company's manufacturing operations are directed toward achieving
ongoing quality improvements, reducing manufacturing and overhead costs,
realizing efficiencies and adding flexibility. The manufacturing operations
utilized by the Company include metal cutting, bending, cold forming, roll
forming, stamping, welding, plastic injection molding, painting, assembly and
packaging. The Company performs most manufacturing operations in-house but
outsources certain processes depending on the capabilities and capacities of
individual plants and cost considerations. For example, while some of the
Company's towing systems manufacturing facilities have painting capabilities,
the Company has chosen to outsource the painting of its rack systems.
The Company develops new tooling used in the manufacture of its products.
Once a customer accepts such tooling, the tooling becomes the property of the
customer and the Company is reimbursed by the customer for the cost of the
tooling, or in certain instances, recovers all or a portion of such costs
through incremental increases in unit selling prices.
In some cases, the Company has also developed special machinery to meet its
particular needs. For example, the hardware that accompanies certain towing
systems is selected automatically by special equipment and is then weighed and
transferred into the final package without human intervention. The Company has
developed specialized, computer operated machinery to enable it to efficiently
perform this operation. The Company has organized its production process to
minimize the number of manufacturing functions and the frequency of material
handling, thereby improving quality and reducing costs. In addition, the Company
uses cellular manufacturing which improves scheduling flexibility, productivity
and quality while reducing work in process and costs.
The Company has established quality procedures at each of its facilities
and strives to manufacture the highest quality product possible. The Company has
achieved ISO-9000 or QS-9000 certification for ten of its seventeen
manufacturing and engineering facilities and is in the process of obtaining
certification for the rest of its facilities. The Company has received numerous
quality and performance awards from its OEM customers, including Chrysler's Gold
Pentastar Award, Ford Q-1 Award, Toyota's Distinguished Supplier Award and the
Nissan Superior Supplier Performance Award.
PRODUCT DESIGN, DEVELOPMENT AND TESTING
The Company believes that it is a leader in the design of towing systems
and rack systems and accessories. The Company believes it offers products that
possess greater quality, reliability and performance than the products sold by
many of its competitors. The 84 members of the Company's engineering and design
staff possess strong technical skills. The Company currently holds more than 150
U.S. and foreign patents, and has numerous patent applications pending. The
expiration of such patents are not expected to have a material adverse effect on
the Company's operations.
On a pro forma basis, the Company spent $6.9 million on research and
development in 1997. The Company works closely with OEMs to constantly improve
design and manufacturing technology and product functionality. When an OEM is in
the process of developing a new model, it typically approaches an established or
incumbent supplier with a request to supply the required towing system or rack
system. The Company is typically contacted two to four years prior to the start
of production of the new model. The Company's product development engineers then
work closely with the OEM to develop a product that satisfies the OEM's
aesthetic and functional requirements. This relationship also provides the
Company with a competitive advantage in the aftermarket because the Company
already possesses the knowledge to create a system compatible with new model
vehicles prior to release.
The Company has extensive testing capabilities which enable it to test and
certify its products. The Company subjects its products to tests which it
believes are more demanding than conditions which would occur during normal use.
The Company has specialized equipment which it has purchased or developed for
use in its testing laboratories.
55
<PAGE> 58
Since May 1994, six European countries enacted the new EC regulatory
standards which require that towing systems undergo significant safety testing
prior to gaining approval for sale. This safety testing requires that a towing
system be extensively tested for fatigue and includes subjecting a towing system
to upwards of two million high load pulses. The Company does its testing in its
own laboratory under the control of an independent institute that is authorized
by the EC to approve the towing systems for sale. The quality assurance system
is regularly audited by an independent institute and by the automotive OEMs
themselves. The Company has continually been awarded the highest distinction of
achievement by the independent institute.
RAW MATERIALS
The principal raw material used in the Company's products is steel, which
is purchased in sheets, rolls, bars or tubes and represents approximately 50% of
the Company's raw material costs. The Company also purchases significant amounts
of aluminum and plastics. The Company has various suppliers globally and has not
had difficulties in procuring raw materials nor does it expect to have any
problems in the future. The Company is committed to supplier development and
long-term supplier relationships. However, most of the Company's raw material
demands are for commodities and, as such, can be purchased on the open market on
an as needed basis. The Company selects among available suppliers by comparing
cost, consistent quality and timely delivery as well as compliance with QS-9000
and ISO-9000 standards.
The Company customarily obtains its supplies through individual purchase
orders. In some instances, the Company will enter into short-term contracts with
its suppliers which generally run one year or less. However, in the Company's
sole outsourcing relationship, it has signed a long-term supply agreement which
terminates in 2004 with one of its painting suppliers, Crown Group, Inc.
("Crown"), under which Crown opened a state-of-the-art paint line in a facility
adjacent to the Company's Port Huron facility.
COMPETITION
The Company's industry is highly competitive. A large number of actual or
potential competitors exist, some of which are larger than the Company and have
substantially greater resources than the Company. The Company competes primarily
on the basis of product quality, cost, timely delivery, customer service,
engineering and design capabilities and new product innovation in both the OEM
market and the automotive aftermarket. The Company believes that as OEMs
continue to strive to reduce new model development cost and time, innovation and
design and engineering capabilities will become more important as a basis for
distinguishing competitors. The Company believes it has an outstanding
reputation in both of these areas. In the automotive aftermarket, the Company
believes that its wide range of product applications is a competitive advantage.
For example, the Company has developed towing systems to fit substantially all
the light vehicles produced in North America and Europe. The Company believes
its competitive advantage in the aftermarket is enhanced by its close
relationship with OEMs, allowing the Company access to automobile design at an
earlier time than its competitors.
In the towing systems market, the Company competes with Draw-Tite Inc. and
Reese Products Inc., both of which are subsidiaries of TriMas Corp., Bosal
Holding B.V., The Oris Group, Production Stamping Inc. and numerous smaller
competitors.
In the rack systems and accessories market, the Company's competitors
include JAC Holding Corp., Thule, which is a wholly-owned subsidiary of Eldon AB
(a Swedish company), Yakima Products Inc., Barrecrafters, Graber Products Inc.
and several smaller competitors.
EMPLOYEES
At December 31, 1997, the Company had approximately 1,600 employees of whom
approximately 1,100 are hourly employees and approximately 500 are salaried
personnel. Approximately 150 of the Company's employees in the United States at
the Port Huron, Michigan facility are represented by the Teamsters Union.
Collective bargaining agreements with the Teamsters Union affecting these
employees expire in April 1999. As is common in many European jurisdictions,
substantially all of the Company's employees in Europe are
56
<PAGE> 59
covered by country-wide collective bargaining agreements. The Company believes
that its relations with its employees are good.
FACILITIES
The Company's executive offices are located in approximately 14,550 square
feet of leased space in Sterling Heights, Michigan. The Company has 19
engineering, manufacturing and distribution facilities with a total of
approximately 1,973,350 square feet of space. The Company believes that
substantially all of its property and equipment is in good condition and that it
has sufficient capacity to meet its current and projected manufacturing and
distribution needs.
The Company's facilities are as follows:
<TABLE>
<CAPTION>
SQUARE OWNED/ LEASE
LOCATION FUNCTION FEET LEASED EXPIRATION**
-------- -------- ------ ------ ------------
<S> <C> <C> <C> <C>
North America
Shelby Township, Michigan* Manufacturing 42,800 Owned --
Port Huron, Michigan* Manufacturing 200,000 Owned --
Sterling Heights, Michigan* Administration and engineering 14,550 Leased 2003
Mt. Clemens, Michigan Warehousing 25,000 Leased 1998
Lodi, California Administration, manufacturing and 150,000 Owned --
engineering
Auburn Hills, Michigan Warehousing 49,000 Leased 2006
Madison Heights, Michigan* Administration and manufacturing 90,000 Leased 2002
Madison Heights, Michigan* Engineering 18,000 Leased 2002
Granby, Quebec Administration, manufacturing and 62,000 Leased 2001
warehousing
Bromptonville, Quebec Manufacturing 2,000 Leased 1999
Europe
Sandhausen, Germany Administration and engineering 5,000 Leased Month to Month
Staphorst, The Netherlands* Administration, manufacturing, 405,000 Owned --
warehousing and engineering
Hoogeveen, The Netherlands* Manufacturing and warehousing 185,000 Owned --
Fensmark, Denmark* Manufacturing and warehousing 95,000 Owned --
Nuneaton, United Kingdom* Manufacturing and warehousing 75,000 Owned --
Vanersborg, Sweden* Manufacturing, warehousing and 160,000 Leased 2004
engineering
Reims, France Manufacturing and warehousing 115,000 Owned --
Reggio Emilia, Italy Administration, manufacturing, 170,000 Leased 2003
warehousing and engineering
Reggio Emilia, Italy Manufacturing and warehousing 110,000 Leased 2003
</TABLE>
- -------------------------
* QS 9000 and/or ISO 9000 certification.
** Gives effect to all renewal options.
ENVIRONMENTAL REGULATION
The Company's operations are subject to foreign federal, state and local
environmental laws and regulations that limit the discharges into the
environment and establish standards for the handling, generation, emission,
release, discharge, treatment, storage and disposal of certain materials,
substances and wastes. In many jurisdictions, these laws are complex, change
frequently, and have tended to become stronger over time. In jurisdictions such
as the United States, such obligations, including but not limited to those under
the Comprehensive Environmental Response, Compensation & Liability Act
("CERCLA") may be joint and several and may apply to conditions at properties
presently or formerly owned or operated by an entity or its predecessors, as
well as to conditions at properties at which waste or other contamination
attributable to an entity or its predecessors have been sent or otherwise come
to be located. The Company believes that its operations are in substantial
compliance with the terms of all applicable environmental laws and regulations
as currently interpreted. In addition, to the best of the Company's knowledge,
there are no existing or potential environmental claims against the Company nor
has the Company received any notification or have any current investigation
regarding, the disposal, release, or threatened release at any location of any
hazardous substance generated or transported by the Company. However, the
Company cannot predict with any certainty that it
57
<PAGE> 60
will not in the future incur liability under environmental laws and regulations
with respect to contamination of sites currently or formerly owned or operated
by the Company (including contamination caused by prior owners and operators of
such sites), or the off-site disposal of hazardous substances.
While historically the Company has not had to make significant capital
expenditures for environmental compliance, the Company cannot predict with any
certainty its future capital expenditures for environmental compliance because
of continually changing compliance standards and technology. Future events, such
as changes in existing environmental laws and regulations or unknown
contamination of sites owned or operated by the Company (including contamination
caused by prior owners and operators of such sites), may give rise to additional
compliance costs which could have a material adverse effect on the Company's
financial condition. Furthermore, actions by foreign, federal, state and local
governments concerning environmental matters could result in laws or regulations
that could increase the cost of producing the products manufactured by the
Company or otherwise adversely affect the demand for its products. Additionally,
the Company does not currently have any insurance coverage for environmental
liabilities and does not anticipate obtaining such coverage in the future. See
"Risk Factors -- Environmental Matters."
LEGAL PROCEEDINGS
From time to time, the Company is subject to legal proceedings and other
claims arising in the ordinary course of its business. The Company believes that
it is not presently a party to any litigation the outcome of which would have a
material adverse effect on its financial condition or results of operations. The
Company maintains insurance coverage against claims in an amount which it
believes to be adequate.
MANAGEMENT
BOARD OF MANAGERS, EXECUTIVE OFFICERS AND OTHER SIGNIFICANT EMPLOYEES
The following table sets forth the names and ages of each of the
individuals that currently serves as a member (each, a "Board Member") of the
Company's board of managers (the "Board of Managers"), executive officer and
other significant employee of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
F. Alan Smith........................ 66 Chairman of the Board of Managers of the Company
Marshall D. Gladchun................. 50 President and Chief Executive Officer of the Company and
SportRack; Board Member
Roger T. Morgan...................... 53 President and Chief Executive Officer of Valley; Board
Member
Gerrit de Graaf...................... 34 General Manager and Chief Executive Officer of Brink
Terence C. Seikel.................... 41 Vice President of Finance and Administration and Chief
Financial Officer of the Company
Richard E. Borghi.................... 51 Executive Vice President and Chief Operating Officer of
SportRack
Jean M. Maynard...................... 43 President of SportRack International
J. Wim Rengelink..................... 43 Managing Director of Brink
Gary K. Houston...................... 44 Vice President of OEM Operations of Valley
Bryan A. Fletcher.................... 38 Vice President of Aftermarket Operations of Valley
Donald J. Hofmann, Jr................ 40 Board Member, Vice President and Secretary of the
Company
Barry Banducci....................... 62 Board Member
Gerard J. Brink...................... 54 Board Member
</TABLE>
F. Alan Smith has served in the automotive industry for 36 years and has
been Chairman of the Board of Managers of the Company since its formation in
September 1995. He served in various assignments at
58
<PAGE> 61
General Motors from 1956 to 1992, including President of GM Canada from 1978 to
1980. He was a member of the Board of Directors of General Motors from 1981 to
1992 and Chief Financial Officer of General Motors from 1981 to 1988. Mr. Smith
is a director of The Minnesota Mining and Manufacturing Corporation ("3M") and
TransPro, Inc. ("TransPro"), a supplier of automotive components.
Marshall D. Gladchun has served in the automotive industry for 24 years and
has been President and Chief Executive Officer of the Company and SportRack
since September 1995. From 1986 to 1995, he held various senior management
positions with MascoTech, and was President and Chief Operating Officer of the
MascoTech Division at the time of its acquisition by the Company.
Roger T. Morgan has served in the automotive industry for 35 years and has
been President and Chief Executive Officer of Valley since June 1990. Prior to
joining Valley, he worked for General Motors for 12 years and Rockwell
International Automotive Group as Vice President -- Operations for 14 years.
Gerrit de Graaf has been General Manager and Chief Executive Officer of
Brink since November 1996. From 1989 to 1996, Mr. de Graaf worked for Philips
Medical Systems as a consultant and most recently as Philips' Marketing Manager
in the United States.
Terence C. Seikel has served in the automotive industry for 14 years and
has been Vice President of Finance and Administration and Chief Financial
Officer of the Company since January 1996. From 1985 to 1996, Mr. Seikel was
employed by Larizza Industries, a publicly held supplier of interior trim to the
automotive industry, in various capacities including Chief Financial Officer.
Richard E. Borghi has served in the automotive industry for 30 years and
has been Executive Vice President of Operations and Chief Operating Officer of
SportRack since 1995. From 1988 to 1995, Mr. Borghi held various senior
management positions with MascoTech, and was the Executive Vice President of
Operations of the MascoTech Division at the time of its acquisition by the
Company.
Jean M. Maynard has served in the automotive industry for 18 years and has
been President of SportRack International or its predecessor since prior to
1992.
J. Wim Rengelink has served in the automotive industry for 11 years and has
been Managing Director of Brink since 1995. From 1988 to 1995 he worked in
Brink's internal audit department.
Gary K. Houston has served in the automotive industry for 24 years and has
been Vice President of OEM Operations of Valley since 1995. From 1991 to 1995 he
was Vice President of Manufacturing of Valley. Prior thereto, Mr. Houston worked
for Rockwell International for 18 years, most recently as a manufacturing
manager.
Bryan A. Fletcher has served in the automotive industry for 9 years and has
been Vice President of Aftermarket Operations of Valley since 1991.
Donald J. Hofmann, Jr. has been a Board Member, Vice President and
Secretary of the Company since October 1995. Mr. Hofmann has been a General
Partner of CCP since 1992.
Barry Banducci has been a Board Member of the Company since October 1995.
Since September 1995, Mr. Banducci has been the Chairman of TransPro. Prior
thereto, Mr. Banducci served in various capacities at Equion Corporation, a
supplier of automotive components, from 1983 to 1995, including President, Chief
Executive Officer and Vice Chairman. Mr. Banducci is a director of TransPro and
Aristotle Corporation.
Gerard J. Brink has been a Board Member of the Company since October 1996.
Mr. Brink was General Manager of Brink from 1965 to 1996.
BOARD MEMBER COMPENSATION
The Board Members do not currently receive compensation for their service
on the Board of Managers or any committee thereof but are reimbursed for their
out-of-pocket expenses.
59
<PAGE> 62
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Managers has an Audit Committee consisting of Messrs. Banducci
and Brink, and a Compensation Committee consisting of Messrs. Hofmann and Smith.
The Audit Committee reviews the scope and results of audits and internal
accounting controls and all other tasks performed by the independent public
accountants of the Company. The Compensation Committee determines compensation
for executive officers of the Company and administers the Company's 1995 Option
Plan.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the compensation for
1997 for the chief executive officer of the Company and the four next most
highly compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------- ------------
OTHER
ANNUAL SECURITIES ALL OTHER
FISCAL SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS(#) ($)
--------------------------- ------ ------ ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
F. Alan Smith........................... 1997 200,000 100,000 -- -- --
Chairman of the Company
Marshall D. Gladchun.................... 1997 362,500 195,000 -- -- --
President and Chief Executive
Officer of the Company and SportRack
Terence C. Seikel....................... 1997 200,600 94,000 -- -- --
Vice President of Finance and
Administration and Chief
Financial Officer of the Company
Roger T. Morgan*........................ 1997 107,220 73,000 -- 178 --
President and Chief Executive
Officer of Valley
Richard E. Borghi....................... 1997 206,500 94,000 -- -- --
Executive Vice President and Chief
Operating Officer of SportRack
</TABLE>
- -------------------------
* August 5, 1997 to December 31, 1997
OPTION GRANTS IN 1997
The following table sets forth information with respect to stock options
pursuant to the 1995 Option Plan granted to the named executive officers of the
Company during 1997. All options were granted at an exercise price equal to the
fair market value per share of Common Stock on the date of grant.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
----------------------------------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF OF STOCK PRICE
SECURITIES PERCENT OF TOTAL EXERCISE APPRECIATION FOR OPTION
UNDERLYING OPTIONS GRANTED OR BASE TERM($)(1)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME GRANTED(#) 1997(%) ($/SH) DATE 5% 10%
---- ---------- ---------------- -------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
F. Alan Smith....................... -- -- -- -- -- --
Marshall D. Gladchun................ -- -- -- -- -- --
Terence C. Seikel................... -- -- -- -- -- --
Roger T. Morgan..................... 178 47.1 5,610 8/5/12 $1,077,000 $3,173,000
Richard E. Borghi................... -- -- -- -- -- --
</TABLE>
- -------------------------
(1) Potential realizable value is based on the assumption that the price of the
Company's common stock appreciates at the annual rate shown, compounded
annually, from the date of grant until the end of the 15-year option term.
The values are calculated in accordance with rules promulgated by the
Securities and Exchange Commission and do not reflect the Company's estimate
of future common stock price appreciation.
60
<PAGE> 63
EMPLOYMENT AGREEMENTS
Each of Marshall D. Gladchun, Roger T. Morgan, Terence C. Seikel, Richard
E. Borghi and Gerrit de Graaf has entered into an employment agreement
(collectively, the "Employment Agreements") with the Company. Mr. Gladchun's
Employment Agreement provides for an annual base salary of $277,304, subject to
increases at the sole discretion of the Board of Managers, a bonus in the range
of 50-70% of his base salary, and a one-time bonus of $400,000 on the earlier of
(i) September 20, 2002, (ii) his termination date, and (iii) a sale of the
Company (any such bonus an "Ending Bonus"). Mr. Morgan's Employment Agreement
provides for an annual base salary of $250,000, subject to increases at the sole
discretion of the Board of Managers, and a bonus in the range of 50% to 70% of
his base salary. Mr. Seikel's Employment Agreement provides for an annual base
salary of $165,000 and a bonus in the range of 30-50% of his base salary. Mr.
Borghi's Employment Agreement provides for an annual base salary of $161,200,
subject to increases at the sole discretion of the Board of Managers, a bonus in
the range of 30-50% of his base salary, and an Ending Bonus of $100,000. Mr. de
Graaf's Employment Agreement provides for an annual base salary of NLG 170,000,
subject to increases at the sole discretion of the Board of Managers, and a
bonus in the range of 30% to 50% of his base salary. The Employment Agreements
also provide for twelve months of severance pay to the executive officer in the
event such officer is terminated without cause (as defined in the Employment
Agreement.)
The Employment Agreements expire at various times between June 30, 2000 and
December 31, 2000 (except that Gerrit de Graaf's Employment Agreement may be
terminated by either party upon three month's prior written notice) but
automatically extend for successive two-year terms unless terminated by the
Company upon 30 days notice prior to the expiration of the current term. Each
Employment Agreement prohibits the executive officer from disclosing non-public
information about the Company. The Employment Agreements also require the
executive officers to assign to the Company any designs, inventions and other
related items and intellectual property rights developed or acquired by the
executive officer during the term of his employment. In addition, for a period
of five years after termination of employment (two years if the termination is
without cause) each executive officer has agreed, in his respective Employment
Agreement, not to (i) engage in any Competitive Business (as defined in the
Employment Agreements), (ii) interfere with or disrupt any relationship between
the Company and its customers, suppliers and employees and (iii) induce any
employee of the Company to terminate his or her employment with the Company or
engage in any Competitive Business.
CONSULTING AGREEMENTS
F. Alan Smith and Barry Banducci have each entered into consulting
agreements (the "Consulting Agreements") with the Company dated as of September
28, 1995. Mr. Smith's Consulting Agreement provides for an annual consulting fee
of $150,000 subject to increases at the sole discretion of the Board of
Managers, and a performance based bonus in the range of 30-50% of the annual
consulting fee. Mr. Banducci's Consulting Agreement provides for an annual
consulting fee of $50,000. The initial term of the Consulting Agreements expired
on March 28, 1997. The Consulting Agreements automatically extend for successive
six-month periods unless terminated by the Company upon 30 days notice prior to
the expiration of the then current term. The Consulting Agreements prohibit
Messrs. Smith and Banducci from disclosing non-public information about the
Company.
MEMBERS' AGREEMENT
Pursuant to the Second Amended and Restated Members' Agreement dated as of
August 5, 1997 (the "Members' Agreement") among the Company and certain of the
holders of outstanding units (the "Units") of the Company, affiliates of CCP
have the ability to appoint a majority of the members of the Company's Board of
Managers.
61
<PAGE> 64
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 15, 1998, the outstanding membership interests of the Company
consisted of 16,271 Units. The following table sets forth certain information
regarding the beneficial ownership of the Units by (i) each person known by the
Company to own more than 5% of the Units, (ii) each named director, (iii) each
named executive officer and (iv) all of the Company's directors and executive
officers treated as a group. To the knowledge of the Company, each of such
holders of Units has sole voting and investment power as to the Units owned
unless otherwise noted.
<TABLE>
<CAPTION>
PERCENTAGE
NAME AND ADDRESS(1) UNITS OWNED OWNERSHIP(2)
------------------- ----------- ------------
<S> <C> <C>
CB Capital Investors, L.P.(3)......................... 10,111 60.28%
380 Madison Avenue, 12th Floor
New York, New York 10017
MascoTech, Inc........................................ 1,500 9.22
275 Rex Boulevard
Auburn Hills, Michigan 48326
Celerity Partners..................................... 1,500 9.22
c/o Mark Benham
300 Sand Hill Road
Building 4, Suite 230
Menlo Park, California 94025
F. Alan Smith(4)...................................... 429 2.62
Marshall D. Gladchun(5)............................... 915 5.48
Roger T. Morgan....................................... 89 0.55
c/o Valley Industries, LLC
32501 Dequindre
Madison Heights, Michigan 48071
Terence C. Seikel(6).................................. 360 2.19
Richard E. Borghi(7).................................. 366 2.23
Barry Banducci(8)..................................... 357 2.18
59 Old Quarry Road
Guildford, Connecticut 06437
Gerard J. Brink....................................... 410 2.52
Lijsterbeslaan 10
B-2950 Kapellen
Belgium
All directors and executive officers as a group (9
persons)............................................ 2,926 16.96
</TABLE>
- -------------------------
(1) Unless otherwise indicated, address is c/o Advanced Accessory Systems, LLC,
12900 Hall Road, Suite 200, Sterling Heights, Michigan 48313.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission and includes voting and investment power with respect to the
Units. Units subject to options or warrants currently exercisable or
exercisable within 60 days of March 15, 1998 are deemed outstanding for
purposes of computing the percentage ownership of the person holding such
options or warrants, but are not deemed outstanding for purposes of
computing the percentage of any other person.
(3) CB Capital Investors, L.P. is an affiliate of CCP. Includes 501 Units
subject to warrants exercisable within 60 days.
(4) Includes 129 Units subject to options exercisable within 60 days. 300 Units
are owned by the F. Alan Smith Family Limited Partnership.
62
<PAGE> 65
(5) Includes 415 Units subject to options exercisable within 60 days.
(6) Includes 160 Units subject to options exercisable within 60 days.
(7) Includes 166 Units subject to options exercisable within 60 days.
(8) Includes 107 Units subject to options exercisable within 60 days. All Units
are owned by the Banducci Family, LLC.
LIMITED LIABILITY COMPANY AGREEMENT
The Company, Valley and SportRack are each limited liability companies
organized under the Delaware Limited Liability Company Act (the "LLC Act").
Valley's equity securities are held 99% by the Company and 1% by SportRack.
SportRack's equity securities are held 99% by the Company and 1% by CB Capital
Investors, L.P. ("CBC"), an affiliate of CCP. The Company controls the policies
and operations of Valley and SportRack. The Company's operations are governed by
a Second Amended and Restated Operating Agreement (the "LLC Agreement") among
the Company, CBC, certain members of the Company's management and the investors
defined therein (each a "Member" and collectively the "Members"). The LLC
Agreement governs the relative rights and duties of the Members.
Units. The Company is authorized to issue up to 25,000 Class A Units and up
to 2,000 Class B Units. As of March 15, 1998, 16,271 Class A Units are issued
and outstanding, 4,200 Class A Units have been duly reserved for issuance to
employees, directors and independent consultants and contractors of the Company
or any subsidiary thereof pursuant to the 1995 Option Plan of the Company, and
no Class B Units have been issued or reserved for issuance.
Management. The Board of Managers of the Company consists of up to 11
members as designated pursuant to the Members Agreement. The Board of Managers
is selected by a majority of the Members holding Class A units (each a "Class A
Member"). Under the Members Agreement, CBC is entitled at all times to hold a
seat on the Board of Managers and has the ability to appoint a majority of the
Members of the Board of Managers. A majority of the Chase Members (as defined in
the Members Agreement) may hold a seat on the Board of Managers through their
representative. Any Board Member of the Company may be removed without cause by
the vote of a majority of the Class A Members so long as the Members entitled to
appoint such Board Member have consented.
If a vacancy on the Board of Managers is not filled by a majority of the
Class A Members within 60 days after such vacancy occurs such vacancy may be
filled by a vote of the majority of the Board Members then in office or, if
none, by a vote of all Members.
Distributions. Both the Amended and Restated Credit Agreement and the
Indenture generally limit the Company's ability to make cash distributions to
Members other than distributions to cover the income tax liabilities of the
Members. Specifically, within 90 days of the end of each fiscal year, the
Company will distribute to each Member an amount (if any) equal to 44% of the
excess of Net Profits over Net Losses (each as defined in the LLC Agreement) to
such Member's capital account less any distributions previously made in that
year.
Restriction on Transfer. No Member may transfer its interest without having
obtained the prior written consent of a majority of the Board Members who hold
in the aggregate more than 50% of the profits and capital interest of the
Company, which consent may be withheld in their sole discretion.
Dissolution. The Company will be dissolved upon the earliest to occur of
(a) December 31, 2025; (b) the determination of the Board of Managers and a
majority of Class A Members to dissolve the Company; or (c) the occurrence of an
event of withdrawal of a Board Member or any other dissolution event under
Section 18-801 of the LLC Act. An event of withdrawal of any Member will not
dissolve the Company if within 90 days of such event the business of the Company
is continued by a majority of its remaining Members.
63
<PAGE> 66
CERTAIN TRANSACTIONS
Chase Securities Inc. ("CSI"), The Chase Manhattan Bank ("Chase"), The
Chase Manhattan Bank of Canada ("Chase Canada") and CCP are affiliates of CB
Capital Investors, L.P., which owns approximately 47.7% of the Company's issued
and outstanding voting securities on a fully diluted basis and the 1.0% minority
interest in SportRack. CSI acted as an Initial Purchaser in connection with the
Offering, for which it received customary fees. Chase is agent bank and a lender
to the Company under the Amended and Restated Credit Agreement and has received
customary fees and reimbursement of expenses in such capacities. Chase Canada is
agent bank and a lender to the Company under the Canadian Credit Agreement and
has received customary fees and reimbursement of expenses in such capacities.
Chase received its proportionate share, $6.0 million, of the repayment by the
Company of $90.0 million under the Amended and Restated Credit Agreement from
the proceeds of the Offering. An affiliate of CCP and CSI held a portion of the
Senior Subordinated Debt and received its proportionate share, $10.7 million,
including prepayment penalties of $700,000, of the repayment by the Company of
such debt from the proceeds of the Offering. As a result of the Offering, such
affiliate was relieved of its obligation to provide up to an additional $20.0
million of senior subordinated debt financing. In addition, an affiliate of CSI
and CCP purchased a portion of the Old Notes in connection with the Offering and
will not be participating in the Exchange Offer. Donald J. Hofmann, Jr., a
general partner of CCP, is a member of the Board of Managers of the Company. In
addition, CSI, Chase and their affiliates participate on a regular basis in
various investment banking and commercial banking transactions for the Company
and its affiliates.
The Company is a party to the Consulting Agreements with F. Alan Smith, the
Chairman of the Company, and Barry Banducci, a Board Member of the Company. See
"Management -- Consulting Agreements."
In connection with the acquisition of the MascoTech Division by the
Company, the Company loaned Messrs. Gladchun and Borghi $400,000 and $100,000,
respectively, to enable them to make their initial equity investments in the
Company. The loans bear interest at 6.2% and mature in September 2002.
DESCRIPTION OF THE CREDIT FACILITIES
CANADIAN CREDIT AGREEMENT
To finance the SportRack International Acquisition and provide working
capital financing in Canada, Chase Canada, First Chicago NBD Bank, Canada, and
Bank of Nova Scotia (collectively, the "Canadian Lenders") have provided to
SportRack International a C$20 million (approximately $14.5 million) term loan
and a C$4.0 million (approximately $2.8 million) working capital revolving
credit facility under a First Amended and Restated Credit Agreement dated as of
March 19, 1998 (the "Canadian Credit Agreement"). The Canadian Credit Agreement
is scheduled to mature on October 31, 2003 and the term loan portion amortizes
in quarterly installments. The Canadian Credit Agreement is guaranteed by the
Company and SportRack and is secured by a pledge of 100% of the stock and assets
of SportRack International. The guarantees of the Company and SportRack are
secured by substantially the same collateral that secures the obligations of
those companies under the Amended and Restated Credit Agreement described below.
The interest margins under the Canadian Credit Agreement are comparable to those
under the Revolving Credit Facility and the Tranche A Term Loan described below.
AMENDED AND RESTATED CREDIT AGREEMENT
In connection with the Valley Acquisition, the Company entered into the
Second Amended and Restated Credit Agreement, dated as of August 5, 1997 (as
amended, the "Amended and Restated Credit Agreement"), with certain of its
subsidiaries, the lenders party thereto, Chase as Co-Administrative Agent and
Syndication Agent and First Chicago NBD Bank ("NBD") as Administrative Agent,
Documentation Agent and Collateral Agent. The Amended and Restated Credit
Agreement amended the Company's existing credit agreement and provided for (i) a
Tranche A Term Loan in the aggregate principal amount of $65 million (the
"Tranche A Term Loan"), (ii) a Tranch B Term Loan in the aggregate principal
amount of $55 million (the
64
<PAGE> 67
"Tranche B Term Loan" and together with the Tranche A Term Loan, collectively,
the "Term Loan Facilities") and (iii) a revolving credit facility in the
aggregate principal amount of $25 million (the "Revolving Credit Facility"),
which includes a $2 million swing line sub facility and a $10 million letter of
credit sub facility. Borrowings by SportRack International under the revolving
credit facility of the Canadian Credit Agreement count against availability
under the Revolving Credit Facility. The outstanding principal amounts of the
Tranche A Term Loan and the Tranche B Term Loan were reduced to $17.5 million
and $16.0 million through prepayments from the proceeds of the sale of the Old
Notes. Subsequent to the sale of the Old Notes, the Amended and Restated Credit
Agreement was further amended to provide a $22 million acquisition facility to
finance future acquisitions (the "Acquisition Facility"). The Tranche A Term
Loan, the Tranche B Term Loan, the Revolving Credit Facility and the Acquisition
Facility are referred to collectively as the "Domestic Facilities".
The following information relating to the Amended and Restated Credit
Agreement is qualified in its entirety by reference to the complete text of the
documents entered into in connection therewith. The following is a description
of the general terms of the Amended and Restated Credit Agreement:
Use of Proceeds; Maturity. The proceeds of the Term Loan Facilities were
used to finance the Valley Acquisition and to refinance existing debt. The
proceeds of the Revolving Credit Facility were used to refinance existing debt,
pay fees and expenses of the Valley Acquisition and for general corporate
purposes. The proceeds of a $21.0 million borrowing under the Acquisition
Facility were used to finance the acquisition of the assets of Ellebi. Prior to
December 31, 1999 the Acquisition Facility may be repaid and reborrowed to
finance future acquisitions. The Term Loan Facilities have maturity schedules as
follows: (i) the Tranche A Term Loan matures on October 30, 2003 and amortizes
in quarterly installments; and (ii) the Tranche B Term Loan matures on October
30, 2004 and amortizes in quarterly installments. The Revolving Credit Facility
matures on October 30, 2003. The Acquisition Facility matures on October 30,
2003 and amortizes in quarterly installments commencing on December 31, 1999.
Revolving Credit Facility. The availability of the commitments under the
Revolving Credit Facility is subject to a borrowing base which generally equals
specified percentages of the then Eligible Receivables or Eligible Inventory
(each as defined in the Amended and Restated Credit Agreement) of the Company
and certain of its Subsidiaries. As of December 31, 1997, $20.3 million of
commitments under the Revolving Credit Facility is available to the Company.
Prepayments; Reduction of Commitments. The Term Loan Facilities are
required to be prepaid with (i) 100% of the net proceeds of any sale or issuance
of equity or any incurrence of indebtedness for borrowed money, subject to
certain exceptions; (ii) 100% of the net proceeds of any sale or other
disposition of any material assets, except for the sale of inventory in the
ordinary course of business, subject to certain exceptions; and (iii) 50% of
excess cash flow for each fiscal year. Such mandatory prepayments are applied
pro rata between the Tranche A Term Loans and the Tranche B Term Loans and, in
each case, in the inverse order of maturity. Any Tranche B Term Loan lender may
decline any mandatory prepayment prescribed in subsections (i) through (iii)
above, in which case the amounts declined are applied as a mandatory prepayment
pro rata to the Term Loan A Lenders in the inverse order of maturity.
Interest. The Domestic Facilities bear interest at a rate per annum, at the
option of the Company, equal to the adjusted eurocurrency base rate (the
"Eurocurrency Base Rate") or the rate which is equal to the higher of (i) NBD's
prime rate and (ii) the federal funds rate plus 1/2 of 1% ("ABR"), in each case
plus an applicable margin based on the leverage ratio from time to time in
effect. The applicable margins range from .50% to 1.75% for ABR Revolving Credit
Facility advances and Tranche A Term Loans and from 1.00% to 2.25% for ABR
Tranche B Term Loans. For Revolving Credit Facility advances and Tranche A Term
Loans bearing interest based on the Eurocurrency Base Rate, the applicable
margins range from 1.50% to 2.75%. For Tranche B Term Loans bearing interest at
the Eurocurrency Base Rate, the applicable margins range from 2.00% to 3.25%.
The rates for letter of credit fees are the same as the applicable margins for
Eurocurrency Revolving Credit advances.
65
<PAGE> 68
Collateral and Guarantees. The Domestic Facilities are guaranteed by the
Company and substantially all of its existing U.S. subsidiaries. The Domestic
Facilities are secured by a first priority lien on (i) all of the capital stock
(or partnership or other membership interest) of the Company, SportRack and each
of the material direct and indirect U.S. subsidiaries of the Company and 65% of
the capital stock of first tier non-U.S. subsidiaries and (ii) substantially all
tangible and intangible assets of the Company and each material direct and
indirect U.S. subsidiary. With respect to certain of the loans made to non-U.S.
subsidiaries, it is currently contemplated that all of the capital stock of
certain non-U.S. subsidiaries and, to the extent permitted by applicable law,
liens on the receivables and inventory of certain of the non-U.S. subsidiaries
and mortgage liens of certain real estate owned by Brink will be pledged to
secure the loans to Brink. The collateral also secures interest rate swaps,
currency or other hedge obligations owning to any lender.
Covenants. The Amended and Restated Credit Agreement contains covenants
restricting the ability of the Company and its subsidiaries to, among other
things, (i) declare dividends or redeem or repurchase capital stock; (ii)
prepay, redeem or purchase debt; (iii) incur liens; (iv) make loans and
investments; (v) issue additional debt; (vi) amend or otherwise alter debt and
other material agreements; (vii) engage in mergers, acquisitions and asset
sales; (viii) engage in transactions with affiliates; and (ix) alter the
business it conducts. The Company has also provided certain customary
indemnification of the Agents, lenders and their respective agents and is
required to comply with financial covenants with respect to (i) maximum leverage
ratio; (ii) minimum fixed charge coverage ratio; (iii) a minimum net worth; and
(iv) capital expenditures; and (v) rentals. The Company must also comply with
certain customary affirmative covenants.
Events of Default. Events of default under the Amended and Restated Credit
Agreement include but are not limited to (i) the Company's failure to pay
principal when due or interest within three business days of the date when due;
(ii) the Company's breach of certain covenants, representations or warranties
contained in the loan documents; (iii) customary cross-default provisions; (iv)
events of bankruptcy, insolvency or dissolution of the Company or its
subsidiaries; (v) the levy of certain judgements against the Company, its
subsidiaries, or their assets; (vi) the actual or asserted invalidity of
security documents or guarantees of the Company or its subsidiaries; (vii) a
Change of Control (as defined in the Amended and Restated Credit Agreement) of
the Company; (viii) the occurrence of certain ERISA events; (ix) the
subordination provisions evidencing subordinated debt shall cease to be valid or
in full force and effect.
DESCRIPTION OF THE NOTES
The Old Notes were, and the New Notes will be, issued under an Indenture
(the "Indenture") among the Company, Capital Corp., the Guarantors and First
Union National Bank, as trustee (the "Trustee"). The terms of the New Notes are
identical in all respects to the Old Notes, except that the New Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting their transfer and will not contain provisions providing for the
payment of liquidated damages under certain circumstances relating to the
Registration Rights Agreement, which provisions will terminate upon the
consummation of the Exchange Offer. The following summary of certain provisions
of the Indenture does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), and to all of the provisions of the
Indenture, including the definitions of certain terms therein and those terms
made a part of the Indenture by reference to the Trust Indenture Act, as in
effect on the date of the Indenture. The definitions of certain capitalized
terms used in the following summary are set forth below under "Certain
Definitions." References in this "Description of the Notes" section to "the
Company" mean only Advanced Accessory Systems, LLC and not any of its
Subsidiaries.
GENERAL
The Notes are joint and several obligations of the Company and Capital
Corp. The Notes are issued only in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. The Issuers have
appointed the Trustee to serve as registrar and paying agent under the Indenture
at its offices at 40 Broad Street, 5th Floor, Suite 550, New York, New York
10004. No service charge will be made for any registration
66
<PAGE> 69
of transfer or exchange of the Notes, except for any tax or other governmental
charge that may be imposed in connection therewith.
RANKING
The Notes rank junior to, and subordinate in right of payment to, all
existing and future Senior Indebtedness of the Issuers, pari passu in right of
payment with all senior subordinated Indebtedness of the Issuers and senior in
right of payment to all Subordinated Indebtedness of the Issuers. At December
31, 1997, on a pro forma basis after giving effect to the 1998 Transactions the
Company would have had approximately $74.3 million of Senior Indebtedness
outstanding (exclusive of unused commitments). All debt incurred under the
Credit Facilities will be Senior Indebtedness of the Company, will be guaranteed
by each of the Guarantors on a senior basis and will be secured by substantially
all of the assets of the Company and the Guarantors.
MATURITY, INTEREST AND PRINCIPAL OF THE NOTES
The Notes are limited to $125,000,000 aggregate principal amount and will
mature on October 1, 2007. Interest on the Notes accrues at a rate of 9 3/4% per
annum and is payable in cash semi-annually in arrears on each April 1 and
October 1, commencing on October 1, 1998, to the holders of record of Notes at
the close of business on March 15 and September 15, respectively, immediately
preceding such interest payment date. Interest accrues from the most recent
interest payment date to which interest has been paid or, if no interest has
been paid, from April 1, 1998. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
OPTIONAL REDEMPTION
The Notes are redeemable at the option of the Issuers, in whole or in part,
at any time on or after October 1, 2002, at the redemption prices (expressed as
a percentage of principal amount) set forth below, plus accrued and unpaid
interest thereon, if any, to the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12-month period
beginning on October 1 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2002........................................................ 104.875%
2003........................................................ 103.250%
2004........................................................ 101.625%
2005 and thereafter......................................... 100.000%
</TABLE>
In addition, at any time and from time to time on or prior to October 1,
2000, the Issuers may redeem in the aggregate up to 35% of the originally issued
aggregate principal amount of the Notes with the net cash proceeds of one or
more Public Equity Offerings by the Company at a redemption price in cash equal
to 109.750% of the principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the date of redemption (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date); provided, however, that at least 65% of the aggregate
principal amount of the Notes originally issued must remain outstanding
immediately after giving effect to each such redemption (excluding any Notes
held by the Company or any of its Affiliates). Notice of any such redemption
must be given within 60 days after the date of the closing of the relevant
Public Equity Offering of the Company.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any time
pursuant to an optional redemption, selection of such Notes for redemption will
be made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed or, if the
Notes are not then listed on a national securities exchange, on a pro rata
basis, by lot or by such method as the
67
<PAGE> 70
Trustee shall deem fair and appropriate; provided, however, that no Notes of a
principal amount of $1,000 or less shall be redeemed in part; provided further,
however, that if a partial redemption is made with the net cash proceeds of a
Public Equity Offering by the Company, selection of the Notes or portions
thereof for redemption shall be made by the Trustee only on a pro rata basis or
on as nearly a pro rata basis as is practicable (subject to the procedures of
The Depository Trust Company), unless such method is otherwise prohibited.
Notice of redemption shall be mailed by first-class mail at least 30 but not
more than 60 days before the redemption date to each Holder of Notes to be
redeemed at its registered address. If any Note is to be redeemed in part only,
the notice of redemption that relates to such Note shall state the portion of
the principal amount thereof to be redeemed. A new Note in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. On and after the redemption
date, interest will cease to accrue on Notes or portions thereof called for
redemption as long as the Company has deposited with the paying agent for the
Notes funds in satisfaction of the applicable redemption price pursuant to the
Indenture.
SUBORDINATION OF THE NOTES
The payment of the principal of, premium, if any, and interest on the Notes
is subordinated in right of payment, to the extent and in the manner provided in
the Indenture, to the prior payment in full in cash of all Senior Indebtedness.
Upon any payment or distribution of assets or securities of the Issuers of
any kind or character, whether in cash, property or securities (excluding any
payment or distribution of Permitted Junior Securities and excluding any payment
from the trust described under "Satisfaction and Discharge of Indenture;
Defeasance" (a "Defeasance Trust Payment")), upon any dissolution or winding-up
or total liquidation or reorganization of the Issuers, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
Senior Indebtedness then due shall first be paid in full in cash before the
Holders of the Notes or the Trustee on behalf of such Holders shall be entitled
to receive any payment by the Issuers of the principal of, premium, if any, or
interest on the Notes, or any payment by the Issuers to acquire any of the Notes
for cash, property or securities, or any distribution by the Issuers with
respect to the Notes of any cash, property or securities (excluding any payment
or distribution of Permitted Junior Securities and excluding any Defeasance
Trust Payment). Before any payment may be made by, or on behalf of, the Issuers
of the principal of, premium, if any, or interest on the Notes upon any such
dissolution or winding-up or total liquidation or reorganization, or in
bankruptcy, insolvency or receivership any payment or distribution of assets or
securities of the Issuers of any kind or character, whether in cash, property or
securities (excluding any payment or distribution of Permitted Junior Securities
and excluding any Defeasance Trust Payment), to which the Holders of the Notes
or the Trustee on their behalf would be entitled, but for the subordination
provisions of the Indenture, shall be made by the Issuers or by any receiver,
trustee in bankruptcy, liquidation trustee, agent or other Person making such
payment or distribution, directly to the holders of the Senior Indebtedness (pro
rata to such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders) or their representatives or to the trustee or
trustees or agent or agents under any agreement or indenture pursuant to which
any of such Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all such Senior
Indebtedness then due in full in cash after giving effect to any prior or
concurrent payment, distribution or provision therefor to or for the holders of
such Senior Indebtedness.
No direct or indirect payment (excluding any payment or distribution of
Permitted Junior Securities and excluding any Defeasance Trust Payment) by or on
behalf of the Issuers of principal of, premium, if any, or interest on the
Notes, whether pursuant to the terms of the Notes, upon acceleration, pursuant
to an Offer to Purchase or otherwise, will be made if, at the time of such
payment, there exists a default in the payment of all or any portion of the
obligations on any Senior Indebtedness, whether at maturity, on account of
mandatory redemption or prepayment, acceleration or otherwise, and such default
shall not have been cured or waived or the benefits of this sentence waived by
or on behalf of the holders of such Senior Indebtedness. In addition, during the
continuance of any non-payment event of default with respect to any Designated
Senior Indebtedness pursuant to which the maturity thereof may, in accordance
with the terms of the agreement or other instrument under which such Designated
Senior Indebtedness was created, be immediately accelerated,
68
<PAGE> 71
and upon receipt by the Trustee of written notice (a "Payment Blockage Notice")
from the holder or holders of such Designated Senior Indebtedness or the trustee
or agent acting on behalf of the holders of such Designated Senior Indebtedness,
then, unless and until such event of default has been cured or waived or has
ceased to exist or such Designated Senior Indebtedness has been discharged or
repaid in full in cash or the benefits of these provisions have been waived by
the holders of such Designated Senior Indebtedness, no direct or indirect
payment (excluding any payment or distribution of Permitted Junior Securities
and excluding any Defeasance Trust Payment) will be made by or on behalf of the
Issuers of principal of, premium, if any, or interest on the Notes, to such
Holders, during a period (a "Payment Blockage Period") commencing on the date of
receipt of such notice by the Trustee and ending 179 days thereafter.
Notwithstanding anything in the subordination provisions of the Indenture or the
Notes to the contrary, (x) in no event will a Payment Blockage Period extend
beyond 179 days from the date the Payment Blockage Notice in respect thereof was
given, (y) there shall be a period of at least 181 consecutive days in each
360-day period when no Payment Blockage Period is in effect and (z) not more
than one Payment Blockage Period may be commenced with respect to the Notes
during any period of 360 consecutive days. No event of default that existed or
was continuing on the date of commencement of any Payment Blockage Period with
respect to the Designated Senior Indebtedness initiating such Payment Blockage
Period (to the extent the holder of Designated Senior Indebtedness, or trustee
or agent, giving notice commencing such Payment Blockage Period had knowledge of
such existing or continuing event of default) may be, or be made, the basis for
the commencement of any other Payment Blockage Period by the holder or holders
of such Designated Senior Indebtedness or the trustee or agent acting on behalf
of such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such event of default has been cured or waived for a
period of not less than 90 consecutive days.
The failure to make any payment or distribution for or on account of the
Notes by reason of the provisions of the Indenture described under this
"Subordination of the Notes" heading will not be construed as preventing the
occurrence of any Event of Default in respect of the Notes. See "Events of
Default" below.
By reason of the subordination provisions described above, in the event of
insolvency of the Issuers, funds which would otherwise be payable to Holders of
the Notes will be paid to the holders of Senior Indebtedness to the extent
necessary to pay the Senior Indebtedness in full in cash, and the Issuers may be
unable to meet fully their obligations with respect to the Notes.
As of March 31, 1998 the United States/Canadian Credit Facility is the only
outstanding Senior Indebtedness. Subject to the restrictions set forth in the
Indenture, in the future the Company may issue additional Senior Indebtedness to
refinance existing Indebtedness or for other corporate purposes.
GUARANTEES OF THE NOTES
The Indenture provides that each of the Guarantors unconditionally
guarantees on a joint and several basis (the "Guarantees") all of the Issuers'
obligations under the Notes, including its obligations to pay principal,
premium, if any, and interest with respect to the Notes. The Guarantees are
general unsecured obligations of the Guarantors. The obligations of each
Guarantor under its Guarantee is subordinated and junior in right of payment to
the prior payment in full of all existing and future Guarantor Senior
Indebtedness of such Guarantor substantially to the same extent as the Notes are
subordinated to all existing and future Senior Indebtedness of the Company. The
Guarantors also guarantee all obligations under the Credit Facilities, and each
Guarantor has granted a security interest in all or substantially all of its
assets to secure the obligations under the Credit Facilities. The obligations of
each Guarantor are limited to the maximum amount which, after giving effect to
all other contingent and fixed liabilities of such Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor under its
Guarantee or pursuant to its contribution obligations under the Indenture, will
result in the obligations of such Guarantor under its Guarantee not constituting
a fraudulent conveyance or fraudulent transfer under Federal or state law. Each
Guarantor that makes a payment or distribution under a Guarantee shall be
entitled to a contribution from each other Guarantor in a pro rata amount, based
on the net assets of each Guarantor determined in accordance with GAAP.
69
<PAGE> 72
The Indenture provides that the Company shall cause each Restricted
Subsidiary issuing a Guarantee after the Issue Date pursuant to "Certain
Covenants -- Limitation on Guarantees by Restricted Subsidiaries" to (i) execute
and deliver to the Trustee a supplemental indenture in form reasonably
satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall
become a party to the Indenture and thereby unconditionally guarantee all of the
Issuers' Obligations under the Notes and the Indenture on the terms set forth
therein and (ii) deliver to the Trustee an Opinion of Counsel that such
supplemental indenture has been duly authorized, executed and delivered by such
Restricted Subsidiary and constitutes a valid, binding and enforceable
obligation of such Restricted Subsidiary (which opinion may be subject to
customary assumptions and qualifications). Thereafter, such Restricted
Subsidiary shall (unless released in accordance with the terms of this
Indenture) be a Guarantor for all purposes of the Indenture.
Each Guarantee is a continuing guarantee and will (a) remain in full force
and effect until payment in full of all of the obligations covered thereby, (b)
be binding upon each Guarantor and (c) inure to the benefit of and be
enforceable by the Trustee, the Holders and their successors, transferees and
assigns.
The Indenture provides that if the Notes are defeased in accordance with
the terms of the Indenture, or if, subject to the requirements of the first
paragraph under "-- Certain Covenants -- Merger, Sale of Assets, etc." all or
substantially all of the assets of any Guarantor or all of the Equity Interests
of any Guarantor are sold (including by issuance or otherwise) by the Company in
a transaction constituting an Asset Sale, and if (x) the Net Cash Proceeds from
such Asset Sale are used in accordance with the covenant described under
"Certain Covenants-Disposition of Proceeds of Asset Sales" or (y) the Company
delivers to the Trustee an Officers' Certificate to the effect that the Net Cash
Proceeds from such Asset Sale shall be used in accordance with the covenant
described under "Certain Covenants -- Disposition of Proceeds of Asset Sales"
and within the time limits specified by such covenant, then such Guarantor (in
the event of a sale or other disposition of all of the Equity Interests of such
Guarantor) or the corporation acquiring such assets (in the event of a sale or
other disposition of all or substantially all of the assets of such Guarantor)
shall be released and discharged of its Guarantee obligations in respect of the
Indenture and the Notes. In addition, if no Default or Event of Default has
occurred and is continuing, upon the release of the guarantees of any Guarantor
of amounts outstanding under the Credit Facilities, the Guarantee of such
Guarantor shall be automatically released.
Any Guarantor that is designated an Unrestricted Subsidiary pursuant to and
in accordance with "Designation of Unrestricted Subsidiaries" below shall upon
such Designation be released and discharged of its Guarantee obligations in
respect of the Indenture and the Notes and any Unrestricted Subsidiary whose
Designation is revoked pursuant to "Designation of Unrestricted Subsidiaries"
below will be required to become a Guarantor in accordance with the procedure
described in the third preceding paragraph.
OFFER TO PURCHASE UPON CHANGE OF CONTROL
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall notify the
Holders of the Notes of such occurrence in the manner prescribed by the
Indenture and shall, within 20 days after the Change of Control Date, make an
Offer to Purchase all Notes then outstanding at a purchase price in cash equal
to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the Purchase Date (subject to the right of Holders
of record on the relevant record date to receive interest due on the relevant
interest payment date).
If a Change of Control occurs which also constitutes an event of default
under the Credit Facilities, the lenders under the Credit Facilities would be
entitled to exercise the remedies available to a secured lender under applicable
law and pursuant to the terms of the Credit Facilities. Accordingly, any claims
of such lenders with respect to the assets of the Issuers will be prior to any
claim of the Holders of the Notes with respect to such assets.
Neither the Board of Managers of the Company nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control.
Restrictions in the Indenture described herein on the ability of the Company and
its Restricted Subsidiaries to incur additional Indebtedness, to grant Liens on
their property, to make Restricted Payments and to make Asset Sales may also
make more difficult or discourage a takeover of the Company, whether favored or
opposed by the management of the Company. Consummation of
70
<PAGE> 73
any such transaction in certain circumstances may require redemption or
repurchase of the Notes, and there can be no assurance that the Company or the
acquiring party will have sufficient financial resources to effect such
redemption or repurchase. Such restrictions and the restrictions on transactions
with Affiliates may, in certain circumstances, make more difficult or discourage
any leveraged buyout of the Company or any of its Restricted Subsidiaries by the
management of the Company. While such restrictions cover a wide variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders of Notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders of the Notes to
require that the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.
CERTAIN COVENANTS
Limitation on Indebtedness. The Company shall not, and shall not cause or
permit any Restricted Subsidiary to, directly or indirectly, Incur any
Indebtedness (including Acquired Indebtedness), except for Permitted
Indebtedness; provided, however,that the Company and any Domestic Restricted
Subsidiary may Incur Indebtedness if, at the time of and immediately after
giving pro forma effect to such Incurrence of Indebtedness and the application
of the proceeds therefrom, the Consolidated Coverage Ratio would be greater than
2.0 to 1.0 if the Indebtedness is Incurred prior to December 31, 1999 and 2.25
to 1.0 if the Indebtedness is Incurred thereafter; and provided further, that
any Foreign Restricted Subsidiary may incur Indebtedness in accordance with "--
Limitation on Foreign Indebtedness" below.
Limitation on Foreign Indebtedness. The Company shall not cause or permit
any Foreign Restricted Subsidiary of the Company to, directly or indirectly,
Incur any Indebtedness (including Acquired Indebtedness) other than Permitted
Indebtedness set forth in clauses (a) through (m) of the definition thereof
unless (i) the Indebtedness is Incurred, denominated and payable in U.S. dollars
or the local currencies of the jurisdictions of the operations of the Foreign
Restricted Subsidiary Incurring such Indebtedness or of the business or the
location of assets being acquired with the proceeds of such Indebtedness;
provided, however, that any Indebtedness permitted to be Incurred in a Western
European currency pursuant to this clause (i) may be Incurred in such Western
European currency or, any other Western European currency, (ii) after giving
effect to the Incurrence of such Indebtedness and the receipt of the application
of the proceeds therefrom, (A) if, as a result of the Incurrence of such
Indebtedness, such Restricted Subsidiary will be or become subject to any
restriction or limitation on the payment of dividends or the making of other
distributions, (I) the ratio of Foreign EBITDA to Foreign Interest Expense
(determined on a pro forma basis for the last four fiscal quarters for which
financial statements are available at the date of determination) is greater than
3.0 to 1.0 and (II) the Company's Consolidated Coverage Ratio (determined on a
pro forma basis for the last four fiscal quarters of the Company for which
financial statements are available at the date of determination) is greater than
2.0 to 1.0 if the Indebtedness is Incurred prior to December 31, 1999 and 2.25
to 1.0 if the Indebtedness is Incurred thereafter and (B) in any other case, the
Company's Consolidated Coverage Ratio (determined on a pro forma basis for the
last four fiscal quarters of the Company for which financial statements are
available at the date of determination) is greater than 2.0 to 1.0 if the
Indebtedness is Incurred prior to December 31, 1999 and 2.25 to 1.0 if the
Indebtedness is Incurred thereafter, and (iii) no Default or Event of Default
shall have occurred and be continuing at the time or as a consequence of the
Incurrence of such Indebtedness.
71
<PAGE> 74
Limitation on Senior Subordinated Indebtedness. The Company shall not,
directly or indirectly, Incur any Indebtedness that by its terms would expressly
rank senior in right of payment to the Notes and subordinate in right of payment
to any other Indebtedness of the Company.
The Company shall not permit any Guarantor to, and no Guarantor shall,
directly or indirectly, Incur any Indebtedness that by its terms would expressly
rank senior in right of payment to the Guarantee of such Guarantor and
subordinate in right of payment to any Indebtedness of such Guarantor.
Limitation on Restricted Payments. The Company shall not, and shall not
cause or permit any Restricted Subsidiary to, directly or indirectly,
(i) declare or pay any dividend or any other distribution on any
Equity Interests of the Company or any Restricted Subsidiary or make any
payment or distribution to the direct or indirect holders (in their
capacities as such) of Equity Interests of the Company or any Restricted
Subsidiary (other than any dividends, distributions and payments made to
the Company or any Restricted Subsidiary (and, in the case of SportRack,
concurrent like dividends, distributions and payments made to the holder of
the 1% minority interest in SportRack) and dividends or distributions
payable to any Person solely in Qualified Equity Interests of the Company
or in options, warrants or other rights to purchase Qualified Equity
Interests of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Restricted Subsidiary (other than
any such Equity Interests owned by the Company or any Restricted
Subsidiary);
(iii) make any Investment in any Person (other than Permitted
Investments); or
(iv) designate any Subsidiary of the Company as an "Unrestricted
Subsidiary" under the Indenture (a "Designation"); provided, however, that
the Designation of a Subsidiary of the Company as an Unrestricted
Subsidiary shall be deemed to include the Designation of all of the
Subsidiaries of such Subsidiary.
(any such payment or any other action (other than any exception thereto)
described in (i), (ii), (iii) or (iv) each, a "Restricted Payment"), unless
(a) no Default or Event of Default shall have occurred and be continuing at
the time of or immediately after giving effect to such Restricted Payment;
(b) immediately after giving effect to such Restricted Payment, the Company
would be able to Incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the "Limitation on Indebtedness" covenant above; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments declared or made on or after the
Issue Date does not exceed an amount equal to the sum of (1) 50% of cumulative
Consolidated Net Income determined for the period (taken as one period) from the
beginning of the first fiscal quarter commencing on the Issue Date and ending on
the last day of the most recent fiscal quarter immediately preceding the date of
such Restricted Payment for which consolidated financial information of the
Company is available (or if such cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss), plus (2) 100% of the aggregate net cash proceeds
received by the Company either (x) as capital contributions to the Company after
the Issue Date or (y) from the issue and sale (other than to a Restricted
Subsidiary) of its Qualified Equity Interests after the Issue Date (excluding
the net proceeds from any issuance and sale of Qualified Equity Interests
financed, directly or indirectly, using funds borrowed from the Company or any
Restricted Subsidiary until and to the extent such borrowing is repaid), plus
(3) the principal amount (or accreted amount (determined in accordance with
GAAP), if less) of any Indebtedness of the Company or any Restricted Subsidiary
Incurred after the Issue Date which has been converted into or exchanged for
Qualified Equity Interests of the Company (minus the amount of any cash or
property distributed by the Company or any Restricted Subsidiary upon such
conversion or exchange), plus (4) so long as the Designation thereof was treated
as a Restricted Payment made after the Issue Date, with respect to any
Unrestricted Subsidiary that has been redesignated as a Restricted Subsidiary
after the Issue Date in
72
<PAGE> 75
accordance with "Designation of Unrestricted Subsidiaries" below, the Company's
proportionate interest in an amount equal to the Fair Market Value of such
Subsidiary, plus (5) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the Issue Date
(including the sale of an Unrestricted Subsidiary) or dividends, distributions
or interest payments received in cash, an amount equal to 100% of the net cash
proceeds received by the Company or its Restricted Subsidiaries therefrom.
The foregoing provisions will not prevent (i) the payment of any dividend
or distribution on, or redemption of, Equity Interests within 60 days after the
date of declaration of such dividend or distribution or the giving of formal
notice of such redemption, if at the date of such declaration or giving of such
formal notice such payment or redemption would comply with the provisions of the
Indenture; (ii) the purchase, redemption, retirement or other acquisition of any
Equity Interests of the Company or its Restricted Subsidiaries that are not
owned by the Company or its Restricted Subsidiaries in exchange for, or out of
the net cash proceeds of the substantially concurrent issue and sale (other than
to a Restricted Subsidiary) of, Qualified Equity Interests of the Company;
provided, however, that any such net cash proceeds and the value of any
Qualified Equity Interests issued in exchange for such retired Equity Interests
are excluded from clause (c)(2) of the preceding paragraph (and were not
included therein at any time) and are not used to redeem the Notes pursuant to
"-- Optional Redemption" above; (iii) the purchase, redemption or other
acquisition for value of Equity Interests of the Company (other than
Disqualified Capital Stock) or options on such Equity Interests held by officers
or employees or former officers or employees (or their estates or beneficiaries
under their estates) upon the death, disability, retirement or termination of
employment of such current or former officers or employees pursuant to the terms
of an employee benefit plan or any other agreement pursuant to which such shares
of capital stock or options were issued or pursuant to a severance, buy-sell or
right of first refusal agreement with such current or former officer or
employee; provided, however, that the aggregate cash consideration paid, or
distributions made, pursuant to this clause (iii) does not exceed $5.0 million;
(iv) Investments constituting Restricted Payments made as a result of the
receipt of non-cash consideration from any Asset Sale made pursuant to and in
compliance with "-- Disposition of Proceeds of Asset Sales" below; (v) Tax
Distributions; (vi) the payment of dividends on the Company's Common Stock,
following the first Public Equity Offering of the Company's Common Stock after
the Issue Date, of up to 6% per annum of the net proceeds received by the
Company in such public offering; and (vii) the purchase, redemption, retirement
or other acquisition prior to June 30, 1999 of Equity Interests of the Company
from unaffiliated third parties; provided, however, that the aggregate cash
consideration paid pursuant to this clause (vii) does not exceed $7.5 million;
provided, however, that in the case of each of clauses (ii), (iii), (iv), (vi)
and (vii) no Default or Event of Default shall have occurred and be continuing
or would arise therefrom.
In determining the amount of Restricted Payments permissible under this
covenant, amounts expended pursuant to clauses (i), (iii), (iv), (vi) and (vii)
of the immediately preceding paragraph shall be included as Restricted Payments.
The amount of any non-cash Restricted Payment shall be deemed to be equal to the
Fair Market Value thereof at the date of the making of such Restricted Payment.
In determining the amount of any Restricted Payment made under clause (iv) of
the first paragraph of this covenant, the amount of such Restricted Payment (the
"Designation Amount") shall be equal to the Fair Market Value of the Company's
proportionate interest in such Subsidiary on such date. Any such Designation
shall be evidenced by a Board Resolution.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions to the Company or any other Restricted Subsidiary on its Equity
Interests or with respect to any other interest or participation in, or measured
by, its profits, or pay any Indebtedness owed to the Company or any other
Restricted Subsidiary, (b) make loans or advances to, or guarantee any
Indebtedness or other obligations of, or make any Investment in, the Company or
any other Restricted Subsidiary or (c) transfer any of its properties or assets
to the Company or any other Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (i) the Credit
Facilities, or any other agreement of the Company or the Restricted Subsidiaries
outstanding on the Issue Date, in each case as in effect on the Issue Date, and
any amendments, restatements, renewals,
73
<PAGE> 76
replacements or refinancings thereof; provided, however, that any such
amendment, restatement, renewal, replacement or refinancing is no more
restrictive in the aggregate with respect to such encumbrances or restrictions
than those contained in the agreement being amended, restated, reviewed,
replaced or refinanced; (ii) applicable law; (iii) any instrument governing
Indebtedness or Equity Interests of an Acquired Person acquired by the Company
or any Restricted Subsidiary as in effect at the time of such acquisition
(except to the extent such Indebtedness was Incurred by such Acquired Person in
connection with, as a result of or in anticipation or contemplation of such
acquisition); provided, however, that such encumbrances and restrictions are not
applicable to the Company or any Restricted Subsidiary, or the properties or
assets of the Company or any Restricted Subsidiary, other than the Acquired
Person; (iv) customary non-assignment provisions in contracts or leases entered
into in the ordinary course of business and consistent with past practices; (v)
Purchase Money Indebtedness for property acquired in the ordinary course of
business that only imposes encumbrances and restrictions on the property so
acquired; (vi) any agreement for the sale or disposition of the Equity Interests
or assets of any Restricted Subsidiary; provided, however, that such
encumbrances and restrictions described in this clause (vi) are only applicable
to such Restricted Subsidiary or assets, as applicable, and any such sale or
disposition is made in compliance with Disposition of Proceeds of Asset Sales"
below to the extent applicable thereto; (vii) secured Indebtedness otherwise
permitted to be incurred pursuant to the covenants described under "Limitation
on Indebtedness" and "Limitation on Liens" that limit the right of the debtor to
dispose of the assets securing such Indebtedness; (viii) customary provisions in
joint venture agreements and other similar agreements entered into in the
ordinary course of business; (ix) an agreement governing Indebtedness incurred
to refinance the Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clauses (i) through (viii) above; provided, however,
that the provisions relating to such encumbrance or restriction contained in any
such Indebtedness are no less restrictive in the aggregate than the provisions
relating to such encumbrance or restriction contained in agreements referred to
in such clauses; (x) an agreement governing Senior Indebtedness permitted to be
incurred pursuant to the "Limitation on Indebtedness" covenant; provided,
however, that the provisions relating to such encumbrance or restriction
contained in such Indebtedness are no less favorable to the Company in any
material respect as determined by the Board of Managers of the Company in its
reasonable and good faith judgment than the provisions contained in the Amended
and Restated Credit Agreement as in effect on the Issue Date; or (xi) the
Indenture.
Designation of Unrestricted Subsidiaries. The Company shall not and shall
not cause or permit any Restricted Subsidiary at any time to (x) provide credit
support for, subject any of its property or assets (other than the Equity
Interests of any Unrestricted Subsidiary) to the satisfaction of, or guarantee,
any Indebtedness of any Unrestricted Subsidiary (including any undertaking,
agreement or instrument evidencing such Indebtedness), (y) be directly or
indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (z) be
directly or indirectly liable for any Indebtedness which provides that the
holder thereof may (upon notice, lapse of time or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior to its
final scheduled maturity upon the occurrence of a default with respect to any
Indebtedness of any Unrestricted Subsidiary, except for any non-recourse
guarantee given solely to support the pledge by the Company or any Restricted
Subsidiary of the capital stock of any Unrestricted Subsidiary.
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") only if:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, be permitted to be Incurred for all purposes of the Indenture.
All Designations and Revocations must be evidenced by resolutions of the
Board of Managers of the Company, delivered to the Trustee certifying compliance
with the foregoing provisions.
Limitation on Liens. The Company shall not, and shall not cause or permit
any Restricted Subsidiary to, directly or indirectly, Incur any Liens of any
kind against or upon any of their respective properties or assets
74
<PAGE> 77
now owned or hereafter acquired, or any proceeds therefrom or any income or
profits therefrom, to secure any Indebtedness unless contemporaneously therewith
effective provision is made, in the case of the Company, to secure the Notes and
all other amounts due under the Indenture, and in the case of a Restricted
Subsidiary which is a Guarantor, to secure such Restricted Subsidiary's
Guarantee of the Notes and all other amounts due under the Indenture, equally
and ratably with such Indebtedness (or, in the event that such Indebtedness is
subordinated in right of payment to the Notes or such Restricted Subsidiary's
Guarantee, prior to such Indebtedness) with a Lien on the same properties and
assets securing such Indebtedness for so long as such Indebtedness is secured by
such Lien, except for (i) Liens securing Senior Indebtedness and Guarantor
Senior Indebtedness and (ii) Permitted Liens.
Disposition of Proceeds of Asset Sales. The Company shall not, and shall
not cause or permit any Restricted Subsidiary to, directly or indirectly, make
any Asset Sale, unless (i) the Company or such Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the assets sold or otherwise disposed of and
(ii) at least 75% of such consideration consists of (A) cash or Cash
Equivalents; provided, however, that the amount of (x) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet) of
the Company or any Restricted Subsidiary (other than liabilities that are by
their terms subordinated to the Notes) that are assumed by the transferee of any
such assets, and (y) any notes or other obligations received by the Company or
any such Restricted Subsidiary from such transferee that are immediately
converted by the Company or such Restricted Subsidiary into cash (to the extent
of the cash received) shall be deemed to be cash for the purposes of this clause
(A), or (B) properties and capital assets that replace the properties and assets
that were the subject of such Asset Sale or in properties and capital assets
that will be used in a Related Business ("Replacement Assets"); provided,
however, that if such property or assets subject to such Asset Sale were
directly owned by the Company or a Guarantor, such Replacement Assets shall also
be directly owned by the Company or a Guarantor. The amount of any Indebtedness
(other than any Subordinated Indebtedness) of the Company or any Restricted
Subsidiary that is actually assumed by the transferee in such Asset Sale and
from which the Company and the Restricted Subsidiaries are fully and
unconditionally released shall be deemed to be cash for purposes of determining
the percentage of cash consideration received by the Company or the Restricted
Subsidiaries.
The Company or such Restricted Subsidiary, as the case may be, may (i)
apply the Net Cash Proceeds of any Asset Sale within 180 days of receipt thereof
to repay Senior Indebtedness and permanently reduce any related commitment, or
(ii) make an Investment in Replacement Assets; provided, however, that such
Investment occurs or the Company or a Restricted Subsidiary enters into
contractual commitments to make such Investment, subject only to customary
conditions (other than the obtaining of financing), on or prior to the 180th day
following the receipt of such Net Cash Proceeds and Net Cash Proceeds
contractually committed are so applied within 270 days following the receipt of
such Net Cash Proceeds.
To the extent all or part of the Net Cash Proceeds of any Asset Sale are
not applied as described in clause (i) or (ii) of the immediately preceding
paragraph within the time periods set forth therein (the "Net Proceeds
Utilization Date") (such Net Cash Proceeds, the "Unutilized Net Cash Proceeds"),
the Company shall, within 20 days after such Net Proceeds Utilization Date, make
an Offer to Purchase all outstanding Notes up to a maximum principal amount
(expressed as a multiple of $1,000) of Notes equal to such Unutilized Net Cash
Proceeds, at a purchase price in cash equal to 100% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the Purchase Date;
provided, however, that the Offer to Purchase may be deferred until there are
aggregate Unutilized Net Cash Proceeds equal to or in excess of $5 million, at
which time the entire amount of such Unutilized Net Cash Proceeds, and not just
the amount in excess of $5 million, shall be applied as required pursuant to
this paragraph.
With respect to any Offer to Purchase effected pursuant to this covenant,
among the Notes, to the extent the aggregate principal amount of Notes tendered
pursuant to such Offer to Purchase exceeds the Unutilized Net Cash Proceeds to
be applied to the repurchase thereof, such Notes shall be purchased pro rata
based on the aggregate principal amount of such Notes tendered by each Holder.
To the extent the Unutilized Net Cash Proceeds exceed the aggregate amount of
Notes tendered by the Holders of the Notes pursuant to such Offer to Purchase,
the Company may retain and utilize any portion of the Unutilized Net Cash
Proceeds not
75
<PAGE> 78
applied to repurchase the Notes for any purpose consistent with the other terms
of the Indenture and such Unutilized Net Cash Proceeds shall no longer be
counted in determining the available amount of Unutilized Net Cash Proceeds for
purposes of this covenant.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to an Offer to Purchase. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of the Indenture by virtue
thereof.
Each Holder shall be entitled to tender all or any portion of the Notes
owned by such Holder pursuant to the Offer to Purchase, subject to the
requirement that any portion of a Note tendered must be tendered in an integral
multiple of $1,000 principal amount and subject to any proration among tendering
Holders as described above.
Merger, Sale of Assets, etc. The Indenture provides that neither of the
Issuers may consolidate with or merge with or into any other entity and the
Company shall not and shall not cause or permit any Restricted Subsidiary to,
sell, convey, assign, transfer, lease or otherwise dispose of all or
substantially all of the Company's and the Restricted Subsidiaries' properties
and assets (determined on a consolidated basis for the Company and the
Restricted Subsidiaries) to any entity in a single transaction or series of
related transactions, unless: (i) either (x) the Company shall be the Surviving
Person or (y) the Surviving Person (if other than the Company) shall be a
corporation or limited liability company organized and validly existing under
the laws of the United States of America or any State thereof or the District of
Columbia or, if any such Restricted Subsidiary was a Foreign Restricted
Subsidiary, under the laws of the United States of America or any state thereof
or the District of Columbia or the jurisdiction under which such Foreign
Restricted Subsidiary was organized, and shall, in any such case, expressly
assume by a supplemental indenture, the due and punctual payment of the
principal of, premium, if any, and interest on all the Notes and the performance
and observance of every covenant of the Indenture and the Registration Rights
Agreement to be performed or observed on the part of the Company; (ii)
immediately thereafter, no Default or Event of Default shall have occurred and
be continuing; and (iii) immediately after giving effect to any such transaction
involving the Incurrence by the Company or any Restricted Subsidiary, directly
or indirectly, of additional Indebtedness (and treating any Indebtedness not
previously an obligation of the Company or any Restricted Subsidiary in
connection with or as a result of such transaction as having been Incurred at
the time of such transaction), the Surviving Person could Incur at least $1.00
of additional Indebtedness (other than Permitted Indebtedness) under the
Consolidated Coverage Ratio of the first paragraph of "Limitation on
Indebtedness" covenant described above.
Notwithstanding the foregoing clause (iii) of the immediately preceding
paragraph, any Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its properties and assets to the Company or any
Restricted Subsidiary that is a Guarantor.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all the properties and assets of one or more Restricted
Subsidiaries the Equity Interest of which constitutes all or substantially all
the properties and assets of the Company shall be deemed to be the transfer of
all or substantially all the properties and assets of the Company.
No Guarantor (other than a Guarantor whose Guarantee is to be released in
accordance with the terms of its Guarantee and the Indenture as provided in the
third paragraph under "Guarantees of the Notes" above) shall consolidate with or
merge with or into another Person, whether or not such Person is affiliated with
such Guarantor and whether or not such Guarantor is the Surviving Person, unless
(i) the Surviving Person (if other than such Guarantor) is a corporation or
limited liability company organized and validly existing under the laws of the
United States, any State thereof or the District of Columbia; (ii) the Surviving
Person (if other than such Guarantor) expressly assumes by a supplemental
indenture all the obligations of such Guarantor under its Guarantee of the Notes
and the performance and observance of every covenant of the
76
<PAGE> 79
Indenture and the Registration Right Agreement to be performed or observed by
such Guarantor; (iii) at the time of and immediately after such Disposition, no
Default or Event of Default shall have occurred and be continuing; and (iv)
immediately after giving effect to any such transaction involving the Incurrence
by such Guarantor, directly or indirectly, of additional Indebtedness (and
treating any Indebtedness not previously an obligation of such Guarantor in
connection with or as a result of such transaction as having been Incurred at
the time of such transaction), the Company could Incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under the
Consolidated Coverage Ratio of the first paragraph of the "Limitation of
Indebtedness" covenant described above; provided, however, that this paragraph
shall not be a condition to a merger or consolidation of a Guarantor if such
merger or consolidation only involves the Company and/or one or more other
Guarantors.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraphs in
which the Company or a Guarantor, as the case may be, is not the Surviving
Person and the Surviving Person is to assume all the Obligations of the Company
under the Notes, the Indenture and the Registration Rights Agreement or of such
Guarantor under its Guarantee, the Indenture and the Registration Rights
Agreement, as the case may be, pursuant to a supplemental indenture, such
Surviving Person shall succeed to, and be substituted for, and may exercise
every right and power of, the Company or such Guarantor, as the case may be, and
the Company, as the case may be, shall be discharged from its Obligations under
the Indenture and the Notes or such Guarantor shall be discharged from its
Obligations under the Indenture and its Guarantee.
Transactions with Affiliates. The Company shall not, and shall not cause or
permit any Restricted Subsidiary to, directly or indirectly, conduct any
business or enter into any transaction (or series of related transactions) with
or for the benefit of any of their respective Affiliates (including, without
limitation, any Unrestricted Subsidiary) or any officer, director or employee of
the Company or any Subsidiary (each an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms which are no less favorable to the Company or
such Restricted Subsidiary, as the case may be, than could be available in a
comparable transaction with an unaffiliated third party and (ii) if such
Affiliate Transaction (or series of related Affiliate Transactions) involves
aggregate payments or other consideration having a Fair Market Value in excess
of $1.0 million, such Affiliate Transaction is in writing and a majority of the
disinterested members of the Board of Managers of the Company shall have
approved such Affiliate Transaction and determined that such Affiliate
Transaction complies with the foregoing provisions. In addition, any Affiliate
Transaction involving aggregate payments or other consideration having a Fair
Market Value in excess of $5.0 million will also require a written opinion from
an Independent Financial Advisor (filed with the Trustee) stating that the terms
of such Affiliate Transaction are fair, from a financial point of view, to the
Company or the Restricted Subsidiary involved in such Affiliate Transaction, as
the case may be.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to (i) transactions with or among the Company and any Restricted
Subsidiary or between or among Restricted Subsidiaries; (ii) reasonable fees and
compensation paid to, and indemnity provided on behalf of, officers, directors,
employees, consultants or agents of the Company or any Restricted Subsidiary of
the Company as determined in good faith by the Company's Board of Managers;
(iii) any transactions undertaken pursuant to any contractual obligations in
existence on the Issue Date (as in effect on the Issue Date); (iv) any
Restricted Payments made in compliance with "Limitation on Restricted Payments"
above; (v) the provision by Persons who may be deemed Affiliates or stockholders
of the Company of investment banking, commercial banking, trust, lending or
financing, investment, underwriting, placement agent, financial advisory or
similar services to the Company or its Subsidiaries; (vi) reasonable and
customary loans to employees of the Company and its Subsidiaries which are
approved by the Board of Managers of the Company in good faith; and (vii)
transactions with customers, clients, suppliers or purchasers or sellers of
goods or services, in each case in the ordinary course of business and otherwise
in compliance with the terms of the Indenture, which are fair to the Company or
its Restricted Subsidiaries, in the reasonable determination of the Board of
Managers of the Company or the senior management thereof, or are on terms at
least as favorable as might reasonably have been obtained at such time from an
unaffiliated party.
77
<PAGE> 80
Limitation on the Sale or Issuance of Equity Interests of Restricted
Subsidiaries. The Company shall not sell any Equity Interest of a Restricted
Subsidiary, and shall not cause or permit any Restricted Subsidiary, directly or
indirectly, to issue or sell or have outstanding any Equity Interests, except:
(i) to the Company or a Wholly Owned Restricted Subsidiary; or (ii) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary. Notwithstanding
the foregoing, the Company is permitted to sell all the Equity Interests of a
Restricted Subsidiary as long as the Company is in compliance with the terms of
the covenants described under "Disposition of Proceeds of Asset Sales" and, if
applicable, "Merger, Sale of Assets, etc." above.
Guarantees by Restricted Subsidiaries. The Indenture provides that the
Company will not create or acquire, nor cause or permit any of the Restricted
Subsidiaries, directly or indirectly, to create or acquire, any Subsidiary other
than (A) an Unrestricted Subsidiary in accordance with the other terms of the
Indenture, (B) a Foreign Restricted Subsidiary or (C) a Domestic Restricted
Subsidiary that, simultaneously with such creation or acquisition, executes and
delivers a supplemental indenture to the Indenture pursuant to which it will
become a Guarantor under the Indenture in accordance with "Guarantees of the
Notes" above.
Provision of Financial Information. Whether or not the Company is subject
to Section 13(a) or 15(d) of the Exchange Act, or any successor provision
thereto, the Company shall file with the SEC (if permitted by SEC practice and
applicable law and regulations) the annual reports, quarterly reports and other
documents which the Issuers would have been required to file with the SEC
pursuant to such Section 13(a) or 15(d) or any successor provision thereto if
the Company were so subject, such documents to be filed with the SEC on or prior
to the respective dates (the "Required Filing Dates") by which the Company would
have been required so to file such documents if the Company were so subject. The
Company shall also in any event (a) within 15 days of each Required Filing Date
(whether or not permitted or required to be filed with the SEC) (i) transmit (or
cause to be transmitted) by mail to all Holders, as their names and addresses
appear in the Note register, without cost to such Holders, and (ii) file with
the Trustee, copies of the annual reports, quarterly reports and other documents
which the Company is required to file with the SEC pursuant to the preceding
sentence, or, if such filing is not so permitted, information and data of a
similar nature, and (b) if, notwithstanding the preceding sentence, filing such
documents by the Issuers with the SEC is not permitted by SEC practice or
applicable law or regulations, promptly upon written request supply copies of
such documents to any Holder. In addition, for so long as any Notes remain
outstanding and prior to the later of the consummation of the Exchange Offer and
the filing of the Initial Shelf Registration Statement, if required, the Company
will furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act, and, to any beneficial holder of
Notes, if not obtainable from the SEC, information of the type that would be
filed with the SEC pursuant to the foregoing provisions, upon the request of any
such holder.
EVENTS OF DEFAULT
The occurrence of any of the following is defined as an "Event of Default"
under the Indenture: (a) failure to pay principal of (or premium, if any, on)
any Note when due (whether or not prohibited by the provisions of the Indenture
described under "Subordination of the Notes" above); (b) failure to pay any
interest on any Note when due, which failure continues for 30 days or more
(whether or not prohibited by the provisions of the Indenture described under
"Subordination of the Notes" above); (c) default in the payment of principal of
or interest on any Note required to be purchased pursuant to any Offer to
Purchase required by the Indenture when due and payable or failure to pay on the
Purchase Date the Purchase Price for any Note validly tendered pursuant to any
Offer to Purchase (whether or not prohibited by the provisions of the Indenture
described under "Subordination of the Notes" above); (d) failure to perform any
other covenant or agreement of the Company under the Indenture or in the Notes
or of the Guarantors under the Indenture or in the Guarantees which failure
continues for 30 days or more after written notice to the Company by the Trustee
or Holders of at least 25% in aggregate principal amount of the outstanding
Notes; (e) default or defaults under the terms of one or more instruments
evidencing or securing Indebtedness of the Company or any of its Restricted
Subsidiaries having an outstanding principal amount of $5.0 million or more
individually or in the aggregate that has resulted in the acceleration of the
payment of such Indebtedness or failure by the
78
<PAGE> 81
Company or any of its Restricted Subsidiaries to pay principal when due at the
stated maturity of any such Indebtedness and such default or defaults shall have
continued after any applicable grace period and shall not have been cured or
waived; (f) the rendering of a final judgment or judgments (not subject to
appeal) against the Company or any of its Restricted Subsidiaries in an amount
of $5.0 million or more (net of any amounts covered by insurance) which remains
undischarged or unstayed for a period of 60 days after the date on which the
right to appeal has expired; (g) certain events of bankruptcy, insolvency or
reorganization affecting the Company or any of its Significant Restricted
Subsidiaries; or (h) other than as provided in or pursuant to any Guarantee or
the Indenture, any Guarantee of a Significant Restricted Subsidiary ceases to be
in full force and effect or is declared null and void and unenforceable or found
to be invalid or any Guarantor denies in writing its liability under its
Guarantee (other than by reason of a release of such Guarantor from its
Guarantee in accordance with the terms of the Indenture and such Guarantee).
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the Holders of Notes, unless
such Holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the Holders of a
majority in aggregate principal amount of the outstanding Notes will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
such Trustee.
If an Event of Default with respect to the Notes (other than an Event of
Default with respect to the Company described in clause (g) of the preceding
paragraph) occurs and is continuing, the Trustee or the Holders of at least 25%
in aggregate principal amount of the outstanding Notes, by notice in writing to
the Company may declare the unpaid principal of (and premium, if any) and
accrued interest to the date of acceleration on all the outstanding Notes to be
due and payable immediately and, upon any such declaration, such principal
amount (and premium, if any) and accrued interest, notwithstanding anything
contained in the Indenture or the Notes to the contrary will become immediately
due and payable. If an Event of Default specified in clause (g) of the preceding
paragraph with respect to the Company occurs under the Indenture, the Notes will
ipso facto become immediately due and payable without any declaration or other
act on the part of the Trustee or any Holder of the Notes.
Any such declaration with respect to the Notes may be annulled by the
Holders of a majority in aggregate principal amount of the outstanding Notes
upon the conditions provided in the Indenture. For information as to waiver of
defaults, see "Modification and Waiver" below.
The Indenture provides that the Trustee shall, within 30 days after the
occurrence of any Default or Event of Default with respect to the Notes
outstanding, give the Holders of the Notes thereof notice of all uncured
Defaults or Events of Default thereunder known to it; provided, however, that,
except in the case of a Default or an Event of Default in payment with respect
to the Notes or a Default or Event of Default in complying with "Certain
Covenants -- Merger, Sale of Assets, etc." above, the Trustee shall be protected
in withholding such notice if and so long as a committee of its trust officers
in good faith determines that the withholding of such notice is in the interest
of the Holders of the Notes.
No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default thereunder and unless the Holders of at least 25% of the aggregate
principal amount of the outstanding Notes shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as the
Trustee, and the Trustee shall have not have received from the Holders of a
majority in aggregate principal amount of such outstanding Notes a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a Holder of such a Note for enforcement of payment of the
principal of and premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note.
The Company is required to furnish to the Trustee annually a statement as
to the performance by the Issuers of certain of their obligations under the
Indenture and as to any default in such performance.
79
<PAGE> 82
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATOR, MEMBERS,
MANAGERS AND STOCKHOLDERS
No director, officer, employee, incorporator, member, manager or
stockholder of either of the Issuers or any of their Affiliates, as such, shall
have any liability for any obligations of either of the Issuers or any of their
Affiliates under the Notes or the Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each holder of
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the obligations of the Guarantors discharged with respect to the
outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Notes, except for (i) the rights of Holders to
receive payments in respect of the principal of, premium, if any, and interest
on the Notes when such payments are due, (ii) the Company's obligations with
respect to the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payments, (iii) the rights, powers, trust, duties and immunities of
the Trustee and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company
released with respect to certain covenants that are described in the Indenture
("Covenant Defeasance") and thereafter any omission to comply with such
obligations shall not constitute a Default or an Event of Default with respect
to the Notes. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, reorganization and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders cash in U.S. dollars, non-callable United States Government
Obligations, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the Notes on the
stated date for payment thereof or on the applicable redemption date, as the
case may be; (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (B) since
the date of the Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel shall confirm that, the Holders will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit or, insofar as
Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit; (v) such
Legal Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a default under, the Indenture or any other material
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound; (vi) the
Company shall have delivered to the Trustee an officers' certificate stating
that the deposit was not made by the Company with the intent of preferring the
Holders over any other creditors of the Company or with the intent of defeating,
hindering, delaying or defrauding any other creditors of the Company or others;
(vii) the Company shall have delivered to the Trustee an officers' certificate
and an opinion of counsel, each stating that all conditions precedent provided
for or relating to the Legal Defeasance
80
<PAGE> 83
or the Covenant Defeasance have been complied with; (viii) the Company shall
have delivered to the Trustee an opinion of counsel to the effect that (A) the
trust funds will not be subject to any rights of holders of Senior Indebtedness,
including, without limitation, those arising under the Indenture, and (B)
assuming no intervening bankruptcy of the Company between the date of deposit
and the 91st day following the date of the deposit and that no Holder is an
insider of the Company, after the 91st day following the date of the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; and (ix) certain other customary conditions precedent are satisfied.
Notwithstanding the foregoing, the opinion of counsel required by clause (ii)
above need not be delivered if all Notes not theretofore delivered to the
Trustee for cancellation (x) have become due and payable, (y) will become due
and payable on the maturity date within one year or (z) are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in the name, and at the
expense, of the Company.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration or transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from the Company directing the Trustee to apply such
funds to the payment thereof at maturity or redemption, as the case may be; (ii)
the Company has paid all other sums payable under the Indenture by the Company;
and (iii) the Company has delivered to the Trustee an officers' certificate and
an opinion of counsel stating that all conditions precedent under the Indenture
relating to the satisfaction and discharge of the Indenture have been complied
with.
GOVERNING LAW
The Indenture, the Notes and the Guarantees are governed by the laws of the
State of New York without regard to principles of conflicts of laws.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Issuers,
the Guarantors, and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the outstanding Notes (including consents obtained
in connection with a tender offer or exchange offer for the Notes); provided,
however, that no such modification or amendment to the Indenture may, without
the consent of the Holder of each Note affected thereby, (a) change the maturity
of the principal of or any installment of interest on any such Note or alter the
optional redemption or repurchase provisions of any such Note or the Indenture
in a manner adverse to the Holders of the Notes; (b) reduce the principal amount
(or the premium) of any such Note; (c) reduce the rate of or extend the time for
payment of interest on any such Note; (d) change the place or currency of
payment of principal of (or premium) or interest on any such Note; (e) modify
any provisions of the Indenture relating to the waiver of past defaults (other
than to add sections of the Indenture or the Notes subject thereto) or the right
of the Holders of Notes to institute suit for the enforcement of any payment on
or with respect to any such Note or any Guarantee in respect thereof or the
modification and amendment provisions of the Indenture and the Notes (other than
to add sections of the Indenture or the Notes which may not be amended,
supplemented or waived without the consent of each Holder affected); (f) reduce
the percentage of the principal amount of outstanding Notes necessary for
amendment to or waiver of compliance with any provision of the Indenture or the
Notes or for waiver of any Default in respect thereof;
81
<PAGE> 84
(g) waive a default in the payment of principal of, interest on, or redemption
payment with respect to, the Notes (except a rescission of acceleration of the
Notes by the Holders thereof as provided in the Indenture and a waiver of the
payment default that resulted from such acceleration); (h) modify the ranking or
priority of any Note or the Guarantee in respect thereof of any Guarantor or
modify the definition of Senior Indebtedness or Guarantor Senior Indebtedness or
amend or modify the subordination provisions of the Indenture in any manner
adverse to the Holders of the Notes; (i) modify the provisions of any covenant
(or the related definitions) in the Indenture requiring the Company to make an
Offer to Purchase in a manner materially adverse to the Holders of Notes
affected thereby otherwise than in accordance with the Indenture; or (j) release
any Guarantor from any of its obligations under its Guarantee or the Indenture
otherwise than in accordance with the Indenture.
The Holders of a majority in aggregate principal amount of the outstanding
Notes, on behalf of all Holders of Notes, may waive compliance by the Issuers
and the Guarantors with certain restrictive provisions of the Indenture. Subject
to certain rights of the Trustee, as provided in the Indenture, the Holders of a
majority in aggregate principal amount of the Notes, on behalf of all Holders,
may waive any past default under the Indenture (including any such waiver
obtained in connection with a tender offer or exchange offer for the Notes),
except a default in the payment of principal, premium or interest or a default
arising from failure to purchase any Notes tendered pursuant to an Offer to
Purchase, or a default in respect of a provision that under the Indenture cannot
be modified or amended without the consent of the Holder of each Note that is
affected.
THE TRUSTEE
Except during the continuance of a Default, the Trustee will perform only
such duties as are specifically set forth in the Indenture. During the existence
of a Default, the Trustee will exercise such rights and powers vested in it
under the Indenture and use the same degree of care and skill in its exercise as
a prudent person would exercise under the circumstances in the conduct of such
person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of either of the Issuers, any Guarantor or any other obligor
upon the Notes, to obtain payment of claims in certain cases or to realize on
certain property received by it in respect of any such claim as security or
otherwise. The Trustee is permitted to engage in other transactions with the
Issuers or an Affiliate of the Issuers; provided, however, that if it acquires
any conflicting interest (as defined in the Indenture or in the Trust Indenture
Act), it must eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full definition of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Acquisition from such Person or (b) existing at the time such
Person becomes a Restricted Subsidiary or is merged or consolidated with or into
the Company or any Restricted Subsidiary.
"Acquired Person" means, with respect to any specified Person, any other
Person which merges with or into or becomes a Subsidiary of such specified
Person.
"Acquisition" means (i) any capital contribution (by means of transfers of
cash or other property to others or payments for property or services for the
account or use of others, or otherwise) by the Company or any Restricted
Subsidiary to any other Person, or any acquisition or purchase of Equity
Interests of any other Person by the Company or any Restricted Subsidiary, in
either case pursuant to which such Person shall become a Restricted Subsidiary
or shall be consolidated with or merged into the Company or any Restricted
Subsidiary or (ii) any acquisition by the Company or any Restricted Subsidiary
of the assets of any Person which constitute substantially all of an operating
unit or line of business of such Person or which is otherwise outside of the
ordinary course of business.
82
<PAGE> 85
"Acquisition Facility" means a credit facility entered into by the Company
and one or more commercial banks or other lenders pursuant to which the Company
and/or its Restricted Subsidiaries may incur Indebtedness for the purpose of
financing one or more acquisitions of assets or equity securities of any Related
Business and paying related fees and expenses.
"Affiliate" of any specified person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "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 or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(that has the effect of a disposition) or other disposition (including, without
limitation, any merger, consolidation or sale-leaseback transaction) to any
Person other than the Company or a Wholly Owned Restricted Subsidiary, in one
transaction or a series of related transactions, of (i) any Equity Interest of
any Restricted Subsidiary (other than directors' qualifying shares, to the
extent mandated by applicable law); (ii) any assets of the Company or any
Restricted Subsidiary which constitute substantially all of an operating unit or
line of business of the Company or any Restricted Subsidiary; or (iii) any other
property or asset of the Company or any Restricted Subsidiary outside of the
ordinary course of business (including the receipt of proceeds paid on account
of the loss of or damage to any property or asset and awards of compensation for
any asset taken by condemnation, eminent domain or similar proceedings). For the
purposes of this definition, the term "Asset Sale" shall not include (a) any
transaction consummated in compliance with "Certain Covenants -- Merger, Sale of
Assets, etc." above and the creation of any Lien not prohibited by "Certain
Covenants -- Limitation on Liens" above; (b) sales of property or equipment that
has become worn out, obsolete or damaged or otherwise unsuitable for use in
connection with the business of the Company or any Restricted Subsidiary, as the
case may be; (c) any transaction consummated in compliance with "Certain
Covenants -- Limitation on Restricted Payments" above; and (d) any transfers of
properties and assets to the Company, between the Company and Wholly Owned
Restricted Subsidiaries that are Guarantors or between Wholly Owned Restricted
Subsidiaries. In addition, solely for purposes of "Certain
Covenants -- Disposition of Proceeds of Asset Sales" above, any sale,
conveyance, transfer, lease or other disposition of any property or asset,
whether in one transaction or a series of related transactions, involving assets
with a Fair Market Value not in excess of $1.0 million in any fiscal year shall
be deemed not to be an Asset Sale.
"Attributable Indebtedness" in respect of a Sale and Lease-Back Transaction
means, as at the time of determination, the present value (discounted according
to GAAP at the cost of indebtedness implied in the lease) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale and Lease-Back Transaction (including any period for
which such lease has been extended).
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Managers of such Person or a duly authorized
committee of such Board of Managers.
"Capitalized Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on the balance sheet in
accordance with GAAP.
"Cash Equivalents" means: (a) securities issued or directly and fully
guaranteed or insured by the U.S. government or any agency or instrumentality
thereof, the government of Canada or the government of any member of the
European Union, in each case having maturities of not more than one year from
the date of acquisition; (b) domestic and Eurocurrency certificates of deposit,
time deposits and base rate certificates of deposit with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any commercial bank incorporated under the laws of the United States, any
state thereof, the District of Columbia or its branches or agencies or under the
laws of Canada or the laws of any member of the European Union and having
capital and surplus in excess of $250 million and whose long-term debt is rated
at least "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the
83
<PAGE> 86
Act); (c) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (a) and (b) above
entered into with any financial institution meeting the qualifications specified
in clause (b) above; (d) commercial paper rated P-1, A-1 or the equivalent
thereof by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Ratings Group ("S&P"), respectively, and in each case maturing within six months
after the date of acquisition; (e) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within one year from the
date of acquisition thereof and, at the time of acquisition, having one of the
two highest ratings obtainable from either S&P or Moody's; (f) investments in
money market funds which invest substantially all their assets in securities of
the types described in clauses (a) through (e) above; and (g) in the case of any
Foreign Restricted Subsidiary, Investments: (i) in direct obligations of the
sovereign nation (or any agency thereof) in which such Foreign Restricted
Subsidiary is organized and is conducting business or in obligations fully and
unconditionally guaranteed by such sovereign nation (or any agency thereof) or
(ii) of the type and maturity described in clauses (a) and (b) above of foreign
obligors, which Investments or obligors (of the parents of such obligors) have
ratings described in such clauses or equivalent ratings from comparable foreign
rating agencies.
"Change of Control" means the occurrence of any of the following events
(whether or not approved by the Board of Managers of the Company): (i) any
Person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act,
including any group acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other
than one or more Permitted Holders, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 and 13d-5 under the Exchange Act, except that a Person
shall be deemed to have "beneficial ownership" of all shares that any such
Person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time, upon the happening of an event or otherwise),
directly or indirectly, of more than 35% of the total voting power of the then
outstanding Voting Equity Interests of the Company; (ii) the Company
consolidates with, or merges with or into, another Person (other than a Wholly
Owned Restricted Subsidiary) or the Company or any of its Subsidiaries sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of the assets of the Company and its Subsidiaries (determined
on a consolidated basis) to any Person (other than the Company or any Wholly
Owned Restricted Subsidiary), other than any such transaction where immediately
after such transaction the Person or Persons that "beneficially owned" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person
shall be deemed to have "beneficial ownership" of all securities that such
Person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time) immediately prior to such transaction,
directly or indirectly, a majority of the total voting power of the then
outstanding Voting Equity Interests of Holdings or the Company, as the case may
be, "beneficially own" (as so determined), directly or indirectly, a majority of
the total voting power of the then outstanding Voting Equity Interests of the
surviving or transferee Person; (iii) during any period of two consecutive
years, individuals who at the beginning of such period constituted the Board of
Managers of the Company (together with any new directors whose election by such
Board of Managers or whose nomination for election by the members of the Company
was approved by a vote of a majority of the directors of the Company then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Managers of the Company then in
office; or (iv) the Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution other than in a transaction which complies with the
provisions described under "--Merger, Sale of Assets, etc."
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of Consolidated EBITDA for the four quarter
period of the most recent four consecutive fiscal quarters ending prior to the
date of such determination (the "Four Quarter Period") to (ii) Consolidated
Fixed Charges for such Four Quarter Period; provided, however, that (1) if the
Company or any Restricted Subsidiary has incurred any Indebtedness since the
beginning of such Four Quarter Period that remains outstanding on such date of
determination or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Incurrence of Indebtedness, Consolidated
EBITDA and Consolidated Fixed Charges for such Four Quarter Period shall be
calculated after giving effect on a pro forma basis to such Indebtedness as if
such Indebtedness had been Incurred on the first day of such Four Quarter Period
and the
84
<PAGE> 87
discharge of any other Indebtedness repaid, repurchased or otherwise discharged
with the proceeds of such new Indebtedness as if such discharge had occurred on
the first day of such Four Quarter Period, (2) if since the beginning of such
Four Quarter Period the Company or any Restricted Subsidiary shall have made any
Asset Sale described in clauses (i) or (ii) of the definition thereof, the
Consolidated EBITDA for such Four Quarter Period shall be reduced by an amount
equal to the Consolidated EBITDA (if positive) directly attributable to the
assets that are the subject of such Asset Sale for such Four Quarter Period or
increased by an amount equal to the Consolidated EBITDA (if negative) directly
attributable thereto for such Four Quarter Period and Consolidated Fixed Charges
for such Four Quarter Period shall be reduced by an amount equal to the
Consolidated Fixed Charges directly attributable to any Indebtedness of the
Company or any Restricted Subsidiary repaid, repurchased or otherwise discharged
with respect to the Company and its continuing Restricted Subsidiaries in
connection with such Asset Sale for such Four Quarter Period (or, if the Equity
Interests of any Restricted Subsidiary are sold, the Consolidated Fixed Charges
for such Four Quarter Period directly attributable to the Indebtedness of such
Restricted Subsidiary to the extent the Company and its continuing Restricted
Subsidiaries are no longer liable for such Indebtedness after such sale), (3) if
since the beginning of such Four Quarter Period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary) or an
acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business,
Consolidated EBITDA and Consolidated Fixed Charges for such Four Quarter Period
shall be calculated after giving pro forma effect thereto (including the
Incurrence of any Indebtedness) as if such Investment or acquisition occurred on
the first day of such Four Quarter Period and (4) if since the beginning of such
Four Quarter Period any Person (that subsequently became a Restricted Subsidiary
or was merged with or into the Company or any Restricted Subsidiary since the
beginning of such Four Quarter Period) shall have made any Asset Sale or any
Investment or acquisition of assets that would have required an adjustment
pursuant to clause (2) or (3) above if made by the Company or a Restricted
Subsidiary during such Four Quarter Period, Consolidated EBITDA and Consolidated
Fixed Charges for such Four Quarter Period shall be calculated after giving pro
forma effect thereto as if such Asset Sale, Investment or acquisition of assets
occurred on, with respect to any Investment or acquisition, the first day of
such Four Quarter Period and, with respect to any Asset Sale, the day prior to
the first day of such Four Quarter Period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of assets, the amount
of income or earnings relating thereto and the amount of Consolidated Fixed
Charges associated with any Indebtedness Incurred in connection therewith, the
pro forma calculations shall be determined in good faith by a responsible
financial or accounting officer of the Company in accordance with Regulation S-X
under the Securities Act as in effect on the Issue Date. If any Indebtedness
bears a floating rate of interest and is being given pro forma effect, the
interest expense on such Indebtedness shall be calculated as if the rate in
effect on the date of determination had been the applicable rate for the entire
period (taking into account any agreement under which Interest Rate Protection
Obligations are outstanding applicable to such Indebtedness if such agreement
under which such Interest Rate Protection Obligations are outstanding has a
remaining term as at the date of determination in excess of 12 months);
provided, however, that the Consolidated Fixed Charges of the Company
attributable to interest on any Indebtedness Incurred under a revolving credit
facility computed on a pro forma basis shall be computed based upon the average
daily balance of such Indebtedness during the Four Quarter Period.
"Consolidated EBITDA" means, for any period, the Consolidated Net Income
for such period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) Consolidated Income Tax Expense for such period;
(ii) Consolidated Interest Expense for such period; and (iii) Consolidated
Non-cash Charges for such period less (A) all non-cash items increasing
Consolidated Net Income for such period and (B) all cash payments during such
period relating to non-cash charges that were added back in determining
Consolidated EBITDA in any prior period.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense and
(ii) the product of (x) the amount of all dividends on any series of Preferred
Equity Interest (other than Qualified Equity Interests) of such Person and its
Restricted Subsidiaries (other than dividends paid solely in Qualified Equity
Interests) paid, accrued or
85
<PAGE> 88
scheduled to be paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated federal, state and local tax rate of such Person,
expressed as a decimal.
"Consolidated Income Tax Expense" means, with respect to the Company for
any period, the provision for federal, state, local and foreign income taxes
payable by the Company and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to the Company for any
period, without duplication, the sum of (i) the interest expense of the Company
and the Restricted Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, including, without limitation, (a) any
amortization of debt discount and amortization or write-off of deferred
financing costs, (b) the net cost or benefit under Interest Rate Protection
Obligations (including any amortization of discounts), (c) the interest portion
of any deferred payment obligation, (d) all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (e) all capitalized interest and all accrued interest, (f) non-cash
interest expense and (g) interest on Indebtedness of another Person that is
guaranteed by the Company or any Restricted Subsidiary actually paid by the
Company or any Restricted Subsidiary and (ii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by the Company and the Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the consolidated net
income (loss) of the Company and the Restricted Subsidiaries; provided, however,
that there shall not be included in such Consolidated Net Income: (i) any net
income (loss) of any Person if such person is not a Subsidiary, except (A) to
the extent of cash actually distributed by such Person during such period to the
Company or a Restricted Subsidiary as a dividend or other distribution and (B)
the Company's equity in a net loss of any such Person (other than an
Unrestricted Subsidiary) for such period shall be included in determining such
Consolidated Net Income; (ii) any net income (loss) of any person acquired by
the Company or a Restricted Subsidiary in a pooling of interests transaction for
any period prior to the date of such acquisition; (iii) any net income (but not
loss) of any Restricted Subsidiary if such Restricted Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the making
of distributions by such Restricted Subsidiary, directly or indirectly, to the
Company to the extent of such restrictions; (iv) any gain or loss realized upon
the sale or other disposition of any asset of the Company or the Restricted
Subsidiaries (including pursuant to any sale/leaseback transaction) outside of
the ordinary course of business (including, without limitation, on or with
respect to Investments) and there shall not be included dividends, distributions
or interest thereon; (v) any extraordinary gain or loss and any foreign currency
gains or losses; (vi) the cumulative effect of a change in accounting principles
after the Issue Date; and (vii) any restoration to income of any contingency
reserve of an extraordinary, non-recurring or unusual nature, except to the
extent that provision for such reserve was made out of Consolidated Net Income
accrued at any time following the Issue Date.
"Consolidated Non-cash Charges" means, with respect to any Person, for any
period the sum of (A) depreciation, (B) amortization and (C) other non-cash
expenses of such Person and its Restricted Subsidiaries reducing Consolidated
Net Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP (excluding, for
purposes of clause (C) only, such charges which require an accrual of or a
reserve for cash charges or payments for any future period and excluding
minority interest).
"Credit Facilities" means (i) the Second Amended and Restated Credit
Agreement, dated as of August 5, 1997, among the Company, the Subsidiaries of
the Company identified on the signature pages thereof and any Restricted
Subsidiary that is later added thereto, the lenders named therein, NBD Bank, as
Administrative Agent and Documentation and Collateral Agent, and The Chase
Manhattan Bank, as Co-Administrative Agent and Syndication Agent, (ii) the
Credit Agreement, dated as of July 2, 1997, among Advanced Accessory Systems
Canada Inc., First Chicago NBD Bank, Canada, as Agent, First Chicago NBD Bank,
Canada and The Chase Manhattan Bank of Canada, as lenders and the guarantors
identified on the signature pages thereof and (iii) an Acquisition Facility, in
each case, as amended, including any deferrals,
86
<PAGE> 89
renewals, extensions, replacements, refinancings or refundings thereof, or
amendments, modifications or supplements thereto and any agreement providing
therefor, whether by or with the same or any other lender, creditor, group of
lenders or group of creditors, and including related notes, guarantee and note
agreements and other instruments and agreements executed in connection
therewith.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Designated Senior Indebtedness" means (a) any Indebtedness outstanding
under the Credit Facilities and (b) any other Senior Indebtedness which, at the
time of determination, has an aggregate principal amount outstanding, together
with any commitments to lend additional amounts, of at least $25.0 million, if
the instrument governing such Senior Indebtedness expressly states that such
Indebtedness is "Designated Senior Indebtedness" for purposes of the Indenture.
"Disposition" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such Person
is the Surviving Person) or the sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of such Person's assets.
"Disqualified Equity Interest" means any Equity Interest which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable at the option of the holder thereof), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable, at the option of the holder thereof
(except, in each case, upon the occurrence of a Change of Control), in whole or
in part, or exchangeable into Indebtedness on or prior to the final maturity
date of the Notes.
"Domestic" with respect to any Person shall mean a Person whose
jurisdiction of incorporation or formation is the United States, any state
thereof or the District of Columbia.
"Equity Interest" in any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, in
such Person, including any Preferred Equity Interests.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.
"Existing Management Holder" means each of F. Alan Smith, Marshall D.
Gladchun, Roger T. Morgan, Terence C. Seikel, Richard E. Borghi, Barry Banducci
and Gerard J. Brink.
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under any
compulsion to complete the transaction; provided, however, that the Fair Market
Value of any such asset or assets shall be determined conclusively by the Board
of Managers of the Company acting in good faith, and shall be evidenced by
resolutions of the Board of Managers of the Company delivered to the Trustee.
"Foreign EBITDA" means, for any period, the aggregate of the Consolidated
EBITDA of each of the Company's Foreign Restricted Subsidiaries.
"Foreign Interest Expense" means, for any period, the aggregate of the
Consolidated Interest Expense of each of the Company's Foreign Restricted
Subsidiaries.
"Foreign Restricted Subsidiary" means a Restricted Subsidiary other than a
Domestic Restricted Subsidiary.
87
<PAGE> 90
"GAAP" means, at any date of determination, generally accepted accounting
principles in effect in the United States which are applicable at the date of
determination and which are consistently applied for all applicable periods.
"Guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantee" means the guarantee of the Notes by each Guarantor under the
Indenture.
"Guarantor" means (i) each Domestic Subsidiary of the Company existing on
the Issue Date and (ii) each other Domestic Restricted Subsidiary, formed,
created or acquired before or after the Issue Date, required to become a
Guarantor after the Issue Date.
"Guarantor Senior Indebtedness" means, with respect to any Guarantor, at
any date, (a) all Obligations of such Guarantor under the Credit Facilities; (b)
all Interest Rate Protection Obligations of such Guarantor; (c) all Obligations
of such Guarantor under letters of credit; and (d) all other Indebtedness of
such Guarantor, including principal, premium, if any, and interest (including
Post-Petition Interest) on such Indebtedness unless the instrument under which
such Indebtedness of such Guarantor is Incurred expressly provides that such
Indebtedness is not senior or superior in right of payment to such Guarantor's
Guarantee of the Notes, and all renewals, extensions, modifications, amendments
or refinancings thereof. Notwithstanding the foregoing, Guarantor Senior
Indebtedness shall not include (a) to the extent that it may constitute
Indebtedness, any Obligation for federal, state, local or other taxes; (b) any
Indebtedness among or between such Guarantor and any Subsidiary of such
Guarantor or any Affiliate of such Guarantor or any of such Affiliate's
Subsidiaries; (c) to the extent that it may constitute Indebtedness, any
Obligation in respect of any trade payable Incurred for the purchase of goods or
materials, or for services obtained, in the ordinary course of business; (d)
Indebtedness evidenced by such Guarantor's Guarantee of the Notes; (e)
Indebtedness of such Guarantor that is expressly subordinate or junior in right
of payment to any other Indebtedness of such Guarantor; (f) to the extent that
it may constitute Indebtedness, any obligation owing under leases (other than
Capitalized Lease Obligations) or management agreements; and (g) any obligation
that by operation of law is subordinate to any general unsecured obligations of
such Guarantor.
"Holders" means the registered holders of the Notes.
"Income Tax Liabilities" means with respect to any member or, in the event
such member is a flow-through entity, such direct or indirect owner or owners of
such member as is or are subject to income taxes on income of the Company or any
of its Restricted Subsidiaries that are limited liability companies for any
calendar year, an amount determined by multiplying (a) such Person's allocable
share of all taxable income and gains of such limited liability company by (b)
forty four percent (44%).
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings
correlative to the foregoing). Indebtedness of any Acquired Person or any of its
Subsidiaries existing at the time such Acquired Person becomes a Restricted
Subsidiary (or is merged into or consolidated with the Company or any Restricted
Subsidiary), whether or not such Indebtedness was Incurred in connection with,
as a result of, or in contemplation of, such Acquired Person becoming a
Restricted Subsidiary (or being merged into or consolidated with the Company or
any Restricted Subsidiary), shall be deemed Incurred at the time any such
Acquired Person becomes a Restricted Subsidiary or merges into or consolidates
with the Company or any Restricted Subsidiary.
"Indebtedness" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (a) every obligation of such Person for
88
<PAGE> 91
money borrowed; (b) every obligation of such Person evidenced by bonds,
debentures, notes or other similar instruments; (c) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person; (d)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (but excluding trade accounts payable incurred in the
ordinary course of business and payable in accordance with industry practices,
or other accrued liabilities arising in the ordinary course of business); (e)
every Capital Lease Obligation of such Person; (f) every net obligation under
Interest Rate Protection Obligations or similar agreements or Currency
Agreements of such Person; (g) Attributable Indebtedness; (h) every obligation
of the type referred to in clauses (a) through (g) of another Person the payment
of which, in either case, such Person has guaranteed or is responsible or liable
for, directly or indirectly, as obligor, guarantor or otherwise; and (i) any and
all deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any liability of the kind described in any of
the preceding clauses (a) through (h) above. Indebtedness (i) shall not include
obligations of any Person (x) arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
drawn against insufficient funds in the ordinary course of business, provided
that such obligations are extinguished within five Business Days of their
incurrence, (y) resulting from the endorsement of negotiable instruments for
collection in the ordinary course of business and consistent with past business
practices and (z) under stand-by letters of credit to the extent collateralized
by cash or Cash Equivalents; (ii) which provides that an amount less than the
principal amount thereof shall be due upon any declaration of acceleration
thereof shall be deemed to be incurred or outstanding in an amount equal to the
accreted value thereof at the date of determination; (iii) shall include the
liquidation preference and any mandatory redemption payment obligations in
respect of any Disqualified Equity Interests of the Company or any Restricted
Subsidiary; and (iv) shall not include obligations under performance bonds,
performance guarantees, surety bonds and appeal bonds, letters of credit or
similar obligations, incurred in the ordinary course of business.
"Independent Financial Advisor" means a nationally recognized, accounting,
appraisal or investment banking firm or consultant (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Managers of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Insolvency or Liquidation Proceeding" means, with respect to any Person,
any liquidation, dissolution or winding up of such Person, or any bankruptcy,
reorganization, insolvency, receivership or similar proceeding with respect to
such Person, whether voluntary or involuntary.
"interest" means, with respect to the Notes, the sum of any cash interest
and any Additional Interest (as defined under "Registration Rights" below) on
the Notes.
"Interest Rate Protection Obligations" means, with respect to any Person,
the Obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Investment" means, with respect to any Person, any direct or indirect
loan, advance, guarantee or other extension of credit or capital contribution to
(by means of transfers of cash or other property or assets to others or payments
for property or services for the account or use of others, or otherwise), or
purchase or acquisition of capital stock, bonds, notes, debentures or other
securities or evidences of Indebtedness issued by, any other Person. For
purposes of the "Limitation on Restricted Payments" covenant above, the amount
of any Investment shall be the original cost of such Investment, plus the cost
of all additions thereto, but without any other adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment; reduced by the payment of dividends or distributions in connection
with such Investment or any other amounts received in respect of such
Investment; provided, however, that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount of
any Investment if such payment of dividends or distributions or receipt of any
such amounts would be included in Consolidated Net Income. In determining the
amount of any Investment involving a transfer of any property or asset other
than cash, such property shall be valued at its Fair Market Value at the time of
such transfer, as determined in
89
<PAGE> 92
good faith by the Board of Managers (or comparable body) of the Person making
such transfer. If the Company or any Restricted Subsidiary sells or otherwise
disposes of any Voting Equity Interests of any direct or indirect Restricted
Subsidiary such that, after giving effect to any such sale or disposition, the
Company no longer owns, directly or indirectly, greater than 50% of the
outstanding Voting Equity Interests of such Restricted Subsidiary, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of Voting Equity Interests of such
former Restricted Subsidiary not sold or disposed of.
"Issue Date" means the original issue date of the Notes.
"Lien" means any lien, mortgage, charge, security interest, hypothecation,
assignment for security or encumbrance of any kind (including any conditional
sale or capital lease or other title retention agreement, any lease in the
nature thereof, and any agreement to give any security interest).
"Maturity Date" means the date, which is set forth on the face of the
Notes, on which the Notes will mature.
"Net Cash Proceeds" means the aggregate proceeds in the form of cash or
Cash Equivalents received by the Company or any Restricted Subsidiary in respect
of any Asset Sale, including all cash or Cash Equivalents received upon any
sale, liquidation or other exchange of proceeds of Asset Sales received in a
form other than cash or Cash Equivalents, net of (a) the direct costs relating
to such Asset Sale (including, without limitation, legal, accounting and
investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof; (b) taxes paid or payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements); (c) amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale (including payments made to obtain or avoid the need for the
consent of any holder of such Indebtedness); (d) amounts deemed, in good faith,
appropriate by the Board of Managers of the Company to be provided as a reserve,
in accordance with GAAP, against any liabilities associated with such assets
which are the subject of such Asset Sale; including, without limitation, pension
and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as reflected in an officers' certificate
delivered to the Trustee (provided that the amount of any such reserves shall be
deemed to constitute Net Cash Proceeds at the time such reserves shall have been
reversed or are not otherwise required to be retained as a reserve); and (e)
with respect to Asset Sales by Restricted Subsidiaries, the portion of such cash
payments attributable to Persons holding a minority interest in such Restricted
Subsidiary.
"Obligations" means any principal, interest (including, without limitation,
Post-Petition Interest), penalties, fees, indemnifications, reimbursement
obligations, damages and other liabilities payable under the documentation
governing any Indebtedness.
"Offer to Purchase" means a written offer (the "Offer") sent by or on
behalf of the Company by first-class mail, postage prepaid, to each holder at
his address appearing in the register for the Notes on the date of the Offer
offering to purchase up to the principal amount of Notes specified in such Offer
at the purchase price specified in such Offer (as determined pursuant to the
Indenture). Unless otherwise required by applicable law, the Offer shall specify
an expiration date (the "Expiration Date") of the Offer to Purchase, which shall
be not less than 30 days nor more than 60 days after the date of such Offer, and
a settlement date (the "Purchase Date") for purchase of Notes to occur no later
than five Business Days after the Expiration Date. The Company shall notify the
Trustee at least 15 days (or such shorter period as is acceptable to the
Trustee) prior to the mailing of the Offer of the Company's obligation to make
an Offer to Purchase, and the Offer shall be mailed by the Company or, at the
Company's request, by the Trustee in the name and at the expense of the Company.
The Offer shall also contain information concerning the business of the Company
and its Subsidiaries which the Company in good faith believes will enable such
Holders to make an informed decision with respect to the Offer to Purchase
(which at a minimum will include (i) the most recent annual and quarterly
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in the documents required to be
filed with the Trustee pursuant to the Indenture (which requirements may be
satisfied by delivery of such documents together with the Offer), (ii) a
90
<PAGE> 93
description of material developments in the Company's business subsequent to the
date of the latest of such financial statements referred to in clause (i)
(including a description of the events requiring the Company to make the Offer
to Purchase), (iii) if applicable, appropriate pro forma financial information
concerning the Offer to Purchase and the events requiring the Company to make
the Offer to Purchase and (iv) any other information required by applicable law
to be included therein). The Offer shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Offer to
Purchase. The Offer shall also state: (1) the Section of the Indenture pursuant
to which the Offer to Purchase is being made; (2) the Expiration Date and the
Purchase Date; (3) the aggregate principal amount of the outstanding Notes
offered to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such amount has been
determined pursuant to the Section of the Indenture requiring the Offer to
Purchase) (the "Purchase Amount"); (4) the purchase price to be paid by the
Company for each $1,000 aggregate principal amount of Notes accepted for payment
(as specified pursuant to the Indenture) (the "Purchase Price"); (5) that the
Holder may tender all or any portion of the Notes registered in the name of such
Holder and that any portion of a Note tendered must be tendered in an integral
multiple of $1,000 principal amount; (6) the place or places where Notes are to
be surrendered for tender pursuant to the Offer to Purchase; (7) that interest
on any Note not tendered or tendered but not purchased by the Company pursuant
to the Offer to Purchase will continue to accrue; (8) that on the Purchase Date
the Purchase Price will become due and payable upon each Note being accepted for
payment pursuant to the Offer to Purchase and that interest thereon shall cease
to accrue on and after the Purchase Date; (9) that each Holder electing to
tender all or any portion of a Note pursuant to the Offer to Purchase will be
required to surrender such Note at the place or places specified in the Offer
prior to the close of business on the Expiration Date (such Note being, if the
Company or the Trustee so requires, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly authorized in
writing); (10) that each Holder will be entitled to withdraw all or any portion
of any Notes tendered by such Holder if the Company (or its Paying Agent)
receives, not later than the close of business on the fifth Business Day next
preceding the Expiration Date, a telegram, telex, facsimile transmission or
letter setting forth the name of such Holder, the principal amount of the Note
such Holder tendered, the certificate number of the Note such Holder tendered
and a statement that such Holder is withdrawing all or a portion of his tender;
(11) that (a) if Notes in an aggregate principal amount less than or equal to
the Purchase Amount are duly tendered and not withdrawn pursuant to the Offer to
Purchase, the Company shall purchase all such Notes and (b) if Notes in an
aggregate principal amount in excess of the Purchase Amount are tendered and not
withdrawn pursuant to the Offer to Purchase, the Company shall purchase Notes
having an aggregate principal amount equal to the Purchase Amount on a pro rata
basis (with such adjustments as may be deemed appropriate so that only Notes in
denominations of $1,000 principal amount or integral multiples thereof shall be
purchased); and (12) that in the case of any Holder whose Note is purchased only
in part, the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Note without service charge, a new Note or Notes,
of any authorized denomination as requested by such Holder, in an aggregate
principal amount equal to and in exchange for the unpurchased portion of the
Note so tendered.
An Offer to Purchase shall be governed by and effected in accordance with
the provisions above pertaining to any Offer.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Permitted Holder" means each of (i) CCP and its affiliates, (ii) the
Existing Management Holders and (iii) any corporation, a majority of the
outstanding Voting Equity Interests of which are owned, directly or indirectly,
by persons listed in clauses (i) and (ii) of this definition, and no more than
35% of the outstanding Voting Equity Interests of which are beneficially owned,
directly or indirectly, by any Person (other than Permitted Holders) or group
acting for the purpose of acquiring, holding or disposing of securities within
the meaning of Rule 13d-15d(b)(1) under the Exchange Act.
91
<PAGE> 94
"Permitted Indebtedness" means the following, each of which shall be given
independent effect:
(a) Indebtedness under the Notes;
(b) Indebtedness of the Company or any Restricted Subsidiary Incurred
under the Credit Facilities in an aggregate principal amount at any one
time outstanding not to exceed the greater of (i) $25.0 million and (ii)
the sum of 85% of the total book value of accounts receivable and 50% of
the total book value of inventory, in each case as reflected on the
Company's most recent consolidated financial statements prepared in
accordance with GAAP;
(c) Indebtedness of any Restricted Subsidiary owed to and held by the
Company or any other Restricted Subsidiary, and Indebtedness of the Company
owed to and held by any Restricted Subsidiary which is unsecured and
subordinated in right of payment to the payment and performance of the
Company's obligations under any Senior Indebtedness, the Indenture and the
Notes; provided, however, that an Incurrence of Indebtedness that is not
permitted by this clause (c) shall be deemed to have occurred upon (i) any
sale or other disposition of any Indebtedness of the Company or any
Restricted Subsidiary referred to in this clause (c) to a Person (other
than the Company or a Restricted Subsidiary), (ii) any sale or other
disposition of Equity Interests of any Restricted Subsidiary which holds
Indebtedness of the Company or another Restricted Subsidiary such that such
Restricted Subsidiary ceases to be a Subsidiary and (iii) the Designation
of a Restricted Subsidiary that holds Indebtedness of the Company or any
other Restricted Subsidiary as an Unrestricted Subsidiary;
(d) the Guarantees and guarantees by any Guarantor of Indebtedness of
the Company or its Restricted Subsidiaries and the guarantees by the
Company of Indebtedness of the Restricted Subsidiaries; provided, however,
that if such guarantee is of Subordinated Indebtedness, then the Guarantee
of such Guarantor or the Company's obligations under the Notes, as the case
may be; shall be senior to such Guarantor's or the Company's, as the case
may be, guarantee of such Subordinated Indebtedness;
(e) Interest Rate Protection Obligations relating to Indebtedness of
the Company (which Indebtedness (i) bears interest at fluctuating interest
rates and (ii) is otherwise permitted to be Incurred under the "Limitation
on Indebtedness" covenant); provided, however, that (i) such Interest Rate
Protection Obligations have been entered into for bona fide business
purposes and not for speculation and (ii) the notional principal amount of
such Interest Rate Protection Obligations, at the time of the incurrence
thereof, does not exceed the principal amount of the Indebtedness to which
such Interest Rate Protection Obligations relate;
(f) Purchase Money Indebtedness and Capitalized Lease Obligations
which, at the time of the incurrence thereof, do not, in the aggregate with
all such other Indebtedness incurred pursuant to this clause (f), exceed
5.0% of the total assets of the Company and its Restricted Subsidiaries, on
a consolidated basis determined consistent with the Company's most recent
balance sheet prepared in accordance with GAAP at any one time outstanding;
(g) Indebtedness under Currency Agreements; provided, however, that in
the case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the principal amount of Indebtedness of the
Company and its Restricted Subsidiaries outstanding other than as a result
of fluctuations in foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(h) Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date, reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereof;
(i) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance or similar requirements in the ordinary course of business
in an amount not to exceed $3.0 million in the aggregate at any time
outstanding;
92
<PAGE> 95
(j) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary of the Company providing for indemnification,
adjustment of purchase price or similar obligations, in each case incurred
or assumed in connection with the disposition of any business, assets or a
Subsidiary, other than guarantees of Indebtedness incurred by any Person
acquiring all or any portion of such business, assets or Subsidiary for the
purpose of financing such acquisition; provided, however, that (i) such
Indebtedness is not reflected on the balance sheet of the Company or any
Restricted Subsidiary of the Company (contingent obligations referred to in
a footnote to financial statements and not otherwise reflected on the
balance sheet will not be deemed to be reflected on such balance sheet for
purposes of this clause (i)) and (ii) the maximum assumable liability in
respect of all such Indebtedness shall at no time exceed the gross proceeds
including noncash proceeds (the fair market value of such noncash proceeds
being measured at the time it is received and without giving effect to any
subsequent changes in value) actually received by the Company and its
Restricted Subsidiaries in connection with such disposition;
(k) Obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted Subsidiary
of the Company in the ordinary course of business;
(l) Indebtedness of the Company or any Restricted Subsidiary Incurred
under an Acquisition Facility in an aggregate principal amount at any one
time outstanding not to exceed $22.0 million, reduced by any required
permanent repayments (which are accompanied by corresponding permanent
commitment reduction thereunder);
(m) Indebtedness to the extent representing a replacement, renewal,
defeasance, refinancing or extension (collectively, a "refinancing") of
outstanding Indebtedness Incurred in compliance with the "Limitation on
Indebtedness" covenant or clauses (a), (h) or (l) of this definition;
provided, however, that (i) any such refinancing shall not exceed the sum
of the principal amount (or accreted amount (determined in accordance with
GAAP), if less) of the Indebtedness being refinanced, plus the amount of
accrued interest thereon, plus the amount of any reasonably determined
prepayment premium necessary to accomplish such refinancing and such
reasonable fees and expenses incurred in connection therewith, (ii)
Indebtedness representing a refinancing of Indebtedness other than Senior
Indebtedness shall have a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of the Indebtedness
being refinanced; and (iii) Indebtedness that is pari passu with the Notes
may only be refinanced with Indebtedness that is made pari passu with or
subordinate in right of payment to the Notes and Subordinated Indebtedness
may only be refinanced with Subordinated Indebtedness; and
(n) in addition to the items referred to in clauses (a) through (m)
above, Indebtedness of the Company (including any Indebtedness under the
Credit Facilities that utilizes this clause (m)) having an aggregate
principal amount not to exceed $10.0 million at any one time outstanding.
"Permitted Investments" means (a) cash and Cash Equivalents; (b)
Investments in prepaid expenses, negotiable instruments held for collection and
lease, utility and workers' compensation, performance and other similar
deposits; (c) Interest Rate Protection Obligations and Currency Agreements; (d)
Investments received in connection with the bankruptcy or reorganization of
suppliers and customers and in settlement of delinquent obligations of, and
other disputes with, customers and suppliers, in each case arising in the
ordinary course of business; (e) Investments in the Company and Investments in
Restricted Subsidiaries or Persons that, as a result of or in connection with
any such Investment, become Restricted Subsidiaries or are merged with or into
or consolidated with the Company or another Restricted Subsidiary; (f)
Investments paid for in Qualified Equity Interests of the Company; (g) loans or
advances to officers or employees of the Company and its Restricted Subsidiaries
in the ordinary course of business for bona fide business purposes of the
Company and its Restricted Subsidiaries (including, but not limited to, travel
and moving expenses) not in excess of $1 million in the aggregate at any one
time outstanding; (h) Investments in Replacement Assets made in compliance with
the "Limitation on Asset Sales" covenant; (i) Investments of a Person or any of
its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary of the Company or at the time such Person merges or consolidates with
the Company or any of its Restricted Subsidiaries, in either case in compliance
with the Indenture; provided that such Investments were not made by such Person
in connection
93
<PAGE> 96
with, or in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary of the Company or such merger or consolidation; and (j) Investments
(including, without limitation, in the form of joint ventures with unaffiliated
third parties) in Related Businesses not in excess of $10 million in the
aggregate at any one time outstanding.
"Permitted Junior Securities" means any securities of the Company or any
other Person that are (i) equity securities without special covenants or (ii)
debt securities expressly subordinated in right of payment to all Senior
Indebtedness that may at the time be outstanding, to substantially the same
extent as, or to a greater extent than, the Notes are subordinated as provided
in the Indenture, in any event pursuant to a court order so providing and as to
which (a) the rate of interest on such securities shall not exceed the effective
rate of interest on the Notes on the date of the Indenture, (b) such securities
shall not be entitled to the benefits of covenants or defaults materially more
beneficial to the holders of such securities than those in effect with respect
to the Notes on the date of the Indenture and (c) such securities shall not
provide for amortization (including sinking fund and mandatory prepayment
provisions) commencing prior to the date six months following the final
scheduled maturity date of the Senior Indebtedness (as modified by the plan of
reorganization of readjustment pursuant to which such securities are issued).
"Permitted Liens" means (a) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary; provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not secure any
property or assets of the Company or any Restricted Subsidiary other than the
property or assets subject to the Liens prior to such merger or consolidation;
(b) Liens imposed by law such as carriers', warehousemen's, mechanics',
suppliers', materialmen's, landlords' and repairmen's Liens and other similar
Liens arising in the ordinary course of business which secure payment of
obligations not more than 30 days past due or which are being contested in good
faith and by appropriate proceedings; (c) Liens existing on the Issue Date; (d)
Liens securing only the Notes or the Guarantees; (e) Liens in favor of the
Company or any Restricted Subsidiary; (f) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings; provided, however, that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (g) easements, reservation of rights of way,
restrictions (including, but not limited to, zoning and building restrictions)
and other similar easements, licenses, restrictions on the use of properties, or
minor imperfections of title that in the aggregate are not material in amount
and do not in any case materially detract from the properties subject thereto or
interfere with the ordinary conduct of the business of the Company and the
Restricted Subsidiaries; (h) Liens resulting from the deposit of cash or notes
in connection with contracts, bids, sales or tenders or expropriation
proceedings, or to secure workers' compensation, unemployment insurance and
other types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practices in
connection therewith, surety, appeal and performance bonds, costs of litigation
when required by law and public and statutory obligations or obligations under
franchise arrangements entered into in the ordinary course of business; (i)
Liens securing Indebtedness consisting of Capitalized Lease Obligations,
Purchase Money Indebtedness, mortgage financings, industrial revenue bonds or
other monetary obligations, in each case incurred solely for the purpose of
financing all or any part of the purchase price or cost of construction or
installation of assets used in the business of the Company or the Restricted
Subsidiaries, or repairs, additions or improvements to such assets, provided,
however, that (I) such Liens secure Indebtedness in an amount not in excess of
the original purchase price or the original cost of any such assets or repair,
addition or improvement thereto (plus an amount equal to the reasonable fees and
expenses in connection with the incurrence of such Indebtedness), (II) such
Liens do not extend to any other assets of the Company or the Restricted
Subsidiaries (and, in the case of repair, addition or improvements to any such
assets, such Lien extends only to the assets (and improvements thereto or
thereon) repaired, added to or improved), (III) the Incurrence of such
Indebtedness is permitted by "Certain Covenants -- Limitation on Indebtedness"
above and (IV) such Liens attach within 120 days of such purchase, construction,
installation, repair, addition or improvement; (j) any interest or title of a
lessor under any Capitalized Lease Obligation; provided, however, that such
Liens do not extend to any property or assets which are not leased property
subject to such Capitalized Lease Obligation; (k) Liens upon specific items of
inventory or other goods and proceeds of any Person securing such Person's
obligations in respect of bankers'
94
<PAGE> 97
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods; (l) Liens
securing reimbursement obligations with respect to commercial letters of credit
which encumber documents and other property relating to such letters of credit
and products and proceeds thereof; (m) Liens encumbering deposits made to secure
obligations arising from statutory, regulatory, contractual or warranty
requirements of the Company or any of its Restricted Subsidiaries, including
rights of offset and set-off; (n) Liens securing Interest Swap Obligations and
Currency Agreements which Obligations and agreements are otherwise permitted
under the Indenture; (o) Liens by reason of judgments, attachments or decree not
otherwise resulting in an Event of Default; (p) Liens securing Indebtedness of
non-Guarantor Restricted Subsidiaries Incurred in compliance with the Indenture;
and (q) Liens to secure any refinancings, renewals, extensions, modifications or
replacements (collectively, "refinancing") (or successive refinancings), in
whole or in part, of any Indebtedness secured by Liens referred to in the
clauses above so long as such Lien does not extend to any other property (other
than improvements thereto).
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, limited liability
partnership, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Post-Petition Interest" means, with respect to any Indebtedness of any
Person, all interest accrued or accruing on such Indebtedness after the
commencement of any Insolvency or Liquidation Proceeding against such Person in
accordance with and at the contract rate (including, without limitation, any
rate applicable upon default) specified in the agreement or instrument creating,
evidencing or governing such Indebtedness, whether or not, pursuant to
applicable law or otherwise, the claim for such interest is allowed as a claim
in such Insolvency or Liquidation Proceeding.
"Preferred Equity Interest," in any Person, means an Equity Interest of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person.
"principal" of a debt security means the principal of the security plus,
when appropriate, the premium, if any, on the security.
"Public Equity Offering" means, with respect to the Company, an
underwritten public offering of Qualified Equity Interests of the Company
pursuant to an effective registration statement filed under the Securities Act
(excluding registration statements filed on Form S-8).
"Purchase Money Indebtedness" means Indebtedness of the Company or any
Restricted Subsidiary Incurred for the purpose of financing all or any part of
the purchase price or the cost of installation, construction or improvement of
any property; provided, however, that the aggregate principal amount of such
Indebtedness does not exceed the lesser of the fair market value of such
property or such purchase price or cost, including any refinancing of such
Indebtedness that does not increase the aggregate principal amount (or accreted
amount, if less) thereof as of the date of refinancing.
"Qualified Equity Interest" in any Person means any Equity Interest in such
Person other than any Disqualified Equity Interest.
"Related Business" means any business related, ancillary or complementary
(as determined in good faith by the Board of Managers) to the business of the
Company and the Restricted Subsidiaries on the Issue Date.
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the Board of Managers of the Company, by a resolution of the
Board of Managers of the Company delivered to the Trustee, as an Unrestricted
Subsidiary pursuant to "Certain Covenants -- Designation of Unrestricted
Subsidiaries" above. Any such designation may be revoked by a resolution of the
Board of Managers of the Company delivered to the Trustee, subject to the
provisions of such covenant.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Restricted Subsidiary of the
Company of any real or tangible personal Property, which
95
<PAGE> 98
property has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such Person in contemplation of such leasing.
"SEC" means the Securities and Exchange Commission.
"Senior Indebtedness" means, at any date, (a) all Obligations under the
Credit Facilities; (b) all Interest Rate Protection Obligations of the Company;
(c) all Obligations of the Company under letters of credit; and (d) all other
Indebtedness of the Company, including principal, premium, if any, and interest
(including Post-Petition Interest) on such Indebtedness, unless the instrument
under which such Indebtedness of the Company is Incurred expressly provides that
such Indebtedness is not senior or superior in right of payment to the Notes,
and all renewals, extensions, modifications, amendments or refinancings thereof.
Notwithstanding the foregoing, Senior Indebtedness shall not include (a) to the
extent that it may constitute Indebtedness, any Obligation for Federal, state,
local or other taxes; (b) any Indebtedness among or between the Company and any
Subsidiary of the Company; (c) to the extent that it may constitute
Indebtedness, any Obligation in respect of any trade payable Incurred for the
purchase of goods or materials, or for services obtained, in the ordinary course
of business; (d) Indebtedness evidenced by the Notes; (e) Indebtedness of the
Company that is expressly subordinate or junior in right of payment to any other
Indebtedness of the Company; (f) to the extent that it may constitute
Indebtedness, any obligation owing under leases (other than Capitalized Lease
Obligations) or management agreements; and (g) any obligation that by operation
of law is subordinate to any general unsecured obligations of the Company.
"Significant Restricted Subsidiary" means, at any date of determination,
(a) any Restricted Subsidiary that, together with its Subsidiaries that
constitute Restricted Subsidiaries (i) for the most recent fiscal year of the
Company accounted for more than 10.0% of the consolidated revenues of the
Company and the Restricted Subsidiaries or (ii) as of the end of such fiscal
year, owned more than 10.0% of the consolidated assets of the Company and the
Restricted Subsidiaries, all as set forth on the consolidated financial
statements of the Company and the Restricted Subsidiaries for such year prepared
in conformity with GAAP, and (b) any Restricted Subsidiary which, when
aggregated with all other Restricted Subsidiaries that are not otherwise
Significant Restricted Subsidiaries and as to which any event described in
clause (h) of "Events of Default" above has occurred, would constitute a
Significant Restricted Subsidiary under clause (a) of this definition.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable.
"Subordinated Indebtedness" means, with respect to the Issuers or any
Guarantor, any Indebtedness of the Issuers or such Guarantor, as the case may
be, which is expressly subordinated in right of payment to the Notes or such
Guarantor's Guarantee, as the case may be.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which the outstanding Voting Equity Interests having at least a majority of the
votes entitled to be cast in the election of directors shall at the time be
owned, directly or indirectly, by such Person, or (b) any other Person of which
at least a majority of Voting Equity Interests are at the time, directly or
indirectly, owned by such first named Person.
"Surviving Person" means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition or the
Person to which such Disposition is made.
"Tax Distribution" means, as of the time of determination thereof, any
distribution by the Company and any of its Restricted Subsidiaries that are
limited liability companies to their respective members (or in each case, if
such member is a flow-through entity, such direct or indirect owner or owners of
such member as is or are subject to income taxes on income of such limited
liability company) which (i) with respect to quarterly estimated tax payments
due in each calendar year shall be equal to twenty-five percent (25%) of the
relevant member's Income Tax Liabilities for such calendar year as estimated in
writing by the chief financial officer of the Company and (ii) with respect to
tax payments to be made with income tax returns filed for a full calendar year
or with respect to adjustments to such returns imposed by the Internal Revenue
Service or other taxing authority, shall be equal to the Income Tax Liabilities
of such member for such calendar year minus the aggregate amount distributed to
such member for such calendar year as provided in clause (i) above. In the
96
<PAGE> 99
event the amount determined under clause (ii) is negative amount, the amount of
any distributions to the relevant member in the succeeding calendar year (or, if
necessary, any subsequent calendar years) shall be reduced by such negative
amount.
"United States Government Obligations" means direct non-callable
obligations of the United States of America for the payment of which the full
faith and credit of the United States is pledged.
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such pursuant to the "Designation of Unrestricted Subsidiaries" covenant. Any
such designation may be revoked by a resolution of the Board of Managers of the
Company delivered to the Trustee, subject to the provisions of such covenant.
"Voting Equity Interests" means Equity Interests in a corporation or other
Person with voting power under ordinary circumstances entitling the holders
thereof to elect the Board of Managers or other governing body of such
corporation or Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Indebtedness.
"Western Europe" means, with respect to any jurisdictional matter, any of
the twelve current member states of the European Community and Switzerland,
Norway, Sweden, Finland, Austria and the Czech Republic (and "Western European"
shall have a meaning correlative to the foregoing).
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary of
which at least 99.0% of the outstanding Voting Equity Interests (other than
qualifying shares or other Equity Interests owned by directors or other members
of any comparable governing body) of which are owned, directly or indirectly, by
the Company and/or one or more Wholly Owned Restricted Subsidiaries.
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Issuers believe that the New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by any holder thereof
(other than any such holder that is an "affiliate" of the Issuers within the
meaning of Rule 405 promulgated under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holder's business, such holder has no arrangement with any person to participate
in the distribution of such New Notes and neither such holder nor any such other
person is engaging in or intends to engage in a distribution of such New Notes.
Accordingly, any holder who is an affiliate of the Issuers or any holder using
the Exchange Offer to participate in a distribution of the New Notes will not be
able to rely on such interpretations by the staff to the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a resale transaction. Notwithstanding the
foregoing, each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with any resale of New Notes received in exchange
for Old Notes where such Old Notes were acquired as a result of market-making
activities or other trading activities (other than Old Notes acquired directly
from the Issuers.) The Issuers have agreed that, for a period of 180 days from
the date of this Prospectus, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until , 1998 (90 days from the date of
this Prospectus), all dealers effecting transactions in the New Notes may be
required to deliver a prospectus.
97
<PAGE> 100
The Issuers will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker-dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver, and by delivering, a
prospectus as required, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
For a period of 180 days from the date of this Prospectus, the Issuers will
send a reasonable number of additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Issuers will pay all the
expenses incident to the Exchange Offer (which shall not include the expenses of
any holder in connection with resales of the New Notes). The Issuers have agreed
to indemnify the Initial Purchasers and any broker-dealers participating in the
Exchange Offer against certain liabilities, including liabilities under the
Securities Act.
This Prospectus has been prepared for use in connection with the Exchange
Offer and may be used by CSI in connection with offers and sales related to
market-making transactions in the Notes. CSI may act as principal or agent in
such transactions. Such sales will be made at prices related to prevailing
market prices at the time of sale. The Company will not receive any of the
proceeds of such sales. CSI has no obligation to make a market in the Notes and
may discontinue its market-making activities at any time without notice, at its
sole discretion. The Company has agreed to indemnify CSI against certain
liabilities, including liabilities under the Securities Act of 1933, and to
contribute to payments which CSI might be required to make in respect thereof.
For a description of certain relationships between the Company and CSI and
its affiliates, see "Certain Transactions."
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Issuers by O'Sullivan Graev & Karabell, LLP, New York, New York.
EXPERTS
The financial statements of the Predecessor for the period from January 1,
1995 through September 27, 1995, included in this Prospectus have been so
included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of the Company as of and for the
period from September 28, 1995 through December 31, 1995 and as of and for the
years ended December 31, 1996 and 1997, included in this Prospectus, have been
so included in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of Brink B.V. as of and for the year
ended December 31, 1995 and as of and for the period from January 1, 1996
through October 30, 1996, included in this Prospectus have been so included in
reliance on the report of Coopers & Lybrand N.V., independent accountants, given
on the authority of said firm as experts in auditing and accounting.
98
<PAGE> 101
The financial statements of Valley Industries, Inc. as of and for the
period from December 29, 1996 through August 5, 1997, included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The financial statements of Valley Industries, Inc. at December 28, 1996
and December 31, 1995, and for each of two years in the period ended December
28, 1996, appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The financial statements of the towbar segment of Ellebi S.p.A. as of and
for the years ended December 31, 1995, 1996 and 1997, included in this
Prospectus, have been so included in reliance on the report of AXIS S.r.l.,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
99
<PAGE> 102
ADVANCED ACCESSORY SYSTEMS, LLC
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ADVANCED ACCESSORY SYSTEMS, LLC AND SUBSIDIARIES
Reports of Independent Accountants.......................... F-2
Consolidated Balance Sheets -- December 31, 1996 and 1997... F-4
Consolidated Statements of Operations -- Period from January
1, 1995 through September 27, 1995 for the Predecessor and
Period from September 28, 1995 through December 31, 1995,
and Years Ended December 31, 1996 and 1997 for the
Company................................................... F-5
Consolidated Statements of Cash Flows -- Period from January
1, 1995 through September 27, 1995 for the Predecessor and
Period from September 28, 1995 through December 31, 1995,
and Years Ended December 31, 1996 and 1997 for the
Company................................................... F-6
Consolidated Statements of Changes in Divisional and
Members' Equity -- Period from January 1, 1995 through
September 27, 1995 for the Predecessor and Period from
September 28, 1995 through December 31, 1995, and Years
Ended December 31, 1996 and 1997 for the Company.......... F-7
Notes to Consolidated Financial Statements.................. F-8
BRINK B. V.
Report of Independent Accountants........................... F-29
Consolidated Balance Sheets -- December 31, 1995 and October
30, 1996.................................................. F-30
Consolidated Profit and Loss Account -- Year Ended December
31, 1995 and Ten Months Ended October 30, 1996............ F-30
Consolidated Cash Flows Statement -- Year Ended December 31,
1995 and Ten Months Ended October 30, 1996................ F-31
Notes to Consolidated Financial Statements.................. F-31
VALLEY INDUSTRIES, INC.
Report of Independent Accountants........................... F-41
Report of Independent Auditors.............................. F-42
Balance Sheets -- December 31, 1995, December 28, 1996 and
August 5, 1997............................................ F-43
Statements of Operations -- Years Ended December 31, 1995,
December 28, 1996 and the Period Ended August 5, 1997..... F-44
Statements of Shareholders' Equity -- Years Ended December
31, 1995, December 28, 1996 and the Period Ended August 5,
1997...................................................... F-45
Statements of Cash Flows -- Years Ended December 31, 1995,
December 28, 1996 and the Period Ended August 5, 1997..... F-46
Notes to Financial Statements............................... F-47
ELLEBI S.P.A.
Report of Independent Accountants........................... F-53
Balance Sheets -- December 31, 1995, 1996 and 1997.......... F-54
Statements of Operations -- Years Ended December 31, 1995,
1996 and 1997............................................. F-55
Statements of Cash Flows -- Years ended December 31, 1995,
1996 and 1997............................................. F-56
Statements of Changes in Ellebi S.p.A. Investment -- Years
ended December 31, 1995, 1996 and 1997.................... F-57
Notes to Financial Statements............................... F-58
</TABLE>
F-1
<PAGE> 103
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Managers
and Members of
Advanced Accessory Systems, LLC
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of cash flows and of changes in
members' equity present fairly, in all material respects, the financial position
of Advanced Accessory Systems, LLC (formerly AAS Holdings, LLC) and its
subsidiaries (the "Company") at December 31, 1996 and 1997 and the results of
their operations and their cash flows for the period from September 28, 1995
through December 31, 1995 and for the years ended December 31, 1996 and 1997, in
conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Bloomfield Hills, Michigan
March 15, 1998
F-2
<PAGE> 104
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Managers
and Members of
Advanced Accessory Systems, LLC
In our opinion, the accompanying statements of income, of cash flows and of
changes in divisional equity of MascoTech Accessories (the "Predecessor"), a
division of MascoTech, Inc. present fairly, in all material respects, the
results of its operations and its cash flows for the period from January 1, 1995
through September 27, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Predecessor's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
The Predecessor was a division of MascoTech, Inc. and, as disclosed in Note
5 to the financial statements, had extensive transactions and relationships with
affiliated entities. Because of these relationships, the terms of these
transactions may differ from those that would result from transactions among
wholly unrelated parties.
As discussed in Note 1, on September 28, 1995, certain of the net assets of
the Predecessor were purchased by Advanced Accessory Systems, LLC (formerly AAS
Holdings, LLC). The accompanying financial statements for the period from
January 1, 1995 through September 27, 1995 do not give effect to the purchase
transaction.
Price Waterhouse LLP
Bloomfield Hills, Michigan
August 25, 1997
F-3
<PAGE> 105
ADVANCED ACCESSORY SYSTEMS, LLC
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1996 1997
---- ----
(DOLLAR AMOUNTS IN THOUSANDS
EXCEPT UNIT-RELATED DATA)
<S> <C> <C>
ASSETS
Current assets
Cash...................................................... $ 2,514 $ 27,348
Accounts receivable, less reserves of $605 and $1,699,
respectively........................................... 18,807 43,523
Inventories............................................... 20,652 34,408
Other current assets...................................... 4,083 6,469
-------- --------
Total current assets................................. 46,056 111,748
Property and equipment, net................................. 41,828 55,928
Goodwill, net............................................... 56,799 85,889
Intangible assets, net...................................... 2,635 7,595
Deferred income taxes....................................... 856 3,626
Other noncurrent assets..................................... 185 697
-------- --------
$148,359 $265,483
======== ========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities
Current maturities of long-term debt...................... $ 5,500 $ 3,746
Accounts payable.......................................... 13,668 23,479
Accrued liabilities....................................... 11,228 18,815
Deferred income taxes..................................... 1,292 1,333
-------- --------
Total current liabilities............................ 31,688 47,373
-------- --------
Noncurrent liabilities
Deferred income taxes..................................... 4,613 3,545
Other noncurrent liabilities.............................. 2,271 1,234
Long-term debt, less current maturities................... 87,642 193,380
-------- --------
Total noncurrent liabilities......................... 94,526 198,159
-------- --------
Commitments and contingencies (Note 10)
Mandatorily redeemable warrants............................. 3,498 3,507
-------- --------
Minority interest........................................... 184 251
-------- --------
Members' equity
Class A Units 25,000 authorized, 15,369 and 16,271 issued
at December 31, 1996 and 1997, respectively............ 17,922 22,912
Class B Units, 2,000 units authorized, no Units issued at
December 31, 1996 and 1997............................. -- --
Currency translation adjustment........................... (89) (490)
Retained earnings (deficit)............................... 630 (6,229)
-------- --------
18,463 16,193
-------- --------
$148,359 $265,483
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 106
ADVANCED ACCESSORY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------ ---------------------------------------
PERIOD FROM PERIOD FROM YEAR ENDED
JANUARY 1, 1995 SEPTEMBER 28, 1995 DECEMBER 31,
THROUGH THROUGH ------------------
SEPTEMBER 27, 1995 DECEMBER 31 1995 1996 1997
------------------ ------------------ ---- ----
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales................................ $48,698 $16,299 $81,466 $188,678
Cost of sales............................ 38,645 12,458 53,607 135,556
------- ------- ------- --------
Gross profit........................... 10,053 3,841 27,859 53,122
Selling, administrative and product
development expenses................... 6,107 1,472 13,413 31,350
Amortization of intangible assets........ -- 546 2,475 2,336
------- ------- ------- --------
Operating income....................... 3,946 1,823 11,971 19,436
------- ------- ------- --------
Other (income) expense
Interest expense....................... -- 975 4,312 12,627
Foreign currency loss.................. -- -- 1,330 6,097
Other (income) expense................. 65 (22) (80) --
------- ------- ------- --------
Income before minority interest,
extraordinary charge and income
taxes.................................. 3,881 870 6,409 712
Provision (benefit) for income taxes..... 1,324 -- (491) (2,856)
------- ------- ------- --------
Income before minority interest and
extraordinary charge................... 2,557 870 6,900 3,568
Minority interest........................ -- 9 69 97
Extraordinary charge resulting from debt
extinguishment......................... -- -- 1,970 7,416
------- ------- ------- --------
Net income (loss)........................ $ 2,557 $ 861 $ 4,861 $ (3,945)
======= ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 107
ADVANCED ACCESSORY SYSTEMS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------- ------------------------------------
PERIOD FROM PERIOD FROM
JANUARY 1, SEPTEMBER 28, YEAR ENDED
1995 THROUGH 1995 THROUGH DECEMBER 31,
SEPTEMBER 27, DECEMBER 31, --------------------
1995 1995 1996 1997
------------- ------------- ---- ----
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).............................. $ 2,557 $ 861 $ 4,861 $ (3,945)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Depreciation and amortization................ 789 890 4,689 9,360
Deferred taxes............................... -- -- (363) (3,146)
Foreign currency loss........................ -- -- 1,118 5,500
Loss on disposal of assets................... -- -- 10 --
Extraordinary charge resulting from debt
extinguishment............................ -- -- 1,970 7,416
Changes in assets and liabilities
Accounts receivable....................... 947 488 (118) (8,661)
Inventories............................... 133 412 (3,736) 582
Other current assets...................... (569) (193) (1,742) 378
Other noncurrent assets................... (13) -- (67) (482)
Accounts payable.......................... 467 (1,679) 1,995 (2,719)
Accrued liabilities....................... (653) 484 3,144 2,819
Other noncurrent liabilities.............. 83 118 (1,913) (217)
Minority interest in consolidated
subsidiaries............................ -- 9 69 97
------- -------- -------- ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES........................... 3,741 1,390 9,917 6,982
------- -------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of machinery and equipment......... (2,079) (491) (3,124) (7,751)
Amount due from sellers of Valley Industries,
Inc.......................................... -- -- -- (1,150)
Acquisition of subsidiaries, net of cash
acquired..................................... -- (46,047) (54,339) (70,832)
------- -------- -------- ---------
NET CASH USED FOR INVESTING
ACTIVITIES........................... (2,079) (46,538) (57,463) (79,733)
------- -------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt................. -- 30,800 88,842 215,050
Proceeds from issuance of warrants............. -- 200 3,498 --
Increase in revolving loan..................... -- 4,100 4,300 504
Extinguishment of warrants..................... -- -- (1,600) --
Repayment of debt.............................. -- -- (44,628) (113,248)
Divisional activity............................ (1,666) -- -- --
Debt issuance costs............................ -- (1,815) (2,643) (7,280)
Issuance of membership units................... -- 13,500 4,562 4,999
Distributions to members....................... -- -- (3,726) (2,945)
------- -------- -------- ---------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES................. (1,666) 46,785 48,605 97,080
------- -------- -------- ---------
Effect of exchange rate changes................ -- -- (182) 505
Net increase (decrease) in cash................ (4) 1,637 877 24,834
Cash at beginning of period.................... 7 -- 1,637 2,514
------- -------- -------- ---------
Cash at end of period.......................... $ 3 $ 1,637 $ 2,514 $ 27,348
======= ======== ======== =========
Cash paid for interest......................... $ -- $ 746 $ 4,215 $ 8,302
======= ======== ======== =========
Cash paid for income taxes..................... $ -- $ -- $ -- $ 581
======= ======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 108
ADVANCED ACCESSORY SYSTEMS, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN DIVISIONAL AND MEMBERS' EQUITY
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
-----------
DIVISIONAL
EQUITY
----------
<S> <C>
Balance at January 1, 1995.................................. $14,903
Net income for the period from January 1, 1995 through
September 27, 1995........................................ 2,557
Divisional activity......................................... (1,666)
-------
Balance at September 27, 1995............................... $15,794
=======
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPANY
------------------------------------------------
CURRENCY RETAINED TOTAL
MEMBERS' TRANSLATION EARNINGS MEMBERS'
CAPITAL ADJUSTMENT (DEFICIT) EQUITY
-------- ----------- --------- --------
<S> <C> <C> <C> <C>
Sale of membership interest on September 28, 1995..... $13,860 $ -- $ -- $13,860
Notes receivable for unit purchase.................... (500) -- -- (500)
------- ----- ------- -------
13,360 -- -- 13,360
Net income for the period from September 28, 1995
through December 31, 1995........................... -- -- 861 861
------- ----- ------- -------
Balance at December 31, 1995.......................... 13,360 -- 861 14,221
Issuance of additional units.......................... 4,562 -- -- 4,562
Accretion of membership warrants...................... -- -- (1,400) (1,400)
Distributions to members, net of minority interest.... -- -- (3,692) (3,692)
Currency translation adjustment....................... -- (89) -- (89)
Net income for 1996................................... -- -- 4,861 4,861
------- ----- ------- -------
Balance at December 31, 1996.......................... 17,922 (89) 630 18,463
Issuance of additional units.......................... 4,999 -- -- 4,999
Accretion of membership warrants...................... (9) -- -- (9)
Distributions to members, net of minority interest.... -- -- (2,914) (2,914)
Currency translation adjustment....................... -- (401) -- (401)
Net (loss) for 1997................................... -- -- (3,945) (3,945)
------- ----- ------- -------
Balance at December 31, 1997.......................... $22,912 $(490) $(6,229) $16,193
======= ===== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 109
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT UNIT RELATED DATA)
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITIES
Advanced Accessory Systems, LLC (formerly AAS Holdings, LLC) (the
"Company") is engaged in the design, manufacture and supply of towing and rack
systems and accessories for the automotive original equipment manufacturer
("OEM") market and the automotive aftermarket. The Company's business commenced
on September 28, 1995, with the acquisition of certain of the net assets of
MascoTech Accessories (the "Predecessor"), a division of MascoTech, Inc.,
through the Company's majority-owned subsidiary, SportRack, LLC. As described in
Note 2, in October 1996 the Company acquired Brink B.V. and in July and August
of 1997 acquired the SportRack division of Bell Sports Corporation, Nomadic
Sports, Inc. and Valley Industries, Inc.
The Company has two significant customers in the automotive OEM industry.
Sales to these customers represented 62% and 22%, for the period from January 1,
1995 through September 27, 1995 for the Predecessor; 72% and 22% for the period
from September 28, 1995 through December 31, 1995, 60% and 21% for the year
ended December 31, 1996 and 29% and 13% for the year ended December 31, 1997 for
the Company. Accounts receivable from these customers represented 57% and 24% of
the Company's trade accounts receivable at December 31, 1996, and 33% and 8% at
December 31, 1997, respectively.
Although the Company is directly affected by the economic well being of the
industries and customers referred to above, management does not believe
significant credit risk exists at December 31, 1997. Consistent with industry
practice, the Company does not require collateral to reduce such credit risk.
BASIS OF PRESENTATION
The financial statements for the period from January 1, 1995 through
September 27, 1995 are those of the Predecessor.
The consolidated financial statements as of December 31, 1996 and 1997, for
the period from September 28, 1995 through December 31, 1995 and for the years
ended December 31, 1996 and 1997 are those of the Company and its subsidiaries.
The financial statements of the Company and the Predecessor are not comparable
in certain respects due to differences between the cost bases of certain assets
held by the Company versus that of the Predecessor, resulting in increased
depreciation and amortization charges subsequent to September 27, 1995, changes
in accounting policies and the recording of certain liabilities at the date of
acquisition in connection with the purchase of the Predecessor by the Company,
as well as the Company's acquisitions as discussed further in Note 2.
F-8
<PAGE> 110
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
PRINCIPLES OF CONSOLIDATION
The Company includes the accounts of the following:
<TABLE>
<S> <C>
SportRack, LLC............................ 99% owned by Advanced Accessory Systems, LLC and 1%
owned by Chase Capital Partners
SportRack Automotive GmbH............... A German corporation, 100% owned by SportRack, LLC
SportRack International, Inc............ A Canadian corporation, 100% owned by SportRack, LLC
AAS Holdings, Inc......................... 100% owned by Advanced Accessory Systems, LLC
Brink International B.V................. A Dutch corporation, 100% owned by AAS Holdings,
Inc.
Valley Industries, LLC.................... 99% owned by Advanced Accessory Systems, LLC and 1%
owned by SportRack, LLC
Valtek, LLC............................... 99% owned by Advanced Accessory Systems, LLC and 1%
owned by SportRack, LLC
AAS Capital Corporation................... 100% owned by Advanced Accessory Systems, LLC
</TABLE>
All intercompany transactions have been eliminated in consolidation.
REVENUE RECOGNITION
Revenue and related cost of goods sold are recognized upon shipment of the
product to the customer. Sales allowances, discounts, rebates and other
adjustments are recorded or accrued in the period of the sale.
SIGNIFICANT ESTIMATES
The preparation of 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 fiscal period. Actual results could differ from those
estimates.
CHANGE IN ESTIMATE
On a periodic basis, the Company reviews the estimated useful lives of its
long-lived assets. In connection with the Company's most recent review, the
Company determined that the remaining period of benefit relating to its goodwill
from the SportRack, LLC and Brink acquisitions was 29 years. Based upon the
Company's assessment of the period of benefit as well as the amortization
periods utilized by other companies operating within the automotive industry,
the Company began amortizing the unamortized value of its goodwill at January 1,
1997 over a remaining 29 year period. The changes in the amortization period
resulted in a decrease in amortization expense of approximately $2,080 for the
year ended December 31, 1997.
FINANCIAL INSTRUMENTS
Financial instruments at December 31, 1996 and 1997, including cash,
accounts receivable and accounts payable, are recorded at cost, which
approximates fair value due to the short-term maturities of these assets and
liabilities. The carrying value of the obligations under the bank agreements are
considered to approximate fair value as the agreements provide for interest rate
revisions based on changes in prevailing market rates or were entered into at
rates that approximate market rates at December 31, 1996 and 1997.
The Company is exposed to certain market risks which exist as a part of its
ongoing business operations. Primary exposures include fluctuations in the value
of foreign currency investments in subsidiaries, volatility in the translation
of foreign currency earnings to U.S. Dollars and movements in Federal Funds
rates and the
F-9
<PAGE> 111
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
London Interbank Offered Rate (LIBOR). The Company uses derivative financial
instruments, where appropriate, to manage these risks. The Company, as a matter
of policy, does not engage in trading or speculative transactions.
CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly-liquid investments with a maturity of three months or less from the date
of purchase to be cash equivalents.
CURRENCY TRANSLATION
The functional currency for the Company's foreign subsidiaries is the
applicable local currency. Assets and liabilities of foreign subsidiaries are
translated into U.S. dollars at the exchange rates in effect at the balance
sheet date; translation adjustments are reported as a separate component of
members' equity. Revenues, expenses and cash flows for foreign subsidiaries are
translated at average exchange rates during the period; foreign currency
transaction gains and losses are included in current earnings. The accompanying
consolidated statement of operations for the years ended December 31, 1996 and
1997 includes net currency losses of $1,330 and $6,097 relating primarily to
debt at Brink International B.V., which is denominated in U.S. dollars.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost being
determined on the first-in, first-out (FIFO) method. Inventories are
periodically reviewed and reserves established for excess and obsolete items.
CUSTOMER TOOLING
The Company incurs costs to develop new tooling used in the manufacture of
products sold to OEM's. In certain instances, the tooling becomes the property
of the OEM and the Company is reimbursed by the OEM for the cost of the tooling,
or in certain instances, recovers all or a portion of such costs through
incremental increases in unit selling prices. Management makes periodic
estimates of the total costs to be incurred for customer tooling projects and
makes provisions for tooling costs which will not be recovered, if any, when
such amounts are known. Customer tooling in-process is included in other current
assets in the accompanying consolidated balance sheets.
PROPERTY AND EQUIPMENT
Property and equipment is stated at acquisition cost, which reflects the
fair market value of assets acquired at the acquisition date for all
subsidiaries. Property and equipment purchased other than through the
acquisitions described in Note 2 is stated at cost. Expenditures for normal
repairs and maintenance are charged to operations as incurred. Depreciation is
computed using the straight-line method over the following estimated useful
lives:
<TABLE>
<CAPTION>
YEARS
----------------------
PREDECESSOR COMPANY
----------- -------
<S> <C> <C>
Buildings and improvements................................ 10-40 5-50
Machinery, equipment and tooling.......................... 3-15 2-10
Furniture and fixtures.................................... 10 5-7
</TABLE>
F-10
<PAGE> 112
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
GOODWILL AND INTANGIBLE ASSETS
Goodwill of $56,799 and $85,889 (net of accumulated amortization of $3,021
and $5,251) at December 31, 1996 and 1997, respectively, represents the costs in
excess of net assets acquired and was amortized using the straight line method
over 15 years in 1996. Due to a change in accounting estimate, the Company began
amortizing goodwill over a remaining 29 year period in 1997.
Debt issuance costs of $2,635 and $6,467, net of accumulated amortization
at December 31, 1996 and 1997, respectively, are amortized over the terms of the
loan agreements, which are six to ten years. Debt issuance cost amortization of
$60, $212 and $551 for 1995, 1996 and 1997, respectively, has been included in
interest expense.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company accounts for long-lived assets in accordance with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". This Statement
requires that long-lived assets and certain identifiable intangibles to be held
and used by the company be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be fully
recoverable. The Company determines the impairment of long-lived assets by
comparing the undiscounted future cash flows to be generated by the assets to
their carrying value. Management believes that there are no impairments as of
December 31, 1996 and 1997.
INCOME TAXES
The Company and certain of its domestic subsidiaries have elected to be
taxed as limited liability companies for federal income tax purposes. As a
result of this election, the Company's domestic taxable income accrues to the
individual members. Distributions are made to the members in amounts sufficient
to meet the tax liability on the Company's domestic taxable income accruing to
the individual members. No distributions were made in the period from September
28, 1995 through December 31, 1995. Distributions to members, net of minority
interest, of $3,692 and $2,914 were made during 1996 and 1997, respectively.
Certain of the Company's domestic subsidiaries and foreign subsidiaries are
subject to income taxes in their respective jurisdictions. Income tax provisions
for these entities are based on the U.S. Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". Deferred tax assets and
liabilities are provided for the expected future tax consequences of temporary
differences between the carrying amounts and the tax basis of such entities'
assets and liabilities. The Company does not provide for U.S. income taxes or
foreign withholding taxes on the undistributed earnings of foreign subsidiaries
because of management's intent to permanently reinvest in such operations.
The Company and certain subsidiaries are subject to taxes, including
Michigan Single Business Tax and Canadian capital tax, which are based primarily
on factors other than income. As such, these amounts are included in selling,
administrative and product development expenses in the accompanying consolidated
statements of income. Deferred taxes related to Michigan Single Business Tax are
provided on the temporary differences resulting from capital acquisitions and
depreciation.
Prior to September 28, 1995, the Predecessor was a division of a C
corporation. In preparing its financial statements, the Predecessor has
determined its tax provision substantially on a separate return basis in
accordance with the provisions of Statement of Accounting Standards No. 109,
"Accounting for Income Taxes".
F-11
<PAGE> 113
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
RESEARCH, DEVELOPMENT AND ENGINEERING
Research, development and engineering costs are expensed as incurred and
aggregated approximately $1,993 for the period from January 1, 1995 through
September 27, 1995 for the Predecessor, $672 for the period from September 28,
1995 through December 31, 1995 and $3,548 and $5,860 for the years ended
December 31, 1996 and 1997, respectively, for the Company.
RECLASSIFICATIONS
Certain amounts from the 1996 financial statements have been reclassified
to conform with the 1997 financial statement presentation.
2. ACQUISITIONS
Acquisitions of the Company from inception through December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
PURCHASE GOODWILL
ACQUIRED COMPANY ACQUISITION DATE PRICE RECORDED
---------------- ---------------- -------- --------
<S> <C> <C> <C>
Predecessor............................. September 28, 1995 $46,050 $32,781
Brink B.V............................... October 30, 1996 54,339 27,730
SportRack Division of Bell Sports....... July 2, 1997 13,505 1,198
Nomadic Sports, Inc..................... July 24, 1997 849 433
Valley Industries, Inc.................. August 5, 1997 56,478 32,891
</TABLE>
The above acquisitions have each been accounted for in accordance with the
purchase method of accounting. Accordingly, the respective purchase price of
each acquisition has been allocated to assets acquired and liabilities assumed
based upon their estimated fair values at the acquisition date. The excess of
the aggregate purchase price over the estimated fair market value of the net
assets acquired has been recorded as goodwill. The operating results of these
entities have been included in the Company's consolidated financial statements
since the date of each acquisition.
Predecessor
SportRack, LLC (formerly "Predecessor") is a designer, manufacturer and
distributor of rack systems and accessories to the automotive OEM market and
aftermarket. The Company was acquired from MascoTech, Inc. through an Asset
Purchase Agreement (the "Agreement") which contains indemnification provisions
relating to certain business activities prior to September 28, 1995.
Brink B.V.
The Company acquired all of the outstanding shares of Brink B.V. ("Brink"),
a designer, manufacturer and distributor of towing systems and related products
in Europe. The purchase price of $54,339, including acquisition costs, was
comprised of $45,801 of cash and a 12,500 Junior Subordinated Note ($7,340),
denominated in Dutch guilders, to Brink Holdings, B.V. Through a statutory
reorganization, the operations of Brink B.V. were transferred to Brink
International B.V.
SportRack Division of Bell Sports and Nomadic Sports, Inc.
The Company acquired the nets assets of the SportRack Division of Bell
Sports and the outstanding shares of Nomadic Sports, Inc. (together SportRack
International, Inc.), which are designers, manufacturers
F-12
<PAGE> 114
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. ACQUISITIONS -- (CONTINUED)
and distributors of rack systems and accessories to the OEM market and
automotive aftermarket in Canada and the U.S.
Valley Industries, Inc.
The Company acquired the net assets of Valley Industries, Inc. ("Valley"),
which is a North American supplier of towing systems and related products to the
automotive OEM market and aftermarket.
Pro Forma Data
The following unaudited pro forma consolidated results of operations have
been prepared as if the Valley and SportRack International, Inc. acquisitions
had occurred on January 1, 1996.
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Net sales................................................ $233,480 $246,669
Income before extraordinary charge....................... 2,724 1,319
Net income (loss)........................................ 754 (6,097)
</TABLE>
The pro forma data is not intended to be a projection of future results.
The pro forma data included above includes adjustments to historical
results of operations for increased depreciation expense, intangible asset
amortization and interest expense, net of the related tax benefits.
3. LONG-TERM DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
OUTSTANDING AT
INTEREST RATE AT DECEMBER 31,
DECEMBER 31, -------------------
1997 1996 1997
---------------- ---- ----
<S> <C> <C> <C>
Senior Subordinated Notes, less discount of $464........... 9.75% $ -- $124,536
Second Amended and Restated Credit Agreement
(U.S. Credit Facility)
Term note A........................................... 8.66% 65,000 17,065
Term note B........................................... 9.02% -- 15,883
Revolving line of credit note......................... 9.50% 4,300 1,900
Acquisition revolving note............................ 10.25% -- 21,000
First Amended and Restated Credit Agreement
(Canadian Credit Facility)
Canadian term note.................................... 7.50% -- 13,952
Canadian revolving line of credit note................ 7.50% -- 2,790
Senior Subordinated Loans, less discount of $3,498......... 16,502 --
Junior Subordinated Note................................... 7,340 --
-------- --------
93,142 197,126
Less -- current portion.................................... 5,500 3,746
-------- --------
$ 87,642 $193,380
======== ========
</TABLE>
In connection with the acquisition of Valley on August 5, 1997, as
described in Note 2, the Company borrowed $55,000, under its Second Amended and
Restated Credit Agreement ("U.S. Credit Facility"), Term note B. In July 1997,
the Company borrowed C$20,000 ($13,952 at December 31, 1997) under its First
F-13
<PAGE> 115
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. LONG-TERM DEBT -- (CONTINUED)
Amended and Restated Credit Agreement ("Canadian Credit Facility") to purchase
SportRack International, Inc.
On October 1, 1997 the Company together with its subsidiary, AAS Capital
Corporation, issued $125,000 in Senior Subordinated Notes (the "Notes"). The
proceeds of the offering totaling $124,529, net of discount, were used to reduce
or repay outstanding debt including borrowings under the U.S. Credit Facility,
the Senior Subordinated Loans and the Junior Subordinated Note, and to pay costs
of the transaction totaling $4,950.
SENIOR SUBORDINATED NOTES
Borrowings under the Notes, due October 1, 2007, are unsecured and are
subordinated in right of payment to all existing and future senior indebtedness
of the Company, including the loans under the U.S. and Canadian Credit
Agreements described below. The Company, at its option, may redeem the Notes, in
whole or in part, together with accrued and unpaid interest subsequent to
October 1, 2002 at certain redemption prices as set forth by the indenture,
under which the Notes have been issued. In addition, at any time the Company may
redeem up to 35% of the aggregate principal amount of the Notes with the net
cash proceeds of one or more public equity offerings at a redemption price equal
to 109.75% of the principal amount to be redeemed. Upon the occurrence of a
change of control of the Company, as defined by the indenture, the Company is
required to make an offer to repurchase the Notes at a price equal to 101% of
the principal amount of the notes. The indenture places certain limits on the
Company, the most restrictive of which include, the incurrence of additional
indebtedness by the Company, the payment of dividends on, and redemption of
capital of the Company, the redemption of certain subordinated obligations,
investments, sales of assets and stock of certain subsidiaries, transactions
with affiliates, consolidations, mergers and transfers of all or substantially
all of the Company's assets. The indenture also requires the Company to file a
registration statement during 1998 with respect to an offer to exchange the
Notes for a series of notes of the Company with terms substantially identical to
the Notes. Interest on the Notes is payable semi-annually in arrears on April 1
and October 1 of each year.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT (U.S. CREDIT FACILITY)
The company's U.S. Credit Facility, which is administrated by the First
Chicago NBD Bank ("NBD") and The Chase Manhattan Bank ("Chase"), is secured by
substantially all the assets of the Company and places certain restrictions on
the Company related to indebtedness, sales of assets, investments, capital
expenditures, dividend payments, management fees, and members' equity
transactions. In addition, the agreement subjects the Company to certain
restrictive covenants, including the attainment of designated operating ratios
and minimum net worth levels. The Company, at its election, may make prepayments
of the term notes under the credit agreement on a pro-rata basis. A mandatory
prepayment of the term notes was made on October 1, 1997 as a result of the
issuance of the Company's Notes. Additionally, mandatory prepayments of the term
notes are required in the event of sales of assets meeting certain criteria, as
set forth by the agreement, or based upon periodic calculations of excess cash
flows, as defined by the agreement.
The agreement provides for two term notes (Term note A and Term note B), a
revolving line of credit note and an acquisitions revolving note. Loans under
each of the term notes and the revolving note can be converted, at the election
of the Company, in whole or in part, into Base Rate Loans or Eurocurrency Loans.
Interest is payable in arrears quarterly on Base Rate Loans, and in arrears in
one, two, three or six months on Eurocurrency Loans, as determined by the length
of the Eurocurrency Loan, as selected by the Company. Interest is charged at an
adjustable rate plus the applicable margin. The applicable margin is based upon
the Company's Senior Debt Ratio, as defined by the Credit Agreement.
Eurocurrency Loans can be made in U.S. dollars or certain other currencies, at
the option of the Company. The agreement also provides for a Letter of Credit
Facility. At December 31, 1997, no letters of credit were outstanding.
F-14
<PAGE> 116
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. LONG-TERM DEBT -- (CONTINUED)
Term note A
On October 30, 1996 the Company borrowed $65,000 under Term note A. The
applicable margin for Term note A ranges from .5% to 1.75% for Base Rate Loans
and from 1.5% to 2.75% for Eurocurrency Loans. Repayments under the note, after
giving effect to the mandatory prepayment totaling $43,475 made on October 1,
1997 as discussed above, are required in the following installments:
<TABLE>
<CAPTION>
QUARTERLY
---------
<S> <C>
March 31, 1998 through September 30, 1998................... $441
December 31, 1998 through September 30, 1999................ 552
December 31, 1999 through September 30, 2000................ 736
December 31, 2000 through June 30, 2003..................... 883
Final installment on October 30, 2003....................... 877
</TABLE>
Term note B
On August 5, 1997, the Company borrowed $55,000 under Term note B. The
applicable margin for Term B note ranges from 1.0% to 2.25% for Base Rate Loans
and from 2.0% to 3.25% for Eurocurrency Loans. Repayments under Term note B,
after giving effect to the mandatory prepayment totaling $39,044 made on October
1, 1997, as discussed above, are required in the following installments:
<TABLE>
<S> <C>
March 31, 1998 through September 30, 2003 (quarterly)....... $ 73
December 31, 2003........................................... 2,912
March 30, 2004, June 30, 2004 and October 30, 2004.......... 3,764
</TABLE>
Revolving line of credit note
The Company has the ability to borrow up to $25,000 under the revolving
line of credit which expires on October 30, 2003. Available borrowings, however,
are limited to a defined borrowing base amount equal to 85% eligible domestic
accounts receivables and 80% of certain eligible foreign accounts receivables.
The base borrowing amount is increased by the lesser of the sum of 50% of
domestic eligible inventory and 40% to 50% of certain eligible foreign inventory
or $10,000. Available borrowings are reduced by amounts outstanding under the
Canadian revolving line of credit note described below. A commitment fee of
.375% to .5% is charged on the unused balance based on the Company's Senior
Leverage Ratio, as defined. At December 31, 1997, $20,300 was available under
the facility.
Acquisition revolving note
On December 31, 1997, the Company borrowed $21,000 under its $22,000
acquisition revolving note. The proceeds are included in cash at December 31,
1997 and were used to acquire the assets of the towbar segment of Ellebi S.p.A
on January 2, 1998, as discussed further in Note 12. The note is available to
the Company on a revolving credit basis until September 24, 1999 at which time
the outstanding principal balance will convert to a term loan which will
amortize in sixteen equal quarterly installments with a final maturity of
October 30, 2003. The applicable margin for the acquisition revolving note
ranges from .5% to 1.75% for Base Rate Loans and from 1.0% to 2.75% for
Eurocurrency Loans. A commitment fee of .375% to .5% is charged on the unused
balance based on the Company's Senior Leverage Ratio, as defined. At December
31, 1997, the acquisition revolving note was a Base Rate Loan with interest
accruing at the rate of 10.25% per annum. On January 1, 1998, the Company
converted the Loan to a Eurocurrency Loan with an interest rate of 8.46%.
F-15
<PAGE> 117
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. LONG-TERM DEBT -- (CONTINUED)
FIRST AMENDED AND RESTATED CREDIT AGREEMENT (CANADIAN CREDIT FACILITY)
The Company's First Amended and Restated Credit Agreement, which is
administered by the NBD and Chase, is secured by substantially of all the assets
of the Company's Canadian subsidiaries.
The agreement provides for a C$20,000 term note and a C$4,000 revolving
note, (U.S. $13,952 and U.S. $2,790) at December 31, 1997, respectively. Loans
under each of the notes can be converted at the election of the company, in
whole or in part, into Floating Rate advances, U.S. Base Rate advances or LIBOR
advances. Floating rate advances are denominated in Canadian dollars and bear
interest at a variable rate based on the bank's prime lending rate plus a
variable margin. U.S. Base Rate advances are denominated in U.S. dollars and
bear interest at the bank's prime lending rate plus a variable margin. LIBOR
advances are denominated in U.S. dollars and bear interest at LIBOR plus a
variable margin. The variable margin is based upon the Company's Senior Debt
Ratio, as defined by the agreement and ranges from .5% to 1.75% for U.S. Base
Rate advances and from 1.5% to 2.75% for LIBOR advances.
Canadian term note
Repayments under the Canadian term note are required in the following
installments:
<TABLE>
<CAPTION>
QUARTERLY
---------
<S> <C>
March 31, 1998 through September 30, 1998................... $373
December 31, 1998 through September 30, 1999................ 459
December 31, 1999 through September 30, 2000................ 602
December 31, 2000 through June 30, 2003..................... 716
Final installment on October 30, 2003....................... 717
</TABLE>
Canadian revolving line of credit note
A commitment fee of .5% is charged on the unused balance of the Canadian
revolving line of credit note. At December 31, 1997, no additional borrowings
were available under the facility.
SENIOR SUBORDINATED LOANS
On October 30, 1996, the Company borrowed $20,000 under its Senior
Subordinated Note Purchase Agreement ("Senior Subordinated Loans") with CB
Capital and International Mezzanine. The Senior Subordinated Loans were repaid
in full on October 1, 1997 with the proceeds of the Notes discussed above.
Interest on the Senior Subordinated Loans was payable in arrears semiannually
and accrued at a rate of 12.5% per annum. The Senior Subordinated Loans provided
for a prepayment penalty if the Senior Subordinated Loans were paid prior to
October 30, 2002. Under this provision, a prepayment penalty totaling $1,400 was
paid in 1997 and is included in the extraordinary charge resulting from debt
extinguishment.
In connection with the issuance of the Senior Subordinated Loans, the
Company issued warrants to purchase 1,002 membership units. The warrants have an
exercise price of one cent per warrant, are exercisable immediately, and expire
October 30, 2004. As provided in the Warrant Agreement, the warrant holder can
put the warrants and membership Units acquired through the exercise of the
warrants back to the Company after October 30, 2001 or upon occurrence of a
Triggering Event, as defined, but prior to the earlier of October 30, 2004 or
the consummation of a Qualified Public Offering for an amount equal to Fair
Market Value, as defined. Additionally, as provided in the Warrant Agreement,
the Company may call the warrants and membership Units acquired through the
exercise of the warrants at any time after the sixth anniversary of the Closing
Date, but prior to the earlier of October 30, 2004 or a Qualified Public
Offering for an amount equal to Fair Market Value, as defined.
F-16
<PAGE> 118
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. LONG-TERM DEBT -- (CONTINUED)
At the date of issuance, the proceeds from the Senior Subordinated Loans
were allocated between the Senior Subordinated Loans and the warrants based upon
their estimated relative fair market value; accordingly, the Senior Subordinated
Loans were recorded at a discount of $3,498, which was partially amortized prior
to repayment on October 1, 1997. The remaining unamortized balance of $3,145 was
charged to 1997 operations as part of the extraordinary charge resulting from
debt extinguishment.
The warrants are being accreted to their redemption value through periodic
charges against Members' Equity through the earlier of October 30, 2001 or the
time redemption first becomes available. Thereafter the warrants will be
recorded at redemption value. The aforementioned warrants have been presented as
mandatorily redeemable warrants in the accompanying balance sheets.
JUNIOR SUBORDINATED NOTE
On October 30, 1996, the Company issued a 12,500 Junior Subordinated Note
("Junior Note"), denominated in Dutch guilders, to Brink Holdings B.V. as part
of the consideration paid for the purchase of Brink B.V. The Junior Note was due
April 30, 2005, but was repaid in full on October 1, 1997 with the proceeds of
the Notes discussed above. The Junior Note accrued interest at a rate of 7% per
annum, payable semi-annually in arrears.
EXTINGUISHMENT OF DEBT
1997 Extinguishments
As discussed above, on October 1, 1997 the Company repaid, in full, its
Senior Subordinated Loans and Junior Note and prepaid a portion of the term
notes under the U.S. Credit Facility. In connection with this extinguishment,
the Company recorded an extraordinary charge of $7,416, net of a tax benefit of
$365. The extinguishment charge is comprised of $1,400 prepayment penalties,
$3,145 of unamortized debt discount and $3,236 of unamoritized debt issuance
costs.
1996 Extinguishments
On October 30, 1996, the Company prepaid all amounts outstanding under a
$30,000 credit agreement and a prior $11,000 senior subordinated loan agreement.
In connection with these extinguishments, the Company recorded an extraordinary
charge of $1,970. The extinguishment charge is comprised of prepayment penalties
totaling $220, unamortized debt discount totaling $150 and debt issuance costs
of $1,600.
In connection with the issuance of the prior senior subordinated loan, the
Company issued warrants to purchase 617 membership units. The proceeds from the
issuance were allocated based on the estimated relative fair market values;
accordingly, the notes were recorded at a discount of $200. As part of the
extinguishment of the prior senior subordinated loan, the Company paid $1,600 to
redeem the warrants.
INTEREST RATE RISK
The Company is exposed to interest rate volatility with regard to variable
rate debt. The Company uses interest rate swaps to reduce interest rate
volatility. At December 31, 1996 and 1997, the notional value of interest rate
swaps was $18,500. Under the terms of the interest rate swap agreements, the
Company pays a fixed interest rate on debt equal to the notional value. The
effects of interest rate swaps are reflected in interest expense.
F-17
<PAGE> 119
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. LONG-TERM DEBT -- (CONTINUED)
SCHEDULED MATURITIES
The aggregate scheduled annual principal payments due in each of the years
ending December 31, is as follows:
<TABLE>
<S> <C>
1998........................................................ $ 3,746
1999........................................................ 4,661
2000........................................................ 11,153
2001........................................................ 11,938
2002 and thereafter......................................... 166,092
--------
197,590
Less -- discount............................................ 464
--------
$197,126
========
</TABLE>
4. INCOME TAXES
The Company's C corporation subsidiaries, taxable foreign subsidiaries and
the Predecessor account for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". The
Company and certain domestic subsidiaries are limited liability corporations; as
such, the Company's earnings are included in the taxable income of the Company's
members. Income (loss) before minority interest, income taxes and the pre-tax
charge resulting from debt extinguishment were attributable to the following
sources:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------- ----------------------------------
PERIOD FROM PERIOD FROM
JANUARY 1, SEPTEMBER 28, YEAR ENDED
1995 THROUGH 1995 THROUGH DECEMBER 31,
SEPTEMBER 27, DECEMBER 31, -----------------
1995 1995 1996 1997
------------- ------------- ------ -------
<S> <C> <C> <C> <C>
United States...................................... $3,881 $870 $6,283 $ 2,872
Foreign............................................ -- -- (1,844) (9,941)
------ ---- ------ -------
$3,881 $870 $4,439 $(7,069)
====== ==== ====== =======
</TABLE>
F-18
<PAGE> 120
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INCOME TAXES -- (CONTINUED)
The provision (benefit) for income taxes, including $365 of income tax
benefit allocated to the extraordinary charge in 1997, is comprised of the
following:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------ ------------------
PERIOD FROM YEAR ENDED
JANUARY 1, 1995 DECEMBER 31,
THROUGH ------------------
SEPTEMBER 27, 1995 1996 1997
------------------ ---- ----
<S> <C> <C> <C>
Currently payable (refundable)
United States............................................. $1,234 $ -- $ --
Foreign................................................... -- (128) 290
------ ----- -------
1,234 (128) 290
------ ----- -------
Deferred
United States............................................. 90 -- --
Foreign................................................... -- (363) (3,511)
------ ----- -------
90 (363) (3,511)
------ ----- -------
$1,324 $(491) $(3,221)
====== ===== =======
</TABLE>
The effective tax rates differ from the U.S. federal income tax rate as
follows:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------ ----------------------------------------
PERIOD FROM PERIOD FROM YEAR ENDED
JANUARY 1, SEPTEMBER 28, DECEMBER 31,
1995 THROUGH 1995 THROUGH --------------------
SEPTEMBER 27, 1995 DECEMBER 31, 1995 1996 1997
------------------ ----------------- ---- ----
<S> <C> <C> <C> <C>
Income tax provision (benefit) at U. S.
statutory rate (35%)........................ $1,358 $ 305 $ 1,554 $(2,474)
U. S. income taxes attributable to members.... -- (305) (2,200) (1,005)
Nondeductible foreign goodwill................ -- -- 102 229
Other, net.................................... (34) -- 53 29
------ ----- ------- -------
$1,324 $ -- $ (491) $(3,221)
====== ===== ======= =======
</TABLE>
F-19
<PAGE> 121
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. INCOME TAXES -- (CONTINUED)
Deferred tax assets and liabilities, related primarily to the Company's
foreign subsidiaries, comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
------- -------
<S> <C> <C>
DEFERRED TAX ASSETS
Net operating loss carryforwards........................... $ 608 $ 3,255
Fixed assets............................................... 248 296
Other...................................................... -- 75
------- -------
856 3,626
------- -------
DEFERRED TAX LIABILITIES
Fixed assets............................................... (4,282) (3,296)
Inventory.................................................. (1,292) (1,244)
Employee benefits and other................................ (331) (176)
Other...................................................... -- (162)
------- -------
(5,905) (4,878)
------- -------
Net deferred tax (liability)............................... $(5,049) $(1,252)
======= =======
</TABLE>
The net operating loss carryforwards of the Company's European subsidiaries
approximate $8,000 at December 31, 1997 and have no expiration date. The net
operating loss carryforwards of the Company's Canadian subsidiaries approximate
$1,100 at December 31, 1997 and expire primarily in 2004. Management believes
that it is more likely than not that the related deferred tax assets will be
realized and no valuation allowance has been provided against such amounts as of
December 31, 1997. If certain substantial changes in the Company's ownership
should occur, there could be an annual limit on the amount of the carryforwards
which can be utilized.
5. RELATED PARTY TRANSACTIONS AND ALLOCATIONS
In connection with the acquisition of Brink B.V., the Company entered into
the Junior Note Agreement, with Brink Holdings B.V., as described in Note 3 to
the financial statements. Concurrent with this acquisition, owners of Brink
Holdings B.V. purchased 1,230 membership units of the Company for cash of $4,286
($3,485 per unit).
A portion of the Company's U.S. Credit Facility and $20,000 Senior
Subordinated Loans, as described in Note 3, is with Chase and CB Capital
Investors, Inc., respectively, affiliates of certain members of the Company.
Charges to operations related to consulting services provided to the
Company by certain members of the Company aggregated approximately $70 for the
period from September 28, 1995 through December 31, 1995, $243 and $350 for the
years ended December 31, 1996 and 1997, respectively.
Certain employees of the Company are also members of the Company.
The Predecessor was a division of MascoTech, Inc. Accordingly, certain
corporate and divisional general and administrative costs were allocated to the
Predecessor from MascoTech, Inc. and certain of its subsidiaries. Allocated
costs include insurance, pensions, profit sharing, accounting and finance,
information systems and corporate overhead costs. Corporate overhead costs
relate to such functions as the corporate office, executive management, investor
relations and legal. Allocated costs, other than corporate overhead, were
charged to the division generally using an effort-based approach or based on the
division's actual
F-20
<PAGE> 122
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. RELATED PARTY TRANSACTIONS AND ALLOCATIONS -- (CONTINUED)
experience or headcount, depending upon the nature of the cost. Allocated
corporate overhead costs were charged to the division based primarily on
divisional sales. Corporate overhead costs allocated to the Predecessor
aggregated approximately $1,000 for the period from January 1, 1995 through
September 27, 1995.
It was MascoTech, Inc.'s policy not to charge the Predecessor interest on
the intercompany balance.
Management believes that the methods utilized to allocate costs to the
division, as discussed above, are reasonable. However, the terms of transactions
between the division and MascoTech, Inc., including allocated costs, may differ
from those that would result from transactions with unrelated parties.
6. OPTION PLAN
At September 28, 1995, the Company adopted the 1995 Option Plan (the
"Plan"). Under the Plan, certain directors and employees of the Company and its
subsidiaries may be granted options to purchase membership units (limited to up
to a total of 3,525 units as of December 31, 1996 and 3,903 units as of December
31, 1997). Of the options granted, 2,925 were granted in 1995, 600 were granted
in January 1996 and 378 were granted in 1997. All options granted in 1995 and
the January 1996 options were granted at an exercise price of $1,000, which
equaled the fair value of a membership unit on the date of grant. Of the options
granted in 1997, 178 were granted at an exercise price of $5,610 and 200 were
granted at an exercise price of $5,000, both of which exceeded the fair value of
a membership unit on the date of grant. Of the total options granted, 275 vest
based upon the results of a Liquidity Event, as defined in the plan, and 739
vest based upon the achievement of certain operating results of the Company. The
remaining options granted under the Plan vest over periods, generally up to ten
years, as determined by the Option Committee. The vesting can be accelerated in
certain instances based on the future operating results of the Company, or the
occurrence of a Liquidity Event, as defined in the Plan. At December 31, 1996
and 1997, 480 units and 938 units, respectively, were exercisable by their
terms. There were no options available for future grant at December 31, 1997. No
options were exercised, cancelled or expired during the period from September
28, 1995 through December 31, 1995 or for the years ended December 31, 1996 and
1997.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25) in accounting for stock options.
Compensation cost was $332 and $263 for the years ended December 31, 1996 and
1997, respectively. If compensation cost had been determined based upon the fair
value method in accordance with Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation", the pro forma net income (loss)
from September 28, 1995 through December 31, 1995 and for the years ended
December 31, 1996 and 1997 would not have been materially different than that
calculated under the provisions of APB 25. For pro forma purposes, the fair
value of each stock option grant was estimated using the Black-Scholes option
pricing model with the following assumptions: weighted average risk free
interest rates of 6.33%, 6.21%, and 6.12% for the period from September 28, 1995
through December 31, 1995 and the years ended December 31, 1996 and 1997,
respectively, an expected option life of eight years and no cash dividends.
7. PENSION PLAN
The Company has a defined benefit pension plan covering substantially all
of SportRack, LLC's domestic employees covered under a collective bargaining
agreement. An employee's monthly pension benefit is determined by multiplying a
defined dollar amount by the years of credited service earned. Plan assets are
comprised principally of marketable equity securities and short-term
investments. The Company's funding policy is to contribute annually the amounts
necessary to comply with ERISA funding requirements.
F-21
<PAGE> 123
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. PENSION PLAN -- (CONTINUED)
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated balance sheet at December 31, 1996 and
1997.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
---- ----
<S> <C> <C>
Actuarial present value of:
Vested benefit............................................. $ 1,417 $ 1,731
Nonvested benefit obligation............................... 220 198
------- -------
Accumulated benefit obligation............................. $ 1,637 $ 1,929
======= =======
Projected benefit obligation............................... $ 1,637 $ 1,929
Plan assets at fair value.................................. (1,308) (1,586)
Unrecognized net gain...................................... 166 122
------- -------
Unfunded pension liability................................. $ 495 $ 465
======= =======
</TABLE>
The components of the Company's domestic pension expense are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1997
---- ----
<S> <C> <C>
Benefits earned during the year............................. $ 76 $ 76
Interest on projected benefit obligation.................... 118 124
Actual return on plan assets................................ (100) (303)
Net amortization, deferral, and other....................... (13) 174
----- -----
Net periodic domestic pension cost.......................... $ 81 $ 71
===== =====
</TABLE>
The weighted average discount rate used in determining the actuarial
present value of the accumulated benefit obligation was 7.75% and 7.00% at
December 31, 1996 and 1997, respectively. The expected long-term rate of return
on plan assets was 9.00% at December 31, 1996 and 1997.
Net periodic pension cost for 1995 was approximately $100, of which $75 was
included in the operations of the Predecessor for the period from January 1,
1995 through September 27, 1995.
The Company has various defined contribution retirement plans for its
domestic and certain foreign subsidiaries, including 401(k) plans, whereby
participants can contribute a portion of their salary up to certain maximums
established by the related plan documents. The Company makes matching
contributions, which are based upon the amounts contributed by employees. The
Company's matching contributions charged to operations aggregated $130 and $229
in 1996 and 1997, respectively.
Substantially all of the employees of Brink International B.V. are covered
by a union-sponsored, collectively-bargained, multi-employer defined benefit
plan. Pension expense was $118 and $660 for the two-month period from November
1, 1996 through December 31, 1996 and for the year ended December 31, 1997,
respectively.
F-22
<PAGE> 124
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. OPERATING LEASES
The Company leases certain equipment under leases expiring on various dates
through 2004. Future minimum annual lease payments required under leases that
have a noncancellable lease term in excess of one year at December 31, 1997 are
as follows:
<TABLE>
<S> <C>
1998........................................................ $1,996
1999........................................................ 1,500
2000........................................................ 1,066
2001........................................................ 770
2002........................................................ 474
2003 and thereafter......................................... 118
------
$5,924
======
</TABLE>
Rental expense charged to operations was approximately $434 for the period
from January 1, 1995 through September 27, 1995 for the Predecessor and $34 for
the period September 28, 1995 through December 31, 1995 and $669 and $2,252 for
the years ended December 31, 1996 and 1997, respectively for the Company.
9. ACCOUNT BALANCES
Account balances included in the consolidated balance sheets are comprised
of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
---- ----
<S> <C> <C>
INVENTORIES
Raw materials.............................................. $ 3,474 $13,744
Work-in-process............................................ 7,715 5,040
Finished goods............................................. 9,463 15,624
------- -------
$20,652 $34,408
======= =======
PROPERTY AND EQUIPMENT
Land, buildings and improvements........................... $18,531 $20,966
Furniture, fixtures and computer hardware.................. 3,417 8,930
Machinery, equipment and tooling........................... 20,565 32,458
Construction-in-progress................................... 1,582 1,985
------- -------
44,095 64,339
Less -- accumulated depreciation........................... (2,267) (8,411)
------- -------
$41,828 $55,928
======= =======
ACCRUED LIABILITIES
Compensation and benefits.................................. $ 5,398 $ 8,900
Interest................................................... 60 3,154
Income taxes............................................... 1,300 646
Other taxes................................................ 417 478
Other...................................................... 4,053 5,637
------- -------
$11,228 $18,815
======= =======
</TABLE>
F-23
<PAGE> 125
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. COMMITMENTS AND CONTINGENCIES
The Company is party to various claims, lawsuits and administrative
proceedings related to matters arising out of the normal course of business.
Management believes that the resolution of these matters will not have a
material adverse effect on the financial position, results of operations or cash
flows of the Company.
11. SEGMENT INFORMATION
The Company operates in one industry segment and all sales are to
unaffiliated customers. Revenues by geographic area, accumulated by the country
where the revenue originated, and long-lived assets, which include net property
and equipment and net goodwill and debt issuance costs, by geographic area are
as follows:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------- -------------------------------------
PERIOD FROM PERIOD FROM
JANUARY 1, SEPTEMBER 28, YEAR ENDED
1995 THROUGH 1995 THROUGH DECEMBER 31,
SEPTEMBER 27, DECEMBER 31, --------------------
1995 1995 1996 1997
------------- ------------- -------- --------
<S> <C> <C> <C> <C>
Revenues
United States................................. $48,698 $16,299 $ 73,895 $122,294
The Netherlands............................... -- -- 2,791 36,268
Other foreign................................. -- -- 4,780 30,116
------- ------- -------- --------
$48,698 $16,299 $ 81,466 $188,678
======= ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
---- ----
<S> <C> <C>
Long-lived assets
United States............................................. $ 45,460 $ 94,931
The Netherlands........................................... 39,712 32,508
Other foreign............................................. 16,090 20,845
-------- --------
$101,262 $148,284
======== ========
</TABLE>
12. SUBSEQUENT EVENT (UNAUDITED)
In January 1998, the Company through Brink International B.V., acquired the
net assets of the towbar segment of Ellebi S.p.A. for an aggregate purchase
price of approximately $22,000, including estimated costs of the transaction.
Ellebi S.p.A. is a manufacturer and distributor of towing systems to the
automotive OEM market and aftermarket. The acquisition will be accounted for
under the purchase method of accounting. The excess of the aggregate purchase
price over the estimated fair market value of the net assets acquired was
approximately $3,250. The acquisition was financed primarily through the
Company's Acquisition revolving note.
In February 1998, the Company through SportRack International, Inc.,
acquired the net assets of Transfo-Rakzs, Inc. for an aggregate purchase price
of approximately $1,100, including estimated costs of the transaction.
Transfo-Rakzs is a designer, manufacturer and distributor of rear hitch rack
carrying systems and related products to Canada and the U.S. The acquisition
will be accounted for under the purchase method of accounting. The excess of the
aggregate purchase price over the estimated fair market value of the net assets
acquired was approximately $900.
F-24
<PAGE> 126
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. CONDENSED CONSOLIDATING INFORMATION
The Notes have been issued by the Company and its wholly-owned subsidiary,
AAS Capital Corporation and are guaranteed, jointly and severally, by all of the
Company's domestic subsidiaries. The following condensed consolidating financial
information for 1997 presents the financial position, results of operations and
cash flows of (i) the Company, as parent, together with its domestic
subsidiaries; and (ii) the foreign subsidiaries, as non-guarantor subsidiaries.
The financial position and operating results of the non-guarantor subsidiaries
do not include any allocation of overhead or similar charges except that certain
foreign subsidiaries are charged interest on their intercompany debt balance.
The Company acquired Brink, a non-guarantor subsidiary, on October 30, 1996.
Consolidated results of operations for 1996 include Brink for the two months
ended December 31, 1996 and reflect Brink's net sales of $7,571 and a net loss
of $1,353. At December 31, 1996, Brink's total assets were $86,285. Other than
Brink, the Company had no non-guarantor subsidiaries during 1996, and had no
non-guarantor subsidiaries as of and for the period ended December 31, 1995.
F-25
<PAGE> 127
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PARENT AND
GUARANTOR NON-GUARANTOR ELIMINATIONS/
SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------------ ------------- ------------- ------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash............................................ $ 2,217 $ 25,131 $ -- $ 27,348
Accounts receivable............................. 31,649 11,874 -- 43,523
Inventories..................................... 14,835 19,573 -- 34,408
Other current assets............................ 4,912 1,557 -- 6,469
-------- -------- -------- --------
Total current assets....................... 53,613 58,135 -- 111,748
-------- -------- -------- --------
Property and equipment, net....................... 28,009 27,919 -- 55,928
Goodwill, net..................................... 62,576 23,313 -- 85,889
Intangible assets, net............................ 6,280 1,315 -- 7,595
Deferred income taxes and other noncurrent
assets.......................................... 384 3,939 -- 4,323
Investment in subsidiaries........................ 9,955 -- (9,955) --
Intercompany notes receivable..................... 25,838 -- (25,838) --
-------- -------- -------- --------
Total Assets............................... $186,655 $114,621 $(35,793) $265,483
======== ======== ======== ========
LIABILITIES AND MEMBER'S EQUITY
Current liabilities
Current maturities of long-term debt............ $ -- $ 3,746 $ -- $ 3,746
Accounts payable................................ 19,053 4,426 -- 23,479
Accrued liabilities and deferred income taxes... 11,382 8,766 -- 20,148
-------- -------- -------- --------
Total current liabilities.................. 30,435 16,938 -- 47,373
-------- -------- -------- --------
Deferred income taxes and other non current
liabilities..................................... 1,318 3,461 -- 4,779
Long-term debt, less current maturities........... 126,436 66,944 -- 193,380
Intercompany debt................................. -- 25,838 (25,838) --
Mandatorily redeemable warrants................... 3,507 -- -- 3,507
Minority interest................................. 251 -- -- 251
Members' equity................................... 24,708 1,440 (9,955) 16,193
-------- -------- -------- --------
Total liabilities and members' equity...... $186,655 $114,621 $(35,793) $265,483
======== ======== ======== ========
</TABLE>
F-26
<PAGE> 128
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PARENT AND
GUARANTOR NON-GUARANTOR ELIMINATIONS/
SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------------ ------------- ------------- ------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales.................................... $122,294 $66,384 $ -- $188,678
Cost of sales................................ 89,647 45,909 -- 135,556
-------- ------- ------- --------
Gross profit............................... 32,647 20,475 -- 53,122
Selling, administrative and product
development expenses....................... 15,406 15,944 -- 31,350
Amortization of intangible assets............ 1,624 712 -- 2,336
-------- ------- ------- --------
Operating income........................... 15,617 3,819 -- 19,436
Interest expense............................. 7,108 5,519 -- 12,627
Foreign currency (gain) loss................. (1,041) 7,138 -- 6,097
-------- ------- ------- --------
Income (loss) before minority interest and
income taxes............................... 9,550 (8,838) -- 712
Provision (benefit) for income taxes......... -- (2,856) -- (2,856)
-------- ------- ------- --------
Income (loss) before minority interest..... 9,550 (5,982) -- 3,568
Minority interest............................ 97 -- -- 97
Extraordinary charge resulting from debt
extinguishment............................. 6,678 738 -- 7,416
-------- ------- ------- --------
Net income (loss)............................ $ 2,775 $(6,720) $ -- $ (3,945)
======== ======= ======= ========
</TABLE>
F-27
<PAGE> 129
ADVANCED ACCESSORY SYSTEMS, LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. CONDENSED CONSOLIDATING INFORMATION -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PARENT AND
GUARANTOR NON-GUARANTOR ELIMINATIONS/
SUBSIDIARIES SUBSIDIARIES ADJUSTMENTS CONSOLIDATED
------------ ------------- ------------- ------------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities................................. $ 8,614 $ (1,632) $ -- $ (6,982)
-------- -------- ------- ---------
Cash flows from investing activities:
Acquisition of machinery and equipment..... (6,005) (1,746) -- (7,751)
Amount due from sellors of Valley
Industries, Inc......................... (1,150) -- -- (1,150)
Acquisition of subsidiaries, net of cash
acquired................................ (56,478) (14,354) -- (70,832)
-------- -------- ------- ---------
Net cash used for investing activities....... (63,633) (16,100) -- (79,733)
-------- -------- ------- ---------
Cash flows from financing activities
Change in intercompany debt................ (23,559) 23,559 -- --
Proceeds from issuance of debt............. 179,529 35,521 -- 215,050
Increase (decrease) in revolving loan...... (2,400) 2,904 -- 504
Repayment of debt.......................... (91,199) (22,049) -- (113,248)
Debt issuance costs........................ (7,280) -- -- (7,280)
Issuance of membership units............... 4,999 -- -- 4,999
Distributions to members................... (2,945) -- -- (2,945)
-------- -------- ------- ---------
Net cash provided by financing activities.... 57,145 39,935 -- 97,080
-------- -------- ------- ---------
Effect of exchange rate changes.............. -- 505 -- 505
Net increase (decrease) in cash.............. 2,126 22,708 -- 24,834
Cash at beginning of period.................. 91 2,423 -- 2,514
-------- -------- ------- ---------
Cash at end of period........................ $ 2,217 $ 25,131 $ -- $ 27,348
======== ======== ======= =========
</TABLE>
F-28
<PAGE> 130
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of Brink B.V.:
We have audited the accompanying consolidated balance sheets of Brink B.V.
as of October 31, 1996 and December 31, 1995, and the related statements of
consolidated income and cash flows for the ten month period ended October 31,
1996 and the year ended December 31, 1995. 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. The financial
statements have been prepared in accordance with accounting principles generally
accepted in The Netherlands.
We conducted our audits in accordance with auditing standards generally
accepted in The Netherlands, which are substantially similar to those followed
in the United States. These 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, 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 consolidated financial position of Brink B.V. at
October 31, 1996 and December 31, 1995, and the consolidated results of their
operations and their cash flows for the ten month period ended October 31, 1996
and the year ended December 31, 1995 in conformity with accounting principles
generally accepted in The Netherlands.
Accounting principles generally accepted in The Netherlands vary in certain
respects from accounting principles generally accepted in the United States. The
application of the latter would have affected the determination of net income
for the ten months ended October 31, 1996 and the year ended December 31, 1995
and the shareholders' equity as of October 31, 1996 and December 31, 1995 to the
extent summarized in Note 1.7 to the consolidated financial statements.
Coopers & Lybrand N.V.
Zwolle, The Netherlands
September 4, 1997
F-29
<PAGE> 131
BRINK B.V.
1.1 CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1995 AND OCTOBER 31, 1996
(AFTER PROFIT APPROPRIATION)
<TABLE>
<CAPTION>
DECEMBER 31, 1995 OCTOBER 31, 1996
--------------------- ---------------------
NLG 1,000 NLG 1,000 NLG 1,000 NLG 1,000
<S> <C> <C> <C> <C>
FIXED ASSETS
Tangible fixed assets............................... 30,099 30,662
Financial fixed assets.............................. 141 --
------ ------
30,240 30,662
CURRENT ASSETS
Stocks.............................................. 29,233 25,087
Accounts receivable................................. 14,532 22,107
Cash on hand and at bank............................ 657 3,517
------ ------
44,422 50,711
------ ------
Total assets...................................... 74,662 81,373
------ ------
GROUP EQUITY........................................ 28,039 33,294
DEFERRED INVESTMENT GRANTS.......................... 1,335 1,334
PROVISIONS.......................................... 3,056 3,395
LONG-TERM LIABILITIES............................... 18,487 20,118
CURRENT LIABILITIES................................. 23,745 23,232
------ ------
74,662 81,373
------ ------
</TABLE>
1.2 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE TEN MONTHS ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
FOR THE TEN MONTHS
FOR THE YEAR ENDED ENDED
DECEMBER 31, 1995 OCTOBER 31, 1996
--------------------- ---------------------
NLG 1,000 NLG 1,000 NLG 1,000 NLG 1,000
<S> <C> <C> <C> <C>
NET TURNOVER........................................ 102,527 98,393
Costs of raw materials and supplies................. 38,031 36,872
Work contracted out and other external costs........ 4,695 5,082
Personnel expenses.................................. 29,346 28,088
Depreciation........................................ 5,321 4,363
Other operating expenses............................ 13,288 14,090
------ ------
TOTAL OF OPERATING EXPENSES......................... 90,681 88,495
------ ------
OPERATING RESULT.................................... 11,846 9,898
Interest income..................................... 44 17
Interest expense.................................... (2,782) (1,788)
------ ------
Financial income and expense........................ (2,738) (1,771)
------ ------
Result from ordinary activities before income tax... 9,108 8,127
Income tax.......................................... 3,292 2,871
------ ------
GROUP RESULT........................................ 5,816 5,256
------ ------
</TABLE>
F-30
<PAGE> 132
BRINK B.V. -- (CONTINUED)
1.3 CONSOLIDATED CASH FLOWS STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1995 AND
THE TEN MONTHS ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
FOR THE TEN MONTHS
FOR THE YEAR ENDED ENDED
DECEMBER 31, 1995 OCTOBER 31, 1996
--------------------- ---------------------
NLG 1,000 NLG 1,000 NLG 1,000 NLG 1,000
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net result.......................................... 5,816 5,256
Depreciation........................................ 5,425 4,394
------ ------
11,241 9,650
Changes in:
Stocks............................................ (4,276) 4,146
Accounts receivable............................... (2,864) (7,575)
Current liabilities............................... 688 2,669
Provisions and other changes...................... 580 337
------ ------
(5,872) (423)
------ ------
Cash flows from operating activities................ 5,369 9,227
CASH FLOWS FROM INVESTING ACTIVITIES
Net additions to tangible fixed assets.............. 2,977 4,957
------ ------
Cash flows from investing activities................ (2,977) (4,957)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in loans..................................... (2,169) 1,631
Change in credit institutions....................... (1,711) (3,182)
Change in financial assets.......................... -- 141
------ ------
Cash flows from financing activities................ (3,880) (1,410)
------ ------
Total cash flows.................................... (1,488) 2,860
Cash on hand and at bank January 1.................. 2,145 657
------ ------
CASH ON HAND AND AT BANK AT END OF PERIOD........... 657 3,517
------ ------
</TABLE>
1.4 GENERAL NOTES
1.4.1 General
Activities
The activities of Brink B.V. and its subsidiaries mainly comprise the
development, manufacture and sale of towbars and accessories.
Group structure
Brink B.V. forms part of the Brink Group. The ultimate parent company of
the group is Brink Holding B.V. As of November 1, 1996 Brink Holding B.V. sold
the shares in Brink B.V. to Advanced Accessory Systems, LLC, (formerly AAS
Holdings, LLC), in the United States of America. Advanced Accessory Systems, LLC
subsequently established Brink International B.V. in The Netherlands. The shares
of Brink B.V. have been transferred from Advanced Accessory Systems, LLC to
Brink International B.V. in December 1996. At that time, Brink B.V. transferred
the shares of its foreign subsidiaries to Brink International B.V.
F-31
<PAGE> 133
BRINK B.V. -- (CONTINUED)
The consolidated financial statements for the year ended December 31, 1995
and for the ten month period ended October 31, 1996 comprise the financial
information of Brink B.V. and the following wholly-owned subsidiaries:
<TABLE>
<S> <C>
- - Brink Trekhaken B.V. Hoogeveen, The Netherlands
- - Nordisk Komponent Holding A/S Naestved, Denmark
- - Brink A/S Naestved, Denmark
- - Brink UK Ltd. Nuneaton, England
- - Brink Sverige AB Vanersborg, Sweden
- - Brink France Sarl Paris, France
- - SCI l'Elmontaise Aiglemont, France
- - Societe de Fabrication
d'Equipements
et d'Accessoires SA (SFEA) Betheny, France
</TABLE>
The information stated in the financial statements of the consolidated
investments are included for 100% in the consolidation.
Outstanding intercompany accounts between group companies, as well as
intercompany supplies and other costs charged between group companies have been
eliminated in the consolidation. Profits on intercompany supplies which have not
yet been delivered to third parties are eliminated in the consolidation.
1.4.2 Accounting principles and determination of result
Comparison with the previous year
The accounting principles and determination of result remained unchanged
compared with the previous year.
General
Assets and liabilities are carried at face value, unless indicated
otherwise. If deemed necessary, a provision is deducted from accounts
receivable.
Foreign currency translation
a. Transactions in foreign currencies
Assets and liabilities denominated in foreign currencies are
translated at the rate of exchange prevailing on the balance sheet
date.
The resulting translation differences are included in the profit and
loss account, except for those on long-term loans, which relate to
the financing of foreign investments.
The exchange differences on these loans are directly added to or
charged against equity.
Transactions in foreign currencies during the reporting period have
been processed in the financial statements at the rate at transaction
date.
b. Investments in group companies
The financial statements denominated in foreign currencies are
translated at the rates prevailing on the balance sheet date.
The exchange difference on the opening balance of investments and the
changes during the year are directly added to or charged against
shareholders' equity.
F-32
<PAGE> 134
BRINK B.V. -- (CONTINUED)
Tangible fixed assets
Valuation occurs at historical cost less depreciation, being a fixed
percentage of cost in accordance with the estimated useful life. The
depreciation period commences at the moment the asset is put into use.
In connection with the acquisition of Brink B.V. by Advanced Accessory
Systems, LLC, the fair value of the tangible fixed assets of Brink B.V. and its
subsidiaries was required to be determined. The fair value of such assets at
November 1997 was approximately NLG 50,000.
Stocks
Stocks consist of raw materials and supplies, work in progress and finished
goods and trade goods.
- Raw materials and supplies are valued at purchase prices.
- Work in progress is valued at the processed raw materials and
supplies, direct labor costs incurred as well as an uplift for
indirect manufacturing costs.
- Installments invoiced to customers are deducted from work in progress.
- Foreseeable losses are provided for and deducted from work in
progress.
- Finished goods and trade goods are valued at manufacturing cost
(direct costs of materials and labor, with an uplift for indirect
costs) and the last known purchase price respectively.
A provision is included for possible obsolescence.
Deferred investment grants
The rights to investment grants are recognized in the year in which they
arise as deferred income. The grants are amortized in the result over the
depreciation period of the assets concerned.
PROVISIONS
Deferred tax liabilities:
This concerns liabilities resulting from the differences in valuation of
assets and liabilities for the financial statements and those for tax purposes.
They are included at nominal value, based on the prevailing tax rate in the
countries concerned.
Deferred tax debits are carried if it can reasonably be assumed that
realization will take place in due course.
Long-term liabilities
Long-term liabilities are debts with a remaining term of more than one
year.
Determination of result
The result represents the difference between the proceeds from goods
supplied or services rendered and the costs and other charges for the year.
Results on transactions are recognized in the year in which they are
realized; losses are taken when foreseeable.
F-33
<PAGE> 135
BRINK B.V. -- (CONTINUED)
Depreciation takes place according to the straight-line method on the basis
of the estimated useful lives.
a. Net turnover
Net turnover represents the amounts charged to third parties for the
goods, supplies and services rendered less discounts and excluding
VAT, as well as the changes in the added value in the stock of work
in progress and of finished goods.
b. Costs of raw materials and supplies
Costs of raw materials and supplies represent the use of raw
materials and supplies in the production by the manufacturing
companies.
c. Work contracted out and other external costs
Costs of work contracted out and other external costs represent the
costs, except for the use of raw materials and supplies, that can
directly be allocated to the manufactured goods and services rendered
in the current financial year.
d. Other operating expenses
Costs are allocated to the reporting year to which they relate.
e. Taxation
Deferred tax assets and liabilities are recognized for the expected
future tax consequences of events that have been included in the
financial statements or tax returns, and are determined annually
based on the difference between financial statement and tax bases
using enacted tax laws and rates in effect for the year in which the
differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized. The provision for
taxes on income is the tax payable for the year plus the change in
deferred tax assets and liabilities during the year.
1.5 NOTES TO THE CONSOLIDATED BALANCE SHEET
1.5.1 Tangible fixed assets
The changes in tangible fixed assets can be summarized as follows (x NLG
1,000):
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
BALANCE JANUARY 1
Cost..................................................... 60,999 62,847
Cumulative depreciation.................................. (28,452) (32,748)
-------- --------
Book value............................................... 32,547 30,099
-------- --------
CHANGE IN BOOK VALUE
Additions................................................ 4,245 5,120
Disposals................................................ (1,100) (550)
Depreciation............................................. (5,425) (4,394)
Exchange rate adjustments................................ (168) 387
-------- --------
(2,448) 563
-------- --------
BALANCE DECEMBER 31, 1995/OCTOBER 31, 1996
Cost..................................................... 62,847 67,804
Cumulative depreciation.................................. (32,748) (37,142)
-------- --------
Book value............................................... 30,099 30,662
-------- --------
</TABLE>
F-34
<PAGE> 136
BRINK B.V. -- (CONTINUED)
Tangible fixed assets can be specified by category as follows:
<TABLE>
<CAPTION>
DECEMBER 31, OCTOBER 31, DEPRECIATION
1995 1996 RATES
------------ ----------- ------------
<S> <C> <C> <C>
Land and buildings.......................... 20,069 19,892 0-10%
Machinery and equipment..................... 9,750 7,564 20-25%
Other....................................... 280 3,206 20-50%
------ ------
30,099 30,662
------ ------
</TABLE>
Tangible fixed assets also include the investment commitments of NLG
237,000 (1995: NLG 203,000).
Tangible fixed assets contain land and buildings, machinery and equipment
with a book value of NLG 1,550,000 (1995: NLG 510,000), financed by means of
financial lease. The lease commitments for the buildings run until 2000, after
which year the buildings will be in the group's ownership.
1.5.2 Stocks
The stocks of raw materials and supplies, work in progress, finished goods
and trade goods within the group can be detailed as follows (x NLG 1,000):
<TABLE>
<CAPTION>
DECEMBER 31, OCTOBER 31,
1995 1996
------------ -----------
<S> <C> <C>
Towbars and accessories................................ 29,156 24,749
Other stock............................................ 77 338
------ ------
29,233 25,087
------ ------
</TABLE>
On account of article 410 sub 2, Book 2 of the Dutch Civil Code, Title 9,
stocks are not broken down.
1.5.3 Accounts receivable
<TABLE>
<CAPTION>
DECEMBER 31, OCTOBER 31,
1995 1996
------------ -----------
NLG 1,000 NLG 1,000
<S> <C> <C>
Trade debtors.......................................... 12,752 18,334
Group companies........................................ 6 --
Taxes and social security premiums..................... 974 274
Other debtors, prepayments and accrued income.......... 800 3,499
------ ------
14,532 22,107
------ ------
</TABLE>
1.5.4 Group equity; shareholders' equity
a. Issued and paid-up capital
The authorized capital amounts to NLG 50,000. The issued and paid-up
capital at October 31, 1996 amounts to NLG 50,000, consisting of 200
shares of NLG 250 nominal each. There were no changes during the ten
month period ended October 30, 1996.
b. Share premium reserve
This concerns the share premium received upon the share issue in
1985. No changes took place during the ten months' period ended
October 31, 1996.
F-35
<PAGE> 137
BRINK B.V. -- (CONTINUED)
c. Legal reserve
A statutory reserve has been formed for income from investments, the
payment of which income cannot be realized without restriction. At
October 31, 1996, this reserve amounted to NLG 0 (1995: NLG 450,000).
d. Other reserves
<TABLE>
<CAPTION>
DECEMBER 31, OCTOBER 31,
1995 1996
------------ -----------
NLG 1,000 NLG 1,000
<S> <C> <C>
Balance as of January 1................................ 21,824 28,039
Profit appropriation................................... 5,816 5,256
Equity movement investment............................. 359 --
Exchange rate adjustments.............................. 40 (1)
------ ------
Balance at end of period............................... 28,039 33,294
------ ------
</TABLE>
1.5.5 Deferred investment grants
<TABLE>
<CAPTION>
DECEMBER 31, OCTOBER 31,
1995 1996
------------ -----------
NLG 1,000 NLG 1,000
<S> <C> <C>
Balance as of January 1................................ 1,082 1,335
Exchange rate adjustments.............................. (18) 30
Received grants to be offset........................... 375 --
Release to the result.................................. (104) (31)
----- -----
Balance at end of period............................... 1,335 1,334
----- -----
</TABLE>
1.5.6 Provisions
<TABLE>
<CAPTION>
DECEMBER 31, OCTOBER 31,
1995 1996
------------ -----------
<S> <C> <C>
Deferred tax liabilities............................... 3,056 3,395
----- -----
</TABLE>
The provisions are mainly of a long-term nature.
1.5.7 Long-term liabilities
<TABLE>
<CAPTION>
DECEMBER 31, OCTOBER 31,
1995 1996
------------ -----------
NLG 1,000 NLG 1,000
<S> <C> <C>
Medium-term credits.................................... 4,710 --
Mortgage loan.......................................... 2,069 --
Roll-over loan......................................... 2,300 --
Private loan credit institution........................ 4,309 --
Loan from parent....................................... 4,400 19,588
Lease commitments...................................... 699 530
------ ------
18,487 20,118
------ ------
</TABLE>
Redemption liabilities due within 12 months after year end have not been
included in the above amounts but are accounted for under current liabilities.
F-36
<PAGE> 138
BRINK B.V. -- (CONTINUED)
Foreign currencies
a. Medium-term credits have been raised in Dutch guilders. The other
long-term liabilities have been raised in the local currencies, being
DKK, GBP and FFR.
b. The medium-term credits were raised with credit institutions; the
interest rate ranges from 8.75% to 9.5%. As collateral for the loans
granted, the real estate in The Netherlands has been mortgaged up to
an amount of NLG 13.5 million.
c. The mortgage loan concerns a loan denominated in DKK at a 7% interest
rate. As collateral for the credit granted, the real estate in
Denmark has been mortgaged up to an amount of DKK 7.5 million (NLG
2.2 million).
d. The roll-over loan concerns a loan originally amounting to GBP 1.5
million. As collateral, a credit guarantee of Brink B.V. has been
given and a negative pledge regarding the assets of Brink UK Ltd. The
interest on the loan is 6.9375%.
e. The private loan of the credit institution concerns a loan for an
amount of FFR 14.5 million. No redemption commitments or securities
have been agreed. The interest rate is 7.25%.
f. This concerns a loan from Advanced Accessory Systems LLC at an
average interest rate of 6.5%. No redemption schedules or securities
have been agreed.
g. Lease commitments: this concerns the capitalized financial lease
agreements, denominated in FFR. The assets concerned have been given
as collateral for the lease commitments.
1.5.8 Current liabilities
<TABLE>
<CAPTION>
DECEMBER 31, OCTOBER 31,
1995 1996
------------ -----------
NLG 1,000 NLG 1,000
<S> <C> <C>
Redemptions on long-term loans......................... 2,230 175
Credit institutions.................................... 4,187 1,005
Creditors.............................................. 8,962 12,271
Group companies........................................ 1,075 --
Income tax............................................. 177 297
Other taxes and social premiums........................ 2,805 2
Other debts, accruals and deferred income.............. 4,309 9,482
------ ------
23,745 23,232
------ ------
</TABLE>
In addition to the securities given for credits received, recognized under
long-term liabilities, a chattel mortgage has been given to credit institutions
by the Swedish subsidiary.
1.5.9 Contingent liabilities
Liability
The company and its Dutch subsidiary are severally liable for each other's
total commitments vis-a-vis the Dutch credit institution.
Lease commitments
The annual amount of lease commitments entered into with third parties
totals approximately NLG 2,400,000.
The operating lease commitments have a term of two to four years.
F-37
<PAGE> 139
BRINK B.V. -- (CONTINUED)
1.6 NOTES TO THE CONSOLIDATED PROFIT AND LOSS ACCOUNT
1.6.1 Net turnover
The turnover can be broken down into geographical area as follows (x NLG
1,000):
<TABLE>
<CAPTION>
TEN MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, OCTOBER 31,
1995 1996
------------ ------------
<S> <C> <C>
The Netherlands....................................... 31,750 22,816
Foreign countries..................................... 70,777 75,577
------- ------
102,527 98,393
------- ------
</TABLE>
1.6.2 Personnel expenses (x NLG 1,000)
<TABLE>
<CAPTION>
TEN MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, OCTOBER 31,
1995 1996
------------ ------------
<S> <C> <C>
Wages and salaries.................................... 24,635 23,838
Social charges........................................ 4,316 3,920
Pension charges....................................... 1,204 1,067
------ ------
30,155 28,825
Charged on by maintenance service..................... (809) (737)
------ ------
29,346 28,088
------ ------
</TABLE>
Pension Plan
Approximately 98% of the Company's employees are covered by a union
sponsored collective bargaining, multiemployer defined benefit pension plan.
1.6.3 Employees
During the year, the group employed on average 563 persons (1995: 551),
spread over geographical areas as follows:
<TABLE>
<CAPTION>
TEN MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, OCTOBER 31,
1995 1996
------------ ------------
<S> <C> <C>
The Netherlands....................................... 293 277
Other European countries.............................. 258 286
--- ---
551 563
--- ---
</TABLE>
F-38
<PAGE> 140
BRINK B.V. -- (CONTINUED)
1.6.4 Depreciation (x NLG 1,000)
<TABLE>
<CAPTION>
TEN MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, OCTOBER 31,
1995 1996
------------ ------------
<S> <C> <C>
Buildings............................................. 726 629
Plant, machinery and equipment........................ 4,498 3,375
Other fixed assets.................................... 201 390
----- -----
5,425 4,394
Release of investment grants.......................... (104) (31)
----- -----
5,321 4,363
----- -----
</TABLE>
1.6.5 Income taxes (x NLG 1,000)
The income tax for the period ended October 31, 1996 consists of the
following:
<TABLE>
<S> <C>
Deferred taxes.............................................. 339
Current taxes............................................... 2,532
-----
2,871
-----
</TABLE>
1.7 SUMMARY OF DIFFERENCES BETWEEN DUTCH AND U.S. GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
Brink's consolidated financial statements have been prepared in accordance
with Dutch GAAP which differs in certain significant respects from U.S. GAAP.
These differences relate principally to the following items, and the effect of
the adjustments to group result and group equity which would be required under
U.S. GAAP are set out in the tables below.
1.7.1 Purchase accounting
Under Dutch GAAP, goodwill arising upon acquisition represents the
difference between the book value of assets acquired and consideration paid, and
is immediately written off against reserves. Under U.S. GAAP, goodwill
represents the difference between fair value of assets acquired and
consideration paid. Resulting goodwill is held as an intangible asset in the
balance sheet and amortized over its estimated useful life, not to exceed 40
years.
Group Result
<TABLE>
<CAPTION>
TEN MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, OCTOBER 31,
1995 1996
------------ ------------
NLG 1,000 NLG 1,000
<S> <C> <C>
Group result reported under Dutch GAAP................ 5,816 5,256
----- -----
U.S. GAAP adjustments
Depreciation........................................ (361) (301)
Amortization of goodwill............................ (262) (218)
----- -----
Pre-tax effect of U.S. GAAP adjustments............... (623) (519)
Tax effect of U.S. GAAP adjustments................... 125 105
----- -----
Net effect of U.S. GAAP adjustments................... (498) (414)
----- -----
Group result under U.S. GAAP.......................... 5,318 4,842
----- -----
</TABLE>
F-39
<PAGE> 141
BRINK B.V. -- (CONTINUED)
Group equity
<TABLE>
<CAPTION>
YEAR TEN MONTHS
ENDED ENDED
DECEMBER 31, OCTOBER 31,
1995 1996
------------ -----------
NLG 1,000 NLG 1,000
<S> <C> <C>
Group equity under Dutch GAAP.......................... 28,039 33,294
------ ------
U.S. GAAP adjustments:
Goodwill............................................. 3,929 3,929
Accumulated amortization............................. (262) (480)
Fixed assets......................................... 2,563 2,563
Accumulated depreciation............................. (805) (1,106)
Deferred tax......................................... (611) (506)
------ ------
Net U.S. GAAP adjustments......................... 4,814 4,400
------ ------
Group equity under U.S. GAAP........................... 32,853 37,694
------ ------
</TABLE>
2 OTHER INFORMATION
2.1 REPORT OF INDEPENDENT ACCOUNTANTS
The report of the independent accountants is enclosed on page F-29 of this
report.
2.2 PROVISIONS IN THE ARTICLES OF ASSOCIATION RE PROFIT APPROPRIATION
Article 19
The profit available for distribution is at the disposal of the general
meeting of shareholders. The general meeting of shareholders can allocate this
profit in full or in part to the (general) reserves or other reserves, for the
payment of bonuses and/or distribution of dividend.
The company is only allowed to make payments to shareholders and other
persons entitled to the profit available for distribution, insofar as the
shareholders' equity exceeds the paid-up and called-in capital increased by the
statutory reserves.
2.3 PROPOSED PROFIT APPROPRIATION
It is proposed to the general meeting of shareholders that the profit for
the period January 1 - October 31, 1996 of NLG 5,256 be added to the other
reserves.
In anticipation of the approval of the general meeting of shareholders,
this proposal has already been processed in the financial statements.
2.4 EVENTS OCCURRED AFTER BALANCE SHEET DATE
In August 1997, the Company executed a nonbinding letter of intent to
acquire a manufacturer of towing systems.
F-40
<PAGE> 142
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
Valley Industries, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations and shareholders' equity and of cash flows present fairly, in all
material respects, the financial position of Valley Industries, Inc. at August
5, 1997 and the results of its operations and its cash flows for the period then
ended in conformity with generally accepted accounting principles. Those
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
As discussed in Note 7, on August 5, 1997, Valley Industries, Inc. sold
certain net operating assets to Advanced Accessory Systems, LLC. The
accompanying financial statements do not give effect to this transaction.
Price Waterhouse LLP
Bloomfield Hills, Michigan
December 5, 1997
F-41
<PAGE> 143
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Valley Industries, Inc.
We have audited the accompanying balance sheets of Valley Industries, Inc.
as of December 31, 1995 and December 28, 1996, and the related statements of
operations, shareholders' equity, and cash flows for each of the two years in
the period ended December 28, 1996. 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, the financial position of Valley Industries, Inc. at
December 31, 1995, and December 28, 1996, and the results of its operations and
its cash flows for each of the two years in the period ended December 28, 1996,
in conformity with generally accepted accounting principles.
Ernst & Young LLP
Sacramento, California
March 10, 1997
F-42
<PAGE> 144
VALLEY INDUSTRIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 28, AUGUST 5,
1995 1996 1997
------------ ------------ ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash..................................................... $ 6 $ 34 $ 2,328
Accounts and notes receivable, less allowance of $216,
$288 and $246, respectively........................... 8,271 13,304 12,673
Receivable from shareholders............................. -- -- 93
Inventories:
Raw materials......................................... 5,904 5,007 5,599
Work in progress...................................... 1,382 2,463 1,965
Finished products..................................... 4,145 4,038 4,823
------- ------- -------
11,431 11,508 12,387
Less LIFO reserve..................................... 853 706 706
------- ------- -------
10,578 10,802 11,681
Prepaid expenses and other current assets................ 753 849 1,151
------- ------- -------
Total current assets................................ 19,608 24,989 27,926
Property, plant and equipment:
Land..................................................... 428 428 428
Buildings and improvements............................... 2,470 2,588 2,596
Machinery and equipment.................................. 8,396 10,245 11,218
Furniture and office equipment........................... 1,777 2,221 2,654
Construction in progress................................. 1,477 701 901
------- ------- -------
14,548 16,183 17,797
Less accumulated depreciation and amortization........... 7,690 8,707 9,300
------- ------- -------
6,858 7,476 8,497
Other assets............................................... 638 621 871
------- ------- -------
$27,104 $33,086 $37,294
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable to bank..................................... $ 6,815 $ 8,709 $13,721
Accounts payable......................................... 8,494 9,996 11,952
Accrued compensation..................................... 447 1,174 959
Other accrued liabilities................................ 701 749 860
Current portion of long-term debt........................ 691 777 692
------- ------- -------
Total current liabilities........................... 17,148 21,405 28,184
Long-term debt............................................. 2,523 1,500 1,480
Note payable to shareholder................................ 5,046 5,046 5,046
Commitments (Note 6)
Shareholders' equity:
Common stock, no par value; 1,000 shares authorized, 555
shares issued and outstanding......................... 443 443 --
Class A voting common stock, no par value; 2,775 shares
authorized, issued and outstanding.................... -- -- 22
Class B non-voting common stock, no par value; 52,725
shares authorized, issued and outstanding............. -- -- 421
Shareholder note receivable................................ (200) (117) --
Retained earnings.......................................... 2,144 4,809 2,141
------- ------- -------
Total shareholders' equity.......................... 2,387 5,135 2,584
------- ------- -------
$27,104 $33,086 $37,294
======= ======= =======
</TABLE>
See accompanying notes to the financial statements.
F-43
<PAGE> 145
VALLEY INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED YEAR ENDED DECEMBER 29,
DECEMBER 31, DECEMBER 28, 1996 TO
1995 1996 AUGUST 5, 1997
------------ ------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales.............................................. $65,277 $85,721 $53,510
Cost of products sold.................................. 54,605 68,876 41,630
Selling and distribution expenses...................... 4,828 5,559 4,560
General and administrative expenses.................... 5,422 6,453 4,686
Product development costs.............................. 479 301 352
------- ------- -------
Operating income (loss)................................ (57) 4,532 2,282
Other income (expense):
Interest expense..................................... (897) (892) (587)
Other, net........................................... (9) (5) (125)
------- ------- -------
Income (loss) before provision (benefit) for income
taxes................................................ (963) 3,635 1,570
Provision (benefit) for income taxes................... (163) 133 (11)
------- ------- -------
Net income (loss)...................................... $ (800) $ 3,502 $ 1,581
======= ======= =======
</TABLE>
See accompanying notes to the financial statements.
F-44
<PAGE> 146
VALLEY INDUSTRIES, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, DECEMBER 28, 1996,
AND THE PERIOD FROM DECEMBER 29, 1996 TO AUGUST 5, 1997
<TABLE>
<CAPTION>
SHAREHOLDER TOTAL
COMMON NOTE RETAINED SHAREHOLDERS'
STOCK RECEIVABLE EARNINGS EQUITY
------ ----------- -------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at December 31, 1994........................ $151 $ -- $ 3,867 $ 4,018
Issuance of common stock for note receivable........ 292 (292) -- --
Dividends........................................... -- -- (923) (923)
Payments received on note receivable................ -- 92 -- 92
Net loss............................................ -- -- (800) (800)
---- ----- ------- -------
Balance at December 31, 1995........................ 443 (200) 2,144 2,387
Dividends........................................... -- -- (837) (837)
Payments received on note receivable................ -- 83 -- 83
Net income.......................................... -- -- 3,502 3,502
---- ----- ------- -------
Balance at December 28, 1996........................ 443 (117) 4,809 5,135
Dividends........................................... -- -- (4,249) (4,249)
Payments received on note receivable................ -- 117 -- 117
Net income.......................................... -- -- 1,581 1,581
---- ----- ------- -------
Balance at August 5, 1997........................... $443 $ -- $ 2,141 $ 2,584
==== ===== ======= =======
</TABLE>
See accompanying notes to the financial statements.
F-45
<PAGE> 147
VALLEY INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED YEAR ENDED DECEMBER 29,
DECEMBER 31, DECEMBER 28, 1996 TO
1995 1996 AUGUST 5, 1997
------------ ------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)...................................... $ (800) $ 3,502 $ 1,581
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................ 929 1,153 775
Deferred income tax expense (benefit)................ (167) 135 (23)
Net changes in operating assets and liabilities:
Accounts, notes and shareholder receivable........ (550) (5,033) 538
Inventories....................................... (386) (224) (879)
Prepaid expenses and other current assets......... (160) (231) (529)
Accounts payable.................................. 1,815 1,502 1,956
Accrued compensation.............................. 59 727 (215)
Other accrued liabilities......................... 53 48 111
------- ------- -------
Net cash provided by operating activities......... 793 1,579 3,315
------- ------- -------
INVESTING ACTIVITIES
Purchases of property, plant and equipment............. (2,262) (1,771) (1,844)
Other, net............................................. 5 17 48
------- ------- -------
Net cash used in investing activities............. (2,257) (1,754) (1,796)
------- ------- -------
FINANCING ACTIVITIES
Net proceeds from notes payable to bank................ 2,616 1,894 5,012
Proceeds of long-term debt............................. -- 2,650 251
Payments of long-term debt............................. (327) (3,587) (356)
Payments received on note receivable from
shareholder.......................................... 92 83 117
Dividends paid......................................... (923) (837) (4,249)
------- ------- -------
Net cash provided by financing activities.............. 1,458 203 775
------- ------- -------
Net increase (decrease) in cash........................ (6) 28 2,294
Cash at beginning of period............................ 12 6 34
------- ------- -------
Cash at end of period.................................. $ 6 $ 34 $ 2,328
======= ======= =======
</TABLE>
See accompanying notes to the financial statements.
F-46
<PAGE> 148
VALLEY INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Valley Industries, Inc. (the "Company") is engaged in the manufacture and
marketing of automotive vehicle products (primarily trailer hitches and towing
products) and sells to original equipment manufacturers and automotive
aftermarket customers principally within the United States.
FISCAL YEAR
The Company operates with a 52/53 week fiscal year ending on the last
Saturday in December. The fiscal years ended December 28, 1996 and December 31,
1995 included 52 and 53 weeks, respectively.
INVENTORIES
Inventories for the Company's Western division are carried at the lower of
cost, as determined by the last-in, first-out (LIFO) method, or market. The
current costs of LIFO inventories exceed their balance sheet carrying amount by
$853, $706 and $706 at December 31, 1995, December 28, 1996, and August 5, 1997,
respectively. In 1996, inventory quantities at the Western division were
reduced. This reduction resulted in a liquidation of LIFO inventory quantities
carried at lower costs prevailing in prior years as compared with current year
costs. The effect of this liquidation was to increase net income by
approximately $80 for the year ended December 28, 1996.
Inventories for the Company's Eastern division are carried at the lower of
cost, as determined by the first-in, first-out (FIFO) method, or market.
RECEIVABLE FROM SHAREHOLDERS
Shareholder receivables represent costs associated with the sale of Valley
Industries, Inc. of $93 which the Shareholders have agreed to pay.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost and depreciated or
amortized on a straight-line basis over the estimated useful lives of the assets
or the capital lease term, whichever is less. The estimated useful lives range
from 5 to 20 years. Amortization of equipment recorded under capital leases is
included in depreciation expense.
INCOME TAXES
The Company has elected S corporation status for federal and state income
tax purposes except for California income tax purposes for which the Company
files its tax return as a C corporation. No provision has been made for federal
income taxes in the accompanying financial statements because the federal income
tax consequences of the Company's operations are the responsibility of the
individual shareholders. The Company provided for income taxes in California and
is subject to the Michigan Single Business Tax (MSBT). MSBT is based primarily
on factors other than income, and accordingly, is classified as general and
administrative expense.
The liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
F-47
<PAGE> 149
VALLEY INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
REVENUE RECOGNITION
Revenues are recognized when the product is shipped to the customer.
ADVERTISING COSTS
The Company accounts for advertising costs as expense in the period in
which incurred. Advertising expense for the years ended December 31, 1995 and
December 28, 1996 was $499 and $622, respectively. Advertising expense for the
period ended August 5, 1997 was $428.
CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS
The Company manufactures and sells automotive vehicle products to companies
in the automotive industry. The Company performs periodic credit evaluations of
its customers and generally does not require collateral. At December 31, 1995,
December 28, 1996, and August 5, 1997, primarily all of the Company's accounts
receivable were from customers in the automotive industry. The Company believes
that adequate provision for uncollectible accounts receivable has been made in
the accompanying financial statements.
Three customers accounted for approximately 21%, 15% and 11% of net sales
for fiscal 1995, and approximately 22%, 16% and 14% of net sales for fiscal
1996. Three customers accounted for approximately 21%, 17% and 17% of net sales
for the period ended August 5, 1997.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. FINANCING ARRANGEMENTS
NOTE PAYABLE TO BANK
The Company has a revolving credit agreement with a bank that expires in
April 1998. Pursuant to an amendment on March 10, 1997, the agreement provides
for borrowings of up to $14,000 based upon specified percentages of eligible
accounts receivable and inventory. Under the agreement, borrowings bear interest
at either the bank's prime rate or a defined Eurodollar-based rate. At August 5,
1997, the outstanding borrowings of $13,721 bear interest at the bank's prime
rate of 8.5%. The Company is subject to certain restrictive covenants under the
revolving credit agreement, including, among other things, the maintenance of
certain financial ratios, and restrictions on repayment of the note payable to
shareholder, payment of dividends (except for tax distributions to the Company's
shareholders), the sale or redemption of the Company's common stock and the
incurrence of additional indebtedness. Substantially all of the Company's assets
are pledged as collateral for borrowings under the revolving credit agreement.
The term note payable to a bank (see "Long-Term Debt" below) is subject to
the restrictive covenants and security arrangements discussed above. As
explained in Note 7, the Company's outstanding debt at August 5, 1997 was repaid
from the proceeds of the sale of certain of the Company's net operating assets.
NOTE PAYABLE TO SHAREHOLDER
The note payable to shareholder is secured by the Company's Lodi facilities
including land and building with a net book value at August 5, 1997 of
approximately $1,365. Payments of principal on the note payable to
F-48
<PAGE> 150
VALLEY INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
2. FINANCING ARRANGEMENTS -- (CONTINUED)
shareholder were not made through August 4, 1997 due to the restrictive
covenants under the Company's current and former revolving credit agreements.
While the agreements with the Company's principal bank permit the payment of
interest on the note payable to shareholder, the Company and the note holder
have agreed to forego the payment or accrual of interest.
LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 28, AUGUST 5,
1995 1996 1997
------------ ------------ ---------
<S> <C> <C> <C>
Term note payable to a bank due in quarterly installments
of principal of $194 through March 1998, and quarterly
installments of principal of $113 from June 1998 to April
2001; with interest at the bank's prime rate (8.5% at
August 5, 1997).......................................... $ -- $2,107 $2,032
Term note payable to a bank (refinanced in 1996)........... 1,800 -- --
Refinancing of previous revolving credit agreement......... 850 -- --
Capitalized lease obligation due in monthly installments of
$6, including principal and interest imputed at 10.6%,
through December 1999.................................... 221 170 140
Other notes payable and capitalized lease obligations...... 343 -- --
------ ------ ------
3,214 2,277 2,172
Less current portion....................................... 691 777 692
------ ------ ------
$2,523 $1,500 $1,480
====== ====== ======
</TABLE>
On March 10, 1997, the Company executed an amendment to the term note
payable to a bank with an outstanding balance of $2,032 at August 5, 1997. In
addition, the Company obtained a new term credit facility which provides for
borrowings of up to $900 to fund a portion of certain planned capital
expenditures. Borrowings under the new term equipment note are due in eight
equal quarterly installments commencing September 1997. No borrowings have been
made under the new term equipment note through August 5, 1997. The term note
payable of $2,032 was repaid from the proceeds of the sale of certain of the
Company's net operating assets as described in Note 7.
Interest paid during 1995 and 1996 was $881 and $889, respectively.
Interest paid during the period ended August 5, 1997 was $628.
3. SHAREHOLDERS' EQUITY
On January 1, 1995, the Company sold 55 shares of common stock to its
President in exchange for a note receivable in the amount of $292. The note
receivable is due in ten annual installments of $29 commencing January 1, 2000,
and bears interest payable annually at a variable rate of interest
(approximately 6% at December 28, 1996). In addition, any cash dividend
distributions on the related common stock are to be applied as a reduction of
the note receivable balance. For 1995, 1996 and 1997, cash dividends of $92, $83
and $117, respectively, were applied against the note receivable balance.
In connection with the issuance of common stock, the Company and the
President have entered into an agreement which provides the Company the right of
first refusal in the event the President attempts to sell or dispose of such
shares. The Company's purchase option allows the Company to acquire the shares
at the lesser of adjusted book value or a bona fide offer from a third party.
Adjusted book value is defined as book value per
F-49
<PAGE> 151
VALLEY INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
3. SHAREHOLDERS' EQUITY -- (CONTINUED)
share adjusted for the per share difference, if any, between the net book value
and fair value of certain of the Company's real estate.
In July 1997, the Company's Board of Directors approved an amendment to the
Company's certificate of incorporation to create two new classes of common
stock. Pursuant to the amendment, each existing share of common stock was
exchanged for five shares of Class A voting common stock and ninety-five shares
of Class B nonvoting common stock.
4. INCOME TAXES
The income tax provision (benefit), which relates solely to California
state taxes, consists of the following components (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED PERIOD
--------------------------- ENDED
DECEMBER 31, DECEMBER 28, AUGUST 5,
1995 1996 1997
------------ ------------ ---------
<S> <C> <C> <C>
Current expense.............................. $ 4 $ (2) $103
Deferred expense (benefit) before benefit of
net operating loss and California
manufacturers' investment tax credit....... (8) 215 (23)
Benefit of net operating loss carryforward... (30) -- --
California manufacturers' investment tax
credit..................................... (129) (80) (91)
----- ---- ----
$(163) $133 $(11)
===== ==== ====
</TABLE>
The components of deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 28, AUGUST 5,
1995 1996 1997
------------ ------------ ---------
<S> <C> <C> <C>
Inventory.................................... $ 53 $ 50 $ 82
Accounts receivable.......................... 20 14 12
California manufacturers' investment tax
credit..................................... 128 23 --
Net operating loss carryforward.............. 30 -- --
Accrued liabilities and other................ 12 21 40
---- ---- ----
$243 $108 $134
==== ==== ====
</TABLE>
Cash paid for income taxes was $92 in 1995. There were no tax payments made
during the year ended December 28, 1996, or the period ended August 5, 1997.
5. PENSION PLANS
DEFINED BENEFIT PENSION PLAN
Effective December 31, 1995, the Company terminated its Defined Benefit
Pension Plan (the "Benefit Plan") and settled the Benefit Plan's obligations
through the purchase of annuity contracts and lump sum payments. The Benefit
Plan was previously amended in August 1993 to freeze benefit accruals and
restrict further participation in the Benefit Plan. The net effect of the
termination of the Benefit Plan in 1995 was not significant, as a settlement
gain of $56 was substantially offset by estimated special benefit distributions
and
F-50
<PAGE> 152
VALLEY INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
5. PENSION PLANS -- (CONTINUED)
expected plan expenses. In addition, the termination of the Benefit Plan did not
have a significant effect on the Company's results of operations for the year
ended December 28, 1996.
Net pension income recognized for 1995, excluding the settlement gain
described above, included the following components:
<TABLE>
<S> <C>
Service cost (benefits earned during the year).............. $ --
Interest cost on projected benefit obligation............... 70
Actual (return) on plan assets.............................. (327)
Net amortization and deferral............................... 242
-----
Net pension (income)........................................ $ (15)
=====
</TABLE>
The expected long-term rate of return used in determining net pension
income was 8.5% for 1995.
DEFINED CONTRIBUTION PLAN
Effective January 1, 1993, substantially all employees became eligible to
participate in a tax deferred investment plan (the "401(k) Plan") established by
the Company. Effective November 1, 1995, the Company's former profit sharing
plan was merged into the 401(k) Plan. The 401(k) Plan permits each participant
to contribute up to 15% of compensation on a pre-tax basis, to a specified
maximum amount per year. The Company, at its discretion, may make matching
contributions. Matching contributions were approximately $31, $32 and $16 for
1995, 1996 and 1997 respectively.
6. LEASE COMMITMENTS
In May 1993, the Company sold the land and building relating to its
principal operating facility in Michigan for $1,450 cash to Valley Industries
Realty, L.P. (the "Partnership"), a related party. Concurrent with the sale, the
Company leased the facilities back from the Partnership through December 31,
2002. The lease requires minimum monthly rentals of approximately $15, with
escalations in certain circumstances. At August 5, 1997, the Company is
obligated to pay minimum lease payments of approximately $84 for the remaining
period of 1997, and approximately $180 in each of the five years ending December
31, 2002. The lease arrangement has been accounted for as an operating lease.
The Company also leases certain machinery, equipment and facilities under
agreements which expire at various dates through 2002. At August 5, 1997, annual
minimum lease and rental payments for all capital leases and noncancellable
operating leases are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1997........................................................ $ 28 $ 274
1998........................................................ 68 634
1999........................................................ 64 527
2000........................................................ -- 473
2001........................................................ -- 401
Thereafter.................................................. -- 290
---- ------
160 $2,599
======
Less amount representing interest........................... (20)
----
Present value of net minimum lease payments................. $140
====
</TABLE>
F-51
<PAGE> 153
VALLEY INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
6. LEASE COMMITMENTS -- (CONTINUED)
During 1995, the Company capitalized equipment of $88, which represents the
present value of the net minimum lease payments on capitalized lease obligations
(none in 1996 or 1997).
Rental expense for 1995 and 1996 was approximately $468 and $453,
respectively. Rental expense for the period ended August 5, 1997 was $295.
7. SUBSEQUENT EVENTS
On August 5, 1997, the net operating assets of the Company were acquired by
Advanced Accessory Systems, LLC. The Company's outstanding debt at August 5,
1997 was repaid from the proceeds of the sale. In conjunction with the sale of
the Company, in July 1997 management and other bonuses aggregating approximately
$900 were paid. The associated expense is included within general and
administrative expenses for the period ended August 5, 1997.
F-52
<PAGE> 154
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Ellebi S.p.A.
In our opinion, the accompanying balance sheets and the related statements
of operations and of cash flows present fairly, in all material respects, the
financial position of the towbar segment of Ellebi S.p.A. (the Company), at
December 31, 1997, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with U.S. generally accepted accounting principles. These financial
statements are the responsibility of the management of the Company; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with U.S.
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
The Company, as disclosed in Note 1 to the accompanying financial
statements, is a division of Ellebi S.p.A. and has extensive transactions and
relationships with Ellebi S.p.A. Because of these relationships, it is possible
that the terms of these transactions are not the same as those that would result
from transactions among wholly unrelated parties.
As discussed in Note 9, on January 2, 1998, Ellebi S.p.A. sold certain net
assets of the Company to Brink International B.V. The accompanying financial
statements do not give effect to this purchase transaction.
AXIS S.r.1.
Reggio Emilia, Italy
March 13, 1998
F-53
<PAGE> 155
TOWBAR SEGMENT OF ELLEBI S.P.A.
BALANCE SHEETS
(AMOUNTS IN MILLIONS OF ITALIAN LIRA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. 1,781 558 10
Trade receivables, less allowance of 147, 248 and 248 at
December 31, 1995, 1996 and 1997, respectively......... 6,471 6,337 7,113
Other receivables, less allowance of 142 at December 31,
1995, 1996 and 1997, respectively...................... 554 482 627
Inventories............................................... 14,308 17,015 15,926
------ ------ ------
Total current assets................................... 23,114 24,392 23,676
Property, plant and equipment, net.......................... 3,221 4,632 4,733
Receivables from associated company......................... -- 71 71
Other receivables........................................... 4 4 113
Intangible assets........................................... 22 103 57
------ ------ ------
TOTAL ASSETS........................................... 26,361 29,202 28,650
====== ====== ======
LIABILITIES AND ELLEBI S.P.A. INVESTMENT
Current liabilities
Trade payables............................................ 8,281 5,913 3,876
Tax payable............................................... 1,336 1,796 2,707
Social Security payable................................... 300 311 345
Other payables............................................ 1,603 1,104 1,237
------ ------ ------
Total current liabilities.............................. 11,520 9,124 8,165
Agents severance fund....................................... 421 462 380
Termination indemnity....................................... 1,551 1,780 1,769
------ ------ ------
TOTAL LIABILITIES...................................... 13,492 11,366 10,314
------ ------ ------
Ellebi S.p.A. investment.................................... 12,869 17,836 18,336
------ ------ ------
TOTAL LIABILITIES AND ELLEBI S.P.A. INVESTMENT......... 26,361 29,202 28,650
====== ====== ======
</TABLE>
See accompanying notes to the financial statements.
F-54
<PAGE> 156
TOWBAR SEGMENT OF ELLEBI S.P.A.
STATEMENTS OF OPERATIONS
(AMOUNTS IN MILLIONS OF ITALIAN LIRA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Net sales................................................... 31,301 32,541 36,378
Cost of sales............................................... 20,521 20,547 21,180
------ ------ ------
Gross profit.............................................. 10,780 11,994 15,198
Selling, general and product development expenses........... 6,517 6,187 6,988
------ ------ ------
Operating income.......................................... 4,263 5,807 8,210
Other income (expense)...................................... 2 (173) (37)
------ ------ ------
Income before provision for income taxes.................. 4,265 5,634 8,173
Taxes on income............................................. 2,270 3,130 4,460
------ ------ ------
Net income................................................ 1,995 2,504 3,713
====== ====== ======
</TABLE>
See accompanying notes to the financial statements.
F-55
<PAGE> 157
TOWBAR SEGMENT OF ELLEBI S.P.A.
STATEMENTS OF CASH FLOWS
(AMOUNTS IN MILLIONS OF ITALIAN LIRA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Net income.................................................. 1,995 2,504 3,713
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization............................. 1,306 1,141 823
Termination indemnity provision........................... 330 322 323
Changes in assets and liabilities
Trade receivables...................................... 74 134 (776)
Other receivables...................................... 146 72 (145)
Inventories............................................ (5,432) (2,707) 1,089
Trade, tax and social security payables................ 1,335 (1,897) (1,092)
Other payables......................................... 282 (499) 133
Agents severance fund.................................. (40) 41 (82)
Other, net............................................. (87) (93) (282)
------ ------ ------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES.... (91) (982) 3,704
------ ------ ------
CASH FLOW FROM INVESTING ACTIVITIES
Intangible asset additions.................................. -- (147) (22)
Property, plant and equipment additions..................... (2,658) (2,486) (909)
Other....................................................... -- (71) (108)
------ ------ ------
NET CASH USED IN INVESTING ACTIVITIES.................. (2,658) (2,704) (1,039)
------ ------ ------
CASH FLOW FROM FINANCING ACTIVITIES
Dividends paid.............................................. (797) (227) --
Increase (decrease) in Ellebi S.p.A. investment............. 707 2,690 (3,213)
------ ------ ------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES....... (90) 2,463 (3,213)
------ ------ ------
Net decrease in cash........................................ (2,839) (1,223) (548)
Cash at beginning of year................................... 4,620 1,781 558
------ ------ ------
Cash at end of year......................................... 1,781 558 10
====== ====== ======
</TABLE>
See accompanying notes to the financial statements.
F-56
<PAGE> 158
TOWBAR SEGMENT OF ELLEBI S.P.A.
STATEMENT OF CHANGES IN ELLEBI S.P.A. INVESTMENT
(AMOUNTS IN MILLIONS OF ITALIAN LIRA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
BEGINNING ELLEBI S.P.A. INVESTMENT.......................... 10,964 12,869 17,836
Net income.................................................. 1,995 2,504 3,713
Intercompany activity....................................... 707 2,690 (3,213)
Dividends paid.............................................. (797) (227) --
------ ------ ------
ENDING ELLEBI S.P.A. INVESTMENT............................. 12,869 17,836 18,336
====== ====== ======
</TABLE>
See accompanying notes to the financial statements.
F-57
<PAGE> 159
TOWBAR SEGMENT OF ELLEBI S.P.A.
NOTES TO FINANCIAL STATEMENTS
(AMOUNTS IN MILLIONS OF ITALIAN LIRA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The towbar segment of Ellebi S.p.A. (the "Company"), is a manufacturer and
distributor of trailers, towbars, accessories and spare parts. The financial
statements have been prepared on a carve-out basis and present the historical
financial position, results of operations and cash flows of the Company
previously included in the financial statements of Ellebi S.p.A. The Company's
financial information included herein is not necessarily indicative of its
financial position, results of operations and cash flows in the future, or of
the results which would have been reported if the Company had operated as an
unaffiliated enterprise.
SIGNIFICANT ESTIMATES
The preparation of combined financial statements on a carve-out basis in
conformity with U.S. 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 revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.
REVENUE RECOGNITION
Revenue from product sales is recognized at the time of shipment to the
customer, which represents the moment when ownership passes.
CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially expose the Company to a
concentration of credit risk, consist primarily of accounts receivable. The
Company does not require collateral from its customers. To minimize this risk,
ongoing credit evaluations of customers' financial condition are performed. At
December 31, 1995, 1996 and 1997, approximately 29%, 41% and 41%, respectively,
of trade accounts receivable were from the Company's ten major customers. For
the same years the major customer (Fiat Auto S.p.A.) represented 19%, 28% and
25%, respectively, of trade accounts receivable.
FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments, comprising cash,
accounts receivable, accounts payable and accrued liabilities, approximate their
fair values.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and on deposit.
RECEIVABLES
Receivables are stated at face value reduced to their estimated realizable
value by the allowance for doubtful accounts.
INVENTORIES
Inventories are carried at the lower of cost, as determined per item by the
last-in-first-out (LIFO) method, or market. Inventories are periodically
reviewed and reserves established for excess and obsolete items.
F-58
<PAGE> 160
TOWBAR SEGMENT OF ELLEBI S.P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful trade receivables is provided for based on
specific identification.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost and depreciated using
estimated useful lives. Depreciation is computed on the straight-line method.
Maintenance and repairs costs are charged to expense as incurred. Plant and
equipment additions and improvements are capitalized. Yearly depreciation rates
are as follows:
<TABLE>
<S> <C>
Plant and machinery......................................... 10%
Equipment and tools (molds)................................. 25%
Cars........................................................ 25%
Furniture................................................... 12%
Computers................................................... 20%
Vans........................................................ 20%
</TABLE>
Management believes that there are no impairments of property, plant and
equipment or other long-lived assets at December 31, 1997.
INTANGIBLE ASSETS
Intangible assets are carried at cost and amortized on the straight-line
method over their estimated useful lives.
RESEARCH, DEVELOPMENT AND ENGINEERING
Research, development and engineering costs are charged to expense as
incurred. These costs for the years ended December 31, 1995, 1996 and 1997 were
1,110, 1,150 and 1,350, respectively.
DEFERRED COMPENSATION
All employees are covered by a plan required under Italian law and labor
contracts which grants a termination indemnity based on compensation and years
of service. The Company accrues the amount due to each employee, based on the
relevant factors at year-end.
TRANSACTIONS IN FOREIGN CURRENCIES
Transactions in foreign currencies are recorded using the exchange rates in
effect at the transaction dates. Exchange gains or losses realized during the
year are included in the statement of income. The effect of translation of
foreign currency receivables and payables using year-end rates are reported as
other payables in the balance sheet.
INCOME TAXES
The Company is included in the income tax return of Ellebi S.p.A. In
preparing its financial statements, the Company has determined its tax provision
on a separate return basis and the resulting liability is settled on an
intercompany basis. There are no temporary differences that give rise to
deferred taxes.
F-59
<PAGE> 161
TOWBAR SEGMENT OF ELLEBI S.P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. INTERCOMPANY TRANSACTIONS AND ALLOCATIONS
The profit and loss accounts are prepared based upon an allocation of costs
between Ellebi S.p.A. and the Company. The allocation of costs has been prepared
taking into account the activities of the Company and of Ellebi S.p.A. and also
under the assumption that the segments were separate and that each segment
should carry its own direct operating costs.
Management believes that the methods utilized to allocate costs to the
Company, as discussed above, are reasonable. However, the terms of transactions
between the Company and Ellebi S.p.A., including allocated costs, may differ
from those that would result from transactions with unrelated parties.
3. NET SALES
Classification of net sales is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Towbars -- aftermarket................................ 13,915 15,610 16,946
Towbars -- OEM........................................ 3,876 4,844 5,939
Trailers.............................................. 10,126 9,381 10,894
Accessories and spare parts........................... 3,769 3,178 3,106
Other................................................. 287 96 233
Bonuses to customer................................... (672) (568) (740)
------ ------ ------
31,301 32,541 36,378
====== ====== ======
</TABLE>
4. TAXES ON INCOME
Current income tax expense for the three years ended December 31, 1997 was
calculated at a rate of 53.2% on taxable income. Current income tax expense
included in the statements of operations are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Income before taxes...................................... 4,265 5,634 8,173
Non deductible costs..................................... -- 252 207
----- ----- -----
4,265 5,886 8,380
----- ----- -----
Tax charge............................................... 2,270 3,130 4,460
===== ===== =====
</TABLE>
5. INVENTORIES
The difference between LIFO and current valuation as of December 31, 1997,
1996 and 1995 is 2,770, 3,670 and 3,690, respectively.
F-60
<PAGE> 162
TOWBAR SEGMENT OF ELLEBI S.P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
6. ACCOUNT BALANCES
Account balances included in the balance sheet are comprised of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS
Banks and postal deposit.................................... 1,761 550 --
Cash on hand................................................ 20 8 10
------- ------- -------
1,781 558 10
======= ======= =======
OTHER RECEIVABLES
Due from personnel.......................................... 4 20 6
Due from sales agents....................................... 329 266 397
Due from freight forwarders................................. 214 167 209
Due from suppliers.......................................... 7 23 10
Other....................................................... 142 148 147
Allowance for doubtful accounts............................. (142) (142) (142)
------- ------- -------
554 482 627
======= ======= =======
INVENTORIES VALUED AT LIFO
Raw materials and supplies.................................. 5,561 4,664 2,846
Work-in-process............................................. 4,052 6,133 6,491
Finished goods and merchandise.............................. 4,965 6,425 6,793
Allowance for obsolescence and slow-moving items............ (270) (207) (204)
------- ------- -------
14,308 17,015 15,926
======= ======= =======
PROPERTY, PLANT AND EQUIPMENT
Plant and machinery......................................... 7,966 9,198 10,050
Molds, jigs and other tools................................. 8,738 9,282 9,476
Other fixed assets.......................................... 2,137 2,180 2,283
Assets under construction and advances...................... 136 44 8
Accumulated depreciation.................................... (15,756) (16,072) (17,084)
------- ------- -------
3,221 4,632 4,733
======= ======= =======
TAXES PAYABLE
Income taxes................................................ 1,107 1,483 2,325
Tax on equity............................................... 63 57 30
V.A.T. tax.................................................. -- 55 150
Withholding tax............................................. 166 201 202
------- ------- -------
1,336 1,796 2,707
======= ======= =======
OTHER PAYABLES
Due to customers............................................ 671 567 740
Due to workers.............................................. 440 478 444
Other....................................................... 492 59 53
------- ------- -------
1,603 1,104 1,237
======= ======= =======
</TABLE>
7. ELLEBI S.P.A. INVESTMENT
The Ellebi S.p.A. investment balance represents the cumulative activity
from transactions between the Company and Ellebi S.p.A.
F-61
<PAGE> 163
TOWBAR SEGMENT OF ELLEBI S.P.A.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. LEASE COMMITMENTS
The Company leases certain buildings under operating lease agreements. Rent
charged from Ellebi S.p.A. to the Company approximates 750 annually.
9. SUBSEQUENT EVENT (UNAUDITED)
On January 2, 1998, Ellebi S.p.A. sold substantially all of the net assets
of the Company to Brink International B.V. for approximately 35,000, subject to
certain post-closing adjustments. The accompanying financial statements do not
give effect to this transaction.
F-62
<PAGE> 164
=========================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION 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. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................... 3
Prospectus Summary...................... 4
Risk Factors............................ 17
The Exchange Offer...................... 23
Use of Proceeds......................... 31
Pro Forma Capitalization................ 32
Unaudited Pro Forma Financial
Information........................... 33
Selected Historical Financial Data...... 41
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 43
Business................................ 48
Management.............................. 58
Security Ownership of Certain Beneficial
Owners and Management................. 62
Limited Liability Company Agreement..... 63
Certain Transactions.................... 64
Description of the Credit Facilities.... 64
Description of the Notes................ 66
Plan of Distribution.................... 97
Legal Matters........................... 98
Experts................................. 98
Index to Financial Statements........... F-1
</TABLE>
=========================================================
=========================================================
$125,000,000
ADVANCED ACCESSORY SYSTEMS, LLC
AAS CAPITAL CORPORATION
9 3/4% SERIES B SENIOR
SUBORDINATED NOTES DUE 2007
------------------------
PROSPECTUS
------------------------
, 1998
=========================================================
<PAGE> 165
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware
provides for the indemnification of officers and directors under certain
circumstances against expenses incurred in successfully defending against a
claim and authorizes Delaware corporations to indemnify their officers and
directors under certain circumstances against expenses and liabilities incurred
in legal proceedings involving such persons because of their being or having
been an officer or director. Pursuant to Section 102(b)(7) of the General
Corporation Law of the State of Delaware, the Certificate of Incorporation of
Capital Corp and AAS Holdings, Inc. provide that the directors of Capital Corp
and AAS Holdings, Inc., individually or collectively, shall not be held
personally liable to Capital Corp or AAS Holdings, Inc. (as the case may be) or
their respective stockholders for monetary damages for breaches of fiduciary
duty as directors, except that any director shall remain liable (1) for any
breach of the director's fiduciary duty of loyalty to Capital Corp or AAS
Holdings, Inc. (as the case may be) or their respective stockholders, (2) for
acts or omissions not in good faith or involving intentional misconduct or a
knowing violation of law, (3) for liability under Section 174 of the General
Corporation Law of the State of Delaware or (4) for any transaction from which
the director derived an improper personal benefit. The by-laws of Capital Corp
and AAS Holdings, Inc. provide for indemnification of their respective officers
and directors to the full extent authorized by law.
Section 18-108 of the Delaware Limited Liability Company Act (the "Act")
provides that, subject to such standards and restrictions, if any, as are set
forth in a limited liability company's operating agreement, a limited liability
company may, and shall have the power to, indemnify and hold harmless any member
or manager or other person from and against any and all claims and demands
whatsoever. The Bylaws of AAS, SportRack, LLC and Valley Industries, LLC provide
that AAS, SportRack, LLC and Valley Industries, LLC shall, to the fullest extent
authorized under the Act, indemnify and hold harmless against all expense,
liability and loss (including attorneys' fees, judgments, fines, excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered, any
manager or officer of AAS, SportRack, LLC or Valley Industries, LLC, as the case
may be, including indemnification for negligence or gross negligence but
excluding indemnification (i) for acts or omissions involving actual fraud or
willful misconduct or (ii) with respect to any transaction from which the
indemnitee derived an improper personal benefit.
I-1
<PAGE> 166
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS.
<TABLE>
<S> <C>
3.1 Amended and Restated Certificate of Formation of AAS
3.2 Second Amended and Restated Operating Agreement of AAS
3.3 Amended Bylaws of AAS
3.4 Certificate of Incorporation of Capital Corp.
3.5 Bylaws of Capital Corp.
4.1 Indenture dated as of October 1, 1997 for the Notes
(including the form of New Note attached as Exhibit B
thereto) among the Issuers, the Guarantors named therein and
First Union National Bank, as Trustee
*5.1 Opinion of O'Sullivan Graev & Karabell, LLP
10.1 Asset Purchase Agreement among MascoTech Automotive Systems
Group, Inc., MascoTech Accessories, Inc. and Advanced
Accessory Systems, LLC dated as of September 28, 1995
10.2 Agreement for the Sale and Purchase of Shares in Brink BV
dated October 30, 1996 among AAS Holdings, Inc., AAS
Holdings, LLC, Brink Holding BV and Brink BV
10.3 Asset Purchase Agreement among Bell Sports Corp., Bell
Sports Canada, Inc. and Advanced Accessory Systems Canada
Inc./Les Systemes d'Accessoire Advanced Canada Inc. dated as
of July 2, 1997
10.4 Stock Purchase Agreement dated July 24, 1997 among Robert
Boulard and Alan Hamer and Advanced Accessory Systems Canada
Inc. / Les Systems d'Accessoire Advanced Canada Inc.
10.5 Asset Purchase Agreement among Valley Industries, LLC,
Valley Industries, Inc., certain affiliates of Valley
Industries, Inc., Robert L. Fisher and Roger T. Morgan dated
as of August 5, 1997
10.6 Preliminary Agreement for the Transfer of a Business dated
December 16, 1997 between Ellebi S.p.A. and Brink Italia
S.r.1. and Brink International B.V.
10.7 Second Amended and Restated Credit Facility among AAS,
SportRack, LLC, Brink International BV, Brink BV and Valley
Industries, LLC, as Borrowers, NBD Bank as Administrative
Agent and Documentation and Collateral Agent and The Chase
Manhattan Bank as Co-Administrative Agent and Syndication
Agent dated August 5, 1997.
10.8 First Amended and Restated Credit Agreement among SportRack
International, Inc. and First Chicago NBD Bank, Canada, The
Chase Manhattan Bank of Canada and The Bank of Nova Scotia
dated as of March 19, 1998.
10.9 Employment Agreement between AAS and Richard Borghi dated
September 28, 1995.
10.10 Employment Agreement between AAS and Marshall Gladchun dated
September 28, 1995.
10.11 Management Consulting Agreement between AAS and Barry
Banducci dated September 28, 1995.
10.12 Management Consulting Agreement between AAS and F. Alan
Smith dated September 28, 1995.
10.13 Employment Agreement between AAS and Terence C. Seikel dated
January 22, 1996.
10.14 Employment Agreement between AAS and Roger T. Morgan dated
August 5, 1997.
10.15 Employment Agreement between Brink B.V. and Gerrit de Graaf
dated November 1, 1996.
10.16 Management Consulting Agreement between AAS and Les
Placements Jean Maynard Inc. dated July 2, 1997.
10.17 Lease dated as of January 24, 1997 between Valley Industries
Realty, L.P. and Valley Industries, Inc.
10.18 Addendum to Sublease dated as of July 2, 1997 between Bell
Sports Canada, Inc. and SportRack International, Inc.
(formerly known as Advanced Accessory Systems Canada
Inc./Les Systems d'Accessoire Advanced Canada Inc.).
</TABLE>
I-2
<PAGE> 167
<TABLE>
<S> <C>
10.19 Lease dated May 25, 1994 between VBG Towbars AB and VBG
Produkter AB.
10.20 Lease Agreement for commercial use between Ellebi S.p.A. and
Brink Italia S.r.l.
10.21 Registration Rights Agreement dated September 25, 1997 by
and among Advanced Accessory Systems, LLC, AAS Capital
Corporation, the Guarantors named therein and Chase
Securities, Inc. and First Chicago Capital Markets, Inc.
12.1 Statement re: computation of ratios
21.1 Subsidiaries of the Registrant
23.1 Consent of O'Sullivan Graev & Karabell, LLP (included in
Exhibit 5.1)
23.2 Consent of Price Waterhouse LLP
23.3 Consent of Price Waterhouse LLP
23.4 Consent of Price Waterhouse LLP
23.5 Consent of Coopers & Lybrand N.V.
23.6 Consent of Ernst & Young LLP
23.7 Consent of AXIS S.r.l.
24.1 Powers of Attorney (included on the signature pages)
25.1 Statement of Eligibility and Qualifications under the Trust
Indenture Act of 1939 of First Union National Bank as
Trustee
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees
99.4 Form of Letter to Clients
</TABLE>
- -------------------------
* To be filed by Amendment.
(B) FINANCIAL STATEMENT SCHEDULES:
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
All other schedules for which provision is made in the applicable
accounting regulations of the 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 have
been omitted.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a) (3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
I-3
<PAGE> 168
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) 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 registrants pursuant to the DGCL, the Act, the
Certificate of Incorporation and Bylaws of Capital Corp., the Certificate of
Formation, Operating Agreement and Bylaws of AAS, or otherwise, the registrants
have 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 registrants of expenses
incurred or paid by a director, officer or controlling person of any 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 registrants 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 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.
(c) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
I-4
<PAGE> 169
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrants
have duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 30th day of March, 1998.
ADVANCED ACCESSORY SYSTEMS, LLC
By: /s/ TERENCE C. SEIKEL
------------------------------------
Name: Terence C. Seikel
Title: Vice President of Finance and
Administration
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS DONALD J. HOFMANN AND TERENCE C. SEIKEL, AND EACH
OF THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN
ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE
AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND
AGENTS AND EACH OF THEM FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND
EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE
PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN
PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND
AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY
DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed as of the 30th day of March,
1998 by the following persons in the capacity indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ MARSHALL D. GLADCHUN President and Manager (principal executive
- ----------------------------------------------------- officer)
Marshall D. Gladchun
/s/ TERENCE C. SEIKEL Vice President of Finance and Administration
- ----------------------------------------------------- and Chief Financial Officer (principal
Terence C. Seikel financial and accounting officer)
/s/ F. ALAN SMITH Chairman of the Board of Managers
- -----------------------------------------------------
F. Alan Smith
/s/ BARRY BANDUCCI Manager
- -----------------------------------------------------
Barry Banducci
/s/ GERARD JACOBUS BRINK Manager
- -----------------------------------------------------
Gerard Jacobus Brink
/s/ DONALD J. HOFMANN Manager
- -----------------------------------------------------
Donald J. Hofmann
/s/ ROGER T. MORGAN Manager
- -----------------------------------------------------
Roger T. Morgan
</TABLE>
<PAGE> 170
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrants
have duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 30th day of March, 1998.
AAS CAPITAL CORPORATION
By: /s/ TERENCE C. SEIKEL
------------------------------------
Name: Terence C. Seikel
Title: Treasurer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS DONALD J. HOFMANN AND TERENCE C. SEIKEL, AND EACH
OF THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN
ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE
AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND
AGENTS AND EACH OF THEM FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND
EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE
PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN
PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND
AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY
DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed as of the 30th day of March,
1998 by the following persons in the capacity indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ DONALD J. HOFMANN President (principal executive officer)
- -----------------------------------------------------
Donald J. Hofmann
/s/ TERENCE C. SEIKEL Treasurer and Director (principal financial
- ----------------------------------------------------- and accounting officer)
Terence C. Seikel
/s/ JOHN J. DAILEADER Director
- -----------------------------------------------------
John J. Daileader
</TABLE>
<PAGE> 171
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrants
have duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 30th day of March, 1998.
AAS HOLDINGS, INC.
By: /s/ TERENCE C. SEIKEL
------------------------------------
Name: Terence C. Seikel
Title: Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS DONALD J. HOFMANN AND TERENCE C. SEIKEL, AND EACH
OF THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN
ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE
AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND
AGENTS AND EACH OF THEM FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND
EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE
PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN
PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND
AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY
DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed as of the 30th day of March,
1998 by the following persons in the capacity indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ MARSHALL D. GLADCHUN President and Director (principal executive
- ----------------------------------------------------- officer)
Marshall D. Gladchun
/s/ TERENCE C. SEIKEL Chief Financial Officer (principal financial
- ----------------------------------------------------- and accounting officer)
Terence C. Seikel
/s/ F. ALAN SMITH Chairman of the Board of Managers
- -----------------------------------------------------
F. Alan Smith
/s/ BARRY BANDUCCI Director
- -----------------------------------------------------
Barry Banducci
/s/ DONALD J. HOFMANN Director
- -----------------------------------------------------
Donald J. Hofmann
</TABLE>
<PAGE> 172
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrants
have duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 30th day of March, 1998.
SPORTRACK, LLC
By: /s/ TERENCE C. SEIKEL
------------------------------------
Name: Terence C. Seikel
Title: Vice President of Finance and
Administration
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS DONALD J. HOFMANN AND TERENCE C. SEIKEL, AND EACH
OF THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN
ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE
AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND
AGENTS AND EACH OF THEM FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND
EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE
PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN
PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND
AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY
DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed as of the 30th day of March,
1998 by the following persons in the capacity indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ MARSHALL D. GLADCHUN President (principal executive officer)
- -----------------------------------------------------
Marshall D. Gladchun
/s/ TERENCE C. SEIKEL Vice President of Finance and Administration
- ----------------------------------------------------- Chief Financial Officer (principal financial
Terence C. Seikel and accounting officer)
/s/ F. ALAN SMITH Chairman of the Board of Managers
- -----------------------------------------------------
F. Alan Smith
/s/ BARRY BANDUCCI Manager
- -----------------------------------------------------
Barry Banducci
/s/ DONALD J. HOFMANN Manager
- -----------------------------------------------------
Donald J. Hofmann
</TABLE>
<PAGE> 173
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrants
have duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 30th day of March, 1998.
VALLEY INDUSTRIES, LLC
By: /s/ TERENCE C. SEIKEL
------------------------------------
Name: Terence C. Seikel
Title: Vice President of Finance and
Administration
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS DONALD J. HOFMANN AND TERENCE C. SEIKEL, AND EACH
OF THEM, HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND AGENTS, WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN
ANY AND ALL CAPACITIES, TO SIGN ANY OR ALL AMENDMENTS (INCLUDING POST-EFFECTIVE
AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME, WITH ALL
EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND
AGENTS AND EACH OF THEM FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND
EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE
PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN
PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND
AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY
DO OR CAUSE TO BE DONE BY VIRTUE HEREOF.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed as of the 30th day of March,
1998 by the following persons in the capacity indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ ROGER T. MORGAN President (principal executive officer)
- -----------------------------------------------------
Roger T. Morgan
/s/ TERENCE C. SEIKEL Vice President of Finance and Administration
- ----------------------------------------------------- and Chief Financial Officer (principal
Terence C. Seikel financial and accounting officer)
/s/ F. ALAN SMITH Chairman of the Board of Managers
- -----------------------------------------------------
F. Alan Smith
/s/ BARRY BANDUCCI Manager
- -----------------------------------------------------
Barry Banducci
/s/ GERARD JACOBUS BRINK Manager
- -----------------------------------------------------
Gerard Jacobus Brink
/s/ MARSHALL GLADCHUN Manager
- -----------------------------------------------------
Marshall Gladchun
/s/ DONALD J. HOFMANN Manager
- -----------------------------------------------------
Donald J. Hofmann
/s/ ROGER T. MORGAN Manager
- -----------------------------------------------------
Roger T. Morgan
</TABLE>
<PAGE> 174
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
3.1 Amended and Restated Certificate of Formation of AAS
3.2 Second Amended and Restated Operating Agreement of AAS
3.3 Amended Bylaws of AAS
3.4 Certificate of Incorporation of Capital Corp.
3.5 Bylaws of Capital Corp.
4.1 Indenture dated as of October 1, 1997 for the Notes
(including the form of New Note attached as Exhibit B
thereto) among the Issuers, the Guarantors named therein and
First Union National Bank, as Trustee
*5.1 Opinion of O'Sullivan Graev & Karabell, LLP
10.1 Asset Purchase Agreement among MascoTech Automotive Systems
Group, Inc., MascoTech Accessories, Inc. and Advanced
Accessory Systems, LLC dated as of September 28, 1995
10.2 Agreement for the Sale and Purchase of Shares in Brink BV
dated October 30, 1996 among AAS Holdings, Inc., AAS
Holdings, LLC, Brink Holding BV and Brink BV
10.3 Asset Purchase Agreement among Bell Sports Corp., Bell
Sports Canada, Inc. and Advanced Accessory Systems Canada
Inc./Les Systemes d'Accessoire Advanced Canada Inc. dated as
of July 2, 1997
10.4 Stock Purchase Agreement dated July 24, 1997 among Robert
Boulard and Alan Hamer and Advanced Accessory Systems Canada
Inc. / Les Systems d'Accessoire Advanced Canada Inc.
10.5 Asset Purchase Agreement among Valley Industries, LLC,
Valley Industries, Inc., certain affiliates of Valley
Industries, Inc., Robert L. Fisher and Roger T. Morgan dated
as of August 5, 1997
10.6 Preliminary Agreement for the Transfer of a Business dated
December 16, 1997 between Ellebi S.p.A. and Brink Italia
S.r.1. and Brink International B.V.
10.7 Second Amended and Restated Credit Facility among AAS,
SportRack, LLC, Brink International BV, Brink BV and Valley
Industries, LLC, as Borrowers, NBD Bank as Administrative
Agent and Documentation and Collateral Agent and The Chase
Manhattan Bank as Co-Administrative Agent and Syndication
Agent dated August 5, 1997.
10.8 First Amended and Restated Credit Agreement among SportRack
International, Inc. and First Chicago NBD Bank, Canada, The
Chase Manhattan Bank of Canada and The Bank of Nova Scotia
dated as of March 19, 1998.
10.9 Employment Agreement between AAS and Richard Borghi dated
September 28, 1995.
10.10 Employment Agreement between AAS and Marshall Gladchun dated
September 28, 1995.
10.11 Management Consulting Agreement between AAS and Barry
Banducci dated September 28, 1995.
10.12 Management Consulting Agreement between AAS and F. Alan
Smith dated September 28, 1995.
10.13 Employment Agreement between AAS and Terence C. Seikel dated
January 22, 1996.
10.14 Employment Agreement between AAS and Roger T. Morgan dated
August 5, 1997.
10.15 Employment Agreement between Brink B.V. and Gerrit de Graaf
dated November 1, 1996.
10.16 Management Consulting Agreement between AAS and Les
Placements Jean Maynard Inc. dated July 2, 1997.
10.17 Lease dated as of January 24, 1997 between Valley Industries
Realty, L.P. and Valley Industries, Inc.
</TABLE>
<PAGE> 175
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.18 Addendum to Sublease dated as of July 2, 1997 between Bell
Sports Canada, Inc. and SportRack International, Inc.
(formerly known as Advanced Accessory Systems Canada Inc./
Les Systems d'Accessoire Advanced Canada Inc.).
10.19 Lease dated May 25, 1994 between VBG Towbars AB and VBG
Produkter AB.
10.20 Lease Agreement for commercial use between Ellebi S.p.A. and
Brink Italia S.r.l.
10.21 Registration Rights Agreement dated September 25, 1997 by
and among Advanced Accessory Systems, LLC, AAS Capital
Corporation, the Guarantors named therein and Chase
Securities, Inc. and First Chicago Capital Markets, Inc.
12.1 Statement re: computation of ratios
21.1 Subsidiaries of the Registrant
23.1 Consent of O'Sullivan Graev & Karabell, LLP (included in
Exhibit 5.1)
23.2 Consent of Price Waterhouse LLP
23.3 Consent of Price Waterhouse LLP
23.4 Consent of Price Waterhouse LLP
23.5 Consent of Coopers & Lybrand N.V.
23.6 Consent of Ernst & Young LLP
23.7 Consent of AXIS S.r.l.
24.1 Powers of Attorney (included on the signature pages)
25.1 Statement of Eligibility and Qualifications under the Trust
Indenture Act of 1939 of First Union National Bank as
Trustee
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees
99.4 Form of Letter to Clients
</TABLE>
- -------------------------
* To be filed by Amendment.
<PAGE> 176
ADVANCED ACCESSORY SYSTEMS, LLC
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996,
AND FOR THE PERIOD FROM SEPTEMBER 28, 1995 THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
ADDITIONS
-------------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING OF COSTS AND OTHER BALANCE AT
YEAR EXPENSES ACCOUNTS(1) WRITE-OFFS END OF YEAR
------------ ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
For the year ended December 31,
1997............................. $ 605,000 $458,000 $ 734,000 $ 98,000 $1,699,000
1996............................. 368,000 54,000 268,000 85,000 605,000
For the period from September 28,
1995 through December 31, 1995... 354,000 14,000 -- -- 368,000
ALLOWANCE FOR INVENTORY OBSOLESCENCE
AND LOWER OF COST OR MARKET RESERVE
For the year ended December 31,
1997............................. $1,579,000 $423,000 $1,303,000 $715,000 $2,590,000
1996............................. 564,000 70,000 1,173,000 228,000 1,579,000
For the period from September 28,
1995 through December 31, 1995... 456,000 108,000 -- -- 564,000
ALLOWANCE FOR REIMBURSABLE TOOLING
For the year ended December 31,
1997............................. $ 368,000 $195,000 $ 493,000 $166,000 $ 890,000
1996............................. 257,000 300,000 -- 189,000 368,000
For the period from September 28,
1995 through December 31, 1995... 257,000 134,000 -- 134,000 257,000
</TABLE>
- -------------------------
(1) Charges to other accounts includes amounts related to acquired companies and
the effects of changing foreign currency exchange rates for the Company's
foreign subsidiaries.
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF FORMATION
OF
AAS HOLDINGS, LLC
The undersigned authorized officer of AAS Holdings, LLC, a Delaware
domestic limited liability company (the "Company") hereby certifies on behalf
of the Company as follows:
1. The name of the Company is "AAS Holdings, LLC." The Company's original
Certificate of Formation was filed with the Secretary of State of the State of
Delaware on August 28, 1995. The Company's amended Certificate of Formation
was filed with the Secretary of State of the State of Delaware on September 13,
1995.
2. The Certificate of Formation of the Company is hereby amended (the
"Amendment") by deleting, in its entirety, Article 1 thereof and inserting in
place thereof a new Article 1 to read as follows:
"Name. The name of the limited liability company is
Advanced Accessory Systems, LLC"
3. The Amendment was duly adopted in accordance with Section 18-202(a) of
the Limited Liability Company Act of the State of Delaware.
IN WITNESS WHEREOF, this Certificate has been duly executed as of this
31st day of August 1997.
By: /s/ Terence Seikel
--------------------------
Name: Terence Seikel
Title: Vice President of
Finance and
Administration
<PAGE> 1
EXHIBIT 3.2
==========================================================================
AAS HOLDINGS, LLC
(a Delaware Limited Liability Company)
-----------------------------------------------
SECOND AMENDED AND RESTATED OPERATING AGREEMENT
-----------------------------------------------
August 5, 1997
==========================================================================
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions; Rules of Construction.................................. 1
2. Name; Formation; Issuance of Units.................................. 4
3. Purpose............................................................. 5
4. Offices............................................................. 5
5. Management of the Company........................................... 5
6. Members............................................................. 7
7. Capital Contributions; Issuance of Units; Capital
Accounts........................................................... 8
8. Distributions...................................................... 10
9. Liability for Return of Capital..................................... 10
10. Administrative Matters............................................. 10
11. Transfers of Units and Interests................................... 10
12. Withdrawal......................................................... 11
13. Additional Members................................................. 11
14. Dissolution........................................................ 11
15. Continuation of the Company........................................ 13
16. Limitation on Liability............................................ 13
17. Amendments......................................................... 13
18. Governing Law...................................................... 13
</TABLE>
<PAGE> 3
OPERATING AGREEMENT dated as of August 5, 1997 of AAS
HOLDINGS, LLC, a Delaware limited liability company (the "Company"), among the
parties listed on SCHEDULE I.
The parties, other than the Valley Investors, Gerard
Jacobus Brink, Koop Brink, Jan Willem Brink, CB Capital
Investors, Inc. and International Mezzanine Capital B.V.,
originally entered into an Operating Agreement dated as of
September 28, 1995 (the "Original Agreement") for the purpose of
forming a limited liability company pursuant to the provisions of
the Delaware Limited Liability Company Act, 6 Del. C. ss. 18-101 et
seq. (the "Delaware Act").
The parties, other than the Valley Investors entered into an
Amended and Restated Operating Agreement dated as of October 30, 1996 (the
"Amended and Restated Agreement") for the purpose of amending and restating the
Original Agreement.
The parties wish to amend and restate the Amended and Restated
Agreement as set forth herein and to add certain parties hereto.
ACCORDINGLY, in consideration of the mutual covenants and
agreements contained in this Agreement, the sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Definitions; Rules of Construction. (a) When
used in this Agreement, the following capitalized terms have the
meanings ascribed to them below:
"Affiliate" means, with respect to any Person,
(i) a director or executive officer of such Person, (ii) a spouse, parent,
sibling or descendant of such Person (or a spouse, parent, sibling or descendant
of any director or executive officer of such Person), and (iii) any other Person
that, directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with such Person. The term "control"
means and includes the possession, directly or indirectly, of the power to
direct the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
"Amendment" has the meaning ascribed to such term
in Section 2(b).
"Board of Managers" means the board of managers
designated pursuant to Section 5.
"Bylaws" means the Bylaws of the Company as
amended from time to time, which are expressly incorporated by reference into
this Agreement and the initial form of which is
-1-
<PAGE> 4
attached hereto as EXHIBIT A and are hereby adopted and approved by the Members.
"Capital Contribution" means, with respect to any
Member, the amount of capital contributed by such Member to the Company, as
determined in accordance with Section 7.
"CB" means CB Capital Investors, Inc.
"CB Warrant" means the warrant issued on October
30, 1996, to CB to purchase up to 501 Class A Units (as modified in accordance
with the terms thereof).
"Certificate" has the meaning ascribed to such
term in Section 2(b).
"Class A Member" means a Member who owns Class A
Units.
"Class A Unit" means one Class A Unit of the
Company entitling the holder thereof to the rights provided by this Agreement.
"Class B Unit" means one Class B Unit of the
Company entitling the holder thereof to the rights designated by the Board of
Managers as provided by an amendment to this Agreement approved by the Board of
Managers.
"Delaware Act" has the meaning ascribed to such
term in the first paragraph.
"Event of Withdrawal of a Member" means the death,
insanity, retirement, resignation, expulsion, bankruptcy or dissolution of a
Member or the occurrence of any other event that terminates the continued
membership of a Member in the Company.
"IMC" means International Mezzanine Capital B.V.
"IMC Warrant" means the warrant issued on October
30, 1996, to IMC to purchase up to 501 Class A Units (as modified in accordance
with the terms thereof).
"Interest" means the ownership interest of a
Member in the Company, consisting of (i) such Member's ownership of Units and
right to receive a portion of distributions, (ii) such Member's right to vote or
grant or withhold consents with respect to Company matters as provided herein or
in the Delaware Act and (iii) such Member's other rights and privileges as
herein provided.
-2-
<PAGE> 5
"Internal Revenue Code" shall mean the Internal
Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
"Majority in Interest of Chase Members" shall have
the meaning set forth in the Members' Agreement.
"Managing Member" means a Member who is a Manager.
"Manager" means a member of the Board of Managers
as designated in, or selected pursuant to, Section 5.
"Majority in Interest of Class A Members" means,
at any time, the Class A Members who hold in the aggregate greater than 50% of
the number of Units outstanding at such time.
"Majority in Interest of Managing Members" means,
at any time, the Managing Members who hold in the aggregate greater than 50% of
the profits and capital interest of the Company held by all Managing Members.
"Majority in Interest of Members" means, at any
time, the Members who hold in the aggregate greater than 50% of the profits and
capital interest of the Company.
"Members" shall mean any Person holding a Unit or
who shall be admitted as additional or substituted Members pursuant to this
Agreement, so long as they remain Members.
"Members' Agreement" means the Second Amended and
Restated Members' Agreement dated as of the date hereof, among the Company and
certain holders of Units.
"Net Profits and Net Losses" means the net taxable
income or net taxable loss of the Company, respectively, as determined for
federal income tax purposes, for each fiscal year of the Company, plus any
income that is exempt from federal income tax and minus expenditures that are
not deductible in computing federal taxable income and not properly chargeable
to capital accounts, in each case to the extent such items are not otherwise
taken into account in computing Net Profits or Net Losses.
"Person" shall be construed broadly and shall
include an individual, a partnership, a corporation, an association, a joint
stock company, a limited liability company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.
"Securities Act" means the Securities Act of 1933,
as amended, or any similar federal law then in force.
-3-
<PAGE> 6
"Sub Debt Warrants" shall mean the CB Warrant and
the IMC Warrant.
"Sub Debt Units" shall mean the Units issued upon
exercise of the Sub Debt Warrants.
"Subsidiary" means with respect to any Person, any
corporation of which the shares of stock having a majority of the general voting
power in electing the board of directors of such corporation are, at the time as
of which any determination is being made, owned by such Person either directly
or indirectly through Subsidiaries.
"Systems" means Advanced Accessory Systems, LLC, a
Delaware limited liability company and a Subsidiary of the Company.
"Transfer" shall have the meaning set forth in
Section 11.
"Units" means collectively or individually, the
Class A Units and the Class B Units.
"Valley Investors" has the meaning ascribed to
such term in Section 7(a) hereof.
"Warrant Agreement" shall have the meaning set
forth in the Members' Agreement.
(b) The title of and the section and paragraph headings in
this Agreement are for convenience of reference only and shall not govern the
interpretation of any of the terms or provisions of this Agreement.
(c) The use herein of the masculine, feminine or neuter forms
shall also denote the other forms, as in each case the context may require.
2. Name; Formation; Issuance of Units. (a) The name of the
Company shall be "AAS Holdings, LLC," or such other name as the Board of
Managers may from time to time hereafter designate.
(b) The Company was formed upon the execution and filing by
Paul Mitrokostas (such Person being hereby authorized to take such action) with
the Secretary of State of the State of Delaware of a certificate of formation of
the Company (the "Certificate") in the form attached hereto as EXHIBIT B on
August 28, 1995, as amended by a certificate of amendment of the Company (the
"Amendment") in the form attached hereto as EXHIBIT C on September 13, 1995.
-4-
<PAGE> 7
(c) The Company shall be authorized to issue from time to time
up to 25,000 Class A Units and up to an additional 2,000 Class B Units, which
Units may be issued pursuant to such agreements as the Board or a committee
thereof shall approve, including pursuant to options on warrants. The Class B
Units shall entitle the holders thereof to such rights as shall be designated by
the Board of Managers upon the original issuance of any Class B Unit; provided,
however, that the rights of the holders of the Class B Units shall not be senior
in right (i) as to allocations of Net Profits or (ii) as to distributions, nor
shall the rights of the holders of the Class B Units adversely affect the rights
of the holders of Class A Units without the consent of a Majority in Interest of
Class A Members. The Board of Managers shall have the right and authority to
amend this Agreement to reflect the admission of holders of Class B Units and to
reflect the rights of such holders hereunder.
(d) The parties hereto ratify and confirm the filing of the
Certificate and the Amendment.
3. Purpose. (a) The purpose of the Company shall be to engage
in any lawful business that may be engaged in by a limited liability company
organized under the Delaware Act, as such business activities may be determined
by the Board of Managers from time to time.
4. Offices. (a) The principal office of the Company, and such
additional offices as the Board of Managers may determine to establish, shall be
located at such place or places inside or outside the State of Delaware as the
Board of Managers may designate from time to time.
(b) The registered office of the Company in the State of
Delaware is located at 32 Loockerman Square, Suite L-100, Dover, Delaware 19904.
The registered agent of the Company for service of process at such address is
The Prentice-Hall Corporation System, Inc.
5. Management of the Company. (a) Subject to the delegation of
rights and powers provided for herein and in the Bylaws, the Board of Managers
shall have the sole right to manage the business of the Company and shall have
all powers and rights necessary, appropriate or advisable to effectuate and
carry out the purposes and business of the Company. The Board of Managers shall
consist of up to eleven (11) members as designated from time to time in
accordance with the Members' Agreement. Subject to the provisions of the
Members' Agreement, the Board of Managers shall be selected by a Majority in
Interest of Class A Members. CB shall at all times be a member of the Board of
Managers for so long as CB shall own any Units. A Majority in Interest of the
Chase Members may act through its duly authorized representative as a member of
the Board of Managers. Any or all
-5-
<PAGE> 8
Managers may be removed as Managers without cause by the vote of a Majority in
Interest of Class A Members, provided, however, that no Manager may be removed
without the consent of Members who are entitled to designate such person as a
Manager pursuant to the Members' Agreement.
(b) No Member, by reason of such Member's status as such,
shall have any authority to act for or bind the Company but shall have only the
right to vote on or approve the actions herein specified to be voted on or
approved by such Member.
(c) The officers of the Company shall be, and shall be
elected, removed and perform such functions, as are provided in the Bylaws. The
Board of Managers may appoint, employ, or otherwise contract with such other
Persons for the transaction of the business of the Company or the performance of
services for or on behalf of the Company as it shall determine in its sole
discretion. The Board of Managers may delegate to any officer of the Company or
to any such other Person such authority to act on behalf of the Company as the
Board of Managers may from time to time deem appropriate in its sole discretion.
(d) Except as otherwise provided by the Board of Managers or
in the Bylaws, when the taking of such action has been authorized by the Board
of Managers, any Manager or officer of the Company or any other Person
specifically authorized by the Board of Managers may execute any contract or
other agreement or document on behalf of the Company and may execute and file on
behalf of the Company with the Secretary of State of the State of Delaware any
certificates of amendment to the Company's certificate of formation, one or more
restated certificates of formation and certificates of merger or consolidation
and, upon the dissolution and completion of winding up of the Company, at any
time when there are fewer than two Members, or as otherwise provided in the
Delaware Act, a certificate of cancellation canceling the Company's certificate
of formation.
(e) If a vacancy on the Board of Managers is not filled within
60 days after such vacancy occurs by a Majority in Interest of Class A Members,
such vacancy may thereafter be filled by a majority of the Managers then in
office, or, if there be none, by a vote of a Majority in Interest of the
Members. Managers shall serve until they resign, die, become incapacitated or
are removed. Any Manager, except CB, can be removed with or without cause by the
vote of a Majority in Interest of Class A Members. Determinations to be made by
the Managers in connection with the conduct of the business of the Company shall
be made in the manner provided in the Bylaws, unless otherwise specifically
provided herein. Notwithstanding the foregoing provisions of this paragraph (e),
any member of the Board of Managers may be removed by the party entitled to
elect such member under the Members' Agreement, and the vacancy created by any
former member
-6-
<PAGE> 9
of the Board of Managers may be filled by the party entitled to elect such
former member under the Members' Agreement.
6. Members; Representations of Members; Representations of
Company. (a) The name and business, mailing or residence address of the Members
of the Company are set forth on SCHEDULE I. Schedule I shall be amended from
time to time to reflect the names and business, mailing or residence address of
each of Persons who shall become Members after the date hereof.
(b) Upon the acquisition of a Unit, each Member makes the
following representations and warranties to the Company with respect to such
Unit:
(i) Such Member has such knowledge and expertise in financial
and business matters that he or it is capable of utilizing the
information made available to the undersigned, to evaluate the merits
and risks of an investment in the Company and to make an informed
investment decision with respect thereto. The undersigned is aware that
his or its purchase of a Unit is highly speculative and he or it is
able, without impairing his or its financial condition, to hold the
Interest for an indefinite period of time and to suffer a complete loss
of its or his or its investment.
(ii) Such Member understands and acknowledges that the
offering of the Units has not been considered or approved by any
governmental or other entity.
(iii) Such Member recognizes that an investment in the Company
involves certain risks, and has taken full cognizance of, and
understands all of, the risk factors related to the purchase of the
Units. Such Member has consulted with his or its professional, tax and
legal advisors with respect to the Federal, state, local and foreign
income tax consequences of the undersigned's participation as a Member
of the Company.
(iv) The execution and delivery of this Agreement by such
Member and has been duly authorized.
(v) Such Member understands that there is no public market for
the Units and that the transferability of the Units is restricted.
(vi) The Units are being purchased by such Member for his or
its own account only for investment and is not being purchased with a
view towards its resale or further distribution. Such Member
understands that the Units are not registered for sale under the
Securities Act or otherwise and that the Units cannot be offered for
sale or sold by such Member or by anyone acting for the
-7-
<PAGE> 10
undersigned's account or on the undersigned's behalf without the
registration of the Units and/or the fulfillment of other regulatory
requirements.
7. Capital Contributions; Issuance of Units; Capital Accounts.
(a) The Members have contributed to the Company on or prior to October 30, 1996
$1,000 per Class A Unit by payment of cash in such amount or by the delivery of
a promissory note. Gerard Jacobus Brink, Koop Brink and Jan Willem Brink have
contributed an aggregate of $4,286,478 in exchange for the 1,230 Class A Units
acquired by them on October 30, 1996 (or $3,484.941 per Unit). Pursuant to the
adjustment requirements of Section 704 of the Internal Revenue Code, each of the
capital accounts of the Members in effect immediately prior to the acquisition
of the foregoing 1,230 Units was revalued and increased to an amount equal to
$3,484.941 per Unit owned by such Member. Pursuant to Subscription Agreements,
each between the Company and Roger T. Morgan and Robert L. Fisher (together, the
"Valley Investors") dated as of the date hereof, the Valley Investors have
purchased certain Class A Units and contributed an aggregate of $4,499,298.01 in
exchange for the 802 Class A Units being acquired by them on the date hereof (or
$5,610.09 per Class A Unit). Pursuant to the adjustment requirements of Section
704 of the Internal Revenue Code, each of the capital accounts of the Members in
effect immediately prior to the acquisition of the foregoing 802 Class A Units
shall be revalued and increased to an amount equal to $5,610.09 per Unit owned
by such Member.
(b) A separate capital account shall be maintained on the
books of the Company for each Member, which shall be adjusted (1) as of December
31 of each year, (2) immediately prior to the acquisition of any Unit by any
Person, (3) effective as of the date of sale of the Company (whether by way of
asset sale, stock sale or merger in which the Members immediately prior to such
stock sale or merger shall cease to own a majority of all Units owned by all
Members) and (4) the date of dissolution of the Company as follows:
(i) the amount of money and the fair market value of property
(net of any liabilities secured by such property that the Company
assumes or takes subject to) contributed by such Member to the Company
shall be credited to such Member's capital account;
(ii) the amount of any distributions (including the fair
market value (as determined by the Board of Managers in good faith) of
property other than cash (net of any liabilities that such Member
assumes or takes subject to) distributed to such Member shall be
debited from such Member's capital account; and
-8-
<PAGE> 11
(iii) Net Profits incurred by the Company since the last date
on which Net Profits or Net Losses shall have been allocated to the
Members shall be credited to such Member's capital account and Net
Losses incurred by the Company since the last date on which Net Losses
or Net Profits shall have been allocated to the Members shall be
debited to such Member's capital account, which allocations shall be
made ratably among the holders of Class A Units according to their
respective holdings of such Class A Units.
(c) Notwithstanding any provision of this Agreement to the
contrary, upon the date of each exercise of each warrant or option issued by the
Company, each Member's (including the optionholder's or warrantholder's) capital
account shall be reallocated (a "Capital Shift") such that after such Capital
Shift the ratio of each Member's (including the optionholder's or
warrantholder's) capital account to the aggregate of all Members' capital
account balances shall be the same as the ratio of the number of Units owned by
each such Member (including the optionholder or warrantholder) to the aggregate
number of all Units outstanding.
(d) Notwithstanding any provision of this Agreement to the
contrary, each Member's capital account shall be maintained and adjusted in
accordance with the Code, including (i) the adjustments permitted or required by
Code Section 704(b) and, to the extent applicable, the principles expressed in
Internal Revenue Code Section 704(c) and the regulations promulgated thereunder
and (ii) adjustments required to maintain capital accounts in accordance with
the "substantial economic effect test" set forth in the regulations promulgated
under Internal Revenue Code Section 704(b).
(e) Any Member, including any substitute Member, who shall
receive any Units by means of a transfer to him of Units of another Member shall
have a capital account that reflects the capital account associated with the
transferred Units.
(f) Anything contained in this Agreement to the contrary
notwithstanding, (i) the aggregate interest of the Managing Members in each
material item of Company income, gain, loss, deduction or credit shall be equal
to at least 1% of each such item at all times during the existence of the
Company, unless otherwise required by the Code, and (ii) the aggregate balance
in the capital accounts of the Managing Members shall be equal to at least 1% of
the aggregate positive balances in the capital accounts of all the Members at
all times.
8. Distributions. (a) Within 90 days following the end of each
fiscal year, the Company will distribute to each Member an amount (if any) equal
to 44% of the excess of Net Profits over Net Losses previously allocated to such
Member's
-9-
<PAGE> 12
capital account for such fiscal year and all prior fiscal years pursuant to
Section 7, less any distributions made during such fiscal year pursuant to
Section 8(b).
(b) All distributions not made pursuant to Section 8(a) of
other assets of the Company, whether in cash or in kind, shall be made at such
times and in such amounts as the Board of Managers may determine, and shall be
allocated among and made to the Members ratably in accordance with their
respective holdings of Class A Units at the date of distribution.
9. Liability for Return of Capital. No Member or Manager shall
have any liability for the return of any Member's Capital Contribution, which
Capital Contribution shall be payable solely from the assets of the Company at
the absolute discretion of the Board of Managers, subject to the requirements of
the Delaware Act.
10. Administrative Matters. (a) The Company hereby designates
CB as the "Tax Matters Partner" for purposes of Code Section 6231 and the
regulations promulgated thereunder. The Tax Matters Partner shall promptly
advise each Member of any audit proceedings proposed to be conducted with
respect to the Company.
(b) It is the intention of the Members that the Company shall
be taxed as a "partnership" for federal, state, local and foreign income tax
purposes. The Members shall take all reasonable actions, including the amendment
of this Agreement and the execution of other documents, as may reasonably be
required in order for the Company to qualify for and receive "partnership"
treatment for federal, state, local and foreign income tax purposes.
(c) The fiscal year of the Company shall be the calendar year.
The books and records of the Company shall be maintained in accordance with
generally accepted accounting principles and Code Section 704(b) and the
regulations promulgated thereunder.
11. Transfers of Units and Interests. No Member may sell,
assign, pledge or otherwise transfer or encumber (collectively, "Transfer") all
or any part of its Units or other part of its Interest, and no transferees of
all or any part of the Units of a Member shall be admitted as a substituted
Member, without, in either event, having obtained the prior written consent of a
Majority in Interest of the Managing Members (excluding Managing Members that
are transferring Units), which consent may be withheld in their sole discretion,
and without complying with the applicable provisions of the Members' Agreement
applicable to such Interest to which such Member is a party (each, a "Members'
Agreement"), among the Company and the Members. Any Transfer or attempted
Transfer of any Interest in
-10-
<PAGE> 13
the Company in violation of any the provisions of this Section 11 shall be void,
and the Company shall not record such Transfer on its books or treat any
purported transferee of such Units as the owner of such Units for any purpose.
The Board of Managers shall amend SCHEDULE I hereto from time to time to reflect
Transfers made in accordance with, and as permitted under, this Section 11 and
the applicable Members' Agreement. Notwithstanding the foregoing, (a) the
transfer of the Sub Debt Warrants and the Sub Debt Units shall not be subject to
the restrictions set forth in this Section 11 but shall be subject to the
transfer restrictions set forth in the Warrant Agreement and (b) the transfer of
the Units acquired by Gerard Jacobus Brink, Koop Brink and Jan Willem Brink on
October 30, 1996 and Robert L. Fisher and Roger T. Morgan on the date hereof
shall not be subject to the restrictions set forth in this Section 11 but shall
be subject to the transfer restrictions set forth in the Members' Agreement.
12. Withdrawal. No Member shall have the right to withdraw
from the Company except with the consent of the Board of Managers and upon such
terms and conditions as may be specifically agreed upon between the Company and
the withdrawing Member. The provisions hereof with respect to distributions upon
withdrawal are exclusive, and no Member shall be entitled to claim any further
or different distribution upon withdrawal under Section 18-604 of the Delaware
Act or otherwise.
13. Additional Members. The Board of Managers shall have the
right to cause the Company to issue additional Units and to admit additional
Members upon the acquisition of such Units upon such terms and conditions, at
such time or times, and for such Capital Contributions as shall be determined by
the Board of Managers. In connection with the admission of an additional Member,
the Board of Managers shall amend SCHEDULE I hereof to reflect the name and
address of the additional Member. Prior to the admission of any Person as a
Member, such Person shall execute a counterpart to this Agreement and shall
agree to be bound by the terms hereof. Any person who shall exercise the Sub
Debt Warrants or options to purchase Units shall automatically be admitted as a
Member upon such person's execution and delivery of a counterpart to this
Agreement.
14. Dissolution. (a) Subject to the provisions of Section 15,
the Company shall be dissolved and its affairs wound up and terminated upon the
first to occur of the following:
(i) December 31, 2025;
(ii) the determination of the Board of Managers and a
Majority in Interest of Class A Members to dissolve the Company; or
-11-
<PAGE> 14
(iii) the occurrence of an Event of Withdrawal of a
Managing Member or any other event causing a dissolution of the Company
under Section 18-801 of the Delaware Act.
(b) Upon dissolution of the Company, the Company's affairs
shall be promptly wound up in accordance with the provisions of this Section 14.
The Company shall engage in no further business except as may be necessary, in
the reasonable discretion of the Board of Managers, to preserve the value of the
Company's assets during the period of dissolution and liquidation.
(c) Distributions to the Members in liquidation may be made in
cash or in kind, or partly in cash and partly in kind, as determined by the
Board of Managers. With respect to distributions in kind, the capital account of
each Member receiving such distribution shall be adjusted as if such distributed
property had been sold at fair market value and the gain or loss on such sale
had been allocated to such Member.
(d) The Net Profits and Net Losses of the Company during the
period of dissolution and liquidation shall be allocated among the Members in
accordance with the provisions of Section 7.
(e) The assets of the Company (including, without limitation,
proceeds from the sale or other disposition of any assets during the period of
dissolution and liquidation) shall be applied as follows:
(i) First, to repay any indebtedness of the
Company, whether to third parties or the Members, in the order of
priority required by law;
(ii) Next, to any reserves which the Board of
Managers reasonably deems necessary for contingent or unforeseen liabilities or
obligations of the Company (which reserves when they become unnecessary shall be
distributed in accordance with the provisions of (iii), below); and
(iii) Next, to the Members in proportion to
their respective positive capital account balances (after taking into account
all adjustments to the Members' capital accounts required under Section 14(d)).
15. Continuation of the Company. Notwithstanding the
-12-
<PAGE> 15
provisions of Section 14, the occurrence of an Event of Withdrawal of a Member
shall not dissolve the Company if within 90 days after the occurrence of such
Event of Withdrawal of a Member the business of the Company is continued by a
Majority in Interest of Members remaining after such Event of Withdrawal.
16. Limitation on Liability. The debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liabilities of the Company, and no
Member or Manager of the Company shall be obligated personally for any such
debt, obligation or liability of the Company solely by reason of being a Member
or Manager.
17. Amendments. Subject to the right of the Board of Managers
to amend this Agreement in accordance with the provisions of Section 2(c) to set
forth the terms of Class B Units, this Agreement may be amended only upon the
written consent of the Board of Managers and a Majority in Interest of Class A
Members.
18. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Delaware without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the state of Delaware.
-13-
<PAGE> 16
IN WITNESS WHEREOF, the undersigned have duly executed this
Operating Agreement as of the date first written above.
AAS HOLDINGS, LLC
By: Terence C. Seikel
--------------------------------
Name: Terence C. Seikel
Title: Vice-President
CB CAPITAL INVESTORS, INC.
By: Donald J. Hofmann
------------------------------------------
Name: Donald J. Hofmann
Title:
The F. Alan Smith Family Limited Partnership
----------------------------------------------
The F. Alan Smith Family Limited Partnership
F. Alan Smith, General Partner
IPA MTECH INVESTORS, LLC
By: [SIG]
------------------------------------------
Name: [SIG]
Title: Partner
MASCOTECH, INC.
By:
----------------------------------------
Name:
Title:
THE BANDUCCI FAMILY, LLC
By: Barry Banducci
----------------------------------------
Name: Barry Banducci
Title: Manager
Marshall Gladchun
----------------------------------------
Marshall Gladchun
-14-
<PAGE> 17
Richard Borghi 5/3/97
-----------------------------------
Richard Borghi
Gerard Jacobus Brink
-----------------------------------
Gerard Jacobus Brink
K. Brink
-----------------------------------
Koop Brink
J.W. Brink
-----------------------------------
Jan Willem Brink
LAVERNE A. FARRIS TRUST
By: LaVerne A. Farris
--------------------------------
Name: LaVerne A. Farris
Title: Trustee
-----------------------------------
Craig A. Stapleton
Barbara A. Rushing
-----------------------------------
Barbara A. Rushing
David A. Koslosky
-----------------------------------
David A. Koslosky
Winston P. Fowler 8/2/97
-----------------------------------
Winston P. Fowler
Joseph A. DiLuca 8-1-97
-----------------------------------
Joseph A. DiLuca
Paul J. Biegansky 8-1-97
-----------------------------------
Paul J. Biegansky
Terence Seikel
-----------------------------------
Terence Seikel
-15-
<PAGE> 18
Robert L. Fisher
-----------------------------------
Robert L. Fisher
Roger T. Morgan
-----------------------------------
Roger T. Morgan
-16-
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
AAS HOLDINGS, LLC
A DELAWARE LIMITED LIABILITY COMPANY
Adopted as of September 28, 1995
As Amended
As of August 5, 1997
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION> Page
----
<S> <C> <C>
ARTICLE I MEETINGS OF MEMBERS ................................. 1
Section 1. Place of Meetings and Meetings by Telephone.......... 1
Section 2. Call of Meetings..................................... 1
Section 3. Notice of Meetings of Members........................ 1
Section 4. Manner of Giving Notice.............................. 2
Section 5. Adjourned Meeting; Notice............................ 2
Section 6. Quorum; Voting....................................... 2
Section 7. Waiver of Notice by Consent of Absent Members........ 2
Section 8. Member Action by Written Consent Without a Meeting... 3
Section 9. Record Date for Member Notice, Voting and Giving
Consents......................................... 3
Section 10. Proxies.............................................. 3
ARTICLE II Managers and Meetings of Managers.................... 4
Section 1. Powers............................................... 4
Section 2. Number of Managers................................... 4
Section 3. Vacancies............................................ 4
Section 4. Place of Meetings and Meetings by Telephone.......... 4
Section 5. Regular Meetings..................................... 4
Section 6. Special Meetings..................................... 4
Section 7. Quorum; Chairman..................................... 5
Section 8. Waiver of Notice..................................... 5
Section 9. Adjournment.......................................... 5
Section 10. Action Without a Meeting............................. 5
Section 11. Delegation of Power.................................. 6
ARTICLE III Officers............................................. 6
Section 1. Officers............................................. 6
Section 2. Election of Officers................................. 6
Section 3. Additional Officers.................................. 6
Section 4. Removal and Resignation of Officers.................. 6
Section 5. Vacancies in Offices................................. 7
Section 6. Chief Executive Officer.............................. 7
Section 7. President............................................ 7
Section 8. Secretary............................................ 7
Section 9. Treasurer............................................ 8
ARTICLE IV Maintenance and Inspection of Records................ 8
Section 1. Member List.......................................... 8
Section 2. Bylaws............................................... 8
Section 3. Other Records........................................ 8
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION> Page
----
<S> <C> <C>
Section 4 Inspection by Managers.......................................... 9
ARTICLE V General Matters................................................. 9
Section 1. Checks, Drafts, Evidence of Indebtedness........................ 9
Section 2. Representation of Shares of Other Entities Held by Company...... 9
Section 3. Seal............................................................ 9
ARTICLE VI Amendments and Incorporation by Reference....................... 10
Section 1. Amendment....................................................... 10
Section 2. Incorporation by Reference of Bylaws into Operating Agreement... 10
ARTICLE VII Indemnification................................................. 10
Section 1. Indemnification of Managers, Officers, Employees and Agents..... 10
</TABLE>
<PAGE> 4
BYLAWS
OF
AAS HOLDINGS, LLC
INTRODUCTION
A. Agreement. These Bylaws are subject to the Second Amended and
Restated Operating Agreement dated as of August 5, 1997, as the same may from
time to time be amended and in effect (the "Operating Agreement"), of AAS
Holdings, LLC, a Delaware limited liability company (the "Company"). In the
event of any inconsistency between the terms hereof and the terms of the
Operating Agreement, the terms of the Operating Agreement shall control.
B. Definitions. Capitalized terms used and not defined in these Bylaws
have the meanings ascribed to them in the Operating Agreement.
ARTICLE I
MEETINGS OF MEMBERS
Section 1. Place of Meetings and Meetings by Telephone. Meetings of
Members shall be held at any place designated by the Board of Managers. In the
absence of any such designation, meetings of Members shall be held at the
principal place of business of the Company. Any meeting of the Members may be
held by conference telephone or similar communication equipment so long as all
Members participating in the meeting can hear one another, and all Members
participating by telephone or similar communication equipment shall be deemed to
be present in person at the meeting.
Section 2. Call of Meetings. Meetings of the Members may be called
at any time by the Board of Managers for the purpose of taking action upon any
matter requiring the vote or authority of the Members as provided herein or in
the Operating Agreement or upon any other matter as to which such vote or
authority is deemed by the Board of Managers to be necessary or desirable.
Section 3. Notice of Meetings of Members. All notices of meetings of
Members shall be sent or otherwise given in accordance with Section 4 of this
Article I not less then five nor more than 60 days before the date of the
meeting. The notice shall specify the place, date and hour of the meeting and
the general nature of the business to be transacted.
Section 4. Manner of Giving Notice. Notice of any meeting of Members
shall be given personally or by telephone to each Member or sent by first class
mail, by
<PAGE> 5
telegram or telecopy (or similar electronic means) or by a nationally
recognized overnight courier, charges prepaid, addressed to the Member at the
address of that Member appearing on the books of the Company or given by the
Member to the Company for the purpose of notice. Notice shall be deemed to
have been given at the time when delivered either personally or by telephone,
or at the time when deposited in the mail or with a nationally recognized
overnight courier, or when sent by telegram or telecopy (or similar electronic
means).
Section 5. Adjourned Meeting; Notice. Any meeting of Members, whether
or not a quorum is present, may be adjourned from time to time by the vote of a
Majority in Interest of Class A Members represented at that meeting, either in
person or by proxy. When any meeting of Members is adjourned to another time or
place, notice need not be given of the adjourned meeting, unless a new record
date of the adjourned meeting is fixed or unless the adjournment is for more
than 30 days from the date set for the original meeting, in which case the Board
of Managers shall set a new record date and shall give notice in accordance with
the provisions of Sections 3 and 4 of this Article I. At any adjourned meeting,
the Company may transact any business that might have been transacted at the
original meeting.
Section 6. Quorum; Voting. At any meeting of the Members, a Majority in
Interest of Class A Members present, in person or by proxy, shall constitute a
quorum for all purposes, unless or except to the extent that the presence
of Members holding a higher aggregate Percentage Interest is required by the
Operating Agreement or applicable law. Except as otherwise required by the
Operating Agreement, these Bylaws or applicable law, all matters shall be
determined by a Majority in Interest of the Class A Members.
Section 7. Waiver of Notice by Consent of Absent Members. The
transactions of a meeting of Members, however called and noticed and wherever
held, shall be as valid as though taken at a meeting duly held after regular
call and notice if a quorum is present either in person or by proxy and if
either before or after the meeting, each person entitled to vote who was not
present in person or by proxy signs a written waiver of notice or a consent to a
holding of the meeting or an approval of the minutes. The waiver of notice or
consent need not specify either the business to be transacted or the purpose of
any meeting of Members. Attendance by a person at a meeting shall also
constitute a waiver of notice of that meeting, except when the person objects at
the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened and except that attendance at a
meeting is not a waiver of any right to object to the consideration of matters
not included in the notice of the meeting if that objection is expressly made at
the beginning of the meeting.
Section 8. Member Action by Written Consent Without a Meeting.
Any action that may be taken at any meeting of Members may be taken without
a meeting and without prior notice if a consent in writing setting forth the
action so taken is signed by a Majority in Interest of Class A Members (or
Members holding such higher
-2-
<PAGE> 6
aggregate Percentage Interest as is required to authorize or take such action
under the terms of the Operating Agreement, these Bylaws or applicable law).
Any such written consent may be executed and given by telecopy or similar
electronic means. Such consents shall be filed with the Secretary of the
Company and shall be maintained in the Company's records.
Section 9. Record Date for Member Notice, Voting and Giving Consents.
(a) For purposes of determining the Members entitled to vote or act at any
meeting or adjournment thereof, the Board of Managers may fix in advance a
record date which shall not be greater than 60 days nor fewer than five days
before the date of any such meeting. If the Board of Managers does not so fix
a record date, the record date for determining Members entitled to notice of or
to vote at a meeting of Members shall be at the close of business on the
business day immediately preceding the day on which notice is given, or if
notice is waived, at the close of business on the business day next preceding
the day on which the meeting is held.
(b) The record date for determining the Members entitled to give consent
to action in writing without a meeting, (a) when no prior action of the Board
of Managers has been taken, shall be the day on which the first written consent
is given, or (b) when prior action of the Board of Managers has been taken,
shall be such date as determined for that purpose by the Board of Managers,
which record date shall not precede the date upon which the resolution fixing
it is adopted by the Board of Managers and shall not be more than 20 days after
the date of such resolution.
(c) Only Members of record on the record date as herein determined shall
have any right to vote or to act at any meeting or give consent to any action
relating to such record date, provided that no Member who transfers all or part
of such Member's Interest after a record date (and no transferee of such
Interest) shall have the right to vote or act with respect to the transferred
Interest as regards the matter for which the record date was set.
Section 10. Proxies. Every Member entitled to vote or act on any matter
at a meeting of Members shall have the right to do so either in person or by
proxy, provided that an instrument authorizing such a proxy to act is executed
by the Member in writing and dated not more than 11 months before the meeting,
unless the instrument specifically provides for a longer period. A proxy shall
be deemed executed by a Member if the Member's name is placed on the proxy
(whether by manual signature, typewriting, telegraphic transmission or
otherwise) by the Member or the Member's attorney-in-fact. A valid proxy that
does not state that it is irrevocable shall continue in full force and effect
unless (i) revoked by the person executing it before the vote pursuant to that
proxy by a writing delivered to the Company stating that the proxy is revoked,
by a subsequent proxy executed by, or by attendance at the meeting and voting in
person by, the person executing that proxy or (ii) written notice of the death
or incapacity of the maker of that proxy is received by the Company before the
vote pursuant to that proxy is counted. A proxy purporting to be executed by or
on behalf of
-3-
<PAGE> 7
a Member shall be deemed valid unless challenged at or prior to its exercise
and the burden of proving invalidity shall rest on the challenger. Except to
the extent inconsistent with the provisions hereof, the General Corporation Law
of the State of Delaware, and judicial construction thereof by the Courts of
the State of Delaware, shall be applicable to proxies granted by any Member.
ARTICLE II
MANAGERS AND MEETINGS OF MANAGERS
Section 1. Powers. The powers of the Managers shall be as provided in
the Operating Agreement.
Section 2. Number of Managers. The Board of Managers shall consist of
up to eleven (11) managers as shall be designated in accordance with the
Operating Agreement.
Section 3. Vacancies. Vacancies in the authorized number of Managers
may be filled as provided in the Operating Agreement.
Section 4. Place of Meetings and Meetings by Telephone. All meetings of
the Board of Managers may be held at any place that has been designated from
time to time by resolution of the Board of Managers. In the absence of such a
designation, regular meetings shall be held at the principal place of business
of the Company. Any meeting, regular or special, may be held by conference
telephone or similar communication equipment so long as all Managers
participating in the meeting can hear one another, and all Managers
participating by telephone or similar communication equipment shall be deemed to
be present in person at the meeting.
Section 5. Regular Meetings. Regular meetings of the Board of Managers
shall be held at such times and at such places as shall be fixed by unanimous
approval of the Managers. Such regular meetings may be held without notice.
Section 6. Special Meetings. Special meetings of the Board of Managers
for any purpose or purposes may be called at any time by CB. Notice of the time
and place of a special meeting shall be delivered personally or by telephone to
each Manager and sent by first-class mail, by telegram or telecopy (or similar
electronic means) or by nationally recognized overnight courier, charges
prepaid, addressed to each Manager at that Manager's address as it is shown on
the records of the Company. If the notice is mailed, it shall be deposited
in the United States mail least five calendar days before the time of the
holding of the meeting. If the notice is delivered personally or by telephone
or by telegram, telecopy (or similar electronic means) or overnight courier, it
shall be given at least 24 hours before the time of the holding of the meeting.
Any oral notice given personally or by telephone may be communicated either to
the Manager or to a
-4-
<PAGE> 8
person at the office of the Manager who the person giving the notice has reason
to believe will promptly communicate it to the Manager. The notice need not
specify the purpose of the meeting.
Section 7. Quorum; Chairman. A majority of the authorized number of
Managers shall constitute a quorum for the transaction of business, except to
adjourn as provided in Section 9 of this Article II. Every act or decision done
or made by the affirmative vote of a majority of the Managers present at a
meeting duly held at which a quorum is present shall be regarded as the act of
the Board of Managers, except to the extent that the vote of a higher number of
Managers is required by the Operating Agreement, these Bylaws or applicable
law. The Board of Managers may from time to time appoint any Manager to serve as
Chairman of the Board of Managers, who shall preside at all meetings of the
Board of Managers and of the Members. If at the time of any such meeting, there
shall not be a Chairman of the Board, then the Board of Managers shall appoint a
person to preside at such meeting.
Section 8. Waiver of Notice. Notice of any meeting need not be given to
any Manager who either before or after the meeting signs a written waiver of
notice, a consent to holding the meeting or an approval of the minutes. The
waiver of notice or consent need not specify the purpose of the meeting. All
such waivers, consents, and approvals shall be filed with the records of the
Company or made a part of the minutes of the meeting. Notice of a meeting shall
also be deemed given to any Manager who attends the meeting without protesting
at or prior to its commencement the lack of notice to that Manager.
Section 9. Adjournment. A majority of the Managers present at any
meeting, whether or not constituting a quorum, may adjourn any meeting to
another time and place. Notice of the time and place of holding an adjourned
meeting need not be given unless the meeting is adjourned for more than 48
hours, in which case notice of the time and place shall be given before the time
of the adjourned meeting in the manner specified in Section 6 of this Article
II.
Section 10. Action Without a Meeting. Any action to be taken by the
Board of Managers at a meeting may be taken without such meeting
by the written consent of a majority of the Managers then in office (or such
higher number of Managers as is required to authorize or take such action under
the terms of the Operating Agreement, these Bylaws or applicable law). Any such
written consent may be executed and given by telecopy or similar electronic
means. Such written consents shall be filed with the minutes of the proceedings
of the Board of Managers. If any action is so taken by the Board of Managers by
the written consent of less than all of the Managers, prompt notice of the
taking of such action shall be furnished to each Manager who did not execute
such written consent, provided that the effectiveness of such action shall not
be impaired by any delay or failure to furnish such notice.
-5-
<PAGE> 9
Section 11. Delegation of Power. Any Manager may, by power of attorney,
delegate his power to any other Manager or Managers; provided, however, that in
no case shall fewer than two Managers personally exercise the powers granted to
the Managers, except as otherwise provided by resolution of the Board of
Managers. A Manager represented by another Manager pursuant to such power of
attorney shall be deemed to be present for purposes of establishing a quorum and
satisfying any voting requirements. The Board of Managers may, by resolution,
delegate any or all of their powers and duties granted hereunder or under the
Operating Agreement to one or more committees of the Board of Managers, each
consisting of one or more Managers, or to one or more officers, employees or
agents (including, without limitation, Members), and to the extent any such
powers or duties are so delegated, action by the delegate or delegates shall be
deemed for all purposes to be action by the Board of Managers. All such
delegates shall serve at the pleasure of the Board of Managers. To the extent
applicable, notice shall be given to, and action may be taken by, any delegate
of the Board of Managers as herein provided with respect to notice to, and
action by, the Board of Managers.
ARTICLE III
OFFICERS
Section 1. Officers. The officers of the Company shall be a Chief
Executive Officer, a President, a Secretary and a Treasurer. The Company may
also have, at the discretion of the Board of Managers, such other officers as
may be appointed in accordance with the provisions of Section 3 of this Article
III. Any number of offices may be held by the same person. Officers may, but
need not, be Managers.
Section 2. Election of Officers. The officers of the Company
shall be chosen by the Board of Managers, and each shall serve at the pleasure
of the Board of Managers, subject to the rights, if any, of an officer under
any contract of employment.
Section 3. Additional Officers. The Board of Managers may appoint and
may empower the Chief Executive Officer or the President to appoint such
additional officers as the business of the Company may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in these Bylaws or as the Board of Managers (or, to the extent
the power to prescribe authorities and duties of additional officers is
delegated to him or her, the Chief Executive Officer or the President) may from
time to time determine.
Section 4. Removal and Resignation of Officers. Subject to the
rights, if any, of an officer under any contract of employment, any officer
may be removed, with or without cause, by the Board of Managers at any regular
or special meeting of the Board of Managers or by such officer, if any, upon
whom such power of removal may be conferred by the Board of Managers. Any
officer may resign at any time by giving
-6-
<PAGE> 10
written notice to the Company. Any resignation shall take effect at the date
of the receipt of that notice or at any later time specified in that notice,
and unless otherwise specified in that notice, the acceptance of the
resignation shall not be necessary to make it effective. Any resignation is
without prejudice to the rights, if any, of the Company under any contract to
which the officer is a party.
Section 5. Vacancies in Offices. A vacancy in any office because of
death, resignation, removal, disqualification or other cause shall be filled by
the Board of Managers. The Chief Executive Officer or the President may make
temporary appointments to a vacant office reporting to the Chief Executive
Officer or the President pending action by the Board of Managers.
Section 6. Chief Executive Officer. The Chief Executive Officer
shall, subject to the control of the Board of Managers, share with the
President the general supervision, direction and control of the business and the
offices of the Company. He or she shall have the general power and duties of
management usually vested in the office of Chief Executive Officer of a
corporation and shall have such other powers and duties as may be prescribed by
the Board of Mangers, the Operating Agreement or these Bylaws.
Section 7. President. The President shall, subject to the
control of the Board of Managers, share with the Chief Executive Officer
the general supervision, direction and control of the business and the officers
of the Company. He or she shall have the general powers and duties of
management usually vested in the office of President of a corporation and shall
have such other powers and duties as may be prescribed by the Board of Managers,
the Operating Agreement or these Bylaws.
Section 8. Secretary. The Secretary shall keep or cause to be
kept at the principal place of business of the Company or such other
place as the Board of Managers may direct a book of minutes of all meetings and
actions of the Board of Managers, committees or other delegates of the Board of
Managers and the Members. The Secretary shall keep or cause to be kept at the
principal place of business of the Company a register or a duplicate register
showing the names of all Members and their addresses, the class and percentage
interests in the Company held by each, the number and date of certificates
issued for the same, and the number and date of cancellation of every
certificate surrendered for cancellation. The Secretary shall give or cause to
be given notice of all meetings of the Members and of the Board of Managers (or
committees or other delegates thereof) required to be given by these Bylaws or
by applicable law and shall have such other powers and perform such other duties
as may be prescribed by the Board of Managers, the Chief Executive Officer or
the President or by these Bylaws.
Section 9. Treasurer. The Treasurer shall be the chief
financial officer of the Company and shall keep and maintain or cause to be
kept and maintained adequate and correct books and records of accounts of the
properties and business transactions of
-7-
<PAGE> 11
the Company. The books of account shall at all reasonable times be open to
inspection by any Manager. The Treasurer shall deposit all monies and other
valuables in the name and to the credit of the Company with such depositaries
as may be designated by the Board of Managers. He or she shall disburse the
funds of the Company as may be ordered by the Board of Managers, shall render
to the Chief Executive Officer, the President and the Board of Managers,
whenever they request it, an account of all of his or her transactions as chief
financial officer and of the financial condition of the Company and shall have
other powers and perform such other duties as may be prescribed by the Board of
Managers, the Chief Executive Officer or the President or these Bylaws.
ARTICLE IV
MAINTENANCE AND INSPECTION OF RECORDS
Section 1. Member List. The Company shall maintain at its
principal place of business a record of its Members, giving the names and
addresses of all Members and the class and percentage interests in the Company
held by each Member. Subject to such reasonable standards (including standards
governing what information and documents are to be furnished and at whose
expense) as may be established by the Board of Managers from time to time, each
Member has the right to obtain from the Company from time to time upon
reasonable demand for any purpose reasonably related to the Member's interest as
a Member of the Company a record of the Company's Members.
Section 2. Bylaws. The Company shall keep at its principal place of
business the original or a copy of these Bylaws as amended to date, which shall
be open to inspection by the Members at all reasonable times during office
hours.
Section 3. Other Records. The accounting books and records, minutes of
proceedings of the Members and the Board of Managers and any committees or
delegates of the Board of Managers and all other information pertaining to the
Company that is required to be made available to the Members under the Delaware
Act shall be kept at such place or places designated by the Board of Managers or
in the absence of such designation, at the principal place of business of the
Company. The minutes shall be kept in written form and the accounting books and
records and other information shall be kept either in written form or in any
other form capable of being converted into written form. The books of account
and records of the Company shall be maintained in accordance with generally
accepted accounting principles consistently applied during the term of the
Company, wherein all transactions, matters and things relating to the business
and properties of the Company shall be currently entered. Subject to such
reasonable standards (including standards, governing what information and
documents are to be furnished and at whose expense) as may be established by the
Board of Managers from time to time, minutes, accounting books and records and
other
-8-
<PAGE> 12
information shall be open to inspection upon the written demand of any Member
at any reasonable time during usual business hours for purposes reasonably
related to the Member's interests as a Member. Any such inspection may be made
in person or by an agent or attorney and shall include the right to copy and
make extracts. Notwithstanding the foregoing, the Board of Managers shall have
the right to keep confidential from Members for such period of time as the
Board of Managers deems reasonable any information which the Board of Managers
reasonably believes to be in the nature of trade secrets or other information
the disclosure of which the Board of Managers in good faith believes is not in
the best interests of the Company or could damage the Company or its business
or which the Company is required by law or by agreement with a third party to
keep confidential.
Section 4. Inspection by Managers. Every Manager shall have the right
at any reasonable time to inspect all books, records and documents of every
kind and the physical properties of the Company for a purpose reasonably related
to his position as Manager. This inspection by a Manager may be made in person
or by an agent or attorney and the right of inspection includes the right to
copy and make extracts of documents.
ARTICLE V
GENERAL MATTERS
Section 1. Checks, Drafts, Evidence of Indebtedness. All checks, drafts
or other orders for payment of money, notes or other evidences of indebtedness
issued in the name of or payable by the Company shall be signed or endorsed in
such manner and by such person or persons as shall be designated from time to
time in accordance with the resolution of the Board of Managers.
Section 2. Representation of Shares of Other Entities Held by Company.
The Chief Executive Officer, the President or any other person authorized by the
Board of Managers or by any of the foregoing designated officers is authorized
to vote or represent on behalf of the Company any and all shares of any
corporation, partnership, limited liability company, trusts or other entities,
foreign or domestic, standing in the name of the Company. Such authority may be
exercised in person or by a proxy duly executed by such designated person.
Section 3. Seal. The Board of Managers may approve and adopt an
official seal of the Company, which may be altered by them at any time. Unless
otherwise requiredby the Board of Managers, any seal so adopted shall not be
necessary to be placed on, and its absence shall not impair the validity of, any
document, instrument or other paper executed and delivered by or on behalf of
the Company.
-9-
<PAGE> 13
ARTICLE VI
AMENDMENTS AND INCORPORATION BY REFERENCE
Section 1. Amendment. These Bylaws may be restated, amended,
supplemented or repealed only by the Board of Managers or a Majority in Interest
of Class A Members.
Section 2. Incorporation by Reference of Bylaws into Operating
Agreement. These Bylaws and any amendments hereto shall be deemed incorporated
by reference in the Operating Agreement.
ARTICLE VII
INDEMNIFICATION
Section 1. Indemnification of Managers, Officers, Employees and Agents.
(a) Each Person who was or is made a party or is threatened to be made a party
to or is otherwise involved 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 Manager or an officer of the
Company, or is or was serving at the request of the Company as a manager,
director, officer, employee or agent of another limited liability company or
of a corporation, partnership, joint venture, trust or other enterprise,
including a service with respect to an employee benefit plan (hereinafter an
"indemnitee"), whether the basis of such a proceeding is alleged action in an
official capacity as a Manager, officer, employee or agent or in any other
capacity while serving as a Manager, officer, employee or agent, shall be
indemnified and held harmless by the Company to the fullest extent authorized
by the Delaware Act (including indemnification for negligence or gross
negligence but excluding indemnification (i) for acts or omissions involving
actual fraud or willful misconduct or (ii) with respect to any transaction from
which the indemnitee derived an improper personal benefit), against all
expense, liability and loss (including attorneys' fees, judgments, fines,
excise taxes or penalties and amounts paid in settlement) reasonably incurred
or suffered by such indemnitee in connection therewith.
(b) The right to indemnification conferred in paragraph (a) shall include
the right to be paid by the Company the expenses (including attorneys' fees)
incurred in defending any proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"). The rights to indemnification and
to the advancement of expenses conferred in paragraph (a) and this paragraph
(b) shall be contract rights and such rights shall continue as to an indemnitee
who has ceased to be a Manager, officer, employee or agent and shall inure to
the benefit of the indemnitee's heirs, executors and administrators.
-10-
<PAGE> 14
(c) The rights to indemnification and to the advancement of expenses
conferred in this Section 1 shall not be exclusive of any other right that any
Person may have or hereafter acquire under any statute, agreement, vote of the
Managers or otherwise.
(d) The Company may maintain insurance, at its expense, to protect itself
and any Manager, officer, employee or agent of the Company or another limited
liability company, consultant, corporation, partnership, joint venture, trust
or other enterprise against any expense, liability or loss, whether or not the
Company would have the power to indemnify such Person against such expense,
liability or loss under the Delaware Act.
(e) The Company may, to the extent authorized from time to time by the
Board of Managers, grant rights to indemnification and to advancement of
expenses to any employee or agent of the Company to the fullest extent of the
provisions of this Section 1 with respect to the indemnification and
advancement of expenses of Managers and officers of the Company.
-11-
<PAGE> 1
EXHIBIT 3.4
CERTIFICATE OF INCORPORATION
OF
AAS CAPITAL CORPORATION
----------------------------
ARTICLE I
The name of the corporation (herein called the "Corporation") is AAS
Capital Corporation.
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is 9 East Loockerman Street, City of Dover, County of Kent. The name of
the registered agent of the Corporation at such address is National Registered
Agents, Inc.
ARTICLE III
The purpose of the Corporation 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.
ARTICLE IV
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is One Thousand (1000) shares, all of which shall
be of one class, shall be designated Common Stock and shall have a par value of
one cent ($.01) per share.
ARTICLE V
The name and mailing address of the incorporator is as follows:
Name Mailing Address
c/o O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
Sharon M. Goodman 41st Floor
New York, New York 10112
<PAGE> 2
ARTICLE VI
The number of directors of the Corporation shall be such as from time to
time shall be fixed in the manner provided in the By-laws of the Corporation.
The election of directors of the Corporation need not be by ballot unless the
By-laws so require.
ARTICLE VII
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended after the
date of incorporation of the Corporation to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so amended.
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 VIII
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation and of its directors and stockholders, it is further
provided:
(a) In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors is expressly authorized
and empowered:
(i) to make, alter, amend or repeal the By-laws in any manner not
inconsistent with the laws of the State of Delaware or this Certificate of
Incorporation;
(ii) without the assent or vote of the stockholders, to authorize and
issue securities and obligations of the Corporation, secured or unsecured,
and to include therein such provisions as to redemption, conversion or
other terms thereof as the Board of Directors in its sole discretion may
determine, and to authorize the mortgaging or pledging, as security
therefor, of any property of the Corporation, real or personal, including
after-acquired property;
(iii) to determine whether any, and if any, what part, of the net
profits of the Corporation or of its surplus shall be declared in dividends
and paid to the
2
<PAGE> 3
stockholders, and to direct and determine the use and disposition of any
such net profits or such surplus; and
(iv) to fix from time to time the amount of net profits of the
Corporation or of its surplus to be reserved as working capital or for any
other lawful purpose.
In addition to the powers and authorities herein or by statute expressly
conferred upon it, the Board of Directors may exercise all such powers and do
all such acts and things as may be exercised or done by the Corporation,
subject, nevertheless, to the provisions of the laws of the State of Delaware,
of this Certificate of Incorporation and of the By-laws of the Corporation.
(b) Any director or any officer elected or appointed by the
stockholders or by the Board of Directors may be removed at any time in such
manner as shall be provided in the By-laws of the Corporation.
(c) From time to time any of the provisions of this Certificate of
Incorporation may be altered, amended or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted, in the manner and at the time prescribed by said laws, and
all rights at any time conferred upon the stockholders of the Corporation by
this Certificate of Incorporation are granted subject to the provisions of this
paragraph (c).
ARTICLE IX
Whenever a compromise or arrangement is proposed between the Corporation
and its creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under the provisions of
Section 291 of the Delaware General Corporation Law or on the application of
trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of the Delaware General
Corporation Law order a meeting of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of the Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree on any compromise or arrangement and to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be,
and also on the Corporation.
3
<PAGE> 4
IN WITNESS WHEREOF, I, the undersigned, being the sole incorporator
hereinabove named, for the purpose of forming a corporation pursuant to the
General Corporation Law of the State of Delaware, DO HEREBY CERTIFY, under
penalties of perjury, that this is my act and deed and that the facts
hereinabove stated are truly set forth and, accordingly, I have hereunto set my
hand as of the 4th day of September, 1997.
__________________________
Sharon M. Goodman
Sole Incorporator
4
<PAGE> 1
EXHIBIT 3.5
==============================================
AAS CAPITAL CORPORATION
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
---------------------------
BY-LAWS
---------------------------
AS ADOPTED ON SEPTEMBER 5, 1997
==============================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
----------------- Page
----
<S> <C>
ARTICLE I OFFICES.................................................................................................1
1.1 Registered Office.......................................................................................1
1.2 Other Offices...........................................................................................1
ARTICLE II MEETING OF STOCKHOLDERS; STOCKHOLDERS' CONSENT IN LIEU OF MEETING......................................1
2.1 Annual Meetings.........................................................................................1
2.2 Special Meetings........................................................................................1
2.3 Notice of Meetings......................................................................................2
2.4 Quorum..................................................................................................2
2.5 Organization............................................................................................2
2.6 Order of Business.......................................................................................3
2.7 Voting..................................................................................................3
2.8 Inspection..............................................................................................4
2.9 List of Stockholders....................................................................................4
2.10 Stockholders' Consent in Lieu of Meeting................................................................4
ARTICLE III BOARD OF DIRECTORS....................................................................................5
3.1 General Powers..........................................................................................5
3.2 Number and Term of Office...............................................................................5
3.3 Election of Directors...................................................................................5
3.4 Resignation, Removal and Vacancies......................................................................5
3.5 Meetings................................................................................................5
3.6 Directors' Consent in Lieu of Meeting...................................................................6
3.7 Action by Means of Conference Telephone or Similar Communications Equipment.............................7
3.8 Committees..............................................................................................7
ARTICLE IV OFFICERS...............................................................................................7
4.1 Executive Officers......................................................................................7
4.2 Authority and Duties....................................................................................7
4.3 Other Officers..........................................................................................7
4.4 Term of Office, Resignation and Removal.................................................................8
4.5 Vacancies...............................................................................................8
4.6 The Chairman............................................................................................8
4.7 The President...........................................................................................8
4.8 The Secretary...........................................................................................9
4.9 The Treasurer...........................................................................................9
ARTICLE V CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC...........................................................9
5.1 Execution of Documents..................................................................................9
5.2 Deposits...............................................................................................10
5.3 Proxies with Respect to Stock or Other Securities of Other Corporations................................10
ARTICLE VI SHARES AND THEIR TRANSFER; FIXING RECORD DATE.........................................................10
6.1 Certificates for Shares................................................................................10
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
6.2 Record.................................................................................................10
6.3 Transfer and Registration of Stock.....................................................................11
6.4 Addresses of Stockholders..............................................................................11
6.5 Lost, Destroyed and Mutilated Certificates.............................................................11
6.6 Regulations............................................................................................11
6.7 Fixing Date for Determination of Stockholders of Record................................................11
ARTICLE VII SEAL.................................................................................................12
ARTICLE VIII FISCAL YEAR.........................................................................................12
ARTICLE IX INDEMNIFICATION AND INSURANCE.........................................................................13
9.1 Indemnification........................................................................................13
9.2 Insurance..............................................................................................14
ARTICLE X AMENDMENT..............................................................................................15
</TABLE>
ii
<PAGE> 4
BY-LAWS OF
AAS CAPITAL CORPORATION
ARTICLE I
OFFICES
1.1 REGISTERED OFFICE.
The registered office of AAS Capital Corporation (the "Corporation"),
in the State of Delaware shall be at 9 East Loockerman Street, City of Dover,
County of Kent 19901, and the registered agent in charge thereof shall be
National Registered Agents, Inc.
1.2 OTHER OFFICES.
The Corporation may also have an office or offices at any other place
or places within or outside the State of Delaware.
ARTICLE II
MEETING OF STOCKHOLDERS; STOCKHOLDERS'
CONSENT IN LIEU OF MEETING
2.1 ANNUAL MEETINGS.
The annual meeting of the stockholders for the election of directors,
and for the transaction of such other business as may properly come before the
meeting, shall be held at such place, date and hour as shall be fixed by the
Board of Directors (the "Board") and designated in the notice or waiver of
notice thereof, except that no annual meeting need be held if all actions,
including the election of directors, required by the General Corporation Law of
the State of Delaware (the "Delaware Statute") to be taken at a stockholders'
annual meeting are taken by written consent in lieu of meeting pursuant to
Section 10 of this Article II.
2.2 SPECIAL MEETINGS.
A special meeting of the stockholders for any purpose or purposes may
be called by the Board, the Chairman, the President or the record holders of at
least a majority of the issued and outstanding shares of Common Stock of the
Corporation, to be held at such place, date and hour as shall be designated in
the notice or waiver of notice thereof.
<PAGE> 5
2.3 NOTICE OF MEETINGS.
Except as otherwise required by statute, the Certificate of
Incorporation of the Corporation (the "Certificate") or these By-laws, notice of
each annual or special meeting of the stockholders shall be given to each
stockholder of record entitled to vote at such meeting not less than 10 nor more
than 60 days before the day on which the meeting is to be held, by delivering
written notice thereof to him personally, or by mailing a copy of such notice,
postage prepaid, directly to him at his address as it appears in the records of
the Corporation, or by transmitting such notice thereof to him at such address
by telegraph, cable or other telephonic transmission. Every such notice shall
state the place, the date and hour of the meeting, and, in case of a special
meeting, the purpose or purposes for which the meeting is called. Notice of any
meeting of stockholders shall not be required to be given to any stockholder who
shall attend such meeting in person or by proxy, or who shall, in person or by
attorney thereunto authorized, waive such notice in writing, either before or
after such meeting. Except as otherwise provided in these By-laws, neither the
business to be transacted at, nor the purpose of, any meeting of the
stockholders need be specified in any such notice or waiver of notice. Notice of
any adjourned meeting of stockholders shall not be required to be given, except
when expressly required by law.
2.4 QUORUM.
At each meeting of the stockholders, except where otherwise provided by
the Certificate or these By-laws, the holders of a majority of the issued and
outstanding shares of Common Stock of the Corporation entitled to vote at such
meeting, present in person or represented by proxy, shall constitute a quorum
for the transaction of business. In the absence of a quorum, a majority in
interest of the stockholders present in person or represented by proxy and
entitled to vote, or, in the absence of all the stockholders entitled to vote,
any officer entitled to preside at, or act as secretary of, such meeting, shall
have the power to adjourn the meeting from time to time, until stockholders
holding the requisite amount of stock to constitute a quorum shall be present or
represented. At any such adjourned meeting at which a quorum shall be present,
any business may be transacted which might have been transacted at the meeting
as originally called.
2.5 ORGANIZATION.
(a) Unless otherwise determined by the Board, at each meeting of
the stockholders, one of the following shall act as chairman of the meeting and
preside thereat, in the following order of precedence:
(i) the Chairman;
(ii) the President;
(iii) any director, officer or stockholder of the
Corporation designated by the Board to act as chairman of such meeting
and to preside thereat if the Chairman or the President shall be
absent from such meeting; or
2
<PAGE> 6
(iv) a stockholder of record who shall be chosen chairman of
such meeting by a majority in voting interest of the stockholders
present in person or by proxy and entitled to vote thereat.
(b) The Secretary or, if he shall be presiding over such meeting
in accordance with the provisions of this Section 5 or if he shall be absent
from such meeting, the person (who shall be an Assistant Secretary, if an
Assistant Secretary has been appointed and is present) whom the chairman of such
meeting shall appoint, shall act as secretary of such meeting and keep the
minutes thereof.
2.6 ORDER OF BUSINESS.
The order of business at each meeting of the stockholders shall be
determined by the chairman of such meeting, but such order of business may be
changed by a majority in voting interest of those present in person or by proxy
at such meeting and entitled to vote thereat.
2.7 VOTING.
Except as otherwise provided by law, the Certificate or these By-laws,
at each meeting of the stockholders, every stockholder of the Corporation shall
be entitled to one vote in person or by proxy for each share of Common Stock of
the Corporation held by him and registered in his name on the books of the
Corporation on the date fixed pursuant to Section 7 of Article VI as the record
date for the determination of stockholders entitled to vote at such meeting.
Persons holding stock in a fiduciary capacity shall be entitled to vote the
shares so held. A person whose stock is pledged shall be entitled to vote,
unless, in the transfer by the pledgor on the books of the Corporation, he has
expressly empowered the pledgee to vote thereon, in which case only the pledgee
or his proxy may represent such stock and vote thereon. If shares or other
securities having voting power stand in the record of two or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in common,
tenants by the entirety or otherwise, or if two or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary shall be
given written notice to the contrary and furnished with a copy of the instrument
or order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect:
(i) if only one votes, his act binds all;
(ii) if more than one votes, the act of the majority so
voting binds all; and
(iii) if more than one votes, but the vote is evenly split on
any particular matter, such shares shall be voted in the manner
provided by law.
If the instrument so filed shows that any such tenancy is held in
unequal interests, a majority or even-split for the purposes of this Section 7
shall be a majority or even-split in interest. The Corporation shall not vote
directly or indirectly any share of its own capital stock. Any vote of stock may
be given by the stockholder entitled thereto in person or by his proxy appointed
by an instrument in writing, subscribed by such stockholder or by his attorney
thereunto authorized, delivered to the secretary of the meeting; provided,
however, that no proxy
3
<PAGE> 7
shall be voted after three years from its date, unless said proxy provides for
a longer period. At all meetings of the stockholders, all matters (except where
other provision is made by law, the Certificate or these By-laws) shall be
decided by the vote of a majority in interest of the stockholders present in
person or by proxy at such meeting and entitled to vote thereon, a quorum being
present. Unless demanded by a stockholder present in person or by proxy at any
meeting and entitled to vote thereon, the vote on any question need not be by
ballot. Upon a demand by any such stockholder for a vote by ballot upon any
question, such vote by ballot shall be taken. On a vote by ballot, each ballot
shall be signed by the stockholder voting, or by his proxy, if there be such
proxy, and shall state the number of shares voted.
2.8 INSPECTION.
The chairman of the meeting may at any time appoint one or more
inspectors to serve at any meeting of the stockholders. Any inspector may be
removed, and a new inspector or inspectors appointed, by the Board at any time.
Such inspectors shall decide upon the qualifications of voters, accept and count
votes, declare the results of such vote, and subscribe and deliver to the
secretary of the meeting a certificate stating the number of shares of stock
issued and outstanding and entitled to vote thereon and the number of shares
voted for and against the question, respectively. The inspectors need not be
stockholders of the Corporation, and any director or officer of the Corporation
may be an inspector on any question other than a vote for or against his
election to any position with the Corporation or on any other matter in which he
may be directly interested. Before acting as herein provided, each inspector
shall subscribe an oath faithfully to execute the duties of an inspector with
strict impartiality and according to the best of his ability.
2.9 LIST OF STOCKHOLDERS.
It shall be the duty of the Secretary or other officer of the
Corporation who shall have charge of its stock ledger to prepare and make, at
least 10 days before every meeting of the stockholders, a complete list of the
stockholders entitled to vote thereat, arranged in alphabetical order, and
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 any such meeting, during ordinary
business hours, for a period of at least 10 days prior to such meeting, either
at a place within the city where such 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. Such list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
2.10 STOCKHOLDERS' CONSENT IN LIEU OF MEETING.
Any action required by the Delaware Statute to be taken at any annual
or special meeting of the stockholders of the Corporation, or any action which
may be taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, by a consent in
writing, as permitted by the Delaware Statute.
4
<PAGE> 8
ARTICLE III
BOARD OF DIRECTORS
3.1 GENERAL POWERS.
The business, property and affairs of the Corporation shall be managed
by or under the direction of the Board, which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by law or by
the Certificate directed or required to be exercised or done by the
stockholders.
3.2 NUMBER AND TERM OF OFFICE.
The number of directors shall be fixed from time to time by the Board.
Directors need not be stockholders. Each director shall hold office until his
successor is elected and qualified, or until his earlier death or resignation or
removal in the manner hereinafter provided.
3.3 ELECTION OF DIRECTORS.
At each meeting of the stockholders for the election of directors at
which a quorum is present, the persons receiving the greatest number of votes,
up to the number of directors to be elected, of the stockholders present in
person or by proxy and entitled to vote thereon shall be the directors;
provided, however, that for purposes of such vote no stockholder shall be
allowed to cumulate his votes. Unless an election by ballot shall be demanded as
provided in Section 7 of Article II, election of directors may be conducted in
any manner approved at such meeting.
3.4 RESIGNATION, REMOVAL AND VACANCIES.
(a) Any director may resign at any time by giving written notice
to the Board, the Chairman, the President or the Secretary. Such resignation
shall take effect at the time specified therein or, if the time be not
specified, upon receipt thereof; unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
(b) Any director or the entire Board may be removed, with or
without cause, at any time by vote of the holders of a majority of the shares
then entitled to vote at an election of directors or by written consent of the
stockholders pursuant to Section 10 of Article II.
(c) Vacancies occurring on the Board for any reason may be filled
by vote of the stockholders or by the stockholders' written consent pursuant to
Section 10 of Article II, or by vote of the Board or by the directors' written
consent pursuant to Section 6 of this Article III. If the number of directors
then in office is less than a quorum, such vacancies may be filled by a vote of
a majority of the directors then in office.
3.5 MEETINGS.
(a) Annual Meetings. As soon as practicable after each annual
election of directors, the Board shall meet for the purpose of organization and
the transaction of other
5
<PAGE> 9
business, unless it shall have transacted all such business by written consent
pursuant to Section 6 of this Article III.
(b) Other Meetings. Other meetings of the Board shall be held at
such times and places as the Board, the Chairman, the President or any director
shall from time to time determine.
(c) Notice of Meetings. Notice shall be given to each director of
each meeting, including the time, place and purpose of such meeting. Notice of
each such meeting shall be mailed to each director, addressed to him at his
residence or usual place of business, at least two days before the date on which
such meeting is to be held, or shall be sent to him at such place by telegraph,
cable, wireless or other form of recorded communication, or be delivered
personally or by telephone not later than the day before the day on which such
meeting is to be held, but notice need not be given to any director who shall
attend such meeting. A written waiver of notice, signed by the person entitled
thereto, whether before or after the time of the meeting stated therein, shall
be deemed equivalent to notice.
(d) Place of Meetings. The Board may hold its meetings at such
place or places within or outside the State of Delaware as the Board may from
time to time determine, or as shall be designated in the respective notices or
waivers of notice thereof.
(e) Quorum and Manner of Acting. A majority of the total number of
directors then in office shall be present in person at any meeting of the Board
in order to constitute a quorum for the transaction of business at such meeting,
and the vote of a majority of those directors present at any such meeting at
which a quorum is present shall be necessary for the passage of any resolution
or act of the Board, except as otherwise expressly required by law or these
By-laws. In the absence of a quorum for any such meeting, a majority of the
directors present thereat may adjourn such meeting from time to time until a
quorum shall be present.
(f) Organization. At each meeting of the Board, one of the
following shall act as chairman of the meeting and preside thereat, in the
following order of precedence:
(i) the Chairman;
(ii) the President (if a director); or
(iii) any director designated by a majority of the directors
present.
The Secretary or, in the case of his absence, an Assistant Secretary,
if an Assistant Secretary has been appointed and is present, or any person whom
the chairman of the meeting shall appoint shall act as secretary of such meeting
and keep the minutes thereof.
3.6 DIRECTORS' CONSENT IN LIEU OF MEETING.
Any action required or permitted to be taken at any meeting of the
Board may be taken without a meeting, without prior notice and without a vote,
if a consent in writing, setting forth
6
<PAGE> 10
the action so taken, shall be signed by all the directors then in office and
such consent is filed with the minutes of the proceedings of the Board.
3.7 ACTION BY MEANS OF CONFERENCE TELEPHONE OR SIMILAR COMMUNICATIONS
EQUIPMENT.
Any one or more members of the Board may participate in a meeting of
the Board by means of conference telephone or similar communications equipment
by which all persons participating in the meeting can hear each other, and
participation in a meeting by such means shall constitute presence in person at
such meeting.
3.8 COMMITTEES.
The Board may, by resolution or resolutions passed by a majority of the
whole Board, designate one or more committees, each such committee to consist of
one or more directors of the Corporation, which to the extent provided in said
resolution or resolutions shall have and may exercise the powers of the Board in
the management of the business and affairs of the Corporation and may authorize
the seal of the Corporation to be affixed to all papers which may require it,
such committee or committees to have such name or names as may be determined
from time to time by resolution adopted by the Board. A majority of all the
members of any such committee may determine its action and fix the time and
place of its meetings, unless the Board shall otherwise provide. The Board shall
have power to change the members of any such committee at any time, to fill
vacancies and to discharge any such committee, either with or without cause, at
any time.
ARTICLE IV
OFFICERS
4.1 EXECUTIVE OFFICERS.
The principal officers of the Corporation shall be a Chairman, if one
is appointed (and any references to the Chairman shall not apply if a Chairman
has not been appointed), a President, a Secretary, and a Treasurer, and may
include such other officers as the Board may appoint pursuant to Section 3 of
this Article IV. Any two or more offices may be held by the same person.
4.2 AUTHORITY AND DUTIES.
All officers, as between themselves and the Corporation, shall have
such authority and perform such duties in the management of the Corporation as
may be provided in these By-laws or, to the extent so provided, by the Board.
4.3 OTHER OFFICERS.
The Corporation may have such other officers, agents and employees as
the Board may deem necessary, including one or more Assistant Secretaries, one
or more Assistant Treasurers and one or more Vice Presidents, each of whom shall
hold office for such period, have such
7
<PAGE> 11
authority, and perform such duties as the Board, the Chairman, or the President
may from time to time determine. The Board may delegate to any principal officer
the power to appoint and define the authority and duties of, or remove, any such
officers, agents, or employees.
4.4 TERM OF OFFICE, RESIGNATION AND REMOVAL.
(a) All officers shall be elected or appointed by the Board and
shall hold office for such term as may be prescribed by the Board. Each officer
shall hold office until his successor has been elected or appointed and
qualified or until his earlier death or resignation or removal in the manner
hereinafter provided. The Board may require any officer to give security for the
faithful performance of his duties.
(b) Any officer may resign at any time by giving written notice to
the Board, the Chairman, the President or the Secretary. Such resignation shall
take effect at the time specified therein or, if the time be not specified, at
the time it is accepted by action of the Board. Except as aforesaid, the
acceptance of such resignation shall not be necessary to make it effective.
(c) All officers and agents elected or appointed by the Board
shall be subject to removal at any time by the Board or by the stockholders of
the Corporation with or without cause.
4.6 VACANCIES.
If the office of Chairman, President, Secretary or Treasurer becomes
vacant for any reason, the Board shall fill such vacancy, and if any other
office becomes vacant, the Board may fill such vacancy. Any officer so appointed
or elected by the Board shall serve only until such time as the unexpired term
of his predecessor shall have expired, unless reelected or reappointed by the
Board.
4.7 THE CHAIRMAN.
The Chairman shall give counsel and advice to the Board and the
officers of the Corporation on all subjects concerning the welfare of the
Corporation and the conduct of its business and shall perform such other duties
as the Board may from time to time determine. Unless otherwise determined by the
Board, he shall preside at meetings of the Board and of the Stockholders at
which he is present.
4.8 THE PRESIDENT.
The President shall be the chief executive officer of the Corporation.
The President shall have general and active management and control of the
business and affairs of the Corporation subject to the control of the Board and
shall see that all orders and resolutions of the Board are carried into effect.
The President shall from time to time make such reports of the affairs of the
Corporation as the Board of Directors may require and shall perform such other
duties as the Board may from time to time determine.
8
<PAGE> 12
4.8 THE SECRETARY.
The Secretary shall, to the extent practicable, attend all meetings of
the Board and all meetings of the stockholders and shall record all votes and
the minutes of all proceedings in a book to be kept for that purpose. He may
give, or cause to be given, notice of all meetings of the stockholders and of
the Board, and shall perform such other duties as may be prescribed by the
Board, the Chairman or the President, under whose supervision he shall act. He
shall keep in safe custody the seal of the Corporation and affix the same to any
duly authorized instrument requiring it and, when so affixed, it shall be
attested by his signature or by the signature of the Treasurer or, if appointed,
an Assistant Secretary or an Assistant Treasurer. He shall keep in safe custody
the certificate books and stockholder records and such other books and records
as the Board may direct, and shall perform all other duties incident to the
office of Secretary and such other duties as from time to time may be assigned
to him by the Board, the Chairman or the President.
4.9 THE TREASURER.
The Treasurer shall have the care and custody of the corporate funds
and other valuable effects, including securities, shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the
Board. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board, taking proper vouchers for such disbursements, shall
render to the Chairman, President and directors, at the regular meetings of the
Board, or whenever they may require it, an account of all his transactions as
Treasurer and of the financial condition of the Corporation and shall perform
all other duties incident to the office of Treasurer and such other duties as
from time to time may be assigned to him by the Board, the Chairman or the
President.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
5.1 EXECUTION OF DOCUMENTS.
The Board shall designate, by either specific or general resolution,
the officers, employees and agents of the Corporation who shall have the power
to execute and deliver deeds, contracts, mortgages, bonds, debentures, checks,
drafts and other orders for the payment of money and other documents for and in
the name of the Corporation, and may authorize such officers, employees and
agents to delegate such power (including authority to redelegate) by written
instrument to other officers, employees or agents of the Corporation; unless so
designated or expressly authorized by these By-laws, no officer, employee or
agent shall have any power or authority to bind the Corporation by any contract
or engagement, to pledge its credit or to render it liable pecuniarily for any
purpose or amount.
9
<PAGE> 13
5.2 DEPOSITS.
All funds of the Corporation not otherwise employed shall be deposited
from time to time to the credit of the Corporation or otherwise as the Board or
Treasurer, or any other officer of the Corporation to whom power in this respect
shall have been given by the Board, shall select.
5.3 PROXIES WITH RESPECT TO STOCK OR OTHER SECURITIES OF OTHER
CORPORATIONS.
The Board shall designate the officers of the Corporation who shall
have authority from time to time to appoint an agent or agents of the
Corporation to exercise in the name and on behalf of the Corporation the powers
and rights which the Corporation may have as the holder of stock or other
securities in any other corporation, and to vote or consent with respect to such
stock or securities. Such designated officers may instruct the person or persons
so appointed as to the manner of exercising such powers and rights, and such
designated officers may execute or cause to be executed in the name and on
behalf of the Corporation and under its corporate seal or otherwise, such
written proxies, powers of attorney or other instruments as they may deem
necessary or proper in order that the Corporation may exercise its powers and
rights.
ARTICLE VI
SHARES AND THEIR TRANSFER; FIXING RECORD DATE
6.1 CERTIFICATES FOR SHARES.
Every owner of stock of the Corporation shall be entitled to have a
certificate certifying the number and class of shares owned by him in the
Corporation, which shall be in such form as shall be prescribed by the Board.
Certificates shall be numbered and issued in consecutive order and shall be
signed by, or in the name of, the Corporation by the Chairman, the President or
any Vice President, and by the Treasurer (or an Assistant Treasurer, if
appointed) or the Secretary (or an Assistant Secretary, if appointed). In case
any officer or officers who shall have signed 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 shall have been delivered by the Corporation, such certificate or
certificates may nevertheless be adopted by the Corporation and be issued and
delivered as though the person or persons who signed such certificate had not
ceased to be such officer or officers of the Corporation.
6.2 RECORD.
A record in one or more counterparts shall be kept of the name of the
person, firm or corporation owning the shares represented by each certificate
for stock of the Corporation issued, the number of shares represented by each
such certificate, the date thereof and, in the case of cancellation, the date of
cancellation. Except as otherwise expressly required by law, the person in whose
name shares of stock stand on the stock record of the Corporation shall be
deemed the owner thereof for all purposes regarding the Corporation.
10
<PAGE> 14
6.3 TRANSFER AND REGISTRATION OF STOCK.
(a) The transfer of stock and certificates which represent the
stock of the Corporation shall be governed by Article 8 of Subtitle 1 of Title 6
of the Delaware Code (the Uniform Commercial Code), as amended from time to
time.
(b) Registration of transfers of shares of the Corporation shall
be made only on the books of the Corporation upon request of the registered
holder thereof, or of his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the Corporation, and upon the
surrender of the certificate or certificates for such shares properly endorsed
or accompanied by a stock power duly executed.
6.4 ADDRESSES OF STOCKHOLDERS.
Each stockholder shall designate to the Secretary an address at which
notices of meetings and all other corporate notices may be served or mailed to
him, and, if any stockholder shall fail to designate such address, corporate
notices may be served upon him by mail directed to him at his post-office
address, if any, as the same appears on the share record books of the
Corporation or at his last known post-office address.
6.5 LOST, DESTROYED AND MUTILATED CERTIFICATES.
The holder of any shares of the Corporation shall immediately notify
the Corporation of any loss, destruction or mutilation of the certificate
therefor, and the Board may, in its discretion, cause to be issued to him a new
certificate or certificates for such shares, upon the surrender of the mutilated
certificates or, in the case of loss or destruction of the certificate, upon
satisfactory proof of such loss or destruction, and the Board may, in its
discretion, require the owner of the lost or destroyed certificate or his legal
representative to give the Corporation a bond in such sum and with such surety
or sureties as it may direct to indemnify the Corporation against any claim that
may be made against it on account of the alleged loss or destruction of any such
certificate.
6.6 REGULATIONS.
The Board may make such rules and regulations as it may deem expedient,
not inconsistent with these By-laws, concerning the issue, transfer and
registration of certificates for stock of the Corporation.
6.7 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.
(a) 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 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, and which record date shall be not more than 60 nor less than 10
days before the date of such meeting. If no record date is fixed by the Board,
the record date for determining stockholders entitled to notice of or to vote at
a meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting
11
<PAGE> 15
is held. 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 may fix a new record date for the adjourned
meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
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, and which date
shall be not more than 10 days after the date upon which the resolution fixing
the record date is adopted by the Board. If no record date has been fixed by the
Board, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
is required by the Delaware Statute, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in this State,
its principal place of business or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board and prior action by the Board is required by the
Delaware Statute, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the day on which the Board adopts the resolution taking such
prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board 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 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 adopts
the resolution relating thereto.
ARTICLE VII
SEAL
The Board may provide a corporate seal, which shall be in the form of a
circle and shall bear the full name of the Corporation, the year of
incorporation of the Corporation and the words and figures "Corporate Seal --
Delaware."
ARTICLE VIII
FISCAL YEAR
The fiscal year of the Corporation shall be the calendar year unless
otherwise determined by the Board.
12
<PAGE> 16
ARTICLE IX
INDEMNIFICATION AND INSURANCE
INDEMNIFICATION.
(a) As provided in the Charter, to the fullest extent permitted by
the Delaware Statute as the same exists or may hereafter be amended, a director
of this Corporation shall not be liable to the Corporation or its stockholders
for breach of fiduciary duty as a director.
(b) Without limitation of any right conferred by paragraph (a) of
this Section 1, each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any threatened, pending or completed
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, officer or employee of the Corporation or is or was
serving at the request of the Corporation as a director, officer or employee 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 while serving as a director, officer or employee
or in any other capacity while serving as a director, officer or employee, shall
be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware Statute, 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, excise taxes or 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 or employee and shall inure to the benefit of the indemnitee's
heirs, testators, intestates, executors and administrators; provided, however,
that such person acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation, and with
respect to a criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful; provided further, however, that no indemnification
shall be made in the case of an action, suit or proceeding by or in the right of
the Corporation in relation to matters as to which it shall be adjudged in such
action, suit or proceeding that such director, officer, employee or agent is
liable to the Corporation, unless a court having jurisdiction shall determine
that, despite such adjudication, such person is fairly and reasonably entitled
to indemnification; provided further, however, that, except as provided in
Section 1(c) of this Article IX 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) initiated by such indemnitee was authorized
by the Board of Directors of the Corporation. The right to indemnification
conferred in this Article IX 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 "advancement of
expenses"); provided, however, that, if the Delaware Statute requires, an
advancement 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)
13
<PAGE> 17
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 or otherwise.
(c) If a claim under Section (b) of this Article IX is not paid in
full by the Corporation with 60 days after a written claim has been received by
the Corporation, except in the case of a claim for an advancement of expenses,
in which case the applicable period shall be 20 days, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of any undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) in any suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking the Corporation
shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met the applicable standard of conduct set forth in the
Delaware Statute. Neither the failure of the Corporation (including the Board,
independent legal counsel, or the stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct set forth in the Delaware Statute, nor an actual
determination by the Corporation (including the Board, independent legal
counsel, or the stockholders) that the indemnitee has not met such applicable
standard of conduct, shall create a presumption that the indemnitee has not met
the applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Section or otherwise shall be on the Corporation.
(d) The rights to indemnification and to the advancement of
expenses conferred in this Article IX shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, the Charter,
agreement, vote of stockholders or disinterested directors or otherwise.
9.2 INSURANCE.
The Corporation may purchase and maintain insurance, at its expense, to
protect itself and any person who is or was a director, officer, employee or
agent of the Corporation or any person who is or was serving at the request of
the Corporation as a director, officer, employer or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under the
Delaware Statute.
14
<PAGE> 18
ARTICLE X
AMENDMENT
Any by-law (including these By-laws) may be adopted, amended or
repealed by the vote of the holders of a majority of the shares then entitled to
vote or by the stockholders' written consent pursuant to Section 10 of Article
II, or by the vote of the Board or by the directors' written consent pursuant to
Section 6 of Article III.
* * * * *
* * *
*
15
<PAGE> 1
EXHIBIT 4.1
=============================================================================
INDENTURE
Dated as of October 1, 1997
Among
ADVANCED ACCESSORY SYSTEMS, LLC
and
AAS CAPITAL CORPORATION, as Issuers,
the GUARANTORS named herein
and
First Union National Bank, as Trustee
------------------
$125,000,000
9 3/4% Senior Subordinated Notes due 2007, Series A
9 3/4% Senior Subordinated Notes due 2007, Series B
=============================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
----------- -------
<S> <C>
Section. 310(a)(1).................................................................... 7.10
(a)(2)........................................................................ 7.10
(a)(3)........................................................................ N.A.
(a)(4)........................................................................ N.A.
(a)(5)........................................................................ 7.08, 7.10.
(b)........................................................................... 7.08; 7.10; 13.02
(c)........................................................................... N.A.
Section. 311(a)....................................................................... 7.11
(b)........................................................................... 7.11
(c)........................................................................... N.A.
Section. 312(a)........................................................................ 2.05
(b)........................................................................... 11.03
(c)........................................................................... 11.03
Section. 313(a)........................................................................ 7.06
(b)(1)........................................................................ N.A.
(b)(2)........................................................................ 7.06
(c)........................................................................... 7.06; 13.02
(d)........................................................................... 7.06
Section. 314(a)........................................................................ 4.11; 4.12; 13.02
(b)........................................................................... N.A.
(c)(1)........................................................................ 13.04
(c)(2)........................................................................ 13.04
(c)(3)........................................................................ N.A.
(d)........................................................................... N.A.
(e)........................................................................... 13.05
(f)........................................................................... N.A.
Section. 315(a)........................................................................ 7.01(b)
(b)........................................................................... 7.05; 13.02
(c)........................................................................... 7.01(a)
(d)........................................................................... 7.01(c)
(e)........................................................................... 6.11
Section. 316(a)(last sentence)......................................................... 2.09
(a)(1)(A)..................................................................... 6.05
(a)(1)(B)..................................................................... 6.04
(a)(2)........................................................................ N.A.
(b)........................................................................... 6.07
(c)........................................................................... 10.04
Section. 317(a)(1)..................................................................... 6.08
(a)(2)........................................................................ 6.09
(b)........................................................................... 2.04
Section. 318(a)........................................................................ 13.01
</TABLE>
- ----------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
SECTION 1.01. Definitions...............................................................................1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act........................................22
SECTION 1.03. Rules of Construction....................................................................22
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating..........................................................................23
SECTION 2.02. Execution and Authentication.............................................................24
SECTION 2.03. Registrar and Paying Agent...............................................................25
SECTION 2.04. Paying Agent To Hold Assets in Trust.....................................................25
SECTION 2.05. Holder Lists.............................................................................25
SECTION 2.06. Transfer and Exchange....................................................................26
SECTION 2.07. Replacement Securities...................................................................26
SECTION 2.08. Outstanding Securities...................................................................27
SECTION 2.09. Treasury Securities......................................................................27
SECTION 2.10. Temporary Securities.....................................................................27
SECTION 2.11. Cancellation.............................................................................28
SECTION 2.12. Defaulted Interest.......................................................................28
SECTION 2.13. CUSIP Number.............................................................................28
SECTION 2.14. Deposit of Moneys........................................................................28
SECTION 2.15. Book-Entry Provisions for Global Securities..............................................29
SECTION 2.16. Registration of Transfers and Exchanges..................................................30
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.......................................................................34
SECTION 3.02. Selection of Securities To Be Redeemed...................................................34
SECTION 3.03. Notice of Redemption.....................................................................34
SECTION 3.04. Effect of Notice of Redemption...........................................................35
SECTION 3.05. Deposit of Redemption Price..............................................................35
SECTION 3.06. Securities Redeemed in Part..............................................................36
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities....................................................................36
</TABLE>
-i-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 4.02. Maintenance of Office or Agency..........................................................36
SECTION 4.03. Transactions with Affiliates.............................................................37
SECTION 4.04. Limitation on Indebtedness...............................................................37
SECTION 4.05. Limitation on Foreign Indebtedness.......................................................38
SECTION 4.06. Limitation on Senior Subordinated Indebtedness...........................................38
SECTION 4.07. Disposition of Proceeds of Asset Sales...................................................38
SECTION 4.08. Limitation on Restricted Payments........................................................40
SECTION 4.09. Limitation on the Sale or Issuance of Equity Interests of Restricted
Subsidiaries...........................................................................42
SECTION 4.10. Notice of Defaults.......................................................................42
SECTION 4.11. Limitation on Liens......................................................................42
SECTION 4.12. Provision of Financial Information.......................................................43
SECTION 4.13. Limitations on Dividend and Other Payment Restrictions Affecting
Subsidiaries...........................................................................43
SECTION 4.14. Guarantees by Restricted Subsidiaries....................................................44
SECTION 4.15. Designation of Unrestricted Subsidiaries.................................................44
SECTION 4.16. Offer to Purchase upon Change of Control.................................................45
SECTION 4.17. Compliance Certificate...................................................................46
SECTION 4.18. Corporate Existence......................................................................46
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Sale of Assets, etc.............................................................47
SECTION 5.02. Successor Corporation Substituted........................................................48
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default........................................................................48
SECTION 6.02. Acceleration.............................................................................50
SECTION 6.03. Other Remedies...........................................................................50
SECTION 6.04. Waiver of Past Default...................................................................51
SECTION 6.05. Control by Majority......................................................................51
SECTION 6.06. Limitation on Suits......................................................................51
SECTION 6.07. Rights of Holders To Receive Payment.....................................................52
SECTION 6.08. Collection Suit by Trustee...............................................................52
SECTION 6.09. Trustee May File Proofs of Claim.........................................................52
SECTION 6.10. Priorities...............................................................................53
SECTION 6.11. Undertaking for Costs....................................................................53
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee........................................................................53
SECTION 7.02. Rights of Trustee........................................................................55
SECTION 7.03. Individual Rights of Trustee.............................................................56
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 7.04. Trustee's Disclaimer.....................................................................56
SECTION 7.05. Notice of Defaults.......................................................................56
SECTION 7.06. Reports by Trustee to Holders............................................................57
SECTION 7.07. Compensation and Indemnity...............................................................57
SECTION 7.08. Replacement of Trustee...................................................................58
SECTION 7.09. Successor Trustee by Merger, etc.........................................................59
SECTION 7.10. Eligibility; Disqualification............................................................59
SECTION 7.11. Preferential Collection of Claims Against Issuers........................................59
ARTICLE EIGHT
SUBORDINATION OF SECURITIES
SECTION 8.01. Securities Subordinated to Senior Indebtedness...........................................60
SECTION 8.02. Payment Over of Proceeds upon Dissolution, etc...........................................60
SECTION 8.03. No Payment on Securities in Certain Circumstances........................................61
SECTION 8.04. Subrogation..............................................................................62
SECTION 8.05. Obligations of Issuers Unconditional.....................................................63
SECTION 8.06. Notice to Trustee........................................................................63
SECTION 8.07. Reliance on Judicial Order or Certificate of Liquidating Agent...........................64
SECTION 8.08. Trustee's Relation to Senior Indebtedness................................................64
SECTION 8.09. Subordination Rights Not Impaired by Acts or Omissions of the Issuers or
Holders of Senior Indebtedness.........................................................64
SECTION 8.10. Holders Authorize Trustee To Effectuate Subordination of Securities......................65
SECTION 8.11. This Article Not To Prevent Events of Default............................................65
SECTION 8.12. Trustee's Compensation Not Prejudiced....................................................65
SECTION 8.13. No Waiver of Subordination Provisions....................................................65
SECTION 8.14. Subordination Provisions Not Applicable to Money Held in Trust for
Holders; Payments May Be Paid Prior to Dissolution.....................................66
SECTION 8.15. Acceleration of Securities...............................................................66
ARTICLE NINE
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 9.01. Termination of the Issuers' Obligations..................................................66
SECTION 9.02. Legal Defeasance and Covenant Defeasance.................................................67
SECTION 9.03. Conditions to Legal Defeasance or Covenant Defeasance....................................68
SECTION 9.04. Application of Trust Money; Trustee Acknowledgment and Indemnity.........................69
SECTION 9.05. Repayment to Company.....................................................................70
SECTION 9.06. Reinstatement............................................................................70
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders...............................................................70
SECTION 10.02. With Consent of Holders..................................................................71
SECTION 10.03. Compliance with Trust Indenture Act......................................................73
SECTION 10.04. Record Date for Consents and Effect of Consents..........................................73
</TABLE>
-iii-
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 10.05. Notation on or Exchange of Securities....................................................73
SECTION 10.06. Trustee To Sign Amendments, etc..........................................................74
ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. Unconditional Guarantee..................................................................74
SECTION 11.02. Severability.............................................................................75
SECTION 11.03. Release of a Guarantor...................................................................75
SECTION 11.04. Limitation of Guarantor's Liability......................................................75
SECTION 11.05. Contribution.............................................................................76
SECTION 11.06. Execution of Security Guarantee..........................................................76
SECTION 11.07. Subordination of Subrogation and Other Rights............................................76
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE
SECTION 12.01. Guarantee Obligations Subordinated to Guarantor Senior Indebtedness......................77
SECTION 12.02. No Payment on Guarantees in Certain Circumstances........................................77
SECTION 12.03. Payment Over of Proceeds upon Dissolution, Etc...........................................78
SECTION 12.04. Subrogation..............................................................................79
SECTION 12.05. Obligations of Guarantors Unconditional..................................................80
SECTION 12.06. Notice to Trustee........................................................................80
SECTION 12.07. Reliance on Judicial Order or Certificate of Liquidating Agent...........................81
SECTION 12.08. Trustee's Relation to Guarantor Senior Indebtedness......................................81
SECTION 12.09. Subordination Rights Not Impaired by Acts or Omissions of the Guarantors
or Holders of Guarantor Senior Indebtedness............................................82
SECTION 12.10. Holders Authorize Trustee To Effectuate Subordination of Guarantee.......................82
SECTION 12.11. This Article Not To Prevent Events of Default............................................82
SECTION 12.12. Trustee's Compensation Not Prejudiced....................................................82
SECTION 12.13. No Waiver of Guarantee Subordination Provisions..........................................82
SECTION 12.14. Payments May Be Paid Prior to Dissolution................................................83
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls.............................................................83
SECTION 13.02. Notices..................................................................................83
SECTION 13.03. Communications by Holders with Other Holders.............................................85
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.......................................85
SECTION 13.05. Statements Required in Certificate.......................................................85
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar................................................86
SECTION 13.07. Governing Law............................................................................86
SECTION 13.08. No Recourse Against Others...............................................................86
SECTION 13.09. Successors...............................................................................86
SECTION 13.10. Counterpart Originals....................................................................86
SECTION 13.11. Severability.............................................................................86
</TABLE>
-iv-
<PAGE> 7
<TABLE>
<S> <C> <C>
SECTION 13.12. No Adverse Interpretation of Other Agreements............................................87
SECTION 13.13. Legal Holidays...........................................................................87
SIGNATURES..................................................................................................S-1
EXHIBIT A Form of Series A Security.................................................................A-1
EXHIBIT B Form of Series B Security.................................................................B-1
EXHIBIT C Form of Legend for Global Securities......................................................C-1
EXHIBIT D Form of Transfer Certificate..............................................................D-1
EXHIBIT E Form of Transfer Certificate for Institutional Accredited Investors.......................E-1
</TABLE>
- -----------------
NOTE: This Table of Contents shall not, for any purpose, be deemed to be a part
of the Indenture.
-v-
<PAGE> 8
INDENTURE dated as of October 1, 1997, among ADVANCED
ACCESSORY SYSTEMS, LLC, a Delaware limited liability company (the "Company"),
AAS CAPITAL CORPORATION, a Delaware corporation ("Capital Corp." and, together
with the Company, the "Issuers"), the GUARANTORS named herein and FIRST UNION
NATIONAL BANK, as trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each
other party and for the equal and ratable benefit of the Holders of the
Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person (a)
assumed in connection with an Acquisition from such Person or (b) existing at
the time such Person becomes a Restricted Subsidiary or is merged or
consolidated with or into the Company or any Restricted Subsidiary.
"Acquired Person" means, with respect to any specified Person,
any other Person which merges with or into or becomes a Subsidiary of such
specified Person.
"Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) by the Company or any
Restricted Subsidiary to any other Person, or any acquisition or purchase of
Equity Interests of any other Person by the Company or any Restricted
Subsidiary, in either case pursuant to which such Person shall become a
Restricted Subsidiary or shall be consolidated with or merged into the Company
or any Restricted Subsidiary, or (ii) any acquisition by the Company or any
Restricted Subsidiary of the assets of any Person which constitute substantially
all of an operating unit or line of business of such Person or which is
otherwise outside of the ordinary course of business.
"Acquisition Facility" means a credit facility entered into by
the Company and one or more commercial banks or other lenders pursuant to which
the Company and/or its Restricted Subsidiaries may incur Indebtedness for the
purpose of financing one or more acquisitions of assets or equity securities of
any Related Business and paying related fees and expenses.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"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 or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise.
"Affiliate Transaction" has the meaning provided in Section
4.03.
"Agent" means any Registrar, Paying Agent or co-Registrar.
<PAGE> 9
-2-
"Asset Sale" means any direct or indirect sale, conveyance,
transfer, lease (that has the effect of a disposition) or other disposition
(including, without limitation, any merger, consolidation or sale-leaseback
transaction) to any Person other than the Company or a Wholly Owned Restricted
Subsidiary, in one transaction or a series of related transactions, of (i) any
Equity Interest of any Restricted Subsidiary (other than directors' qualifying
shares, to the extent mandated by applicable law); (ii) any assets of the
Company or any Restricted Subsidiary which constitute substantially all of an
operating unit or line of business of the Company or any Restricted Subsidiary;
or (iii) any other property or asset of the Company or any Restricted Subsidiary
outside of the ordinary course of business (including the receipt of proceeds
paid on account of the loss of or damage to any property or asset and awards of
compensation for any asset taken by condemnation, eminent domain or similar
proceedings). For the purposes of this definition, the term "Asset Sale" shall
not include (a) any transaction consummated in compliance with Section 5.01 and
the creation of any Lien not prohibited by Section 4.11; (b) sales of property
or equipment that has become worn out, obsolete or damaged or otherwise
unsuitable for use in connection with the business of the Company or any
Restricted Subsidiary, as the case may be; (c) any transaction consummated in
compliance with Section 4.08; and (d) any transfers of properties and assets to
the Company, between the Company and Wholly Owned Restricted Subsidiaries that
are Guarantors or between Wholly Owned Restricted Subsidiaries. In addition,
solely for purposes of Section 4.07, any sale, conveyance, transfer, lease or
other disposition of any property or asset, whether in one transaction or a
series of related transactions, involving assets with a Fair Market Value not in
excess of $1.0 million in any fiscal year shall be deemed not to be an Asset
Sale.
"Attributable Indebtedness" in respect of a Sale and
Lease-Back Transaction means, as at the time of determination, the present value
(discounted according to GAAP at the cost of indebtedness implied in the lease)
of the total obligations of the lessee for rental payments during the remaining
term of the lease included in such Sale and Lease-Back Transaction (including
any period for which such lease has been extended).
"Bankruptcy Law" has the meaning provided in Section 6.01.
"Board Resolution" means, with respect to any Person, a duly
adopted resolution of the Board of Managers of such Person or a duly authorized
committee of such Board of Managers.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions in New York, New York or Charlotte, North
Carolina are not required to be open.
"Capital Corp." means the Person named as "Capital Corp." in
the first paragraph of this Indenture until a successor shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter "Capital
Corp." shall mean such successor.
"Capitalized Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at such time be required to be capitalized on the
balance sheet in accordance with GAAP.
"Cash Equivalents" means: (a) securities issued or directly
and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof, the government of Canada or the government of any
member of the European Union, in each case having maturities of not more than
one year from the date of acquisition; (b) domestic and Eurocurrency
certificates of deposit, time deposits and base rate certificates of deposit
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any commercial bank in-
<PAGE> 10
-3-
corporated under the laws of the United States, any state thereof, the District
of Columbia or its branches or agencies or under the laws of Canada or the laws
of any member of the European Union and having capital and surplus in excess of
$250 million and whose long-term debt is rated at least "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Act); (c) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (a) and (b) above entered into with any financial
institution meeting the qualifications specified in clause (b) above; (d)
commercial paper rated P-1, A-1 or the equivalent thereof by Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's Ratings Group ("S&P"),
respectively, and in each case maturing within six months after the date of
acquisition; (e) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either S&P or Moody's; (f) investments in money market funds
which invest substantially all their assets in securities of the types described
in clauses (a) through (e) above; and (g) in the case of any Foreign Restricted
Subsidiary, Investments: (i) in direct obligations of the sovereign nation (or
any agency thereof) in which such Foreign Restricted Subsidiary is organized and
is conducting business or in obligations fully and unconditionally guaranteed by
such sovereign nation (or any agency thereof) or (ii) of the type and maturity
described in clauses (a) and (b) above of foreign obligors, which Investments or
obligors (or the parents of such obligors) have ratings described in such
clauses or equivalent ratings from comparable foreign rating agencies.
"Change of Control" means the occurrence of any of the
following events (whether or not approved by the Board of Managers of the
Company): (i) any Person (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act, including any group acting for the purpose of acquiring,
holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under
the Exchange Act), other than one or more Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
shares that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the happening of
an event or otherwise), directly or indirectly, of more than 35% of the total
voting power of the then outstanding Voting Equity Interests of the Company;
(ii) the Company consolidates with, or merges with or into, another Person
(other than a Wholly Owned Restricted Subsidiary) or the Company or any of its
Subsidiaries sells, assigns, conveys, transfers, leases or otherwise disposes of
all or substantially all of the assets of the Company and its Subsidiaries
(determined on a consolidated basis) to any Person (other than the Company or
any Wholly Owned Restricted Subsidiary), other than any such transaction where
immediately after such transaction the Person or Persons that "beneficially
owned" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a Person shall be deemed to have "beneficial ownership" of all securities that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time) immediately prior to such
transaction, directly or indirectly, a majority of the total voting power of the
then outstanding Voting Equity Interests of Holdings or the Company, as the case
may be, "beneficially own" (as so determined), directly or indirectly, a
majority of the total voting power of the then outstanding Voting Equity
Interests of the surviving or transferee Person; (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Managers of the Company (together with any new directors whose
election by such Board of Managers or whose nomination for election by the
members of the Company was approved by a vote of a majority of the directors of
the Company then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of Managers
of the Company then in office; or (iv) the Company is liquidated or dissolved or
adopts a plan of liquidation or dissolution other than in a transaction which
complies with the provisions described under Section 5.01.
<PAGE> 11
-4-
"Change of Control Date" has the meaning provided in
Section 4.16.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor.
"Consolidated Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of Consolidated EBITDA for the four
quarter period of the most recent four consecutive fiscal quarters ending prior
to the date of such determination (the "Four Quarter Period") to (ii)
Consolidated Fixed Charges for such Four Quarter Period; provided, however, that
(1) if the Company or any Restricted Subsidiary has incurred any Indebtedness
since the beginning of such Four Quarter Period that remains outstanding on such
date of determination or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, Consolidated
EBITDA and Consolidated Fixed Charges for such Four Quarter Period shall be
calculated after giving effect on a pro forma basis to such Indebtedness as if
such Indebtedness had been Incurred on the first day of such Four Quarter Period
and the discharge of any other Indebtedness repaid, repurchased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such Four Quarter Period, (2) if since the
beginning of such Four Quarter Period the Company or any Restricted Subsidiary
shall have made any Asset Sale described in clause (i) or (ii) of the definition
thereof, the Consolidated EBITDA for such Four Quarter Period shall be reduced
by an amount equal to the Consolidated EBITDA (if positive) directly
attributable to the assets that are the subject of such Asset Sale for such Four
Quarter Period or increased by an amount equal to the Consolidated EBITDA (if
negative) directly attributable thereto for such Four Quarter Period and
Consolidated Fixed Charges for such Four Quarter Period shall be reduced by an
amount equal to the Consolidated Fixed Charges directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased or
otherwise discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Asset Sale for such Four Quarter Period
(or, if the Equity Interests of any Restricted Subsidiary are sold, the
Consolidated Fixed Charges for such Four Quarter Period directly attributable to
the Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (3) if since the beginning of such Four Quarter Period the
Company or any Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any Person that becomes a Restricted
Subsidiary) or an acquisition of assets, including any acquisition of assets
occurring in connection with a transaction causing a calculation to be made
hereunder, which constitutes all or substantially all of an operating unit of a
business, Consolidated EBITDA and Consolidated Fixed Charges for such Four
Quarter Period shall be calculated after giving pro forma effect thereto
(including the Incurrence of any Indebtedness) as if such Investment or
acquisition occurred on the first day of such Four Quarter Period and (4) if
since the beginning of such Four Quarter Period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such Four Quarter Period) shall
have made any Asset Sale or any Investment or acquisition of assets that would
have required an adjustment pursuant to clause (2) or (3) above if made by the
Company or a Restricted Subsidiary during such Four Quarter Period, Consolidated
EBITDA and Consolidated Fixed Charges for such Four Quarter Period shall be
calculated after giving pro forma effect thereto as if such Asset Sale,
Investment or acquisition of assets occurred on, with respect to any Investment
or acquisition, the first day of such Four Quarter Period and, with respect to
any Asset Sale, the day prior to the first day of such Four Quarter Period. For
purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Fixed Charges associated with any Indebtedness Incurred
in connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting officer of the Company in
accordance with Regulation S-X under the Securities Act as in effect on the
Issue Date. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest expense on such Indebtedness shall be
calculated as if the rate in effect
<PAGE> 12
-5-
on the date of determination had been the applicable rate for the entire period
(taking into account any agreement under which Interest Rate Protection
Obligations are outstanding applicable to such Indebtedness if such agreement
under which such Interest Rate Protection Obligations are outstanding has a
remaining term as at the date of determination in excess of 12 months);
provided, however, that the Consolidated Fixed Charges of the Company
attributable to interest on any Indebtedness Incurred under a revolving credit
facility computed on a pro forma basis shall be computed based upon the average
daily balance of such Indebtedness during the Four Quarter Period.
"Consolidated EBITDA" means, for any period, the Consolidated
Net Income for such period, plus the following to the extent deducted in
calculating such Consolidated Net Income: (i) Consolidated Income Tax Expense
for such period; (ii) Consolidated Interest Expense for such period; and (iii)
Consolidated Non-cash Charges for such period less (A) all non-cash items
increasing Consolidated Net Income for such period and (B) all cash payments
during such period relating to non-cash charges that were added back in
determining Consolidated EBITDA in any prior period.
"Consolidated Fixed Charges" means, with respect to any Person
for any period, the sum, without duplication, of (i) Consolidated Interest
Expense and (ii) the product of (x) the amount of all dividends on any series of
Preferred Equity Interest (other than Qualified Equity Interests) of such Person
and its Restricted Subsidiaries (other than dividends paid solely in Qualified
Equity Interests) paid, accrued or scheduled to be paid or accrued during such
period times (y) a fraction, the numerator of which is one and the denominator
of which is one minus the then current effective consolidated federal, state and
local tax rate of such Person, expressed as a decimal.
"Consolidated Income Tax Expense" means, with respect to the
Company for any period, the provision for federal, state, local and foreign
income taxes payable by the Company and the Restricted Subsidiaries for such
period as determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to the
Company for any period, without duplication, the sum of (i) the interest expense
of the Company and the Restricted Subsidiaries for such period as determined on
a consolidated basis in accordance with GAAP, including, without limitation, (a)
any amortization of debt discount and amortization or write-off of deferred
financing costs, (b) the net cost or benefit under Interest Rate Protection
Obligations (including any amortization of discounts), (c) the interest portion
of any deferred payment obligation, (d) all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (e) all capitalized interest and all accrued interest, (f) non-cash
interest expense and (g) interest on Indebtedness of another Person that is
guaranteed by the Company or any Restricted Subsidiary actually paid by the
Company or any Restricted Subsidiary and (ii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by the Company and the Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, the
consolidated net income (loss) of the Company and the Restricted Subsidiaries;
provided, however, that there shall not be included in such Consolidated Net
Income: (i) any net income (loss) of any Person if such Person is not a
Subsidiary, except (A) to the extent of cash actually distributed by such Person
during such period to the Company or a Restricted Subsidiary as a dividend or
other distribution and (B) the Company's equity in a net loss of any such Person
(other than an Unrestricted Subsidiary) for such period shall be included in
determining such Consolidated Net Income; (ii) any net income (loss) of any
Person acquired by the Company or a Restricted Subsidiary in a pooling of
interests transaction for any period prior to the date of such acquisition;
(iii) any net income (but not
<PAGE> 13
-6-
loss) of any Restricted Subsidiary if such Restricted Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the making
of distributions by such Restricted Subsidiary, directly or indirectly, to the
Company to the extent of such restrictions; (iv) any gain or loss realized upon
the sale or other disposition of any asset of the Company or the Restricted
Subsidiaries (including pursuant to any sale/leaseback transaction) outside of
the ordinary course of business (including, without limitation, on or with
respect to Investments) and there shall not be included dividends, distributions
or interest thereon; (v) any extraordinary gain or loss and any foreign currency
gains or losses; (vi) the cumulative effect of a change in accounting principles
after the Issue Date; and (vii) any restoration to income of any contingency
reserve of an extraordinary, non-recurring or unusual nature, except to the
extent that provision for such reserve was made out of Consolidated Net Income
accrued at any time following the Issue Date.
"Consolidated Non-cash Charges" means, with respect to any
Person, for any period the sum of (A) depreciation, (B) amortization and (C)
other non-cash expenses of such Person and its Restricted Subsidiaries reducing
Consolidated Net Income of such Person and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP (excluding,
for purposes of clause (C) only, such charges which require an accrual of or a
reserve for cash charges or payments for any future period and excluding
minority interest).
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 13.02 or such other address as the
Trustee may give notice to the Company.
"Credit Facilities" means (i) the Second Amended and Restated
Credit Agreement, dated as of August 5, 1997, among the Company, the
Subsidiaries of the Company identified on the signature pages thereof and any
Restricted Subsidiary that is later added thereto, the lenders named therein,
NBD Bank, as Administrative Agent and Documentation and Collateral Agent, and
The Chase Manhattan Bank, as Co-Administrative Agent and Syndication Agent, (ii)
the Credit Agreement, dated as of July 2, 1997, among Advanced Accessory Systems
Canada Inc., First Chicago NBD Bank, Canada, as Agent, First Chicago NBD Bank,
Canada and The Chase Manhattan Bank of Canada, as lenders and the guarantors
identified on the signature pages thereof and (iii) an Acquisition Facility, in
each case, as amended, including any deferrals, renewals, extensions,
replacements, refinancings or refundings thereof, or amendments, modifications
or supplements thereto and any agreement providing therefor, whether by or with
the same or any other lender, creditor, group of lenders or group of creditors,
and including related notes, guarantee and note agreements and other instruments
and agreements executed in connection therewith.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any Restricted Subsidiary of the Company against
fluctuations in currency values.
"Custodian" has the meaning provided in Section 6.01.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"Defeasance Trust Payment" has the meaning provided in
Section 8.02.
"Depository" means, with respect to the Securities issued in
the form of one or more Global Securities, The Depository Trust Company or
another Person designated as Depository by the Company, which must be a clearing
agency registered under the Exchange Act.
<PAGE> 14
-7-
"Designated Senior Indebtedness" means (a) any Indebtedness
outstanding under the Credit Facilities and (b) any other Senior Indebtedness
which, at the time of determination, has an aggregate principal amount
outstanding, together with any commitments to lend additional amounts, of at
least $25.0 million, if the instrument governing such Senior Indebtedness
expressly states that such Indebtedness is "Designated Senior Indebtedness" for
purposes of this Indenture.
"Designation" has the meaning provided in Section 4.08.
"Designation Amount" has the meaning provided in Section 4.11.
"Disposition" means, with respect to any Person, any merger,
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets.
"Disqualified Equity Interest" means any Equity Interest
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the holder
thereof), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable,
at the option of the holder thereof (except, in each case, upon the occurrence
of a Change of Control), in whole or in part, or exchangeable into Indebtedness
on or prior to the final maturity date of the Securities.
"Domestic" with respect to any Person shall mean a Person
whose jurisdiction of incorporation or formation is the United States, any state
thereof or the District of Columbia.
"Equity Interest" in any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) corporate stock or other
equity participations, including partnership interests, whether general or
limited, in such Person, including any Preferred Equity Interests.
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"Exchange Securities" means the 9 3/4% Senior Subordinated
Notes due 2007, Series B, to be issued in exchange for the Initial Securities
pursuant to the Registration Rights Agreement.
"Existing Management Holder" means each of F. Alan Smith,
Marshall D. Gladchun, Roger T. Morgan, Terence C. Seikel, Richard E. Borghi,
Barry Banducci and Gerard J. Brink.
"Expiration Date" has the meaning set forth in the definition
of "Offer to Purchase."
"Fair Market Value" means, with respect to any asset, the
price (after taking into account any liabilities relating to such assets) which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of which is under
any compulsion to complete the transaction; provided, however, that the Fair
Market Value of any such asset or assets shall be determined conclusively by the
Board of Managers of the Company acting in good faith, and shall be evidenced by
resolutions of the Board of Managers of the Company delivered to the Trustee.
<PAGE> 15
-8-
"Final Maturity Date" means October 1, 2007.
"Foreign EBITDA" means, for any period, the aggregate of the
Consolidated EBITDA of each of the Company's Foreign Restricted Subsidiaries.
"Foreign Interest Expense" means, for any period, the
aggregate of the Consolidated Interest Expense of each of the Company's Foreign
Restricted Subsidiaries.
"Foreign Restricted Subsidiary" means a Restricted Subsidiary
other than a Domestic Restricted Subsidiary.
"Four Quarter Period" has the meaning set forth in the
definition of "Consolidated Coverage Ratio."
"Funding Guarantor" has the meaning provided in Section 11.05.
"GAAP" means, at any date of determination, generally accepted
accounting principles in effect in the United States which are applicable at the
date of determination and which are consistently applied for all applicable
periods.
"Global Securities" means one or more 144A Global Securities
or IAI Global Securities.
"Guarantee" means, as applied to any obligation, (i) a
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner, of any part
or all of such obligation and (ii) an agreement, direct or indirect, contingent
or otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Guarantee" means the guarantee of the Securities by each
Guarantor under this Indenture.
"Guarantor" means (i) each Domestic Subsidiary of the Company
existing on the Issue Date and (ii) each other Domestic Restricted Subsidiary,
formed, created or acquired before or after the Issue Date, required to become a
Guarantor after the Issue Date.
"Guarantor Blockage Period" has the meaning provided in
Section 12.02(a).
"Guarantor Payment Blockage Notice" has the meaning provided
in Section 12.02(a).
"Guarantor Senior Indebtedness" means, with respect to any
Guarantor, at any date, (a) all Obligations of such Guarantor under the Credit
Facilities; (b) all Interest Rate Protection Obligations of such Guarantor; (c)
all Obligations of such Guarantor under letters of credit; and (d) all other
Indebtedness of such Guarantor, including principal, premium, if any, and
interest (including Post-Petition Interest) on such Indebtedness unless the
instrument under which such Indebtedness of such Guarantor is Incurred expressly
provides that such Indebtedness is not senior or superior in right of payment to
such Guarantor's Guarantee of the Securities, and all renewals, extensions,
modifications, amendments or refinancings thereof. Notwithstanding the
foregoing, Guarantor Senior Indebtedness shall not include (a) to the extent
that it may constitute Indebtedness, any Obligation for federal, state, local or
other taxes; (b) any Indebtedness among or between such Guarantor
<PAGE> 16
-9-
and any Subsidiary of such Guarantor or any Affiliate of such Guarantor or any
of such Affiliate's Subsidiaries; (c) to the extent that it may constitute
Indebtedness, any Obligation in respect of any trade payable Incurred for the
purchase of goods or materials, or for services obtained, in the ordinary course
of business; (d) Indebtedness evidenced by such Guarantor's Guarantee of the
Securities; (e) Indebtedness of such Guarantor that is expressly subordinate or
junior in right of payment to any other Indebtedness of such Guarantor; (f) to
the extent that it may constitute Indebtedness, any obligation owing under
leases (other than Capitalized Lease Obligations) or management agreements; and
(g) any obligation that by operation of law is subordinate to any general
unsecured obligations of such Guarantor.
"Holders" means the registered holders of the Securities.
"IAI Global Security" means a permanent global security in
registered form representing the aggregate principal amount of Securities
transferred after the Issue Date to Institutional Accredited Investors.
"Income Tax Liabilities" means with respect to any member or,
in the event such member is a flow-through entity, such direct or indirect owner
or owners of such member as is or are subject to income taxes on income of the
Company or any of its Restricted Subsidiaries that are limited liability
companies for any calendar year, an amount determined by multiplying (a) such
Person's allocable share of all taxable income and gains of such limited
liability company by (b) forty-four percent (44%).
"Incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (including by conversion,
exchange or otherwise), assume, guarantee or otherwise become liable in respect
of such Indebtedness or other obligation or the recording, as required pursuant
to GAAP or otherwise, of any such Indebtedness or other obligation on the
balance sheet of such Person (and "Incurrence," "Incurred" and "Incurring" shall
have meanings correlative to the foregoing). Indebtedness of any Acquired Person
or any of its Subsidiaries existing at the time such Acquired Person becomes a
Restricted Subsidiary (or is merged into or consolidated with the Company or any
Restricted Subsidiary), whether or not such Indebtedness was Incurred in
connection with, as a result of, or in contemplation of, such Acquired Person
becoming a Restricted Subsidiary (or being merged into or consolidated with the
Company or any Restricted Subsidiary), shall be deemed Incurred at the time any
such Acquired Person becomes a Restricted Subsidiary or merges into or
consolidates with the Company or any Restricted Subsidiary.
"Indebtedness" means (without duplication), with respect to
any Person, whether recourse is to all or a portion of the assets of such Person
and whether or not contingent, (a) every obligation of such Person for money
borrowed; (b) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments; (c) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person; (d) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable incurred in the ordinary course of
business and payable in accordance with industry practices, or other accrued
liabilities arising in the ordinary course of business; (e) every Capitalized
Lease Obligation of such Person; (f) every net obligation under Interest Rate
Protection Obligations or similar agreements or Currency Agreements of such
Person; (g) Attributable Indebtedness; (h) every obligation of the type referred
to in clauses (a) through (g) of another Person the payment of which, in either
case, such Person has guaranteed or is responsible or liable for, directly or
indirectly, as obligor, guarantor or otherwise; and (i) any and all deferrals,
renewals, extensions and refundings of, or amendments, modifications or
supplements to, any liability of the kind described in any of the preceding
clauses (a) through (h) above. Indebtedness (i) shall not include obligations of
any Person (x) arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently drawn against
insufficient funds in the ordinary course of business, provided
<PAGE> 17
-10-
that such obligations are extinguished within five Business Days of their
incurrence, (y) resulting from the endorsement of negotiable instruments for
collection in the ordinary course of business and consistent with past business
practices and (z) under stand-by letters of credit to the extent collateralized
by cash or Cash Equivalents; (ii) which provides that an amount less than the
principal amount thereof shall be due upon any declaration of acceleration
thereof shall be deemed to be incurred or outstanding in an amount equal to the
accreted value thereof at the date of determination; (iii) shall include the
liquidation preference and any mandatory redemption payment obligations in
respect of any Disqualified Equity Interests of the Company or any Restricted
Subsidiary; and (iv) shall not include obligations under performance bonds,
performance guarantees, surety bonds and appeal bonds, letters of credit or
similar obligations incurred in the ordinary course of business.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Independent Financial Advisor" means a nationally recognized
accounting, appraisal or investment banking firm or consultant (i) which does
not, and whose directors, officers and employees or Affiliates do not, have a
direct or indirect financial interest in the Company and (ii) which, in the
judgment of the Board of Managers of the Company, is otherwise independent and
qualified to perform the task for which it is to be engaged.
"Initial Purchasers" means Chase Securities Inc. and First
Chicago Capital Markets, Inc.
"Initial Securities" means the 9 3/4% Senior Subordinated
Notes due 2007, Series A, of the Issuers.
"Insolvency or Liquidation Proceeding" means, with respect to
any Person, any liquidation, dissolution or winding up of such Person, or any
bankruptcy, reorganization, insolvency, receivership or similar proceeding with
respect to such Person, whether voluntary or involuntary.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"interest" means, with respect to the Securities, the sum of
any cash interest and any Additional Interest (as defined under "Registration
Rights") on the Securities.
"Interest Payment Date" means each semiannual interest payment
date on April 1 and October 1 of each year, commencing on April 1, 1998.
"Interest Rate Protection Obligations" means, with respect to
any Person, the Obligations of such Person under (i) interest rate swap
agreements, interest rate cap agreements and interest rate collar agreements,
and (ii) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
"Interest Record Date" for the interest payable on any
Interest Payment Date (except a date for payment of defaulted interest) means
the March 15 or September 15 (whether or not a Business Day), as the case may
be, immediately preceding such Interest Payment Date.
"Investment" means, with respect to any Person, any direct or
indirect loan, advance, guarantee or other extension of credit or capital
contribution to (by means of transfers of cash or other property or assets to
others or payments for property or services for the account or use of others, or
otherwise), or pur-
<PAGE> 18
-11-
chase or acquisition of capital stock, bonds, notes, debentures or other
securities or evidences of Indebtedness issued by, any other Person. For
purposes of Section 4.08, the amount of any Investment shall be the original
cost of such Investment, plus the cost of all additions thereto, but without any
other adjustments for increases or decreases in value, or write-ups, write-downs
or write-offs with respect to such Investment, reduced by the payment of
dividends or distributions in connection with such Investment or any other
amounts received in respect of such Investment; provided, however, that no such
payment of dividends or distributions or receipt of any such other amounts shall
reduce the amount of any Investment if such payment of dividends or
distributions or receipt of any such amounts would be included in Consolidated
Net Income. In determining the amount of any Investment involving a transfer of
any property or asset other than cash, such property shall be valued at its Fair
Market Value at the time of such transfer, as determined in good faith by the
Board of Managers (or comparable body) of the Person making such transfer. If
the Company or any Restricted Subsidiary sells or otherwise disposes of any
Voting Equity Interests of any direct or indirect Restricted Subsidiary such
that, after giving effect to any such sale or disposition, the Company no longer
owns, directly or indirectly, greater than 50% of the outstanding Voting Equity
Interests of such Restricted Subsidiary, the Company shall be deemed to have
made an Investment on the date of any such sale or disposition equal to the fair
market value of Voting Equity Interests of such former Restricted Subsidiary not
sold or disposed of.
"Issue Date" means the original issue date of the Securities.
"Issuer Request" or "Issuer Order" means a written request or
order signed in the name of each of the Issuers by its respective Chairman of
the Board, its Vice Chairman of the Board, its President, a Vice President or
its Treasurer, and by its respective Assistant Treasurer, its Secretary or an
Assistant Secretary, and delivered to the Trustee.
"Issuers" means collectively, the Company and Capital Corp.
"Lien" means any lien, mortgage, charge, security interest,
hypothecation, assignment for security or encumbrance of any kind (including any
conditional sale or capital lease or other title retention agreement, any lease
in the nature thereof, and any agreement to give any security interest).
"Maturity Date" means the date, which is set forth on the face
of the Securities, on which the Securities will mature.
"Net Cash Proceeds" means the aggregate proceeds in the form
of cash or Cash Equivalents received by the Company or any Restricted Subsidiary
in respect of any Asset Sale, including all cash or Cash Equivalents received
upon any sale, liquidation or other exchange of proceeds of Asset Sales received
in a form other than cash or Cash Equivalents, net of (a) the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof; (b) taxes paid or payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements); (c) amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale (including payments made to obtain or avoid the need for the
consent of any holder of such Indebtedness); (d) amounts deemed, in good faith,
appropriate by the Board of Managers of the Company to be provided as a reserve,
in accordance with GAAP, against any liabilities associated with such assets
which are the subject of such Asset Sale; including, without limitation, pension
and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as reflected in an officers' certificate
delivered to the Trustee (provided that the amount of any such reserves shall be
deemed to constitute Net Cash Proceeds at the time such reserves shall have been
re-
<PAGE> 19
-12-
versed or are not otherwise required to be retained as a reserve); and (e)
with respect to Asset Sales by Restricted Subsidiaries, the portion of such cash
payments attributable to Persons holding a minority interest in such Restricted
Subsidiary.
"Net Proceeds Utilization Date" has the meaning provided in
Section 4.07.
"Obligations" means any principal, interest (including,
without limitation, Post-Petition Interest), penalties, fees, indemnifications,
reimbursement obligations, damages and other liabilities payable under the
documentation governing any Indebtedness.
"Offer" has the meaning set forth in the definition of
"Offer to Purchase."
"Offer to Purchase" means a written offer (the "Offer") sent
by or on behalf of the Company by first-class mail, postage prepaid, to each
Holder at his address appearing in the register for the Securities on the date
of the Offer offering to purchase up to the principal amount of Securities
specified in such Offer at the purchase price specified in such Offer (as
determined pursuant to this Indenture). Unless otherwise required by applicable
law, the Offer shall specify an expiration date (the "Expiration Date") of the
Offer to Purchase, which shall be not less than 30 days nor more than 60 days
after the date of such Offer, and a settlement date (the "Purchase Date") for
purchase of Securities to occur no later than five Business Days after the
Expiration Date. The Company shall notify the Trustee at least 15 days (or such
shorter period as is acceptable to the Trustee) prior to the mailing of the
Offer of the Company's obligation to make an Offer to Purchase, and the Offer
shall be mailed by the Company or, at the Company's request, by the Trustee in
the name and at the expense of the Company. The Offer shall also contain
information concerning the business of the Company and its Subsidiaries which
the Company in good faith believes will enable such Holders to make an informed
decision with respect to the Offer to Purchase (which at a minimum will include
(i) the most recent annual and quarterly financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in the documents required to be filed with the Trustee pursuant to
this Indenture (which requirements may be satisfied by delivery of such
documents together with the Offer), (ii) a description of material developments
in the Company's business subsequent to the date of the latest of such financial
statements referred to in clause (i) (including a description of the events
requiring the Company to make the Offer to Purchase), (iii) if applicable,
appropriate pro forma financial information concerning the Offer to Purchase and
the events requiring the Company to make the Offer to Purchase and (iv) any
other information required by applicable law to be included therein). The Offer
shall contain all instructions and materials necessary to enable such Holders to
tender Securities pursuant to the Offer to Purchase. The Offer shall also state:
(1) the Section of this Indenture pursuant to which the Offer to Purchase is
being made; (2) the Expiration Date and the Purchase Date; (3) the aggregate
principal amount of the outstanding Securities offered to be purchased by the
Company pursuant to the Offer to Purchase (including, if less than 100%, the
manner by which such amount has been determined pursuant to this Section of this
Indenture requiring the Offer to Purchase) (the "Purchase Amount"); (4) the
purchase price to be paid by the Company for each $1,000 aggregate principal
amount of Securities accepted for payment (as specified pursuant to this
Indenture) (the "Purchase Price"); (5) that the Holder may tender all or any
portion of the Securities registered in the name of such Holder and that any
portion of a Security tendered must be tendered in an integral multiple of
$1,000 principal amount; (6) the place or places where Securities are to be
surrendered for tender pursuant to the Offer to Purchase; (7) that interest on
any Security not tendered or tendered but not purchased by the Company pursuant
to the Offer to Purchase will continue to accrue; (8) that on the Purchase Date
the Purchase Price will become due and payable upon each Security being accepted
for payment pursuant to the Offer to Purchase and that interest thereon shall
cease to accrue on and after the Purchase Date; (9) that each Holder electing to
tender all or any portion of a Security pursuant to the Offer to Purchase will
be required to surren-
<PAGE> 20
-13-
der such Security at the place or places specified in the Offer prior to the
close of business on the Expiration Date (such Security being, if the Company or
the Trustee so requires, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in writing);
(10) that each Holder will be entitled to withdraw all or any portion of any
Securities tendered by such Holder if the Company (or its Paying Agent)
receives, not later than the close of business on the fifth Business Day next
preceding the Expiration Date, a telegram, telex, facsimile transmission or
letter setting forth the name of such Holder, the principal amount of the
Security such Holder tendered, the certificate number of the Security such
Holder tendered and a statement that such Holder is withdrawing all or a portion
of his tender; (11) that (a) if Securities in an aggregate principal amount less
than or equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Securities and (b) if Securities in an aggregate principal amount in excess of
the Purchase Amount are tendered and not withdrawn pursuant to the Offer to
Purchase, the Company shall purchase Securities having an aggregate principal
amount equal to the Purchase Amount on a pro rata basis (with such adjustments
as may be deemed appropriate so that only Securities in denominations of $1,000
principal amount or integral multiples thereof shall be purchased); and (12)
that in the case of any Holder whose Security is purchased only in part, the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder of such Security without service charge, a new Security or Securities, of
any authorized denomination as requested by such Holder, in an aggregate
principal amount equal to and in exchange for the unpurchased portion of the
Security so tendered.
"Officer" means, with respect to each of the Issuers, the
Chairman, any Vice Chairman, the President, any Vice President, the Chief
Financial Officer, the Treasurer or the Secretary of such Issuer, and, with
respect to any Guarantor, the Chairman, any Vice Chairman, the President, any
Vice President, the Chief Financial Officer, the Treasurer or the Secretary of
such Guarantor.
"Officers' Certificate" means a certificate signed by two
Officers or by an Officer and an Assistant Treasurer or Assistant Secretary of
each of the Issuers complying with Sections 13.04 and 13.05.
"144A Global Security" means a permanent global security in
registered form representing the aggregate principal amount of Securities sold
in reliance on Rule 144A.
"Opinion of Counsel" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee. The counsel may be an
employee of or counsel to the Issuers or the Trustee.
"Participant" has the meaning provided in Section 2.15.
"Paying Agent" has the meaning provided in Section 2.03.
"Payment Blockage Notice" has the meaning provided in Section
8.03.
"Payment Blockage Period" has the meaning provided in Section
8.03.
"Permitted Holder" means each of (i) CCP and its affiliates,
(ii) the Existing Management Holders and (iii) any corporation, a majority of
the outstanding Voting Equity Interests of which are owned, directly or
indirectly, by Persons listed in clauses (i) and (ii) of this definition, and no
more than 35% of the outstanding Voting Equity Interests of which are
beneficially owned, directly or indirectly, by any Person (other than Permitted
Holders) or group acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-15d(b)(1) under the Exchange Act.
<PAGE> 21
-14-
"Permitted Indebtedness" means the following, each of which
shall be given independent effect:
(a) Indebtedness under the Securities;
(b) Indebtedness of the Company or any Restricted Subsidiary
Incurred under the Credit Facilities in an aggregate principal amount
at any one time outstanding not to exceed the greater of (i) $25.0
million and (ii) the sum of 85% of the total book value of accounts
receivable and 50% of the total book value of inventory, in each case
as reflected on the Company's most recent consolidated financial
statements prepared in accordance with GAAP;
(c) Indebtedness of any Restricted Subsidiary owed to and held
by the Company or any other Restricted Subsidiary, and Indebtedness of
the Company owed to and held by any Restricted Subsidiary which is
unsecured and subordinated in right of payment to the payment and
performance of the Company's obligations under any Senior Indebtedness,
this Indenture and the Securities; provided, however, that an
Incurrence of Indebtedness that is not permitted by this clause (c)
shall be deemed to have occurred upon (i) any sale or other disposition
of any Indebtedness of the Company or any Restricted Subsidiary
referred to in this clause (c) to a Person (other than the Company or a
Restricted Subsidiary), (ii) any sale or other disposition of Equity
Interests of any Restricted Subsidiary which holds Indebtedness of the
Company or another Restricted Subsidiary such that such Restricted
Subsidiary ceases to be a Subsidiary and (iii) the designation of a
Restricted Subsidiary that holds Indebtedness of the Company or any
other Restricted Subsidiary as an Unrestricted Subsidiary;
(d) the Guarantees and guarantees by any Guarantor of
Indebtedness of the Company or its Restricted Subsidiaries and the
guarantees by the Company of Indebtedness of the Restricted
Subsidiaries; provided, however, that if such guarantee is of
Subordinated Indebtedness, then the Guarantee of such Guarantor or the
Company's obligations under the Securities, as the case may be; shall
be senior to such Guarantor's or the Company's, as the case may be,
guarantee of such Subordinated Indebtedness;
(e) Interest Rate Protection Obligations relating to
Indebtedness of the Company (which Indebtedness (i) bears interest at
fluctuating interest rates and (ii) is otherwise permitted to be
Incurred under this definition and Section 4.04); provided, however,
that (i) such Interest Rate Protection Obligations have been entered
into for bona fide business purposes and not for speculation and (ii)
the notional principal amount of such Interest Rate Protection
Obligations, at the time of the incurrence thereof, does not exceed the
principal amount of the Indebtedness to which such Interest Rate
Protection Obligations relate;
(f) Purchase Money Indebtedness and Capitalized Lease
Obligations which, at the time of the incurrence thereof, do not, in
the aggregate with all such other Indebtedness incurred pursuant to
this clause (f), exceed 5.0% of the total assets of the Company and its
Restricted Subsidiaries, on a consolidated basis determined consistent
with the Company's most recent balance sheet prepared in accordance
with GAAP at any one time outstanding;
(g) Indebtedness under Currency Agreements; provided, however,
that in the case of Currency Agreements which relate to Indebtedness,
such Currency Agreements do not increase the principal amount of
Indebtedness of the Company and its Restricted Subsidiaries outstanding
other than as
<PAGE> 22
-15-
a result of fluctuations in foreign currency exchange rates or by
reason of fees, indemnities and compensation payable thereunder;
(h) Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the Issue Date, reduced by the amount of
any scheduled amortization payments or mandatory prepayments when
actually paid or permanent reductions thereof;
(i) Indebtedness of the Company or any of its Restricted
Subsidiaries represented by letters of credit for the account of the
Company or such Restricted Subsidiary, as the case may be, in order to
provide security for workers' compensation claims, payment obligations
in connection with self-insurance or similar requirements in the
ordinary course of business in an amount not to exceed $3.0 million in
the aggregate at any time outstanding;
(j) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary of the Company providing for indemnification,
adjustment of purchase price or similar obligations, in each case
incurred or assumed in connection with the disposition of any business,
assets or a Subsidiary, other than guarantees of Indebtedness incurred
by any Person acquiring all or any portion of such business, assets or
Subsidiary for the purpose of financing such acquisition; provided,
however, that (i) such Indebtedness is not reflected on the balance
sheet of the Company or any Restricted Subsidiary of the Company
(contingent obligations referred to in a footnote to financial
statements and not otherwise reflected on the balance sheet will not be
deemed to be reflected on such balance sheet for purposes of this
clause (i)) and (ii) the maximum assumable liability in respect of all
such Indebtedness shall at no time exceed the gross proceeds including
noncash proceeds (the fair market value of such noncash proceeds being
measured at the time it is received and without giving effect to any
subsequent changes in value) actually received by the Company and its
Restricted Subsidiaries in connection with such disposition;
(k) Obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted
Subsidiary of the Company in the ordinary course of business;
(l) Indebtedness of the Company or any Restricted Subsidiary
Incurred under an Acquisition Facility in an aggregate principal amount
at any one time outstanding not to exceed $22.0 million, reduced by any
required permanent repayments (which are accompanied by corresponding
permanent commitment reduction thereunder);
(m) Indebtedness to the extent representing a replacement,
renewal, defeasance, refinancing or extension (collectively, a
"refinancing") of outstanding Indebtedness Incurred in compliance with
Section 4.04 clauses (a), (h) or (l) of this definition; provided,
however, that (i) any such refinancing shall not exceed the sum of the
principal amount (or accreted amount (determined in accordance with
GAAP), if less) of the Indebtedness being refinanced, plus the amount
of accrued interest thereon, plus the amount of any reasonably
determined prepayment premium necessary to accomplish such refinancing
and such reasonable fees and expenses incurred in connection therewith,
(ii) Indebtedness representing a refinancing of Indebtedness other than
Senior Indebtedness shall have a Weighted Average Life to Maturity
equal to or greater than the Weighted Average Life to Maturity of the
Indebtedness being refinanced; and (iii) Indebtedness that is pari
passu with the Securities may only be refinanced with Indebtedness that
is made pari passu with or subordinate in right of payment to the
Securities and Subordinated Indebtedness may only be refinanced with
Subordinated Indebtedness; and
<PAGE> 23
-16-
(n) in addition to the items referred to in clauses (a)
through (m) above, Indebtedness of the Company (including any
Indebtedness under the Credit Facilities that utilizes this clause (m))
having an aggregate principal amount not to exceed $10.0 million at any
one time outstanding.
"Permitted Investments" means (a) cash and Cash Equivalents;
(b) Investments in prepaid expenses, negotiable instruments held for collection
and lease, utility and workers' compensation, performance and other similar
deposits; (c) Interest Rate Protection Obligations and Currency Agreements; (d)
Investments received in connection with the bankruptcy or reorganization of
suppliers and customers and in settlement of delinquent obligations of, and
other disputes with, customers and suppliers, in each case arising in the
ordinary course of business; (e) Investments in the Company and Investments in
Restricted Subsidiaries or Persons that, as a result of or in connection with
any such Investment, become Restricted Subsidiaries or are merged with or into
or consolidated with the Company or another Restricted Subsidiary; (f)
Investments paid for in Qualified Equity Interests of the Company; (g) loans or
advances to officers or employees of the Company and its Restricted Subsidiaries
in the ordinary course of business for bona fide business purposes of the
Company and its Restricted Subsidiaries (including, but not limited to, travel
and moving expenses) not in excess of $1 million in the aggregate at any one
time outstanding; (h) Investments in Replacement Assets made in compliance with
Section 4.07; (i) Investments of a Person or any of its Subsidiaries existing at
the time such Person becomes a Restricted Subsidiary of the Company or at the
time such Person merges or consolidates with the Company or any of its
Restricted Subsidiaries, in either case in compliance with this Indenture;
provided that such Investments were not made by such Person in connection with,
or in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary of the Company or such merger or consolidation; and (j) Investments
(including, without limitation, in the form of joint ventures with unaffiliated
third parties) in Related Businesses not in excess of $10 million in the
aggregate at any one time outstanding.
"Permitted Junior Securities" means any securities of the
Company or any other Person that are (i) equity securities without special
covenants or (ii) debt securities expressly subordinated in right of payment to
all Senior Indebtedness that may at the time be outstanding, to substantially
the same extent as, or to a greater extent than, the Securities are subordinated
as provided in this Indenture, in any event pursuant to a court order so
providing and as to which (a) the rate of interest on such securities shall not
exceed the effective rate of interest on the Securities on the date of this
Indenture, (b) such securities shall not be entitled to the benefits of
covenants or defaults materially more beneficial to the holders of such
securities than those in effect with respect to the Securities on the date of
this Indenture and (c) such securities shall not provide for amortization
(including sinking fund and mandatory prepayment provisions) commencing prior to
the date six months following the final scheduled maturity date of the Senior
Indebtedness (as modified by the plan of reorganization of readjustment pursuant
to which such securities are issued).
"Permitted Liens" means (a) Liens on property of a Person
existing at the time such Person is merged into or consolidated with the Company
or any Restricted Subsidiary; provided, however, that such Liens were in
existence prior to the contemplation of such merger or consolidation and do not
secure any property or assets of the Company or any Restricted Subsidiary other
than the property or assets subject to the Liens prior to such merger or
consolidation; (b) Liens imposed by law such as carriers', warehousemen's,
mechanics', suppliers', materialmen's, landlords' and repairmen's Liens and
other similar Liens arising in the ordinary course of business which secure
payment of obligations not more than 30 days past due or which are being
contested in good faith and by appropriate proceedings; (c) Liens existing on
the Issue Date; (d) Liens securing only the Securities or the Guarantees; (e)
Liens in favor of the Company or any Restricted Subsidiary; (f) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings; provided,
however, that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (g) easements,
<PAGE> 24
-17-
reservation of rights of way, restrictions (including, but not limited to,
zoning and building restrictions) and other similar easements, licenses,
restrictions on the use of properties, or minor imperfections of title that in
the aggregate are not material in amount and do not in any case materially
detract from the properties subject thereto or interfere with the ordinary
conduct of the business of the Company and the Restricted Subsidiaries; (h)
Liens resulting from the deposit of cash or notes in connection with contracts,
bids, sales or tenders or expropriation proceedings, or to secure workers'
compensation, unemployment insurance and other types of social security,
including any Lien securing letters of credit issued in the ordinary course of
business consistent with past practices in connection therewith, surety, appeal
and performance bonds, costs of litigation when required by law and public and
statutory obligations or obligations under franchise arrangements entered into
in the ordinary course of business; (i) Liens securing Indebtedness consisting
of Capitalized Lease Obligations, Purchase Money Indebtedness, mortgage
financings, industrial revenue bonds or other monetary obligations, in each case
incurred solely for the purpose of financing all or any part of the purchase
price or cost of construction or installation of assets used in the business of
the Company or the Restricted Subsidiaries, or repairs, additions or
improvements to such assets, provided, however, that (I) such Liens secure
Indebtedness in an amount not in excess of the original purchase price or the
original cost of any such assets or repair, addition or improvement thereto
(plus an amount equal to the reasonable fees and expenses in connection with the
incurrence of such Indebtedness), (II) such Liens do not extend to any other
assets of the Company or the Restricted Subsidiaries (and, in the case of
repair, addition or improvements to any such assets, such Lien extends only to
the assets (and improvements thereto or thereon) repaired, added to or
improved), (III) the Incurrence of such Indebtedness is permitted by Section
4.04 and (IV) such Liens attach within 120 days of such purchase, construction,
installation, repair, addition or improvement; (j) any interest or title of a
lessor under any Capitalized Lease Obligation; provided, however, that such
Liens do not extend to any property or assets which are not leased property
subject to such Capitalized Lease Obligation; (k) Liens upon specific items of
inventory or other goods and proceeds of any Person securing such Person's
obligations in respect of bankers' acceptances issued or created for the account
of such Person to facilitate the purchase, shipment or storage of such inventory
or other goods; (l) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof; (m) Liens
encumbering deposits made to secure obligations arising from statutory,
regulatory, contractual or warranty requirements of the Company or any of its
Restricted Subsidiaries, including rights of offset and set-off; (n) Liens
securing Interest Swap Obligations and Currency Agreements which Obligations and
agreements are otherwise permitted under this Indenture; (o) Liens by reason of
judgments, attachments or decree not otherwise resulting in an Event of Default;
(p) Liens securing Indebtedness of non-Guarantor Restricted Subsidiaries
Incurred in compliance with this Indenture; and (q) Liens to secure any
refinancings, renewals, extensions, modifications or replacements (collectively,
"refinancing") (or successive refinancings), in whole or in part, of any
Indebtedness secured by Liens referred to in the clauses above so long as such
Lien does not extend to any other property (other than improvements thereto).
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, limited
liability partnership, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"Physical Securities" means one or more certificated
Securities in registered form.
"Post-Petition Interest" means, with respect to any
Indebtedness of any Person, all interest accrued or accruing on such
Indebtedness after the commencement of any Insolvency or Liquidation Proceeding
against such Person in accordance with and at the contract rate (including,
without limitation, any rate applicable upon default) specified in the agreement
or instrument creating, evidencing or governing such Indebt-
<PAGE> 25
-18-
edness, whether or not, pursuant to applicable law or otherwise, the claim for
such interest is allowed as a claim in such Insolvency or Liquidation
Proceeding.
"Preferred Equity Interest," in any Person, means an Equity
Interest of any class or classes (however designated) which is preferred as to
the payment of dividends or distributions, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over Equity Interests of any other class in such Person.
"principal" of a debt security means the principal of the
security plus, when appropriate, the premium, if any, on the security.
"Private Exchange Securities" has the meaning provided in
Section 2(b) of the Registration Rights Agreement.
"Private Placement Legend" means the legend initially set
forth on the Initial Securities in the form set forth on Exhibit A hereto.
"Public Equity Offering" means, with respect to the Company,
an underwritten public offering of Qualified Equity Interests of the Company
pursuant to an effective registration statement filed under the Securities Act
(excluding registration statements filed on Form S-8).
"Purchase Agreement" means the Purchase Agreement dated as of
September 25, 1997 by and among the Issuers, the Guarantors and the Initial
Purchasers.
"Purchase Amount" has the meaning set forth in the definition
of "Offer to Purchase."
"Purchase Date" has the meaning set forth in the definition
of "Offer to Purchase."
"Purchase Money Indebtedness" means Indebtedness of the
Company or any Restricted Subsidiary Incurred for the purpose of financing all
or any part of the purchase price or the cost of installation, construction or
improvement of any property; provided, however, that the aggregate principal
amount of such Indebtedness does not exceed the lesser of the fair market value
of such property or such purchase price or cost, including any refinancing of
such Indebtedness that does not increase the aggregate principal amount (or
accreted amount, if less) thereof as of the date of refinancing.
"Purchase Price" has the meaning set forth in the definition
of "Offer to Purchase."
"Qualified Equity Interest" in any Person means any Equity
Interest in such Person other than any Disqualified Equity Interest.
"Qualified Institutional Buyer" or "QIB" means a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act.
"Redemption Date," when used with respect to any Security to
be redeemed, means the date fixed for such redemption pursuant to this
Indenture.
<PAGE> 26
-19-
"redemption price," when used with respect to any Security to
be redeemed, means the price fixed for such redemption pursuant to this
Indenture as set forth in the form of Security annexed hereto as Exhibit A.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the Issue Date by and among the Issuers, the Guarantors
and the Initial Purchasers.
"Registration" means a registered exchange offer for the
Securities by the Company or other registration of the Securities under the
Securities Act pursuant to and in accordance with the terms of the Registration
Rights Agreement.
"Related Business" means any business related, ancillary or
complementary (as determined in good faith by the Board of Managers) to the
business of the Company and the Restricted Subsidiaries on the Issue Date.
"Replacement Assets" has the meaning provided in Section 4.07.
"Required Filing Date" has the meaning provided in Section
4.11.
"Restricted Investment" means any Investment other than a
Permitted Investment.
"Restricted Payment" has the meaning provided in Section 4.08.
"Restricted Security" has the meaning set forth in Rule
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
entitled to request and conclusively rely upon an Opinion of Counsel with
respect to whether any Security is a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company
that has not been designated by the Board of Managers of the Company, by a
resolution of the Board of Managers of the Company delivered to the Trustee, as
an Unrestricted Subsidiary pursuant to Section 4.15. Any such designation may be
revoked by a resolution of the Board of Managers of the Company delivered to the
Trustee, subject to the provisions of such Section.
"Revocation" has the meaning provided in Section 4.15.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Lease-Back Transaction" means any arrangement with
any Person providing for the leasing by the Company or any Restricted Subsidiary
of the Company of any real or tangible personal Property, which property has
been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person in contemplation of such leasing.
"SEC" or "Commission" means the Securities and Exchange
Commission.
<PAGE> 27
-20-
"Securities" means, collectively, the Initial Securities, the
Private Exchange Securities and the Unrestricted Securities treated as a single
class of securities, as amended or supplemented from time to time in accordance
with the terms of this Indenture.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Security Guarantee" means the Form of Security Guarantee of
each Guarantor to be endorsed on each of the Securities in the form of Exhibit A
(in the case of an Initial Security) or Exhibit B (in the case of an Exchange
Security) hereto.
"Senior Indebtedness" means, at any date, (a) all Obligations
under the Credit Facilities; (b) all Interest Rate Protection Obligations of the
Company; (c) all Obligations of the Company under letters of credit; and (d) all
other Indebtedness of the Company, including principal, premium, if any, and
interest (including Post-Petition Interest) on such Indebtedness, unless the
instrument under which such Indebtedness of the Company is Incurred expressly
provides that such Indebtedness is not senior or superior in right of payment to
the Securities, and all renewals, extensions, modifications, amendments or
refinancings thereof. Notwithstanding the foregoing, Senior Indebtedness shall
not include (a) to the extent that it may constitute Indebtedness, any
Obligation for Federal, state, local or other taxes; (b) any Indebtedness among
or between the Company and any Subsidiary of the Company; (c) to the extent that
it may constitute Indebtedness, any Obligation in respect of any trade payable
Incurred for the purchase of goods or materials, or for services obtained, in
the ordinary course of business; (d) Indebtedness evidenced by the Securities;
(e) Indebtedness of the Company that is expressly subordinate or junior in right
of payment to any other Indebtedness of the Company; (f) to the extent that it
may constitute Indebtedness, any obligation owing under leases (other than
Capitalized Lease Obligations) or management agreements; and (g) any obligation
that by operation of law is subordinate to any general unsecured obligations of
the Company.
"Significant Restricted Subsidiary" means, at any date of
determination, (a) any Restricted Subsidiary that, together with its
Subsidiaries that constitute Restricted Subsidiaries (i) for the most recent
fiscal year of the Company accounted for more than 10.0% of the consolidated
revenues of the Company and the Restricted Subsidiaries or (ii) as of the end of
such fiscal year, owned more than 10.0% of the consolidated assets of the
Company and the Restricted Subsidiaries, all as set forth on the consolidated
financial statements of the Company and the Restricted Subsidiaries for such
year prepared in conformity with GAAP, and (b) any Restricted Subsidiary which,
when aggregated with all other Restricted Subsidiaries that are not otherwise
Significant Restricted Subsidiaries and as to which any event described in
clause (h) of Section 6.01 has occurred, would constitute a Significant
Restricted Subsidiary under clause (a) of this definition.
"Stated Maturity" means, when used with respect to any
Security or any installment of interest thereon, the date specified in such
Security as the fixed date on which the principal of such Security or such
installment of interest is due and payable.
"Subordinated Indebtedness" means, with respect to the Issuers
or any Guarantor, any Indebtedness of the Issuers or such Guarantor, as the case
may be, which is expressly subordinated in right of payment to the Securities or
such Guarantor's Guarantee, as the case may be.
"Subsidiary" means, with respect to any Person, (a) any
corporation of which the outstanding Voting Equity Interests having at least a
majority of the votes entitled to be cast in the election of directors
<PAGE> 28
-21-
shall at the time be owned, directly or indirectly, by such Person, or (b) any
other Person of which at least a majority of Voting Equity Interests are at the
time, directly or indirectly, owned by such first named Person.
"Surviving Person" means, with respect to any Person involved
in or that makes any Disposition, the Person formed by or surviving such
Disposition or the Person to which such Disposition is made.
"Tax Distribution" means, as of the time of determination
thereof, any distribution by the Company and any of its Restricted Subsidiaries
that are limited liability companies to their respective members (or in each
case, if such member is a flow-through entity, such direct or indirect owner or
owners of such member as is or are subject to income taxes on income of such
limited liability company) which (i) with respect to quarterly estimated tax
payments due in each calendar year shall be equal to twenty-five percent (25%)
of the relevant member's Income Tax Liabilities for such calendar year as
estimated in writing by the chief financial officer of the Company and (ii) with
respect to tax payments to be made with income tax returns filed for a full
calendar year or with respect to adjustments to such returns imposed by the
Internal Revenue Service or other taxing authority, shall be equal to the Income
Tax Liabilities of such member for such calendar year minus the aggregate amount
distributed to such member for such calendar year as provided in clause (i)
above. In the event the amount determined under clause (ii) is negative amount,
the amount of any distributions to the relevant member in the succeeding
calendar year (or, if necessary, any subsequent calendar years) shall be reduced
by such negative amount.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
ss.ss. 77aaa-77bbbb), as amended, as in effect on the date of this Indenture
(except as provided in Section 10.03) until such time as this Indenture is
qualified under the TIA, and thereafter as in effect on the date on which this
Indenture is qualified under the TIA.
"Trust Officer" means any officer within the corporate trust
department (or any successor group of the Trustee) including any vice president,
assistant vice president, assistant secretary or any other officer or assistant
officer of the Trustee customarily performing functions similar to those
performed by the persons who at that time shall be such officers, and also
means, with respect to a particular corporate trust matter, any other officer to
whom such trust matter is referred because of his knowledge of and familiarity
with the particular subject.
"Trustee" means the party named as such in the first paragraph
of this Indenture until a successor replaces it in accordance with the
provisions of this Indenture and thereafter means such successor.
"United States Government Obligations" means direct
non-callable obligations of the United States of America for the payment of
which the full faith and credit of the United States is pledged.
"Unrestricted Securities" means one or more Securities that do
not and are not required to bear the Private Placement Legend in the form set
forth in Exhibit A hereto, including, without limitation, the Exchange
Securities and any Securities registered under the Securities Act pursuant to
and in accordance with the Registration Rights Agreement.
"Unrestricted Subsidiary" means any Subsidiary of the Company
designated as such pursuant to Section 4.15. Any such designation may be revoked
by a resolution of the Board of Managers of the Company delivered to the
Trustee, subject to the provisions of such section.
"Unutilized Net Cash Proceeds" has the meaning provided in
Section 4.07.
<PAGE> 29
-22-
"Voting Equity Interests" means Equity Interests in a
corporation or other Person with voting power under ordinary circumstances
entitling the holders thereof to elect the Board of Managers or other governing
body of such corporation or Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Indebtedness.
"Western Europe" means, with respect to any jurisdictional
matter, any of the twelve current member states of the European Community and
Switzerland, Norway, Sweden, Finland, Austria and the Czech Republic (and
"Western European" shall have a meaning correlative to the foregoing).
"Wholly Owned Restricted Subsidiary" means any Restricted
Subsidiary of which at least 99.0% of the outstanding Voting Equity Interests
(other than qualifying shares or other Equity Interests owned by directors or
other members of any comparable governing body) are owned, directly or
indirectly, by the Company and/or one or more Wholly Owned Restricted
Subsidiaries.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the Indenture securities means the Issuers or
any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
<PAGE> 30
-23-
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles in effect from time to time, and any other reference in this
Indenture to "generally accepted accounting principles" refers to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions;
and
(6) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section
or other subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Initial Securities and the Trustee's certificate of
authentication thereof shall be substantially in the form of Exhibit A hereto,
which is hereby incorporated in and expressly made a part of this Indenture. The
Exchange Securities and the Trustee's certificate of authentication thereof
shall be substantially in the form of Exhibit B hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule or
usage. The Issuers and the Trustee shall approve the form of the Securities and
any notation, legend or endorsement on them. Each Security shall be dated the
date of its issuance and shall show the date of its authentication. Each
Security shall have an executed Guarantee from each of the Guarantors endorsed
thereon substantially in the form set forth in Exhibits A and B hereto.
The terms and provisions contained in the Securities annexed
hereto as Exhibits A and B shall constitute, and are hereby expressly made, a
part of this Indenture and, to the extent applicable, the Issuers, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
Securities offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more Global Securities, substantially in
the form set forth in Exhibit A hereto, deposited with the Trustee, as custodian
for the Depository, duly executed by the Issuers and authenticated by the
Trustee as hereinafter provided and shall bear the legend set forth in Exhibit C
hereto. The aggregate principal amount of the Global Securities may from time to
time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depository, as hereinafter provided.
<PAGE> 31
-24-
SECTION 2.02. Execution and Authentication.
Two Officers shall sign, or one Officer shall sign and one
Officer (each of whom shall, in each case, have been duly authorized by all
requisite corporate actions) of each of the Issuers shall attest to, the
Securities for each of the Issuers, and the Guarantees for the Guarantors, by
manual or facsimile signature.
If an Officer whose signature is on a Security or a Guarantee,
as the case may be, was an Officer at the time of such execution but no longer
holds that office at the time the Trustee authenticates the Security or
Guarantee, as the case may be, the Security or Guarantee, as the case may be,
shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate (i) Initial Securities for
original issue in an aggregate principal amount not to exceed $125,000,000, (ii)
Private Exchange Securities from time to time only in exchange for a like
principal amount of Initial Securities and (iii) Unrestricted Securities from
time to time only in exchange for (A) a like principal amount of Initial
Securities or (B) a like principal amount of Private Exchange Securities, in
each case upon a written order of each of the Issuers in the form of an
Officers' Certificate. Each such written order shall specify the amount of
Securities to be authenticated and the date on which the Securities are to be
authenticated, whether the Securities are to be Initial Securities, Private
Exchange Securities or Unrestricted Securities and whether the Securities are to
be issued as Physical Securities or Global Securities and such other information
as the Trustee may reasonably request. The aggregate principal amount of
Securities outstanding at any time may not exceed $125,000,000, except as
provided in Sections 2.07 and 2.08.
Notwithstanding the foregoing, all Securities issued under
this Indenture shall vote and consent together on all matters (as to which any
of such Securities may vote or consent) as one class and no series of Securities
will have the right to vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent reasonably
acceptable to each of the Issuers to authenticate Securities. Unless otherwise
provided in the appointment, an authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent shall have the same rights as an Agent to deal with either
of the Issuers and Affiliates of either of the Issuers.
The Securities shall be issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Issuers shall maintain an office or agency, which may be
in the Borough of Manhattan, The City of New York, where (a) Securities may be
presented or surrendered for registration of transfer or for exchange (the
"Registrar"), (b) Securities may be presented or surrendered for payment (the
"Paying Agent") and (c) notices and demands in respect of the Securities and
this Indenture may be served. The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Issuers, upon notice to the
Trustee, may appoint one or more co-Registrars and one or more additional Paying
Agents. The term "Paying Agent"
<PAGE> 32
-25-
includes any additional Paying Agent. Except as provided herein, the Issuers may
act as Paying Agent, Registrar or co-Registrar.
The Issuers shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, which shall incorporate the
provisions of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such Agent. The Issuers shall notify the Trustee of the
name and address of any such Agent. If the Issuers fail to maintain a Registrar
or Paying Agent, or fail to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 7.07.
The Issuers initially appoint the Trustee as Registrar and
Paying Agent until such time as the Trustee has resigned or a successor has been
appointed.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Issuers shall require each Paying Agent other than the
Trustee to agree in writing that each Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all assets held by the Paying Agent for the
payment of principal of, or interest on, the Securities, and shall notify the
Trustee of any Default by the Issuers in making any such payment. The Issuers at
any time may require a Paying Agent to distribute all assets held by it to the
Trustee and account for any assets disbursed and the Trustee may at any time
during the continuance of any payment Default, upon written request to a Paying
Agent, require such Paying Agent to distribute all assets held by it to the
Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Issuers to the
Paying Agent (if other than the Issuers), the Paying Agent shall have no further
liability for such assets. If the Issuers or any of their Affiliates acts as
Paying Agent, it shall, on or before each due date of the principal of or
interest on the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal or interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and will promptly notify the Trustee of its action or
failure so to act.
SECTION 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Holders. If the Trustee is not the Registrar, the Issuers shall
furnish to the Trustee before each Interest Record Date and at such other times
as the Trustee may request in writing a list as of such date and in such form as
the Trustee may reasonably require of the names and addresses of Holders, which
list may be conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
Subject to the provisions of Sections 2.15 and 2.16, when
Securities are presented to the Registrar or a co-Registrar with a request to
register the transfer of such Securities or to exchange such Securities for an
equal principal amount of Securities of other authorized denominations of the
same series, the Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its requirements for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Issuers and the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Issuers shall execute and
the Trustee shall authenticate Securities at the Registrar's or co-Registrar's
written request. No service charge shall be made for any regis-
<PAGE> 33
-26-
tration of transfer or exchange, but the Issuers may require payment of a sum
sufficient to cover any transfer tax or similar governmental charge payable in
connection therewith (other than any such transfer taxes or other governmental
charge payable upon exchanges or transfers pursuant to Section 2.02, 2.10, 3.06,
4.07, 4.16, or 10.05). The Registrar or co-Registrar shall not be required to
register the transfer or exchange of any Security (i) during a period beginning
at the opening of business 15 days before the mailing of a notice of redemption
of Securities and ending at the close of business on the day of such mailing and
(ii) selected for redemption in whole or in part pursuant to Article Three
hereof, except the unredeemed portion of any Security being redeemed in part.
Prior to the registration of any transfer by a Holder as
provided herein, the Issuers, the Trustee and any Agent of the Issuers shall
treat the person in whose name the Security is registered as the owner thereof
for all purposes whether or not the Security shall be overdue, and none of the
Issuers, the Trustee or any such Agent shall be affected by notice to the
contrary. Any Holder of a beneficial interest in a Global Security shall, by
acceptance of such beneficial interest in a Global Security, agree that
transfers of beneficial interests in such Global Security may be effected only
through a book-entry system maintained by the Depository (or its agent), and
that ownership of a beneficial interest in a Global Security shall be required
to be reflected in a book entry.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if
the Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Issuers shall issue and the Trustee shall authenticate a
replacement Security if the Trustee's requirements for replacement of Securities
are met. If required by the Issuers or the Trustee, such Holder must provide an
indemnity bond or other indemnity, sufficient in the judgment of both of the
Issuers and the Trustee, to protect the Issuers, the Trustee and any Agent from
any loss which any of them may suffer if a Security is replaced. The Issuers may
charge such Holder for their reasonable out-of-pocket expenses in replacing a
Security, including reasonable fees and expenses of counsel.
Every replacement Security is an additional obligation of the
Issuers.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities that
have been authenticated by the Trustee except those canceled by it, those
delivered to it for cancellation and those described in this Section 2.08 as not
outstanding. Subject to Section 2.09, a Security does not cease to be
outstanding because either of the Issuers or any Affiliates of either of the
Issuers holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than
a mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section
2.07.
If on a Redemption Date, Purchase Date or the Final Maturity
Date the Paying Agent holds money sufficient to pay all of the principal and
interest due on the Securities payable on that date, and is not prohibited from
paying such money to the Holders pursuant to the terms of this Indenture, then
on and after that date such Securities cease to be outstanding and interest on
them ceases to accrue.
<PAGE> 34
-27-
SECTION 2.09. Treasury Securities.
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by either of the Issuers, the Guarantors or any of their
respective Affiliates shall be disregarded, except that, for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities that a Trust Officer of the
Trustee actually knows are so owned shall be disregarded.
The Issuers shall notify the Trustee, in writing, when either
of them, any Guarantor, or any of their respective Affiliates repurchases or
otherwise acquires Securities, of the aggregate principal amount of such
Securities so repurchased or otherwise acquired.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the
Issuers may prepare and the Trustee shall authenticate temporary Securities upon
receipt of a written order of the Issuers in the form of an Officers'
Certificate. The Officers' Certificate shall specify the amount of temporary
Securities to be authenticated and the date on which the temporary Securities
are to be authenticated.
Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Issuers consider
appropriate for temporary Securities. Without unreasonable delay, the Issuers
shall prepare and the Trustee shall authenticate upon receipt of a written order
of the Issuers pursuant to Section 2.02 definitive Securities in exchange for
temporary Securities.
SECTION 2.11. Cancellation.
The Issuers at any time may deliver Securities to the Trustee
for cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for transfer, exchange or payment.
The Trustee, or at the direction of the Trustee, the Registrar or the Paying
Agent, and no one else, shall cancel, and at the written direction of the
Issuers, dispose of and deliver evidence of such disposal of all Securities
surrendered for transfer, exchange, payment or cancellation. Subject to Section
2.07, the Issuers may not issue new Securities to replace Securities that they
have paid or delivered to the Trustee for cancellation. If the Issuers shall
acquire any of the Securities, such acquisition shall not operate as a
redemption or satisfaction of the Indebtedness represented by such Securities
unless and until the same are surrendered to the Trustee for cancellation
pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
The Issuers shall pay interest on overdue principal from time
to time on demand at the rate of interest then borne by the Securities. The
Issuers shall, to the extent lawful, pay interest on overdue installments of
interest (without regard to any applicable grace periods) from time to time on
demand at the rate of interest then borne by the Securities.
If the Issuers default in a payment of interest on the
Securities, they shall pay the defaulted interest, plus (to the extent lawful)
any interest payable on the defaulted interest to the Persons who are Holders on
a subsequent special record date, which date shall be the fifteenth day
preceding the date fixed by the Issuers for the payment of defaulted interest or
the next succeeding Business Day if such date is not a Business Day. At least 15
days before the subsequent special record date, the Issuers shall mail to each
Holder, with a
<PAGE> 35
-28-
copy to the Trustee, a notice that states the subsequent special record date,
the payment date and the amount of defaulted interest, and interest payable on
such defaulted interest, if any, to be paid.
Notwithstanding the foregoing, any interest which is paid
prior to the expiration of the 30-day period set forth in Section 6.01(b) shall
be paid to Holders as of the Interest Record Date for the Interest Payment Date
for which interest has not been paid.
SECTION 2.13. CUSIP Number.
The Issuers in issuing the Securities will use a "CUSIP"
number and the Trustee shall use the CUSIP number in notices of redemption or
exchange as a convenience to Holders; provided, however, that any such notice
may state that no representation is made as to the correctness or accuracy of
the CUSIP number printed in the notice or on the Securities, and that reliance
may be placed only on the other identification numbers printed on the
Securities. The Issuers shall promptly notify the Trustee of any changes in
CUSIP numbers.
SECTION 2.14. Deposit of Moneys.
Prior to 12:00 noon New York City time on each Interest
Payment Date, Redemption Date, Purchase Date and the Final Maturity Date, the
Issuers shall deposit with the Paying Agent in immediately available funds money
sufficient to make cash payments, if any, due on such Interest Payment Date,
Redemption Date, Purchase Date or Final Maturity Date, as the case may be, in a
timely manner which permits the Paying Agent to remit payment to the Holders on
such Interest Payment Date, Redemption Date, Purchase Date or Final Maturity
Date, as the case may be.
SECTION 2.15. Book-Entry Provisions for Global Securities.
(a) The Global Securities initially shall (i) be registered in
the name of the Depository or the nominee of such Depository, (ii) be delivered
to the Trustee as custodian for such Depository and (iii) bear legends as set
forth in Exhibit C.
Members of, or participants in, the Depository
("Participants") shall have no rights under this Indenture with respect to any
Global Security held on their behalf by the Depository, or the Trustee as its
custodian, or under the Global Security, and the Depository may be treated by
the Issuers, the Trustee and any agent of the Issuers or the Trustee as the
absolute owner of the Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Issuers, the
Trustee or any agent of the Issuers or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and Participants, the operation of
customary practices governing the exercise of the rights of a Holder of any
Security.
(b) Transfers of Global Securities shall be limited to
transfers in whole, but not in part, to the Depository, its successors or their
respective nominees. Interests of beneficial owners in the Global Securities may
be transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depository and the provisions of Section 2.16; provided,
however, that Physical Securities shall be transferred to all beneficial owners
in exchange for their beneficial interests in Global Securities if (i) the
Depository notifies the Issuers that it is unwilling or unable to continue as
Depository for any Global Security and a successor Depository is not appointed
by the Issuers within 90 days of such notice or (ii) an Event of Default
<PAGE> 36
-29-
has occurred and is continuing and the Registrar has received a request from the
Depository to issue Physical Securities.
(c) In connection with the transfer of Global Securities as an
entirety to beneficial owners pursuant to paragraph (b) of this Section 2.15,
the Global Securities shall be deemed to be surrendered to the Trustee for
cancellation, and the Issuers shall execute, and the Trustee shall upon written
instructions from the Issuers authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial interest in the
Global Securities, an equal aggregate principal amount of Physical Securities of
authorized denominations.
(d) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in a Global Security pursuant to paragraph
(c) of this Section 2.15 shall, except as otherwise provided by Section 2.16,
bear the Private Placement Legend.
(e) The Holder of any Global Security may grant proxies and
otherwise authorize any Person, including Participants and Persons that may hold
interests through Participants, to take any action which a Holder is entitled to
take under this Indenture or the Securities and the Trustee is entitled to rely
upon any electronic instructions from beneficial owners to the Holder of any
Global Security.
SECTION 2.16. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Securities. When
Physical Securities are presented to the Registrar or co-Registrar with a
request:
(i) to register the transfer of the Physical Securities; or
(ii) to exchange such Physical Securities for an equal
principal amount of Physical Securities of other authorized
denominations,
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if the requirements under this Indenture as set forth in this
Section 2.16 for such transactions are met; provided, however, that the Physical
Securities presented or surrendered for Registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Registrar or
co-Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(II) in the case of Physical Securities the offer and sale of
which have not been registered under the Securities Act, such Physical
Securities shall be accompanied, in the sole discretion of the Issuers,
by the following additional information and documents, as applicable:
(A) if such Physical Security is being delivered to the
Registrar or co-Registrar by a Holder for
Registration in the name of such Holder, without
transfer, a certification from such Holder to that
effect (substantially in the form of Exhibit D
hereto); or
(B) if such Physical Security is being transferred to a
QIB in accordance with Rule 144A, a certification to
that effect (substantially in the form of Exhibit D
hereto); or
<PAGE> 37
-30-
(C) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a
certification to that effect (substantially in the
form of Exhibit D hereto) and a transferee letter of
representation (substantially in the form of Exhibit
E hereto) and, at the option of the Issuers, an
Opinion of Counsel reasonably satisfactory to the
Issuers to the effect that such transfer is in
compliance with the Securities Act; or
(D) if such Physical Security is being transferred in
reliance on Rule 144 under the Securities Act,
delivery of a certification to that effect
(substantially in the form of Exhibit D hereto) and,
at the option of the Issuers, an Opinion of Counsel
reasonably satisfactory to the Issuers to the effect
that such transfer is in compliance with the
Securities Act; or
(E) if such Physical Security is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
to that effect (substantially in the form of Exhibit
D hereto) and, at the option of the Issuers, an
Opinion of Counsel reasonably acceptable to the
Issuers to the effect that such transfer is in
compliance with the Securities Act.
(b) Restrictions on Transfer of a Physical Security for a
Beneficial Interest in a Global Security. A Physical Security the offer and sale
of which has not been registered under the Securities Act may not be exchanged
for a beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar or co-Registrar of a
Physical Security, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Registrar or co-Registrar, together with:
(A) certification, substantially in the form of Exhibit D
hereto, that such Physical Security is being
transferred (I) to a QIB or (II) to an Accredited
Investor and, with respect to (II), at the option of
the Issuers, an Opinion of Counsel reasonably
acceptable to the Issuers to the effect that such
transfer is in compliance with the Securities Act;
and
(B) written instructions directing the Registrar or
co-Registrar to make, or to direct the Depository to
make, an endorsement on the applicable Global
Security to reflect an increase in the aggregate
amount of the Securities represented by the Global
Security,
then the Registrar or co-Registrar shall cancel such Physical Security and
cause, or direct the Depository to cause, in accordance with the standing
instructions and procedures existing between the Depository and the Registrar or
co-Registrar, the principal amount of Securities represented by the applicable
Global Security to be increased accordingly. If no 144A Global Security or IAI
Global Security, as the case may be, is then outstanding, the Issuers shall,
unless either of the events in the proviso to Section 2.15(b) have occurred and
are continuing, issue and the Trustee shall, upon written instructions from the
Issuers in accordance with Section 2.02, authenticate such a Global Security in
the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. The transfer
and exchange of Global Securities or beneficial interests therein shall be
effected through the Depository in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depository
therefor. Upon
<PAGE> 38
-31-
receipt by the Registrar or Co-Registrar of written instructions, or such other
instruction as is customary for the Depository, from the Depository or its
nominee, requesting the Registration of transfer of an interest in a 144A Global
Security or an IAI Global Security, as the case may be, to another type of
Global Security, together with the applicable Global Securities (or, if the
applicable type of Global Security required to represent the interest as
requested to be obtained is not then outstanding, only the Global Security
representing the interest being transferred), the Registrar or Co-Registrar
shall reflect on its books and records (and the applicable Global Security) the
applicable increase and decrease of the principal amount of Securities
represented by such types of Global Securities, giving effect to such transfer.
If the applicable type of Global Security required to represent the interest as
requested to be obtained is not outstanding at the time of such request, the
Issuers shall issue and the Trustee shall, upon written instructions from the
Issuers in accordance with Section 2.02, authenticate a new Global Security of
such type in principal amount equal to the principal amount of the interest
requested to be transferred.
(d) Transfer of a Beneficial Interest in a Global Security for
a Physical Security.
(i) If the Depository is at any time unwilling or unable to
continue as a depositary for the Global Securities and a successor
depositary is not appointed by the Issuers within 90 days, Physical
Securities will be issued in exchange for the Global Securities. Upon
receipt by the Registrar or co-Registrar of written instructions, or
such other form of instructions as is customary for the Depository,
from the Depository or its nominee on behalf of any Person (subject to
the previous sentence) having a beneficial interest in a Global
Security and upon receipt by the Trustee of a written order or such
other form of instructions as is customary for the Depository or the
Person designated by the Depository as having such a beneficial
interest containing registration instructions and, in the case of any
such transfer or exchange of a beneficial interest in Securities the
offer and sale of which have not been registered under the Securities
Act, the following additional information and documents:
(A) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act,
delivery of a certification to that effect
(substantially in the form of Exhibit D hereto) and,
at the option of the Issuers, an Opinion of Counsel
reasonably satisfactory to the Issuers to the effect
that such transfer is in compliance with the
Securities Act; or
(B) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act, a certification
to that effect (substantially in the form of Exhibit
D hereto) and, at the option of the Issuers, an
Opinion of Counsel reasonably satisfactory to the
Issuers to the effect that such transfer is in
compliance with the Securities Act,
then the Registrar or co-Registrar will cause, in accordance with the
standing instructions and procedures existing between the Depository
and the Registrar or co-Registrar, the aggregate principal amount of
the applicable Global Security to be reduced and, following such
reduction, the Issuers will execute and, upon receipt of an
authentication order in the form of an Officers' Certificate in
accordance with Section 2.02, the Trustee will authenticate and deliver
to the transferee a Physical Security in the appropriate principal
amount.
(ii) Securities issued in exchange for a beneficial interest
in a Global Security pursuant to this Section 2.16(d) shall be
registered in such names and in such authorized denominations as the
Depository, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct
<PAGE> 39
-32-
the Registrar or co-Registrar in writing. The Registrar or
co-Registrar shall deliver such Physical Securities to the Persons in
whose names such Physical Securities are so registered.
(e) Restrictions on Transfer and Exchange of Global
Securities. Notwithstanding any other provisions of this Indenture, a Global
Security may not be transferred as a whole except by the Depository to a nominee
of the Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar or co-Registrar shall deliver Securities that do not bear the Private
Placement Legend. Upon the transfer, exchange or replacement of Securities
bearing the Private Placement Legend, the Registrar or co-Registrar shall
deliver only Securities that bear the Private Placement Legend unless, and the
Trustee is hereby authorized to deliver Securities without the Private Placement
Legend if, (i) there is delivered to the Trustee an Opinion of Counsel
reasonably satisfactory to the Issuers and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act;(ii) such
Security has been sold pursuant to an effective registration statement under the
Securities Act (including pursuant to a Registration); or (iii) the date of such
transfer, exchange or replacement is two years after the later of (x) the Issue
Date and (y) the last date that the Issuers or any affiliate (as defined in Rule
144 under the Securities Act) of the Issuers was the owner of such Securities
(or any predecessor thereto).
(g) General. By its acceptance of any Security bearing the
Private Placement Legend, each Holder of such a Security acknowledges the
restrictions on transfer of such Security set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Security only as
provided in this Indenture.
The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Security (including any transfers between or among Participants
or beneficial owners of interest in any Global Security) other than to require
delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by the terms
of, this Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.15 or this Section
2.16. The Issuers shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar
<PAGE> 40
-33-
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Issuers want to redeem Securities pursuant to paragraph
5 or 6 of the Securities at the applicable redemption price set forth thereon,
they shall notify the Trustee in writing of the Redemption Date and the
principal amount of Securities to be redeemed. The Issuers shall give such
notice to the Trustee at least 45 days before the Redemption Date (unless a
shorter notice shall be agreed to by the Trustee in writing), together with an
Officers' Certificate stating that such redemption will comply with the
conditions contained herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed pursuant
to paragraph 5 of the Securities, the Trustee shall select the Securities to be
redeemed in compliance with the requirements of the national securities
exchange, if any, on which the Securities are listed or, if the Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
or in such other manner as the Trustee shall deem fair and appropriate.
Selection of the Securities to be redeemed pursuant to paragraph 6 of the
Securities shall be made by the Trustee only on a pro rata basis or on as nearly
a pro rata basis as is practicable (subject to the procedures of the Depository)
based on the aggregate principal amount of Securities held by each Holder. The
Trustee shall make the selection from the Securities then outstanding, subject
to redemption and not previously called for redemption.
The Trustee may select for redemption pursuant to paragraph 5
or 6 of the Securities portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption
Date, the Issuers shall mail a notice of redemption by first-class mail to each
Holder whose Securities are to be redeemed at such Holder's registered address;
provided, however, that notice of a redemption pursuant to paragraph 6 of the
Securities shall be mailed to each Holder whose Securities are to be redeemed no
later than 60 days after the date of the Closing of the relevant Public Equity
Offering of the Company.
Each notice of redemption shall identify the Securities to be
redeemed (including the CUSIP number thereon) and shall state:
(1) the Redemption Date;
(2) the redemption price;
<PAGE> 41
-34-
(3) the name and address of the Paying Agent to which the
Securities are to be surrendered for redemption;
(4) that Securities called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(5) that, unless the Issuers default in making the redemption
payment, interest on Securities called for redemption ceases to accrue
on and after the Redemption Date and the only remaining right of the
Holders is to receive payment of the redemption price upon surrender to
the Paying Agent; and
(6) in the case of any redemption pursuant to paragraph 5 or 6
of the Securities, if any Security is being redeemed in part, the
portion of the principal amount of such Security to be redeemed and
that, after the Redemption Date, upon surrender of such Security, a new
Security or Securities in principal amount equal to the unredeemed
portion thereof will be issued.
At the Issuers' request, the Trustee shall give the notice of
redemption on behalf of the Issuers, in the Issuers' name and at the Issuers'
expense.
SECTION 3.04. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for
redemption become due and payable on the Redemption Date and at the redemption
price. Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price, plus accrued interest thereon, if any, to the Redemption Date,
but interest installments whose maturity is on or prior to such Redemption Date
shall be payable to the Holders of record at the close of business on the
relevant Interest Record Date.
SECTION 3.05. Deposit of Redemption Price.
At least one Business Day before the Redemption Date, the
Issuers shall deposit with the Paying Agent (or if the either of the Issuers is
its own Paying Agent, it shall, on or before the Redemption Date, segregate and
hold in trust) money sufficient to pay the redemption price of and accrued
interest, if any, on all Securities to be redeemed on that date other than
Securities or portions thereof called for redemption on that date which have
been delivered by the Issuers to the Trustee for cancellation.
If any Security surrendered for redemption in the manner
provided in the Securities shall not be so paid on the Redemption Date due to
the failure of the Issuers to deposit with the Paying Agent money sufficient to
pay the redemption price thereof, the principal and accrued and unpaid interest,
if any, thereon shall, until paid or duly provided for, bear interest as
provided in Sections 2.12 and 4.01 with respect to any payment default.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the
Trustee shall authenticate for the Holder a new Security equal in principal
amount to the unredeemed portion of the Security surrendered.
<PAGE> 42
-35-
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Issuers shall pay the principal of and interest on the
Securities in the manner provided in the Securities and the Registration Rights
Agreement. An installment of principal or interest shall be considered paid on
the date due if the Trustee or Paying Agent (other than the Issuers or any
Affiliates of the Issuers) holds on that date money designated for and
sufficient to pay the installment in full and is not prohibited from paying such
money to the Holders of the Securities pursuant to the terms of this Indenture.
The Issuers shall pay cash interest on overdue principal at
the same rate per annum borne by the Securities. The Issuers shall pay cash
interest on overdue installments of interest at the same rate per annum borne by
the Securities, to the extent lawful, as provided in Section 2.12.
SECTION 4.02. Maintenance of Office or Agency.
The Issuers shall give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time the Issuers shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in this Section 4.02. The Issuers hereby
initially designate the Trustee at its address at: First Union National Bank, 40
Broad Street, 5th Floor, Suite 550, New York, NY 10004.
SECTION 4.03. Transactions with Affiliates.
The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, conduct any business or enter
into any transaction (or series of related transactions) with or for the benefit
of any of their respective Affiliates (including, without limitation, any
Unrestricted Subsidiary) or any officer, director or employee of the Company or
any Subsidiary (each, an "Affiliate Transaction"), unless (i) such Affiliate
Transaction is on terms which are no less favorable to the Company or such
Restricted Subsidiary, as the case may be, than could be available in a
comparable transaction with an unaffiliated third party and (ii) if such
Affiliate Transaction (or series of related Affiliate Transactions) involves
aggregate payments or other consideration having a Fair Market Value in excess
of $1.0 million, such Affiliate Transaction is in writing and a majority of the
disinterested members of the Board of Managers of the Company shall have
approved such Affiliate Transaction and determined that such Affiliate
Transaction complies with the foregoing provisions. In addition, any Affiliate
Transaction involving aggregate payments or other consideration having a Fair
Market Value in excess of $5.0 million will also require a written opinion from
an Independent Financial Advisor (filed with the Trustee) stating that the terms
of such Affiliate Transaction are fair, from a financial point of view, to the
Company or the Restricted Subsidiary involved in such Affiliate Transaction, as
the case may be.
Notwithstanding the foregoing, the restrictions set forth in
this Section 4.03 shall not apply to (i) transactions with or among the Company
and any Restricted Subsidiary or between or among Restricted Subsidiaries; (ii)
reasonable fees and compensation paid to, and indemnity provided on behalf of,
officers, directors, employees, consultants or agents of the Company or any
Restricted Subsidiary of the Company as determined in good faith by the
Company's Board of Managers; (iii) any transactions undertaken pursuant to any
contractual
<PAGE> 43
-36-
obligations in existence on the Issue Date (as in effect on the Issue Date);
(iv) any Restricted Payments made in compliance with Section 4.08; (v) the
provision by Persons who may be deemed Affiliates or stockholders of the Company
of investment banking, commercial banking, trust, lending or financing,
investment, underwriting, placement agent, financial advisory or similar
services to the Company or its Subsidiaries; (vi) reasonable and customary loans
to employees of the Company and its Subsidiaries which are approved by the Board
of Managers of the Company in good faith; and (vii) transactions with customers,
clients, suppliers or purchasers or sellers of goods or services, in each case
in the ordinary course of business and otherwise in compliance with the terms of
this Indenture, which are fair to the Company or its Restricted Subsidiaries, in
the reasonable determination of the Board of Managers of the Company or the
senior management thereof, or are on terms at least as favorable as might
reasonably have been obtained at such time from an unaffiliated party.
SECTION 4.04. Limitation on Indebtedness.
The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness
(including Acquired Indebtedness), except for Permitted Indebtedness; provided,
however, that the Company and any Domestic Restricted Subsidiary may Incur
Indebtedness if, at the time of and immediately after giving pro forma effect to
such Incurrence of Indebtedness and the application of the proceeds therefrom,
the Consolidated Coverage Ratio would be greater than 2.0 to 1.0 if the
Indebtedness is Incurred prior to December 31, 1999 and 2.25 to 1.0 if the
Indebtedness is Incurred thereafter; and provided, further, that any Foreign
Restricted Subsidiary may Incur Indebtedness in accordance with Section 4.05.
SECTION 4.05. Limitation on Foreign Indebtedness.
The Company shall not cause or permit any Foreign Restricted
Subsidiary of the Company to, directly or indirectly, Incur any Indebtedness
(including Acquired Indebtedness) other than Permitted Indebtedness set forth in
clauses (a) through (m) of the definition thereof unless (i) the Indebtedness is
Incurred, denominated and payable in U.S. dollars or the local currencies of the
jurisdictions of the operations of the Foreign Restricted Subsidiary Incurring
such Indebtedness or of the business or the location of assets being acquired
with the proceeds of such Indebtedness; provided, however, that any Indebtedness
permitted to be Incurred in a Western European currency pursuant to this clause
(i) may be Incurred in such Western European currency or any other Western
European currency, (ii) after giving effect to the Incurrence of such
Indebtedness and the receipt of the application of the proceeds therefrom, (A)
if, as a result of the Incurrence of such Indebtedness, such Restricted
Subsidiary will be or become subject to any restriction or limitation on the
payment of dividends or the making of other distributions, (I) the ratio of
Foreign EBITDA to Foreign Interest Expense (determined on a pro forma basis for
the last four fiscal quarters for which financial statements are available at
the date of determination) is greater than 3.0 to 1 and (II) the Company's
Consolidated Coverage Ratio (determined on a pro forma basis for the last four
fiscal quarters of the Company for which financial statements are available at
the date of determination) is greater than 2.0 to 1 if the Indebtedness is
Incurred prior to December 31, 1999 and 2.25 to 1.0 if the Indebtedness is
Incurred thereafter and (B) in any other case, the Company's Consolidated
Coverage Ratio (determined on a pro forma basis for the last four fiscal
quarters of the Company for which financial statements are available at the date
of determination) is greater than 2.0 to 1 if the Indebtedness is Incurred prior
to December 31, 1999 and 2.25 to 1 if the Indebtedness is Incurred thereafter,
and (iii) no Default or Event of Default shall have occurred and be continuing
at the time or as a consequence of the Incurrence of such Indebtedness.
<PAGE> 44
-37-
SECTION 4.06. Limitation on Senior Subordinated Indebtedness.
The Company shall not, directly or indirectly, Incur any
Indebtedness that by its terms would expressly rank senior in right of payment
to the Securities and subordinate in right of payment to any other Indebtedness
of the Company.
The Company shall not permit any Guarantor to, and no
Guarantor shall, directly or indirectly, Incur any Indebtedness that by its
terms would expressly rank senior in right of payment to the Guarantee of such
Guarantor and subordinate in right of payment to any Indebtedness of such
Guarantor.
SECTION 4.07. Disposition of Proceeds of Asset Sales.
The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, make any Asset Sale, unless
(i) the Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the assets sold or otherwise disposed of and (ii) at least 75% of such
consideration consists of (A) cash or Cash Equivalents; provided, however, that
the amount of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet) of the Company or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Securities) that are assumed by the transferee of any such assets, and (y) any
notes or other obligations received by the Company or any such Restricted
Subsidiary from such transferee that are immediately converted by the Company or
such Restricted Subsidiary into cash (to the extent of the cash received) shall
be deemed to be cash for the purposes of this clause (A), or (B) properties and
capital assets that replace the properties and assets that were the subject of
such Asset Sale or in properties and capital assets that will be used in a
Related Business ("Replacement Assets"), provided, however, that if such
property or assets subject to such Asset Sale were directly owned by the Company
or a Guarantor, such Replacement Assets shall also be directly owned by the
Company or a Guarantor. The amount of any Indebtedness (other than any
Subordinated Indebtedness) of the Company or any Restricted Subsidiary that is
actually assumed by the transferee in such Asset Sale and from which the Company
and the Restricted Subsidiaries are fully and unconditionally released shall be
deemed to be cash for purposes of determining the percentage of cash
consideration received by the Company or the Restricted Subsidiaries.
The Company or such Restricted Subsidiary, as the case may be,
may (i) apply the Net Cash Proceeds of any Asset Sale within 180 days of receipt
thereof to repay Senior Indebtedness and permanently reduce any related
commitment, or (ii) make an Investment in Replacement Assets; provided, however,
that such Investment occurs or the Company or a Restricted Subsidiary enters
into contractual commitments to make such Investment, subject only to customary
conditions (other than the obtaining of financing), on or prior to the 180th day
following the receipt of such Net Cash Proceeds and Net Cash Proceeds
contractually committed are so applied within 270 days following the receipt of
such Net Cash Proceeds.
To the extent all or part of the Net Cash Proceeds of any
Asset Sale are not applied as described in clause (i) or (ii) of the immediately
preceding paragraph within the time periods set forth therein (the "Net Proceeds
Utilization Date") (such Net Cash Proceeds, the "Unutilized Net Cash Proceeds"),
the Company shall, within 20 days after such Net Proceeds Utilization Date, make
an Offer to Purchase all outstanding Securities up to a maximum principal amount
(expressed as a multiple of $1,000) of Securities equal to such Unutilized Net
Cash Proceeds, at a purchase price in cash equal to 100% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the Purchase Date;
provided, however, that the Offer to Purchase may be deferred until there are
aggregate Unutilized Net Cash Proceeds equal to or in excess of $5 million, at
which time the en-
<PAGE> 45
-38-
tire amount of such Unutilized Net Cash Proceeds, and not just the amount in
excess of $5 million, shall be applied as required pursuant to this paragraph.
With respect to any Offer to Purchase effected pursuant to
this Section 4.07, among the Securities, to the extent the aggregate principal
amount of Securities tendered pursuant to such Offer to Purchase exceeds the
Unutilized Net Cash Proceeds to be applied to the repurchase thereof, such
Securities shall be purchased pro rata based on the aggregate principal amount
of such Securities tendered by each Holder. To the extent the Unutilized Net
Cash Proceeds exceed the aggregate amount of Securities tendered by the Holders
of the Securities pursuant to such Offer to Purchase, the Company may retain and
utilize any portion of the Unutilized Net Cash Proceeds not applied to
repurchase the Securities for any purpose consistent with the other terms of
this Indenture and such Unutilized Net Cash Proceeds shall no longer be counted
in determining the available amount of Unutilized Net Cash Proceeds for purposes
of this Section 4.07.
The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of Securities pursuant to an Offer to Purchase. To the extent that
the provisions of any securities laws or regulations conflict with this Section
4.07, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.07 by virtue hereof.
Each Holder shall be entitled to tender all or any portion of
the Securities owned by such Holder pursuant to the Offer to Purchase, subject
to the requirement that any portion of a Security tendered must be tendered in
an integral multiple of $1,000 principal amount and subject to any proration
among tendering Holders as described above.
SECTION 4.08. Limitation on Restricted Payments.
The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly,
(i) declare or pay any dividend or any other distribution on
any Equity Interests of the Company or any Restricted Subsidiary or
make any payment or distribution to the direct or indirect holders (in
their capacities as such) of Equity Interests of the Company or any
Restricted Subsidiary (other than any dividends, distributions and
payments made to the Company or any Restricted Subsidiary (and, in the
case of SportRack, concurrent like dividends, distributions and
payments made to the holder of the 1% minority interest in SportRack)
and dividends or distributions payable to any Person solely in
Qualified Equity Interests of the Company or in options, warrants or
other rights to purchase Qualified Equity Interests of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value
any Equity Interests of the Company or any Restricted Subsidiary (other
than any such Equity Interests owned by the Company or any Restricted
Subsidiary);
(iii) make any Investment in any Person (other than Permitted
Investments); or
(iv) designate any Subsidiary of the Company as an
"Unrestricted Subsidiary" under this Indenture (a "Designation");
provided, however, that the Designation of a Subsidiary of the Company
as an Unrestricted Subsidiary shall be deemed to include the
Designation of all of the Subsidiaries of such Subsidiary
<PAGE> 46
-39-
(any such payment or any other action (other than any exception thereto)
described in (i), (ii), (iii) or (iv) each, a "Restricted Payment"), unless
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving effect to such Restricted
Payment, the Company would be able to Incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section 4.04;
and
(c) immediately after giving effect to such Restricted
Payment, the aggregate amount of all Restricted Payments declared or
made on or after the Issue Date does not exceed an amount equal to the
sum of (1) 50% of cumulative Consolidated Net Income determined for the
period (taken as one period) from the beginning of the first fiscal
quarter commencing after the Issue Date and ending on the last day of
the most recent fiscal quarter immediately preceding the date of such
Restricted Payment for which consolidated financial information of the
Company is available (or if such cumulative Consolidated Net Income
shall be a loss, minus 100% of such loss), plus (2) 100% of the
aggregate net cash proceeds received by the Company either (x) as
capital contributions to the Company after the Issue Date or (y) from
the issue and sale (other than to a Restricted Subsidiary) of its
Qualified Equity Interests after the Issue Date (excluding the net
proceeds from any issuance and sale of Qualified Equity Interests
financed, directly or indirectly, using funds borrowed from the Company
or any Restricted Subsidiary until and to the extent such borrowing is
repaid), plus (3) the principal amount (or accreted amount (determined
in accordance with GAAP), if less) of any Indebtedness of the Company
or any Restricted Subsidiary Incurred after the Issue Date which has
been converted into or exchanged for Qualified Equity Interests of the
Company (minus the amount of any cash or property distributed by the
Company or any Restricted Subsidiary upon such conversion or exchange),
plus (4) so long as the Designation thereof was treated as a Restricted
Payment made after the Issue Date, with respect to any Unrestricted
Subsidiary that has been redesignated as a Restricted Subsidiary after
the Issue Date in accordance with Section 4.15 below, the Company's
proportionate interest in an amount equal to the Fair Market Value of
such Subsidiary, plus (5) in the case of the disposition or repayment
of any Investment constituting a Restricted Payment made after the
Issue Date (including the sale of an Unrestricted Subsidiary) or
dividends, distributions or interest payments received in cash, an
amount equal to 100% of the net cash proceeds received by the Company
or its Restricted Subsidiaries therefrom.
The foregoing provisions will not prevent (i) the payment of
any dividend or distribution on, or redemption of, Equity Interests within 60
days after the date of declaration of such dividend or distribution or the
giving of formal notice of such redemption, if at the date of such declaration
or giving of such formal notice such payment or redemption would comply with the
provisions of this Indenture; (ii) the purchase, redemption, retirement or other
acquisition of any Equity Interests of the Company or its Restricted
Subsidiaries that are not owned by the Company or its Restricted Subsidiaries in
exchange for, or out of the net cash proceeds of the substantially concurrent
issue and sale (other than to a Restricted Subsidiary) of, Qualified Equity
Interests of the Company; provided, however, that any such net cash proceeds and
the value of any Qualified Equity Interests issued in exchange for such retired
Equity Interests are excluded from clause (c)(2) of the preceding paragraph (and
were not included therein at any time) and are not used to redeem the Securities
pursuant to paragraphs 5 or 6 of the Securities; (iii) the purchase, redemption
or other acquisition for value of Equity Interests of the Company (other than
Disqualified Capital Stock) or options on such Equity Interests held by officers
or employees or former officers or employees (or their estates or beneficiaries
under their estates) upon the death, disability, retirement or termination of
employment of such current or former officers or em-
<PAGE> 47
-40-
ployees pursuant to the terms of an employee benefit plan or any other agreement
pursuant to which such shares of capital stock or options were issued or
pursuant to a severance, buy-sell or right of first refusal agreement with such
current or former officer or employee; provided, however, that the aggregate
cash consideration paid, or distributions made, pursuant to this clause (iii)
does not exceed $5.0 million; (iv) Investments constituting Restricted Payments
made as a result of the receipt of non-cash consideration from any Asset Sale
made pursuant to and in compliance with Section 4.07; (v) Tax Distributions;
(vi) the payment of dividends on the Company's Common Stock, following the first
Public Equity Offering of the Company's Common Stock after the Issue Date, of up
to 6% per annum of the net proceeds received by the Company in such public
offering; and (vii) the purchase, redemption, retirement or other acquisition
prior to June 30, 1999 of Equity Interests of the Company from unaffiliated
third parties; provided, however, that the aggregate cash consideration paid
pursuant to this clause (vii) does not exceed $7.5 million; provided, however,
that in the case of each of clauses (ii), (iii), (iv), (vi) and (vii) no Default
or Event of Default shall have occurred and be continuing or would arise
therefrom.
In determining the amount of Restricted Payments permissible
under this covenant, amounts expended pursuant to clauses (i), (iii), (iv), (vi)
and (vii) of the immediately preceding paragraph shall be included as Restricted
Payments. The amount of any non-cash Restricted Payment shall be deemed to be
equal to the Fair Market Value thereof at the date of the making of such
Restricted Payment. In determining the amount of any Restricted Payment made
under clause (iv) of the first paragraph of this Section 4.07, the amount of
such Restricted Payment (the "Designation Amount") shall be equal to the Fair
Market Value of the Company's proportionate interest in such Subsidiary on such
date. Any such Designation shall be evidenced by a Board Resolution.
SECTION 4.09. Limitation on the Sale or Issuance of Equity Interests of
Restricted Subsidiaries.
The Company shall not sell any Equity Interest of a Restricted
Subsidiary, and shall not cause or permit any Restricted Subsidiary, directly or
indirectly, to issue or sell or have outstanding any Equity Interests, except
(i) to the Company or a Wholly Owned Restricted Subsidiary; or (ii) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would not longer constitute a Restricted Subsidiary. Notwithstanding
the foregoing, the Company is permitted to sell all the Equity Interests of a
Restricted Subsidiary so long as the Company is in compliance with Section 4.07
and, if applicable, Article Five.
SECTION 4.10. Notice of Defaults.
(a) In the event that any Indebtedness of the Company or any
of its Subsidiaries is declared due and payable before its maturity because of
the occurrence of any default (or any event which, with notice or lapse of time,
or both, would constitute such a default) under such Indebtedness, the Company
shall promptly give written notice to the Trustee of such declaration, the
status of such default or event and what action the Company is taking or
proposes to take with respect thereto.
(b) Upon becoming aware of any Default or Event of Default,
the Company shall promptly deliver an Officers' Certificate to the Trustee
specifying the Default or Event of Default.
SECTION 4.11. Limitation on Liens.
The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, Incur any Liens of any kind
against or upon any of their respective properties or assets now owned or
hereafter acquired, or any proceeds therefrom or any income or profits
therefrom, to secure any Indebtedness unless contemporaneously therewith
effective provision is made, in the case of the Company, to
<PAGE> 48
-41-
secure the Securities and all other amounts due under this Indenture, and in the
case of a Restricted Subsidiary which is a Guarantor, to secure such Restricted
Subsidiary's Guarantee of the Securities and all other amounts due under this
Indenture, equally and ratably with such Indebtedness (or, in the event that
such Indebtedness is subordinated in right of payment to the Securities or such
Restricted Subsidiary's Guarantee, prior to such Indebtedness) with a Lien on
the same properties and assets securing such Indebtedness for so long as such
Indebtedness is secured by such Lien, except for (i) Liens securing Senior
Indebtedness and Guarantor Senior Indebtedness and (ii) Permitted Liens.
SECTION 4.12. Provision of Financial Information.
Whether or not the Company is subject to Section 13(a) or
15(d) of the Exchange Act, or any successor provision thereto, the Company shall
file with the SEC (if permitted by SEC practice and applicable law and
regulations) the annual reports, quarterly reports and other documents which the
Company would have been required to file with the SEC pursuant to such Section
13(a) or 15(d) or any successor provision thereto if the Company were so
subject, such documents to be filed with the SEC on or prior to the respective
dates (the "Required Filing Dates") by which the Company would have been
required so to file such documents if the Company were so subject. The Company
shall also in any event (a) within 15 days of each Required Filing Date (whether
or not permitted or required to be filed with the SEC) (i) transmit (or cause to
be transmitted) by mail to all Holders, as their names and addresses appear in
the Security Register, without cost to such Holders, and (ii) file with the
Trustee, copies of the annual reports, quarterly reports and other documents
which the Company is required to file with the SEC pursuant to the preceding
sentence, or, if such filing is not so permitted, information and data of a
similar nature, and (b) if, notwithstanding the preceding sentence, filing such
documents by the Company with the SEC is not permitted by SEC practice or
applicable law or regulations, promptly upon written request supply copies of
such documents to any Holder. In addition, for so long as any Securities remain
outstanding and prior to the later of the consummation of the Exchange Offer and
the filing of the Initial Shelf Registration Statement, if required, the Company
will furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act, and, to any beneficial holder of
Securities, if not obtainable from the SEC, information of the type that would
be filed with the SEC pursuant to the foregoing provisions, upon the request of
any such Holder.
SECTION 4.13. Limitations on Dividend and Other Payment Restrictions
Affecting Subsidiaries.
The Company shall not, and shall not cause or permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (a) pay dividends or make any other
distributions to the Company or any other Restricted Subsidiary on its Equity
Interests or with respect to any other interest or participation in, or measured
by, its profits, or pay any Indebtedness owed to the Company or any other
Restricted Subsidiary, (b) make loans or advances to, or guarantee any
Indebtedness or other obligations of, or make any Investment in, the Company or
any other Restricted Subsidiary or (c) transfer any of its properties or assets
to the Company or any other Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (i) the Credit
Facilities, or any other agreement of the Company or the Restricted Subsidiaries
outstanding on the Issue Date, in each case as in effect on the Issue Date, and
any amendments, restatements, renewals, replacements or refinancings thereof;
provided, however, that any such amendment, restatement, renewal, replacement or
refinancing is no more restrictive in the aggregate with respect to such
encumbrances or restrictions than those contained in the agreement being
amended, restated, reviewed, replaced or refinanced; (ii) applicable law; (iii)
any instrument governing Indebtedness or Equity Interests of an Acquired Person
acquired by the Company or any Restricted Subsidiary as in effect at the time of
such acquisition
<PAGE> 49
-42-
(except to the extent such Indebtedness was Incurred by such Acquired Person in
connection with, as a result of or in anticipation or contemplation of such
acquisition); provided, however, that such encumbrances and restrictions are not
applicable to the Company or any Restricted Subsidiary, or the properties or
assets of the Company or any Restricted Subsidiary, other than the Acquired
Person; (iv) customary non-assignment provisions in contracts or leases entered
into in the ordinary course of business and consistent with past practices; (v)
Purchase Money Indebtedness for property acquired in the ordinary course of
business that only imposes encumbrances and restrictions on the property so
acquired; (vi) any agreement for the sale or disposition of the Equity Interests
or assets of any Restricted Subsidiary; provided, however, that such
encumbrances and restrictions described in this clause (vi) are only applicable
to such Restricted Subsidiary or assets, as applicable, and any such sale or
disposition is made in compliance with Section 4.07 below to the extent
applicable thereto; (vii) secured Indebtedness otherwise permitted to be
incurred pursuant to Section 4.04 and Section 4.11 that limit the right of the
debtor to dispose of the assets securing such Indebtedness; (viii) customary
provisions in joint venture agreements and other similar agreements entered into
in the ordinary course of business; (ix) an agreement governing Indebtedness
incurred to refinance the Indebtedness issued, assumed or incurred pursuant to
an agreement referred to in clauses (i) through (viii) above; provided, however,
that the provisions relating to such encumbrance or restriction contained in any
such Indebtedness are no less restrictive in the aggregate than the provisions
relating to such encumbrance or restriction contained in agreements referred to
in such clauses; (x) an agreement governing Senior Indebtedness permitted to be
incurred pursuant to Section 4.04; provided, however, that the provisions
relating to such encumbrance or restriction contained in such Indebtedness are
no less favorable to the Company in any material respect as determined by the
Board of Managers of the Company in its reasonable and good faith judgment than
the provisions contained in the Amended and Restated Credit Agreement as in
effect on the Issue Date; or (xi) this Indenture.
SECTION 4.14. Guarantees by Restricted Subsidiaries.
The Company will not create or acquire, nor cause or permit
any of the Restricted Subsidiaries, directly or indirectly, to create or
acquire, any Subsidiary other than (A) an Unrestricted Subsidiary in accordance
with the other terms of this Indenture, (B) a Foreign Restricted Subsidiary or
(C) a Domestic Restricted Subsidiary that, simultaneously with such creation or
acquisition, executes and delivers a supplemental indenture to this Indenture
pursuant to which it will become a Guarantor under this Indenture in accordance
with Article Twelve.
SECTION 4.15. Designation of Unrestricted Subsidiaries.
The Company shall not and shall not cause or permit any
Restricted Subsidiary at any time to (x) provide credit support for, subject any
of its property or assets (other than the Equity Interests of any Unrestricted
Subsidiary) to the satisfaction of, or guarantee, any Indebtedness of any
Unrestricted Subsidiary (including any undertaking, agreement or instrument
evidencing such Indebtedness), (y) be directly or indirectly liable for any
Indebtedness of any Unrestricted Subsidiary or (z) be directly or indirectly
liable for any Indebtedness which provides that the holder thereof may (upon
notice, lapse of time or both) declare a default thereon or cause the payment
thereof to be accelerated or payable prior to its final scheduled maturity upon
the occurrence of a default with respect to any Indebtedness of any Unrestricted
Subsidiary, except for any non-recourse guarantee given solely to support the
pledge by the Company or any Restricted Subsidiary of the capital stock of any
Unrestricted Subsidiary.
The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") only if:
<PAGE> 50
-43-
(i) no Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such Revocation;
and
(ii) all Liens and Indebtedness of such Unrestricted
Subsidiary outstanding immediately following such Revocation would, if
Incurred at such time, be permitted to be Incurred for all purposes of
this Indenture.
All Designations and Revocations must be evidenced by
resolutions of the Board of Managers of the Company, delivered to the Trustee
certifying compliance with the foregoing provisions.
SECTION 4.16. Offer to Purchase upon Change of Control.
(a) Following the occurrence of a Change of Control (the date
of such occurrence being the "Change of Control Date"), the Company shall notify
the Holders of the Securities of such occurrence in the manner prescribed by
this Indenture and shall, within 20 days after the Change of Control Date, make
an Offer to Purchase all Securities then outstanding at a purchase price in cash
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the Purchase Date (subject to the right of Holders
of record on the relevant Interest Record Date to receive interest due on the
relevant Interest Payment Date). Each Holder shall be entitled to tender all or
any portion of the Securities owned by such Holder pursuant to the Offer to
Purchase, subject to the requirement that any portion of a Security tendered
must be tendered in an integral multiple of $1,000 principal amount.
(b) On or prior to the Purchase Date specified in the Offer to
Purchase, the Company shall (i) accept for payment all Securities or portions
thereof validly tendered pursuant to the Offer, (ii) deposit with the Paying
Agent or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 2.04, money sufficient to pay the Purchase Price
of all Securities or portions thereof so accepted and (iii) deliver or cause to
be delivered to the Trustee for cancellation all Securities so accepted together
with an Officers' Certificate stating the Securities or portions thereof
accepted for payment by the Company. The Paying Agent (or the Company, if so
acting) shall promptly mail or deliver to Holders of Securities so accepted,
payment in an amount equal to the Purchase Price for such Securities, and the
Trustee shall promptly authenticate and mail or deliver to each Holder of
Securities a new Security or Securities equal in principal amount to any
unpurchased portion of the Security surrendered as requested by the Holder. Any
Security not accepted for payment shall be promptly mailed or delivered by the
Company to the Holder thereof. The Company shall publicly announce the results
of the Offer on or as soon as practicable after the Purchase Date.
(c) If the Company makes an Offer to Purchase, the Company
will comply with all applicable tender offer laws and regulations, including, to
the extent applicable, Section 14(e) and Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of Securities
pursuant of a Change of Control Offer. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this Section
4.16, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.16.
SECTION 4.17. Compliance Certificate.
The Issuers shall deliver to the Trustee within 120 days after
the close of each fiscal year a certificate signed by the principal executive
officer, principal financial officer or principal accounting officer stating
that a review of the activities of the Issuers has been made under the
supervision of the signing officers with a view to determining whether a Default
or Event of Default has occurred and whether or not the signers
<PAGE> 51
-44-
know of any Default or Event of Default by the Company that occurred during such
fiscal year. If they do know of such a Default or Event of Default, their status
and the action the Company is taking or proposes to take with respect thereto.
The first certificate to be delivered by the Issuers pursuant to this Section
4.17 shall be for the fiscal year ending December 31, 1998.
SECTION 4.18. Corporate Existence.
Subject to Article Five, each of the Issuers shall do or shall
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and the corporate, partnership or other existence
of each Restricted Subsidiary in accordance with the respective organizational
documents of each such Restricted Subsidiary and the rights (charter and
statutory) and material franchises of Capital Corp., the Company and the
Restricted Subsidiaries; provided, however, that the Company shall not be
required to preserve any such right or franchise, or the corporate existence of
any Restricted Subsidiary, if the Board of Directors of the Company shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and the Restricted Subsidiaries, taken as a whole;
provided, further, however, that a determination of the Board of Directors of
the Company shall not be required in the event of a merger of one or more Wholly
Owned Restricted Subsidiaries of the Company with or into another Wholly Owned
Restricted Subsidiary of the Company or another Person, if the surviving Person
is a Wholly Owned Restricted Subsidiary of the Company organized under the laws
of the United States or a State thereof or of the District of Columbia or, in
the case of a Foreign Restricted Subsidiary, the jurisdiction of incorporation
or organization of such Foreign Restricted Subsidiary. This Section 4.18 shall
not prohibit either of the Issuers from taking any other action otherwise
permitted by, and made in accordance with, the provisions of this Indenture.
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Sale of Assets, etc.
(a) Neither of the Issuers shall consolidate with or merge
with or into any other entity and the Company shall not, and shall not cause or
permit any Restricted Subsidiary to, sell, convey, assign, transfer, lease or
otherwise dispose of all or substantially all of the Company's and the
Restricted Subsidiaries' properties and assets (determined on a consolidated
basis for the Company and the Restricted Subsidiaries) to any entity in a single
transaction or series of related transactions, unless: (i) either (x) the
Company shall be the Surviving Person or (y) the Surviving Person (if other than
the Company) shall be a corporation or limited liability company organized and
validly existing under the laws of the United States of America or any State
thereof or the District of Columbia or, if any such Restricted Subsidiary was a
Foreign Restricted Subsidiary, under the laws of the United States of America or
any state thereof or the District of Columbia or the jurisdiction under which
such Foreign Restricted Subsidiary was organized, and shall, in any such case,
expressly assume by a supplemental indenture, the due and punctual payment of
the principal of, premium, if any, and interest on all the Securities and the
performance and observance of every covenant of this Indenture and the
Registration Rights Agreement to be performed or observed on the part of the
Company; (ii) immediately thereafter, no Default or Event of Default shall have
occurred and be continuing; and (iii) immediately after giving effect to any
such transaction involving the Incurrence by the Company or any Restricted
Subsidiary, directly or indirectly, of additional Indebtedness (and treating any
Indebtedness not previously an obligation of
<PAGE> 52
-45-
the Company or any Restricted Subsidiary in connection with or as a result of
such transaction as having been Incurred at the time of such transaction), the
Surviving Person could Incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under the Consolidated Coverage Ratio of the first
paragraph of Section 4.04.
(b) Notwithstanding the foregoing clause (iii) of the
immediately preceding paragraph, any Restricted Subsidiary may consolidate with,
merge into or transfer all or part of its properties and assets to the Company
or any Restricted Subsidiary that is a Guarantor.
(c) For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all the properties and assets of one or
more Restricted Subsidiaries the Equity Interest of which constitutes all or
substantially all the properties and assets of the Company shall be deemed to be
the transfer of all or substantially all the properties and assets of the
Company.
(d) No Guarantor (other than a Guarantor whose Guarantee is to
be released in accordance with the terms of its Guarantee and this Indenture as
provided in the third paragraph under Article Eleven above) shall consolidate
with or merge with or into another Person, whether or not such Person is
affiliated with such Guarantor and whether or not such Guarantor is the
Surviving Person, unless (i) the Surviving Person (if other than such Guarantor)
is a corporation or limited liability company organized and validly existing
under the laws of the United States, any State thereof or the District of
Columbia; (ii) the Surviving Person (if other than such Guarantor) expressly
assumes by a supplemental indenture all the obligations of such Guarantor under
its Guarantee of the Securities and the performance and observance of every
covenant of this Indenture and the Registration Right Agreement to be performed
or observed by such Guarantor; (iii) at the time of and immediately after such
Disposition, no Default or Event of Default shall have occurred and be
continuing; and (iv) immediately after giving effect to any such transaction
involving the Incurrence by such Guarantor, directly or indirectly, of
additional Indebtedness (and treating any Indebtedness not previously an
obligation of such Guarantor in connection with or as a result of such
transaction as having been Incurred at the time of such transaction), the
Company could Incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the Consolidated Coverage Ratio of the first
paragraph of Section 4.04; provided, however, that this paragraph shall not be a
condition to a merger or consolidation of a Guarantor if such merger or
consolidation only involves the Company and/or one or more other Guarantors.
SECTION 5.02. Successor Corporation Substituted.
In the event of any transaction (other than a lease) described
in and complying with the conditions listed in Section 5.01 in which the Company
or a Guarantor, as the case may be, is not the Surviving Person and the
Surviving Person is to assume all the Obligations of the Company under the
Securities, this Indenture and the Registration Rights Agreement or of such
Guarantor under its Guarantee, this Indenture and the Registration Rights
Agreement, as the case may be, pursuant to a supplemental indenture, such
Surviving Person shall succeed to, and be substituted for, and may exercise
every right and power of, the Company or such Guarantor, as the case may be, and
the Company, as the case may be, shall be discharged from its Obligations under
this Indenture and the Securities or such Guarantor shall be discharged from its
Obligations under this Indenture and its Guarantee, as the case may be.
<PAGE> 53
-46-
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
Each of the following shall be an "Event of Default" for
purposes of this Indenture:
(a) failure to pay principal of (or premium, if any, on) any
Security when due (whether or not prohibited by the provisions of
Article Eight);
(b) failure to pay any interest on any Security when due,
which failure continues for 30 days or more (whether or not prohibited
by the provisions of Article Eight);
(c) default in the payment of principal of or interest on any
Security required to be purchased pursuant to any Offer to Purchase
required by this Indenture when due and payable or failure to pay on
the Purchase Date the Purchase Price for any Security validly tendered
pursuant to any Offer to Purchase (whether or not prohibited by the
provisions of Article Eight);
(d) failure to perform any other covenant or agreement of the
Company under this Indenture or in the Securities or of the Guarantors
under this Indenture or in the Guarantees which failure continues for
30 days or more after written notice to the Company by the Trustee or
the Holders of at least 25% in aggregate principal amount of the
outstanding Securities;
(e) default or defaults under the terms of one or more
instruments evidencing or securing Indebtedness of the Company or any
of its Restricted Subsidiaries having an outstanding principal amount
of $5.0 million or more individually or in the aggregate that has
resulted in the acceleration of the payment of such Indebtedness or
failure by the Company or any of its Restricted Subsidiaries to pay
principal when due at the stated maturity of any such Indebtedness and
such default or defaults shall have continued after any applicable
grace period and shall not have been cured or waived;
(f) the rendering of a final judgment or judgments (not
subject to appeal) against the Company or any of its Subsidiaries in an
amount of $5.0 million or more (net of any amounts covered by
insurance) which remains undischarged or unstayed for a period of 60
days after the date on which the right to appeal has expired;
(g) the Company or any of its Significant Restricted
Subsidiaries pursuant to or within the meaning of any Bankruptcy Law:
(i) admits in writing its inability to pay its debts generally as they
become due; (ii) commences a voluntary case or proceeding; (iii)
consents to the entry of an order for relief against it in an
involuntary case or proceeding; (iv) consents or acquiesces in the
institution of a bankruptcy or insolvency proceeding against it; (v)
consents to the appointment of a Custodian of it or for all or
substantially all of its property; or (vi) makes a general assignment
for the benefit of its creditors, or any of them takes any action to
authorize or effect any of the foregoing;
(h) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (i) is for relief against the
Company or any Significant Restricted Subsidiary of the Company in an
involuntary case or proceeding; (ii) appoints a Custodian of the
Company or any Significant Sub-
<PAGE> 54
-47-
sidiary of the Company for all or substantially all of its property;
or (iii) orders the liquidation of the Company or any Significant
Restricted Subsidiary of the Company; and in each case the order or
decree remains unstayed and in effect for 60 days; provided, however,
that if the entry of such order or decree is appealed and dismissed on
appeal, then the Event of Default hereunder by reason of the entry of
such order or decree shall be deemed to have been cured;
(i) other than as provided in or pursuant to any Guarantee or
this Indenture, any Guarantee of a Significant Restricted Subsidiary
ceases to be in full force and effect or is declared null and void and
unenforceable or found to be invalid or any Guarantor denies in writing
its liability under its Guarantee (other than by reason of a release of
such Guarantor from its Guarantee in accordance with the terms of this
Indenture and such Guarantee).
The term "Bankruptcy Law" means Title 11, U.S. Code or any
similar Federal, state or foreign law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or
similar official under any Bankruptcy Law.
SECTION 6.02. Acceleration.
If an Event of Default with respect to the Securities (other
than an Event of Default specified in clauses (g) or (h) of Section 6.01 with
respect to the Company) occurs and is continuing, the Trustee or the Holders of
at least 25% in aggregate principal amount of the outstanding Securities, by
notice in writing to the Company (and to the Trustee if given by the Holders)
may declare the unpaid principal of (and premium, if any) and accrued interest
to the date of acceleration on all outstanding Securities to be due and payable
immediately and, upon any such declaration, such principal amount (and premium,
if any) and accrued interest, notwithstanding anything contained in this
Indenture or the Securities to the contrary, shall become immediately due and
payable.
If an Event of Default specified in clauses (g) or (h) of
Section 6.01 with respect to the Company occurs, all unpaid principal of and
accrued interest on all outstanding Securities shall ipso facto become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.
Any such declaration with respect to the Securities may be
rescinded and annulled by the Holders of a majority in aggregate principal
amount of the outstanding Securities by written notice to the Trustee if all
existing Events of Default (other than the nonpayment of principal of and
interest on the Securities which has become due solely by virtue of such
acceleration) have been cured or waived and if the rescission would not conflict
with any judgment or decree. No such rescission shall affect any subsequent
Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the proceeding.
A delay or omission by the Trustee or any Holder in exercising any right or
remedy maturing upon an Event of Default shall not impair the right or remedy or
consti-
<PAGE> 55
-48-
tute a waiver of or acquiescence in the Event of Default. No remedy is exclusive
of any other remedy. All available remedies are cumulative to the extent
permitted by law.
SECTION 6.04. Waiver of Past Default.
Subject to Sections 2.09, 6.07 and 10.02, prior to the
declaration of acceleration of the Securities, the Holders of not less than a
majority in aggregate principal amount of the outstanding Securities by written
notice to the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default in the payment of principal of or interest on any
Security as specified in clauses (a), (b) and (c) of Section 6.01 or a Default
in respect of any term or provision of this Indenture that may not be amended or
modified without the consent of each Holder affected as provided in Section
10.02. The Issuers shall deliver to the Trustee an Officers' Certificate stating
that the requisite percentage of Holders have consented to such waiver and
attaching copies of such consents. In case of any such waiver, the Issuers, the
Trustee and the Holders shall be restored to their former positions and rights
hereunder and under the Securities, respectively. This paragraph of this Section
6.04 shall be in lieu of Section 316(a)(1)(B) of the TIA and such Section.
316(a)(1)(B) of the TIA is hereby expressly excluded from this Indenture and
the Securities, as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have occurred
for every purpose of this Indenture and the Securities, but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of a majority in
principal amount of the outstanding Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture that the
Trustee determines may be unduly prejudicial to the rights of another Holder, it
being understood that the Trustee shall have no duty (subject to Section 7.01)
to ascertain whether or not such actions or forebearances are unduly prejudicial
to such holders, or that may involve the Trustee in personal liability;
provided, however, that the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction. In the event the
Trustee takes any action or follows any direction pursuant to this Indenture,
the Trustee shall be entitled to indemnification satisfactory to it in its sole
discretion against any loss or expense caused by taking such action or following
such direction. This Section 6.05 shall be in lieu of Section 316(a)(1)(A) of
the TIA, and such Section 316(a)(1)(A) of the TIA is hereby expressly excluded
from this Indenture and the Securities, as permitted by the TIA.
SECTION 6.06. Limitation on Suits.
A Holder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(i) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount
of the outstanding Securities make a written request to the Trustee to
pursue a remedy;
(iii) such Holder or Holders offer and, if requested, provide
to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
<PAGE> 56
-49-
(iv) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(v) during such 60-day period the Holders of a majority in
principal amount of the outstanding Securities do not give the Trustee
a direction which, in the opinion of the Trustee, is inconsistent with
the request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, but
subject in any event to the provisions of Article Eight, the right of any Holder
to receive payment of principal of or interest on a Security, on or after the
respective due dates expressed in the Security, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest
specified in Section 6.01(a), (b) or (c) occurs and is continuing, the Trustee
may recover judgment in its own name and as trustee of an express trust against
the Issuers or any other obligor on the Securities for the whole amount of
principal and accrued interest remaining unpaid, together with interest overdue
on principal and to the extent that payment of such interest is lawful, interest
on overdue installments of interest, in each case at the rate per annum borne by
the Securities and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Issuers (or any
other obligor upon the Securities), its creditors or its property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each Holder
to make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.07. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding; provided, however, that the Trustee may, on behalf of the Holders,
vote for the election of a trustee in bankruptcy or similar official and may be
a member of the creditors' committee.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money or property in the following order:
<PAGE> 57
-50-
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the
Securities for principal and interest, ratably, without
preference or priority of any kind, according to the amounts due
and payable on the Securities for principal and interest,
respectively; and
Third: to the Issuers.
The Trustee, upon prior written notice to the Issuers, may fix
a record date and payment date for any payment to the Holders pursuant to this
Section 6.10.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section 6.11 shall not apply to a suit by the Trustee,
a suit by a Holder or group of Holders of more than 10% in aggregate principal
amount of the outstanding Securities, or to any suit instituted by any Holder
for the enforcement or the payment of the principal or interest on any
Securities on or after the respective due dates expressed in the Security.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If a Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of a Default:
(1) The Trustee shall not be liable except for the
performance of such duties as are specifically set forth herein; and
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions conforming to the requirements of this Indenture, however, in
the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the
Trustee shall examine such certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
<PAGE> 58
-51-
(c) The Trustee shall not be relieved from liability for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01;
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or to take or omit to take any
action under this Indenture or take any action at the request or direction of
Holders if it shall have reasonable grounds for believing that repayment of such
funds is not assured to it or it does not receive from such Holders an indemnity
satisfactory to it in its sole discretion against such risk, liability, loss,
fee or expense which might be incurred by it in compliance with such request or
direction.
(e) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section
7.01.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate and/or an Opinion of Counsel, which
shall conform to the provisions of Section 13.05. The Trustee shall not
be liable for any action it takes or omits to take in good faith in
reliance on such certificate or opinion.
(c) The Trustee may act through attorneys and agents of its
selection and shall not be responsible for the misconduct or negligence
of any agent or attorney (other than an agent who is an employee of the
Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers.
(e) Before the Trustee acts or refrains from acting, it may
consult with counsel and the advice or opinion of such counsel as to
matters of law shall be full and complete authorization and pro-
<PAGE> 59
-52-
tection from liability in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the
advice or opinion of such counsel.
(f) Any request or direction of the Issuers mentioned herein
shall be sufficiently evidenced by an Issuer Request or Issuer Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution.
(g) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.
(h) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Issuers, personally or by agent or
attorney.
(i) The Trustee shall not be deemed to have notice of any
Event of Default unless a Trust Officer of the Trustee has actual
knowledge thereof or unless the Trustee shall have received written
notice thereof at the Corporate Trust Office of the Trustee, and such
notice references the Securities and this Indenture. As used herein,
the term "actual knowledge" means the actual fact or statement of
knowing, without any duty to make any investigation with regard
thereto.
(j) The Trustee shall not be required to give any bond or
surety in respect of the performance of its powers and duties
hereunder.
(k) The permissive rights of the Trustee to do things
enumerated in this Indenture shall not be construed as a duty and the
Trustee shall not be answerable for other than its gross negligence or
willful misconduct.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Securities and may otherwise deal with the Issuers or
their Affiliates with the same rights it would have if it were not Trustee,
subject to Section 7.10 hereof. Any Agent may do the same with like rights.
However, the Trustee is subject to Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Issuers' use of the proceeds
from the Securities, and it shall not be responsible for any statement of the
Issuers in this Indenture or any document issued in connection with the sale of
Securities or any statement in the Securities other than the Trustee's
certificate of authentication.
<PAGE> 60
-53-
SECTION 7.05. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing
and the Trustee has actual knowledge of such Defaults or Events of Default, the
Trustee shall mail to each Holder notice of the Default or Event of Default
within 30 days after the occurrence thereof. Except in the case of a Default or
an Event of Default in payment of principal of or interest on any Security or a
Default or Event of Default in complying with Section 5.01, the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in good
faith determines that withholding the notice is in the interest of Holders. This
Section 7.05 shall be in lieu of the proviso to Section 315(b) of the TIA and
such proviso to Section 315(b) of the TIA is hereby expressly excluded from this
Indenture and the Securities, as permitted by the TIA.
SECTION 7.06. Reports by Trustee to Holders.
If required by TIA Section 313(a), as amended, within 60 days
after each October 1 beginning with October 1, 1998, the Trustee shall mail to
each Holder a report dated as of such October 1 that complies with TIA Section
313(a). The Trustee also shall comply with TIA Section 313(b), (c) and (d).
A copy of each such report at the time of its mailing to
Holders shall be filed with the SEC and each stock exchange, if any, on which
the Securities are listed.
The Issuers shall promptly notify the Trustee in writing if
the Securities become listed on any stock exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity.
The Issuers shall pay to the Trustee from time to time, and
the Trustee shall be entitled to, such compensation as the Issuers and the
Trustee shall from time to time agree in writing for its services. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Issuers shall reimburse the Trustee upon request for all
reasonable disbursements, expenses and advances, including all costs and
expenses of collection (including reasonable fees, disbursements and expenses of
its agents and outside counsel) incurred or made by it in addition to the
compensation for its services except any such disbursements, expenses and
advances as may be attributable to the Trustee's negligence or willful
misconduct. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents, accountants, experts and
outside counsel and any taxes or other expenses incurred by a trust created
pursuant to Section 9.01 hereof.
The Issuers shall indemnify the Trustee for, and hold it
harmless against any and all loss, damage, claims, liability or expense,
including taxes (other than franchise taxes imposed on the Trustee and taxes
based upon, measured by or determined by the income of the Trustee), arising out
of or in connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of defending itself against or
investigating any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to the extent that
such loss, damage, claim, liability or expense is due to its own negligence or
willful misconduct. The Trustee shall notify the Issuers promptly of any claim
asserted against the Trustee for which it may seek indemnity. However, the
failure by the Trustee to so notify the Issuers shall not relieve the Issuers of
their obligations hereunder. The Issuers shall defend the claim and the Trustee
shall cooperate in the defense (and may employ its own counsel) at the Issuers'
expense; provided, however, that the Issuers' reimbursement obligation with
respect to counsel employed by the Trustee will be limited to the reasonable
fees and expenses of such counsel.
<PAGE> 61
-54-
The Issuers need not pay for any settlement made without their
written consent, which consent shall not be unreasonably withheld. The Issuers
need not reimburse any expense or indemnify against any loss or liability
incurred by the Trustee as a result of its own gross negligence or willful
misconduct.
To secure the Issuers' payment obligations in this Section
7.07, the Trustee shall have a Lien prior to the Securities against all money or
property held or collected by the Trustee, in its capacity as Trustee, except
money or property held in trust to pay principal of or interest on particular
Securities or the Purchase Price or redemption price of any Securities to be
purchased pursuant to an Offer to Purchase or redeemed.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel) and the
compensation for the services shall be preferred over the status of the Holders
in a proceeding under any Bankruptcy Law and are intended to constitute expenses
of administration under any Bankruptcy Law. The Issuers' obligations under this
Section 7.07 and any claim arising hereunder shall survive the resignation or
removal of any Trustee, the discharge of the Issuers' obligations pursuant to
Article Nine and any rejection or termination under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Issuers
in writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee and the Issuers in
writing and may appoint a successor Trustee with the Issuers' consent. The
Issuers may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a custodian or other public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Issuers shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Issuers.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. As promptly as
practicable after that, the retiring Trustee shall transfer, after payment of
all sums then owing to the Trustee pursuant to Section 7.07, all property held
by it as Trustee to the successor Trustee, subject to the Lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have the rights, powers and duties of
the Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.
<PAGE> 62
-55-
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Issuers or the Holders of at least 10% in principal amount of the outstanding
Securities may petition, at the expense of the Issuers, any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Issuers' obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or banking corporation, the resulting, surviving or transferee
corporation or banking corporation without any further act shall be the
successor Trustee; provided, however, that such corporation shall be otherwise
qualified and eligible under this Article Seven.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be
eligible to act as Trustee under TIA ss.ss. 310(a)(1) and 310(a)(2). The Trustee
shall have a combined capital and surplus of at least $50,000,000 as set forth
in its most recent published annual report of condition. If the Trustee has or
shall acquire any "conflicting interest" within the meaning of TIA ss. 310(b),
the Trustee and the Issuers shall comply with the provisions of TIA ss. 310(b);
provided, however, that there shall be excluded from the operation of TIA ss.
310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Issuers are
outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 7.10, the Trustee shall resign
immediately in the manner and with the effect hereinbefore specified in this
Article Seven. The provisions of TIA ss. 310 shall apply to the Company and any
other obligor of the Securities.
SECTION 7.11. Preferential Collection of Claims Against Issuers.
The Trustee shall comply with TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE EIGHT
SUBORDINATION OF SECURITIES
SECTION 8.01. Securities Subordinated to Senior Indebtedness.
The Issuers covenant and agree, and the Trustee and each
Holder of the Securities by his acceptance thereof likewise covenant and agree,
that all Securities shall be issued subject to the provisions of this
<PAGE> 63
-56-
Article Eight; and each person holding any Security, whether upon original issue
or upon transfer, assignment or exchange thereof, accepts and agrees that all
payments of the principal of and interest on the Securities by the Issuers
shall, to the extent and in the manner set forth in this Article Eight, be
subordinated and junior in right of payment to the prior payment in full in cash
of all amounts payable under Senior Indebtedness.
SECTION 8.02. Payment Over of Proceeds upon Dissolution, etc.
(a) Upon any payment or distribution of assets or securities
of the Issuers of any kind or character, whether in cash, property or securities
(excluding any payment or distribution of Permitted Junior Securities and
excluding any payment from funds held in trust for the benefit of Holders
pursuant to Article Nine (a "Defeasance Trust Payment"), upon any dissolution or
winding up or total liquidation or reorganization of the Issuers, whether
voluntary or involuntary or in bankruptcy, insolvency, receivership or other
proceedings, all Senior Indebtedness then due shall first be paid in full in
cash before the Holders of the Securities or the Trustee on behalf of such
Holders shall be entitled to receive any payment by the Issuers of the principal
of, premium, if any, or interest on the Securities, or any payment by the
Issuers to acquire any of the Securities for cash, property or securities, or
any distribution by the Issuers with respect to the Securities of any cash,
property or securities (excluding any payment or distribution of Permitted
Junior Securities and excluding any Defeasance Trust Payment). Before any
payment may be made by, or on behalf of, the Issuers of the principal of,
premium, if any, or interest on the Securities upon any such dissolution or
winding up or total liquidation or reorganization, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, any
payment or distribution of assets or securities of the Issuers of any kind or
character, whether in cash, property or securities (excluding any payment or
distribution of Permitted Junior Securities and excluding any Defeasance Trust
Payment), to which the Holders of the Securities or the Trustee on their behalf
would be entitled, but for the subordination provisions of this Indenture, shall
be made by the Issuers or by any receiver, trustee in bankruptcy, liquidation
trustee, agent or other Person making such payment or distribution, directly to
the holders of the Senior Indebtedness (pro rata to such holders on the basis of
the respective amounts of Senior Indebtedness held by such holders) or their
representatives or to the trustee or trustees or agent or agents under any
agreement or indenture pursuant to which any of such Senior Indebtedness may
have been issued, as their respective interests may appear, to the extent
necessary to pay all such Senior Indebtedness in full in cash after giving
effect to any prior or concurrent payment, distribution or provision therefor to
or for the holders of such Senior Indebtedness.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of the Issuers of any kind or character, whether in cash, property
or securities (excluding any payment or distribution of Permitted Junior
Securities and excluding any Defeasance Trust Payment), shall be paid by the
Issuers to the Trustee or any Holder of Securities at a time when such payment
or distribution is prohibited by Section 8.02(a) and before all obligations then
due in respect of Senior Indebtedness are paid in full in cash, such payment or
distribution shall be received and held in trust for the benefit of, and shall
be paid over or delivered by the Trustee (if the Notice required by Section 8.06
has been received by the Trustee) or the Holder to, the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders) or their respective representatives,
or to the trustee or trustees or agent or agents under any indenture pursuant to
which any of such Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of Senior Indebtedness
remaining unpaid until all such Senior Indebtedness has been paid in full in
cash after giving effect to any prior or concurrent payment, distribution or
provision therefor to or for the holders of such Senior Indebtedness.
<PAGE> 64
-57-
The consolidation of the Issuers with, or the merger of the
Issuers with or into, another corporation or the liquidation or dissolution of
the Issuers following the conveyance or transfer of its property as an entirety,
or substantially as an entirety, to another corporation upon the terms and
conditions provided in Article Five shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 8.02
if such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article Five.
SECTION 8.03. No Payment on Securities in Certain Circumstances.
(a) No direct or indirect payment (excluding any payment or
distribution of Permitted Junior Securities and excluding any Defeasance Trust
Payment) by or on behalf of the Issuers of principal of, premium, if any, or
interest on the Securities, whether pursuant to the terms of the Securities,
upon acceleration, pursuant to an Offer to Purchase or otherwise, shall be made
if, at the time of such payment, there exists a default in the payment of all or
any portion of the obligations on any Senior Indebtedness, whether at maturity,
on account of mandatory redemption or prepayment, acceleration or otherwise, and
such default shall not have been cured or waived or the benefits of this
sentence waived by or on behalf of the holders of such Senior Indebtedness. In
addition, during the continuance of any non-payment event of default with
respect to any Designated Senior Indebtedness pursuant to which the maturity
thereof may be immediately accelerated, and upon receipt by the Trustee of
written notice (a "Payment Blockage Notice" ) from the holder or holders of such
Designated Senior Indebtedness or the trustee or agent acting on behalf of such
Designated Senior Indebtedness, then, unless and until such non-payment event of
default has been cured or waived or has ceased to exist or such Designated
Senior Indebtedness has been discharged or repaid in full in cash or the
benefits of these provisions have been waived by the holders of such Designated
Senior Indebtedness, no direct or indirect payment (excluding any payment or
distribution of Permitted Junior Securities and excluding any Defeasance Trust
Payment) shall be made by or on behalf of the Issuers of principal of, premium,
if any, or interest on the Securities, to such Holders, during a period (a
"Payment Blockage Period") commencing on the date of receipt of such notice by
the Trustee and ending 179 days thereafter.
Notwithstanding anything in this Article Eight or in the
Securities to the contrary, (x) in no event shall a Payment Blockage Period
extend beyond 179 days from the date the Payment Blockage Notice in respect
thereof was given, (y) there shall be a period of at least 181 consecutive days
in each 360-day period when no Payment Blockage Period is in effect and (z) not
more than one Payment Blockage Period may be commenced with respect to the
Securities during any period of 360 consecutive days. No event of default that
existed or was continuing on the date of commencement of any Payment Blockage
Period with respect to the Designated Senior Indebtedness initiating such
Payment Blockage Period (to the extent the holder of Designated Senior
Indebtedness, or trustee or agent, giving notice commencing such Payment
Blockage Period had knowledge of such existing or continuing event of default)
may be, or be made, the basis for the commencement of any other Payment Blockage
Period by the holder or holders of such Designated Senior Indebtedness or the
trustee or agent acting on behalf of such Designated Senior Indebtedness,
whether or not within a period of 360 consecutive days, unless such event of
default has been cured or waived for a period of not less than 90 consecutive
days.
(b) In the event that, notwithstanding the foregoing, the
Issuers shall have made payment to the Trustee or any Holder when such payment
is prohibited by Section 8.03(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered by the Trustee (if the Notice
required by Section 8.06 has been received by the Trustee) or the Holder to, the
holders of Designated Senior Indebtedness or their respective representatives,
or to the trustee or trustees under any indenture pursuant to which any of such
Designated Senior Indebtedness may have been issued, as their respective
interests may appear, but only to the
<PAGE> 65
-58-
extent that, upon notice from the Trustee to the holders of Designated Senior
Indebtedness that such prohibited payment has been made, the holders of the
Designated Senior Indebtedness (or their representative or representatives or a
trustee or trustees) notify the Trustee in writing of the amounts then due and
owing on the Designated Senior Indebtedness, if any, and only the amounts
specified in such notice to the Trustee shall be paid to the holders of
Designated Senior Indebtedness.
SECTION 8.04. Subrogation.
Upon the payment in full in cash of all Senior Indebtedness,
or provision for payment, the Holders of the Securities shall be subrogated to
the rights of the holders of Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Issuers made on such Senior
Indebtedness until the principal of and interest on the Securities shall be paid
in full in cash; and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of any cash, property or
securities to which the Holders of the Securities or the Trustee on their behalf
would be entitled except for the provisions of this Article Eight, and no
payment over pursuant to the provisions of this Article Eight to the holders of
Senior Indebtedness by Holders of the Securities or the Trustee on their behalf
shall, as between the Issuers, their creditors other than holders of Senior
Indebtedness, and the Holders of the Securities, be deemed to be a payment by
the Issuers to or on account of the Senior Indebtedness. It is understood that
the provisions of this Article Eight are and are intended solely for the purpose
of defining the relative rights of the Holders of the Securities, on the one
hand, and the holders of the Senior Indebtedness, on the other hand.
If any payment or distribution to which the Holders of the
Securities would otherwise have been entitled but for the provisions of this
Article Eight shall have been applied, pursuant to the provisions of this
Article Eight, to the payment of all amounts payable under Senior Indebtedness,
then and in such case, the Holders of the Securities shall be entitled to
receive from the holders of such Senior Indebtedness any payments or
distributions received by such holders of Senior Indebtedness in excess of the
amount required to make payment in full in cash of such Senior Indebtedness.
SECTION 8.05. Obligations of Issuers Unconditional.
Nothing contained in this Article Eight or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as among the
Issuers and the Holders of the Securities, the obligation of the Issuers, which
is absolute and unconditional, to pay to the Holders of the Securities the
principal of and interest on the Securities as and when the same shall become
due and payable in accordance with their terms, or is intended to or shall
affect the relative rights of the Holders of the Securities and creditors of the
Issuers other than the holders of the Senior Indebtedness, nor shall anything
herein or therein prevent the Holder of any Security or the Trustee on their
behalf from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
Eight of the holders of the Senior Indebtedness in respect of cash, property or
securities of the Issuers received upon the exercise of any such remedy.
Without limiting the generality of the foregoing, nothing
contained in this Article Eight shall restrict the right of the Trustee or the
Holders of Securities to take any action to declare the Securities to be due and
payable prior to their stated maturity pursuant to Section 6.01 or to pursue any
rights or remedies hereunder; provided, however, that all Senior Indebtedness
then due and payable shall first be paid in full in cash before the Holders of
the Securities or the Trustee are entitled to receive any direct or indirect
payment from the Issuers of principal of or interest on the Securities.
<PAGE> 66
-59-
SECTION 8.06. Notice to Trustee.
The Issuers shall give prompt written notice to the Trustee of
any fact known to the Issuers which would prohibit the making of any payment to
or by the Trustee in respect of the Securities pursuant to the provisions of
this Article Eight. The Trustee shall not be charged with knowledge of the
existence of any event of default with respect to any Senior Indebtedness or of
any other facts which would prohibit the making of any payment to or by the
Trustee unless and until the Trustee shall have received notice in writing at
its Corporate Trust Office to that effect signed by an Officer of each of the
Issuers, or by a holder of Senior Indebtedness or trustee or agent therefor; and
prior to the receipt of any such written notice, the Trustee shall, subject to
Article Seven, be entitled to assume that no such facts exist; provided,
however, that if the Trustee shall not have received the notice provided for in
this Section 8.06 at least two Business Days prior to the date upon which by the
terms of this Indenture any moneys shall become payable for any purpose
(including, without limitation, the payment of the principal of or interest on
any Security), then, regardless of anything herein to the contrary, the Trustee
shall have full power and authority to receive any moneys from the Issuers and
to apply the same to the purpose for which they were received, and shall not be
affected by any notice to the contrary which may be received by it on or after
such prior date. Nothing contained in this Section 8.06 shall limit the right of
the holders of Senior Indebtedness to recover payments as contemplated by
Section 8.03. The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself or itself to be a holder of any
Senior Indebtedness (or a trustee on behalf of, or other representative of, such
holder) to establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee or representative on behalf of any such holder.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article Eight, the Trustee may request such Person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amount of Senior
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article Eight, and if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 8.07. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets or securities
referred to in this Article Eight, the Trustee and the Holders of the Securities
shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which bankruptcy, dissolution, winding-up, liquidation
or reorganization proceedings are pending, or upon a certificate of the
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Trustee or to the Holders
of the Securities for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the Senior Indebtedness and
other indebtedness of the Issuers, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Eight.
SECTION 8.08. Trustee's Relation to Senior Indebtedness.
The Trustee and any Paying Agent shall be entitled to all the
rights set forth in this Article Eight with respect to any Senior Indebtedness
which may at any time be held by it in its individual or any other capacity to
the same extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall deprive the Trustee or any Paying Agent of any of its rights as
such holder.
<PAGE> 67
-60-
With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Eight, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness (except
as provided in Section 8.03(b)). The Trustee shall not be liable to any such
holders if the Trustee shall in good faith mistakenly pay over or distribute to
Holders of Securities or to the Issuers or to any other person cash, property or
securities to which any holders of Senior Indebtedness shall be entitled by
virtue of this Article Eight or otherwise.
SECTION 8.09. Subordination Rights Not Impaired by Acts or Omissions of
the Issuers or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior
Indebtedness to enforce subordination as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Issuers or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Issuers with the terms of this Indenture,
regardless of any knowledge thereof which any such holder may have or otherwise
be charged with. The provisions of this Article Eight are intended to be for the
benefit of, and shall be enforceable directly by, the holders of Senior
Indebtedness.
SECTION 8.10. Holders Authorize Trustee To Effectuate Subordination of
Securities.
Each Holder of Securities by his acceptance of such Securities
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article Eight, and appoints the Trustee his attorney-in-fact for such
purposes, including, in the event of any dissolution, winding-up, total
liquidation or reorganization of either of the Issuers (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon an
assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of either of the Issuers, the filing of a
claim for the unpaid balance of its or his Securities in the form required in
those proceedings.
SECTION 8.11. This Article Not To Prevent Events of Default.
The failure to make a payment or distribution for or on
account of the Securities by reason of any provision of this Article Eight shall
not be construed as preventing the occurrence of an Event of Default in respect
of the Securities.
SECTION 8.12. Trustee's Compensation Not Prejudiced.
Nothing in this Article Eight shall apply to amounts due to
the Trustee pursuant to other sections in this Indenture.
SECTION 8.13. No Waiver of Subordination Provisions.
Without in any way limiting the generality of Section 8.09,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
Eight or the obligations hereunder of the Holders of the Securities to the
holders of Senior Indebtedness, do any one or more of the following: (a) change
the manner,
<PAGE> 68
-61-
place or terms of payment or extend the time of payment of, or renew or alter,
Senior Indebtedness or any instrument evidencing the same or any agreement under
which Senior Indebtedness is outstanding or secured; (b) sell, exchange, release
or otherwise deal with any property pledged, mortgaged or otherwise securing
Senior Indebtedness; (c) release any Person liable in any manner for the
collection of Senior Indebtedness; and (d) exercise or refrain from exercising
any rights against either of the Issuers and any other Person.
SECTION 8.14. Subordination Provisions Not Applicable to Money Held in
Trust for Holders; Payments May Be Paid Prior to
Dissolution.
All money and United States Government Obligations deposited
in trust with the Trustee pursuant to and in accordance with Article Nine shall
be for the sole benefit of the Holders and shall not be subject to this Article
Eight.
Nothing contained in this Article Eight or elsewhere in this
Indenture shall prevent (i) the Issuers, except under the conditions described
in Section 8.02, from making payments of principal of and interest on the
Securities or from depositing with the Trustee any moneys for such payments or
from effecting a termination of the Issuers' and the Guarantors' obligations
under the Securities and this Indenture as provided in Article Nine, or (ii) the
application by the Trustee of any moneys deposited with it for the purpose of
making such payments of principal of and interest on the Securities, to the
holders entitled thereto unless at least two Business Days prior to the date
upon which such payment becomes due and payable, the Trustee shall have received
the written notice provided for in Section 8.02(b) or in Section 8.06. The
Issuers shall give prompt written notice to the Trustee of any dissolution,
winding-up, liquidation or reorganization of either of the Issuers.
SECTION 8.15. Acceleration of Securities.
If payment of the Securities is accelerated because of an
Event of Default, the Issuers shall promptly notify holders of the Senior
Indebtedness of the acceleration.
ARTICLE NINE
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 9.01. Termination of the Issuers' Obligations.
The Issuers may terminate their obligations under the
Securities and this Indenture as well as the obligations of the Guarantors under
their respective Guarantees, except those obligations referred to in the
penultimate paragraph of this Section 9.01, if:
(i) either (a) all the Securities theretofore authenticated
and delivered (except lost, stolen or destroyed Securities which have
been replaced or paid and Securities for whose payment money has
theretofore been deposited in trust or segregated and held in trust by
the Issuers and thereafter repaid to the Issuers or discharged from
such trust) have been delivered to the Trustee for cancellation or (b)
all Securities not theretofore delivered to the Trustee for
cancellation have become due and payable and the Issuers have
irrevocably deposited or caused to be deposited with the Trustee funds
in an amount sufficient to pay and discharge the entire Indebtedness on
the Securities not
<PAGE> 69
-62-
theretofore delivered to the Trustee for cancellation, for principal
of, premium, if any, and interest on the Securities to the date of
deposit together with irrevocable instructions from the Issuers
directing the Trustee to apply such funds to the payment thereof at
maturity or redemption, as the case may be;
(ii) the Issuers have paid all other sums payable under this
Indenture by the Issuers; and
(iii) the Issuers have delivered to the Trustee an officers'
certificate and an opinion of counsel stating that all conditions
precedent under this Indenture relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the first paragraph of this Section 9.01, the
Issuers' obligations in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 4.18, 7.07,
9.05 and 9.06 shall survive until the Securities are no longer outstanding
pursuant to the last paragraph of Section 2.08. After the Securities are no
longer outstanding, the Issuers' obligations in Sections 7.07, 9.05 and 9.06
shall survive.
After such delivery or irrevocable deposit, the Trustee upon
request shall acknowledge in writing the discharge of the Issuers' and
Guarantors' obligations under the Securities and this Indenture except for those
surviving obligations specified above.
SECTION 9.02. Legal Defeasance and Covenant Defeasance
(a) Subject to the provisions of Article Eight, the Company
may terminate its obligations in respect of the Securities by delivering all
outstanding Securities to the Trustee for cancellation and paying all sums
payable by it on account of principal of and interest on all Securities or
otherwise. In addition to the foregoing, the Company may, at its option, at any
time elect to have either paragraph (b) or (c) below be applied to all
outstanding Securities, subject in either case to compliance with the conditions
set forth in Section 9.03.
(b) Upon the Company's exercise under paragraph (a) hereof of
the option applicable to this paragraph (b), the Company shall, subject to the
satisfaction of the conditions set forth in Section 9.03, be deemed to have paid
and discharged the entire indebtedness represented by the outstanding
Securities, except for (i) the rights of Holders to receive payments in respect
of the principal of, premium, if any, and interest on the Securities when such
payments are due, (ii) the Company's obligations with respect to the Securities
under Sections 2.02 through 2.07, inclusive, 2.10, 2.13, 4.02 and 4.18, (iii)
the rights, powers, trust, duties and immunities of the Trustee under this
Indenture and the Company's obligations in connection therewith and (iv) Article
Nine of this Indenture (hereinafter, "Legal Defeasance"). Subject to compliance
with this Article Nine, the Company may exercise its option under this paragraph
(b) notwithstanding the prior exercise of its option under paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of
the option applicable to this paragraph (c), the Company shall, subject to the
satisfaction of the conditions set forth in Section 9.03, be released from its
obligations under the covenants contained in Sections 4.03 through 4.17,
inclusive, and Article Five with respect to the outstanding Securities
(hereinafter, "Covenant Defeasance") and thereafter any omission to comply with
such obligations shall not constitute a Default or an Event of Default with
respect to the Securities. In addition, upon the Company's exercise under
paragraph (a) hereof of the option applicable to this paragraph (c), subject to
the satisfaction of the conditions set forth in Section 9.02, any failure or
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to the Securities.
<PAGE> 70
-63-
SECTION 9.03. Conditions to Legal Defeasance or Covenant Defeasance.
In order to exercise either Legal Defeasance pursuant to
Section 9.02(b) or Covenant Defeasance pursuant to Section 9.02(c):
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, cash in U.S. dollars or United
States Government Obligations, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal
of premium, if any, and interest on the Securities on the stated date
for payment thereof or on the applicable redemption date, as the case
may be;
(b) in the case of an election under Section 9.02(b), the
Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that
(A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of this
Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Holders of the Securities will not
recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 9.02(c), the
Company shall have delivered to the Trustee an Opinion of Counsel in
the United States reasonably acceptable to the Trustee confirming that
the Holders of the Securities will not recognize income, gain or loss
for federal income tax purposes as a result of such Covenant Defeasance
and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Sections 6.01(g)
and 6.01(h) are concerned, at any time in the period ending on the 91st
day after the date of such deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of or constitute a Default under this
Indenture or any other material agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders over any other
creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or others;
(g) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with; and
(h) the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that (i) the trust funds will not be subject
to any rights of holders of Senior Indebtedness, including, with-
<PAGE> 71
-64-
out limitation, those arising under this Indenture, and (ii) assuming
no intervening bankruptcy or insolvency of the Company between the
date of deposit and the 91st day following the deposit and that no
Holder is an insider of the Company, after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar law
affecting creditors' rights generally.
Notwithstanding the foregoing, the opinion of counsel required
by clause (b) above need not be delivered if all Securities not theretofore
delivered to the Trustee for cancellation (x) have become due and payable, (y)
will become due and payable on the maturity date within one year or (z) are to
be called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company.
SECTION 9.04. Application of Trust Money; Trustee Acknowledgment and
Indemnity.
The Trustee shall hold in trust money or United States
Government Obligations deposited with it pursuant to Section 9.03, and shall
apply the deposited money and the money from United States Government
Obligations in accordance with this Indenture solely to the payment of principal
of and interest on the Securities.
After such delivery or irrevocable deposit and delivery of an
Officers' Certificate and Opinion of Counsel, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Securities and this Indenture except for those surviving obligations specified
above.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the United States
Government Obligations deposited pursuant to Section 9.03 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of outstanding Securities.
SECTION 9.05. Repayment to Company.
Subject to Sections 7.07 and 9.04, the Trustee shall promptly
pay to the Company upon written request any excess money held by it at any time.
The Trustee shall pay to the Company upon written request any money held by it
for the payment of principal or interest that remains unclaimed for two years;
provided, however, that the Trustee before being required to make any payment
may at the expense of the Company cause to be published once in a newspaper of
general circulation in The City of New York or mail to each Holder entitled to
such money notice that such money remains unclaimed and that, after a date
specified therein which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining shall
be repaid to the Company. After payment to the Company, Holders entitled to
money must look solely to the Company for payment as general creditors unless an
applicable abandoned property law designates another person and all liability of
the Trustee or Paying Agent with respect to such money shall thereupon cease.
SECTION 9.06. Reinstatement.
If the Trustee is unable to apply any money or United States
Government Obligations in accordance with Section 9.02 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit
<PAGE> 72
-65-
had occurred pursuant to Section 9.02 until such time as the Trustee is
permitted to apply all such money or United States Government Obligations in
accordance with Section 9.02; provided, however, that if the Company has made
any payment of interest on or principal of any Securities because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money or
United States Government Obligations held by the Trustee.
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.
The Issuers and the Guarantors, when authorized by a
resolution of the Board of Directors, and the Trustee may amend or supplement
this Indenture or the Securities without notice to or consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency; provided,
however, that such amendment or supplement does not adversely affect
the rights of any Holder;
(b) to effect the assumption by a successor Person of all
obligations of the Company under the Securities and this Indenture in
connection with any transaction complying with Article Five of this
Indenture;
(c) to provide for uncertificated Securities in addition to or
in place of certificated Securities;
(d) to comply with any requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA;
(e) to make any change that would provide any additional
benefit or rights to the Holders;
(f) to make any other change that does not adversely affect
the rights of any Holder under this Indenture;
(g) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon
the Company;
(h) to add a Guarantor in accordance with Section 4.14 or
otherwise; or
(i) to secure the Securities pursuant to the requirements of
Section 4.11 or otherwise;
provided, however, that the Company has delivered to the Trustee an Opinion of
Counsel stating that such amendment or supplement complies with the provisions
of this Section 10.01.
<PAGE> 73
-66-
SECTION 10.02. With Consent of Holders.
Subject to Section 6.07, the Issuers and the Guarantors, when
authorized by a resolution of the Board of Directors, and the Trustee may
modify, amend or supplement, or waive compliance by the Issuers with any
provision of, this Indenture or the Securities with the written consent of the
Holders of at least a majority in principal amount of the outstanding
Securities. However, without the consent of each Holder affected, no such
modification, amendment, supplement or waiver, including a waiver pursuant to
Section 6.04, may:
(a) change the Stated Maturity of the principal of or any
installment of interest on such Security or alter the optional
redemption or repurchase provisions of any such Security or this
Indenture in a manner adverse to the Holders of the Securities;
(b) reduce the principal amount (or the premium) of any such
Security;
(c) reduce the rate of or extend the time for payment of
interest on any such Security;
(d) change the place or currency of payment of principal of
(or premium) or interest on any such Security;
(e) modify any provisions of Section 6.04 (other than to add
sections of this Indenture or the Securities subject thereto) or 6.07
or this Section 10.02 (other than to add sections of this Indenture or
the Securities which may not be modified, amended, supplemented or
waived without the consent of each Holder affected);
(f) reduce the percentage of the principal amount of
outstanding Securities necessary for amendment to or waiver of
compliance with any provision of this Indenture or the Securities or
for waiver of any Default in respect thereof;
(g) waive a Default in the payment of principal of, interest
on, or redemption payment with respect to, the Securities (except a
rescission of acceleration of the Securities by the Holders thereof as
provided in Section 6.02 and a waiver of the payment default that
resulted from such acceleration);
(h) modify the ranking or priority of any Security or the
Guarantee in respect thereof of any Guarantor or modify the definition
of Senior Indebtedness or Guarantor Senior Indebtedness or amend or
modify any of the provisions of Article Eight in any manner adverse to
the Holders of the Securities;
(i) modify the provisions of Section 4.07 or Section 4.16 (or
the related definitions) in a manner materially adverse to the Holders
of Securities affected thereby otherwise than in accordance with this
Indenture; or
(j) release any Guarantor from any of its obligations under
its Guarantee or this Indenture otherwise than in accordance with this
Indenture.
An amendment under this Section 10.02 may not make any change
under Article Eight hereof that adversely affects in any material respect the
rights of any holder of Senior Indebtedness then out-
<PAGE> 74
-67-
standing unless the holders of such Senior Indebtedness (or any representative
thereof authorized to give a consent) shall have consented to such change.
It shall not be necessary for the consent of the Holders under
this Section 10.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
10.02 becomes effective, the Issuers shall mail to the Holders affected thereby
a notice briefly describing the amendment, supplement or waiver. Any failure of
the Issuers to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment, supplement or
waiver.
SECTION 10.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 10.04. Record Date for Consents and Effect of Consents.
The Issuers may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders of Securities entitled to
consent to any amendment, supplement or waiver. If a record date is fixed, then
those persons who were Holders of Securities at such record date (or their duly
designated proxies), and only those persons, shall be entitled to consent to
such amendment, supplement or waiver or to revoke any consent previously given,
whether or not such persons continue to be Holders of such Securities after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date. The Trustee is entitled to rely upon any electronic
instruction from beneficial owners to the Holders of any Global Security.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder, unless it makes a change described in any of clauses
(a) through (i) of Section 10.02. In that case the amendment, supplement or
waiver shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security.
SECTION 10.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Issuers or
the Trustee so determine, the Issuers in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms. Failure to make the appropriate notation or issue a new Security shall
not affect the validity and effect of such amendment, supplement or waiver.
SECTION 10.06. Trustee To Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel stating that the execution of
any amendment, supplement or waiver authorized pursuant to this Article Ten is
authorized or permitted by this Indenture and that such amendment, supplement or
waiver constitutes the legal, valid and binding obligation of the Issuers,
enforceable in accordance with its terms
<PAGE> 75
-68-
(subject to customary exceptions). The Trustee may, but shall not be obligated
to, execute any such amendment, supplement or waiver which affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise. In signing
any amendment, supplement or waiver, the Trustee shall be entitled to receive an
indemnity reasonably satisfactory to it.
ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. Unconditional Guarantee.
Each Guarantor hereby unconditionally, jointly and severally,
guarantees (each, a "Guarantee") to each Holder of a Security authenticated by
the Trustee and to the Trustee and its successors and assigns that: the
principal of and interest on the Securities will be promptly paid in full when
due, subject to any applicable grace period, whether at maturity, by
acceleration or otherwise, and interest on the overdue principal and interest on
any overdue interest on the Securities, to the extent lawful, and all other
obligations of the Issuers to the Holders or the Trustee hereunder or under the
Securities will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; subject, however, to the limitations set forth in
Section 12.04. Each Guarantor hereby agrees that its obligations hereunder shall
be unconditional, irrespective of the validity, regularity or enforceability of
the Securities or this Indenture, the absence of any action to enforce the same,
any waiver or consent by any Holder of the Securities with respect to any
provisions hereof or thereof, the recovery of any judgment against the Issuers,
any action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a Guarantor. Each
Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Issuers, any
right to require a proceeding first against the Issuers, protest, notice and all
demands whatsoever and covenants that the Guarantee will not be discharged
except by complete performance of the obligations contained in the Securities,
this Indenture and this Guarantee. If any Holder or the Trustee is required by
any court or otherwise to return to the Issuers, any Guarantor, or any
custodian, trustee, liquidator or other similar official acting in relation to
the Issuers or any Guarantor, any amount paid by the Issuers or any Guarantor to
the Trustee or such Holder, this Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect. Each Guarantor further
agrees that, as between each Guarantor, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article Six for the purpose of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (y) in
the event of any acceleration of such obligations as provided in Article Six,
such obligations (whether or not due and payable) shall forth become due and
payable by each Guarantor for the purpose of this Guarantee.
SECTION 11.02. Severability.
In case any provision of this Guarantee shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
<PAGE> 76
-69-
SECTION 11.03. Release of a Guarantor.
If the Securities are defeased in accordance with the terms of
this Indenture, or if Section 5.01(b) is complied with, or if, subject to the
requirements of Section 5.01(a), all or substantially all of the assets of any
Guarantor or all of the Equity Interests of any Guarantor are sold (including by
issuance or otherwise) by the Company in a transaction constituting an Asset
Sale and (x) the Net Cash Proceeds from such Asset Sale are used in accordance
with Section 4.07 or (y) the Company delivers to the Trustee an Officers'
Certificate to the effect that the Net Cash Proceeds from such Asset Sale shall
be used in accordance with Section 4.07 and within the time limits specified by
Section 4.07, then each Guarantor (in the case of defeasance) or such Guarantor
(in the case of compliance with Section 5.01(b) or in the event of a sale or
other disposition of all of the Equity Interests of such Guarantor) or the
corporation acquiring such assets (in the event of a sale or other disposition
of all or substantially all of the assets of such Guarantor) shall be released
and discharged from all obligations under this Article Eleven without any
further action required on the part of the Trustee or any Holder. Upon the
designation of a Guarantor as an Unrestricted Subsidiary pursuant to and in
accordance with Section 4.15, such Guarantor shall be released and discharged
from all obligations under this Article Eleven without any further action
required on the part of the Trustee or any Holder. In addition, if no Default or
Event of Default has occurred and is continuing, upon release of the guarantees
of any Guarantor of amounts outstanding under the Credit Facilities, the
Guarantee of such Guarantor shall be released.
The Trustee shall, at the sole cost and expense of the Issuers
and upon receipt at the reasonable request of the Trustee of an Opinion of
Counsel that the provisions of this Section 11.03 have been complied with,
deliver an appropriate instrument evidencing such release upon receipt of a
request by the Issuers accompanied by an Officers' Certificate certifying as to
the compliance with this Section 11.03. Any Guarantor not so released remains
liable for the full amount of principal of and interest on the Securities and
the other obligations of the Issuers hereunder as provided in this Article
Eleven.
SECTION 11.04. Limitation of Guarantor's Liability.
Each Guarantor, and by its acceptance hereof each Holder and
the Trustee, hereby confirms that it is the intention of all such parties that
the guarantee by such Guarantor pursuant to its Guarantee not constitute a
fraudulent transfer or conveyance for purposes of title 11 of the United States
Code, as amended, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar U.S. Federal or state or other applicable law. To
effectuate the foregoing intention, the Holders and each Guarantor hereby
irrevocably agree that the obligations of each Guarantor under its Guarantee
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor (including any Guarantor
Senior Indebtedness Incurred after the Issue Date) and after giving effect to
any collections from or payments made by or on behalf of any other Guarantor in
respect of the obligations of such other Guarantor under its Guarantee or
pursuant to Section 11.05, result in the obligations of such Guarantor under its
Guarantee not constituting such a fraudulent transfer or conveyance under
Federal or State law.
SECTION 11.05. Contribution.
In order to provide for just and equitable contribution among
the Guarantors, the Guarantors agree, inter se, that in the event any payment or
distribution is made by any Guarantor (a "Funding Guarantor") under the
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount, based on the net assets of each Guarantor
(including the Funding Guarantor), determined in accordance with GAAP, subject
to Section 11.04, for all payments, damages and expenses incurred by such
<PAGE> 77
-70-
Funding Guarantor in discharging the Issuers' obligations with respect to the
Securities or any other Guarantor's obligations with respect to the Guarantee.
SECTION 11.06. Execution of Security Guarantee.
To further evidence their Guarantee to the Holders, each of
the Guarantors hereby agrees to execute a Security Guarantee to be endorsed on
each Security ordered to be authenticated and delivered by the Trustee. Each
Security Guarantee shall be substantially in the form set forth in Exhibits A
and B hereto. Each Guarantor hereby agrees that its Guarantee set forth in
Section 11.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Security a Security Guarantee. Each such Security Guarantee
shall be signed on behalf of each Guarantor by two Officers prior to the
authentication of the Security on which it is endorsed, and the delivery of such
Security by the Trustee, after the authentication thereof hereunder, shall
constitute due delivery of such Security Guarantee on behalf of such Guarantor.
Such signature upon the Security Guarantee may be manual or facsimile signature
of such officer and may be imprinted or otherwise reproduced on the Security
Guarantee, and in case such officer who shall have signed the Security Guarantee
shall cease to be such officer before the Security on which such Security
Guarantee is endorsed shall have been authenticated and delivered by the Trustee
or disposed of by the Issuers, such Security nevertheless may be authenticated
and delivered or disposed of as though the Person who signed the Security
Guarantee had not ceased to be such officer of such Guarantor.
SECTION 11.07. Subordination of Subrogation and Other Rights.
Each Guarantor hereby agrees that any claim against the
Issuers that arises from the payment, performance or enforcement of such
Guarantor's obligations under its Guarantee or this Indenture, including,
without limitation, any right of subrogation, shall be subject and subordinate
to, and no payment with respect to any such claim of such Guarantor shall be
made before, the payment in full in cash of all outstanding Securities in
accordance with the provisions provided therefor in this Indenture.
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE
SECTION 12.01. Guarantee Obligations Subordinated to Guarantor Senior
Indebtedness.
Each Guarantor covenants and agrees, and the Trustee and each
Holder of the Securities by his acceptance thereof likewise covenant and agree,
that the Guarantee of such Guarantor shall be issued subject to the provisions
of this Article Twelve; and each person holding any Security, whether upon
original issue or upon transfer, assignment or exchange thereof, accepts and
agrees that all payments of the principal of and interest on the Securities
pursuant to the Guarantee made by or on behalf of any Guarantor shall, to the
extent and in the manner set forth in this Article Twelve, be subordinated and
junior in right of payment to the prior payment in full in cash of all amounts
payable under Guarantor Senior Indebtedness of such Guarantor.
SECTION 12.02. No Payment on Guarantees in Certain Circumstances.
(a) No direct or indirect payment (excluding any payment or
distribution of Permitted Junior Securities) by or on behalf of any Guarantor of
principal of or interest on the Securities pursuant to such Guar-
<PAGE> 78
-71-
antor's Guarantee, whether pursuant to the terms of the Securities, upon
acceleration or otherwise, shall be made if, at the time of such payment, there
exists a default in the payment of all or any portion of the obligations on any
Designated Guarantor Senior Indebtedness of such Guarantor, whether at maturity,
on account of mandatory redemption or prepayment, acceleration or otherwise, and
such default shall not have been cured or waived or the benefits of this
sentence waived by or on behalf of the holders of such Designated Guarantor
Senior Indebtedness. In addition, during the continuance of any non-payment
event of default with respect to any Designated Guarantor Senior Indebtedness
pursuant to which the maturity thereof may be immediately accelerated, and upon
receipt by the Trustee of written notice (the "Guarantor Payment Blockage
Notice") from the holder or holders of such Designated Guarantor Senior
Indebtedness or the trustee or agent acting on behalf of such Designated
Guarantor Senior Indebtedness, then, unless and until such non-payment event of
default has been cured or waived or has ceased to exist or such Designated
Guarantor Senior Indebtedness has been discharged or paid in full in cash or the
benefits of these provisions have been waived by the holders of such Designated
Guarantor Senior Indebtedness, no direct or indirect payment (excluding any
payment or distribution of Permitted Junior Securities) shall be made by or on
behalf of such Guarantor of principal or interest on the Securities during a
period (a "Guarantor Blockage Period") commencing on the date of receipt of such
notice by the Trustee and ending 179 days thereafter.
Notwithstanding anything herein or in the Securities to the
contrary, (x) in no event shall a Guarantor Blockage Period extend beyond 179
days from the date the Guarantor Payment Blockage Notice in respect thereof was
given, (y) there shall be a period of at least 181 consecutive days in each
360-day period when no Guarantor Blockage Period is in effect and (z) not more
than one Guarantor Blockage Period may be commenced with respect to any
Guarantor during any period of 360 consecutive days. No non-payment event of
default that existed or was continuing on the date of commencement of any
Guarantor Blockage Period with respect to the Designated Guarantor Senior
Indebtedness initiating such Guarantor Blockage Period (to the extent the holder
of Designated Guarantor Senior Indebtedness, or trustee or agent, giving notice
commencing such Guarantor Blockage Period had knowledge of such existing or
continuing event of default) may be, or be made, the basis for the commencement
of any other Guarantor Blockage Period by the holder or holders of such
Designated Guarantor Senior Indebtedness or the trustee or agent acting on
behalf of such Designated Guarantor Senior Indebtedness, whether or not within a
period of 360 consecutive days, unless such non-payment event of default has
been cured or waived for a period of not less than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any
payment shall be made directly to the Trustee or any Holder when such payment is
prohibited by Section 12.02(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered by the Trustee (if the Notice
required by Section 12.06 has been received by the Trustee) or the Holder to,
the holders of such Designated Guarantor Senior Indebtedness or their respective
representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Designated Guarantor Senior Indebtedness may have been issued,
as their respective interests may appear, but only to the extent that, upon
notice from the Trustee to the holders of such Designated Guarantor Senior
Indebtedness that such prohibited payment has been made, the holders of such
Designated Guarantor Senior Indebtedness (or their representative or
representatives or a trustee or trustees) notify the Trustee in writing of the
amounts then due and owing on such Designated Guarantor Senior Indebtedness, if
any, and only the amounts specified in such notice to the Trustee shall be paid
to the holders of such Designated Guarantor Senior Indebtedness.
SECTION 12.03. Payment Over of Proceeds upon Dissolution, Etc.
(a) Upon any payment or distribution of assets or securities
of any Guarantor of any kind or character, whether in cash, property or
securities (excluding any payment or distribution of Permitted Junior
<PAGE> 79
-72-
Securities), upon any dissolution or winding-up or total liquidation or
reorganization of such Guarantor, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all Guarantor Senior
Indebtedness of such Guarantor shall first be paid in full in cash before the
Holders of the Securities or the Trustee on behalf of such Holders shall be
entitled to receive any payment by such Guarantor of the principal of or
interest on the Securities pursuant to such Guarantor's Guarantee, or any
payment to acquire any of the Securities for cash, property or securities, or
any distribution with respect to the Securities of any cash, property or
securities (excluding any payment or distribution of Permitted Junior
Securities). Before any payment may be made by, or on behalf of, any Guarantor
of the principal of or interest on the Securities upon any such dissolution or
winding-up or total liquidation or reorganization, any payment or distribution
of assets or securities of such Guarantor of any kind or character, whether in
cash, property or securities (excluding any payment or distribution of Permitted
Junior Securities), to which the Holders of the Securities or the Trustee on
their behalf would be entitled, but for the subordination provisions of this
Indenture, shall be made by such Guarantor or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, directly to the holders of the Guarantor Senior Indebtedness of
such Guarantor (pro rata to such holders on the basis of the respective amounts
of such Guarantor Senior Indebtedness held by such holders) or their
representatives or to the trustee or trustees or agent or agents under any
agreement or indenture pursuant to which any of such Guarantor Senior
Indebtedness may have been issued, as their respective interests may appear, to
the extent necessary to pay all such Guarantor Senior Indebtedness in full in
cash after giving effect to any prior or concurrent payment, distribution or
provision therefor to or for the holders of such Guarantor Senior Indebtedness.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of any Guarantor of any kind or character, whether in cash,
property or securities (excluding any payment or distribution of Permitted
Junior Securities), shall be made directly to the Trustee or any Holder of
Securities at a time when such payment or distribution is prohibited by Section
12.03(a) and before all obligations in respect of the Guarantor Senior
Indebtedness of such Guarantor are paid in full in cash, such payment or
distribution shall be received and held in trust for the benefit of, and shall
be paid over or delivered by the Trustee (if the Notice required by Section
12.06 has been received by the Trustee) or the Holder to, the holders of such
Guarantor Senior Indebtedness (pro rata to such holders on the basis of the
respective amounts of such Guarantor Senior Indebtedness held by such holders)
or their respective representatives, or to the trustee or trustees or agent or
agents under any indenture pursuant to which any of such Guarantor Senior
Indebtedness may have been issued, as their respective interests may appear, for
application to the payment of such Guarantor Senior Indebtedness remaining
unpaid until all such Guarantor Senior Indebtedness has been paid in full in
cash after giving effect to any prior or concurrent payment, distribution or
provision therefor to or for the holders of such Guarantor Senior Indebtedness.
The consolidation of any Guarantor with, or the merger of any
Guarantor with or into, another corporation or the liquidation or dissolution of
any Guarantor following the conveyance or transfer of its property as an
entirety, or substantially as an entirety, to another corporation upon the terms
and conditions provided in Article Five shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 12.03
if such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article Five.
SECTION 12.04. Subrogation.
Upon the payment in full in cash of all Guarantor Senior
Indebtedness of a Guarantor, or provision for payment, the Holders of the
Securities shall be subrogated to the rights of the holders of such Guarantor
Senior Indebtedness to receive payments or distributions of cash, property or
securities of such
<PAGE> 80
-73-
Guarantor made on such Guarantor Senior Indebtedness until the principal of and
interest on the Securities shall be paid in full in cash; and, for the purposes
of such subrogation, no payments or distributions to the holders of such
Guarantor Senior Indebtedness of any cash, property or securities to which the
Holders of the Securities or the Trustee on their behalf would be entitled
except for the provisions of this Article Twelve, and no payment over pursuant
to the provisions of this Article Twelve to the holders of such Guarantor Senior
Indebtedness by Holders of the Securities or the Trustee on their behalf shall,
as between such Guarantor, its creditors other than holders of such Guarantor
Senior Indebtedness, and the Holders of the Securities, be deemed to be a
payment by such Guarantor to or on account of such Guarantor Senior
Indebtedness. It is understood that the provisions of this Article Twelve are
and are intended solely for the purpose of defining the relative rights of the
Holders of the Securities, on the one hand, and the holders of Guarantor Senior
Indebtedness of each Guarantor, on the other hand.
If any payment or distribution to which the Holders of the
Securities would otherwise have been entitled but for the provisions of this
Article Twelve shall have been applied, pursuant to the provisions of this
Article Twelve, to the payment of all amounts payable under Guarantor Senior
Indebtedness, then and in such case, the Holders of the Securities shall be
entitled to receive from the holders of such Guarantor Senior Indebtedness any
payments or distributions received by such holders of Guarantor Senior
Indebtedness in excess of the amount required to make payment in full in cash of
such Guarantor Senior Indebtedness.
SECTION 12.05. Obligations of Guarantors Unconditional.
Nothing contained in this Article Twelve or elsewhere in this
Indenture or in the Securities or the Guarantees is intended to or shall impair,
as among each of the Guarantors and the Holders of the Securities, the
obligation of each Guarantor, which is absolute and unconditional, to pay to the
Holders of the Securities the principal of and interest on the Securities as and
when the same shall become due and payable in accordance with the terms of the
Guarantee of such Guarantor, or is intended to or shall affect the relative
rights of the Holders of the Securities and creditors of any Guarantor other
than the holders of Guarantor Senior Indebtedness of such Guarantor, nor shall
anything herein or therein prevent the Holder of any Security or the Trustee on
their behalf from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article Twelve of the holders of Guarantor Senior Indebtedness in respect of
cash, property or securities of any Guarantor received upon the exercise of any
such remedy.
Without limiting the generality of the foregoing, nothing
contained in this Article Twelve shall restrict the right of the Trustee or the
Holders of Securities to take any action to declare the Securities to be due and
payable prior to their stated maturity pursuant to Section 6.01 or to pursue any
rights or remedies hereunder; provided, however, that all Guarantor Senior
Indebtedness of any Guarantor then due and payable shall first be paid in full
before the Holders of the Securities or the Trustee are entitled to receive any
direct or indirect payment from such Guarantor of principal of or interest on
the Securities pursuant to such Guarantor's Guarantee.
SECTION 12.06. Notice to Trustee.
The Issuers and each Guarantor shall give prompt written
notice to the Trustee of any fact known to the Issuers or such Guarantor which
would prohibit the making of any payment to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article Twelve. The Trustee shall
not be charged with knowledge of the existence of any event of default with
respect to any Guarantor Senior Indebtedness or of any other facts which would
prohibit the making of any payment to or by the Trustee unless and until the
<PAGE> 81
-74-
Trustee shall have received notice in writing at its Corporate Trust Office to
that effect signed by an Officer of either of the Issuers or such Guarantor, or
by a holder of Guarantor Senior Indebtedness or trustee or agent therefor; and
prior to the receipt of any such written notice, the Trustee shall, subject to
Article Seven, be entitled to assume that no such facts exist; provided,
however, that if the Trustee shall not have received the notice provided for in
this Section 12.06 at least two Business Days prior to the date upon which by
the terms of this Indenture any moneys shall become payable for any purpose
(including, without limitation, the payment of the principal of or interest on
any Security), then, regardless of anything herein to the contrary, the Trustee
shall have full power and authority to receive any moneys from any Guarantor and
to apply the same to the purpose for which they were received, and shall not be
affected by any notice to the contrary which may be received by it on or after
such prior date. Nothing contained in this Section 12.06 shall limit the right
of the holders of Guarantor Senior Indebtedness to recover payments as
contemplated by Section 12.03. The Trustee shall be entitled to rely on the
delivery to it of a written notice by a Person representing himself or itself to
be a holder of any Guarantor Senior Indebtedness (or a trustee on behalf of, or
other representative of, such holder) to establish that such notice has been
given by a holder of such Guarantor Senior Indebtedness or a trustee or
representative on behalf of any such holder.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Guarantor Senior Indebtedness to participate in any payment or distribution
pursuant to this Article Twelve, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Guarantor Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article Twelve, and if
such evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 12.07. Reliance on Judicial Order or Certificate of Liquidating
Agent.
Upon any payment or distribution of assets or securities of a
Guarantor referred to in this Article Twelve, the Trustee and the Holders of the
Securities shall be entitled to rely upon any order or decree made by any court
of competent jurisdiction in which bankruptcy, dissolution, winding-up,
liquidation or reorganization proceedings are pending, or upon a certificate of
the receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Trustee or to the Holders
of the Securities for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of Guarantor Senior Indebtedness
of such Guarantor and other indebtedness of such Guarantor, the amount thereof
or payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this Article Twelve.
SECTION 12.08. Trustee's Relation to Guarantor Senior Indebtedness.
The Trustee and any Paying Agent shall be entitled to all the
rights set forth in this Article Twelve with respect to any Guarantor Senior
Indebtedness which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Guarantor Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee or any
Paying Agent of any of its rights as such holder.
With respect to the holders of Guarantor Senior Indebtedness,
the Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Twelve, and no implied
covenants or obligations with respect to the holders of Guarantor Senior
Indebtedness shall be read into this Indenture against the Trustee. The Trustee
shall not be deemed to owe any fiduciary
<PAGE> 82
-75-
duty to the holders of Guarantor Senior Indebtedness (except as provided in
Section 12.03(b)). The Trustee shall not be liable to any such holders if the
Trustee shall in good faith mistakenly pay over or distribute to Holders of
Securities or to the Issuers or to any other person cash, property or securities
to which any holders of Guarantor Senior Indebtedness shall be entitled by
virtue of this Article Twelve or otherwise.
SECTION 12.09. Subordination Rights Not Impaired by Acts or Omissions of
the Guarantors or Holders of Guarantor Senior Indebtedness.
No right of any present or future holders of any Guarantor
Senior Indebtedness to enforce subordination as provided herein shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of any Guarantor or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by any Guarantor with the terms of this
Indenture, regardless of any knowledge thereof which any such holder may have or
otherwise be charged with. The provisions of this Article Twelve are intended to
be for the benefit of, and shall be enforceable directly by, the holders of
Guarantor Senior Indebtedness.
SECTION 12.10. Holders Authorize Trustee To Effectuate Subordination of
Guarantee.
Each Holder of Securities by his acceptance of such Securities
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article Twelve, and appoints the Trustee his attorney-in-fact for such
purposes, including, in the event of any dissolution, winding-up, total
liquidation or reorganization of any Guarantor (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon an
assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of such Guarantor, the filing of a claim
for the unpaid balance of its or his Securities in the form required in those
proceedings.
SECTION 12.11. This Article Not To Prevent Events of Default.
The failure to make a payment on account of principal of or
interest on the Securities by reason of any provision of this Article Twelve
shall not be construed as preventing the occurrence of an Event of Default
specified in clause (a), (b) or (c) of Section 6.01.
SECTION 12.12. Trustee's Compensation Not Prejudiced.
Nothing in this Article Twelve shall apply to amounts due to
the Trustee pursuant to other sections in this Indenture.
SECTION 12.13. No Waiver of Guarantee Subordination Provisions.
Without in any way limiting the generality of Section 12.09,
the holders of Guarantor Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
Twelve or the obligations hereunder of the Holders of the Securities to the
holders of Guarantor Senior Indebtedness, do any one or more of the following:
(a) change the manner, place or terms of payment or extend the time of payment
of, or renew or alter, Guarantor Senior Indebtedness or any instrument
evidencing the same or any agreement under which Guarantor Senior Indebtedness
is outstanding or secured; (b) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Guarantor Senior
Indebtedness; (c) release any Person liable in any
<PAGE> 83
-76-
manner for the collection of Guarantor Senior Indebtedness; and (d) exercise or
refrain from exercising any rights against any Guarantor and any other Person.
SECTION 12.14. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article Twelve or elsewhere in this
Indenture shall prevent (i) a Guarantor, except under the conditions described
in Section 12.02, from making payments of principal of and interest on the
Securities, or from depositing with the Trustee any moneys for such payments, or
(ii) the application by the Trustee of any moneys deposited with it for the
purpose of making such payments of principal of and interest on the Securities,
to the holders entitled thereto unless at least two Business Days prior to the
date upon which such payment becomes due and payable, the Trustee shall have
received the written notice provided for in Section 12.02(b) or in Section
12.06. The Guarantors shall give prompt written notice to the Trustee of any
dissolution, winding-up, liquidation or reorganization of such Guarantor.
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls.
This Indenture is subject to the provisions of the TIA that
are required to be a part of this Indenture, and shall, to the extent
applicable, be governed by such provisions. If any provision of this Indenture
modifies any TIA provision that may be so modified, such TIA provision shall be
deemed to apply to this Indenture as so modified. If any provision of this
Indenture excludes any TIA provision that may be so excluded, such TIA provision
shall be excluded from this Indenture.
The provisions of TIA ss.ss. 310 through 317 that impose
duties on any Person (including the provisions automatically deemed included
unless expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
SECTION 13.02. Notices.
Any notice or communication shall be sufficiently given if in
writing and delivered in person, by facsimile and confirmed by overnight
courier, or mailed by first-class mail addressed as follows:
if to the Issuers:
c/o Advanced Accessory Systems, LLC
12900 Hall Road, Suite 200
Sterling Heights, MI 48313
Attention: Chief Financial Officer
Facsimile: (810) 997-2900
Telephone: (810) 997-6839
<PAGE> 84
[FORM OF SECURITY GUARANTEE]
SENIOR SUBORDINATED GUARANTEE
For value received, the undersigned Guarantor (as defined in
the Indenture referred to in the Security upon which this notation is endorsed)
hereby unconditionally guarantees on a senior subordinated basis (such Guarantee
by the Guarantor being referred to herein as the "Guarantee") the due and
punctual payment of the principal of, premium, if any, and interest on the
Securities, whether at maturity, by acceleration or otherwise, the due and
punctual payment of interest on the overdue principal, premium and interest on
the Securities, and the due and punctual performance of all other obligations of
the Issuers to the Holders or the Trustee, all in accordance with the terms set
forth in Article Eleven of the Indenture (as defined below). This Guarantee will
become effective in accordance with Article Eleven of the Indenture and its
terms shall be evidenced therein. The validity and enforceability of any
Guarantee shall not be affected by the fact that it is not affixed to any
particular Security.
Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Indenture dated as of October 1, 1997, among
Advanced Accessory Systems, LLC, AAS Capital Corporation, each of the Guarantors
named therein and First Union National Bank, as trustee, as amended or
supplemented (the "Indenture").
The obligations of the undersigned to the Holders of
Securities and to the Trustee pursuant to this Guarantee and the Indenture are
expressly set forth in Article Eleven of the Indenture and reference is hereby
made to the Indenture for the precise terms of the Guarantee and all of the
other provisions of the Indenture to which this Guarantee relates.
The obligations of the Guarantor to the Holders of Securities
and to the Trustee pursuant to the Guarantee and the Indenture are expressly set
forth, and are expressly subordinated and subject in right of payment to the
prior payment in full of all Guarantor Senior Indebtedness (as defined in the
Indenture) of such Guarantor, to the extent and in the manner provided in
Article Eleven and Article Twelve of the Indenture, and reference is hereby made
to such Indenture for the precise terms of the Guarantee therein made.
This Security Guarantee shall not be valid or obligatory for
any purpose until the certificate of authentication on the Securities upon which
this Security Guarantee is noted shall have been executed by the Trustee under
the Indenture by the manual signature of one of its authorized officers.
This Security Guarantee shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of laws to the extent that the application of the laws of another
jurisdiction would be required thereby.
This Security Guarantee is subject to release upon the terms
set forth in the Indenture.
[LIST GUARANTORS]
By: ___________________________
Name:
Title:
B-8
<PAGE> 85
ASSIGNMENT FORM
I or we assign and transfer this Security to
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- -------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint________________________________________________________
agent to transfer this Security on the books of the Issuers. The agent may
substitute another to act for him.
Dated:___________________ Signed: ______________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: ______________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE> 86
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.06 or Section 4.07 of the Indenture, check the
appropriate box:
Section 4.06 [ ]
Section 4.07 [ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.06 or Section 4.07 of the
Indenture, state the amount: $_____________
Dated:___________________ Your Signature:__________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: ______________________________________________________
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE> 87
EXHIBIT C
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder
shall bear a legend (which would be in addition to any other legends required in
the case of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.16 OF THE INDENTURE.
C-1
<PAGE> 88
EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 9 3/4% Senior Subordinated Notes due 2007
(the "Securities") of Advanced Accessory Systems, LLC
and AAS Capital Corporation
This Certificate relates to $_______ principal amount of
Securities held in the form of* ___ a beneficial interest in a Global Security
or* _______ Physical Securities by ______ (the "Transferor").
The Transferor:*
[ ] has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Security held by the
Depositary a Physical Security or Physical Securities in definitive, registered
form of authorized denominations and an aggregate number equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
[ ] has requested that the Registrar by written order exchange or
register the transfer of a Physical Security or Physical Securities.
In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Indenture relating to the above captioned Securities and the
restrictions on transfers thereof as provided in Section 2.16 of such Indenture,
and that the transfer of the Securities does not require registration under the
Securities Act of 1933, as amended (the "Act"), because*:
[ ] Such Security is being acquired for the Transferor's own
account, without transfer (in satisfaction of Section 2.16 of the Indenture).
[ ] Such Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Act), in reliance on
Rule 144A.
[ ] Such Security is being transferred to an institutional
"accredited investor" (within the meaning of subparagraph (a)(1), (2), (3) or
(7) of Rule 501 under the Act) which delivers a certificate to the Trustee in
the form of Exhibit E to the Indenture.
[ ] Such Security is being transferred in reliance on Rule 144
under the Act.
[ ] Such Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act other
than Rule 144A or Rule 144 under the Act to a person other than an institutional
"accredited investor." [An Opinion of Counsel to the effect that such transfer
does not require Registration under the Securities Act accompanies this
certification.]
_____________________________________
[INSERT NAME OF TRANSFEROR]
By: _________________________________
[Authorized Signatory]
Date: ______________________
*Check applicable box.
D-1
<PAGE> 89
EXHIBIT E
Form of Transferee Letter of Representation
Advanced Accessory Systems, LLC
AAS Capital Corporation
c/o
[Address of Trustee]
Dear Sirs:
This certificate is delivered to request a transfer of
$________ principal amount of the 9 3/4% Senior Subordinated Notes due 2007 (the
"Notes") of Advanced Accessory Systems, LLC and AAS Capital Corp. (the
"Issuers"). Upon transfer, the Notes would be registered in the name of the new
beneficial owner as follows:
Name: __________________________________________
Address:________________________________________
Taxpayer ID Number:_____________________________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the
"Securities Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Notes, and we are acquiring the Notes not with a view to, or for offer or sale
in connection with, any distribution in violation of the Securities Act. We have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risk of our investment in the Notes and we invest
in or purchase securities similar to the Notes in the normal course of our
business. We and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
2. We understand that the Notes have not been registered under
the Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on behalf of
any investor account for which we are purchasing Notes to offer, sell or
otherwise transfer such Notes prior to the date which is two years after the
later of the date of original issue and the last date on which the Issuers or
any affiliate of the Issuers was the owner of such Notes (or any predecessor
thereto) (the "Resale Restriction Termination Date") only (a) to the Issuers ,
(b) pursuant to a registration statement which has been declared effective under
the Securities Act, (c) in a transaction complying with the requirements of Rule
144A under the Securities Act, to a person we reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases for its own account
or for the account of a QIB and to whom notice is given that the transfer is
being made in reliance on Rule 144A, (d) to an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is purchasing for its own account or for the account of such
an institutional "accredited investor," in each case in a minimum principal
amount of Notes of $250,000 or (e) pursuant to any other available exemption
from the registration requirements of the Securities Act, subject in each of the
foregoing cases to any requirement of
E-1
<PAGE> 90
law that the disposition of our property or the property of such investor
account or accounts be at all times within our or their control and in
compliance with any applicable state securities laws. The foregoing restrictions
on resale will not apply subsequent to the Resale Restriction Termination Date.
If any resale or other transfer of the Notes is proposed to be made pursuant to
clause (d) above prior to the Resale Restriction Termination Date, the
transferor shall deliver a letter from the transferee substantially in the form
of this letter to the Issuers and the Trustee, which shall provide, among other
things, that the transferee is an institutional "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it
is acquiring such Notes for investment purposes and not for distribution in
violation of the Securities Act. Each purchaser acknowledges that the Issuers
and the Trustee reserve the right prior to any offer, sale or other transfer
prior to the Resale Restriction Termination Date of the Notes pursuant to clause
(d) or (e) above to require the delivery of an opinion of counsel, certificates
and/or other information satisfactory to the Issuers and the Trustee.
Dated: ______________________ TRANSFEREE:______________________________
By:______________________________________
E-2
<PAGE> 1
EXHIBIT 10.1
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
AMONG
MASCOTECH AUTOMOTIVE SYSTEMS GROUP, INC.,
MASCOTECH ACCESSORIES, INC.,
AND
ADVANCED ACCESSORY SYSTEMS, LLC
Dated as of September 28, 1995
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I TRANSFER OF PURCHASED ASSETS, ASSUMPTION OF
LIABILITIES AND RELATED MATTERS......................................1
1.1 Transfer of Assets...................................................1
1.2 Assets Not Being Transferred.........................................4
1.3 Liabilities Being Assumed............................................5
1.4 Liabilities Not Being Assumed........................................6
1.5 Instruments of Conveyance and Transfer, Etc..........................7
1.6 Further Assurances, Etc..............................................7
1.7 Assignment of Contracts, Rights, Etc.................................8
1.8 Right of Endorsement, Etc............................................8
1.9 Subscription Agreement...............................................8
ARTICLE II PURCHASE PRICE; ALLOCATION..........................................8
2.1 Purchase Price.......................................................8
2.2 Payments at Closing..................................................9
2.3 Purchase Price Adjustment............................................9
2.4 Allocation of Purchase Price........................................11
ARTICLE III REPRESENTATIONS AND WARRANTIES....................................11
3.1 Representations and Warranties of the Sellers.......................11
3.2 Representations and Warranties of the Buyer.........................25
ARTICLE IV CLOSING............................................................26
ARTICLE V INDEMNIFICATION.....................................................26
5.1 Definitions.........................................................26
5.2 Indemnification Generally...........................................29
5.3 Notice and Defense of Third Party Claims............................30
5.4 Survival of Representations, Warranties, Agreements and Covenants...32
5.5 Remedies Cumulative.................................................32
5.6 Remediation.........................................................32
5.7 Product Distinguishment.............................................33
5.8 Stand-alone Costs...................................................33
ARTICLE VI ADDITIONAL POST-CLOSING AGREEMENTS.................................34
6.1 Access..............................................................34
6.2 Bulk Sales Laws.....................................................35
6.3 Brokers, Finders and Investment Bankers.............................35
6.4 Certain Employee Matters............................................35
6.5 Guaranties..........................................................36
6.6 Audited Financials..................................................37
ARTICLE VII MISCELLANEOUS.....................................................37
7.1 Expenses; Transfer Taxes, Etc.......................................37
<PAGE> 3
7.2 Entire Agreement....................................................37
7.3 Related Documents...................................................37
7.4 Notices.............................................................37
7.5 Counterparts........................................................39
7.6 Governing Law; Consent to Jurisdiction..............................39
7.7 Benefits of Agreement; Assignment...................................39
7.8 Construction........................................................39
7.9 Pronouns............................................................39
7.10 Descriptive Headings................................................39
7.11 Severability........................................................39
7.12 Amendment...........................................................40
7.13 No Third Party Beneficiaries........................................40
ii
<PAGE> 4
LIST OF EXHIBITS
LIST OF SCHEDULES
Schedule 1.3(c) - Customer And Purchase Orders Note Being Assumed
Schedule 1.3(f) - Liabilities And Obligations
Schedule 3.1(c) - Corporate Action; No Conflict
Schedule 3.1(d) - Financial Information
Schedule 3.1(e) - Undisclosed Liabilities
Schedule 3.1(f) - Changes
Schedule 3.1(g) - Real Property
Schedule 3.1(h) - Title To Assets, Etc.
Schedule 3.1(i) - Intellectual Property Rights
Schedule 3.1(j) - Environmental Matters
Schedule 3.1(k) - Contracts
Schedule 3.1(l) - Litigation
Schedule 3.1(m) - Compliance With Law
Schedule 3.1(o) - Inventories
Schedule 3.1(p) - Labor Relations; Employees
Schedule 3.1(q) - Employee Benefits
Schedule 3.1(s) - Brokers Employed By Sellers
Schedule 3.1(t) - Transactions With Affiliates
Schedule 3.1(u) - Principal Customers
Schedule 3.1(v) - Best Knowledge
iii
<PAGE> 5
DEFINITIONS
THE FOLLOWING TERMS WHICH MAY APPEAR IN MORE THAN ONE SECTION OF THIS AGREEMENT
ARE DEFINED IN THE FOLLOWING SECTIONS:
TERM SECTION OR OTHER LOCATION
---- -------------------------
Accountants' Determination 2.3(b)
Actual Stand-Alone Costs 5.8(a)
Additional Payment 2.3(c)
Affiliate 3.1(t)
Arbitrating Accountants 2.3(b)
Assigned Contracts 1.1(a)(viii)
Assumed Employee Plans 1.1(a)(xi)
Assumed Obligations 1.3
Best Knowledge 3.1(w)
Bill of Sale and Assumption Agreement 1.5(a)
Business First Paragraph
Business Day 7.4
Buyer Caption
Buyer Indemnification Event 5.1(a)
Buyer Indemnified Persons 5.1(b)
Buyer's Accountants 2.3(b)
By-Laws 3.1(a)
Cash Payment 2.2
CERCLA 3.1(j)(iv)
CERCLIS 3.1(j)(iv)
Charter 3.1(a)
Claim 5.1(c)
Closing Article IV
Closing Date Article IV
Closing Net Working Capital 2.3(a)
Closing Statement 2.3(a)
Code 2.4
Contracts 3.1(k)
Conveyance Instruments 1.5(a)
Current Employees 3.1(p)
Employee Plan 3.1(q)(i)
Encumbrances 1.1(a)
Environmental Laws 3.1(j)(i)
ERISA 3.1(q)(i)
ERISA Affiliate 3.1(q)(i)
Excluded Assets 1.2
Excluded Obligations 1.4
Final Determination Date 2.3(e)
Financial Statements 3.1(d)
iv
<PAGE> 6
GAAP 3.1(d)
Governmental Authority 3.1(c)
Hazardous Materials 3.1(j)(ii)
Hired Employees 6.4(a)
Holdings 1.9
HSR Act 3.1(c)
Indemnified Persons 5.1(d)
Indemnifying Person 5.1(e)
Intellectual Property Rights 3.1(i)(iii)
Interim Balance Sheet 3.1(d)(ii)
Interim Balance Sheet Date 3.1(d)(ii)
Leased Real Property 1.1(a)(iv)
Leases 1.1(a)(iv)
Legal Requirement 3.1(c)
Liability Letter 5.3(b)(i)
Losses 5.1(f)
MAI Caption
MascoTech 1.9
MASG Caption
Net Working Capital Statement 2.3(a)
NPL 3.1(j)(v)
Objection Notice 2.3(b)
Owned Real Property 1.1(a)(iii)
Permits 3.1(m)(ii)
Permitted Encumbrances 1.1(a)
Permitted Owned Real Property Exceptions 3.1(g)(ii)
Person 3.1(c)
Principal Customers 3.1(u)
Projected Working Capital Statement 3.1(d)(iii)
Proprietary Technology 3.1(i)(iii)
Purchase Price 2.1
Purchased Assets 1.1(a)
Purchased Inventory 1.1(a)(v)
Real Property 1.1(a)(iv)
Related Documents 7.3
Release 3.1(j)(ii)
Requisite Rights 3.1(i)(i)
Seller Indemnification Event 5.1(g)
Seller Indemnified Persons 5.1(h)
Sellers Caption
Sellers' Accountants 2.3(b)
Sellers' Refund 2.3(c)
Settlement Agreement 2.3(b)
Stand-alone Costs Accountants' Determination 5.8(c)
Stand-alone Costs Arbitrating Accountants 5.8(c)
Stand-alone Costs Objection Notice 5.8(c)
v
<PAGE> 7
Stand-alone Costs Statement 5.8(b)
Statement of Allocation 2.4
Subscription Agreement 1.9
Survival Date 5.4
Target Net Working Capital 2.3(a)
Taxes 5.1(i)
Third Party Claim 5.3
US EPA 3.1(j)(iv)
vi
<PAGE> 8
ASSET PURCHASE AGREEMENT dated
as of September 28, 1995, among
MASCOTECH AUTOMOTIVE SYSTEMS GROUP,
INC., a Michigan corporation ("MASG"),
MASCOTECH ACCESSORIES, INC., a
California corporation ("MAI"; and
together with MASG, the "Sellers"), and
ADVANCED ACCESSORY SYSTEMS, LLC, a
Delaware limited liability company (the
"Buyer").
MASG, through its accessories group and MAI, is engaged in the
business (the "Business") of designing, engineering, manufacturing, selling and
distributing rack systems, vehicular lifestyle accessories (such as bike racks,
ski racks, surfboard carriers, and roof-mounted spare tire carriers) and
exterior decorative trim for automobiles, light trucks and other vehicles. The
parties hereto desire that the Sellers sell, transfer, convey and assign to the
Buyer all of the assets, properties, interests in properties and rights
principally used in the Business and that the Buyer purchase and acquire the
same, subject to the assumption by the Buyer of certain specified liabilities
and obligations of the Sellers relating to the Business, upon the terms and
subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
ARTICLE I
TRANSFER OF PURCHASED ASSETS,
ASSUMPTION OF LIABILITIES AND RELATED MATTERS
1.1 TRANSFER OF ASSETS.
(a) On the terms and subject to the conditions set forth in this
Agreement, at the Closing the Sellers shall sell, transfer, convey and assign to
the Buyer, free and clear of all Encumbrances (other than Permitted
Encumbrances), and the Buyer shall purchase and acquire from the Sellers, all of
the Sellers' right, title and interest in, to and under the assets, properties,
interests in properties and rights of the Sellers of every kind, nature and
description, whether real, personal or mixed, tangible or intangible,
principally used in or held for use in the Business (other than the Excluded
Assets), wherever located, as the same shall exist immediately prior to the
Closing, including, without limitation, the following:
(i) all machinery and equipment, including, without
limitation, all manufacturing, production, maintenance, packaging,
testing and other machinery, equipment, molds, presses, rolling stock,
motor vehicles, tractors and other vehicles, spare or replacement
parts, computer equipment (including the A/S 4000 computer system used
in the Business), furniture, fixtures, office equipment and software
programs (including Sellers' interest in the software used on the A/S
4000 computer system), supplies and other items of tangible personal
property;
<PAGE> 9
(ii) all tooling owned by the Sellers and used in connection
with the Business, including any tooling jointly owned with any
customers or Affiliates of the Sellers; provided that in the case of
tooling jointly owned with customers, Buyer shall only receive Sellers'
rights and interest in such tooling;
(iii) all real property listed on Schedule 3.1(g), together
with all appurtenances to such real property and all structures,
fixtures and improvements located thereon (the "Owned Real Property");
(iv) all real property leases listed on Schedule 3.1(g)
(collectively, the "Leases"), together with all of the Seller's
interest in all of the structures, fixtures and improvements located on
the real property covered by such Leases (the "Leased Real Property";
and the Leased Real Property, together with the Owned Real Property,
being collectively referred to herein as the "Real Property");
(v) all inventories of work-in-process, raw materials,
finished products, returned goods, stores and supplies, spare parts,
packaging, shipping containers and other materials (the "Purchased
Inventory");
(vi) all prepaid expenses (other than prepaid Taxes),
advances, deposits (including utility deposits) and accounts
receivable;
(vii) all insurance and indemnity claims against third
parties relating to the Purchased Assets and the Assumed Obligations
(including, without limitation, all insurance proceeds paid or payable
by any insurance provider for any Purchased Asset that is destroyed or
damaged after the Interim Balance Sheet Date and on or prior to the
Closing Date) other than any of the foregoing to the extent that they
relate to the Excluded Assets or Excluded Obligations;
(viii) all contracts, agreements, licenses, personal
property leases, commitments, purchase orders, sales orders and other
agreements (collectively, the "Assigned Contracts");
(ix) all Requisite Rights, including, without
limitation, the names "APPEND", "Huron/St. Clair" and all other names
used or held for use in the Business and owned by Sellers or their
Affiliates (excluding the name "MascoTech");
(x) all records of the Sellers, either in computer or
original or photostatic form (except in the case of computer software,
which must be in original form), whether or not in computer or machine
readable format, including, without limitation, property records,
plans, specifications, surveys, titles policies, production records,
engineering records, purchasing and sales records, personnel and
payroll records, accounting records, mailing lists, customer and vendor
lists and records, and computer software and related licenses, manuals
and other materials, in each case principally relating to the Purchased
Assets or the Business;
(xi) all telephone, telex and telecopier numbers and all
listings in all telephone books and directories (excluding listings
using the name "MascoTech");
2
<PAGE> 10
(xii) all interests in and to joint ventures, technology
transfers or offshore businesses or ventures;
(xiii) all warranties and guarantees received from vendors,
suppliers or manufacturers with respect to the Purchased Assets or the
Business to the extent assignable;
(xiv) all stationery, purchase orders, forms, labels,
shipping material, catalogs, brochures, art work, photographs and
advertising material (subject to Buyer covering over the name
"MascoTech" or any variation thereof on any such materials);
(xv) all Permits to the extent assignable;
(xvi) all rights which are transferable by the Sellers
(including experience ratings) with respect to unemployment, workers'
compensation and other similar insurance reserves, in each case
relating to employees of the Sellers who become employees of the Buyer;
(xvii) all rights, recoveries, refunds, counterclaims, rights
to offset, other rights, choses in action and Claims (known or unknown,
matured or unmatured, accrued or contingent) against third parties
(including, but not limited to, all warranty and other contractual
claims (express, implied or otherwise) against third parties), other
than any of the foregoing to the extent that they relate to the
Excluded Assets or Excluded Obligations;
(xviii) all assets of MAI, excluding the Lease, dated
August 20, 1993, between PSLC Limited Partnership II and Sport Rack
Systems, Inc. and any sublets thereunder;
(xix) all assets reflected on the Closing Statement other
than assets identified as I/C MascoTech;
(xx) the goodwill of the Sellers associated with the
Business; and
(xxi) control over all assets associated with the Huron/St.
Clair Company Plant II Hourly Pension Plan, the Golden Dental Plan, the
Plant II Hourly Employees Medical Benefit and Short-Term Disability
Plans, and the Plant II Hourly Employees Life Insurance Plan (the
"Assumed Employee Plans").
For convenience of reference, the assets, properties, interests in properties
and rights that are to be sold, transferred, conveyed and assigned to the Buyer
by the Sellers pursuant to this Section are collectively called the "Purchased
Assets" in this Agreement. As used in this Agreement, the term "Encumbrances"
means, collectively, all security interests, judgments, liens, pledges, charges,
escrows, encumbrances, Claims, options, rights of first refusal, rights of first
offer, mortgages, indentures, security agreements and other agreements,
arrangements, contracts, commitments, understandings or obligations, whether
written or oral and whether or not relating in any way to credit or the
borrowing of money. As used in this Agreement, the term "Permitted Encumbrances"
means, collectively, (i) Encumbrances for current taxes or other governmental
assessments or charges not yet due and payable, (ii) Encumbrances granted under
any of the
3
<PAGE> 11
Assigned Contracts and any other Encumbrances being assumed by the Buyer
pursuant to Section 1.3 and (iii), with respect to real property, any
Encumbrance indicated on the title commitment for such property.
(b) Anything contained in this Agreement to the contrary
notwithstanding, but subject to the provisions of Section 1.2, to the extent
that any asset, property, interest in property or right principally used in the
conduct of the Business is owned by any Affiliate of the Sellers, such asset,
property, interest in property or right shall be deemed to be a Purchased Asset
for all purposes of this Agreement, and the Sellers shall do, and shall cause
any such other Affiliate of any Seller to do, all things required to be done by
the Sellers with respect thereto, including, but not limited to, those things
set forth in Sections 1.5, 1.6, 1.7 and 1.8.
1.2 ASSETS NOT BEING TRANSFERRED.
Anything contained in this Agreement to the contrary notwithstanding,
there are expressly excluded from the Purchased Assets the following:
(a) the consideration delivered to the Sellers pursuant to this
Agreement;
(b) all assets used primarily in connection with the Sellers'
corporate functions (including, but not limited to, corporate charters, seals,
minute books, stock transfer ledgers, taxpayer and other identification numbers,
tax returns, tax information and tax records), whether or not used for the
benefit of the Business;
(c) rights to or claims for refunds or rebates of Taxes for
periods ending on or prior to the Closing Date and the benefit of net operating
loss carryforwards, carrybacks or other credits of any Seller;
(d) claims or rights against third parties relating to any other
Excluded Asset or Excluded Liability;
(e) all records relating to pending lawsuits to which a Seller
is a party and which involve the Business, provided that copies thereof shall
have been furnished to the Buyer prior to or at the Closing;
(f) all "MascoTech" and "Creative" marks, including any and all
trademarks, service marks, trade names and service names;
(g) all accounts receivable due from Affiliates of the Sellers;
(h) except as provided in Section 1.1(xxi), all assets related
to or owned by any "employee benefit plan" (as that term is defined in Section
3(3) of ERISA) sponsored or maintained by the Sellers, or any of its ERISA
Affiliates; and
(i) all assets identified on the Closing Statement as I/C
MascoTech.
4
<PAGE> 12
For convenience of reference, the assets, properties, interests in properties
and rights of the Sellers which do not constitute Purchased Assets are
collectively called the "Excluded Assets" in this Agreement.
1.3 LIABILITIES BEING ASSUMED.
Subject to the terms and conditions of this Agreement, simultaneously
with the sale, transfer, conveyance and assignment to the Buyer of the Purchased
Assets, the Buyer shall assume, pay and perform when due the following, and only
the following, liabilities and obligations of the Sellers:
(a) accounts payable and accrued expenses of the Business
(excluding accruals for (i) any Taxes other than Taxes to the extent accrued on
the Closing Statement and (ii) any intercompany or other payments due to
Affiliates of the Seller, including all items identified as I/C MascoTech on the
Closing Statement) to the extent accrued or otherwise properly reflected on the
Closing Statement;
(b) all liabilities and obligations arising after the Closing
under the Assigned Contracts in accordance with their respective terms;
(c) all obligations under open customer orders and purchase
orders (including any such orders placed with any Affiliate of the Sellers
relating to products or services of the Business) included in the Assigned
Contracts which arose in the ordinary course of business of the Business prior
to the Closing Date;
(d) accrued payroll and vacation expenses of the Sellers arising
in the ordinary course of business of the Business and relating to the Hired
Employees to the extent reflected on the Closing Statement;
(e) warranty obligations of the Sellers with respect to the
Business resulting from products manufactured, distributed or sold or services
performed on or before the Closing Date, notwithstanding that the date on which
the warranty obligation is asserted is after the Closing Date; provided,
however, the Buyer shall assume no liability with respect to warranty claims for
rack systems sold prior to the Closing for the "NS Minivan";
(f) liabilities and obligations relating to the Business and
disclosed on Schedule 1.3(f);
(g) the liabilities and obligations assumed by the Buyer under
Section 6.4;
(h) liabilities and obligations arising out of the operation of
the Business after the Closing Date; and
(i) l liabilities associated with the Assumed Employee Plans.
For convenience of reference, the foregoing liabilities and
obligations of the Sellers being assumed by the Buyer are collectively called
the "Assumed Obligations" in this
5
<PAGE> 13
Agreement. The Buyer hereby expressly agrees with the Sellers to pay and perform
when due all of the Assumed Obligations.
1.4 LIABILITIES NOT BEING ASSUMED.
Anything contained in this Agreement to the contrary notwithstanding,
the Buyer is not assuming any liabilities or obligations (fixed or contingent,
known or unknown, matured or unmatured) of the Sellers other than the Assumed
Obligations, whether or not relating to the Purchased Assets or the Business,
all of which liabilities and obligations shall at and after the Closing remain
the exclusive responsibility of the Sellers. Without limiting the generality of
the foregoing, the Buyer is not assuming any of the following liabilities and
obligations:
(a) except as provided in Section 1.3(a), all liabilities and
obligations for Taxes of the Sellers and all liabilities and obligations for
Taxes arising out of or in connection with the operation of the Business on or
prior to the Closing Date (in each case regardless of whether arising as a
result of or in connection with the transactions contemplated hereby or
otherwise);
(b) except as provided in Section 1.3(e) with respect to
warranty obligations, all Claims, liabilities and obligations of any nature
(including product liability claims) with respect to any products sold on or
before the Closing Date, notwithstanding that the date on which the Claim,
liability or obligation is asserted is after the Closing Date;
(c) all liabilities and obligations of any nature whatsoever of
the Sellers to any of their respective Affiliates (including any notes or
accounts payable and the items identified on the Closing Statement as I/C
MascoTech);
(d) except as provided in Sections 1.3(d), (g) and (i), all
Claims by and all liabilities and obligations to employees and independent
contractors for periods prior to and including the Closing Date, including,
without limitation, any Claims, liabilities and obligations arising out of
workers' compensation, unemployment, any employee benefit plan (as that term is
defined in Section 3(3) of ERISA) sponsored by the Sellers or their ERISA
Affiliates, the Sellers' failure to deposit or fund any amounts withheld from
employees pursuant to any retirement plan or arrangement or retiree medical plan
or arrangement, any unfunded retirement plan or arrangement or retiree medical
plan or arrangement, any obligations to current or former plan participants or
beneficiaries under any plan or arrangement intended to provide benefits to
current or former employees of the Sellers, or any stay bonuses required to be
paid to any employee of the Business;
(e) all liabilities and obligations of the Sellers to financial
institutions or other Persons for borrowed money or with respect to indebtedness
and obligations of others which any Seller has directly or indirectly
guaranteed;
(f) all liabilities and obligations of the Sellers relating to
the Excluded Assets and all liabilities and obligations of the Sellers under or
arising out of this Agreement and any Related Document or with respect to the
transactions contemplated hereby and thereby, including, without limitation,
legal and accounting fees, expenses and Taxes incurred by the Sellers;
6
<PAGE> 14
(g) all cash overdrafts for any banking accounts maintained for
the benefit of the Business; and
(h) all liabilities identified on the Closing Statement as I/C
MascoTech and all obligations to Hired Employees for stay bonuses.
For convenience of reference, the liabilities and obligations of the Sellers
which do not constitute Assumed Obligations are collectively called the
"Excluded Obligations" in this Agreement.
1.5 INSTRUMENTS OF CONVEYANCE AND TRANSFER, ETC.
(a) Simultaneously with the execution herewith, the Sellers are
executing and delivering (or causing to be executed and delivered) to the Buyer,
such deeds, bills of sale, endorsements, assignments and other good and
sufficient instruments of sale, transfer, conveyance and assignment
(collectively, the "Conveyance Instruments") as are necessary to sell, transfer,
convey and assign to the Buyer, in accordance with the terms hereof, the
Purchased Assets, free and clear of all Encumbrances (other than Permitted
Encumbrances), including, without limitation, a bill of sale, assignment and
assumption agreement (the "Bill of Sale and Assumption Agreement").
Simultaneously with the execution herewith, the Sellers shall relinquish to the
Buyer possession and operating control of the Purchased Assets and shall take
all other steps that may be required to pass title to the Purchased Assets to
the Buyer.
(b) Simultaneously with the execution herewith, the Buyer is
executing and delivering (or causing to be executed and delivered) to the
Sellers, such instruments of assumption as are necessary to assume, in
accordance with the terms hereof, the Assumed Obligations, including, without
limitation, the Bill of Sale and Assumption Agreement.
1.6 FURTHER ASSURANCES, ETC.
(a) The Sellers shall promptly pay or deliver to the Buyer any
amounts or items which may be received by any Seller after the Closing which
constitute Purchased Assets and shall cause all customer orders and purchase
orders placed with Affiliates of the Sellers and relating to the products or
services of the Business to be assigned at the Closing to the Buyer. The Sellers
shall, at any time and from time to time after the Closing, upon the reasonable
request of the Buyer and at the expense of the Sellers, do, execute,
acknowledge, deliver and file, or cause to be done, executed, acknowledged,
delivered and filed, all such further acts, transfers, conveyances, assignments
or assurances as may reasonably be required for better selling, transferring,
conveying, assigning and assuring to the Buyer, or for aiding and assisting in
the collection of or reducing to possession by the Buyer, any of the Purchased
Assets.
(b) The Buyer shall promptly pay or deliver to MascoTech on
behalf of the Sellers any amounts or items which may be received by the Buyer
after the Closing which constitute Excluded Assets. The Buyer shall, at any time
and from time to time, after the Closing, upon the reasonable request of the
Sellers and at the Buyer's expense, do, execute, acknowledge, deliver and file,
or cause to be done, executed, acknowledged, delivered and filed, all such
further acts, transfers, conveyances, assignments or assurances as may
reasonably be required for better assuming the Assumed Obligations.
7
<PAGE> 15
1.7 ASSIGNMENT OF CONTRACTS, RIGHTS, ETC.
Anything contained in this Agreement to the contrary notwithstanding,
this Agreement shall not constitute an agreement or attempted agreement to
transfer, sublease or assign any contract, license, real or personal property
lease, sales order, purchase order or other agreement, or any Claim or right
with respect to any benefit arising thereunder or resulting therefrom, or any
Permit, if an attempted transfer, sublease or assignment thereof, without the
required consent of any other party thereto, would constitute a breach thereof
or in any way affect the rights of the Buyer or the Sellers thereunder. The
parties shall use commercially reasonable efforts to obtain the consent of any
such third party to any of the foregoing to the transfer or assignment thereof
to the Buyer in all cases in which such consent is required for such transfer or
assignment. If such consent is not obtained, the parties shall cooperate in any
arrangements necessary or desirable to provide for the Buyer the benefits
thereunder, including, without limitation, enforcement by the Sellers for the
benefit of the Buyer of any and all rights of the Sellers thereunder against the
other party thereto.
1.8 RIGHT OF ENDORSEMENT, ETC.
The Sellers hereby constitute and appoint the Buyer and its successors
and assigns the true and lawful attorney of the Sellers with full power of
substitution, in the name of the Buyer, or the name of the Sellers, on behalf of
and for the benefit of the Buyer, to collect all accounts and notes receivable
and other items being sold, transferred, conveyed and assigned to the Buyer as
provided herein, to endorse, without recourse, checks, notes and other
instruments constituting the Purchased Assets in the name of the Sellers, to
institute and prosecute all proceedings which the Buyer may deem proper in order
to collect, assert or enforce any claim, right or title of any kind in or to the
Purchased Assets, to defend and compromise any and all actions, suits or
proceedings in respect of any of the Purchased Assets or the Business (excluding
any with respect to which Buyer makes a claim for indemnification hereunder) and
to do all such acts and things in relation thereto as the Buyer may deem
advisable. The foregoing powers are coupled with an interest and shall be
irrevocable by the Sellers, directly or indirectly, whether by the dissolution
of the Sellers or in any manner or for any reason.
1.9 SUBSCRIPTION AGREEMENT.
Simultaneously with the execution herewith, MascoTech, Inc., a Delaware
corporation ("MascoTech"), is executing and delivering to AAS Holdings, LLC, a
Delaware limited liability company ("Holdings"), a Subscription Agreement (the
"Subscription Agreement") to purchase 1,500 Units from Holdings for an aggregate
of $1,500,000, receipt of which is hereby acknowledged.
ARTICLE II
PURCHASE PRICE; ALLOCATION
2.1 PURCHASE PRICE.
The aggregate purchase price (the "Purchase Price") to be paid for the
Purchased Assets shall be an amount equal to the sum of (i) the Cash Payment
plus any Additional Payment or less
8
<PAGE> 16
any Sellers' Refund, as the case may be, pursuant to Section 2.3(c), plus (ii)
the Assumed Obligations.
2.2 PAYMENTS AT CLOSING.
Against delivery of the Conveyance Instruments by the Sellers to the
Buyer at the Closing, the Buyer shall deliver to MascoTech on behalf of the
Sellers (i) $46,000,000 (the "Cash Payment") by transfer of immediately
available funds to an account or accounts designated by the Sellers to the
Buyer, and (ii) the Bill of Sale and Assumption Agreement, duly executed by the
Buyer.
2.3 PURCHASE PRICE ADJUSTMENT.
(a) As soon as practicable, but in no event later than 60
calendar days, following the Closing Date, the Sellers shall prepare, and shall
deliver to Buyer, a statement of total current assets, total current liabilities
and intercompany accounts of the Business as of the Closing Date (the "Closing
Statement"), which Closing Statement shall be prepared on a basis consistent
with the preparation of the Projected Working Capital Statement utilizing the
same line items, the same accounting methodologies, practices and procedures as
used therein (including the accrual of intercompany payables and receivables in
the ordinary course of business consistent with past practice), consistent with
the basis used for determining reserves and all valuation methods and practices
used therein, together with a statement (the "Net Working Capital Statement")
setting forth the Sellers' computations of Closing Net Working Capital and the
amount, if any, by which the Closing Net Working Capital is greater than or less
than $4,700,000 (the "Target Net Working Capital"). All items designated as I/C
MascoTech on the Projected Working Capital Statement shall be similarly
designated on the Closing Statement. As used herein, the term "Closing Net
Working Capital" means the current assets of the Business minus current
liabilities of the Business in each case as of the Closing Date and as reflected
on the Closing Statement. The Sellers shall bear all costs and expenses incurred
in connection with the preparation of the Closing Statement.
(b) The Sellers shall provide, and shall (if applicable) cause
the Sellers' independent certified public accountants (the "Sellers'
Accountants") to provide, the Buyer and the Buyer's independent certified public
accountants (the "Buyer's Accountants") with timely access to the work papers,
trial balances and similar materials used in connection with the preparation of
the Closing Statement. The Buyer shall have 30 calendar days following its
receipt of the Closing Statement and the Net Working Capital Statement within
which to deliver to the Sellers a written notice of objection thereto (the
"Objection Notice"), which Objection Notice shall (i) set forth the Buyer's
determination of the Closing Net Working Capital and (ii) specify in reasonable
detail the Buyer's basis for objection. Each individual item forming a basis for
objection must be for an amount greater than $10,000 or shall not be considered
as an item forming the basis for an objection; provided, however, that if the
aggregate of all individual items forming a basis for objection exceeds $25,000,
then all such items, including those for an amount less than $10,000, shall form
a basis for objection. The failure by the Buyer to deliver the Objection Notice
within such 30-calendar-day period shall constitute the Buyer's acceptance of
the Closing Statement and the Sellers' calculation of the Closing Net Working
Capital contained therein. The Buyer and the Sellers shall in good faith attempt
to resolve their
9
<PAGE> 17
differences, if any, with respect to the Closing Statement and the computation
of the Closing Net Working Capital and reach a written agreement with respect
thereto (the "Settlement Agreement") within 30 calendar days following delivery
of the Objection Notice. If the Buyer and the Sellers are unable to resolve all
of such differences within such 30-calendar-day period, the items in dispute
will be referred for determination as promptly as practicable to Ernst & Young,
LLP, or if such firm is unable or unwilling to serve, to another "Big 6"
accounting firm independent of the Buyer and the Sellers selected by agreement
between the Buyer and the Sellers or, if the Buyer and the Sellers cannot so
agree within the 30-calendar-day period referred to above, by lot (the
"Arbitrating Accountants"). The Arbitrating Accountants will make a
determination (the "Accountants' Determination") as to each of the items in
dispute, which Accountants' Determination will be (A) in writing, (B) furnished
to the Buyer and the Sellers as soon as practicable after the items in dispute
have been referred to the Arbitrating Accountants, (C) made in accordance with
this Agreement and (D) conclusive and binding upon the Buyer and the Sellers.
The Arbitrating Accountants will be entitled (but shall not be required) to rely
on the work papers, trial balances and similar materials used in connection with
the preparation of the Closing Statement. The reasonable fees and expenses of
the Arbitrating Accountants shall be shared one-half by the Buyer and one-half
by the Sellers.
(c) Upon the final determination of Closing Net Working Capital
in accordance with this Section 2.3, the following adjustments to the Purchase
Price and the following payments will be made, as applicable, within three
Business Days after the Final Determination Date: (i) if Closing Net Working
Capital exceeds Target Net Working Capital by more than $250,000, the Buyer
shall pay the Sellers an amount equal to (A) the amount by which Closing Net
Working Capital exceeds Target Net Working Capital, minus (B) $250,000, and (ii)
if Target Net Working Capital exceeds Closing Net Working Capital by more than
$250,000, the Sellers shall pay the Buyer an amount equal to (A) the amount by
which the Target Net Working Capital exceeds Closing Net Working Capital, minus
(B) $250,000. Any payment made pursuant to clause (i) of the preceding sentence
is called an "Additional Payment" in this Agreement. Any payment made pursuant
to clause (ii) of the preceding sentence is called a "Sellers' Refund" in this
Agreement. If Closing Net Working Capital is within $250,000 of Target Net
Working Capital, no adjustment shall be made to the Purchase Price.
(d) Any Additional Payment to be made to the Sellers pursuant to
Section 2.3(c) shall be made by transfer of immediately available funds to the
account or accounts designated by MascoTech, on behalf of the Sellers, in
writing to the Buyer. The payment of any Sellers' Refund shall be made by
transfer of immediately available funds to the account or accounts designated by
the Buyer in writing to the Sellers.
(e) For purposes of this Agreement, the "Final Determination
Date" means the earliest to occur of (i) the 31st calendar day following the
Buyer's receipt of the Closing Statement if, prior to such date, the Sellers
shall not have received an Objection Notice, (ii) the date on which the Buyer
receives a written notice from the Sellers stating that the Sellers have no
objection to the Buyer's determination of the Closing Net Working Capital set
forth in the Objection Notice, (iii) the date on which the Sellers and the Buyer
shall have executed and delivered a Settlement Agreement and (iv) the dates on
which the Buyer and the Sellers shall have received the Accountants'
Determination.
10
<PAGE> 18
2.4 ALLOCATION OF PURCHASE PRICE.
The Purchase Price shall be allocated to the Purchased Assets in a
statement (the "Statement of Allocation") prepared by the Buyer's Accountants
and approved by Sellers, which approval shall not be unreasonably withheld. The
Buyer's Accountants shall deliver the Statement of Allocation to the Sellers
within 90 days of the Closing Date. The Sellers shall (a) complete and execute a
Form 8594 Asset Acquisition Statement Under Section 1060 of the Internal Revenue
Code of 1986, as amended (the "Code"), promptly upon receipt of such allocation,
in a manner consistent with the Statement of Allocation and (b) deliver a copy
of such form to the Buyer and (c) file a copy of such form with the Sellers' tax
returns, as the case may, for the period which includes the Closing. None of the
parties shall take any action inconsistent with the Statement of Allocation
prepared in accordance with this Section 2.4.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLERS.
Each of the Sellers, jointly and severally, represents and warrants to
the Buyer as follows:
(a) Organization; Corporate Authority; Good Standing. Each of
the Sellers is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, to execute and deliver this
Agreement and the Related Documents to which it is or will be a party, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. Each Seller has delivered to the
Buyer a copy of its Charter and By-laws in effect on the date hereof. As used in
this Agreement, the terms "Charter" and "By-laws" mean, respectively with
respect to any corporation, those instruments that, among other things, (A)
define its existence, as filed or recorded with the applicable Governmental
Authority, including, without limitation, such corporation's Articles or
Certificate of Incorporation, Organization or Association, and (B) govern its
internal affairs, in each case as amended, supplemented, or restated.
(b) Other Jurisdictions. Neither Seller is qualified to do
business as a foreign corporation in any jurisdiction due to the operation of
the Business.
(c) Corporate Action; No Conflict. The execution, delivery and
performance by each Seller of this Agreement and the Related Documents to which
it is or will be a party and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary
corporate action on the part of such Seller. This Agreement has been duly and
validly executed and delivered by each Seller and is, and each of the Related
Documents to which such Seller is or will be a party, when executed and
delivered in accordance with its terms, will be, the valid and binding
obligation of such Seller enforceable against it in accordance with the terms
thereof, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws now or hereafter in effect relating to creditors'
rights generally and
11
<PAGE> 19
subject to limitations on the remedy of specific performance and injunctive and
other forms of equitable relief. Except as set forth on Schedule 3.1(c), neither
the execution, delivery or performance by any Seller of this Agreement or any
Related Document to which it is or will be a party, nor the consummation by such
Seller of the transactions contemplated hereby or thereby, nor compliance by
such Seller with any provision hereof or thereof will (i) conflict with or
result in a breach of any provision of the Charter or By-laws of such Seller, in
each case as in effect on the date hereof, (ii) cause a default or give rise to
any right of termination, cancellation or acceleration under any of the terms,
conditions or provisions of any note, bond, lease, mortgage, indenture, license,
agreement or other instrument or obligation to which such Seller is a party or
by which it or its properties or assets may be bound or (iii) violate any law,
statute, ordinance, rule, regulation, order, writ, judgment, injunction, award,
decree, concession, grant, franchise, restriction or agreement (each, a "Legal
Requirement") of, from or with any Governmental Authority applicable to such
Seller or any of its properties or assets. Except as set forth on Schedule
3.1(c), no Permit, consent or approval of or by, or any notification of or
filing with, any Person is required in connection with the execution, delivery
or performance by each Seller of this Agreement and the Related Documents to
which it is or will be a party, or the consummation of the transactions
contemplated hereby or thereby, other than required filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). For the
purposes of this Agreement, the term "Person" means any individual, corporation,
association, partnership, joint venture, trust or other entity or organization,
including a Governmental Authority, and "Governmental Authority" means any
international or federal, state, local or regional (whether domestic or foreign)
government, authority, instrumentality, department, commission, board, bureau,
agency or court.
(d) Financial Information. Schedule 3.1(d) contains a true and
complete copy of the following:
(i) the unaudited balance sheet of the Business as at
December 31, 1994, and the related unaudited statements of income and
retained earnings and cash flows for the fiscal year then ended;
(ii) the unaudited balance sheet of the Business as at
August 31, 1995 (the "Interim Balance Sheet"), and the related
statements of income and retained earnings and cash flows for the
eight-month period ended August 31, 1995 (the "Interim Balance Sheet
Date"); and
(iii) the unaudited projected working capital statement
of total current assets, total current liabilities and intercompany
accounts of the Business (the "Projected Working Capital Statement"),
which was prepared by the Sellers.
The financial statements described in the foregoing clauses (i) and (ii) are
collectively referred to herein as the "Financial Statements." The Financial
Statements (B) were prepared in accordance with the books and records of the
Business (whether maintained by MascoTech or MASG or otherwise) and (B) fairly
present the financial position of the Business in each case at and as of the
dates indicated and the results of operations, retained earnings and cash flows
of the Business for the periods indicated. Except as set forth on Schedule
3.1(d), the financial statements described in the foregoing clauses (i) and (ii)
were prepared in accordance with generally
12
<PAGE> 20
accepted accounting principles ("GAAP") consistently applied throughout the
periods covered thereby.
(e) Absence of Undisclosed Liabilities. Except for liabilities
incurred in the ordinary course of the Business since the Interim Balance Sheet
Date, there are no liabilities of any nature (matured or unmatured, fixed or
contingent) affecting or relating to the Business which were not provided for or
disclosed on the Interim Balance Sheet and which should have been provided for
or disclosed thereon in accordance with GAAP, except as disclosed on Schedule
3.1(d).
(f) Absence of Changes. Except as set forth on Schedule 3.1(f),
since the Interim Balance Sheet Date the Business has been operated in the
ordinary course and consistent with past practice, and there have not been any:
(i) material adverse changes in the assets
(including, without limitation, levels of working capital and the
components thereof), properties, rights, liabilities, earnings,
financial condition, operations, results of operations, earnings or
business of the Business;
(ii) occurrences resulting in the damage, destruction
or loss (whether or not covered by insurance) affecting any tangible
asset or property of the Business in excess of $50,000 in the
aggregate;
(iii) obligations or liabilities (whether absolute,
accrued, contingent or otherwise and whether due or to become due)
created or incurred or entered into, or any transactions, contracts or
commitments entered into, by the Business, other than in the ordinary
course of the business of the Business and consistent with past
practice;
(iv) licenses, sales, transfers, pledges, mortgages
or other hypothecations or dispositions of any tangible or intangible
assets of the Business, other than in the ordinary course of the
business of the Business and consistent with past practice;
(v) agreements or contracts entered into by or on
behalf of the Business which require the delivery by any Seller of a
performance bond;
(vi) any amendments, terminations or waivers of any
rights of material value to the Business;
(vii) increases in, or changes in the method of
computing, the compensation of employees of MascoTech or MASG who are
employed in the Business (including, without limitation, increases
pursuant to or change in method under any bonus, pension, profit
sharing, deferred compensation arrangement or other plan or
commitment), or increase in compensation payable to any officer,
employee, consultant or agent of MascoTech or MASG who are employed in
the Business, or entering into of any employment contract with or
making of any loan to, or engagement in any transaction with, any
officer or employee of MascoTech or MASG who are employed in the
Business, in each case other than in the ordinary course of the
business of the Business and consistent with past practice;
13
<PAGE> 21
(viii) material changes in the manner in which the
Business extends discounts or credits to customers or otherwise deals
with customers;
(ix) changes in the accounting methods or practices
followed by or with respect to the Business, or any changes in
depreciation or amortization policies or rates theretofore adopted;
(x) forward purchase commitments in excess of normal
operating inventories or at prices higher than current market prices;
(xi) termination of employment of any key employee of
MascoTech or MASG employed in the Business, or any expression of
intention by any key employee of MascoTech or MASG employed in the
Business to terminate his employment;
(xii) cancellation or termination of any insurance
policy maintained by or with respect to the Business;
(xiii) any account receivable with a face amount in
excess of $50,000 having (i) become past due in excess of 90 days in
its payment, (ii) had asserted against it any claim, refusal to pay or
right of set-off or (iii) to the best knowledge of any Seller, been
placed in jeopardy by reason of its account debtor having become
insolvent or bankrupt;
(xiv) any material write-down or write-up of the
value of any inventory of the Business, or any material write-off of
any accounts receivable or notes receivable of the Business or any
material portion thereof;
(xv) any changes in the manner in which corporate
overhead is allocated to the Business; or
(xvi) agreements or understandings, whether in
writing or otherwise, for any Seller to take any of the actions
specified in items (i) through (xv) above.
(g) Real Property -- Owned or Leased.
(i) Schedule 3.1(g) sets forth a list of all Owned
Real Property and all Leased Real Property. Except for the Real
Property listed on Schedule 3.1(g), neither MASG nor MascoTech owns
any real property or interest therein that is held for use in the
Business.
(ii) The Sellers are the owners of good and
marketable fee title to the Owned Real Property, free and clear of all
Encumbrances and other matters affecting title, except for the matters
listed on Schedule 3.1(g) (collectively, the "Permitted Owned Real
Property Exceptions"). To the Best Knowledge of the Sellers, the
Sellers and the Owned Real Property are in compliance with any
and all covenants and restrictions contained in all recorded deeds,
resolutions, Declarations of Protective Covenants and similar recorded
documents in any way applicable to the Owned Real Property.
14
<PAGE> 22
(iii) (A) Each Lease is in full force and effect and all
rent and other sums and charges payable thereunder are current, (B) no
notice of default or termination under any Lease is outstanding, (C) no
termination event or condition or uncured default under any Lease
caused by Sellers exists, and to the Best Knowledge of Sellers, no such
termination event or condition or uncured default caused by any other
party exists or has occurred, (D) no event or condition caused by
Sellers which, with the giving of notice or the lapse of time or both,
would constitute a default or termination event or condition under any
Lease exists or has occurred, and to the Best Knowledge of Sellers, no
such event or condition caused by any other party exists or has
occurred, and (E) no lessor under any Lease has any Encumbrance under
any Lease or otherwise against the Purchased Assets. The Sellers'
leasehold estate under and the Sellers' leasehold interest in each
Lease is held free and clear of all Encumbrance and other matters
affecting title thereto, which is claimed by or through the Sellers.
The Sellers have delivered to the Buyer true and complete copies of all
Leases.
(iv) Except as set forth on Schedule 3.1(g), (A) all
improvements on the Real Property conform in all material respects to
all applicable Legal Requirements (including applicable environmental
and occupational safety and health laws and regulations) and zoning and
building ordinances of Governmental Authorities, and all of the Real
Property is zoned for the various purposes for which such Real Property
is presently being used, (B) all improvements on the Real Property are
in good condition, normal wear and tear excepted, and there does not
exist any condition which materially interferes with the present
economic value or use thereof, (C) none of the buildings and structures
located on the Real Property, the appurtenances thereto or the
equipment therein or the operation or maintenance thereof violates any
restrictive covenant or encroaches on any property owned by others or
any easement, right of way or other encumbrance or restriction
affecting such Real Property, nor does any building or structure of any
third party encroach upon the Real Property or any easement or right of
way benefitting the Real Property, and (D) no condemnation proceeding
is pending or, to the Best Knowledge of the Sellers, threatened, which
would preclude or materially impair the use of any Real Property for
the uses for which it is intended.
(h) Title to Assets, Properties, Interests in Properties and
Rights and Related Matters. Except as set forth on Schedule 3.1(h), the Sellers
have good, valid and marketable title to all of the Purchased Assets (other than
the Owned Real Property), free and clear of all Encumbrances, other than
Permitted Encumbrances. Except as disclosed on Schedule 3.1(h), no other
Affiliate of any Seller owns any assets, properties, interests in properties or
rights, of any kind or description, principally used in the Business. There does
not exist any condition which materially interferes with the use of any tangible
personal property included in the Purchased Assets. The Purchased Assets are, in
the aggregate, in good operating condition, normal wear and tear excepted. Other
than the Excluded Assets, the Purchased Assets include all assets and properties
(real, personal and mixed, tangible and intangible), interests in properties and
rights necessary to permit the Buyer to carry on the Business as presently
conducted by the Sellers. Except as set forth on Schedule 3.1(h), each Seller
has the complete and unrestricted power and the unqualified right to sell,
transfer, convey and assign the Purchased Assets owned by it.
15
<PAGE> 23
(i) Intellectual Property Rights. (i) Schedule 3.1(i)(i)(a)
attached hereto, sets forth a list of all extant (a) patents, trademarks,
service marks, and registrations thereof, trade names and copyrights,
applications and registrations for the foregoing owned by Sellers and licenses
of Intellectual Property granted to Seller that are used or held for use in the
Business; and invention disclosures of the employees on Schedule 3.1(i)(ii),
which invention disclosures relate to the Business and for which patent
applications have not been filed. As used herein, the term "Requisite Rights"
means the Intellectual Property Rights of Sellers listed on Schedule
3.1(i)(i)(a) together with all other Intellectual Property owned or possessed by
Sellers that is used or held for use in the Business as presently conducted and
as proposed to be conducted. Except as set forth or disclosed (or
cross-referenced) in Schedule 3.1(i)(i)(b):
(A) Sellers own, and possess all incidents of
ownership of, the Requisite Rights;
(B) no royalties or other such fees are payable by any
Seller to other persons by reason of the ownership, sale, license or
use of the Requisite Rights in the Business as presently conducted;
(C) (x) to the Best Knowledge of the Sellers, no
product or service manufactured, marketed or sold presently by the
Business violates or infringes any Intellectual Property Rights of any
other Person and (y) no Rack Product manufactured, marketed or sold
presently by the Business violates or infringes any Intellectual
Property Rights of any other Person;
(D) there is no pending or, to the Best Knowledge of
the Sellers, threatened claim or litigation against any Seller (nor, to
the Best Knowledge of the Sellers, does there exist any basis therefor)
contesting the validity of or the right to bring actions for
infringement (to the extent any such right presently exists with any
Seller) or the right to use in the Business as presently conducted any
of the Requisite Rights, nor has any Seller received any notice that
any of the Requisite Rights or the operation or proposed operation of
the Business conflicts or will conflict with the asserted rights of any
other Person; and
(E) the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
will not breach, violate or conflict with any instrument or agreement
governing any Requisite Right and will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any
Requisite Right or in any way impair the right of the Buyer to use,
sell, license or dispose of or bring any action for the infringement
(to the extent any such right presently exists) of any Requisite Right
or portion thereof.
(ii) Schedule 3.1(i)(ii) sets forth the form of an agreement
entitled Proprietary Confidential Information And Invention Assignment
Agreement and a list of the employees of the Sellers who have been
engaged in the Business and have signed such an agreement or an
Agreement substantially similar thereto which provides for such
employees to assign or otherwise transfer to the respective Seller all
of their respective right, title and interest in and to any
Intellectual Property Rights relating to the Business.
16
<PAGE> 24
(iii) As used herein, the term "Intellectual Property Rights"
means all intellectual property rights including, without limitation,
Proprietary Technology, patents, patent applications, patent rights,
trademarks, trademark registrations, trademark applications, trade
names, service marks, service mark registrations, service mark
applications, logos, copyrights (statutory and common law), copyright
applications, copyright registrations, know-how, licenses, trade
secrets, proprietary processes and formulae, layouts, processes,
inventions, development tools and all documentation and media
constituting, describing or relating to any of the foregoing,
including, without limitations, manuals, memoranda and records. As used
herein, the term "Proprietary Technology" means all proprietary
processes, formulae, inventions, trade secrets, know-how, development
tools and other proprietary rights owned by any Seller pertaining to
any product or service currently or previously manufactured, sold,
distributed or marketed or proposed to be manufactured, sold,
distributed or marketed (as the case may be), by the Business or used,
employed or exploited in the development, manufacture, license, sale,
distribution, marketing or maintenance of the business thereof, and all
documentation and media constituting, describing or relating to the
foregoing. As used herein, "Rack Product" shall mean any roof rack,
deck rack (or component thereof) and other products which are
functionally equivalent to a roof rack or deck rack.
(j) Environmental Matters. Except as disclosed on Schedule 3.1(j)(i),
(i) each Seller has obtained all Permits which are
required to conduct the Business under all Legal Requirements existing
as of the Closing Date relating to the environment and the release of
any materials into the environment (collectively, "Environmental
Laws"). Each Seller is as of the Closing Date and for the past five
years has been in compliance with the terms and conditions of all
such Permits and with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in any Environmental Law applicable to the
Business or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or
approved thereunder.
(ii) Except as disclosed on Schedule 3.1(j)(ii), no notice,
notification, demand, request for information, citation, summons or
order has been issued, no complaint has been filed, no penalty has been
assessed and no investigation or review is pending or, to the Best
Knowledge of Sellers, threatened by any Governmental Authority with
respect to any alleged failure by any Seller to comply with any
Environmental Law or to have any Permit required in connection with the
conduct of the Business or with respect to any generation, treatment,
storage, recycling, transportation, release or disposal, or any release
as defined in 42 U.S.C. Section 9601(22) ("Release") of any pollutants,
contaminants, chemicals or industrial, hazardous or toxic substances or
wastes of any kind regulated under Environmental Laws ("Hazardous
Materials").
(iii) Except as disclosed on Schedule 3.1(j)(iii), in the
conduct of the Business, (A) no Seller has handled any Hazardous
Material so as to require a hazardous waste management permit, and no
Seller has generated, recycled, treated, stored, disposed of or
Released any Hazardous Material in violation of any
17
<PAGE> 25
Environmental Law in the conduct of the Business; (B)no PCB is or has
been present, in violation of any Environmental Law, at any property
occupied by the Business; (C) no asbestos is or has been present, in
violation of any Environmental Law, at any property occupied by the
Business; (D) there are no underground storage tanks for Hazardous
Materials, active or abandoned, in violation of any Environmental Law,
at any property occupied by the Business; and (E) no Hazardous
Materials have been Released in excess of a "reportable quantity"
established by statute, ordinance, rule, regulation or order or in a
quantity or manner that would support an order from any government
agency or other legal obligation under Environmental Laws requiring
Buyer to perform or pay for investigation, remediation, or other relief
or response to such Release.
(iv) Except as disclosed on Schedule 3.1(j)(iv), in the
conduct of the Business, no Seller has transported or arranged for the
transportation of any Hazardous Material to any location which is
listed on the National Priorities List under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), listed on the Comprehensive Environmental Response
Compensation and Liability and Information System ("CERCLIS")
maintained by the U.S. Environmental Protection Agency ("US EPA"), or
listed on any similar state list, or which, to the Best Knowledge of
Sellers, may lead to any Claim under Environmental Laws against such
Seller or the Business for or with respect to clean-up costs, remedial
work, damages to natural resources or personal injury claims,
including, but not limited to, Claims under CERCLA.
(v) Except as disclosed on Schedule 3.1(j)(v), no oral or
written notification of a Release of a Hazardous Material has been
filed by or on behalf of any Seller in the conduct of the Business, and
no property now or previously owned or leased by any Seller in the
conduct of the Business is listed on the National Priorities List
("NPL") promulgated pursuant to CERCLA, on CERCLIS or on any similar
state list of sites potentially requiring investigation or clean-up or
formally proposed for listing by the US EPA on the NPL.
(vi) Sellers have provided to Buyer a copy of all draft or
final reports or studies in Sellers' possession or control relating to
compliance of the Business with Environmental Laws or contamination of
the Real Property or other environmental issues affecting the Business.
(k) Contracts, Etc. Schedule 3.1(k) and, with respect to
Intellectual Property Rights, Schedule 3.1(i) contains a list of all oral and
written contracts, agreements and other instruments to which any Seller is a
party and which relate solely or in significant part to the Business, which are
outside the ordinary course of business or which are referred to in clauses (i)
through (xvi) below (collectively, the "Contracts"). Except as set forth in
Schedule 3.1(k), no Seller is, with respect to the Business, a party to any of
the following:
(i) distributor, dealer, sales, advertising, agency,
manufacturer's representative, franchise or similar contract or any
other contract requiring the payment of any commissions in excess of
$25,000 per year;
18
<PAGE> 26
(ii) continuing contract for the future purchase of
inventory, material, supplies, equipment or services or for the future
sale of products or services, in each case which is not immediately
terminable without cost or other liability at the Closing or any other
time thereafter;
(iii) any license or other agreement or arrangement
providing for the payment of a royalty or licensing fee to or by any
Seller;
(iv) any contract with or commitment for the employment or
retention of any officer, employee or consultant or any other type of
contract or understanding with any officer, employee or consultant for
services rendered to any Seller;
(v) any profit-sharing, bonus, stock option, pension,
retirement, stock purchase, disability, hospitalization, insurance or
similar plan or agreement, formal or informal, providing benefits to
any current or former director, officer or employee of or consultant to
any Seller employed in or retained with respect to the Business;
(vi) any indenture, mortgage, promissory note, loan
agreement or other agreement or commitment for the borrowing of money,
for a line of credit or for any leasing transaction of a type required
to be capitalized in accordance with Statement of Financial Accounting
Standards No. 13 issued by the Financial Accounting Standards Board;
(vii) any contract or commitment for capital expenditures
involving more than $50,000 each or $200,000 in the aggregate;
(viii) any lease, sublease or other agreement pursuant to
which it is a lessee of or holds or operates any real or personal
property owned by any third party;
(ix) any option or other agreement to purchase or otherwise
acquire or sell or otherwise dispose of any interest in real property;
(x) any contract or commitment for charitable contributions
involving more than $5,000 each or $25,000 in the aggregate;
(xi) any agreement or contract with a "disqualified
individual" (as defined in Section 280G(c) of the Code) which would
result in a disallowance of the deduction for any "excess parachute
payment" (as defined under Section 280G(b)(i) of the Code) if such
Seller were subject to such provisions;
(xii) any guaranty of the obligations of third parties;
(xiii) any agreement which restricts it from conducting the
Business anywhere in the world;
(xiv) any agreement under which it has agreed to indemnify
any third party with respect to, or to share, the tax liability of any
third party;
19
<PAGE> 27
(xv) any agreement or arrangement for the purchase or other
acquisition of or sale or other disposition of any assets, properties
or rights other than in the ordinary course of business; or
(xvi) any other agreement or contract which is material to
the Business or the Purchased Assets or Assumed Obligations (including,
without limitation, levels of working capital and the components
thereof), other than this Agreement, the Related Documents and any
other agreement related to the transactions contemplated hereby and
thereby.
No Seller is or, to the Best Knowledge of the Sellers, has been alleged to be in
default in any material respect, and each Seller has in all material respects
performed all the obligations required to be performed by it to date and is not
in default in any material respect under any Contract, and there exists no
event, condition or occurrence which, with the giving of notice or lapse of
time, or both, would constitute a default by any Seller under any Contract. No
Seller has received from any party to any Contract notice of its intention to
cancel or terminate such Contract. The Sellers have furnished to the Buyer true
and complete copies of all of the Contracts or a description thereof as part of
Schedule 3.1(k).
(l) Litigation, Etc. Except as set forth on Schedule 3.1(i) or
(l), there are no (i) claims (whether legal, administrative, arbitration or
otherwise) pending or, to the Best Knowledge of the Sellers, threatened against
any Seller affecting the Business or the Purchased Assets or Assumed
Obligations, whether at law or in equity, or before or by any Governmental
Authority or (ii) judgments, decrees, injunctions or orders of any Governmental
Authority, or arbitrator against any Seller affecting the Business or the
Purchased Assets or Assumed Obligations. The Sellers have delivered to the Buyer
true and complete copies of all documents and correspondence relating to matters
referred to in Schedule 3.1(l) which are included in the Assumed Obligations.
(m) Compliance with Law; Governmental Authorizations.
(i) No Seller is in violation in any material respect
of any Legal Requirement applicable to the Business.
(ii) (A) Each Seller has all licenses, permits, orders,
approvals and other authorizations of or from all Governmental
Authorities which are necessary in the conduct of the Business
(collectively, the "Permits"), (B) such Permits are in full force and
effect, (C) no violations are currently pending with respect to any
such Permit, and (D) no proceeding is pending or, to the Best Knowledge
of the Sellers, threatened to revoke or limit any such Permit. Schedule
3.1(m) contains a true and complete list of all of the Permits and the
Sellers have furnished to the Buyer true and complete copies thereof.
(iii) No studies have been conducted and to the Best
Knowledge of Sellers no conditions exist which indicate the presence of
any occupational health or safety problem relating to any of the
manufacturing or research operations of any Seller. Within the past
five years, neither the United States Occupational Safety and Health
20
<PAGE> 28
Administration nor any other Governmental Authority has alleged or
requested a correction of any such occupational health or safety
problem.
(n) Warranties of Products; Products Liability; Regulatory
Compliance Regarding Products.
(i) In the aggregate, the products manufactured, sold
or distributed, by any Seller in connection with the Business are free
from any significant defects in workmanship and materials, and conform
in all material respects with all standards for products of such type.
(ii) No Governmental Authority regulating the
marketing, testing or advertising of any of the products manufactured,
sold or distributed by the Business has requested that any such product
be removed from the market, that substantial new product testing be
undertaken as a condition to the continued manufacturing, selling or
distribution of any such product or that such product be modified.
(o) Inventories. Except as set forth on Schedule 3.1(o), the
inventories of the Sellers with respect to the Business include no items which
are obsolete, of below standard quality or of a quality or quantity not usable
or salable in the normal course of business of the Business, the aggregate value
of which has not been written down on the books of account of any Seller to
realizable market value or with respect to which adequate reserves have not been
provided.
(p) Labor Relations; Employees. Schedule 3.1(p) contains a true
and complete list of the persons employed by each Sellers in the Business as of
the date hereof (the "Current Employees"). Except as set forth on Schedule
3.1(p), (i)no material grievance or problem exists between any Seller and any of
the Current Employees; (ii)no Seller is delinquent in payments to any of the
Current Employees for any wages, salaries, commissions, bonuses or other direct
or indirect compensation for any services performed by them to the date hereof
or for amounts required to be reimbursed to the Current Employees; (iii) upon
termination of the employment of any of the Current Employees, none of the
Sellers or the Buyer will by reason of anything done prior to the Closing, or by
reason of the consummation of the transactions contemplated hereby, be liable
for any excise taxes pursuant to Section 4980B of the Code or to any of the
Current Employees for so-called "severance pay" or any other payments; (iv) each
of the Sellers is in compliance in all material respects with all Legal
Requirements respecting labor, employment and employment practices, terms and
conditions of employment and wages and hours (including, without limitation, all
Legal Requirements promulgated by the Equal Employment Opportunity Commission
and the Department of Labor under the Occupational Safety Hazards Act and the
Worker Adjustment and Retraining Notification Act); (v) there is no unfair labor
practice complaint against any Seller relating to or arising out of the conduct
of the Business pending or, to the Best Knowledge of the Sellers, threatened
before the National Labor Relations Board or any comparable state, local or
foreign agency; (vi) there is no labor strike, dispute, slowdown or stoppage
pending or, to the Best Knowledge of the Seller, threatened against or involving
any Seller affecting the Business; (vii) no representation question exists
regarding the Current Employees; (viii) no grievance and no arbitration
proceeding arising out of or under collective bargaining agreements is actually
pending and no Claim therefor has been asserted; and (ix) no
21
<PAGE> 29
collective bargaining agreement or other contract with or commitment to any
labor union is in effect or currently being negotiated by any Seller. The
Sellers have delivered to the Buyer true and complete copies of all handbooks,
manuals and other policies describing the employment policies with respect to
the Business.
(q) Employee Plans.
(i) Except as set forth on Schedule 3.1(q), no Seller
has been within the past five years a party to, sponsors or maintains
any Employee Plans. "Employee Plan" means any "employee benefit plan"
(as that term is defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), as well as any other
plan, program or arrangement involving direct and indirect
compensation, under which the Sellers have any present or future
obligations or liability on behalf of their employees or former
employees, contractual employees or their dependents or beneficiaries.
"ERISA Affiliate" means any entity that is a member of a "controlled
group of corporations" with or is under "common control" with the
Sellers as defined in Section 414(b) or (c) of the Code.
(ii) Schedule 3.1(q) contains a true and complete list
of all Employee Plans.
(iii) No Employee Plan currently maintained by the
Sellers is or was a "multiple employer plan" (within the meaning of
Section 413 of the Code).
(iv) No Seller is or has been for the past five years
obligated to contribute to any "multiemployer plan" (within the meaning
of Section 3(37) of ERISA.
(v) No Seller, nor to the knowledge of the Sellers,
any other "disqualified person" or "party in interest" (as defined in
Section 4975 of the Code and Section 3(14) of ERISA, respectively)
with respect to an Assumed Employee Plan has breached the fiduciary
rules of ERISA or engaged in a prohibited transaction which
could subject the Sellers to any tax or penalty imposed under Section
4975 of the Code or Section 502(i), (j) or (l) of ERISA.
(vi) Each Assumed Employee Plan has been maintained and
operated in accordance with its terms and are in substantial compliance
with the requirements of ERISA and the Code and in accordance with the
provisions of any applicable collective bargaining agreement.
(vii) Each Assumed Employee Plan for which the Sellers
have claimed a deduction under Section 404 of the Code, as if such
Assumed Employee Plan were qualified under Section 401 of the Code, has
received or has timely applied for a favorable determination letter
from the Internal Revenue Service as to the qualification of such
Assumed Employee Plan, and such favorable determination letter has not
been modified, revoked or limited.
(viii) All contributions due and payable on or before
the Closing Date in respect of the Assumed Employee Plans will be made
in full and in proper form, and adequate accruals have been provided
for in the financial statements for all other
22
<PAGE> 30
contributions or amounts in respect of the Assumed Employee Plans for
periods ending on the Closing Date.
(ix) The present value of all accrued benefits (whether
or not vested) under each Assumed Employee Plan subject to Title IV of
ERISA did not exceed, as of the Closing Date, the then current fair
market value of the assets of such Assumed Employee Plan (for purposes
of determining the present value of accrued benefits under the Assumed
Employee Plans, the actuarial assumptions and methods used under each
Assumed Employee Plan for the most recent plan valuation date shall be
used) by more than $50,000.
(x) No Assumed Employee Plan subject to Part (3) of
Subtitle B of Title I of ERISA or Section 412 of the Code has incurred
any "accumulated funding deficiency" (as defined in Section 412(a) of
the Code), whether or not waived.
(xi) No Seller has made nor agreed to make, nor is it
required to make (in order to bring any of the Assumed Employee Plans
into substantial compliance with ERISA or the Code), any change in
benefits that would materially increase the costs of maintaining any of
the Assumed Employee Plans.
(xii) As of the Closing Date, there are no actions,
suits, disputes, arbitration or claims pending (other than routine
claims for benefits) or legal, administrative or other proceedings or
governmental investigations pending or, to the knowledge of the
Sellers, threatened against any Assumed Employee Plan or against the
assets of any Assumed Employee Plan.
(xiii) No Employee Plan subject to Title IV of ERISA has
been terminated within the past four years, and no proceeding has been
initiated, to the knowledge of the Sellers or their ERISA Affiliates,
to terminate any Employee Plan.
(xiv) Neither the Sellers nor their ERISA Affiliates nor
any member of a controlled group including the Sellers and their ERISA
Affiliates has incurred within the past five years, nor reasonably
expects to incur, any liability in respect of any Employee Plan under
Section 4064 or 4069 of ERISA.
(xv) No "reportable event" (within the meaning of
Section 4043 of ERISA) has occurred within the past five years with
respect to any Employee Plan subject to ERISA.
(xvi) Each Assumed Employee Plan which is a "group
health plan" (as defined in Section 5000 of the Code) has been
maintained in compliance with Section 4980B of the Code and Title I,
Subtitle B, Part 6 of ERISA and no tax payable on account of Section
4980B of the Code has been or is expected to be incurred.
(xvii) No benefit payable or which may become payable by
the Sellers pursuant to any Assumed Employee Plan shall constitute an
"excess parachute payment" (within the meaning of Section 280G of the
Code) which is subject to the imposition of
23
<PAGE> 31
an excise tax under Section 4999 of the Code or which would not be
deductible by reason of Section 280G of the Code.
(xviii) No Employee Plan currently maintained by the
Sellers provides any post-retirement health or life insurance benefits,
and the Sellers do not maintain any obligations to provide any
post-retirement benefits in the future.
(xix) Prior to the Closing Date, Sellers have made
contributions to the Huron/St. Clair Company Plant II Hourly Employees
Pension Plan for the 1994 and/or 1995 plan years, in an amount of at
least $500,000.
(r) Tax Matters. (i) The Sellers have paid all Taxes required to
be paid through the date hereof and will pay all Taxes required to be paid by
them for periods ending on or prior to the Closing Date and have properly and
timely filed and will, prior to the Closing, properly and timely file all
returns, declarations of estimated Tax, Tax reports, information returns and
statements required to be filed by either of them prior to the Closing (other
than those for which extensions shall have been granted prior to Closing)
relating to any Taxes with respect to any income, properties or operations of
the Seller prior to the Closing and (ii) no tax liens have been filed with
respect to any of the Purchased Assets, and there are no pending tax audits of
any Returns of the Sellers relating to the Business. No Seller is a foreign
person within the meaning of ss.1.1445-2(b) of the Regulations under Section
1445 of the Code.
(s) Brokers. Except as set forth on Schedule 3.1(s), neither
Seller nor any of their respective officers, directors, stockholders or
employees has employed any investment banker, broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
(t) Distributions; Transactions with Affiliates. Except for the
Excluded Assets and as set forth on Schedule 3.1(t), since the Interim Balance
Sheet Date, no Affiliate of any Seller has purchased, acquired or leased any
property or services from (or made any payments or incurred any indebtedness
with respect thereto), or sold, transferred or leased any property or services
to, or entered into any management, consulting or similar agreement or
tax-sharing agreement with, the Business. For purposes of this Agreement, the
term "Affiliate," as to any Person, means any other Person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by or is
under common control with such Person.
(u) Principal Customers. Schedule 3.1(u) sets forth a list of
each customer of the Sellers to which either Seller, individually or in the
aggregate, sold more than $900,000 in goods or services in connection with the
Business in its most recent fiscal year (the "Principal Customers"). Except as
set forth on Schedule 3.1(u), (1) no material disagreement or problem exists
between the Sellers and any of the Principal Customers, (2) the business
relationship between the Sellers and each of the Principal Customers is
generally good and (3) to the Best Knowledge of the Sellers, no Principal
Customer has threatened to terminate its relationship and dealings with the
Business, whether as a result of the transactions contemplated by this Agreement
or otherwise.
24
<PAGE> 32
(v) Securities Act. The Sellers are purchasing the Units for
their own account and not with a view to any distribution or resale of the
Shares in any manner which would be in violation of the Securities Act of 1933,
as amended.
(w) Definition of Best Knowledge. As used in this Agreement, the
term "Best Knowledge" of each of the Sellers means and includes actual knowledge
of those employees of the Sellers listed on Schedule 3.1(w).
3.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER.
The Buyer represents and warrants to the Sellers as follows:
(a) Organization; Corporate Authority; Good Standing. The Buyer
is a limited liability company duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. The Buyer has all requisite power
and authority to execute and deliver this Agreement and the Related Documents to
which it is or will be a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
(b) Capitalization. The authorized capital of the Buyer consists
of 14,000 Units which are all issued and outstanding and owned by Holdings and
Chemical Venture Capital Associates, A California Limited Partnership.
Immediately after the Closing, all such issued and outstanding Units will be
duly authorized and validly issued and outstanding.
(c) Corporate Action; No Conflict. The execution, delivery and
performance by the Buyer of this Agreement and the Related Documents to which
the Buyer is or will be a party and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part of the Buyer. This Agreement has been
duly and validly executed and delivered by the Buyer and is, and each of the
Related Documents to which the Buyer is or will be a party, when executed and
delivered in accordance with its terms, will be, the valid and binding
obligation of the Buyer, enforceable in accordance with the terms thereof.
Neither the execution, delivery or performance by the Buyer of this Agreement or
any of the Related Documents to which the Buyer is or will be a party, nor the
consummation by the Buyer of the transactions contemplated hereby or thereby,
nor compliance by the Buyer with any provision hereof or thereof will (i)
conflict with or result in a breach of any provision of the Operating Agreement
or By-laws of the Buyer, in each case as in effect on the date hereof, (ii)
cause a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, lease, mortgage, indenture, license, agreement or other instrument or
obligation to which the Buyer is a party or by which it or any of its properties
or assets is or may be bound or (iii) violate any Legal Requirement of, from or
with any Governmental Authority applicable to the Buyer or any of its properties
or assets. No Permit, consent or approval of or by, or any notification of or
filing with, any Person is required in connection with the execution, delivery
or performance by the Buyer of this Agreement and the Related Documents to which
the Buyer is or will be a party, or the consummation by the Buyer of the
transactions contemplated hereby or thereby, other than required filings under
the HSR Act.
25
<PAGE> 33
(d) Brokers. Neither the Buyer nor Holdings nor any of their
respective officers, managers or employees has employed any investment banker,
broker or finder or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated hereby.
(e) No Prior Business. The Buyer and Holdings were formed for
the purpose of acquiring the Business and have not conducted any business in the
past, except in connection with the transactions contemplated by this Agreement
and related activities.
ARTICLE IV
CLOSING
The closing (the "Closing") for the consummation of the
transactions contemplated by this Agreement is taking place at the offices of
Sidley & Austin simultaneously with the execution herewith (the "Closing Date").
ARTICLE V
INDEMNIFICATION
5.1 DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
(a) "Buyer Indemnification Event" means any of the following:
(i) the untruthfulness, inaccuracy or breach of any
representation or warranty of any Seller contained in this
Agreement or any Related Document, any Schedule or Exhibit
attached hereto or thereto or any certificate delivered by such
Seller in connection herewith or therewith at or before the
Closing; provided that for purposes of this Section 5.1(a)(i), the
representation contained in Section 3.1(m)(i) shall be deemed to
have been made as if the words "in all material respects" did not
appear therein and the representation contained in Section
3.1(g)(ii) shall be deemed to have been made as if the words "To
the Best Knowledge of Sellers" did not appear therein;
(ii) the breach by any Seller of any agreement or
covenant of such Seller contained in this Agreement or any Related
Document;
(iii) (Insert Title Here)
(A) the assertion of any Claim against or the
payment of any Loss by any Buyer Indemnified Person that arose in
connection with, or is in any way related to any Excluded
Obligations identified in Sections 1.4(b) or (d), regardless of
whether or not any Seller had any knowledge of such Claim or Loss
or the basis thereof;
(B) the assertion of any Claim against or the
payment of any Loss by any Buyer Indemnified Person that arose in
connection with, or is in any way related
26
<PAGE> 34
to any other Excluded Obligations, regardless of whether or not
any Seller had any knowledge of such Claim or Loss or the basis
thereof;
(C) the assertion of any Claim against or the
payment of any Loss of any Buyer Indemnified Person that arose in
connection with, or is in any way related to the matters described
on Schedule 4.1(l) (other than items 1 and 4 of such Schedule);
(iv) the assertion against or payment by any Buyer
Indemnified Person of any Claim or Loss as a result of
non-compliance by any Seller or the Buyer with the "bulk sales
laws" of any state or foreign jurisdiction which may be applicable
to the transactions contemplated hereby;
(v) the assertion of any Claim against or payment of
any Loss by any Buyer Indemnified Person relating in any way to
Taxes of any kind whatsoever, or expenses, interest or penalties
relating thereto, with respect to periods ending on or prior to
the Closing Date, other than Taxes relating to the conduct of the
Business after the Closing Date and Taxes accrued on the Closing
Statement;
(vi) the assertion of any Claim against or the payment
of any Loss by any Buyer Indemnified Person relating to or arising
out of the environmental matters existing or occurring prior to
the Closing Date described on Schedule 5.1(a)(vii) (except that
Sellers shall not be required to indemnify any Buyer Indemnified
Person to the extent that Buyer's actions exacerbate any such
environmental matter by causing a Release or threatened Release of
Hazardous Material);
(vii) any amount paid under the Settlement Agreement
dated September 2, 1992 among MascoTech, John A. Bott, The Bott
Group, Inc., and JAC Products, Inc., to the extent such payment
relates to periods prior to the Closing;
(viii) any amount paid to or credited against
receivables of Chrysler Corporation related to any credit or
reimbursement obligation owed to Chrysler Corporation or any
Affiliate thereof for periods prior to the Closing; and
(ix) all reasonable fees, costs and expenses (including,
without limitation, reasonable attorneys', accountants' and other
professional fees and expenses) incurred by any Buyer Indemnified
Person in connection with any action, suit, proceeding, demand,
assessment or judgment incident to any of the matters indemnified
against under this Article or in connection with the enforcement
by any Buyer Indemnified Person of its rights under this Article;
provided, however, that if such Buyer Indemnified Person is found
partially liable in connection with any Buyer Indemnification
Event, only the percentage of such fees, costs and expenses equal
to the percentage of Sellers' liability in connection with such
Buyer Indemnification Event shall be included pursuant hereto.
(b) "Buyer Indemnified Persons" means and includes the Buyer and
its officers, directors, stockholders (other than MascoTech), employees, agents,
Affiliates, successors and assigns of all or any substantial portion of the
Business.
27
<PAGE> 35
(c) "Claim" means any claim, demand, assessment, action, suit,
proceeding, investigation, cause of action, litigation, judgment, order or
decree.
(d) "Indemnified Persons" means the Buyer Indemnified Persons or
the Seller Indemnified Persons, as the case may be.
(e) "Indemnifying Person" means the Buyer, in the case of any
Seller Indemnification Event, or the Sellers, jointly and severally, in the case
of any Buyer Indemnification Event, as the case may be.
(f) "Losses" means any and all losses, claims, shortages,
damages, liabilities, obligations, expenses, assessments, tax deficiencies and
Taxes, and fees, costs and expenses (including, without limitation, reasonable
attorneys', accountants' and other professional fees and expenses) sustained,
suffered or incurred by any Indemnified Person in connection with any Claim
incident to or otherwise arising from any matter which is the subject of
indemnification under this Article or in connection with the enforcement by the
Indemnified Persons or any of them of their respective rights under this
Article; provided, however, that in computing the amount of any Losses for
purposes of determining the liability of any Indemnifying Party under Section
5.2, the amount of any insurance proceeds actually received by the Indemnified
Party, less any deductibles and any resulting premium increases, shall be
deducted from such Losses.
(g) "Seller Indemnification Event" means the following:
(i) the untruthfulness, inaccuracy or breach of any
representation or warranty of the Buyer contained in this Agreement or
any Related Document, any Schedule or Exhibit attached hereto or
thereto or any certificate delivered by the Buyer in connection
herewith or therewith at or before the Closing;
(ii) the breach of any agreement or covenant of the
Buyer contained in this Agreement or any Related Document;
(iii) the assertion of any Claim against or payment of
any Loss by any Seller which arose in connection with or is in any way
related to any Assumed Obligation;
(iv) the assertion of any Claim against or payment of
any Loss by any Seller Indemnified Person relating in any way to Taxes
of any kind whatsoever, or expenses, interest or penalties relating
thereto, with respect to periods after the Closing Date or in
connection with the conduct of the Business after the Closing Date;
(v) all reasonable fees, costs and expenses
(including, without limitation, reasonable attorneys', accountants'
and other professional fees and expenses) incurred by any Seller
Indemnified Person in connection with any action, suit, proceeding,
demand, assessment or judgment incident to any of the matters
indemnified against under this Article or in connection with the
enforcement by any Seller Indemnified Person of its rights under
this Article; provided, however, that if such Seller Indemnified
Person is found partially liable in connection with any Seller
Indemnification Event, only the percentage of such fees, costs and
expenses equal to the percentage of Buyer's liability in connection
with such Seller Indemnification Event shall be included pursuant
hereto; and
28
<PAGE> 36
(vi) the assertion of any Claim against or payment of
any Loss by any Seller Indemnified Person related to the conduct of the
Business or the ownership of the Purchased Assets after the Closing
Date and with respect to which Seller has no indemnification obligation
to any Buyer Indemnified Person hereunder.
(h) "Seller Indemnified Persons" means and includes the Sellers
and their respective officers, directors, stockholders, employees, agents,
Affiliates and successors.
(i) "Taxes" means, with respect to any Person, (A) all income
taxes (including any tax on or based upon net income, or gross income, or income
as specially defined, or earnings, or profits, or selected items of income,
earnings or profits) and all gross receipts, sales, use, ad valorem, transfer,
franchise, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property or windfall profits taxes, real property tax,
alternative or add-on minimum taxes, customs duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any
Governmental Authority and (B) any liability for the payment of any amount of
the type described in the immediately preceding clause (A) as a result of being
a "transferee" (within the meaning of Section 6901 of the Code or any other
applicable law) of another Person or a member of an affiliated or combined
group.
5.2 INDEMNIFICATION GENERALLY.
(a) Buyer Indemnification. The Sellers shall, jointly and
severally, indemnify the Buyer Indemnified Persons for, and hold each of them
harmless from and against, any and all Losses resulting from any Buyer
Indemnification Event (other than a Buyer Indemnification Event described in
clause (vi) of Section 5.1(a)); provided, however, that:
(i) the Sellers shall have no obligation or liability
to indemnify and hold harmless the Buyer Indemnified Persons from and
against Losses resulting from a Buyer Indemnification Event described
in Section 5.1(a)(i) (unless such Buyer Indemnification Event relates
to a breach of the representation set forth in Section 3.1(q)(xix)),
Section 5.1(a)(iii)(A) and Section 5.1(a)(ix) (in the case of (ix),
only to the extent such fees, costs and expenses arise from a Buyer
Indemnification Event described in clause (i) and (iii)(A) of Section
5.1(a)) unless and until the aggregate amount of all such Losses shall
exceed $450,000 and then only to the extent of such Losses in excess of
$450,000 and the aggregate liability of the Sellers under this Section
5.2(a) for such Losses shall not exceed, when aggregated with any other
payment by the Sellers to the Buyer Indemnified Persons under this
Agreement, the Purchase Price; and
(ii) the Buyer Indemnified Persons shall not be
entitled to indemnification for any Losses resulting from a Buyer
Indemnification Event described in clause (i) of Section 5.1(a) which
is based upon a breach of the representation and warranty set forth in
Section 3.1(i)(i)(C)(y) which result from sales of Rack Products after
the Buyer has knowledge that such Rack Product infringes the
Intellectual Property Rights of another Person.
29
<PAGE> 37
The Sellers shall, jointly and severally, indemnify the Buyer
Indemnified Persons for, and hold each of them harmless from and against, any
and all Losses resulting from any Buyer Indemnification Event described in
clause (vi) of Section 5.1(a); provided, however, that the Sellers shall have no
obligation or liability to indemnify and hold harmless the Buyer Indemnified
Persons from and against 50% of the first $450,000 of Losses (other than Losses
arising from the first item described under Section III of Schedule 5.1(a)(vii)
as to which no basket shall apply) resulting from a Buyer Indemnified Event
described in clause (vi) of Section 5.1(a) (after the Buyer Indemnified Persons
have incurred 50% of the first $450,000 of Losses all Losses above $450,000
shall be indemnified by the Sellers) and the aggregate liability of the Sellers
under this Section 5.2(a) for such Losses shall not exceed, when aggregated with
any other payment by the Sellers to the Buyer Indemnified Persons under this
Agreement, the Purchase Price.
(b) Seller Indemnification. The Buyer shall indemnify the Seller
Indemnified Persons for, and hold each of them harmless from and against, any
and all Losses resulting from any Seller Indemnification Event.
5.3 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS.
The obligations and liabilities of the Indemnifying Persons with
respect to Claims resulting from the assertion of liability by third parties
(each, a "Third Party Claim") shall be subject to the following terms and
conditions:
(a) The Indemnified Persons shall give prompt written notice to
the Indemnifying Persons of any Third Party Claim which might give rise to a
Claim by the Indemnified Persons against the Indemnifying Persons based on the
indemnity agreements contained in Section 5.2, stating the nature and basis of
said Third Party Claim, and the amount thereof to the extent known. Such notice
shall be accompanied by copies of all relevant documentation with respect to
such Third Party Claim, including, without limitation, any summons, complaint or
other pleading which may have been served or written demand, or other document
or other instrument. Failure to give notice within the terms of this Section
5.3(a) shall serve to excuse the Indemnifying Person from its obligation under
Section 5.2 only if and to the extent that the Indemnifying Person can establish
that it was prejudiced or injured by the failure.
(b) (Insert Title Here)
(i) The Indemnifying Persons will have the right to
participate in or, if the Indemnifying Persons shall acknowledge in a
writing delivered to the Indemnified Persons that the Indemnifying
Persons shall be obligated under the terms of their indemnity hereunder
in connection with such Third Party Claim (a "Liability Letter"), then
the Indemnifying Persons shall have the right to assume the defense of
any Third Party Claim at their own expense and by their own counsel
(reasonably satisfactory to the Indemnified Persons); provided,
however, that the Indemnifying Persons shall not have the right to
assume the defense of any Third Party Claim if (x) such Third Party
Claim seeks an injunction, restraining order, declaratory relief or
other non-monetary relief, (y) the named parties to any such action or
proceeding (including any impleaded parties) include both the
Indemnified Persons and the Indemnifying Persons and the former shall
30
<PAGE> 38
have been advised in writing by counsel (with a copy to the
Indemnifying Persons) that there are one or more legal or equitable
defenses available to them which are different from or additional to
those available to Indemnifying Persons or (z) such action or
proceeding involves matters beyond the scope of the indemnification
obligation of the Indemnifying Persons, and in such event under
subsection (y) or (z) the suit or proceeding may, at the election of
the Indemnifying Person, be defended jointly as provided in (ii) below.
(ii) Notwithstanding the foregoing subsection (b)(i),
if the Indemnifying Persons desire to participate in the defense of
any Third Party Claim without delivering a Liability Letter to the
Indemnified Persons, the Indemnifying Persons and the Indemnified
Persons shall jointly assume the defense against such Third Party
Claim under the following conditions:
(A) a law firm will be selected by agreement
between the Indemnifying Persons and the Indemnified Persons to
represent the interests of both such parties in defending against the
Third Party Claim;
(B) if such law firm determines at any time that
a conflict of interest exists between the Indemnifying Persons and the
Indemnified Persons for any reason and that such law firm can not
adequately represent the interests of both parties, then such law firm
shall promptly notify the Indemnified Persons and the Indemnifying
Persons in writing of such determination and the Indemnified Persons
and Indemnifying Persons shall decide by agreement, based upon which
party is more likely to be more liable for the Third Party Claim,
which party the law firm will continue to represent;
(C) if the party which is no longer represented
by the law firm as a result of subclause (B) desires to continue to
participate in the defense of the Third Party Claim, such party may do
so and may retain its own counsel at its own expense; provided,
however, that if such party is found to have no liability in connection
with such Third Party Claim, its reasonable fees and expenses in
connection with this subclause (C) shall be reimbursed by the other
party.
(c) (Insert Title Here)
(i) If the Indemnifying Persons exercise their right
to assume the defense of a Third Party Claim pursuant to subsection
(b)(i) or (b)(ii) above, they shall not make any settlement of any
claims other than settlements consisting solely of monetary awards
without the prior written consent of the Indemnified Persons, which
consent shall not be unreasonably withheld. (ii) If the Indemnifying
Persons do not exercise their right to assume the defense of a Third
Party Claim, the Indemnified Persons shall not make any settlement of
any claims for which they may seek indemnification hereunder unless (A)
they first provide written notice to the Indemnifying Persons
describing the material terms of the settlement and (B) the
Indemnifying Persons fail to deliver a Liability Letter within ten days
of receiving such notice.
31
<PAGE> 39
5.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS.
The representations and warranties of the Sellers in Section 3.1 and
the representations and warranties of the Buyer contained in Section 3.2 shall
survive the Closing and remain in full force and effect for a period of 24
months and thereafter shall terminate; provided, however, that (a) the
representations and warranties of the Sellers set forth in Section 3.1(j) shall
survive the Closing and remain in full force and effect for a period of four
years from the Closing Date, (b) the representations and warranties of the
Sellers set forth in Section 3.1(r) shall survive the Closing and remain in full
force and effect for the applicable statute of limitations, and (c) the
representations and warranties of the Sellers set forth in Sections 3.1(a), (c)
and (e), shall survive the Closing and remain in full force and effect without
time limit. Except as otherwise expressly provided in this Agreement, all
agreements and covenants requiring future performance contained in this
Agreement shall survive the Closing and remain in full force and effect without
time limit. For convenience of reference, the date upon which any
representation, warranty, agreement or covenant shall terminate, if any, shall
be referred to herein as the "Survival Date." No Claim under Section 5.2 for
indemnification based on (a) the untruthfulness, inaccuracy or breach of any
representation or warranty or (b) any Losses resulting from a Buyer
Indemnification Event identified in Section 5.1(a)(iii)(A) shall be brought by
an Indemnified Person against an Indemnifying Person, and an Indemnified Person
shall not be entitled to receive any payment with respect thereto, unless the
Indemnified Persons, or any of them, at any time prior to in the case of
subclause (a), the applicable Survival Date and in the case of subclause (b),
seven years from the Closing Date, give the Indemnifying Persons written notice
of the existence of any such Claim, specifying in such notice the nature and
amount of such Claim together with the applicable provisions of this Agreement
to the extent known by the Indemnified Persons based on then available
information. Upon the giving of such written notice as aforesaid, the
Indemnified Persons, or any of them, shall have the right to commence legal
proceedings (whether before or after the applicable Survival Date or the end of
the seven year period, as the case may be) for the enforcement of their rights
under Section 5.2.
5.5 REMEDIES CUMULATIVE.
The rights of the Indemnified Persons to indemnification under this
Article shall be cumulative and the pursuit thereof shall not preclude the
assertion of any other right or remedy by the Indemnified Persons in connection
with any Losses arising from or in connection with this Agreement; provided,
however, with respect to any Claim arising or asserted by any Buyer Indemnified
Person or any third party (including any governmental agency) at any time under
any statute or the common law, the rights of any Indemnified Person shall be
limited to the indemnification remedy provided under this Agreement, and
provided, further, that to the extent any provision of this Agreement limits or
excludes Sellers' liability or indemnification obligation for certain matters,
Sellers shall have no liability or indemnification obligation for such matters
under any other provisions of this Agreement or the Related Documents.
5.6 REMEDIATION.
Sellers shall, at their sole expense and in the manner determined by
Sellers consistent with applicable law, conduct or direct any environmental
cleanup or remediation which is required by law after the date of Closing for
which Sellers are responsible hereunder; provided,
32
<PAGE> 40
however, that Sellers will consult with Buyer with respect to such matters, and
will provide Buyer with a complete copy of any governmental filing or submission
at the time it is made. Buyer agrees to cooperate with Sellers (including,
without limitation, by making relevant personnel and records available to
Sellers at all reasonable times free of charge) in connection with any such
cleanup or remediation. Notwithstanding the foregoing, Sellers shall not take
any action which will materially interfere with the ability of Buyer to carry on
its business in the ordinary course; provided, however, if the Sellers are
required by law to effect any environmental cleanup or remediation that will so
disrupt the business of the Buyer, the Sellers and the Buyer shall use their
best efforts to conduct such cleanup and remediation in a manner that will
minimize the disruption to the business of the Buyer.
5.7 PRODUCT DISTINGUISHMENT.
Buyer will use commercially reasonable efforts after the Closing to
distinguish products manufactured after the Closing Date from products
manufactured before the Closing Date.
5.8 STAND-ALONE COSTS.
(a) Beginning with fiscal year 1996 and ending with fiscal year
1999, the Sellers agree to pay to the Buyer an amount equal to 50% of the
difference between (i) the lower of the Actual Stand-alone Costs for such fiscal
year and $866,000 and (ii) $516,000. As used herein, the term "Actual
Stand-alone Costs" shall mean all costs and expenses incurred by the Buyer in
connection with workers compensation insurance, commercial and business
insurance (including general product liability, automobile, property, boiler and
machinery and umbrella insurance), and administration of any pension or profit
sharing plans adopted by Buyer in replacement of the plans currently covering
the Hired Employers (including 401(k) plans), all as reflected on the Buyer's
audited financial statements for such fiscal year; provided, however, if at any
time after the Closing the Buyer materially increases the level of any type of
insurance coverage included in the calculation of Actual Stand-alone Costs,
Actual Stand-alone Costs shall be calculated on a pro forma basis as if the
level of such insurance coverage was substantially the same as the level of
insurance coverage in effect on the Closing Date.
(b) For any fiscal year for which the Buyer seeks reimbursement
pursuant to Section 5.8(a), the Buyer shall prepare, and shall deliver to the
Sellers, a statement setting forth its computation of the Actual Stand-alone
Costs for such fiscal year (the "Stand-alone Costs Statement").
(c) The Buyer shall provide, and shall (if applicable) cause the
Buyer's Accountants to provide, the Sellers and the Sellers' Accountants with
timely access to the work papers, trial balances and similar materials used in
connection with the preparation of the Stand-alone Costs Statement. The Sellers
shall have 30 calendar days following its receipt of the Stand-alone Costs
Statement within which to deliver to the Buyer a written notice of objection
thereto (the "Stand-alone Costs Objection Notice"), which Stand-alone Costs
Objection Notice shall (i) set forth the Sellers' determination of the Actual
Stand-alone Costs and (ii) specify in reasonable detail the Sellers' basis for
objection. The failure by the Sellers to deliver the Stand-alone Costs Objection
Notice within such 30-calendar-day period shall constitute the Sellers'
acceptance of the Stand-Alone Costs Statement and the Buyer's calculation of the
Actual Stand-alone Costs contained therein. The Buyer and the Sellers shall in
good faith attempt to resolve their differences, if any, with respect to the
Stand-alone Costs Statement and the computation of the Actual Stand-
33
<PAGE> 41
alone Costs and reach a written agreement with respect thereto within 30
calendar days following delivery of the Stand-alone Costs Objection Notice. If
the Buyer and the Sellers are unable to resolve all of such differences within
such 30-calendar-day period, the items in dispute will be referred for
determination as promptly as practicable to Ernst & Young, LLP, or if such firm
is unable or unwilling to serve, to another "Big 6" accounting firm independent
of the Buyer and the Sellers selected by agreement between the Buyer and the
Sellers or, if the Buyer and the Sellers cannot so agree within the
30-calendar-day period referred to above, by lot (the "Stand-alone Costs
Arbitrating Accountants"). The Stand-alone Costs Arbitrating Accountants will
make a determination (the "Stand-alone Costs Accountants' Determination") as to
each of the items in dispute, which Stand-alone Costs Accountants' Determination
will be (A) in writing, (B) furnished to the Buyer and the Sellers as soon as
practicable after the items in dispute have been referred to the Stand-alone
Costs Arbitrating Accountants, (C) made in accordance with this Agreement and
(D) conclusive and binding upon the Buyer and the Sellers. The Stand-alone Costs
Arbitrating Accountants will be entitled (but shall not be required) to rely on
the work papers, trial balances and similar materials used in connection with
the preparation of the Stand-alone Costs Statement. The reasonable fees and
expenses of the Stand-alone Costs Arbitrating Accountants shall be shared
one-half by the Buyer and one-half by the Sellers.
(d) Within 2 business days of the final determination of the
Actual Stand-alone Costs in accordance with Section 5.8(c), the Sellers shall
make any payment required by Section 5.8(a) to the Buyer by wire transfer of
immediately available funds to an account designated by Buyer.
(e) The provisions of this Section 5.8 shall terminate upon a
public offering of Class A Units of Holdings with net proceeds to the Company of
at least $25,000,000 or upon a sale of all or substantially all of the assets of
the Buyer to an unaffiliated third party of the Buyer or Holdings.
ARTICLE VI
ADDITIONAL POST-CLOSING AGREEMENTS
6.1 ACCESS.
In connection with any financial audit of the Sellers or any tax audit
or other governmental investigation of the Sellers for any matter relating to
any period prior to the Closing, or for any other reasonable and lawful purpose,
the Buyer shall, upon request, permit the Sellers and their respective
representatives to have access, at reasonable times during normal business hours
and in a manner which is not disruptive to the operations of the Buyer, to the
work papers, books and records of the Buyer relating to the Sellers and their
conduct of the Business prior to the Closing which shall have been in the
possession of the Buyer as of the Closing and which remain in the possession of
the Buyer. The Buyer shall not dispose of such work papers, books and records
during the six-year period beginning with the Closing without the Sellers'
consent, which consent shall not be unreasonably withheld. Following the
expiration
34
<PAGE> 42
of such six-year period, the Buyer may dispose of such work papers, books and
records at any time upon giving 30 days' prior written notice to the Sellers,
unless the Sellers agree to take possession of such work papers, books and
records within such 30 days at no expense to the Buyer.
6.2 BULK SALES LAWS.
Each of the parties waives compliance by the other parties with the
provisions of the "bulk sales laws" of any jurisdiction which may be applicable
to the transactions contemplated by this Agreement.
6.3 BROKERS, FINDERS AND INVESTMENT BANKERS.
The Sellers and the Buyer shall be responsible for any compensation
payable to any broker, finder or investment banker which such party has retained
in connection with this Agreement, the Related Documents and the transactions
contemplated hereby and thereby.
6.4 CERTAIN EMPLOYEE MATTERS.
(a) On the Closing Date the Buyer intends to offer employment to
the employees of the Sellers who are actively employed by the Sellers in the
Business on the Closing Date, and the employees identified on Schedule 6.4 (any
such employees who accept such offer of employment being referred to herein as
the "Hired Employees"); provided, however, that the Buyer shall offer the Hired
Employees employee benefit plans that are similar to those offered by other
companies that are of the same size as the Buyer after the Closing Date; except
for Hired Employees, the Buyer shall have no liability to any employees of the
Sellers who, on the Closing Date, are not actively employed or are on
disability, leave of absence, military service leave or lay-off (whether or not
with recall rights), or whose employment has been terminated (voluntarily or
involuntarily) or who have retired prior to the Closing Date. Nothing contained
in this Agreement shall confer upon any Hired Employee any rights or remedies of
any nature or kind whatsoever under or by reason of this Agreement, including,
without limitation, any right to employment or continued employment or to any
benefits that may be provided, directly or indirectly, under any employee
benefit plan, policy or arrangement of the Buyer, nor shall anything contained
in this Agreement constitute a limitation on or restriction against the right of
the Buyer to amend, modify or terminate any such plan, policy or arrangement or
the terms or conditions of employment. The Sellers shall retain all liabilities
and obligations arising from the termination or severance of all employees of
the Business who do not become Hired Employees on the Closing Date. The Buyer
shall bear the cost of any liability to Hired Employees under the Worker
Adjustment and Retraining Notification Act which arises as a consequence of
actions of the Buyer after the Closing.
(b) The Sellers shall cause all Current Employees to be fully
vested as of the Closing Date under each defined benefit pension plan (except
for the Huron/St. Clair Company Plant II Hourly Employees Pension Plan), profit
sharing plan, benefit restoration programs, savings plan and other employee
pension benefit plan and retirement arrangements of the Sellers covering such
employees.
35
<PAGE> 43
(c) Buyer shall adopt and assume the assets, liabilities and
obligations to maintain the Huron/St. Clair Company Plant II Hourly Employees
Pension Plan, effective as of the Closing Date.
(d) The Buyer shall provide that (i) any amount paid by Sellers'
employees through the Closing Date for medical expenses that are treated as
deductible or co-insurance payments under the Sellers' health plan shall reduce
the amount of any deductible or co-insurance payment required to be paid for a
similar period under the Buyer's health plan; provided, however, that the
Sellers provide a list of all current and former employees participating in the
Sellers' health plan along with a listing of each employee's deductible and
co-insurance payments through the Closing Date, and (ii) Sellers' employees
shall receive credit towards satisfying the eligibility requirements for
participation in the Buyer's health plan to the extent such employees satisfied
eligibility requirements under the Sellers' health plan. The transfer of assets
from the trust maintained by the Sellers for the Huron/St. Clair Company Plant
II Hourly Employees Pension Plan will take place on or after the Closing Date,
but as soon as administratively possible, and the amount of such transfer shall
be reduced by the amount of required benefit payments due on or about October 1,
1995.
6.5 GUARANTIES.
(a) MascoTech hereby irrevocably and unconditionally guarantees
to Buyer the prompt and complete payment and performance of all obligations of
the Sellers under this Agreement. The obligations of MascoTech (i) are absolute
and unconditional and shall continue in full force and effect until the payment
and performance of all of the obligations of the Sellers that are guaranteed
hereunder, (ii) other than a good faith demand for payment or performance
against the Sellers, are not conditioned upon any event or contingency, or upon
any attempt to enforce the Sellers' performance under this Agreement or any
other right or remedy against the Sellers or to collect from the Sellers through
the commencement of legal proceedings or otherwise, and (iii) shall be binding
upon and enforceable in full against MascoTech without regard to any
circumstance which might otherwise constitute a legal defense available to, or a
discharge of, MascoTech in respect of the obligations guaranteed hereby;
provided, however, that MascoTech shall be entitled to assert any rights or
defenses which any Seller may have against the Buyer or its assigns and the
Buyer's and its assigns rights hereunder shall be subject thereto (excluding any
defenses based upon the insolvency of such Seller). In no event shall
MascoTech's liability under this guarantee exceed the liability it would have
had if MascoTech were the primary obligor under this Agreement.
(b) Holdings hereby irrevocably and unconditionally guarantees
to Sellers the prompt and complete payment and performance of all obligations of
the Buyer under this Agreement. The obligations of Holdings (i)are absolute and
unconditional and shall continue in full force and effect until the payment and
performance of all of the obligations of the Buyer that are guaranteed
hereunder, (ii) other than a good faith demand for payment or performance
against the Buyer, are not conditioned upon any event or contingency, or upon
any attempt to enforce the Buyer's performance under this Agreement or any other
right or remedy against the Buyer or to collect from the Buyer through the
commencement of legal proceedings or otherwise, and (ii) shall be binding upon
and enforceable in full against Holdings without regard to any circumstance
which might otherwise constitute a legal defense available to, or a discharge
36
<PAGE> 44
of, Holdings in respect of the obligations guaranteed hereby; provided however,
that Holdings shall be entitled to assert any rights or defenses which the Buyer
may have against the Sellers or their assigns and the Sellers' and their assigns
rights hereunder shall be subject thereto (excluding any defenses based upon the
insolvency of Buyer). In no event shall Holdings liability under this guarantee
exceed the liability it would have had if Holdings were the primary obligor
under this Agreement.
6.6 AUDITED FINANCIALS.
Upon the request of the Buyer, the Sellers shall use their best efforts
to cause Sellers' Accountants to prepare at Buyer's expense audited financial
statements for any period preceding the Closing Date.
ARTICLE VII
MISCELLANEOUS
7.1 EXPENSES; TRANSFER TAXES, ETC.
All fees, costs and expenses incurred by any party to this Agreement in
connection with, relating to or arising out of the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, attorneys', accountants' and
other professional fees and expenses, shall be borne by such party. The Sellers
shall pay all sales, use, gains and excise taxes and all registration, or
transfer taxes which may be payable in connection with the transactions
contemplated by this Agreement and the Related Documents. The Buyer shall pay
all recording fees which may be payable in connection with the transactions
contemplated by this Agreement and the Related Documents.
7.2 ENTIRE AGREEMENT.
This Agreement and the Related Documents (including the Schedules and
the Exhibits attached hereto and thereto) and the other documents, instruments
and certificates referred to herein and therein contain the entire agreement
among the parties hereto with respect to the transactions contemplated hereby
and thereby and supersede all prior agreements or understandings between the
parties with respect hereto and thereto, other than the Confidentiality
Agreement dated as of April 25, 1995 between MascoTech and Chemical Venture
Partners.
7.3 RELATED DOCUMENTS.
As used in this Agreement, the term "Related Documents" means,
collectively, the Bill of Sale and Assumption Agreement and the other Conveyance
Instruments.
7.4 NOTICES.
All notices or other communications which are required or permitted
hereunder shall be in writing and shall be deemed to have been given if (a)
personally delivered or sent by telecopier, (b) sent by nationally-recognized
overnight courier or (c) sent by registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
37
<PAGE> 45
if to the Buyer, to:
Advanced Accessory Systems, LLC
c/o Chemical Venture Partners
270 Park Avenue, 5th Floor
New York, New York 10017
Attention: Don Hofmann
Telephone: (212) 270-3220
Telecopier: (212) 270-2327
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: John J. Suydam, Esq.
Telephone: 212-408-2400
Telecopier: 212-408-2467; and
if to the Sellers, to:
MascoTech, Inc.
21001 Van Born Road
Taylor, MI 48180
Attention: President
Telephone: (313) 274-7400
Telecopier: (313) 374-6135
with a copy to:
MascoTech, Inc.
21001 Van Born Road
Taylor, MI 48180
Attention: General Counse
Telephone: (313) 274-7400
Telecopier: (313) 374-6430
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such
communication shall be deemed to have been received (i) when delivered, if
personally delivered or sent by telecopier, (ii) on the Business Day after
dispatch, if sent by nationally recognized, overnight courier and (iii) on the
fifth Business Day following the date on which the piece of mail containing such
communication is posted, if sent by mail. As used herein, the term "Business
Day" means a day that is not a Saturday, Sunday or a day on which banking
institutions in New York City are not required to be open.
38
<PAGE> 46
7.5 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement; provided, however,
that in proving this Agreement, it shall not be necessary to produce or account
for more than one counterpart hereof.
7.6 GOVERNING LAW; CONSENT TO JURISDICTION.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without giving effect to the principles of
conflicts of laws.
7.7 BENEFITS OF AGREEMENT; ASSIGNMENT.
The terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Anything contained herein to the contrary notwithstanding,
this Agreement shall not be assignable by any party hereto without the consent
of the other parties hereto; provided, however, that (a) the Buyer may transfer
or assign, in whole or from time to time in part, to one or more of its
Affiliates, any of its rights in, to and under this Agreement, including,
without limitation, the right to purchase all or any part of the Purchased
Assets, but in no event shall any such transfer or assignment relieve the Buyer
of its obligations under this Agreement, (b)the Buyer may assign its rights to
indemnification hereunder to or for the benefit of any Person and (c) the
Sellers may assign their rights to indemnification hereunder to or for the
benefit of any Affiliate.
7.8 CONSTRUCTION.
The provisions of this Agreement shall be construed according to their
fair meaning and neither for nor against any party hereto irrespective of which
party caused such provisions to be drafted. Each of the parties acknowledges
that it has been represented by an attorney in connection with the preparation
and execution of this Agreement.
7.9 PRONOUNS.
As used herein, all pronouns shall include the masculine, feminine,
neuter, singular and plural thereof whenever the context and facts require such
construction.
7.10 DESCRIPTIVE HEADINGS.
Descriptive headings are for convenience only and shall not control or
affect the meaning or construction of any provisions of this Agreement.
7.11 SEVERABILITY.
It is the desire and intent of the parties that the provisions of this
Agreement shall be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any provision of this Agreement shall be adjudicated to be
invalid, illegal or unenforceable in any respect in any jurisdiction, such
39
<PAGE> 47
provision shall be automatically deemed amended, but only to the extent
necessary to render such provision valid, legal and enforceable in such
jurisdiction, such amendment to apply only with respect to the operation of such
provision in such jurisdiction, and the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
7.12 AMENDMENT.
This Agreement may not be amended except by an instrument in writing
signed by the Buyer and the Sellers.
7.13 NO THIRD PARTY BENEFICIARIES.
Nothing in the Agreement shall confer any rights upon any Person other
than the parties hereto and their respective heirs, successors and permitted
assigns.
40
<PAGE> 48
IN WITNESS WHEREOF, each of the parties hereto has caused this
Asset Purchase Agreement to be executed on its behalf as of the day and year
first above written.
MASCOTECH AUTOMOTIVE SYSTEMS GROUP, INC.
By:___________________________
Name:
Title:
MASCOTECH ACCESSORIES, INC.
By:___________________________
Name:
Title:
ADVANCED ACCESSORY SYSTEMS, LLC
By:___________________________
Name:
Title:
Only with respect to the guaranty in Section 6.5(a):
MASCOTECH, INC.
By:___________________________
Name:
Title:
Only with respect to the guaranty in Section 6.5(b):
AAS HOLDINGS, LLC
By:___________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.2
AGREEMENT FOR THE SALE AND PURCHASE
OF
SHARES IN
BRINK BV
between
AAS HOLDINGS, INC.
AAS HOLDINGS, LLC
BRINK HOLDING BV
and
BRINK BV
CLIFFORD CHANCE
Apollolaan 171
1077 AS AMSTERDAM
Telephone: (+31-20)5777-111
Telefax: (+31-20)5777-222
ref: JF/MBS
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1: SALE AND PURCHASE, CONSIDERATION............................... 2
ARTICLE 2: INTERCOMPANY INDEBTEDNESS...................................... 3
ARTICLE 3: ACTION PENDING COMPLETION...................................... 3
ARTICLE 4: CONDITIONS PRECEDENT........................................... 3
ARTICLE 5: COMPLETION..................................................... 4
ARTICLE 6: POST-COMPLETION MATTERS........................................ 6
ARTICLE 7: REPRESENTATIONS AND WARRANTIES................................. 7
ARTICLE 8: INDEMNIFICATION................................................ 7
ARTICLE 9: LIMITATION OF LIABILITY........................................ 9
ARTICLE 10: ENVIRONMENTAL INDEMNITY....................................... 10
ARTICLE 11: RESTRICTIVE COVENANTS......................................... 10
ARTICLE 12: COSTS AND EXPENSES............................................ 12
ARTICLE 13: PRESS ANNOUNCEMENTS........................................... 12
ARTICLE 14: NOTICES....................................................... 12
ARTICLE 15: JOINT AND SEVERAL LIABILITY................................... 14
ARTICLE 16: MISCELLANEOUS PROVISIONS...................................... 14
SCHEDULE 1: SUBSIDIARIES.................................................. 16
SCHEDULE 2: CASH, FUNDED AND INTERCOMPANY INDEBTEDNESS.................... 17
SCHEDULE 3: REPRESENTATIONS AND WARRANTIES OF VENDOR...................... 18
SCHEDULE 4: REPRESENTATIONS AND WARRANTIES OF THE PURCHASER............... 28
SCHEDULE 5: KEY OFFICERS.................................................. 29
SCHEDULE 6: VENDOR'S CERTIFICATE.......................................... 30
(1)
<PAGE> 3
SCHEDULE 7: FORM OF DEED OF TRANSFER OF SHARES............................ 31
SCHEDULE 8: FORM OF TRADE NAME AND LOGO AGREEMENT......................... 32
SCHEDULE 9: FORM OF NON-COMPETE LETTER.................................... 33
EXHIBITS: 2.1
4
5.1
5.2
6.4
9.3
10.3
10.4
(2)
<PAGE> 4
AGREEMENT FOR THE SALE AND PURCHASE
OF
SHARES IN BRINK BV
This Agreement is made the 30th day of October 1996
BETWEEN:
1. AAS HOLDINGS, INC., a limited liability company incorporated under the
laws of the State of Delaware and having its principal place of
business at Sterling Town Center, 12900 Hall Road, Suite 200, Sterling
Heights, Michigan, U.S.A., (the "PURCHASER");
2. AAS HOLDINGS, LLC, a limited liability company incorporated under the
laws of the State of Delaware and having its principal place of
business at Sterling Town Center, 12900 Hall Road, Suite 200, Sterling
Heights, Michigan, U.S.A., ("AHL");
3. BRINK HOLDING BV, a private company with limited liability (besloten
vennootschap met beperkte aansprakelijkheid) incorporated under the
laws of The Netherlands and having its registered office at
Industrieweg 5, 7951 CX Staphorst, The Netherlands (the "VENDOR"); and
4. BRINK BV, a private company with limited liability (besloten
vennootschap met beperkte aansprakelijkheid) incorporated under the
laws of The Netherlands and having its registered office at
Industrieweg 5, 7951 CX Staphorst, The Netherlands (the "COMPANY");
WHEREAS:
(A) The Company has an issued share capital of NLG 50,000, consisting of
200 shares with a nominal value of NLG 250 each (the "SHARES");
(B) All of the Shares are owned by the Vendor;
(C) The Company is the owner of the entire share capitals of the companies
listed in SCHEDULE 1 (the "SUBSIDIARIES");
(D) The Company and the Subsidiaries are engaged in the business of the
design, production, sale and marketing of car and van towing systems
and related products (the "BUSINESS");
(E) The consultation procedures under the Merger Code (SER-besluit
Fusiegedragsregels 1975) and the Works Council Act (Wet op de
Ondernemingsraden) with respect to the transactions contemplated in
this Agreement have been concluded to the satisfaction of the Vendor
and the Purchaser;
(F) The Vendor has agreed to sell the Shares and the Purchaser has agreed
to purchase the Shares,
1
<PAGE> 5
subject to the terms and conditions contained in this Agreement;
NOW IT IS HEREBY AGREED AS FOLLOWS:
ARTICLE 1: SALE AND PURCHASE, CONSIDERATION
1.1 The Vendor hereby sells to the Purchaser and the Purchaser hereby
purchases from the Vendor the Shares, free from all liens, charges and
encumbrances and together with all accrued benefits and rights attached
thereto.
1.2 Subject to Articles 1.3, 1.4 and 1.5, the consideration due by the
Purchaser to the Vendor for the sale of the Shares shall be a total
amount of one hundred and seven million five hundred thousand Dutch
Guilders (NLG 107,500,000) (the "CONSIDERATION").
1.3 The Consideration shall be subject to the following adjustments:
(a) there shall be added an amount, if any, by which Cash at
Completion is greater than Funded Indebtedness at Completion; and
(b) there shall be deducted an amount, if any, by which Cash at
Completion is less than Funded Indebtedness at Completion.
For the purposes of the above, the parties have in SCHEDULE 2 hereto
described the items constituting "Cash" and the items constituting
"Funded Indebtedness" as at 28 October 1996. The corresponding
adjustment to the Consideration is reflected in the amount payable on
Completion set out in Article 5.2(d)(i).
1.4 The Consideration shall be subject to a guilder for guilder reduction
by the amount of any dividend payments, contributions or distributions
of whatever nature made or declared to be made outside of the ordinary
course of business by the Company and the Subsidiaries to the Vendor or
for the Vendor's benefit between 1 January 1996 and Completion.
1.5 The Consideration shall be subject to a guilder for guilder reduction
by the net amount of Intercompany Indebtedness due by the Company to
the Vendor and any group companies of the Vendor other than the
Subsidiaries as at Completion.
For the purposes of the above, the parties have in SCHEDULE 2 specified
such net Intercompany Indebtedness as at 28 October 1996. The
corresponding adjustment to the Consideration is reflected in the
amount payable on Completion set out in Article 5.2(d)(i).
1.6 The sale and purchase of the Shares shall be completed at the date and
place and in the manner
2
<PAGE> 6
set forth in Article 5 ("COMPLETION").
ARTICLE 2: INTERCOMPANY INDEBTEDNESS
2.1 At Completion, the Vendor shall arrange for the repayment of all
amounts due to the Company and the Subsidiaries by the Vendor and any
group companies of the Vendor (but, for the avoidance of doubt,
excluding the Subsidiairies), and the Company shall arrange for
repayment of all amounts due to the Vendor and any group companies of
the Vendor (other than the Subsidiaries) by the Company and the
Subsidiaries, together with interest accrued, but excluding any amounts
originated in the ordinary course of the relevant parties' business
(the "INTERCOMPANY INDEBTEDNESS").
2.2 The payments referred to in Article 2.1 shall be made in the manner set
forth in Article 5.
ARTICLE 3: ACTION PENDING COMPLETION
3.1 The Company shall not and shall procure that the Subsidiaries shall not
without the prior written consent of the Purchaser (such consent not to
be unreasonably withheld) prior to Completion:
(a) operate the Business other than in the ordinary course,
consistent with past practice, with the aim to preserve its
business organisation, including the services of its officers and
employees, and its business relationships with customers,
suppliers and others having business dealings with it; for the
avoidance of doubt, any act or thing as a consequence of which
the statements in SCHEDULE 3 would be rendered untrue,
incomplete, inaccurate or misleading in any material respect
shall be considered to be outside the ordinary course;
(b) make any expenditure which is not within the ordinary course of
the business of the Company and its Subsidiaries; or
(c) increase any borrowings of the Company or any of its Subsidiaries
other than within the ordinary course of their business.
3.2 The Vendor shall not knowingly do or refrain from doing any act or
thing which would render the statements in SCHEDULE 3 untrue,
incomplete, inaccurate or misleading in any material respect.
ARTICLE 4: CONDITIONS PRECEDENT
4.1 The obligations of the Purchaser under this Agreement are conditional
upon the following conditions precedent (opschortende voorwaarden)
being fulfilled on or prior to Completion or,
3
<PAGE> 7
as the case may be, waived by the Purchaser by written notice to the
Vendor:
(a) the Vendor and the Company having complied in all respects with
their respective obligations under this Agreement and under any
ancillary documents entered into pursuant hereto;
(b) satisfactory terms of the employment agreements to be entered
into by the persons listed in SCHEDULE 5 having been agreed
between the Purchaser and such persons; and
(c) Messrs Gerard, Wim and Koo Brink having signed the non-compete
letter in the form attached hereto as SCHEDULE 9.
4.2 The parties shall use their best efforts to procure that the conditions
mentioned under paragraph (b) and (c) of Article 4.1 shall be fulfilled
as soon as possible and in any event on or prior to Completion.
ARTICLE 5: COMPLETION
5.1 Completion shall take place on 30 October 1996 at the offices of Caron
& Stevens, Leidseplein 29, Amsterdam, unless otherwise agreed between
the parties hereto.
5.2 The following shall take place (or, to the extent that any of the
documents referred to below shall have been executed before Completion,
shall be deemed to have taken place) at Completion in the following
order:
(a) unless Completion takes place on the date hereof, the Vendor
shall submit to the Purchaser a certificate to the effect that
(i) the statements contained in paragraphs 1, 7, 13.1, 13.4, 13.5
and 14 of SCHEDULE 3 are true, complete, correct in all respects
and not misleading at Completion, and (ii) the Vendor and the
Company have complied in all respects with their respective
obligations under this Agreement and under any ancillary
documents entered into pursuant hereto; such certificate shall be
substantially in the form set forth in SCHEDULE 6;
(b) the Vendor, the Purchaser and the Company shall sign a Share
Transfer Deed in respect of the Shares substantially in the form
set forth in SCHEDULE 7;
(c) the Vendor shall submit to the Purchaser evidence of the release
and discharge of each guarantee, mortgage and charge given by the
Company and the Subsidiaries in favour of any bank or other
financial institution being conditional only on the repayment of
all Funded Indebtedness (including all pre-payment penalties in
respect thereof); the Purchaser shall be responsible for all
pre-payment penalties payable in connection therewith up to a
maximum of NLG 100,000; any pre-payment penalties in excess of
this amount shall be for the account of the Vendor;
(d) the Purchaser shall pay the Consideration due to the Vendor as
follows:
4
<PAGE> 8
(i) by transferring by telephone transfer an amount of
seventy-one million two hundred and sixty-five thousand
Dutch Guilders (NLG 71,265,000.00) to bank account number
54.31.72.201 at ABN AMRO Bank N.V in the name of Stichting
Derdengelden notariaat Caron & Stevens;
(ii) by crediting on behalf of the Vendor an amount of twelve
million five hundred thousand Dutch guilders (NLG 12,500,00)
against the obligation of the Vendor to make to AHL an
interest bearing loan for an equivalent amount (the "VENDOR
LOAN") in respect of which AHL has issued a promissory note
to the Vendor of even date herewith (the "JUNIOR
SUBORDINATED PROMISSORY NOTE");
(iii) by crediting on behalf of the Vendor an amount of seven
million three hundred thousand Dutch Guilders (NLG
7,300,000) against the obligations of Messrs Gerard, Wim and
Ko Brink to pay up certain stock in AHL pursuant to a
subscription agreement of even date herewith.
In addition, the Purchaser shall on behalf of the Company and the
Subsidiaries settle the net Intercompany Indebtedness as at 28
October 1996, by transferring to the Vendor by telephone transfer
an amount of two million five hundred thousand Dutch (NLG
2,500,000) to bank account number 54.31.72.201 at ABN AMRO Bank
N.V. in the name of Stichting Derdengelden Notariaat Caron &
Stevens.
(e) the Vendor, the Company and AHL shall sign a confirmation of
receipt of the monies referred to in paragraph (d);
(f) the Vendor and AHL shall execute the Junior Subordinated
Promissory Note;
(g) the Vendor shall sign and deliver to Purchaser a letter in which
it resigns as managing director of the Company and confirms that
it has no claims for compensation for loss of such office;
(h) the Purchaser shall, in its capacity as shareholder of the
Company, adopt a written Shareholders' Resolution to accept the
resignation referred to in paragraph (g) and to appoint Messrs
J.W. Rengelink and G. de Graaf as managing directors of the
Company;
(i) the Vendor shall produce a duly signed stock transfer form in
respect of the transfer to the Company of one nominee share held
by the Vendor in the capital of Brink UK Ltd (a Subsidiary);
(j) the Vendor, the Purchaser and the Company shall enter into the
Trade Name and Logo Agreement in the form of SCHEDULE 8;
(k) the Vendor shall provide the Purchaser with the Insurance
Statement (as defined in Article 6.6);
(l) the Purchaser shall produce to the Vendor a letter in respect of
the appointment of Mr.
<PAGE> 9
Gerard Brink as supervisory director of the new Dutch holding
company upon its incorporation as set out in Article 6.7; and
(m) the Vendor and the Company shall do all such further acts and
execute all such further documents as shall in the reasonable
opinion of the Purchaser be necessary to fully effect the transfer
of the Shares to the Purchaser and to vest the ownership thereof
in the Purchaser.
ARTICLE 6: POST-COMPLETION MATTERS
6.1 The Vendor and the Purchaser shall within 15 days of Completion jointly
determine the further adjustment to the Consideration pursuant to
Articles 1.3, 1.4 and 1.5 for the period between 28 October 1996 up to
and including Completion, using in respect of the adjustment pursuant
to Article 1.3 the definitions of "Cash" and "Funded Indebtedness" as
per SCHEDULE 2.
6.2 If the Vendor and the Purchaser cannot agree the amounts of Cash at
Completion and Funded Indebtedness at Completion and Intercompany
Indebtedness as at Completion in accordance with Article 6.1, either
party may refer the matter to an independent firm of registered
accountants agreed by the parties or, in default of agreement within 14
days, an independent firm of registered accountants nominated by the
Chairman for the time being of the Dutch Institute of Registered
Accountants (the "EXPERT"), on the basis that the Expert is to make a
decision on the matter in dispute within 30 days starting on the day
after receiving the reference. In a reference, the Expert shall act as
an expert and not as an arbitrator. The decision of the Expert is,
without prejudice to section 7:904 of the Dutch Civil Code, final and
binding on both parties. The Vendor and the Purchaser shall each pay
one half of the Expert's costs in respect of a reference. The necessary
balancing payment (if any) shall be made within seven days after the
date on which the parties reach agreement or the date of notification
of the Expert's decision.
6.3 The Vendor as and when requested by the Purchaser and the Purchaser as
and when requested by the Vendor after Completion shall execute and do
or procure to be executed and done all such further documents, forms,
assignments, transfers, assurances and other things as may be requisite
for giving full effect to this Agreement.
6.4 The Vendor shall provide or procure to be provided to the Purchaser all
information relevant to the Purchaser in its possession or under its
control that the Purchaser shall from time to time reasonably require
(both before and after Completion) directly relating to the business
and affairs of the Company or the Subsidiaries and will give or procure
to be given to the Purchaser and its advisers such access (including
the right to take copies) to such documents containing such information
relevant to the Purchaser as the Purchaser may from time to time
reasonably require.
6.5 The Purchaser shall (i) submit the requisite K2 notification form to
the Swedish competition authority in accordance with the Swedish
Competition Act (1993:20), and (ii) submit such further information to
the Bundes Kartelambt in Germany as it may require in connection with
6
<PAGE> 10
the pre-notification of the transaction contemplated by this Agreement.
6.6 The Vendor shall ensure that the Company and the Subsidiaries will for
a period of three months after Completion continue to be insured under
the Insurance Policies (as defined in paragraph 4 of Schedule 3). The
Company shall at the Vendor's first request reimburse the Vendor such
part of the insurance premium payable under the Insurance Policies as
shall be attributable to the insurance cover provided to the Company
and the Subsidiaries.
On Completion, the Vendor shall produce a statement from its insurers
confirming that the Companies and the Subsidiaries shall continue to be
insured as set out in this Article 6.6 (the "INSURANCE STATEMENT").
6.7 The Purchaser shall (i) procure that the articles of association of the
new Dutch holding company to be incorporated as part of the proposed
reorganisation shall provide for a board of supervisory directors, and
(ii) appoint Mr Gerard Brink as supervisory director of such company.
ARTICLE 7: REPRESENTATIONS AND WARRANTIES
7.1 The Vendor hereby represents and warrants (staat er voor in) to the
Purchaser that each of the statements contained in SCHEDULE 3 hereto is
true, complete, accurate in all respects and not misleading as at the
date of this Agreement and that the statements contained in paragraphs
1, 7, 13.1, 13.4, 13.5 and 14 of SCHEDULE 3 will be true, complete,
accurate in all respects and not misleading on Completion and on each
day between the date hereof and Completion. The Vendor acknowledges
that the said representations and warranties are material and that the
accuracy in all respects of these representations and warranties is
essential for the Purchaser's decision to enter into this Agreement on
the terms herein contained.
7.2 The Purchaser confirms that it has carried out investigations into the
state of affairs of the Company and the Subsidiaries, and that the
results of such investigations were satisfactory to the Purchaser.
However, the Vendor and the Purchaser agree that any such
investigations carried out by the Purchaser or by representatives or
advisers of the Purchaser shall not relieve the Vendor of its
obligations under any warranty or representation made herein, except in
the event that the Vendor can demonstrate that the Purchaser on the
date hereof or on Completion was actually aware of an obvious breach by
the Vendor of any such obligations. The Purchaser hereby confirms that
it is not on the date hereof actually aware of an obvious breach by the
Vendor of any of its obligations under any warranty or representation
made by the Vendor herein.
7.3 The Purchaser hereby represents and warrants (staat er voor in) to the
Vendor that each of the statements contained in SCHEDULE 4 hereto is
true, complete, accurate in all respects and not misleading as at the
date of this Agreement and will be true, complete, accurate in all
respects and not misleading on Completion and on each day between the
date hereof and Completion. The Purchaser acknowledges that the said
representations and warranties are material and that the accuracy in
all respects of these representations and warranties is essential for
the Vendor's
7
<PAGE> 11
decision to enter into this Agreement on the terms herein contained.
ARTICLE 8: INDEMNIFICATION
8.1 In the event that there will be or will appear to be any
misrepresentation, breach of warranty or non-fulfilment of any
agreement on the part of the Vendor contained in this Agreement the
Vendor shall:
(a) indemnify and hold harmless the Purchaser (or, at the Purchaser's
option, the Company or one of the Subsidiaries) from and against
any and all damages, liabilities, actions, legal proceedings,
costs and expenses (including but not limited to legal and other
advisers' fees and expenses) incurred by the Purchaser, the
Company or one of the Subsidiaries, resulting, directly or
indirectly, from any such misrepresentation, breach of warranty or
non-fulfilment of any agreement, if and insofar as not
specifically provided for in the Accounts (as defined in paragraph
2 of SCHEDULE 3); and
(b) at the request of the Purchaser take whatever steps are required
for the Purchaser, the Company and the Subsidiaries to be brought
in the financial position they would have been in if such
misrepresentation, breach of warranty or non-fulfilment would not
have occurred.
8.2 If the Purchaser or the Company becomes aware of any matter which will
result in the Vendor being liable pursuant to Article 8.1, the
Purchaser and the Company shall:
(a) as soon as possible give written notice thereof to the Vendor;
(b) provide to the Vendor and its advisers reasonable access to the
relevant premises, assets, documents and records;
(c) take such action as the Vendor may reasonably request to avoid,
dispute or mitigate any claim or matter which would give rise to a
claim under this Agreement on the basis that the Purchaser and the
Company shall be fully indemnified by the Vendor as to all costs
and expenses which they may incur by reason of such action;
(d) take such action as may in the reasonable opinion of the Purchaser
be required to avoid or diminish an adverse effect on the
financial position or the business of the Purchaser, the Company
or the Subsidiaries.
8.3 Without prejudice to its other rights and remedies, the Purchaser shall
be entitled (but shall not at any time be required) to elect that all
or part of the amount of any liability of the Vendor arising pursuant
to this Article 8 or any other provision of this Agreement be satisfied
by the
8
<PAGE> 12
Purchaser's obligation to repay the Vendor Loan being reduced by an
equivalent amount, regardless of whether the Vendor Loan or such part
thereof shall at that time be due and payable.
8.4 Neither the Purchaser nor the Company or any Subsidiary shall settle or
compromise any potential claim without the prior consent of the Vendor
(such consent not to be unreasonably withheld), provided that such
consent shall no longer be required if timely requested by the
Purchaser or the Company and not received within fourteen days after
receipt by the Vendor of a notice given by the Purchaser pursuant to
Article 8.2(a), or so much sooner as the third party with whom a
settlement or compromise is to be made shall require a response.
8.5 The Vendor shall be entitled, if it so elects within fourteen days
after receipt of a notice given by the Purchaser pursuant to Article
8.2(a), to take control of the defense, settlement, negotiation or
other resolution of any claim or other event giving rise to any
liability for indemnification hereunder and to employ and engage
lawyers of its own choice to handle and defend such matter, at its
cost, risk and expense; and the Purchaser and the Company shall
cooperate in all reasonable respects with the Vendor in such matter;
provided, however, (i) that the Purchaser and the Company may
participate in such matter at its own cost, (ii) that the Purchaser and
the Company shall on a timely basis receive full information of any
action to be taken by the Vendor, and (iii) that the Vendor shall in
its handling of the matter not act in an unreasonable manner. If the
Vendor does not or not timely notify the Purchaser in writing that the
Vendor has elected to assume the defense of a matter, the Purchaser
shall be entitled to take control of that matter at the Vendor's cost
and expense.
8.6 For the purposes of this Article 8, in calculating the Vendor's
liability for any claim for indemnification hereunder, such liability
shall be reduced by the sum of the following economic benefits, if any,
pertaining to that particular claim:
(i) any amount actually recovered under an insurance policy by the
Purchaser, the Company or one of the Subsidiaries, with respect to
the matter to which such claim relates; and
(ii) the net present value of any payment actually received or certain
to be received or any reduction of an amount due and payable
actually obtained or certain to be obtained, pursuant to any tax
laws.
In the event that the Purchaser, the Company or one of the Subsidiaries
pays a claim covered by insurance for which it is entitled to
indemnification by the Vendor hereunder, the Purchaser shall procure
that all relevant rights with respect to such insurance cover are
assigned to the Vendor.
ARTICLE 9: LIMITATION OF LIABILITY
9.1 The Vendor shall not be liable to the Purchaser or, as the case may be,
to the Company or one of its Subsidiaries pursuant to Article 8 for any
amounts claimed by notice to the Vendor sent
9
<PAGE> 13
after:
(a) 31 December 2002, to the extent that claims are based on any
matter relating to taxation (which term shall include social
security charges (both the employer's part and the employee's
part) and any penalties or interest payable to the relevant
authorities);
(b) four years after Completion, to the extent that claims are based
on environmental matters; and
(c) two years after Completion in respect of any other claims.
9.2 The Vendor shall be liable pursuant to Article 8 only if the amounts
claimed exceed NLG 750,000 in total, at which time the Vendor shall be
liable for the full amount claimed. Individual claims of less than NLG
100,000 will not be taken into account. The total liability of the
Vendor pursuant to Article 8 shall not exceed an amount of NLG
20,000,000.
ARTICLE 10: ENVIRONMENTAL INDEMNITY
10.1 The Vendor shall, subject to the limitations set out in Article 10.3,
indemnify and hold harmless the Purchaser (or at the Purchasers'
option, the Company or any of the Subsidiaries) from and against any
and all damage, liability, action, legal proceedings, governmental
orders, costs and expenses (including but limited to legal and other
advisers' fees and expenses) incurred by the Purchaser, the Company or
one of the Subsidiaries and resulting directly or indirectly from any
soil or groundwater contamination at the site located in Betheny,
France and currently occupied by SFEA S.A..
10.2 The Purchaser, or as the case may be, the Company or one of it
Subsidiaries, shall claim any amounts due by the Vendor by notice in
writing. The Vendor shall not be liable for any amount claimed by
notice to the Vendor sent after 31 December 1999.
10.3 The total liability of the Vendor pursuant to this Article 10 shall not
exceed an amount of NLG 1,000,000. Save for Article 8.3, the provisions
of Article 8 and 9 do not apply to this Article 10.
ARTICLE 11: RESTRICTIVE COVENANTS
11.1 The Vendor hereby covenants and undertakes with the Purchaser that
neither it nor any of its subsidiaries will:
(a) at any time after Completion disclose or use for any purpose any
information concerning the Company or the Subsidiaries, except:
(i) to the extent required by law or any competent authority, after
prior consultation with the Purchaser;
(ii) to its professional advisers under circumstances of
confidentiality and only to the extent
10
<PAGE> 14
necessary for any lawful purpose of the Vendor;
(iii) to the extent that such information is at the date hereof or
hereafter becomes public knowledge otherwise than through improper
disclosure by any person; or
(b) at any time prior to the expiry of three years from the date of
Completion, either alone or jointly with others, directly or
indirectly, do any of the following without the Purchaser's prior
written consent:
(i) directly or indirectly incorporate, establish or engage in any
business competing with any of the businesses now carried on by
the Company and the Subsidiaries ("AAS COMPETING BUSINESS");
(ii) acquire or hold a controlling interest in any company or business
which is itself or through any company or business directly or
indirectly controlled by it is engaged in any AAS Competing
Business, unless such AAS Competing Business accounts for not
more than 10% of the gross turnover of such company or business,
in which case the Vendor shall use its reasonable efforts to
ensure that such AAS Competing Business is offered for sale to
the Company at its fair market value;
(iii) participate in a joint venture or other co-operative arrangement
aimed at generating AAS Competing Business; and
(iv) employ or solicit the employment of any person earning an annual
salary of more than NLG 75,000 who is on the date hereof or has
during the month prior to the date hereof been an employee of the
Company or one of the Subsidiaries.
11.2 The Purchaser hereby covenants and undertakes with the Vendor that
neither it nor any of its subsidiaries will:
(a) at any time after Completion disclose or use for any purpose any
information concerning the Vendor, except:
(i) to the extent required by law or any competent authority, after
prior consultation with the Vendor;
(ii) to its professional advisers under circumstances of
confidentiality and only to the extent necessary for any lawful
purpose of the Purchaser;
(iii) to the extent that such information is at the date hereof or
hereafter becomes public knowledge otherwise than through
improper disclosure by any person; or
(b) at any time prior to the expiry of three years from the date of
Completion, either alone or jointly with others, directly or
indirectly, do any of the following without the Vendor's prior written
consent:
11
<PAGE> 15
(i) directly or indirectly incorporate, establish or engage in any
business competing with any of the businesses now carried on by
the Vendor and its subsidiaries (excluding the Company and the
Subsidiaries), such businesses being the production and sales of
air heating equipment and office furniture ("VENDOR COMPETING
BUSINESS");
(ii) acquire or hold a controlling interest in any company or
business which is itself or through any company or business
directly or indirectly controlled by it is engaged in any Vendor
Competing Business, unless such Vendor Competing Business
accounts for not more than 10% of the gross turnover of such
company or business, in which case the Purchaser shall use its
reasonable efforts to ensure that such Vendor Competing Business
is offered for sale to the Vendor at its fair market value;
(iii) participate in a joint venture or other co-operative arrangement
aimed at generating Vendor Competing Business; and
(iv) employ or solicit the employment of any person earning an annual
salary of more than NLG 75,000 who is on the date hereof or has
during the month prior to the date hereof been an employee of the
Vendor.
11.3 AHL hereby covenants and undertakes with the Vendor that for as long as
either Mr Gerard Brink, Mr Koo Brink or Mr Wim Brink either directly or
indirectly invest in AHL, it will conduct all towbar related production
and trading activities through companies and other entities directly or
indirectly controlled by AHL.
11.4 The Purchaser, the Company and the Vendor shall on Completion, and the
Vendor and the Purchaser shall procure that within 14 days after
Completion the Subsidiairies, Brink Luchtverwarming B.V., Brink
Plaattechniek B.V. and Brink Beheer B.V. shall enter into the Trade
Name and Logo Agreement in the form of Schedule 8.
ARTICLE 12: COSTS AND EXPENSES
The costs incurred by the Vendor, the Company and the Subsidiaries in relation
to the Purchaser's due diligence investigations shall be paid by the Company, up
to a maximum of NLG 50,000. All other costs and expenses incurred by the Vendor,
the Company or the Subsidiaries in connection with the preparation of this
Agreement and the transactions contemplated hereby, including (without
limitation) legal, fiscal and auditing fees and expenses, will be paid by the
Vendor, and all such costs and expenses incurred by the Purchaser will be paid
by the Purchaser.
ARTICLE 13: PRESS ANNOUNCEMENTS
Neither of the parties hereto shall make any press release or public
announcement relating to the transactions contemplated by this Agreement without
the other party's prior written consent, unless there is a statutory obligation
to make a press release or public announcement and the other party's consent is
unreasonably delayed or withheld.
12
<PAGE> 16
ARTICLE 14: NOTICES
14.1 All notices, requests, claims, demands and other communications
hereunder shall be delivered to the parties in person or sent to the
addresses set out in the heading hereof by registered letter, postage
prepaid and return receipt requested or by telefax as follows:
if to the Vendor, to: Brink Holding B.V. C/o Caron &
Attn: Stevens
Telefax: Mr. M. van Bremen
Address: # 31 (0) 20 626 7919
Hirsch Gebouw
Leidseplein 29
1017 PS Amsterdam
The Netherlands
if the to AHL, to: AAS Holdings, LLC
Attn: Chief Financial Officer
Telefax: # (1)810 997 6839
Address: Sterling Town Center
12900 Hall Road, Suite 200
Sterling Heights, MI 48313
United States of America
with a copy to: Clifford Chance
Attn: Mr. J. Fleury
Telefax: # 31 (0) 20-5777222
Address: Apollolaan 171
1077 AS Amsterdam
The Netherlands
if the to the Purchaser, to: AAS Holdings, Inc.
Attn: Chief Financial Officer
Telefax: # (1) 810 997 6839
Address: c/o AAS Holdings, LLC
Sterling Town Center
12900 Hall Road, Suite 200
Sterling Heights, MI 48313
United States of America
with a copy to: Clifford Chance
Attn: Mr. J. Fleury
Telefax: # 31 (0) 20-5777222
Address: Apollolaan 171
1077 AS Amsterdam
The Netherlands
if to the Company, to: Brink B.V.
Attn: Financial Director
Telefax: # (31) (0) 522-469722
13
<PAGE> 17
Address: Industrieweg 5
7951 CX Staphorst
The Netherlands
with a copy to: Clifford Chance
Attn: Mr. J. Fleury
Telefax: # 31 (0) 20-5777222
Address: Apollolaan 171
1077 AS Amsterdam
The Netherlands
14.2 Either party may change its address for the purpose of this Agreement
by giving notice of such change to the other pursuant to the provisions
of this Article.
14.3 Any notice, demand or other communication sent by mail shall be deemed
to have been received by the party to whom it was sent at the end of
the day shown as the day of receipt on the return receipt sent with the
same. Any notice, demand or other communication sent by telefax shall
be deemed, in the absence of proof to the contrary, to have been
received by the party to whom it was sent on the date of despatch,
provided that the report generated by the sender's telefax machine
shows that all pages of such notice, demand or other communication were
properly transmitted to the recipient's telefax number.
ARTICLE 15: JOINT AND SEVERAL LIABILITY
AHL shall be jointly and severally liable for the due performance of the
obligations of the Purchaser under this Agreement.
ARTICLE 16: MISCELLANEOUS PROVISIONS
16.1 This Agreement shall be governed by and construed in accordance with
the laws of The Netherlands.
16.2 The Schedules and Exhibits hereto form an integral part hereof.
16.3 This Agreement supersedes all prior written and oral agreements and
arrangements between the parties hereto with regard to the subject
matter hereof.
16.4 None of the parties may assign or agree to assign any of its rights and
obligations under this Agreement without the prior written consent of
the other parties, except that the Purchaser shall be entitled without
such written consent to assign to any third party the benefit of the
warranties and the associated obligations of the Vendor pursuant to
Articles 7, 8 and 10.
16.5 Any dispute arising under or in connection with this Agreement shall be
settled by the competent courts in Amsterdam, The Netherlands, subject
to appeal and appeal in the second instance (cassatie).
14
<PAGE> 18
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto in
Amsterdam in two counterparts on the date first above written
for and on behalf of
AAS HOLDINGS, INC.
- -----------------------------------
Terence C. Seikel,
Duly authorised representative
for and on behalf of
AAS HOLDINGS, LLC
- -----------------------------------
Terence C. Seikel
Vice President Finance and Administration/Chief Financial Officer
for and on behalf of
BRINK HOLDING BV
- -----------------------------------
Brink Beheer B.V. represented by its director:
Gerard J. Brink
15
<PAGE> 19
for and on behalf of
BRINK BV
- -----------------------------------
Brink Holding B.V. represented by its director:
Brink Beheer B.V. represented by by its director:
Gerard J. Brink
16
<PAGE> 20
SCHEDULE 1: SUBSIDIARIES
<TABLE>
<CAPTION>
NAME COUNTRY OF INCORPORATION SHARES HELD BY
<S> <C> <C>
1. Brink Trekhaken BV The Netherlands Brink BV (100%)
2. Brink Sverige AB Sweden Brink BV (100%)
3. Brink U.K. Limited England Brink BV (100%)
4. Nordisk Komponent Holding A/S Denmark Brink BV (100%)
5. Brink France SarL France Brink BV (100%)
6. Brink A/S Denmark Nordisk Komponent
Holding A/S (100%)
7. Financiere J&JCG SarL France Brink France SarL
(100%)
8. SFEA SA France Brink France SarL
(977 shares)
Financiere J&JCG SarL
(2017 shares)
Brink B.V.
(1 share)*
Mr Gerard Brink
(1 share)*
Mr Bonnefant
(1 share)*
Mr Foldes
(1 share)*
Mr Rengelink
(1 share)*
Mr Van Kesteren
(1 share)*
9. SCI L'Elmontaise France Brink France SarL
(33.7%)
Financiere J&JCG
SarL
(66.3%)
</TABLE>
* nominee shares only
17
<PAGE> 21
SCHEDULE 2: CASH, FUNDED AND INTERCOMPANY INDEBTEDNESS
19
<PAGE> 22
SCHEDULE 3: REPRESENTATIONS AND WARRANTIES OF VENDOR
1. ORGANISATION, TITLE TO SHARES
1.1 The Company is duly incorporated and existing as a private company with
limited liability (besloten vennootschap met beperkte
aansprakelijkheid) under the laws of The Netherlands and has the power
to own its property and to carry on its business as presently
conducted. Each of the Subsidiaries is duly incorporated and existing
as a company with limited liability in the jurisdiction set forth
against its name in SCHEDULE 1.
1.2 The Shares represent the whole of the issued share capital of the
Company. Except for the Shares, the Company has not issued, and no
obligation (certain or contingent) exists for it to issue to anyone at
any time, any shares, debentures, options, warrants, subscription
rights, founders certificates, profit sharing certificates or other
securities of any kind.
1.3 The Shares have been fully paid up and no obligation exists for anyone
to make further contributions to the equity capital (whether by
subscription for further shares, by payment of share premium or
otherwise) or to provide loan financing to the Company.
1.4 The Vendor has full legal and beneficial title to all of the Shares
free and clear of any pledges, liens, encumbrances and restrictions of
every kind or nature and with full right and capacity for the Vendor to
transfer and sell the same.
1.5 Except as set forth in SCHEDULE 1, the Company has full legal and
(where such concept is relevant) beneficial title to the entire issued
share capital of each of the Subsidiaries, free and clear of any
pledges, liens, encumbrances and restrictions of every kind or nature.
Paragraphs 1.2, 1.3 and 1.4 apply mutatis mutandis to the shares in
such capital. Other than the Subsidiaries, the Company has no direct or
indirect subsidiary or any interest in any other company, partnership
or enterprise. Except for the branch office of the Company at
Hollandstrasse 9, 44309 Dortmund, Germany neither the Company nor any
of the Subsidiaries has any branch offices outside its country of
incorporation.
1.6 After 31 December 1995 the Company has not declared or paid any
dividends and has not made any other distributions to shareholders or
third parties, except as referred to in this Agreement.
2. FINANCIAL STATEMENTS
2.1 EXHIBIT 2.1 contains copies of the audited consolidated financial
statements of the Company and the Subsidiaries for the financial years
ended on 31 December 1994 and 31 December 1995 (the "AUDITED ACCOUNTS")
and the management accounts of the Company and the Subsidiaries for the
period between 1 January 1996 and 4 October 1996 (the "MANAGEMENT
ACCOUNTS", together with the Audited Accounts referred to as the
"ACCOUNTS"), in each case comprising a consolidated balance sheet of
the Company, balance sheets of each of the Company and the
Subsidiaries, a consolidated profit and loss statement of the Company,
and profit and loss statements of each of the Company and the
Subsidiaries, together with notes and ancillary
20
<PAGE> 23
documentation. The Accounts:
(a) have been prepared in accordance with applicable statutory
requirements and with applicable accounting principles and
practices generally accepted in The Netherlands, or (in the case
of the balance sheets and profit and loss statements of the
Subsidiaries) in the country in which the relevant Subsidiary has
been incorporated, and, save in respect of the Management
Accounts, have been prepared on a basis consistent with previous
years; and
(b) are true, complete and accurate in all material respects and
fairly represent:
(i) each of the items separately specified in the balance sheets
and profit and loss statements therein comprised;
(ii) the consolidated financial position of the Company and each
of the Subsidiaries as at 31 December 1994, 31 December 1995
and 4 October 1996, respectively, and the financial position
of the Company and of each of the Subsidiaries as at such
dates, respectively; and
(iii) the results of operations of the Company and the
Subsidiaries on a consolidated basis and of the Company and
of each of the Subsidiaries respectively during the
financial periods to which they relate;
(c) reserve or provide in full for all material commitments and
liabilities of the Company and the Subsidiaries, whether actual or
contingent, due or to become due, whether or not known at the time
the financial information was prepared, or at 31 December 1994, 31
December 1995, or 4 October 1996, respectively.
2.2 Except as disclosed in the Accounts there are no:
(a) mortgages, charges, liens or other encumbrances on the assets of
the Company or the Subsidiaries;
(f) guarantees, securities or other liabilities of the Company or the
Subsidiaries (certain or contingent) for any present or future
debt of any member of the Vendor's group or any third party.
3. TAX MATTERS
3.1 All taxes, duties, levies and social security charges, whether direct
or indirect, for which the Company or the Subsidiaries at 31 December
1995 or at any time thereafter may have become or may hereafter become
liable to be assessed in respect of any period ending on or before 4
October 1996 have either been paid in full or adequate provision
therefor has been made in the Management Accounts. With respect to all
such taxes assessed and paid prior to the date hereof, no further
payments or penalties or interest charges are or will become due with
respect thereto,
21
<PAGE> 24
save to the extent provided for in the Accounts. The Company and the
Subsidiaries are not and will not on the basis of any events having
occurred during the period up to and including the date hereof be
liable to repay any investment premiums or subsidies granted to it or
enjoyed by them prior to the date hereof.
3.2 All amounts properly due for payment to the relevant authorities in
respect of value added tax on goods sold or services rendered prior to
the date hereof, wage tax to be withheld prior to the date hereof and
social security contributions (both the employers' and the employees'
part) due in respect of employees of the Company or the Subsidiaries
have been duly withheld and paid.
3.3 There are no agreements with or with respect to the Company or the
Subsidiaries for the extension of time for the assessment or payment of
any tax, whether direct or indirect.
3.4 All documents required to be filed on or before the date of the date
hereof on behalf of or relating to the Company or the Subsidiaries in
respect of all taxes have been timely filed and all such documents (and
all other information supplied to the fiscal authorities for any
purpose) have been accurate and complete and filed on a proper basis.
3.5 Neither the Company nor any of the Subsidiaries is involved or to the
best of the knowledge of the Vendor is likely to be involved in any
dispute with the tax authorities or others concerning any matter likely
to affect any liability of the Company or the Subsidiaries to taxation.
3.6 From 1985 up to Completion the Vendor formed a fiscal unity with the
Company and certain other companies for the purposes of corporate
income tax. During the same period the Vendor filed all necessary
consolidated returns, except in so far as extension has been granted in
the ordinary course and paid all taxes on behalf of and otherwise acted
in such a way as representative of the fiscal unity as to ensure that
insofar as relevant the warranties contained in paragraphs 3.1 through
3.5 above are also satisfied in so far as that fiscal unity concerned
the Company, and the Company shall not be liable for any taxes due with
respect to the activities or results of any other person, firm or
entity.
3.7 There are no "tainted transactions" involving the Company (as referred
to in the sixteenth standard condition to the fiscal unity provisions)
that have occurred within the financial year 1996 and the preceding six
financial years.
3.8 To the best of the knowledge, information and belief of the Vendor, the
execution of this Agreement will not give rise to any material adverse
tax consequences for the Company or the Subsidiaries.
4. INSURANCE
The Company and the Subsidiaries have taken out insurance in respect of all
risks normally insured against by persons carrying on the same type of business
as that carried on by the Company (the "INSURANCE POLICIES") and the
Subsidiaries and the Company and the Subsidiaries is and has for at least five
(5) years prior to the date hereof been adequately covered against accident,
third party liability and
22
<PAGE> 25
other risks normally insured against by persons carrying on the same type of
business as carried on by the Company and the Subsidiaries and nothing has been
done or omitted which would make any insurance policy relating to the Company or
the Subsidiaries void or voidable. Except as set forth in EXHIBIT 4, there are
no claims outstanding under any such insurance policy. The Company and the
Subsidiaries have not failed to give any notice or to present any claim under
any such policy in due and timely fashion.
5. PREMISES
5.1 EXHIBIT 5.1 contains a list of all land, buildings and other real
property owned, used or occupied by the Company and the Subsidiaries
(the "PREMISES"), together with a description of the tenure thereof.
The occupation and use of each of the Premises by the Company and the
Subsidiaries is in all material respects in accordance with all
applicable laws, permits and planning regulations and in the case of
property leased or rented by the Company or the Subsidiaries complies
in all material respects with the agreements entered into with the
owners of the Premises with respect to such occupation and use. All
permits, licenses, consents and approvals requisite for the occupation
and use of the Premises have been obtained and are valid and
subsisting.
5.2 The Company and the Subsidiaries have (where applicable) good and
marketable title to each of the Premises. No person other than the
Company and the Subsidiaries possesses, occupies or uses the Premises,
or has a right to possess, occupy or use them, otherwise than pursuant
to a valid lease or sublease agreement entered into with the Company or
the relevant Subsidiary on an arm's length basis and on customary
terms. Exhibit 5.2 sets forth details of all such lease and sub-lease
arrangements.
5.3 There are no circumstances to the Vendor's knowledge which would
entitle or require a lessor or superior lessor of the Premises or any
other person to exercise any power of entry upon or of taking
possession of the Premises or which would otherwise restrict or
terminate the continued possession or occupation of the Premises.
5.4 All permissions, consents and approvals have been obtained and are
valid and subsisting for all developments, alterations or additions to
or other works on or in relation to the Premises and all conditions or
restrictions imposed in or by any such permissions, consents or
approvals have been complied with and nothing further remains to be
done thereunder.
5.5 There is no material physical defect in any part of the Premises or any
structure thereon and all structures thereon are in good and
substantial repair and condition and fit for the purpose for which they
are currently used.
5.6 The Premises are not subject to any mortgage, option, restriction,
easement (which affects the operation of the business or materially
detracts from the value of the Company), third party interest or other
encumbrance or security interest of any kind and no person claims or
is, to the best of the knowledge, information and belief of the Vendor,
entitled to claim any of the aforesaid.
23
<PAGE> 26
5.7 Save in relation to the Premises, there is no liability on the part of
the Company or the Subsidiaries relating to land or any interest in
land.
5.8 In the case of any of the Premises which are held by the Company or the
Subsidiaries under a lease or rental agreement:
(a) no person has a right to terminate that lease or rental agreement
before it is due to expire (other than as a result of breach of
its terms by the Company or the Subsidiaries);
(b) nothing (other than the need to obtain the consent of the relevant
authority in relation to planning) can restrict or terminate the
possession, occupation or use of, or prevent or restrict the
development of the Premises by, the Company or the Subsidiaries.
6. CONTRACTS
6.1 There are no long term (i.e. with a duration in excess of one (1) year)
or unusual or onerous contracts, or contracts not concluded on an arm's
length basis binding upon the Company or the Subsidiaries.
6.2 None of the Company and the Subsidiaries is in material default under
any contract to which it is a party and this Agreement will not of
itself result in such default or change any terms of any such contract
or permit the termination or cancellation thereof. For the avoidance of
doubt, the Company shall not be considered in material default if it is
under the obligation to conduct repairs in the ordinary course of its
business, pursuant to customary warranty provisions contained in
agreements with its customers.
6.3 There is not in force any agreement restricting the freedom of the
Company and the Subsidiaries to carry on their business in the manner
presently conducted.
6.4 Except as set forth in EXHIBIT 6.4, no written agreements or
arrangements, and, to the best knowledge, information and belief of the
Vendor, no oral agreements or arrangements, exist between the Company
or one of the Subsidiaries on the one hand and a member of the Vendor's
group on the other hand.
7. ABSENCE OF ADVERSE CHANGES
After 31 December 1995:
(a) there has not been any damage, destruction or loss (whether or not
covered by insurance) materially adversely affecting the business
or assets of the Company or the Subsidiaries;
(b) the business of the Company and the Subsidiaries has been carried
on in the ordinary course and so as to maintain the same as a
going concern;
24
<PAGE> 27
(c) the Company and the Subsidiaries have not disposed of any assets
or incurred any liabilities (including contingent liabilities)
other than in the ordinary course of their business, and they have
not encumbered or created any security interest in any of their
respective assets; and
(d) the business, profitability or prospects of the Company and the
Subsidiaries have, to the best of the knowledge, information and
belief of the Vendor not been adversely affected by the loss of
any important customer or source of supply.
8. LITIGATION
Neither the Company, nor the Subsidiaries, nor any person for whose
acts or defaults the Company or the Subsidiaries may be liable is, to
the best of the knowledge, information and belief of the Vendor
involved in any civil, criminal or arbitral proceedings, no such
proceedings are pending or threatened against the Company, any of the
Subsidiaries or any such person and to the best of the knowledge,
information and belief of the Vendor there are no facts likely to give
rise to any such proceedings against the Company, any of the
Subsidiaries or any such person.
9. EMPLOYEES
9.1 The basis of remuneration or other terms of employment payable to the
directors, employees and agents (if any) of the Company and the
Subsidiaries is the same as that in force at 31 December 1995 and none
of the Company and the Subsidiaries is under any contractual or other
obligation to make any increase in the rates of remuneration of or to
make any bonus or incentive or other similar payments to any of its
directors, employees or agents (if any) at any future date, except to
the extent that (i) any increase in remuneration resulting from the
promotion of any individual employee, where such promotion is in the
ordinary course and consistent with past policies, or (ii) any
collective labour agreement binding on the Company or any of the
Subsidiaries requires an increase in base salary by no more than the
average rate of wage increases in the relevant industry for the year
concerned.
9.2 The employment agreements with or terms of employment applicable to any
of the employees of the Company and the Subsidiaries do not contain any
provision which is unusual for a relationship of the kind concerned or
provide for a notice period on termination in excess of the statutory
minimum or for other arrangements applicable as at termination
exceeding statutory requirements.
9.3 Except as described in EXHIBIT 9.3, there are no pension, stock option,
share saving or profit sharing schemes, whether legally enforceable or
not, relating to all or part of the employees or directors of the
Company and the Subsidiaries in operation, proposed or promised.
9.4 All pension contributions made by the Company and the Subsidiaries for
the benefit of any director or employee of the Company or the
Subsidiaries which have fallen due have been paid
25
<PAGE> 28
and have been made in accordance with the applicable laws and
regulations to a duly authorised insurance company or private pension
fund. The Company and the Subsidiaries have complied with any statutory
obligation to participate in any state or branch of industry pension
fund in respect of all employees subject to such obligation, save for
such exceptions as statute allows. Each of the pension schemes and
other comparable benefit schemes operated by the Company or the
Subsidiaries (the "PENSION SCHEMES") have been designed to comply with
and have been operated in accordance with all applicable laws,
including but only in relation to The Netherlands the provisions of
Article 119 of the E.C. Treaty, and with any decision of the European
Court of Justice or any Court relating to the application of this
Article 119 on pension schemes and regulations and articles of
association applicable to the Pension Schemes.
Each of the Pension Schemes which provides benefits on a defined
benefits basis is sufficiently and effectively funded on an ongoing
basis using the actuarial assumptions contained in the last actuarial
valuation of each such scheme, respectively, to secure all benefits
currently, prospectively and contingently payable under each such
scheme, respectively, at least to the extent to which they have accrued
at the date hereof. To the best of the knowledge, information and
belief of the Vendor, there are no factors which have caused or
contributed to any substantial deterioration in the level of funding of
any such scheme since the date of such valuation.
All employees and former employees of the Company and the Subsidiaries
who are (or were) eligible or entitled to a pension have participated
in the Pension Schemes.
26
<PAGE> 29
10. ENVIRONMENTAL MATTERS
10.1 On Completion all environmental permits necessary for the Company and
the Subsidiaries to conduct the Business as conducted up to Completion
have been obtained, are in full force and effect, and will apply for
the benefit of the Purchaser as from Completion, provided that the
Purchaser is aware that, in relation to the Company, a
"Revisievergunning" has to be applied for by the Purchaser. No works or
investments are or will be necessary to obtain the "Revisievergunning"
and to the best of the Vendor's knowledge there are no facts or
circumstances indicating that any other environmental permit would or
might be revoked, suspended, cancelled, varied or not renewed and:
(a) all appropriate or necessary action in connection with the
renewal or extension of any environmental permit has been
taken;
(b) neither the execution nor the performance of this Agreement
will of itself cause any environmental permit to be
withdrawn or modified; and
(c) none of the conditions to which any environmental permit is
subject is personal to the Vendor.
10.2 Each of the Company and the Subsidiaries has complied in all respects
with all environmental laws, regulations, and orders applicable to it.
10.3 Except as disclosed in EXHIBIT 10.3, to the best of the knowledge,
information and belief of the Vendor, neither the Company nor the
Subsidiaries has or will have under existing laws any liability
resulting from the release or discharge into the environment of any
dangerous, radioactive, toxic or hazardous substance either (a) by the
Company or one of the Subsidiaries, or (b) onto any land, building or
other property now or in the past owned, used or occupied by the
Company or one of the Subsidiaries.
10.4 Except as disclosed in EXHIBIT 10.4, there have not been any
complaints, whether official or not, against the Company or the
Subsidiaries about noise, smells, pollution or other inconveniences
caused by the Company or the Subsidiaries, nor is it to the best of the
knowledge, information and belief of the Vendor likely that such
complaints will be made in respect of any period prior to Completion.
11. COMPLIANCE WITH LAWS
11.1 Each of the Company and the Subsidiaries has complied in all material
respects with all laws, regulations, and orders applicable to it.
11.2 All permits, licenses and approvals required by the Company and the
Subsidiaries for the conduct of their respective businesses have been
obtained and are valid and subsisting. The Company and the Subsidiaries
have complied with all material conditions imposed by such permits,
licences and approvals and, to the best of the Vendor's knowledge,
information and
27
<PAGE> 30
belief, no circumstances exist which are likely to result in the
revocation or amendment of any such permit, licence or approval. The
execution and performance of this Agreement will not of itself
adversely affect the continued validity of any of such permits,
licenses and approvals.
12. INDUSTRIAL PROPERTY RIGHTS
12.1 All patents, service marks, trademarks, tradenames, copyrights,
registered designs and similar industrial property rights (whether
registered or not) (the "INDUSTRIAL PROPERTY RIGHTS") used or proposed
to be used by the Company or the Subsidiaries in connection with their
business are either (a) the property of the Company or one of the
Subsidiaries, or (b) the subject of a valid license permitting the use
thereof by the Company and the Subsidiaries.
12.2 Industrial Property Rights owned by the Company or one of the
Subsidiaries are registered in the name of the Company or one of the
Subsidiaries (where registration is possible), are valid and
subsisting, have been properly maintained and (where necessary)
renewed, are (to the best of the knowledge, information and belief of
the Vendor) not being infringed, are not subject to any licence or
authority in favour of another and the execution and performance of
this Agreement will not of itself adversely affect the continued
validity of any of such Industrial Property Rights.
12.3 Where Industrial Property Rights have been licensed to the Company and
the Subsidiaries, the Company and the Subsidiaries have, to the best
knowledge, information and belief of the Vendor, at all times complied
with all material conditions of the applicable license agreements.
12.4 To the best of the knowledge, information and belief of the Vendor, the
Company and the Subsidiaries do not and have not at any time prior to
the date hereof in any way infringed the industrial property rights of
any third party. The Company and the Subsidiaries are not using any
industrial property right owned by or licensed to any member of the
Vendor's group.
13. FULL DISCLOSURE
13.1 All material information and facts as to the condition (financial or
otherwise), assets, liabilities, earnings, business and affairs of the
Company and the Subsidiaries material for disclosure to an intending
purchaser of the Shares have been disclosed to the Purchaser.
13.2 The representations and warranties made by the Vendor herein and any
disclosures made in qualification thereof do not contain any untrue or
inaccurate statement of material fact nor do they omit to state any
material fact necessary to keep these representations and warranties or
disclosures from being misleading or inaccurate.
13.3 All written information which has been given by the Vendor or any of
its directors, auditors or advisers to the Purchaser, or the
Purchaser's legal or financial advisers in the course of negotiations
leading to this Agreement was when given and is true, complete and
accurate in all material respects.
28
<PAGE> 31
13.4 The facts set out in this Agreement, including the Recitals, Schedules
and Exhibits, are true and accurate in all material respects.
13.5 No agreements (whether oral or written) or arrangements exist between
any of the directors and employees of the Company and the Subsidiaries
on the one hand and any member of the Vendor's group on the other hand,
including without limitation agreements or arrangements regarding
future profit sharing or bonus payments and agreements or arrangements
whereby the Vendor could seek recourse against any such director or
employee with respect to any liability incurred under this Agreement or
in connection herewith.
14. VALIDITY OF SALE
14.1 Neither the execution of this Agreement or any agreement in connection
herewith by the Vendor nor the consummation by the Vendor of the
transactions contemplated hereby or thereby will constitute a violation
of, or be in conflict with, or constitute or create a default under any
agreement or arrangement binding upon the Company, one of the
Subsidiaries or the Vendor, or result in the creation of any mortgage,
lien, pledge, charge, security interest or any encumbrance of any
nature whatsoever.
14.2 No statutory or regulatory rule or order of a Court or a governmental
body and no agreement between the Vendor and any such governmental body
is in effect which restrains or prohibits the sale by the Vendor to the
Purchaser of the Shares as reflected in this Agreement nor is there to
the best of the Vendor's knowledge, information and belief pending,
threatened or any basis for any action, suit, proceeding or
investigation by any person, entity or governmental body which
questions or might jeopardise the validity of this Agreement or
challenges any of the transactions contemplated hereby.
14.3 No consent, approval, or authorisation of or registration, designation,
declaration or filing with any governmental authority on the part of
the Vendor, the Company or the Subsidiaries is required in connection
with the sale or transfer of the Shares pursuant to this Agreement or
the consummation of any other transaction contemplated hereby except as
set out in this Agreement.
15. NO BROKERS' FEES
No finder's fee or brokerage commission is payable to any person by the
Purchaser, by the Company or by any of the Subsidiaries as a result of any
action by the Vendor or any action known to the Vendor by any other person, in
connection with the transactions contemplated by this Agreement.
29
<PAGE> 32
SCHEDULE 4: REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
1. No statutory or regulatory rule or order of a court or governmental
body and no agreement between the Purchaser and any such governmental
body is in effect which restrains or prohibits the purchase by the
Purchaser of the Shares as reflected in this Agreement nor is there to
the best of the Purchaser's knowledge, information and belief pending
threatened or any basis for any action, suit, proceeding or
investigation by any person, entity or governmental body which
questions or might jeopardize the validity of this Agreement or
challenges any of the transactions contemplated hereby.
2. No consent, approval, or authorization of or registration designated,
declaration or filing with any governmental authority on the part of
the Purchaser is required in connection with the sale or transfer of
the Shares pursuant to this Agreement or the consummation of any other
transaction contemplated hereby except as set out in this Agreement.
30
<PAGE> 33
SCHEDULE 5: KEY OFFICERS
- - Jan Willem Rengelink
- - Gerrit de Graaf
31
<PAGE> 34
SCHEDULE 6: VENDOR'S CERTIFICATE
[DELIBERATELY LEFT BLANK]
32
<PAGE> 35
SCHEDULE 7: FORM OF DEED OF TRANSFER OF SHARES
33
<PAGE> 36
SCHEDULE 8: FORM OF TRADE NAME AND LOGO AGREEMENT
34
<PAGE> 37
SCHEDULE 9: FORM OF NON-COMPETE LETTER
AAS Holdings, LLC
AAS Holdings, Inc.
Sterling Town Center
12900 Hall Road
Suite 200, Sterling Heights
Michigan 48313
United States of America
30 October 1996
Dear Sirs,
We refer to the Sale and Purchase Agreement dated 30 October 1996 between Brink
Holding B.V., Brink B.V. and yourselves (the "AGREEMENT").
In connection with the Agreement, we agree as ultimate beneficiaries of Brink
Holding B.V. and having either directly or indirectly been involved in the
towbar production and trading activities of the Company and certain of its
Subsidiaries (as defined in the Agreement), to be bound by certain restrictive
covenants.
Each of the undersigned hereby covenants and undertakes with each of you that
they will not:
(a) at any time after Completion (as defined in the Agreement) disclose or
use for any purpose any information concerning the Company or the
Subsidiaries, except:
(i) to the extent required by law or any competent authority, after
prior consultation with yourselves;
(ii) to our professional advisers under circumstances of
confidentiality and only to the extent necessary for any lawful
purpose of either one of us;
(iii) to the extent that such information is at the date hereof or
hereafter becomes public knowledge otherwise than through
improper disclosure by any person; or
(b) at any time prior to the expiry of three years from the date of
Completion,either alone or jointly with others, directly or indirectly,
do any of the following without your prior written consent:
(i) directly or indirectly incorporate, establish or engage in any
business competing with
35
<PAGE> 38
any of the businesses now carried on by the Company and the
Subsidiaries ("AAS COMPETING BUSINESS");
(ii) acquire or hold a controlling interest in any company or business
which is itself or through any company or business directly or
indirectly controlled by it, engaged in any AAS Competing
Business, unless such AAS Competing Business accounts for not
more than 10% of the gross turnover of such company or business,
in which case we shall use our reasonable efforts to
ensure that such AAS Competing Business is offered for sale to
the Company at its fair market value;
(iii) participate in a joint venture or other co-operative arrangement
aimed at generating AAS Competing Business; and
(iv) employ or solicit the employment of any person earning an annual
salary of more than NLG 75,000 who is on the date hereof or has
during the month prior to the date hereof been an employee of the
Company or one of the Subsidiaries.
Yours faithfully,
- ------------------ ------------------ ------------------
Gerard Brink Wim Brink Koo Brink
For acceptance for and on behalf of
AAS HOLDINGS, LLC AND AAS HOLDINGS, INC.
- ------------------
Terry Seikel
Chief Financial Officer
36
<PAGE> 1
================================================================================
EXHIBIT 10.3
ASSET PURCHASE AGREEMENT
AMONG
BELL SPORTS CORP.,
BELL SPORTS CANADA INC.
AND
ADVANCED ACCESSORY SYSTEMS CANADA INC./
LES SYSTEMES D'ACCESSOIRE ADVANCED CANADA INC.
Dated as of July 2, 1997
================================================================================
<PAGE> 2
LIST OF SCHEDULES
Schedule 1.1(i) - Tangible Personal Property
Schedule 1.1(ii) - Tooling
Schedule 1.1(iv) - Purchased Inventory
Schedule 1.1(vii) - Assigned Contracts
Schedule 1.1(viii) - Requisite Rights
Schedule 1.1(x) - Telephone, Telex and Telecopier Numbers
Schedule 1.1(xiv) - Permits
Schedule 1.3(c) - Open Customer Orders
Schedule 3.1(b) - Consents
Schedule 3.1(c) - Financial Information
Schedule 3.1(d) - Undisclosed Liabilities
Schedule 3.1(e) - Changes to the Business
Schedule 3.1(f) - Improvements
Schedule 3.1(g) - Exceptions to Title
Schedule 3.1(h)(i)(a) - Intellectual Property Rights
Schedule 3.1(h)(i)(b) - Exceptions to Intellectual Property Rights
Schedule 3.1(h)(ii) - Employee Invention Disclosures
Schedule 3.1(i)(i) - Environmental Permit Exceptions
Schedule 3.1(i)(ii) - Environmental Notice Exceptions
Schedule 3.1(i)(iii) - Hazardous Materials
Schedule 3.1(i)(iv) - CERCLA Claims
Schedule 3.1(j) - Contracts
Schedule 3.1(k) - Litigation
Schedule 3.1(l) - Permits
Schedule 3.1(n) - Inventories
Schedule 3.1(o) - Employees
Schedule 3.1(p) - Employee Plans
Schedule 3.1(r) - Brokers
Schedule 3.1(s) - Transactions with Affiliates
Schedule 3.1(t) - Principal Customers
Schedule 3.1(u) - Bank Accounts
Schedule 3.1(y) - Individuals with Knowledge
Schedule 6.3 - Additional Employee Offerees
<PAGE> 3
DEFINITIONS
The following terms which may appear in more than one Section
of this Agreement are defined in the following Sections:
Term Section or Other Location
- ---- -------------------------
Accountants' Determination 2.2(b)(ii)
Affiliate 3.1(s)
Arbitrating Accountants 2.2(b)(ii)
Assigned Contracts 1.1(a)(vii)
Assumed Obligations 1.3
Bill of Sale and Assumption Agree 1.5(a)
Business Preamble
Business Day 7.4
Buyer Preamble
Buyer Indemnification Event 5.1(a)
Buyer Indemnified Persons 5.1(b)
CERCLA 3.1(i)(iv)
CERCLIS 3.1(i)(iv)
Charter 3.1(a)
Claim 5.1(c)
Closing Article IV
Closing Balance Sheet 2.2(a)
Closing Date Article IV
Competitive Businesses 6.5
Confidential Information 6.6(c)
Contracts 3.1(j)
Conveyance Instruments 1.5(a)
Covered Persons 6.6(a)
CSST 1.4(l)
Current Employees 3.1(o)
Employee Plan 3.1(p)(i)
Encumbrances 1.1(a)
Environmental Law 3.1(i)(i)
ERISA Affiliate 3.1(p)(i)
ERISA 3.1(p)(i)
Excluded Assets 1.2
Excluded Earnout Liabilities 1.3(b)
Excluded Obligations 1.4
Final Determination Date 2.2(b)(iii)
Final Net Book Value 2.2(a)
Final Net Book Value Statement 2.2(a)
Financial Statements. 3.1(c)
First 30 Day Period 2.2(b)(ii)
GAAP 2.2(a)
Governmental Authority 3.1(b)
<PAGE> 4
Term Section or Other Location
- ---- -------------------------
GST 5.1(i)
GST Legislation 5.1(i)
Hazardous Materials 3.1(i)(i)
Hired Employees 6.3(a)
HSR Act 3.1(b)
Indemnified Persons 5.1(d)
Indemnifying Person 5.1(e)
Intellectual Property Rights 3.1(h)(iii)
Interim Balance Sheet 3.1(c)(ii)
Interim Balance Sheet Date 3.1(c)(ii)
Knowledge 3.1(x)
Leased Real Property 3.1(iii)
Leases 3.1(iii)
Legal Requirement 3.1(b)
Liability Letter 5.3(b)(i)
Losses 5.1(f)
NPL 3.1(i)
Objection Notice 2.2(b)(ii)
Original Purchase Agreement 1.3(b)
Overpayment Amount 2.2(c)(iii)
Parent Preamble
Patent License 1.1(a)(viii)
Permits 3.1(l)(ii)
Permitted Encumbrances 1.1
Person 3.1(b)
Principal Customers 3.1(t)
Proprietary Technology 3.1(h)(iii)
Purchase Price 2.1
Purchased Assets 1.1(a)
Purchased Inventory 1.1(a)(iv)
QST 5.1(i)
QST Legislation 5.1(i)
Related Documents 7.3
Related Person 3.1(q)
Requisite Rights 3.1(h)(i)
Returns 3.1(a)
Restricted Party 6.5
Seller Preamble
Seller Indemnification Event 5.1(g)
Seller Indemnified Persons 5.1(h)
Seller's Accountants 2.2(a)
Seller's Bulk Sales Statement 6.2
Seller's Notice of Adjustment 2.2(b)(i)
Settlement Agreement 2.2(b)(ii)
<PAGE> 5
Term Section or Other Location
- ---- -------------------------
Statement of Allocation 2.3
Survival Date 5.4(b)
Taxes 5.1(i)
Third Party Claim 5.3
Trademark License ?
Underpayment Amount 2.2(c)(i)
US EPA 3.1(i)(iv)
<PAGE> 6
TABLE OF CONTENTS
ARTICLE I TRANSFER OF PURCHASED ASSETS, ASSUMPTION OF LIABILITIES
AND RELATED MATTERS..................................................1
1.1 Transfer of Assets...................................................1
1.2 Assets Not Being Transferred.........................................4
1.3 Liabilities Being Assumed............................................5
1.4 Liabilities Not Being Assumed........................................6
1.5 Instruments of Conveyance and Transfer, Etc..........................8
1.6 Further Assurances, Etc..............................................8
1.7 Assignment of Contracts, Rights, Etc.................................8
1.8 Right of Endorsement, Etc............................................9
ARTICLE IIPURCHASE PRICE; ALLOCATION...........................................9
2.1 Acquisition Price....................................................9
2.2 Net Book Value Adjustment............................................9
2.3 Allocation of Purchase Price........................................11
ARTICLE III REPRESENTATIONS AND WARRANTIES....................................11
3.1 Representations and Warranties of the Seller........................11
3.2 Representations and Warranties of the Buyer.........................26
ARTICLE IV CLOSING............................................................27
ARTICLE V INDEMNIFICATION.....................................................27
5.1 Definitions.........................................................27
5.2 Indemnification Generally...........................................30
5.3 Notice and Defense of Third Party Claims............................31
5.4 Survival of Representations, Warranties, Agreements and Covenants...32
5.5 Indemnification Exclusive...........................................33
ARTICLE VI POST-CLOSING AGREEMENTS............................................33
6.1 Access..............................................................33
6.2 Bulk Sales Laws.....................................................33
6.3 Certain Employee Matters............................................33
6.4 Parent Guaranty.....................................................35
6.5 Non-Competition.....................................................35
6.6 Non-Disclosure......................................................36
6.7 Non-Solicitation of Employees and Customers.........................37
6.8 Usage of Tradenames.................................................37
6.9 Agreements in Respect of Inventory..................................37
6.10 Agreements Regarding Canadian Taxes.................................37
ARTICLE VII MISCELLANEOUS.....................................................37
7.1 Expenses; Transfer Taxes, Etc.......................................37
7.2 Entire Agreement....................................................38
7.3 Related Documents...................................................38
<PAGE> 7
7.4 Notices...........................................................38
7.5 Counterparts......................................................40
7.6 GOVERNING LAW; CONSENT TO JURISDICTION............................40
7.7 Benefits of Agreement; Assignment.................................41
7.8 Construction......................................................41
7.9 Pronouns..........................................................41
7.10 Descriptive Headings..............................................41
7.11 Severability......................................................41
7.12 Disclaimer of Warranties..........................................41
7.13 Amendment.........................................................42
7.14 No Third Party Beneficiaries......................................42
ii
<PAGE> 8
ASSET PURCHASE
AGREEMENT dated as of July
2, 1997, among BELL SPORTS
CORP., a Delaware
corporation (the "Parent"),
BELL SPORTS CANADA INC., a
corporation existing under
the laws of Canada (the
"Seller"), and ADVANCED
ACCESSORY SYSTEMS CANADA
INC./LES SYSTEMES
D'ACCESSOIRE ADVANCED
CANADA INC., a corporation
existing under the laws of
Canada (the "Buyer").
The Seller is engaged, among other things, through its
"SportRack" division in the business (the "Business") of designing, engineering,
manufacturing, marketing, selling and distributing automotive roof rack systems,
and vehicular accessories (such as bike racks, ski racks and surfboard carriers)
and rear carriers and shuttles and related rear carrier and shuttle systems (to
the extent comprising part of the "SportRack" division). The parties hereto
desire that the Seller sell, transfer, convey and assign to the Buyer, and that
Buyer purchase from Seller, substantially all of the assets, properties,
interests in properties and rights of the Seller used primarily in the Business
(other than the Excluded Assets) and that the Buyer purchase and acquire the
same and assume certain specified liabilities and obligations of the Seller
relating to the Business, in each case, upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements hereinafter set
forth, the parties hereto hereby agree as follows:
ARTICLE I
TRANSFER OF PURCHASED ASSETS,
ASSUMPTION OF LIABILITIES AND RELATED MATTERS
1.1 TRANSFER OF ASSETS.
(a) On the terms and subject to the conditions set forth in this
Agreement, at the Closing, the Seller shall sell, transfer, convey and assign to
the Buyer, free and clear of all Encumbrances (other than Permitted
Encumbrances), and the Buyer shall purchase and acquire from the Seller, all of
the Seller's right, title and interest in, to and under the assets, properties,
interests in properties and rights of the Seller of every kind, nature and
description, whether real, personal or mixed, movable or immovable, tangible or
intangible, primarily used in or primarily held for use in the Business (other
than the Excluded Assets), wherever located, as the same shall exist immediately
prior to the Closing, including, without limitation, the following:
(i) all machinery and equipment, including, without limitation,
all manufacturing, production, maintenance, packaging, testing and other
machinery, equipment, molds, presses, rolling stock, motor vehicles,
tractors and other vehicles, spare or replacement parts, computer equipment
(including all computers and computer systems used in the Business),
furniture, fixtures, office equipment and software
<PAGE> 9
programs (including Seller's interest in the software used on
any computer systems), supplies and all other items of tangible personal
property, all of which are listed on Schedule 1.1(i);
(ii) all tooling owned by the Seller and used in connection
with the Business, including any tooling jointly owned with any customers
or Affiliates of the Seller and used primarily in connection with the
Business; provided that in the case of tooling jointly owned with
customers, Buyer shall only receive Seller's rights and interests in such
tooling, all of which are listed on Schedule 1.1(ii);
(iii) [intentionally ommitted];
(iv) all inventories of work-in-process, raw materials,
finished products, returned goods, stores and supplies, spare parts,
packaging, shipping containers and other materials in each case, to the
extent primarily related to the Business, all of which are listed on
Schedule 1.1 (iv)(the "Purchased Inventory");
(v) all prepaid expenses, advances, deposits (including
utility deposits) and accounts receivable, to the extent primarily
related to the Business;
(vi) all insurance and indemnity claims against third parties
relating to the Purchased Assets and the Assumed Obligations, to the extent
primarily related to the Business (including, without limitation, all
insurance proceeds paid or payable by any insurance provider for any
Purchased Asset that is destroyed or damaged on or prior to the Closing
Date) other than any of the foregoing to the extent that they relate to the
Excluded Assets or Excluded Obligations;
(vii) all contracts, agreements, licenses, personal property
leases, commitments, purchase orders, sales orders and other agreements in
each case, to the extent primarily related to the Business, all of which
are listed on Schedule 1.1(vii) (collectively, the "Assigned Contracts");
(viii) (A) all Requisite Rights, including, without limitation,
the names "SportRack", "Mondial", "SnapRack" and all other names primarily
used or held for use in the Business and owned by Seller or its Affiliates,
all of which are listed on Schedule 1.1(viii), (B) the rights to license
the assets set forth in the Patent License, dated as of the date hereof
between Bell Sports, Inc., a California corporation and the Buyer (the
"Patent License") to the extent and in the manner set forth therein and (C)
the rights to use the tradenames as set forth in Section 6.8 hereof to the
extent and in the manner set forth therein;
(ix) all records of the Seller, either in computer or original
or photostatic form (except in the case of computer software, which must be
in original form), whether or not in computer or machine readable format,
including, without limitation, property records, plans, specifications,
surveys, title policies, production records, engineering records,
purchasing and sales records, personnel and payroll records, accounting
records, mailing lists, customer and vendor lists and records, and computer
software and related
2
<PAGE> 10
licenses, manuals and other materials, in each case relating
primarily to the Purchased Assets or the Business;
(x) all telephone, telex and telecopier numbers and all
listings of such numbers in all telephone books and directories, in each
case, to the extent primarily related to the Business, all of which
numbers are listed on Schedule 1.1(x);
(xi) [intentionally omitted]
(xii) all warranties and guarantees received from vendors,
suppliers or manufacturers with respect to the Purchased Assets or the
Business (other than to extent such warranties relate to product liability
obligations of the Seller described in Section 1.4(b));
(xiii) all stationery, purchase orders, forms, labels, shipping
material, catalogues, brochures, art work, photographs and advertising
materials, related primarily to the Business;
(xiv) all Permits, all of which are listed on Schedule
1.1(xiv);
(xv) all rights (including experience ratings) with respect to
unemployment, workers' compensation, occupational health and safety and
other similar insurance reserves, in each case relating to employees of the
Seller who become employees of the Buyer;
(xvi) all rights (including rights in respect of QST or GST
payable by any Governmental Authority), recoveries, refunds, counterclaims,
rights to offset, other rights, choses in action and Claims (known or
unknown, matured or unmatured, accrued or contingent) against third parties
(including, but not limited to, all warranty and other contractual claims
(express, implied or otherwise) against third parties), other than any of
the foregoing to the extent that they relate to the Excluded Assets or
Excluded Obligations; and
(xvii) the goodwill and other intangible assets of the Seller
associated with the Business.
For convenience of reference, the assets, properties, interests in properties
and rights described above that are to be sold, transferred, conveyed and
assigned to the Buyer by the Seller pursuant to this Section are collectively
called the "Purchased Assets" in this Agreement. Notwithstanding the foregoing,
the terms "Purchased Assets" and "Business" specifically exclude and the Buyer
is not acquiring (except, in each case, to the extent specifically constituting
part of the SportRack division of the Seller); (i) any business, properties or
assets of Bell Sports, Inc., Giro Ireland Limited, Giro Sport Design
International, Inc., American Recreation Company Holdings, Inc., Euro Bell S.A.,
American Recreation Company, Inc., Bell Sports Australia Pty. Limited (other
than as may be licensed to Buyer under the Related Documents and other than as
set forth in Section 6.8) including without limitation the business of
designing, developing, manufacturing, distributing, marketing, sourcing and
selling bicycle, in-line skate, ski, auto racing car, any other helmets, bicycle
parts and accessories, shuttles and rear
3
<PAGE> 11
rack carrier system in each case, under the "Bell", "Giro", "Rhode Gear",
"Vistalite", "Blackburn", "BSI", "Bike Star", "Copper Canyon", "Cycle Products",
"Bike Xtras", "Cycle Tech" or "Spoke Hedz" brand names or names licensed from
third parties, (ii) any business conducted through the IBD and Mass
Merchant/Sporting Goods divisions of the Seller and (iii) any rights to the
"Rhode Gear" patented hub system currently utilized by the Seller (other than as
may be licensed to Buyer under the Patent License). As used in this Agreement,
the term "Encumbrances" means, collectively, all security interests, hypothecs,
judgments, liens, pledges, charges, escrows, encumbrances, Claims, options,
rights of first refusal, rights of first offer, mortgages, indentures, loan
agreements, credit agreements, security agreements and other agreements,
arrangements, contracts, commitments, understandings or obligations, whether
written or oral and whether or not relating in any way to credit or the
borrowing of money. As used in this Agreement, the term "Permitted Encumbrances"
means, collectively, (i) Encumbrances arising under applicable law for current
taxes or other governmental assessments or charges not yet due and payable, (ii)
Encumbrances granted under any of the Assigned Contracts and any other
Encumbrances being assumed by the Buyer pursuant to Section 1.3 and (iii), with
respect to real property leased to the Seller (the "Leased Real Property"), any
Encumbrance indicated on the title commitment for such Leased Real Property.
(b) Anything contained in this Agreement to the contrary
notwithstanding, but subject to the provisions of Section 1.2, to the extent
that any asset, property, interest in property or right, in each case, used
primarily in the conduct of the Business is owned by any Affiliate of the Seller
or the Parent, such asset, property, interest in property or right shall be
deemed to be a Purchased Asset for all purposes of this Agreement, and the
Seller and the Parent shall do, and shall cause any such other Affiliate to do,
all things required to be done by the Seller with respect thereto, including,
but not limited to, those things set forth in Sections 1.5, 1.6, 1.7 and 1.8.
1.2 ASSETS NOT BEING TRANSFERRED.
Anything contained in this Agreement to the contrary notwithstanding,
there are expressly excluded from the Purchased Assets the following:
(a) the consideration delivered to the Seller pursuant to this
Agreement;
(b) all assets used primarily in connection with the Seller's corporate
functions (including, but not limited to, corporate charters, seals, minute
books, stock transfer ledgers, taxpayer and other identification numbers, tax
returns, tax information and tax records), whether or not used for the benefit
of the Business;
(c) claims or rights against third parties relating to any Excluded
Asset or Excluded Obligation;
(d) all records relating to pending lawsuits to which the Seller is a
party and which involve the Business;
(e) all assets related to or owned by any Employee Plan;
(f) all cash on hand or held on deposit on the Closing Date and owned
by the Seller and related to the Business, to the extent not reflected on the
Closing Balance Sheet;
4
<PAGE> 12
(g) the Seller's rights, claims or causes of action relating hereto or
any Related Document;
(h) all refunds of any Tax for which the Seller is liable pursuant to
this Agreement;
(i) all liabilities or obligations under any contracts, agreements,
licenses, personal property leases, commitments, purchase orders, sales orders,
and other agreements not effectively assigned under this Agreement or under any
Related Document;
(j) any information or records of the Seller, including, without
limitation, financial records, used by the Seller or its Affiliates in
connection with the conduct of its, or their, respective businesses generally
and not relating primarily to the Purchased Assets or the Business; and
(k) any right or interest in the tradenames or brand names "Bell,"
"Giro," "Rhode Gear," "Vistalite," "Blackburn," "BSI," "Bike Star," "Copper
Canyon," "Cycle Products," "Bike Xtras," "Cycle Tech" or "Spoke Hedz," other
than as specifically contemplated by Section 6.8 hereof.
For convenience of reference, the assets, properties, interests in
properties and rights of the Seller which do not constitute Purchased Assets
pursuant to Section 1.1 or Section 1.2 are collectively called the "Excluded
Assets" in this Agreement.
1.3 LIABILITIES BEING ASSUMED.
At the Closing, subject to the terms and conditions of this Agreement,
simultaneously with the sale, transfer, conveyance and assignment to the Buyer
of the Purchased Assets, the Buyer shall assume, pay and perform when due the
following, and only the following, liabilities and obligations of the Seller:
(a) accounts payable and accrued expenses of the Business (including
with respect to QST or GST and excluding accruals for any other Taxes) to the
extent accrued or otherwise properly reflected on the Closing Balance Sheet;
(b) all liabilities and obligations arising after the Closing under the
Assigned Contracts which are effectively assigned to the Buyer in accordance
with their respective terms; provided, however, that all liabilities and
obligations under Article III and Section 2.2(vi) of the Asset Purchase
Agreement, dated May 12, 1995 among the Seller, SportRack Canada Inc., Jean
Maynard, Richard Bedard, 2987988 Canada Inc. and Robert Choquette (as amended by
the First Amendment thereto, dated April 4, 1996 among such parties) (the
"Original Purchase Agreement") of the Seller to the extent arising out of or
related to periods prior to and including the period ending on the date of the
Closing Balance Sheet (the "Excluded Earnout Liabilities") shall not be assumed,
paid or performed by the Buyer (it being understood that the Seller shall
satisfy the Excluded Earnout Liabilities in full on or prior to the Closing);
(c) all obligations under open customer orders and purchase orders
relating to products or services of the Business included in the Assigned
Contracts which arose in the
5
<PAGE> 13
ordinary course of business of the Business prior to the Closing Date
or are set forth on Schedule 1.3(c);
(d) accrued payroll, sick leave and vacation expenses of the Seller
arising in the ordinary course of business of the Business and relating to the
Hired Employees to the extent reflected on the Closing Balance Sheet;
(e) the liabilities and obligations assumed by the Buyer under Section
6.3;
(f) liabilities and obligations arising out of the operation of the
Business after the Closing Date; and
(g) all Claims under warranties or product returns with respect to the
sale of products of the Business which arose or may arise before or after the
Closing Date; and
(h) all Claims, liabilities and obligations relating to product
liability claims with respect to any products sold by Buyer after the Closing
Date.
For convenience of reference, the foregoing liabilities and obligations of
the Seller being assumed by the Buyer are collectively called the "Assumed
Obligations" in this Agreement. The Buyer hereby expressly agrees to pay and
perform when due all of the Assumed Obligations.
1.4 LIABILITIES NOT BEING ASSUMED.
Anything contained in this Agreement to the contrary notwithstanding,
the Buyer is not assuming any liabilities or obligations (fixed or contingent,
known or unknown, matured or unmatured) of the Seller other than the Assumed
Obligations, whether or not relating to the Purchased Assets or the Business,
all of which liabilities and obligations shall at and after the Closing remain
the exclusive responsibility of the Seller. Without limiting the generality of
the foregoing, the Buyer is not assuming any of the following liabilities and
obligations:
(a) except as provided in Section 1.3(a), all liabilities and
obligations for Taxes of the Seller and all liabilities and obligations for
Taxes arising out of or in connection with the operation of the Business on or
prior to the Closing Date (in each case regardless of whether arising as a
result of or in connection with the transactions contemplated hereby or
otherwise);
(b) all Claims, liabilities and obligations of any nature (including
product liability claims with respect to any products to the extent sold on or
before the Closing Date) for any accidents, breach of contract, occupational
health and safety violations, illnesses, or any other type of Claim (other then
Claims under warranties or product returns as specified in Section 1.3(g)),
liability or obligation connected with or arising out of any matter, incident,
occurrence or set of facts or circumstances prior to the Closing Date;
(c) all liabilities and obligations of any nature whatsoever of the
Seller to any of its Affiliates;
(d) except as provided in Sections 1.3(d) and (e), all Claims by and
all liabilities and obligations to employees and independent contractors for
periods prior to the Closing,
6
<PAGE> 14
including, without limitation, any Claims, liabilities and obligations
arising out of workers' compensation, unemployment, occupational health and
safety, any Employee Plan sponsored by the Seller or its ERISA Affiliates, the
Seller's failure to deposit or fund any amounts withheld from employees pursuant
to any retirement plan or arrangement or retiree medical plan or arrangement,
any unfunded retirement plan or arrangement or retiree medical plan or
arrangement, any obligations to current or former plan participants or
beneficiaries under any plan or arrangement intended to provide benefits to
current or former employees of the Seller, or other remuneration required to be
paid to any employee of the Business (including for wages, earned vacations,
vacation pay and sick leave);
(e) all liabilities and obligations of the Seller to financial
institutions or other Persons for borrowed money or with respect to indebtedness
and obligations of others which the Seller has directly or indirectly
guaranteed;
(f) all liabilities and obligations of the Seller to the extent
relating to the Excluded Assets and all liabilities and obligations of the
Seller under or arising out of this Agreement and any Related Document or with
respect to the transactions contemplated hereby and thereby, including, without
limitation, (but subject to Section 7.1) legal and accounting fees, expenses and
Taxes incurred by the Seller;
(g) all cash overdrafts for any banking accounts maintained for the
benefit of the Business;
(h) all obligations to Hired Employees for stay bonuses established by
the Seller prior to Closing;
(i) all Excluded Earnout Liabilities;
(j) any liabilities or obligations which may arise under Article 1768
of the Civil Code of Quebec, as amended;
(k) all Claims, liabilities or obligations under any Environmental Law
arising directly or indirectly out of or in connection with the generation, use,
release (including as defined in 42 U.S.C. 9601(22)), emission, deposit,
discharge, treatment, storage, handling, recycling, disposal or transportation
of any Hazardous Materials, to the extent that the same arose out of facts or
circumstances commenced or occurring prior to the Closing Date; and
(l) all liabilities and obligations of the Seller arising out of or
relating to any Claims, adjustments, assessments or other charges (including
relating to interest or penalties) relating to any applicable legislation on
workers' compensation or occupational health and safety including with respect
to Commission de la Sante et Securite au Travail ("CSST"), connected with or
arising out of any matter, incident, occurrence or set of facts or circumstances
to the extent that any such matter, incident, occurrence or set of facts of
circumstances arose prior to the Closing, in each case, involving employees or
former employees of the Seller.
For convenience of reference, the liabilities and obligations of the Seller
which do not constitute Assumed Obligations are collectively called the
"Excluded Obligations" in this Agreement.
7
<PAGE> 15
1.5 INSTRUMENTS OF CONVEYANCE AND TRANSFER, ETC.
(a) Simultaneously with the execution herewith, the Seller is executing
and delivering (or causing to be executed and delivered) to the Buyer, such
deeds, bills of sale, endorsements, assignments and other good and sufficient
instruments of sale, transfer, conveyance and assignment (collectively, the
"Conveyance Instruments") as are necessary to sell, transfer, convey and assign
to the Buyer, in accordance with the terms hereof, the Purchased Assets, free
and clear of all Encumbrances (other than Permitted Encumbrances), including,
without limitation, a bill of sale, assignment and assumption agreement in a
form previously agreed upon by the Buyer and the Seller (the "Bill of Sale and
Assumption Agreement"). Simultaneously with the execution herewith, the Seller
shall relinquish to the Buyer possession and operating control of the Purchased
Assets and shall take all other steps that may be required or desirable to pass
title to the Purchased Assets to the Buyer.
(b) Simultaneously with the execution herewith, the Buyer is executing
and delivering to the Seller, such instruments of assumption as are necessary to
assume, in accordance with the terms hereof, the Assumed Obligations, including,
without limitation, the Bill of Sale and Assumption Agreement.
1.6 FURTHER ASSURANCES, ETC.
(a) The Seller shall promptly pay or deliver to the Buyer any amounts
or items which may be received by the Seller after the Closing which constitute
Purchased Assets and shall cause all customer orders and purchase orders placed
with Affiliates of the Seller and relating to the products or services of the
Business to be assigned at the Closing to the Buyer. The Seller shall, at any
time and from time to time after the Closing, upon the reasonable request of the
Buyer and at the expense of the Seller, do, execute, acknowledge, deliver and
file, or cause to be done, executed, acknowledged, delivered and filed, all such
further acts, transfers, conveyances, assignments or assurances as may
reasonably be required for better selling, transferring, conveying, assigning
and assuring to the Buyer, or for aiding and assisting in the collection of or
reducing to possession by the Buyer, any of the Purchased Assets.
(b) The Buyer shall promptly pay or deliver to the Seller any amounts
or items which may be received by the Buyer after the Closing which constitute
Excluded Assets. The Buyer shall, at any time and from time to time, after the
Closing, upon the reasonable request of the Seller and at the Buyer's expense,
do, execute, acknowledge, deliver and file, or cause to be done, executed,
acknowledged, delivered and filed, all such further acts, transfers,
conveyances, assignments or assurances as may reasonably be required for better
assuming the Assumed Obligations.
1.7 ASSIGNMENT OF CONTRACTS, RIGHTS, ETC.
Anything contained in this Agreement to the contrary notwithstanding, this
Agreement shall not constitute an agreement or attempted agreement to transfer,
sublease or assign any contract, license, real or personal property lease, sales
order, purchase order or other agreement, or any Claim or right with respect to
any benefit arising thereunder or resulting therefrom, or any Permit, if an
attempted transfer, sublease or assignment thereof, without the required consent
of
8
<PAGE> 16
any other party thereto, would constitute a breach thereof or in any
material respect affect the rights of the Buyer or the Seller thereunder. The
Seller shall use its commercially reasonable efforts to obtain the consent of
any such third party to any of the foregoing to the transfer or assignment
thereof to the Buyer in all cases in which such consent is required for such
transfer or assignment. If such consent is not obtained, the Seller shall make
any arrangements necessary or desirable to provide for the Buyer the benefits
thereunder, including, without limitation, enforcement by the Seller for the
benefit of the Buyer of any and all rights of the Seller thereunder against the
other party thereto.
1.8 RIGHT OF ENDORSEMENT, ETC.
The Seller hereby constitutes and appoints the Buyer and its successors
and assigns the true and lawful attorney of the Seller with full power of
substitution, in the name of the Buyer, or the name of the Seller (in such case
only if the Buyer clearly indicates that it is the assignee of the Seller), on
behalf of and for the benefit of the Buyer, to collect all accounts and notes
receivable and other items being sold, transferred, conveyed and assigned to the
Buyer to endorse, without recourse, checks, notes and other instruments
constituting the Purchased Assets in the name of the Seller, to institute and
prosecute all proceedings which the Buyer may deem proper in order to collect,
assert or enforce any claim, right or title of any kind in or to the Purchased
Assets, to defend and compromise any and all actions, suits or proceedings in
respect of any of the Purchased Assets or the Business and to do all such acts
and things in relation thereto as the Buyer may deem advisable. The foregoing
powers are coupled with an interest and shall be irrevocable by the Seller,
directly or indirectly, whether by the dissolution of the Seller or in any
manner or for any reason. All costs and expenses incurred by Buyer in the
exercise of its rights under this Section 1.8 shall be borne by Buyer.
ARTICLE II
PURCHASE PRICE; ALLOCATION
2.1 ACQUISITION PRICE.
The aggregate consideration (the "Purchase Price") to be received by
the Seller from the Buyer for the Purchased Assets shall be Cnd. $18,650,000
(such amount being subject to adjustment pursuant to Section 2.2 below),
payable, subject to the conditions set forth herein, by the Buyer to the Seller.
2.2 NET BOOK VALUE ADJUSTMENT.
(a) Preparation of Closing Balance Sheet and Final Book Value
Statement. As promptly as practicable following the Closing Date (but in no
event later than 30 days after the Closing Date), the Seller shall prepare, and
cause Price Waterhouse LLP, the independent accountants of the Seller (the
"Seller's Accountants"), to review a balance sheet (the "Closing Balance Sheet")
of the Seller reflecting the financial position of the Business immediately
prior to the Closing Date and a statement (the "Final Net Book Value Statement")
setting forth the computation of the Final Net Book Value (as defined below)
derived therefrom, which statement shall be prepared in accordance with
generally accepted accounting principles in Canada as
9
<PAGE> 17
recommended in the Handbook of the Canadian Institute of Chartered
Accountants ("GAAP") consistently applied with the Financial Statements;
provided, however, that (i) reserves shall be made for uncollectible (or
doubtful) accounts receivable in an amount equal to Cnd. $150,000 and old,
obsolete, unmerchantable or slow moving inventory, in an amount equal to Cnd.
$265,156 whether or not consistent with past practices and (ii) any write-offs
or write-downs of prepaid expenses which are reflected on the Interim Balance
Sheet shall be made in accordance with GAAP, whether or not consistent with past
practices. In preparing the Closing Balance Sheet, the amount of goodwill to be
reflected from the payment on or before the Closing of the Excluded Earnout
Liabilities by the Seller shall not exceed the amount of Excluded Earnout
Liabilities actually paid by the Seller and shall be stated otherwise in
accordance with GAAP. For purposes of preparing the Final Net Book Value
Statement, "Final Net Book Value" shall mean total assets of the Business
immediately prior to the Closing Date (other than Excluded Assets) less total
liabilities of the Business immediately prior to the Closing Date (other than
Excluded Liabilities); provided, however, that no effect shall given to any
increase in property, plant, or equipment as a result of an "involuntary
conversion" as defined by GAAP.
(b) Review by the Buyer.
(i) Upon completion of the Final Net Book Value Statement, the
Seller shall promptly deliver the same to the Buyer with a notice
("Seller's Notice of Adjustment") of the Seller setting forth its proposed
adjustment, if any, of the Purchase Price as contemplated hereby. During
and after the preparation of the Final Net Book Value Statement until the
Final Determination Date (as defined below), the Seller shall provide the
Buyer and its advisors with reasonable and timely access to the employees
and records of the Seller and the work papers, trial balances and similar
materials used in connection with the preparation of the Final Net Book
Value Statement.
(ii) Following receipt of the Seller's Notice of Adjustment, the
Buyer will be afforded a period of 30 Business Days (the "First 30 Day
Period") to review the Seller's Notice of Adjustment. At or before the end
of the First 30 Day Period, the Buyer will either (A) accept the Final Net
Book Value (as set forth in the Seller's Notice of Adjustment) in its
entirety, in which case the Final Net Book Value will be as set forth in
the Seller's Notice of Adjustment or (B) deliver to the Seller a written
notice (the "Objection Notice") containing a written explanation of those
items in the Final Net Book Value Statement (as set forth in the Seller's
Notice of Adjustment) which the Buyer disputes, in which case the items
identified by the Buyer shall be deemed to be in dispute. The failure by
the Buyer to deliver the Objection Notice within the First 30 Day Period
shall constitute the Buyer's acceptance of the Final Book Value as set
forth in the Seller's Notice of Adjustment. If the Buyer delivers the
Objection Notice in a timely manner, then, within a further period of 20
Business Days from the end of the First 30 Day Period the parties and, if
mutually desired, their accountants will attempt to resolve in good faith
any disputed items and reach a written agreement (the "Settlement
Agreement") with respect thereto. Failing such resolution, the unresolved
disputed items will be referred for final binding resolution to an
independent recognized firm of certified public accountants mutually
acceptable to the Seller and the Buyer (the "Arbitrating Accountants"), the
fees and expenses of which shall be borne equally by the Seller, on the one
hand, and the Buyer, on the other hand. The Final Net Book Value will be
deemed to
10
<PAGE> 18
be as determined by the Arbitrating Accountants in accordance with
Section 2.2(a). Such determination (the "Accountants' Determination")
shall be (A) in writing, (B) furnished to the Seller and the Buyer as soon
as practicable after the items in dispute have been referred to the
Arbitrating Accountants, (C) made in accordance with GAAP and (D)
nonappealable and incontestable by the Seller, the Parent, the Buyer or
any of their respective Affiliates and not subject to collateral attack
for any reason.
(iii) For purposes of this Section 2.2, the "Final
Determination Date" shall mean the earliest to occur of (A) the
31st day following the receipt by the Buyer of the Seller's Notice of
Adjustment if the Buyer shall have failed to deliver the Objection Notice
to the Seller within the First 30-Day Period, (B) the date on which
either the Seller or the Buyer gives the other a written notice to the
effect that such party has no objection to the other party's
determination of the Final Net Book Value, (C) the date on which the
Seller and the Buyer execute and deliver a Settlement Agreement and (D)
the date as of which the Seller and the Buyer shall have received the
Accountants' Determination.
(c) Adjustment.
(i) If the Final Net Book Value is greater than Cnd.
$18,650,000 (the amount of such excess being referred to herein as the
"Underpayment Amount"), then, within five Business Days following the
Final Determination Date, the Purchase Price shall be increased by the
amount of the Underpayment Amount and the Buyer shall pay, or cause to be
paid, to the Seller the Underpayment Amount.
(ii) If the Final Net Book Value is less than Cnd. $18,650,000
(the amount of such shortfall being referred to herein as the "Overpayment
Amount"), then, within five Business Days following the Final
Determination Date, the Purchase Price shall be decreased by the amount of
the Overpayment Amount and the Seller and/or the Parent shall pay, or
cause to be paid, to the Buyer the Overpayment Amount. The Seller and
the Parent shall be jointly and severally liable for the obligations in
this Section 2.2.
2.3 ALLOCATION OF PURCHASE PRICE.
The Purchase Price shall be allocated to the Purchased Assets in a
statement (the "Statement of Allocation") prepared in good faith by the Buyer
and approved in writing by Seller, which approval shall not be unreasonably
withheld. The Buyer shall deliver the Statement of Allocation to the Seller
within 90 days of the Closing Date. None of the parties shall take any action
inconsistent with the Statement of Allocation prepared in accordance with this
Section 2.3.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller hereby represents and warrants to the Buyer as follows:
11
<PAGE> 19
(a) Organization; Corporate Authority; Good Standing. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of its incorporation and has all requisite power and
authority to own, lease and operate the Purchased Assets and to carry on the
Business as now being conducted, to execute and deliver this Agreement and the
Related Documents to which it is or will be a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The Seller has delivered to the Buyer a copy of its articles or
certificate of incorporation (the "Charter") and by-laws in effect on the
Closing Date.
(b) Corporate Action; No Conflict. The execution, delivery and
performance by each of the Seller and the Parent of this Agreement and the
Related Documents to which it is or will be a party and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of such Person. This
Agreement has been duly and validly executed and delivered by each of the Seller
and the Parent and is, and each of the Related Documents to which such Person is
or will be a party, when executed and delivered in accordance with its terms,
will be, the valid and binding obligation of such Person enforceable against it
in accordance with the terms thereof, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws now or hereafter in effect
relating to creditors' rights generally and subject to limitations on the remedy
of specific performance and injunctive and other forms of equitable relief.
Except as set forth on Schedule 3.1(b), neither the execution, delivery or
performance by any of the Seller or the Parent of this Agreement or any Related
Document to which it is or will be a party, nor the consummation by such Person
of the transactions contemplated hereby or thereby, nor compliance by such
Person with any provision hereof or thereof will (i) conflict with or result in
a breach of any provision of the Charter or by-laws of such Person, in each case
as in effect on the Closing Date, (ii) cause a default or give rise to any right
of termination, cancellation or acceleration under any of the terms, conditions
or provisions of any note, bond, lease, mortgage, indenture, license, agreement,
contract or other instrument or obligation to which such Person is a party or by
which it or its properties or assets may be bound or (iii) violate any law,
statute, ordinance, rule, regulation, order, writ, judgment, injunction, award,
decree, concession, grant, franchise, restriction or agreement (each, a "Legal
Requirement") of, from or with any Governmental Authority applicable to such
Person or any of its properties or assets. Except as set forth on Schedule
3.1(b), no Permit, consent or approval of or by, or any notification of or
filing with, any Person is required in connection with the execution, delivery
or performance by each of the Seller or the Parent of this Agreement and the
Related Documents to which it is or will be a party, or the consummation of the
transactions contemplated hereby or thereby, other than required filings, if
any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"), the Competition Act (Canada) and the Investment Canada Act. For the
purposes of this Agreement, the term "Person" means any individual, corporation,
association, partnership, joint venture, trust or other entity or organization,
including a Governmental Authority, and "Governmental Authority" means any
international or federal, provincial, state, local or regional (whether domestic
or foreign) or other government, authority, instrumentality, department,
commission, board, bureau, agency or court.
(c) Financial Information. Schedule 3.1(c) contains a true and complete
copy of the following:
12
<PAGE> 20
(i) the internally-prepared unaudited balance sheet of the
Business as at June 30, 1996, and the related internally-prepared unaudited
statements of income and retained earnings for the fiscal period then ended
relating to the Business; and
(ii) the internally-prepared unaudited balance sheet (the
"Interim Balance Sheet") of the Business as at May 24, 1997 (the "Interim
Balance Sheet Date") and the related internally-prepared unaudited
statements of income and retained earnings for the 11-month period then
ended relating to the Business.
The financial statements described in the foregoing clauses (i) and (ii) are
collectively referred to herein as the "Financial Statements." The Financial
Statements (A) were prepared in accordance with the books and records of the
Business and (B) fairly present the financial position of the Business in each
case at and as of the dates indicated and the results of operations and retained
earnings of the Business for the periods indicated. Except as set forth on
Schedule 3.1(c), the financial statements described in the foregoing clauses (i)
and (ii) were prepared in accordance with GAAP consistently applied throughout
the periods covered thereby (except that any unaudited financial statements may
omit footnote disclosure). All allocations of corporate overhead by the Parent
to the Seller in the Financial Statements were fair, proper and made in
accordance with GAAP.
(d) Absence of Undisclosed Liabilities. Except for liabilities incurred
in the ordinary course of the Business not to exceed Cnd. $500,000 since the
Interim Balance Sheet Date, there are no liabilities of any nature (matured or
unmatured, fixed or contingent) affecting or relating to the Business which were
not provided for or disclosed on the Interim Balance Sheet and which are
required to have been provided for or disclosed thereon in accordance with GAAP,
except as disclosed on Schedule 3.1(d).
(e) Absence of Changes. Except as set forth on Schedule 3.1(e), since
the Interim Balance Sheet Date the Business has been operated in the ordinary
course and consistent with past practice, and there have not been any:
(i) adverse changes in the assets (including, without
limitation, levels of working capital and the components thereof),
properties, liabilities, financial condition, operations, results
of operations, or business of the Business (other than changes relating
solely to the Excluded Assets or the Excluded Liabilities);
(ii) occurrences resulting in the damage, destruction or loss
(whether or not covered by insurance) affecting any tangible asset or
property of the Business in excess of Cnd. $50,000 in the aggregate;
(iii) obligations or liabilities (whether absolute, accrued,
contingent or otherwise and whether due or to become due) created or
incurred or entered into, or any transactions, contracts or commitments
entered into, by the Business, other than in the ordinary course of the
business of the Business and consistent with past practice (other than as
related solely to the Excluded Liabilities);
(iv) licenses, sales, transfers, pledges, mortgages or other
hypothecations or dispositions of any tangible or intangible assets of the
Business, other than in the ordinary
13
<PAGE> 21
course of the business of the Business and consistent with past
practice (other than as related solely to the Excluded Assets);
(v) agreements or contracts entered into by or on behalf of
the Business which require the delivery by the Seller of a performance
bond;
(vi) any amendments, terminations or waivers of any rights of
value to the Business;
(vii) increases in, or changes in the method of computing, the
compensation of employees of the Seller who are employed in the Business
(including, without limitation, increases pursuant to or change in method
under any bonus, pension, profit sharing, deferred compensation arrangement
or other plan or commitment), or increase in compensation payable to any
officer, employee, consultant or agent of the Seller who are employed in
the Business, or entering into of any employment contract with or making of
any loan to, or engagement in any transaction with, any officer or employee
of the Seller who are employed in the Business, except for increases in
compensation in the ordinary course of the Business, consistent with past
practices and not in excess of 10% of any such employee's overall
compensation;
(viii) changes in the manner in which the Business extends
discounts or credits to customers or otherwise deals with customers;
(ix) changes in the accounting methods or practices followed by
or with respect to the Business, or any changes in depreciation or
amortization policies or rates theretofore adopted;
(x) forward purchase commitments in excess of normal operating
inventories or at prices higher than current market prices;
(xi) termination of employment of any key employee of the
Seller employed in the Business, or, to the Knowledge of the Seller, any
expression of intention by any key employee of the Seller employed in the
Business to terminate his or her employment;
(xii) cancellation or termination of any insurance policy
maintained by or with respect to the Business;
(xiii) any account receivable with a face amount in excess of
Cnd. $100,000 having (i) become past due in excess of 90 days in its
payment, (ii) had asserted against it any claim, refusal to pay or right of
set-off or (iii) been placed in jeopardy;
(xiv) any write-down or write-up of the value of any inventory
of the Business, or any write-off of any accounts receivable or notes
receivable of the Business or any portion thereof;
(xv) any changes in the manner in which corporate overhead is
allocated to the Business; or
14
<PAGE> 22
(xvi) agreements or understandings, whether in writing or
otherwise, for the Seller to take any of the actions specified in items (i)
through (xv) above.
(f) Leased Real Property.
(i) Neither the Seller nor any Affiliate (including the Parent)
owns any real property or interest therein that is held for use primarily
in connection with the Business.
(ii) (A) Each lease set forth on Schedule 3.1(f) (collectively,
the "Leases") is in full force and effect and all rent and other sums and
charges payable by the Seller thereunder are current, (B) no notice of
default or termination under any Lease is outstanding, (C) no event or
condition which, with the giving of notice or the lapse of time or both,
would constitute a default or termination event or condition under any
Lease exists or has occurred, and (D) no lessor under any Lease has any
Encumbrance (other than Permitted Encumbrances) under any Lease or
otherwise against the Purchased Assets. The Seller's leasehold estate under
and the Seller's leasehold interest in each Lease is held free and clear of
all Encumbrances (other than Permitted Encumbrances) and other matters
adversely affecting title thereto, which is claimed by or through the
Seller. The Seller has delivered to the Buyer true and complete copies of
all Leases (including all amendments, waivers, modifications and
supplements thereto).
(iii) Except as set forth on Schedule 3.1(f), (A) all
improvements on the real property leased to the Seller (the "Leased Real
Property"), insofar as they relate to the Business, conform in all respects
to all applicable Legal Requirements (including applicable environmental
and occupational safety and health laws and regulations) and zoning and
building ordinances of Governmental Authorities, and all of the Leased Real
Property is zoned for the purposes for which such Leased Real Property is
presently being used, (B) all improvements on the Leased Real Property,
insofar as they relate to the Business, are in good condition, normal wear
and tear excepted, and there does not exist any condition which interferes
with the present economic value or use thereof by the Business, (C) none of
the buildings and structures located on the Leased Real Property, the
appurtenances thereto or the equipment therein or the operation or
maintenance thereof, insofar as they relate to the Business, violates any
restrictive covenant or encroaches on any property owned by others or any
servitude easement, right of way or other encumbrance or restriction
affecting such Leased Real Property, nor does any building or structure of
any third party encroach upon the Leased Real Property or any servitude
easement or right of way benefitting the Leased Real Property, and (D) no
condemnation proceeding is pending or, to the Knowledge of the Seller,
threatened, which would preclude or impair the use by the Business of any
Leased Real Property for the uses for which it is intended.
(g) Title to Assets, Properties, Interests in Properties and Rights and
Related Matters. The Seller has good, valid and marketable title to all of
the Purchased Assets, free and clear of all Encumbrances, other than
Permitted Encumbrances. Except as disclosed on Schedule 3.1(g), no
Affiliate of the Seller or the Parent owns any assets, properties,
interests in properties or rights, of any kind or description, used in the
Business, other than the Excluded Assets. There does not exist any
condition which interferes with the use of any tangible personal property
15
<PAGE> 23
included in the Purchased Assets. The Purchased Assets are in good
operating condition, normal wear and tear excepted. The Purchased Assets
include all assets and properties (real, personal and mixed, tangible and
intangible), interests in properties and rights necessary to permit the
Buyer to carry on the Business as presently conducted by the Seller. The
Seller has the complete and unrestricted power and the unqualified right to
sell, transfer, convey and assign the Purchased Assets owned by it.
(h) Intellectual Property Rights.
(i) Schedule 3.1(h)(i)(a) attached hereto, sets forth a list of
all extant patents, rademarks, service marks, and registrations thereof,
trade names and copyrights, applications and registrations for the
foregoing owned by the Seller and licenses of Intellectual Property
granted to the Seller that are used or held for use in the Business; and
invention disclosures of the employees on Schedule 3.1(h)(ii), which
invention disclosures relate to the Business and for which patent
applications have not been filed. As used herein, the term "Requisite
Rights" means the Intellectual Property Rights of the Seller listed on
Schedule 3.1(h)(i)(a). Except as set forth or disclosed in Schedule
3.1(h)(i)(b):
(A) the Seller owns, and possesses all incidents of
ownership of, the Requisite Rights;
(B) no royalties or other fees are payable by the Seller
to other persons by reason of the ownership, sale, license or use of the
Requisite Rights in the Business as presently conducted;
(C) no product or service manufactured, marketed or sold
presently by the Business violates or infringes on any Intellectual
Property Rights of any other Person;
(D) there is no pending or, to the Knowledge of the
Seller, threatened claim or litigation (nor, to the Knowledge of the
Seller, does there exist any basis therefor) contesting the validity of
or the right to bring actions for infringement (to the extent any such
right presently exists with the Seller) or the right to use in the
Business as presently conducted any of the Requisite Rights, nor has the
Seller received any notice that any of the Requisite Rights or the
operation or proposed operation of the Business conflicts or will
conflict with the asserted rights of any other Person; and
(E) the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
will not breach, violate or conflict with any instrument or agreement
governing any Requisite Right and will not cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any
Requisite Right or in any way impair the right of the Buyer to use,
sell, license or dispose of or bring any action for the infringement (to
the extent any such right presently exists) of any Requisite Right or
portion thereof.
(ii) Schedule 3.1(h)(ii) sets forth a list of the employees of
the Seller who have signed any agreement which provides for such
employees to assign or otherwise
16
<PAGE> 24
transfer to the Seller all of their respective right, title and
interest in and to any Intellectual Property Rights relating to the
Business.
(iii) As used herein, the term "Intellectual Property Rights"
means all intellectual property rights including, without limitation,
Proprietary Technology, patents, patent applications, patent rights,
trademarks, trademark registrations, trademark applications, trade
names, service marks, service mark registrations, service mark
applications, logos, copyrights (statutory and common law), copyright
applications, copyright registrations, know-how, licenses, trade
secrets, industrial designs, industrial registrations, industrial design
or registration applications, proprietary processes and formulae,
layouts, processes, inventions, development tools and all documentation
and media constituting, describing or relating to any of the foregoing,
including, without limitations, manuals, memoranda and records. As used
herein, the term "Proprietary Technology" means all proprietary
processes, formulae, inventions, trade secrets, know-how, development
tools and other proprietary rights owned by the Seller pertaining to any
product or service currently or previously manufactured, sold,
distributed or marketed or proposed to be manufactured, sold,
distributed or marketed (as the case may be), by the Business or used,
employed or exploited in the development, manufacture, license, sale,
distribution, marketing or maintenance of the business thereof, and all
documentation and media constituting, describing or relating to the
foregoing.
(i) Environmental Matters. Except as disclosed on Schedule
3.1(i)(i),
(i) the Seller has obtained all Permits which are required to
conduct the Business under all Environmental Laws. The Seller is as of
the Closing Date and for the past five years has been in compliance with
the terms and conditions of all such Permits and with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any
Environmental Law applicable to the Business or in any regulation, code,
plan, order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder. As used herein,
"Environmental Law" shall mean, without limitation, any federal, state,
provincial or local statute, law, rule, regulation, ordinance, code,
guideline, policy or rule of common or civil law of the United States or
Canada including, without limitation, the Environmental Quality Act
(Quebec), the Canadian Environmental Protection Act (Canada), the Clean
Air Act (Canada), the Transportation of Dangerous Goods Act (Canada),
the Hazardous Materials Information Review Act (Canada), the Act
Respecting Pesticides (Quebec), the Act Respecting Ecological Reserves
(Quebec), the Act Respecting Occupational Health and Safety (Quebec),
the Use of Petroleum Products Act (Quebec), Regulation no. 87 (Montreal
Urban Community), Regulation no. 90 (Montreal Urban Community) or of any
other jurisdiction in which the Seller owns or leases any real property
or conducts operations in respect of the Business, in each case as
amended, and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree of
judgment relating to the environment, health, safety or Hazardous
Materials. As used herein, "Hazardous Materials" shall mean all
infectious, toxic or hazardous pollutants, contaminants (including
contaminants as defined in the Environmental Quality Act, R.S.Q., c. Q-2
(Canada), as amended from time to time), chemicals, substances,
materials or wastes of whatever kind or nature,
17
<PAGE> 25
whether liquid, solid or gaseous, referenced, described, defined or
included in any Environmental Law. Hazardous Materials
include, without limitation, petroleum products, heavy metals, asbestos
and PCBs.
(ii) Except as disclosed on Schedule 3.1(i)(ii), no notice,
notification, demand, request for information, citation, summons or
order has been issued, no complaint has been filed, no penalty has been
assessed and no investigation or review is pending or, to the Knowledge
of the Seller, threatened by any Governmental Authority with respect to
any alleged failure by the Seller to comply with any Environmental Law
or to have any Permit required in connection with the conduct of the
Business or with respect to any generation, treatment, storage,
recycling, transportation, release or disposal, or any release
(including as such term is defined in 42 U.S.C. Section 9601(22)) of any
Hazardous Materials.
(iii) Except as disclosed on Schedule 3.1(i)(iii), in the
conduct of the Business, (A) the Seller has not handled any Hazardous
Material so as to require a hazardous waste management permit, and the
Seller has not generated, recycled, treated, stored, disposed of or
Released any Hazardous Material in violation of any Environmental Law in
the conduct of the Business; (B) no PCB is or has been present, in
violation of any Environmental Law, at any property occupied by the
Business; (C) no asbestos is or has been present, in violation of any
Environmental Law, at any property occupied by the Business; (D) there
are no underground storage tanks for Hazardous Materials, active or
abandoned, in violation of any Environmental Law, at any property
occupied by the Business; and (E) no Hazardous Materials have been
Released in excess of a "reportable quantity" established by statute,
ordinance, rule, regulation or order or in a quantity or manner that
would support an order from any Governmental Authority or other legal
obligation under Environmental Laws requiring Buyer to perform or pay
for investigation, remediation, or other relief or response to such
Release.
(iv) Except as disclosed on Schedule 3.1(i)(iv), the Seller
has not transported or arranged for the transportation of any Hazardous
Material to any location which is listed on the National Priorities List
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), listed on the
Comprehensive Environmental Response Compensation and Liability and
Information System ("CERCLIS") maintained by the U.S. Environmental
Protection Agency ("US EPA"), or listed on any similar state list or
provincial list under any Environmental Law, or which may lead to any
Claim under Environmental Laws against the Seller or the Business for or
with respect to clean-up costs, remedial work, damages to natural
resources or personal injury claims, including, but not limited to,
Claims under CERCLA.
Except as disclosed on Schedule 3.1(i)(i), no oral or written notification of a
Release of a Hazardous Material has been filed by or on behalf of the Seller and
no property now or previously owned or leased by the Seller in the conduct of
the Business is listed on the National Priorities List ("NPL") promulgated
pursuant to CERCLA, on CERCLIS or on any similar state list of sites or
provincial list under any Environmental Law, potentially requiring investigation
or clean-up or formally proposed for listing by the US EPA or any other
Governmental Authority.
18
<PAGE> 26
(j) Contracts, Etc. Schedule 3.1(j) and, with respect to Intellectual
Property Rights, Schedule 3.1(h) contains a list of all oral and written
contracts, agreements and other instruments to which the Seller is a party and
which relate solely or in principal part to the Business, which are outside the
ordinary course of business or which are referred to in clauses (i) through
(xvi) below (collectively, the "Contracts"). Except as set forth in Schedule
3.1(j), the Seller is not, with respect to the Business, a party to any of the
following:
(i) any distributor, dealer, sales, advertising, agency,
manufacturer's representative, franchise or similar contract or any other
contract requiring the payment of any commissions in excess of Cnd. $25,000
per year;
(ii) any continuing contract for the future purchase of
inventory, material, supplies, equipment or services or for the future sale
of products or services, in each case which is not terminable within 60
days of the Closing Date without cost or other liability;
(iii) any license or other agreement or arrangement providing
for the payment of a royalty or licensing fee to or by the Seller;
(iv) any contract with or commitment for the employment or
retention of any officer, employee or consultant or any other type of
contract with any officer, employee or consultant for services rendered to
the Seller;
(v) any profit-sharing, bonus, stock option, pension,
retirement, stock purchase, disability, hospitalization, insurance or
similar plan or agreement, formal or informal, providing benefits to any
current or former director, officer or employee of or consultant to the
Seller employed in or retained with respect to the Business;
(vi) except as may relate to any Excluded Liabilities, any
indenture, mortgage, promissory note, loan agreement or other agreement or
commitment for the borrowing of money, for a line of credit or for any
leasing transaction of a type required to be capitalized in accordance with
Statement of Financial Accounting Standards No. 13 issued by the Financial
Accounting Standards Board;
(vii) any contract or commitment for capital expenditures
involving more than Cnd. $25,000 each or Cnd. $50,000 in the aggregate;
(viii) any lease, sublease or other agreement pursuant to
which it is a lessee of or holds or operates any real or personal property
owned by any third party;
(ix) any option or other agreement to purchase or otherwise
acquire or sell or otherwise dispose of any interest in real property;
(x) any contract or commitment for charitable
contributions;
(xi) any agreement or contract with a "disqualified
individual" (as defined in Section 280G(c) of the Code) which would result
in a disallowance of the deduction for any "excess parachute payment" (as
defined under Section 280G(b)(i) of the Code) if the Seller were subject to
such provisions;
19
<PAGE> 27
(xii) any guaranty of the obligations of third parties;
(xiii) any agreement which restricts it from conducting the
Business anywhere in the world;
(xiv) any agreement under which it has agreed to indemnify
any third party with respect to, or to share, the tax liability of any third
party;
(xv) any agreement or arrangement for the purchase or other
acquisition of or sale or other disposition of any assets, properties or
rights other than in the ordinary course of business; or
(xvi) any other agreement or contract which is material to
the Business, the Purchased Assets or Assumed Obligations (including, without
limitation, levels of working capital and the components thereof), other than
this Agreement, the Related Documents and any other agreement related to the
transactions contemplated hereby and thereby. The Seller has not received
notice alleging it to be in default in any respect, and the Seller has in all
respects performed all the obligations required to be performed by it to date
and is not in default in any respect under any Contract, and there exists no
event, condition or occurrence which, with the giving of notice or lapse of
time, or both, would constitute a default under any Contract.
The Seller has not received from any party to any Contract notice of its
intention to cancel or terminate such Contract. The Seller has furnished to the
Buyer true and complete copies of all of the Contracts (including all
amendments, supplements and modifications in respect thereof) or a description
thereof as set forth on Schedule 3.1(j).
(k) Litigation, Etc. Except as set forth on Schedule 3.1(h) or (k),
there are no (i) claims (whether legal, administrative, arbitration or
otherwise) pending or, to the Knowledge of the Seller, threatened affecting the
Business or the Purchased Assets or Assumed Obligations, whether at law or in
equity, or before or by any Governmental Authority or (ii) judgments, decrees,
injunctions or orders of any Governmental Authority, or arbitrator affecting the
Business or the Purchased Assets or Assumed Obligations. The Seller has
delivered to the Buyer true and complete copies of all documents and
correspondence relating to matters referred to in Schedule 3.1(k) which are
included in the Assumed Obligations.
(l) Compliance with Law; Governmental Authorizations.
(i) The Seller is not in violation of any Legal Requirement
applicable to the Business.
(ii) (A) The Seller has all licenses, permits, orders,
approvals and other authorizations of or from all Governmental Authorities
which are necessary in the conduct of the Business (collectively, the
"Permits"), (B) such Permits are in full force and effect, (C) no violations
are currently pending with respect to any such Permit, and (D) no proceeding
is pending or, to the Knowledge of the Seller, threatened to revoke or limit
any such Permit. Schedule 3.1(l) contains a true and complete list of all of
the Permits and the Seller has furnished to the Buyer true and complete copies
thereof.
20
<PAGE> 28
(iii) Within the past five years, neither the United States
Occupational Safety and Health Administration, CSST nor any other
Governmental Authority has alleged or requested a correction by the Seller
in respect of the Business of any such occupational health or safety
problem.
(m) Warranties of Products; Products Liability; Regulatory Compliance
Regarding Products.
(i) The products manufactured, sold or distributed, by the
Seller in connection with the Business are free from any material defects,
and conform in all respects with all standards for products of such type.
(ii) No Governmental Authority regulating the marketing, testing
or advertising of any of the products manufactured, sold or distributed by
the Business has requested that any such product be removed from the
market, that substantial new product testing be undertaken as a condition
to the continued manufacturing, selling or distribution of any such
product or that such product be modified.
(n) Inventories; Accounts and Notes Receivable.
(i) Except as set forth on Schedule 3.1(n), the inventories of
the Seller with respect to the Business include no items which are
obsolete, of below standard quality or of a quality or quantity not usable
or salable in the normal course of business of the Business, the aggregate
value of which has not been written down on the books of account of the
Seller to realizable market value or with respect to which adequate
reserves have not been, or will not be in the Closing Balance Sheet in
accordance with GAAP and Section 2.2(b), provided.
(ii) Except as set forth on Schedule 3.1(n), all of the accounts
receivable and notes receivable owing to the Seller as of the Closing Date
constitute, and as of the Closing will constitute, valid and enforceable
claims arising from bona fide transactions in the ordinary course of
business, and there are no known or asserted claims, refusals to pay or
other rights of set-off against any thereof. Except as set forth on
Schedule 3.1(n) as of the Closing Date, there is (i) no account debtor or
note debtor delinquent in its payment by more than 90 days, (ii) no
account debtor or note debtor that has refused or threatened to refuse to
pay its obligations for any reason, (iii) no account debtor or note debtor
that is insolvent or bankrupt, (iv) no account receivable or note
receivable pledged to any third party by the Seller and (v) no account or
note receivable that is in jeopardy for any reason.
(o) Labor Relations; Employees. Schedule 3.1(o) contains a true and
complete list of the persons employed by the Seller in the Business as of
the Closing Date (the "Current Employees"). Except as set forth on
Schedule 3.1(o), (i)the Seller has not been notified by any Current
Employee of any grievance or problem existing between the Seller and such
Current Employee; (ii) the Seller is not delinquent in payments to any of
the Current Employees for any wages, salaries, commissions, bonuses or
other direct or indirect compensation for any services performed by them
to the Closing Date or for amounts required to be reimbursed to the
Current
21
<PAGE> 29
Employees;(iii) upon termination of the employment of any of the
Current Employees, neither the Seller nor the Buyer will by reason of
anything done prior to the Closing, or by reason of the consummation of
the transactions contemplated hereby, be liable for any excise taxes
pursuant to Section 4980B of the Code or to any of the Current Employees
for so-called "severance pay" or any other payments; (iv) the Seller is in
compliance in all respects with all Legal Requirements respecting labor,
employment and employment practices, terms and conditions of employment
and wages and hours (including, without limitation, all Legal Requirements
promulgated by the Equal Employment Opportunity Commission and the
Department of Labor under the Occupational Safety Hazards Act and the
Worker Adjustment and Retraining Notification Act); (v) there is no unfair
labor practice complaint against the Seller relating to or arising out of
the conduct of the Business pending or, to the Knowledge of the Seller,
threatened before the National Labor Relations Board or any comparable
state, provincial, local or foreign agency; (vi) there is no labor strike,
dispute, slowdown or stoppage pending or, to the Knowledge of the Seller,
threatened against or involving the Seller affecting the Business; (vii)
no representation question exists regarding the Current Employees; (viii)
no grievance and no arbitration proceeding arising out of or under
collective bargaining agreements is pending in respect of the Business and
no Claim therefor has been asserted; and (ix) no collective bargaining
agreement or other contract with or commitment to any labor union is in
effect or currently being negotiated by the Seller. The Seller has
delivered to the Buyer true and complete copies of all handbooks, manuals
and other policies describing the employment policies with respect to the
Business.
(p) Employee Plans.
(i) Except as set forth on Schedule 3.1(p), the Seller has not
been within the past five years a party to, sponsored or maintained any
Employee Plans. As used herein, the term "Employee Plan" means any
employee benefit plan (including as such term is defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), as well as any other plan, program or arrangement organized,
maintained and/or administered pursuant to any provincial pension plan act
(e.g., the Supplemental Pension Plan Act (Quebec)) involving direct or
indirect compensation, under which the Seller may have any present or
future obligations or liability on behalf of its employees or former
employees, contractual employees or their dependents or beneficiaries, and
which relates primarily to the Business. As used herein, the term "ERISA
Affiliate" means any entity that is a member of a "controlled group of
corporations" with or is under "common control" with the Seller as defined
in Section 414(b) or (c) of the Code.
(ii) Schedule 3.1(p) contains a true and complete list of all
Employee Plans.
(iii) No Employee Plan currently maintained by the Seller is or
was within the past five years a "multiple employer plan" (including as
such term is defined within the meaning of Section 413 of the Code).
(iv) The Seller is not and has not been for the past five years
obligated to contribute to any Employee Plan which is a "multiemployer
plan" (as such term is defined within the meaning of Section 3(37) of
ERISA).
22
<PAGE> 30
(v) Neither the Seller nor any other "disqualified person" or
"party in interest" (as such terms are defined in Section 4975 of the Code
and Section 3(14) of ERISA, respectively) with respect to an Employee Plan
has breached the fiduciary rules of ERISA (or any other statute pursuant
to which the Seller maintains any other Employee Plan) or engaged in a
prohibited transaction which could subject the Seller to any tax or
penalty imposed under any Legal Requirement including, without limitation,
Section 4975 of the Code or Section 502(i), (j) or (l) of ERISA.
(vi) Each Employee Plan has been maintained and operated in
accordance with its terms and is in substantial compliance with the
requirements of all Legal Requirements including, without limitation,
ERISA and the Code and in accordance with the provisions of any
applicable collective bargaining agreement.
(vii) Each Employee Plan for which the Seller has claimed a
deduction under Section 404 of the Code, as if such Employee Plan were
qualified under Section 401 of the Code, has received or has timely
applied for a favorable determination letter from the Internal Revenue
Service as to the qualification of such Employee Plan, and such favorable
determination letter has not been modified, revoked or limited in any way.
(viii) All contributions due and payable on or before the
Closing Date in respect of the Employee Plans will be made in full and in
proper form, and adequate accruals have been provided for in the financial
statements for all other contributions or amounts in respect of the
Employee Plans for periods ending on the Closing Date.
(ix) No Employee Plan subject to, any applicable employee
benefits Law including, without limitation, Part (3) of Subtitle B of
Title I of ERISA or Section 412 of the Code has incurred any "accumulated
funding deficiency" (as defined in Section 412(a) of the Code), whether or
not waived.
(x) The Seller has neither made nor agreed to make, nor is it
required to make (in order to bring any of the Employee Plans into
substantial compliance with any applicable employee benefits Legal
Requirement including, without limitation, ERISA or the Code), any change
in benefits that would increase the costs of maintaining any of the
Employee Plans.
(xi) As of the Closing Date, there are no actions, suits,
disputes, arbitrations or claims pending (other than routine claims for
benefits) or legal, administrative or other proceedings or governmental
investigations pending or, to the knowledge of the Seller, threatened
against any Employee Plan or against the assets of any Employee Plan.
(xii) No Employee Plan subject to Title IV of ERISA (or any
equivalent Canadian Legal Requirement) has been terminated within the past
four years, and no proceeding has been initiated to terminate any Employee
Plan.
(xiii) Neither the Seller nor its ERISA Affiliates nor any
member of a controlled group including the Seller or any of its ERISA
Affiliates has incurred within the past five years, nor reasonably expects
to incur, any termination, liability in respect of
23
<PAGE> 31
any Employee Plan under any applicable employee benefits Legal
Requirement including, without limitation, Section 4064 or 4069 of ERISA.
(xiv) No "reportable event" under any applicable employee
benefits Legal Requirement (within the meaning of Section 4043 of ERISA)
has occurred within the past five years with respect to any Employee Plan
subject to ERISA.
(xv) Each Employee Plan which is a "group health plan" (as
defined in any applicable employee benefits Legal Requirement including as
defined in Section 5000 of the Code) has been maintained in compliance
with all applicable employee benefits Legal Requirements including,
without limitation, Section 4980B of the Code and Title I, Subtitle B,
Part 6 of ERISA and no tax payable on account of any applicable employee
benefits Law including, without limitation, Section 4980B of the Code has
been or is expected to be incurred by Seller with respect to an Employee
Plan.
(xvi) No benefit payable or which may become payable by the
Seller pursuant to any Employee Plan shall constitute an "excess parachute
payment" (as defined in any applicable employee benefits Legal Requirement
including within the meaning of Section 280G of the Code) which is subject
to the imposition of an excise tax under any applicable employee benefits
Legal Requirement including, without limitation, Section 4999 of the Code
or which would not be deductible by reason of Section 280G of the Code.
(xvii) No Employee Plan currently maintained by the Seller
provides any post-retirement health or life insurance benefits, and the
Seller does not maintain any obligations to provide any post-retirement
benefits in the future.
(q) Tax Matters. (i) The Seller has paid (or the Parent on behalf of
the Seller has paid) all Taxes required to be paid through the Closing Date and
will pay all Taxes required to be paid by it, in respect of the Business, for
periods ending on or prior to the Closing Date and has properly and timely
filed and will, prior to the Closing, properly and timely file all returns,
declarations of estimated Tax, Tax reports, information returns and statements
required to be filed by it (collectively, "Returns"), in respect of the
Business, prior to the Closing (other than those for which extensions shall
have been granted prior to Closing) relating to any Taxes with respect to any
income, properties or operations of the Seller prior to the Closing; (ii) no
tax liens have been filed with respect to any of the Purchased Assets, and
there are no pending tax audits of any of the Seller or the Parent relating to
the Business; (iii) the Seller has withheld from each payment made to any of
its present or former employees, officers and directors, and to all Persons who
are non-residents of Canada for the purposes of the Income Tax Act (Canada),
all amounts required by Law, and has remitted such withheld amounts within the
prescribed periods to the appropriate Governmental Authority; (iv) the Seller
has remitted all Canada Pension Plan and Quebec Pension Plan contributions,
unemployment insurance premiums, employer health taxes and other Taxes payable
by it in respect of its employees to the proper Governmental Authority within
the time required by applicable Law; (v) the Seller has charged, collected and
remitted on a timely basis all amounts as required by applicable Law on any
sale, supply or delivery whatsoever, made by the Seller in respect to the
Business including, without limitation, sales and goods and services taxes;
(v) the Seller is a registrant for the purposes of the goods and
24
<PAGE> 32
services tax provided for under the Excise Tax Act and its registration
number is 140640236RT; (vi) the Seller is a registrant for the purposes of the
Taxes provided for under the Quebec Sales Tax Act and its registration number
is 1017799629TQ0001; (vii) The Seller has never acquired or had the use of any
of the Purchased Assets from a Person (a "Related Person") with whom the Seller
was not dealing at arm's length, as determined under the Income Tax Act
(Canada); and the Seller is not a party to or bound by any agreement with, it
is not indebted to, and no amount is owing to the Seller by any Person, not
dealing at arm's length, within the meaning of the Income Tax Act (Canada),
with the Seller.
(r) Brokers. Except as set forth on Schedule 3.1(r), neither Seller nor
any of its officers, directors, stockholders or employees has employed any
investment banker, broker or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated hereby.
(s) Distributions; Transactions with Affiliates. Except as set forth on
Schedule 3.1(s), no Affiliate of the Seller has purchased, acquired or leased
any property or services from (or made any payments or incurred any
indebtedness with respect thereto), or sold, transferred or leased any property
or services to, or entered into any management, consulting or similar agreement
or tax-sharing agreement with, the Business. For purposes of this Agreement,
the term "Affiliate," as to any Person, means any other Person that, directly
or indirectly, through one or more intermediaries, controls, is controlled by
or is under common control with such Person; provided, however, that with
respect to the Parent and the Seller, the term "Affiliate" shall not be deemed
to include Chase Capital Partners.
(t) Principal Customers. Schedule 3.1(t) sets forth a list of each
customer of the Seller to which the Seller, individually or in the aggregate,
sold more than Cnd. $250,000 in goods or services in connection with the
Business in its most recent fiscal year (the "Principal Customers"). Except as
set forth on Schedule 3.1(t), (1) no disagreement or problem exists between the
Seller and any of the Principal Customers with an amount in controversy in
excess of Cnd. $250,000, (2) the business relationship between the Seller and
each of the Principal Customers is good and (3) no Principal Customer has
threatened to terminate its relationship and dealings with the Business,
whether as a result of the transactions contemplated by this Agreement or
otherwise.
(u) Bank Accounts; Powers of Attorney. Schedule 3.1(u) sets forth a
complete and correct list of (i) the names of each bank account in which the
Seller has an account or safe deposit box used for the Business, and the names
of all persons authorized to draw thereon, or have access thereto and (ii) the
names of all persons, firms, associations, corporations or business
organizations, holding general or special powers of attorney from the Seller in
respect of the Business and a summary of the terms thereof.
(v) Suppliers and Vendors. Since June 30, 1996, no material supplier or
vendor of the Seller has canceled or otherwise terminated, or threatened to
cancel or otherwise terminate, its relationship with the Seller or has
decreased, limited or otherwise modified, or threatened to decrease, limit or
otherwise modify, the services, supplies or materials it provides to the
Seller.
25
<PAGE> 33
(w) Original Purchase Agreement. The Seller or the Parent has, prior to
the Closing, paid in full all Excluded Earnout Liabilities. The full amount of
the liabilities or obligations of the Seller under (i) Article III of the
Original Purchase Agreement (including under Sections 3.3(ii) and 3.3(vi) for
the Performance Measurement Period (as such term is defined therein)) ending
June 30, 1997 does not exceed Cnd. $1,250,000, and (ii)(x) Section 2.2(vi) of
the Original Purchase Agreement (as it relates to clause (a) of Schedule
2.2(vi) thereunder) for the period ending on the Closing Date shall be deemed
to be Excluded Obligations hereunder and (y) Section 2.2(vi) of the Original
Purchase Agreement (as it relates to clause (b) of Schedule 2.2(vi) thereunder
shall either have been satisfied in full on or prior to the Closing or shall be
reflected as a liability on the Closing Balance Sheet in accordance with GAAP.
Immediately prior to the Closing, the Seller has no obligations then owing to
any Person under Sections 2.2(vi), 2.3 or 3.5 of the Original Purchase
Agreement.
(x) Definition of Knowledge. As used in this Agreement, the term
"Knowledge" of the Seller means and includes actual knowledge of those persons
listed on Schedule 3.1(y).
3.2 REPRESENTATIONS AND WARRANTIES OF THE BUYER.
The Buyer represents and warrants to the Seller as follows:
(a) Organization; Corporate Authority; Good Standing. The Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. The Buyer has all requisite power and authority to
execute and deliver this Agreement and the Related Documents to which it is or
will be a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby.
(b) Capitalization. The authorized capital of the Buyer consists of 100
Class A shares of common stock which are all issued and outstanding and owned
by Advanced Accessory Systems, LLC, a Delaware limited liability company.
Immediately after the Closing, all such issued and outstanding shares of common
stock will be duly authorized and validly issued and outstanding.
(c) Corporate Action; No Conflict. The execution, delivery and
performance by the Buyer of this Agreement and the Related Documents to which
the Buyer is or will be a party and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action on the part of the Buyer. This Agreement has been
duly and validly executed and delivered by the Buyer and is, and each of the
Related Documents to which the Buyer is or will be a party, when executed and
delivered in accordance with its terms, will be, the valid and binding
obligation of the Buyer, enforceable in accordance with the terms thereof.
Neither the execution, delivery or performance by the Buyer of this Agreement
or any of the Related Documents to which the Buyer is or will be a party, nor
the consummation by the Buyer of the transactions contemplated hereby or
thereby, nor compliance by the Buyer with any provision hereof or thereof will
(i) conflict with or result in a breach of any provision of the certificate of
incorporation or by-laws of the Buyer, in each case as in effect on the Closing
Date, (ii) cause a default (or give rise to any right of termination,
cancellation or
26
<PAGE> 34
acceleration) under any of the terms, conditions or provisions of any
note, bond, lease, mortgage, indenture, license, agreement, contract or other
instrument or obligation to which the Buyer is a party or by which it or any of
its properties or assets is or may be bound or (iii) violate any Legal
Requirement of, from or with any Governmental Authority applicable to the Buyer
or any of its properties or assets. No Permit, consent or approval of or by, or
any notification of or filing with, any Person is required in connection with
the execution, delivery or performance by the Buyer of this Agreement and the
Related Documents to which the Buyer is or will be a party, or the consummation
by the Buyer of the transactions contemplated hereby or thereby, other than
required filings under the HSR Act or under Canadian Legal Requirements.
(d) Brokers. Neither the Buyer nor any of its officers, managers or
employees has employed any investment banker, broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
(e) No Prior Business. The Buyer was formed for the purpose of
acquiring the Business and has not conducted any business in the past, except
in connection with the transactions contemplated by this Agreement and related
activities.
(f) GST and QST. The Buyer has applied to the Quebec Ministry of
Revenue for the issuance to it of GST and QST numbers and has been assured that
the same will be issued to it retroactively to no later than the Closing Date.
ARTICLE IV
CLOSING
The closing (the "Closing") for the consummation of the
transactions contemplated by this Agreement shall take place at the offices of
Martineau Walker simultaneously with the execution and delivery herewith on July
2, 1997 (the "Closing Date").
ARTICLE V
INDEMNIFICATION
5.1 DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
(a) "Buyer Indemnification Event" means any of the following:
(i) the untruthfulness, inaccuracy or breach of any
representation or warranty of the Seller contained in this Agreement or
any Related Document, any Schedule attached hereto or thereto or any
certificate delivered by the Seller in connection herewith or therewith;
(ii) the breach by the Seller of any agreement or covenant of
the Seller contained in this Agreement or any Related Document;
27
<PAGE> 35
(iii) the assertion of any Claim against or the payment of any
Loss to the extent related to such Claim by any Buyer Indemnified Person
that arose in connection with, or is in any way related to any Excluded
Obligations;
(iv) the assertion against or payment by any Buyer Indemnified
Person of any Claim or Loss to the extent related to such Claim as a
result of non-compliance by the Seller or the Buyer with the "bulk sales
laws" of any jurisdiction which may be applicable to the transactions
contemplated hereby (including, without limitation, under Article 1768 of
the Civil Code of Quebec, as amended (including, without limitation, the
sale of enterprise provisions thereunder));
(v) the assertion of any Claim against or payment of any
Loss to the extent related to such Claim by any Buyer Indemnified Person
relating in any way to Taxes of any kind whatsoever, or expenses, interest
or penalties relating thereto, with respect to periods ending on or prior
to the Closing Date, other than Taxes relating to the conduct of the
Business after the Closing Date or as may be specified in Section 1.3(a);
(vi) the assertion of any Claim against or the payment of any
Loss to the extent related to such Claim by any Buyer Indemnified Person
relating to or arising out of the environmental matters existing or
occurring prior to the Closing Date;
(vii) the assertion of any Claim against or the payment of any
Loss to the extent related to such Claim by any Buyer Indemnified Person
relating to or arising out of any Excluded Earnout Liabilities; and
(viii) all reasonable fees, costs and expenses (including,
without limitation, reasonable attorneys', accountants' and other
professional fees and expenses) incurred by any Buyer Indemnified Person
in connection with any action, suit, proceeding, demand, assessment or
judgment arising out of any of the matters indemnified against under this
Article or in connection with the enforcement by any Buyer Indemnified
Person of its rights under this Article.
(b) "Buyer Indemnified Persons" means and includes the Buyer and its
officers, directors, employees, Affiliates, successors and assigns of all or
any portion of the Business.
(c) "Claim" means any claim, demand, assessment, action, suit,
proceeding, investigation, cause of action, litigation, judgment, order or
decree.
(d) "Indemnified Persons" means the Buyer Indemnified Persons or the
Seller Indemnified Persons, as the case may be.
(e) "Indemnifying Person" means the Buyer, in the case of any Seller
Indemnification Event, or the Seller, in the case of any Buyer Indemnification
Event, as the case may be.
(f) "Losses" means any and all losses, claims, shortages, damages,
liabilities, obligations, expenses, assessments, tax deficiencies and Taxes,
and fees, costs and expenses (including, without limitation, reasonable
attorneys', accountants' and other professional fees and
28
<PAGE> 36
expenses) sustained, suffered or incurred by any Indemnified Person in
connection with any Claim incident to or otherwise arising from any matter
which is the subject of indemnification under this Article or in connection
with the enforcement by the Indemnified Persons or any of them of their
respective rights under this Article; provided, however, that in computing the
amount of any Losses for purposes of determining the liability of any
Indemnifying Party under Section 5.2, the amount of any insurance proceeds
actually received by the Indemnified Person, less any deductibles and any
resulting premium increases, shall be deducted from such Losses.
(g) "Seller Indemnification Event" means the following:
(i) the untruthfulness, inaccuracy or breach of any
representation or warranty of the Buyer contained in this Agreement or any
Related Document, any Schedule attached hereto or thereto or any
certificate delivered by the Buyer in connection herewith or therewith;
(ii) the breach of any agreement or covenant of the Buyer
contained in this Agreement or any Related Document;
(iii) the assertion of any Claim against or payment of any
Loss to the extent related to such Claim by any Seller Indemnified Person
that arose in connection with or is in any way related to any
Assumed Obligation;
(iv) the assertion of any Claim against or payment of any
Loss to the extent related to such Claim by any Seller Indemnified Person
relating in any way to Taxes of any kind whatsoever, or expenses, interest
or penalties relating thereto, with respect to periods after the Closing
Date (other than to the extent assumed under Section 1.3(a));
(v) the assertion of any Claim against or the payment of any
Loss to the extent related to such Claim by any Seller Indemnified Person
relating to any legal action against such Seller Indemnified Person
arising as a result of the agreements in Section 6.8 hereof;
(vi) the assertion of any Claim against or the payment of any
Loss to the extent directly related to such Claim by any Seller
Indemnified Person relating to any legal action against such Seller
Indemnified Person arising as a direct result of the grossly negligent use
by the Buyer of the power of attorney in a manner in contravention of
Section 1.8 hereof;
(vii) the assertion of any Claim against or the payment of any
Loss to the extent related to such Claim by any Seller Indemnified Person
resulting from the Seller's failure to collect and remit any applicable
GST and QST with respect to the transactions contemplated hereunder; and
(viii) all reasonable fees, costs and expenses (including,
without limitation, reasonable attorneys', accountants' and other
professional fees and expenses) incurred by any Seller Indemnified Person
in connection with any action, suit, proceeding, demand, assessment or
judgment arising out of any of the matters indemnified against under this
29
<PAGE> 37
Article or in connection with the enforcement by any Seller
Indemnified Person of its rights under this Article.
(h) "Seller Indemnified Persons" means and includes the Seller and its
respective officers, directors, employees, Affiliates and successors.
(i) "Taxes" means, with respect to any Person, (A) all income taxes
(including any tax on or based upon net income, or gross income, or income as
specially defined, or earnings, or profits, or selected items of income,
earnings or profits) and all gross receipts, sales, use, ad valorem, transfer,
franchise, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property or windfall profits taxes, real property taxes,
alternative or add-on minimum taxes, customs duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any
Governmental Authority and (B) any liability for the payment of any amount of
the type described in the immediately preceding clause (A) as a result of being
a "transferee" (within the meaning of Section 6901 of the Code or any other
applicable law) of another Person or a member of an affiliated or combined
group. Without limiting the foregoing, the term "Taxes" shall include GST and
QST. The term "GST" shall mean taxes, interest, penalties and fines imposed
under Part IX of the Excise Tax Act (Canada) and the regulations made
thereunder as well as any Notice of Ways and Means Motion or Bill tabled in the
House of Commons or any press release or publicly disseminated statement by the
Minster of Finance, which sets forth a proposal to amend or a proposed
amendment to the Excise Tax Act (Canada) or the regulations made thereunder
which, when enacted, shall have retroactive effect to the date of its enactment
and all provincial sales taxes integrated with such federal taxes, as the case
may be (collectively, the "GST Legislation"). The term "QST" means taxes,
interest, penalties and fines imposed under the Quebec Sales Tax Act and the
regulations made thereunder including any proposed amendment to such
legislation announced by way of press release from time to time by the Minister
of Finance for the Province of Quebec or such other minister charged with the
administration of the Quebec Sales Tax Act, which announcement confirms that
such proposed amendment, when enacted, shall have retroactive effect to a date
prior to the date of its enactment (collectively, the "QST Legislation").
5.2 INDEMNIFICATION GENERALLY.
(a) Buyer Indemnification. The Seller shall indemnify the Buyer
Indemnified Persons for, and hold each of them harmless from and against, any
and all Losses resulting from any Buyer Indemnification Event; provided,
however, that the Seller shall have no obligation or liability to indemnify and
hold harmless the Buyer Indemnified Persons from and against Losses resulting
from a Buyer Indemnification Event described in Section 5.1(a)(i) (other than a
Buyer Indemnification Event relating to a breach of the representations set
forth in Sections 3.1(a), (b), (d), (n), (r) and (w)) unless and until the
aggregate amount of all such Losses shall exceed Cnd. $300,000 and then only to
the extent of such Losses in excess of Cnd. $300,000 and the aggregate
liability of the Seller under this Section 5.2(a) for such Losses shall not
exceed, when aggregated with any other payment by the Seller to the Buyer
Indemnified Persons under this Agreement, Cnd. $5,000,000. Notwithstanding
anything to the contrary contained herein, the foregoing limitation shall not
apply to the willful breach of any representation or warranty.
30
<PAGE> 38
(b) Seller Indemnification. The Buyer shall indemnify the Seller
Indemnified Persons for, and hold each of them harmless from and against, any
and all Losses resulting from any Seller Indemnification Event provided that
the aggregate liability of the Buyer under this Section 5.2(b) for such Losses
(except Losses resulting from the failure by the Buyer to assume, perform, pay
or discharge in accordance with this Agreement, any Assumed Obligation) shall
not exceed when aggregated with any other payment by the Buyer to the Seller
Indemnified Persons under this Agreement Cnd. $5,000,000.
5.3 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS.
The obligations and liabilities of the Indemnifying Persons with
respect to Claims resulting from the assertion of liability by third parties
(each, a "Third Party Claim") shall be subject to the following terms and
conditions:
(a) The Indemnified Persons shall give prompt written notice to the
Indemnifying Persons of any Third Party Claim which might give rise to a Claim
by the Indemnified Persons against the Indemnifying Persons based on the
indemnity agreements contained in Section 5.2, stating the nature and basis of
said Third Party Claim, and the amount thereof to the extent known. Such notice
shall be accompanied by copies of all relevant documentation with respect to
such Third Party Claim, including, without limitation, any summons, complaint
or other pleading which may have been served or written demand, or other
document or other instrument. Failure to give notice within the terms of this
Section 5.3(a) shall serve to excuse the Indemnifying Person from its
obligation under Section 5.2 only if and to the extent that the Indemnifying
Person can establish that it was materially prejudiced or injured by the
failure.
(b) (Insert Title Here)
(i) The Indemnifying Persons will have the right to participate
in or, if the Indemnifying Persons shall acknowledge in a writing
delivered to the Indemnified Persons that the Indemnifying Persons shall
be obligated under the terms of their indemnity hereunder in connection
with such Third Party Claim (a "Liability Letter"), then the Indemnifying
Persons shall have the right to assume the defense of any Third Party
Claim at their own expense and by their own counsel (satisfactory to the
Indemnified Persons); provided, however, that the Indemnifying Persons
shall not have the right to assume the defense of any Third Party Claim if
(x) such Third Party Claim seeks an injunction, restraining order,
declaratory relief or other non-monetary relief, (y) the named parties to
any such action or proceeding (including any impleaded parties) include
both the Indemnified Persons and the Indemnifying Persons and the former
shall have been advised in writing by counsel (with a copy to the
Indemnifying Persons) that there are one or more legal or equitable
defenses available to them which are different from or additional to those
available to Indemnifying Persons or (z) such action or proceeding
involves matters beyond the scope of the indemnification obligation of the
Indemnifying Persons, and in such event under subsection (y) or (z) the
suit or proceeding may, at the election of the Indemnifying Person, be
defended jointly as provided in (ii) below.
31
<PAGE> 39
(ii) Notwithstanding the foregoing subsection (b)(i), if the
Indemnifying Persons desire to participate in the defense of any Third
Party Claim without delivering a Liability Letter to the Indemnified
Persons, the Indemnifying Persons and the Indemnified Persons shall
jointly assume the defense against such Third Party Claim under the
following conditions:
(A) a law firm will be selected by agreement between the
Indemnifying Persons and the Indemnified Persons to represent the
interests of both such parties in defending against the Third Party Claim;
(B) if such law firm determines at any time that a
conflict of interest exists between the Indemnifying Persons and the
Indemnified Persons for any reason and that such law firm can not
adequately represent the interests of both parties, then such law firm
shall promptly notify the Indemnified Persons and the Indemnifying Persons
in writing of such determination and the Indemnified Persons and
Indemnifying Persons shall decide by agreement, based upon which party is
more likely to be more liable for the Third Party Claim, which party the
law firm will continue to represent;
(C) if the party which is no longer represented by the law
firm as a result of subclause (B) desires to continue to participate in
the defense of the Third Party Claim, such party may do so and may retain
its own counsel at its own expense; provided, however, that if such party
is found to have no liability in connection with such Third Party Claim,
its reasonable fees and expenses in connection with this subclause (C)
shall be reimbursed by the other party.
(c) (Insert Title Here)
(i) If the Indemnifying Persons exercise their right to assume
the defense of a Third Party Claim pursuant to subsection (b)(i) or
(b)(ii) above, they shall not make any settlement of any claims without
the prior written consent of the Indemnified Persons.
(ii) If the Indemnifying Persons do not exercise their right to
assume the defense of a Third Party Claim, the Indemnified Persons shall
not make any settlement of any claims for which they may seek
indemnification hereunder unless (A) they first provide written notice to
the Indemnifying Persons describing the material terms of the settlement
and (B) the Indemnifying Persons fail to deliver a Liability Letter within
ten days of receiving such notice.
5.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS.
The representations and warranties of the Seller in Section 3.1
and the representations and warranties of the Buyer contained in
Section 3.2 shall survive the Closing and remain in full force and effect for a
period of 24 months and thereafter shall terminate; provided, however, that (a)
the representations and warranties of the Seller set forth in Section 3.1(q)
shall survive the Closing and remain in full force and effect for the
applicable statute of limitations, (b) the representations and warranties of
the Seller set forth in Sections 3.1(a), (b), (d), (n), (r) and (w), and the
representations and warranties of the Buyer set forth in Sections 3.2(a), (c)
and (e) shall
32
<PAGE> 40
survive the Closing and remain in full force and effect without time
limit (without regard to any statute of limitations). Except as otherwise
expressly provided in this Agreement, all agreements and covenants requiring
future performance contained in this Agreement shall survive the Closing and
remain in full force and effect without time limit, provided, however, that the
obligation of the Buyer to indemnify the Seller Indemnified Parties under
Section 5.2(b) as it relates to a Seller Indemnification Event specified in
Section 5.1(g)(v) shall terminate upon the expiration of the applicable statute
of limitations relating to the subject matter of such event. For convenience of
reference, the date upon which any representation, warranty, agreement or
covenant shall terminate, if any, shall be referred to herein as the "Survival
Date".
5.5 INDEMNIFICATION EXCLUSIVE.
The parties hereto acknowledge agree that, from and after the Closing,
the sole and exclusive remedy with respect to any and all Claims relating to the
subject matter of this Agreement and the transactions contemplated hereby (other
than the Sub-Lease) shall be pursuant to Article V hereof.
ARTICLE VI
POST-CLOSING AGREEMENTS
6.1 ACCESS.
In connection with any financial audit of the Seller or any tax audit
or other governmental investigation of the Seller for any matter relating to any
period prior to the Closing, the Buyer shall, upon written request, permit the
Parent or the Seller and their respective representatives to have access, at
reasonable times during normal business hours and in a manner which is not
disruptive to the operations of the Buyer, to the work papers, books and records
of the Buyer relating to the Seller and the conduct of the Business prior to the
Closing which shall have been in the possession of the Buyer as of the Closing
and which remain in the possession of the Buyer; provided, however, that this
Section 6.1 shall not create any obligation on the part of the Buyer to retain
any such work papers, books and records, so long as prior to destroying any such
work papers, books, and records, the Buyer shall notify the Parent and provide
the Parent an opportunity (at the Parent's sole expense) to retrieve such work
papers, books and records.
6.2 BULK SALES LAWS.
The Seller shall deliver to the Buyer at Closing an officer's
certificate containing the aggregate indebtedness of each of the Business and
the Seller, and indicating that the Purchased Assets are not subject to any
security (the "Seller's Bulk Sales Statement").
6.3 CERTAIN EMPLOYEE MATTERS.
(a) On the Closing Date, the Buyer shall offer employment as of the
Closing Date to the employees of the Seller who are actively employed
by the Seller in the Business on the Closing Date and identified on Schedule
6.3 (any such employees who accept such offer of employment being referred to
herein as the "Hired Employees"); such offer of employment to be on
substantially the same terms as applicable to such employees immediately prior
to the
33
<PAGE> 41
Closing; except for Hired Employees, the Buyer shall have no liability
to any employees of the Seller who, on the Closing Date, are not actively
employed or are on disability, leave of absence, military service leave or
lay-off (whether or not with recall rights), or whose employment has been
terminated (voluntarily or involuntarily) or who have retired prior to the
Closing Date. After the Closing Date, each Hired Employee shall cease to be
employees of the Seller or entitled to participate in Seller's employee benefit
plans, programs, policies and arrangements except to the extent required by
applicable Legal Requirements. Subject to the provisions of this Section 6.3,
for periods on and after the Closing Date, each Hired Employee shall be
eligible to participate in employee benefit plans, programs, policies and
arrangements, if any, maintained from time to time by the Buyer for the benefit
of Hired Employees, as determined in the sole discretion of the Buyer so long
as such Hired Employee shall satisfy the eligibility criteria thereunder.
Nothing contained in this Agreement shall confer upon any Hired
Employee any rights or remedies of any nature or kind whatsoever under
or by reason of this Agreement, including, without limitation, any right
to employment or continued employment or to any benefits that may be provided,
directly or indirectly, under any employee benefit plan, policy or arrangement
of the Buyer or Seller, nor shall anything contained in this Agreement
constitute a limitation on or restriction against the right of the Buyer or
Seller to amend, modify or terminate any such plan, policy or arrangement or
the terms or conditions of employment. The Seller shall retain all liabilities
and obligations arising from the termination or severance of all employees of
the Business who do not become Hired Employees on the Closing Date.
(b) To the extent permitted by Legal Requirement or any applicable
Employee Benefit Plans the Seller shall cause all Hired Employees to be
fully vested as of the Closing Date under each defined benefit pension plan,
profit sharing plan, benefit restoration programs, savings plan and other
employee pension benefit plan and retirement arrangements of the Seller
covering such employees. To the extent applicable, Hired Employees (and their
eligible dependents) shall be given credit under employee benefit plans,
programs, policies and arrangements, if any, that are established or maintained
by the Buyer for the benefit of Hired Employees for their service with the
Seller (i) for purposes of eligibility to participate and vesting (but not
benefit accrual) to the extent such service was taken into account under a
corresponding Seller's plan, program, policy or arrangement and (ii) for
purposes of satisfying any waiting periods, evidence of insurability
requirements, or the application of any pre-existing condition limitations and
shall be given credit for amounts paid under a corresponding Seller's plan,
program, policy or arrangement during the same period for purposes of applying
deductibles, copayments and out-of-pocket maximums as though such amounts had
been paid in accordance with the terms and conditions of the Buyer's plans,
programs, policies or arrangements. Notwithstanding the foregoing, service and
other amounts shall not be credited to Hired Employees (or their eligible
dependents) to the extent the crediting of such service or other amounts would
produce benefits which are substantially more favorable to Hired Employees than
are provided to the current similarly situated employees of the Buyer or its
affiliates who are covered by similar plans, programs, policies and
arrangements.
34
<PAGE> 42
6.4 PARENT GUARANTY.
The Parent hereby irrevocably and unconditionally guarantees to Buyer
the prompt and complete payment and performance when due of all obligations of
the Seller under Article V of this Agreement and any Related Documents. The
obligations of the Parent (i) are absolute and unconditional and shall continue
in full force and effect until the payment and performance of all of the
obligations of the Seller that are guaranteed hereunder, (ii) are not
conditioned upon any event or contingency, or upon any attempt to enforce the
Seller's performance under this Agreement or any Related Document or any other
right or remedy against the Seller or to collect from the Seller through the
commencement of legal proceedings or otherwise, and (iii) shall be binding upon
and enforceable in full against the Parent without regard to any circumstance
which might otherwise constitute a legal defense available to, or a discharge
of, the Parent in respect of the obligations guaranteed hereby; provided,
however, that the Parent shall be entitled to assert any rights or defenses
which the Seller may have against the Buyer or its assigns and the Buyer's and
its assigns' rights hereunder shall be subject thereto (excluding any defenses
based upon the insolvency of the Seller).
6.5 NON-COMPETITION.
For a period commencing on the Closing Date and terminating on the
fourth anniversary thereof, no Restricted Party (as defined below) will,
directly or indirectly, own, manage or control or have any equity interest in
any sole proprietorship, partnership, corporation or business or any other
Person (whether as a partner, agent, security holder, creditor, consultant or
otherwise) that directly or indirectly is engaged in the business of designing,
engineering, manufacturing, marketing, selling and distributing automotive roof
rack systems and vehicular accessories (such as bike racks, ski racks and
surfboard carriers) other than rear carriers and shuttles and related rear
carrier and shuttle systems (collectively "Competitive Businesses") in the
United States of America or Canada; provided, however, that nothing herein shall
be deemed to prevent any Restricted Party from (i) acquiring through market
purchases and owning, solely as an investment, less than two percent of the
equity securities of any class of any issuer whose shares are registered under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and
are listed or admitted for trading on any United States national securities
exchange or are quoted on the National Association of Securities Dealers
Automated Quotations System or on any Canadian stock exchange or any similar
system of automated dissemination of quotations of securities prices in common
use, so long as the Restricted Party is not a member of any "control group"
(within the meaning of the rules and regulations of the United States Securities
and Exchange Commission) of any such issuer and which is engaged in a
Competitive Business, (ii) from owning one Competitive Business with aggregate
annual revenues less than Cnd. $5,000,000, provided, however, that in the event
such Competitive Business has aggregate annual revenues equal to or in excess of
Cnd. $5,000,000, the Seller shall not be deemed to be in violation of this
Section 6.5 until one year after the date that the financial statements of such
Competitive Business shall reflect such fact, or (iii) owning an interest
acquired as a creditor in bankruptcy provided that the Restricted Party makes
arrangements reasonably satisfactory to the Buyer to dispose of such interest as
promptly as reasonably practicable after the acquisition of such investment (and
in any event within one year after the acquisition of such investment). In the
event that any Restricted Party shall own, manage or control, directly or
indirectly any Competitive Business, the Parent or Seller shall immediately
notify Buyer in writing and, from
35
<PAGE> 43
time to time, upon Buyer's request, deliver such financial or other information
and certifications to the Buyer to enable the Buyer to monitor the Restricted
Parties' compliance with this Section 6.5. The Restricted Parties agree that the
covenant provided for in this Section 6.5 is reasonable and necessary in terms
of time, activity and territory to protect the Buyer's interest as a buyer of
the Purchased Assets and the Business. To the extent that the covenant provided
for in this Section 6.5 may later be deemed by a court to be too broad to be
enforced with respect to its duration or with respect to any particular activity
or geographic area, the court making such determination shall have the power to
reduce the duration or scope of the provision, and to add or delete specific
words or phrases to or from the provision. The provision as modified shall then
be enforced. As used in this Agreement, a "Restricted Party" is the Seller, the
Parent and any of their Affiliates; provided, however, that the restrictions of
this Section 6.5 shall not be deemed to apply to any Person (other than any
controlled Affiliate of the Parent or any subsidiary) that acquires, whether by
purchase, merger or otherwise, all or any portion of the assets or capital stock
of the Parent or any subsidiary thereof solely to the extent that any actions
that would otherwise be limited or prohibited by the provisions of this Section
6.5 are conducted by or on behalf of any Person through an entity other than the
Parent or any subsidiary of the Parent.
6.6 NON-DISCLOSURE.
(a) Neither the Seller, the Parent nor any of their respective
controlled Affiliates (collectively, the "Covered Persons") shall disclose,
divulge, furnish or make accessible to anyone (other than the Buyer or any of
its Affiliates or representatives) any Confidential Information (as defined
below), or in any way use any such Confidential Information in the conduct of
any business.
(b) Nothing in this Section 6.6 shall prohibit the disclosure by any
Covered Person of any Confidential Information to (i) any federal, provincial,
state or other regulatory authority having jurisdiction over such Covered Person
or (ii) any other Person to which such disclosure shall, in the opinion of
counsel, be legally necessary (x) to effect compliance with any law, rule,
regulation or order applicable to such Covered Person, (y) in response to any
subpoena or other legal process, (z) in connection with any litigation to which
such Covered Person is a party; provided, however, that no disclosure shall be
made until such Covered Person shall give written notice to the Buyer of the
intention to disclose such Confidential Information so that the Buyer may
contest the need for disclosure, and such Covered Person shall reasonably
cooperate at the request of the Buyer with the Buyer in connection with any such
proceeding.
(c) For purposes of this Section 6.6, "Confidential Information" means
any confidential information pertaining to the Purchased Assets or the Business
immediately prior to the Closing, including, but not limited to, information
concerning its financial condition, prospects, customers, sources of leads,
methods of doing business, and the manner of design, manufacture, financing,
marketing and distribution of its products; provided, however, that Confidential
Information does not include information that is or becomes generally available
to the public other than as a result of a disclosure in violation of this
Section 6.6 by any Covered Person.
36
<PAGE> 44
6.7 NON-SOLICITATION OF EMPLOYEES AND CUSTOMERS.
For a period of four years following the Closing Date with respect to
senior executives or key management and employees of the Buyer, and for a period
of one year following the Closing Date with respect to the Buyers's other
employees, no Restricted Party will, directly or indirectly, for itself or for
any other Person, attempt to employ or enter into any contractual employment
arrangement with any employee of the Buyer or any former employee of the Buyer
until six months after such Person's employment with the Buyer ended.
6.8 USAGE OF TRADENAMES.
The Buyer shall, for no additional consideration in excess of the
Purchase Price, have the right to sell inventory of the Business existing as of
the Closing under the tradenames "Bell" and "Rhode Gear" to the extent such
tradenames currently appear on such inventory. The Parent shall not and shall,
not permit its subsidiaries to prevent or in any way interfere with the Buyer's
rights under this Section 6.8.
6.9 AGREEMENTS IN RESPECT OF INVENTORY.
For a period of 90 days after the Closing Date, the Parent shall or
shall cause any of its Affiliates to provide reasonable access from time to time
to Buyer or its agents for the purpose of removing any portion of the Purchased
Assets located at Route 136E, Rantoul, Illinois 61866. During such period, the
Parent shall safekeep and store such Purchased Assets in a safe and commercially
reasonable manner.
6.10 AGREEMENTS REGARDING CANADIAN TAXES.
The Buyer and the Seller shall each execute and file a joint election
under Section 167 of the Income Tax Act (Canada) and the corresponding
provisions of any other applicable tax Law, within the prescribed time periods,
in respect of the Purchased Assets. The Seller and the Buyer agree to prepare
and file their respective tax returns in a manner consistent with such elections
and the allocation of the Purchase Price set out in Section 2.3.
ARTICLE VII
MISCELLANEOUS
7.1 EXPENSES; TRANSFER TAXES, ETC.
All fees, costs and expenses incurred by any party to this Agreement or
any Related Document in connection with, relating to or arising out of the
execution, delivery and performance of this Agreement or any Related Document
and the consummation of the transactions contemplated hereby, including, without
limitation, attorneys', accountants' and other professional fees and expenses,
shall be borne by such party; provided, however, that up to U.S. $50,000 of the
reasonable fees and expenses of the Seller shall be reimbursed by the Buyer at
the Closing or promptly thereafter upon delivery of satisfactory back-up
documentation. The Seller shall pay all sales, use, gains and excise taxes and
all registration, or transfer taxes which
37
<PAGE> 45
may be payable in connection with the transactions contemplated by
this Agreement and the Related Documents.
7.2 ENTIRE AGREEMENT.
This Agreement and the Related Documents (including the Schedules and
the Exhibits attached hereto and thereto) and the other documents, instruments
and certificates referred to herein and therein contain the entire agreement
among the parties hereto with respect to the transactions contemplated hereby
and thereby and supersede all prior agreements or understandings between the
parties with respect hereto and thereto.
7.3 RELATED DOCUMENTS.
As used in this Agreement, the term "Related Documents" means,
collectively, the Bill of Sale and Assumption Agreement and the other Conveyance
Instruments the Patent License and the Sub-Lease, dated as of the date hereof
between the Seller and the Buyer.
7.4 NOTICES.
All notices or other communications which are required or permitted
hereunder shall be in writing and shall be deemed to have been given if (a)
personally delivered or sent by telecopier, (b) sent by nationally-recognized
overnight courier or (c) sent by registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
if to the Buyer, to:
Advanced Accessory Systems Canada Inc./
Les systemes d'accessoire Advanced Canada inc.
c/o Advanced Accessory Systems, LLC
Sterling Town Center
12900 Hall Road
Suite 2000
Sterling Heights, Michigan 48313
Attention: Chief Executive Officer
Telephone: (810) 997-2900
Telecopier: (810) 997-6839
with a copy to:
c/o Chase Capital Partners
380 Madison Avenue
12th Floor
New York, New York 10017
Attention: Donald Hofmann
Telephone: (212) 622-3100
Telecopier: (212) 622-3101
38
<PAGE> 46
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: John J. Suydam, Esq.
Telephone: 212-408-2400
Telecopier: 212-408-2467;
if to the Seller, to:
Bell Sports Canada Inc.
c/o Bell Sports Corp.
6350 San Ignacio
San Jose, CA 95119
Attention: Chief Financial Officer
Telephone: 408-574-3436
Telecopier: 408-574-3590
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Larry A. Barden
Telephone: 312-853-7785
Telecopier: 312-853-7036; and
if to the Parent, to:
Bell Sports Corp.
6350 San Ignacio
San Jose, CA 95119
Attention: Chief Financial Officer
Telephone: 408-574-3436
Telecopier: 408-574-3590
with a copy to Sidley & Austin at the address specified above;
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such
communication shall be deemed to have been received (i) when delivered, if
personally delivered or sent by telecopier, (ii) on the Business Day after
dispatch, if sent by nationally recognized, overnight courier and (iii) on the
fifth Business Day following the date on which the piece of mail containing such
communication is posted, if sent by mail. As used herein, the term "Business
Day" means a day that is not a
39
<PAGE> 47
Saturday, Sunday or a day on which banking institutions in New York City are
not required to be open.
7.5 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement; provided, however,
that in proving this Agreement, it shall not be necessary to produce or account
for more than one counterpart hereof.
7.6 GOVERNING LAW; CONSENT TO JURISDICTION.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICTS OF LAWS (EXCEPT FOR THOSE PRINCIPLES SET FORTH IN SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW).
(B) ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, ANY RELATED DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE SELLER, PARENT
OR BUYER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE
OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK. THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREE TO BE BOUND BY ANY FINAL AND
NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE
PARTIES FURTHER IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS BY REGISTERED
MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW
YORK. THE PARTIES HEREBY EXPRESSLY AND IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH THEY 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 ANY PARTY 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, SUCH PARTY, TO THE EXTENT
PERMITTED BY LAW, HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS.
40
<PAGE> 48
7.7 BENEFITS OF AGREEMENT; ASSIGNMENT.
The terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Anything contained herein to the contrary notwithstanding,
this Agreement shall not be assignable by any party hereto without the written
consent of the other parties hereto; provided, however, that (a) the Buyer may,
without the consent of any other party, transfer or assign, in whole or from
time to time in part, to one or more of its Affiliates, any of its rights in, to
and under this Agreement, including, without limitation, the right to purchase
all or any part of the Purchased Assets, (b) the Buyer may, without the consent
of any other party, assign its rights to indemnification hereunder to or for the
benefit of any Person, (c) the Seller may, without the consent of any other
party, assign its rights to indemnification hereunder to or for the benefit of
any Affiliate and (d) the Buyer may, without the consent of any other party,
assign any or all of its rights and interests hereunder to any lenders providing
financing for the transactions contemplated hereby.
7.8 CONSTRUCTION.
The provisions of this Agreement shall be construed according to their
fair meaning and neither for nor against any party hereto irrespective of which
party caused such provisions to be drafted. Each of the parties acknowledges
that it has been represented by an attorney in connection with the preparation
and execution of this Agreement.
7.9 PRONOUNS.
As used herein, all pronouns shall include the masculine, feminine,
neuter, singular and plural thereof whenever the context and facts require such
construction.
7.10 DESCRIPTIVE HEADINGS.
Descriptive headings are for convenience only and shall not control or
affect the meaning or construction of any provisions of this Agreement.
7.11 SEVERABILITY.
It is the desire and intent of the parties that the provisions of this
Agreement shall be enforced to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any provision of this Agreement shall be adjudicated to be
invalid, illegal or unenforceable in any respect in any jurisdiction, such
provision shall be automatically deemed amended, but only to the extent
necessary to render such provision valid, legal and enforceable in such
jurisdiction, such amendment to apply only with respect to the operation of such
provision in such jurisdiction, and the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
7.12 DISCLAIMER OF WARRANTIES.
The Seller makes no representations or warranties with respect to any
projections, forecasts or forward-looking information provided to the Buyer.
There is no assurance that any
41
<PAGE> 49
such projected or forecasted results will be achieved. EXCEPT AS TO
THOSE MATTERS EXPRESSLY COVERED BY THE REPRESENTATIONS AND WARRANTIES IN THIS
AGREEMENT AND THE RELATED DOCUMENTS, THE SELLER IS SELLING THE PURCHASED ASSETS
(AND THE BUSINESS) ON AN "AS IS, WHERE IS" BASIS AND DISCLAIMS ALL OTHER
WARRANTIES AND REPRESENTATIONS WHETHER EXPRESS OR IMPLIED. THE SELLER MAKES NO
REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE AND NO IMPLIED WARRANTIES WHATSOEVER.
7.13 AMENDMENT.
This Agreement may not be amended except by an instrument in writing
signed by the Buyer, the Seller and the Parent.
7.14 NO THIRD PARTY BENEFICIARIES.
Nothing in the Agreement shall confer any rights upon any Person other
than the parties hereto and their respective heirs, successors and permitted
assigns.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Asset Purchase Agreement to be executed on its behalf as of the day and year
first above written.
BELL SPORTS CANADA INC.
By:___________________________
Name:
Title:
BELL SPORTS CORP.
By:___________________________
Name:
Title:
ADVANCED ACCESSORY SYSTEMS
CANADA INC./LES SYSTEMES
D'ACCESSOIRE ADVANCED CANADA INC.
By:___________________________
Name:
Title:
42
<PAGE> 1
EXHIBIT 10.4
Memorandum of Agreement made and entered into on the 24th day of July, 1997,
AMONG:
ROBERT BOULARD
(hereinafter referred to as "Boulard")
PARTY OF THE FIRST PART,
- and -
ALAN HAMER
(hereinafter referred to as Hamer")
PARTY OF THE SECOND PART,
(Boulard and Hamer, being hereinafter
referred to collectively as the "Vendors")
- and -
ADVANCED ACCESSORY SYSTEMS CANADA INC. / LES
SYSTEMS D'ACCESSOURY ADVANCED DU CANADA INC.
(hereinafter referred to as the "Purchaser")
PARTY OF THE THIRD PART.
WHEREAS the Vendors have agreed to sell and the Purchaser has agreed to
purchase all the Vendors' issued and outstanding shares in the capital stock of
the Corporation.
NOW, THEREFORE, THIS AGREEMENT WITNESSETH AS FOLLOWS:
SECTION 1 - DEFINED TERMS
1.1 Where used herein the following terms have the following meanings
respectively:
1.1.1 "Agreement" means this memorandum of agreement;
1.1.2 "Banking Day" means any day, Monday through Friday, inclusively, when
Canadian chartered banks are open for business in the City of Toronto,
Province of Ontario;
<PAGE> 2
2
1.1.3 "Benefit Plans" means all pension, retirement, profit sharing, bonus,
savings, compensation, incentive, severance, stock option, stock
purchase, stock appreciation, group insurance, medical,
hospitalization, disability, death and other similar plans, programs,
arrangements or practices covering any or all of the past or present
employees, shareholders, directors or officers of the Corporation; and
"Benefit Plan" means any one of them;
1.1.4 "Best Efforts" means the taking by a party of all such actions as would
be prudent in accordance with reasonable commercial practices as applied
to the particular matter in question;
1.1.5 "Closing" means the completion of the transaction contemplated herein on
the Closing Date, at the offices of Pinckard, Wyjad, 39 Dominion Street,
Bracebridge, Ontario P1L 1T6, or such other place as the parties may
agree upon;
1.1.6 "Closing Date" means July 9, 1997, or such other Banking Day as the
parties may agree upon;
1.1.7 "1997 Financial Statements" means the financial statements of the
Corporation for the period ended January 31, 1997, consisting of the
unaudited balance sheet of the Corporation as at January 31, 1997, and
the unaudited statements of earnings, retained earnings and changes in
financial position for the period ending March January 31, 1997, and
annexed hereto as Schedule 1.1.7;
1.1.8 "Constating Documents" means the constating documents of the Corporation
annexed hereto as Schedule 1.1.8;
1.1.9 "Contracts" means the agreements, obligations and undertakings listed on
Schedule 1.1.9 annexed hereto;
1.1.10 "Corporation" means Nomadic Sport Inc.;
1.1.11 "Environment" means surface waters, groundwater, drinking water supply,
land surface, subsurface strata, air, both inside and outside of
buildings and structures, and plant and animal life;
1.1.12 "Boulard Employment Agreement" means the employment agreement to be
entered into between Boulard and Advanced Accessory Systems, LLC on the
Closing Date annexed hereto as Schedule 1.1.12;
1.1.13 "Boulard Purchase Price" means One Hundred and Ninety Thousand, Six
Hundred and Twenty Five ($190,625.00) Dollars;
<PAGE> 3
3
1.1.14 "Boulard Shares" means One Thousand, One Hundred and Twenty Five (1,125)
Common shares in the capital of the Corporation;
1.1.15 "Governmental Authority" means any government or political subdivision
thereof, whether federal, state, provincial, county, local, municipal or
regional or any other governmental authority, any agency or
instrumentality of any such government, political subdivision or other
governmental authority, any court, arbitral tribunal or arbitrator, and
any non-governmental regulating body, to the extent that the rules,
regulations or orders of such body have the force of law;
1.1.16 "Hazardous Substance" means any toxic waste, pollutant, contaminant,
hazardous substance, hazardous material, toxic substance, hazardous
waste, special waste, industrial substance or waste, petroleum or
petroleum-derived substance or waste, or any constituent of any of same
as such terms are regulated under or defined by any Environmental Law;
1.1.17 "Indemnified Party" has the meaning ascribed thereto in subsection 7.6
hereof;
1.1.18 "Indemnifying Party" has the meaning ascribed thereto in subsection 7.6
hereof;
1.1.19 "Hamer Purchase Price" means One Hundred and Nine Thousand, Three
Hundred and Seventy Five ($109,375.00) Dollars;
1.1.20 "Hamer Shares" means Eight Hundred and Seventy Five (875) Common shares
in the capital of the Corporation;
1.1.21 "Losses" has the meaning ascribed thereto in subsection 7.1 hereof;
1.1.22 "Non-Competition and Confidentiality Agreement" means the agreement to
be entered into between the Corporation, Boulard, Hamer, Janet Boulard
and the Purchaser on the Closing Date and annexed hereto as Schedule
1.1.22;
1.1.23 "Permits" means all permits, licenses, consents, certificates,
authorizations and approvals required pursuant to applicable
Environmental Laws;
1.1.24 "Purchase Price" means Three Hundred Thousand ($300,000.00) Dollars;
1.1.25 "Purchased Shares" means, collectively, the Boulard Shares, and the
Hamer Shares;
<PAGE> 4
4
1.1.26 "Real Property" means the real property, together with all buildings,
structures, fixtures and improvements thereon owned by the Corporation
and described in Schedule 1.1.26;
1.1.27 "Real Property Mortgage" means the mortgages affecting the Real Property
and annexed hereto as Schedule 1.1.27;
1.1.28 "Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or
migration into the Environment;
1.1.29 "Tax Claim" means any claim based upon, arising out of or otherwise in
respect of any inaccuracy in or any breach of any representation or
warranty of the Vendors contained in paragraphs 4.3.17 and 4.3.26
hereof;
1.1.30 "Taxes" (or "Tax" where the context requires) means all taxes, whether
federal, provincial, local, municipal or otherwise (including, without
limitation, income, profit, corporation, business, excise, sales, goods
and services, value-added, franchise, withholding, capital, transfer,
stamp, unemployment compensation, payroll, property and duties), whether
or not measured in whole or in part by net income, and including
interest and penalties with respect thereto;
1.1.31 "Third Party Claim" has the meaning ascribed thereto in subsection 7.8
hereof;
1.1.32 "Title Defect(s)" means any mortgage, deed of trust, lien, pledge,
security interest, hypothec, charge (including any local improvement
charge), right of first refusal, easement, servitude, restrictive
covenant, encroachment or other survey or title defect, encumbrance or
other restriction or limitation whatsoever, other than (i) any
unperfected security interest for a purchase money obligation under the
Personal Property Security Act (Ontario) incurred by the
Corporation in the ordinary and usual conduct and course of its
business; (ii) any registered restriction or covenant which runs with
the Leased Real Property and/or the Real Property provided same is
complied with and does not restrict in any material adverse respect the
current use of the Leased Real Property and/or the Real Property by the
Corporation; (iii) unregistered liens for taxes, assessments and
governmental charges or levies not yet due; (iv) undetermined or
inchoate privileges, liens or charges of mechanics, labourers or
workmen, builders and contractors, suppliers of materials or others
incidental to construction of improvements on the Leased Real Property
and/or the Real Property incidental to maintenance or operation of the
same and arising by operation of law, provided that claims for them
have not yet been registered or filed pursuant to law and provided they
relate to obligations not due and delinquent; (v) statutory privileges,
liens and charges which relate to obligations incurred with respect to
hydro-electric and other
<PAGE> 5
5
utility services and which are not overdue; (vi) servitudes, easements,
rights-of-way and other similar rights in the nature of a servitude or
easement which do not prevent or materially adversely affect the
current use of the Leased Real Property and/or Real Property; (vii)
zoning by-laws and ordinances and municipal by-laws and regulations and
land use restrictions which do not materially, adversely affect the
current use of the Leased Real Property and/or the Real Property;
(viii) any reservations and exceptions expressed in the original grant
from the Crown; (ix) title defects or irregularities which are of a
minor nature and which, in the aggregate, do not materially, adversely
affect the current use or value of the Leased Real Property and/or the
Real Property; (x) any registered municipal or similar agreements and
registered agreements with publicly regulated utilities provided the
same have been complied with to date; (xi) any leases, the benefit
of which form part of the property of the Corporation; and (xii) any
encumbrance which the Purchaser has expressly agreed to assume or
accept pursuant to the terms of this Agreement;
1.1.33 "To the best of their knowledge" means a statement of the declarants'
knowledge of the facts or circumstances to which such qualification
relates, after reasonable inquiry and investigation into issues brought
to their attention or with respect to which they have knowledge.
SECTION 2 - SCHEDULES
2.1 The following are the Schedules annexed hereto and deemed to be a part
hereof:
Schedule 1.1.7 - 1997 Financial Statements
Schedule 1.1.8 - Constating Documents
Schedule 1.1.9 - List of Contracts
Schedule 1.1.12 - Boulard Employment Agreement
Schedule 1.1.22 - Non-Competition and Confidentiality Agreement
Schedule 1.1.26 - Real Property
Schedule 1.1.27 - Real Property Mortgage
Schedule 4.3.3 - Authorized Capital of the Corporation
Schedule 4.3.5 - Powers of Attorney
Schedule 4.3.9 - List and Condition and of Assets
Schedule 4.3.11 - Intellectual Property
Schedule 4.3.12 - Aged Listing of Accounts Receivable and Accounts
Payable
Schedule 4.3.16 - Litigation
Schedule 4.3.18.1 - Labour Relations Issues
Schedule 4.3.19 - Benefit Plans
Schedule 4.3.20 - Insurance
<PAGE> 6
6
Schedule 4.3.21 - List of Employees
Schedule 4.3.22.1 - Suppliers and Customers
Schedule 4.3.24 - Related Transactions
Schedule 9.1.1 - Vendors' Solicitors' Opinion
Schedule 9.1.3 - Releases of Officers and Directors
SECTION 3 - PURCHASE AND SALE
3.1 Subject to subsection 9.2, on the Closing Date the Purchaser shall
purchase the Boulard Shares and the Hamer Shares from Boulard and Hamer,
respectively, and pay for same as follows and the Vendors, jointly and
severally, agree as follows:
3.1.1 Boulard shall sell to the Purchaser, and the Purchaser shall purchase
from Boulard, the Boulard Shares in consideration of the payment of the
sum of One Hundred and Ninety Thousand, Six Hundred and Twenty Five
($190,625.00) Dollars (the "Boulard Purchase Price"), payable on
closing:
3.1.2 Hamer shall sell to the Purchaser, and the Purchaser shall purchase from
Hamer, the Hamer Shares in consideration of the payment of the sum of
One Hundred and Nine Thousand, Three Hundred and Seventy Five
($109,375.00) Dollars (the "Hamer Purchase Price"), payable on closing:
SECTION 4 - REPRESENTATIONS AND WARRANTIES OF THE VENDORS
4.1 Boulard hereby represents and warrants to the Purchaser that the
following representations and warranties are true and correct and
acknowledges that the Purchaser is relying upon such representations and
warranties in connection with the transaction contemplated hereby and that the
Purchaser would not have entered into this Agreement without the same:
4.1.1 OWNERSHIP OF BOULARD SHARES
Boulard is, on the date hereof, the legal and beneficial owner of One
Thousand, One Hundred and Twenty Five (1,125) Common shares in the
capital stock of the Corporation, and these are the only shares which he
owns legally and beneficially in the Corporation, with good and
marketable title, free and clear of any mortgage, lien, encumbrance,
security interest, restriction or claim of any kind whatsoever. On
Closing, Boulard will deliver to the Purchaser good and marketable title
to the Boulard Shares free and clear of any mortgage, lien, encumbrance,
security interest, restriction or claim of any kind whatsoever. The
share certificates representing the Boulard Shares are true, genuine and
subsisting, and nothing affects the validity of same;
<PAGE> 7
7
4.1.2 OPTIONS TO ACQUIRE BOULARD SHARES
There are no outstanding options or other rights or agreements to
purchase any of the Boulard Shares, and Boulard has not agreed to sell
any of the Boulard Shares;
4.1.3 SHAREHOLDERS AGREEMENT
None of the Boulard Shares is subject to any shareholders agreement,
voting trust, escrow agreement or other agreement or restriction.
Without limiting the generality of the foregoing, there is no
restriction or limitation on the power of Boulard to vote any of
the Boulard Shares. Boulard does not have and does not know of any
other shareholder of the Corporation who has any interest, directly or
indirectly, in any corporation, partnership, business trust,
association, syndicate, joint venture or other business entity or
organization of any kind whatsoever in competition or engaged in a
similar business to that of the Corporation. Boulard has no material
direct or indirect interest or ownership, or profit participation, in
any outside business with which the Corporation has had significant
transactions, or with which Boulard has had significant transactions, or
which are competitors of the Corporation, and, to the best of the
information and belief of Boulard, no other officer, director, or
employee of the Corporation, has any such material direct or indirect,
interest or ownership, or profit participation, in any outside
businesses which have had significant transactions with the Corporation
or which are its competitors;
4.1.4 LITIGATION
There are no claims, actions, suits, arbitrations, investigations or
other proceedings pending or threatened which affect any of the Boulard
Shares;
4.1.5 AUTHORITY TO ENTER INTO AGREEMENT
Boulard has the legal capacity and authority to enter into this
Agreement and consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the performance of the
transaction contemplated hereby will not, with or without the giving of
notice and/or the passage of time, or both, (i) violate any provision of
law applicable to Boulard, or require any consent or approval of, or
any filing with or notice to, any third party, governmental or
otherwise, (ii) result in the loss of any right under or conflict with
or result in a default of any provision or termination of or accelerate
the date of performance of any obligation under any agreement,
obligation or undertaking which affects the Boulard Shares. This
Agreement constitutes a valid and binding obligation of Boulard
enforceable against him in accordance with its terms, subject to
applicable bankruptcy, insolvency and other similar laws relating to or
affecting the enforcement of creditors' rights generally, and principles
of equity;
<PAGE> 8
8
4.1.6 RESIDENCE
Boulard is not a "non-resident" for purposes of the Income Tax Act
(Canada);
4.2 Hamer hereby represents and warrants to the Purchaser that the following
representations and warranties are true and correct and acknowledges that the
Purchaser is relying upon such representations and warranties in connection
with the transactions contemplated hereby and that the Purchaser would not have
entered into this Agreement without the same;
4.2.1 OWNERSHIP OF HAMER SHARES
Hamer is, on the date hereof, the legal and beneficial owner of Eight
Hundred and Seventy Five (875) Common shares in the capital stock of the
Corporation and these are the only shares which he owns legally or
beneficially in the Corporation with good and marketable title, free and
clear of any mortgage, lien, encumbrance, security interest, restriction
or claim of any kind whatsoever. On Closing, Hamer will deliver to the
Purchaser good and marketable title to the Hamer Shares, free and
clear of any mortgage, lien, encumbrance, security interest, restriction
or claim of any kind whatsoever. The share certificate representing the
Hamer Shares is true, genuine and subsisting, and nothing affects the
validity of same;
4.2.2 OPTIONS TO ACQUIRE HAMER SHARES
There are no outstanding options or other rights or agreements to
purchase any of the Hamer Shares, and Hamer has not agreed to sell any
of the Hamer Shares;
4.2.3 SHAREHOLDERS AGREEMENT
None of the Hamer Shares is subject to any shareholders agreement,
voting trust, escrow agreement or other agreement or restriction.
Without limiting the generality of the foregoing, there is no
restriction or limitation on the power of Hamer to vote any of the Hamer
Shares. Hamer does not have and does not know of any other shareholder
of the Corporation who has any interest, directly or indirectly, in any
corporation, partnership, business trust, association, syndicate, joint
venture or other business entity or organization of any kind whatsoever
in competition or engaged in a similar business to that of the
Corporation. Hamer has no material direct or indirect interest or
ownership, or profit participation, in any outside business with which
the Corporation has had significant transactions, or with which Hamer
has had significant transactions, or which are competitors of the
Corporation, and, to the best of the information and belief of Hamer, no
other officer, director, or employee of the Corporation, has any such
material direct or indirect, interest or ownership, or profit
participation, in any outside businesses which have had significant
transactions with the Corporation or which are its competitors;
<PAGE> 9
9
4.2.4 LITIGATION
There are no claims, actions, suits, arbitrations, investigations or
other proceedings pending or threatened which affect any of the Hamer
Shares;
4.2.5 AUTHORITY TO ENTER INTO AGREEMENT
Hamer has the legal capacity and authority to enter into this Agreement
and consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the performance of the transactions
contemplated hereby will not, with or without the giving of notice
and/or the passage of time, or both, (i) violate any provision of law
applicable to Hamer or require any consent or approval of, or any filing
with or notice to, any third party, governmental or otherwise or (ii)
result in the loss of any right under or conflict with or result in a
default of any provision or termination of or accelerate the date of
performance of any obligation under any agreement, obligation or
undertaking which affects the Hamer Shares. This Agreement constitutes a
valid and binding obligation of Hamer enforceable against him in
accordance with its terms, subject to applicable bankruptcy, insolvency
and other similar laws relating to or affecting the enforcement of
creditors' rights generally, and principles of equity; and
4.2.6 RESIDENCE
Hamer is not a "non-resident" for purposes of the Income Tax Act
(Canada).
4.3 The Vendors, jointly and severally, hereby represent and warrant to the
Purchaser that the following representations and warranties are true and
correct and acknowledge that the Purchaser is relying upon such representations
and warranties in connection with the transactions contemplated hereby and that
the Purchaser would not have entered into this Agreement without the same:
4.3.1 CONSTATING DOCUMENTS
The Corporation is a corporation duly organized, existing, subsisting
under the laws of the Province of Ontario, has full corporate power to
carry on its business as now conducted, and does not now carry on
business in any jurisdiction other than Ontario, and does not own any
assets in any jurisdiction other than Ontario, which would require
qualification in another jurisdiction. Schedule 1.1.8 annexed hereto
contains a true and complete copy of the constating documents of the
Corporation, which have not been amended other than as reflected in said
Schedule, and there is no application pending for the amendment of any
of the same. The minute books and corporate records of the Corporation
contain true and complete records of all the by-laws of the Corporation
and all meetings and consents in lieu of meetings of the board of
directors of the Corporation and their shareholders, and accurately and
completely reflect all matters referred to in such minutes
<PAGE> 10
10
and consents. The share certificate book and the register of
shareholders, directors and transfers of shares of the Corporation are
complete and accurate. There is no claim, liability or obligation of
the Corporation approved at any meeting of the shareholders or directors
of the Corporation which is not set out or contained in the corporate
records or minute book of the Corporation;
4.3.2 OPTIONS
There are no outstanding subscriptions, calls, options, warrants or
other agreements or rights to purchase or subscribe for any shares of
the capital stock of the Corporation or to convert any obligation into
shares of the capital stock of the Corporation and the Corporation has
not agreed to issue or sell any shares of its capital stock or any
securities of any kind;
4.3.3 CAPITAL STOCK
Schedule 4.3.3 annexed hereto sets forth the authorized capital of the
Corporation, and all of the shareholders of issued shares in the capital
stock of the Corporation. All of the Purchased Shares are validly
issued, fully paid and non-assessable;
4.3.4 SUBSIDIARIES
The Corporation does not have any subsidiary or own any equity or other
interest in any corporation, partnership, joint venture or other entity.
4.3.5 POWERS OF ATTORNEY
Schedule 4.3.5 annexed hereto sets forth a true and complete list of (i)
the name of each person with whom the Corporation maintains an account
or safety deposit box and the names of all persons authorized to draw
thereon or having access thereto and (ii) the name of each person
holding a general or special power of attorney from the Corporation, and
a true and complete copy thereof;
4.3.6 FINANCIAL STATEMENTS AND CLOSING FINANCIAL STATEMENTS
The 1997 Financial Statements have been prepared from the books and
records of the Corporation in accordance with Canadian generally
accepted accounting principles applied on a consistent basis throughout
the period indicated and have been prepared upon a basis consistent with
that of preceding years and present fairly, accurately and completely
the financial position and results of operation of the Corporation as at
the year ending January 31, 1997, including, without limitation,
accruals or provisions for warranty claims, bonuses, vacation pay and
Taxes within the bounds of reasonable materiality. Except to the extent
reflected or reserved against in the 1997 Financial Statements, the
Corporation has no liabilities or obligations of any nature whatsoever,
whether accrued, absolute, contingent
<PAGE> 11
11
or otherwise, other than those incurred by the Corporation in the
ordinary course of business since January 31, 1997.
4.3.7 SUBSEQUENT ACTIVITIES
Without limiting the generality of paragraph 4.3.6 hereof, since January
31, 1997, there has not occurred any material adverse change in the
condition, financial or otherwise, of the Corporation other than changes
occurring in the ordinary course of business which changes, individually
or in the aggregate, have not materially adversely affected the
Corporation's business, financial condition or results of operations.
Without limiting the generality of the foregoing, since January 31,
1997, the Corporation has not, directly or indirectly:
4.3.7.1 declared or paid any dividend on its capital stock or
redeemed, purchased or otherwise acquired any shares of its capital
stock, or otherwise reduced its paid up capital or altered its capital
stock,
4.3.7.2 incurred any material obligation or liability or entered
into any agreement, obligation, undertaking or transaction outside the
ordinary and usual conduct and course of its business,
4.3.7.3 except for the payment of bonuses to employees with respect
to the year ended January 31, 1997, which bonuses are reflected in the
1997 Financial Statements, increased the salary, benefits, bonuses or
other compensation of its officers, directors or employees or amended
its existing group insurance or bonus plans or adopted any new Benefit
Plan,
4.3.7.4 sold, leased, mortgaged, pledged or otherwise encumbered or
disposed of any of its material assets, rights or properties, except in
the ordinary and usual conduct and course of its business,
4.3.7.5 purchased or leased any additional material assets, rights
or properties, except for purchases of inventory and supplies in the
ordinary and usual conduct and course of its business,
4.3.7.6 made any purchase commitment in excess of Five Thousand
($5,000.00) Dollars or made any changes in its selling, pricing,
advertising or personnel practices,
4.3.7.7 cancelled or released any material debts or material claims
of customers,
<PAGE> 12
12
4.3.7.8 made any material change in its accounting principles,
policies or practices as heretofore applied including, without
limitation, the basis upon which its assets and liabilities are
recorded on its books, its earnings are ascertained or the methods or
rates of depreciation or amortization employed,
4.3.7.9 violated any material provision of any agreement,
obligation or undertaking to which it is a party or by which it or any
of its material assets, rights or properties may be bound, or
4.3.7.10 agreed to do any of the things described in paragraphs
4.3.7.1 through 4.3.7.9 hereof, inclusive;
4.3.7.11 received any material items of income which are
unusual or non-recurring;
4.3.7.12 materially changed the manner in which the business and
affairs of the Corporation are being conducted as at the date hereof.
4.3.7.13 since the preparation of the 1997 Financial Statements,
the Corporation has been subject to an audit of its Scientific Research
and Experimental Claims for the years 1989 to 1996. Although a Notice of
Assessment has not been issued, Revenue Canada has indicated that such
Notice will have the following effect on shareholders deficit, income
tax losses and undepreciated capital cost
<TABLE>
<CAPTION>
As reported As revised
<S> <C> <C>
Shareholders Deficit 75,073 56,346
Non Capital Loss carry-forward 284,220 42,909
Undepreciated capital cost 228,226 550,699
Investment tax credits 47,849 39,071
</TABLE>
4.3.8 TITLE TO ASSETS
The Corporation is the legal and beneficial owner of, has good and
marketable title to and possesses all its material properties, rights
and assets free and clear of any Title Defect;
4.3.8.1 TITLE TO REAL PROPERTY
The Corporation is the legal and beneficial owner of the Real Property,
has good and marketable title to the Real Property, and it possesses
the Real Property free of any Title Defect and free of any mortgages,
liens or encumbrances, except the Real Property Mortgage, subject to
usual qualifications on title.
<PAGE> 13
13
4.3.9 LIST AND CONDITION OF ASSETS
Schedule 4.3.9 annexed hereto sets forth a true and complete list of all
the major fixed assets owned or used by the Corporation having a
value in excess of Five Thousand ($5,000.00) Dollars, all of which are
located at the Real Property. To the best of Boulard's knowledge all of
the material assets and properties of the Corporation (i) are operating
as required for the normal and ordinary conduct of the Corporation's
business and have been serviced and maintained in the manner of a
prudent owner and (ii) are adequate and sufficient for the continuing
conduct of the business of the Corporation as now conducted, subject to
normal wear and tear. There are no outstanding work orders relating to
any of the assets, rights or properties of the Corporation which were
received from or required by any Governmental Authority;
4.3.10 REAL PROPERTY
4.3.10.1 The Corporation leases no real property. The Real Property
is the only Real Property, which the Corporation owns, uses or occupies.
4.3.10.2 except as set forth in Schedule 1.1.11 annexed hereto, the
Corporation has not entered into any sublease, license or other
agreement granting to any person any right to the possession, use,
occupancy or enjoyment of the Real Property or any portion thereof,
4.3.10.3 all water, gas, electrical, steam, compressed air,
telecommunication, sanitary and storm sewage lines and systems and
other similar systems serving the Real Property are operating as
required for the normal and ordinary conduct of the Corporation's
business and have been serviced and maintained in the manner of a
prudent owner. The continued existence, use, occupancy and operation of
each such line and system is not dependent on the granting of any
special permit, exception, approval or variance, and
4.3.10.4 the Corporation has received all certificates of
occupancy, permits, licenses, approvals and authorizations of all
governmental authorities having jurisdiction over the Real Property,
required to have been issued to the Corporation to enable the Real
Property to be lawfully occupied and used by the Corporation for all of
the purposes for which they are currently occupied and used, and each of
the certificates, permits, licenses, approvals and authorizations have
been lawfully issued and is in full force and effect and no action by
the Corporation or the Purchaser is required in order that such
certificates, permits, licenses, approvals and authorizations will
remain valid following the completion of the transactions contemplated
hereby, except such renewals as are required by applicable law;
<PAGE> 14
14
4.3.10.5 the Corporation does not own or hold, and is not obligated
under or party to, any option, right of first refusal or other
contractual right to purchase, use, lease, occupy, acquire, sell or
dispose of the Real Property or any portion thereof or interest therein;
4.3.10.6 there are no pending or, to the best of their knowledge,
threatened expropriation proceedings affecting the Real Property or any
part thereof or any sale or other disposition of the Real Property or
any part thereof in lieu of expropriation.
4.3.11 INTELLECTUAL PROPERTY
Schedule 4.3.11 annexed hereto is a true and complete list and copy of
all Intellectual Property used by the Corporation in the conduct of its
business, as currently conducted, none of which has been opposed or
held unenforceable and each of which is in full force and effect. To
the best of their knowledge, the Corporation is the absolute owner and
has the sole and exclusive right to use the said Intellectual Property
without making any payment to others or granting rights to others in
exchange. To the best of their knowledge, there is no infringement by
others of any of the said Intellectual Property. To the best of their
knowledge, the operations of the Corporation do not infringe in any
respect upon the Intellectual Property of any other person or entity
and, without limiting the generality of paragraph 4.3.16 hereof, no
other person or entity has claimed or threatened to claim the right to
use any Intellectual Property set forth in Schedule 4.3.11 annexed
hereto or to deny the right of the Corporation to use same. No license
or sub-license has been granted by the Corporation with respect to any
Intellectual Property. The completion of the transactions contemplated
hereby will not limit the ownership of or the use by the Corporation of
any of the Intellectual Property. To the best of their knowledge, no
third party has any interest in any of the Intellectual Property. The
Corporation has not conducted business under any name other than its
corporate name;
4.3.12 ACCOUNTS RECEIVABLE AND PAYABLE
Schedule 4.3.12 annexed hereto sets forth a true and complete (i) aged
accounts receivable listing of the Corporation as of June 30, 1997, and
(ii)
<PAGE> 15
15
aged accounts payable listing of the Corporation as of June 30, 1997.
The accounts receivable of the Corporation reflected on the 1997
Financial Statements and those created after January 31, 1997, are
genuine and bona fide receivables which arose in the ordinary course of
business;
4.3.13 CONTRACTS
The Vendors have delivered to the Purchaser a true and complete copy of
each of the material written Contracts. The Corporation has no
material verbal contracts. The Contracts represent all material
agreements, obligations and undertakings to which the Corporation is a
party or by which the Corporation or its assets may be bound. The
Corporation is not in material violation of or in material default with
respect to and no event has occurred which, with lapse of time or
action by a third party, or both, would result in violation of or a
material default with respect to any of the Contracts. Each of the
Contracts is in full force and effect and is valid, binding and
enforceable in accordance with its terms and, to the best of their
knowledge, all parties to the Contracts (other than the Corporation)
are in compliance with their material obligations thereunder. The
Corporation has complied with and satisfied (and will have complied
with and satisfied in calendar year 1994) all requirements relating to
minimum purchase order and sales levels in the Contracts. The
Corporation does not have any executory or open contracts with any
customers. The aggregate outstanding purchase orders or purchase
commitments do not exceed Twenty-Five Thousand ($25,000.00) Dollars;
4.3.14 QUALIFICATIONS
The Corporation has not been required to suspend operations of its
business or been liable for a fine or penalty as a result of the
operation of its business. The Corporation has all licenses, permits,
certificates and authorizations necessary for the conduct of its
business as presently conducted and such licenses, permits,
certificates and authorizations are validly issued, in full force and
effect and the Corporation is in compliance therewith, and none of
them will be affected by the transactions contemplated hereby;
4.3.15 COMPLIANCE WITH LAWS
The Corporation has to date received no notice from any source that it
is in material violation of any law, by-law, ordinance or regulation of
any Governmental Authority applicable to the Corporation or to which
the Corporation is subject;
4.3.16 LITIGATION
Schedule 4.3.16 annexed hereto contains true and complete details of
all claims, actions, suits, investigations, arbitrations and other
proceedings pending or, to the best of their knowledge, threatened
against the
<PAGE> 16
16
Corporation, including any opinions given to or discussions with any
person or other entity which may lead to litigation in the future. The
claims, actions, suits, investigations, arbitrations and other
proceedings listed on Schedule 4.3.16 annexed hereto will not,
individually or in the aggregate, have a material adverse effect on the
business, financial condition or results of operations of the
Corporation. There are no product liability claims to which the
Corporation is or has been subject. There is no order, decree,
decision, ruling or judgment of any kind in existence enjoining or
restraining the Corporation in any manner, or requiring the Corporation
to take any action of any kind;
4.3.17 TAX MATTERS
4.3.17.1 The Corporation (a) has paid all Taxes required to be paid
by it through the date hereof or such Taxes have been recorded as a
liability on the 1997 Financial Statements and (b) has duly and
punctually filed all returns, reports and other forms related to Taxes
required to be filed through the date hereof, each of which is true and
complete in all respects,
4.3.17.2 The liability of the Corporation for Taxes as of the date
of the 1997 Financial Statements do not and will not, in either case,
exceed the amount reserved for Taxes thereon and, other than in the
ordinary course of business, such liability for Taxes will not increase
from the date of the 1997 Financial Statements through the Closing Date,
4.3.17.3 No penalties or other charges are or will become due with
respect to the late filing of any Tax return of the Corporation required
to be filed on or before the Closing Date,
4.3.17.4 The Corporation has withheld from each payment made to
each of its past and present shareholders, agents, employees, officers
and directors all deductions required to be made therefrom and has paid
same to the proper tax or other authorities,
4.3.17.5 There has not been any Tax audit of any Tax return of the
Corporation in the past ten (10) years,
4.3.17.6 Each Tax return heretofore filed by the Corporation,
correctly and accurately reflects the amount of liability for Taxes
thereunder and makes all disclosures required thereon and, without
limiting the generality of paragraph 4.3.15 hereof, otherwise complies
with applicable provisions of law,
4.3.17.7 No extension of time is in force with respect to any date
on which any Tax return was or is to be filed, and no waiver or
agreement is in force for the extension of time for the assessment or
payment of any Tax, and
<PAGE> 17
17
4.3.17.8 The Corporation is registered under the Excise Tax Act
(Canada) and the Retail Sales Tax Act (Ontario);
4.3.18 LABOUR RELATIONS AND RELATIONS WITH EMPLOYEES
4.3.18.1 Without limiting the generality of paragraph 4.3.15 hereof,
and to the best of Boulard's knowledge and belief the Corporation is in
compliance with all laws and regulations respecting employment and
employment practices, terms and conditions of employment, wages and
hours of work, other than that set out on Schedule 4.3.18.1 annexed
hereto,
4.3.18.2 There is no collective agreement or labour contract to
which the Corporation is a party,
4.3.18.3 To the best of Boulard's knowledge and belief there are no
labour disruptions pending or, to the best of their knowledge,
threatened against the Corporation and the Corporation is not involved
in any controversy with any of its employees except in the ordinary and
usual conduct and course of its business,
4.3.18.4 There are no written employment agreements entered into by
the Corporation. Without limiting the generality of paragraph 4.3.12
hereof, there is no agreement providing for a specified notice of
termination or fixed term of employment. There is no director, officer
or employee of the Corporation who, provided his or her common law
rights are fulfilled, cannot be dismissed upon such notice as is
required by the Employment Standards Act of Ontario, and
4.3.18.5 To the best of their knowledge, there has never been and
there is not presently pending or existing any strike, slowdown,
picketing, work stoppage, labour arbitration or proceeding in respect of
the grievance of any employee or other labour dispute against or
affecting the Corporation, or threatened against the Corporation. To
the best of their knowledge, no application for the certification of a
collective bargaining unit has been instituted or is pending or
threatened. To the best of their knowledge, no fact, condition or
circumstance exists which could provide the basis for any work stoppage
or other labour dispute.
4.3.19 BENEFIT PLANS
4.3.19.1 Schedule 4.3.19 annexed hereto contains a list of all the
Benefit Plans to which the Corporation is a party. The Vendors have
delivered to the Purchaser a true and complete copy of all the said
Benefit Plans. Without
<PAGE> 18
18
limiting the generality of paragraph 4.3.15 hereof, all Benefit Plans
are duly registered where required by law (including registration with
the relevant tax authorities where such registration is required to
qualify for tax exemption or other beneficial tax status) and are in
good standing under all applicable laws,
4.3.19.2 There are no material outstanding defaults or violations
by the Corporation of any obligation required to be performed by it in
connection with any Benefit Plans. Without limiting the generality of
the foregoing, there are no actions, suits, claims, trials, demands,
investigations, arbitrations or other proceedings pending or, to the
best of our knowledge, threatened with respect to any of the Benefit
Plans (other than routine claims for benefits) against the Corporation,
4.3.19.3 Without limiting the generality of paragraph 4.3.14, all
Benefit Plans which are funded plans are funded in accordance with their
rules and all relevant laws and are fully funded on both a going-concern
and a termination basis. Without limiting the generality of paragraph
4.3.14, all required employer contributions, premium payments and
source-deducted employee contributions under the Benefit Plans have been
made and remitted to the funding agents including, without limitation,
all current service costs and special payments,
4.3.19.4 The Vendors have delivered to the Purchaser true and complete
copies of all documents embodying, related to or summarizing the Benefit
Plans,
4.3.19.5 No step has been taken to terminate any Benefit Plan and
no liability has been incurred by the Corporation in connection with any
Benefit Plan that has not been satisfied in full. There exists no
agreement, decree or other binding provision which prohibits the
termination of any Benefit Plan, and
4.3.19.6 No promises or commitments have been made by the
Corporation to amend any Benefit Plan or to provide increased benefits
thereunder;
4.3.20 INSURANCE
Schedule 4.3.20 annexed hereto contains a list of each insurance policy
currently maintained by the Corporation. The Vendors have delivered to
the Purchaser a true and complete copy of each of the said insurance
policies. All such policies are in full force and effect and to the
best of Boulard's knowledge and belief are not void or voidable and
nothing has been done or omitted to be done by the Corporation that
would make any such policy void or voidable. The Corporation has not
failed to give any notice or present any
<PAGE> 19
19
claim under any insurance policy when due or in a timely fashion.
No claim presented by the Corporation has been or continues to be
disputed or is under negotiation, nor does any amount recoverable from
any insurer in respect of any such claim remain unpaid;
4.3.21 EMPLOYEES
Schedule 4.3.21 annexed hereto contains a true and complete a list of
the employees of the Corporation detailing dates of hire, total
remuneration including total salary and bonuses paid and position held.
Each of the employees listed on Schedule 4.3.21 annexed hereto
received compensation from the Corporation solely in consideration of
services performed on their behalf. The salaries and bonuses of all
officers and employees of the Corporation were paid entirely by the
Corporation;
4.3.22 SUPPLIERS AND CUSTOMERS
4.3.22.1 Schedule 4.3.22.1 annexed hereto contains a true and complete
list of (i) the Corporation's five (5) largest suppliers detailing
amounts purchased during the 1996 calendar year and the 1997 year to
date from the Corporation's five (5) largest suppliers, and (ii) the
Corporation's customers, and amounts of sales during the 1996 calendar
year and the 1997 year to date in connection with the Corporation's Ten
(10) largest customers by volume; and written details of all material
customer complaints and warranty claims for each of the last three (3)
fiscal periods of the Corporation which have not been resolved. The
Corporation has not granted or consented to any mortgage, lien, pledge,
security interest, charge or encumbrance in favour of any of its
suppliers;
4.3.22.2 Since March 31, 1994, no supplier or customer of the
Corporation has cancelled or otherwise terminated or, to the best of
their knowledge, threatened to cancel or otherwise terminate its
relationship with the Corporation other than as set out on Schedule
4.3.22.2 annexed hereto. To the best of their knowledge, there is no
condition which adversely affects the supply of materials required to
conduct the business of the Corporation. There is no reason to believe
that the transactions contemplated by this Agreement will materially
adversely affect the Corporation's relationship with any supplier or
customer. The Vendors have no notice that any customers intend to cease
dealing with the Corporation.
4.3.23 INVENTORY
The inventory of the Corporation (including that reflected on the
balance sheets forming part of the Financial Statements and the Closing
Financial Statements) has been reflected in accordance with Canadian
generally accepted accounting principles, consistently applied.
Without limiting the generality of the foregoing, such inventory does
not and will not include any
<PAGE> 20
20
obsolete, defective or excess items which have not been valued in
accordance with Canadian generally accepted accounting principles,
consistently applied;
4.3.24 RELATED TRANSACTIONS
The Corporation does not have any indebtedness to any of its
shareholders, directors, officers or employees, past or present, or any
person not dealing at arms-length with any of such persons, except for
current unpaid salaries and bonuses; and no shareholder, director,
officer or employee, past or present, of the Corporation or any person
not dealing at arms-length with any of such persons has any
indebtedness to the Corporation, other than as set out on Schedule
4.3.24 annexed hereto;
4.3.25 NO BROKER
The Corporation has not employed, nor is the Corporation subject to any
claim of any broker, finder, consultant or other intermediary in
connection with the transactions contemplated by this Agreement;
4.3.26 PAID-UP CAPITAL
There is no tax liability of the Corporation under parts IV, VII or
VIII of the Income Tax Act (Canada). No property has been acquired by
the Corporation pursuant to subsection 85(1) of the Income Tax Act
(Canada). The paid up capital (as such expression is used in the
Income Tax Act (Canada)) of the Shares of the Corporation's capital
stock is identical to their stated capital under applicable corporate
legislation;
4.3.27 NO GUARANTEES
Without limiting the generality of paragraph 4.3.13 hereof, the
Corporation is not a party to nor bound by any comfort letter,
understanding or agreement of guarantee, indemnification, assumption or
endorsement or any like commitment with respect to the liabilities or
obligations of any third party, whether accrued, absolute, contingent
or otherwise;
4.3.28 PRODUCT LIABILITY AND WARRANTIES
To the best of their knowledge, but without limiting the generality of
paragraph 4.3.14 hereof, the Corporation has marketed its products and
services in accordance with all applicable truth-in-labelling, health
and safety, truth-in-advertising, anti-fraud and other such laws which
are applicable to the marketing of the Corporation's products and
services. Subject to any warranty required by law (including, without
limitation, pursuant to the Sale of Goods Act of Ontario), the
Corporation has not issued any warranty to, nor had any other
understanding or made any other agreement with, any customer relating
to warranties, including warranties, understandings or agreements
relating to the quality or condition of any products or services sold
by the Corporation.
<PAGE> 21
21
4.3.29 GRANTS AND SUBSIDIES
Without limiting the generality of paragraphs 4.1.5 and 4.2.5 hereof,
neither the execution and delivery of this Agreement nor the completion
of the transactions contemplated hereby will result in any obligation
or liability of the Corporation or the Purchaser to repay, in whole or
in part, any grant, subsidy, loan or other benefit which has been paid
to or for the benefit of the Corporation, nor will the Corporation
suffer any reduction in the amount of, loss of right to or any adverse
change in the terms and conditions of any grant, subsidy, loan or other
benefit paid to or for the benefit of the Corporation or which are or
may become payable to the Corporation after the date hereof;
4.3.30 ENVIRONMENTAL CLAIMS
To the best of their knowledge, there has been no material Release by
the Corporation (or, to the best of their knowledge, any predecessor in
interest of the Corporation or any prior owner, lessee or occupant of
the Leased Real Property or the Real Property) of Hazardous Substances
in, under or on the Leased Real Property or the Real Property and the
Leased Real Property and the Real Property are free of any material
contamination by the Corporation (or, to the best of their knowledge,
any predecessor in interest of the Corporation or any prior owner,
lessee or occupant of the Leased Real Property and the Real Property) of
the Environment by Hazardous Substances therein or thereon,
4.3.31 ACCURACY OF INFORMATION
4.3.31.1 The Vendors have made or caused to be made reasonable
inquiry with respect to each covenant, agreement, obligation,
representation and warranty contained in this Agreement, and any
certificates or other documents referred to herein or furnished to the
Purchaser pursuant hereto, and to the best of Boulard's knowledge and
belief, none of the aforesaid covenants, agreements, obligations,
representations, warranties, certificates or documents contains any
untrue statement of a material fact or omits to state a material fact
necessary to make such representation, warranty, certificate or other
document not misleading, and
4.3.31.2 To the best of their knowledge, there is no fact,
condition or circumstance which (i) materially adversely or in the
future may (so far as the Vendors can now reasonably foresee) materially
adversely affect the business, operations, properties, prospects, or
condition of the Corporation or the ability of the Vendors to perform
this Agreement or (ii) relates to the business of the Corporation and
might reasonably be expected to deter a person carrying on a like
business from consummating the transactions hereby contemplated.
<PAGE> 22
22
SECTION 5 - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
5.1 The Purchaser hereby represents and warrants to the Vendors that the
following representations and warranties are true and correct and acknowledges
that the Vendors are relying upon such representations and warranties in
connection with the transactions contemplated hereby and that the Vendors would
not have entered into this Agreement without the same:
5.1.1 CORPORATE ORGANIZATION, QUALIFICATIONS, ETC.
The Purchaser is duly incorporated and organized and is a validly
existing corporation and is current with respect to filings required
under the laws of its jurisdiction of incorporation; the Purchaser has
all the requisite power and authority to own, lease and operate its
properties and carry on its business as presently conducted;
5.1.2 AUTHORITY TO ENTER INTO AGREEMENT
The Purchaser has the necessary corporate power and authority to enter
into this Agreement and consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Purchaser and the
performance by the Purchaser of the transactions contemplated hereby
will not, with or without the giving of notice and/or the passage of
time, or both, (i) violate any provision of law applicable to the
Purchaser or, require any consent or approval of, or any filing with or
notice to, any third party, governmental or otherwise, (ii) conflict
with or result in a default of any provision or termination of or
accelerate the date for performance of any obligation under any
agreement to which the Purchaser is a party or by which it may be bound
(iii) result in the creation of any Title Defect upon any of its
property or assets or (iv) conflict with or result in a default of any
provision or termination of any of its constating documents or by-laws.
All necessary corporate action has been taken by the Purchaser in order
to authorize the execution and delivery by the Purchaser of this
Agreement and the consummation by the Purchaser of the transactions
contemplated hereby. This Agreement constitutes a valid and binding
obligation of the Purchaser enforceable against the Purchaser in
accordance with its terms, subject to applicable bankruptcy, insolvency
and other similar laws relating to or affecting the enforcement of
creditors' rights generally, and principles of equity;
SECTION 6 - SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS
6.1 The representations and warranties set forth herein and in any document,
certificate or other instrument expressly required to be delivered by or on
behalf of any party pursuant hereto and the covenants and agreements of the
parties set forth herein shall survive
<PAGE> 23
23
the Closing Date, notwithstanding any investigation concluded by any of the
parties hereto, until one year from the Closing Date, other than (i) the
representations and warranties relating to any Tax Claim as set out in
paragraphs 4.3.17 or 4.3.26 hereof, which shall survive the Closing Date
until the later of (a) the date upon which the liability to which any such
Tax Claim may relate is barred by all applicable statutes of limitation
(after taking into account any extensions, provided same have not been
requested by either the Purchaser or the Corporation) or (b) the date upon
which any claim for refund or credit related to such Tax Claim is barred by
all applicable statutes of limitations and (ii) the representations and
warranties contained in subsections 4.1.1, 4.1.2, 4.1.3, 4.1.4, 4.1.5 and
4.1.6 hereof and in paragraphs 4.2 and 5.1 hereof, each of which shall
survive the Closing Date for a period of three (3) years from the Closing
Date.
SECTION 7 - INDEMNIFICATION
7.1 The Vendors shall indemnify and save harmless the Purchaser from and
against any claims, demands, actions, causes of actions, judgments, damages,
losses (which shall include any diminution in value), liabilities, costs or
expenses (including, without limitation, interest, penalties and reasonable
attorneys' and experts' fees and disbursements) any claims, demands, actions,
causes of actions, judgments, damages, losses (which shall include any
diminution in value), liabilities, costs or expenses (including, without
limitation, interest, penalties and reasonable attorneys' and experts' fees
and disbursements) shall be collectively referred to as the "Losses") which
may be made against the Purchaser or the Corporation or which any of them may
suffer or incur as a result of, arising out of or relating to:
7.1.1 any violation, contravention or breach of any covenant, agreement or
obligation of the Vendors under or pursuant to this Agreement;
7.1.2 any incorrectness in, or breach of, any representation or warranty
made by the Vendors in this Agreement or in any certificate or other
document delivered or given pursuant to this Agreement (other than in
connection with subsections 4.1 or 4.2 hereof);
7.2 Boulard shall indemnify and save harmless the Purchaser from and against
any Losses which may be made against the Purchaser or the Corporation or
which any of them may suffer or incur as a result of, arising out of or
relating to any incorrectness in, or breach of, any representation or
warranty made by Boulard in subsection 4.1 hereof or in any certificate or
other document delivered or given by Boulard pursuant hereto in connection
with subsection 4.1 hereof.
7.3 Hamer shall indemnify and save harmless the Purchaser from and against
any Losses which may be made against the Purchaser or the Corporation or
which any of them may suffer or incur as a result of, arising out of or
relating to any incorrectness in, or breach
<PAGE> 24
24
of, any representation or warranty made by Hamer in subsection 4.2 hereof or
in any certificate or other document delivered or given by Hamer pursuant
hereto in connection with subsection 4.2 hereof.
7.4 The Purchaser shall indemnify and save harmless the Vendors from and
against any Losses which may be made against the Vendors or which the Vendors
may suffer or incur as a result of, arising out of or relating to:
7.4.1 any violation, contravention or breach of any covenant, agreement or
obligation of the Purchaser under or pursuant to this Agreement;
7.4.2 any incorrectness in, or breach of, any representation or warranty
made by the Purchaser in this Agreement or in any certificate or other
document delivered or given pursuant to this Agreement; and
7.4.3 any action, suit, claim, trial, demand, investigation, arbitration or
other proceeding by any person containing allegations which, if true,
would constitute an event described in subsection 7.4.1 or 7.4.2 hereof.
7.5 The party or parties providing indemnification hereunder (the
"Indemnifying Party") shall jointly and severally in the case of paragraph
7.1 and severally only, in the case of paragraphs 7.2 and 7.3, reimburse, on
demand, to the party or parties being indemnified hereunder (the "Indemnified
Party") the amount of any Losses suffered or incurred by the Indemnified
Party, as of the date that the Indemnified Party incurs any such Losses,
together with interest thereon from the aforesaid date until payment in full
at the rate per annum equal to the rate announced by the Toronto-Dominion
Bank in Toronto from time to time as its reference rate for determining the
rate of interest charged to its most credit-worthy customers for commercial
loans in Canadian currency, plus two percent (2%).
7.6 Promptly upon obtaining knowledge thereof, the Indemnified Party
shall notify the Indemnifying Party of any cause which the Indemnified Party
has determined has given or could give rise to indemnification under this
Section 7. In circumstances where the Indemnifying Party is notified of such
cause but not promptly, the Indemnifying Party shall not be relieved from any
duty to indemnify and hold harmless which otherwise might exist with respect to
such cause unless (and only to that extent) the omission to notify promptly
materially prejudices the ability of the Indemnifying Party to exercise its
right to defend provided in this Section 7.
7.7 If any legal proceeding shall be instituted or any claim or demand shall
be asserted by a third party against the Indemnified Party (each a "Third
Party Claim"), in respect of a matter for which the Indemnifying party has
agreed in this section 7 to indemnify the Indemnified party, then the
Indemnifying Party shall have the right, after receipt of the
<PAGE> 25
25
Indemnified Party's notice under subsection 7.6 hereof and upon giving
written notice to the Indemnified Party within ten (10) Banking Days of such
receipt, to defend the Third Party Claim at its own cost and expense with
counsel of its own selection, provided that:
7.7.1 the Indemnified Party shall at all times have the right to fully
participate in the defense at its own expense;
7.7.2 the Third Party Claim seeks only monetary damages and does not seek
any injunctive or other relief against the Indemnified Party;
7.7.3 the Indemnifying Party unconditionally acknowledges in writing its
obligation to indemnify and hold the Indemnified Party harmless with
respect to the Third Party Claim;
7.7.4 legal counsel chosen by the Indemnifying Party is satisfactory to the
Indemnified Party, acting reasonably.
7.8 The Indemnifying Party shall not be permitted to compromise and settle
or to cause a compromise and settlement of any Third Party Claim, without the
prior written consent of the Indemnified Party, unless:
7.8.1 the terms of the compromise and settlement require only the payment of
money and do not require the Indemnified Party or the Corporation to
admit any wrongdoing or take or refrain from taking any action;
7.8.2 the Indemnified Party receives, as part of the compromise and
settlement, a legally binding and enforceable unconditional satisfaction
or release, which is in form and substance satisfactory to the
Indemnified Party, acting reasonably.
7.9 If the Indemnifying Party fails:
7.9.1 within fifteen (15) Banking Days from receipt of the notice of a Third
Party Claim to give notice of its intention to defend the Third Party
Claim in accordance with subsection 7.6 hereof, or
7.9.2 to comply at any time with any of paragraphs 7.7.1 through 7.7.4
(inclusive) hereof,
then the Indemnifying Party shall be deemed to have waived its right to
defend the Third Party Claim and the Indemnified Party shall have the right
(but not the obligation) to undertake or to cause the Corporation to
undertake the defense of the Third Party Claim and compromise and settle the
Third Party Claim on behalf, for the account and at the risk and expense of
the Indemnifying Party.
<PAGE> 26
26
7.10 The obligations of indemnification set out in subsections 7.1, 7.2, 7.3
and 7.4 hereof shall survive the Closing as to time, in accordance with the
limitations regarding survival of representations and warranties set forth in
Section 6.
7.11 The rights, recourses and remedies provided to an Indemnified Party
under this Section 7 are cumulative with any other right such Indemnified
Party may have or may hereafter acquire under any applicable law or in
equity, any provision of this Agreement or otherwise, and any right, recourse
or remedy of such Indemnified Party may be asserted completely against the
Indemnifying Party, without regard to the rights, recourses or remedies the
Indemnified Party may have against any third party.
7.12 The Vendors, jointly and severally, and the Purchaser agree to provide
each other with such assistance as may reasonably be requested in connection
with Tax matters relating to any taxable period, including but not limited
to, providing information with respect to the preparation of any Tax return,
any audit or other examination by any taxing authority, or any judicial or
administrative proceeding relating to liability for Taxes, or any Tax Claim.
The Purchaser will cause the Corporation to retain all books and records that
relate to any Tax return, audit or examination, proceedings, or determination
of the Corporation for a period of not less than five (5) years following the
filing date of such Tax return.
SECTION 8 - INTERIM PERIOD
8.1 The Vendors, jointly and severally, covenant that during the Interim
Period, they shall:
8.1.1 cause the Corporation to (a) timely pay all Taxes required to be paid
by it after the date hereof and on or before the Closing Date; and (b)
duly and punctually prepare and file, in a manner consistent with the
prior years and applicable laws and regulations, all returns for Taxes
required to be filed after the date hereof and on or before the Closing
Date;
8.1.2 promptly notify the Purchaser, in writing, of the existence of any
fact, event, condition or occurrence, which comes to their attention,
which may alter the accuracy or truth of any representation or warranty
on their part contained herein, or result in such representation or
warranty being incorrect;
8.1.3 cause the Corporation to carry on business in the ordinary course, and
use its best efforts to preserve its business organization and goodwill,
maintain its relationships with suppliers, customers and others having
business relations with it and retain in its employ all of its
employees;
8.1.4 use their Best Efforts to satisfy or cause to be satisfied all of the
conditions precedent set forth in subsection 9.2 hereof;
<PAGE> 27
27
8.1.5 cause to be afforded to the Purchaser, and its representatives, at
reasonable times and on reasonable notice, complete access to the Real
Property, as well as to the assets, rights, properties, books, files and
records of, and all other documents and data relating to, the
Corporation (including the right to make copies and extracts thereof)
and all officers and employees of the Corporation shall cooperate with
such individuals;
8.1.6 ensure that the Corporation does not make or promise any change in the
compensation, rate of compensation, commissions or bonuses payable by
it, pay any bonus, profit-sharing or other extraordinary compensation of
any kind or adopt or enter into any additional Benefit Plan.
8.1.7 not to enter into discussions or negotiations with any third party
relating to the sale of any of the Purchased Shares, or the issuance of
any shares in the capital stock of the Corporation; and ensure that the
Corporation does not enter into any discussions or negotiations with any
third party relating to the merger, sale or other disposition of any of
the assets of the Corporation, except for sales of inventory in the
ordinary and usual conduct and course of its business.
8.2 The Purchaser covenants that during the Interim Period it shall:
8.2.1 promptly notify the Vendors, in writing, of the existence of any fact,
event, condition or occurrence, which comes to its attention, which may
alter the accuracy or truth of any representation or warranty on its
part contained herein, or result in such representation or warranty
being incorrect; and
8.2.2 use its Best Efforts to satisfy or cause to be satisfied all of the
conditions precedent set forth in subsection 9.5 hereof.
SECTION 9 - CLOSING AND CLOSING CONDITIONS
9.1 On the Closing Date, the Vendors, jointly and severally, undertake to:
9.1.1 cause to be delivered to the Purchaser the opinion of the Vendors'
solicitors, dated the Closing Date, in the form annexed hereto as
Schedule 9.1.1;
9.1.2 cause all requisite corporate action of the Corporation to be taken to
approve the transfer of the Purchased Shares pursuant hereto;
9.1.3 deliver to the Purchaser the written resignations of such members of
the board of directors and officers of the Corporation as are designated
by the Purchaser, and cause each of such directors and officers to
execute and deliver to the Purchaser releases in the form annexed hereto
as Schedule 9.1.3;
<PAGE> 28
28
9.1.4 deliver to the Purchaser share certificates representing the Purchased
Shares, in each case duly endorsed in blank for transfer;
9.1.5 cause Boulard to execute and deliver the Boulard Employment Agreement
to Advanced Accessory Systems, LLC.
9.1.6 cause Boulard, Janet Boulard and Hamer to execute and deliver the Non-
Competition and Confidentiality Agreement to the Purchaser;
9.1.7 deliver to the Purchaser (i) the minute books, registers of transfer,
registers of shareholders, registers of directors, share certificate
books and the corporate seal of the Corporation, and (ii) by leaving
same at the Corporation's head office location the ledgers, account
books, financial records, permits and licenses, policies of insurance,
contracts, agreements, indentures, instruments, commitments, Tax
returns, evidence or indications of ownership of the Corporation in and
to their assets, rights and properties and all other documents,
certificates and records of the Corporation, all of which shall be true
and complete.
9.1.8 cause Boulard to pay the sum of Sixteen Thousand ($16,000.00) Dollars
(Cdn) plus the relevant G.S.T. and P.S.T. to the Corporation for a
transfer of ownership to Boulard of the Nissan vehicle owned by the
Corporation and used by Boulard.
9.2 The obligation of the Purchaser to proceed with the Closing is subject
to each of the conditions hereinbelow set forth, all of which are agreed to be
material and are inserted for the exclusive benefit of the Purchaser, and may
be waived in whole or part by the Purchaser, provided that any waiver, to be
effective, must be in writing:
9.2.1 the representations and warranties of Boulard contained in subsection
4.1 hereof shall be true and correct as if made at and as of the Closing
Date; the representations and warranties of Hamer contained in
subsection 4.2 hereof shall be true and correct as if made at and as of
the Closing Date; all other representations and warranties of the
Vendors contained herein, which are not expressly limited or qualified
as to materiality, shall be true and correct in all material respects as
if made at and as of the Closing Date; all other representations and
warranties of the Vendors contained herein, which are expressly limited
or qualified as to materiality, shall be true and correct as if made at
and as of the Closing Date; the Vendors shall have complied with all the
covenants and agreements contained herein and satisfied all the
conditions set forth in this subsection 9.2 as of the Closing Date;
Boulard shall have delivered to the Purchaser a certificate in his
personal capacity, dated as of the Closing Date, certifying that the
representations and warranties contained in subsection 4.1 hereof are
true and correct as of the Closing Date; Hamer shall
<PAGE> 29
29
have delivered to the Purchaser a certificate in his personal capacity,
dated as of the Closing Date, certifying that the representation and
warranties contained in subsection 4.2 hereof are true and correct as
of the Closing Date, and the Vendors shall have delivered to the
Purchaser a certificate, dated as of the Closing Date, certifying that
the representations and warranties of the Vendors to the Purchaser
contained in this Agreement (other than in subsections 4.1 and 4.2
hereof): (i) which are not expressly limited or qualified as to
materiality are true and correct in all material respects as of the
Closing Date (ii) which are expressly limited or qualified as to
materiality are true and correct as of the Closing Date, and confirming
that the Vendors have complied with all their covenants and agreements
contained herein and satisfied all the conditions in this subsection 9.2
as of the Closing Date;
9.2.2 The Corporation shall not have suffered any material adverse change in
its business, financial condition, results of operations or prospects
since the date hereof, and there will not have been any occurrence or
circumstance which might reasonably be expected to result in a change
thereto, and there shall be no material adverse difference in the
financial position of the Corporation as compared with the financial
position of the Corporation set out in the 1997 Financial Statements;
9.2.3 all actions, proceedings, instruments and documents required to complete
the transactions contemplated herein or instrumental thereto, and all
other legal matters relating to the matters contemplated herein, shall
have been approved as to form, substance and legality by counsel for the
Purchaser, acting reasonably;
9.2.4 that no suit, action or other proceeding of material consequence shall
be pending, or threatened, before a court or Governmental Agency seeking
to restrain or to obtain damages or other relief in connection with this
Agreement, or the consummation of the transaction contemplated hereby;
9.2.5 the Purchaser and its accountants shall undertake such examination of
the books of account and financial statements of the Corporation (and in
particular, but without restricting the generality of that statement,
financial representations of the Vendors herein) as the Purchaser views
requisite, and the Purchaser shall, in its sole discretion, be satisfied
with the accountants' report, provided that the Purchaser and its
accountant's due diligence shall be completed within thirty (30) days of
the date of the execution of this Agreement by all of the parties to the
Agreement. In the event that the Purchaser or its accountants
identifies any discrepancy in the representations and warranties of the
Vendors, that is material in nature, the period of due diligence will
be extended by up to five (5) days. If a resolution of any material
discrepancy in the representations and warranties of the Vendors is not
achieved within the further five (5) day period and the discrepancy
results in the breach of a
<PAGE> 30
30
material representation or warranty herein, the Agreement will be deemed
to be terminated in accordance with Section 9.3 and the parties shall no
longer be obligated to each other, except for the joint and several
obligations of the Vendors to pay the Purchaser's reasonable legal and
accounting fees and expenses and the Purchaser shall have no further
recourse against the Vendors in respect thereof. If the Purchaser has
not notified the Vendors in writing prior to the end of such fifteen
(15) day period (or twenty (20) day period in the event it has been
extended) that this condition has not been fulfilled, this condition
shall be deemed to be fulfilled.
9.3 In the event that any of the conditions precedent to the obligations of
the Purchaser set forth in subsection 9.2 hereof shall not have been fulfilled
and/or performed on or prior to the Closing Date, otherwise than as a result of
the Purchaser's acts or omissions, the Purchaser may, at its option, either (i)
terminate this Agreement by written notice to the Vendors at any time prior to
the Closing without further formality or (ii) proceed with the Closing, in
either case without prejudice to the Purchaser's rights, recourses and
remedies.
9.4 At Closing, the Purchaser undertakes to:
9.4.1 cause all requisite corporate action of the Purchaser to be taken to
approve the transactions contemplated herein;
9.4.2 pay the Purchase Price;
9.4.3 to loan Three Hundred and Fifty Two Thousand Three Hundred and Forty
Eight ($352,348.00) Dollars (Cdn) to the Corporation to be used by the
Corporation to pay out shareholders loans in the amount of Two Hundred
and Forty One Thousand Three Hundred and Forty Eight ($241,348.00)
Dollars and to allow the Corporation to redeem all of the outstanding
Preference shares for One Hundred and Eleven Thousand ($111,000.00)
Dollars;
9.4.4 To loan to the Corporation a sum sufficient to pay out as of closing the
Corporation's outstanding third party debts as listed below, to a
maximum of $547,652.00, in order to secure release of all of the
personal guarantees of the shareholders of the Corporation.
<TABLE>
<CAPTION>
THIRD PARTY CREDITOR OUTSTANDING AS OF JUNE 30/97
<S> <C>
Ontario Development Corporation - Loan 1 (July 4) $201,214.90
Ontario Development Corporation - Loan 2 (July 4) 78,025.32
Business Development Bank of Canada (Mortgage) 140,800.00
Toronto Dominion Bank (line of credit) 62,500.00
Jutland Tool and Die 15,699.70
AT & T Capital Lease 3,913.06
Nissan Canada 16,923.01
Teleteck 1,091.78
-----------
TOTAL: $520,167.77
</TABLE>
<PAGE> 31
31
9.5 The Vendors' obligation to proceed with the Closing is subject to the
conditions hereinbelow set forth, all of which are agreed to be material and
are inserted for the Vendors' exclusive benefit, and may be waived in whole or
part by the Vendors, provided that any waiver, to be effective, must be in
writing:
9.5.1 the representations and warranties of the Purchaser contained herein
shall be true and correct in all material respects as if made at and as
of the Closing Date and the Purchaser shall have complied with all the
covenants and agreements contained herein and satisfied all the
conditions in this subsection 9.5 as of the Closing Date; the Purchaser
shall have delivered to the Vendors a certificate, dated as of the
Closing Date, certifying that the representations and warranties of the
Purchaser to the Vendors contained in this Agreement are true and
correct in all material respects as of the Closing Date, and confirming
that the Purchaser has complied with all its covenants and agreements
contained herein and satisfied all the conditions in this subsection
9.5 as of the Closing Date; and
9.5.2 all material actions, proceedings, instruments and documents required to
complete the transactions contemplated herein or instrumental thereto,
and all other legal matters relating to the matters contemplated
herein, shall have been approved as to form, substance and legality by
counsel for the Vendors, acting reasonably.
9.6 In the event that any of the conditions precedent to the Vendors'
obligations set forth in subsection 9.5 hereof shall not have been fulfilled
and/or performed on or prior to the Closing Date, otherwise than as a result of
the acts or omissions of any of the Vendors, the Vendors may, at their option,
either (i) terminate this Agreement by written notice to the Purchaser at any
time prior to the Closing without further formality or (ii) proceed with the
Closing, in either case without prejudice to the Vendors' rights, recourses or
remedies.
SECTION 10 - NOTICES
10.1 Any notice, demand or other communication required or permitted to be
given hereunder shall be given in writing and sent by prepaid registered mail,
return receipt requested, by telecopier or delivered by hand, at the following
addresses:
If to Boulard: Hamer Bay Road
Hamer Bay, Ontario
P0C 1H0
If to Hamer: Hamer Bay Road
Hamer Bay, Ontario
P0C 1H0
<PAGE> 32
32
In each case
with a copy to: Pinckard, Wyjad Associates
39 Dominion Street, Box 77
Bracebridge, Ontario
P1L 1R6
Att: Daniel J. Wyjad, M Sc., L.L.B.
If to the Purchaser: Advanced Accessory Systems Canada Inc. / Les Systems
D'Accessoury Advanced Du Canada Inc.
Sterling Town Centre
12900 Hall Road, Suite 200
Sterling Heights, Michigan
U.S.A. 48313
Att: Terence C. Seikel, V.P. Finance and Administration
Fax: (810) 997 6839
With a copy to: Wilson, Walker, Hochberg, Slopen
300 - 443 Ouellette Avenue
Windsor, Ontario N9A 6R4
(519) 977-1555
Att: Stephen M. Cheifetz
Fax: (519) 977-1566
or to such other address as any of the parties may have previously indicated in
writing in accordance with the terms hereof. Any such notice, demand or
communication shall be deemed to have been received on the first Banking Day
following actual receipt.
SECTION 11 - CONCLUDING PROVISIONS
11.1 No public statement regarding the transactions contemplated herein shall
be made without the prior written consent of the parties hereto.
11.2 This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein. Any and all disputes, claims or controversies between the
parties hereto, whether arising during the term of this Agreement or at any
time thereafter, which touches upon the validity, negotiation, breach,
existence, construction, meaning, performance or effect of this Agreement or
the rights and liabilities of the parties hereto or any matter arising out of
or connected with this Agreement shall be referred to and finally settled by
binding arbitration pursuant to the Arbitrations Act (Ontario) and as provided
in this subsection 11.2 and the decision of the arbitrator shall be final and
binding as among the parties hereto. There will be one arbitrator chosen by
and acceptable to the parties hereto. The place of arbitration shall be in
Toronto, Ontario, Canada. The governing law shall be the substantive law of
the Province of Ontario and the laws of Canada applicable therein.
<PAGE> 33
33
11.3 No party hereto may assign or transfer any of its rights or obligations
hereunder without the express written consent of the other parties hereto,
except that any party shall be entitled to assign or transfer its rights and/or
obligations hereunder to: (i) any subsidiary or affiliated company thereof,
(ii) any or all of its lenders, as general and continuing collateral security
for the performance of its obligations to such lenders. Subject to the
foregoing, this Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors, heirs, administrators,
executors and legal representatives.
11.4 The parties agree to perform such acts and execute and deliver such
agreements and instruments as may be necessary or desirable from time to time
in order to give full effect to the provisions hereof including, without
limitation, the timely furnishing of all information.
11.5 The provisions contained herein and in any document, certificate or
other instrument required to be delivered by or on behalf of a party hereto
constitute the entire understanding among the parties in connection with the
matters contemplated herein. All previous communications between the parties,
whether written or verbal, relating to the subject matter hereof, are
superseded and replaced hereby. No modification of the terms hereof shall be
binding upon a party hereto unless made in writing and signed by such party.
11.6 The terms "hereof", "herein", "hereunder" and other words of similar
import mean and refer to this Agreement as a whole and not a particular section,
subsection or paragraph, unless expressly so stated. Any reference herein to
any gender shall include all genders.
11.7 Time shall be of the essence hereof.
11.8 All references to dollar amounts herein mean Canadian dollars unless
otherwise indicated.
11.9 Each of the parties hereto shall be responsible and pay for all costs,
expenses and fees incurred by them in connection with the transactions
contemplated hereby.
<PAGE> 34
34
11.10 This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, and together shall constitute one and the
same document.
IN WITNESS WHEREOF THE PARTIES HAVE SIGNED ON THE DATE AND AT THE PLACE
FIRST HEREINABOVE MENTIONED.
/s/ Robert Boulard
-----------------------------------------------
ROBERT BOULARD
/s/ Alan Hamer
-----------------------------------------------
ALAN HAMER
ADVANCED ACCESSORY SYSTEMS CANADA INC. /
LES SYSTEMES D'ACCESSOIRE ADVANCED CANADA INC.
Per: /s/ Terence Seikel
--------------------------------------------
(Authorized Signing Officer)
<PAGE> 1
EXHIBIT 10.5
ASSET PURCHASE AGREEMENT
This Agreement is entered into as of the 5th day of August, 1997, by
and between VALLEY INDUSTRIES, LLC, a Delaware limited liability company (the
"Buyer"), AAS HOLDINGS, LLC, a Delaware limited liability company (the
"Parent", and together with Buyer, the "Buyer Companies"), VALLEY INDUSTRIES,
INC., a Delaware corporation (the "Company"), FISHER FAMILY HOLDINGS LIMITED
PARTNERSHIP, a Nevada limited partnership ("FHLP", and together with the
Company, individually, a "Seller" and, jointly, the "Sellers"), FISHER FAMILY
HOLDINGS, INC., a Nevada corporation ("FFHI"), FISHER PARENT HOLDINGS, INC., a
Nevada corporation ("FPHI"), FISHER PARENT HOLDINGS LIMITED PARTNERSHIP, a
Nevada limited partnership ("Parent LP"), ROBERT L. FISHER ("Fisher"), ROGER T.
MORGAN ("Morgan", and together with FFHI, FPHI, Parent LP and Fisher,
individually, an "Equityholder" and, collectively, the "Equityholders"). The
Buyer Companies, Sellers and Equityholders are sometimes referred to herein
individually as a "Party" and, collectively, as the "Parties." The Sellers and
Equityholders are sometimes referred to herein, jointly, severally and
collectively, as the "Selling Group Members."
RECITALS
A. The Company is engaged in the business (the "Company Business")
of designing, engineering, manufacturing, marketing, selling and distributing
towing products, including trailer hitches, trailer balls, ball mounts,
couplers, tow bars and brush guards. As of the Closing (as defined below),
substantially all of the assets, rights and properties used in the conduct of
the Company Business (as further defined hereinbelow, the "Valley Assets") are
owned by the Sellers.
B. The Equityholders collectively own directly or indirectly all
of the capital stock, partnership interests and other equity interests in the
Sellers.
C. Pursuant to the terms and conditions herein set forth, the
Buyer will purchase and acquire all of the right, title and interest of
the Sellers in and to all of the Valley Assets and Third Party Property from
the Sellers and the Sellers will sell, transfer, assign and convey all of their
respective right, title and interest in and to Valley Assets and Third Party
Property to the Buyer.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
meaning ascribed to them in this Section 1:
<PAGE> 2
"Action" means any action, suit, arbitration, inquiry, proceeding,
hearing or investigation by or before any court, arbitration tribunal or
panel or any Governmental Authority.
"Adjustment Date" has the meaning defined in Section 3(c)(iv) below.
"Adjustment Notice" has the meaning set forth in Section 3(c)(i) below.
"Affiliate" means, as to any Person, any other Person (i) which
directly or indirectly controls, is controlled by, or is under
common control with such Person, (ii) which beneficially owns or holds
5% or more of any class of voting interests or other equity interests
of such Person or (iii) 5% or more of any class of voting interests or
other equity interests of which is beneficially owned or held, directly
or indirectly, by such Person. As used herein, the term "control" of a
Person shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract
or otherwise.
"Affiliate Debt" means the indebtedness of the Sellers described on
EXHIBIT A-1 attached hereto and any other indebtedness of either Seller
to any Equityholder or any Affiliate of either Seller or any
Equityholder otherwise unpaid on the Closing Date.
"Affiliated Group" means any affiliated group within the meaning of Code
Section 1504(a).
"Allocable Portion" means, with respect to the share of any Selling
Group Member in a particular amount, (i) in the case of Morgan, a
percentage amount equal to ten percent (10%) and (ii) in the case
of each of the other Selling Group Members, jointly, severally and
collectively, a percentage amount equal to ninety percent (90%).
"Applicable Laws" means, as to the Person to which reference is made,
all laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of all
Governmental Authorities applicable to such Person, its assets or
properties or its operations.
"Arbitrator" means the accounting firm of Deloitte & Touche LLP or,
subject to the mutual agreement of the Buyer and the Valley
Equityholder Representative, such other firm of certified public
accountants as may be so mutually agreed.
"Assumed Contracts" means each of the Contracts, other than any Excluded
Contracts.
"Assumed Funded Debt" means the portion of the Funded Debt, to the
extent outstanding as of the Closing Date, identified on EXHIBIT A-2
attached hereto.
"Assumption Documents" means each of the instruments and other
documents which are executed by the Buyer and delivered to the Sellers
to further evidence the Buyer's assumption of the obligations of the
Sellers to pay and discharge the Valley Liabilities and
-2-
<PAGE> 3
otherwise assume all of the liabilities and obligations of the Sellers'
under the terms of the Assumed Contracts.
"Auburn Hills Lease" means that certain Lease between the Company and
Herman Kaplan and Shirley Kaplan dated October 1, 1996, relating to the
real property and improvements located at 1972 Brown Road in Auburn
Hills, Michigan, as amended, modified or supplemented.
"Base Equity Value" means an amount equal to $23,645,000.
"Blanket Purchase Orders" mean such purchase orders for products of the
Company as have been submitted to the Company by customers such as
Chrysler Corporation, Ford Motor Company and General Motors Corporation
and which cover all or a portion of such customer's annual requirements
for a particular product.
"Business Day" means a day other than a Saturday, Sunday, holiday or
other day on which commercial banks in the locale of any Party are
authorized by law to be closed.
"Buyer" has the meaning set forth in the preface above.
"Buyer Auditors" means Price Waterhouse L.L.P. or such other firm of
independent certified public accountants as may be designated by the
Buyer.
"Buyer Companies" has the meaning set forth in the preface above.
"Charter Documents" mean the respective certificates of incorporation,
bylaws, partnership agreements and other agreements, instruments or
documents (i) pursuant to which the Selling Group Members have, as
applicable, been formed, incorporated or organized or (ii) which
otherwise govern or restrict the respective rights, powers and
authority of the Selling Group Members.
"Claims Period" has the meaning set forth in 7(a) below.
"Closing" has the meaning set forth in Section 3(e) below.
"Closing Asset Value" means the Net Book Value of the Valley Assets
determined as of the Closing Date on the basis of the Closing Balance
Sheet, provided, that, notwithstanding anything to the contrary herein,
in determining the Closing Asset Value (a) no value shall be
recognized for or in respect of (i) the deferred loss on the
sale/leaseback relating to the Dequindre Road real property and
improvements, (ii) prepaid travel expenses, (iii) unamortized
tooling or (iv) nonreimbursable tooling and (b) the lost contract
reserve shall be fixed at the amount of $128,000.
"Closing Balance Sheet" has the meaning set forth in Section 3(c)(i)
below.
-3-
<PAGE> 4
"Closing Date" has the meaning set forth in Section 3(e) below.
"Closing Equity Value" means an amount equal to the difference between
the Closing Asset Value and Closing Liability Value, provided, however,
that no effect shall be given to any increase in property, plant or
equipment as a result of an "involuntary conversion" as defined in
GAAP.
"Closing Liability Value" means the Net Book Value of the Valley
Liabilities determined as of the Closing Date on the basis of the
Closing Balance Sheet.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preface above.
"Company Business" has the meaning set forth in Recital A above.
"Confidential Information" means any confidential information
pertaining to the Company and Company Business as of the date hereof,
including, but not limited to, information concerning its financial
condition, prospects, customers, sources of leads, methods of doing
business, and the manner of design, manufacture, financing, marketing
and distribution of its products, provided, however, that Confidential
Information does not include information that is or becomes generally
available to the public other than as a result of a disclosure
in violation of Section 8(d) by any Covered Person.
"Contract" means each contract, agreement or arrangement, whether
written or oral, to which the Company is a party, or by which the
Company or any of its assets is bound.
"Conveyance Documents" means each of the instruments and other
documents which are executed by either of the Sellers and delivered to
the Buyer to further evidence the sale, transfer, assignment or other
conveyance of the rights, title and interests of the Sellers in and to
the Valley Assets and Third Party Property by the Sellers to
Buyer.
"Covered Persons" has the meaning set forth in Section 8(d) below.
"Customer Tooling" means the tooling identified on EXHIBIT B attached
hereto.
"Dequindre Road Lease" means that certain Lease Agreement between the
Company and Valley Realty dated January 21, 1997, relating to the real
property and improvements located at 32451 and 32501 Dequindre Road in
Madison Heights, Michigan, as amended, modified or supplemented.
"Disputed Matter(s)" has the meaning set forth in Section 3(c)(iii)
below.
-4-
<PAGE> 5
"Documents" mean this Agreement, the Parent Subscription Documents, the
Reorganization Documents, the Employment Agreement, the Conveyance
Documents and the Assumption Documents, in each instance, each as
amended, modified or supplemented from time to time.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan, (b) qualified defined contribution retirement
plan or arrangement which is an Employee Pension Benefit Plan, (c)
qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan, or (d) Employee Welfare Benefit Plan.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Employment Agreement" means an Employment Agreement, dated as of the
Closing Date between the Buyer and Morgan, in form satisfactory to
Morgan.
"Environmental Claim" means any notice or claim, written or oral, by any
Person or any governmental authority alleging potential liability
(including, without limitation, potential liability for investigatory
costs, cleanup costs, governmental response costs, natural resources
damages, property damages, personal injuries or penalties) arising out
of, based on or resulting from now or at any time in the past on property
currently or formerly owned or operated by the Company (a) the presence,
or release into the environment, of any Material of Environmental Concern
at any location, whether or not owned or leased by the Company presently
or at any time in the past or (b) any violation, or alleged violation, of
any Environmental Law.
"Environmental Laws" means all federal, state, local and foreign laws and
regulations relating to pollution or protection of the environment
(including, without limitation, ambient air, surface water, ground water,
land surface or subsurface strata) or the protection of human health from
environmental hazards, including, without limitation, laws and
regulations relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern.
"Equityholder" and "Equityholders" have the meaning set forth in the
preface above.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means the Excluded Contracts and such other assets,
rights and properties identified on EXHIBIT C attached hereto.
-5-
<PAGE> 6
"Excluded Contracts" means the Excluded Debt Documents and each of the
other Contracts identified on EXHIBIT D attached hereto.
"Excluded Debt Closing Payments" has the meaning set forth in Section
3(b)(ii).
"Excluded Debt Documents" means each of the Contracts which evidence any
Excluded Obligations or any security therefor or other agreements
incidental thereto.
"Excluded Funded Debt" means the Funded Debt to the extent not Assumed
Fund Debt.
"Excluded Obligations" means, collectively, the Excluded Funded Debt,
Affiliate Debt and such other liabilities, indebtedness and obligations
of the Company identified on EXHIBIT E attached hereto.
"Excluded Representations and Warranties" means those representations and
warranties of the Parties set forth in subsections (a), (b), (c), (d),
(e), (f), (g), and, as to matter of title, (h) of Section 4 hereof and
subsections (a), (b), (c), (d) and (f) of Section 5 hereof.
"Facility Leases" means the Auburn Hills Lease, the Dequindre Road Lease
and the Turner Road Lease.
"FFHI", "FHLP" and "FPHI" have the meaning set forth in the preface
above.
"Financial Statements" has the meaning set forth in Section 4(i) below.
"Fisher" has the meaning set forth in the preface above.
"FHLP/Valley Assets" means that portion of the Valley Assets consisting
of (a) accounts and notes receivable, (b) inventory, and (c) prepaid
items.
"Funded Debt" means, without duplication, the aggregate amount (including
the current portions thereof) outstanding as of the Closing Date of all
(a) indebtedness of the Sellers for money borrowed from others and
purchase money indebtedness (other than accounts payable or trade letters
of credit issued in the ordinary course and outstanding as of the Closing
Date); (b) indebtedness of the type described in clause (a) in respect of
which a Seller has provided a Guaranty to any other Person, (c)
indebtedness of the type described in clause (a) above secured by any
Lien upon property owned by a Seller, even though each Seller has not in
any manner become liable for the payment of such indebtedness; and (d)
interest expense accrued but unpaid, and all prepayment premiums. on or
relating to any of such indebtedness.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time, applied on a basis consistent with such
principles and methodologies as employed by the Company in the
preparation of the Financial Statements, so long as such
-6-
<PAGE> 7
principles and methodologies do not conflict with such United States
generally accepted accounting principles.
"Governmental Authority" means any foreign, federal, state or local
government or political subdivision, or any department or agency thereof.
"Guaranty" means, with respect to the Person to which reference is made,
any agreement, contingent or otherwise, excluding endorsements of checks,
instruments or other items of payment in the ordinary course for deposit
or collection, to guarantee or in effect guarantee or assure the payment
of, or performance with respect to, any indebtedness, liability or other
obligation of any other Person (a "primary obligor"), including, without
limitation, any agreement made with a creditor of such primary obligor,
primarily for the purpose of enabling such primary obligor to make
payment of the indebtedness or to assure the owners or holders of the
indebtedness against loss, (a) to supply funds to, or in any other manner
invest in, such primary obligor or (b) to purchase indebtedness, or
Co-purchase and pay for property if not delivered, or pay for services if
not performed.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Income Tax" means any federal, state, local, or foreign income tax,
including any interest, penalty, or addition thereto, whether disputed or
not, including any tax on or based upon net income, gross income, or
income as specially defined, or earnings, profits, or selected items of
income, earnings or profits, including all taxes payable in respect of
the Michigan Single Business Tax and California Corporate Income Tax.
"Income Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes,
including any schedule or attachment thereto.
"Indemnifiable Loss" means, with respect to any claim for indemnification
made by a Party entitled to indemnification pursuant to this Agreement,
any and all losses, liabilities, claims (including assertion of claims),
damages, obligations, payments, costs and expenses incurred by such Party
(including attorney's fees and expenses) with respect to such claim,
including, without limitation, the costs and expenses of any and all
Actions, demands, assessments, judgments, settlements and compromises
relating thereto.
"Indemnified Party" has the meaning set forth in Section 7(e) below.
"Indemnifying Party" has the meaning set forth in Section 7(e) below.
"Indemnity Claim Notice" has the meaning set forth in Section 7(e) below.
-7-
<PAGE> 8
"Interim Balance Sheet" means the unaudited balance sheet of the Company
as of March 31, 1997.
"Interim Financial Statements" means the Interim Balance Sheet and the
related unaudited statement of income and changes in stockholders' equity
and cash flow for the three month period ending as of March 31, 1997.
"Knowledge" or "known" means actual knowledge of the matter to which
reference is made.
"Leased Property" means the property leased by the Company under the Real
Property Leases and each of the other leases identified on EXHIBIT F
attached hereto.
"Licensed Property" means the property or technology which is licensed to
the Company as identified on EXHIBIT G attached hereto.
"Lien" means any security interest mortgage, pledge, lien, encumbrance or
other charge upon any property, including the leasehold interest of the
lessor under any capital lease.
"Lodi Environmental Liabilities" means Indemnifiable Losses any of the
Buyer Indemnified Persons shall incur as a direct result of any breach or
inaccuracy in the representations and warranties of the Sellers under
Section 4(n) hereof to the extent relating to the Lodi Facility.
"Lodi Facility" means the real property described on EXHIBIT H attached
hereto, and all buildings, improvements, fixtures and fittings thereon
and all easements, rights-of-way and other appurtenants thereto (such as
appurtenant rights in and to public streets).
"Material Adverse Change" and "Material Adverse Effect" mean, as related
to the circumstances, events or conditions to which reference is made,
any such circumstances, events or conditions which (a) has any material
adverse effect upon the validity or enforceability of any of the
Documents, (b) impairs, in any material respect, any of the rights of the
Buyer or Parent under any of the Documents or (c) is material and adverse
to the business, properties, assets, financial condition or results of
operations, of the Company Business, taken as a whole.
"Material Agreements" means, (a) the Real Property Leases, (b) each other
Material Lease and (c) other than the Excluded Contracts, each other
Contract of the following nature:
(i) letters of credit, pledges, bonds or similar arrangements
running to the account of or for the benefit of the Company,
excluding, however, trade letters of credit and bonds issued for
the benefit or account of the Company in the ordinary course of
business and, which do not evidence obligations in excess of
$25,000, determined as of the Closing Date;
-8-
<PAGE> 9
(ii) Contracts relating to the purchase, maintenance or
acquisition, or sale or furnishing of materials, supplies,
merchandise, machinery, equipment, parts or any other property or
services, excluding, however, any such Contract made in the
Ordinary Course of Business and which is expected to be fully
performed within 30 days of the Closing Date or which involves
revenues or expenditures of less than $50,000);
(iii) any collective bargaining agreement;
(iv) Contracts obligating the Company to refrain from competing
with any business, or to conduct any business with only certain
parties, or which otherwise restrains or prevents the Company from
carrying on any lawful business or which restricts the right of the
Company to use or disclose any information in its possession,
excluding, however, such nondisclosure arrangements incidental to
the Company's supply of product to customers pursuant to such
customer's designs or specifications;
(v) employment, compensation, severance or consulting Contracts,
not otherwise terminable by the Company, without penalty, on no
more than 30 days advance written notice, involving, in any
instance, an annual expenditure, by the Company, including any such
amounts as would be payable upon termination of such Contract
(computed as if so terminated effective as of the Closing Date), of
in excess of $25,000 (excluding however any such arrangements
provided for under the written employment policies of the Company
generally applicable to all employees of the Company);
(vi) any Contract with any Equityholder, or any Affiliate of any
Equityholder, excluding, however, any such Contract which has been
terminated, without further liability to the Company, effective as
of the Closing Date;
(vii) any Contract, not otherwise cancelable by the Company without
material penalty or loss, for capital expenditures or the
acquisition or construction of fixed assets for or in respect of
any real property involving payments in excess of $100,000 per
year;
(viii) any Contract granting any Person a Lien on any of the assets
of the Company, in whole or in part, other than a Permitted Lien
or, in the case of any real property, any Permitted Real Estate
Restriction;
(ix) any Contract, not otherwise cancellable without liability on
30 days notice, by which (A) the Company retains any manufacturer's
representatives, broker, sales agent or other distributor or (B)
the Company is appointed or authorized as a sales agent,
distributor or representative of any other Person;
-9-
<PAGE> 10
(x) any Contract under which the Company has granted or received
a license or sublicense or under which the Company is obligated to
pay, or has the right to receive. a royalty, license fee or similar
payment of in excess of $25,000 per annum;
(xi) any Contract for the Company's participation in any joint
venture or partnership;
(xii) any Contract for (A) the storage, transportation, treatment
and disposal of any materials subject to regulation under any
Environmental Laws, or (B) for storage, transportation or similar
services with carriers or warehousemen, excluding, however, any
such Contract entered into in the ordinary course and involving
annual expenditures not exceeding $25,000;
(xiii) other than as related to the insurance policies described on
SCHEDULE 4(U) hereto, any Employee Benefit Plan or any Contract
otherwise a Material Agreement or excluded by reason of the
foregoing provisions of this definition, any Contract which is
otherwise material to the assets, business, operations or financial
condition of the Company and (A) is not otherwise described in a
Schedule, or (B) involves the payment of more than $50,000 by the
Company or (C) is not cancellable by the Company on 30 days notice
without liability.
"Material Leases" means (a) the Facility Leases and Real Property Leases
and (b) each other lease or sublease of real property, or a lease,
sublease or other title retention agreement or conditional sales
agreement relating to any machinery, equipment, vehicle or other tangible
personal property, which, individually, involves annual payments in
excess of $25,000.
"Material Real Property" means the Lodi Facility and the real property
leased by the Company under the Facility Leases and Real Property Leases.
"Materials of Environmental Concern" means chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum
and petroleum products in each case with respect to which liability or
standards of conduct are imposed pursuant to any Environmental Laws.
"Members Agreement" means the Second Amended and Restated Members'
Agreement among the Parent, Fisher, Morgan and the other members of the
Parent, dated as of the Closing Date.
"Morgan" has the meaning set forth in the preface above.
-10-
<PAGE> 11
"Morgan Note" means that certain Promissory Note dated January 1, 1995,
executed by Roger T. Morgan in favor of the Company, in the original
principal amount of $291,500.00.
"Most Recent Year-End" means December 31, 1996.
"Most Recent Year-End Balance Sheet" means the balance sheet of the
Company as of the Most Recent Year-End included in the Most Recent
Year-End Financial Statements.
"Most Recent Year-End Financial Statements" means the Financial
Statements of the Company for, and as of, the fiscal year ending as of
the Most Recent Year-End.
"Net Book Value" means the net book value of the Valley Assets or the
Valley Liabilities, as the case may be, as determined in accordance with
GAAP.
"Notice of Dispute" has the meaning set forth in Section 3(c)(iii) below.
"Operating Agreement" means the Second Amended and Restated Operating
Agreement of the Parent, dated as of the Closing Date.
"Ordinary Course of Business" or "ordinary course of business" means the
ordinary course of business consistent with past custom and practice
(including with respect to quantity and frequency).
"Other Taxes" means Taxes, other than Income Taxes.
"Parent" has the meaning set forth in the preface above.
"Parent LP" has the meaning set forth in the preface above.
"Parent LP/Valley Assets" means that portion of the Valley Assets
consisting of the Company's machinery, equipment, tooling, jigs, dies and
other tangible personal property, other than inventory.
"Parent Subscription Documents" means the Subscription Agreements, the
Operating Agreement, the Members Agreements and each of the other
agreements, instruments or documents executed by, or delivered to, Fisher
and Morgan in connection with their subscription for Units of the Parent.
"Party" or "Parties" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
-11-
<PAGE> 12
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or any Governmental Authority.
"Permits" means, with respect to the Person to which reference is made,
all governmental permits, licenses and authorizations necessary for the
conduct of such Person's business as presently conducted.
"Permitted Liens" means (a) Liens securing taxes, assessments or other
governmental charges or levies, or the claims or demands of materialmen,
mechanics, contractors, carriers, warehousemen, landlords and other
similarly situated Persons, incurred in the ordinary course of business
and which are not yet due and payable, or which are being contested in
good faith through appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP, and (b) Liens
incurred or deposits made in the ordinary course of business, and
provided that no amounts secured thereby are overdue or delinquent, (i)
in connection with worker's compensation, unemployment insurance, social
security and other like laws or (ii) to secure performance of letters of
credit, bids, tenders, sales contracts, leases, statutory obligations,
surety, appeal and performance bonds incurred in the ordinary course of
business and (c) such other Liens, if any, described on EXHIBIT I
attached hereto.
"Permitted Real Estate Restrictions" means (a) reservations, exceptions,
rights of way, encroachments, easements, covenants, conditions,
restrictions, and other similar title exceptions or encumbrances
affecting real property, provided that the same do not materially detract
from the value of said real properties or materially interfere with their
use in the ordinary conduct of business and (b) such other exceptions to
title, if any, as are described in EXHIBIT J attached hereto.
"Purchase Price" has the meaning set forth in Section 3(b) below.
"Real Property Leases" mean the Facility Leases and each other lease of
real property to which the Company is a party, other than any leases or
storage agreements for warehouse space used to store inventory, entered
into in the Ordinary Course of Business, and which are terminable by the
Company, without penalty, on the delivery of written notice of not more
than sixty (60) days.
"Reorganization" means the transactions consummated pursuant to the
Reorganization Documents and as further described in Section 2 below.
"Reorganization Documents" mean each of those agreements, instruments and
other documents to which any of the Selling Group Members are a party
relating to the reorganization of Fisher's ownership of the Company and
the transfer of Valley Assets ultimately to FHLP immediately prior to
Closing.
-12-
<PAGE> 13
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Response Period" has the meaning set forth in Section 7(e) below.
"Review Period" means the thirty (30) day period following the Buyer's
receipt of the Adjustment Notice.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Seller" and "Sellers" have the meaning set forth in the preface above.
"Selling Group Members" has the meaning set forth in the preface above.
"Subscription Agreements" means those certain Subscription Agreements
dated as of the Closing Date between the Parent and Fisher and the Parent
and Morgan, respectively, relating to the purchase by Fisher and Morgan
of certain Class A Units of the Parent.
"Tax" or "Taxes" means, with respect to any Person, all Income Taxes and
all gross receipts, sales, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment or windfall profits taxes, alternative
or add-in minimum taxes, customs duties or other taxes of any kind
whatsoever, together with any interest and any penalties, additions to
tax or additional amounts imposed by any taxing authority on such Person.
"Threatened Claims" means those matters described on EXHIBIT K attached
hereto.
"Third Party Claim" has the meaning set forth in Section 7(f) below.
"Third Party Property" means, collectively, Leased Property, Licensed
Property and Customer Tooling.
"Transactions" means, collectively, the transactions contemplated to be
effected under the terms of the Documents.
"Turner Road Lease" means that certain Lease dated April 23, 1996 between
Stanley Herstein, as Lessor, and the Company, as Lessee, for Unit C at
104 East Turner Road in Lodi, California, as supplemented by that certain
Agreement to Lease Additional Space dated March 12, 1997 between such
parties relating to the lease of Unit B at 104 East Turner Road in Lodi,
California and that certain Lease Extension dated June 20, 1997 between
such parties extending the term of the lease as related to Unit C.
"Valley Assets" means, to the extent not otherwise an Excluded Asset, all
of the Sellers' right, title and interest to and under all assets,
properties, interests in properties and rights of the Sellers of every
kind, nature and description, whether real, personal or mixed,
-13-
<PAGE> 14
moveable or immoveable, tangible or intangible, wherever located as the
same shall exist immediately prior to Closing including the following:
(a) the Lodi Facility;
(b) all of the assets, properties and rights of the Sellers in
and to all of each Seller's (i) accounts and notes receivable and,
regardless of the nature, other amounts which may be owing to
either such Seller, (ii) inventories of raw materials and supplies,
manufactured and purchased parts, goods in process and finished
goods, (iii) machinery, equipment, furniture, automobiles, trucks,
tractors, trailers, tools, jigs, dies and other tangible personal
property, (iv) in respect of Third Party Property, including all
leasehold interests under all Leases (including the Material Leases
and any other lease of real or personal property), (v) intellectual
property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder,
remedies against infringements thereof, and rights to protection of
interests therein under the laws of all jurisdictions, (vi) rights
under, and interests in, any Contracts or other arrangements
relating to, or arising out of the conduct of, its business,
including all Assumed Contracts, (vii) claims, deposits,
prepayments, refunds, causes of action, chooses in action, rights
of recovery, rights of set off, and rights of recoupment (exclusive
of any such item relating to the payment of Income Taxes in respect
of periods prior to the Closing Date), (viii) franchises,
approvals, Permits, licenses, orders, registrations, certificates,
variances, and similar rights obtained from governments and
governmental agencies, (ix) books, records, ledgers, files,
documents, correspondence, lists, plats, architectural plans,
drawings, and specifications, creative materials, advertising and
promotional materials, studies, reports, and other printed or
written materials, and (x) rights in and with respect to the assets
associated with its Employee Benefit Plans; and
(c) all other assets, properties, rights, interests and other
items existing as of the Closing Date to the extent categorized as
"assets" (including "other assets") on the balance sheet of either
Seller included in the Financial Statements, including all
unamortized expenses, prepaid expenses or items, deposits and the
like.
The term "Valley Assets" shall not include the Excluded Assets.
"Valley Auditors" means Ernst & Young LLP.
"Valley Closing Bonuses" means bonus payments to be made by the Company
on the Closing Date as set forth on EXHIBIT L attached hereto.
"Valley Liabilities" means each of the following:
-14-
<PAGE> 15
(a) all liabilities and obligations of the Company, whether known
or unknown, asserted or unasserted, absolute or contingent, accrued
or unaccrued, liquidated or unliquidated, and whether due or to
become due, including, without limitation, all such liabilities and
obligations for, under, in respect of or arising out of (i)
accounts payable and other liabilities and expenses incurred in the
Ordinary Course of Business on or before the Closing Date, (ii)
unpaid Taxes, other than Income Taxes, with respect to periods
prior to the Closing Date, (iii) any agreements, contracts, leases,
licenses, and other arrangements to which the Company is or was a
party, including, without limitation, each of the Assumed
Contracts, (iv) goods manufactured or sold prior to Closing,
including all warranty and product liability claims relating
thereto, (v) the Assumed Funded Debt, and (vi) all other
liabilities and obligations of the Company arising out of the
conduct of its business prior to the Closing Date or any of the
facts, events, circumstances or conditions set forth in any of the
Schedules hereto;
(b) all liabilities and obligations of FHLP for or in respect of
any of the liabilities or obligations described in clause (a)
above; and
(c) all other liabilities and obligations of the Company
categorized as "liabilities" on the balance sheets of the Company
included in the Financial Statements.
The term "Valley Liabilities" shall not include the Excluded Obligations.
"Valley Equityholder Representative" means Robert L. Fisher or such
successor representative as may be designated in writing by Fisher.
"Valley/FHLP Partnership Interest" has the meaning set forth in Section
2(a) below.
"Valley/Parent LP Partnership Interest" has the meaning set forth in
Section 2(a) below.
"Valley Realty" means Valley Industries Realty, L.P., a Delaware limited
partnership.
-15-
<PAGE> 16
2. REORGANIZATION.
Prior to the consummation of the transactions contemplated hereby,
(i) the Company has transferred all of its right, title and interest in
and to the Parent LP/Valley Assets to Parent LP in return for a limited
partnership interest in Parent LP (the "Valley/Parent LP Partnership
Interest"), (ii) Parent LP has, in turn, transferred all of its right,
title and interest in the Valley Assets to FHLP in consideration of the
issuance of a preferred limited partnership interest in FHLP to Parent LP
and (iii) the Company has otherwise transferred all of its right, title
and interest in and to FHLP/Valley Assets directly to FHLP in
consideration of the issuance to the Company of a common limited
partnership interest in FHLP (the "Valley/FHLP Partnership Interest").
3. BASIC TRANSACTION.
(a) Purchase and Sale of Valley Assets/Assumption of Valley Liabilities.
On and subject to the terms and conditions of this Agreement, and for the
consideration specified below in this Section 3:
(i) The Buyer agrees to purchase and acquire from the Sellers,
and each of the Sellers agrees to sell, transfer, assign, convey,
and deliver to the Buyer, all of the Valley Assets, including all
such rights, title and interests of each Seller with respect to any
Third Party Property free and clear of all Liens other than
Permitted Liens and with respect to the Lodi Facility free and
clear of all Liens other than Permitted Real Estate Restrictions.
(ii) The Buyer agrees to assume, pay and discharge, as and when
due, all of the Valley Liabilities.
(iii) Simultaneously with the execution herewith, the Sellers are
executing and delivering (or causing to be executed and delivered)
to the Buyer, the Conveyance Documents necessary to sell, transfer,
convey and assign to the Buyer, in accordance with the terms
hereof, the Valley Assets, free and clear of all Liens (other than
Permitted Liens). Simultaneously with the execution herewith, the
Sellers shall relinquish to the Buyer possession and operating
control of the Valley Assets and shall take all other steps that
may be required or desirable to pass title to the Valley Assets to
the Buyer.
(iv) The Sellers shall promptly pay or deliver to the Buyer any
amounts or items which may be received by the Sellers after the
Closing which constitute Valley Assets and shall cause all customer
orders and purchase orders placed with Affiliates of the Sellers
and relating to the products or services of the Company Business to
be assigned at the Closing to the Buyer. Each of the Selling Group
Members shall, at any time and from time to time after the Closing,
upon the reasonable request of the Buyer, and at Buyer's sole cost
and expense, do,
-16-
<PAGE> 17
execute, acknowledge, deliver and file, or cause to be done,
executed, acknowledged, delivered and filed, all such further acts,
transfers, conveyances, assignments or assurances as may reasonably
be required for better selling, transferring, conveying, assigning
and assuring to the Buyer, or for aiding and assisting in the
collection of or reducing to possession by the Buyer, any of the
Valley Assets.
(v) Anything contained in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement
or attempted agreement to transfer, sublease or assign any
contract, license, real or personal property lease, sales order,
purchase order or other agreement, or any claim or right with
respect to any benefit arising thereunder or resulting therefrom,
or any Permit, if an attempted transfer, sublease or assignment
thereof, without the required consent of any other party thereto,
would constitute a breach thereof or in any respect affect the
rights of the Buyer or the Sellers thereunder. The Sellers shall
use their commercially reasonable efforts to obtain the consent of
any such third party to any of the foregoing to the transfer or
assignment thereof to the Buyer in all cases in which such consent
is required for such transfer or assignment. If such consent is
not obtained, the Sellers, at Buyer's sole cost and expense, shall
make any arrangements necessary or desirable to provide for the
Buyer the benefits thereunder, including, without limitation,
enforcement by the Sellers for the benefit of the Buyer of any and
all rights of the Sellers thereunder against the other parties
thereto.
(vi) The Sellers hereby constitute and appoint the Buyer and its
successors and assigns the true and lawful attorney of the Sellers
with full power of substitution, in the name of the Buyer, or the
name of the Sellers on behalf of and for the benefit of the Buyer,
to collect all accounts and notes receivable and other items being
sold, transferred, conveyed and assigned to the Buyer hereunder to
endorse, without recourse, checks, notes and other instruments
constituting the Valley Assets in the name of the Sellers, to
institute and prosecute all proceedings which the Buyer may deem
proper in order to collect, assert or enforce any claim, right or
title of any kind in or to the Valley Assets, to defend and
compromise any and all actions, suits or proceedings in respect of
any of the Valley Assets or the Company Business and to all such
acts and things in relation thereto as the Buyer may deem
advisable. The foregoing powers are coupled with an interest and
shall be irrevocable by the Sellers, directly or indirectly,
whether by the dissolution of the Sellers or in any manner or for
any reason.
(b) The Purchase Price
(i) Purchase Price. The aggregate purchase price (the "Purchase
Price") to be paid by the Buyer to the Sellers for the Valley
Assets, and the covenants set forth in Section Sections 8(c) and
8(e) hereof, shall be an amount equal to:
-17-
<PAGE> 18
(A) $___________ (the "Closing Payment Amount"); and
(B) less, the amount, if any, by which the Closing Equity
Value is less than the Base Equity Value, or plus, the
amount, if any, by which the Closing Equity Value exceeds the
Base Equity Value.
The Purchase Price, as increased to reflect the Closing Liability
Value, shall be subject to allocation among the Valley Assets by
the Buyer in accordance with the allocation principles attached as
EXHIBIT M hereto, provided, that, the allocation so made by the
Buyer shall be subject to the Sellers' consent, which will not be
unreasonably withheld. The Parties agree to use such allocation
for all purposes and to assist each other as reasonably requested
in the preparation of IRS Form 8594.
(ii) Payment of Closing Payment Amount. The Closing Payment Amount
shall be paid, on the Closing Date, to or for the account of the
Sellers as follows:
(A) such amounts as may be required to discharge any Liens
(not otherwise a Permitted Lien) securing any Excluded Funded
Debt (the "Excluded Debt Closing Payments") shall be paid and
delivered by Buyer, out of and as a credit against the
Closing Payment Amount, directly to the holders of such
Excluded Funded Debt; and
(B) the balance of the Closing Payment Amount (i.e. after
credit for Excluded Debt Closing Payments) shall be paid by
wire transfer of immediately available funds to such
account(s) as the Sellers may direct.
The amount of the Excluded Debt Closing Payments shall be
determined on the basis of the payoff letters from the holders of
such Excluded Funded Debt required to be so paid as delivered to
Buyer under the provisions of Section 3(f)(i)(G) below.
(iii) Payment of Adjustments. Following the finalization of the
Closing Balance Sheet in accordance with the provisions of Section
3(c) below, the Buyer and Sellers shall, within five (5) Business
Days following the Adjustment Date, make such final payments in
respect of the Purchase Price as follows:
(A) If the Closing Equity Value is greater than the Base
Equity Value (the amount of such excess being referred to
herein as the "Underpayment Amount"), the Buyer shall pay the
Underpayment Amount to the Sellers; or
(B) If the Closing Equity Value is less than the Base
Equity Value (the amount of such shortfall being
referred to herein as the "Overpayment Amount"), the Sellers
shall pay the Overpayment Amount to the Buyer.
-18-
<PAGE> 19
(iv) Reliance. The Buyer shall be entitled to rely on the such
written disbursement instructions or payment directions as may be
executed by each of the Sellers in making any payment required to
be made to the Sellers under this Agreement.
(c) Closing Balance Sheet.
(i) Preparation of Closing Balance Sheet. Promptly following the
Closing, the Company's internal accounting staff shall prepare a
balance sheet of the Company as of Closing Date (the "Closing
Balance Sheet") which, for purposes of this Agreement, shall
reflect the Net Book Value of FHLP's interest in the Valley Assets
as if such interest were wholly-owned by the Company. The Valley
Auditors shall, at the expense of the Sellers, review the Closing
Balance Sheet as so prepared and issue their report thereon as
provided below. For such purposes, the Buyer shall provide the
Valley Auditors with such access to, and copies of, such financial
information and reports concerning the Valley Assets and Valley
Liabilities as the Valley Auditors deem necessary or appropriate so
as to enable them to so review the Closing Balance Sheet. The
Closing Balance Sheet shall be prepared in accordance with GAAP and
reviewed subject to standards otherwise consistent with the
"review" provisions of Statement No. 1, entitled "Compilation and
Review of Financial Statements" (December 1978) of the Accounting
and Review Services Committee of the American Institute of
Certified Public Accountants. For purposes of the foregoing, the
Closing Balance Sheet shall specifically identify any Excluded
Obligations otherwise discharged on the Closing Date.
The Valley Auditors shall provide the Parties with the Closing
Balance Sheet, together with its report thereon to the effect that
there are no material modifications that should be made to the
Closing Balance Sheet in order for them to be in conformity with
GAAP, as soon as practicable but in any event not later than 45
days after the Closing Date. In addition to such report, the
Valley Auditors shall, at the time of delivery of the report on the
Closing Balance Sheet, also provide the Buyer and Sellers with a
separate schedule setting forth the calculation of the Closing
Equity Value. The Closing Equity Value shall be calculated in
accordance with the agreed-upon procedures set forth on EXHIBIT N
attached hereto, which the Parties agree shall be followed in
making such calculation. Upon calculation of the Closing Equity
Value, the Sellers shall promptly deliver a written notice to Buyer
setting forth, as applicable, the calculation of the Underpayment
Amount or Overpayment Amount, if any (the "Adjustment Notice").
(ii) Review by Buyer's Auditors. In rendering the foregoing
review and report, the Valley Auditors shall consult with the Buyer
Auditors, and permit the
-19-
<PAGE> 20
Buyer Auditors and Buyer at the earliest practicable date to review
the report of the Valley Auditors, including all work papers,
schedules and calculations related thereto, whether prior to or
after the issuance thereof. The Buyer Auditors shall commence its
review of said work papers, schedules and calculations as soon as
practicable after the Valley Auditors have completed the field work
phase of its review. Final review of the Closing Balance Sheet as
prepared by the Valley Auditors, and the related determination of
the Closing Equity Value, shall be completed by the Buyer and Buyer
Auditors within the Review Period.
(iii) Dispute Resolution. To the extent the Buyer (or the Buyer
Auditors) dispute the Closing Balance Sheet, or the amount of the
Closing Equity Value, such dispute (a "Disputed Matter(s)") shall
be resolved in the following manner:
(A) Buyer shall notify the Valley Equityholder
Representative in writing of such Disputed Matter(s),
describing such Disputed Matter(s) in reasonable detail,
prior to the expiration of the Review Period (such notice
being referred to as a "Notice of Dispute"). In the absence
of the timely delivery of a Notice of Dispute to the Valley
Equityholder Representative, the Closing Balance Sheet, and
Closing Equity Value, as determined by the Valley Auditors
shall be final and binding upon the Parties;
(B) during the 30 day period following the date of receipt
of a Notice of Dispute, the Valley Equityholder
Representative and Buyer shall attempt, in good faith,
to resolve the Disputed Matter(s) and to determine the
appropriateness of the Closing Balance Sheet or the Closing
Equity Value; and
(C) if at the end of the 30 day period specified in
subsection (c)(iii)(B) above, the Valley Equityholder
Representative and Buyer shall have failed to reach a written
agreement with respect to the Disputed Matter(s), such
matter(s) shall be referred for final binding resolution to
the Arbitrator, which shall act as an arbitrator and shall
issue its report as to the Closing Balance Sheet and Closing
Equity Value within sixty (60) days after such dispute is
referred to the Arbitrator. The Arbitrator shall issue such
report using the methodologies specified in this Agreement.
Each of the parties hereto shall bear all costs and expenses
incurred by it in connection with such arbitration, except
that the fees and expenses of the Arbitrator hereunder shall
be borne equally by the Selling Group Members on the one hand
(in accordance with their Allocable Portion) and Buyer on the
other hand. This provision for arbitration shall be
specifically enforceable by the parties and the decision of
the Arbitrator in accordance with the provisions hereof shall
be final, binding, not subject to collateral attack and there
shall be no right of appeal therefrom.
-20-
<PAGE> 21
(iv) Adjustment Date. The "Adjustment Date", as such term is used
herein, shall be the later of the last day of the Review Period,
or, assuming a Notice of Dispute is delivered by the Buyer to the
Valley Equityholder Representative, the date upon which the
Disputed Matter(s), if any, are finally resolved pursuant to the
foregoing procedures of this Section 3(c).
(d) Allocation to Non-Compete and Non-Solicitation Covenants. $100,000
of the Purchase Price shall be allocated to, and deemed consideration for
the covenants set forth in Section Section 8(c) and 8(e) below.
(e) The Closing. The closing ("Closing") of the transactions
contemplated hereby shall, unless a later date is otherwise mutually
agreed upon in writing by the Buyer and Valley Equityholder
Representative, take place on the date hereof. The date of the Closing
is herein referred to as the "Closing Date."
(f) Actions Taken at Closing. At the Closing and subject to the terms
and conditions herein contained:
(i) unless otherwise waived by the Buyer, the Sellers shall
deliver to Buyer the following:
(A) such bills of sale, deeds, assignments, releases and
other instruments, documents and certificates (including
Conveyance Documents), duly executed by the Sellers or, as
applicable, the holders of any Liens, as may, in the opinion
of the Buyer, be required to effectively vest in Buyer all of
the right, title and interest of the Sellers in and to the
Valley Assets, free and clear of all Liens of any nature,
other than Permitted Liens;
(B) such opinion(s) of counsel from counsel to the Selling
Group Members, addressed to the Buyer and dated as of the
Closing Date, in form and substance satisfactory to the
Buyer;
(C) copies of the Charter Documents of each Selling Group
Member other than Fisher and Morgan, accompanied by a
certificate of the Secretary of such Selling Group Member (or
the General Partner thereof);
(D) good standing certificates for the Company from the
States of Delaware, Michigan and California and from each of
the other Selling Group Members (other than Morgan and
Fisher) from the respective jurisdiction of such
organization;
(E) to the extent that the rights of the Company under, or
in respect of, any Assumed Contract or Permit would be
subject to termination or
-21-
<PAGE> 22
revocation by reason of the sale and transfer of the Valley
Assets to the Buyer unless the consent of another Person is
first obtained, and such termination or revocation would
result in a Material Adverse Effect, such consent(s) with
respect thereto as Buyer may reasonably require;
(F) such estoppel letters, subordination, non-disturbance
and attornment agreements and landlord waiver agreements,
in such form as Buyer may reasonably require, executed by
the owners and/or mortgagees of the real property leased to
the Company under the Facility Leases.
(G) customary forms of pay-off letters from all holders of
Excluded Funded Debt secured by any Lien, together with, in
recordable form where appropriate, such lien releases,
termination statements, trademark and patent assignments and
other documents reasonably requested by the Buyer in order to
evidence the release and/or termination of any Liens securing
the repayment of any such Excluded Funded Debt, it being
agreed by the Buyer that all such instruments effecting the
release of Liens may be delivered under reasonable conditions
of escrow requiring the payment of the related Excluded
Funded Debt as a condition of delivery to the Buyer; and
(H) a certificate, executed by the Selling Group Members,
to the effect that:
(1) the representations and warranties made by such
Selling Group Members under the Documents do not
contain any untrue statement of a material fact and,
when taken together, do not omit to state any material
fact necessary to make such representations and
warranties, in light of the circumstances under which
they are made, not materially misleading;
(2) the Selling Group Members holders have performed
and complied with all of their respective covenants
under the Documents in all material respects through
the Closing Date; and
(3) no injunction, judgment, order, decree, ruling,
or charge in effect preventing consummation of any of
the Transactions; and
(I) MESC Form 1027, executed by the Company.
(ii) Unless otherwise agreed by the Valley Equityholder
Representative, Buyer shall deliver to the Sellers the following:
-22-
<PAGE> 23
(A) the Closing Payment Amount in accordance with Section
3(b)(ii) hereof; and
(B) an opinion of counsel from counsel to Buyer addressed
to the Sellers, dated as of the Closing Date, and in form and
substance satisfactory to the Sellers;
(C) an instrument of assumption evidencing Buyer's
assumption of the Valley Liabilities in form reasonably
acceptable to the Sellers, together with such additional
forms of assignment and assumption with respect to such of
the Assumed Contracts as the Sellers may reasonably require.
(D) a certificate, executed by the Buyer Companies, to the
effect that:
(1) the representations and warranties made by the
Buyer Companies under the Documents do not contain any
untrue statement of a material fact and, when taken
together, do not omit to state any material fact
necessary to make such representations and warranties,
in light of the circumstances under which they are
made, not materially misleading;
(2) the Buyer Companies have performed and complied
with all of their respective covenants under the
Documents in all material respects through the Closing
Date; and
(3) no injunction, judgment, order, decree, ruling,
or charge in effect preventing consummation of any of
the Transactions.
(iii) Unless otherwise agreed by Morgan, the Buyer shall otherwise
deliver the Employment Agreement, duly executed by Buyer, to Morgan
and Morgan shall execute and deliver to the Buyer, a copy of such
Employment Agreement.
(iv) Sellers shall cause, or have caused, Medikmark, Inc. and
Automed, Inc. to repay all amounts owed to the Company as
reimbursement for claims paid by the Company to, or for the account
of, employees and beneficiaries of Medikmark, Inc. and Automed,
Inc. under the Company's health plan.
4. REPRESENTATIONS AND WARRANTIES OF SELLERS.
Each of the Sellers hereby jointly and severally represent and
warrant to the Buyer that:
(a) Organizational Matters. Each Selling Group Member (other than
Morgan and Fisher) is a corporation or limited partnership duly organized,
validly existing, and in good
-23-
<PAGE> 24
standing under the laws of the state of its incorporation, formation or
organization. Each Selling Group Member has all requisite power and
authority to own, lease and operate its assets and properties and to
conduct its business as it has been and is now conducted. The Charter
Documents of each Selling Group Member delivered under Section 3(f)(i)(C)
above are correct complete and in full force and effect on the date
hereof. Each Selling Group Member is qualified to do business and in good
standing as a foreign Person in each jurisdiction where the conduct of
its business or the ownership of its assets requires it to be so
qualified. Except to the extent otherwise disclosed herein, and except
as may relate to Fisher or Morgan, none of the Selling Group Members has
any subsidiary corporations, nor does any such Selling Group Member own
any interest, directly or indirectly, in any other business, enterprise,
firm or corporation.
(b) FHLP Interests. After giving effect to the Reorganization and the
Closing of the transactions contemplated by this Agreement, none of the
Selling Group Members has any interest in any of the Valley Assets.
Prior to the Closing, FHLP, FFHI, FPHI and Parent LP did not engage in
any transactions or conduct any business whatsoever except in connection
with the consummation of the Reorganization. On and as of the Closing
Date, the Reorganization has been fully consummated in accordance with
its terms. None of the Selling Group Members (other than the Company)
has any employees. The entirety of the Company Business is operated by
the Company.
(c) Authorization of Transactions. Each of the Selling Group Members
has full power and authority to execute and deliver each of the
Documents to which it is a party and to perform his or its obligations
under all such Documents. Each of the Documents constitutes the valid
and legally binding obligation of each of the Selling Group Members a
party thereto, enforceable in accordance with its terms and conditions.
Except as set forth on SCHEDULE 4(C) hereto, no filing with, and no
Permit, authorization, consent or approval of, any Person is necessary to
be made or obtained by any of the Selling Group Members for the
consummation of the Transactions which has not otherwise been so made or
obtained. The execution, delivery and performance by each of the Selling
Group Members of this Agreement and each other Document to which he or it
is or will be a party, and the consummation of the Transactions, have
been duly and validly authorized by all necessary action on the part of
each such Party.
(d) Litigation. There are no Actions pending or, to the knowledge of
any of the Sellers, threatened against or involving any Selling
Group Member, or any of his or its assets or properties, that question
the validity of any of the Documents or seeks to prohibit, enjoin or
otherwise challenge the consummation of the Transactions. There are no
outstanding orders, judgments, injunctions, stipulations, awards or
decrees of any Governmental Authority against any Selling Group Member,
or any of his or its assets or properties, which prohibit or enjoin the
consummation of the Transactions.
(e) Noncontravention. Except as set forth on SCHEDULE 4(E) hereto,
neither the execution and the delivery of the Documents by any Selling
Group Member, nor the
-24-
<PAGE> 25
performance by any such Selling Group Member of his or its obligations
thereunder, will (i) violate any law, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any Governmental Authority or court to which any such Selling Group
Member is subject or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require
any notice under any Contract, Permit or other arrangement to which any
such Selling Group Member is a party or by which he or it is bound or to
which any of his or its assets is subject.
(f) Consents and Authorizations. Except as set forth in SCHEDULE 4(F)
attached hereto, none of the Selling Group Members need to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the
Parties to consummate any of the Transactions.
(g) Brokers' Fees. The Selling Group Members will be and remain solely
and fully liable for, and will pay and discharge, all fees or commissions
which are payable with respect to the transactions contemplated by this
Agreement to any broker, finder, or agent who was engaged by any of the
Selling Group Members with respect to the sale of the Company Business.
(h) Title to Valley Assets. The Valley Assets, together with the Third
Party Property, constitute all of the assets, properties and rights used
in carrying on the Company Business as conducted by the Company prior to
the Closing, and the Sellers have good, valid title to, or a valid
leasehold interest in, or right to use, all of such assets, properties
and rights. The interest of Sellers in and to the Valley Assets, and the
interests of the Sellers under the Assumed Contracts, will be transferred
to the Buyer on the Closing Date free of all Liens, other than any such
Liens as may be created by Buyer at Closing, Permitted Liens and, in the
case of any real property, any Permitted Real Estate Restrictions. Other
than as related to the Third Party Property otherwise identified herein,
there are no assets, properties or rights which are used in the operation
of the Company Business which are owned by any Person other than the
Sellers which are of any material value or which are otherwise material
to the operations of the Company Business. The Sellers enjoy peaceful
and undisturbed possession of all Leased Property.
(i) Financial Statements. Attached hereto as EXHIBIT O are (i) the
audited balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended December 31,
1996, December 31, 1995, December 31, 1994 for the Company and (ii) the
Interim Financial Statements (collectively the "Financial Statements").
The Financial Statements (including the notes thereto) have been prepared
in accordance with the books and records of the Company and, in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby and fairly present the financial condition of the Company
as of such dates and the results of operations of the Company for such
periods subject, in the case of the Interim Financial Statements, to
normal year end audit adjustments, none of which are material.
-25-
<PAGE> 26
(j) Events Subsequent to Most Recent Year-End. Since the Most Recent
Year-End, and except as otherwise disclosed on, or reflected in, the
Interim Financial Statements or SCHEDULE 4(J) hereto, (i) no event,
condition or circumstance has occurred which has resulted, or is
reasonably expected to result, in any Material Adverse Change, (ii) the
Company has been operated in the Ordinary Course of Business and (iii)
the Company has not suffered any damage, destruction or casualty loss to
any of its assets (whether or not covered by insurance) having a
replacement cost or fair market value in excess of $50,000.
(k) Liabilities. Except as disclosed on SCHEDULE 4(K) hereto or
otherwise disclosed or reflected on the Most Recent Year-End Balance
Sheet and the Interim Balance Sheet, and/or the notes thereto, neither of
the Sellers have any liabilities (matured or unmatured, fixed or
contingent) except (i) liabilities incurred by the Company in the
Ordinary Course of Business since the Most Recent Year-End, (ii)
liabilities of the Company disclosed on any Schedule hereto, (iii)
liabilities of the Company arising (A) under any Contracts or (B) in
respect of warranty or product liability claims in amounts consistent
with historical claims experience, (iv) obligations of the Company for
borrowed money or under any guarantees of obligations of third parties
not required by GAAP to be reflected, reserved against or disclosed on
the Most Recent Year-End Balance Sheet or the Interim Balance Sheet
which, individually or in the aggregate, could not reasonably be expected
by the Sellers to have a Material Adverse Effect and (v) other
liabilities of the Company which, individually or in the aggregate, could
not reasonably be expected by the Sellers to have a Material Adverse
Effect.
(l) Legal Compliance. Except as otherwise disclosed on SCHEDULE 4(L)(I)
hereto, the Sellers are in compliance with all Applicable Laws. Except
as otherwise disclosed on SCHEDULE 4(S) hereto in connection with any
threatened or pending Action, none of the Selling Group Members have
received any written notice of any alleged claim or threatened claim,
violation of or liability under any such Applicable Law which has not
heretofore been cured or for which there is no remaining liability not
otherwise reflected, or reserved for, in the Interim Balance Sheet.
SCHEDULE 4(L)(II) hereto sets forth a list of all Permits held by the
Company. Except as set forth on SCHEDULE 4(L)(II), the Company is the
holder of all Permits and is in compliance with all of the Permits and
all such Permits are valid, binding, and in full force and effect and no
loss or termination of any such Permit is pending, threatened or
reasonably foreseeable (other than expiration upon the end of the term
thereof).
(m) Tax Matters. Except as set forth on SCHEDULE 4(M)(I) hereto, or
in respect of which any resulting liability has been properly accrued in
accordance with GAAP (i) the Sellers have filed, or caused to be filed in
compliance with Applicable Laws, all returns, declarations of estimated
tax, tax reports, information returns and statements required to be filed
by each such Seller prior to the Closing Date relating to any Taxes due
from the either Seller with respect to any income, assets or operations
of the Sellers prior to the Closing Date (collectively, the "Returns"),
(ii) as of the time of filing, the Returns were
-26-
<PAGE> 27
true and correct in all respects, (iii) the Sellers have paid all Taxes
shown to be due on such Returns, (iv) the Sellers have not waived any
statute of limitations affecting any Tax liability or agreed to any
extension of time during which a Tax assessment or deficiency assessment
may be made, (v) there are no pending Tax audits of any Returns of either
of the Sellers and neither Seller has received written notice of any
unresolved questions or claims concerning its Tax liability, and (vi)
neither of the Sellers have consented to have the provisions of Section
341(f)(2) of the Code applied to it. Neither of the Sellers have, during
the five-year period ending on the Closing Date, been a personal holding
company within the meaning of Section 541 of the Code. Except as set
forth on SCHEDULE 4(M)(II) hereto, each of the Sellers have complied in
all respects with all Applicable Laws relating to the payment and
withholding of Taxes and have withheld all amounts required to be
withheld from the wages or salaries of employees in accordance with
Applicable Laws. Neither of the Sellers is, or has been, a party to any
Tax sharing agreement. Neither of the Sellers has any obligation,
including in connection with this Agreement and the other Documents, to
make any payments that will be non-deductible under Section 280G of the
Code (or any corresponding provision of any applicable state, local or
foreign law relating to Income Taxes). Since December 31, 1986, neither
of the Sellers has filed or been included in any combined or consolidated
Return with any other Person or been a member of an Affiliated Group
within the meaning of Section 1504 of the Code.
(n) Environmental Matters.
Except as set forth on SCHEDULE 4(N) hereto:
(i) the Company is in compliance with all Environmental Laws and,
other than as to matters heretofore corrected or resolved, the
Company has not received any communication from a Governmental
Authority that alleges that the Company is not in such compliance;
(ii) there is no Environmental Claim currently pending or, to the
knowledge of any of the Selling Group Members, threatened against
(A) the Company, (B) any Person whose liability for such
Environmental Claim the Company has retained or assumed either
contractually or by operation of law or (C) against any real or
personal property or operations which the Company currently or
formerly owns/owned, leases/leased or operates/operated;
(iii) the Company has not disposed of or released any substance,
arranged for the disposal of any substance, knowingly exposed any
employee or other individual to any substance or condition, or
owned or operated its businesses or any property or facility nor at
any time in the past which could reasonably be expected to give
rise to any liability or corrective or remedial obligation of the
Company under any Environmental Laws;
-27-
<PAGE> 28
(iv) no real property currently or formerly owned or operated by
the Company is currently listed on the National Priorities List or
the Comprehensive Environmental Response, Compensation and
Liability Information System, both promulgated under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), or on any comparable state
list, nor does the Company have any knowledge of any facts that
could, if known to any Governmental Authority, give rise to a
potential claim under any Environmental Law, and the Company has
not received any written notice of potential liability from any
Person under or relating to CERCLA or any comparable state or local
Environmental Law;
(v) the Company has not disposed or arranged for the disposal of
any waste at any off-site location which is listed on the National
Priorities List or on any comparable state list, nor has the
Company received any written notice from any Person with respect to
any such off-site location, of potential or actual liability or a
written request for information from any Person under or relating
to CERCLA or any comparable state or local law; and
(vi) to the knowledge of Sellers, no underground storage tanks
("USTs"), asbestos containing materials ("ACMs"), polychlorinated
biphenyls ("PCBs"), above ground storage tanks ("ASTs") or other
storage containers are located on, under, in, or otherwise
connected to any property or facility currently or formerly owned
or operated by the Company.
(o) Real Property.
(i) The Lodi Facility constitutes the only real property that the
Company owns. As related to the Lodi Facility:
(A) the Company has good and marketable fee simple title to
the same, free and clear of any Lien or other easement,
covenant, or other restriction, except for Permitted Liens
and Permitted Real Estate Restrictions;
(B) there are no leases, subleases, licenses or other
agreements granting to any party or parties the right of use
or occupancy of any portion of the Lodi Facility; and
(C) there are no outstanding options or rights of first
refusal to purchase the Lodi Facility, or any portion thereof
or interest therein.
(ii) SCHEDULE 4(O)(II) hereto lists all Real Property Leases,
other than the Facility Leases. The Sellers have delivered to the
Buyer correct and complete copies of each of the Real Property
Leases. Neither Seller subleases any real
-28-
<PAGE> 29
property. Each Real Property Lease is legal, valid, binding,
enforceable, and in full force and effect.
(iii) With respect to the Material Real Property, no portion
thereof is subject to any pending condemnation proceeding or
proceeding by any public or quasi-public authority and there is no
threatened condemnation or proceeding with respect thereto.
(iv) All plant structures and equipment of the Sellers are in good
operating condition and repair, subject to normal wear and tear and
the provision of usual and customary maintenance and repair
performed in the ordinary course with respect to similar properties
of like age and construction.
(v) Other than as related to customary service agreements, and
such agreements as the Company has otherwise entered into in
connection with certain construction-in-progress at the Company's
facility located at 32501 Dequindre Road, neither of the Sellers
has entered into any Contract, arrangement, license, concession or
easement, either recorded or unrecorded, written or oral, affecting
any of the Material Real Property, or any portion thereof or the
use thereof.
(vi) With respect to the Material Real Property, there are no (i)
pending improvement Liens to be made by any Governmental Authority;
(ii) violations of zoning ordinances, building codes or related
regulations; or (iii) pending Actions to which either of the
Sellers is a named party or in respect of which it has otherwise
received notice, including any pending condemnation proceedings.
(vii) All improvements made by the Company on the Material Real
Property were permitted and conforming structures under applicable
zoning and building laws and ordinances in effect when the
improvements were constructed and the present uses thereof are
permitted and conforming uses under applicable zoning and building
laws and ordinances.
(p) Intellectual Property. SCHEDULE 4(P)(I) hereto sets forth an
accurate and complete list of all patents, pending patent applications,
trademarks, servicemarks, pending trademark or servicemark applications
and trade names licensed to, applied for or registered in the name of,
either of the Sellers, and all copyright registrations or pending
applications for registrations of the Sellers, including the nature
(e.g., patent, trademark, etc.) of the intellectual property, the
application or registration number, the jurisdiction and the record owner
(the "Listed Intellectual Property"). Except as set forth on SCHEDULE
4(P)(II), with respect to the Listed Intellectual Property, no
registration relating thereto (if any) has lapsed, expired or been
abandoned or canceled or is the subject of cancellation proceedings.
Except as set forth on SCHEDULE 4(P)(III), the Sellers own or possess
adequate and enforceable licenses to use all Listed Intellectual Property
and any other intellectual property rights (including, without
limitation, drawings, trade secrets,
-29-
<PAGE> 30
know-how and confidential information) currently used by the Sellers, or
necessary to permit the Sellers to conduct the Company Business as now
conducted (the Listed Intellectual Property and the other intellectual
property rights hereinafter collectively called the "Intellectual
Property"). SCHEDULE 4(P)(IV) sets forth all licenses to which either of
the Sellers are a party relating to the Intellectual Property (the
"Intellectual Property Licenses"). Except as set forth on SCHEDULE
4(P)(V), the operations of the Company Business as currently conducted do
not infringe upon the proprietary rights of others, nor have any of the
Selling Group Members received any notice or claim from any third party
of any such infringement. The Company is not aware of any infringement
by any third party on, or any competing claim of right to use or own any
of the Intellectual Property. No Contract between the Company and any
other Person exists and no Liens, other than Permitted Liens, exist which
in either case would impede or prevent the continued use by the Company
of the entire right, title and interest of the Company in and to any of
the Intellectual Property.
(q) Contracts. SCHEDULE 4(Q) hereto sets forth an accurate and complete
list of each Material Agreement. All of the Material Agreements are
enforceable in all respects by the Company in accordance with their terms
except to the extent that such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights generally and the Company is not in breach
or default under (and no event has occurred which with notice or the
passage of time or both would constitute a breach or default under) any
Material Agreement. To the knowledge of the Company, no other party to a
Material Agreement is in beach or default thereunder.
(r) Powers of Attorney. SCHEDULE 4(R) hereto sets forth outstanding
powers of attorney executed on behalf of either of the Sellers.
(s) Litigation. SCHEDULE 4(S) hereto sets forth each instance in which
either of the Sellers (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge, (ii) is a party to any Action
or (iii) has, to the knowledge of any of the Selling Group Members, been
threatened with any claim or litigation which has not otherwise been
finally resolved,.
(t) Employee Benefits.
(i) The Company is not a party to, or bound by, any collective
bargaining agreement covering its employees. The Company is in
compliance with all Applicable Laws respecting employment and
employment practices, terms and conditions of employment and wages
and hours. There is no labor strike, dispute, slowdown, stoppage
or organizational effort pending or threatened against or involving
the Company (other than individual grievances that arise in the
ordinary course).
-30-
<PAGE> 31
(ii) Except as set forth on SCHEDULE 4(T)(II) hereto, the Company
(A) does not maintain any Employee Benefit Plan, (B) does not
presently contribute to any Employee Benefit Plan maintained by any
other Person and (C) is not liable for any payments pursuant to any
Employee Benefit Plan maintained by the Company or any other
Person. Each Employee Benefit Plan has been maintained in all
respects in accordance with its terms and, where applicable, in
compliance with ERISA, the Code and all other Applicable Laws. The
Company has not maintained or contributed to any Employee Benefit
Plan which is an "employee defined pension benefit plan" as such
term is defined in Section 3(35) of ERISA or a "multi-employer
plan" as such term is defined in Section 3(37) of ERISA.
(iii) With respect to each such Employee Benefit Plan governed by
ERISA, the Company previously has furnished to Buyer a true and
correct copy of, where applicable, (A) the most recent annual
report (Form 5500) filed with the Internal Revenue Service (the
"IRS"), (B) the plan document, (C) each trust agreement and group
annuity contract, if any, relating to such ERISA Plan, (D) the most
recent summary plan description and (E) the most recent
determination letter issued by the IRS.
(iv) Except as set forth in SCHEDULE 4(T)(IV) hereto, with respect
to each such Employee Benefit Plan, there are no funded benefit
obligations for which contributions have not been made or properly
accrued.
(v) No such Employee Benefit Plan has incurred any "accumulated
funding deficiency" (as defined in Section 412 of the Code),
whether or not waived.
(vi) Except as set forth in SCHEDULE 4(T)(VI) hereto, each of such
Employee Benefit Plans which is intended to be a qualified plan
within the meaning of Section 40l(a) of the Code has been
determined by the IRS to be so qualified and nothing has occurred
to cause the loss of such qualified status.
(vii) Except as set forth in SCHEDULE 4(T)(VII) hereto, no such
Employee Benefit Plan provides health, medical or life insurance
benefits with respect to any current or former employees of the
Company beyond their retirement or other termination of service
other than (A) coverage mandated by applicable law, or (B) benefits
the full cost of which are borne by the current or former employee
(or his or her beneficiary).
(viii) With respect to all of its past and present employees, the
Company has complied with the notice and continuation requirements
of Part 6 of Subtitle B of Title I of ERISA and of Section 4980B of
the Code.
-31-
<PAGE> 32
(ix) All contributions (including all employer contributions and
employee salary reduction contributions, if any) which are due have
been paid to each such ERISA Plan which is an "Employee Pension
Benefit Plan", (as defined in ERISA).
(x) Each such Employee Benefit Plan which is intended to meet the
requirements of Section 125 of the Code meets such requirements and
each program of benefits for which employee contributions are
provided pursuant to elections under any such Employee Benefit Plan
meets the requirements of the Code applicable thereto.
(xi) No "prohibited transaction" (as such term is defined in
Section 406 of ERISA or Section 4975 of the Code) has occurred with
respect to any such ERISA Plan which is an Employee Pension Benefit
Plan (as defined in ERISA), or its related trust, which could
subject the Company, or any officer, director or employee of the
Company, to any Tax or penalty imposed under Section 4975 of the
Code or liability under Section 406 of ERISA.
(xii) There are no actions, suits, proceedings, hearings or
investigations with respect to the administration or the investment
of assets of any such Employee Benefit Plan (other than routine
claims for benefits) and none of the Selling Group Members have
received any written notice threatening any such action, suit,
proceeding, hearing or investigation.
(xiii) All reporting and disclosure obligations imposed under ERISA
and the Code have been satisfied with respect to each Employee
Benefit Plan.
(u) Insurance. SCHEDULE 4(U) hereto contains an accurate and complete
list and a brief description of all insurance policies currently in
effect which are presently owned or held by either of the Sellers,
insuring the products, properties, assets, business and operations of the
Company and its potential liabilities to third parties, and all general
liability policies maintained by either of the Sellers. As of the
Closing Date, all premiums due have been paid and no notice of
cancellation or termination or intent to cancel has been received by
either of the Sellers with respect to any such policy. To the knowledge
of the Sellers, the Company is not in default under any such insurance
policies, nor do such Sellers have any reason to believe the Company is
in violation of any of the conditions necessary for the maintenance of
continued coverage under such policies.
(v) Bank Accounts. SCHEDULE 4(V) hereto contains a correct and complete
list of the name of each bank or other financial institution which the
Company has an account or safe deposit box, and the names of all Persons
authorized to draw thereon or to have access thereto.
(w) Product Liability. Except as set forth on SCHEDULE 4(W) hereto and
except for routine warranty claims for the return of defective or
non-conforming merchandise, there
-32-
<PAGE> 33
exist no claims made and not otherwise covered by insurance, but subject
otherwise to currently applicable deductibles threatened claims against
the Company for injury to persons or property suffered by any Person as a
result of the sale of any product by the Company, including, but not
limited to, claims alleging defective or unsafe nature of the products of
the Company.
(x) HSR. The Selling Group Members have received notice of the early
termination of the waiting required under the provisions the
Hart-Scott-Rodino Act.
(y) Inventories; Accounts and Notes Receivable.
(i) Except as set forth on SCHEDULE 4(Y)(I) hereto, the
inventories of the Sellers include no items which are obsolete, of
below standard quality or of a quality or quantity not usable or
salable in the normal course of business, the aggregate value of
which has not been written down on the books of account of the
Sellers to realizable market value or with respect to which
adequate reserves have not been provided.
(ii) All of the accounts receivable and notes receivable owing to
the Sellers as of the Closing Date constitute and as of the Closing
will constitute valid and enforceable claims arising from bona fide
transactions in the Ordinary Course of Business. SCHEDULE 4(Y)(II)
hereto sets forth all known or asserted claims, refusals to pay or
other rights of set-off against the accounts receivable and notes
receivable owing to the Sellers as of the Closing Date which are in
excess of $_________________________.
(z) Customers. SCHEDULE 4(Z)(I) sets forth a list of each customer of
the Company to which the Company, individually or in the aggregate, sold
more than $750,000.00 in goods or service in its most recent fiscal year
(the "Principal Customers"). Except as set forth on SCHEDULE 4(Z)(I),
the relationships of the Company with its customers are good commercial
relationships, and the Company does not know of any plan or intention of
any customer and has not received any written threat or notice from any
customer to terminate, cancel or modify its relationship with the
Company.
(aa) Suppliers and Vendors. Since March 31, 1997, no material supplier
or vendor of the Company has canceled or otherwise terminated, or
threatened to cancel or otherwise terminate, its relationship with the
Company or has decreased, limited or otherwise modified, or threatened to
decrease, limit or otherwise modify, the services, supplies or materials
it provides to the Company.
(bb) Certain Business Relationships with Valley. Except as set forth on
SCHEDULE 4(BB) hereto, and except for normal advances to employees
consistent with past practices, payment of compensation to employees
consistent with past practices, and participation in Employee Benefit
Plans by employees, neither of the Sellers has purchased, acquired or
-33-
<PAGE> 34
leased any property or services from, or sold, transferred or leased any
property or services to, or loaned or advanced any money to, or borrowed
any money from, or entered into or been subject to any management,
consulting or similar agreement with, any Affiliate of such Person or any
officer, director, manager or partner of the Company or their respective
Affiliates (including, the Selling Group Members).
(cc) Reimbursement of Advances. All amounts owed to the Company as
reimbursements for claims paid by the Company to, or for the account of,
employees and beneficiaries of Medikmark, Inc. and Automed, Inc. under
the Company's health plan have been fully reimbursed to Valley.
(dd) Trust Representation. No more than $____________________ of the
Closing Payment Amount shall be distributed by the Selling Group Members
to the Trust established under that certain Trust Agreement dated August
__, 1997 between Charles J. O'Toole and Citicorp Trust South Dakota, as
Trustees, and Fisher, as Settlor.
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
The Buyer represents and warrants to the Selling Group Members that:
(a) Organization of Buyer Companies. The Buyer is a limited liability
company duly formed, validly existing, and in good standing under the
laws of the State of Delaware. Parent is a limited liability company,
duly formed, validly existing, and in good standing under the laws of the
State of Delaware.
(b) Authorization of Transactions. Each of the Buyer Companies has full
power and authority to execute and deliver this Agreement and each of the
other Documents to which it is a party, and to perform its obligations
under the Documents to which it is a party. Each of the Documents
constitutes the valid and legally binding obligation of each of the Buyer
Companies a party thereto, enforceable in accordance with its terms and
conditions. Except as set forth on SCHEDULE 5(B) hereto, no filing with,
and no permit, authorization, consent or approval of, any Person is
necessary to be obtained by the either of the Buyer Companies for the
consummation by the Buyer Companies of the Transactions. The execution,
delivery and performance by each of the Buyer Companies of this Agreement
and each other Document to which such Party is or will be a party, and
the consummation of the Transactions, have been duly and validly
authorized by all necessary action on the part of such Party.
(c) Noncontravention. Neither the execution and the delivery of the
Documents by either of the Buyer Companies, nor the performance by such
Party of its obligations thereunder, will (i) violate any law, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other restriction of any government, governmental agency, or court to
which either such Party is subject or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of,
create in any party the right to
-34-
<PAGE> 35
accelerate, terminate, modify, or cancel, or require any notice under any
other agreement, contract, instrument, or other arrangement which, if
terminated or otherwise violated, would as to the Parent and its
subsidiaries, taken as a whole, have a Material Adverse Effect.
(d) Consents and Authorizations. Except as required under the
provisions of the Hart-Scott-Rodino Act, neither of the Buyer
Companies, nor any member of the Parent needs to give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency or other Person in order for the
Parties to consummate the Transactions, which authorization, consent, or
approval has not otherwise been so obtained.
(e) Litigation. There are no Actions pending or, to the knowledge of
either of the Buyer Companies, threatened against or involving such
Party, any of its assets or properties, or otherwise that question the
validity of the Documents or seek to prohibit, enjoin or otherwise
challenge the consummation of the Transactions. There are no outstanding
orders, judgments, injunctions, stipulations, awards or decrees of any
Governmental Authority against either of the Buyer Companies or any of
its assets or properties which prohibit or enjoin the consummation of the
Transactions.
(f) Brokers' Fees. The Buyer has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any of the Seller
Group Members could become liable or obligated.
6. EMPLOYEE MATTERS.
(a) Employment. On the Closing Date, Buyer will offer employment
to all employees (whether working or on a leave of absence) of the
Company Business, effective as of the Closing Date and at rates of
compensation at least equal to the rates of compensation applicable to
such employees as of the Closing Date.
(b) Employee Benefit Obligations. Buyer acknowledges that, except as
set forth in SCHEDULE 6(B) hereto, the Valley Liabilities shall include
all employee benefit-related obligations or liabilities of the Sellers
existing at the Closing Date with respect to the current and former
employees of the Company Business under the provisions of each Employee
Benefit Plan or other employee benefit plan, fund, program or arrangement
sponsored or maintained by Sellers as of the Closing Date, including,
without limitation, all liabilities and obligations of the Sellers in
respect of vacation pay, sick pay, severance pay, insurance and payroll
taxes and all accrued contributions, if any, required under the terms of
any Employee Benefit Plans, or salary reduction amounts and matching
contributions with respect thereto through the Closing Date. Nothing
contained in this Agreement shall obligate the Buyer to continue or
maintain any Employee Benefit Plan or paid time off policy adopted or
sponsored by the Company prior to the Closing Date, or to continue to
provide the same level of benefits
-35-
<PAGE> 36
under any Employee Benefit Plan or paid time off policy adopted or
sponsored by the Company prior to the Closing.
(c) Medikmark/Automed Coverage. Effective as of the Closing Date, the
Sellers shall cause Medikmark, Inc. ("Medikmark") and Automed, Inc.
("Automed") to have established their own separate 401(k) plan and
employee health and medical plan coverage and all coverage of employees
of Medikmark and Automed under the Employee Benefit Plan shall thereupon
terminate; provided, however, the Buyer shall administer all claims
incurred prior to the Closing Date under, and subject to, the terms of
the Company's self-insured health plan, and Sellers shall immediately
reimburse all payments made by the Buyer with respect to such claims.
(d) Severance Liabilities. Buyer will be responsible for, and will
indemnify Sellers against, any and all liabilities for severance pay,
including liability under the Worker Adjustment and Retraining
Notification Act or any similar state law relating to or arising out of
the layoff or termination of employment of any employees of the Company
Business after the Closing Date.
(e) No Third-Party Rights. Nothing contained in this Agreement shall
confer upon any employee any rights or remedies of any nature or kind
whatsoever under or by reason of this Agreement, including, without
limitation, any right to employment or continued employment or to any
benefits that may be provided, directly or indirectly, under any employee
benefit plan, policy or arrangement of the Buyer or Sellers, nor shall
anything contained in this Agreement constitute a limitation on or
restriction against the right of the Buyer or Sellers to amend, modify or
terminate any such plan, policy or arrangement or the terms or conditions
of employment.
7. REMEDIES FOR BREACHES OF THIS AGREEMENT AND THE OTHER DOCUMENTS.
(a) Survival of Representations and Warranties/Claims Period. The
representations and warranties of the Parties contained in the Documents,
shall survive the Closing and continue in full force and effect for a
period (the "Claims Period") determined as follows: (i) the
representations and warranties of the Sellers set forth in Section 4(a),
(b), (c), (d), (e), (f), (g) and, as to matters of title, (h), and the
representations and warranties of the Buyer in Section 5(a), (b), (c),
(d) and (f), shall continue in full force and effect indefinitely, (ii)
the representations and warranties of the Seller in Section 4(n) shall
continue in full force and effect for a period of 3 years after Closing
and (iii) all other representations and warranties of the Parties shall
continue in full force and effect for a period of 18 months after the
Closing.
(b) Indemnification Provisions for Benefit of the Buyer. Each of the
Selling Group Members shall indemnify the Buyer and its officers,
directors, stockholders, partners, trustees, beneficiaries, employees,
agents, Affiliates, successors and assigns (collectively, the "Buyer
Indemnified Persons") from and against such Selling Group Member's
Allocable Portion of any Indemnifiable Losses such Buyer Indemnified
Persons shall incur as a result of (i) any breach or inaccuracy in any
representation or warranty made by any
-36-
<PAGE> 37
of the Selling Group Members under the Documents, (ii) except as set
forth in clause (D) below, any breach by any of the Selling Group Members
of any of the Selling Group Members' covenant or other agreement of any
of the Selling Group Members as provided for in the Documents, (iii) all
costs and penalties incurred by any of the Buyer Indemnified Persons,
including legal fees, if any, as a result of the alleged failure of the
Company to file Annual Reports with respect to the Company's 125 Plan,
(iv) any claims asserted in respect of the Threatened Claims or (v) the
assertion against any of the Buyer Indemnified Persons of any Excluded
Obligation, provided, that:
(A) such claim for indemnification must be asserted by Buyer
Indemnified Persons within the related Claims Period (if any),
pursuant to a written claim for indemnification delivered to the
Valley Equityholder Representative by written notice in the manner
provided herein, provided, however, that after the assertion of any
such claim hereunder on or prior to the expiration of the Claims
Period (if any), the Buyer Indemnified Persons shall be fully
entitled to the benefits of this Section 7 (and the other
indemnification provisions in this Agreement) notwithstanding the
fact that such claim shall not be finally resolved on or prior to
the expiration of the Claims Period (if any);
(B) except for any Lodi Environmental Liabilities or
Indemnifiable Losses caused by the breach of an Excluded
Representation or Warranty, the Selling Group Members shall not
have any obligation to indemnify the Buyer Indemnified Persons from
and against any Indemnifiable Losses arising out of any Threatened
Claims or caused by the breach of any representation or warranty
contained in Section 4 of this Agreement until the Buyer
Indemnified Persons have incurred such Indemnifiable Losses which,
in the aggregate, exceed a $750,000 aggregate deductible, it being
acknowledged and agreed that the Selling Group Members will only be
obligated to indemnify the Buyer Indemnified Persons from and
against such further Indemnifiable Losses in excess of such
$750,000 deductible amount;
(C) except for Indemnifiable Losses caused by the breach of an
Excluded Representation or Warranty, the Selling Group Members
shall not have any obligation to indemnify the Buyer Indemnified
Persons from and against any Indemnifiable Losses caused by the
breach of any representation or warranty contained in Section 4 of
this Agreement, any Lodi Environmental Liabilities or any
Threatened Claims to the extent the indemnification claims which
the Selling Group Members have, in the aggregate, paid, discharged
or otherwise satisfied, exceed an aggregate ceiling of $6,000,000,
it being acknowledged and agreed that the maximum liability of the
Selling Group Members to the Buyer Indemnified Persons in respect
of such Indemnifiable Losses shall be the aggregate amount of
$6,000,000; and
(D) with regard to any breach of any of the covenants set forth
in subsections (c), (d) or (e) of Section 8 hereof, (1) Morgan shall
be solely liable to the
-37-
<PAGE> 38
Buyer Indemnified Persons for any breach of any such covenant(s) by
Morgan, and neither Fisher, nor any other Selling Group Member,
shall have any liability to the Buyer Indemnified Persons for such
breach and (2) Fisher and each of the other Selling Group Members
(other than Morgan) shall be solely liable to the Buyer Indemnified
Persons for any breach of any covenant(s) by Fisher or such other
Selling Group Member (other than Morgan), and Morgan shall have no
liability to the Buyer Indemnified persons for such breach.
Notwithstanding anything to the contrary contained herein, the
limitations set forth in the foregoing provisions of clauses (B) and (C)
above shall not apply to the willful breach of any representation or
warranty.
(c) Indemnification Provisions for Benefit of Selling Group Members.
The Buyer Companies shall jointly and severally indemnify the Selling
Group Members and each of the officers, directors, stockholders,
partners, trustees, beneficiaries, employees, agents, Affiliates,
successors and assigns of each of the Selling Group Members
(collectively, the "Seller Indemnified Persons") from and against all
Indemnifiable Losses any of the Seller Indemnified Persons shall incur as
a direct result of (i) any breach or inaccuracy in any representation or
warranty made by the Buyer Companies under the Documents, and (ii) any
breach by the Buyer Companies of any of the covenants or other agreements
of the Buyer Companies as provided for in the Documents or (iii) the
assertion against any of the Seller Indemnified Persons of any liability
for any of the Valley Liabilities, provided, that:
(A) such claim for indemnification must be asserted by a
Stockholder within the related Claims Period, pursuant to a written
claim for indemnification delivered to the Buyer by written notice
as herein provided, however, that after the assertion of any such
claim hereunder on or prior to the expiration of the Claims Period
(if any), the Seller Indemnified Persons shall be fully entitled to
the benefits of this Section 7 (and the other indemnification
provisions in this Agreement) notwithstanding the fact that such
claim shall not be finally resolved on or prior to the expiration
of the Claims Period (if any).;
(B) the Buyer Companies shall not have any obligation to
indemnify the Seller Indemnified Persons from and against any
Indemnifiable Losses caused by the breach of any representation or
warranty (other than an Excluded Representation or Warranty)
contained in Section 5 of this Agreement, or any representation or
warranty made to Fisher or Morgan under the Parent Subscription
Documents, until the Seller Indemnified Persons have incurred such
Indemnifiable Losses which, in the aggregate, exceed a $60,000.00
aggregate deductible, it being acknowledged and agreed that the
Buyer Companies will only be obligated to indemnify the Seller
Indemnified Persons from and against such further Indemnifiable
Losses in excess of such $60,000.00 deductible amount; and
-38-
<PAGE> 39
(C) the Buyer Companies shall not have any obligation to
indemnify the Seller Indemnified Persons from and against any
Indemnifiable Losses caused by the breach of any representation or
warranty (other than an Excluded Representation or Warranty)
contained in Section 5 of this Agreement, or any representation or
warranty made to Fisher or Morgan under the Parent Subscription
Documents, to the extent the indemnification claims which the Buyer
Companies have, in the aggregate, paid, discharged or otherwise
satisfied, exceed an aggregate ceiling of $480,000.00, it being
acknowledged and agreed that the maximum liability of the Selling
Group Members to the Buyer Indemnified Persons in respect of such
Indemnifiable Losses shall be the aggregate amount of $480,000.00.
Notwithstanding anything to the contrary contained herein, the
limitations set forth in the foregoing provisions of clauses (B) and (C)
above shall not apply to the willful breach of any representation or
warranty.
(d) Closing Equity Value. Notwithstanding anything to the contrary set
forth in this Section 7, the Selling Group Members have no liability to
the Buyer Indemnified Persons for any claims arising out of the breach of
any representation or warranty set forth in Section 4 hereof to the
extent the liability or loss claimed to have been incurred by the Buyer
Indemnified Person(s) has otherwise been reflected or reserved for in the
determination of the Closing Equity Value, as finally determined and
adjustment to the Purchase Price shall have been made in accordance with
this Agreement.
(e) Notice of Claim. In the event a Party, or Parties, desire(s) to
make a claim for indemnification under the provisions of this Agreement,
including any claim for indemnification in respect of a Third Party Claim
under subsection (f) below, against any other Party(ies), the Party(ies)
seeking indemnification (the "Indemnified Party") shall, within the
Claims Period, promptly notify the other Party(ies) (the "Indemnifying
Party"), in writing (an "Indemnity Claim Notice"), of such claim or
demand, specifying in reasonable detail the nature of such claim or
demand and the amount or estimated amount thereof to the extent then
feasible. The Indemnifying Party shall have fifteen (15) days after
receipt of the Indemnity Claim Notice (the "Response Period") within
which to notify the Indemnified Party (i) whether or not such
Indemnifying Party disputes liability to the Indemnified Party hereunder
with respect to such claim or demand and (ii) in the case of a claim for
indemnity involving a Third Party Claim, and notwithstanding whether the
Indemnifying Party disputes his or its liability to the Indemnified
Party, whether or not the Indemnifying Party desires, at its sole cost
and expense, to defend the Indemnified Party against such Third Party
Claim. If the Indemnifying Party disputes his or its liability with
respect to such claim or demand for indemnification, or the amount
thereof (and whether or not, in the case of any Third Party Claim, such
Indemnifying Party otherwise desires to defend the Indemnified Party
against such claim as otherwise provided in subsection (e) below), the
dispute as to the liability of the Indemnifying Party with respect to
such claim or demand for indemnification, or the amount thereof, shall,
unless otherwise agreed by the Indemnified Party and Indemnifying Party,
be resolved in accordance with the
-39-
<PAGE> 40
provisions of subsection (g) below. If the Indemnifying Party fails to
notify the Indemnified Party within the Response Period that it disputes
the claim or demand for indemnification made by the Indemnified Party, or
the amount thereof, or otherwise admits such liability in such
notification, the amount of such claim shall be conclusively deemed a
liability of the Indemnifying Party hereunder.
(f) Third Party Claims.
(i) In the event that any claim or demand made by an
Indemnified Party for indemnification in an Indemnity Claim Notice
arises out of the assertion of any claim or demand against the
Indemnified Party by any third party (a "Third Party Claim"), then
the defense of such Third Party Claim shall be handled in
accordance with the provisions of this subsection (f).
(ii) In the event the Indemnifying Party notifies the
Indemnified Party within the Response Period that they desire to
defend against the Third party Claim, then the Indemnifying Party
will have the right thereafter to assume and thereafter conduct the
defense of the Third Party Claim with counsel of his or its choice
reasonably satisfactory to the Indemnified Party; provided,
however, that:
(A) in the event the Indemnifying Party has otherwise
disputed his or its liability with respect to such claim or
demand for indemnification made by the Indemnified Party, or
the amount thereof, the Indemnifying Party will not consent
to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior
written consent of the Indemnified Party;
(B) in the event the Indemnifying Party has otherwise
admitted or accepted his or its liability with respect to
such claim or demand for indemnification made by the
Indemnified Party, and the amount thereof, the Indemnifying
Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnified Party.
(iii) In the event the Indemnifying Party does not elect to
assume the defense of a Third Party Claim within the Response
Period, such Indemnifying Party may, at any time thereafter, and
provided such Indemnifying Party agrees to assume liability for
such Third Party Claim and the underlying indemnity claim made by
the Indemnified Party, elect to assume such defense, provided,
that, the assumption of such defense at such time would not
otherwise unduly prejudice the rights or interests of the
Indemnified Party.
(iv) Unless and until an Indemnifying Party assumes the
defense of a Third Party Claim as provided in Section 7(f)(ii) or
(iii) above, the Indemnified Party may
-40-
<PAGE> 41
defend against such Third Party Claim in any manner he or it
reasonably may deem appropriate.
(iv) In no event will the Indemnified Party consent to the
entry of any judgment or enter into any settlement with respect to
the Third Party Claim without the prior written consent of the
Indemnifying Party in the event the Indemnifying Party has
otherwise elected to assume and conduct the defense of such Third
Party Claim or otherwise prior to the expiration of the Response
Period.
(g) Arbitration. The parties shall attempt in good faith to resolve all
disputes with respect to any claims for indemnification under this
Agreement by arbitration in Detroit, Michigan, before a single arbitrator
pursuant to the rules of the American Arbitration Association.
Arbitration may be commenced at any time by any Party hereto by giving
written notice to each other Party to such dispute that such dispute has
been referred to arbitration under the provisions of this subsection (g).
The arbitrator shall be selected by the joint agreement of the
Indemnified Party and Indemnifying Party, but if they do not so jointly
agree within twenty (20) days after the date of the notice referred to
above, the selection shall be made pursuant to the rules from the panels
of arbitrators maintained by such Association. Any award rendered by the
arbitrator shall be appealable by any Party in accordance with Section
9(i). The Selling Group Members on the one hand and the Buyer Companies
on the other hand shall each bear their own expenses of arbitration,
provided, that, the expenses of the arbitrator shall be equally shared by
the Selling Group Members and the Buyer Companies.
(h) Determination of Indemnifiable Loss. In the determination of
Indemnifiable Losses for purposes of this Agreement, appropriate
adjustments for tax benefits resulting in actual reduced tax payments in
the fiscal year in which the Indemnified Loss was paid shall be made. All
indemnification payments under this Agreement shall be deemed adjustments
to the Purchase Price.
(i) Exclusive Remedy. The indemnification provisions of this Agreement
are intended to be the exclusive remedy of the Parties for any breach of
the representations, warranties or covenants set forth in this Agreement,
provided, however, that, in such instances where injunctive or other
equitable relief is otherwise appropriate, nothing herein shall be deemed
to preclude a Party from commencing an action in a court specified in
Section 9(i) for the purpose of obtaining any such injunctive or other
equitable relief otherwise deemed necessary or appropriate by such Party.
8. POST-CLOSING COVENANTS.
The Parties agree as follows with respect to the period following
the Closing:
-41-
<PAGE> 42
(a) General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any
other Party reasonably may request, all at the sole cost and expense of
the requesting Party (unless the requesting Party is entitled to
indemnification therefor under Section 7 above).
(b) Litigation Support. In the event and for so long as any Party is
actively contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection
with (i) any transaction contemplated under this Agreement or the other
Documents or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to
act, or transaction on or prior to the Closing Date involving the
Company, each of the other Parties will cooperate with the contesting or
defending Party and his or its counsel in the contest or defense, make
available his or its personnel, and provide such testimony and access to
his or its books and records as shall be necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Section 7 above).
(c) Non-Competition. For a period commencing on the Closing Date and
terminating on the fifth anniversary thereof, no Restricted Party (as
defined below) will, directly or indirectly, engage in or have any
interest in any sole proprietorship, partnership, corporation or business
or any other Person (whether as an employee, officer, director, partner,
agent, security holder, creditor, consultant or otherwise) that directly
or indirectly is engaged in the Company Business (collectively
"Competitive Businesses'') in the United States of America or Canada;
provided, however, that nothing herein shall be deemed to prevent any
Restricted Party from acquiring through market purchases and owning,
solely as an investment, less than two percent of the equity securities
of any class of any issuer whose shares are registered under Section
12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and
are listed or admitted for trading on any national securities exchange or
are quoted on the National Association of Securities Dealers Automated
Quotations System or any similar system of automated dissemination of
quotations of securities prices in common use, so long as the Restricted
Party is not a member of any ''control group" (within the meaning of the
rules and regulations of the United States Securities and Exchange
Commission) of any such issuer and which is engaged in a Competitive
Business. The Restricted Parties agree that the covenant provided for in
this Section 8(c) is reasonable and necessary in terms of time, activity
and territory to protect the Buyer's interest as a buyer of the Purchased
Shares. To the extent that the covenant provided for in this Section
8(c) may later be deemed by a court to be too broad to be enforced with
respect to its duration or with respect to any particular activity or
geographic area, the court making such determination shall have the power
to reduce the duration or scope of the provision, and to add or delete
specific words or phrases to or from the provision. The provision as
modified shall then be enforced. As used in this Agreement, a "Restricted
Party" shall mean the Selling Group Members and their respective
Affiliates.
-42-
<PAGE> 43
(d) Non-Disclosure.
(A) Neither the Selling Group Members nor any of their respective
Affiliates (collectively, the "Covered Persons") shall disclose.
divulge, furnish or make accessible to anyone (other than the Buyer
or any of its Affiliates or representatives) any Restricted
Confidential Information (as defined below), or in any way use any
such Restricted Confidential Information in the conduct of any
business.
(B) Nothing in this Section 8(d) shall prohibit the disclosure by
any Covered Person of any Restricted Confidential Information to
(i) any federal, state or other regulatory authority having
jurisdiction over such Covered Person or (ii) any other Person to
which such disclosure shall, in the opinion of counsel, be legally
necessary (x) to effect compliance with any law, rule, regulation
or order applicable to such Covered Person, (y) in response to any
subpoena or other legal process, (z) in connection with any
litigation to which such Covered Person is a party; provided,
however, that no disclosure shall be made until such Covered Person
shall give written notice to the Buyer of the intention to disclose
such Restricted Confidential Information so that the Buyer may
contest the need for disclosure, and such Covered Person shall
reasonably cooperate at the request of the Buyer with the Buyer in
connection with any such proceeding.
(C) For purposes of this Section 8(d), "Restricted Confidential
Information" means any Confidential Information pertaining to the
Company immediately prior to the Closing, including, but not
limited to, information concerning its financial condition,
prospects, customers, sources of leads, methods of doing business,.
and the manner of design, manufacture, financing, marketing and
distribution of its products; provided, however, that Restricted
Confidential Information does not include information that is or
becomes generally available to the public other than as a result of
a disclosure in violation of this Section 8(d) by any Covered
Person.
(e) Non-Solicitation of Employees and Customers. For a period of five
years following the Closing Date, no Restricted Party will, directly or
indirectly, for itself or for any other Person, (a) attempt to employ or
enter into any contractual employment arrangement with any employee of
the Buyer or any former employee of the Buyer until nine months after
such Person's employment with the Buyer ended, or (b) call on or solicit
any of the customers or clients of the Buyer for the purpose of competing
with the Borrower.
9. MISCELLANEOUS.
-43-
<PAGE> 44
(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in this Agreement
shall survive the Closing hereunder as and to the extent provided in
Section 7 above.
(b) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the other
Party; provided, however, that any Party may make any public disclosure
it believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will advise the other Party prior to making the
disclosure and allow the other Party to comment upon the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents listed as
Exhibits and Schedules and attached hereto) constitutes the entire
agreement between the Parties and supersedes any prior understandings,
agreements, or representations by or between the Parties, written or
oral, to the extent they related in any way to the subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the other Party, provided, however,
that the Buyer may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and to any financing
institutions providing financing for the transactions contemplated
hereunder and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if (and then two business days after) it is sent by
-44-
<PAGE> 45
registered or certified mail, return receipt requested, postage prepaid,
and addressed to the intended recipient as set forth below:
If to the Selling Group Members or Valley
Equityholders Representative:
Robert L. Fisher
Ocean Reef Club
18 W. Snapper Point Drive
Key Largo, FL 33037
Telephone: (305) 367-2454
Facsimile: (305) 367-2964
with a copies to:
Roger T. Morgan
c/o Valley Industries, Inc.
32501 Dequindre Road
Madison Hts., MI 48071
Telephone: (810) 588-6900
Facsimile: (810) 588-0027
and
Arter & Hadden
925 Euclid Avenue, Suite 1100
Cleveland, Ohio 44115
Attention: Charles J. O'Toole, Esq.
Telephone: (216) 696-1100
Facsimile: (216) 696-2645
If to the Buyer: Valley Industries, LLC
c/o Advanced Accessory Systems, LLC
Sterling Town Center
12900 Hall Road
Suite 2000
Sterling Heights, Michigan 48313
Attention: Chief Executive Officer
Telephone: (810) 997-2900
Telecopier: (810) 997-6839
-45-
<PAGE> 46
with a copies to:
c/o Chase Capital Partners
380 Madison Avenue
12th Floor
New York, New York 10017
Attention: Donald Hofmann
Telephone: (212) 622-3100
Telecopier: (212) 622-3101
and
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: John J. Suydam, Esq.
Telephone: 212-408-2400
Telecopier: 212-408-2467;
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set
forth above using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it actually is
received by the intended recipient. Any Party may change the address to
which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Party notice in the
manner herein set forth.
(i) Governing Law.
(i) This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without
giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other
than the State of Michigan.
(ii) Each party hereto hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so,
trial by jury in any suit, action or proceeding arising hereunder.
(iii) The parties to this Agreement agree that any and all actions
arising under or in respect of this Agreement (including, without
limitation, the resolution of any dispute under Section 7(g)) shall
be litigated exclusively in any federal or state court of competent
jurisdiction located in the State of Michigan. By execution and
delivery
-46-
<PAGE> 47
of this Agreement, each party to this Agreement irrevocably submits
to the personal and. exclusive jurisdiction of such courts for
itself or himself and in respect of its or his property with
respect to such action. Each party to this Agreement agrees that
venue would be proper in any of such courts, and hereby waives any
objection that any such court is an improper or inconvenient forum
for the resolution of any such action. The parties further agree
that the mailing by certified or registered mail, return receipt
requested, to he addresses specified for notice in this Agreement,
of any processor summons required by any such court shall
constitute valid and lawful service of process against them,
without the necessity for service by any other means provided by
statute or rule of court.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed
by the Buyer and each of the Stockholders. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to be a continuous waiver or
to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term
or provision in any other situation or in any other jurisdiction.
(l) Expenses. Each of the Buyer and the Stockholders will bear its own
costs and expenses (including investment banking and legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue
of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local, or foreign statute or law shall
be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word "including"
shall mean including without limitation.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and
made a part hereof.
(o) Maintenance of Books and Records. Until the third anniversary of
the Closing Date, the Buyer shall preserve all of the records relating to
any of the assets, liabilities or business of the Company prior to the
Closing Date. After the Closing Date, where there is a legitimate
purpose, the Selling Group members, and their respective representatives,
-47-
<PAGE> 48
shall be provided with access, upon prior reasonable written request
specifying the need therefor, during regular business hours, to (i) the
former officers and employees of the Company and (ii) the books of
account and records of the Company, but, in each case, only to the extent
relating to the assets, liabilities or business of the Company prior to
the Closing Date, and the Selling Group Members, and their respective
representatives, shall have the right to make copies of such books and
records; provided, however, that the foregoing right of access shall not
be exercisable in such a manner as to interfere unreasonably with the
normal operations and business of such party. Such records may
nevertheless be destroyed by the Buyer if the Buyer sends written notice
of its intent to destroy records to the Valley Equityholder
Representative, specifying with particularity the contents of the records
to be destroyed. Such records may then be destroyed after the 30th day
after such notice is given unless the Valley Equityholder Representative
objects to the destruction in which case the Buyer shall deliver such
records to the objecting party.
(p) Transfer Taxes. Buyer acknowledges that in addition to the Buyer's
liability to assume the Valley Liabilities, Buyer shall be, subject to
receipt from Sellers of relevant sales and resales certificates which are
required by the relevant state tax authorities in connection with the
transfers contemplated by the Reorganization and evidence of payment,
responsible to reimburse to Sellers all sums paid to any state or local
taxing authority by the Sellers or any of the other Selling Group Members
as sales or use taxes, or any transfer or conveyance fees or taxes, which
may be payable by reason of the transfer of any of the Valley Assets to
the Buyer and the consummation otherwise of the Transactions.
(q) Release of Assets. Each Selling Group Member agrees that after
giving effect to the Closing of the transactions contemplated by this
Agreement, the Buyer shall be the owner of the Valley Assets, free and
clear of all Liens, other than Permitted Liens and Liens granted by
Buyer. To the extent that any Selling Group Member is deemed to have any
interest in any Valley Asset, whether by operation of law, contract or
otherwise, such Party hereby releases irrevocably, such interest and
agrees, at the request of the Buyer to execute such further documents or
instruments to further evidence of such release.
*****
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on [as
of] the date first above written.
VALLEY INDUSTRIES, LLC AAS HOLDINGS, LLC
By: By:
-------------------------------- ---------------------------------
Title: Title:
----------------------------- ------------------------------
VALLEY INDUSTRIES, INC. FISHER PARENT HOLDINGS, INC.
By: By:
-------------------------------- ---------------------------------
Title: Title:
----------------------------- ------------------------------
<PAGE> 49
FISHER FAMILY HOLDINGS, INC. FISHER PARENT HOLDINGS LIMITED
PARTNERSHIP
By:
--------------------------------
Title: By: Fisher Parent Holdings, Inc.
----------------------------- General Partner
By:
---------------------------------
Title:
------------------------------
FISHER FAMILY HOLDINGS LIMITED
PARTNERSHIP
By: Fisher Family Holdings, Inc. -------------------------------------
General Partner Robert L. Fisher
By:
--------------------------------
Title:
----------------------------- -------------------------------------
Roger T. Morgan
<PAGE> 50
INDEX TO SCHEDULES
Schedule 4(c) Third-Party Approvals to be Obtained by the Selling Group
Members
Schedule 4(e) Noncontravention
Schedule 4(f) Governmental Consents to Transactions
Schedule 4(j) Interim Events
Schedule 4(k) Liabilities
Schedule 4(l)(i) Non-Compliance with Applicable Laws
Schedule 4(l)(ii) Permits
Schedule 4(m)(i) Pending Tax Audits of the Company
Schedule 4(m)(ii) Non-Compliance with Applicable Laws Regarding Withholding
of Taxes
Schedule 4(n) Environmental Claims and Non-Compliance
Schedule 4(o)(ii) Real Property Leases
Schedule 4(p)(i) Listed Intellectual Property
Schedule 4(p)(ii) Lapsed Listed Intellectual Property
Schedule 4(p)(iii) Exceptions to License Rights
Schedule 4(p)(iv) Intellectual Property Licenses
Schedule 4(p)(v) Notice of Third-Party Claims for Infringement of
Proprietary Rights of Others
Schedule 4(q) Material Agreements
Schedule 4(r) Powers of Attorney on Behalf of Valley
Schedule 4(s) Litigation for Valley
Schedule 4(t)(ii) Employee Benefit Plans
Schedule 4(t)(iv) Funded Benefit Obligations Under Employee Benefit Plans
Schedule 4(t)(vi) Non-Qualified Employee Benefit Plans
<PAGE> 51
Schedule 4(t)(vii) Employee Benefit Plans Providing Health, Medical or Life
Insurance Benefits
Schedule 4(u) Schedule of Insurance
Schedule 4(v) Bank Accounts of the Company
Schedule 4(w) Warranty Claims of the Company
Schedule 4(y)(i) Obsolete Inventory
Schedule 4(y)(ii) Accounts Receivable and Notes Receivable Disputes
Schedule 4(z)(i) Principal Customers
Schedule 4(z)(ii) Notices from Principal Customers to Terminate, Cancel or
Modify a Relationship
Schedule 4(bb) Stockholder or Affiliate Agreements with the Company
<PAGE> 1
EXHIBIT 10.6
PRELIMINARY AGREEMENT FOR THE TRANSFER OF
A BUSINESS
THIS AGREEMENT entered into on
between
ELLEBI S.P.A., an Italian corporation with paid-in capital of Lit. 9.250.000.000
and registered office at Gualtieri (Reggio Emilia) Frazione Santa Vittoria,
Strada Statale 63 n. 189, Taxpayer No. 00356930354, (hereinafter referred to as
"Seller"), represented by the Chairman of the Board of Directors Mr. Vittorio
Benaglia;
on the one part
AND
BRINK ITALIA S.R.L., an Italian corporation with paid-in capital of 20,000,000
and registered office at Milano, Piazza Meda n. 5, Taxpayer No. 12212400159
(hereinafter referred to as "Buyer" and which changed its corporate name into
"Ellebi Srl" and its corporate address to Gualtieri (Reggio Emilia), Frazione
Santa Vittoria, Strada Statale 63, n. 189, by means of a quotaholders resolution
of Dec. 9, 1997, subject to Court approval ), represented by Mr. Jan Willem
Rengelink, in his capacity as Managing Director;
BRINK INTERNATIONAL B.V., a Dutch corporation with registered office at
Industrieweg, 5, 7951 CX Staphorst, The Netherlands, Italian fiscal code No.
97203440157, represented by Mr. Jan Willem Rengelink, in his capacity as
Managing Director;
on the other part
<PAGE> 2
WITNESSETH:
WHEREAS Seller, among other activities, is engaged in the manufacturing,
marketing and selling of towbars for passengers cars and vans, trailers,
accessories and parts thereof, and
WHEREAS Seller desires to sell to Buyer the business referred to above, and
WHEREAS Buyer desires to buy such business at the Closing (as such term is
defined in Article 1.0 hereinbelow) and, to this end, prior to the date of this
Agreement, has conducted, directly and through auditors and advisors of its
choice, a due diligence investigation of such business;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1.0 - DEFINITIONS
In this Agreement the following terms shall have the following meaning unless
otherwise specified:
(a) "Accounting Principles" shall mean the accounting principles
of the "Commissione per la statuizione dei principi contabili
dei Commercialisti e dei Ragionieri" as integrated (or, as the
case may be, superseded) by the special accounting principles
agreed upon between the parties, which are set forth in
Exhibit "E" hereto.
(b) "Assumed Liabilities" shall have the meaning set forth in
point (c) of paragraph 2.1 hereof.
(c) "Business" shall have the meaning set forth in paragraph 2.1
hereof.
2
<PAGE> 3
(d) "Buyer" shall mean Brink Italia S.r.l.
(e) "Closing" shall have the meaning set forth in Article 7
hereof.
(f) "Effective Date" shall mean the hours 00.01 of January 1,
1998, or such different date that the parties hereto may
agree, and will be the date of the actual transfer from Seller
to Buyer of the Business, as hereinafter specified.
(g) "Effective Date Financial Statement" shall have the meaning
set forth in paragraph 6.3 hereof.
(h) "Financial Statement" shall mean a financial statement of the
Business as of 31 December 1996, which indicates the book
value at the same date of the assets and liabilities comprised
in the Business and which is attached under Exhibit "A"
hereto.
(i) "Guarantor" shall mean Brink International B.V.
(j) "Seller" shall mean Ellebi SpA.
(k) "Transferred Assets" shall have the meaning set forth in point
(A) of paragraph 2.1 hereof.
ARTICLE 2.0 - PURPOSE
2.1 Subject to the terms and conditions of this Agreement. Seller shall sell to
Buyer, and Buyer shall purchase from Seller, the Business, as hereinafter
defined, effective as of the Effective Date.
For the purposes of this Agreement Business shall mean the going concern
(azienda)of the Seller
3
<PAGE> 4
comprising the assets and properties, the contracts and rights and the
liabilities and obligations set forth hereafter relating to the production, sale
and distribution of the products described in the first recital hereof, provided
that such going concern shall not include any assets or properties, contracts or
rights, liabilities or obligations that are not specifically and expressly
listed or referred to in this paragraph 2.1, even if they relate to or are
connected with the Business:
(A) Assets and Properties
(a) All machinery vehicles, equipment, fixtures, furniture, tools,
spare parts, maintenance equipment and supplies and other
items of personal property (other than inventory, which is
separately dealt with in paragraph (b) below), the book value
of which is indicated in the Financial Statement and such
other items of machinery, vehicles, equipment, furniture,
tools, spare parts, maintenance equipment and supplies and
other items of personal property as are owned or otherwise
held by the Seller on the date of this Agreement or which will
be acquired by same on or prior to the Effective Date and used
in connection with or for the purpose of the conduct and
operation of the Business, but excluding any such items
disposed of by the Seller in the ordinary course of business
between the reference date of the Financial Statement and the
Effective Date.
(b) All raw materials, work-in-process, finished products,
packaging, advertising and other materials owned or otherwise
held by the Seller as at the Effective Date and used in
connection with or for the purpose of the conduct and
operation of the Business.
4
<PAGE> 5
(c) The accounts and notes receivable relating to or arising in
connection with the conduct and operation of the Business up
to the Effective Date (excluded), excluding tax refunds and
any other receivable relating to taxes.
(d) The intellectual property rights referred to in paragraph 3.3
hereof.
(e) Deposits, pre-paid expenses or premiums and other items of
similar nature as existing as of the Effective Date.
(f) All goodwill and goodwill related items concerning the
Business (customer lists, market information, marketing and
sales plans, etc.).
(B) Contracts and Rights
(a) All employment relationships entered into with the persons
employed by the Seller in the conduct and operation of the
Business as of the date hereof, listed on Schedule 5 attached
to Exhibit "F", plus any other employees hired by the Seller
in the ordinary course of the Business and upon written
approval of Buyer between the date hereof and the Effective
Date, but excluding any employees the employment of which was
terminated (for any cause) effective on or prior to the
Effective Date.
(b) All other contracts, agreements, commitments or other binding
arrangements, whether oral or written, including purchase
orders, existing as of the date of this Agreement entered into
by the Seller in connection with or for the purpose of the
conduct and operation of the Business and referred to in
paragraph 3.7.
5
<PAGE> 6
(c) All contracts, agreements, commitments or other binding
arrangements whether oral or written, including purchase
orders, entered into by the Seller in the ordinary course of
business between the date hereof and the Effective Date,
consistently with the provisions of Article 5.
(C) Liabilities and Obligations
(a) All liabilities and obligations relating to the employees of
the Seller, including (without limitation) any accrued
liabilities for severance indemnity (trattamento difine
rapporto) 13th and 14th month salary and unused vacation and
for any social security charges accrued prior to the Effective
Date the payment of which has not yet fallen due.
(b) The total amount which Seller would be required to pay to any
of its agents up to the Effective Date to cover any kind of
termination entitlements upon cessation of the relevant agency
relationship (i.e. "indennita di clientela" and "F.I.R.R." if
not accrued with ENASARCO) as provided for by the applicable
provisions of law.
(c) All obligations to be performed or accruing under the
contracts referred to under paragraph (b) preceding.
(d) The trading accounts and notes payable relating to or arising
in connection with the conduct and operation to the Business
up to the Effective Date (excluded).
2.2 In consideration for the sale, Buyer shall pay to Seller the difference
between the value of
6
<PAGE> 7
the Transferred Assets, including goodwill, and the value of the Assumed
Liabilities as of the Effective Date, to be determined in accordance with the
criteria and adjustments hereinafter set forth.
ARTICLE 3.0 - REPRESENTATIONS, WARRANTIES AND GUARANTEES OF THE SELLER
Seller represents, warrants and guarantees to Buyer that each of the
representations and warranties contained in this Agreement is true as of the
date of execution of this Agreement and will be true as of the Effective Date.
3.1 Seller's Rights
(a) Seller is a corporation duly organized, validly existing and
in good standing under the laws of Italy.
It has full right and authority to own, operate and lease its
property and to carry on its business substantially as it is
being conducted on the date hereof, and to pursue the
purposes indicated in its by laws, and has obtained all
necessary governmental licences, permits and authorizations
to carry on its business.
(b) The execution of this Agreement by the proper representative
of Seller has been duly authorized by its Administrative Body
and no other authorizations and approvals are required by
Seller.
3.2 Title to property
7
<PAGE> 8
Seller has good and marketable title to all the properties and assets presently
used in the operations of the Business (excepting only those properties and
assets which are leased) which are listed in Exhibit "B(i)" hereto. Except as
set forth in Exhibit "B(i)" hereto, such properties and assets are free from
liens, mortgages, pledges, encumbrances or charges of any kind or nature
whatsoever and, except as set forth in Exhibit "C" hereto, are not held or used
by Seller as a lessee or as a conditional vendee.
Attached hereto as Exhibit "C" is a true and complete list, with a detailed
description thereof, of all properties, leased or subleased or to be leased or
subleased by Seller in connection with the activity of the Business and
transferred under this Agreement, together with the terms, rental and other
material provisions of each lease.
All properties currently owned, used or leased by Seller in connection with the
activity of the Business conform to all applicable laws, statutes, ordinances
and regulations relating to such properties, including, by way of example,
zoning and environmental laws and regulations, and no notice of violation
relating to same has been received by Seller.
3.3. Know-How and Industrial Property
(a) Exhibit "B"(ii) is a list of all intellectual or industrial
property belonging to the Seller and related to the Business
including, without limitation, trademarks, patent and design
granted or applied for or de facto used in the Business.
(b) Tradenames, trademarks and patents listed in Exhibit "B"( ii)
are valid and enforceable in the countries where they have
been registered.
8
<PAGE> 9
(c) Except as disclosed in Exhibit "B"(ii) Seller is in a position
to operate the Business without requiring any know-how,
trademark and/or patent licenses from third parties.
(d) Except for the trademarks whose use have been granted by the
Seller to the South African company Towlink Ltd., Seller has
not licensed any know-how, trademark or patent owned by Seller
to any third parties.
(e) All application and renewal fees, costs and charges for
patents and trademarks of Seller have been paid on time.
(f) Seller owns or has adequate licenses or other rights to use
all patents, inventions, trademarks, trade names and
copyrights, with all relating applications, presently used,
related to, or necessary for the conduct of the Business.
Seller owns or has adequate licenses or other rights relating
to the use of technical data and know-how used in its products
and operations, including the right to utilize the
manufacturing processes presently employed.
No claim for infringement of any such patents, inventions, trademarks, trade
names or copyrights, with all relating applications, or relating to use of
technical data or know-how, is pending or known to be threatened against Seller
nor has any such claim been filed or lodged against Seller in the five years
preceding the Effective Date.
To the best of Seller's knowledge and belief, none of the Seller's products
violates any industrial property rights of any third party.
9
<PAGE> 10
3.4 Financial
(a) The Financial Statement attached under "A" hereto includes all
assets and liabilities comprised in the Business as of 31
December 1996 on the basis of the net value thereof resulting
from Seller's mandatory accounting books as of 31 December
1996, except the total value of the goodwill which has been
agreed upon between the parties hereto.
(b) The book value of the inventory indicated in the Financial
Statement has been calculated applying the Accounting
Principles and shall be adjusted following the procedure under
paragraph 6.3(ii) below.
3.5 Indemnities and Social Security
(a) The amount shown on the Financial Statement as "accrued
seniority indemnity" is equal to the total amount which the
Seller would be required to pay to the identified employees
through 31 December 1996 to cover employees' entitlements upon
cessation of the employment relationships as of that date,
including, by way of example, seniority indemnity, holiday
indemnity if applicable, thirteenth and fourteenth months pay,
prorated to the extent necessary. Such amount shall be
adjusted accordingly through the Effective Date.
(b) The amount shown on the Financial Statement as "termination
entitlements due to Agents", is equal to the total amount
which the Seller would be required to pay to all its agents
through 31 December 1996 to cover any
10
<PAGE> 11
kind of termination entitlements upon cessation of the agency
relationships as of that date (including "i.e. "indenita di
clientela" and F.I.R.R. if not accrued with ENASARCO). Such
amount to be adjusted accordingly through the Effective Date.
(c) Except as set forth on Schedule 5 attached to Exhibit "F",
neither of employees or agents of the Business has been
granted any special termination pay, pension or beneficial
plan in excess of what is required by the law and by the
applicable National Collective Agreements.
(d) Seller has timely filed and will timely file all declarations,
returns and reports required to be filed with respect to
social security and welfare laws and regulations. All social
and welfare charges of Seller through the Effective Date have
been or will be timely paid in ful1.
3.6 Taxes
All declarations, returns and reports to be filed by Seller with respect to all
municipal, provincial, regional and national direct and indirect taxes, duties,
imposts and governmental levies (hereinafter collectively referred to as
"Taxes") have been or shall be timely filed. All Taxes concerning the Business
for which Seller is or may be liable through the Effective Date have been or
shall be timely paid in full by Seller.
3.7 Contracts and Commitments
The transfer of the Business includes (i) those contracts or commitments with
any third party listed in Exhibit "F", together with its attached schedules,
(ii) the contracts for the supply of
11
<PAGE> 12
water, energy, telephone and other services (collectively referred to as
"utenze"); and (iii) all other oral and written contracts inherent to the
Business, but not listed in Exhibit "F", Schedule 1, provided that they do not
exceed, in the case of any one agreement, an obligation or benefit of Lire
10,000,000 (ten millions) and, in the case of all agreements, an aggregate
obligation of Lire 50,000,000 (fifty millions) [all of them referred to
hereinafter as "Contracts"].
The Seller is not in default or alleged to be in default under any Contract nor
is Seller aware of any default by any other party to any Contract, and there
exists no event, condition or occurrence which, after notice or lapse of time,
or both, would constitute a default under any Contract. All of the Contracts
are in full force and effect and constitute legal, valid and binding
obligations of the parties thereto in accordance with their terms, and will
remain in full force and effect after the Closing without any notice to or
consent by any other party, subject to the provisions of Section 2558, second
paragraph, of the Italian Civil Code. Copies of all agreements, contracts and
documents delivered and to be delivered hereunder by Seller are and will be
true and complete copies of such agreements, contracts and documents. All
written summaries of oral agreements will be true and complete.
Seller hereby represents that each of the following schedules of Exhibit "F" is
complete and the information contained therein is correct in all material
respect as of the date of execution of this Agreement and will be correct in
all material respect as of the Effective Date:
Schedule 1: This Schedule lists the following agreements, whether oral or
written to which Seller is a party as of the date of this Agreement, and which
relate to the activity of the Business to the extent such agreements are not set
forth in other Exhibits or Schedules:
12
<PAGE> 13
(i) Each contract, agreement, or arrangements made in the course
of ordinary business by Seller for the purchase of any
services, materials, or equipment.
(ii) Each contract, agreement, or commitment by Seller for
delivery of its products or services.
(iii) Each consultancy agreement between Seller and third party
who is not an employee of Seller.
(iv) Each sales agency or distributorship agreements providing for
the services of an independent contractor to which Seller is a
party or by which it is bound.
Scheudle 2: This Schedule lists each policy of product liability covering only
the assets relating to the Business and not listed in Schedule 1.
Schedule 3: This Schedule lists the homologations obtained for the products of
the Business; Seller guarantees that it has obtained all permits, licences and
other approvals and authorizations which are necessary to conduct the activity
of the Business.
Schedule 4: This Schedule lists all tangible personal property owned by any
third parties (whether a customer, supplier or other person) for which Seller is
responsible, and which relate to the activity of the Business.
Schedule 5: This Schedule is a list of all current employees of the Seller
hereinafter referred to also as ("Transferred Employees"), a designation of such
employees' full or part time status, the compensation payable to each such
employee, all fringe benefits which Seller currently makes available to such
employees, and the accrued vacation pay owing by Seller to
13
<PAGE> 14
each of its employee. It is hereby agreed that absent different agreement
between the parties, only the employees of the Seller listed in Schedule 5 shall
be transferred from Seller to Buyer. Seller does hereby undertake to hold Buyer
harmless from whatsoever liability it might incur for Seller's inability to
comply with its undertaking. Seller guarantees (i) that all employees listed in
Schedule 5 are employed in the correct level and category, as provided for by
the applicable Italian laws and Collective Agreements, and (ii) that it will
hold Buyer harmless from whatsoever liability it might incur for claims filed by
the employees relating to their employment with Seller and matured before the
Effective Date.
3.8 Legal proceedings.
(a) Exhibit "G" lists any legal action, suit, arbitration,
governmental investigation or other legal or administrative
proceeding and any order, decree or judgement against or
relating to Seller, its officers, directors or employees, its
properties, assets or business or the transaction contemplated
by this Agreement, with exclusion of credit collection cases.
(b) Any liability (or gain) arising out of the proceedings listed
under Exhibit "G" shall be borne (or accrued) to Seller.
3.9 Liabilities related to products
There are no liabilities, accrued or unaccrued, of the Seller, including
products liability, arising from the sale of the products manufactured and/or
sold by Seller, which products were and will be manufactured and/or sold in
compliance with all the applicable laws and regulations.
3.10 Accounts Receivable
14
<PAGE> 15
All accounts receivable which will be reflected in the Effective Date Financial
Statement shall be actually due to Seller and shall be collected within 270 days
of Closing. None of such accounts receivable is or will be subject to any claim,
dispute or set off arising from any circumstances up to the Effective Date. Upon
expiration of the term of 270 days of Closing, within the following 30 days,
Buyer shall be entitled to require the Seller to repurchase all or part of the
accounts which remain uncollected for a price equal to the aggregate face value
thereof less the entire amount of the provision for bad and doubtful debts which
shall be reflected in the Effective Date Financial Statement.
3.11 Compliance with laws and environmental liabilities
(a) For the purposes of this Agreement:
(i) "the Environmental Legislation" means any law and any
other statute or subordinate legislation relating to pollution
of the environment in force in Italy as at the date hereof.
(ii) "Hazardous Items" means any controlled waste (as defined
in the Environmental Legislation) of any kind noise,
vibration, smell, fumes, smoke, soot, ash, dust, grit,
chemical, petroleum products, noxious, radioactive,
inflammable, explosive, dangerous or offensive gases or
materials and any other substances of whatever nature which
may cause harm to the health of living organisms or the
environment and which are regulated under the Environmental
Legislation.
15
<PAGE> 16
(iii) "Pollution of the environment" means the pollution of
all or any of the air, water and land due to the release into
such from any process or substances which are capable of
causing harm to man or any other living organism.
(iv) "Properties" shall mean any real estate owned, leased or
occupied at the date hereof by the Seller for the operation of
the Business.
(v) "Consents" shall mean all necessary licenses, consents,
authorizations, and registrations required under the
Environmental Legislation to operate the Business.
(b) The Consents as hereinabove defined (or true and complete
evidential copies of the same) are in the possession or under
the control of the Seller and the Business and there are no
outstanding applications or appeals in relation to the same.
(c) Seller guarantees that there is anything in, on, over or under
the Properties the presence existence or condition of which
constitutes a breach of the Environmental Legislation nor is
any manufacturing, storage, generation, servicing treatment,
disposal or other process carried on at the Properties in such
a way as to amount to a breach of the same.
(d) The Consents with regard to the Properties and/or any
activities processes and substances from time to time on the
Properties have been obtained and made in the name of the
Seller and the Business.
16
<PAGE> 17
(e) All statements made and all information supplied by or on
behalf of Seller and the Business in support of applications
made for the Consents were and remain true and accurate in all
respects.
(f) All conditions attached to the Consents have in all respects
been complied with and no claims or proceedings have been made
or issued or are contemplated or threatened alleging a breach
of such conditions.
(g) No writ, summons, orders, enforcement notice, prohibition
notice or other notice has been received by the Seller and the
Business and so far as the Seller is aware, no direction of
any public, local or other statutory authority has been made
with regard to the Properties and/or any activities, processes
or substances in, on, over or under the Properties pursuant to
the Environmental Legislation and no prosecutions have been
instituted with respect thereto.
(h) Seller and the Business guarantees that any offense pursuant
to the Environmental Legislation has been committed during
Seller and the Business, occupation of the Properties or
before in connection with the Properties or any activities,
processes or substances in, or over or under the Properties.
(i) No complaints have been received by Seller or the Business
from any governmental body or agency or any other competent
authority or any third party (including any employee) with
regard to the Properties and/or any activities, processes or
substances in, or over or under the properties as the
17
<PAGE> 18
result of any actual or alleged breach of the Environmental
Legislation or the presence of any Hazardous Items and Seller
is not aware of any facts which may lead to any such
complaint.
(j) No works have been carried out on the Properties by any
public, local or other statutory authority under the
Environmental Legislation in respect of which such authority
is entitled to recover costs nor have Seller or the Business
received any notice or have any information indicating that it
is or may be responsible for all or some portion of the costs
of investigating, treating, containing, removing from any
place or otherwise addressing any Hazardous Items.
(k) There are not in use or stored on the Properties: (i) Any
radioactive material or radioactive apparatus.
(ii) Any hazardous substance as defined in the Environmental
legislation.
(iii) Any processes or substances prescribed by regulations
under the Environmental Legislation for which an authorization
is required.
(iv) Any underground storage tanks (UST), pipes or landfills.
(l) The Properties have not been affected by any landfill gas nor
has there been deposited on or in the Properties any Hazardous
Items.
18
<PAGE> 19
(m) Seller guarantees that no Hazardous Items have been spilled,
released, discharged or disposed of and no contamination of
any kind has ever occurred in the soil or water in, under or
upon the Properties.
3.12 Governmental Authorities.
Seller is not required to submit any notice, report or other filing with, and no
consent, approval or authorization is required, by any governmental or
regulatory authority in connection with their execution, delivery, consummation
or performance of this Agreement or the transactions contemplated hereby, except
for any approval or authorization which may be required for the transfer to
Purchaser of any of the permits, licences and authorizations referred to in
point (b) of paragraph 3.11 preceding.
3.13 No Undisclosed Liabilities, Claims, etc.
Except for (a) liabilities fully reflected or reserved against in the Financial
Statement; and (b) regular and usual liabilities and obligations incurred in the
ordinary course of business consistent with past practices after the date of the
Financial Statement and which will be reflected in the Effective Date Financial
Statement, the Seller has no liabilities, obligations or claims (absolute,
accrued, fixed or contingent, matured or unmatured, or otherwise), including
liabilities, obligations or claims which may become known or which arise only
after the Effective Date and which result from actions, omissions or occurrences
of the Seller prior to the Closing, to the extent that any such liability,
obligation or claim may be enforced against the Purchaser.
3.14 Absence of Certain Business Practices
19
<PAGE> 20
Neither Seller, or any person or entity related to or affiliated with the
Seller, any officer, employee or agent of the Seller, any other person or entity
acting on behalf of or associated with the Seller, nor any other entity directly
or indirectly owned or controlled by the Seller, acting alone or together, has
(a) received, directly or indirectly, any rebates, payments,
commissions, promotional allowances or any other economic
benefit, regardless of its nature or type, from any customer,
supplier, trading company, shipping company, governmental
employee or other entity or individual with whom the Seller
has done business directly or indirectly; or
(b) directly or indirectly, given or agreed to give any gift or
similar benefit to any customer, supplier, trading company,
shipping company, governmental employee or other person or
entity who is or may be in a position to help or hinder the
business of the Seller (or assist the Seller in connection
with any actual or proposed transaction) which
(i) might subject the Seller to any damage or penalty in any
civil, criminal or governmental litigation or proceeding;
(ii) if not given in the past, might have had an adverse
effect on the assets, business or operations of the Seller as
reflected in the Financial Statements; or,
(iii) if not continued in the future, might adversely affect
the assets, business, operations or prospects of the Seller or
which might subject the
20
<PAGE> 21
Seller to suit or penalty in any private or governmental
litigation or proceeding.
3.15 Disclosure
The representations, warranties and guarantees made by Seller herein and the
statements, documents and certificates furnished or to be furnished by or on
behalf of Seller to Buyer, in connection with the transaction contemplated
herein, do not and will not contain any untrue statement of a material fact, do
not and will not omit to state a material fact necessary to make any of said
representations, warranties, guarantees, statements, documents and certificates
not misleading. Seller shall give Buyer prompt written notice of any change in
any of the information contained in the representations and warranties made in
Article 3 or elsewhere in this Agreement or in the Exhibits or Schedules
referred to herein which occurs prior to the Effective Date.
Seller shall consult with and follow the recommendations of Buyer respect to (i)
the cancellation of contracts, agreements, commitments or other understandings
or arrangements to which Seller is a party, including, without limitation,
commitments for improvements (ii) the commencement in one or more of Seller's
locations of the orderly and gradual discontinuance of particular items or
operation, and (iii) purchasing, pricing or selling policy (including, without
limitation, selling merchandise at discounts); provided, however, that nothing
contained in this subsection shall require Seller to take or fail to take any
action that, in Seller's reasonable judgement, is likely to give rise to a
substantial penalty or a claim for damages by any third party against Seller, or
is likely to result in losses to Seller, or is otherwise likely to prejudice in
any material respect or unduly interfere with the conduct of Seller's business
and operations in the ordinary course
21
<PAGE> 22
consistent with prior practice, or is likely to result in a breach by Seller or
any of its representations, warranties or covenants contained in this Agreement
(unless any such breach is first waived in writing by Buyer).
The representations and warranties of the Seller contained in this Agreement are
in lieu of all other representations and warranties however provided under
applicable law and constitute all of the representations and warranties made by
the Seller in connection with the purchase and sale of the Business and the
other transactions contemplated under this Agreement.
ARTICLE 4.0 - REPRESENTATIONS AND WARRANTIES OF BUYER AND GUARANTOR
Buyer and Guarantor hereby make to Seller the following representations and
warranties as of the date of this Agreement and as of the Effective Date:
(a) The Buyer and the Guarantor are corporations duly organized,
validly existing and in good standing under the laws of Italy
and respectively, The Netherlands.
(b) The execution of this Agreement by the proper representative
of the Buyer and the Guarantor has been duly authorized by the
relevant Board of Directors and no other authorizations or
approvals are required.
(c) The execution of this Agreement by Buyer and Guarantor and its
performance hereunder will not contravene any contract to
which either the Buyer or the Guarantor are parties, or any
applicable law or regulations.
22
<PAGE> 23
ARTICLE 5.0 - CONDUCT OF BUSINESS AND ACTIONS BY SELLER
5.1 Absence of Certain Changes.
Except as set forth in Exhibit "O", since the date of the Financial Statement,
Seller has conducted its business only in the ordinary course and has not:
(i) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, except
current liabilities for trade or business obligations incurred
in the ordinary course of business and consistent with its
prior practice, none of which liabilities, in any case or in
the aggregate, materially and adversely affects the business,
liabilities or financial condition of Seller;
(ii) mortgaged, pledged or subjected to lien, charge, security
interest or any other encumbrance or restriction any of its
property, business or assets, tangible or intangible, other
than in the ordinary course of business;
(iii) received any notice of termination of any contract,
lease or other agreement or suffered any damage, destruction
or loss (whether or not covered by insurance) which, in any
case or in the aggregate, has had a materially adverse effect
on the assets, operations or prospects of Seller;
(iv) encountered any labour union organizing activity, had any
actual or threatened employee strikes, work stoppages,
slow-downs or lock-outs which have had a materially adverse
effect on its operations, or had any material change in its
relations with its employees, agents, customers or suppliers;
23
<PAGE> 24
(iv) made any material change in the rate of compensation,
commission, bonus or other direct or indirect remuneration
payable, or paid or agreed or orally promised to pay,
conditionally or otherwise, any bonus, extra compensation,
pension or severance or vacation pay, to any Shareholder,
director, officer, employee, salesman, distributor or agent of
Seller;
(v) suffered any change, event or condition which, in any case
or in the aggregate, has had or may have a materially adverse
effect on Seller's condition (financial or otherwise),
properties, assets, liabilities, operations or prospects,
including, without limitation, any change in Seller's
revenues, costs, backlog or relations with its employees,
agents, customers or suppliers;
(vi) entered into any transaction, contract or commitment
other than in the ordinary course of business or paid or
agreed to pay any legal, accounting, brokerage, finder's fee,
taxes or other expenses in connection with, or incurred any
severance pay obligations by reason of, this Agreement or the
transactions contemplated hereby;
(vii) made any change to its accounting methods, practices or
principles;
(viii) adopted or amended any collective bargaining, bonus,
profit sharing, compensation, stock option, pension,
retirement, deferred compensation, or other plan, agreement,
trust, fund or arrangement for the benefit of employees,
exception made for the coming into force of the National Metal
Workers Collective Agreement in 1997.
24
<PAGE> 25
(ix) entered into any other transaction or event other than in
the ordinary course of the Business.
5.2 Between the date hereof and the Effective Date, Seller:
(a) Will not negotiate, enter into, renew or terminate any
shop-level collective labour agreement without prior written
consent of Buyer.
(b) Will cooperate with Buyer, if so requested by it, for the
purposes of obtaining from the appropriate authorities the
transfer of all licenses, franchises, permits, and
authorizations necessary to run the activity of the Business
in the name of Buyer.
(c) Will conduct its business and affairs in the ordinary course
and consistent with its prior practice and shall maintain,
keep and preserve its assets and properties in good condition
and repair and maintain insurance thereon in accordance with
present practices.
5.3 Without limiting the generality of the foregoing, prior to the Effective
Date, Seller will not without Buyer's prior written approval:
(i) increase the salaries or other fringe benefits made
available to its employees of more than lira 75,000,000
(seventy-five millions), other than in the ordinary course of
business (i.e. due to mandatory laws or collective agreements)
and excluding the increases of salary to Messrs. Guidetti,
Poti, Pavesi and Ragni referred to under 8.0 below;
25
<PAGE> 26
(ii) enter into any contract or commitment with respect to the operation of the
Business extending beyond the Effective Date, other than sales or purchases made
in the ordinary course of business;
(iii) enter into any capital expenses higher than lira 15,000,000 (fifteen
millions) without written consent of Buyer.
ARTICLE 6.0 - PURCHASE AND SALE OF THE BUSINESS - CONSIDERATION
6.1 Purchase and Sale
The purchase and sale of the Business will occur on the basis of the Transferred
Assets and the Assumed Liabilities, as resulting from the Effective Date
Financial Statement.
6.2 Transfer of assets and liabilities
As of the Closing Seller shall transfer to Buyer, at latter's expenses, the
Business, including:
(i) the Transferred Assets and the Assumed Liabilities as of
the Effective Date;
(ii) all customer lists, and
(iii) the contracts and commitments pertinent to the Business
listed in Exhibit "F" hereto.
Buyer shall not assume nor be liable for any liabilities, obligations or
undertakings of Seller of any nature whatsoever, whether fixed or contingent and
whether known or unknown, other than the Assumed Liabilities and liabilities and
obligations deriving from the Contracts which will be transferred to the Buyer
as contemplated in this Agreement.
26
<PAGE> 27
6.3 Consideration
In consideration for the transfer, Buyer shall pay to Seller a purchase price
equal to the difference between the Transferred Assets and the Assumed
Liabilities as of the Effective Date plus Lire 17,734,764,795 (seventeen billion
seven hundred thirty-four millions seven hundred sixty-four thousand seven
hundred ninety-five) for goodwill:
(i) as of January 2, 1998, Buyer (i) shall pay to Seller in
cash, to the bank account which shall be communicated by the
Seller the amount of lire 33,500,000,000 (thirty-three billion
five hundred millions):
(ii) shall put in escrow with the notary public Pasquale
Lebano of Milan the amount of lira 1,500,000,000 (one billion
five hundred millions), to secure payment of the adjustment of
the Purchase Price (if any). The parties undertake to
instruct the notary to release the amount only upon joint
request of duly authorized representatives of the Seller and
of the Buyer or upon request of one of the parties supported
by the award of the arbitration panel referred to under
article 11.10 hereinbelow, as per the draft instructions
attached hereto under Exhibit "P"; and
(iii) within forty-five days from the Effective Date the
parties shall jointly prepare a financial statement of the
Business as of the Effective Date (the "Effective Date
Financial Statement") on the basis of the Accounting
Principles, with the purpose to adjourn the Financial
Statement to the situation of the Business as of the Effective
Date. The difference between (i) the net value of the Business
(excluding goodwill) as resulting
27
<PAGE> 28
from the Effective Date Financial Statement and the net value
of the Business (excluding goodwill) as resulting from the
Financial Statement shall be paid by the Buyer to the Seller
or reimbursed by Seller to the Buyer within the following 30
days, increased by an interest of 5% p.a. starting from the
Effective Date. Should the parties fail to reach an agreement
on the Effective Date Financial Statement, each of them may
promote an audit to be carried out by Arthur Andersen of Milan
(or, should the latter refuse, by an auditing company
appointed by the Chairman of the Milan Chamber of Commerce),
whose report shall be released to the parties within 45 days
from the mandate and shall be binding upon the parties.
The cost of the audit shall be borne equally by the parties
and the aforesaid difference shall be paid (or reimbursed)
within 30 days from the delivery of the audit report,
increased by an interest of 5% p.a. starting from the
Effective Date.
ARTICLE 7.0 - CLOSING
As of the Effective Date, (i) a Deed of Sale shall be executed before the public
notary Pasquale Lebano in Milano, according to the Draft attached hereto under
Exhibit "H", it being understood that all obligations of Seller and Buyer set
forth by this agreement shall survive and shall prevail over the Deed of Sale;
(ii) a lease agreement for the plants and buildings hosting the Business shall
be entered into between Seller and Buyer according to the draft attached under
Exhibit "L" hereto; (iii) Buyer and Seller shall enter into a pre-emption
agreement substantially in the terms of Exhibit "Q" hereto; (iv) Seller shall
deliver the original bank guarantee referred to under
28
<PAGE> 29
article 9.3, as per the draft attached under "N"; (v) the parties shall give the
notary the letter of instructions as per the draft attached under Exhibit "P";
(vi) each party shall deliver such documents, instructions and materials as may
be reasonably required in order to effectuate the intent and provisions of this
Agreement, and all such documents, instruments and materials shall be
satisfactory in form and in substance to counsel for the other party. The
closing shall take place in the offices of Baker & McKenzie at Milano, Piazza
Meda, 3, or at such other time and place as shall be mutually acceptable to the
parties.
ARTICLE 8.0 - CONDITIONS PRECEDENT TO THE CLOSING
The obligations of Buyer and Seller hereunder to complete the purchase of the
Business on the Effective Date are subject to the conditions precedent (i) that
a revision of the employment agreement with Messrs. Guidetti, Poti, Pavesi and
Ragni entered into according to Exhibit "I" hereto, (ii) that current
shareholders of Seller and their relatives resign as employees effective as of
March 31, 1998 without any cost for the Business, save for ordinary termination
entitlements due under Italian labour laws, and (iii) that the procedure
contemplated in paragraph 11.8 has been duly completed in accordance with the
applicable provisions of law.
ARTICLE 9.0 - ENFORCEMENT PROVISIONS
9.1 Indemnities
9.1.1 Seller shall defend at its expenses, and hold Buyer harmless against any
liability, damage or loss in any way relating to the Business which are the
consequence of circumstances, obligations and omissions before the Effective
Date, including, without limitation,
(i) any and all liabilities relating to the Business arising
from operations or transactions occurring before the Effective
Date, and (ii) any
29
<PAGE> 30
and all liability concerning employees and agents accrued
before the Effective Date and any charge and liability
vis-a-vis employees, agents and social security agencies, to
the extent (but only to the extent) that any such liabilities
are not reflected or reserved for in the Effective Date
Financial Statement or do not arise from the contracts and
commitments transferred to Buyer pursuant to this Agreement.
Anything in any applicable law to the contrary
notwithstanding, no breach or inaccuracy of any representation
or warranty contained herein shall give rise to any right on
the part of the Buyer to rescind or terminate this Agreement
after completion of the Closing, unless the default is
"serious" according to article 1455 of the Italian Civil Code.
The parties hereto agree that a default shall be considered
"serious" if it implies the impossibility to carry out the
Business or involves a liability for the Seller or the Buyer
exceeding 4 billion lira. The non defaulting party shall give
the other party 30 days to cure the default, warning it that
the failure to cure it shall entitle the other party to
terminate the agreement.
9.2 Survival of Representations - Limitation of liability.
(a) All representations, warranties, guarantees and undertakings
set forth in this Agreement and the obligations and rights
arising therefrom shall survive the Effective Date and shall
continue in full force for a period of 2 years following the
Effective Date.
With respect to Taxes, claims from employees, social security
contributions and environmental matters, all obligations and
undertakings shall survive
30
<PAGE> 31
for 6 years or until final settlement thereof, or until
expiration of the statute of limitations relating to thereto,
whichever is later.
(b) Buyer and Seller (and their respective tax, accounting and
legal service providers) shall provide each other with such
assistance as may reasonably be requested by any of them in
connection with the preparation of any return or report of
Taxes, any audit or other examination by any taxing authority,
or any judicial or administrative proceedings relating to
liability for Taxes. Buyer and Seller (and their respective
tax, accounting and legal service providers) will retain for
the full period of any statute of limitations and provide the
others with any records or information that may be relevant to
such preparation, audit, examination, proceeding or
determination.
(c) Buyer and Seller hereby agree that in the event a claim with
respect to Taxes is made pursuant to this Agreement, each
party shall furnish or cause to be furnished to any of them
all books, records, tax returns and other information
reasonably requested by such other party that relate to such
claims, and each party agrees to file on behalf of the other
party any returns, forms or other statements that relate to
such claims.
(d) If in connection with any examination, investigation, audit or
other proceeding of any Tax return for a taxable period ending
prior to the Effective Date, any governmental body or
authority issues to Buyer, a written notice of deficiency, a
proposed adjustment, an assertion of claim or demand
concerning the tax period covered by such return, Buyer shall
31
<PAGE> 32
notify Seller of its receipt of such communication from the
governmental body or authority. Seller shall, at its expense,
have the sole and exclusive right, power and authority to
contest any such assessment, proposal, claim, demand or other
proceeding and to represent and act for and on behalf of
Seller in connection with any notice, proposal, investigation,
assessment, audit, examination or any other proceedings of any
kind whatsoever in connection with any Tax return for a
taxable period of Seller ending on or prior to the Effective
Date. Seller agrees to keep Buyer informed of the progress of
any such proceeding and to consult with Buyer in good faith in
connection therewith. Seller further agrees that they will not
settle or resolve any issue related to Taxes which, is so
settled or resolved, would have an effect on Seller or Buyer
for periods ending after the Effective Date, without having
consulted with Buyer. If any examination, investigation, audit
or other proceeding relates to a Tax return for a period that
ends after the Effective Date, Buyer shall control and resolve
such examination, investigation, audit or other proceeding,
without prejudice to Seller's liability under article 3.6
hereof.
9.3 Bank Guarantee
The performance by Seller of all the obligations arising as of this agreement,
including, without limitation, the obligation to indemnify Buyer in case of
breach of the representations and warranties given by Seller, shall be
guaranteed by a Bank guarantee, released at Seller's cost by a primary Italian
Bank according to the draft attached under Exhibit "N".
32
<PAGE> 33
The Bank guarantee shall amount to 2 (two) billion lira and shall have a
duration of 6 years from the Effective Date for the indemnification obligations
arising as of the breach of guarantees referred to under articles 3.6, 3.5 and
3.7 (Exhibit F.5) and 3.11 hereof and of 2 years for all other obligations.
The Bank shall pay to Buyer, without delay, (I) the amounts indicated in a
written request bearing the joint signature of the Seller and of the Buyer, or
(II) the amounts indicated in a written request of the Buyer, provided that it
is supported by the award of the arbitration panel referred to in article 11.10
hereinbelow.
The duration of the guarantee shall be suspended from the date of the filing of
the arbitration claim to the date of delivery of the arbitration award.
9.4 Covenants of Buyer
Buyer shall indemnify and hold Seller harmless in respect of any claim or demand
of third parties however relating to liabilities comprised in the Business
pursuant to this Agreement, to the extent that such liabilities are reflected in
the Effective Date Financial Statement.
ARTICLE 10.0 - EXCLUSIONS AND LIMITATIONS - REFUND
10.1 Exclusions and Limitations
Anything herein or in any applicable law to the contrary notwithstanding:
(a) The Seller shall not be liable to the Buyer under Article 9 or
otherwise:
(i) if the sum due in connection with any single occurrence
giving rise to liability pursuant thereto does not exceed Lire
20 (twenty) million; and
33
<PAGE> 34
(ii) until the aggregate of all amounts that would otherwise
be due pursuant to such Article 9 or otherwise, exceeds Lire
300 (three hundred) million, provided that, if such limit is
exceeded, the Seller's liability shall be limited to the
excess.
(b) The Seller's maximum aggregate liability under Article 9 or
otherwise shall be limited to Lire 8.5 (eightpointfive)
billion.
(c) The amount of all indemnities payable by the Seller to the
Buyer pursuant to Article 9 or otherwise shall be further
reduced by:
(i) any reserve amount recorded on the Effective Date
Financial Statement relating to the event giving rise to
indemnification;
(ii) the amount of any insurance or similar payment that Buyer
has received or is entitled to receive in connection with the
event giving rise to indemnification;
(iii) the amount of any indemnification that Buyer has
received or is entitled to receive from any third party;
(iv) the amount by which any liabilities or provisions shown
on the Effective Date Financial Statement subsequently proves
to have been overstated or unnecessary.
(d) The Seller will not be required to indemnify the Buyer under
Article 9 or otherwise in respect of any contingent or
potential liability, unless and until
34
<PAGE> 35
such liability has become actual and has been paid for by the
Buyer or has become the subject matter of a final and
uncontestable obligation to pay the Buyer.
(e) In no event will the Seller be responsible to the Buyer under
Article 9 or otherwise in respect of:
(i) any actual or alleged inaccuracy or breach of the
representations and warranties (other than representations and
warranties referred to at point (ii) below) which is notified
to the Seller later than two (2) years following the Effective
Date; or
(ii) any actual or alleged inaccuracy or breach of the
representations and warranties with respect to Taxes, claims
from employees, social security contributions and
environmental matters that is notified to the Seller later
than 30 (thirty) days after the elapse of 6 years or final
settlement thereof or expiration of the statute of limitations
relating thereto, whichever is later.
10.2 Refund
Buyer shall refund to Seller any portion of the provision which will be
reflected in the Effective Date Financial Statement to cover any termination
entitlements (including "indennita di clientela" and F.I.R.R., if not accrued
with ENASARCO) accrued in favour of the agents of the Seller as of the Effective
Date, if and to the extent that any portion of such provision will become
unnecessary or excessive under the applicable provisions of law after the
Effective Date,
35
<PAGE> 36
including the fact that the relevant agents or any of them have
terminated the respective agency relationship with Buyer thus becoming no longer
entitled to the payment by Buyer of the respective termination entitlements
(including "indennita di clientela" and F.I.R.R., if not accrued with ENASARCO).
ARTICLE 11.0 - MISCELLANEOUS
11.1 Finder's Fees Expenses
(a) Buyer agrees to indemnify and hold harmless Seller against any
claim asserted against Seller for brokerage or finder's fees
in respect to the transactions contemplated herein by any
person purporting to act on behalf of Buyer and its
representatives. Seller agrees to indemnify and hold harmless
Buyer for brokerage or finder's fees in respect of the
transactions contemplated herein by any person purporting to
act on behalf of Seller.
(b) Each of the parties hereto shall pay the expenses incident to
its preparation, signature and performance under this
Agreement whether or not the transactions contemplated herein
are consummated. The Seller shall bear the income tax incident
to this transaction, whereas the registration tax of the Deed
of Sale and the notary fees shall be borne by Buyer.
11.2 Covenant not to Compete
Seller and its shareholders represent, warrant and agree that for the maximum
duration of 5 (five) years from the Effective Date, they shall not, either
jointly or separately, directly or indirectly,
36
<PAGE> 37
engage in any business in competition with the Business in Italy, and in the
territory in which, at the Effective Date, shall be marketed the products
manufactured by the Business.
Each of the Seller and its shareholders shall be severally (and not jointly with
the others) liable towards Buyer for any breach of the aforesaid covenant.
The shareholders of the Seller execute this agreement for acceptance of the
above mentioned non compete obligation and of any other provision set forth in
this agreement whose accomplishment will require their actions and or
intervention.
11.3 Notices
Unless otherwise provided herein, any notices under this Agreement or in
connection therewith shall be sent by registered airmail, or telegraph, cable or
telex to the addresses indicated in the preamble hereof. Such notice or
communication shall be deemed to have been given as of the date of receipt.
Either party may change its address for receipt of notices and copies by notice
duly given to the other party.
11.4 Assignment
Neither party may assign this Agreement unless such assignment is authorized in
writing by the other party except that Buyer without consent of Seller may
assign this Agreement to any company belonging to the Brink Group, it being
however understood that in such event the Guarantor shall be jointly liable
towards the Seller for the due performance of the obligations of the aforesaid
assignee arising out of this Agreement.
11.5 Headings
37
<PAGE> 38
The descriptive words or phrases at the head of the various Articles hereof are
inserted only as a convenience and for reference and in no way are or are
intended to be a part of this Agreement, or in any way define, limit or describe
the scope or intent of the particular Article to which they refer.
11.6 Waivers
No party hereto shall have been deemed to have waived any right arising out of
this Agreement or out of any default or breach hereunder, unless such waiver is
evidenced by a written instrument by such party. No waiver of any default or
breach hereunder shall be construed to constitute a waiver of any other default
or breach hereunder whether similar or not.
l1.7 Complete agreement
This Agreement including the Exhibits hereto constitute the entire agreement
between the parties relating to the subject matter hereof, and there are no
prior representations, warranties, or agreements relating thereto. No change in,
addition to, or waiver of the terms and conditions hereof shall be binding on
any party unless approved by it in writing.
11.8 Announcements - Notice to the Unions
This Agreement and the transaction contemplated hereby shall be maintained as
confidential. No public announcements or publicity shall be made by Seller and
Buyer without the prior written consent of the other party. Seller and Buyer, as
soon as practicable after the execution of this agreement, shall send a joint
communication to the Unions and to the Shop Representatives of the Unions
(R.S.A.) under section 47 of the Law no. 428 according to the draft attached
hereto under Exhibit "M", and shall thereafter take any actions required
pursuant to the aforesaid law.
38
<PAGE> 39
11.9 Obligations of the Guarantor
The Guarantor hereby jointly and severally guarantees to the Seller-the
obligations of the Buyers (i) to complete the purchase of the Business at
closing, and (ii) to pay the Purchase Price, including its adjustments.
11.10 Post-closing obligation
As soon as possible after Closing, Seller shall transfer to Buyer, free of
charge, all the 250 shares equity it currently owns in Towlink Ltd., a company
with registered office at 19 Ficus, Heldervue 7130, Cape Town, South Africa,
representing 25% of the corporate capital of Towlink Ltd., (the "South African
Shares"). Buyer recognizes that the other shareholder of Towlink Ltd, the
company Aucrite Close Corporation may exercise a pre-emptive right on the
transfer of the South African Shares and Seller shall endeavor to obtain its
consent to the sale of the South African Shares to the Buyer. The parties hereto
agree that should Seller not obtain within 60 days from the date of closing the
consent of Aucrite Close Corporation to the transfer of the Shares from Seller
to Buyer, Seller shall repossess tile financial rights related to Towlink (Lire
71.219.429) free of charge and, if so requested by Buyer, shall terminate the
distribution agreement on July 8, 1998.
11.11 Governing law and jurisdiction
This agreement is subject to the Italian law and all the controversies arising
therefrom shall be settled by formal arbitration to be conducted and governed
under the rules of the Camera Arbitrale of the Chamber of Commerce of Milan.
39
<PAGE> 40
For the purpose of the arbitration proceedings, Buyer and Guarantor shall be
deemed to constitute a single party.
IN WITNESS WHEREOF, the parties hereto have signed and delivered this Agreement.
<TABLE>
<S><C>
- ------------------------ ------------------------ ------------------------
(Buyer) (Seller) (Guarantor)
- --------------------- Shareholders of Ellebi
( )
Vittorio Benaglia
------------------------
Gianfranco Landini
------------------------
Paolo Landini
------------------------
Renato Bianchi
------------------------
</TABLE>
40
<PAGE> 41
LIST OF EXHIBITS
<TABLE>
<S> <C> <C>
A - Financial Statement 1.
B(i) - List of properties and assets presently used in the operations of the Business 3.2
B(ii) - List of the industrial property and know how 3.3
C - List of all properties leased or subleased or to be leased or subleased by Seller 3.2
D - Annulled
E - Accounting principles 3.3(c)
F - Contracts and commitments 3.6
Schedule 1. Agreements
Schedule 2. Product liability policies
Schedule 3. Permits and licenses
Schedule 4. Personal property owned by third parties
Schedule 5. List of employees
G - Legal proceedings 3.8(a)
H - Draft Deed of Sale 7.0
I - Draft Employment Agreement 8.0(i)
L - Draft Lease Agreement 8.0(ii)
M - Notice under section 47 of Law no. 428 11.8
N - Draft Bank Guarantee 9.3
O - "Changes" since the date of Financial Statement 5.0
P - Instructions to notary (draft) 6.3(i)
Q - Draft pre-emption agreement 7.0
</TABLE>
41
<PAGE> 1
EXHIBIT 10.7
EXECUTION COPY
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of August 5, 1997
among
AAS HOLDINGS, LLC
ADVANCED ACCESSORY SYSTEMS, LLC
VALLEY INDUSTRIES, LLC
BRINK INTERNATIONAL BV
BRINK BV
THE INSTITUTIONS FROM TIME TO TIME
PARTY HERETO AS LENDERS
and
NBD BANK,
as Administrative Agent and
Documentation and Collateral Agent
and
THE CHASE MANHATTAN BANK,
as Co-Administrative Agent
and Syndication Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I: DEFINITIONS...................................................................................1
1.1 Certain Defined Terms.......................................................................1
1.2 Supplemental Disclosure....................................................................41
ARTICLE II: THE CREDITS.................................................................................42
2.1. Term Loans.................................................................................42
2.2 Revolving Loans............................................................................46
2.3 Swing Line Loans...........................................................................46
2.4 Rate Options for all Advances..............................................................48
2.5 Optional Payments; Mandatory Prepayments...................................................48
(A) Optional Payments.................................................................48
(B) Mandatory Prepayments.............................................................48
2.6 Reduction of Commitments...................................................................52
2.7 Method of Borrowing........................................................................52
2.8 Method of Selecting Types and Interest Periods for Advances; Determination of
Applicable Margins.....................................................................52
(a) Method of Selecting Types and Interest Periods for Advances.......................52
(b) Determination of Applicable Margins, Applicable Letter of Credit Fee and
Applicable Commitment Fee.....................................................53
2.9 Minimum Amount of Each Advance.............................................................55
2.10 Method of Selecting Types and Interest Periods for Conversion and Continuation
of Advances............................................................................55
(A) Right to Convert..................................................................55
(B) Automatic Conversion and Continuation.............................................56
(C) No Conversion Post-Default or Post-Unmatured Default..............................56
(D) Conversion/Continuation Notice....................................................56
2.11 Default Rate..............................................................................56
2.12 Collections Account Arrangements..........................................................56
2.13 Method of Payment.........................................................................57
2.14 Notes, Telephonic Notices.................................................................58
2.15 Promise to Pay; Interest and Fees; Interest Payment Dates; Interest and Fee Basis;
Taxes; Loan and Control Accounts.......................................................58
(A) Promise to Pay....................................................................58
(B) Interest Payment Dates............................................................59
(C) Fees..............................................................................59
(D) Interest and Fee Basis............................................................59
(E) Taxes.............................................................................60
</TABLE>
- i -
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
(F) Loan Account......................................................................63
(G) Control Account...................................................................63
(H) Entries Binding...................................................................63
2.16 Notification of Advances, Interest Rates, Prepayments and Aggregate Revolving
Loan Commitment Reductions.............................................................64
2.17 Lending Installations.....................................................................64
2.18 Non-Receipt of Funds by the Administrative Agent..........................................64
2.19 Termination Date..........................................................................64
2.20 Replacement of Certain Lenders............................................................65
2.21 Letter of Credit Facility.................................................................66
2.22 Letter of Credit Participation............................................................66
2.23 Reimbursement Obligation..................................................................67
2.24 Cash Collateral...........................................................................67
2.25 Letter of Credit Fees.....................................................................68
2.26 Indemnification; Exoneration..............................................................68
2.27 Judgment Currency.........................................................................70
2.28 Market Disruption.........................................................................70
2.29 Borrowing Subsidiaries....................................................................70
ARTICLE III: CHANGE IN CIRCUMSTANCES....................................................................71
3.1 Yield Protection...........................................................................71
3.2 Changes in Capital Adequacy Regulations....................................................72
3.3 Availability of Types of Advances..........................................................73
3.4 Funding Indemnification....................................................................73
3.5 Lender Statements; Survival of Indemnity...................................................73
ARTICLE IV: CONDITIONS PRECEDENT........................................................................74
4.1 Initial Advances and Letters of Credit.....................................................74
4.2 Each Advance and Letter of Credit..........................................................74
ARTICLE V: REPRESENTATIONS AND WARRANTIES...............................................................74
5.1 Organization; Powers.......................................................................75
5.2 Authority..................................................................................75
5.3 No Conflict; Governmental Consents.........................................................76
5.4 Financial Statements.......................................................................76
5.5 No Material Adverse Change.................................................................77
5.6 Taxes......................................................................................77
(A) Tax Examinations..................................................................77
(B) Payment of Taxes..................................................................77
5.7 Litigation; Loss Contingencies and Violations..............................................77
5.8 Subsidiaries...............................................................................78
5.9 ERISA......................................................................................78
5.10 Accuracy of Information...................................................................79
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
5.11 Securities Activities.....................................................................79
5.12 Material Agreements.......................................................................79
5.13 Compliance with Laws......................................................................79
5.14 Assets and Properties.....................................................................80
5.15 Statutory Indebtedness Restrictions.......................................................80
5.16 Post-Retirement Benefits..................................................................80
5.17 Insurance.................................................................................80
5.18 Contingent Obligations....................................................................80
5.19 Restricted Junior Payments................................................................80
5.20 Labor Matters.............................................................................81
5.21 The Valley Acquisition....................................................................81
5.22 Environmental Matters.....................................................................81
5.23 Capitalization............................................................................82
5.24 Solvency..................................................................................82
5.25 Foreign Employee Benefit Matters..........................................................83
5.26 Dutch Withholding.........................................................................83
ARTICLE VI: COVENANTS...................................................................................83
6.1 Reporting..................................................................................83
(A) Financial Reporting...............................................................83
(B) Notice of Default.................................................................85
(C) Lawsuits..........................................................................85
(D) Insurance.........................................................................86
(E) ERISA Notices.....................................................................86
(F) Labor Matters.....................................................................88
(G) Other Indebtedness................................................................88
(H) Other Reports.....................................................................88
(I) Environmental Notices.............................................................88
(J) Borrowing Base Certificate........................................................88
(K) Other Information.................................................................89
6.2 Affirmative Covenants......................................................................89
(A) Existence, Etc....................................................................89
(B) Powers............................................................................89
(C) Compliance with Laws, Etc.........................................................89
(D) Payment of Taxes and Claims; Tax Consolidation....................................90
(E) Insurance.........................................................................90
(F) Inspection of Property; Books and Records; Discussions............................90
(G) Insurance and Condemnation Proceeds...............................................91
(H) ERISA Compliance..................................................................92
(I) Maintenance of Property...........................................................92
(J) Environmental Compliance..........................................................92
(K) Use of Proceeds...................................................................92
(L) Interest Rate Agreements..........................................................92
</TABLE>
- iii -
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
(M) High Yield Offering...............................................................93
(N) Foreign Employee Benefit Compliance...............................................93
6.3 Negative Covenants.........................................................................93
(A) Indebtedness......................................................................93
(B) Sales of Assets...................................................................95
(C) Liens.............................................................................95
(D) Investments.......................................................................96
(E) Contingent Obligations............................................................97
(F) Restricted Junior Payments........................................................98
(G) Conduct of Business; Subsidiaries; Acquisitions...................................99
(H) Transactions with Shareholders and Affiliates....................................100
(I) Restriction on Fundamental Changes...............................................100
(J) Sales and Leasebacks.............................................................101
(K) Margin Regulations...............................................................101
(L) ERISA............................................................................101
(M) Issuance of Equity Interests.....................................................102
(N) Organizational Documents.........................................................102
(O) Other Indebtedness...............................................................102
(P) Fiscal Year......................................................................102
(Q) Change of Deposit Accounts.......................................................102
(R) Rate Hedging Obligations.........................................................103
(S) Subordinated Indebtedness........................................................103
6.4 Financial Covenants.......................................................................103
(A) Defined Terms for Financial Covenants............................................103
(B) Rentals..........................................................................105
(C) Fixed Charge Coverage Ratio......................................................105
(D) Minimum Consolidated Net Worth...................................................106
(E) Maximum Leverage Ratio...........................................................106
(F) Capital Expenditures.............................................................107
ARTICLE VII: DEFAULTS..................................................................................107
7.1 Defaults..................................................................................107
ARTICLE VIII: ACCELERATION, DEFAULTING LENDERS; WAIVERS,
AMENDMENTS AND REMEDIES........................................................................110
8.1 Remedies..................................................................................110
(a) Termination of Commitments; Acceleration.........................................110
(b) Rescission.......................................................................111
(c) Enforcement.......................................................................111
8.2 Defaulting Lender.........................................................................111
8.3 Amendments................................................................................113
8.4 Preservation of Rights....................................................................114
</TABLE>
- iv -
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C>
ARTICLE IX: GENERAL PROVISIONS.........................................................................114
9.1 Survival of Representations...............................................................114
9.2 Governmental Regulation...................................................................115
9.3 Performance of Obligations................................................................115
9.4 Headings..................................................................................115
9.5 Entire Agreement..........................................................................116
9.6 Several Obligations; Benefits of this Agreement...........................................116
9.7 Expenses; Indemnification.................................................................116
(A) Expenses.........................................................................116
(B) Indemnity........................................................................117
(C) Waiver of Certain Claims; Settlement of Claims...................................118
(D) Survival of Agreements...........................................................118
9.8 Numbers of Documents......................................................................118
9.9 Accounting................................................................................118
9.10 Severability of Provisions...............................................................118
9.11 Nonliability of Lenders..................................................................118
9.12 GOVERNING LAW............................................................................118
9.13 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL..................................119
(A) EXCLUSIVE JURISDICTION...........................................................119
(B) OTHER JURISDICTIONS..............................................................119
(C) VENUE............................................................................120
(D) WAIVER OF JURY TRIAL.............................................................120
(E) WAIVER OF BOND...................................................................120
(F) ADVICE OF COUNSEL................................................................120
9.14 No Strict Construction...................................................................120
ARTICLE X: THE ADMINISTRATIVE AGENT....................................................................121
10.1 Appointment; Nature of Relationship......................................................121
10.2 Powers...................................................................................122
10.3 General Immunity.........................................................................122
10.4 No Responsibility for Loans, Creditworthiness, Collateral, Recitals, Etc.................122
10.5 Action on Instructions of Lenders........................................................123
10.6 Employment of Administrative Agents and Counsel..........................................123
10.7 Reliance on Documents; Counsel...........................................................123
10.8 The Agents' Reimbursement and Indemnification............................................123
10.9 Rights as a Lender.......................................................................124
10.10 Lender Credit Decision..................................................................124
10.11 Successor Administrative Agent; Successor Documentation and Collateral Agent............124
10.12 Collateral Documents....................................................................125
ARTICLE XI: SETOFF; RATABLE PAYMENTS...................................................................126
11.1 Setoff...................................................................................126
11.2 Ratable Payments.........................................................................126
</TABLE>
- v -
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
<S> <C>
11.3 Application of Payments..................................................................126
11.4 Relations Among Lenders..................................................................127
ARTICLE XII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS.........................................127
12.1 Successors and Assigns...................................................................127
12.2 Participations...........................................................................128
(A) Permitted Participants; Effect...................................................128
(B) Voting Rights....................................................................128
(C) Benefit of Setoff................................................................129
12.3 Assignments..............................................................................129
(A) Permitted Assignments............................................................129
(B) Effect; Effective Date...........................................................129
(C) The Register.....................................................................130
12.4 Confidentiality..........................................................................130
12.5 Dissemination of Information.............................................................130
ARTICLE XIII: NOTICES..................................................................................131
13.1 Giving Notice............................................................................131
13.2 Change of Address........................................................................131
ARTICLE XIV: COUNTERPARTS..............................................................................131
</TABLE>
- vi -
<PAGE> 8
EXHIBITS AND SCHEDULES
EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT A -- Borrowing Base Certificate
(Definitions)
EXHIBIT B -- Commitments
(Definitions)
EXHIBIT C -- Form of Revolving Note
(Definitions)
EXHIBIT D-1 -- Form of Tranche A Term Note
(Definitions)
EXHIBIT D-2 -- Form of Tranche B Term Note
(Definitions)
EXHIBIT E -- Form of Swing Line Loan Note
(Definitions)
EXHIBIT F -- Form of Assignment Agreement
(Sections 2.19, 12.3)
EXHIBIT G -- List of Closing Documents
(Section 4.1)
EXHIBIT H -- Form of Officer's Certificate
(Sections 4.2, 6.1(A)(iv))
EXHIBIT I -- Form of Compliance Certificate
(Sections 4.2, 6.1(A)(iv))
EXHIBIT J -- Pro Forma Financial Statements
(Section 5.4(A))
EXHIBIT K -- Form of Assumption Letter
(Definitions)
EXHIBIT J -- Acquisition Agreement
(Definitions)
</TABLE>
- vii -
<PAGE> 9
SCHEDULES
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule 1.1.1 -- Permitted Existing Contingent Obligations (Definitions)
Schedule 1.1.2 -- Permitted Existing Indebtedness (Definitions)
Schedule 1.1.3 -- Permitted Existing Investments (Definitions)
Schedule 1.1.4 -- Permitted Existing Liens (Definitions)
Schedule 5.3 -- Conflicts; Governmental Consents (Section 5.3)
Schedule 5.7 -- Litigation; Loss Contingencies (Section 5.7)
Schedule 5.8 -- Subsidiaries (Section 5.8)
Schedule 5.17 -- Insurance (Sections 5.17, 6.2(E))
Schedule 5.18 -- Contingent Obligations (Sections 5.7, 5.18)
Schedule 5.20 -- Labor Matters; Compensation Agreements (Section 5.20)
Schedule 5.22 -- Environmental Matters (Section 5.22)
</TABLE>
- viii -
<PAGE> 10
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
This Second Amended and Restated Credit Agreement dated as of August 5,
1997 is entered into among AAS Holdings, LLC, a Delaware limited liability
company, Advanced Accessory Systems, LLC, a Delaware limited liability company,
Valley Industries, LLC, a Delaware limited liability company, Brink
International BV, a private company with limited liability incorporated under
the laws of The Netherlands, Brink BV, a private company with limited liability
incorporated under the laws of The Netherlands, and any Borrowing Subsidiaries
which are now or may hereafter become a party hereto from time to time, the
institutions from time to time a party hereto as Lenders, whether by execution
of this Agreement or an assignment and acceptance pursuant to Section 12.3, NBD
Bank, in its capacity as Administrative Agent for itself and the other Lenders
and as Documentation and Collateral Agent, The Chase Manhattan Bank, in its
capacity as Co-Administrative Agent and Syndication Agent and Chase Manhattan
Bank Delaware, a Delaware banking corporation, as an Issuing Lender (as defined
in Section 2.21) to amend and restate the Amended and Restated Credit Agreement
entered into on or about December 26, 1996 among certain of the parties hereto
(the "Existing Credit Agreement" which was an amendment to and restatement of
the Credit Agreement dated as of October 30, 1996 among certain of the parties
hereto) which is hereby amended and restated in its entirety. The parties hereto
agree as follows:
ARTICLE I: DEFINITIONS
1.1 Certain Defined Terms. In addition to the terms defined in other
sections of this Agreement, the following terms used in this Agreement shall
have the following meanings, applicable both to the singular and the plural
forms of the terms defined:
As used in this Agreement:
"AAS" means Advanced Accessory Systems, LLC, a Delaware limited
liability company, and its successors and assigns, including a
debtor-in-possession on behalf of AAS.
"AAS CANADA" means Advanced Accessory Systems Canada Inc./Les Systemes
d'Accessoire Advanced Canada inc., and its successors and assigns.
"ACCOUNT DEBTOR" means the account debtor or obligor with respect to
any of the Receivables and/or the prospective purchaser with respect to any
contract right, and/or any party who enters into or proposes to enter into any
contract or other arrangement with a Borrower.
"ACQUISITION" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which a
Borrower or any Subsidiary of a Borrower
<PAGE> 11
(i) acquires any going business or all or substantially all of the assets of any
firm, corporation or division thereof, whether through purchase of assets,
merger or otherwise or (ii) directly or indirectly acquires (in one transaction
or as the most recent transaction in a series of transactions) at least a
majority (in number of vote) of the securities of a corporation which have
ordinary voting power for the election of directors (other than securities
having such power only by reason of the happening of a contingency) or a
majority (by percentage of voting power), of the membership, ownership or other
equity interests in a limited liability company or of the outstanding
partnership interests of a partnership.
"ACQUISITION AGREEMENT" has the meaning given that term in the
definition of Valley Acquisition below.
"ACQUISITION DOCUMENTS" means the Acquisition Agreement and all other
documents, instruments and agreements entered into by Valley in connection with
the Valley Acquisition.
"ADMINISTRATIVE AGENT" means NBD in its capacity as contractual
representative for itself and the Lenders pursuant to Article X hereof and any
successor Administrative Agent appointed pursuant to Article X hereof.
"ADVANCE" means a borrowing hereunder consisting of the aggregate
amount of the several Loans (other than Swing Line Loans) made by the Lenders to
any Borrower of the same Type and, in the case of Eurocurrency Rate Advances,
denominated in the same currency and for the same Interest Period.
"AFFECTED LENDER" is defined in Section 2.20 hereof.
"AFFILIATE" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person is the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act)
of greater than ten percent (10%) or more of any class of voting securities (or
other voting interests) of the controlled Person or possesses, directly or
indirectly, the power to direct or cause the direction of the management or
policies of the controlled Person, whether through ownership of stock,
membership, ownership or other equity interests, by contract or otherwise. In
addition, each director of a Borrower or any Subsidiary of a Borrower shall be
deemed to be an Affiliate of each Borrower. Notwithstanding the foregoing, none
of Chase, any Subsidiary or Affiliate (including Chase Capital Partners) of, or
any Person which directly or indirectly controls, is under common control with
or is controlled by Chase Capital Partners shall be deemed to be an Affiliate of
any Borrower solely as a result of such Person's affiliation with Chase Capital
Partners.
"AGENTS" means the Administrative Agent, the Documentation and
Collateral Agent, the Co-Administrative Agent and the Syndication Agent.
-2-
<PAGE> 12
"AGREED CURRENCIES" means Dollars, Dutch Guilders, and any other
currency which is freely available and convertible into Dollars in which
deposits are customarily offered to banks in the London interbank market, which
the applicable Borrower requests the Administrative Agent to include as an
Agreed Currency hereunder and which is acceptable to each Lender; provided that
the Administrative Agent shall promptly notify each Lender of each such request
and each Lender shall be deemed not to have agreed to each such request unless
its consent thereto has been received by the Administrative Agent within four
Business Days from the date of such notification by the Administrative Agent to
such Lender.
"AGGREGATE REVOLVING LOAN COMMITMENT" means the aggregate of the
Revolving Loan Commitments of all the Lenders, as reduced from time to time
pursuant to the terms hereof. The initial Aggregate Revolving Loan Commitment is
Twenty-Five Million and 00/100 Dollars ($25,000,000.00).
"AGGREGATE TERM LOAN COMMITMENT" means the aggregate of the Tranche A
Term Loan Commitments and the Tranche B Term Loan Commitments. The Aggregate
Term Loan Commitment is One Hundred Fifteen Million Nine Hundred Eighty Two
Thousand and 00/100 Dollars ($115,982,000.00).
"AGREEMENT" means this Credit Agreement, as it may be amended, restated
or otherwise modified and in effect from time to time.
"AGREEMENT ACCOUNTING PRINCIPLES" means generally accepted accounting
principles as in effect as of the date of this Agreement in the United States,
applied in a manner consistent with that used by Holdings and AAS in their
preparation of their audited financial statements for the year ended December
31, 1996.
"ALTERNATE BASE RATE" means, for any day, a fluctuating interest rate
per annum (rounded upwards, if necessary, to the next 1/16 of 1%) as shall be in
effect from time to time, which rate per annum shall at all times be equal to
the greatest of (a) the Prime Rate in effect on such day; and (b) the sum of
one-half of one percent (0.50%) and the Federal Funds Effective Rate in effect
on such day. For purposes hereof, "Prime Rate" shall mean the rate of interest
per annum publicly announced from time to time by NBD as its prime rate (it
being acknowledged that such announced rate may not necessarily be the lowest
rate charged by the Administrative Agent to any of its customers) in effect at
its principal office in Detroit, Michigan; each change in the Prime Rate shall
be effective on the date such change is publicly announced as being effective.
"Federal Funds Effective Rate" shall mean, for any day, a fluctuating interest
rate per annum equal to 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 on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions
-3-
<PAGE> 13
received by NBD from three Federal funds brokers of recognized standing
selected by the Administrative Agent. If for any reason the Administrative Agent
shall have determined (which determination shall be conclusive absent manifest
error) that it is unable to ascertain the Federal Funds Effective Rate for any
reason, including the inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms hereof, the Alternate Base
Rate shall be determined without regard to clause (b) of the first sentence of
this definition until the circumstances giving rise to such inability no longer
exist. Any change in the Alternate Base Rate due to a change in the Prime Rate
or the Federal Funds Effective Rate shall be effective on the effective date of
such change.
"APPLICABLE BASE RATE MARGINS" as at any date of determination, shall
be the rate per annum then applicable to Base Rate Loans which are Revolving
Loans, Tranche A Term Loans or Tranche B Term Loans, as applicable, determined
in accordance with the provisions of Section 2.8(b).
"APPLICABLE COMMITMENT FEE" as at any date of determination, shall be
the rate per annum then applicable in the determination of the amount payable
under Section 2.15(C) with respect to the unused Aggregate Revolving Loan
Commitment, determined in accordance with the provisions of Section 2.8(b).
"APPLICABLE EUROCURRENCY MARGINS" as at any date of determination,
shall be the rate per annum then applicable to Eurocurrency Rate Loans which are
Revolving Loans, Tranche A Term Loans or Tranche B Term Loans, as applicable,
determined in accordance with the provisions of Section 2.8(b).
"APPLICABLE LETTER OF CREDIT FEE" as at any date of determination,
shall be the rate per annum then applicable in the determination of the amount
payable under Section 2.25 with respect to Letters of Credit, determined in
accordance with the provisions of Section 2.8(b).
"APPLICABLE MARGIN(S)" shall have the meaning ascribed to that term in
Section 2.8(b).
"APPROXIMATE EQUIVALENT AMOUNT" of any currency with respect to any
amount of Dollars shall mean the Equivalent Amount of such currency with respect
to such amount of Dollars at such date (i) if such currency is Dutch Guilders,
rounded up to the nearest 100,000 of such currency and (ii) if such currency is
any other Agreed Currency, rounded up to the nearest amount of such currency as
determined by the Administrative Agent from time to time.
"ARRANGERS" means Chase Securities Inc. and First Chicago Capital
Markets, Inc.
"ASSET SALE" means, with respect to any Person, (i) the sale, lease,
conveyance, disposition or other transfer by such Person of any of its assets
(including by way of a sale-leaseback transaction and including the sale or
other transfer of any of the capital stock or ownership,
-4-
<PAGE> 14
membership or other equity interest of any Subsidiary of such Person)
or (ii) the issuance, sale, conveyance, disposition or other transfer by such
Person of any Capital Stock of or ownership, membership or other equity
interests in such Person; provided, however, that notwithstanding the foregoing,
the term "Asset Sale" shall not include the sale, lease, conveyance, disposition
or other transfer of inventory in the ordinary course of business.
"ASSUMPTION LETTER" means a letter of a Subsidiary of Holdings
addressed to the Lenders substantially in the form of Exhibit K hereto pursuant
to which such Subsidiary agrees to become a "Borrowing Subsidiary" and agrees to
be bound by the terms hereof.
"AUTHORIZED OFFICER" means any of the chief executive officer, chief
financial officer, controller and treasurer of a Borrower, acting singly.
"BASE RATE" means, for any day for any Loan, a rate per annum equal to
(i) the Alternate Base Rate for such day plus (ii) the Applicable Base Rate
Margin applicable to such Loan, changing when and as the Alternate Base Rate
changes.
"BASE RATE ADVANCE" means an Advance which bears interest at the Base
Rate.
"BASE RATE LOAN" means a Loan, or portion thereof, which bears interest
at the Base Rate.
"BELL PURCHASE AGREEMENT" means that certain Asset Purchase Agreement
among Bell Sports Corp., Bell Sports Canada Inc. and AAS Canada dated as of July
2, 1997.
"BENEFIT PLAN" means a defined benefit plan as defined in Section 3(35)
of ERISA (other than a Multiemployer Plan) in respect of which the Borrower or
any other member of the Controlled Group is, or within the immediately preceding
six (6) years was, an "employer" as defined in Section 3(5) of ERISA.
"BORROWER" means, as applicable, Holdings, AAS, Brink International,
Brink, Valley and their respective successors and assigns and any Borrowing
Subsidiary.
"BORROWING BASE" means, as of any date of calculation, an amount, as
set forth on the most current Borrowing Base Certificate delivered to the
Administrative Agent, equal to the sum of: (i) eighty-five percent (85%) of the
Gross Amount of Eligible U.S. Receivables; plus (ii) eighty percent (80%) of the
Gross Amount of Eligible Dutch Receivables; plus (iii) eighty percent (80%) of
the Gross Amount of Eligible Canadian Receivables; plus (iv) the lesser of (A)
$10,000,000 and (B) the sum of fifty percent (50%) of the Gross Amount of
Eligible U.S. Inventory plus forty percent (40%) of the Gross Amount of Eligible
Dutch Inventory; plus fifty percent (50%) of the Gross Amount of Eligible
Canadian Inventory.
-5-
<PAGE> 15
"BORROWING BASE CERTIFICATE" means a certificate, in substantially the
form of Exhibit A attached hereto and made a part hereof, setting forth the
Borrowing Base and the component calculations thereof.
"BORROWING DATE" means a date on which an Advance or a Swing Line Loan
is made hereunder.
"BORROWING NOTICE" is defined in Section 2.8 hereof.
"BORROWING SUBSIDIARY" means any Borrowing Subsidiary duly designated
by Holdings pursuant to Section 2.29 hereof to request Advances hereunder,
provided 95% of the Capital Stock of such Subsidiary is owned directly or
indirectly by Holdings and such Subsidiary shall have delivered to the
Administrative Agent an Assumption Letter in accordance with Section 2.29 and
such other documents, instruments and agreements as may be required pursuant to
the terms of this Agreement.
"BRINK ACQUISITION" means AAS Holdings, Inc., a Delaware corporation.
"BRINK" means Brink BV, a private company with limited liability
incorporated under the laws of The Netherlands and a wholly-owned Subsidiary of
Holdings.
"BRINK INTERNATIONAL" means Brink International BV, a private company
with limited liability incorporated under the laws of The Netherlands and a
wholly-owned Subsidiary of Holdings.
"BUSINESS ACTIVITY REPORT" means (A) a Notice of Business Activities
Report from the State of Minnesota, Department of Revenue or (B) any similar
report required by any other State relating to the ability of the Borrower or
its Subsidiaries to enforce their accounts receivable claims against account
debtors located in any such state.
"BUSINESS DAY" means (i) with respect to any borrowing, payment or rate
selection of Loans bearing interest at the Eurocurrency Rate, a day (other than
a Saturday or Sunday) on which banks are open for business in Detroit, Michigan
and New York, New York and on which dealings in United States Dollars and the
other Agreed Currencies are carried on in the London interbank market and (ii)
for all other purposes a day (other than a Saturday or Sunday) on which banks
are open for business in Detroit, Michigan and New York, New York.
"CANADIAN LENDERS" means First Chicago NBD Bank, Canada, The Chase
Manhattan Bank of Canada and The Bank of Nova Scotia in their capacity as
lenders to AAS Canada and any successors or assigns of either.
"CAPITAL EXPENDITURES" is defined in Section 6.4(A) hereof.
-6-
<PAGE> 16
"CAPITALIZED LEASE" of a Person means any lease of property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be capitalized
on a balance sheet of such Person prepared in accordance with Agreement
Accounting Principles.
"CAPITAL STOCK", with respect to any Person, means any capital stock of
such Person, regardless of class or designation, and all warrants, options,
purchase rights, conversion or exchange rights, voting rights, calls or claims
of any character with respect thereto.
"CASH EQUIVALENTS" means (i) marketable direct obligations issued or
unconditionally guaranteed by the government of the United States, the
government of Canada or the government of any member of the European Union; (ii)
domestic and Eurocurrency certificates of deposit and time deposits, bankers'
acceptances and base rate certificates of deposit issued by any commercial bank
organized under the laws of the United States, any state thereof, the District
of Columbia, or its branches or agencies or under the laws of Canada or the laws
of any member of the European Union and having capital and surplus in an
aggregate amount not less than $500,000,000 (fully protected against currency
fluctuations for any such deposits with a term of more than ten (10) days);
(iii) shares of money market, mutual or similar funds having net assets in
excess of $500,000,000 maturing or being due or payable in full not more than
one hundred eighty (180) days any Borrower's acquisition thereof and the
investments of which are limited to investment grade securities (i.e.,
securities rated at least Baa by Moody's Investors Service, Inc. or at least BBB
by Standard & Poor's Ratings Group) or shares of similar funds of similar credit
quality in Europe approved for such purposes by the Administrative Agent in its
sole discretion and (iv) commercial paper of United States and foreign banks and
bank holding companies and their subsidiaries and United States and foreign
finance, commercial, industrial or utility companies which, at the time of
acquisition, are rated A-1 (or better) by Standard & Poor's Ratings Group or P-1
(or better) by Moody's Investors Services, Inc. or commercial paper of Dutch,
Canadian, British or French banks of similar credit quality approved for such
purposes by the Administrative Agent in its sole discretion; provided that the
maturities of such Cash Equivalents shall not exceed 365 days.
"CASH FLOW PERIOD" means each 12-month period ending on December 31 of
each calendar year commencing with the 12-month period ending December 31, 1997.
"CB CAPITAL" means CB Capital Investors, Inc., a Delaware corporation
and a wholly-owned Subsidiary of Chase.
"CHANGE" is defined in Section 3.2 hereof.
- 7 -
<PAGE> 17
"CHANGE OF CONTROL" means an event or series of events by which (a)
prior to any initial public offering of equity interests in Holdings:
(i) CB Capital or an entity controlled by Chase
Capital Partners or CB Capital ceases to be the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange
Act), directly or indirectly, of at least forty percent (40%)
(or thirty-three percent (33%) if the reduction below forty
percent (40%) is attributable solely to dilution as a result
of an acquisition or acquisitions permitted by this Agreement
or consented to by the Required Lenders) of the ownership,
membership or other equity interests of Holdings ordinarily
having the right to vote at an election of managers;
(ii) Holdings ceases to be the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act),
directly or indirectly, of at least ninety-nine percent (99%)
of the combined voting power of the ownership, membership or
other equity interests of both AAS and Brink ordinarily having
the right to vote at an election of managers;
(iii) CB Capital or an entity controlled by Chase
Capital Partners or CB Capital, together with members of
management of Holdings and its Subsidiaries, members of the
Brink family and related Affiliates, F. Alan Smith and Barry
R. Banducci, cease to be the "beneficial owner"(as defined in
Rule 13d-3 under the Securities Exchange Act), directly or
indirectly, of at least fifty-one percent (51%) on a fully
diluted basis of the ownership, membership or other equity
interests of both AAS and Brink ordinarily having the right to
vote at an election of managers; or
(iv) any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange Act)
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Securities Exchange Act), directly or indirectly, of an
equal or greater percentage of the total economic interests in
equity of Holdings than that percentage beneficially owned by
CB Capital or an entity controlled by Chase Capital Partners
or CB Capital; and
(b) after any initial public offering of equity interests in
Holdings:
(i) CB Capital or an entity controlled by Chase
Capital Partners or CB Capital ceases to be the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange
Act), directly or indirectly, of at least twenty-eight percent
(28%) (or twenty-two percent (22%) if the reduction below
twenty-eight percent (28%) is attributable solely to dilution
as a result of an acquisition or acquisitions permitted by
this Agreement or consented to by the Required Lenders) of the
-8-
<PAGE> 18
ownership, membership or other equity interests of Holdings
ordinarily having the right to vote at an election of
managers;
(ii) Holdings ceases to be the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act),
directly or indirectly, of at least ninety-nine percent (99%)
of the combined voting power of the ownership, membership or
other equity interests of both AAS and Brink ordinarily having
the right to vote at an election of managers;
(iii) CB Capital or an entity controlled by Chase
Capital Partners or CB Capital, together with members of
management of Holdings and its Subsidiaries, members of the
Brink family and related Affiliates, F. Alan Smith and Barry
R. Banducci, cease to be the "beneficial owner"(as defined in
Rule 13d-3 under the Securities Exchange Act), directly or
indirectly, of at least thirty-four percent (34%) on a fully
diluted basis of the ownership, membership or other equity
interests of both AAS and Brink ordinarily having the right to
vote at an election of managers; or
(iv) any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange Act)
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Securities Exchange Act), directly or indirectly, of an
equal or greater percentage of the total economic interests in
equity of Holdings than that percentage beneficially owned by
CB Capital or an entity controlled by Chase Capital Partners
or CB Capital.
"CHASE" means The Chase Manhattan Bank, in its individual capacity.
"CLOSING DATE" means the date on which a portion of the Term Loans and
the initial Revolving Loans were advanced under the Credit Agreement dated as of
October 30, 1996.
"CO-ADMINISTRATIVE AGENT" means Chase in its capacity as
Co-Administrative Agent with respect to this Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"COLLATERAL" means all property and interests in property now owned or
hereafter acquired by a Borrower or any of its Subsidiaries in or upon which a
security interest, lien or mortgage is granted to the Administrative Agent or
the Documentation and Collateral Agent, for the benefit of the Lenders, to
secure all of the Secured Obligations or, in the case of property now owned or
hereafter acquired by non-U.S. Borrowers, that portion of the Secured
Obligations arising from
-9-
<PAGE> 19
Advances made to non-U.S. Borrowers, whether under the Security Agreement, under
any of the other Collateral Documents or under any of the other Loan Documents.
"COLLATERAL DOCUMENTS" means all agreements, instruments and documents
executed in connection with this Agreement, including, without limitation the
Security Agreements, the Collection Account Agreements, the Pledge Agreements,
the Mortgages, the Intellectual Property Security Agreements and all other
security agreements, loan agreements, notes, guarantees, mortgages,
subordination agreements, pledges, powers of attorney, consents, assignments,
contracts, fee letters, notices, leases, financing statements and all other
written matter whether heretofore, now, or hereafter executed by or on behalf of
a Borrower or any Subsidiary of a
Borrower and delivered to the Administrative Agent or any of the Lenders,
together with all agreements and documents referred to therein or contemplated
thereby.
"COLLECTION ACCOUNT" means each lock-box and blocked depository account
maintained by AAS or Valley, subject to a Collection Account Agreement, for the
collection of Receivables and other proceeds of Collateral.
"COLLECTION ACCOUNT AGREEMENTS" means the written agreements among AAS
or Valley, the Documentation and Collateral Agent, and, as applicable, each of
the banks at which AAS maintains a Collection Account.
"COLLECTION ACCOUNT BLOCKAGE DATE" means the date, following the
occurrence of a Default on which the Documentation and Collateral Agent or the
Required Lenders, in the Documentation and Collateral Agent's or the Required
Lenders' sole discretion, instruct(s) any financial institution party to a
Collection Account Agreement as described in the applicable Collection Account
Agreement to remit, during the continuance of such Default, all amounts
deposited in the Collection Account to the Documentation and Collateral Agent or
as the Documentation and Collateral Agent shall direct.
"COMMISSION" means the Securities and Exchange Commission and any
Person succeeding to the functions thereof.
"COMMITMENT" means, for each Lender, collectively, such Lender's
Revolving Loan Commitment, Tranche A Term Loan Commitment and Tranche B Term
Loan Commitment and for the Swing Line Lender, its Swing Line Loan Commitment.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
of Exhibit I delivered to the Administrative Agent and each Lender by Holdings
pursuant to the provisions of this Agreement and covering, among other things,
its calculation of the Applicable Margins, Commitment Fee, Applicable Letter of
Credit Fee, its compliance with the financial covenants contained in Section 6.4
and certain other provisions of this Agreement.
-10-
<PAGE> 20
"CONSOLIDATED NET WORTH" is defined in Section 6.4(A) hereof.
"CONTAMINANT" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos, polychlorinated biphenyls ("PCBS"), or any
constituent of any such substance or waste, and includes but is not limited to
these terms as defined in Environmental, Health or Safety Requirements of Law.
"CONTINGENT OBLIGATION", as applied to any Person, means any
Contractual Obligation, contingent or otherwise, of that Person with respect to
any Indebtedness of another or other obligation or liability of another,
including, without limitation, any such Indebtedness, obligation or liability
of another directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the ordinary course of business), co-made or
discounted or sold with recourse by that Person, or in respect of which that
Person is otherwise directly or indirectly liable, including Contractual
Obligations (contingent or otherwise) arising through any agreement to
purchase, repurchase, or otherwise acquire such Indebtedness, obligation or
liability or any security therefor, or to provide funds for the payment or
discharge thereof (whether in the form of loans, advances, stock purchases,
capital contributions or otherwise), or to maintain solvency, assets, level of
income, or other financial condition, or to make payment other than for value
received.
"CONTRACTUAL OBLIGATION", as applied to any Person, means any provision
of any equity or debt securities issued by that Person or any indenture,
mortgage, deed of trust, security agreement, pledge agreement, guaranty,
contract, undertaking, agreement or instrument, in any case in writing, to which
that Person is a party or by which it or any of its properties is bound, or to
which it or any of its properties is subject.
"CONTROLLED GROUP" means the group consisting of (i) any corporation
which is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as Holdings; (ii) a partnership or other
trade or business (whether or not incorporated) which is under common control
(within the meaning of Section 414(c) of the Code) with Holdings; and (iii) a
member of the same affiliated service group (within the meaning of Section
414(m) of the Code) as Holdings, any corporation described in clause (i) above
or any partnership or trade or business described in clause (ii) above.
"CONVERSION/CONTINUATION NOTICE" is defined in Section 2.10(D) hereof.
"CURE LOAN" is defined in Section 8.2 hereof.
"CUSTOMARY PERMITTED LIENS" means:
(i) Liens (other than Environmental Liens and Liens in favor
of the IRS or the PBGC) with respect to the payment of taxes,
assessments or governmental charges in all
-11-
<PAGE> 21
cases which are not yet due or which are being contested in good faith
by appropriate proceedings and with respect to which adequate reserves
or other appropriate provisions are being maintained in accordance with
Agreement Accounting Principles;
(ii) statutory Liens of landlords and Liens of suppliers,
mechanics, carriers, materialmen, warehousemen or workmen and other
similar Liens imposed by law created in the ordinary course of business
for amounts not yet due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves or
other appropriate provisions are being maintained in accordance with
Agreement Accounting Principles;
(iii) Liens (other than Environmental Liens and Liens in favor
of the IRS or the PBGC) incurred or deposits made in the ordinary
course of business in connection with worker's compensation,
unemployment insurance or other types of social security benefits or to
secure the performance of bids, tenders, sales, contracts (other than
for the repayment of borrowed money), surety, appeal and performance
bonds; provided that (A) all such Liens do not in the aggregate
materially detract from the value of assets or property of any Borrower
taken as a whole or materially impair the use thereof in the operation
of the businesses taken as a whole, and (B) all Liens securing bonds to
stay judgments or in connection with appeals that do not secure at any
time an aggregate amount exceeding $500,000;
(iv) Liens arising with respect to zoning restrictions,
easements, licenses, reservations, covenants, rights-of-way, utility
easements, building restrictions and other similar charges or
encumbrances on the use of real property which do not interfere with
the ordinary conduct of the business of any Borrower or any Subsidiary
of any Borrower;
(v) Liens of attachment or judgment with respect to judgments,
writs or warrants of attachment, or similar process against any
Borrower or any Subsidiary of any Borrower which do not constitute a
Default under Section 7.1(h);
(vi) Liens arising from leases, subleases or licenses granted
to others which do not interfere in any material respect with the
business of any Borrower or any Subsidiary of any Borrower; and
(vii) any interest or title of the lessor in the property
subject to any operating lease entered into by any Borrower or any
Subsidiary of any Borrower in the ordinary course of business.
"DECISION PERIOD" is defined in Section 6.2(G) hereof.
-12-
<PAGE> 22
"DECISION RESERVE"at any time shall be the sum of (a) the Reinvestment
Reserve and (b) the Insurance Reserve.
"DEFAULT" means an event described in Article VII hereof.
"DOCUMENTATION AND COLLATERAL AGENT" means NBD in its capacity as
contractual representative for itself and the Lenders pursuant to Article X
hereof and any successor Documentation and Collateral Agent appointed pursuant
to Article X hereof.
"DOL" means the United States Department of Labor and any Person
succeeding to the functions thereof.
"DOLLAR" and "$" means dollars in the lawful currency of the United
States of America.
"DOLLAR AMOUNT" of any currency at any date shall mean (i) the amount
of such currency if such currency is Dollars or (ii) the Equivalent Amount of
Dollars if such currency is any currency other than Dollars, calculated on the
basis of the arithmetical mean of the buy and sell spot rates of exchange of the
Administrative Agent for such currency on the London market at 11:00 a.m.,
London time, two Business Days prior to the date on which such amount is to be
determined.
"EBITDA" is defined in Section 6.4(A) hereof.
"EFFECTIVE DATE" means August 5, 1997.
"ELIGIBLE CANADIAN INVENTORY" means Inventory of AAS Canada which is
held for sale or lease or furnished under any contract of service by AAS Canada
which is not rendered ineligible by the provisions set forth herein. Holdings
understands and agrees that the standards of ineligibility may be revised from
time to time by the Documentation and Collateral Agent in its reasonable credit
judgment (which credit judgment shall be exercised in a manner that is not
arbitrary or capricious and shall be exercised in a manner not inconsistent with
the manner in which the initial ineligibility standards were determined). The
following Inventory is ineligible and shall not be included in Eligible Canadian
Inventory: (i) (to the extent not provided for by reserves described in the
definition of the Gross Amount of Eligible Canadian Inventory) Inventory which
is obsolete, not in good condition, not either currently usable or currently
saleable in the ordinary course of AAS Canada's business or does not meet all
material standards imposed by any Governmental Authority having regulatory
authority over such item of Inventory, its use or its sale; (ii) Inventory which
the Documentation and Collateral Agent determines, in the exercise of its
reasonable discretion (which discretion shall not be exercised in a manner that
is arbitrary or capricious and shall be exercised in a manner not inconsistent
with the manner in which the initial ineligibility standards were determined),
to be unacceptable due to age, type, category and/or quantity; (iii) Inventory
consisting of packaging material and supplies; (iv) Inventory which (a) is
consigned to a third party for sale or (b) is on consignment from a third
-13-
<PAGE> 23
party to AAS Canada for sale; (v) Inventory which consists of goods in transit;
(vi) Inventory which is subject to a Lien in favor of any Person other than the
Documentation and Collateral Agent; (vii) Inventory with respect to which the
Documentation and Collateral Agent does not have a first and valid
fully-perfected security interest; (viii) Inventory which is not located on
premises owned by AAS Canada in Canada unless AAS Canada has entered into
arrangements satisfactory to the Documentation and Collateral Agent; (ix)
Inventory which is evidenced by a Receivable; and (x) Inventory which is not in
full conformity with the representations and warranties made by AAS Canada to
the Documentation and Collateral Agent with respect thereto whether contained in
this Agreement or any other agreement.
"ELIGIBLE DUTCH INVENTORY" means Inventory of Brink BV which is held
for sale or lease or furnished under any contract of service by Brink BV which
is not rendered ineligible by the provisions set forth herein. Holdings
understands and agrees that the standards of ineligibility may be revised from
time to time by the Documentation and Collateral Agent in its reasonable
credit judgment (which credit judgment shall be exercised in a manner that is
not arbitrary or capricious and shall be exercised in a manner not inconsistent
with the manner in which the initial ineligibility standards were determined).
The following Inventory is ineligible and shall not be included in Eligible
Dutch Inventory: (i) (to the extent not provided for by reserves described in
the definition of the Gross Amount of Eligible Dutch Inventory) Inventory which
is obsolete, not in good condition, not either currently usable or currently
saleable in the ordinary course of Brink BV's business or does not meet all
material standards imposed by any Governmental Authority having regulatory
authority over such item of Inventory, its use or its sale; (ii) Inventory which
the Documentation and Collateral Agent determines, in the exercise of its
reasonable discretion (which discretion shall not be exercised in a manner that
is arbitrary or capricious and shall be exercised in a manner not inconsistent
with the manner in which the initial ineligibility standards were determined),
to be unacceptable due to age, type, category and/or quantity; (iii) Inventory
consisting of packaging material and supplies; (iv) Inventory which (a) is
consigned to a third party for sale or (b) is on consignment from a third party
to Brink BV for sale; (v) Inventory which consists of goods in transit; (vi)
Inventory which is subject to a Lien in favor of any Person other than the
Documentation and Collateral Agent; (vii) Inventory with respect to which the
Documentation and Collateral Agent does not have a first and valid
fully-perfected security interest; (viii) Inventory which is not located on
premises owned by Brink BV in The Netherlands unless Brink BV has entered into
arrangements satisfactory to the Documentation and Collateral Agent; (ix)
Inventory which is evidenced by a Receivable; and (x) Inventory which is not in
full conformity with the representations and warranties made by Brink BV to the
Documentation and Collateral Agent with respect thereto whether contained in
this Agreement or any other agreement.
-14-
<PAGE> 24
"ELIGIBLE U.S. INVENTORY" means Inventory of AAS or Valley which is
held for sale or lease or furnished under any contract of service by AAS or
Valley which is not rendered ineligible by the provisions set forth herein. AAS
and Valley understand and agree that the standards of ineligibility may be
revised from time to time by the Documentation and Collateral Agent in its
reasonable credit judgment (which credit judgment shall be exercised in a manner
that is not arbitrary or capricious and shall be exercised in a manner not
inconsistent with the manner in which the initial ineligibility standards were
determined). The following Inventory is ineligible and shall not be included in
Eligible U.S. Inventory: (i) (to the extent not provided for by reserves
described in the definition of the Gross Amount of Eligible Inventory) Inventory
which is obsolete, not in good condition, not either currently usable or
currently saleable in the ordinary course of AAS's or Valley's business or does
not meet all material standards imposed by any Governmental Authority having
regulatory authority over such item of Inventory, its use or its sale; (ii)
Inventory which the Documentation and Collateral Agent determines, in the
exercise of its reasonable discretion (which discretion shall not be exercised
in a manner that is arbitrary or capricious and shall be exercised in a manner
not inconsistent with the manner in which the initial ineligibility standards
were determined), to be unacceptable due to age, type, category and/or quantity;
(iii) Inventory consisting of packaging material and supplies; (iv) Inventory
which (a) is consigned to a third party for sale or (b) is on consignment from a
third party to AAS or Valley for sale; (v) Inventory which has been held by AAS
or Valley for more than ninety (90) days (to the extent not provided
for by reserves described in the definition of the Gross Amount of Eligible
Inventory) to the extent that the value of such Inventory (valued as provided in
this Agreement) exceeds $500,000; (vi) Inventory which consists of goods in
transit; (vii) Inventory which is subject to a Lien in favor of any Person other
than the Documentation and Collateral Agent; (viii) Inventory with respect to
which the Documentation and Collateral Agent does not have a first and valid
fully-perfected security interest; (ix) Inventory which is not located either
(a) on premises owned by AAS or Valley in the United States listed on Schedule 2
to the applicable Security Agreement or (b) in other owned or leased premises,
warehouses or with bailees in the United States not listed on Schedule 2 to the
Security Agreement permitted to be established under the applicable Security
Agreement or established in connection with a Permitted Acquisition, in each
case in connection with which the Documentation and Collateral Agent shall have
received landlord, mortgagee, bailee and/or warehousemen's access and lien
waiver agreements, as applicable, in each case, if requested by the
Administrative Agent, in form and substance reasonably acceptable to the
Documentation and Collateral Agent (except with respect to Inventory located in
a warehouse in Auburn Hills, Michigan which, so long as Valley remains current
with respect to rent payments, will be treated as Eligible U.S. Inventory
subject to a reserve equal in amount to three months rent); (x) Inventory which
is evidenced by a Receivable; and (xi) Inventory which is not in full conformity
with the representations and warranties made by AAS or Valley to the
Documentation and Collateral Agent with respect thereto whether contained in
this Agreement or the applicable Security Agreement.
Without limiting the foregoing, (i) Inventory of AAS or Valley which is acquired
pursuant to a Permitted Acquisition shall be treated as Eligible Inventory only
if the Documentation and
-15-
<PAGE> 25
Collateral Agent and the Required Lenders, after concluding any due
diligence they reasonably deem necessary, shall be satisfied as to the condition
thereof and that such Inventory would not otherwise be ineligible under the
ineligibility standards set forth herein (including, without limitation, each of
perfection and priority of the Documentation and Collateral Agent's security
interests in such Inventory) and (ii) Inventory acquired pursuant to such
Permitted Acquisition may be deemed Eligible Inventory from and after such
Permitted Acquisition if the foregoing determinations have been made to the
Documentation and Collateral Agent's and the Required Lenders' satisfaction.
"ELIGIBLE CANADIAN RECEIVABLES" means Receivables created by AAS Canada
in the ordinary course of its business arising out of the sale of goods or
rendition of services by AAS Canada, which Receivables are not rendered
ineligible by the provisions set forth herein. Holdings understands and agrees
that the standards of ineligibility may be revised from time to time by the
Documentation and Collateral Agent in its reasonable credit judgment (which
credit judgment shall be exercised in a manner that is not arbitrary or
capricious and shall be exercised in a manner not inconsistent with the manner
in which the initial ineligibility standards were determined). The following
Receivables are ineligible and shall not be included in Eligible Canadian
Receivables:
(i) Receivables which remain unpaid ninety (90) days after the
date payment is due in accordance with the original applicable invoice;
(ii) all Receivables owing by a single Account Debtor
(including a Receivable which remains unpaid fewer than ninety (90)
days after the date of the original applicable invoice) if twenty-five
percent (25%) of the balance owing by such Account Debtor, calculated
without taking into account any credit balances of such Account Debtor,
remains unpaid one hundred and twenty (120) days after the date of the
original applicable invoice;
(iii) Receivables with respect to which the Account Debtor is
a director, officer, employee, Subsidiary or Affiliate (with the
percentage test for Affiliate set forth in the definition of Affiliate
being 15% for purposes of this clause (iii)) of any of the Borrowers;
(iv) Receivables with respect to which the Account Debtor is
(a) any Governmental Authority, or any department, agency or
instrumentality thereof;
(v) Receivables consisting of tooling and non-production
related Receivables and Receivables consisting of cancellation fees
unless such Receivables are evidenced by purchase orders or the
Documentation and Collateral Agent in its discretion elects to treat
such Receivables as eligible in which case such Receivables shall
thereafter be treated as eligible;
-16-
<PAGE> 26
(vi) Receivables with respect to which the Account Debtor has
(a) asserted a counterclaim, (b) a right of setoff or (c) a receivable
owing from AAS Canada but only to the extent of such counterclaim,
setoff or receivable;
(vii) Receivables for which the prospect of payment or
performance by the Account Debtor is or will be impaired as determined
by the Documentation and Collateral Agent in the exercise of its
reasonable credit judgment (which credit judgment shall not be
exercised in a manner that is arbitrary or capricious and shall be
exercised in a manner not inconsistent with the manner in which the
initial ineligibility standards were determined);
(viii) Receivables with respect to which the Documentation and
Collateral Agent does not have a first and valid fully perfected and
enforceable security interest;
(ix) Receivables with respect to which the Account Debtor is
the subject of bankruptcy or a similar insolvency proceeding or has
made an assignment for the benefit of creditors or whose assets have
been conveyed to a receiver, trustee or assignee for the benefit of
creditors;
(x) Receivables with respect to which the Account Debtor's
obligation to pay the Receivable is conditional upon the Account
Debtor's approval or is otherwise subject to any repurchase obligation
or return right, as with sales made on a bill-and-hold, guaranteed
sale, sale-and-return, sale on approval (except with respect to
Receivables in connection with which Account Debtors are entitled to
return Inventory on the basis of the quality of such Inventory) or
consignment basis;
(xi) Receivables with respect to which the Account Debtor's
obligation does not constitute its legal, valid and binding obligation,
enforceable against it in accordance with its terms;
(xii) Receivables with respect to which AAS Canada has not yet
shipped the applicable goods, performed the applicable service or
issued the applicable invoice;
(xiii) Receivables with respect to which AAS Canada requires
cash on delivery;
(xiv) any Receivable which is not in conformity with the
representations and warranties made by AAS Canada to the Documentation
and Collateral Agent with respect thereto whether contained in this
Agreement or the applicable Security Agreement; and
(xv) Receivables in connection with which AAS Canada or any
other party to such Receivable, is in default in the performance or
observance of any of the terms thereof in any material respect.
-17-
<PAGE> 27
"ELIGIBLE DUTCH RECEIVABLES" means Receivables created by Brink in the
ordinary course of its business arising out of the sale of goods or rendition of
services by Brink, which Receivables are not rendered ineligible by the
provisions set forth herein. Holdings understands and agrees that the standards
of ineligibility may be revised from time to time by the Documentation and
Collateral Agent in its reasonable credit judgment (which credit judgment shall
be exercised in a manner that is not arbitrary or capricious and shall be
exercised in a manner not inconsistent with the manner in which the initial
ineligibility standards were determined). The following Receivables are
ineligible and shall not be included in Eligible Dutch Receivables:
(i) Receivables which remain unpaid ninety (90) days after the
date of the original applicable invoice;
(ii) all Receivables owing by a single Account Debtor
(including a Receivable which remains unpaid fewer than ninety (90)
days after the date of the original applicable invoice) if twenty-five
percent (25%) of the balance owing by such Account Debtor, calculated
without taking into account any credit balances of such Account Debtor,
remains unpaid one hundred and twenty (120) days after the date of the
original applicable invoice;
(iii) Receivables with respect to which the Account Debtor is
a director, officer, employee, Subsidiary or Affiliate (with the
percentage test for Affiliate set forth in the definition of Affiliate
being 15% for purposes of this clause (iii)) of any of the Borrowers;
(iv) Receivables with respect to which the Account Debtor is
(a) any Governmental Authority, or any department, agency or
instrumentality thereof;
(v) Receivables consisting of tooling and non-production
related Receivables and Receivables consisting of cancellation fees
unless such Receivables are evidenced by purchase orders or the
Documentation and Collateral Agent in its discretion elects to treat
such Receivables as eligible in which case such Receivables shall
thereafter be treated as eligible;
(vi) Receivables with respect to which the Account Debtor has
(a) asserted a counterclaim, (b) a right of setoff or (c) a receivable
owing from Brink but only to the extent of such counterclaim, setoff or
receivable;
(vii) Receivables for which the prospect of payment or
performance by the Account Debtor is or will be impaired as determined
by the Documentation and Collateral Agent in the exercise of its
reasonable credit judgment (which credit judgment shall not be
exercised in a manner that is arbitrary or capricious and shall be
exercised in a manner not inconsistent with the manner in which the
initial ineligibility standards were determined);
-18-
<PAGE> 28
(viii) Receivables with respect to which the Documentation and
Collateral Agent does not have a first and valid fully perfected and
enforceable security interest;
(ix) Receivables with respect to which the Account Debtor is
the subject of bankruptcy or a similar insolvency proceeding or has
made an assignment for the benefit of creditors or whose assets have
been conveyed to a receiver, trustee or assignee for the benefit of
creditors;
(x) Receivables with respect to which the Account Debtor's
obligation to pay the Receivable is conditional upon the Account
Debtor's approval or is otherwise subject to any repurchase obligation
or return right, as with sales made on a bill-and-hold, guaranteed
sale, sale-and-return, sale on approval (except with respect to
Receivables in connection with which Account Debtors are entitled to
return Inventory on the basis of the quality of such Inventory) or
consignment basis;
(xi) Receivables with respect to which the Account Debtor's
obligation does not constitute its legal, valid and binding obligation,
enforceable against it in accordance with its terms;
(xii) Receivables with respect to which Brink has not yet
shipped the applicable goods, performed the applicable service or
issued the applicable invoice;
(xiii) Receivables with respect to which Brink requires cash
on delivery;
(xiv) any Receivable which is not in conformity with the
representations and warranties made by Brink to the Documentation and
Collateral Agent with respect thereto whether contained in this
Agreement or the applicable Security Agreement; and
(xv) Receivables in connection with which Brink or any other
party to such Receivable, is in default in the performance or
observance of any of the terms thereof in any material respect.
"ELIGIBLE U.S. RECEIVABLES" means Receivables created by AAS or Valley
in the ordinary course of its business arising out of the sale of goods or
rendition of services by AAS or Valley, which Receivables are not rendered
ineligible by the provisions set forth herein. AAS and Valley understand and
agree that the standards of ineligibility may be revised from time to time by
the Documentation and Collateral Agent in its reasonable credit judgment (which
credit judgment shall be exercised in a manner that is not arbitrary or
capricious and shall be exercised in a manner not inconsistent with the manner
in which the initial ineligibility standards were determined). The following
Receivables are ineligible and shall not be included in Eligible U.S.
Receivables:
- 19 -
<PAGE> 29
(i) Receivables which remain unpaid ninety (90) days after the
date of the original applicable invoice;
(ii) all Receivables owing by a single Account Debtor
(including a Receivable which remains unpaid fewer than ninety (90)
days after the date of the original applicable invoice) if twenty-five
percent (25%) of the balance owing by such Account Debtor, calculated
without taking into account any credit balances of such Account Debtor,
remains unpaid one hundred and twenty (120) days after the date of the
original applicable invoice;
(iii) Receivables with respect to which the Account Debtor is
a director, officer, employee, Subsidiary or Affiliate (with the
percentage test for Affiliate set forth in the definition of Affiliate
being 15% for purposes of this clause (iii)) of AAS or Valley or any of
the other Borrowers;
(iv) Receivables with respect to which the Account Debtor is
(a) any federal Governmental Authority, the United States of America,
or, in each case, any department, agency or instrumentality thereof,
unless with respect to any such Account, AAS or Valley has complied to
the Documentation and Collateral Agent's satisfaction with the
provisions of the Federal Assignment of Claims Act or other applicable
statutes, including, without limitation, executing and delivering to
Documentation and Collateral Agent all statements of assignment and/or
notification which are in form and substance acceptable to
Documentation and Collateral Agent and which are deemed necessary by
Documentation and Collateral Agent to effectuate the assignment to the
Documentation and Collateral Agent of such Accounts on behalf of the
Lenders or (b) any state or municipal Governmental Authority or any
agency or instrumentality thereof;
(v) Receivables consisting of tooling and non-production
related Receivables and Receivables consisting of cancellation fees
unless such Receivables are evidenced by purchase orders or the
Documentation and Collateral Agent in its discretion elects to treat
such Receivables as eligible in which case such Receivables shall
thereafter be treated as eligible;
(vi) Receivables not denominated in U.S. Dollars or Canadian
Dollars or with respect to which the Account Debtor is not a resident
of the United States or Quebec or one of the provinces of Canada which
has adopted the Personal Property Security Act unless the Account
Debtor has supplied AAS or Valley, as applicable, with an irrevocable
letter of credit, issued by a financial institution satisfactory to the
Documentation and Collateral Agent, sufficient to cover such Receivable
in form and substance satisfactory to the Documentation and Collateral
Agent;
-20-
<PAGE> 30
(vii) Receivables with respect to which the Account Debtor has
(a) asserted a counterclaim, (b) a right of setoff or (c) a receivable
owing from AAS or Valley, as applicable, but only to the extent of such
counterclaim, setoff or receivable;
(viii) Receivables for which the prospect of payment or
performance by the Account Debtor is or will be impaired as determined
by the Documentation and Collateral Agent in the exercise of its
reasonable credit judgment (which credit judgment shall not be
exercised in a manner that is arbitrary or capricious and shall be
exercised in a manner not inconsistent with the manner in which the
initial ineligibility standards were determined);
(ix) Receivables with respect to which the Documentation and
Collateral Agent does not have a first and valid fully perfected and
enforceable security interest;
(x) Receivables with respect to which the Account Debtor is
the subject of bankruptcy or a similar insolvency proceeding or has
made an assignment for the benefit of creditors or whose assets have
been conveyed to a receiver, trustee or assignee for the benefit of
creditors;
(xi) Receivables with respect to which the Account Debtor's
obligation to pay the Receivable is conditional upon the Account
Debtor's approval or is otherwise subject to any repurchase obligation
or return right, as with sales made on a bill-and-hold, guaranteed
sale, sale-and-return, sale on approval (except with respect to
Receivables in connection with which Account Debtors are entitled to
return Inventory on the basis of the quality of such Inventory) or
consignment basis;
(xii) Receivables with respect to which the Account Debtor is
located in Minnesota (or any other jurisdiction which adopts a statute
or other requirement with respect to which any Person that obtains
business from within such jurisdiction or is otherwise subject to such
jurisdiction's tax law requiring such Person to file a Business
Activity Report or make any other required filings in a timely manner
in order to enforce its claims in such jurisdiction's courts or arising
under such jurisdiction's laws); provided, however, such Receivables
shall nonetheless be eligible if AAS or Valley, as applicable, has
filed a Business Activity Report (or other applicable report) with the
applicable state office or is qualified to do business in such
jurisdiction and, at the time the Receivable was created, was qualified
to do business in such jurisdiction or had on file with the applicable
state office a current Business Activity Report (or other applicable
report);
(xiii) Receivables with respect to which the Account Debtor's
obligation does not constitute its legal, valid and binding obligation,
enforceable against it in accordance with its terms;
-21-
<PAGE> 31
(xiv) Receivables with respect to which AAS or Valley, as
applicable, has not yet shipped the applicable goods, performed the
applicable service or issued the applicable invoice;
(xv) Receivables with respect to which AAS or Valley, as
applicable, requires cash on delivery;
(xvi) any Receivable which is not in conformity with the
representations and warranties made by AAS or Valley, as applicable, to
the Documentation and Collateral Agent with respect thereto whether
contained in this Agreement or the Security Agreement;
(xvii) Receivables in connection with which AAS or Valley, as
applicable, has not complied with all material requirements contained
in the charter and by-laws or other organizational or governing
documents of AAS or Valley, as applicable, and any law, rule or
regulation, or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon AAS
or Valley, as applicable, or any of its property or to which AAS or
Valley, as applicable, or any of its property is subject, including,
without limitation, all laws, rules, regulations and orders of any
Governmental Authority or judicial authority relating to truth in
lending, billing practices, fair credit reporting, equal credit
opportunity, debt collection practices and consumer debtor protection,
applicable to such Receivable (or any related contracts) or affecting
the collectibility of such Receivables; and
(xviii) Receivables in connection with which AAS or Valley, as
applicable, or any other party to such Receivable, is in default in the
performance or observance of any of the terms thereof in any material
respect.
Without limiting the foregoing, (i) Receivables of AAS or Valley, as applicable,
which are acquired pursuant to a Permitted Acquisition shall be treated as
Eligible Receivables only if the Documentation and Collateral Agent and the
Required Lenders, after concluding any due diligence they reasonably deem
necessary, shall be satisfied as to the quality and creditworthiness thereof and
that such Receivables would not otherwise be ineligible under the ineligibility
standards set forth herein (including, without limitation, lack of perfection
and priority of the Documentation and Collateral Agent's security interests in
such Receivables) but for the fact that they were acquired by AAS or Valley, as
applicable, outside of the ordinary course of business and (ii) Receivables
acquired pursuant to such Permitted Acquisition may be deemed Eligible
Receivables from and after such Permitted Acquisition if the foregoing
determinations have been made to the Documentation and Collateral Agent's and
the Required Lenders' satisfaction.
"ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS OF LAW" means all
Requirements of Law derived from or relating to federal, state and local laws or
regulations relating to or
-22-
<PAGE> 32
addressing pollution or protection of the environment, or protection of worker
health or safety, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601
et seq., the Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651
et seq., and the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
Section 6901 et seq., in each case including any amendments thereto, any
successor statutes, and any regulations or guidance promulgated thereunder, and
any state or local equivalent thereof.
"ENVIRONMENTAL LIEN" means a lien in favor of any Governmental
Authority for (a) any liability under Environmental, Health or Safety
Requirements of Law, or (b) damages arising from, or costs incurred by such
Governmental Authority in response to, a Release or threatened Release of a
Contaminant into the environment.
"ENVIRONMENTAL PROPERTY TRANSFER ACT" means any applicable requirement
of law that conditions, restricts, prohibits or requires any notification or
disclosure triggered by the closure of any property or the transfer, sale or
lease of any property or deed or title for any property for environmental
reasons, including, but not limited to, any so-called "Industrial Site Recovery
Act" or "Responsible Property Transfer Act."
"EQUIVALENT AMOUNT" of any currency with respect to any amount of
Dollars at any date shall mean the equivalent in such currency of such amount of
Dollars, calculated on the basis of the arithmetical mean of the buy and sell
spot rates of exchange of the Administrative Agent for such other currency at
11:00 a.m., London time, two Business Days prior to the date on which such
amount is to be determined.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time including (unless the context otherwise requires) any
rules or regulations promulgated thereunder.
"EUROCURRENCY BASE RATE" means, with respect to any Eurocurrency Rate
Advance for any specified Interest Period, either (i) the rate of interest per
annum equal to the rate for deposits in the applicable Agreed Currency in the
approximate amount of the pro rata share of the Administrative Agent of such
Eurocurrency Advance with a maturity approximately equal to such Interest Period
which appears on Telerate Page 3740 or Telerate Page 3750, as applicable, or, if
there is more than one such rate, the average of such rates rounded to the
nearest 1/100 of 1%, as of 11 a.m. (London time) two Business Days prior to the
first day of such Interest Period or (ii) if no such rate of interest appears on
Telerate Page 3740 or Telerate Page 3750, as applicable, for any specified
Interest Period, the rate at which deposits in the applicable Agreed Currency
are offered by the Administrative Agent to first-class banks in the London
interbank market at approximately 11 a.m. (London time) two Business Days prior
to the first day of such Interest Period, in the approximate amount of the pro
rata share of the Administrative Agent of such Eurocurrency Advance and having a
maturity approximately equal to such Interest Period. The terms "Telerate Page
3740" and "Telerate Page 3750" mean the display designated as "Page
-23-
<PAGE> 33
3740" and "Page 3750", as applicable, on the Associated Press-Dow Jones Telerate
Service (or such other page as may replace Page 3740 or Page 3750, as
applicable, on the Associated Press- Dow Jones Telerate Service or such other
service as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying British Bankers' Association
interest rate settlement rates for the relevant Agreed Currency). Any
Eurocurrency Base Rate determined on the basis of the rate displayed on Telerate
Page 3740 or Telerate Page 3750 in accordance with the foregoing provisions of
this subparagraph shall be subject to corrections, if any, made in such rate and
displayed by the Associated Press-Dow Jones Telerate Service within one hour of
the time when such rate is first displayed by such service.
"EUROCURRENCY PAYMENT OFFICE" of the Administrative Agent shall mean,
for each of the Agreed Currencies, the office, branch or affiliate of the
Administrative Agent, specified as the "EUROCURRENCY PAYMENT OFFICE" for such
currency in Schedule I hereto or such other office, branch, affiliate or
correspondent bank of the Administrative Agent, as it may from time to time
specify to the Borrowers and each Lender as its Eurocurrency Payment Office.
"EUROCURRENCY RATE" means, with respect to a Eurocurrency Rate Advance
for the relevant Interest Period, the sum of (a) the Eurocurrency Base Rate and
(b) the percentage determined in accordance with Section 2.8(b) to be the
Applicable Margin in connection with Eurocurrency Loans.
"EUROCURRENCY RATE ADVANCE" means an Advance which bears interest at
the Eurocurrency Rate.
"EUROCURRENCY RATE LOAN" means a Loan, or portion thereof, which bears
interest at the Eurocurrency Rate.
"EXCESS CASH FLOW" means, for any Cash Flow Period, an amount equal to
Holdings' and its Subsidiaries' consolidated (i) EBITDA for such period plus or
minus (ii) the net reduction or increase, respectively, if any, in Working
Capital during such period, minus (iii) Tax Distributions for such period, minus
(iv) Capital Expenditures, whether paid in cash or accrued during such period,
minus (v) Interest Expense for such period, minus (vi) scheduled amortization of
the principal portion of the Term Loans and scheduled amortization of the
principal portion of all other Indebtedness of Holdings and its Subsidiaries
during such period, plus (vii) the amount of any extraordinary gain realized in
such period in connection with an Asset Sale to the extent deducted in
calculating EBITDA for such period and to the extent applied in such period as a
mandatory prepayment pursuant to Section 2.5(B)(i)(a).
"EXCLUDED EQUITY SALES" means the private placement and sale of equity
interests by Holdings, AAS or any Subsidiary: (i) the Net Cash Proceeds of which
are used to consummate a Permitted Acquisition or (ii) the aggregate Net Cash
Proceeds of which do not exceed $5,000,000
-24-
<PAGE> 34
(excluding amounts used as described in clause (i) above) since the Closing Date
or (iii) in a transaction which is an Excluded Transfer.
"EXCLUDED TRANSFER" means any transfer of the Capital Stock of a
Subsidiary of Holdings to Holdings or another Subsidiary of Holdings or any
issuance of the Capital Stock of any Subsidiary of Holdings that is a Borrower
or a Guarantor or a Subsidiary the Capital Stock of which is pledged pursuant to
one of the Pledge Agreements.
"FEDERAL FUNDS EFFECTIVE RATE" shall have the meaning assigned to that
term in the definition of Alternate Base Rate above.
"FEES" is defined in Section 6.4(A) hereof.
"FIXED CHARGE COVERAGE RATIO" is defined in Section 6.4(C) hereof.
"FOREIGN EMPLOYEE BENEFIT PLAN" means any employee benefit plan as
defined in Section 3(3) of ERISA which is maintained or contributed to for the
benefit of the employees of Holdings, any of its Subsidiaries or any members of
its Controlled Group and is not covered by ERISA pursuant to ERISA Section
4(b)(4).
"FOREIGN PENSION PLAN" means any employee benefit plan as described in
Section 3(3) of ERISA which (i) is maintained or contributed to for the benefit
of employees of Holdings, any of its Subsidiaries or any of its ERISA
Affiliates, (ii) is not covered by ERISA pursuant to Section 4(b)(4) of ERISA,
and (iii) under applicable local law, is required to be funded through a trust
or other funding vehicle.
"GOVERNMENTAL ACTS" is defined in Section 2.26(a) hereof.
"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GROSS AMOUNT OF ELIGIBLE CANADIAN INVENTORY" means the Dollar Amount
of the Canadian Dollar value of Eligible Canadian Inventory valued at the lower
of cost determined on a first-in-first-out basis (determined in accordance with
Agreement Accounting Principles, consistently applied) or market value less (i)
the value of reserves which have been recorded by AAS Canada with respect to
obsolete, slow-moving or excess Inventory and (ii) such other reserves as the
Documentation and Collateral Agent elects to establish in accordance with its
reasonable credit judgment (which credit judgment shall be exercised in a manner
that is not arbitrary or capricious and shall be exercised in a manner not
inconsistent with the manner in which the initial reserves were determined).
-25-
<PAGE> 35
"GROSS AMOUNT OF ELIGIBLE DUTCH INVENTORY" means the Dollar Amount of
the Dutch Guilder value of Eligible Dutch Inventory valued at the lower of cost
determined on a first-in- first-out basis (determined in accordance with
Agreement Accounting Principles, consistently applied) or market value less (i)
the value of reserves which have been recorded by Brink with respect to
obsolete, slow-moving or excess Inventory and (ii) such other reserves as the
Documentation and Collateral Agent elects to establish in accordance with its
reasonable credit judgment (which credit judgment shall be exercised in a manner
that is not arbitrary or capricious and shall be exercised in a manner not
inconsistent with the manner in which the initial reserves were determined).
"GROSS AMOUNT OF ELIGIBLE U.S. INVENTORY" means Eligible U.S. Inventory
valued at the lower of cost determined on a first-in-first-out basis (determined
in accordance with Agreement Accounting Principles, consistently applied) or
market value less (i) the value of reserves which have been recorded by AAS with
respect to obsolete, slow-moving or excess Inventory and (ii) such other
reserves as the Documentation and Collateral Agent elects to establish in
accordance with its reasonable credit judgment (which credit judgment shall be
exercised in a manner that is not arbitrary or capricious and shall be exercised
in a manner not inconsistent with the manner in which the initial reserves were
determined).
"GROSS AMOUNT OF ELIGIBLE CANADIAN RECEIVABLES" means the Dollar Amount
of the outstanding face amount in Canadian Dollars of Eligible Canadian
Receivables, determined in accordance with Agreement Accounting Principles,
consistently applied, less (i) all finance charges, late fees and other fees
that are unearned, (ii) the value of any accrual which has been recorded by AAS
Canada with respect to downward price adjustments, (iii) a warranty reserve in
an amount reasonably sufficient for purposes of meeting AAS Canada's warranty
obligations or warranty sharing obligations; and (iv) such other reserves as the
Documentation and Collateral Agent elects to establish in accordance with its
reasonable credit judgment (which credit judgment shall be exercised in a manner
that is not arbitrary or capricious and shall be exercised in a manner not
inconsistent with the manner in which the initial reserves were determined).
"GROSS AMOUNT OF ELIGIBLE DUTCH RECEIVABLES" means the Dollar Amount of
the outstanding face amount in Dutch Guilders of Eligible Dutch Receivables,
determined in accordance with Agreement Accounting Principles, consistently
applied, less (i) all finance charges, late fees and other fees that are
unearned, (ii) the value of any accrual which has been recorded by Brink with
respect to downward price adjustments, (iii) a warranty reserve in an amount
reasonably sufficient for purposes of meeting Brink's warranty obligations or
warranty sharing obligations; and (iv) such other reserves as the Documentation
and Collateral Agent elects to establish in accordance with its reasonable
credit judgment (which credit judgment shall be exercised in a manner that is
not arbitrary or capricious and shall be exercised in a manner not inconsistent
with the manner in which the initial reserves were determined).
-26-
<PAGE> 36
"GROSS AMOUNT OF ELIGIBLE U.S. RECEIVABLES" means the outstanding face
amount of Eligible U.S. Receivables, determined in accordance with Agreement
Accounting Principles, consistently applied, less (i) all finance charges, late
fees and other fees that are unearned, (ii) the value of any accrual which has
been recorded by AAS or Valley, as applicable, with respect to downward price
adjustments, (iii) a warranty reserve in an amount reasonably sufficient for
purposes of meeting the warranty obligations or warranty sharing obligations of
AAS or Valley, as applicable; and (iv) such other reserves as the Documentation
and Collateral Agent elects to establish in accordance with its reasonable
credit judgment (which credit judgment shall be exercised in a manner that is
not arbitrary or capricious and shall be exercised in a manner not inconsistent
with the manner in which the initial reserves were determined).
"GROSS NEGLIGENCE" means recklessness, the absence of the slightest
care or the complete disregard of consequences. Gross Negligence does not mean
the absence of ordinary care or diligence, or an inadvertent act or inadvertent
failure to act. If the term "gross negligence" is used with respect to the
Administrative Agent, the Documentation and Collateral Agent, any Arranger or
any Lender or any Indemnitee in any of the other Loan Documents, it shall have
the meaning set forth herein.
"GUARANTIES" means those certain Guaranties executed by Holdings, AAS,
Valley and Brink Acquisition with respect to all of the Secured Obligations and
Brink International with respect to that portion of the Secured Obligations
arising out of Advances made to Subsidiaries of Brink International.
"HIGH YIELD NOTE AGREEMENT" means the Indenture to be dated a date
occurring between July 31, 1997 and December 31, 1997 among Holdings and a
trustee acting on behalf of the note purchasers pursuant to which Holdings plans
to issue notes in the original principal amount of US$100,000,000.
"HOLDERS OF SECURED OBLIGATIONS" shall mean the holders of the Secured
Obligations from time to time and shall include their respective successors,
transferees and assigns.
"HOLDINGS" means AAS Holdings, LLC, a Delaware limited liability
company, and its successors and assigns, including a debtor-in-possession on
behalf of Holdings.
"INCOME TAX LIABILITIES" means with respect to any member or, in the
event such member is a flow-through entity, such direct or indirect owner or
owners of such member as is or are subject to income taxes on income of AAS,
Valley or Holdings for any calendar year, an amount determined as follows:
(i) with respect to any Tax Distribution to be made at a time
when no Default or Unmatured Default has occurred and is continuing,
determined by multiplying (a) such Person's allocable share of all
taxable income and gains of AAS, Valley or Holdings (as
-27-
<PAGE> 37
determined under Section 7 of each of the Operating Agreements of AAS,
Valley and Holdings) by (b) forty-four percent (44%); and
(ii) with respect to any Tax Distribution to be made after the
occurrence and during the continuance of a Default or Unmatured
Default, an amount equal to such Person's actual liabilities for U.S.
federal income taxes and for all relevant state and local income taxes
for jurisdictions located in the U.S. (taking into account the
deductibility of state and local taxes for federal income tax purposes
and determined based on the highest marginal income tax rates
applicable to any such member without taking into account such member's
actual taxable income or losses from other sources), however
denominated (together with any interest, penalties, additions to tax,
or additional amounts with respect thereto), imposed under applicable
tax law (i.e., reflecting all items and the amounts thereof in the
period properly applicable thereto for tax accounting purposes)
resulting to such member based upon its allocable share (as determined
under Section 7 of each of the Operating Agreements of AAS, Valley and
Holdings) of all taxable income and gains of AAS, Valley or Holdings
for such calendar year.
"INDEBTEDNESS" of any Person means (i) any indebtedness of such Person,
contingent or otherwise, (a) in respect of borrowed money including all
principal, interest, fees and expenses with respect thereto (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), or (b) evidenced by bonds, notes, acceptances, debentures or
other instruments or letters of credit (or reimbursement obligations with
respect thereto, including, in the case of the Borrowers, Reimbursement
Obligations under the Letters of Credit) or representing the balance deferred
and unpaid of the purchase price of any property (including pursuant to
Capitalized Leases) or services, if and to the extent any of the foregoing
indebtedness would appear as a liability upon a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles (except that any
such balance that constitutes a trade payable and/or an accrued liability
arising in the ordinary course of business shall not be considered
Indebtedness); (ii) to the extent not otherwise included, (a) interest accruing
after the commencement of any bankruptcy, insolvency, receivership or similar
proceedings and other interest that would have accrued but for the commencement
of such proceedings, (b) any Capitalized Lease Obligations, (c) obligations,
whether or not assumed, secured by Liens or payable out of the proceeds or
production from property now or hereafter owned or acquired by such Person, and
(d) Contingent Obligations (exclusive of whether such items would appear upon
such balance sheet). The amount of Indebtedness of any Person at any date shall
be without duplication (i) the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability of any
such Contingent Obligations at such date and (ii) in the case of Indebtedness of
others secured by a Lien to which the property or assets owned or held by such
Person is subject, the lesser of the fair market value at such date of any asset
subject to a Lien securing the Indebtedness of others and the amount of the
Indebtedness secured.
"INDEMNIFIED MATTERS" is defined in Section 9.7(B) hereof.
-28-
<PAGE> 38
"INDEMNITEES" is defined in Section 9.7(B) hereof.
"INSURANCE RESERVE" is defined in Section 6.2(G) hereof.
"INTELLECTUAL PROPERTY SECURITY AGREEMENTS" means (a) those certain
Patent Security Agreements, and (b) those certain Trademark Security Agreements
executed by AAS and Valley, respectively, in favor of the Documentation and
Collateral Agent for the benefit of the holders of Secured Obligations as
amended, restated or otherwise modified from time to time.
"INTEREST EXPENSE" is defined in Section 6.4(A) hereof.
"INTEREST EXPENSE COVERAGE RATIO" is defined in Section 6.4(B) hereof.
"INTEREST PERIOD" means, with respect to a Eurocurrency Rate Loan, a
period of one (1), two (2), three (3) or six (6) months commencing on a Business
Day selected by the applicable Borrower pursuant to this Agreement. Such
Interest Period shall end on (but exclude) the day which corresponds numerically
to such date one, two, three or six months thereafter; provided, however, that
if there is no such numerically corresponding day in such next, second, third or
sixth succeeding month, such Interest Period shall end on the last Business Day
of such next, second, third or sixth succeeding month. If an Interest Period
would otherwise end on a day which is not a Business Day, such Interest Period
shall end on the next succeeding Business Day, provided, however, that if said
next succeeding Business Day falls in a new calendar month, such Interest Period
shall end on the immediately preceding Business Day.
"INTEREST RATE AGREEMENTS" is defined in Section 6.3(R) hereof.
"INVENTORY" shall mean any and all goods, including, without
limitation, goods in transit, wheresoever located, whether now owned or
hereafter acquired by AAS, Valley, AAS Canada or Brink which are held for sale
or lease, furnished under any contract of service or held as raw materials, work
in process or supplies, and all materials used or consumed in the business of
AAS, Valley, AAS Canada or Brink, and shall include such property the sale or
other disposition of which has given rise to Receivables and which has been
returned to or repossessed or stopped in transit by AAS, Valley, AAS Canada or
Brink.
"INVESTMENT" means, with respect to any Person, (i) any purchase or
other acquisition by that Person of stock, partnership interest, ownership or
membership interest, notes, debentures or other securities, or of a beneficial
interest in stock, partnership interest, ownership or membership interest,
notes, debentures or other securities, issued by any other Person, (ii) any
purchase by that Person of all or substantially all of the assets of a business
conducted by another Person, and (iii) any loan, advance (other than deposits
with financial institutions available for withdrawal on demand, prepaid
expenses, accounts receivable, advances to employees and similar items made or
incurred in the ordinary course of business) or capital contribution by that
Person to any other
-29-
<PAGE> 39
Person, including all Indebtedness to such Person arising from a sale of
property by such Person other than in the ordinary course of its business.
"IRS" means the Internal Revenue Service and any Person succeeding to
the functions thereof.
"ISSUING LENDER" means, as the context may require, (i) The Chase
Manhattan Bank, with respect to Letters of Credit issued by it pursuant to this
Agreement, (ii) NBD Bank, with respect to Letters of Credit issued by it
pursuant to this Agreement, (iii) Chase Manhattan Bank Delaware, with respect to
Letters of Credit issued by it pursuant to this Agreement, (iv) any other Lender
that becomes an Issuing Lender, pursuant to Section 2.21, with respect to
Letters of Credit issued by such Lender or (v) collectively, all the foregoing.
"L/C DRAFT" means a draft drawn on an Issuing Lender pursuant to a
Letter of Credit.
"L/C INTEREST" shall have the meaning ascribed to such term in Section
2.22.
"L/C OBLIGATIONS" means, without duplication, an amount equal to the
sum of (i) the aggregate of the amount then available for drawing under each of
the Letters of Credit, (ii) the face amount of all outstanding L/C Drafts
corresponding to the Letters of Credit, which L/C Drafts have been accepted by
the Issuing Lender, (iii) the aggregate outstanding amount of all Reimbursement
Obligations at such time and (iv) the aggregate face amount of all Letters of
Credit requested by any Borrower but not yet issued (unless the request for an
unissued Letter of Credit has been denied).
"LENDERS" means the lending institutions listed on the signature pages
of this Agreement, including the Issuing Lenders and the Swing Line Lenders and
their respective successors and assigns.
"LENDING INSTALLATION" means, with respect to a Lender or the
Administrative Agent, any office, branch, subsidiary or affiliate of such Lender
or the Administrative Agent.
"LETTER(S) OF CREDIT" means the letters of credit to be issued by one
of the Issuing Lenders pursuant to Section 2.21 hereof.
"LIEN" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, the interest of a vendor or lessor
under any conditional sale, Capitalized Lease or other title retention
agreement).
"LOAN(S)" means, (i) with respect to a Lender, such Lender's portion of
any Advance made pursuant to Section 2.1 or Section 2.2, as applicable, (ii)
with respect to the Swing Line
-30-
<PAGE> 40
Lender, its Swing Line Loans and (iii) collectively all Term Loans and Revolving
Loans, whether made or continued as or converted to Base Rate Loans or
Eurocurrency Rate Loans and all Swing Line Loans.
"LOAN ACCOUNT" is defined in Section 2.15(F) hereof.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Guaranties, the
Collateral Documents and all other documents, instruments and agreements
executed in connection therewith or contemplated thereby, including the letter
agreements regarding fees among the Administrative Agent, AAS and Holdings and
among Chase, NBD, the Arrangers, Holdings and AAS, in each case as the same may
be amended, restated or otherwise modified and in effect from time to time.
"MANAGEMENT" means those Persons listed on Schedule 1.1.5 under such
heading.
"MARGIN STOCK" shall have the meaning ascribed to such term in
Regulation U.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of Holdings and its Subsidiaries taken as a whole, (b)
the ability of the Borrowers to perform their respective obligations under the
Loan Documents in any material respect, or (c) the ability of the Lenders, the
Administrative Agent or the Documentation and Collateral Agent to enforce in any
material respect the Obligations or their rights with respect to the Collateral.
"MAXIMUM REVOLVING CREDIT AMOUNT" means, at any particular time: (i)
the lesser of (A) the Aggregate Revolving Loan Commitment at such time minus the
Dollar Amount of the outstanding principal balance of the Indebtedness of AAS
Canada to the Canadian Lenders with respect to the Four Million Canadian Dollar
(C$4,000,000.00) revolving credit facility provided by the Canadian Lenders to
AAS Canada and (B) the Borrowing Base at such time minus (ii) the amount of any
Decision Reserve in effect at such time.
"MORTGAGES" shall mean mortgages, deeds of trust, collateral
assignments of beneficial interest, leasehold mortgages and/or leasehold deeds
of trust of even date herewith executed by any U.S. Borrower in favor of the
Documentation and Collateral Agent for the benefit of the Holders of Secured
Obligations as amended, restated or otherwise modified from time to time and any
other mortgage executed by any Subsidiary of Brink International securing
Advances made to Brink International or Subsidiaries of Brink International.
"MULTIEMPLOYER PLAN" means a "Multiemployer Plan" as defined in Section
4001(a)(3) of ERISA which is, or within the immediately preceding six (6) years
was, contributed to by either Holdings, AAS, Valley or any member of the
Controlled Group.
-31-
<PAGE> 41
"NBD" means NBD Bank, in its individual capacity.
"NET CASH PROCEEDS" means, with respect to any Asset Sale of any
Person, (a) cash (freely convertible into U.S. Dollars) received by such Person
or any Subsidiary of such Person from such Asset Sale (including cash received
as consideration for the assumption or incurrence of liabilities incurred in
connection with or in anticipation of such Asset Sale), after (i) provision for
all income or other taxes measured by or resulting from such Asset Sale, (ii)
payment of all brokerage commissions and other fees and expenses related to such
Asset Sale, (iii) all amounts used to repay Indebtedness secured by a Lien on
any asset disposed of in such Asset Sale or which is or may be required (by the
express terms of the instrument governing such Indebtedness) to be repaid in
connection with such Asset Sale (including payments made to obtain or avoid the
need for the consent of any holder of such Indebtedness), and (iv) deduction of
appropriate amounts to be provided by such Person or a Subsidiary of such Person
as a reserve, in accordance with Agreement Accounting Principles, against any
liabilities associated with the assets sold or disposed of in such Asset Sale
and retained by such Person or a Subsidiary of such Person after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with the assets sold or disposed of in
such Asset Sale; and (b) cash payments in respect of any Indebtedness, Capital
Stock, ownership or membership interest or other consideration received by such
Person or any Subsidiary of such Person from such Asset Sale upon receipt of
such cash payments by such Person or such Subsidiary.
"NET INCOME" is defined in Section 6.4(A) hereof.
"NON PRO RATA LOAN" is defined in Section 8.2 hereof.
"NOMADIC SPORTS PURCHASE" means the purchase by AAS Canada of certain
assets and stock for a purchase price not to exceed in the aggregate
C$2,000,000.
"NOTES" means the Revolving Notes, the Term Notes and the Swing Line
Loan Note.
"NOTICE OF ASSIGNMENT" is defined in Section 12.3(B) hereof.
"OBLIGATIONS" means all Loans, advances, debts, liabilities,
obligations, covenants and duties owing by any of the Borrowers to the
Administrative Agent, the Documentation and Collateral Agent, either of the
Arrangers, any Lenders, the Issuing Lenders, the Swing Line Lender, any
Affiliate of any of the foregoing or any Indemnitee, of any kind or nature,
present or future, arising under this Agreement, the Notes, the Collateral
Documents, any other Loan Document, whether or not evidenced by any note,
guaranty or other instrument, whether or not for the payment of money, whether
arising by reason of an extension of credit, loan, guaranty, indemnification, or
in any other manner, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired. The term includes, without limitation,
all interest, charges, expenses, fees,
-32-
<PAGE> 42
attorneys' fees and disbursements, paralegals' fees (in each case
whether or not allowed), and any other sum chargeable to any of the Borrowers
under this Agreement or any other Loan Document.
"OTHER TAXES" is defined in Section 2.15(E)(ii) hereof.
"PARTICIPANTS" is defined in Section 12.2(A) hereof.
"PAYMENT DATE" means the last Business Day of each March, June,
September and December.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"PERMITTED ACQUISITION" is defined in Section 6.3(G) hereof.
"PERMITTED EXISTING CONTINGENT OBLIGATIONS" means the Contingent
Obligations of the Borrowers and all other Subsidiaries of Holdings identified
as such on Schedule 1.1.1 to this Agreement.
"PERMITTED EXISTING INDEBTEDNESS" means the Indebtedness of the
Borrowers and all other Subsidiaries of Holdings identified as such on Schedule
1.1.2 to this Agreement.
"PERMITTED EXISTING INVESTMENTS" means the Investments of the Borrowers
and all other Subsidiaries of Holdings identified as such on Schedule 1.1.3 to
this Agreement.
"PERMITTED EXISTING LIENS" means the Liens on assets of the Borrowers
or all other Subsidiaries of Holdings identified as such on Schedule 1.1.4 to
this Agreement.
"PERMITTED PURCHASE MONEY INDEBTEDNESS" is defined in Section
6.3(A)(ii) hereof.
"PERMITTED SUBORDINATED INDEBTEDNESS" means (a) Indebtedness evidenced
by the Subordinated Notes in an outstanding principal amount not at any time
exceeding $20,000,000, plus interest, fees and expenses and any other amounts
other than principal provided for under the Subordinated Note Agreement in
connection therewith, together with interest thereon; (b) Indebtedness evidenced
by substitute subordinated notes delivered upon the registration of the transfer
or exchange for or in lieu of such Subordinated Notes as provided in the
Subordinated Note Agreement; (c) Indebtedness evidenced by the Seller Note; (d)
Indebtedness evidenced by the Subordinated Notes in an outstanding principal
amount not at any time exceeding $100,000,000 issued pursuant to the High Yield
Note Agreement; (e) Indebtedness evidenced by the Subordinated Notes in an
outstanding principal amount not exceeding $20,000,000 issued pursuant to the
Supplemental Subordinated Note Agreement; and (e) other Subordinated
Indebtedness permitted pursuant to Section 6.3(A)(d)
-33-
<PAGE> 43
"PERSON" means any natural person, corporation, firm, company, joint
venture, partnership, association, enterprise, trust or other entity or
organization, or any government or political subdivision or any agency,
department or instrumentality thereof.
"PLAN" means an employee benefit plan defined in Section 3(3) of ERISA
in respect of which the Borrower or any member of the Controlled Group is, or
within the immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA.
"PLEDGE AGREEMENTS" means (i) that certain Pledge Agreement executed by
Holdings in favor of the Documentation and Collateral Agent for the benefit of
the Holders of Secured Obligations to secure payment of the Secured Obligations,
as amended, restated or otherwise modified from time to time; (ii) that certain
Pledge Agreement executed by CB Capital in favor of the Documentation and
Collateral Agent for the benefit of the Holders of Secured Obligations to secure
payment of the Secured Obligations, as amended, restated or otherwise modified
from time to time; (iii) that certain Pledge Agreement executed by Brink
International in favor of the Documentation and Collateral Agent for the benefit
of the Holders of Secured Obligations pledging 65% of the Capital Stock of Brink
to secure payment of the Secured Obligations and (iv) any other pledge
agreements executed by Brink Acquisition and non-U.S. Subsidiaries of Holdings
in favor of the Documentation and Collateral Agent for the benefit of the
Holders of Secured Obligations pledging the Capital Stock of certain non-U.S.
Subsidiaries of Holdings to secure payment of Advances made to non-U.S.
Subsidiaries of Holdings.
"PRO RATA SHARE" means, with respect to any Lender, (i) at any time
prior to the Effective Date, the percentage obtained by dividing (A) such
Lender's Commitments at such time (in each case, as adjusted from time to time
in accordance with the provisions of this Agreement) by (B) the sum of the
Aggregate Term Loan Commitments and the Aggregate Revolving Loan Commitments at
such time and (ii) at any time after the Effective Date, the percentage obtained
by dividing (A) the sum of such Lender's Term Loans and Revolving Loan
Commitment at such time (in each case, as adjusted from time to time in
accordance with the provisions of this Agreement) by (B) the sum of the
aggregate amount of all of the Term Loans and the Aggregate Revolving Loan
Commitment at such time; provided, however, if all of the Commitments are
terminated pursuant to the terms of this Agreement, then "Pro Rata Share" means
the percentage obtained by dividing (x) the sum of such Lender's Term Loans and
Revolving Loans by (y) the aggregate amount of all Term Loans and Revolving
Loans.
"PURCHASERS" is defined in Section 12.3(A) hereof.
"RATE HEDGING OBLIGATIONS" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect at least one of the
-34-
<PAGE> 44
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (ii) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.
"RATE OPTION" means the Eurocurrency Rate or the Base Rate.
"RECEIVABLE(S)" means and includes all of AAS's, Valley's, AAS Canada's
or Brink's presently existing and hereafter arising or acquired accounts,
accounts receivable, and all present and future rights of AAS, Valley, AAS
Canada or Brink to payment for goods sold or leased or for services rendered
(except those evidenced by instruments or chattel paper), whether or not they
have been earned by performance, and all rights in any merchandise or goods
which any of the same may represent, and all rights, title, security and
guaranties with respect to each of the foregoing, including, without limitation,
any right of stoppage in transit.
"REGISTER" is defined in Section 12.3(C) hereof.
"REGULATION G" means Regulation G of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by nonbank, nonbroker lenders for the purpose of purchasing
or carrying margin stock (as defined therein).
"REGULATION T" means Regulation T of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by and to brokers and dealers of securities for the purpose
of purchasing or carrying margin stock (as defined therein).
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying Margin
Stock applicable to member banks of the Federal Reserve System.
"REGULATION X" means Regulation X of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by foreign lenders for the purpose of purchasing or carrying
margin stock (as defined therein).
"REIMBURSEMENT OBLIGATION" is defined in Section 2.23 hereof.
-35-
<PAGE> 45
"REINVESTMENT PERIOD" is defined in Section 2.5(B)(i)(f) hereof.
"REINVESTMENT RESERVE" is defined in Section 2.5(B)(i)(f) hereof.
"RELEASE" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including the movement of Contaminants
through or in the air, soil, surface water or groundwater.
"RENTALS" is defined in Section 6.4(A) hereof.
"REPLACEMENT LENDER" is defined in Section 2.20 hereof.
"REPORTABLE EVENT" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days after
such event occurs, provided, however, that a failure to meet the minimum funding
standards of Section 412 of the Code and of Section 302 of ERISA shall be a
Reportable Event regardless of the issuance of any such waiver of the notice
requirement in accordance with either Section 4043(a) of ERISA or Section 412(d)
of the Code.
"REQUIRED LENDERS" means Lenders whose Pro Rata Shares, in the
aggregate, are greater than fifty percent (50%); provided, however, that, if any
of the Lenders shall have failed to fund its Pro Rata Share of any Revolving
Loan requested by the Borrower which such Lenders are obligated to fund under
the terms of this Agreement and any such failure has not been cured, then for so
long as such failure continues, "REQUIRED LENDERS" means Lenders (excluding all
Lenders whose failure to fund their respective Pro Rata Shares of such Revolving
Loans have not been so cured) whose Pro Rata Shares represent greater than fifty
percent (50%) of the aggregate Pro Rata Shares of such Lenders; provided,
further, however, that, if the Commitments have been terminated pursuant to the
terms of this Agreement, "REQUIRED LENDERS" means Lenders (without regard to
such Lenders' performance of their respective obligations hereunder) whose
aggregate ratable shares (stated as a percentage) of the aggregate outstanding
principal balance of all Loans and L/C Obligations are greater than fifty
percent (50%).
"REQUIREMENTS OF LAW" means, as to any Person, the charter and by-laws
or other organizational or governing documents of such Person, and any law, rule
or regulation, or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is subject
including, without limitation, the Securities Act, the Securities Exchange Act,
Regulations G, T, U and X, ERISA, the Fair Labor Standards Act, the Worker
Adjustment and Retraining Notification Act, Americans with Disabilities Act of
1990, and any certificate of occupancy, zoning ordinance, building,
environmental or land use requirement or Permit or
-36-
<PAGE> 46
environmental, labor, employment, occupational safety or health law,
rule or regulation, including Environmental, Health or Safety Requirements of
Law.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any ownership, membership or
other equity interest in Holdings now or hereafter outstanding, except
a dividend payable solely in additional interests of the same type, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any ownership, membership or other
equity interest in Holdings or any such interests or shares of any class of
Capital Stock of Holdings now or hereafter outstanding, (iii) any payment or
prepayment of principal of, premium, if any, or interest, fees or other charges
on or with respect to, and any redemption, purchase, retirement, defeasance,
sinking fund or similar payment and any claim for rescission with respect to any
Permitted Subordinated Indebtedness, (iv) any payment made to redeem, purchase,
repurchase or retire, or to obtain the surrender of, any outstanding options or
other rights to acquire any ownership, membership or other equity interests in
Holdings, (v) any payment of a claim for the rescission of the purchase or sale
of, or for material damages arising from the purchase or sale of any Permitted
Subordinated Indebtedness or any ownership, membership or other equity interests
in Holdings or of a claim for reimbursement, indemnification or contribution
arising out of or related to any such claim for damages or rescission and (vi)
any payment of management fees (or other fees of a similar nature) by Holdings
to CB Capital, any holder of ownership, membership or other equity interests in
Holdings or any member of management of Holdings or their Affiliates.
"REVOLVING CREDIT AVAILABILITY" means, at any particular time, the
amount by which the Maximum Revolving Credit Amount at such time exceeds the
Revolving Credit Obligations at such time.
"REVOLVING CREDIT OBLIGATIONS" means, at any particular time, the sum
of (i) the outstanding principal amount of the Revolving Loans at such time,
plus (ii) the L/C Obligations at such time plus (iii) the outstanding principal
amount of the Swing Line Loans at such time.
"REVOLVING LOAN" is defined in Section 2.2.
"REVOLVING LOAN COMMITMENT" means, for each Lender, the obligation of
such Lender to make Revolving Loans and to purchase participations in Letters of
Credit not exceeding the amount set forth on Exhibit B to this Agreement
opposite its name thereon under the heading "Revolving Loan Commitment" or the
signature page of the Assignment and Acceptance by which it became a Lender, as
such amount may be modified from time to time pursuant to the terms of this
Agreement or to give effect to any applicable Assignment and Acceptance.
"REVOLVING NOTE" means a promissory note, in substantially the form of
Exhibit C hereto, duly executed by a Borrower and payable to the order of a
Lender in the amount of its Revolving
-37-
<PAGE> 47
Loan Commitment, including any amendment, restatement modification, renewal or
replacement of such Revolving Note.
"RISK-BASED CAPITAL GUIDELINES" is defined in Section 3.2 hereof.
"SECURED OBLIGATIONS" means, collectively, (i) the Obligations, (ii)
all Rate Hedging Obligations owing to one or more of the Lenders and (iii) the
obligations of Holdings and AAS under guaranties of the Indebtedness of AAS
Canada owed to the Canadian Lenders.
"SECURITY AGREEMENTS" means those certain Security Agreements executed
by AAS, Holdings, Valley and Brink Acquisition, respectively, in favor of the
Documentation and Collateral Agent for the benefit of the Holders of Secured
Obligations as amended, restated or otherwise modified from time to time.
"SELLER" means Valley Industries, Inc.
"SELLER NOTE" means that certain Amended and Restated Note issued by
Holdings to the Seller in the principal amount of Twelve Million Five Hundred
Thousand Dutch Guilders (NLG 12,500,000).
"SINGLE EMPLOYER PLAN" means a Plan maintained by AAS or any member of
the Controlled Group for employees of AAS, Valley or any member of the
Controlled Group.
"SOLVENT" shall mean, when used with respect to any Person, that at the
time of determination:
(i) the fair value of its assets (both at fair valuation and
at present fair saleable value) is equal to or in excess of the total
amount of its liabilities, including, without limitation, contingent
liabilities; and
(ii) it is then able and expects to be able to pay its debts
as they mature; and
(iii) it has capital sufficient to carry on its business as
conducted and as proposed to be conducted.
With respect to contingent liabilities (such as litigation, guarantees and
pension plan liabilities), such liabilities shall be computed at the amount
which, in light of all the facts and circumstances existing at the time,
represent the amount which can be reasonably be expected to become an actual or
matured liability.
"SUBORDINATED INDEBTEDNESS" means the Indebtedness evidenced by the
Subordinated Notes and the Seller Note and other Permitted Subordinated
Indebtedness.
-38-
<PAGE> 48
"SUBORDINATED NOTE AGREEMENT" means the Senior Subordinated Note
Purchase Agreement dated as of October 30, 1996 among Holdings, and CB Capital
and International Mezzanine Capital BV, as amended by Amendment No. 1 dated July
2, 1997 and Amendment No. 2 dated as of August 5, 1997.
"SUBORDINATED NOTES" means (i) the Senior Subordinated Promissory Notes
issued by Holdings pursuant to the Subordinated Note Agreement, (ii) any notes
issued by Holdings pursuant to the High Yield Note Agreement and (iii) any notes
issued by Holdings pursuant to the Supplemental Subordinated Note Agreement.
"SUBSIDIARY" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any company, partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a direct
or indirect Subsidiary of Holdings.
"SUPPLEMENTAL SUBORDINATED NOTE AGREEMENT" means the Senior
Subordinated Note Purchase Agreement to be dated a date occurring between July
31, 1997 and December 31, 1997 among Holdings and one or more note purchasers or
a trustee acting on their behalf pursuant to which Holdings plans to issue
subordinated notes in an original principal amount sufficient to generate
proceeds available to prepay the Loans of not less than US$20,000,000.
"SWING LINE COMMITMENT" means the obligation of the Swing Line Lenders
to make Swing Line Loans up to a maximum principal amount of $2,000,000 in the
aggregate at any one time outstanding.
"SWING LINE LENDER" means Chase, NBD and any other Lender that elects
to be a Swing Line Lender.
"SWING LINE LOAN" means a loan made available to any of the Borrowers
by the Swing Line Lender pursuant to Section 2.3.
"SWING LINE LOAN NOTE" means a Note in substantially the form of
Exhibit E hereto duly executed by the applicable Borrower and payable to the
order of each Swing Line Lender in the amount of its Swing Line Commitment.
"SYNDICATION AGENT" means Chase in its capacity as Syndication Agent
with respect to this Agreement.
-39-
<PAGE> 49
"TAX DISTRIBUTION" means, as of the time of determination thereof, any
distribution by AAS, Valley or Holdings to members of AAS, Valley or Holdings
(or in each case, if such member is a flow-through entity, such direct or
indirect owner or owners of such member as is or are subject to income taxes on
income of AAS, Valley or Holdings) pursuant to the provisions of Section
6.3(F)(i), which (i) with respect to quarterly estimated tax payments due in
each calendar year shall be equal to twenty-five percent (25%) of the relevant
member's Income Tax Liabilities for such calendar year as estimated in writing
by the chief financial officer of Holdings and (ii) with respect to tax
payments to be made with income tax returns filed for a full calendar year or
with respect to adjustments to such returns imposed by the IRS or other taxing
authority, shall be equal to the Income Tax Liabilities of such member for such
calendar year minus the aggregate amount distributed to such member for such
calendar year as provided in clause (i) above. In the event the amount
determined under clause (ii) is a negative amount, the amount of any
distributions to the relevant member in the succeeding calendar year (or, if
necessary, any subsequent calendar years) shall be reduced by such negative
amount.
"TAXES" is defined in Section 2.15(E)(i) hereof.
"TERMINATION DATE" means the earlier of (a) October 30, 2003, (b) the
date of termination of the Commitments pursuant to Section 2.6 or Section 8.1
and (c) the date of the payment in full of the Tranche A Term Loans.
"TERMINATION EVENT" means (i) a Reportable Event with respect to any
Benefit Plan; (ii) the withdrawal of AAS, Valley or any member of the Controlled
Group from a Benefit Plan during a plan year in which AAS, Valley or such
Controlled Group member was a "substantial employer" as defined in Section
4001(a)(2) of ERISA or the cessation of operations which results in the
termination of employment of twenty percent (20%) of Benefit Plan participants
who are employees of AAS, Valley or any member of the Controlled Group; (iii)
the imposition of an obligation on AAS, Valley or any member of the Controlled
Group under Section 4041 of ERISA to provide affected parties written notice of
intent to terminate a Benefit Plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the institution by the PBGC of proceedings to
terminate a Benefit Plan; (v) any event or condition which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Benefit Plan; or (vi) the partial or complete
withdrawal of AAS, Valley or any member of the Controlled Group from a
Multiemployer Plan.
"TERM LOANS" means, collectively, the Tranche A Term Loans and the
Tranche B Term Loans.
"TRANCHE A PRO RATA SHARE" shall mean, at any particular time and with
respect to any Lender, a fraction (expressed as a percentage), the numerator of
which shall be the then aggregate amount of such Lender's Revolving Credit
Commitment plus the outstanding principal balance of such Lender's Tranche A
Term Loans and the denominator of which shall be the then aggregate
-40-
<PAGE> 50
amount of all Revolving Credit Commitments and the outstanding principal balance
of the Tranche A Term Loans.
"TRANCHE A TERM LOAN" is defined in Section 2.1(a) hereof.
"TRANCHE A TERM LOAN COMMITMENT" means, for each Lender, the obligation
of such Lender to make its Tranche A Term Loan pursuant to the terms and
conditions of this Agreement, and which shall not exceed the principal amount
set forth on Exhibit B to this Agreement opposite its name thereon under the
heading "Tranche A Term Loan Commitment", as such amount may be modified from
time to time pursuant to the terms hereof.
"TRANCHE A TERM LOAN LENDER" means any Lender with a Tranche A Term
Loan Commitment.
"TRANCHE A TERM LOAN TERMINATION DATE" means the earlier of (a) October
30, 2003 and (b) the date of termination of the Revolving Loan Commitments
pursuant to Section 2.6 or Section 8.1.
"TRANCHE A TERM NOTE" means a promissory note, in substantially the
form of Exhibit D- 1 hereto, duly executed by the applicable Borrower and
payable to the order of a Lender in the amount of its Tranche A Term Loan
Commitment, including any amendment, restatement, modification, renewal or
replacement of such Tranche A Term Note.
"TRANCHE B PRO RATA SHARE" shall mean, at any particular time and with
respect to any Lender, a fraction (expressed as a percentage), the numerator of
which shall be the then outstanding principal balance of such Lender's Tranche B
Term Loans and the denominator of which shall be the then outstanding principal
balance of all Tranche B Term Loans.
"TRANCHE B TERM LOAN" is defined in Section 2.1(b) hereof.
"TRANCHE B TERM LOAN COMMITMENT" means, for each Lender, the obligation
of such Lender to make its Tranche B Term Loan pursuant to the terms and
conditions of this Agreement, and which shall not exceed the principal amount
set forth on Exhibit B to this Agreement opposite its name thereon under the
heading "Tranche B Term Loan Commitment", as such amount may be modified from
time to time pursuant to the terms hereof.
"TRANCHE B TERM LOAN LENDER" means any Lender with a Tranche B Term
Loan Commitment.
"TRANCHE B TERM LOAN TERMINATION DATE" means October 30, 2004.
-41-
<PAGE> 51
"TRANCHE B TERM NOTE" means a promissory note, in substantially the
form of Exhibit D- 2 hereto, duly executed by the applicable Borrower and
payable to the order of a Lender in the amount of its Tranche B Term Loan
Commitment, including any amendment, restatement, modification, renewal or
replacement of such Tranche B Term Note.
"TRANSACTION COSTS" means the fees, costs and expenses payable by the
Borrowers in connection with the execution, delivery and performance of the
Transaction Documents and the consummation of the Valley Acquisition.
"TRANSACTION DOCUMENTS" means the Loan Documents, the Subordinated Note
Agreement and the Acquisition Documents.
"TRANSFEREE" is defined in Section 12.5 hereof.
"TYPE" means, with respect to any Loan, its nature as a Base Rate Loan
or a Eurocurrency Rate Loan.
"UNMATURED DEFAULT" means an event which, but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"U.S. BORROWING BASE" means, as of any date of calculation, an amount,
as set forth on the most current Borrowing Base Certificate delivered to the
Administrative Agent, equal to the sum of (i) eighty-five percent (85%) of the
Gross Amount of Eligible U.S. Receivables plus (ii) the lesser of (A)
$10,000,000 and (B) fifty percent (50%) of the Gross Amount of Eligible U.S.
Inventory.
"VALLEY" means Valley Industries, LLC, a Delaware limited liability
company, and its successors and assigns, including a debtor-in-possession on
behalf of Valley.
"VALLEY ACQUISITION" means the acquisition of substantially all of the
assets of Valley Industries, Inc. by Valley on the terms and conditions set
forth in that certain Asset Purchase Agreement ("ACQUISITION AGREEMENT") dated
as of August 5, 1997 by and among Valley, Seller and certain other parties
substantially in the form attached as Exhibit J hereto.
"WORKING CAPITAL" means, as at any date of determination, the excess,
if any, of (i) Holding's consolidated current assets, except cash and Cash
Equivalents, over (ii) Holdings' consolidated current liabilities, except
current maturities of long-term debt and Revolving Credit Obligations as of such
date and all accrued interest as of such date.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms. Any accounting terms used in
this Agreement which are not specifically
-42-
<PAGE> 52
defined herein shall have the meanings customarily given them in
accordance with generally accepted accounting principles in existence as of the
date hereof.
1.2 Supplemental Disclosure. At any time at the request of the
Administrative Agent and at such additional times as Holdings determines,
Holdings shall supplement each schedule or representation herein or in the other
Loan Documents with respect to any matter hereafter arising which, if existing
or occurring at the date of this Agreement, would have been required to be set
forth or described in such schedule or as an exception to such representation or
which is necessary to correct any information in such schedule or representation
which has been rendered inaccurate thereby. If any such supplement to such
schedule or representation discloses the existence or occurrence of events,
facts or circumstances which are restricted or prohibited by the terms of this
Agreement or any other Loan Documents, such supplement to such schedule or
representation shall not be deemed an amendment thereof unless expressly
consented to in writing by Administrative Agent and the Required Lenders, and no
such amendments, except as the same may be consented to in a writing which
expressly includes a waiver, shall be or be deemed a waiver by the
Administrative Agent or any Lender of any Default disclosed therein.
ARTICLE II: THE CREDITS
2.1. Term Loans. (a) Amount of Tranche A Term Loans. Subject to the
terms and conditions set forth in this Agreement, each Tranche A Term Loan
Lender on the Effective Date severally and not jointly agrees to make (or, to
the extent previously made, re-evidence) a term loan or loans, in one or more
Agreed Currencies, to one or more of the Borrowers in an aggregate Dollar Amount
at any time outstanding not to exceed such Lender's Tranche A Term Loan
Commitment (each individually, a "TRANCHE A TERM LOAN" and, collectively, the
"TRANCHE A TERM LOANS"). All Tranche A Term Loans shall be made or re-evidenced
by the Lenders on or after the Effective Date simultaneously and proportionately
to their respective Tranche A Pro Rata Shares, it being understood that no
Tranche A Term Loan Lender shall be responsible for any failure by any other
Tranche A Term Loan Lender to perform its obligation to make or re- evidence any
Tranche A Term Loan hereunder nor shall the Tranche A Term Loan Commitment of
any Lender be increased or decreased as a result of any such failure.
(b) Amount of Tranche B Term Loans. Subject to the terms and conditions
set forth in this Agreement, each Tranche B Term Loan Lender on the Effective
Date severally and not jointly agrees to make a term loan or loans, in Dollars,
to one or more of the Borrowers in an aggregate amount at any time outstanding
not to exceed such Lender's Tranche B Term Loan Commitment (each individually, a
"TRANCHE B TERM LOAN" and, collectively, the "TRANCHE B TERM LOANS"). All
Tranche B Term Loans shall be made by the Lenders on or after the Effective Date
simultaneously and proportionately to their respective Tranche B Pro Rata
Shares, it being understood that no Tranche B Term Loan Lender shall be
responsible for any failure by any other Tranche B Term Loan Lender to perform
its obligation to make any Tranche B Term Loan
-43-
<PAGE> 53
hereunder nor shall the Tranche B Term Loan Commitment of any Lender be
increased or decreased as a result of any such failure.
(c) Borrowing Notice. The applicable Borrower shall deliver to the
Administrative Agent a Borrowing Notice, signed by an
Authorized Officer, on or after the Effective Date. Such Borrowing Notice shall
specify (i) the aggregate amount of the Tranche A Term Loans and Tranche B Term
Loans requested which shall be $60,982,000 and $55,000,000, respectively, on the
Effective Date and (ii) instructions for the disbursement of the proceeds of
such Term Loans. The Term Loans shall initially be Base Rate Loans and
thereafter may be continued as Base Rate Loans or converted into Eurocurrency
Rate Loans in the manner provided in Section 2.10 and subject to
the other conditions and limitations therein set forth and set forth in this
Article II. Any Borrowing Notice given pursuant to this Section
2.1(b) shall be irrevocable.
(d) Making of Term Loans. Promptly after receipt of the Borrowing
Notice under Section 2.1(c) in respect of any Term Loans, the Administrative
Agent shall notify each Lender by telex or telecopy, or other similar form of
transmission, of the proposed Advance. Each Lender shall deposit an amount equal
to its Tranche A Pro Rata Share of such Tranche A Term Loans and its Tranche B
Pro Rata Share of such Tranche B Term Loans with the Administrative Agent at its
office (i) in Detroit, Michigan in immediately available funds with respect to
any Advance denominated in Dollars and (ii) in the Administrative Agent's
Eurocurrency Payment Office in immediately available funds with respect to any
Advance denominated in an Agreed Currency other than Dollars, in each case, on
the Effective Date or, if thereafter, on the date specified in the Borrowing
Notice. Subject to the fulfillment of the conditions precedent set forth in
Sections 4.1 and 4.2, the Administrative Agent shall make the proceeds of such
amounts received by it available to the applicable Borrower at the
Administrative Agent's office in Detroit, Michigan on the date specified and
shall disburse such proceeds in accordance with the disbursement instructions
set forth in such Borrowing Notice. The failure of any Lender to deposit the
amount described above with the Administrative Agent on or after the Closing
Date shall not relieve any other Lender of its obligations hereunder to make
such Term Loan.
(e) Repayment of the Tranche A Term Loans. (i) The Tranche A Term Loans
shall be repaid by the Borrowers (it being understood that each non-U.S.
Borrower shall be liable only to repay Loans made to such Borrower and certain
other non-U.S. Borrowers) in twenty-five (25) consecutive quarterly installments
payable on the last day of each calendar quarter commencing September 30, 1997
and continuing thereafter until the Tranche A Term Loan Termination Date, and
the Tranche A Term Loans shall be permanently reduced by the amount of each
installment on the date payment thereof is required to be made hereunder. The
principal amount of the installments may be paid by any or all of the Borrowers
at their discretion provided that each of the quarterly installments shall be in
the aggregate amounts set forth below:
-44-
<PAGE> 54
<TABLE>
<CAPTION>
INSTALLMENT DATE INSTALLMENT AMOUNT
---------------- ------------------
<S> <C>
September 30, 1997 $1,500,000
December 31, 1997 $1,500,000
March 31, 1998 $1,500,000
June 30, 1998 $1,500,000
September 30, 1998 $1,500,000
December 31, 1998 $1,875,000
March 31, 1999 $1,875,000
June 30, 1999 $1,875,000
September 30, 1999 $1,875,000
December 31, 1999 $2,500,000
March 31, 2000 $2,500,000
June 30, 2000 $2,500,000
September 30, 2000 $2,500,000
December 31, 2000 $3,000,000
March 31, 2001 $3,000,000
June 30, 2001 $3,000,000
September 30, 2001 $3,000,000
December 31, 2001 $3,000,000
March 31, 2002 $3,000,000
June 30, 2002 $3,000,000
September 30, 2002 $3,000,000
December 31, 2002 $3,000,000
March 31, 2003 $3,000,000
June 30, 2003 $3,000,000
October 30, 2003 $2,982,000
</TABLE>
Notwithstanding the foregoing, the final installment shall be in the amount of
the then outstanding principal balance of the Tranche A Term Loans. In addition,
the then outstanding principal balance of the Tranche A Term Loans, if any,
shall be due and payable on the Tranche A Term Loan Termination Date. No
installment of any Tranche A Term Loan shall be reborrowed once repaid, except
that the initial Tranche A Term Loans extended or re-evidenced on the Effective
Date may, to the extent they have not been repaid, be refinanced with Tranche A
Term Loans made subsequently to Brink International or one of the other
Borrowers.
(ii) In addition to the scheduled payments on the Tranche A Term Loans,
the (a) Borrowers may make the voluntary prepayments described in Section 2.5(A)
for credit against the scheduled payments on the Tranche A Term Loans pursuant
to Section 2.5(A) and (b) Holdings
-45-
<PAGE> 55
shall make or cause to be made the mandatory prepayments prescribed in Section
2.5(B), for credit against such scheduled payments on the Tranche A Term Loans
pursuant to Section 2.5(B).
(f) Repayment of the Tranche B Term Loans. (i) The Tranche B Term Loans
shall be repaid by the Borrowers (it being understood that each non-U.S.
Borrower shall be liable only to repay Loans made to such Borrower and certain
other non-U.S. Borrowers) in twenty-nine (29) consecutive quarterly installments
payable on the last day of each calendar quarter commencing September 30, 1997
and continuing thereafter until the Tranche B Term Loan Termination Date, and
the Tranche B Term Loans shall be permanently reduced by the amount of each
installment on the date payment thereof is required to be made hereunder. The
principal amount of the installments may be paid by any or all of the Borrowers
at their discretion provided that each of the quarterly installments shall be in
the aggregate amounts set forth below:
<TABLE>
<CAPTION>
INSTALLMENT DATE INSTALLMENT AMOUNT
---------------- ------------------
<S> <C>
September 30, 1997 $250,000
December 31, 1997 $250,000
March 31, 1998 $250,000
June 30, 1998 $250,000
September 30, 1998 $250,000
December 31, 1998 $250,000
March 31, 1999 $250,000
June 30, 1999 $250,000
September 30, 1999 $250,000
December 31, 1999 $250,000
March 31, 2000 $250,000
June 30, 2000 $250,000
September 30, 2000 $250,000
December 31, 2000 $250,000
March 31, 2001 $250,000
June 30, 2001 $250,000
September 30, 2001 $250,000
December 31, 2001 $250,000
March 31, 2002 $250,000
June 30, 2002 $250,000
September 30, 2002 $250,000
December 31, 2002 $250,000
March 31, 2003 $250,000
June 30, 2003 $250,000
</TABLE>
-46-
<PAGE> 56
<TABLE>
<S> <C>
September 30, 2003 $ 250,000
December 31, 2003 $10,000,000
March 31, 2004 $12,916,666
June 30, 2004 $12,916,667
October 30, 2004 $12,916,667
</TABLE>
Notwithstanding the foregoing, the final installment shall be in the amount of
the then outstanding principal balance of the Tranche B Term Loans. In addition,
the then outstanding principal balance of the Tranche B Term Loans, if any,
shall be due and payable on the Tranche B Term Loan Termination Date. No
installment of any Tranche B Term Loan shall be reborrowed once repaid, except
that the initial Tranche B Term Loans extended or re-evidenced on the Effective
Date may, to the extent they have not been repaid, be refinanced with Tranche B
Term Loans made subsequently to Brink International or one of the other
Borrowers.
(ii) In addition to the scheduled payments on the Tranche B Term Loans,
the (a) Borrowers may make the voluntary prepayments described in Section 2.5(A)
for credit against the scheduled payments on the Tranche B Term Loans pursuant
to Section 2.5(A) and (b) Holdings shall make or cause to be made the mandatory
prepayments prescribed in Section 2.5(B), for credit against such scheduled
payments on the Tranche B Term Loans pursuant to Section 2.5(B).
2.2 Revolving Loans. Upon the satisfaction of the conditions precedent
set forth in Sections 4.1 and 4.2 hereof, from and including the date of this
Agreement and prior to the Termination Date, each Lender severally and not
jointly agrees, on the terms and conditions set forth in this Agreement, to make
revolving loans to the applicable Borrower from time to time, in an Agreed
Currency, in a Dollar Amount not to exceed such Lender's Tranche A Pro Rata
Share of the Dollar Amount of the Revolving Credit Availability at such time
(each individually, a "REVOLVING LOAN" and, collectively, the "REVOLVING
LOANS"); provided, however, at no time shall the Dollar Amount of the Revolving
Credit Obligations exceed the Dollar Amount of the Maximum Revolving Credit
Amount except to the extent permitted in Section 2.5(B)(ii); provided further
that at no time shall the Dollar Amount of the Revolving Credit Obligations owed
by Holdings, AAS and Valley exceed the U.S. Borrowing Base. Each Advance under
Section 2.2 shall consist of Revolving Loans made by each Lender ratably in
proportion to such Lender's respective Tranche A Pro Rata Share. Subject to the
terms of this Agreement, the Borrower may borrow, repay and reborrow at any time
prior to the Termination Date. The Revolving Loans made on the Closing Date
shall initially be Base Rate Loans and thereafter may be continued as Base Rate
Loans or converted into Eurocurrency Rate Loans in the manner provided in
Section 2.10 and subject to the other conditions and limitations therein set
forth and set forth in this Article II. On the Termination Date, the outstanding
principal balance of the Revolving Loans shall be paid in full by the applicable
Borrower.
-47-
<PAGE> 57
2.3 Swing Line Loans. (a) Amount of Swing Line Loans. Upon the
satisfaction of the conditions precedent set forth in Sections 4.1 and 4.2, from
and including the date of this Agreement and prior to the Termination Date, each
Swing Line Lender agrees, on the terms and conditions set forth in this
Agreement, to make Swing Line Loans in Dollars to AAS or Valley from time to
time in an amount not to exceed the lesser of (i) $2,000,000 (minus the
outstanding principal balance of all Swing Line Loans then outstanding)or (ii)
the Revolving Credit Availability at such time. Each Swing Line Loan shall be in
a minimum amount of not less than $50,000 (or such lesser amount as may be
agreed to by any Swing Line Lender) or an integral multiple of $50,000 ( or such
lesser amount as may be agreed to by any Swing Line Lender) in excess thereof,
and all interest payable on the Swing Line Loans shall be payable to the Swing
Line Lender for the account of such Swing Line Lender.
(b) Borrowing Notice. The applicable Borrower shall deliver to
the Administrative Agent and the applicable Swing Line Lender a Borrowing Notice
signed by it not later than 11:00 a.m. (Detroit time) on the Borrowing Date of
each Swing Line Loan specifying (i) the applicable Borrowing Date (which shall
be a Business Day) and (ii) the aggregate amount of the requested Swing Line
Loan. The Swing Line Loans shall at all times be Base Rate Loans.
(c) Making of Swing Line Loans. Promptly after receipt of the
Borrowing Notice under Section 2.3(b), the Administrative Agent shall notify
each Lender of the requested Swing Line Loan. Not later than 2:00 p.m. (Detroit
time) on the applicable Borrowing Date, the applicable Swing Line Lender shall
make available its Swing Line Loan in funds immediately available in Detroit to
the Administrative Agent at the address specified by the Administrative Agent or
directly to the applicable Borrower. If such funds are made available to the
Administrative Agent, the Administrative Agent will promptly make such funds
available to the applicable Borrower.
(d) Repayment of Swing Line Loans. The Swing Line Loans shall
be evidenced by the Swing Line Loan Notes and each Swing Line Loan shall be paid
in full by the applicable Borrower on or before the fifth Business Day after the
Borrowing Date for such Swing Line Loan. Outstanding Swing Line Loans may be
repaid from the proceeds of Revolving Loans or Swing Line Loans. Any repayment
of a Swing Line Loan shall be accompanied by accrued interest thereon and shall
be in the minimum amount of $50,000 (or such lesser amount as may be agreed to
by the applicable Swing Line Lender) and in increments of $50,000 (or such
lesser amount as may be agreed to by the applicable Swing Line Lender) in excess
thereof or the full amount of such Swing Line Loan. If the applicable Borrower
at any time fails to repay a Swing Line Loan on the applicable date when due,
the applicable Borrower shall be deemed to have elected to borrow a Revolving
Loan which shall be a Base Rate Loan under Section 2.2 as of such date equal in
amount to the unpaid amount of such Swing Line Loan (notwithstanding the minimum
amount of Base Rate Advances as provided in Section 2.9). The proceeds of any
such Advance shall be used to repay such Swing Line Loan. Unless the
Administrative Agent upon the request of or with the consent of the Required
Lenders shall have notified the applicable Swing
-48-
<PAGE> 58
Line Lender prior to such Swing Line Lender making any Swing Line Loan,
that the applicable conditions precedent set forth in Article IV have not then
been satisfied, each Lender's obligation to make Loans pursuant to Section 2.2
and this Section 2.3(d) to repay such Swing Line Loan shall be unconditional,
continuing, irrevocable and absolute and shall not be affected by any
circumstances, including the occurrence or continuance of a Default. In the
event that any Lender fails to make payment to the Administrative Agent of any
amount due under this Section 2.3(d), the Administrative Agent shall be entitled
to receive, retain and apply against such obligation the principal and interest
otherwise payable to such Lender hereunder until the Administrative Agent
receives such payment from such Lender or such obligation is otherwise fully
satisfied. In addition to the foregoing, if for any reason any Lender fails to
make payment to the Administrative Agent of any amount due under this Section
2.3(d), such Lender shall be deemed, at the option of the Administrative Agent,
to have unconditionally and irrevocably purchased from the applicable Swing Line
Lender, without recourse or warranty, an undivided interest in and participation
in the applicable Swing Line Loan in the amount of the Loan such Lender was
required to make pursuant to this Section 2.3(d) and such interest and
participation may be recovered from such Lender together with interest thereon
at the Federal Funds Effective Rate for each day during the period commencing on
the date of demand by the Administrative Agent and ending on the date such
obligation is fully satisfied.
2.4 Rate Options for all Advances. The Advances may be Base Rate
Advances or Eurocurrency Rate Advances, or a combination thereof, selected by
the applicable Borrower in accordance with Section 2.10. The applicable Borrower
may select, in accordance with Section 2.10, Rate Options and Interest Periods
applicable to portions of the Revolving Loans and the Term Loans.
2.5 Optional Payments; Mandatory Prepayments.
(A) Optional Payments. The Borrowers may from time to time repay or
prepay, without penalty or premium all or any part of outstanding Base Rate
Advances. A Eurocurrency Rate Advance may not be voluntarily repaid or prepaid
prior to the last day of the applicable Interest Period. Unless the aggregate
outstanding principal balance of the Term Loans is to be prepaid in full,
voluntary prepayments of the Term Loans shall be in an aggregate minimum amount
of $1,000,000 and integral multiples of $500,000 in excess of that amount. Each
voluntary prepayment shall be applied pro rata between the Tranche A Term Loans
and the Tranche B Term Loans and, in each case, applied to the unpaid
installments of such Term Loans pro rata over the remaining unpaid installments.
(B) Mandatory Prepayments.
(i) Mandatory Prepayments of Term Loans.
-49-
<PAGE> 59
(a) Upon the consummation of any Asset Sale by Holdings, any
other Borrower or any Subsidiary of any Borrower (other than Excluded
Equity Sales, Excluded Transfers and other than as set forth in Section
6.2(G) with respect to insurance and condemnation proceeds and other
than other Asset Sales which generate Net Cash Proceeds of less than
$250,000 in any one fiscal year) or, except as otherwise expressly
provided in Section 2.5(B)(i)(d)(II), the issuance of any Indebtedness
for borrowed money of Holdings or any other Borrower (other than
Indebtedness permitted pursuant to Section 6.3(A)(f) and (i)), within
three (3) Business Days after the applicable Borrower's or Subsidiary's
(i) receipt of any Net Cash Proceeds from any such Asset Sale or
issuance of Indebtedness for borrowed money, or (ii) conversion to cash
or Cash Equivalents of non-cash proceeds (whether principal or interest
and including securities, release of escrow arrangements or lease
payments) received from any Asset Sale, Holdings shall make or cause to
be made a mandatory prepayment of the Obligations in an amount equal to
one hundred percent (100%) of such Net Cash Proceeds (or in the case of
the issuance of Subordinated Notes pursuant to the Supplemental
Subordinated Note Agreement, not less than $20,000,000) or such
proceeds converted from non-cash to cash or Cash Equivalents in the
case of Asset Sales, including, without limitation, Asset Sales
consisting of the issuance of Capital Stock or ownership, membership or
other equity interests.
(b) Simultaneously with the delivery of the annual audited
financial statements required to be delivered pursuant to Section
6.1(A)(iii) for each Cash Flow Period, Holdings shall calculate Excess
Cash Flow for such Cash Flow Period and shall make a mandatory
prepayment, payable no later than ten (10) days after such calculation
is made and financial statements are delivered in an amount equal to
the difference between (1) seventy-five percent (75%), or, with respect
to each Cash Flow Period beginning with the Cash Flow Period ending
December 31, 1999 or, if Holdings effects an offering of Subordinated
Notes in an aggregate principal amount of not less than $100,000,000 in
accordance with Section 6.2(M), with respect to each Cash Flow Period
beginning with the Cash Flow Period ending December 31, 1997, fifty
percent (50%) of such Excess Cash Flow and (2) all prepayments of Term
Loans made during such period (other than repayments of Term Loans to
the extent financed with new Term Loans) and the aggregate amount of
all permanent reductions in the Aggregate Revolving Loan Commitment
made during such period.
(c) Nothing in this Section 2.5(B)(i) shall be construed to
constitute the Lenders' consent to any transaction referred to in
Section 2.5(B)(i)(a) above which is not expressly permitted by the
terms of this Agreement.
(d) Each mandatory prepayment required by clauses (a) and (b)
of this Section 2.5(B) shall be referred to herein as a "DESIGNATED
PREPAYMENT". Except as set forth in clause (f) below and in Section
6.2(G) with respect proceeds of insurance and
-50-
<PAGE> 60
condemnation, Designated Prepayments shall be allocated and applied to
the Obligations as follows:
(I) the amount of each Designated Prepayment (other
than a Designated Prepayment attributable to the issuance of
Subordinated Notes pursuant to either the High Yield Note
Agreement or the Supplemental Subordinated Note Agreement)
shall be applied pro rata between the Tranche A Term Loans and
the Tranche B Term Loans and, in each case, applied to the
unpaid installments of such Term Loans in the inverse order of
their maturity;
(II) the amount of each Designated Prepayment
attributable to the issuance of Subordinated Notes pursuant to
the High Yield Note Agreement shall be applied as follows:
first, to repay in full the Subordinated Notes issued pursuant
to the Subordinated Note Agreement and, at Holdings' option,
the Seller Note; second, at Holdings' option, up to $7,500,000
may be applied to reduce the outstanding balance of the
Revolving Credit Obligations (without reducing the Revolving
Loan Commitment); and, third, pro rata between the Tranche A
Term Loans and the Tranche B Term Loans and, in each case,
applied to the unpaid installments of such Term Loans on a pro
rata basis;
(III) the amount of each Designated Prepayment
attributable to the issuance of Subordinated Notes pursuant to
the Supplemental Subordinated Note Agreement shall be applied
pro rata between the Tranche A Term Loans and the Tranche B
Term Loans and, in each case, applied to the unpaid
installments of such Term Loans on a pro rata basis; and
(IV) following the payment in full of the Term Loans,
the amount of each Designated Prepayment shall be applied to
repay Revolving Loans (but shall reduce Revolving Loan
Commitments only at the option of the Required Lenders) and
following the payment in full of the Revolving Loans, the
amount of each Designated Prepayment shall be applied first to
interest on the Reimbursement Obligations, then to principal
on the Reimbursement Obligations, then to fees on account of
Letters of Credit and then, to the extent any L/C Obligations
are contingent, deposited with the Administrative Agent as
cash collateral in respect of such L/C Obligations.
(e) Any Tranche B Term Loan Lender may decline any Designated
Prepayment attributable to an Asset Sale or to Excess Cash Flow (but
not Designated Prepayments attributable to the issuance of Subordinated
Notes pursuant to the High Yield Note Agreement or the Supplemental
Subordinated Note Agreement), in which case the amount
-51-
<PAGE> 61
declined will be applied pro rata to each of the then remaining
installments of the Tranche A Term Loans in the inverse order of
maturity.
(f) Unless Holdings directs otherwise and agrees to pay any
resulting breakage costs as required by Section 3.4, on the date any
Designated Prepayment is received by the Administrative Agent, such
prepayment shall be applied first to Base Rate Loans and to any
Eurocurrency Rate Loans maturing on such date. The Administrative Agent
shall hold the remaining portion of such Designated Prepayment as cash
collateral in an interest bearing deposit account and shall apply funds
from such account to subsequently maturing Eurocurrency Rate Loans in
order of maturity unless the applicable Borrower directs the
Administrative Agent to prepay specific Eurocurrency Rate Loans and
agrees to make the payments required pursuant to Section 3.4 in
connection therewith.
(g) Notwithstanding anything herein to the contrary, if, in
connection with the making of the mandatory prepayment under clause (a)
in connection with any Asset Sale (other than from the issuance, sale,
conveyance or disposition of Capital Stock or ownership, membership or
other equity interests), the Borrowers notify the Administrative Agent
of their intention to use the proceeds (1) for replacement assets
purchased not longer than thirty (30) days prior to the consummation of
such sale, which assets at or prior to the time of such purchase were
identified to the Administrative Agent as assets being purchased in
anticipation of a reinvestment sale under this provision ("SCHEDULED
ASSETS") or (2) to replace the assets sold with operating assets to be
used in one or more lines of business in which the Borrowers were
engaged at the time of such Asset Sale, then, provided and to the
extent that such proceeds do not exceed $7,500,000, the Administrative
Agent shall, upon receipt of such proceeds and at the Borrowers'
direction, (y) return the same to the applicable Borrower for
application to the cost of the purchase of Scheduled Assets or (z)
apply the same to the principal amount of the Revolving Loans
outstanding at the time of such receipt and create a corresponding
reserve against Revolving Credit Availability in an amount equal to
such application (the "REINVESTMENT RESERVE") or, if the outstanding
balance of the Revolving Loan is zero, hold such proceeds in an
interest bearing account as cash collateral for the Loans. To the
extent that such proceeds exceed $7,500,000, they shall be applied as a
mandatory prepayment of the Term Loans pursuant to Section 2.5(B). For
up to 120 days from the date of any Asset Sale not in connection with
Scheduled Assets (the "REINVESTMENT PERIOD"), the Borrowers may notify
the Administrative Agent that they seek the use of such funds to
replace the property subject to any such Asset Sale with operating
assets to be used in one or more lines of business in which the
Borrowers were engaged at the time of such Asset Sale. Should a Default
occur at any time during the Reinvestment Period, should the Borrowers
notify the Administrative Agent that they have decided not to replace
such property during the Reinvestment Period, or should the Borrowers
fail to consummate such repurchase during the Reinvestment Period, then
the amounts held as the
-52-
<PAGE> 62
Reinvestment Reserve shall, unless otherwise agreed by the Required
Lenders, be applied as a mandatory prepayment pursuant to Section
2.5(B) and allocated in accordance with clause (d) above. Amounts
constituting the Reinvestment Reserve shall be disbursed as payments
for replacement of such property; provided, however, should a Default
occur after the Borrowers have notified the Administrative Agent that
they intend to replace the property, the Reinvestment Reserve shall,
unless otherwise agreed by the Required Lenders, be applied as a
mandatory prepayment pursuant to Section 2.5(B) and allocated in
accordance with clause (d) above. In the event the Reinvestment Reserve
is to be applied as a mandatory prepayment to the Term Loans, the
Borrowers shall be deemed to have requested Revolving Loans in an
amount equal to the Reinvestment Reserve, and such Loans shall be made
regardless of any failure of the Borrowers to meet the conditions
precedent set forth in Article IV. Upon completion of the replacement
of such property, the unused proceeds shall constitute Net Cash
Proceeds of an Asset Sale and shall be allocated in accordance with
clause (d) above.
(ii) Mandatory Prepayments of Revolving Loans. In addition to
repayments under Section 2.5(B)(i)(d)(II), if at any time and for any reason the
Dollar Amount of the Revolving Credit Obligations is greater than the Dollar
Amount of the Maximum Revolving Credit Amount or the Dollar Amount of the
Revolving Credit Obligations owed by Holdings, AAS and Valley exceeds the U.S.
Borrowing Base, the Borrowers shall immediately make a mandatory prepayment of
the Obligations in an amount equal to such excess, provided, however, that to
the extent that such excess is attributable to changes in currency exchanges
rates, any such mandatory prepayment to eliminate such excess will be required
only at the end of the Interest Period next ended, or to the extent necessary to
avoid the incurrence of breakage costs under Section 3.4 the Interest Period or
Periods next ended thereafter. In addition, if the Revolving Credit Availability
is at any time less than the amount of contingent L/C Obligations outstanding at
any time, the Borrowers shall deposit cash collateral with the Administrative
Agent in an amount equal to the amount by which such L/C Obligations exceed such
Maximum Revolving Credit Amount.
(iii) Subject to the preceding provisions of this Section 2.5(B), all
of the mandatory prepayments made under this Section 2.5(B) shall be applied
first to Base Rate Loans and to any Eurocurrency Rate Loans maturing on such
date. The Administrative Agent shall hold the remaining portion of such
mandatory prepayment as cash collateral in an interest bearing deposit account
and shall apply funds from such account to subsequently maturing Eurocurrency
Rate Loans in order of maturity.
2.6 Reduction of Commitments. The Borrowers may permanently reduce the
Aggregate Revolving Loan Commitment in whole, or in part ratably among the
Lenders, in an aggregate minimum amount of $500,000 and integral multiples of
$250,000 in excess of that amount, upon at least one Business Day's prior
written notice to the Administrative Agent, which notice shall specify the
amount of any such reduction; provided, however, that the amount of the
Aggregate Revolving Loan Commitment may not be reduced below the aggregate
principal amount of the
-53-
<PAGE> 63
outstanding Revolving Credit Obligations. All accrued commitment fees shall be
payable on the effective date of any termination of the obligations of the
Lenders to make Loans hereunder.
2.7 Method of Borrowing. The Administrative Agent shall notify each
Lender by 11:30 a.m. (Detroit time) of each Advance on the Borrowing Date of
each Base Rate Advance, three Business Days before the Borrowing Date of each
Eurocurrency Rate Advance in Dollars and four Business Days before the Borrowing
Date for each Eurocurrency Rate Advance in an Agreed Currency other than Dollars
and, not later than 1:00 p.m. (Detroit time) on each Borrowing Date, each Lender
shall make available its Revolving Loan or Loans, in funds immediately available
in Detroit to the Administrative Agent at its address specified pursuant to
Article XIII hereof unless the Administrative Agent has notified the Lenders
that such Loan is to be made available to the applicable Borrower at the
Administrative Agent's Eurocurrency Payment Office in which case each Lender
shall make available its Revolving Loan or Loans, in funds immediately available
to the Administrative Agent at its Eurocurrency Payment Office not later than
1:00 p.m. (local time in the city of the Administrative Agent's Eurocurrency
Payment Office) in the Agreed Currency designated by the Administrative Agent.
The Administrative Agent will promptly make the funds so received from the
Lenders available to the applicable Borrower.
2.8 Method of Selecting Types and Interest Periods for Advances;
Determination of Applicable Margins.
(a) Method of Selecting Types and Interest Periods for
Advances. The applicable Borrower shall select the Type of Advance and,
in the case of each Eurocurrency Rate Advance, the Interest Period and
Agreed Currency applicable to each Advance from time to time. The
applicable Borrower shall give the Administrative Agent irrevocable
notice (a "BORROWING NOTICE") not later than 11:00 a.m. (Detroit time)
on the Borrowing Date of each Base Rate Advance, three Business Days
before the Borrowing Date for each Eurocurrency Rate Advance in Dollars
and four Business Days before the Borrowing Date for each Eurocurrency
Rate Advance in an Agreed Currency other than Dollars, specifying: (i)
the Borrowing Date (which shall be a Business Day) of such Advance;
(ii) the aggregate amount of such Advance; (iii) the Type of Advance
selected; and (iv) in the case of each Eurocurrency Rate Advance, the
Interest Period and Agreed Currency applicable thereto. Each Advance in
an Agreed Currency other than Dollars must be a Eurocurrency Rate
Advance. There shall be no more than eight Interest Periods in effect
with respect to all of the Loans at any time. The Borrowers shall
select Interest Periods so that, to the best of the Borrowers'
knowledge, it will not be necessary to prepay all or any portion of any
Eurocurrency Rate Advance prior to the last day of the applicable
Interest Period in order to make mandatory prepayments as required
pursuant to the terms hereof. Each Base Rate Advance shall bear
interest from and including the date of the making of such Advance to
(but not including) the date of repayment thereof at the Base Rate,
changing when and as such Base Rate changes. All Obligations (other
than Advances) shall bear interest from and including the date such
amount is payable under the
-54-
<PAGE> 64
terms of this Agreement or the other Loan Documents to (but not
including) the date of repayment thereof at the Base Rate, changing
when and as such Base Rate changes. Changes in the rate of interest on
that portion of any Advance maintained as a Base Rate Loan or such
other Obligations will take effect simultaneously with each change in
the Alternate Base Rate. Each Eurocurrency Rate Advance shall bear
interest from and including the first day of the Interest Period
applicable thereto to (but not including) the last day of such Interest
Period at the interest rate determined as applicable to such
Eurocurrency Rate Advance.
(b) Determination of Applicable Margins, Applicable Letter of
Credit Fee and Applicable Commitment Fee.
(i) Definitions. As used in this Section 2.8(b) and in this
Agreement, the following terms shall have the following meanings:
"Applicable Margins", "Applicable Commitment Fee" and
"Applicable Letter of Credit Fee" shall mean the Applicable
Base Rate Margin and/or Applicable Eurocurrency Margin, with
respect to Loans and the Applicable Commitment Fee and/or
Applicable Letter of Credit Fee, with respect to fees payable
as the case may be. The Applicable Margins shall be
determined, in accordance with the provisions of this Section
2.8(b), by reference to the following:
-55-
<PAGE> 65
<TABLE>
<CAPTION>
APPLICABLE BASE APPLICABLE BASE APPLICABLE EUROCURRENCY APPLICABLE APPLICABLE
SENIOR DEBT RATIO RATE MARGIN FOR RATE MARGIN FOR MARGIN FOR TRANCHE A TERM EUROCURRENCY COMMITMENT
TRANCHE A TERM TRANCHE B TERM LOANS AND REVOLVING LOANS MARGIN FOR FEE
LOANS AND LOANS AND APPLICABLE LETTER OF TRANCHE B
REVOLVING LOANS CREDIT FEE TERM LOANS
<S> <C> <C> <C> <C> <C>
GREATER THAN OR
EQUAL TO 4.0 TO 1.75% 2.25% 2.75% 3.25% 0.50%
1.0
LESS THAN 4.0 TO
1.0 AND GREATER
THAN OR EQUAL TO 1.50% 2.00% 2.50% 3.00% 0.50%
3.5 TO 1.0
LESS THAN 3.5 TO
1.0 AND GREATER
THAN OR EQUAL TO 1.25% 1.75% 2.25% 2.75% 0.50%
3.0 TO 1.0
LESS THAN 3.0 TO
1.0 AND GREATER
THAN OR EQUAL TO 1.00% 1.50% 2.00% 2.50% 0.50%
2.5 TO 1.0
LESS THAN 2.5 TO
1.0 AND GREATER
THAN OR EQUAL TO 0.75% 1.25% 1.75% 2.25% 0.375%
2.0 TO 1.0
LESS THAN 2.0 TO
1.0 0.50% 1.00% 1.50% 2.00% 0.375%
</TABLE>
"Senior Debt Ratio" shall have the meaning ascribed
to that term in Section 6.4(A).
(ii) Determination of Applicable Margins, Applicable Letter of
Credit Fee and Applicable Commitment Fee.
(A) Subject to the provisions of clause (C) below, the
Applicable Margin in respect of any Loan, the Applicable Letter of
Credit Fee payable under Section 2.25 and the Applicable Commitment Fee
payable under Section 2.15(c) shall be determined by reference to the
tables set forth in clause (i) above, as applicable, on the basis of
the Senior
-56-
<PAGE> 66
Debt Ratio (calculated as provided in Section 6.4(A)) determined by
reference to the most recent financial statements delivered pursuant to
Section 6.1(A)(ii) or 6.1(A)(iii).
(B) Upon receipt of the financial statements delivered
pursuant to Section 6.1(A)(ii) or Section 6.1(A)(iii), as applicable,
the Applicable Margins for all outstanding Loans, the Applicable Letter
of Credit Fee and Applicable Commitment Fee shall be adjusted, such
adjustment being effective on the first (1st) Business Day after
receipt of such financial statements and the Compliance Certificate to
be delivered in connection therewith; provided, however, if the
Borrowers shall not have timely delivered such financial statements in
accordance with Section 6.1(A)(ii) or Section 6.1(A)(iii), as
applicable, beginning with the date upon which such financial
statements should have been delivered and continuing until such
financial statements are delivered, it shall be assumed for purposes of
determining the Applicable Margins, the Applicable Commitment Fee and
the Applicable Letter of Credit Fee that the Senior Debt Ratio was
greater than or equal to 4.0 to 1.0.
(C) Notwithstanding anything herein to the contrary, from the
Effective Date to but not including the first Business Day following
receipt of the Borrowers' quarterly financial statements delivered
pursuant to Section 6.1(A)(ii) for the quarter ended June 30, 1997, the
Applicable Margins, Applicable Letter of Credit Fee and Applicable
Commitment Fee shall be determined based upon an assumption that the
Senior Debt Ratio is greater than 4.0 to 1.0. In addition,
notwithstanding anything herein to the contrary, from the Effective
Date to but not including the first Business Day following receipt of
the Borrowers' quarterly financial statements delivered pursuant to
Section 6.1(A)(ii) for the quarter ending September 30, 1998, the
Borrowers shall not be entitled to a reduction in the Applicable
Margins, Applicable Letter of Credit Fee or Applicable Commitment Fee
to the lowest Applicable Margins, Applicable Letter of Credit Fee and
Applicable Commitment Fee (based upon a Senior Debt Ratio of less than
2.0 to 1.0).
2.9 Minimum Amount of Each Advance. Each Eurocurrency Rate Advance
shall be in the minimum amount of $1,000,000 or the Approximate Equivalent
Amount of any Agreed Currency other than Dollars (and in multiples of $500,000
or the Approximate Equivalent Amount of any Agreed Currency other than Dollars
if in excess thereof), and each Base Rate Advance shall be in the minimum amount
of $500,000 (and in multiples of $100,000 if in excess thereof), provided,
however, that any Base Rate Advance may be in the amount of the unused Aggregate
Revolving Loan Commitment.
2.10 Method of Selecting Types and Interest Periods for Conversion
and Continuation of Advances.
(A) Right to Convert. The Borrowers may elect from time to time,
subject to the provisions of Section 2.4, Section 2.8 and this Section 2.10, to
convert all or any part of a Loan
-57-
<PAGE> 67
(other than a Swing Line Loan) of any Type into any other Type or Types of
Loans; provided that any conversion of any Eurocurrency Rate Advance shall be
made on, and only on, the last day of the Interest Period applicable thereto.
(B) Automatic Conversion and Continuation. Base Rate Loans shall
continue as Base Rate Loans unless and until such Base Rate Loans are converted
into Eurocurrency Rate Loans. Eurocurrency Rate Loans shall continue as
Eurocurrency Rate Loans until the end of the then applicable Interest Period
therefor, at which time such Eurocurrency Rate Loans (other than Eurocurrency
Rate Loans in an Agreed Currency other than Dollars) shall be automatically
converted into Base Rate Loans unless the Borrower shall have given the
Administrative Agent notice in accordance with Section 2.10(D) requesting that,
at the end of such Interest Period, such Eurocurrency Rate Loans continue as a
Eurocurrency Rate Loan. Eurocurrency Rate Loans in an Agreed Currency other than
Dollars shall automatically continue as Eurocurrency Rate Loans unless the
applicable Borrower notifies the Administrative Agent otherwise as provided
herein.
(C) No Conversion Post-Default or Post-Unmatured Default.
Notwithstanding anything to the contrary contained in Section 2.10(A) or Section
2.10(B), no Loan may be converted into or continued as a Eurocurrency Rate Loan
(other than a Eurocurrency Rate Loan in an Agreed Currency other than Dollars)
except with the consent of the Required Lenders when any Default or Unmatured
Default has occurred and is continuing.
(D) Conversion/Continuation Notice. The Borrower shall give the
Administrative Agent irrevocable notice (a "CONVERSION/CONTINUATION NOTICE") of
each conversion of a Base Rate Loan into a Eurocurrency Rate Loan or
continuation of a Eurocurrency Rate Loan (other than a Eurocurrency Rate Loan in
an Agreed Currency other than Dollars) not later than 11:00 a.m. (Detroit time)
three Business Days or with respect to the continuation of a Eurocurrency Rate
Loan in an Agreed Currency other than Dollars, four Business Days prior to the
date of the requested conversion or continuation, specifying: (1) the requested
date (which shall be a Business Day) of such conversion or continuation; (2) the
amount and Type of the Loan to be converted or continued; and (3) the amounts of
Eurocurrency Rate Loan(s) into which such Loan is to be converted or continued
and the duration of the Interest Periods applicable thereto. If no such notice
is given with respect to a Eurocurrency Rate Loan in an Agreed Currency other
than Dollars, the Interest Period applicable to the automatic continuation of
such Loan shall be one month.
2.11 Default Rate. After the occurrence and during the continuance of a
Default, at the option of the Administrative Agent or at the direction of the
Required Lenders, the interest rate(s) applicable to the Obligations and the
letter of credit fee payable under Section 2.25 with respect to Letters of
Credit shall be increased by two percent (2.0%) per annum above the Base Rate,
Eurocurrency Rate or Applicable Letter of Credit Fee, as applicable.
-58-
<PAGE> 68
2.12 Collections Account Arrangements. (a) All collections of
Receivables owed to AAS or Valley included in the Collateral and other proceeds
of Collateral shall be deposited in a Collection Account which is subject to a
Collection Account Agreement or pursuant to another similar arrangement for the
collection of such amounts established by AAS or Valley, as applicable, and the
Documentation and Collateral Agent and shall be transferred in accordance with
the provisions of the respective Collection Account Agreements. On or prior to
the Effective Date, AAS and Valley shall each have entered into and shall
thereafter maintain lock-box services agreements with banks which are parties to
Collection Account Agreements and to which lock-boxes Account Debtors shall
directly remit all payments on Receivables. Any of the foregoing collections
received by AAS or Valley and not so deposited, shall be deemed to have been
received by AAS or Valley, as applicable, as the Documentation and Collateral
Agent's trustee and, upon receipt thereof by AAS or Valley, as applicable, AAS
or Valley shall immediately transfer all such amounts into the applicable
Collection Account in their original form. Such deposits shall be remitted to
the Documentation and Collateral Agent, or as the Documentation and Collateral
Agent may direct, all in accordance with the provisions of the Collection
Account Agreements.
(b) Following the Collection Account Blockage Date and during the
continuance of a Default giving rise thereto, (i) all payments received by the
Documentation and Collateral Agent, all collections of Receivables owed to AAS
or Valley included in the Collateral received by the Documentation and
Collateral Agent, and all proceeds of other Collateral received by the
Documentation and Collateral Agent, whether through payment or otherwise, will
be the sole property of the Documentation and Collateral Agent for the benefit
of the Holders of Secured Obligations and will be deemed received by the
Documentation and Collateral Agent for application to the Obligations pursuant
to the terms of this Agreement.
2.13 Method of Payment. All payments of principal, interest, and fees
hereunder shall be made, without setoff, deduction or counterclaim, to the
Administrative Agent (i) at the Administrative Agent's office in Detroit,
Michigan in immediately available funds with respect to Advances denominated in
Dollars and (ii) in the Administrative Agent's Eurocurrency Payment Office in
immediately available funds with respect to any Advance denominated in an Agreed
Currency other than Dollars, in each case, or at any other Lending Installation
of the Administrative Agent specified in writing (by 9:00 a.m. (Detroit time) on
the day before the date when due) by the Administrative Agent to the Borrower,
by 2:00 p.m. local time in Detroit with respect to Advances denominated in
Dollars and 2:00 p.m. local time in the Administrative Agent's Eurocurrency
Payment Office with respect to Advances denominated in an Agreed Currency other
than Dollars on the date when due and shall be made ratably among the Lenders
(unless such amount is not to be shared ratably in accordance with the terms
hereof). Each Advance shall be repaid or prepaid in the currency in which it was
made in the amount borrowed and interest payable thereon shall be paid in such
currency. Each payment delivered to the Administrative Agent for the account of
any Lender shall be delivered promptly by the Administrative Agent to such
Lender in the same type of funds which the Administrative Agent
-59-
<PAGE> 69
received at its address specified pursuant to Article XIII or at any Lending
Installation specified in a notice received by the Administrative Agent from
such Lender. The Borrowers authorize the Administrative Agent or the
Documentation and Collateral Agent to charge any account of any Borrower
maintained with Chase or NBD, as applicable, for each payment of principal,
interest and fees as it becomes due hereunder. Notwithstanding the foregoing
provisions of this Section, if, after the making of any Advance in any currency
other than Dollars, currency control or exchange regulations are imposed in the
country which issues such currency with the result that different types of such
currency (the "New Currency") are introduced and the type of currency in which
the Advance was made (the "Original Currency") no longer exists or the
applicable Borrower is not able to make payment to the Administrative Agent for
the account of the Lenders in such Original Currency, then all payments to be
made by the applicable Borrower hereunder or under the Notes in such currency
shall be made in such amount and such type of the New Currency or Dollars as
shall be equivalent to the amount of such payment otherwise due hereunder or
under the Notes in the Original Currency, it being the intention of the parties
hereto that the Borrowers take all risks of the imposition of any such currency
control or exchange regulations. In addition, notwithstanding the foregoing
provisions of this Section, if, after the making of any Advance in any currency
other than Dollars, the applicable Borrower is not able to make payment to the
Administrative Agent for the account of the Lenders in the type of currency in
which such Advance was made because of the imposition of any such currency
control or exchange regulation, then such Advance shall instead be repaid when
due in Dollars in a principal amount equal to the Dollar Amount (as of the date
of repayment) of such Advance.
2.14 Notes, Telephonic Notices. Each Lender is authorized to record the
principal amount of each of its Loans and each repayment with respect to its
Loans on the schedule attached to its respective Notes; provided, however, that
the failure to so record shall not affect the applicable Borrower's obligations
under any such Note. The Borrowers authorize the Lenders and the Administrative
Agent to extend Advances, effect selections of Types of Advances and to transfer
funds based on telephonic notices made by any person or persons the
Administrative Agent or any Lender in good faith believes to be acting on behalf
of one or more of the Borrowers. The Borrowers agree to deliver promptly to the
Administrative Agent a written confirmation, signed by an Authorized Officer, if
such confirmation is requested by the Administrative Agent or any Lender, of
each telephonic notice. If the written confirmation differs in any material
respect from the action taken by the Administrative Agent and the Lenders, (i)
the telephonic notice shall govern absent manifest error and (ii) the
Administrative Agent or the Lender, as applicable, shall promptly notify the
Authorizing Officer who provided such confirmation of such difference.
2.15 Promise to Pay; Interest and Fees; Interest Payment Dates;
Interest and Fee Basis; Taxes; Loan and Control Accounts.
(A) Promise to Pay. Each of the Borrowers unconditionally promises to
pay when due the principal amount of each Loan made to it and all other
Obligations incurred by it, and to pay
-60-
<PAGE> 70
all unpaid interest accrued thereon, in accordance with the terms of this
Agreement and the Notes, it being understood and agreed that each non-U.S.
Borrower shall be obligated to repay only the Loans made to it and pay the other
Obligations incurred by it and certain other Loans made and Obligations incurred
by other non-U.S. Borrowers.
(B) Interest Payment Dates. Interest accrued on each Base Rate Loan
shall be payable on each Payment Date, commencing with the first such date to
occur after the date hereof, on any date on which the Base Rate Loan is prepaid,
whether due to acceleration or otherwise, and at maturity (whether by
acceleration or otherwise). Interest accrued on each Eurocurrency Rate Loan
shall be payable on the last day of its applicable Interest Period, on any date
on which the Eurocurrency Rate Loan is prepaid, whether by acceleration or
otherwise, and at maturity. Interest accrued on each Eurocurrency Rate Loan
having an Interest Period longer than three months shall also be payable on the
last day of each three-month interval during such Interest Period. Interest
accrued on the principal balance of all other Obligations shall be payable in
arrears (i) upon repayment thereof in full or in part, (ii) if not theretofore
paid in full, at the time such other Obligation becomes due and payable (whether
by acceleration or otherwise) and (iii) if not theretofore paid in full, on
demand, commencing on the first such day following the date such Obligation
became payable pursuant to the terms of this Agreement or the other Loan
Documents.
(C) Fees. (i) Holdings shall pay or cause the appropriate Subsidiary to
pay to the Administrative Agent, for the account of the Lenders in accordance
with their Tranche A Pro Rata Shares, a commitment fee accruing at the rate of
the Applicable Commitment Fee per annum from and after the Effective Date until
the Termination Date on the amount by which (A) the Aggregate Revolving Loan
Commitment in effect from time to time exceeds (B) the Revolving Credit
Obligations (excluding the outstanding balance of any Swing Line Loans) in
effect from time to time. All such commitment fees payable under this clause (C)
shall be payable quarterly in arrears on the last calendar day of each quarter
occurring after the Effective Date and, in addition, on the Termination Date.
For purposes of calculating the Applicable Commitment Fee hereunder, the
principal amount of each Advance made in a currency other than Dollars shall be
the Dollar Amount of such Advance as determined under clause (ii) of the
definition of "Dollar Amount".
(ii) Holdings agrees to pay or cause the appropriate Subsidiary to pay
to the Administrative Agent and the Documentation and Collateral Agent,
respectively, the fees set forth in the letter agreements (A) among the
Administrative Agent, AAS and Holdings dated July 10, 1997 and (B) among
Holdings, AAS, the Agents and the Arrangers dated July 10, 1997.
(D) Interest and Fee Basis. Interest and fees shall be calculated for
actual days elapsed on the basis of a 360-day year. Interest shall be payable
for the day an Obligation is incurred but not for the day of any payment on the
amount paid if payment is received prior to 12:00 noon local time in Detroit
with respect to Advances denominated in Dollars and 12:00 noon local time in the
Administrative Agent's Eurocurrency Payment Office with respect to Advances
denominated in an
-61-
<PAGE> 71
Agreed Currency other than Dollars at the place of payment. If any payment of
principal of or interest on a Loan or any payment of any other Obligations shall
become due on a day which is not a Business Day, such payment shall be made on
the next succeeding Business Day and, in the case of a principal payment, such
extension of time shall be included in computing interest in connection with
such payment.
(E) Taxes.
(i) Any and all payments by any of the Borrowers hereunder
shall be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or
withholdings or any liabilities with respect thereto including those
arising after the date hereof as a result of the adoption of or any
change in any law, treaty, rule, regulation, guideline or determination
of a Governmental Authority or any change in the interpretation or
application thereof by a Governmental Authority but excluding, in the
case of each Lender and the Administrative Agent, such taxes (including
income taxes, franchise taxes and branch profit taxes) as are imposed
on or measured by such Lender's or Administrative Agent's, as the case
may be, income by the United States of America or any Governmental
Authority of the jurisdiction under the laws of which such Lender or
Administrative Agent, as the case may be, is organized (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings,
and liabilities which the Administrative Agent or a Lender determines
to be applicable to this Agreement, the other Loan Documents, the
Revolving Loan Commitments, the Loans or the Letters of Credit being
hereinafter referred to as "TAXES"). If any of the Borrowers shall be
required by law to deduct any Taxes from or in respect of any sum
payable hereunder or under the other Loan Documents to any Lender or
the Administrative Agent, (i) the sum payable shall be increased as may
be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section
2.15(E)) such Lender or Administrative Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) such Borrower shall make such deductions,
and (iii) such Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable law. If a withholding tax of the United States of America or
any other Governmental Authority shall be or become applicable (y)
after the date of this Agreement, to such payments by any of the
Borrowers made to the Lending Installation or any other office that a
Lender may claim as its Lending Installation, or (z) after such
Lender's selection and designation of any other Lending Installation,
to such payments made to such other Lending Installation, such Lender
shall use reasonable efforts to make, fund and maintain its Loans
through another Lending Installation of such Lender in another
jurisdiction so as to reduce the Borrowers' liability hereunder, if the
making, funding or maintenance of such Loans through such other Lending
Installation of such Lender does not, in the good faith judgment of
such Lender, otherwise adversely affect such Loans, or obligations
under the Revolving Loan Commitments or such Lender.
-62-
<PAGE> 72
(ii) In addition, Holdings agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes,
charges, or similar levies that arise from any payment made hereunder,
from the issuance of Letters of Credit hereunder, or from the
execution, delivery or registration of, or otherwise with respect to,
this Agreement, the other Loan Documents, the Revolving Loan
Commitments, the Loans or the Letters of Credit (hereinafter referred
to as "OTHER TAXES").
(iii) Subject to Section 2.15(E)(vii), Holdings indemnifies
each Lender and the Administrative Agent for the full amount of Taxes
and Other Taxes (including, without limitation, any Taxes or Other
Taxes imposed by any Governmental Authority on amounts payable under
this Section 2.15(E)) paid by such Lender or the Administrative Agent
(as the case may be) and any liability (including penalties, interest,
and expenses) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be made within thirty (30) days after the date
such Lender or the Administrative Agent (as the case may be) makes
written demand therefor. A certificate as to any additional amount
payable to any Lender or the Administrative Agent under this Section
2.15(E) submitted to Holdings and the Administrative Agent (if a Lender
is so submitting) by such Lender or the Administrative Agent shall show
in reasonable detail the amount payable and the calculations used to
determine such amount and shall, absent manifest error, be final,
conclusive and binding upon all parties hereto. With respect to such
deduction or withholding for or on account of any Taxes and to confirm
that all such Taxes have been paid to the appropriate Governmental
Authorities, Holdings shall promptly (and in any event not later than
thirty (30) days after receipt) furnish to each Lender and the
Administrative Agent such certificates, receipts and other documents as
may be required (in the judgment of such Lender or the Administrative
Agent) to establish any tax credit to which such Lender or the
Administrative Agent may be entitled. A payment may be made by Holdings
or by the Subsidiary that is the Borrower with respect to the Loan that
gives rise to such payment.
(iv) Within thirty (30) days after the date of any payment of
Taxes or Other Taxes by any Borrower, such Borrower shall furnish to
the Administrative Agent the original or a certified copy of a receipt
evidencing payment thereof.
(v) Without prejudice to the survival of any other agreement
of Holdings hereunder, the agreements and obligations of Holdings
contained in this Section 2.15(E) shall survive the payment in full of
principal and interest hereunder, the termination of the Letters of
Credit and the termination of this Agreement.
(vi) Without limiting the obligations of the Borrowers under
this Section 2.15(E), each Lender that is not created or organized
under the laws of the United States of America or a political
subdivision thereof shall deliver to Holdings and the Administrative
-63-
<PAGE> 73
Agent on or before the Closing Date, or, if later, the date on which
such Lender becomes a Lender pursuant to Section 12.3 hereof, a true
and accurate certificate executed in duplicate by a duly authorized
officer of such Lender, in a form satisfactory to Holdings and the
Administrative Agent, to the effect that such Lender is capable under
the provisions of an applicable tax treaty concluded by the United
States of America (in which case the certificate shall be accompanied
by two executed copies of Form 1001 of the IRS) or under Section 1442
of the Code (in which case the certificate shall be accompanied by two
copies of Form 4224 of the IRS) or, if such Lender is not a "bank"
within the meaning of Section 881(c)(3)(A) of the Code, two completed
and signed copies of IRS Form W-8 or W-9 or successor applicable form,
of receiving payments of interest and fees hereunder without deduction
or withholding of United States federal income tax. Each such Lender
further agrees to deliver to Holdings and the Administrative Agent from
time to time a true and accurate certificate executed in duplicate by a
duly authorized officer of such Lender substantially in a form
satisfactory to Holdings and the Administrative Agent, before or
promptly upon the occurrence of any event requiring a change in the
most recent certificate previously delivered by it to Holdings and the
Administrative Agent pursuant to this Section 2.15(E)(vi). Further,
each Lender which delivers a certificate accompanied by Form 1001 of
the IRS covenants and agrees to deliver to Holdings and the
Administrative Agent within fifteen (15) days prior to January 1, 1999,
and every third (3rd) anniversary of such date thereafter, on which
this Agreement is still in effect, another such certificate and two
accurate and complete original signed copies of Form 1001 (or any
successor form or forms required under the Code or the applicable
regulations promulgated thereunder), and each Lender that delivers a
Form W-8 or W-9 as prescribed above or a certificate accompanied by
Form 4224 of the IRS covenants and agrees to deliver to Holdings and
the Administrative Agent within fifteen (15) days prior to the
beginning of each subsequent taxable year of such Lender during which
this Agreement is still in effect, another such Form W-8 or W-9 or
another such certificate and two accurate and complete original signed
copies of IRS Form 4224 (or any successor form or forms required under
the Code or the applicable regulations promulgated thereunder). Each
such certificate shall certify as to one of the following:
(a) that such Lender is capable of receiving payments
of interest hereunder without deduction or withholding of
United States of America federal income tax;
(b) that such Lender is not capable of receiving
payments of interest hereunder without deduction or
withholding of United States of America federal income tax as
specified therein but is capable of recovering the full amount
of any such deduction or withholding from a source other than
the Borrowers and will not seek any such recovery from the
Borrowers; or
-64-
<PAGE> 74
(c) that, as a result of the adoption of or any
change in any law, treaty, rule, regulation, guideline or
determination of a Governmental Authority or any change in the
interpretation or application thereof by a Governmental
Authority after the date such Lender became a party hereto,
such Lender is not capable of receiving payments of interest
hereunder without deduction or withholding of United States of
America federal income tax as specified therein and that it is
not capable of recovering the full amount of the same from a
source other than the Borrowers.
Each Lender shall promptly furnish to Holdings and the
Administrative Agent such additional documents as may be reasonably
required by Holdings or the Administrative Agent to establish any
exemption from or reduction of any Taxes or Other Taxes required to be
deducted or withheld and which may be obtained without undue expense to
such Lender.
(vii) None of the Borrowers shall be required to pay any
additional amounts under subsection (i) above or indemnification under
subsection (iii) above to the extent that the obligation to pay such
additional amounts or indemnification would not have arisen but for:
(a) a failure by the Lender or Administrative Agent to comply with the
provisions of subsection (vi) above; or (b) the certifications referred
to in subsection (vi) above not being true.
(viii) Each Lender and the Administrative Agent agree that if
it shall become aware that it is entitled to receive a refund in
respect of Taxes or Other Taxes as to which it has been indemnified by
Holdings or any other Borrower pursuant to this Section 2.15(E), it
shall promptly notify Holdings of the availability of such refund and
at the request of Holdings will apply for such refund; provided,
however the failure to provide such notice shall not relieve Holdings
or any other Borrower of any of their Obligations hereunder. Upon
receipt of such refund, the Lender or Administrative Agent agrees to
pay such refund to the applicable Borrower along with any interest
actually received from the taxing authority, net of all out-of-pocket
expenses of such Lender or Administrative Agent incurred with respect
to such refund.
(F) Loan Account. Each Lender shall maintain in accordance with its
usual practice an account or accounts (a "LOAN ACCOUNT") evidencing the
Obligations of each of the Borrowers to such Lender owing to such Lender from
time to time, including the amount of principal and interest payable and paid to
such Lender from time to time hereunder and under the Notes.
(G) Control Account. The Register maintained by the Administrative
Agent pursuant to Section 12.3(C) shall include a control account, and a
subsidiary account for each Lender and each Borrower, in which accounts (taken
together) shall be recorded (i) the date and amount of each Advance made
hereunder, the type and currency of each Loan comprising such Advance, the
-65-
<PAGE> 75
Borrower of such Advance, and any Interest Period applicable thereto, (ii) the
effective date and amount of each assignment and acceptance delivered to and
accepted by it and the parties thereto pursuant to Section 12.3, (iii) the
amount of any principal or interest due and payable or to become due and payable
from any Borrower to each Lender hereunder or under its Notes, (iv) the amount
of any sum received by the Administrative Agent from each of the Borrowers
hereunder and each Lender's share thereof, and (v) all other appropriate debits
and credits as provided in this Agreement, including, without limitation, all
fees, charges, expenses and interest.
(H) Entries Binding. The entries made in the Register and each Loan
Account shall be conclusive and binding for all purposes, absent manifest error,
unless the Borrowers object to information contained in the Register and each
Loan Account within thirty (30) days of the Borrowers' receipt of such
information.
2.16 Notification of Advances, Interest Rates, Prepayments and
Aggregate Revolving Loan Commitment Reductions. Promptly after receipt thereof,
the Administrative Agent will notify each Lender of the contents of each
Aggregate Revolving Loan Commitment reduction notice, Borrowing Notice,
Continuation/Conversion Notice, and repayment notice received by it hereunder.
The Administrative Agent will notify each Lender of the interest rate applicable
to each Eurocurrency Rate Loan promptly upon determination of such interest rate
and will give each Lender prompt notice of each change in the Alternate Base
Rate.
2.17 Lending Installations. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Notes shall be deemed held by each Lender for
the benefit of such Lending Installation. Each Lender may, by written or
facsimile notice to the Administrative Agent and the Borrowers, designate a
Lending Installation through which Loans will be made by it and for whose
account Loan payments are to be made.
2.18 Non-Receipt of Funds by the Administrative Agent. Unless the
applicable Borrower or a Lender, as the case may be, notifies the Administrative
Agent prior to the date on which it is scheduled to make payment to the
Administrative Agent of (i) in the case of a Lender, the proceeds of a Loan or
(ii) in the case of a Borrower, a payment of principal, interest or fees to the
Administrative Agent for the account of the Lenders, that it does not intend to
make such payment, the Administrative Agent may assume that such payment has
been made. The Administrative Agent may, but shall not be obligated to, make the
amount of such payment available to the intended recipient in reliance upon such
assumption. If such Lender or Borrower, as the case may be, has not in fact made
such payment to the Administrative Agent, the recipient of such payment shall,
on demand by the Administrative Agent, repay to the Administrative Agent the
amount so made available together with interest thereon in respect of each day
during the period commencing on the date such amount was so made available by
the Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to (i) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day or (ii) in the case of payment by a
Borrower, the interest rate applicable to the relevant Loan.
-66-
<PAGE> 76
2.19 Termination Date. This Agreement shall be effective until the
Tranche B Term Loan Termination Date. Notwithstanding the termination of this
Agreement on the Tranche B Term Loan Termination Date, until all of the
Obligations (other than contingent indemnity and reimbursement obligations)
shall have been fully and indefeasibly paid and satisfied, all financing
arrangements among the Borrowers and the Lenders shall have been terminated
(other than under Interest Rate Agreements or other agreements with respect to
Rate Hedging Obligations) and all of the Letters of Credit shall have expired,
been canceled or terminated, all of the rights and remedies under this Agreement
and the other Loan Documents shall survive and the Administrative Agent shall be
entitled to retain its security interest in and to all existing and future
Collateral for the benefit of itself and the Holders of Secured Obligations.
2.20 Replacement of Certain Lenders. In the event a Lender ("AFFECTED
LENDER") shall have: (i) failed to fund its Tranche A Pro Rata Share or Tranche
B Pro Rata Share, as applicable, of any Advance requested by any Borrower which
such Lender is obligated to fund under the terms of this Agreement and which
failure has not been cured, (ii) requested compensation from the Borrower under
Sections 2.15(E), 3.1 or 3.2 to recover Taxes, Other Taxes or other additional
costs incurred by such Lender which are not being incurred generally by the
other Lenders, (iii) delivered a notice pursuant to Section 3.3 claiming that
such Lender is unable to extend Eurocurrency Rate Loans to any Borrower for
reasons not generally applicable to the other Lenders or (iv) has invoked
Section 9.2, then, in any such case, any Borrower or the Administrative Agent
may make written demand on such Affected Lender (with a copy to the
Administrative Agent in the case of a demand by any Borrower and a copy to the
Borrowers in the case of a demand by the Administrative Agent) for the Affected
Lender to assign, and such Affected Lender shall use its best efforts to assign
pursuant to one or more duly executed assignment and acceptance agreements in
substantially the form of Exhibit F five (5) Business Days after the date of
such demand, to one or more financial institutions that comply with the
provisions of Section 12.3(A) (and, if selected by the Borrowers is reasonably
acceptable to the Administrative Agent) which any Borrower or the Administrative
Agent, as the case may be, shall have engaged for such purpose ("REPLACEMENT
LENDER"), all of such Affected Lender's rights and obligations under this
Agreement and the other Loan Documents (including, without limitation, its
Revolving Loan Commitment, all Loans owing to it, all of its participation
interests in existing Letters of Credit, and its obligation to participate in
Letters of Credit hereunder) in accordance with Section 12.3. The Administrative
Agent agrees, upon the occurrence of such events with respect to an Affected
Lender and upon the written request of any Borrower, to use its reasonable
efforts to obtain the commitments from one or more financial institutions to act
as a Replacement Lender. Further, with respect to such assignment the Affected
Lender shall have concurrently received, in cash, all amounts due and owing to
the Affected Lender hereunder or under any other Loan Document, including,
without limitation, the aggregate outstanding principal amount of the Loans owed
to such Lender, together with accrued interest thereon through the date of such
assignment, amounts payable under Sections 2.15(E), 3.1, and 3.2 with respect to
such Affected Lender and compensation payable under Section 2.15(C) in the event
of any replacement of any
-67-
<PAGE> 77
Affected Lender under clause (ii) or clause (iii) of this Section 2.20; provided
that upon such Affected Lender's replacement, such Affected Lender shall cease
to be a party hereto but shall continue to be entitled to the benefits of
Sections 2.15(E), 3.1, 3.2, 3.4, and 9.7, as well as to any fees accrued for its
account hereunder and not yet paid, and shall continue to be obligated under
Section 10.8. Upon the replacement of any Affected Lender pursuant to this
Section 2.20, the provisions of Section 8.2 shall continue to apply with respect
to Advances which are then outstanding with respect to which the Affected Lender
failed to fund its obligations hereunder and which failure has not been cured.
2.21 Letter of Credit Facility. Upon receipt of duly executed
applications therefor, and such other documents, instructions and agreements as
such Issuing Lender may reasonably require, and subject to the provisions of
Article IV, the Administrative Agent shall, or any other Lender in its sole
discretion may, issue letters of credit denominated in dollars for the account
of the applicable Borrower, on terms as are satisfactory to the Issuing Lender;
provided, however, that no Letter of Credit will be issued for the account of
any Borrower by an Issuing Lender if on the date of issuance, before or after
taking such Letter of Credit into account, (i) the Revolving Credit Obligations
at such time would exceed the Maximum Revolving Credit Amount at such time or
(ii) the aggregate outstanding amount of the L/C Obligations exceeds
$10,000,000; and provided, further, that no Letter of Credit shall be issued
which has an expiration date more than one year after the date of issuance of
such Letter of Credit or an expiration date later than the date which is five
(5) Business Days immediately preceding the Termination Date. Each Issuing
Lender that is not the Administrative Agent will notify the Administrative Agent
of any request for issuance of a Letter of Credit prior to the issuance of such
Letter of Credit. Each Letter of Credit may, upon the request of the applicable
Borrower, include a provision whereby such Letter of Credit shall be renewed
automatically for additional consecutive periods of 12 months or less (but not
beyond the date that is five Business Days prior to the Termination Date) unless
the Issuing Lender notifies the beneficiary thereof at least 30 days prior to
the then-applicable expiry date that such Letter of Credit will not be renewed.
That certain letter of credit No. 536224 issued by Comerica Bank for the account
of Valley Industries, Inc. shall be treated as a Letter of Credit issued
hereunder for all purposes from and after the Effective Date, including, without
limitation, Section 2.25; Valley hereby assumes the reimbursement obligation
with respect to such letter of credit.
2.22 Letter of Credit Participation. Immediately upon the issuance of
each Letter of Credit by any Issuing Lender hereunder, each Lender with a
Tranche A Pro Rata Share shall be deemed to have automatically, irrevocably and
unconditionally purchased and received from the applicable Issuing Lender an
undivided interest and participation in and to such Letter of Credit, the
obligations of the applicable Borrower in respect thereof, and the liability of
the applicable Issuing Lender thereunder (collectively, an "L/C INTEREST") in an
amount equal to the amount available for drawing under such Letter of Credit
multiplied by such Lender's Tranche A Pro Rata Share.
-68-
<PAGE> 78
The applicable Issuing Lender will notify the Administrative Agent
promptly upon presentation to it of an L/C Draft or upon any other draw under a
Letter of Credit and the Administrative Agent will promptly notify each Lender.
On or before the Business Day on which the applicable Issuing Lender makes
payment of each such L/C Draft or any other draw on a Letter of Credit, on
demand of the Issuing Lender received by each Lender not later than 1:00 p.m.
(Detroit time) on such Business Day, each Lender shall make payment on such
Business Day to the Administrative Agent for the account of the applicable
Issuing Lender, in immediately available funds in an amount equal to such
Lender's Tranche A Pro Rata Share of the amount of such payment or draw.
Upon the Administrative Agent's receipt of funds as a result of an
Issuing Lender's payment on an L/C Draft or any other draw on a Letter of Credit
issued by an Issuing Lender, the Administrative Agent shall promptly pay such
funds to the Issuing Lender. The obligation of each Lender to pay the
Administrative Agent for the account of the applicable Issuing Lender under this
Section 2.22 shall be unconditional, continuing, irrevocable and absolute. In
the event that any Lender fails to make payment to the Administrative Agent of
any amount due under this Section 2.22, the Administrative Agent shall be
entitled to receive, retain and apply against such obligation the principal and
interest otherwise payable to such Lender hereunder until the Administrative
Agent on behalf of the applicable Issuing Lender receives such payment from such
Lender or such obligation is otherwise fully satisfied; provided, however, that
nothing contained in this sentence shall relieve such Lender of its obligation
to reimburse the Administrative Agent for such amount in accordance with this
Section 2.22.
2.23 Reimbursement Obligation. Each of the Borrowers agrees
unconditionally, irrevocably and absolutely upon receipt of notice from the
Administrative Agent or the applicable Issuing Lender to pay immediately to the
Administrative Agent, for the account of the applicable Issuing Lender or the
account of the Lenders, as the case may be, the amount of each advance which may
be drawn under or pursuant to a Letter of Credit issued for its account or an
L/C Draft related thereto (such obligation of each of the Borrowers to reimburse
the Issuing Lender or the Administrative Agent for an advance made under a
Letter of Credit or L/C Draft being hereinafter referred to as a "REIMBURSEMENT
OBLIGATION" with respect to such Letter of Credit or L/C Draft), each such
payment to be made by the applicable Borrower to the Administrative Agent no
later than 2:00 p.m. (Detroit time) on the Business Day on which the applicable
Issuing Lender makes payment of each such L/C Draft or, in the case of any other
draw on a Letter of Credit, 2:00 p.m. (Detroit time) on the date specified in a
demand by the Administrative Agent. Any Issuing Lender may direct the
Administrative Agent to make such demand with respect to Letters of Credit
issued by such Issuing Lender. If any Borrower at any time fails to repay a
Reimbursement Obligation pursuant to this Section 2.23, such Borrower shall be
deemed to have elected to borrow a Revolving Loan from the Lenders, as of the
date of the Advance giving rise to the Reimbursement Obligation equal in amount
to the amount of the unpaid Reimbursement Obligation. Such Revolving Loan shall
be made as of the date of the payment giving rise to such Reimbursement
Obligation, automatically, without notice and without any requirement to satisfy
-69-
<PAGE> 79
the conditions precedent otherwise applicable to an Advance of Revolving Loans
if such Borrower shall have failed to make such payment to the Administrative
Agent for the account of the applicable Issuing Lender prior to such time. Such
Revolving Loans shall constitute a Base Rate Advance, the proceeds of which
Advance shall be used to repay such Reimbursement Obligation. If, for any
reason, such Borrower fails to repay a Reimbursement Obligation on the day such
Reimbursement Obligation arises and, for any reason, the Lenders are unable to
make or have no obligation to make a Revolving Loan, then such Reimbursement
Obligation shall bear interest from and after such day, until paid in full, at
the interest rate applicable to a Base Rate Advance.
2.24 Cash Collateral. Notwithstanding anything to the contrary herein
or in any application for a Letter of Credit, after the occurrence and during
the continuance of Default, each Borrower shall, upon the Administrative Agent's
demand, deliver to the Administrative Agent for the benefit of the Lenders,
cash, or other collateral of a type satisfactory to the Required Lenders, having
a value, as determined by such Lenders, equal to the aggregate outstanding L/C
Obligations or such Borrower. In addition, if the amount of L/C Obligations
outstanding at any time exceeds the Maximum Revolving Credit Amount minus the
outstanding principal balance of the Revolving Loans, Holdings shall deposit
cash collateral with the Administrative Agent in an amount equal to the amount
by which such L/C Obligations exceeds the Maximum Revolving Credit Amount minus
the outstanding principal balance of the Revolving Loans. Any such collateral
shall be held by the Administrative Agent in a separate account appropriately
designated as a cash collateral account in relation to this Agreement and the
Letters of Credit and retained by the Administrative Agent for the benefit of
the Lenders as collateral security for the Borrowers' obligations in respect of
this Agreement and each of the Letters of Credit and L/C Drafts. Such amounts
shall be applied to reimburse the Administrative Agent or each Issuing Lender,
as applicable, for drawings or payments under or pursuant to Letters of Credit
or L/C Drafts, or if no such reimbursement is required, to payment of such of
the other Obligations as the Administrative Agent shall determine. If no Default
shall be continuing, amounts remaining in any cash collateral account
established pursuant to this Section 2.24 which are not to be applied to
reimburse the Administrative Agent for amounts actually paid or to be paid by
the Administrative Agent in respect of a Letter of Credit or L/C Draft, shall be
returned to the applicable Borrower (after deduction of the Administrative
Agent's expenses incurred in connection with such cash collateral account).
2.25 Letter of Credit Fees. Each of the Borrowers agrees to pay (i)
quarterly, in arrears, on each Payment Date to the Administrative Agent for the
ratable benefit of the Lenders, except as set forth in Section 8.2, a letter of
credit fee ("LETTER OF CREDIT FEE")in the amount of the Applicable Letter of
Credit Fee Rate per annum on the aggregate average daily outstanding amount
available for drawing under all of the Letters of Credit issued for its account,
and (ii) to the Administrative Agent for the benefit of the Issuing Lenders, a
fronting fee of one-eighth of one percent (0.125%) per annum on the aggregate
average daily outstanding amount available for drawing under all of the Letters
of Credit issued for its account payable monthly in arrears plus all
-70-
<PAGE> 80
customary fees and other issuance, amendment, document examination, negotiation
and presentment expenses and related charges in connection with the issuance,
amendment, presentation of L/C Drafts, and the like customarily charged by the
Issuing Lender with respect to standby and commercial Letters of Credit,
including, without limitation, standard commissions with respect to commercial
Letters of Credit, payable at the time of invoice of such amounts.
2.26 Indemnification; Exoneration. (a) In addition to amounts payable
as elsewhere provided in this Agreement, each Borrower with respect to Letters
of Credit issued for its account agrees to protect, indemnify, pay and save
harmless the Administrative Agent, each Issuing Lender and each Lender from and
against any and all liabilities and costs which the Administrative Agent, any
Issuing Lender or any Lender may incur or be subject to as a consequence, direct
or indirect, of (i) the issuance of any Letter of Credit other than, in the case
of the Issuing Lender, as a result of its Gross Negligence or willful
misconduct, as determined by the final judgment of a court of competent
jurisdiction, or (ii) the failure of the Issuing Lender of a Letter of Credit to
honor a drawing under such Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
Governmental Authority (all such acts or omissions herein called "GOVERNMENTAL
ACTS").
(b) As among the Borrowers, the Lenders, the Issuing Lenders and the
Administrative Agent, the Borrowers assume all risks of the acts and omissions
of, or misuse of such Letter of Credit by, the beneficiary of any Letter of
Credit. In furtherance and not in limitation of the foregoing, subject to the
provisions of the Letter of Credit applications and Letter of Credit
reimbursement agreements executed by the applicable Borrower at the time of
request for any Letter of Credit, the Issuing Lender of a Letter of Credit, the
Administrative Agent and the Lenders shall not be responsible (in the absence of
Gross Negligence or willful misconduct in connection therewith, as determined by
the final judgment of a court of competent jurisdiction): (i) for the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
the Letters of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (iii) for failure of the beneficiary of a
Letter of Credit to comply duly with conditions required in order to draw upon
such Letter of Credit; (iv) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex, or
other similar form of teletransmission or otherwise; (v) for errors in
interpretation of technical trade terms; (vi) for any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any Letter of Credit or of the proceeds thereof; (vii) for the
misapplication by the beneficiary of a Letter of Credit of the proceeds of any
drawing under such Letter of Credit; and (viii) for any consequences arising
from causes beyond the control of the Administrative Agent, the Issuing Lender
and the Lenders including, without limitation, any Governmental Acts. None
-71-
<PAGE> 81
of the above shall affect, impair, or prevent the vesting of any of the Issuing
Lender's rights or powers under this Section 2.26.
(c) In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by an Issuing
Lender under or in connection with Letters of Credit issued on behalf of any
Borrower or any related certificates shall not, in the absence of Gross
Negligence or willful misconduct, as determined by the final judgment of a court
of competent jurisdiction, put the Issuing Lender, the Administrative Agent or
any Lender under any resulting liability to any Borrower or relieve any Borrower
of any of its obligations hereunder to any such Person.
(d) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in this Section 2.26 shall survive the payment in full of principal and interest
hereunder, the termination of the Letters of Credit and the termination of this
Agreement.
2.27 Judgment Currency. If, for the purposes of obtaining judgment in
any court, it is necessary to convert a sum due from a Borrower hereunder or
under any of the Notes in the currency expressed to be payable herein or under
the Notes (the "specified currency") into another currency, the parties hereto
agree, to the fullest extent that they may effectively do so, that the rate of
exchange used shall be that at which in accordance with normal banking
procedures the Administrative Agent could purchase the specified currency with
such other currency at the Administrative Agent's main office in Detroit,
Michigan on the Business Day preceding that on which the final, non-appealable
judgment is given. The obligations of the applicable Borrower in respect of any
sum due to any Lender or the Administrative Agent hereunder or under any Note
shall, notwithstanding any judgment in a currency other than the specified
currency, be discharged only to the extent that on the Business Day following
receipt by such Lender or the Administrative Agent (as the case may be) of any
sum adjudged to be so due in such other currency such Lender or the
Administrative Agent (as the case may be) may in accordance with normal,
reasonable banking procedures purchase the specified currency with such other
currency. If the amount of the specified currency so purchased is less than the
sum originally due to such Lender or the Administrative Agent, as the case may
be, in the specified currency, the applicable Borrower agrees, to the fullest
extent that it may effectively do so, as a separate obligation and
notwithstanding any such judgment, to indemnify such Lender or the
Administrative Agent, as the case may be, against such loss, and if the amount
of the specified currency so purchased exceeds (a) the sum originally due to any
Lender or the Administrative Agent, as the case may be, in the specified
currency and (b) any amounts shared with other Lenders as a result of
allocations of such excess as a disproportionate payment to such Lender under
Section 11.2, such Lender or the Agent, as the case may be, agrees to remit such
excess to the applicable Borrower.
2.28 Market Disruption. Notwithstanding the satisfaction of all
conditions referred to in Article II with respect to any Advance in any currency
other than Dollars, if there shall occur on
-72-
<PAGE> 82
or prior to the date of such Advance any change in national or international
financial, political or economic conditions or currency exchange rates or
exchange controls which would in the reasonable opinion of the Administrative
Agent or the Required Lenders make it impracticable for the Eurocurrency Rate
Loans comprising such Advance to be denominated in the currency specified by the
applicable Borrower, then the Administrative Agent shall forthwith give notice
thereof to Holdings and the Lenders, and such Loans shall not be denominated in
such currency but shall be made on such Borrowing Date in Dollars, in an
aggregate principal amount equal to the Dollar Amount of the aggregate principal
amount specified in the related Borrowing Notice, as Base Rate Loans, unless the
applicable Borrower notifies the Agent at least one Business Day before such
date that (i) it elects not to borrow on such date or (ii) it elects to borrow
on such date in a different Agreed Currency, as the case may be, in which the
denomination of such Loans would in the opinion of the Administrative Agent and
the Required Lenders be practicable and in an aggregate principal amount equal
to the Dollar Amount of the aggregate principal amount specified in the related
Borrowing Notice.
2.29 Borrowing Subsidiaries. Holdings may at any time or from time to
time, with the consent of the Administrative Agent, which consent shall not be
unreasonably withheld, add as a party to this Agreement any Subsidiary to be a
"Borrowing Subsidiary" hereunder by (a) the execution and delivery to the
Administrative Agent of a duly completed Assumption Letter by such Subsidiary,
with the written consent of Holdings at the foot thereof and (b) the execution
and delivery to the Administrative Agent of such guaranty and security documents
as may be reasonably required by the Administrative Agent. Upon such execution,
delivery and consent, such Subsidiary shall for all purposes be a party hereto
as a Borrowing Subsidiary as fully as if it had executed and delivered this
Agreement. So long as the principal of and interest on any Advances made to any
Borrowing Subsidiary under this Agreement shall have been repaid or paid in
full, all Letters of Credit issued for the account of such Borrowing Subsidiary
have expired or been returned and terminated and all other obligations of such
Borrowing Subsidiary under this Agreement shall have been fully performed,
Holdings may, by not less than five Business Days' prior notice to the
Administrative Agent (which shall promptly notify the Lenders thereof),
terminate such Borrowing Subsidiary's status as a "Borrowing Subsidiary".
ARTICLE III: CHANGE IN CIRCUMSTANCES
3.1 Yield Protection. If any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law) adopted after the date of this Agreement and having
general applicability to all banks within the jurisdiction in which such Lender
operates (excluding, for the avoidance of doubt, the effect of and phasing in of
capital requirements or other regulations or guidelines passed prior to the date
of this Agreement), or any interpretation or application thereof by any
Governmental Authority charged with the interpretation or application thereof,
or the compliance of any Lender therewith,
-73-
<PAGE> 83
(i) subjects any Lender (each reference in this Section 3.1 to
a Lender being in its capacity as a Lender or an Issuing Lender, or
both) or any applicable Lending Installation to any tax, duty, charge
or withholding on or from payments due from any of the Borrowers
(excluding taxation imposed by the United States of America or any
Governmental Authority of the jurisdiction under the laws of which such
Lender is organized, on the overall net income of any Lender or
applicable Lending Installation), or changes the basis of taxation of
payments to any Lender in respect of its Loans, its L/C Interests, the
Letters of Credit or other amounts due it hereunder, provided however
that this clause (i) shall not apply with respect to any Taxes to which
Section 2.15(E) applies, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, any Lender or any applicable Lending Installation with
respect to its Eurocurrency Rate Loans, L/C Interests or the Letters of
Credit, or
(iii) imposes any other condition the result of which is to
increase the cost to any Lender or any applicable Lending Installation
of making, funding or maintaining the Eurocurrency Rate Loans, the L/C
Interests or the Letters of Credit or reduces any amount received by
any Lender or any applicable Lending Installation in connection with
Eurocurrency Rate Loans or Letters of Credit, or requires any Lender or
any applicable Lending Installation to make any payment calculated by
reference to the amount of Loans or L/C Interests held or interest
received by it or by reference to the Letters of Credit, by an amount
deemed material by such Lender;
and the result of any of the foregoing is to increase the cost to that Lender of
making, renewing or maintaining its Loans, L/C Interests or Letters of Credit or
to reduce any amount received under this Agreement, then, within 15 days after
receipt by Holdings of written demand by such Lender pursuant to Section 3.5,
Holdings shall pay or cause the appropriate Subsidiary to pay such Lender that
portion of such increased expense incurred or reduction in an amount received
which such Lender determines is attributable to making, funding and maintaining
its Loans, L/C Interests, Letters of Credit and its Revolving Loan Commitment.
3.2 Changes in Capital Adequacy Regulations. If a Lender (each
reference in this Section 3.2 to a Lender being in its capacity as a Lender or
an Issuing Lender, or both) determines (i) the amount of capital required or
expected to be maintained by such Lender, any Lending Installation of such
Lender or any corporation controlling such Lender is increased as a result of a
"Change" (as defined below), and (ii) such increase in capital will result in an
increase in the cost to such Lender of maintaining its Loans, L/C Interests, the
Letters of Credit or its obligation to make Loans hereunder, then, within 15
days after receipt by Holdings of written demand by such Lender pursuant to
Section 3.5, Holdings shall pay or cause the appropriate Subsidiary to pay such
Lender the amount necessary to compensate for any shortfall in the rate of
return on the
-74-
<PAGE> 84
portion of such increased capital which such Lender determines is attributable
to this Agreement, its Loans, its L/C Interests, the Letters of Credit or its
obligation to make Loans hereunder (after taking into account such Lender's
policies as to capital adequacy). "CHANGE" means (i) any change after the date
of this Agreement in the "Risk-Based Capital Guidelines" (as defined below)
excluding, for the avoidance of doubt, the effect of any phasing in of such
Risk-Based Capital Guidelines or any other capital requirements passed prior to
the date hereof, or (ii) any adoption of or change in any other law,
governmental or quasi-governmental rule, regulation, policy, guideline,
interpretation, or directive (whether or not having the force of law) after the
date of this Agreement and having general applicability to all banks and
financial institutions within the jurisdiction in which such Lender operates
which affects the amount of capital required or expected to be maintained by any
Lender or any Lending Installation or any corporation controlling any Lender.
"RISK-BASED CAPITAL GUIDELINES" means (i) the risk-based capital guidelines in
effect in the United States on the date of this Agreement, including transition
rules, and (ii) the corresponding capital regulations promulgated by regulatory
authorities outside the United States implementing the July 1988 report of the
Basle Committee on Banking Regulation and Supervisory Practices Entitled
"International Convergence of Capital Measurements and Capital Standards,"
including transition rules, and any amendments to such regulations adopted prior
to the date of this Agreement.
3.3 Availability of Types of Advances. If (i) any Lender determines
that maintenance of its Eurocurrency Rate Loans at a suitable Lending
Installation would violate any applicable law, rule, regulation or directive,
whether or not having the force of law, or (ii) the Required Lenders determine
that (x) deposits of a type, currency and maturity appropriate to match fund
Eurocurrency Rate Advances are not available or (y) the interest rate applicable
to a Eurocurrency Rate Advance does not accurately reflect the cost of making or
maintaining such a Eurocurrency Rate Advance, then the Administrative Agent
shall suspend the availability of Eurocurrency Rate Advances and, in the case of
any occurrence set forth in clause (i), require any Eurocurrency Rate Advances
to be repaid or, at the option of Holdings, converted to Base Rate Advances.
3.4 Funding Indemnification. If any payment of a Eurocurrency Rate
Advance occurs on a date which is not the last day of the applicable Interest
Period, whether because of acceleration, prepayment, or otherwise, or a
Eurocurrency Rate Advance is not made or continued on the date specified by the
applicable Borrower for any reason other than default by the Lenders, the
applicable Borrower agrees to indemnify each Lender for any loss or cost
incurred by it resulting therefrom, including, without limitation, any loss or
cost in liquidating or employing deposits acquired to fund or maintain the
Eurocurrency Rate Advance. In connection with any assignment by Chase or NBD of
any portion of the Loans made pursuant to Section 12.3 and made on or prior to
September 8, 1997, and if any of the Borrowers has requested the use of the
Eurocurrency Rate, such Borrower shall be deemed to have repaid all outstanding
Eurocurrency Rate Advances as of such date and reborrowed such amount as a Base
Rate Advance and/or
-75-
<PAGE> 85
Eurocurrency Rate Advance (chosen in accordance with the provisions of Section
2.4) and the indemnification provisions under this Section 3.4 shall apply.
3.5 Lender Statements; Survival of Indemnity. If reasonably possible,
each Lender shall designate an alternate Lending Installation with respect to
its Eurocurrency Rate Loans to reduce any liability of Holdings to such Lender
under Sections 3.1 and 3.2 or to avoid the unavailability of a Type of Advance
under Section 3.3, so long as such designation is not disadvantageous to such
Lender. Each Lender requiring compensation pursuant to Section 2.15(E) or to
this Article III shall use its best efforts to notify Holdings and the
Administrative Agent in writing of any Change, law, policy, rule, guideline or
directive giving rise to such demand for compensation not later than ninety (90)
days following the date upon which the responsible account officer of such
Lender knows or should have known of such Change, law, policy, rule, guideline
or directive. Any demand for compensation pursuant to this Article III shall be
in writing and shall state the amount due, if any, under Section 3.1, 3.2 or 3.4
and shall set forth in reasonable detail the calculations upon which such Lender
determined such amount. Such written demand shall be rebuttably presumed correct
for all purposes. Notwithstanding anything in this Agreement to the contrary,
neither Holdings nor any of the other Borrowers shall be obligated to pay any
amount or amounts under Section 2.15(E) or this Article III to the extent such
amount or amounts result from a Change, law, policy, rule, guideline or
directive which took effect more than 120 days prior to the date of delivery of
the notice described above. Determination of amounts payable under such Sections
in connection with a Eurocurrency Rate Loan shall be calculated as though each
Lender funded its Eurocurrency Rate Loan through the purchase of a deposit of
the type, currency and maturity corresponding to the deposit used as a reference
in determining the Eurocurrency Rate applicable to such Loan, whether in fact
that is the case or not. The obligations of the Borrowers under Sections 3.1,
3.2 and 3.4 shall survive payment of the Obligations and termination of this
Agreement.
ARTICLE IV: CONDITIONS PRECEDENT
4.1 Initial Advances and Letters of Credit. The Lenders shall not be
required to make the initial Loans or issue any Letters of Credit unless the
Borrowers have furnished to the Administrative Agent, with sufficient copies for
the Lenders, such documents as the Administrative Agent or any Lender or its
counsel may have reasonably requested, including, without limitation, all of the
documents reflected on the List of Closing Documents attached as Exhibit G to
this Agreement (other than those designated to be delivered post-closing).
4.2 Each Advance and Letter of Credit. Except as expressly provided in
Sections 2.5(B)(i)(f) and 2.23, the Lenders shall not be required to make any
Advance and the Issuing Lender shall not be required to issue any Letter of
Credit, unless on the applicable Borrowing Date, or in the case of a Letter of
Credit, the date on which the Letter of Credit is to be issued:
-76-
<PAGE> 86
(i) There exists no Default or Unmatured Default; and
(ii) The representations and warranties contained in Article V
are true and correct in all material respects as of such Borrowing
Date, except for representations and warranties made with reference to
a specific date which representations and warranties shall be true and
correct in all material respects as of such date, and except for
amendments to the Schedules made pursuant to the provisions of Section
1.3.
Each Borrowing Notice with respect to each such Advance and the letter
of credit application with respect to a Letter of Credit shall constitute a
representation and warranty by the Borrower that the conditions contained in
Sections 4.2(i) and (ii) will have been satisfied as of the date of such Advance
or the issuance of such Letter of Credit. Any Lender may require a duly
completed officer's certificate in substantially the form of Exhibit H hereto
and/or a duly completed compliance certificate in substantially the form of
Exhibit I hereto as a condition to making an Advance.
ARTICLE V: REPRESENTATIONS AND WARRANTIES
In order to induce the Administrative Agent and the Lenders to enter
into this Agreement and to make the Loans and the other financial accommodations
to the Borrowers and in order to induce the Issuing Lender to issue the Letters
of Credit described herein, each of the Borrowers represents and warrants as
follows to each Lender and the Administrative Agent as of the Effective Date and
thereafter on each date as required by Section 4.2:
5.1 Organization; Powers. Each of the Borrowers and each of their
respective Subsidiaries (i) is a duly organized limited liability company or
corporation, as applicable, validly existing and, with respect to U.S.
Borrowers, in good standing under the laws of the jurisdiction of its
organization, (ii) is duly qualified to do business as a foreign company or
corporation and is in good standing under the laws of each jurisdiction in which
failure to be so qualified and in good standing could have a Material Adverse
Effect, (iii) has timely filed and maintained effective (unless exempt from the
requirements for filing) a current Business Activity Report with the appropriate
Governmental Authority in the States in which it is required to do so, and (iv)
has all requisite power and authority to own, operate and encumber its property
and to conduct its business as presently conducted giving effect to the Valley
Acquisition and as proposed to be conducted in connection with and following the
consummation of the transactions contemplated by this Agreement.
5.2 Authority.
(A) Each of the Borrowers and each of their respective Subsidiaries has
the requisite power and authority (i) to execute, deliver and perform each of
the Transaction Documents which
-77-
<PAGE> 87
are to be executed by it in connection with the Valley Acquisition or which have
been executed by it as required by this Agreement on or prior to the Effective
Date and (ii) to file the Transaction Documents which must be filed by it in
connection with the Valley Acquisition or which have been filed by it as
required by this Agreement on or prior to the Effective Date with any
Governmental Authority.
(B) The execution, delivery, performance and filing, as the case may
be, of each of the Transaction Documents which must be executed or filed by any
of the Borrowers or any other Subsidiary of Holdings in connection with the
Valley Acquisition or which have been executed or filed as required by this
Agreement on or prior to the Effective Date and to which any of the Borrowers or
any other Subsidiary of Holdings is party, and the consummation of the
transactions contemplated thereby, have been duly approved, to the extent
required, by the respective boards of managers or directors, as applicable, and,
if necessary, the members or shareholders or workers' councils of the applicable
Borrower or Subsidiary, as applicable, and such approvals have not been
rescinded. No other action or proceedings on the part of any Borrower or any
other Person are necessary to consummate such transactions.
(C) Each of the Transaction Documents to which any of the Borrowers or
any other Subsidiary of Holdings is a party has been duly executed, delivered or
filed, as the case may be, by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms (except as
enforceability may be limited by bankruptcy, insolvency, or similar laws
affecting the enforcement of creditor's rights generally), is in full force and
effect and no material term or condition thereof has been amended, modified or
waived from the terms and conditions contained in the Transaction Documents
delivered to the Administrative Agent pursuant to Section 4.1 without the prior
written consent of the Required Lenders, and each of the Borrowers or each other
Subsidiary of Holdings have, and, to the best of such Borrower's or Subsidiary's
knowledge, all other parties thereto have performed and complied with all the
terms, provisions, agreements and conditions set forth therein and required to
be performed or complied with by such parties on or before the Effective Date,
and no unmatured default, default or breach of any covenant by any such party
exists thereunder.
5.3 No Conflict; Governmental Consents. The execution, delivery and
performance of each of the Loan Documents and other Transaction Documents to
which any of the Borrowers or any other Subsidiary of Holdings is a party do not
and will not (i) conflict with the documents of organization or governance of
such Borrower or Subsidiary (ii) constitute tortious interference with any
Contractual Obligation of any Person or conflict with, result in a breach of or
constitute (with or without notice or lapse of time or both) a default under any
Requirement of Law (including, without limitation, any Environmental Property
Transfer Act) or Contractual Obligation of any Borrower or any such Subsidiary,
or require termination of any Contractual Obligation, except such interference,
breach, default or termination which individually or in the aggregate would not
reasonably be expected to have a Material Adverse Effect or to subject the
Administrative Agent, any of the Lenders or the Issuing Lender to any liability,
(iii) with respect
-78-
<PAGE> 88
to the Loan Documents and, to the best of each Borrower's and each Subsidiary's
knowledge with respect to the other Transaction Documents, result in or require
the creation or imposition of any Lien whatsoever upon any of the property or
assets of any Borrower or any such Subsidiary, other than Liens permitted by the
Loan Documents, or (iv) require any approval of the Borrower's or any such
Subsidiary's members or shareholders except such as have been obtained. Except
as set forth on Schedule 5.3 to this Agreement, the execution, delivery and
performance of each of the Transaction Documents to which any Borrower or any
other Subsidiary is a party do not and will not require any registration with,
consent or approval of, or notice to, or other action to, with or by any
Governmental Authority, including under any Environmental Property Transfer Act,
except (i) filings, consents or notices which have been or, in the case of any
of the foregoing, not required prior to the Effective Date, will be made,
obtained or given, or which, if not made, obtained or given, individually or in
the aggregate would not reasonably be expected to have a Material Adverse
Effect, and (ii) filings necessary to create or perfect security interests in
the Collateral.
5.4 Financial Statements. The pro forma financial statements of
Holdings and its Subsidiaries, copies of which are attached hereto as Exhibit J,
present on an estimated pro forma basis the financial condition of Holdings and
such Subsidiaries as of June 30, 1997, as if the Valley Acquisition and the
other transactions contemplated hereby had been consummated as of such date, and
reflect on a pro forma basis those liabilities reflected in the notes thereto
and resulting from consummation of the Valley Acquisition and the transactions
contemplated by this Agreement, and the payment or accrual of all Transaction
Costs payable on the Effective Date with respect to any of the foregoing. The
projections and assumptions expressed in the pro forma financials referenced in
this Section 5.4 were prepared in good faith and represent management's opinion
based on the information available to Holdings at the time so furnished.
5.5 No Material Adverse Change. (a) Since December 31, 1996 up to the
Effective Date, there has occurred no change in the business, properties,
condition (financial or otherwise) or results of operations of (i) Holdings and
its Subsidiaries taken as a whole or (ii) Valley Industries, Inc. or any other
event which has had or is reasonably likely to have a Material Adverse Effect.
(b) Since the Effective Date, there has occurred no change in the
business, properties, condition (financial or otherwise) or results of
operations of Holdings and its Subsidiaries taken as a whole or any other event
which has had or is reasonably likely to have a Material Adverse Effect.
5.6 Taxes.
(A) Tax Examinations. All deficiencies which have been asserted against
Holdings or any of Holdings' Subsidiaries as a result of any federal, state,
local or foreign tax examination for each taxable year in respect of which an
examination has been conducted have been fully paid or finally settled or are
being contested in good faith, and as of the Effective Date no issue has been
raised
-79-
<PAGE> 89
by any taxing authority in any such examination which, by application of similar
principles, reasonably can be expected to result in assertion by such taxing
authority of a material deficiency for any other year not so examined which has
not been reserved for in Holdings' consolidated financial statements to the
extent, if any, required by Agreement Accounting Principles. Except as permitted
pursuant to Section 6.2(D), neither Holdings nor any of Holdings' Subsidiaries
anticipates any material tax liability with respect to the years which have not
been closed pursuant to applicable law.
(B) Payment of Taxes. All tax returns and reports of each of Holdings,
AAS, Brink and Holdings' other Subsidiaries required to be filed have been
timely filed, and all taxes, assessments, fees and other governmental charges
thereupon and upon their respective property, assets, income and franchises
which are shown in such returns or reports to be due and payable have been paid
except those items which are being contested in good faith and have been
reserved for in accordance with Agreement Accounting Principles. Holdings has no
knowledge of any proposed tax assessment against Holdings, AAS, Brink or any of
Holdings' other Subsidiaries that will have or is reasonably likely to have a
Material Adverse Effect.
5.7 Litigation; Loss Contingencies and Violations. Except as set forth
in Schedules 5.7 and 5.18 to this Agreement, there is no action, suit,
proceeding, investigation of which Holdings has knowledge or arbitration before
or by any Governmental Authority or private arbitrator pending or, to the
knowledge of Holdings or any of its Subsidiaries, threatened against Holdings or
any of its Subsidiaries or any property of any of them (i) challenging the
validity or the enforceability of any material provision of the Transaction
Documents or (ii) which will have or is reasonably likely to have a Material
Adverse Effect. There is no material loss contingency within the meaning of
Agreement Accounting Principles which has not been reflected in the consolidated
financial statements of Holdings prepared and delivered pursuant to Section
6.1(A) for the fiscal period during which such material loss contingency was
incurred. Neither Holdings nor any of its Subsidiaries is (A) in violation of
any applicable Requirements of Law which violation will have or is reasonably
likely to have a Material Adverse Effect, or (B) subject to or in default with
respect to any final judgment, writ, injunction, restraining order or order of
any nature, decree, rule or regulation of any court or Governmental Authority
which will have or is reasonably likely to have a Material Adverse Effect.
5.8 Subsidiaries. Schedule 5.8 to this Agreement (i) contains a
description (both narratively and in flow chart form) of the corporate structure
of Holdings, Holding's Subsidiaries and any other Person in which Holdings or
any of its Subsidiaries holds an equity interest; and (ii) accurately sets forth
(A) the correct legal name, the jurisdiction of organization or incorporation
and the jurisdictions in which each Borrower and the direct and indirect
Subsidiaries of Holdings is qualified to transact business as a foreign company
or corporation, (B) the authorized, issued and outstanding shares of each class
of Capital Stock of each entity referred to above that is a corporation and the
owners of such shares (both as of the Closing Date and on a
-80-
<PAGE> 90
fully-diluted basis), and (C) a summary of the direct and indirect ownership,
membership, partnership, joint venture, or other equity interests, if any, of
Holdings and each Subsidiary of Holdings in any Person that is not a
corporation.
5.9 ERISA. No Benefit Plan has incurred any accumulated funding
deficiency (as defined in Sections 302(a)(2) of ERISA and 412(a) of the Code)
whether or not waived. Neither Holdings nor any member of the Controlled Group
has incurred any liability to the PBGC which remains outstanding other than the
payment of premiums, and there are no premium payments which have become due
which are unpaid. Schedule B to the most recent annual report filed with the IRS
with respect to each Benefit Plan and furnished to the lenders is complete and
accurate. Since the date of each such Schedule B, there has been no material
adverse change in the funding status or financial condition of the Benefit Plan
relating to such Schedule B. Neither Holdings nor any member of the Controlled
Group has (i) failed to make a required contribution or payment to a
Multiemployer Plan or (ii) made a complete or partial withdrawal under Sections
4203 or 4205 of ERISA from a Multiemployer Plan. Neither Holdings nor any member
of the Controlled Group has failed to make a required installment or any other
required payment under Section 412 of the Code on or before the due date for
such installment or other payment. Neither Holdings nor any member of the
Controlled Group is required to provide security to a Benefit Plan under Section
401(a)(29) of the Code due to a Plan amendment that results in an increase in
current liability for the plan year. Neither Holdings nor any of its
Subsidiaries maintains or contributes to any employee welfare benefit plan
within the meaning of Section 3(1) of ERISA which provides benefits to employees
after termination of employment other than as required by Section 601 of ERISA.
Each Plan which is intended to be qualified under Section 401(a) of the Code as
currently in effect is so qualified, and each trust related to any such Plan is
exempt from federal income tax under Section 501(a) of the Code as currently in
effect. Holdings and all Subsidiaries are in compliance in all material respects
with the responsibilities, obligations and duties imposed on them by ERISA and
the Code with respect to all Plans. Neither Holdings nor any of its Subsidiaries
nor any fiduciary of any Plan has engaged in a nonexempt prohibited transaction
described in Sections 406 of ERISA or 4975 of the Code which could reasonably be
expected to subject Holdings to liability in excess of $500,000. Neither
Holdings nor any member of the Controlled Group has taken or failed to take any
action which would constitute or result in a Termination Event, which action or
inaction could reasonably be expected to subject Holdings to liability in excess
of $500,000. Neither Holdings nor any Subsidiary is subject to any liability
under Sections 4063, 4064, 4069, 4204 or 4212(c) of ERISA and no other member of
the Controlled Group is subject to any liability under Sections 4063, 4064,
4069, 4204 or 4212(c) of ERISA which could reasonably be expected to subject
Holdings to liability in excess of $500,000. Neither Holdings nor any of its
Subsidiaries has, by reason of the transactions contemplated hereby, any
obligation to make any payment to any employee pursuant to any Plan or existing
contract or arrangement.
5.10 Accuracy of Information. The information, exhibits and reports
furnished by or on behalf of Holdings and any of its Subsidiaries to the
Administrative Agent or to any Lender in
-81-
<PAGE> 91
connection with the negotiation of, or compliance with, the Loan Documents,
including, without limitation, the Confidential Information Memorandum dated
July, 1997 prepared by Holdings, the representations and warranties of Holdings
and its Subsidiaries contained in the Loan Documents, and all certificates and
documents delivered to the Administrative Agent and the Lenders pursuant to the
terms thereof do not contain as of the date furnished any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading.
5.11 Securities Activities. Neither Holdings nor any of its
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
5.12 Material Agreements. Neither Holdings nor any Subsidiary is a
party to any agreement or instrument or subject to any charter or other
contractual or corporate restriction which will have or is reasonably likely to
have a Material Adverse Effect. Neither Holdings nor any of its Subsidiaries has
received notice or has knowledge that (i) it is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any Contractual Obligation applicable to it, or (ii) any condition
exists which, with the giving of notice or the lapse of time or both, would
constitute a default with respect to any such Contractual Obligation, in each
case, except where such default or defaults, if any, will not have or are not
reasonably likely to have a Material Adverse Effect.
5.13 Compliance with Laws. Holdings and its Subsidiaries are in
compliance with all Requirements of Law applicable to them and their respective
businesses, in each case where the failure to so comply individually or in the
aggregate will have or is reasonably likely to have a Material Adverse Effect.
5.14 Assets and Properties. Holdings and each of its Subsidiaries has
good and marketable title to all of its assets and properties (tangible and
intangible, real or personal) owned by it or a valid leasehold interest in all
of its leased assets (except insofar as marketability may be limited by any laws
or regulations of any Governmental Authority affecting such assets), and all
such assets and property are free and clear of all Liens, except Liens securing
the Obligations and Liens permitted under Section 6.3(C). Substantially all of
the assets and properties owned by, leased to or used by Holdings and/or each
such Subsidiary of Holdings are in adequate operating condition and repair,
ordinary wear and tear excepted. Except for Liens granted to the Administrative
Agent for the benefit of the Administrative Agent and the Holders of Secured
Obligations, neither this Agreement nor any other Transaction Document, nor any
transaction contemplated under any such agreement, will affect any right, title
or interest of Holdings or such Subsidiary in and to any of such assets in a
manner that will have or is reasonably likely to have a Material Adverse Effect.
5.15 Statutory Indebtedness Restrictions. Neither Holdings, nor any of
its Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, or the
Investment Company Act of 1940, or any other federal
-82-
<PAGE> 92
or state statute or regulation which limits its ability to incur indebtedness or
its ability to consummate the transactions contemplated hereby or in connection
with the Valley Acquisition.
5.16 Post-Retirement Benefits. As of the Effective Date, Holdings and
its Subsidiaries have no expected cost of post-retirement medical and insurance
benefits payable by Holdings or its Subsidiaries to its employees and former
employees, as estimated by the Borrower in accordance with Financial Accounting
Standards Board Statement No. 106.
5.17 Insurance. Schedule 5.17 to this Agreement accurately sets forth
as of the Effective Date all insurance policies and programs currently in effect
with respect to the respective properties and assets and business of Holdings
and its Subsidiaries, specifying for each such policy and program, (i) the
amount thereof, (ii) the risks insured against thereby, (iii) the name of the
insurer and each insured party thereunder, (iv) the policy or other
identification number thereof, (v) the expiration date thereof, (vi) the annual
premium with respect thereto and (vii) describes any reserves, relating to any
self-insurance program that is in effect. Such insurance policies and programs
reflect coverage that is reasonably consistent with prudent industry practice.
5.18 Contingent Obligations. Except as set forth on Schedule 5.18 to
this Agreement, neither Holdings nor any of its Subsidiaries has any Contingent
Obligation, contingent liability, long-term lease, synthetic lease or
commitment, not reflected in the pro forma financial statements attached hereto
as Exhibit J or otherwise disclosed to the Administrative Agent and the Lenders
in the other Schedules to this Agreement, which could reasonably be expected to
subject Holdings to liability in excess of $1,000,000.
5.19 Restricted Junior Payments. Neither Holdings nor any of its
Subsidiaries has directly or indirectly declared, ordered, paid or made or set
apart any sum or properties for any Restricted Junior Payment or agreed to do
so, except to the extent not prohibited pursuant to Section 6.3(F) of this
Agreement.
5.20 Labor Matters.
(A) Except as listed on Schedule 5.20 to this Agreement, there are on
the Effective Date no collective bargaining agreements, other labor agreements
or Multiemployer Plans covering any of the employees of Holdings or any of its
Subsidiaries. As of the Effective Date, no labor disputes, strikes or walkouts
affecting the operations of Holdings or any of its Subsidiaries, is pending, or,
to Holdings' knowledge, threatened, planned or contemplated.
(B) Set forth in Schedule 5.20 to this Agreement is a list, as of the
Effective Date, of all material consulting agreements, executive compensation
plans, deferred compensation agreements, employee pension plans or retirement
plans, employee profit sharing plans, employee stock purchase and stock option
plans, severance plans, group life insurance, hospitalization
-83-
<PAGE> 93
insurance or other plans or arrangements of Holdings, AAS and Valley providing
for benefits for employees of Holdings, AAS and Valley.
5.21 The Valley Acquisition.
As of the Effective Date and immediately prior to the making of the
Loans hereunder to be made on the Effective Date:
(i) the Acquisition Documents are in full force and effect, no
material breach, default or waiver of any term or provision of any of
the Acquisition Documents by Holdings or any of its Subsidiaries or, to
the best of Holdings' knowledge, the other parties thereto has occurred
(except for such breaches, defaults and waivers, if any, consented to
in writing by the Administrative Agent) and no action has been taken by
any competent authority which restrains, prevents or imposes any
material adverse condition upon, or seeks to restrain, prevent or
impose any material adverse condition upon, the Valley Acquisition;
(ii) the representations and warranties of each of Holdings
and its Subsidiaries contained in the Acquisition Documents, if any,
are true and correct in all material respects;
(iii) the Valley Acquisition was consummated in accordance
with the Acquisition Documents.
5.22 Environmental Matters. (a) Except as disclosed on Schedule
5.22 to this Agreement
(i) the operations of Holdings and its Subsidiaries comply in
all material respects with Environmental, Health or Safety Requirements
of Law;
(ii) Holdings and its Subsidiaries have all material permits,
licenses or other authorizations required under Environmental, Health
or Safety Requirements of Law and are in material compliance with such
permits;
(iii) neither Holdings, any of its Subsidiaries nor any of
their respective present property or operations, or, to the best of,
Holdings' or any of its Subsidiaries' knowledge, any of their
respective past property or operations, are subject to or the subject
of, any investigation known to Holdings or any of its Subsidiaries, any
judicial or administrative proceeding, order, judgment, decree,
settlement or other agreement respecting: (A) any material violation of
Environmental, Health or Safety Requirements of Law; (B) any material
remedial action; or (C) any material claims or liabilities arising from
the Release or threatened Release of a Contaminant into the
environment;
-84-
<PAGE> 94
(iv) there is not now, nor to the best of Holdings' or any of
its Subsidiaries' knowledge has there ever been on or in the property
of Holdings or any of its Subsidiaries any material landfill, waste
pile, underground storage tanks, aboveground storage tanks, surface
impoundment or hazardous waste storage facility of any kind,
polychlorinated biphenyls (PCBs) used in hydraulic oils, electric
transformers or other equipment, or asbestos-containing material; and
(v) neither Holdings nor any of its Subsidiaries has any
material Contingent Obligation or material contingent liability in
connection with any Release or threatened Release of a Contaminant into
the environment.
(b) For purposes of this Section 5.22 "material" means any
noncompliance or basis for liability which could reasonably be likely to subject
Holdings to liability in excess of $1,000,000.
5.23 Capitalization.
As of the Effective Date and immediately prior to and
following the funding of the Loans to be funded on the Effective Date, the
subordination provisions of the Subordinated Note Agreement are enforceable
against the holders of the Subordinated Notes, the subordination provisions of
the Seller Note are enforceable against the holder of the Seller Note, and the
Secured Obligations are within the definition of "Senior Debt" as defined in the
Subordination Agreement and the Seller Note.
5.24 Solvency. After giving effect to the (i) Loans to be made on the
Effective Date or such other date as Loans requested hereunder are made, (ii)
the disbursement of the proceeds of such Loans pursuant to Holdings'
instructions, and (iii) the transactions contemplated by the Acquisition
Agreement and (iv) the payment and accrual of all Transaction Costs with respect
to the foregoing, Holdings and its Subsidiaries taken as a whole is Solvent.
5.25 Foreign Employee Benefit Matters. Each Foreign Employee Benefit
Plan is in compliance in all respects with all laws, regulations and rules
applicable thereto and the respective requirements of the governing documents
for such Plan, except for any non-compliance the consequences of which, in the
aggregate, would not result in a material obligation to pay money. The aggregate
of the accumulated benefit obligations under all Foreign Pension Plans does not
exceed the current fair market value of the assets held in the trusts or similar
funding vehicles for such Plans or reasonable reserves have been established in
accordance with prudent business practices or as required by Agreement
Accounting Principles with respect to any shortfall. With respect to any Foreign
Employee Benefit Plan maintained or contributed to by Holdings or any Subsidiary
or any member of its Controlled Group (other than a Foreign Pension Plan),
reasonable reserves have been established in accordance with prudent business
practice or where required by ordinary accounting practices in the jurisdiction
in which such Plan is maintained. There are no actions, suits or claims (other
than routine claims for benefits) pending or, to the knowledge of
-85-
<PAGE> 95
the Borrowers, threatened against Holdings or any Subsidiary or any ERISA
Affiliate with respect to any Foreign Employee Benefit Plan.
5.26 Dutch Withholding. As of the Effective Date, with respect to
any portion of the Loans, the interest referred to in Article II is not subject
to withholding tax in The Netherlands. If any interest referred to in Article II
due to a Dutch Bank or to the Dutch branch of a non-Dutch Bank are paid to the
Administrative Agent in accordance with the provisions of Article XI, then, as
at the Effective Date, such interest or commitment and utilization commission is
not subject to any withholding in The Netherlands. For the purposes of this
Section, a "Dutch Bank" shall mean a bank organized under the laws of The
Netherlands and a "non-Dutch Bank" shall mean a bank organized under the laws of
a country other than The Netherlands.
ARTICLE VI: COVENANTS
Each of the Borrowers covenants and agrees that so long as any
Commitments are outstanding and thereafter until payment in full of all of the
Obligations (other than contingent indemnity and reimbursement obligations),
unless the Required Lenders shall otherwise give prior written consent:
6.1 Reporting. The Borrowers shall:
(A) Financial Reporting. Furnish to the Administrative Agent (which
will furnish copies of the following to the Lenders):
(i) Monthly Reports. As soon as practicable, and in any event
within forty-five (45) days after the end of each calendar month, the
consolidated and consolidating balance sheet of Holdings and its
Subsidiaries as at the end of such period and the related consolidated
and consolidating statements of income and of cash flow of Holdings and
its Subsidiaries for such calendar month, certified by the chief
financial officer of Holdings on behalf of Holdings as fairly
presenting in all material respects the consolidated and consolidating
financial position of Holdings and its Subsidiaries as at the dates
indicated and the results of operations and cash flow for the calendar
months indicated in accordance with Agreement Accounting Principles,
subject to normal year end adjustments.
(ii) Quarterly Reports. As soon as practicable, and in any
event within forty-five (45) days after the end of each fiscal quarter
in each fiscal year, the consolidated and consolidating balance sheet
of Holdings and its Subsidiaries as at the end of such period and the
related consolidated and consolidating statements of income and cash
flow of Holdings and its Subsidiaries for such fiscal quarter and for
the period from the beginning of the then current fiscal year to the
end of such fiscal quarter and a comparison of the
-86-
<PAGE> 96
statement of earnings and cash flow to the budget, certified by the
chief financial officer of Holdings on behalf of Holdings as fairly
presenting in all material respects the consolidated and consolidating
financial position of Holdings and its Subsidiaries as at the dates
indicated and the results of their operations and cash flow for the
periods indicated in accordance with Agreement Accounting Principles,
subject to normal year end adjustments.
(iii) Annual Reports. As soon as practicable, and in any event
within one hundred twenty (120) days after the end of each fiscal year,
(a) the consolidated and consolidating balance sheet of Holdings and
its Subsidiaries as at the end of such fiscal year and the related
consolidated and consolidating statements of income, members' equity
and cash flow of Holdings and its Subsidiaries for such fiscal year,
and, in comparative form the corresponding figures for the previous
fiscal year, (b) a schedule from Holdings setting forth for each item
in clause (a) hereof, the corresponding figures from the consolidated
financial budget for the current fiscal year delivered pursuant to
Section 6.1(A)(v), and (c) an audit report on the items (other than the
consolidating financial statements) listed in clause (a) hereof of
independent certified public accountants of recognized national
standing, which audit report shall be unqualified and shall state that
such financial statements fairly present in all material respects the
consolidated financial position of Holdings and its Subsidiaries as at
the dates indicated and the results of their operations and cash flow
for the periods indicated in conformity with Agreement Accounting
Principles and that the examination by such accountants in connection
with such consolidated financial statements has been made in accordance
with generally accepted auditing standards. The deliveries made
pursuant to this clause (iii) shall be accompanied by (y) any
management letter prepared by the above-referenced accountants and (z)
a certificate of such accountants that, in the course of their
examination necessary for their certification of the foregoing, (i)
they have obtained no knowledge of any Default or Unmatured Default, or
if, in the opinion of such accountants, any Default or Unmatured
Default shall exist, stating the nature and status thereof and (ii) if
a Tax Distribution has been made after the occurrence and during the
continuance of any Default or Unmatured Default, they have reviewed the
calculations of Income Tax Liabilities for such period and have
determined that the amount of the Tax Distributions for such year does
not exceed the amount permitted under Section 6.3(F).
(iv) Officer's Certificate. Together with each delivery of any
financial statement (a) pursuant to clauses (i), (ii) and (iii) of this
Section 6.1(A), an Officer's Certificate of Holdings, substantially in
the form of Exhibit H attached hereto and made a part hereof, stating
that no Default or Unmatured Default exists, or if any Default or
Unmatured Default exists, stating the nature and status thereof and (b)
pursuant to clauses (ii) and (iii) of this Section 6.1(A), a Compliance
Certificate, substantially in the form of Exhibit I attached hereto and
made a part hereof, signed by Holdings' chief financial officer or
treasurer, setting forth calculations for the period then ended for
Section 2.5(B), if
-87-
<PAGE> 97
applicable, for Income Tax Liabilities for such period, and which
demonstrate compliance, when applicable, with the provisions of Section
6.4.
(v) Budgets; Business Plans; Financial Projections. As soon as
practicable and in any event not later than the beginning of each
fiscal year beginning with the fiscal year beginning January 1, 1998, a
copy of the plan and forecast (including a projected balance sheet,
income statement and funds flow statement) of Holdings for the upcoming
fiscal year prepared in such detail as shall be reasonably satisfactory
to the Administrative Agent.
(B) Notice of Default. Promptly upon any of the chief executive
officer, chief operating officer, chief financial officer, treasurer or
controller of Holdings obtaining knowledge (i) of any condition or event which
constitutes a Default or Unmatured Default, or becoming aware that any Lender or
Administrative Agent has given any written notice with respect to a claimed
Default or Unmatured Default under this Agreement, or (ii) that any Person has
given any written notice to Holdings or any Subsidiary of Holdings or taken any
other action with respect to a claimed default or event or condition of the type
referred to in Section 7.1(e), deliver to the Administrative Agent and the
Lenders an Officer's Certificate specifying (a) the nature and period of
existence of any such claimed default, Default, Unmatured Default, condition or
event, (b) the notice given or action taken by such Person in connection
therewith, and (c) what action Holdings has taken, is taking and proposes to
take with respect thereto.
(C) Lawsuits. (i) Promptly upon Holdings obtaining knowledge of the
institution of, or written threat of, any action, suit, proceeding, governmental
investigation or arbitration against or affecting Holdings or any of its
Subsidiaries or any property of Holdings or any of its Subsidiaries not
previously disclosed pursuant to Section 5.7, which action, suit, proceeding,
governmental investigation or arbitration exposes, or in the case of multiple
actions, suits, proceedings, governmental investigations or arbitrations arising
out of the same general allegations or circumstances which expose, in Holdings'
reasonable judgment, Holdings or any of its Subsidiaries to liability in an
amount aggregating $1,000,000 or more (exclusive of claims covered by insurance
policies of Holdings or any of its Subsidiaries unless the insurers of such
claims have disclaimed coverage or reserved the right to disclaim coverage on
such claims and exclusive of claims covered by the indemnity of a financially
responsible indemnitor in favor of Holdings or any of its Subsidiaries (unless
the indemnitor has disclaimed or reserved the right to disclaim coverage
thereof)), give written notice thereof to the Administrative Agent on behalf of
the Lenders and provide such other information as may be reasonably available to
enable each Lender and the Administrative Agent and its counsel to evaluate such
matters; and (ii) in addition to the requirements set forth in clause (i) of
this Section 6.1(C), upon request of the Administrative Agent or the Required
Lenders, promptly give written notice of the status of any action, suit,
proceeding, governmental investigation or arbitration covered by a report
delivered pursuant to clause (i) above and provide such other information as may
be reasonably available to it that would not result in loss of any
attorney-client privilege by disclosure to the Lenders to enable each Lender and
the Administrative Agent and its counsel to evaluate such matters.
-88-
<PAGE> 98
(D) Insurance. As soon as practicable and in any event within one
hundred twenty (120) days of the end of each fiscal year, deliver to the
Administrative Agent and the Lenders (i) a report in form and substance
reasonably satisfactory to the Administrative Agent and the Lenders outlining
all material insurance coverage maintained as of the date of such report by
Holdings and its Subsidiaries and the duration of such coverage and (ii) an
insurance broker's statement that all premiums with respect to such coverage
have been paid when due.
(E) ERISA Notices. Deliver or cause to be delivered to the
Administrative Agent and the Lenders, at Holdings' expense, the following
information and notices as soon as reasonably possible, and in any event:
(i) (a) within ten (10) Business Days after any Borrower
obtains knowledge that a Termination Event has occurred, a written
statement of the chief financial officer of Holdings describing such
Termination Event and the action, if any, which Holdings has taken, is
taking or proposes to take with respect thereto, and when known, any
action taken or threatened by the IRS, DOL or PBGC with respect thereto
and (b) within ten (10) Business Days after any member of the
Controlled Group obtains knowledge that a Termination Event has
occurred which could reasonably be expected to subject Holdings to
liability in excess of $250,000, a written statement of the chief
financial officer of Holdings describing such Termination Event and the
action, if any, which the member of the Controlled Group has taken, is
taking or proposes to take with respect thereto, and when known, any
action taken or threatened by the IRS, DOL or PBGC with respect
thereto;
(ii) within ten (10) Business Days after Holdings or any of
its Subsidiaries obtains knowledge that a prohibited transaction
(defined in Sections 406 of ERISA and Section 4975 of the Code) has
occurred, a statement of the chief financial officer of Holdings
describing such transaction and the action which Holdings or such
Subsidiary has taken, is taking or proposes to take with respect
thereto;
(iii) within ten (10) Business Days after any material
increase in the benefits of any existing Plan or the establishment of
any new Benefit Plan or the commencement of, or obligation to commence,
contributions to any Benefit Plan or Multiemployer Plan to which
Holdings or any member of the Controlled Group was not previously
contributing, notification of such increase, establishment,
commencement or obligation to commence and the amount of such
contributions;
(iv) within ten (10) Business Days after Holdings or any of
its Subsidiaries receives notice of any unfavorable determination
letter from the IRS regarding the qualification of a Plan under Section
401(a) of the Code, copies of each such letter;
-89-
<PAGE> 99
(v) within thirty (30) Business Days after the establishment
of any Foreign Employee Benefit Plan or the commencement of, or
obligation to commence, contributions to any Foreign Employee Benefit
Plan to which Holdings or any Subsidiary was not previously
contributing, notification of such establishment, commencement or
obligation to commence and the amount of such contributions;
(vi) within ten (10) Business Days after the filing thereof
with the IRS, a copy of each funding waiver request filed with respect
to any Benefit Plan and all communications received by Holdings or a
member of the Controlled Group with respect to such request;
(vii) within ten (10) Business Days after receipt by Holdings
or any member of the Controlled Group of the PBGC's intention to
terminate a Benefit Plan or to have a trustee appointed to administer a
Benefit Plan, copies of each such notice;
(viii) within ten (10) Business Days after receipt by Holdings
or any member of the Controlled Group of a notice from a Multiemployer
Plan regarding the imposition of withdrawal liability, copies of each
such notice;
(ix) within ten (10) Business Days after Holdings or any
member of the Controlled Group fails to make a required installment or
any other required payment under Section 412 of the Internal Revenue
Code on or before the due date for such installment or payment, a
notification of such failure; and
(x) within ten (10) Business Days after Holdings or any member
of the Controlled Group knows or has reason to know that (a) a
Multiemployer Plan has been terminated, (b) the administrator or plan
sponsor of a Multiemployer Plan intends to terminate a Multiemployer
Plan, or (c) the PBGC has instituted or will institute proceedings
under Section 4042 of ERISA to terminate a Multiemployer Plan.
For purposes of this Section 6.1(E), Holdings, any of its Subsidiaries and any
member of the Controlled Group shall be deemed to know all facts known by the
Administrator of any Plan of which the Borrower or any member of the Controlled
Group or such Subsidiary is the plan sponsor.
(F) Labor Matters. Notify the Administrative Agent and the Lenders in
writing, promptly upon Holdings' or any of its Subsidiaries' learning thereof,
of (i) any labor dispute to which Holdings or any of its Subsidiaries may become
a party, including, without limitation, any strikes, lockouts or other disputes
relating to such Persons' plants and other facilities and (ii) any Worker
Adjustment and Retraining Notification Act liability incurred with respect to
the closing of any plant or other facility of Holdings or any of its
Subsidiaries where, in the case of (i) or (ii), such is reasonably likely to
have a Material Adverse Effect.
-90-
<PAGE> 100
(G) Other Indebtedness. Deliver to the Administrative Agent (i) a copy
of each regular report, notice or communication regarding potential or actual
defaults (including any accompanying officers' certificate) delivered by or on
behalf of Holdings to the holders of Indebtedness for money borrowed pursuant to
the terms of the agreements governing such Indebtedness, such delivery to be
made at the same time and by the same means as such notice or other
communication is delivered to such holders, and (ii) a copy of each notice or
other communication received by Holdings from the holders of Indebtedness for
money borrowed pursuant to the terms of such Indebtedness, such delivery to be
made promptly after such notice or other communication is received by Holdings.
(H) Other Reports. Deliver or cause to be delivered to the
Administrative Agent and the Lenders copies of all financial statements, reports
and notices, if any, sent or made available generally by Holdings to owners of
ownership, membership or other equity interests in Holdings or filed with the
Commission by Holdings, all press releases made available generally by Holdings
or any of Holdings' Subsidiaries to the public concerning material developments
in the business of Holdings or any such Subsidiary and all notifications
received from the Commission by Holdings or its Subsidiaries pursuant to the
Securities Exchange Act and the rules promulgated thereunder.
(I) Environmental Notices. As soon as possible and in any event within
ten (10) days after receipt by Holdings or any of its Subsidiaries, a copy of
(i) any notice or claim to the effect that Holdings or any of its Subsidiaries
is or may be liable to any Person as a result of the Release by Holdings, any of
its Subsidiaries, or any other Person of any Contaminant into the environment,
and (ii) any notice alleging any violation of any Environmental, Health or
Safety Requirements of Law by Holdings or any of its Subsidiaries if, in either
case, such notice or claim relates to an event which could reasonably be
expected to subject Holdings or any of its Subsidiaries to liability in excess
of $500,000.
(J) Borrowing Base Certificate. As soon as practicable, and in any
event within thirty (30) days after the close of each calendar month (and more
often if requested by the Administrative Agent, the Documentation and Collateral
Agent or the Required Lenders but no more often than once weekly for so long as
no Default has occurred and is continuing), Holdings shall provide the
Administrative Agent, the Documentation and Collateral Agent and the Lenders
with a Borrowing Base Certificate, together with such supporting documents as
the Administrative Agent or the Documentation and Collateral Agent deems
desirable, all certified as being true and correct by the chief financial
officer or treasurer of Holdings. Holdings may update the Borrowing Base
Certificate and supporting documents more frequently than monthly and the most
recently delivered Borrowing Base Certificate shall be the applicable Borrowing
Base Certificate for purposes of determining the Borrowing Base at any time.
(K) Other Information. Promptly upon receiving a request therefor from
the Administrative Agent, prepare and deliver to the Administrative Agent and
the Lenders such other information with respect to Holdings, any of its
Subsidiaries, or the Collateral, including, without
-91-
<PAGE> 101
limitation, schedules identifying and describing the Collateral and any
dispositions thereof or any Asset Sale (and the use of the Net Cash Proceeds
thereof), as from time to time may be reasonably requested by the Administrative
Agent or the Documentation and Collateral Agent.
6.2 Affirmative Covenants.
(A) Existence, Etc. Holdings shall, and shall cause each of its
Subsidiaries to, at all times maintain its existence and preserve and keep, or
cause to be preserved and kept, in full force and effect its rights and
franchises material to its businesses except that any Subsidiary of Holdings may
merge with or liquidate into Holdings or any other Subsidiary of Holdings,
provided that the surviving entity expressly assumes any liabilities, if any, of
either of such Subsidiaries with respect to the Obligations pursuant to an
assumption agreement reasonably satisfactory to the Administrative Agent and
provided further that the consolidated net worth of the surviving corporation is
not less than the consolidated net worth of the Subsidiary with any liability
with respect to the Obligations immediately prior to such merger and any limited
liability company other than Holdings can elect to terminate its existence and
Holdings can merge or liquidate into a corporation that expressly assumes
Holdings' liabilities with respect to the Obligations pursuant to an assumption
agreement reasonably satisfactory to the Administrative Agent provided the
consolidated net worth of such corporation following such merger is not less
than the consolidated net worth of Holdings immediately prior to such merger.
(B) Powers. Holdings shall, and shall cause each of its Subsidiaries to
qualify and remain qualified to do business in each jurisdiction in which the
nature of its business requires it to be so qualified and where the failure to
be so qualified will have or is reasonably likely to have a Material Adverse
Effect.
(C) Compliance with Laws, Etc. Holdings shall, and shall cause its
Subsidiaries to, (a) comply with all Requirements of Law and all restrictive
covenants affecting such Person or the business, properties, assets or
operations of such Person, and (b) obtain as needed all Permits necessary for
its operations and maintain such Permits in good standing unless failure to
comply or obtain could not reasonably be anticipated to have a Material Adverse
Effect.
(D) Payment of Taxes and Claims; Tax Consolidation. Holdings shall pay,
and cause each of its Subsidiaries to pay, (i) all taxes, assessments and other
governmental charges imposed upon it or on any of its properties or assets or in
respect of any of its franchises, business, income or property before any
penalty or interest accrues thereon, and (ii) all claims (including, without
limitation, claims for labor, services, materials and supplies) for sums which
have become due and payable and which by law have or may become a Lien (other
than a Lien permitted by Section 6.3(C)) upon any of Holdings' or such
Subsidiary's property or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto; provided, however, that no such taxes,
assessments and governmental charges referred to in clause (i) above or claims
referred to in clause (ii) above (and interest, penalties or fines relating
thereto) need be paid if being contested in good faith by appropriate
proceedings diligently instituted and conducted and if such reserve or
-92-
<PAGE> 102
other appropriate provision, if any, as shall be required in conformity with
Agreement Accounting Principles shall have been made therefor. Holdings will not
permit any of its Subsidiaries to file or consent to the filing of any
consolidated income tax return with any Person other than Holdings or any of its
Subsidiaries.
(E) Insurance. Holdings shall maintain for itself and its Subsidiaries,
or shall cause each of its Subsidiaries to maintain in full force and effect the
insurance policies and programs listed on Schedule 5.17 to this Agreement or
substantially similar policies and programs or other policies and programs as
reflect coverage that is reasonably consistent with prudent industry practice.
Holdings shall deliver to the Administrative Agent endorsements (y) to all "All
Risk" physical damage insurance policies on all of the Borrowers' tangible real
and personal property and assets and business interruption insurance policies
naming the Documentation and Collateral Agent loss payee, and (z) to all general
liability and other liability policies naming the Administrative Agent an
additional insured. In the event Holdings, at any time or times hereafter shall
fail to obtain or maintain any of the policies or insurance required herein or
to pay any premium in whole or in part relating thereto, then the Administrative
Agent, without waiving or releasing any obligations or resulting Default
hereunder, may at any time or times thereafter (but shall be under no obligation
to do so) obtain and maintain such policies of insurance and pay such premiums
and take any other action with respect thereto which the Administrative Agent
deems advisable. All sums so disbursed by the Administrative Agent shall
constitute part of the Obligations, payable as provided in this Agreement.
(F) Inspection of Property; Books and Records; Discussions. Holdings
shall permit, and cause each of Holdings' Subsidiaries to permit, any authorized
representative(s) designated by either the Administrative Agent or any Lender to
visit and inspect any of the properties of Holdings or any of its Subsidiaries,
to examine, audit, check and make copies of their respective financial and
accounting records, books, journals, orders, receipts and any correspondence and
other data relating to their respective businesses or the transactions
contemplated hereby and by the Valley Acquisition (including, without
limitation, in connection with environmental compliance, hazard or liability),
and to discuss their affairs, finances and accounts with their officers and
independent certified public accountants, all upon reasonable notice and at such
reasonable times during normal business hours, as often as may be reasonably
requested; provided, the Administrative Agent and the Lenders shall not retain
independent accountants to conduct an accounting audit pursuant to the
provisions of this Section unless a Default or Unmatured Default shall have
occurred and be continuing. Holdings shall keep and maintain, and cause each of
Holdings' Subsidiaries to keep and maintain, in all material respects, proper
books of record and account in which entries in conformity with Agreement
Accounting Principles shall be made of all dealings and transactions in relation
to their respective businesses and activities, including, without limitation,
transactions and other dealings with respect to the Collateral. If a Default has
occurred and is continuing, Holdings, upon the Administrative Agent's request,
shall turn over any such records to the Administrative Agent or its
representatives.
-93-
<PAGE> 103
(G) Insurance and Condemnation Proceeds. Holdings directs (and, if
applicable, shall cause its Subsidiaries to direct) all insurers under policies
of property damage, boiler and machinery and business interruption insurance and
payors of any condemnation claim or award relating to the property to pay all
proceeds payable under such policies or with respect to such claim or award for
any loss with respect to the Collateral directly to the Documentation and
Collateral Agent, for the benefit of the Documentation and Collateral Agent and
the Holders of the Secured Obligations; provided, however, in the event that
such proceeds or award are less than $100,000 ("EXCLUDED PROCEEDS"), unless a
Default shall have occurred and be continuing, the Documentation and Collateral
Agent shall remit such Excluded Proceeds to Holdings. Each such policy shall
contain a long-form loss-payable endorsement naming the Documentation and
Collateral Agent as loss payee, which endorsement shall be in form and substance
acceptable to the Documentation and Collateral Agent. The Documentation and
Collateral Agent shall, upon receipt of such proceeds (other than Excluded
Proceeds) and at Holdings' direction, either remit such proceeds to the
Administrative Agent which will apply the same to the principal amount of the
Revolving Loans outstanding at the time of such receipt and create a
corresponding reserve against Revolving Credit Availability in an amount equal
to such application (the "INSURANCE RESERVE") or hold them as cash collateral
for the Obligations. For up to 180 days from the date of any loss (the "DECISION
PERIOD"), Holdings may notify the Documentation and Collateral Agent that it
intends to restore, rebuild or replace the property subject to any insurance
payment or condemnation award and shall, as soon as practicable thereafter,
provide the Documentation and Collateral Agent detailed information, including a
construction schedule and cost estimates. Should a Default occur at any time
during the Decision Period, should Holdings notify the Documentation and
Collateral Agent that it has decided not to rebuild or replace such property
during the Decision Period, or should Holdings fail to notify the Documentation
and Collateral Agent of Holdings' decision during the Decision Period, then the
amounts held as cash collateral pursuant to this Section 6.2(G) or as the
Insurance Reserve shall, at the option of the Required Lenders, be applied as a
mandatory prepayment of the Term Loans pursuant to Section 2.5(B). Proceeds held
as cash collateral pursuant to this Section 6.2(G) or constituting the Insurance
Reserve shall be disbursed as payments for restoration, rebuilding or
replacement of such property as such amounts become due; provided, however,
should a Default occur after Holdings has notified the Documentation and
Collateral Agent that it intends to rebuild or replace the property, the
Insurance Reserve or amounts held as cash collateral may, or shall, upon the
Required Lenders' direction, be applied as a mandatory prepayment of the Term
Loans pursuant to Section 2.5(B). In the event the Insurance Reserve is to be
applied as a mandatory prepayment to the Term Loans, Holdings shall be deemed to
have requested Revolving Loans in an amount equal to the Insurance Reserve, and
such Loans shall be made regardless of any failure of Holdings to meet the
conditions precedent set forth in Article IV. Upon completion of the
restoration, rebuilding or replacement of such property, the unused proceeds
shall constitute Net Cash Proceeds of an Asset Sale and shall be applied as a
mandatory prepayment of the Term Loans pursuant to Section 2.5(B). Proceeds of
insurance with respect to non-U.S. assets will be applied only to Loans made to
a non-U.S. Borrower.
-94-
<PAGE> 104
(H) ERISA Compliance. Holdings shall, and shall cause each of Holdings'
U.S. Subsidiaries to, establish, maintain and operate all Plans to comply in all
material respects with the provisions of ERISA, the Code, all other applicable
laws, and the regulations and interpretations thereunder and the respective
requirements of the governing documents for such Plans.
(I) Maintenance of Property. Holdings shall cause all property used or
useful in the conduct of its business or the business of any Subsidiary to be
maintained and kept in adequate condition, repair and working order and supplied
with all necessary equipment and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of Holdings may be necessary so that the business carried on in
connection therewith may be properly conducted at all times; provided, however,
that nothing in this Section 6.2(I) shall prevent Holdings from discontinuing
the operation or maintenance of any of such property if such discontinuance is,
in the judgment of Holdings, desirable in the conduct of its business or the
business of any Subsidiary and not disadvantageous in any material respect to
the Administrative Agent or the Lenders.
(J) Environmental Compliance. Holdings and its Subsidiaries shall
comply with all Environmental, Health or Safety Requirements of Law, except
where noncompliance will not have or is not reasonably likely to subject
Holdings and its Subsidiaries to liability, individually or in the aggregate, in
excess of $500,000 (excluding amounts covered by indemnity claims that are not
in dispute).
(K) Use of Proceeds. Holdings shall use the proceeds of the Loans to
effect the Valley Acquisition, to pay Transaction Costs, and to provide funds
for the working capital needs and other general corporate purposes of the
Borrowers and to repay outstanding Indebtedness. Holdings will not, nor will it
permit any Subsidiary to, use any of the proceeds of the Loans to purchase or
carry any "Margin Stock" or to make any Acquisition, other than the Valley
Acquisition and any Permitted Acquisition pursuant to Section 6.3(G).
(L) Interest Rate Agreements. Within one hundred eighty (180) days
after the Effective Date, Holdings shall enter or AAS or Valley shall have
entered into, and shall thereafter maintain, Interest Rate Agreements on terms
and with counterparties determined by Holdings and reasonably acceptable to the
Administrative Agent. In the event a Lender elects to enter into any Interest
Rate Agreement with Holdings, the obligations of Holdings with respect to such
Interest Rate Agreement shall be Secured Obligations secured by the Collateral.
(M) High Yield Offering. On or before December 31, 1997, Holdings
either (i) will effect an offering of Subordinated Notes in an aggregate
principal amount of not less than $100,000,000 pursuant to the High Yield Note
Agreement which shall contain terms, including, without limitation, terms with
respect to amount, maturity, amortization, interest rate, premiums, fees,
redemption, covenants, subordination terms, events of default and remedies
satisfactory to the Lenders or (ii) will have raised an additional $20,000,000
in net proceeds through the issuance of additional Subordinated Notes pursuant
to the Supplemental Subordinated Note Agreement
-95-
<PAGE> 105
which shall contain terms, including, without limitation, terms with respect to
amount, maturity, amortization, interest rate, premiums, fees, redemption,
covenants, subordination terms, events of default and remedies substantially
identical to those in the Subordinated Note Agreement or otherwise satisfactory
to the Required Lenders.
(N) Foreign Employee Benefit Compliance. Holdings shall, and shall
cause each of its Subsidiaries and ERISA Affiliates to, establish, maintain and
operate all Foreign Employee Benefit Plans to comply in all material respects
with all laws, regulations and rules applicable thereto and the respective
requirements of the governing documents for such Plans, except for failures to
comply which, in the aggregate, would not result in a material obligation to pay
money.
6.3 Negative Covenants.
(A) Indebtedness. Neither Holdings nor any of its Subsidiaries shall
directly or indirectly create, incur, assume or otherwise become or remain
directly or indirectly liable with respect to any Indebtedness, except:
(a) the Obligations;
(b) the Transaction Costs;
(c) Permitted Existing Indebtedness, and any extension,
renewal, refunding or refinancing thereof, provided that any such
extension, renewal, refunding or refinancing is in an aggregate
principal amount not greater than the principal amount of and interest,
fees and expenses accrued on, such Permitted Existing Indebtedness
outstanding at the time thereof and is on terms (including, without
limitation, maturity, amortization, interest rate, premiums, fees,
covenants, events of default, and remedies) not materially less
favorable to the obligor or materially adverse to the Lenders than the
terms of such Permitted Existing Indebtedness;
(d) Indebtedness evidenced by the Subordinated Notes, but not
any increase in the principal amount thereof or interest rate or fees
applicable thereto and not any refinancing or refunding thereof, in
whole or in part, unless (i) any such refinancing is in an aggregate
principal amount not greater than the principal amount of and interest,
fees and expenses accrued on, such Subordinated Notes outstanding at
the time thereof; (ii) the terms of such refinancing or refunding,
including, without limitation, with respect to amount, maturity,
amortization, interest rate, premiums, fees, covenants, subordination
terms, events of default and remedies have been disclosed in writing to
the Administrative Agent and the Lenders not later than fifteen (15)
Business Days prior to the date of the proposed refinancing and (iii)
neither the Administrative Agent nor the Required Lenders shall have
informed Holdings within ten (10) Business Days of the receipt of the
written terms of such proposed refinancing, that, in their reasonable
judgment, such refinancing or refunding is materially less favorable to
Holdings or adverse to the interests of the
-96-
<PAGE> 106
Lenders, including, without limitation, with respect to amount,
maturity, amortization, interest rate, premiums, fees, covenants,
subordination terms, events of default and remedies;
(e) Indebtedness evidenced by the Seller Note but not any
increase in the principal amount thereof or interest rate or fees
applicable thereto and not any refinancing or refunding thereof, in
whole or in part;
(f) Indebtedness arising from intercompany loans from (1)
Holdings or any Subsidiary of Holdings to any Borrower, or (2) any
Subsidiary that is not a Borrower to any other Subsidiary or (3) Brink
or Brink International to any Subsidiary of Brink or Brink
International provided the aggregate amount of all Indebtedness of such
Subsidiaries of Brink or Brink International to Brink or Brink
International does not exceed in the aggregate the sum of $12,000,000
or the Equivalent Amount thereof, and provided further that all such
Indebtedness is evidenced by notes (or other evidence of indebtedness
acceptable to the Documentation and Collateral Agent) which are pledged
to the Documentation and Collateral Agent, (it being understood that
notes and debt obligations pledged by non-U.S. Subsidiaries will secure
payment only of Advances made to non-U.S.
Subsidiaries);
(g) Indebtedness in respect of Interest Rate Agreements
permitted under Section 6.3(R);
(h) Indebtedness with respect to warranties and indemnities
made under any agreements for Asset Sales permitted under Section
6.3(B);
(i) secured or unsecured purchase money Indebtedness
(including Capitalized Leases) incurred by Holdings or any of its
Subsidiaries after the Closing Date to finance the acquisition of fixed
assets, if (1) at the time of such incurrence, no Default or Unmatured
Default has occurred and is continuing or would result from such
incurrence, (2) such Indebtedness has a scheduled maturity and is not
due on demand, (3) such Indebtedness does not exceed in the aggregate
outstanding at any time $4,000,000, and (4) any Lien securing such
Indebtedness is permitted under Section 6.3(C) (such Indebtedness being
referred to herein as "PERMITTED PURCHASE MONEY INDEBTEDNESS");
(j) Indebtedness with respect to surety, appeal and
performance bonds obtained by Holdings or any of its Subsidiaries in
the ordinary course of business;
(k) Indebtedness constituting Contingent Obligations permitted
by Section 6.3(E);
-97-
<PAGE> 107
(l) unsecured Indebtedness and other liabilities incurred in
the ordinary course of business and consistent with past practice, but
not incurred through the borrowing of money or the obtaining of credit
(other than customary trade terms); and
(m) Indebtedness incurred by AAS Canada on or after July 2,
1997 in an amount not to exceed Twenty Four Million Canadian Dollars
(C$24,000,000.00) to purchase certain assets pursuant to the Bell
Purchase Agreement, to effect the Nomadic Sports Purchase and to
provide for the working capital needs of AAS Canada.
(B) Sales of Assets. Neither Holdings nor any of its Subsidiaries shall
sell, assign, transfer, lease, convey or otherwise dispose of any property,
whether now owned or hereafter acquired, or any income or profits therefrom, or
enter into any agreement to do so, except:
(i) sales of Inventory in the ordinary course of business;
(ii) the disposition of obsolete equipment in the ordinary
course of business;
(iii) subject to compliance in connection therewith with the
terms of Section 2.5(B), sales, assignments, transfers, leases,
conveyances or other dispositions of other assets if such transaction
(a) is for all cash consideration with respect to any Collateral which
is sold, (b) is for not less than fair market value, and (c) when
combined with all such other sales, assignments, transfers, conveyances
or other dispositions in the immediately preceding twelve-month period
represents the disposition of not greater than ten percent (10.0%) of
Holdings' consolidated (y) tangible assets or (z) revenues;
(iv) subject to compliance in connection therewith with the
terms of Section 2.5(B) and Section 6.2(G), non-consensual dispositions
of property resulting from casualty damage (provided the loss is
covered by insurance in accordance with the provisions of Section
6.2(E)) or condemnation; and
(v) Excluded Transfers.
(C) Liens. Neither Holdings nor any of its Subsidiaries shall directly
or indirectly create, incur, assume or permit to exist any Lien on or with
respect to any of their respective property or assets except:
(i) Liens created by the Loan Documents;
(ii) Permitted Existing Liens;
(iii) Customary Permitted Liens;
-98-
<PAGE> 108
(iv) Liens to secure Indebtedness permitted pursuant to
Section 6.3(A)(f);
(v) purchase money Liens (including the interest of a lessor
under a Capitalized Lease and Liens to which any property is subject at
the time of the acquisition thereof by Holdings or one of its
Subsidiaries) securing Permitted Purchase Money Indebtedness; provided
that such Liens shall not apply to any property of Holdings or its
Subsidiaries other than that purchased or subject to such Capitalized
Lease; and
(vi) Liens to secure Indebtedness permitted pursuant to
Section 6.3(A)(m).
In addition, neither Holdings nor any or its Subsidiaries (other than AAS
Canada) shall become a party to any agreement, note, indenture or other
instrument, or take any other action, which would prohibit the creation of a
Lien on any of its properties or other assets in favor of the Administrative
Agent for the benefit of itself and the Holders of Secured Obligations, as
additional collateral for the Obligations; provided that any agreement, note,
indenture or other instrument in connection with Permitted Purchase Money
Indebtedness (including Leases) may prohibit the creation of a Lien in favor of
the Administrative Agent for the benefit of itself and the Holders of the
Secured Obligations on the items of property obtained with the proceeds of such
Permitted Purchase Money Indebtedness.
(D) Investments. Except to the extent permitted pursuant to paragraph
(G) below, neither Holdings nor any of its Subsidiaries shall directly or
indirectly make or own any Investment except:
(i) Investments in Cash Equivalents;
(ii) Permitted Existing Investments in an amount not greater
than the amount thereof on the Effective Date;
(iii) Investments received in connection with the bankruptcy
or reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(iv) Investments consisting of deposit accounts maintained by
AAS or Valley in connection with their cash management systems provided
funds deposited in such deposit accounts are regularly transferred to
concentration accounts maintained, as of the date of this Agreement
with the Documentation and Collateral Agent, or such other
concentration account as is established with the consent of the
Administrative Agent;
(v) Investments consisting of deposit accounts maintained by
AAS Canada, or Brink International or Brink or any other Subsidiaries
of Brink International;
-99-
<PAGE> 109
(vi) Investments made prior to the occurrence of a Default or
Unmatured Default in third parties or joint ventures consisting of
manufacturing operations in a related line of business to that of AAS
and which can provide manufacturing support to AAS ("DESIGNATED
INVESTMENTS"), provided the aggregate amount of Designated Investments
after the date hereof do not exceed $5,000,000 and treating such
Designated Investment as capital expenditures, after making such
Investments, AAS is in full compliance with the Terms of Section 6.4;
(vii) Investments made by Holdings in Brink Acquisition prior
to January 31, 1997 and in Brink International, by Brink Acquisition in
Brink and its Subsidiaries and in Brink International and Investments
made prior to January 31, 1997 by Brink International in Brink and its
Subsidiaries;
(viii) Investments with respect to Indebtedness permitted
pursuant to Section 6.3(A)(f);
(ix) Investments with any other Persons which do not exceed
$50,000 in the aggregate at any time;
(x) Investments by AAS Canada effected pursuant to the Bell
Purchase Agreement; and
(xi) Investments in AAS Canada in an aggregate amount not to
exceed C$2,500,000.
(E) Contingent Obligations. Neither Holdings nor any of its
Subsidiaries shall directly or indirectly create or become or be liable with
respect to any Contingent Obligation, except: (i) recourse obligations resulting
from endorsement of negotiable instruments for collection in the ordinary course
of business; (ii) Permitted Existing Contingent Obligations and any extensions,
renewals or replacements thereof, provided that any such extension, renewal or
replacement is not greater than the Indebtedness under, and shall be on terms no
less favorable to Holdings or such Subsidiary than the terms of, the Permitted
Existing Contingent Obligation being extended, renewed or replaced; (iii)
obligations, warranties, and indemnities, not relating to Indebtedness of any
Person, which have been or are undertaken or made in the ordinary course of
business and not for the benefit of or in favor of an Affiliate of Holdings or
such Subsidiary; (iv) Contingent Obligations arising under the Transaction
Documents; (v) Contingent Obligations of Holdings or any of its Subsidiaries
with respect to any Indebtedness permitted by this Agreement, (vi) additional
Contingent Obligations which do not exceed $500,000 in the aggregate at any
time; (vii) Contingent Obligations with respect to surety, appeal and
performance bonds obtained by borrower or any subsidiary in the ordinary course
of business; (viii) guaranties by Holdings and AAS of Indebtedness incurred by
AAS Canada to the Canadian Lenders to finance the purchase pursuant to the Bell
Purchase Agreement and any earnout or contingent purchase price payments
-100-
<PAGE> 110
assumed pursuant to the Bell Purchase Agreement, to finance the Nomadic Sports
Purchase and to provide for the working capital needs of AAS Canada; and (ix)
earnout or contingent purchase price obligations assumed by AAS Canada pursuant
to the Bell Purchase Agreement in an aggregate amount not to exceed C$2,500,000.
(F) Restricted Junior Payments. Neither Holdings nor any of its
Subsidiaries shall declare or make any Restricted Junior Payment, except:
(i) Tax Distributions made sufficiently in advance to permit
the members of AAS, Valley or Holdings to pay (or if a flow-through
entity, to permit the party liable with respect thereto to pay) their
respective Income Tax Liabilities at the time they are obligated to
make such payments in respect thereof to the relevant Governmental
Authorities;
(ii) scheduled payments of interest, fees or expenses, if any,
due on the Subordinated Indebtedness permitted under Section 6.3(A)(d)
and Section 6.3(A)(e) unless such payments are prohibited by the terms
of such Indebtedness;
(iii) payments of Permitted Subordinated Indebtedness from the
proceeds of Indebtedness incurred pursuant to Section 6.3(A)(d) to
refinance such Permitted Subordinated Indebtedness;
(iv) payments made in connection with the repurchase of
membership, ownership or other equity interests in Holdings or any of
its Subsidiaries from any Person in connection with the termination
(voluntarily or involuntarily) of such Person's employment with
Holdings or any of its Subsidiaries which, in the aggregate, exceed the
aggregate amount received by Holdings or any of its Subsidiaries from
the resale or reissuance of such interests by not more than $300,000;
(v) payments of customary and reasonable fees and expense
reimbursements to members of the board of managers or directors of
Holdings and any Borrower in an aggregate amount not to exceed $100,000
in any 12-month period;
(vi) management, consulting, advisory or other similar fees to
F. Alan Smith and/or Barry Banducci in the amounts required to be paid
pursuant to the Consulting Agreements dated as of the Closing Date
between AAS and F. Alan Smith and Barry R. Banducci, respectively, in
an aggregate amount not to exceed $290,000 in any 12-month period; and
(vii) Restricted Junior Payments made by any Subsidiary of
Holdings to Holdings or any other Subsidiary of Holdings except that no
Subsidiary that is a Borrower or an
-101-
<PAGE> 111
obligor on a Guaranty shall make any Restricted Junior Payment to a
Subsidiary of Holdings that is not a Borrower or an obligor on a
Guaranty.
provided, however, that the Restricted Junior Payments described in clause (iv)
above shall not be permitted if either a Default or an Unmatured Default shall
have occurred and be continuing at the date of declaration or payment thereof or
would result therefrom and further provided that the Restricted Junior Payments
described in clause (vi) above shall not be permitted if either a Default or an
Unmatured Default under Section 7.1(a) or an "Event of Default" (as defined in
the Subordinated Note Agreement) under Section 9.01(a) of the Subordinated Note
Agreement shall have occurred and be continuing at the date of declaration or
payment thereof, provided that after any such default is cured or waived in
writing and all amounts then due or owing to the Lenders and/or the holder of
the Subordinated Indebtedness have been paid in full, AAS, Valley or Holdings
may make the payments which, but for such default, AAS, Valley or Holdings would
have been permitted to make.
(G) Conduct of Business; Subsidiaries; Acquisitions. Neither Holdings
nor any of its Subsidiaries shall engage in any business other than the
businesses engaged in by them on the date hereof and any business or activities
which are substantially similar, related or incidental thereto. Holdings shall
not engage, either directly or indirectly (except through its Subsidiaries) in
any operating business enterprise but shall solely own ownership, membership or
other equity interests in its Subsidiaries. Holdings shall not and shall not
permit any of its Subsidiaries to create, capitalize or acquire any Subsidiary
after the date hereof except (i) Excluded Transfers, (ii) the reorganization of
certain French Subsidiaries and (iii) AAS Canada. Neither Holdings nor any of
its Subsidiaries shall enter into any transaction or series of transactions
(other than Excluded Transfers) in which it acquires all or any significant
portion of the assets of another Person unless such purchase meets the following
requirements (each such purchase constituting a "PERMITTED ACQUISITION") except
for AAS Canada:
(1) no Default or Unmatured Default shall have occurred and be
continuing or would result from such transaction or transactions or the
incurrence of any Indebtedness in connection therewith;
(2) prior to each such purchase, Holdings shall deliver to the
Administrative Agent and the Lenders a certificate from one of
Holdings' Authorized Officers demonstrating to the satisfaction of the
Administrative Agent and the Required Lenders that after giving effect
to such transaction or transactions and the incurrence of any
Indebtedness permitted by Section 6.3(A) in connection therewith on a
pro forma basis as if such acquisition and such incurrence of
Indebtedness had occurred on the first day of the twelve-month period
ending on the last day of Holdings' most recently completed fiscal
quarter, Holdings would have been in compliance with all provisions of
Section 6.4 at all times during such twelve-month period; and
-102-
<PAGE> 112
(3) effective as of the date of each such purchase (taking
into account the effect of such purchase and any indebtedness incurred
in connection therewith), Holdings shall deliver to the Administrative
Agent a Borrowing Base Certificate, which Borrowing Base Certificate
shall demonstrate that Revolving Credit Availability shall not be less
than $5,000,000; and
(4) the purchase is consummated pursuant to a negotiated
acquisition agreement on a non-hostile basis and involves the purchase
of a business line similar, related or incidental to that of the
Borrowers' as of the Effective Date; and
(5) the aggregate purchase price (including assumed
liabilities) in connection with all such transactions from and after
the Effective Date shall not exceed:
(A) $10,000,000 provided the sources for such
purchases are from Net Cash Proceeds resulting from the
issuance, sale, conveyance, disposition or other transfer by
Holdings or one of the other Borrowers of any Capital Stock of
or ownership, membership or other equity interests in such
Person; and
(B) $2,000,000 if the sources for such purchases are
other than as set forth in clause (A) above.
The acquisitions pursuant to the Bell Purchase Agreement and the Nomadic Sports
Purchase shall each be deemed to be Permitted Acquisitions.
(H) Transactions with Shareholders and Affiliates. Neither Holdings nor
any of its Subsidiaries shall directly or indirectly (i) except as permitted in
Section 6.3(F), pay any management fees or other similar fees or compensation to
Chase Capital Partners, Management or any other holder or holders of ownership,
membership or other equity interests in any of the Borrowers, other than wages,
salaries and bonuses of employees who are also holders of ownership, membership
or other equity interests in any of the Borrowers or Holdings in the ordinary
course and consistent with past practices or (ii) enter into or permit to exist
any transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with any holder or
holders of any ownership, membership or other equity interests in Holdings, or
with any Affiliate of Holdings which is not its Subsidiary, on terms that are
less favorable to Holdings or its Subsidiaries, as applicable, than those that
might be obtained in an arm's length transaction at the time from Persons who
are not such a holder or Affiliate.
(I) Restriction on Fundamental Changes. Neither Holdings nor any of its
Subsidiaries shall enter into any merger or consolidation, or liquidate, wind-up
or dissolve (or suffer any liquidation or dissolution), or convey, lease, sell,
transfer or otherwise dispose of, in one transaction or series of transactions,
all or substantially all of Holdings' or any such Subsidiary's
-103-
<PAGE> 113
business or property, whether now or hereafter acquired, except transactions
permitted under Sections 6.3(B) or 6.3(G) and except that any Subsidiary of
Holdings may merge with or liquidate into Holdings or any other Subsidiary of
Holdings, provided that the surviving entity expressly assumes any liabilities,
if any, of either of such Subsidiaries with respect to the Obligations pursuant
to an assumption agreement reasonably satisfactory to the Administrative Agent
and provided further that the consolidated net worth of the surviving
corporation is not less than the consolidated net worth of the Subsidiary with
any liability with respect to the Obligations immediately prior to such merger
and any limited liability company other than Holdings may terminate its
existence and Holdings may merge or liquidate into a corporation provided such
corporation expressly assumes the liabilities of Holdings with respect to the
Obligations pursuant to an assumption agreement reasonably satisfactory to the
Administrative Agent and the consolidated net worth of such corporation
following such merger is not less than the consolidated net worth of Holdings
immediately prior thereto.
(J) Sales and Leasebacks. Neither Holdings nor any of its Subsidiaries
shall become liable, directly, by assumption or by Contingent Obligation, with
respect to any lease, whether an Operating Lease or a Capitalized Lease, of any
property (whether real or personal or mixed) (i) which it or one of its
Subsidiaries sold or transferred or is to sell or transfer to any other Person,
or (ii) which it or one of its Subsidiaries intends to use for substantially the
same purposes as any other property which has been or is to be sold or
transferred by it or one of its Subsidiaries to any other Person in connection
with such lease, unless in either case the sale involved is not prohibited under
Section 6.3(B) and the lease involved is not prohibited under Section 6.3(A).
(K) Margin Regulations. Neither the Borrower nor any of its
Subsidiaries, shall use all or any portion of the proceeds of any credit
extended under this Agreement to purchase or carry Margin Stock.
(L) ERISA. Holdings shall not (i) engage, or permit any of its
Subsidiaries to engage, in any prohibited transaction described in Sections 406
of ERISA or 4975 of the Code for which a statutory or class exemption is not
available or a private exemption has not been previously obtained from the DOL;
(ii) permit to exist any accumulated funding deficiency (as
defined in Sections 302 of ERISA and 412 of the Internal Revenue Code),
with respect to any Benefit Plan, whether or not waived;
(iii) fail, or permit any Controlled Group member to fail, to
pay timely required contributions or annual installments due with
respect to any waived funding deficiency to any Benefit Plan;
(iv) terminate, or permit any Controlled Group member to
terminate, any Benefit Plan which would result in any liability of
Holdings or any Controlled Group member under Title IV of ERISA;
-104-
<PAGE> 114
(v) fail to make any contribution or payment to any
Multiemployer Plan which Holdings or any Controlled Group member may be
required to make under any agreement relating to such Multiemployer
Plan, or any law pertaining thereto;
(vi) fail, or permit any Controlled Group member to fail, to
pay any required installment or any other payment required under
Section 412 of the Internal Revenue Code on or before the due date for
such installment or other payment; or
(vii) amend, or permit any Controlled Group member to amend, a
Plan resulting in an increase in current liability for the plan year
such that Holdings or any Controlled group member is required to
provide security to such Plan under Section 401(a)(29) of the Code.
(M) Issuance of Equity Interests. Neither Holdings nor any of its
Subsidiaries shall issue any ownership, membership or other equity interests
after the date of this Agreement other than issuance of equity interests by
Subsidiaries of Holdings to Holdings or to a wholly-owned Subsidiary of
Holdings; provided in each such case all mandatory prepayments required under
Section 2.5(B) are made and provided further that all such equity interests
shall have been pledged to the Documentation and Collateral Agent for the
benefit of itself and the Holders of Secured Obligations pursuant to pledge
documentation in form and substance acceptable to the Documentation and
Collateral Agent (unless such a pledge would have adverse tax consequences for
Holdings).
(N) Organizational Documents. Neither Holdings nor any of its
Subsidiaries shall amend, modify or otherwise change any of the terms or
provisions in any of their respective organizational documents as in effect on
the date hereof in any manner adverse to the interests of the Lenders without
the prior written consent of the Required Lenders.
(O) Other Indebtedness. Neither Holdings nor any of its Subsidiaries
shall amend, supplement or otherwise modify the terms of any Indebtedness (other
than the Obligations) permitted under Section 6.3(A) except Indebtedness owed by
a Borrower or Guarantor to a Borrower or Guarantor in any way that would be
materially less advantageous to Holdings or such Subsidiary or materially
adverse to the Lenders, including, without limitation, with respect to amount,
maturity, amortization, interest rate, premiums, fees, covenants, events of
default and remedies.
(P) Fiscal Year. Neither Holdings nor any of its consolidated
Subsidiaries shall change its fiscal year for accounting or tax purposes from a
period consisting of the 12-month period ending on December 31 of each calendar
year.
(Q) Change of Deposit Accounts. Holdings shall not, and shall not
permit any Subsidiary to, establish or maintain any deposit account with any
bank or other financial institution other than
-105-
<PAGE> 115
(i) those which have entered into a Collection Account Agreement in form and
substance acceptable to the Documentation and Collateral Agent, (ii) in the case
of AAS Canada, Brink International or Brink or other Subsidiaries of Brink
International, those which have entered into arrangements acceptable to the
Documentation and Collateral Agent and (iii) others where the aggregate balance
does not exceed $500,000 in the aggregate.
(R) Rate Hedging Obligations. Holdings shall not and shall not permit
any of its Subsidiaries to enter into any interest rate, commodity or foreign
currency exchange, swap, collar, cap or similar agreements other than interest
rate, foreign currency or commodity exchange, swap, collar, cap, leveraged
derivative or similar agreements entered into pursuant to Section 6.2(L) hereof
or pursuant to which Holdings or any of its Subsidiaries have hedged its or
their actual interest rate, foreign currency or commodity exposure (such hedging
agreements are sometimes referred to herein as "INTEREST RATE AGREEMENTS").
(S) Subordinated Indebtedness. Holdings shall not amend, supplement or
modify the terms of any Permitted Subordinated Indebtedness, or make any payment
required as a result of an amendment or change thereto. Except as permitted in
Section 6.3(F)(ii) or as required by Section 2.5(B)(ii)(d)(II), neither Holdings
nor any of its Subsidiaries shall purchase, redeem, prepay (by set-off or
otherwise), defease or repay any principal of, premium, if any, or other amount
(other than interest) payable in respect of any Permitted Subordinated
Indebtedness nor shall any of them prepay (by set-off or otherwise) any interest
payable in respect of any Permitted Subordinated Indebtedness.
6.4 Financial Covenants. Holdings shall comply with the following:
(A) Defined Terms for Financial Covenants. The following terms used in
this Agreement shall have the following meanings (such meanings to be
applicable, except to the extent otherwise indicated in a definition of a
particular term, both to the singular and the plural forms of the terms
defined):
"CAPITAL EXPENDITURES" means, for any period, the aggregate of (i) all
expenditures (whether paid in cash or accrued as liabilities and including
Capitalized Leases and Permitted Purchase Money Indebtedness) by Holdings and
its Subsidiaries during that period that, in conformity with Agreement
Accounting Principles, are required to be included in or reflected by the
property, plant, equipment or similar fixed asset accounts reflected in the
consolidated balance sheet of Holdings and its Subsidiaries other than with
respect to the acquisition of inventory in the ordinary course of business and
(ii) all Designated Investments during that period under Section 6.3(D)(v). No
portion of the purchase of assets by AAS Canada pursuant to the Bell Purchase
Agreement or the Nomadic Sports Purchase shall be deemed to be a Capital
Expenditure.
"CONSOLIDATED NET WORTH" shall mean, at a particular date, all amounts
which would be included under owners' or members' equity for Holdings and its
consolidated Subsidiaries
-106-
<PAGE> 116
determined in accordance with Agreement Accounting Principles, provided,
however, (i) if Holdings issues Subordinated Notes pursuant to the High Yield
Note Agreement, the effect of payments made to repurchase, redeem or cancel the
warrants issued to the Holders of the Subordinated Notes issued pursuant to the
Subordinated Note Agreement shall be excluded in calculating Holdings'
Consolidated Net Worth and (ii) the effect of any adjustments in the cumulative
foreign currency translation account of Holdings and its consolidated
Subsidiaries shall be excluded in calculating Holdings' Consolidated Net Worth.
"EBITDA" means, for any period, on a consolidated basis for Holdings
and its consolidated Subsidiaries, the sum of the amounts for such period,
without duplication, of (i) Net Income, plus (ii) Tax Distributions, plus (iii)
charges against income for foreign income taxes or U.S. income taxes, plus (iv)
Interest Expense, plus (v) depreciation expense, plus (vi) amortization expense,
including, without limitation, amortization of goodwill and other intangible
assets, plus (vii) other non-cash charges (including, without duplication, any
effect of any write-up in the value of Inventory attributable to purchase
accounting) in accordance with Agreement Accounting Principles, minus (viii)
interest income, minus (ix) extraordinary gains (and any nonrecurring unusual
gains arising in or outside of the ordinary course of business not included in
extraordinary gains determined in accordance with Agreement Accounting
Principles which have been included in the determination of Net Income).
"INTEREST EXPENSE" means, for any period, the total interest expense of
Holdings and its consolidated Subsidiaries, whether paid or accrued, but without
duplication (including the interest component of Capitalized Leases), but
excluding interest expense not payable in cash (including amortization of
discount), all as determined in conformity with Agreement Accounting Principles.
"NET INCOME" means, for any period, the net earnings (or loss) after
taxes of Holdings and its Subsidiaries on a consolidated basis for such period
taken as a single accounting period determined in conformity with Agreement
Accounting Principles minus an amount equal to Tax Distributions made for such
period.
"RENTALS" of a Person means the aggregate fixed amounts payable by such
Person under any lease of real or personal property but does not include any
amounts payable under Capitalized Leases of such Person.
"SENIOR DEBT RATIO" shall mean the ratio of (i) the Indebtedness of
Holdings and its consolidated Subsidiaries with respect to the Secured
Obligations (other than Rate Hedging Obligations) to (ii) EBITDA. In each case,
the Senior Debt Ratio shall be determined as of the last day of each fiscal
quarter based upon, for Indebtedness, the outstanding principal balance of the
Obligations of the Borrowers as of the last day of each such fiscal quarter and,
for EBITDA, the actual amount of EBITDA of Holdings and its consolidated
Subsidiaries for the four (4) fiscal quarter period ending on such day
(provided, however, that (a) for the fiscal quarter ending September 30, 1997,
the Senior Debt Ratio shall be calculated using EBITDA for Holdings and
-107-
<PAGE> 117
its consolidated Subsidiaries for such fiscal quarter multiplied by four (4),
(b) for the fiscal quarter period ending December 31, 1997, the Senior Debt
Ratio shall be calculated using EBITDA for Holdings and its consolidated
Subsidiaries for the two (2) fiscal quarters ending December 31, 1997 multiplied
by two (2), and (c) for the fiscal quarter ending March 31, 1998, the Senior
Debt Ratio shall be calculated using EBITDA for Holdings and its consolidated
Subsidiaries for the three (3) fiscal quarters ending March 31, 1998 multiplied
by four-thirds (4/3)).
(B) Rentals. Holdings will not, nor will it permit any Subsidiary to,
create, incur or suffer to exist obligations for Rentals in excess of $4,000,000
in any fiscal year of Holdings on a non-cumulative basis in the aggregate for
Holdings and its Subsidiaries.
(C) Fixed Charge Coverage Ratio. Holdings shall maintain a ratio
("FIXED CHARGE COVERAGE RATIO") of: (i) the sum of the amounts of (a) EBITDA,
minus (b) Capital Expenditures (excluding Capital Expenditures to the extent (x)
they are financed by third parties, (y) they are paid for with proceeds from
Asset Sales or (z) they are paid for with insurance or condemnation proceeds) to
(ii) the sum of the amounts of (a) Interest Expense, plus (b) scheduled
amortization of the principal portion of the Term Loans and scheduled
amortization of the principal portion of all other Indebtedness of Holdings and
its Subsidiaries during such period of at least:
(1) 1.25 to 1.00 for the fiscal quarter ending December 31,
1997;
(2) 1.30 to 1.00 for the fiscal quarter ending March 31, 1998;
(3) 1.35 to 1.00 for the fiscal quarter ending June 30, 1998;
(4) 1.40 to 1.00 for the fiscal quarter ending September 30,
1998; and
(5) 1.50 to 1.00 for each fiscal quarter thereafter until the
Tranche B Term Loan Termination Date.
In each case the Fixed Charge Coverage Ratio shall be determined as of the last
day of each fiscal quarter for the four-quarter period ending on such day
(provided, however, that (a) for the fiscal quarter ending December 31, 1997,
the Fixed Charge Coverage Ratio shall be calculated using (i) EBITDA, Capital
Expenditures, Interest Expense and the scheduled principal amortization of
Indebtedness of Holdings and its consolidated Subsidiaries for the fiscal
quarter ended December 31, 1997, (b) for the fiscal quarter ending March 31,
1998, the Fixed Charge Coverage Ratio shall be calculated using (i) EBITDA,
Capital Expenditures, Interest Expense and the scheduled principal amortization
of Indebtedness of Holdings and its consolidated Subsidiaries for the two fiscal
quarters ending March 31, 1998 and (c) for the fiscal quarter ending June 30,
1998, the Fixed Charge Coverage Ratio shall be calculated using (i) EBITDA,
Capital Expenditures, Interest Expense and the scheduled principal amortization
of Indebtedness of Holdings and its consolidated Subsidiaries for the three
fiscal quarters ending June 30, 1998).
-108-
<PAGE> 118
(D) Minimum Consolidated Net Worth. Holdings shall not permit its
Consolidated Net Worth at any time to be less than $14,000,000 plus seventy-five
percent (75%) of Net Income from October 1, 1997 to the date of such
calculation.
At the time the purchase accounting adjustments for the Valley Acquisition are
finalized, the financial covenants in Section 6.4(D) will be amended in a credit
neutral manner to reflect any difference between the actual purchase accounting
adjustments and the purchase accounting adjustments projected as of the
Effective Date.
(E) Maximum Leverage Ratio. Holdings shall not permit the ratio
("LEVERAGE RATIO") of (i) the sum of (a) Indebtedness of Holdings and its
consolidated Subsidiaries for borrowed money, including, without limitation,
Indebtedness evidenced by the Subordinated Notes and Indebtedness evidenced by
the Seller Note and (b) Capitalized Lease Obligations to (ii) EBITDA to be
greater than the ratio set forth below at the end of the fiscal quarter ending
on the corresponding date set forth below:
PERIOD ENDING MAXIMUM LEVERAGE RATIO
------------- ----------------------
December 31, 1997 5.50 to 1.00
March 31, 1998 5.25 to 1.00
June 30, 1998 5.00 to 1.00
September 30, 1998 4.75 to 1.00
December 31, 1998 4.50 to 1.00
March 31, 1999 4.50 to 1.00
June 30, 1999 4.25 to 1.00
September 30, 1999 4.25 to 1.00
December 31, 1999 4.00 to 1.00
March 31, 2000 4.00 to 1.00
June 30, 2000 3.75 to 1.00
September 30, 2000 3.75 to 1.00
December 31, 2000 3.50 to 1.00
and each quarter
thereafter
The Leverage Ratio shall be calculated, in each case, determined as of the last
day of each fiscal quarter based upon (A) for Indebtedness, Indebtedness as of
the last day of each such fiscal quarter; and (B) for EBITDA, the actual amount
for the four-quarter period ending on such day (provided, however, that (a) for
the fiscal quarter ending December 31, 1997, the Leverage Ratio
-109-
<PAGE> 119
shall be calculated using EBITDA for Holdings and its consolidated Subsidiaries
for the fiscal quarter ending on such date multiplied by four (4), (b) for the
fiscal quarter ending March 31, 1998, the Leverage Ratio shall be calculated
using EBITDA for Holdings and its consolidated Subsidiaries for the two fiscal
quarter period ending March 31, 1998 multiplied by two (2), and (c) for the
fiscal quarter ending June 30, 1998, the Leverage Ratio shall be calculated
using EBITDA for Holdings and its consolidated Subsidiaries for the three fiscal
quarter period ending June 30, 1998 multiplied by four-thirds (4/3).
(F) Capital Expenditures. Holdings will not, nor will it permit any
Subsidiary to, expend, or be committed to expend, for Capital Expenditures
(excluding Capital Expenditures to the extent (x) they are financed by third
parties, (y) they are paid for with proceeds from Asset Sales or (z) they are
paid for with insurance or condemnation proceeds) during any one fiscal year in
the aggregate for Holdings and its Subsidiaries in excess of $10,000,000 plus
the difference, if positive, between the maximum aggregate amount of Capital
Expenditures permitted to be expended in the immediately preceding fiscal year
and the amount of Capital Expenditures actually expended in the immediately
preceding fiscal year but only to the extent that such difference does not
exceed $5,000,000.
ARTICLE VII: DEFAULTS
7.1 Defaults. Each of the following occurrences shall constitute a
Default under this Agreement:
(a) Failure to Make Payments When Due. Any Borrower shall (i) fail to
pay when due any of the Obligations consisting of principal with respect to the
Loans or (ii) shall fail to pay within three (3) Business Days of the date when
due any of the other Obligations under this Agreement or the other Loan
Documents.
(b) Breach of Certain Covenants. Any Borrower shall fail duly and
punctually to perform or observe any agreement, covenant or obligation binding
on such Borrower under:
(i) Sections 6.1(C), 6.1(D), 6.1(E), 6.1(F), 6.1(G), 6.1(H),
6.1(I), 6.1(K), 6.2(B), 6.2(C) or 6.2(F) and such failure shall
continue unremedied for fifteen (15) days;
(ii) Section 6.1(A), 6.1(B) or 6.1(J) and such failure shall
continue unremedied for five (5) Business Days; or
(iii) Section 6.3 or 6.4(B), 6.4(C), 6.4(D), 6.4(E) or 6.4(F).
(c) Breach of Representation or Warranty. Any representation or
warranty made or deemed made by any Borrower to the Administrative Agent or any
Lender herein or by Holdings or any of its Subsidiaries in any of the other Loan
Documents or in any statement or certificate at
-110-
<PAGE> 120
any time given by any such Person pursuant to any of the Loan Documents shall be
false or misleading in any material respect on the date as of which made (or
deemed made).
(d) Other Defaults. Any Borrower shall default in the performance of or
compliance with any term contained in this Agreement (other than as covered by
paragraphs (a), (b) or (c) of this Section 7.1), or Holdings or any of its
Subsidiaries shall default in the performance of or compliance with any term
contained in any of the other Loan Documents, and such default shall continue
for thirty (30) days after Holdings or any of its Subsidiaries knew of such
default or should have known of such default exercising reasonable diligence, or
Holdings or any of its Subsidiaries shall default on the performance of or
compliance with any term contained in the Subordinated Note Agreement, the High
Yield Note Agreement or the Supplemental Subordinated Note Agreement and such
default shall continue for the applicable period of grace set forth therein.
(e) Default as to Other Indebtedness. Any of Holdings or any of its
Subsidiaries shall fail to make any payment when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) with respect
to any Indebtedness (other than the Obligations) the outstanding principal
amount of which Indebtedness is in excess of $500,000; or any breach, default or
event of default shall occur, or any other condition shall exist under any
instrument, agreement or indenture pertaining to any such Indebtedness, if the
effect thereof is to cause an acceleration, mandatory redemption, a requirement
that Holdings or any such Subsidiary offer to purchase such Indebtedness or
other required repurchase of such Indebtedness, or permit the holder(s) of such
Indebtedness to accelerate the maturity of any such Indebtedness or require a
redemption or other repurchase of such Indebtedness; or any such Indebtedness
shall be otherwise declared to be due and payable (by acceleration or otherwise)
or required to be prepaid, redeemed or otherwise repurchased by Holdings or any
of its Subsidiaries (other than by a regularly scheduled required prepayment)
prior to the stated maturity thereof.
(f) Involuntary Bankruptcy; Appointment of Receiver, Etc.
(i) An involuntary case shall be commenced against Holdings or
any of its Subsidiaries and the petition shall not be dismissed,
stayed, bonded or discharged within sixty (60) days after commencement
of the case; or a court having jurisdiction in the premises shall enter
a decree or order for relief in respect of Holdings or any of its
Subsidiaries in an involuntary case, under any applicable bankruptcy,
insolvency or other similar law now or hereinafter in effect; or any
other similar relief shall be granted under any applicable federal,
state, local or foreign law.
(ii) A decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over Holdings
or any of its Subsidiaries or over all or a substantial part of the
property of Holdings or any of its Subsidiaries shall be entered; or an
interim receiver, trustee or other custodian of Holdings or any of its
Subsidiaries or of all or a
-111-
<PAGE> 121
substantial part of the property of Holdings or any of its Subsidiaries
shall be appointed or a warrant of attachment, execution or similar
process against any substantial part of the property of Holdings or any
of its Subsidiaries shall be issued and any such event shall not be
stayed, dismissed, bonded or discharged within sixty (60) days after
entry, appointment or issuance.
(g) Voluntary Bankruptcy; Appointment of Receiver, Etc. Holdings or any
of its Subsidiaries shall (i) commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, (ii)
consent to the entry of an order for relief in an involuntary case, or to the
conversion of an involuntary case to a voluntary case, under any such law, (iii)
consent to the appointment of or taking possession by a receiver, trustee or
other custodian for all or a substantial part of its property, (iv) make any
assignment for the benefit of creditors or (v) take any corporate, partnership
or comparable action to authorize any of the foregoing.
(h) Judgments and Attachments. Any money judgment(s) (other than a
money judgment covered by insurance as to which the insurance company has not
disclaimed or reserved the right to disclaim coverage), writ or warrant of
attachment, or similar process against any of Holdings or any of its
Subsidiaries or any of their respective assets involving in any single case or
in the aggregate an amount in excess of $500,000 is (are) entered and shall
remain undischarged, unvacated, unbonded or unstayed for a period of sixty (60)
days or in any event later than fifteen (15) days prior to the date of any
proposed sale thereunder.
(i) Dissolution. Any order, judgment or decree shall be entered against
Holdings or any of its Subsidiaries decreeing its involuntary dissolution or
split up and such order shall remain undischarged and unstayed for a period in
excess of sixty (60) days; or Holdings or any of its Subsidiaries shall
otherwise dissolve or cease to exist except as specifically permitted by this
Agreement unless the dissolving entity is a limited liability company which
elects to continue its existence.
(j) Loan Documents; Failure of Security. At any time, for any reason,
(i) any Loan Document as a whole that materially affects the ability of the
Administrative Agent, Documentation and Collateral Agent, or any of the Lenders
to enforce the Obligations or enforce their rights against the Collateral ceases
to be in full force and effect or any of Holdings or any of its Subsidiaries
party thereto seeks to repudiate its obligations thereunder and the Liens
intended to be created thereby are, or any of Holdings or any such Subsidiary
seeks to render such Liens, invalid and unperfected, or (ii) Liens on Collateral
with a fair market value in excess of $500,000 in favor of the Administrative
Agent contemplated by the Loan Documents shall, at any time, for any reason, be
invalidated or otherwise cease to be in full force and effect, or such Liens
shall not have the priority contemplated by this Agreement or the Loan
Documents.
-112-
<PAGE> 122
(k) Termination Event. Any Termination Event occurs which the Required
Lenders believe is reasonably likely to subject Holdings, Valley or AAS to
liability in excess of $250,000.
(l) Waiver of Minimum Funding Standard. If the plan administrator of
any Plan applies under Section 412(d) of the Code for a waiver of the minimum
funding standards of Section 412(a) of the Code and any Lender believes the
substantial business hardship upon which the application for the waiver is based
could reasonably be expected to subject either Holdings or any Controlled Group
member to liability in excess of $250,000.
(m) Change of Control. A Change of Control shall occur.
(n) Interest Rate Agreements. Nonpayment by Holdings or any of its
Subsidiaries of any obligation under the any Interest Rate Agreements entered
into with any Lender on the date such payment is due or the breach by Holdings
or any of its Subsidiaries of any other term, provision or condition contained
in any such Interest Rate Agreements which breach remains unremedied for thirty
(30) days.
(o) Environmental Matters. Holdings or any of its Subsidiaries shall be
the subject of any proceeding or investigation pertaining to (i) the Release by
Holdings or any of its Subsidiaries of any Contaminant into the environment,
(ii) the liability of any of Holdings or any of its Subsidiaries arising from
the Release by any other Person of any Contaminant into the environment, or
(iii) any violation of any Environmental, Health or Safety Requirements of Law
by Holdings or any of its Subsidiaries, which, in any case, has or is reasonably
likely to subject Holdings or any of its Subsidiaries to liability individually
or in the aggregate in excess of $500,000.
(p) Guarantor Revocation. Any guarantor of the Obligations shall
terminate or revoke or refuse to perform any of its payment obligations under
the applicable guarantee agreement or breach any of the other terms of such
guarantee agreement which breach remains unremedied for thirty (30) days.
(q) Failure of Subordination. The subordination provisions of the
documents and instruments evidencing any Permitted Subordinated Indebtedness, at
any time, be invalidated or otherwise cease to be in full force and effect.
A Default shall be deemed "continuing" until cured or until waived in
writing in accordance with Section 8.3.
ARTICLE VIII: ACCELERATION, DEFAULTING LENDERS; WAIVERS,
AMENDMENTS AND REMEDIES
-113-
<PAGE> 123
8.1 Remedies
(a) Termination of Commitments; Acceleration. If any Default described
in Section 7.1(f) or 7.1(g) occurs with respect to any of the Borrowers, the
obligations of the Lenders to make Loans hereunder and the obligation of the
Administrative Agent or any Issuing Lender to issue Letters of Credit hereunder
shall automatically terminate and the Obligations shall immediately become due
and payable without any election or action on the part of the Administrative
Agent, any Lender or any Issuing Lender. If any other Default occurs, the
Required Lenders may (i) terminate or suspend the obligations of the Lenders to
make Loans hereunder and the obligation of the Issuing Lenders to issue Letters
of Credit hereunder, or (ii) declare the Obligations to be due and payable, or
both, and upon any declaration under clause (ii), the Obligations shall become
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which the Borrowers expressly waive.
(b) Rescission. If at any time after termination of the Lenders'
obligations to make Revolving Loans or acceleration of the maturity of the
Loans, Borrowers shall pay all arrears of interest and all payments on account
of principal of the Loans and Reimbursement Obligations which shall have become
due otherwise than by acceleration (with interest on principal and, to the
extent permitted by law, on overdue interest, at the rates specified in this
Agreement) and all Defaults and Unmatured Defaults (other than nonpayment of
principal of and accrued interest on the Loans due and payable solely by virtue
of acceleration) shall be remedied or waived pursuant to Section 8.3, then upon
the written consent of the Required Lenders and written notice to Borrowers, the
termination of Lenders' respective obligations to make Revolving Loans and the
respective Lenders' and the Issuing Lenders' obligations to participate in or
issue Letters of Credit or the aforesaid acceleration and its consequences may
be rescinded and annulled; but such action shall not affect any subsequent
Default or Unmatured Default or impair any right or remedy consequent thereon.
The provisions of the preceding sentence are intended merely to bind the Lenders
and the Issuing Lenders to a decision which may be made at the election of the
Required Lenders; they are not intended to benefit Borrowers and do not give
Borrowers the right to require the Lenders to rescind or annul any termination
of the aforesaid obligations of the Lenders or Issuing Lenders or any
acceleration hereunder, even if the conditions set forth herein are met.
(c) Enforcement. The Borrowers acknowledge that in the event the
Borrowers fail to perform, observe or discharge any of their respective
obligations or liabilities under this Agreement or any other Loan Document, any
remedy of law may prove to be inadequate relief to the Administrative Agent, the
Issuing Lenders and the Lenders; therefore, Borrowers agree that the
Administrative Agent, the Issuing Lenders and the Lenders shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
8.2 Defaulting Lender. In the event that any Lender fails to fund its
Tranche A Pro Rata Share or Tranche B Pro Rata Share, as applicable, of any
Advance requested or deemed requested by any Borrower which such Lender is
obligated to fund under the terms of this
-114-
<PAGE> 124
Agreement (the funded portion of such Advance being hereinafter referred to as a
"NON PRO RATA LOAN"), until the earlier of such Lender's cure of such failure
and the termination of the Revolving Loan Commitments, the proceeds of all
amounts thereafter repaid to the Administrative Agent by the Borrowers and
otherwise required to be applied to such Lender's share of all other Obligations
pursuant to the terms of this Agreement shall be advanced to the Borrowers by
the Administrative Agent ("CURE LOANS") on behalf of such Lender to cure, in
full or in part, such failure by such Lender, but shall nevertheless be deemed
to have been paid to such Lender in satisfaction of such other Obligations.
Notwithstanding anything in this Agreement to the contrary:
(i) the foregoing provisions of this Section 8.2 shall apply
only with respect to the proceeds of payments of Obligations and shall
not affect the conversion or continuation of Loans pursuant to Section
2.10;
(ii) any such Lender shall be deemed to have cured its failure
to fund its Tranche A Pro Rata Share or Tranche B Pro Rata Share, as
applicable of any Advance at such time as an amount equal to such
Lender's original Tranche A Pro Rata Share or Tranche B Pro Rata Share,
as applicable, of the requested principal portion of such Advance is
fully funded to the applicable Borrower, whether made by such Lender
itself or by operation of the terms of this Section 8.2, and whether or
not the Non Pro Rata Loan with respect thereto has been repaid,
converted or continued;
(iii) amounts advanced to any Borrower to cure, in full or in
part, any such Lender's failure to fund its Tranche A Pro Rata Share or
Tranche B Pro Rata Share, as applicable, of any Advance shall bear
interest at the rate applicable to Tranche A Term Loans or Tranche B
Term Loans, as applicable, which are Base Rate Loans, in effect from
time to time, and for all other purposes of this Agreement shall be
treated as if they were Base Rate Loans;
(iv) regardless of whether or not a Default has occurred or is
continuing, and notwithstanding the instructions of the applicable
Borrower as to its desired application, all repayments of principal
which, in accordance with the other terms of this Agreement, would be
applied to the outstanding Base Rate Loans shall be applied first,
ratably to all Base Rate Loans constituting Non Pro Rata Loans, second,
ratably to Base Rate Loans other than those constituting Non Pro Rata
Loans or Cure Loans and, third, ratably to Base Rate Loans constituting
Cure Loans;
(v) for so long as and until the earlier of any such Lender's
cure of the failure to fund its Tranche A Pro Rata Share or Tranche B
Pro Rata Share, as applicable, of any Advance and the termination of
the Revolving Loan Commitments, the term "Required Lenders" for
purposes of this Agreement shall
-115-
<PAGE> 125
mean Lenders (excluding all Lenders whose failure to fund their
respective Tranche A Pro Rata Share or Tranche B Pro Rata Share, as
applicable, of such Advance have not been so cured) whose Pro Rata
Shares represent greater than fifty percent (50%) of the aggregate Pro
Rata Shares of such Lenders; and
(vi) for so long as and until any such Lender's failure to
fund its Tranche A Pro Rata Share or Tranche B Pro Rata Share, as
applicable, of any Advance is cured in accordance with Section 8.2(ii),
(A) such Lender shall not be entitled to any commitment fees with
respect to its Revolving Loan Commitment and (B) such Lender shall not
be entitled to any letter of credit fees, which commitment fees and
letter of credit fees shall accrue in favor of the Lenders which have
funded their respective Tranche A Pro Rata Share or Tranche B Pro Rata
Share, as applicable, of such requested Advance, shall be allocated
among such performing Lenders ratably based upon their relative
Revolving Loan Commitments, and shall be calculated based upon the
average amount by which the aggregate Revolving Loan Commitments of
such performing Lenders exceeds the sum of (I) the outstanding
principal amount of the Loans owing to such performing Lenders, plus
(II) the outstanding Reimbursement Obligations owing to such performing
Lenders, plus (III) the aggregate participation interests of such
performing Lenders arising pursuant to Section 2.21 with respect to
undrawn and outstanding Letters of Credit.
8.3 Amendments. Subject to the provisions of this Article VIII, the
Required Lenders (or the Administrative Agent with the consent in writing of the
Required Lenders) and the Borrowers may enter into agreements supplemental
hereto for the purpose of adding or modifying any provisions to the Loan
Documents or changing in any manner the rights of the Lenders or the Borrowers
hereunder or waiving any Default hereunder; provided, however, that no such
supplemental agreement shall, without the consent of each Lender affected
thereby:
(i) Postpone or extend the Termination Date, the Tranche A
Term Loan Termination Date, the Tranche B Term Loan Termination Date or
any other date fixed for any payment of principal of, or interest on,
the Loans, the Reimbursement Obligations or any fees or other amounts
payable to such Lender (except with respect to (a) any modifications of
the provisions relating to prepayments of Loans and other Obligations
(other than the provisions relating to prepayments of the Tranche B
Term Loans which can be modified only with the approval of Lenders with
Tranche B Pro Rata Shares greater than fifty percent (50%)) and (b) a
waiver of the application of the default rate of interest pursuant to
Section 2.11 hereof).
(ii) Reduce the principal amount of any Loans or L/C
Obligations, or reduce the rate or extend the time of payment of
interest or fees thereon or other amounts payable hereunder.
-116-
<PAGE> 126
(iii) Reduce the percentage specified in the definition of
Required Lenders or any other percentage of Lenders specified to be the
applicable percentage in this Agreement to act on specified matters or
amend the definitions of "Requisite Lenders", "Tranche A Pro Rata
Share", "Tranche B Pro Rata Share" or "Pro Rata Share".
(iv) Increase the amount of the Revolving Loan Commitment of
any Lender hereunder (except with respect to an increase in the amount,
or other modification to the terms or components, of the Borrowing
Base) or increase any Lender's Tranche A Pro Rata Share, Tranche B Pro
Rata Share or Pro Rata Share.
(v) Amend the provisions of Section 2.5 to the extent they
prescribe pro rata application between Tranche A Term Loans and Tranche
B Term Loans of all prepayments governed by Section 2.5.
(vi) Permit any Borrower to assign its rights under this
Agreement.
(vii) Amend this Section 8.3.
(viii) Release any guarantor of the Obligations or all or
substantially all of the Collateral.
(ix) Amend, modify or waive the provisions of Section 6.2(M).
(x) Amend, modify or waive the provisions of Section 11.3.
No amendment of any provision of this Agreement relating to the Administrative
Agent shall be effective without the written consent of the Administrative
Agent. No amendment of any provision of this Agreement relating to any Issuing
Lender shall be effective without the written consent of the Administrative
Agent and each of the Issuing Lenders. No amendment of any provision of this
Agreement relative to any Swing Line Lender shall be effective without the
written consent of each of the Swing Line Lenders. The Administrative Agent may
waive payment of the fee required under Section 12.3(B) without obtaining the
consent of any of the Lenders.
8.4 Preservation of Rights. No delay or omission of the Lenders, the
Issuing Lenders, the Documentation and Collateral Agent or the Administrative
Agent to exercise any right under the Loan Documents shall impair such right or
be construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan or the issuance of a Letter of Credit notwithstanding the
existence of a Default or the inability of the Borrowers to satisfy the
conditions precedent to such Loan or issuance of such Letter of Credit shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other
-117-
<PAGE> 127
or further exercise thereof or the exercise of any other right, and no waiver,
amendment or other variation of the terms, conditions or provisions of the Loan
Documents whatsoever shall be valid unless in writing signed by the Lenders
required pursuant to Section 8.3, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan Documents or by law
afforded shall be cumulative and all shall be available to the Administrative
Agent, the Issuing Lenders, the Documentation and Collateral Agent and the
Lenders until the Obligations have been paid in full.
ARTICLE IX: GENERAL PROVISIONS
9.1 Survival of Representations. All representations and warranties of
the Borrowers contained in this Agreement shall survive delivery of the Notes
and the making of the Loans herein contemplated.
9.2 Governmental Regulation. Anything contained in this Agreement to
the contrary notwithstanding, no Lender shall be obligated to extend credit to
the Borrowers and neither the Administrative Agent nor any Issuing Lender shall
be obligated to issue any Letter of Credit for the account of any Borrower in
violation of any limitation or prohibition provided by any applicable statute or
regulation.
9.3 Performance of Obligations. Each of the Borrowers agrees that the
Administrative Agent may, but shall have no obligation to (i) at any time, pay
or discharge taxes, liens, security interests or other encumbrances levied or
placed on or threatened against any Collateral and (ii) after the occurrence and
during the continuance of a Default make any other payment or perform any act
required of any Borrower under any Loan Document or take any other action which
the Administrative Agent in its discretion deems necessary or desirable to
protect or preserve the Collateral, including, without limitation, any action to
(y) effect any repairs or obtain any insurance called for by the terms of any of
the Loan Documents and to pay all or any part of the premiums therefor and the
costs thereof and (z) pay any rents payable by any Borrower which are more than
30 days past due, or as to which the landlord has given notice of termination,
under any lease. The Administrative Agent shall use its best efforts to give the
applicable Borrower notice of any action taken under this Section 9.3 prior to
the taking of such action or promptly thereafter provided the failure to give
such notice shall not affect the applicable Borrower's obligations in respect
thereof. Each of the Borrowers agrees to pay the Administrative Agent, upon
demand, the principal amount of all funds advanced by the Administrative Agent
under this Section 9.3, together with interest thereon at the rate from time to
time applicable to Base Rate Loans from the date of such advance until the
outstanding principal balance thereof is paid in full. If any Borrower fails to
make payment in respect of any such advance under this Section 9.3 within one
(1) Business Day after the date such Borrower receives written demand therefor
from the Administrative Agent, the Administrative Agent shall promptly notify
each Lender and each Lender agrees that it shall thereupon make available to the
Administrative Agent, in Dollars in
-118-
<PAGE> 128
immediately available funds, the amount equal to such Lender's Pro Rata Share of
such advance. If such funds are not made available to the Administrative Agent
by such Lender within one (1) Business Day after the Administrative Agent's
demand therefor, the Administrative Agent will be entitled to recover any such
amount from such Lender together with interest thereon at the Effective Federal
Funds Rate for each day during the period commencing on the date of such demand
and ending on the date such amount is received. The failure of any Lender to
make available to the Administrative Agent its Pro Rata Share of any such
unreimbursed advance under this Section 9.3 shall neither relieve any other
Lender of its obligation hereunder to make available to the Administrative Agent
such other Lender's Pro Rata Share of such advance on the date such payment is
to be made nor increase the obligation of any other Lender to make such payment
to the Administrative Agent. All outstanding principal of, and interest on,
advances made under this Section 9.3 shall constitute Obligations secured by the
Collateral until paid in full by the Borrower.
9.4 Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents.
9.5 Entire Agreement. The Loan Documents embody the entire agreement
and understanding among the Borrowers, the Administrative Agent, the
Documentation and Collateral Agent and the Lenders and supersede all prior
agreements and understandings among the Borrowers, the Administrative Agent and
the Lenders relating to the subject matter thereof.
9.6 Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other. The failure of any Lender to perform
any of its obligations hereunder shall not relieve any other Lender from any of
its obligations hereunder. This Agreement shall not be construed so as to confer
any right or benefit upon any Person other than the parties to this Agreement
and their respective successors and assigns.
9.7 Expenses; Indemnification.
(A) Expenses. The Borrowers shall reimburse the Agents and the
Arrangers for any reasonable costs, internal charges and out-of-pocket expenses
(including attorneys' and paralegals' fees and time charges of attorneys and
paralegals for either Agent or Arranger, which attorneys and paralegals may be
employees of either Agent or Arranger) paid or incurred by either Agent or
Arranger in connection with the preparation, negotiation, execution, delivery,
syndication, review, amendment, modification, and administration of the Loan
Documents other than costs and charges incurred prior to a Default customarily
viewed as the overhead expenses of either Agent of customary administration of
the Loan Documents, the Collateral and the Loans. Each of the Borrowers also
agrees to reimburse the Agents, the Lenders and the Issuing Lenders for any
costs, internal charges and out-of-pocket expenses (including attorneys' and
paralegals' fees and time charges of attorneys and paralegals for the Agents,
the Lenders and the Issuing Lenders,
-119-
<PAGE> 129
which attorneys and paralegals may be employees of either Agent, the Lenders or
the Issuing Lenders) paid or incurred by either Agent, any Lender or any Issuing
Lender in connection with the collection of the Obligations and enforcement of
the Loan Documents. In addition to expenses set forth above, each of the
Borrowers agrees to reimburse the Documentation and Collateral Agent, promptly
after the request therefor, for each audit, collateral analysis or other
business analysis performed by or for the benefit of the Lenders in connection
with this Agreement or the other Loan Documents in an amount equal to the
Documentation and Collateral Agent's then customary charges for each person
employed to perform such audit or analysis, plus all costs and expenses
(including without limitation, travel expenses) incurred by the Documentation
and Collateral Agent in the performance of such audit or analysis; provided,
however the Borrowers shall be obligated to reimburse the or Documentation and
Collateral Agent for not more than two (2) such audits in any twelve-month
period with respect to Brink and its Subsidiaries and (1) such audit in any
twelve-month period with respect to each of AAS, Valley and AAS Canada and in an
aggregate amount not to exceed $100,000 if such audits were conducted other than
in connection with a proposed Acquisition and at a time when no Default has
occurred and is continuing; provided, further, it is expressly understood that
the Borrowers shall reimburse the Administrative Agent or Documentation and
Collateral Agent for all such audits (1) conducted in connection with a proposed
Valley Acquisition and related matters or (2) conducted at a time when a Default
has occurred and is continuing. The Administrative Agent or Documentation and
Collateral Agent, as applicable, shall provide the Borrowers with a detailed
statement of all reimbursements requested under this Section 9.7(A).
(B) Indemnity. Each of the Borrowers further agrees to defend, protect,
indemnify, and hold harmless the Agents, the Arrangers, each and all of the
Lenders, each and all of the Issuing Lenders, the Swing Loan Lender and each of
their respective Affiliates, and each of such Agent's, Arrangers', Lender's,
Issuing Lender's or Affiliate's respective officers, directors, employees,
attorneys and agents (including, without limitation, those retained in
connection with the satisfaction or attempted satisfaction of any of the
conditions set forth in Article IV) (collectively, the "INDEMNITEES") from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses of any kind or nature
whatsoever (including, without limitation, the fees and disbursements of counsel
for such Indemnitees in connection with any investigative, administrative or
judicial proceeding, whether or not such Indemnitees shall be designated a party
thereto), imposed on, incurred by, or asserted against such Indemnitees in any
manner relating to or arising out of:
(i) this Agreement, the other Loan Documents or any of the
Transaction Documents, or any act, event or transaction related or
attendant thereto or to the Valley Acquisition, the making of the
Loans, and the issuance of and participation in Letters of Credit
hereunder, the management of such Loans or Letters of Credit, the use
or intended use of the proceeds of the Loans or Letters of Credit
hereunder, or any of the other transactions contemplated by the
Transaction Documents; or
-120-
<PAGE> 130
(ii) any liabilities, obligations, responsibilities, losses,
damages, personal injury, death, punitive damages, economic damages,
consequential damages, treble damages, intentional, willful or wanton
injury, damage or threat to the environment, natural resources or
public health or welfare, costs and expenses (including, without
limitation, attorney, expert and consulting fees and costs of
investigation, feasibility or remedial action studies), fines,
penalties and monetary sanctions, interest, direct or indirect, known
or unknown, absolute or contingent, past, present or future relating to
violation of any Environmental, Health or Safety Requirements of Law
arising from or in connection with the past, present or future
operations of Holdings, its Subsidiaries or any of their respective
predecessors in interest, or, the past, present or future
environmental, health or safety condition of any respective property of
Holdings or its Subsidiaries, the presence of asbestos-containing
materials at any respective property of Holdings or its Subsidiaries or
the Release or threatened Release of any Contaminant into the
environment (collectively, the "INDEMNIFIED MATTERS");
provided, however, the Borrowers shall have no obligation to an Indemnitee
hereunder with respect to Indemnified Matters caused solely by or resulting
solely from the willful misconduct or Gross Negligence of such Indemnitee or
breach of contract by such Indemnitee with respect to the Loan Documents, in
each case, as determined by the final non-appealable judgment of a court of
competent jurisdiction. If the undertaking to indemnify, pay and hold harmless
set forth in the preceding sentence may be unenforceable because it is violative
of any law or public policy, the Borrowers shall contribute the maximum portion
which it is permitted to pay and satisfy under applicable law, to the payment
and satisfaction of all Indemnified Matters incurred by the Indemnitees.
(C) Waiver of Certain Claims; Settlement of Claims. Each of the
Borrowers further agrees to assert no claim against any of the Indemnitees on
any theory of liability for consequential, special, indirect, exemplary or
punitive damages. No settlement shall be entered into by Holdings or any if its
Subsidiaries with respect to any claim, litigation, arbitration or other
proceeding relating to or arising out of the transaction evidenced by this
Agreement, the other Loan Documents or in connection with the Valley Acquisition
(whether or not the Administrative Agent, any Lender, any Issuing Lender or any
Indemnitee is a party thereto) unless such settlement releases all Indemnitees
from any and all liability with respect thereto.
(D) Survival of Agreements. The obligations and agreements of the
Borrowers under this Section 9.7 shall survive the termination of this
Agreement.
9.8 Numbers of Documents. All statements, notices, closing documents,
and requests hereunder shall be furnished to the Administrative Agent with
sufficient counterparts so that the Administrative Agent may furnish one to each
of the Lenders.
-121-
<PAGE> 131
9.9 Accounting. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles.
9.10 Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable, or invalid
without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
9.11 Nonliability of Lenders. The relationship among the Borrowers and
the Lenders, Issuing Lenders, the Swing Line Lender, the Administrative Agent
and the Documentation and Collateral Agent shall be solely that of borrower and
lender. Neither the Administrative Agent nor the Documentation and Collateral
Agent nor any Lender nor any Issuing Lender shall have any fiduciary
responsibilities to the Borrowers. Neither the Administrative Agent, nor the
Documentation and Collateral Agent, nor any Lender, nor any Issuing Lender
undertakes any responsibility to the Borrowers to review or inform the Borrowers
of any matter in connection with any phase of the Borrowers' business or
operations.
9.12 GOVERNING LAW. THE ADMINISTRATIVE AGENT ACCEPTS THIS AGREEMENT, ON
BEHALF OF ITSELF, THE LENDERS AND THE ISSUING LENDERS, AT NEW YORK, NEW YORK BY
ACKNOWLEDGING AND AGREEING TO IT THERE. ANY DISPUTE BETWEEN THE BORROWERS AND
THE ADMINISTRATIVE AGENT, ANY LENDER, ANY ISSUING LENDER OR ANY OTHER HOLDER OF
SECURED OBLIGATIONS ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY,
OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT
REGARD TO THE CONFLICTS OF LAWS PROVISIONS) OF THE STATE OF NEW YORK.
9.13 CONSENT TO JURISDICTION; SERVICE OF PROCESS; JURY TRIAL.
(A) EXCLUSIVE JURISDICTION. EXCEPT AS PROVIDED IN SUBSECTION (B), EACH
OF THE PARTIES HERETO AGREES THAT ALL DISPUTES AMONG THEM ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG
THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS
WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED
EXCLUSIVELY BY STATE OR FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK, BUT THE
PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS
-122-
<PAGE> 132
MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK. EACH OF
THE PARTIES HERETO WAIVES IN ALL DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION
(A) ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE
DISPUTE.
(B) OTHER JURISDICTIONS. EACH OF THE BORROWERS AGREES THAT THE
ADMINISTRATIVE AGENT, THE DOCUMENTATION AND COLLATERAL AGENT, ANY LENDER, ANY
ISSUING LENDER OR ANY HOLDER OF SECURED OBLIGATIONS SHALL HAVE THE RIGHT TO
PROCEED AGAINST ANY BORROWER OR ITS PROPERTY IN A COURT IN ANY LOCATION TO
ENABLE SUCH PERSON TO (1) OBTAIN PERSONAL JURISDICTION OVER SUCH BORROWER OR (2)
REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SUCH PERSON. EACH OF
THE BORROWERS AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY
PROCEEDING BROUGHT UNDER THIS CLAUSE (B) BY SUCH PERSON TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF SUCH PERSON ALL OF WHICH PERMISSIVE COUNTERCLAIMS
MAY BE BROUGHT ONLY IN THE JURISDICTION SET FORTH IN CLAUSE (A) ABOVE. EACH OF
THE BORROWERS WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT
IN WHICH SUCH PERSON HAS COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION
(B).
(C) VENUE. EACH OF THE BORROWERS IRREVOCABLY WAIVES ANY OBJECTION
(INCLUDING, WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH IN ANY JURISDICTION SET FORTH ABOVE.
(D) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH. EACH OF THE PARTIES HERETO AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS AGREEMENT
-123-
<PAGE> 133
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(E) WAIVER OF BOND. EACH OF THE BORROWERS WAIVES THE POSTING OF ANY
BOND OTHERWISE REQUIRED OF ANY PARTY HERETO IN CONNECTION WITH ANY JUDICIAL
PROCESS OR PROCEEDING TO REALIZE ON THE COLLATERAL (INCLUDING, WITHOUT
LIMITATION, THE REAL PROPERTY COLLATERAL) OR ANY OTHER SECURITY FOR THE
OBLIGATIONS OR TO ENFORCE ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
SUCH PARTY, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER,
PRELIMINARY OR PERMANENT INJUNCTION, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
(F) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER
PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE
PROVISIONS OF THIS SECTION 9.13, WITH ITS COUNSEL.
9.14 No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
ARTICLE X: THE ADMINISTRATIVE AGENT AND THE DOCUMENTATION AND
COLLATERAL AGENT
10.1 Appointment; Nature of Relationship. NBD Bank is appointed by the
Lenders (each reference in this Article X to a Lender being in its capacity
either as a Lender or an Issuing Lender or a Swing Line Lender, or any or all of
the foregoing) and the Canadian Lenders as the Administrative Agent hereunder
and under each other Loan Document, and each of the Lenders and the Canadian
Lenders irrevocably authorizes the Administrative Agent to act as the
contractual representative of such Lender or Canadian Lender with the rights and
duties expressly set forth herein and in the other Loan Documents. The
Administrative Agent agrees to act as such contractual representative upon the
express conditions contained in this Article X. Notwithstanding the use of the
defined term "Administrative Agent," it is expressly understood and agreed that
the Administrative Agent shall not have any fiduciary responsibilities to any
Lender or Canadian Lenders by reason of this Agreement and that the
Administrative Agent is merely acting as the representative of the Lenders and
Canadian Lenders with only those duties as are expressly set forth in this
Agreement and the other Loan Documents. In its capacity as the Lenders' and
Canadian Lenders' contractual representative, the Administrative Agent (i) does
not assume any fiduciary duties to any of the Lenders or Canadian Lenders, (ii)
is a "representative"
-124-
<PAGE> 134
of the Lenders and Canadian Lenders within the meaning of Section 9-105 of the
Uniform Commercial Code and (iii) is acting as an independent contractor, the
rights and duties of which are limited to those expressly set forth in this
Agreement and the other Loan Documents. Each of the Lenders and Canadian Lenders
agrees to assert no claim against the Administrative Agent on any agency theory
or any other theory of liability for breach of fiduciary duty, all of which
claims each Lender waives. NBD Bank is appointed by the Lenders (each reference
in this Article X to a Lender being in its capacity either as a Lender or an
Issuing Lender or a Swing Line Lender or any or all of the foregoing) and the
Canadian Lenders as the Documentation and Collateral Agent hereunder and under
each other Loan Document, and each of the Lenders and Canadian Lenders
irrevocably authorizes the Documentation and Collateral Agent to act as the
contractual representative of such Lender or Canadian Lender with the rights and
duties expressly set forth herein and in the other Loan Documents. The
Documentation and Collateral Agent agrees to act as such contractual
representative upon the express conditions contained in this Article X.
Notwithstanding the use of the defined term "Documentation and Collateral
Agent," it is expressly understood and agreed that the Documentation and
Collateral Agent shall not have any fiduciary responsibilities to any Lender or
Canadian Lender by reason of this Agreement and that the Documentation and
Collateral Agent is merely acting as the representative of the Lenders with only
those duties as are expressly set forth in this Agreement and the other Loan
Documents. In its capacity as the Lenders' and Canadian Lenders' contractual
representative, the Documentation and Collateral Agent (i) does not assume any
fiduciary duties to any of the Lenders or Canadian Lenders, (ii) is a
"representative" of the Lenders and Canadian Lenders within the meaning of
Section 9-105 of the Uniform Commercial Code and (iii) is acting as an
independent contractor, the rights and duties of which are limited to those
expressly set forth in this Agreement and the other Loan Documents. Each of the
Lenders and Canadian Lenders agrees to assert no claim against the Documentation
and Collateral Agent on any agency theory or any other theory of liability for
breach of fiduciary duty, all of which claims each Lender waives.
10.2 Powers. The Administrative Agent shall have and may exercise such
powers under the Loan Documents as are specifically delegated to the
Administrative Agent by the terms of each thereof, together with such powers as
are reasonably incidental thereto. The Administrative Agent shall have no
implied duties or fiduciary duties to the Lenders or Canadian Lenders, or any
obligation to the Lenders or Canadian Lenders to take any action hereunder or
under any of the other Loan Documents except any action specifically provided by
the Loan Documents required to be taken by the Administrative Agent. The
Documentation and Collateral Agent shall have and may exercise such powers under
the Loan Documents as are specifically delegated to the Documentation and
Collateral Agent by the terms of each thereof, together with such powers as are
reasonably incidental thereto. The Documentation and Collateral Agent shall have
no implied duties or fiduciary duties to the Lenders or Canadian Lenders, or any
obligation to the Lenders or Canadian Lenders to take any action hereunder or
under any of the other Loan Documents except any action specifically provided by
the Loan Documents required to be taken by the Documentation and Collateral
Agent.
-125-
<PAGE> 135
10.3 General Immunity. Neither the Administrative Agent, nor the
Documentation and Collateral Agent, nor the Co-Administrative Agent, nor the
Syndication Agent, nor any of their respective directors, officers, agents or
employees shall be liable to any of the Borrowers, the Lenders or any Lender or
either Canadian Lender for any action taken or omitted to be taken by it or them
hereunder or under any other Loan Document or in connection herewith or
therewith except to the extent such action or inaction is found in a final
non-appealable judgment by a court of competent jurisdiction to have arisen
solely from (i) the Gross Negligence or willful misconduct of such Person or
(ii) breach of contract by such Person with respect to the Loan Documents.
10.4 No Responsibility for Loans, Creditworthiness, Collateral,
Recitals, Etc. Neither the Administrative Agent nor the Documentation and
Collateral Agent, nor the Co-Administrative Agent, nor the Syndication Agent,
nor any of their respective directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into, or verify (i) any
statement, warranty or representation made in connection with any Loan Document
or any borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of any obligor under any Loan Document; (iii) the
satisfaction of any condition specified in Article IV; (iv) the existence or
possible existence of any Default or (v) the validity, effectiveness or
genuineness of any Loan Document or any other instrument or writing furnished in
connection therewith. Neither the Administrative Agent nor the Documentation and
Collateral Agent shall be responsible to any Lender or either Canadian Lender
for any recitals, statements, representations or warranties herein or in any of
the other Loan Documents, for the perfection or priority of any of the Liens on
any of the Collateral, or for the execution, effectiveness, genuineness,
validity, legality, enforceability, collectibility, or sufficiency of this
Agreement or any of the other Loan Documents or the transactions contemplated
thereby, or for the financial condition of any guarantor of any or all of the
Obligations, Holdings or any of its Subsidiaries.
10.5 Action on Instructions of Lenders. The Administrative Agent, the
Documentation and Collateral Agent, the Co-Administrative Agent and the
Syndication Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder and under any other Loan Document in
accordance with written instructions signed by the Required Lenders (except with
respect to actions that require the consent of all of the Lenders as provided in
Section 8.3), and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders and on all holders of
Notes. The Administrative Agent, the Documentation and Collateral Agent, the
Co-Administrative Agent and the Syndication Agent shall be fully justified in
failing or refusing to take any action hereunder and under any other Loan
Document unless it shall first be indemnified to its satisfaction by the Lenders
pro rata against any and all liability, cost and expense that it may incur by
reason of taking or continuing to take any such action.
10.6 Employment of Administrative Agents and Counsel. The
Administrative Agent and the Documentation and Collateral Agent may execute any
of their respective duties hereunder and under any other Loan Document by or
through employees, agents, and attorneys-in-fact, and shall not be answerable to
the Lenders or the Canadian Lenders, except as to money or securities
-126-
<PAGE> 136
received by it or its authorized agents, for the default or misconduct of any
such agents or attorneys-in-fact selected by it with reasonable care. The
Administrative Agent, the Documentation and Collateral Agent, the
Co-Administrative Agent and the Syndication Agent shall be entitled to advice of
counsel concerning the contractual arrangement among the Administrative Agent,
the Documentation and Collateral Agent and the Lenders or the Co- Administrative
Agent and the Syndication Agent and the Lenders, as the case may be, and all
matters pertaining to such Agent's duties hereunder and under any other Loan
Document.
10.7 Reliance on Documents; Counsel. The Administrative Agent shall be
entitled to rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram, statement, paper or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and, in respect
to legal matters, upon the opinion of counsel selected by the Administrative
Agent, which counsel may be employees of the Administrative Agent.
10.8 The Agents' Reimbursement and Indemnification. The Lenders agree
to reimburse and indemnify the Administrative Agent, the Documentation and
Collateral Agent, the Co- Administrative Agent and the Syndication Agent ratably
in proportion to their respective Pro Rata Shares (i) for any amounts not
reimbursed by the Borrowers for which the Administrative Agent or the
Co-Administrative Agent is entitled to reimbursement or indemnification by the
Borrowers under the Loan Documents, (ii) for any other expenses incurred by the
Administrative Agent or the Documentation and Collateral Agent or the
Co-Administrative Agent or the Syndication Agent on behalf of the Lenders, in
connection with the preparation, execution, delivery, administration and
enforcement of the Loan Documents including as a result of a dispute among the
Lenders or between any Lender and the Administrative Agent or the Documentation
and Collateral Agent, and (iii) for any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever which may be imposed on, incurred by or
asserted against the Administrative Agent or the Documentation and Collateral
Agent in any way relating to or arising out of the Loan Documents or any other
document delivered in connection therewith or the transactions contemplated
thereby, or the enforcement of any of the terms thereof or of any such other
documents, including as a result of a dispute among the Lenders or between any
Lender and the Administrative Agent or the Documentation and Collateral Agent,
provided that no Lender shall be liable for any of the foregoing to the extent
any of the foregoing is found in a final non-appealable judgment by a court of
competent jurisdiction to have arisen solely from the Gross Negligence or
willful misconduct of the Administrative Agent or the Documentation and
Collateral Agent, as applicable.
10.9 Rights as a Lender. With respect to its Revolving Loan Commitment,
its Tranche A Term Loan Commitment, its Tranche B Term Loan Commitment, Loans
made by it and the Notes issued to it and Letters of Credit issued by it as an
Issuing Lender, the Administrative Agent and the Co-Administrative Agent each
shall have the same rights and powers hereunder and under any other Loan
Document as any Lender and may exercise the same as through it were not the
Administrative Agent or the Co-Administrative Agent, as applicable, and the term
"Lender" or
-127-
<PAGE> 137
"Lenders" or "Issuing Lender" or "Issuing Lenders", as applicable, shall, unless
the context otherwise indicates, include the Administrative Agent and the
Co-Administrative Agent, each in its individual capacity. The Administrative
Agent and the Co-Administrative Agent may each accept deposits from, lend money
to, enter into Interest Rate Agreements and generally engage in any kind of
trust, debt, equity or other transaction, in addition to those contemplated by
this Agreement or any other Loan Document, with Holdings or any of its
Subsidiaries in which such Person is not prohibited hereby from engaging with
any other Person.
10.10 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent or the
Co-Administrative Agent or any other Lender and based on the financial
statements prepared by Holdings and the Borrowers and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and the other Loan Documents. Each Lender
also acknowledges that it will, independently and without reliance upon the
Administrative Agent or the Co-Administrative Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement and the other Loan Documents.
10.11 Successor Administrative Agent; Successor Documentation and
Collateral Agent. (A) The Administrative Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrowers. Upon any such
resignation, the Required Lenders shall have the right to appoint, on behalf of
the Borrowers and the Lenders, a successor Administrative Agent. If no successor
Administrative Agent shall have been so appointed by the Required Lenders and
shall have accepted such appointment within thirty days after the retiring
Administrative Agent's giving notice of resignation, then the retiring
Administrative Agent may appoint, on behalf of the Borrowers and the Lenders, a
successor Administrative Agent. Notwithstanding anything herein to the contrary,
so long as no Default has occurred and is continuing, each such successor
Administrative Agent shall be subject to approval by the Borrowers, which
approval shall not be unreasonably withheld. Such successor Administrative Agent
shall be a commercial bank having capital and retained earnings of at least
$500,000,000. Upon the acceptance of any appointment as the Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder and under the other Loan Documents. After any retiring Administrative
Agent's resignation hereunder as Administrative Agent, the provisions of this
Article X shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the Administrative
Agent hereunder and under the other Loan Documents.
(B) The Documentation and Collateral Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrowers. Upon any
such resignation, the Required Lenders shall have the right to appoint, on
behalf of the Borrowers and the Lenders, a successor Documentation and
Collateral
-128-
<PAGE> 138
Agent. If no successor Documentation and Collateral Agent shall have
been so appointed by the Required Lenders and shall have accepted such
appointment within thirty days after the retiring Documentation and Collateral
Agent's giving notice of resignation, then the retiring Documentation and
Collateral Agent may appoint, on behalf of the Borrowers and the Lenders, a
successor Documentation and Collateral Agent. Notwithstanding anything herein to
the contrary, so long as no Default has occurred and is continuing, each such
successor Documentation and Collateral Agent shall be subject to approval by the
Borrowers, which approval shall not be unreasonably withheld. Such successor
Documentation and Collateral Agent shall be a commercial bank having capital and
retained earnings of at least $500,000,000. Upon the acceptance of any
appointment as the Documentation and Collateral Agent hereunder by a successor
Documentation and Collateral Agent, such successor Documentation and Collateral
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Documentation and Collateral Agent, and
the retiring Documentation and Collateral Agent shall be discharged from its
duties and obligations hereunder and under the other Loan Documents. After any
retiring Documentation and Collateral Agent's resignation hereunder as
Documentation and Collateral Agent, the provisions of this Article X shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as the Documentation and Collateral Agent
hereunder and under the other Loan Documents.
10.12 Collateral Documents. Each Lender authorizes the Documentation
and Collateral Agent to enter into each of the Collateral Documents to which it
is a party and to take all action contemplated by such documents. Each Lender
agrees that no Lender shall have the right individually to seek to realize upon
the security granted by any Collateral Document, it being understood and agreed
that such rights and remedies may be exercised solely by the Documentation and
Collateral Agent for the benefit of the Holders of Secured Obligations upon the
terms of the Collateral Documents.
ARTICLE XI: SETOFF; RATABLE PAYMENTS
11.1 Setoff. In addition to, and without limitation of, any rights of
the Lenders or Issuing Lenders under applicable law, if any Default occurs and
is continuing, any indebtedness from any Lender or Issuing Lender to any of the
Borrowers (including all account balances, whether provisional or final and
whether or not collected or available) may be offset and applied toward the
payment of the Obligations owing to such Lender, such Issuing Lender and the
other Obligations, whether or not the Obligations, or any part hereof, shall
then be due.
11.2 Ratable Payments. If any Lender, whether by setoff or otherwise,
has payment made to it upon its Loans (other than payments received pursuant to
Sections 3.1, 3.2 or 3.4) in a greater proportion than that received by any
other Lender, such Lender agrees, promptly upon demand, to purchase a portion of
the Loans held by the other Lenders so that after such purchase each Lender will
hold its ratable proportion of Loans. If any Lender, whether in connection with
setoff or amounts which might be subject to setoff or otherwise, receives
collateral or other protection for its Obligation or such amounts which may be
subject to setoff, such Lender agrees,
-129-
<PAGE> 139
promptly upon demand, to take such action necessary such that all Lenders share
in the benefits of such collateral ratably in proportion to the obligations
owing to them. In case any such payment is disturbed by legal process, or
otherwise, appropriate further adjustments shall be made.
11.3 Application of Payments. Subject to the provisions of Section 8.2,
the Administrative Agent shall apply all payments in respect of any Obligations
and all proceeds of Collateral in the following order:
(A) first, to pay interest on and then principal of any
portion of the Loans which the Administrative Agent may have advanced
on behalf of any Lender for which the Administrative Agent has not then
been reimbursed by such Lender or the Borrower;
(B) second, to pay interest on and then principal of any
advance made under Section 9.3 for which the Administrative Agent has
not then been paid by the Borrowers or reimbursed by the Lenders;
(C) third, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Administrative Agent;
(D) fourth, to pay Obligations in respect of any fees,
expenses, reimbursements or indemnities then due to the Lenders and
Issuing Lender;
(E) fifth, to pay interest due in respect of the Secured
Obligations (other than Rate Hedging Obligations);
(F) sixth, to the ratable payment or prepayment of principal
outstanding on the Secured Obligations (other than Rate Hedging
Obligations);
(G) seventh, to the payment of the Rate Hedging Obligations in
such order as the Administration Agent may determine in its sole
discretion;
(H) eighth, to provide required cash collateral if any
pursuant to Section 2.24; and
(I) ninth, to the ratable payment of all other Obligations.
Unless otherwise designated (which designation shall only be applicable prior to
the occurrence of a Default) by the Borrowers, all principal payments in respect
of Loans shall be applied first, to repay outstanding Base Rate Loans, and then
to repay outstanding Eurocurrency Rate Loans with those Eurocurrency Rate Loans
which have earlier expiring Interest Periods being repaid prior to those which
have later expiring Interest Periods. The order of priority set forth in this
Section 11.3 and the related provisions of this Agreement are set forth solely
to determine the rights and
-130-
<PAGE> 140
priorities of the Administrative Agent, the Lenders, the Issuing Lender and
other Holders of Secured Obligations as among themselves.
11.4 Relations Among Lenders.
(a) Except with respect to the exercise of set-off rights of any Lender
in accordance with Section 11.1, the proceeds of which are applied in accordance
with this Agreement, and each Lender agrees that it will not take any action,
nor institute any actions or proceedings, against any Borrower or any other
obligor hereunder or with respect to any Collateral or Loan Document, without
the prior written consent of the Required Lenders or, as may be provided in this
Agreement or the other Loan Documents, at the direction of the Administrative
Agent.
(b) The Lenders are not partners or co-venturers, and no Lender shall
be liable for the acts or omissions of, or (except as otherwise set forth herein
in case of the Administrative Agent) authorized to act for, any other Lender.
ARTICLE XII: BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1 Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrowers and
the Lenders and their respective successors and assigns, except that (i) the
Borrowers shall not have the right to assign their rights or obligations under
the Loan Documents and (ii) any assignment by any Lender must be made in
compliance with Section 12.3 hereof. Notwithstanding clause (ii) of this Section
12.1, any Lender may at any time, without the consent of any Borrower or the
Administrative Agent, assign all or any portion of its rights under this
Agreement and its Notes to a Federal Reserve Bank; provided, however, that no
such assignment shall release the transferor Lender from its obligations
hereunder. The Administrative Agent may treat the payee of any Note as the owner
thereof for all purposes hereof unless and until such payee complies with
Section 12.3 hereof in the case of an assignment thereof or, in the case of any
other transfer, a written notice of the transfer is filed with the
Administrative Agent. Any assignee or transferee of a Note agrees by acceptance
thereof to be bound by all the terms and provisions of the Loan Documents. Any
request, authority or consent of any Person, who at the time of making such
request or giving such authority or consent is the holder of any Note, shall be
conclusive and binding on any subsequent holder, transferee or assignee of such
Note or of any Note or Notes issued in exchange therefor.
12.2 Participations.
(A) Permitted Participants; Effect. Subject to the terms set forth in
this Section 12.2, any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time sell to one or more banks or other
entities ("PARTICIPANTS") participating interests in any Loan owing to such
Lender, any Note held by such Lender, any Revolving Loan Commitment of such
Lender, any L/C Interest of such Lender or any other interest of such Lender
under the Loan
-131-
<PAGE> 141
Documents on a pro rata basis; provided that the amount of such participation
shall not be for less than $5,000,000. Notice of such participation to Holdings
and the Administrative Agent shall be required prior to any participation
becoming effective with respect to a Participant which is not a Lender or an
Affiliate thereof. In the event of any such sale by a Lender of participating
interests to a Participant, such Lender's obligations under the Loan Documents
shall remain unchanged, such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, such Lender shall remain
the holder of any such Note for all purposes under the Loan Documents, all
amounts payable by the Borrowers under this Agreement shall be determined as if
such Lender had not sold such participating interests, and the Borrowers and the
Administrative Agent shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations under the Loan Documents
except that, for purposes of Article III hereof, the Participants shall be
entitled to the same rights as if they were Lenders provided however that no
Participant shall be entitled to receive any greater payment under such Article
III than the Lender would have been entitled to receive with respect to the
rights participated.
(B) Voting Rights. Each Lender shall retain the sole right to approve,
without the consent of any Participant, any amendment, modification or waiver of
any provision of the Loan Documents other than any amendment, modification or
waiver with respect to any Loan or Revolving Loan Commitment in which such
Participant has an interest which forgives principal, interest or fees or
reduces the interest rate or fees payable pursuant to the terms of this
Agreement with respect to any such Loan or Revolving Loan Commitment, postpones
any date fixed for any regularly-scheduled payment of principal of, or interest
or fees on, any such Loan or Revolving Loan Commitment, or releases all or
substantially all of the Collateral, if any, securing any such Loan.
(C) Benefit of Setoff. The Borrowers agree that each Participant shall
be deemed to have the right of setoff provided in Section 11.1 hereof in respect
to its participating interest in amounts owing under the Loan Documents to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under the Loan Documents, provided that each Lender shall
retain the right of setoff provided in Section 11.1 hereof with respect to the
amount of participating interests sold to each Participant except to the extent
such Participant exercises its right of set off. The Lenders agree to share with
each Participant, and each Participant, by exercising the right of setoff
provided in Section 11.1 hereof, agrees to share with each Lender, any amount
received pursuant to the exercise of its right of setoff, such amounts to be
shared in accordance with Section 11.2 as if each Participant were a Lender.
12.3 Assignments.
(A) Permitted Assignments. Any Lender may, in the ordinary course of
its business and in accordance with applicable law, at any time assign to one or
more banks or other entities ("PURCHASERS") all or a portion of its rights and
obligations under this Agreement (including, without limitation, its Revolving
Loan Commitment, all Loans owing to it, all of its interests as
-132-
<PAGE> 142
Issuing Lender with respect to Letters of Credit, all of its participation
interests in existing Letters of Credit and Swing Line Loans, and its obligation
to participate in additional Letters of Credit and Swing Line Loans hereunder)
in accordance with the provisions of this Section 12.3. Each assignment shall be
of a constant, and not a varying, ratable percentage of all of the rights and
obligations of any assigning Lender under this Agreement. Such assignment shall
be substantially in the form of Exhibit F hereto and shall not be permitted
hereunder unless such assignment is either for all of such Lender's rights and
obligations under the Loan Documents or involves loans and commitments in an
aggregate amount of at least $5,000,000. Notice to the Administrative Agent and
consent of the Administrative Agent (which consent will not be unreasonably
withheld) shall be required prior to an assignment becoming effective with
respect to a Purchaser which is not a Lender or an Affiliate thereof. Each
Lender with a Revolving Loan Commitment shall at all times have a Tranche A Pro
Rata Share of the Tranche A Term Loans equal to its pro rata share of the
aggregate Revolving Loan Commitments.
(B) Effect; Effective Date. Upon (i) delivery to the Administrative
Agent of a notice of assignment, substantially in the form attached as Appendix
I to Exhibit F hereto (a "NOTICE OF ASSIGNMENT"), together with any consent
required by Section 12.3(A) hereof, and (ii) except in the case of an assignment
from a Lender to an Affiliate thereof or to a fund managed by the same
investment manager, payment of a $3,500 fee to the Administrative Agent for
processing such assignment, such assignment shall become effective on the
effective date specified in such Notice of Assignment. The Notice of Assignment
shall contain a representation by the Purchaser to the effect that none of the
consideration used to make the purchase of the Commitment, Loans and L/C
Obligations under the applicable assignment agreement are "plan assets" as
defined under ERISA and that the rights and interests of the Purchaser in and
under the Loan Documents will not be "plan assets" under ERISA. On and after the
effective date of such assignment, such Purchaser, if not already a Lender,
shall for all purposes be a Lender party to this Agreement and any other Loan
Documents executed by the Lenders and shall have all the rights and obligations
of a Lender under the Loan Documents, to the same extent as if it were an
original party hereto, and no consent or action by any of the Borrowers or the
Lenders and no further consent or action by the Administrative Agent shall be
required to release the transferor Lender with respect to the percentage of the
Aggregate Revolving Loan Commitment, Loans and Letter of Credit participations
assigned to such Purchaser. Upon the consummation of any assignment to a
Purchaser pursuant to this Section 12.3(B), the transferor Lender, the
Administrative Agent and the Borrowers shall make appropriate arrangements so
that replacement Notes are issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such Purchaser, in each case in
principal amounts reflecting their Revolving Loan Commitment and their Term
Loans, as adjusted pursuant to such assignment.
(C) The Register. The Administrative Agent shall maintain at its
address referred to in Section 13.1 a copy of each assignment delivered to and
accepted by it pursuant to this Section 12.3 and a register (the "REGISTER") for
the recordation of the names and addresses of the Lenders and the Revolving Loan
Commitment of and principal amount of the Loans owing to, each
-133-
<PAGE> 143
Lender from time to time and whether such Lender is an original Lender or the
assignee of another Lender pursuant to an assignment under this Section 12.3.
The entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and Holdings and each of its Subsidiaries, the
Administrative 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 Borrowers or
any Lender at any reasonable time and from time to time upon reasonable prior
notice.
12.4 Confidentiality. Subject to Section 12.5, the Administrative Agent
and the Lenders shall hold all nonpublic information obtained pursuant to the
requirements of this Agreement and identified as such by Holdings in accordance
with such Person's customary procedures for handling confidential information of
this nature and in accordance with safe and sound banking practices and in any
event may make disclosure reasonably required by a prospective Transferee in
connection with the contemplated participation or assignment or as required or
requested by any Governmental Authority or representative thereof or pursuant to
legal process and shall require any such Transferee or prospective Transferee to
agree (and require any of its Transferees to agree) to comply with this Section
12.4. In no event shall the Administrative Agent or any Lender be obligated or
required to return any materials furnished by the Borrowers; provided, however,
each prospective Transferee shall be required to agree that if it does not
become a participant or assignee it shall return all materials furnished to it
by or on behalf of the Borrowers in connection with this Agreement.
12.5 Dissemination of Information. Each of the Borrowers authorizes
each Lender to disclose to any Participant or Purchaser or any other Person
acquiring an interest in the Loan Documents by operation of law (each a
"TRANSFEREE") and any prospective Transferee any and all information in such
Lender's possession concerning the Holdings and its Subsidiaries and the
Collateral; provided that prior to any such disclosure, such prospective
Transferee shall agree to preserve in accordance with Section 12.4 the
confidentiality of any confidential information described therein.
ARTICLE XIII: NOTICES
13.1 Giving Notice. Except as otherwise permitted by Section 2.14 with
respect to borrowing notices, all notices and other communications provided to
any party hereto under this Agreement or any other Loan Documents shall be in
writing or by telex or by facsimile and addressed or delivered to such party at
its address set forth below its signature hereto or at such other address as may
be designated by such party in a notice to the other parties. Any notice, if
mailed and properly addressed with postage prepaid, shall be deemed given when
received; any notice, if transmitted by telex or facsimile, shall be deemed
given when transmitted (answerback confirmed in the case of telexes); or, if by
courier, one (1) Business Day after deposit with a reputable overnight carrier
service; with all charges paid.
-134-
<PAGE> 144
13.2 Change of Address. Any of the Borrowers, the Administrative Agent
and any Lender may each change the address for service of notice upon it by a
notice in writing to the other parties hereto.
ARTICLE XIV: COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Borrowers, the
Administrative Agent and the Lenders and each party as notified the
Administrative Agent by telex or telephone, that it has taken such action.
[Remainder of This Page Intentionally Blank]
-135-
<PAGE> 145
IN WITNESS WHEREOF, the Borrowers, the Lenders, the Administrative
Agent and the Documentation and Collateral Agent, the Co-Administrative Agent
and the Syndication Agent have executed this Agreement as of the date first
above written.
AAS HOLDINGS, LLC
as a Borrower
By:___________________________
Name:
Title:
Address:
Sterling Town Center
12900 Hall Road
Suite 2000
Sterling Heights, Michigan 48313
Attention: Chief Executive Officer
Telephone No.: 810-997-2900
Facsimile No.: 810-997-6868
ADVANCED ACCESSORY SYSTEMS, LLC
as a Borrower
By: AAS HOLDINGS, LLC
Its Manager
By:___________________________
Name:
Title:
Address:
Sterling Town Center
12900 Hall Road
Suite 2000
Sterling Heights, Michigan 48313
Attention: Chief Executive Officer
Telephone No.: 810-997-2900
Facsimile No.: 810-997-6868
S-1
<PAGE> 146
VALLEY INDUSTRIES, LLC
as a Borrower
By: AAS HOLDINGS, LLC
Its Manager
By:___________________________
Name:
Title:
Address:
Sterling Town Center
12900 Hall Road
Suite 2000
Sterling Heights, Michigan 48313
Attention: Chief Executive Officer
Telephone No.: 810-997-2900
Facsimile No.: 810-997-6868
BRINK INTERNATIONAL
as a Borrower
By:___________________________
Name:
Title:
Address:
___________________
___________________
___________________
___________________
Attention: _________________
Telephone No.: _________________
Facsimile No.: _________________
S-2
<PAGE> 147
BRINK BV
as a Borrower
By:___________________________
Name:
Title:
Address:
________________________
________________________
________________________
________________________
Attention: _________________
Telephone No.: _________________
Facsimile No.: _________________
NBD BANK
as the Administrative Agent, the Documentation
and Collateral Agent, an Issuing Lender, a
Swing Line Lender and as a Lender
By:___________________________
Name:
Title:
Address:
611 Woodward Avenue
Detroit, MI 48226
_______________________________
Attention: William H. Canney
Telephone No.: (313) 225-3489
Facsimile No.: (313) 225-2290
S-3
<PAGE> 148
THE CHASE MANHATTAN BANK
as the Co-Administrative Agent, the Syndication
Agent, an Issuing Lender, a Swing Line Lender and
as a Lender
By:___________________________
Name: Thomas H. Kozlark
Title: Vice President
Address:
270 Park Avenue, 10th Floor
New York, New York 10017-2070
______________________________
Attention: George C. Hansen
Telephone No.: 212-270-5723
Facsimile No.: 212-270-1340
CHASE MANHATTAN BANK DELAWARE
as an Issuing Lender
By:___________________________
Name:
Title:
Address:
1201 North Market Street,
9th Floor
Wilmington, Delaware 19801
_______________________________
Attention: Michael P. Handago
Telephone No.: (302) 428-3311
Facsimile No.: (302)428-3390
S-4
<PAGE> 149
FIRST UNION NATIONAL BANK
as a Lender
By:____________________________
Name:
Title:
Address:
301 South College Street
Charlotte, NC 28288-0745
_______________________________
Attention: John S. Cannon
Telephone No.: (704) 383-4747
Facsimile No.: (704) 374-2802
THE BANK OF NOVA SCOTIA
as a Lender
By:____________________________
Name:
Title:
Address:
Suite 2700
600 Peachtree St. N.E.
Atlanta, Georgia 30308
_______________________________
Attention: Sharon Law
Telephone No.: (404) 887-1500
Facsimile No.: (404) 888-8998
S-5
<PAGE> 150
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
By:____________________________
Title:
By:____________________________
Title:
Address:
245 Park Avenue
New York, New York 10167
Attention: Corporate Services Department
Telephone No.: (212) 916-7800
Facsimile No.: (212) 818-0233
With a copy to:
Rabobank Nederland
300 South Wacker Drive
Suite 3500
Chicago, Illinois 60606
Attn: David Thompson
Wire Transfer Instructions:
Bank of New York
ABA No. 021000018
A/C Rabobank New York
A/C/ No. 802 6002533
Re: AAS Holdings
S-6
<PAGE> 151
LASALLE NATIONAL BANK
as a Lender
By:____________________________
Name:
Title:
Address:
125 Ottawa Avenue, Suite 370 NW
Grand Rapids, MI 48503
________________________________
Attention: __________________
Telephone No.: (616) 776-____
Facsimile No.: (616) 776-7770
MICHIGAN NATIONAL BANK
as a Lender
By:____________________________
Name:
Title:
Address:
27777 Inkster Road
Farmington Hills, MI 48334-9066
_______________________________
Attention: __________________
Telephone No.: (810) 473-____
Facsimile No.: (810) 473-3577
S-7
<PAGE> 152
NATIONAL CITY BANK (CLEVELAND)
as a Lender
By:____________________________
Name:
Title:
Address:
979 Westwood
Birmingham, MI 48009
________________________________
Attention: __________________
Telephone No.: (810) 664-____
Facsimile No.: (810) 664-0432
S-8
<PAGE> 153
FIRST CHICAGO NBD BANK, CANADA
as a Holder of Secured Obligations
By:____________________________
Name:
Title:
Address:
________________________
________________________
_________________________________
Attention: __________________
Telephone No.: (___) ___-____
Facsimile No.: (___) ___-____
THE CHASE MANHATTAN BANK OF CANADA
as a Holder of Secured Obligations
By:____________________________
Name:
Title:
Address:
___________________
___________________
___________________________
Attention: __________________
Telephone No.: (___) ___-____
Facsimile No.: (___) ___-____
S-9
<PAGE> 154
COMERICA BANK,
as Lender
By:____________________________
Name:
Title:
Address:
_________________________
_________________________
_______________________________
Attention: __________________
Telephone No.: (___) ___-____
Facsimile No.: (___) ___-____
S-10
<PAGE> 155
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST,
as a Lender
By:____________________________
Name:
Title:
Address:
One Parkview Plaza
Oakbrook Terrace, IL
Attention: __________________
Telephone No.: (___) ___-____
Facsimile No.: (___) ___-____
S-11
<PAGE> 156
DEBT STRATEGIES FUND, INC.
as a Lender
By:____________________________
Name:
Title:
Address:
800 Scudders Mill Road, Area 2C
Plainsboro, NJ 08536
Attention: __________________
Telephone No.: (___) ___-____
Facsimile No.: (___) ___-____
S-12
<PAGE> 157
SENIOR HIGH INCOME PORTFOLIO, INC.
as a Lender
By:____________________________
Name:
Title:
Address:
______________________
______________________
______________________________
Attention: __________________
Telephone No.: (___) ___-____
Facsimile No.: (___) ___-____
S-13
<PAGE> 158
DEEPROCK & COMPANY
as a Lender
By:____________________________
Name:
Title:
Address:
24 Federal Street, 6th Floor
Boston, MA 02110
Attention: __________________
Telephone No.: (___) ___-____
Facsimile No.: (___) ___-____
S-14
<PAGE> 159
AMENDMENT NO. 1
Dated as of September 5, 1997
to
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of August 5, 1997
and
SECURITY AGREEMENTS
Dated as of October 5, 1996
THIS AMENDMENT NO. 1 ("Amendment") is made as of September 5,
1997 by and among AAS Holdings, LLC, Advanced Accessory Systems, LLC, Valley
Industries, LLC, Brink International BV and Brink BV (the "Borrowers"), the
financial institutions listed on the signature pages hereof (the "Lenders") and
NBD Bank, as Administrative Agent and Documentation and Collateral Agent, and
The Chase Manhattan Bank, as Co-Administrative Agent and Syndication Agent (the
"Agents"), under that certain Second Amended and Restated Credit Agreement dated
as of August 5, 1997 by and among the Borrowers, the Lenders and the Agents (the
"Credit Agreement"). Defined terms used herein and not otherwise defined herein
shall have the respective meanings given to them in the Credit Agreement.
WHEREAS, the Borrowers, the Lenders and the Agents have agreed
to amend the Credit Agreement and certain of the Security Agreements on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrowers, the Lenders and the Agents have agreed to the following amendments to
the Credit Agreement.
1. Amendments to Credit Agreement and Security Agreements.
Effective as of the Effective Date (as defined below) and subject to the
satisfaction of the condition precedent set forth in Section 3 below:
1.1 Schedule 5.8 to the Credit Agreement is amended by
deleting the existing Schedule 5.8 in its entirety and substituting therefor
Amended Schedule 5.8 attached hereto.
1.2 Section 5(a) of the Security Agreement executed by
Holdings in favor of the Documentation and Collateral Agent is amended by
deleting the first sentence thereof in its entirety and substituting therefor
the following:
The correct name of Grantor is "Advanced Accessory Systems,
LLC".
1.3 Section 5(a) of the Security Agreement executed by AAS in
favor of the Documentation and Collateral Agent is amended by deleting the first
sentence thereof in its entirety and substituting therefor the following:
The correct name of Grantor is "SportRack, LLC".
2. Consent. The Lenders hereby consent to the amendment by
Holdings and AAS of their respective organizational documents to effect changes
in their names to "Advanced Accessory Systems, LLC" and "SportRack, LLC",
respectively.
<PAGE> 160
3. Condition of Effectiveness. The effectiveness of this
Amendment is subject to the condition precedent that the Administrative Agent
shall have received counterparts of this Amendment duly executed by the
Borrowers, the Required Lenders and the Agents. Upon the satisfaction of the
foregoing condition precedent, this Amendment shall become effective (i) with
respect to the consent set forth in Section 2 above, as of the date hereof, and
(ii) with respect to the amendments set forth in Section 1 above, as of the date
on which appropriate amendments effecting the name changes are filed with the
Secretary of State of Delaware and copies thereof are delivered to the
Administrative Agent (the "Effective Date").
4. Representations and Warranties of the Borrowers. Each
Borrower hereby represents and warrants as follows:
(a) This Amendment and the Credit Agreement as amended hereby
constitute legal, valid and binding obligations of the Borrowers and are
enforceable against the Borrowers in accordance with their terms.
(b) As of the Effective Date, (i) there exists no Default or
Unmatured Default and (ii) the representations and warranties contained in
Article V of the Credit Agreement, as amended hereby, are true and correct in
all material respects, except for representations and warranties made with
reference to a specific date which representations and warranties are true and
correct in all material respects as of such date.
5. Reference to and Effect on the Credit Agreement and
Security Agreements.
(a) Upon the effectiveness of Section 1 hereof, each reference
in any Loan Document to such Loan Document or any other Loan Document shall mean
and be a reference to the applicable Loan Document as amended hereby.
(b) Except as specifically amended above, the Credit Agreement
and all other documents, instruments and agreements executed and/or delivered in
connection therewith shall remain in full force and effect and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Agents or the Lenders, nor constitute a waiver
of any provision of the Credit Agreement or any other documents, instruments and
agreements executed and/or delivered in connection therewith.
6. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
7. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
8. Counterparts. This Amendment may be executed by one or more
of the parties hereto on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
-2-
<PAGE> 161
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first above written.
AAS HOLDINGS, LLC
as a Borrower
By:____________________________
Name:
Title:
ADVANCED ACCESSORY SYSTEMS, LLC
as a Borrower
By: AAS HOLDINGS, LLC
Its Manager
By:____________________________
Name:
Title:
VALLEY INDUSTRIES, LLC
as a Borrower
By: AAS HOLDINGS, INC.
Its Manager
By:____________________________
Name:
Title:
BRINK INTERNATIONAL BV
as a Borrower
By:____________________________
Name:
Title:
BRINK BV
as a Borrower
By:____________________________
Name:
Title:
-3-
<PAGE> 162
NBD BANK
as the Administrative Agent and
the Documentation and Collateral
Agent, and as a Lender
By:____________________________
Name:
Title:
THE CHASE MANHATTAN BANK
as the Co-Administrative Agent
and the Syndication Agent, and as
a Lender
By:____________________________
Name:
Title:
FIRST UNION NATIONAL BANK
as a Lender
By:____________________________
Name:
Title:_________________________
THE BANK OF NOVA SCOTIA
as a Lender
By:____________________________
Name:
Title:
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
as a Lender
By:____________________________
Name:
Title:
By:____________________________
Name:
Title:
-4-
<PAGE> 163
LASALLE NATIONAL BANK
as a Lender
By:____________________________
Name:
Title:
MICHIGAN NATIONAL BANK
as a Lender
By:____________________________
Name:
Title:
NATIONAL CITY BANK (CLEVELAND)
as a Lender
By:____________________________
Name:
Title:
COMERICA BANK
as a Lender
By:____________________________
Name:
Title:
VAN KAMPEN AMERICA CAPITAL
PRIME RATE INCOME TRUST
as a Lender
By:____________________________
Name:
Title:
DEBT STRATEGIES FUND, INC.
as a Lender
By:____________________________
Name:
Title:
-5-
<PAGE> 164
SENIOR HIGH INCOME PORTFOLIO, INC.
as a Lender
By:____________________________
Name:
Title:
DEEPROCK & CO.
By: Eaton Vance Management
as Investment Advisor
By:____________________________
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research
as Investment Advisor
By:____________________________
Name:
Title:
-6-
<PAGE> 165
EXECUTION COPY
AMENDMENT NO. 2
Dated as of September 24, 1997
to
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of August 5, 1997
THIS AMENDMENT NO. 2 ("Amendment") is made as of September 24,
1997 by and among Advanced Accessory Systems, LLC (formerly known as AAS
Holdings, LLC), Sportrack, LLC (formerly known as Advanced Accessory Systems,
LLC), Valley Industries, LLC, Brink International BV and Brink BV (the
"Borrowers"), the financial institutions listed on the signature pages hereof
(the "Lenders") and NBD Bank, as Administrative Agent and Documentation and
Collateral Agent, and The Chase Manhattan Bank, as Co-Administrative Agent and
Syndication Agent (the "Agents"), under that certain Second Amended and Restated
Credit Agreement dated as of August 5, 1997 by and among the Borrowers, the
Lenders and the Agents (as amended, the "Credit Agreement"). Defined terms used
herein and not otherwise defined herein shall have the respective meanings given
to them in the Credit Agreement.
WHEREAS, the Borrowers, the Lenders and the Agents have agreed
to amend the Credit Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrowers, the Lenders and the Agents have agreed to the following amendments to
the Credit Agreement.
1. Amendments to Credit Agreement. Effective as of September
24, 1997 and subject to the satisfaction of the conditions precedent set forth
in Section 2 below, the Credit Agreement is hereby amended as follows:
1.1 Article I of the Credit Agreement is hereby amended to add
alphabetically the following defined terms:
"ACQUISITION FACILITY COMMITMENT" means, for each Lender, the
obligation of such Lender to make Acquisition Facility Loans not exceeding the
amount set forth on Exhibit B to this Agreement opposite its name thereon under
the heading "Acquisition Facility Commitment" or in the Assignment Agreement by
which it became a Lender, as such amount may be modified from time to time
pursuant to the terms of this Agreement or to give effect to any applicable
assignment and acceptance.
"ACQUISITION FACILITY LOAN" is defined in Section 2.2A hereof.
"ACQUISITION FACILITY NOTE" means a note in substantially the
form of Exhibit C-1 hereto duly executed by the applicable Borrower and payable
to the order of a Lender in the amount of its Acquisition Facility Commitment,
including any amendment, restatement, modification, renewal or replacement of
such Acquisition Facility Note.
<PAGE> 166
"AGGREGATE ACQUISITION FACILITY COMMITMENT" means the
aggregate of the Acquisition Facility Commitments of all the Lenders, as reduced
from time to time pursuant to the terms hereof. The initial Aggregate
Acquisition Facility Commitment is Twenty Two Million Dollars ($22,000,000).
1.2 Article I of the Credit Agreement is hereby amended to add
the following phrase immediately after the phrase "Tranche B Term Loans" in the
definition of "Applicable Base Rate Margin":
"or Acquisition Facility Loans".
1.3 Article I of the Credit Agreement is hereby amended to add
the following phrase immediately after the phrase "Tranche B Term Loans" in the
definition of "Applicable Eurocurrency Margins":
"or Acquisition Facility Loans".
1.4 Article I of the Credit Agreement is hereby amended to add
the following phrase immediately after the phrase "Tranche A Term Loan
Commitment" in the definition of "Commitment":
", Acquisition Facility Commitment,".
1.4(A) Article I of the Credit Agreement is hereby amended to
add the following phrase immediately after the phrase "principal amount of" in
the definition of "High Yield Note Agreement":
"not less than".
1.5 Article I of the Credit Agreement is hereby amended to add
the following phrase immediately after the phrase "Term Loans" in the definition
of "Loans":
", Acquisition Facility Loans"
and to add the following immediately after the reference to "Section 2.2" in
such definition"
"or Section 2.2A".
1.6 Article I of the Credit Agreement is hereby amended to add
the following phrase immediately after the phrase "Revolving Loan Commitment" in
(ii)(A) of the definition of "Pro Rata Share":
"and Acquisition Facility Commitment (or, after December 31, 1999, the
outstanding principal balance of such Lender's Acquisition Facility
Loans)"
and to add the following immediately after the phrase "Aggregate Revolving Loan
Commitment" in (ii)(B) of such definition:
"and the Aggregate Acquisition Facility Commitment (or after December 31, 1999,
the outstanding principal balance of such Lender's Acquisition Facility Loans)"
"and to add the following immediately after the phrase "such Lender's Term
Loans" in (x) of such definition: Acquisition Facility Loans"
-2-
<PAGE> 167
and to add the following immediately after the phrase "all Term Loans" in (y) of
such definition:
", Acquisition Facility Loans".
1.7 Article I of the Credit Agreement is hereby amended to add
the following phrase immediately after the phrase "Pro Rata Share of any
Revolving Loan" in the definition of "Required Lenders":
"or Acquisition Facility Loan"
and to add the following phrase immediately after the phrase "Pro Rata Shares of
such Revolving Loans" in such definition:
"or Acquisition Facility Loans".
1.8 Article I of the Credit Agreement is hereby amended to add
the following phrase immediately after the phrase "Tranche B Term Loans" in the
definition of "Term Loans":
"and, after December 31, 1999, the Acquisition Facility Loans".
1.9 Article I of the Credit Agreement is hereby amended to add
the following definition of "Term Notes":
"Term Notes means, collectively, the Tranche A Term Notes, the Tranche
B Term Notes, and, after December 31, 1999, the Acquisition Facility Notes".
1.10 Article I of the Credit Agreement is hereby amended to
delete the definition of "Tranche A Pro Rata Share" now contained therein and to
substitute the following therefor:
"'TRANCHE A PRO RATA SHARE' shall mean, at any particular time and with
respect to any Lender, a fraction (expressed as a percentage), the
numerator of which shall be the then aggregate amount of such Lender's
Revolving Credit Commitment (or, if such Commitment has been
terminated, the outstanding principal balance of such Lender's
Revolving Loans) and Acquisition Facility Commitment (or, after
December 31, 1999 or if such Commitment has been terminated, the
outstanding principal balance of such Lender's Acquisition Facility
Loans) plus the outstanding principal balance of such Lender's Tranche
A Term Loans and the denominator of which shall be the then aggregate
amount of all Revolving Credit Commitments (or, if such Commitments
have been terminated, the outstanding principal balance of all
Revolving Loans), Acquisition Facility Commitments (or, after December
31, 1999 or if such Commitments have been terminated, the outstanding
principal balance of all Acquisition Facility Loans) and the
outstanding principal balance of the Tranche A Term Loans."
-3-
<PAGE> 168
1.11 Article II of the Credit Agreement is hereby amended by
adding the following new Section 2.2A immediately after Section 2.2 and before
Section 2.3:
"2.2A Acquisition Facility. Upon the satisfaction of the
conditions precedent set forth in Sections 4.1 and 4.2, from and
including the date of this Agreement and prior to December 31, 1999,
each Lender severally and not jointly agrees, on the terms and
conditions set forth in this Agreement, to make revolving loans, in
Dollars only, to the applicable Borrower from time to time in an amount
not to exceed such Lender's Acquisition Facility Commitment (each
individually, an "'ACQUISITION FACILITY LOAN" and collectively, the
"ACQUISITION FACILITY LOANS"). Each Advance under this Section 2.2A
shall consist of Acquisition Facility Loans made by each Lender ratably
in proportion to such Lender's respective Tranche A Pro Rata Share.
Subject to the terms of this Agreement, the Borrowers may borrow, repay
and reborrow Acquisition Facility Loans at any time prior to December
31, 1999. On December 31, 1999, the Borrower's option to borrow and
reborrow Acquisition Facility Loans shall terminate, the Aggregate
Acquisition Facility Commitment shall be reduced to zero and the
outstanding principal balance of the Acquisition Facility Loans shall
be repaid in sixteen (16) equal consecutive quarterly installments of
principal, payable on the last Business Day of each fiscal quarter of
the Borrower, commencing on December 31, 1999 and continuing thereafter
until the Tranche A Term Loan Termination Date, and the Acquisition
Facility Loans shall be permanently reduced by the amount of each
installment on the date payment thereof is made hereunder.
Notwithstanding the foregoing, the final installment shall be in the
amount of the then outstanding principal balance of the Acquisition
Facility Loans. In addition, the then outstanding principal balance of
all Acquisition Facility Loans, if any, shall be due and payable on the
Tranche A Term Loan Termination Date."
1.12 Section 2.5(B)(i)(d)(I) of the Credit Agreement is hereby
amended to insert the following phrase immediately after the phrase "Tranche B
Term Loans":
"and, after December 31, 1999, the Acquisition Facility Loans".
1.13 Section 2.5(B)(i)(e) of the Credit Agreement is hereby
amended to insert the following phrase immediately after the reference to
"Tranche A Term Loans":
"and, after December 31, 1999, the Acquisition Facility Loans".
1.14 Section 2.6 of the Credit Agreement is hereby amended to
insert the following phrase after the first reference to "Aggregate Revolving
Loan Commitment":
"or the Aggregate Acquisition Facility Commitment",
and to insert at the end of the first sentence the following:
"and the amount of the Aggregate Acquisition Facility Commitment may
not be reduced below the aggregate principal amount of the outstanding
Acquisition Facility Loans".
-4-
<PAGE> 169
1.15 Section 2.7 of the Credit Agreement is hereby amended to
insert the following phrase immediately after the phrase "Revolving Loan or
Loans":
"or Acquisition Facility Loan or Loans".
1.16 Section 2.8(b)(i) of the Credit Agreement shall be
amended to insert immediately after the reference to "Tranche A Term Loans and
Revolving Loans" in the pricing grid a reference to the following:
"and Acquisition Facility Loans".
1.17 Section 2.9 of the Credit Agreement is hereby amended to
insert the following phrase immediately after the phrase "Aggregate Revolving
Loan Commitment":
"or the unused Aggregate Acquisition Facility Commitment".
1.18 Section 2.15(C) of the Credit Agreement is hereby amended
to add the following phrase immediately after the phrase "Aggregate Revolving
Loan Commitment" in (i)(A):
"plus the Aggregate Acquisition Facility Commitment (prior to December
31, 1999)"
and to insert immediately after the phrase "Revolving Credit Obligations" in (i)
(B) the following:
"plus, prior to December 31, 1999, the outstanding principal balance of
the Acquisition Facility Loans".
1.19 Section 2.22 of the Credit Agreement is hereby amended to
add the following immediately after the end thereof:
"Notwithstanding the foregoing, Comerica Bank may issue commercial
Letters of Credit up to an aggregate amount at any one time outstanding
of $75,000 for its own account with respect to which the participation
provisions of this Section 2.22 shall not apply."
1.20 Section 2.25 of the Credit Agreement is hereby amended to
add the following immediately after the end thereof:
-5-
<PAGE> 170
"Notwithstanding the foregoing, the Letter of Credit Fee prescribed in
this Section 2.25 shall not apply to the commercial letters of credit
issued by Comerica Bank for its own account as described in Section
2.22 and Comerica Bank and the Borrowers shall negotiate separate fee
arrangements with respect to such letters of credit and such fees shall
be for the account of Comerica Bank."
1.21 Section 6.3(D) of the Credit Agreement is hereby amended
to add the following new subsection (xii) ad the end thereof:
"(xii) Investments made in Permitted Acquisitions".
1.22 Section 6.3(G) of the Credit Agreement is here by amended
to delete Section 6.3(G)(2) now contained therein and to substitute the
following therefor:
"prior to each such acquisition, Holdings shall deliver to the
Administrative Agent a certificate from one of Holdings' Authorized
Officers demonstrating to the satisfaction of the Administrative Agent
that after giving effect to the transaction or transactions on a pro
forma basis using pro forma historical audited and reviewed unaudited
financial statements (or other financial statements reasonably
acceptable to the Administrative Agent) obtained from the seller on an
unadjusted basis (other than one-time adjustments agreed to by the
Administrative Agent, such agreement not to be unreasonable withheld)
as if the acquisition had occurred in the first day of the twelve-month
period ending on the last day of Holdings' most recently completed
fiscal quarter, Holdings and its Subsidiaries (a) would have been in
compliance with all provisions of Section 6.4 at all times during such
twelve-month period and would have maintained a Leverage Ratio at all
times prior to January 1, 1998 of less than 5.50 to 1.0; and (b) will
be in compliance, based on projections deemed reasonable by the
Administrative Agent, with all provisions of Section 6.4 through the
first anniversary of such acquisition;"
and is further amended to delete the language now contained in Section
6.3(G)(5)(B) and substitute the following therefor:
"with respect to acquisitions other than the acquisition of Ellebi,
S.A., $5,000,000 if the sources for such purchases are other than as
set forth in clause (A) above, unless such acquisition is approved by
the Required Lenders"
and is further amended to add a new subsection (6) immediately following
subsection (5):
"(6) if the acquisition is a stock acquisition, the acquisition shall
result in a transfer of 100% of the common stock of the company being
acquired".
1.23 Section 8.2(vi) of the Credit Agreement is hereby amended
to insert immediately after each reference to "Revolving Loan Commitment" the
following:
"or its Acquisition Facility Commitment".
1.24 Section 8.3(iv) of the Credit Agreement is hereby amended
to insert immediately after the phrase "Revolving Loan Commitment" the
following:
-6-
<PAGE> 171
"or Acquisition Facility Commitment".
1.25 Section 10.9 of the Credit Agreement is hereby amended to
insert immediately after the phrase "Revolving Loan Commitment" the following:
"its Acquisition Facility Commitment".
1.26 Section 12.2 of the Credit Agreement is hereby amended to
insert immediately after each reference to the phrase "Revolving Loan
Commitment" the following:
"or any Acquisition Facility Commitment".
1.27 Section 12.3 of the Credit Agreement is hereby amended to
insert immediately after each reference to the phrase "Revolving Loan
Commitment" the following:
"or Acquisition Facility Commitment",
and to insert immediately after the phrase "Aggregate Revolving Loan Commitment"
the following:
", the Aggregate Acquisition Facility Commitment".
2. Conditions of Effectiveness. The effectiveness of this
Amendment is subject to the conditions precedent that (a) the Administrative
Agent shall have received counterparts of this Amendment duly executed by the
Borrowers, the Required Lenders and the Agents, (b) the Borrowers shall have
raised $100,000,000 through an offering of subordinated notes containing terms
substantially identical to those set forth in the Preliminary Offering
Memorandum dated September 8, 1997, and (c) the Borrowers shall have paid any
fees due and payable pursuant to any applicable fee letter. Upon the
satisfaction of the foregoing conditions precedent, this Amendment shall become
effective with respect to the amendments set forth in Section 1 above.
3. Representations and Warranties of the Borrowers. Each
Borrower hereby represents and warrants as follows:
(a) This Amendment and the Credit Agreement as amended hereby
constitute legal, valid and binding obligations of the Borrowers and are
enforceable against the Borrowers in accordance with their terms.
(b) As of September 24, 1997, (i) there exists no Default or
Unmatured Default and (ii) the representations and warranties contained in
Article V of the Credit Agreement, as amended hereby, are true and correct in
all material respects, except for representations and warranties made with
reference to a specific date which representations and warranties are true and
correct in all material respects as of such date.
4. Reference to and Effect on the Credit Agreement and
Security Agreements.
(a) Upon the effectiveness of Section 1 hereof, each reference
in any Loan Document to such Loan Document or any other Loan Document shall mean
and be a reference to the applicable Loan Document as amended hereby.
-7-
<PAGE> 172
(b) Except as specifically amended above, the Credit Agreement
and all other documents, instruments and agreements executed and/or delivered in
connection therewith shall remain in full force and effect and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Agents or the Lenders, nor constitute a waiver
of any provision of the Credit Agreement or any other documents, instruments and
agreements executed and/or delivered in connection therewith.
5. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
6. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
7. Counterparts. This Amendment may be executed by one or more
of the parties hereto on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
-8-
<PAGE> 173
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first above written.
ADVANCED ACCESSORY SYSTEMS, LLC
as a Borrower
By:____________________________
Name:
Title:
SPORTRACK, LLC
as a Borrower
By: ADVANCED ACCESSORY SYSTEMS, LLC
Its Manager
By:____________________________
Name:
Title:
VALLEY INDUSTRIES, LLC
as a Borrower
By: ADVANCED ACCESSORY SYSTEMS, LLC
Its Manager
By:____________________________
Name:
Title:
BRINK INTERNATIONAL BV
as a Borrower
By:____________________________
Name:
Title:
BRINK BV
as a Borrower
By:____________________________
Name:
Title:
-9-
<PAGE> 174
NBD BANK
as the Administrative Agent and the
Documentation and Collateral Agent,
and as a Lender
By:____________________________
Name:
Title:
THE CHASE MANHATTAN BANK
as the Co-Administrative Agent and
the Syndication Agent, and as a
Lender
By:____________________________
Name:
Title:
FIRST UNION NATIONAL BANK
as a Lender
By:____________________________
Name:
Title:_________________________
THE BANK OF NOVA SCOTIA
as a Lender
By:____________________________
Name:
Title:
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
as a Lender
By:____________________________
Name:
Title:
By:____________________________
Name:
Title:
-10-
<PAGE> 175
LASALLE NATIONAL BANK
as a Lender
By:____________________________
Name:
Title:
MICHIGAN NATIONAL BANK
as a Lender
By:____________________________
Name:
Title:
NATIONAL CITY BANK (CLEVELAND)
as a Lender
By:____________________________
Name:
Title:
COMERICA BANK
as a Lender
By:____________________________
Name:
Title:
VAN KAMPEN AMERICA CAPITAL
PRIME RATE INCOME TRUST
as a Lender
By:____________________________
Name:
Title:
DEBT STRATEGIES FUND, INC.
as a Lender
By:____________________________
Name:
Title:
-11-
<PAGE> 176
SENIOR HIGH INCOME PORTFOLIO, INC.
as a Lender
By:____________________________
Name:
Title:
DEEPROCK & CO.
By: Eaton Vance Management
as Investment Advisor
By:____________________________
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research
as Investment Advisor
By:____________________________
Name:
Title:
MERRILL LYNCH DEBT STRATEGIES
PORTFOLIO
By: Merrill Lynch Asset Management, L.P.,
as Investment Advisor
By:____________________________
Name:
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P.,
as Investment Advisor
By:____________________________
Name:
Title:
-12-
<PAGE> 177
EXECUTION COPY
AMENDMENT NO. 3
Dated as of December 29, 1997
to
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of August 5, 1997
THIS AMENDMENT NO. 3 ("Amendment") is made as of December 29,
1997 by and among Advanced Accessory Systems, LLC (formerly known as AAS
Holdings, LLC), SportRack, LLC (formerly known as Advanced Accessory Systems,
LLC), Valley Industries, LLC, Brink International BV and Brink BV (the
"Borrowers"), the financial institutions listed on the signature pages hereof
(the "Lenders") and NBD Bank, as Administrative Agent and Documentation and
Collateral Agent, and The Chase Manhattan Bank, as Co-Administrative Agent and
Syndication Agent (the "Agents"), under that certain Second Amended and Restated
Credit Agreement dated as of August 5, 1997 by and among the Borrowers, the
Lenders and the Agents (as amended, the "Credit Agreement"). Defined terms used
herein and not otherwise defined herein shall have the respective meanings given
to them in the Credit Agreement.
WHEREAS, the Borrowers, the Lenders and the Agents have agreed
to amend the Credit Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth
above, the terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrowers, the Lenders and the Agents have agreed to the following amendments to
the Credit Agreement.
1. Amendments to Credit Agreement. Effective as of December
29, 1997 and subject to the satisfaction of the conditions precedent set forth
in Section 2 below, the Credit Agreement is hereby amended as follows:
1.1 Article I of the Credit Agreement is hereby amended to
delete the definition of "AAS" now contained therein and to substitute therefor
the following definition:
"'AAS' means SportRack, LLC, a Delaware limited liability
company (formerly known as Advanced Accessory Systems, LLC), and its
successors and assigns, including a debtor-in-possession on behalf of
AAS."
1.2 Article I of the Credit Agreement is hereby amended to
delete the definition of "Holdings" now contained therein and to substitute
therefor the following:
"'HOLDINGS' means Advanced Accessory Systems, LLC, a Delaware
limited liability company (formerly known as AAS Holdings, LLC), and
its successors and assigns, including a debtor-in-possession on behalf
of Holdings."
1.3 Section 6.3(A)(f) of the Credit Agreement is hereby
amended to add a new subsection (5) at the end thereof:
"and (5) Brink BV or Brink International to Brink Italia S.r.l. in an
amount not to exceed $22,000,000 or the Equivalent Amount thereof,
provided that if such
<PAGE> 178
Indebtedness is evidenced by a note, such note is pledged to the
Documentation and Collateral Agent to secure payment of Advances made
to non-U.S. Subsidiaries."
1.4 Section 6.3(D) of the Credit Agreement is hereby amended
to add a new subsection (xiii) at the end thereof:
(xiii) Investments made through a purchase of equity or as a
contribution to capital by Brink BV or Brink International in Brink
Italia S.r.l. provided that any such Investment shall not exceed
$10,000,000 or the Equivalent Amount thereof."
1.5 Section 6.4(A) of the Credit Agreement is hereby amended
to add the following as a new last sentence at the end of the definition of
"Capital Expenditures":
"No portion of the purchase of assets by Brink Italia S.r.l. from
Ellebi S.p.A. shall be deemed to be a Capital Expenditure."
1.6 Schedule 5.8 of the Credit Agreement is hereby amended to
add immediately at the end thereof the following:
"Brink Italia S.r.l., an Italian corporation."
2. Conditions of Effectiveness. The effectiveness of this
Amendment is subject to the conditions precedent that the Administrative Agent
shall have received counterparts of this Amendment duly executed by the
Borrowers, the Required Lenders and the Agents. Upon the satisfaction of the
foregoing conditions precedent, this Amendment shall become effective with
respect to the amendments set forth in Section 1 above.
3. Representations and Warranties of the Borrowers. Each
Borrower hereby represents and warrants as follows:
(a) This Amendment and the Credit Agreement as amended hereby
constitute legal, valid and binding obligations of the Borrowers and are
enforceable against the Borrowers in accordance with their terms.
(b) As of December 29, 1997, (i) there exists no Default or
Unmatured Default and (ii) the representations and warranties contained in
Article V of the Credit Agreement, as amended hereby, are true and correct in
all material respects, except for representations and warranties made with
reference to a specific date which representations and warranties are true and
correct in all material respects as of such date.
4. Reference to and Effect on the Credit Agreement and
Security Agreements.
(a) Upon the effectiveness of Section 1 hereof, each reference
in any Loan Document to such Loan Document or any other Loan Document shall mean
and be a reference to the applicable Loan Document as amended hereby.
(b) Except as specifically amended above, the Credit Agreement
and all other documents, instruments and agreements executed and/or delivered in
connection therewith shall remain in full force and effect and are hereby
ratified and confirmed.
-2-
<PAGE> 179
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Agents or the Lenders, nor constitute a waiver
of any provision of the Credit Agreement or any other documents, instruments and
agreements executed and/or delivered in connection therewith.
5. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
6. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
7. Counterparts. This Amendment may be executed by one or more
of the parties hereto on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
-3-
<PAGE> 180
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first above written.
ADVANCED ACCESSORY SYSTEMS, LLC
as a Borrower
By:____________________________
Name:
Title:
SPORTRACK, LLC
as a Borrower
By: ADVANCED ACCESSORY SYSTEMS, LLC
Its Manager
By:____________________________
Name:
Title:
VALLEY INDUSTRIES, LLC
as a Borrower
By: ADVANCED ACCESSORY SYSTEMS, LLC
Its Manager
By:____________________________
Name:
Title:
BRINK INTERNATIONAL BV
as a Borrower
By:____________________________
Name:
Title:
BRINK BV
as a Borrower
By:____________________________
Name:
Title:
-4-
<PAGE> 181
NBD BANK
as the Administrative Agent and
the Documentation and Collateral
Agent, and as a Lender
By:____________________________
Name:
Title:
THE CHASE MANHATTAN BANK
as the Co-Administrative Agent and
the Syndication Agent, and as a
Lender
By:____________________________
Name:
Title:
FIRST UNION NATIONAL BANK
as a Lender
By:____________________________
Name:
Title:_________________________
THE BANK OF NOVA SCOTIA
as a Lender
By:____________________________
Name:
Title:
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
as a Lender
By:____________________________
Name:
Title:
By:____________________________
Name:
Title:
-5-
<PAGE> 182
LASALLE NATIONAL BANK
as a Lender
By:____________________________
Name:
Title:
MICHIGAN NATIONAL BANK
as a Lender
By:____________________________
Name:
Title:
NATIONAL CITY BANK (CLEVELAND)
as a Lender
By:____________________________
Name:
Title:
COMERICA BANK
as a Lender
By:____________________________
Name:
Title:
VAN KAMPEN AMERICA CAPITAL
PRIME RATE INCOME TRUST
as a Lender
By:____________________________
Name:
Title:
DEBT STRATEGIES FUND, INC.
as a Lender
By:____________________________
Name:
Title:
-6-
<PAGE> 183
SENIOR HIGH INCOME PORTFOLIO, INC.
as a Lender
By:____________________________
Name:
Title:
DEEPROCK & CO.
By: Eaton Vance Management
as Investment Advisor
By:____________________________
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research
as Investment Advisor
By:____________________________
Name:
Title:
MERRILL LYNCH DEBT STRATEGIES
PORTFOLIO
By: Merrill Lynch Asset Management,
L.P., as Investment Advisor
By:____________________________
Name:
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management,
L.P., as Investment Advisor
By:____________________________
Name:
Title:
-7-
<PAGE> 1
EXHIBIT 10.8
================================================================================
FIRST AMENDED AND RESTATED
CREDIT AGREEMENT
AMONG
SPORTRACK INTERNATIONAL INC.
(AS "BORROWER")
- AND -
FIRST CHICAGO NBD BANK, CANADA
(AS "AGENT")
- AND -
FIRST CHICAGO NBD BANK, CANADA,
THE CHASE MANHATTAN BANK OF CANADA AND
THE BANK OF NOVA SCOTIA
(AS "LENDERS")
DATED AS OF THE 19TH DAY OF MARCH, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1 INTERPRETATION.................................................................... 2
1.1 Defined Terms............................................................. 2
1.2 Interpretation............................................................ 15
1.3 Ancillary Agreements...................................................... 16
1.4 Severability.............................................................. 16
1.5 Entire Agreement.......................................................... 16
1.6 Waiver.................................................................... 16
1.7 Governing Law............................................................. 17
1.8 Incorporation of Schedules and Exhibits................................... 17
1.9 Conflicts................................................................. 17
1.10 Language.................................................................. 17
ARTICLE 2 CREDIT FACILITIES................................................................. 18
2.1 Revolving Facility and Term Facility...................................... 18
2.2 Commitments and Facility Limits........................................... 18
2.3 Available Accommodations.................................................. 19
2.4 Use of Proceeds........................................................... 19
2.5 Mandatory Repayments...................................................... 19
2.6 Mandatory Prepayments and Payments........................................ 20
2.7 Additional Prepayments and Reductions..................................... 21
2.8 Evidence of Indebtedness.................................................. 21
2.9 Facility Ratios........................................................... 21
2.10 Allocation of Fees and Expenses........................................... 22
ARTICLE 3 LOAN ADVANCES..................................................................... 22
3.1 The Advances.............................................................. 22
3.2 Procedure for Borrowing................................................... 25
3.3 Interest on Advances...................................................... 25
3.4 Conversions and Elections Regarding Types of Advances and
Interest Rates............................................................ 26
3.5 Conversions of Floating Rate Advances to Bankers' Acceptances
or BA Equivalent Notes.................................................... 27
3.6 Circumstances Requiring US Base Rate or Floating Rate Pricing............. 27
ARTICLE 4 BANKERS' ACCEPTANCES.............................................................. 30
4.1 Acceptances and BA Equivalent Notes....................................... 30
4.2 Procedure for Drawing..................................................... 30
4.3 Amount and Term........................................................... 30
</TABLE>
<PAGE> 3
- 2 -
<TABLE>
<S> <C>
4.4 Completion of Drafts...................................................... 31
4.5 Making of Accommodations.................................................. 31
4.6 Reimbursement at Contract Maturity Date................................... 31
4.7 Renewal or Conversion of Bankers' Acceptances............................. 32
4.8 Waiver.................................................................... 32
4.9 Obligations Absolute...................................................... 32
4.10 Prepayments............................................................... 33
4.11 Circumstances Making Bankers' Acceptances Unavailable..................... 33
4.12 Presigned Draft Forms..................................................... 33
4.13 Schedule 2 Reference Lenders.............................................. 33
ARTICLE 5 CONDITIONS OF LENDING............................................................. 34
5.1 Conditions Precedent to Further Accommodations Under
Revolving Facility and Term Facility ....................................... 34
5.2 Conditions of all Accommodations........................................... 37
5.3 Condition Precedent to Initial Accommodation under the
Revolving Facility......................................................... 37
ARTICLE 6 REPRESENTATIONS AND WARRANTIES.................................................... 37
6.1 Representations and Warranties............................................. 37
6.2 Survival of Representations and Warranties................................. 41
6.3 No Representations by Lenders.............................................. 41
ARTICLE 7 COVENANTS OF THE BORROWER......................................................... 41
7.1 Affirmative Covenants...................................................... 41
ARTICLE 8 SECURITY.......................................................................... 44
8.1 Guarantees................................................................. 44
8.2 Security................................................................... 44
8.3 Registrations.............................................................. 44
ARTICLE 9 EVENTS OF DEFAULT................................................................. 45
9.1 Events of Default.......................................................... 45
9.2 Expense of Agent........................................................... 47
9.3 Right to Confirm and Set-off............................................... 47
9.4 Remedies Cumulative........................................................ 47
</TABLE>
<PAGE> 4
- 3 -
<TABLE>
<S> <C>
ARTICLE 10 PAYMENTS, COMPUTATIONS AND INDEMNITIES........................................... 47
10.1 Timing of Payments under this Agreement, etc............................... 47
10.2 Payments on Non-Business Days.............................................. 48
10.3 Overdue Amounts............................................................ 48
10.4 Application of Proceeds.................................................... 48
10.5 Computations of Interest and Fees.......................................... 49
10.6 Judgment Currency.......................................................... 50
10.7 Costs and Expenses......................................................... 50
10.8 Indemnity for Change in Circumstances...................................... 51
10.9 Indemnity Relating to Accommodations....................................... 52
10.10 Indemnity for Transactional and Environmental Liability.................... 53
10.11 Survival of Indemnities: Contribution...................................... 54
ARTICLE 11 GENERAL PROVISIONS............................................................... 54
11.1 Notices.................................................................... 54
11.2 Time of the Essence........................................................ 55
11.3 Third Party Beneficiaries.................................................. 55
11.4 Enurement.................................................................. 55
11.5 Counterparts............................................................... 55
11.6 Knowledge.................................................................. 55
11.7 Assignment................................................................. 56
11.8 Non-Merger................................................................. 56
11.9 Certificates and Opinions.................................................. 56
11.10 Amendment.................................................................. 56
11.11 Agent's and Lenders' Confidentiality Obligations........................... 56
ARTICLE 12 THE AGENT........................................................................ 57
12.1 Appointment and Authorization of Agent..................................... 57
12.2 Interest Holders........................................................... 57
12.3 Consultation with Counsel.................................................. 57
12.4 Documents.................................................................. 57
12.5 Agent as Lender............................................................ 57
12.6 Responsibility of Agent.................................................... 58
12.7 Action by Agent............................................................ 58
12.8 Notice of Events of Default................................................ 58
12.9 Benefit of Article 12...................................................... 58
12.10 Responsibility Disclaimed.................................................. 59
12.11 Indemnification............................................................ 59
12.12 Credit Decision............................................................ 59
12.13 Successor Agent............................................................ 59
12.14 Delegation by Agent........................................................ 60
12.15 Waivers and Amendments..................................................... 60
12.16 Determination by Agent Conclusive and Binding.............................. 61
12.17 Remittance of Payments..................................................... 61
12.18 Redistribution of Set-Off Payment.......................................... 61
</TABLE>
<PAGE> 5
- 4 -
<TABLE>
<S> <C>
12.19 Redistribution of Payment Under Security................................... 62
12.20 Distribution of Notices.................................................... 63
12.21 Dealings Between Borrower and Agent........................................ 63
12.22 Appointment of NBD Bank.................................................... 63
</TABLE>
<PAGE> 6
FIRST AMENDED AND RESTATED
CREDIT AGREEMENT
DATED as of the 19th day of March, 1998
A M O N G:
SPORTRACK INTERNATIONAL INC.
(as "BORROWER")
- and -
FIRST CHICAGO NBD BANK, CANADA
(as "AGENT")
- and -
FIRST CHICAGO NBD BANK, CANADA, THE CHASE
MANHATTAN BANK OF CANADA AND THE BANK OF
NOVA SCOTIA
(as "LENDERS")
WHEREAS the Borrower, the Agent and certain of the Lenders have entered
into and executed a Credit Agreement, dated as of July 2, 1997, as amended by
that certain First Amending Agreement thereto, dated as of September 24, 1997
(collectively, the "EXISTING CREDIT AGREEMENT");
AND WHEREAS the Borrower has requested that the Agent and the Lenders
amend the Existing Credit Agreement in accordance with the terms hereof.
NOW, THEREFORE, THE BORROWER, THE AGENT AND THE LENDERS AGREE THAT THE EXISTING
CREDIT AGREEMENT IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY AS SET FORTH
HEREIN, WITHOUT NOVATION.
<PAGE> 7
- 2 -
ARTICLE 1
INTERPRETATION
1.1 DEFINED TERMS. In this Agreement, the following terms shall have the
following meanings:
"ACCOMMODATION" means (i) an Advance made by the Lenders, or any one or
more of them, on the occasion of any Borrowing and (ii) a Bankers' Acceptance
created or a BA Equivalent Note purchased by a Lender on the occasion of any
Drawing.
"ACCOMMODATION NOTICE" means a Borrowing Notice or a Drawing Notice.
"ACCOUNTS" means, with respect to any Person, all accounts receivable,
Claims (including Claims relating to insurance policies and Refundable Taxes),
monies and book debts, on account or in respect of any Disposition of any
Inventory, at any time due, owed or owing to such Person (including by any
Affiliate of such Person), and all Liens, instruments, chattel paper,
securities, bills, notes and other documents in respect of any such accounts
receivable, Claims, monies or book debts.
"ACQUISITION" means the purchase by the Borrower of certain assets from
Bell Sports Canada Inc. pursuant to that certain asset purchase agreement,
dated as of July 2, 1997, between the Borrower and Bell Sports Canada Inc.
"ADVANCES" means advances made by the Lenders, or any one or more of them,
under this Agreement and "ADVANCE" means any one of such Advances. A Canadian
Dollar Advance may be designated a "FLOATING RATE ADVANCE" and a US Dollar
Advance may be designated a "LIBOR ADVANCE" or a "US BASE RATE ADVANCE".
"AFFECTED LENDER" has the meaning specified in SECTION 10.8(2).
"AFFILIATE" shall have the meaning ascribed thereto in the Amended and
Restated Credit Agreement.
"AGENT" means First Chicago NBD Bank, Canada, in its capacity as
administrative agent for the Lenders, its successors and permitted assigns.
"AGREEMENT" means this first amended and restated credit agreement and all
schedules and exhibits hereto, as the same may be amended, supplemented or
restated from time to time.
"AGREEING LENDER" has the meaning specified in SECTION 3.6(2).
"AMENDED AND RESTATED CREDIT AGREEMENT" means that certain second amended
and restated credit agreement, dated as of August 5, 1997, among Holdings,
SportRack, Valley Industries, LLC, Brink International BV, Brink BV, the other
Borrowing Subsidiaries (as defined therein), the financial institutions from
time to time party thereto, as lenders, as well as NBD Bank and The Chase
Manhattan Bank, as amended by (i) that certain amendment No. 1 thereto, dated
as of September 5, 1997, by (ii) that certain amendment No. 2 thereto, dated as
of September 24, 1997 and by (iii) that certain amendment No. 3 thereto, dated
as of
<PAGE> 8
- 3 -
December 29, 1997 and as such agreement may be further amended, modified
or otherwise supplemented form time to time.
"ANCILLARY AGREEMENTS" means all Drafts, Bankers' Acceptances, BA
Equivalent Notes, Guarantees, Security Documents, Fee Agreements and
other agreements, certificates and instruments delivered or given pursuant to or
in connection with this Agreement, in each case as the same may be amended,
supplemented or restated from time to time; and "ANCILLARY AGREEMENT" means any
one of such Drafts, Bankers' Acceptances, BA Equivalent Notes, Guarantees,
Security Documents, Fee Agreements and other agreements, certificates or
instruments.
"ASSENTING LENDER" has the meaning specified in SECTION 10.8(2).
"ASSUMPTION AGREEMENT" means an agreement substantially in the form
attached as SCHEDULE 8.
"AUTHORIZATION" means, with respect to any Person, any authorization,
order, permit, approval, grant, license, written consent, right, franchise,
privilege, certificate, judgment, writ, injunction, award, determination,
direction, decree, by-law, rule or regulation of any Governmental Entity having
jurisdiction over such Person.
"BA DISCOUNT PROCEEDS" means, in respect of any Bankers' Acceptance or BA
Equivalent Note, an amount calculated on the applicable Drawing Date which is
the result (rounded to the nearest full cent, with one-half of one cent being
rounded up) obtained by dividing the Face Amount of such Bankers' Acceptance or
BA Equivalent Note by the sum of one plus the product of (i) the BA Discount
Rate applicable thereto expressed as a decimal fraction and (ii) a decimal
fraction, the numerator of which is the number of days to elapse from and
including the Drawing Date of such Bankers' Acceptance or BA Equivalent Note up
to but excluding the maturity date thereof and the denominator of which is 365,
which product will be rounded to the nearest multiple of 0.0001.
"BA DISCOUNT RATE" means either (i) with respect to any Bankers'
Acceptance accepted by a Schedule 1 BA Lender, the rate determined by the Agent
as being the arithmetic average (rounded up to the nearest 0.01%) of the
discount rates, calculated on the basis of a year of 365 days and determined in
accordance with normal market practice at or about 10:00 a.m. (Montreal time)
on the applicable Drawing Date, for bankers' acceptances of the Schedule 1
Reference Lenders having a comparable face amount and identical maturity date
to the Face Amount and maturity date of such Bankers' Acceptance accepted by a
Schedule 1 BA Lender, (ii) with respect to any Bankers' Acceptance accepted by
a Schedule 2 BA Lender, the rate determined by the Agent as being the
arithmetic average (rounded up to the nearest 0.01%) of the discount rates,
calculated on the basis of a year of 365 days and determined in accordance with
normal market practice at or about 10:00 a.m. (Montreal time) on the applicable
Drawing Date, for bankers' acceptances of the Schedule 2 Reference Lenders
having a comparable face amount and identical maturity date to the Face Amount
and maturity date of such Bankers' Acceptance accepted by a Schedule 2 BA
Lender, or (iii) with respect to any BA Equivalent Note, the rate determined in
(i).
<PAGE> 9
- 4 -
"BA EQUIVALENT NOTE" means, on any date, a notional bankers' acceptance
issued by the Borrower in favour of any Non-BA Lender evidenced by the account
records maintained by the Agent.
"BA LENDER" means each Lender which is not a Non-BA Lender.
"BANKERS' ACCEPTANCE" has the meaning specified in SECTION 4.1.
"BORROWER" means SportRack International Inc. (formerly known as Advanced
Accessory Systems Canada Inc./Les Systemes d'Accessoire Advanced Canada Inc.),
its successors and permitted assigns.
"BORROWER'S CANADIAN DOLLAR ACCOUNT" means the Canadian Dollar account
maintained by the Borrower at the Canadian Account Branch, the particulars of
which shall have been notified by the Borrower to the Agent.
"BORROWER'S US DOLLAR ACCOUNT" means the US Dollar account maintained by
the Borrower at the Canadian Account Branch, the particulars of which shall
have been notified by the Borrower to the Agent.
"BORROWING" means a borrowing consisting of one or more Advances.
"BORROWING NOTICE" has the meaning specified in SECTION 3.2.
"BUSINESS" means the business acquired from Bell Sports Canada Inc. and
from Nomadic Sports Inc. and henceforth carried on by the Borrower and its
Subsidiaries in respect of the designing, engineering, manufacturing,
marketing, selling and distributing of automotive roof rack systems and
vehicular accessories (such as bike racks, ski racks and surfboard carriers)
and rear carriers and shuttles and related rear carriers and shuttle systems as
well as all ancillary or related activities and businesses of the Borrower and
its Subsidiaries.
"BUSINESS DAY" means any day of the year on which banks are open for
business in Montreal, Quebec, Toronto, Ontario and New York City, New York and,
where used in the context of a LIBOR Advance, such day is also a day on which
dealings are carried on in the London interbank market.
"CANADIAN ACCOUNT BRANCH" means the branch bank of the Agent in Toronto,
Ontario at which the Borrower maintains the Borrower's Canadian Dollar Account
and the Borrower's US Dollar Account from time to time.
"CANADIAN DOLLARS", "CDN. $" AND "$" each mean lawful money of Canada.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents of or interests in (however
designated) the equity interest (including common shares, preferred shares and
partnership interests) of such Person and any rights (other than debt
securities convertible into an equity interest), warrants or options to
subscribe for or acquire an equity interest in such Person.
<PAGE> 10
- 5 -
"CHANGE OF CONTROL" means, with respect to the Borrower, the purchase or
acquisition, by any Person (other than Holdings or any of its Subsidiaries), or
any other Person acting jointly or in concert with such Person directly or
indirectly, legally or beneficially, of shares in the capital stock of the
Borrower, having ordinary voting power to elect a majority of the board of
directors of the Borrower, or persons performing similar functions.
"CLAIM" means any claim of any nature whatsoever, including any demand,
dispute, liability, obligation, debt, action, cause of action, suit,
proceeding, litigation, arbitration, judgment, order, award, assessment and
reassessment, and any formal inquiry reasonably likely in the opinion of the
Borrower to result in any of the foregoing.
"CLOSING" means the date on which the initial Accommodation was made under
the Term Facility pursuant to the terms and conditions of the Existing Credit
Agreement.
"COLLATERAL" means (i) all Accounts and Inventory; (ii) all Property
(including all books, records, lists, correspondence, papers, data, choses in
action, warehouse receipts, bills of lading, licenses, permits, franchises,
leases, goodwill, instruments, chattel paper, documents of title, intangibles,
contracts, purchase orders and proceeds) relating to any Accounts or Inventory;
(iii) all bank or other deposit accounts; (iv) all certificates of deposit and
other deposit instruments purchased with the proceeds of Dispositions of
Accounts, Inventory or such certificates of deposit or other deposit
instruments, (v) all Intellectual Property relating to Inventory; (vi) all
insurance policies in respect of the loss or destruction of Inventory; and
(vii) all increases, additions and accessions to and all substitutions,
replacements and proceeds of any of the foregoing; in each case, present and
future, of the Borrower.
"COMMITMENTS" means the Revolving Facility Aggregate Commitment and the
Term Facility Aggregate Commitment; and "Commitment" means any one of such
Commitments.
"CONSOLIDATED SUBSIDIARY" means, at any time, in respect of any Person,
any other Person the accounts of which are or should, in accordance with GAAP,
be consolidated with those of such first-mentioned Person in its consolidated
financial statements at such time.
"CONTRIBUTING LENDER" has the meaning specified in SECTION 3.1(2)(A).
"CREDIT DOCUMENTS" means this Agreement and the Ancillary Agreements; and
"CREDIT DOCUMENT" means any one of such Credit Documents.
"CREDIT FACILITIES" means, collectively, the Revolving Facility and the
Term Facility; and "CREDIT FACILITY" means either one of the Credit Facilities.
"DEFAULT" means an event, condition or circumstance which, with the giving
of notice or passage of time, or both, would constitute an Event of Default.
"DEFAULTING LENDER" has the meaning specified in SECTION 3.1(2)(A).
"DEPOSITARY" means any depositary, bailee or warehouseperson of any of the
Collateral.
<PAGE> 11
- 6 -
"DEPOSITARY'S LETTER" means a letter substantially in the form attached as
SCHEDULE 10.
"DETERMINING LENDER" has the meaning specified in SECTION 3.6(1).
"DISPOSITION" means, with respect to any Property of any Person, any
direct or indirect sale, lease (where such Person is the lessor of such
Property), transfer (including any transfer of title or possession), exchange,
conveyance, release, abandonment expropriation, requisition of title, seizure,
condemnation, forfeiture, actual or constructive, total loss or agreed or
compromised loss or other disposition, including by means of a reorganization,
consolidation, amalgamation or merger ; and "DISPOSE" and "DISPOSED" have
meanings correlative thereto.
"DRAFT" means, at any time, a blank bill of exchange within the meaning of
the Bills of Exchange Act (Canada) drawn by the Borrower on a BA Lender in the
form supplied by such BA Lender and bearing such distinguishing letters and
numbers as such BA Lender may determine, but which at such time, except as
otherwise provided herein, has not been completed or accepted by such BA
Lender.
"DRAWING" means the creation of Bankers' Acceptances or purchase of BA
Equivalent Notes by the Lenders.
"DRAWING DATE" means any Business Day fixed pursuant to SECTION 4.2 for a
Drawing.
"DRAWING FEE" means, with respect to each Draft or BA Equivalent Note
drawn by the Borrower hereunder and accepted (or, in the case of a BA
Equivalent Note, purchased) by a Lender on any Drawing Date, an amount equal to
the Variable Percentage applicable to Bankers' Acceptances or BA Equivalent
Notes, as the case may be, on such date, multiplied by the Face Amount of such
Draft or BA Equivalent Note, calculated daily on the basis of the term to
maturity of such Draft or BA Equivalent Note and a year of 365 days.
"DRAWING FEE ADJUSTMENT" shall mean, with respect to any Bankers'
Acceptance accepted or BA Equivalent Note purchased hereunder, a positive or
negative amount equal to (i) the Drawing Fee paid by the Borrower with respect
to such Bankers' Acceptance or BA Equivalent Note, minus (ii) the sum of the
amounts, each of which is an amount equal to the Variable Percentage applicable
to such Bankers' Acceptance or BA Equivalent Note on each day during the term
thereof multiplied by the Face Amount thereof, and divided by 365 days. If the
aforesaid calculation results in a negative amount such negative amount shall
be deemed to be an additional Drawing Fee payable hereunder by the Borrower on
account of the Drawing of such Bankers' Acceptance or BA Equivalent Note.
"DRAWING NOTICE" has the meaning specified in SECTION 4.2.
"ELECTION NOTICE" has the meaning specified in SECTION 3.4(2).
"ELIGIBLE ASSIGNEE" means (i) a commercial bank organized under the laws
of Canada, and having total assets in excess of $1,000,000,000; (ii) a
commercial bank organized under the laws of any other country which is a member
of the Organization for Economic Cooperation and Development ("OECD"), or a
political subdivision of any such country , and having total assets in excess
of $3,000,000,000, provided that such bank is acting through a branch or
<PAGE> 12
- 7 -
agency located in the country in which it is organized or another
country which is a member of the OECD; (iii) the central bank of any country
which is a member of the OECD; and (iv) any other financial institution approved
in writing by the Borrower and the Agent as an Eligible Assignee for the
purposes of this Agreement; provided that the Borrower's approval shall not be
unreasonably withheld. Without limitation to the foregoing, the Borrower may
withhold its consent of any such other financial institution if the proposed
assignment of any portion of any Lender's rights and obligations under this
Agreement to such other financial institution would materially increase the
amount of Taxes required to be deducted by the Borrower from or in respect of
any sum payable under the Credit Documents or would materially increase the cost
to the Borrower of obtaining Accommodations (determined as of the date on which
such other financial institution is proposed to become a Lender hereunder).
"ENVIRONMENT" means all components of the earth, including, without
limitation, air (and all layers of the atmosphere), land (and all surface and
subsurface soil, underground spaces and cavities and all land submerged under
water) and water (and all surface and underground water), organic and inorganic
matter and living organisms, and the interacting natural systems that include
components referred to above in this definition of "ENVIRONMENT".
"ENVIRONMENTAL LAWS" means all applicable Laws relating to the
Environment, Hazardous Substances, pollution or protection of the Environment,
including Laws relating to: (i) on site or off-site contamination; (ii)
chemical substances or products; (iii) Releases of pollutants, contaminants,
chemicals or other industrial, toxic or radioactive substances or Hazardous
Substances into the Environment; and (iv) the manufacture, processing,
distribution, use, treatment, storage, transport, packaging, labeling, sale,
recycling, disposal, destruction, incineration, burial or handling of Hazardous
Substances.
"ENVIRONMENTAL LIABILITIES AND COSTS" means all Losses and Claims, whether
known or unknown, present or future, imposed by, under or pursuant to any
Environmental Laws applicable to the Borrower or any of its Subsidiaries or
resulting from any Environmental Order and all reasonable fees, disbursements
and expenses of counsel and experts, including Losses and Claims based on or
arising out of: (i) the ownership or operation of the Business or any Real
Estate or Leasehold Real Estate either related to the Business or owned, leased
or operated by the Borrower or any of its Subsidiaries; (ii) the conditions on,
under or above any Real Estate or Leasehold Real Estate, currently or
previously owned, leased or operated by the Borrower or any of its
Subsidiaries; (iii) expenditures necessary to cause the operations of the
Business, Real Estate or Leasehold Real Estate either related to the Business
or owned, leased or operated by the Borrower or any of its Subsidiaries to
comply with any and all requirements pursuant to any applicable Environmental
Laws or Environmental Orders; (iv) the use, generation, manufacture, refining,
treatment, transportation, storage, handling, recycling, disposal, depositing,
transferring, producing or processing of Hazardous Substances; and (v)
liability for personal injury or property damage, including damages assessed
for the maintenance of a public or private nuisance.
"ENVIRONMENTAL NOTICE" means any written Claim, citation, directive,
statement of claim, notice of investigation, notice of default, letter or other
written communication from any Person given in connection with any actual or
alleged violation of any applicable Environmental Law or Environmental Order.
<PAGE> 13
- 8 -
"ENVIRONMENTAL ORDER" means any final and binding (or, if not final and
binding, any executory (notwithstanding the institution of an appeal or the
filing of an application for review)) order, citation, summons, suit, action or
judgment issued or given by any competent court or any Governmental Entity
pursuant to any violation of Environmental Laws, caused by the activities, acts
or omissions of the Borrower or any of its Subsidiaries.
"ENVIRONMENTAL PERMITS" means all permits, certificates, approvals,
registrations and licenses issued by any Governmental Entity to the Borrower,
its Subsidiaries or to the Business pursuant to Environmental Laws and relating
to or required for the operation of the Business or the use or ownership of the
Real Estate, Leasehold Real Estate or other Property of the Borrower or its
Subsidiaries.
"EQUIVALENT CDN. $ AMOUNT" means, on any day with respect to any amount in
any currency other than Canadian Dollars, the equivalent amount of
Canadian Dollars determined by using the quoted spot rate at which the Agent at
its head or principal office in Toronto offers to provide Canadian Dollars in
exchange for such other currency, at 12:00 noon (Montreal time) on such day.
"EQUIVALENT US $ AMOUNT" means, on any day with respect to any amount of
Canadian Dollars, the equivalent amount of US Dollars determined by using the
quoted spot rate at which the Agent at its head or principal office in Toronto
offers to provide US Dollars in exchange for Canadian Dollars at 12:00 noon
(Montreal time) on such day.
"EVENT OF DEFAULT" has the meaning specified in SECTION 9.1.
"FACE AMOUNT" means, in respect of a Bankers' Acceptance or BA Equivalent
Note, the amount payable to the holder thereof at its maturity.
"FEE AGREEMENTS" means (i) the provisions of this Agreement relating to
Fees; and (ii) all agreements entered into after the date of this Agreement
between the Agent and the Borrower relating to Fees.
"FEES" means any and all fees payable by the Borrower in connection with
the Credit Facilities.
"FINANCIAL QUARTER" means, in relation to the Borrower and its
Consolidated Subsidiaries, each successive period of three consecutive months,
the first such period beginning on the first day of the first month of the
Borrower's Financial Year.
"FINANCIAL YEAR" means, in relation to the Borrower and its Consolidated
Subsidiaries, the Borrower's financial year commencing on January of each
calendar year and ending on December 31 of such calendar year.
"FLOATING RATE" means, for any particular day, the rate of interest per
annum equal to the greater of: (i) the Prime Rate plus the Variable Percentage
applicable to Floating Rate Advances on such day; and (ii) the sum of (A) the
rate per annum for Canadian Dollar bankers' acceptances accepted by First
Chicago NBD Bank, Canada having a term of one month that appears on the Reuters
Screen CDOR Page as of 10:00 a.m. (Montreal time) for such day
<PAGE> 14
- 9 -
plus one percent, and (B) the Variable Percentage applicable to
Bankers' Acceptances on such day.
"FLOATING RATE ADVANCE" means an Advance denominated in Canadian Dollars
which bears interest based on the Floating Rate.
"GAAP" has the meaning ascribed to the expression "Agreement Accounting
Principles" contained in the Amended and Restated Credit Agreement.
"GOVERNMENTAL ENTITY" means any: (i) multinational, federal, provincial,
state, regional, municipal, local or other government, governmental or public
department, central bank, court, commission, board, bureau or agency, domestic
or foreign; (ii) any subdivision, agent, commission, board, or authority of any
of the foregoing; or (iii) any quasi-governmental or private body exercising
any regulatory, expropriation or taxing authority under or for the account of
any of the foregoing.
"GUARANTEE" means an unconditional, irrevocable, continuing joint and
several guarantee, acceptable to the Agent, acting reasonably, of the payment
and performance of all the obligations of the Borrower under, in connection
with or relating to the Credit Facilities.
"GUARANTOR" means each of Holdings and SportRack individually or
collectively, as the case may be, and their respective successors and permitted
assigns.
"HAZARDOUS SUBSTANCE" means any Substance which is or is deemed to be,
alone or in any combination, hazardous, hazardous waste, toxic, a pollutant, a
contaminant or a source of pollution or contamination under any applicable
Environmental Laws.
"HOLDINGS" means Advanced Accessory Systems, LLC, formerly known as AAS
Holdings, LLC.
"INDEMNIFIED LIABILITIES" has the meaning specified in SECTION 10.10.
"INDEMNIFIED PARTIES" has the meaning specified in SECTION 10.10.
"INDIVIDUAL COMMITMENT" means, at any time with respect to a Lender, when
used with reference to a particular Credit Facility only, the amount set forth
in SCHEDULE 1 as the individual commitment of such Lender under such Credit
Facility, and otherwise, the aggregate of the amounts set forth in SCHEDULE 1
as the individual commitments of such Lender under both of the Credit
Facilities, in each case as such amount may be reduced from time to time
pursuant to this Agreement.
"INSOLVENCY LAW" means any Law relating to bankruptcy, insolvency,
reorganization, arrangement, adjustment, liquidation, winding-up, relief,
protection or composition of debts or debtors, or relating to creditors'
rights, or those provisions of any other Law (whether or not similar to the
foregoing Laws) affecting or relating to solvency or liquidity of any Person.
"INTELLECTUAL PROPERTY" means any and all patents and patent applications
and registrations, industrial designs and industrial design applications and
registrations, trademarks and trademark applications and registrations, trade
names and styles, logos, copyrights and
<PAGE> 15
- 10 -
copyright applications and registrations, all of the foregoing owned by
or licensed to the Debtor and used in or necessary to the operation of the
Debtor's business.
"INTEREST PERIOD" means, for each LIBOR Advance, a period which commences:
(i) in the case of the initial Interest Period, on the date such Advance is
made or converted from another Type of Advance or Accommodation; and (ii) in
the case of any subsequent Interest Period, on the last day of the immediately
preceding Interest Period, and which ends, in either case, on (but does not
include) the day selected by the Borrower in the applicable Borrowing Notice or
Election Notice in accordance with this Agreement.
"INVENTORY" means, with respect to any Person, all inventory now owned or
hereafter acquired or reacquired by such Person, whether or not
conditionally or unconditionally sold to such Person, including: (i)
merchandise, finished goods, work in progress, raw materials, new and unused
production, packing and shipping supplies; (ii) all automotive roof rack
systems and vehicular accessories (such as bike racks, ski racks and surfboard
carriers) and rear carriers and shuttles and related rear carriers and shuttle
systems manufactured, produced, assembled, processed or purchased for sale,
lease or resale by such Person, or procured for such manufacture, production,
assembly, processing or sale, lease or resale; (iii) all new and unused
maintenance items and replacement parts; and (iv) all other materials and
supplies on hand to be used or consumed or which might be used or consumed in
connection with the manufacture, production, assembly, processing, packing,
shipping, advertising, selling, or furnishing of goods.
"LANDLORD" means an owner, landlord or lessor of Leasehold Real Estate.
"LANDLORD'S LETTER" means a letter substantially in the form attached as
SCHEDULE 9.
"LAWS" means all statutes, codes, ordinances, decrees, rules, regulations,
municipal by-laws, judicial or arbitral or administrative or ministerial or
departmental or regulatory judgments, orders, decisions, rulings or awards,
policies and guidelines which are binding or any provisions of the foregoing,
binding on the Person referred to in the context in which such word is used;
and "LAW" means any one of such Laws.
"LEASEHOLD REAL ESTATE" means the real estate of the Borrower and its
Subsidiaries held under a lease, agreement to lease or other right of
occupation.
"LENDERS" means the lenders named in SCHEDULE 1 and any one or more
Eligible Assignee and their respective successors and permitted assigns.
"LIBOR" means, for each Interest Period for each LIBOR Advance, the
variable rate of interest per annum which appears on the Reuters Screen LIBO
page at approximately 11:00 a.m. (London time) on the second Business Day
before the first day of such Interest Period for, if there is no such rate at
such time, the London inter-bank offered rate quoted by First Chicago NBD Bank,
Canada at its head or principal office in Toronto at such time), for a period
comparable to such Interest Period and in an amount approximately equal to the
amount of such LIBOR Advance to be outstanding during such Interest Period.
"LIBOR ADVANCE" means an Advance denominated in US Dollars which bears
interest based on the LIBOR Rate.
<PAGE> 16
- 11 -
"LIBOR RATE" means, for any particular day of an Interest Period, the rate
of interest per annum equal to (i) LIBOR for such Interest Period, plus (ii)
the Variable Percentage applicable to LIBOR Advances on such day.
"LIEN" means, with respect to any Property of any Person, any charge,
mortgage, prior claim (within the meaning of the Civil Code of Quebec), pledge,
hypothecation, security interest, security under the Bank Act (Canada), lien,
conditional sale (or other title retention agreement or lease in the nature
thereof), lease (where such Person is the lessee of such Property), servitude,
assignment, adverse claim, defect of title, restriction, trust, right of setoff
or other encumbrance of any kind in respect of such Property, whether or not
filed, recorded or otherwise perfected under applicable Law.
"LOSS" means any loss whatsoever, whether direct or indirect, including
expenses, costs, damages, judgments, penalties, fines, charges, claims,
demands, liabilities, loss of profits, debts, interest and any and all
reasonable legal fees and disbursements.
"MAJORITY LENDERS" means, at any particular time but subject to SECTION
12.15(B), in the case of any request, consent, approval, instruction or other
action required or permitted to be made, given or taken at such time by the
Majority Lenders, such group of Lenders whose Individual Commitments aggregate
more than 50% of the aggregate of the Individual Commitments of all of the
Lenders under the Credit Facilities collectively at such time.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon: (i) the
business, condition (financial or otherwise), operations, performance, Property
or prospects of the Holdings and its Subsidiaries, taken as a whole; or (ii)
the ability of the Borrower to perform any of its obligations under any of the
Credit Documents to which the Borrower is a party in any material respect; or
(iii) the ability of any Guarantor to perform any of its obligations under any
Ancillary Agreement to which such Guarantor is a party in any material respect;
or (iv) the ability of the Agent and the Lenders to enforce in any material
respect any of the obligations of the Borrower under this Agreement, any of the
obligations of the Borrower or any of the Guarantors under any of the Ancillary
Agreements or any of their rights with respect to the Collateral or the shares
in the share capital of the Borrower which are pledged in favour of the Agent,
in each case in accordance with applicable Laws.
"NOMADIC ACQUISITION" means the purchase, as of July 24, 1997, by the
Borrower of either (i) substantially all of the assets of Nomadic Sports Inc.
or (ii) all of the issued and outstanding shares in the share capital thereof.
"NON-BA LENDER" means a Lender which is not permitted by applicable Law or
by customary market practices to stamp, for purposes of subsequent sale, or
accept, a Bankers' Acceptance.
"NOTICE" means any written notice, citation, directive, request for
information, writ, summons, statement of claim, or other written communication
from any Person.
"ORIGINAL CURRENCY" has the meaning specified in SECTION 10.6.
"OTHER CURRENCY" has the meaning specified in SECTION 10.6.
<PAGE> 17
- 12 -
"OUTSTANDINGS" means, at any time, when used with reference to the
Revolving Facility, an amount, calculated by reference to the Equivalent Cdn. $
Amount in the case of amounts denominated in US Dollars, equal to the sum of:
(i) the aggregate principal amount at such time of all outstanding Advances
under the Revolving Facility; and (ii) the aggregate Face Amount at such time
of all outstanding Bankers' Acceptances or BA Equivalent Notes under the
Revolving Facility; and when used with reference to the Term Facility, an
amount, calculated by reference to the Equivalent Cdn. $ Amount in the case of
amounts denominated in US Dollars, equal to the sum of: (a) the aggregate
principal amount at such time of all outstanding Advances under the Term
Facility; and (b) the aggregate Face Amount at such time of all outstanding
Bankers' Acceptances or BA Equivalent Notes under the Term Facility.
"PERSON" means an individual, partnership, corporation, limited liability
company, trust, unincorporated association, syndicate, joint venture or other
entity or Governmental Entity, and pronouns have a similarly extended meaning.
"PRIME RATE" means, for any particular day, the variable rate of interest
per annum, calculated on the basis of a year of 365 days (or 366 days),
established by First Chicago NBD Bank, Canada at its head or principal office
in Toronto for such day as the reference rate of interest per annum for the
determination of interest rates that First Chicago NBD Bank, Canada charges to
its customers of varying degrees of creditworthiness for Canadian Dollar loans
made by it in Canada and which it refers to as its "prime rate".
"PROPERTY" means, with respect to any Person, any interest of such Person
in any kind of property or asset, wherever situate, whether real or immovable,
personal, moveable or mixed, tangible or corporeal, intangible or incorporeal,
including Capital Stock in any other Person.
"PRO RATA SHARE" means, at any time with respect to a Lender, when used
with respect to a particular Credit Facility, the ratio of the Individual
Commitment of such Lender at such time under such Credit Facility to the
aggregate of the Individual Commitments of all of the Lenders at such time
under such Credit Facility, and otherwise, the ratio of the aggregate amount of
the Individual Commitments of such Lender at such time under both Credit
Facilities to the aggregate of the Individual Commitments of all of the Lenders
at such time under both Credit Facilities.
"REAL ESTATE" means an interest as absolute owner as it relates to
immovable property of the Borrower and its Subsidiaries situate in the Province
of Quebec and the real estate of the Borrower and its Subsidiaries held in fee
simple.
"REFUNDABLE TAXES" means Taxes paid by the Borrower or any Guarantor to
the Government of Canada or any province thereof or of the United States of
America or any state thereof, which Taxes are required by Law to be refunded by
such Governmental Entity to the Borrower or any Guarantor.
"RELEASE" when used as a verb includes release, spill, leak, emit,
deposit, discharge, leach, migrate, dump, issue, empty, place, seep, exhaust,
abandon, bury, incinerate or dispose into the Environment and "RELEASE" when
used as a noun has a correlative meaning.
<PAGE> 18
- 13 -
"RELEVANT MATURITY DATE" means: (i) in the case of the Revolving Facility,
the Revolving Facility Maturity Date; and (ii) in the case of the Term
Facility, the Term Facility Maturity Date.
"REMEDIAL ACTION" means any action taken by the Borrower or any of its
Subsidiaries, that is reasonably necessary to comply with any applicable
Environmental Laws or Environmental Order to: (i) clean up, remove, treat or in
any other way deal with Hazardous Substances in the Environment as required by
any applicable Environmental Laws or Environmental Order; (ii) prevent any
Release of Hazardous Substances where such Release would violate any
Environmental Laws or Environmental Order; or (iii) perform remedial studies,
investigations, restoration and post-remedial studies, investigations and
monitoring as required by any applicable Environmental Laws or Environmental
Order on, about or in connection with the Business or any of the Real Estate,
Leasehold Real Estate or other Property.
"REPLACEMENT LENDER" has the meaning specified in SECTION 3.1(2)(B).
"REVOLVING FACILITY" means the revolving liquidity facility to be made
available to the Borrower hereunder.
"REVOLVING FACILITY AGGREGATE COMMITMENT" means $4,000,000, as such amount
may be reduced from time to time in accordance with this Agreement.
"REVOLVING FACILITY MATURITY DATE" means the earlier of (i) October 30,
2003 and (ii) the date of termination of the Amended and Restated Credit
Agreement, whether at maturity, pursuant to acceleration or otherwise, or if
such date is not a Business Day, then the next succeeding Business Day.
"REVOLVING FACILITY RATIO" has the meaning specified in SECTION 2.9.
"SCHEDULE 1 BA LENDER" means any BA Lender which is a bank referred to in
Schedule I of the Bank Act (Canada).
"SCHEDULE 2 BA LENDER" means any BA Lender which is a bank referred to in
Schedule II of the Bank Act (Canada).
"SCHEDULE 1 REFERENCE LENDERS" means The Bank of Nova Scotia and, if there
is more than one Schedule 1 BA Lender at any time hereafter other than The Bank
of Nova Scotia, one of such other Schedule 1 BA Lenders designated by the
Borrower (provided that if the Borrower does not so designate, The Bank of Nova
Scotia shall be the sole Schedule 1 Reference Lender), the initial Schedule 1
Reference Lenders being The Bank of Nova Scotia.
"SCHEDULE 2 REFERENCE LENDERS" means the Schedule 2 BA Lenders which have
been designated as such or deemed to be Schedule 2 Reference Lenders in
accordance with SECTION 4.13, the initial Schedule 2 Reference Lenders
designated in accordance with SECTION 4.13 being First Chicago NBD Bank, Canada
and The Chase Manhattan Bank of Canada.
<PAGE> 19
- 14 -
"SECURITY DOCUMENTS" means those agreements and other documents in favour
of the Agent and/or the Lenders described in SCHEDULE 4, as such documents may
be amended, supplemented or replaced from time to time, and any other agreement
or instrument which the Agent may reasonably from time to time deem necessary
for the purpose of obtaining, creating, perfecting, preserving or protecting
any of the Liens in favour of the Agent and/or the Lenders in any of the
Collateral, in the shares of the capital stock of the Borrower or in the
respective personal property of SportRack and Holdings.
"SENIOR DEBT RATIO" has the meaning ascribed thereto in the Amended and
Restated Credit Agreement.
"SPORTRACK" means SportRack, LLC, formerly known as Advanced Accessory
Systems, LLC.
"SUBSIDIARY" means, at any time, as to any Person, any corporation or
other Person, if at such time the first-mentioned Person owns, directly or
indirectly, securities or other ownership interests in such corporation or
other Person, having ordinary voting power to elect a majority of the board of
directors or persons performing similar functions for such corporation or other
Person. For greater certainty, the term "SUBSIDIARY" shall refer to a direct or
indirect Subsidiary.
"SUBSTANCE" means any substance, waste, liquid, gaseous or solid matter,
fuel, micro-organism, sound, vibration, ray, heat, odour, radiation, energy
vector, plasma, and organic or inorganic matter.
"TAXES" means all taxes imposed by any Governmental Entity, including
income, profits, real property, personal property, goods and services, sales,
transfer, purchase, stumpage, registration, capital, excise, import duties,
payroll, unemployment, disability, employee's income withholding, social
security or withholding.
"TERM FACILITY" means the term acquisition facility to be made available
to the Borrower hereunder.
"TERM FACILITY AGGREGATE COMMITMENT" means $20,000,000, as such amount may
be reduced from time to time in accordance with this Agreement.
"TERM FACILITY MATURITY DATE" means the earlier of (i) October 30, 2003
and (ii) the date of termination of the Amended and Restated Credit Agreement,
whether at maturity, pursuant to acceleration or otherwise, or if such date is
not a Business Day, then the next succeeding Business Day.
"TERM FACILITY RATIO" has the meaning specified in SECTION 2.9.
"TOTAL OUTSTANDINGS" means, at any time, the aggregate amount in Canadian
Dollars of all Outstandings under both the Credit Facilities at such time,
calculated by reference to the Equivalent Cdn. $ Amount in the case of
Outstandings in US Dollars.
"TYPE OF ACCOMMODATION" means, with respect to any Accommodation, an
Advance or a Bankers' Acceptance or BA Equivalent Note (as the case may be).
<PAGE> 20
- 15 -
"TYPE OF ADVANCE" means, with respect to any Advance, a Floating Rate
Advance, a LIBOR Advance or a US Base Rate Advance.
"US BASE" means, for any particular day, the variable rate of interest per
annum, calculated on the basis of a year of 365 days (or 366 days), established
by First Chicago NBD Bank, Canada at its head or principal office in Toronto
for such day as the reference rate of interest per annum for the determination
of interest rates that First Chicago NBD Bank, Canada charges to its customers
of varying degrees of creditworthiness for US Dollar loans made by it in Canada
and which it refers to as its "US base rate".
"US BASE RATE" means, for any particular day, the rate of interest per
annum equal to (i) the US Base on such day; plus (ii) the Variable Percentage
applicable to US Base Rate Advances on such day.
"US BASE RATE ADVANCE" means an Advance denominated in US Dollars bearing
interest based on the US Base Rate.
"US DOLLARS" AND "US $" means lawful money of the United States of
America.
"VARIABLE PERCENTAGE" means, with respect to any Type of Accommodation
under either Credit Facility for any particular day, the percentage per
annum set out in SCHEDULE 3, which is applicable to such Type of Accommodation
under such Credit Facility based on the highest level on the grid set forth in
SCHEDULE 3 under the heading "Senior Debt Ratio" in respect of which the Senior
Debt Ratio was met for the fiscal quarter immediately preceding the fiscal
quarter during which such day occurs.
1.2 INTERPRETATION. This Agreement shall be interpreted in accordance with the
following:
(a) words denoting the singular include the plural and vice versa
and words denoting any gender include all genders;
(b) headings shall not affect the interpretation of this
Agreement;
(c) "HEREOF", "HERETO" and "HEREUNDER" and similar expressions
refer to this Agreement and not to any particular Article, Section
or other subdivision, and "Article", "Section" or other subdivision
of this Agreement followed by a number refers to the specified
Article, Section or other subdivision of this Agreement;
(d) references to dollars, unless otherwise specifically
indicated, shall be references to Canadian Dollars;
(e) the word "including" shall mean "including without
limitation" and "includes" shall mean "includes without limitation";
(f) the expressions "THE AGGREGATE", "THE TOTAL", "THE SUM" and
expressions of similar meaning shall mean "the aggregate (or total
or sum) without DUPLICATION";
<PAGE> 21
- 16 -
(g) in the computation of periods of time, unless otherwise
expressly provided, the word ,"FROM" means "FROM AND INCLUDING" and
the words "TO" and "UNTIL" mean "TO BUT EXCLUDING";
(h) accounting terms not specifically defined shall be construed
in accordance with GAAP; and
(i) the references in this Agreement to terms defined in the
Amended and Restated Credit Agreement are made in respect of such
terms as they are defined on the date hereof under such Amended and
Restated Credit Agreement, unless any relevant amendment thereto is
approved by the Majority Lenders, in which case, such amendment will
apply for the purposes hereof. Furthermore, such references shall
not in any way be affected by the fact that the Amended and Restated
Credit Agreement is terminated or is no longer in force at any time
prior to the Relevant Maturity Date.
1.3 ANCILLARY AGREEMENTS. The provisions of SECTION 1.2 (other than SECTION
1.2(C)) shall apply to the interpretation of Ancillary Agreements unless
specifically otherwise indicated.
1.4 SEVERABILITY. If any provision of this Agreement or any Ancillary Agreement
is, or becomes, illegal, invalid or unenforceable in any jurisdiction,
such provision shall be severed, for the purposes of such jurisdiction, from
this Agreement or such Ancillary Agreement and, for the purposes of such
jurisdiction, be ineffective in such jurisdiction to the extent of such
illegality, invalidity or unenforceability. The remaining provisions hereof or
thereof and such provision for the purposes of any other jurisdiction shall be
unaffected and shall continue to be valid and enforceable.
1.5 ENTIRE AGREEMENT. Other than any Fee Agreements, this Agreement supersedes
all prior agreements, understandings, negotiations and discussions, whether
oral or written, of the parties relating to the subject matter hereof and
entered into prior to the date of this Agreement. The Fee Agreements entered
into on or prior to the date of this Agreement shall remain in full force and
effect. The Borrower, the Agent and the Lenders hereby agree that the entering
into and execution of this Agreement does not constitute novation, including,
without limitation, in respect of the Existing Credit Agreement and the
indebtedness and obligations of the Borrower evidenced thereunder or in
connection therewith, and that all of the security created under the Security
Documents shall continue to apply in relation to all of the Outstandings under
the Credit Facilities in all respects and for all purposes.
1.6 WAIVER. No failure on the part of the Borrower, the Agent or any of the
Lenders to exercise, and no delay in exercising, any right under this Agreement
or any Ancillary Agreement shall operate as a waiver of such right; nor shall
any single or partial exercise of any right under this Agreement or any
Ancillary Agreement preclude any other or further exercise thereof or the
exercise of any other right; nor shall any waiver of one provision be deemed to
constitute a waiver of any other provision (whether or not similar). No waiver
of any of the provisions of this Agreement or any Ancillary Agreement shall be
effective unless it is in writing duly executed by the waiving party.
<PAGE> 22
- 17 -
1.7 GOVERNING LAW.
(1) This Agreement and, unless otherwise provided therein, each Ancillary
Agreement, shall be governed by, and interpreted in accordance with, the
Laws of the Province of Quebec and the Laws of Canada applicable therein,
without giving effect to any conflicts of law rules thereof.
(2) The parties hereby irrevocably attorn and submit to the non-exclusive
jurisdiction of the courts of the Province of Quebec with respect to any
matter arising under or related to the Agreement or any Ancillary
Agreement.
1.8 INCORPORATION OF SCHEDULES AND EXHIBITS. The following schedules and
exhibits attached hereto shall, for all purposes hereof, be incorporated in and
form an integral part of this Agreement:
<TABLE>
<S> <C>
SCHEDULE 1 Individual Commitments
SCHEDULE 2 Addresses for Notices
SCHEDULE 2.5 Term Loan Repayment Schedule
SCHEDULE 3 Variable Percentages
SCHEDULE 4 Security Documents
SCHEDULE 5 Form of Borrowing Notice
SCHEDULE 6 Form of Election Notice
SCHEDULE 7 Form of Drawing Notice
SCHEDULE 8 Assumption Agreement
SCHEDULE 9 Landlord's Letter
SCHEDULE 10 Depositary's Letter
EXHIBIT 6.1(4)(A) Locations which are not Real Estate of the Borrower
EXHIBIT 6.1(4)(B) Locations which are Real Estate of the Borrower
EXHIBIT 6.1(7) List of Bank Accounts
</TABLE>
1.9 CONFLICTS. If a conflict or inconsistency exists between a provision of
this Agreement and a provision of any of the other Credit Documents or any part
thereof, then the provisions of this Agreement shall prevail. Notwithstanding
the foregoing, if there is any right or remedy of the Borrower, the Agent or
any of the Lenders set out in any of the other Credit Documents or any part
thereof which is not set out or provided for in this Agreement, such additional
right or remedy shall not constitute a conflict or inconsistency.
1.10 LANGUAGE. The parties hereto agree that this Agreement and all agreements
and documents entered into in connection herewith or pursuant hereto shall be
drawn up in English only. Les parties confirment qu'elles ont convenu que ce
document ainsi que tous les autres documents ou contrats s'y rattachant soient
rediges en anglais seulement.
<PAGE> 23
- 18 -
ARTICLE 2
CREDIT FACILITIES
2.1 REVOLVING FACILITY AND TERM FACILITY. Each of the Lenders severally (and
not solidarily) agrees, on the terms and conditions of this Agreement, to make
available to the Borrower:
(a) its Pro Rata Share of the Term Facility by making such
Accommodations to the Borrower as may be requested by the Borrower
in accordance with this Agreement; and
(b) its Pro Rata Share of the Revolving Facility by making such
Accommodations as may be requested by the Borrower thereunder from
time to time in accordance with this Agreement.
2.2 COMMITMENTS AND FACILITY LIMITS.
(1) The Borrower shall at all times cause:
(a) the Outstandings under the Term Facility to be no greater
than the Term Facility Aggregate Commitment at such time; and
(b) the Outstandings under the Revolving Facility to be no
greater than the Revolving Facility Aggregate Commitment.
(2) Any portion of the Term Facility Aggregate Commitment which is not
utilized by the Borrower by March 31, 1998 shall automatically be canceled. The
Term Facility shall not revolve and any amount repaid or prepaid under the Term
Facility shall not be reborrowed and shall reduce the Term Facility Aggregate
Commitment by the amount repaid or prepaid, with the exception however of the
repayment to the Lenders who have executed and entered into the Existing Credit
Agreement on the date of this Agreement of an aggregate amount equal to the Pro
Rata Share of The Bank of Nova Scotia in respect of the Term Facility, which
amount shall have been borrowed immediately prior to such repayment by the
Borrower from The Bank of Nova Scotia (such borrowing to be subject to an
irrevocable direction and instruction on the part of the Borrower to The Bank
of Nova Scotia to effect the above-mentioned repayment to the Lenders having
entered into and executed the Existing Credit Agreement). Upon any reduction
of the Term Facility Aggregate Commitment, the Individual Commitment of each
Lender under the Term Facility shall thereupon be reduced by an amount equal to
such Lender's Pro Rata Share of the amount of such reduction of the Term
Facility Aggregate Commitment.
(3) All or any portion of the Revolving Facility Aggregate Commitment which is
not utilized by the Borrower on Closing may be utilized from time to time
thereafter but prior to the Revolving Facility Maturity Date on the terms and
conditions of this Agreement. The Revolving Facility shall revolve and no
payment under the Revolving Facility shall, of itself, reduce the Revolving
Facility Aggregate Commitment. All or any portion of the Revolving Facility
Aggregate Commitment may be canceled at any time by written notice from the
Borrower to the Agent in accordance with SECTION 2.7(1). Upon any reduction of
the Revolving Facility Aggregate Commitment, the Individual Commitment of each
Lender under the Revolving
<PAGE> 24
- 19 -
Facility shall thereupon be reduced by an amount equal to such Lender's
Pro Rata Share of the amount of such reduction of the Revolving Facility
Aggregate Commitment.
(4) Notwithstanding any other provision of the Credit Documents, the Credit
Facilities shall automatically be canceled and all obligations of the Agent and
the Lenders under the Credit Documents shall automatically terminate on July
15, 1997 (without affecting any obligations of the Borrower under any of the
Credit Documents, including all the Borrower's obligations under SECTIONS 10.7
through 10.10, and under any Fee Agreements) if an Accommodation under the Term
Facility has not been made prior to such date.
2.3 AVAILABLE ACCOMMODATIONS.
(1) Each of the Lenders shall, on the terms and conditions of this Agreement,
make its Pro Rata Share of the following Accommodations available under the
Credit Facilities as follows:
(a) Floating Rate Advances, US Base Rate Advances and LIBOR
Advances on the occasion of any Borrowing; and
(b) Bankers' Acceptances (or, in the case of any Non-BA Lender,
BA Equivalent Notes) denominated in Canadian Dollars on the occasion
of any Drawing.
(2) All Advances, Bankers' Acceptances and BA Equivalent Notes requested
hereunder shall be made available to the Borrower in accordance with ARTICLES 3
and 4, respectively.
2.4 USE OF PROCEEDS.
(1) The Borrower shall use the proceeds of the Accommodations under the Term
Facility for the sole purpose of paying (i) the purchase price payable to Bell
Sports Canada Inc. for the assets being sold by it to the Borrower pursuant to
the Acquisition and (ii) paying a portion or all of the purchase price payable
to Nomadic Sports Inc. for the assets being sold by it to the Borrower pursuant
to the Nomadic Acquisition or to each shareholder of Nomadic Sports Inc. for
all of the issued and outstanding shares in the share capital thereof pursuant
to the Nomadic Acquisition, as the case may be.
(2) The Borrower may use the proceeds of the first Accommodation under the
Revolving Facility for the purpose of (i) paying fees to the Agent and the
Lenders and transaction expenses and fees in connection with the Credit
Facilities and the Acquisition and (ii) paying a portion or all of the purchase
price payable to Nomadic Sports Inc. for the assets being sold by it to the
Borrower pursuant to the Nomadic Acquisition or to each shareholder of Nomadic
Sports Inc. for all of the issued and outstanding shares in the share capital
thereof pursuant to the Nomadic Acquisition, as the case may be, and the fees
and expenses in relation thereto.
(3) The Borrower shall use the proceeds of all Accommodations under the
Revolving Facility other than as provided in SECTION 2.4(2) for general
corporate purposes.
2.5 MANDATORY REPAYMENTS.
(1) Unless demand is earlier made pursuant to SECTION 9.1 and without prejudice
to SECTION 2.6, on the Revolving Facility Maturity Date, the Revolving Facility
Aggregate
<PAGE> 25
- 20 -
Commitment shall be canceled and the Borrower shall repay, and there
shall become due and payable, the Outstandings under the Revolving Facility and
all accrued and unpaid interest and the Fees, costs, expenses and other amounts
owing under the Credit Documents.
(2) Unless demand is earlier made pursuant to SECTION 9.1 and without prejudice
to SECTION 2.6, the Borrower shall repay the Term Facility in 23 consecutive
quarterly installments payable on the last day of each calendar quarter
commencing on March 31, 1998 (except in the case of the final installment which
shall be due on the Term Facility Maturity Date) in the respective amount set
out opposite each such day in SCHEDULE 2.5. Furthermore, the Borrower shall
repay all Fees, costs, expenses and other amounts owing in respect of the Term
Facility at the Term Facility Maturity Date on such date.
(3) All optional prepayments of Outstandings under the Term Facility shall be
applied to the quarterly installment amounts payable pursuant to SECTION 2.5(2)
as set out in SCHEDULE 2.5 on a pro rata basis over the remaining unpaid
quarterly installments mentioned above.
2.6 MANDATORY PREPAYMENTS AND PAYMENTS.
(1) If, on any day, the Outstandings of the Borrower to the Lenders under the
Revolving Facility exceed (except to the extent that such excess arises solely
as a result of currency fluctuations) the Revolving Facility Aggregate
Commitment, or under the Term Facility exceed (except to the extent that such
excess arises solely as a result of currency fluctuations) the Term Facility
Aggregate Commitment, the Borrower shall on that day: (i) prepay Borrowings; or
(ii) make a prepayment to the Agent and irrevocably authorize and direct the
Agent to apply such prepayment in reduction of the Borrower's reimbursement
obligation in respect of any Drawing on the next contract maturity date; or
(iii) make both a prepayment referred to in Clause (i) of this SECTION 2.6(1)
and a prepayment referred to in Clause (ii) of this SECTION 2.6(1); in all
cases so that the Outstandings under each Credit Facility after the prepayment
referred to in Clause (i) of this SECTION 2.6(1), and less the amount of any
prepayments held by the Agent pursuant to Clause (ii) of this SECTION 2.6(1),
will not exceed (except to the extent that such excess arises solely as a
result of currency fluctuations) the Revolving Facility Aggregate Commitment
(in the case of the Revolving Facility) or the Term Facility Aggregate
Commitment (in the case of the Term Facility).
(2) At the end of each calendar month, the Agent shall determine, and at any
other time, the Agent may (or, if requested by any Lender, shall) determine
whether the Outstandings under the Revolving Facility exceed 100% of the
Revolving Facility Aggregate Commitment, or under the Term Facility exceed 100%
of the Term Facility Aggregate Commitment, and whether such excess arises
wholly or partly as a result of currency fluctuations. If the Agent so
determines, the Agent shall notify the Borrower of the amount of the excess
over 100% of the Revolving Facility Aggregate Commitment or 100% of the Term
Facility Aggregate Commitment, and the Borrower shall as soon as possible, but
in any event within two Business Days after the giving of such notice: (i) pay
Borrowings; or (ii) make a payment to the Agent and irrevocably authorize and
direct the Agent to apply such payment in reduction of the Borrower's
reimbursement obligation in respect of any Drawing on the next contract
maturity date; or (iii) make both a payment referred to in Clause (i) of this
SECTION 2.6(2) and a payment referred to in Clause (ii) of this SECTION 2.6(2);
in all cases so that the Outstandings under each Credit Facility after the
payment referred to in Clause (i) of this SECTION 2.6(2), and less the amount
of any payments held by the Agent pursuant to Clause (ii) of this SECTION
2.6(2),
<PAGE> 26
- 21 -
will not exceed the Revolving Facility Aggregate Commitment (in the
case of the Revolving Facility) or the Term Facility Aggregate Commitment (in
the case of the Term Facility).
2.7 ADDITIONAL PREPAYMENTS AND REDUCTIONS.
(1) The Borrower may from time to time, subject to the provisions of this
Agreement, prepay the Outstandings under the Term Facility or reduce the
Revolving Facility Aggregate Commitment, in each case in whole or in part,
without penalty or premium but subject, where applicable, to SECTION 10.9, upon
at least one Business Day's notice to the Agent, stating the proposed date of
such prepayment or reduction and the aggregate principal amount of the
prepayment or reduction. If such notice is given, the Borrower shall pay the
Agent in accordance with such notice the amount of the prepayment of the Term
Facility or the amount, if any, by which the Outstandings under the Revolving
Facility exceed the proposed reduced Revolving Facility Aggregate Commitment,
plus all interest on the amount of such prepayment or excess amount accrued to
the date of such prepayment or reduction. Each partial prepayment or reduction
shall be in a minimum aggregate principal amount of $100,000 and in an integral
multiple of $ 100,000, in the case of Floating Rate Advances or other
Accommodations denominated in Canadian Dollars, and in a minimum aggregate
principal amount of US $100,000 and in an integral multiple of US $100,000, in
the case of US Base Rate Advances or other Accommodations denominated in US
Dollars except that the minimum aggregate amount shall be US $100,000 in the
case of LIBOR Advances.
(2) The Borrower may not pursuant to this SECTION 2.7(2) prepay the amount of
any Drawing, except on the contract maturity date for the relevant Bankers'
Acceptance or BA Equivalent Note.
2.8 EVIDENCE OF INDEBTEDNESS. The Indebtedness of the Borrower in respect of
all Accommodations hereunder, absent manifest error, shall be conclusively
evidenced by the account records maintained by the Agent. The failure of the
Agent to correctly record any amount or date shall not, however, affect the
obligation of the Borrower to pay amounts due hereunder to the Agent or any of
the Lenders in accordance with this Agreement.
2.9 FACILITY RATIOS. Notwithstanding any other provision of any of the Credit
Documents, in the event that the ratio of the Individual Commitment of
a Lender under the Revolving Facility to the Revolving Facility Aggregate
Commitment (the "REVOLVING FACILITY RATIO") at any time is not the same as the
ratio of the Individual Commitment of such Lender under the Term Facility to
the Term Facility Aggregate Commitment (the "TERM FACILITY RATIO") at such
time, then:
(i) any adjustment at such time to, and any acquisition of, the Individual
Commitment or the Outstandings of such Lender under the Revolving Facility
or the Term Facility, as the case may be,
(ii) any Accommodation, payment, contribution or indemnification at such time
pursuant to any of the Credit Documents to or in favour of the Agent, the
Borrower or any Guarantor by such Lender under or in respect of the
Revolving Facility or the Term Facility, as the case may be, and
<PAGE> 27
- 22 -
(iii) any payment, remittance or distribution at such time pursuant to any of
the Credit Documents to such Lender by the Agent of any amount or Property
received from the Borrower or from any Guarantor or as proceeds of any of
the Collateral realized in connection with any realization or enforcement
proceedings, whether on account of principal, interest, Fees or any other
amounts, under or in respect of the Revolving Facility or the Term
Facility, as the case may be,
shall be made in the proportion of such Lender's Revolving Facility Ratio or
Term Facility Ratio, as the case may be.
2.10 ALLOCATION OF FEES AND EXPENSES. Notwithstanding any other provision of
any of the Credit Documents, all Fees (other than Drawing Fees), expenses,
costs, charges and other amounts payable at any time by the Borrower or any
Guarantor under any of the Credit Documents which do not relate exclusively to
either of the Credit Facilities shall be allocated between the Revolving
Facility and the Term Facility in the respective proportions which the
Revolving Facility Aggregate Commitment bears to the Commitments at such time
and the Term Facility Aggregate Commitment bears to the Commitments at such
time.
ARTICLE 3
LOAN ADVANCES
3.1 THE ADVANCES.
(1) Each Lender has agreed and agrees on the terms and conditions of
this Agreement to make Advances to the Borrower under the Term Facility, on the
Closing and thereafter from time to time but no later than March 31, 1998, and
under the Revolving Facility, on the Closing and thereafter from time to time
on any Business Day prior to the Revolving Facility Maturity Date. Each Lender
shall make available to the Agent its Pro Rata Share of the principal amount of
each Advance in the appropriate currency, prior to 11:00 a.m. (Montreal time)
on the date of the Advance. Unless the Agent has been notified by a Lender no
later than 11:00 a.m. two Business Days prior to the date of the Advance that
such Lender will not make available to the Agent its Pro Rata Share of such
Advance, the Agent may assume that such Lender has made such portion of the
Advance available to the Agent on the date of the Advance in accordance with
the provisions hereof and the Agent may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount. If the Agent has
made such assumption, to the extent such Lender shall not have so made its Pro
Rata Share of the Advance available to the Agent, such Lender agrees to pay to
the Agent, forthwith on demand, such Lender's Pro Rata Share of the Advance and
all costs and expenses incurred by the Agent in connection therewith (including
any costs of funding or maintaining any Advance or liquidating or redeploying
any funds acquired by the Agent to fund or maintain any Advance), together with
interest thereon at the rate per annum determined by the Agent in accordance
with its usual practice for making similar loans to financial institutions of
like standing as such Lender for each day from the date such amount is made
available to the Borrower until the date such amount is paid or repaid to the
Agent; PROVIDED, HOWEVER, that notwithstanding such obligation, if such Lender
fails so to pay, the Borrower shall repay such amount to the Agent forthwith
after demand therefor by the Agent, and all costs and expenses incurred by the
Agent in connection therewith (including any costs of funding or maintaining
<PAGE> 28
- 23 -
any Advance or liquidating or redeploying any funds acquired by the Agent to
fund or maintain any Advance), together with interest thereon at the rate
payable hereunder by the Borrower in respect of such Advance for each day from
the date such amount is made available to the Borrower until the date such
amount is paid or repaid to the Agent. The amount payable by each Lender to the
Agent pursuant to this Section shall be set forth in a certificate delivered by
the Agent to such Lender (which certificate shall contain reasonable details of
how the amount payable is calculated) and shall constitute prima facie evidence
of such amount payable. If such Lender makes the payment to the Agent required
herein, the amount so paid shall constitute such Lender's Pro Rata Share of the
Advance for purposes of this Agreement and shall entitle the Lender to all
rights and remedies against the Borrower and the Guarantors in respect of such
Advance. The failure of any Lender to make available to the Agent its Pro Rata
Share of an Advance shall not relieve any other Lender of its obligation
hereunder to make available to the Agent its Pro Rata Share of the Advance on
the date thereof.
(2)
(a) If any Lender fails to make available to the Agent its Pro
Rata Share of any Advance as required (the "DEFAULTING LENDER")
and the Agent has not made the Advance to the Borrower pursuant to
SECTION 3.1(1), the Agent shall forthwith give notice of such
failure by the Defaulting Lender to the Borrower and the other
Lenders and such notice shall state that any Lender may make
available to the Agent all or any portion of the Defaulting Lender's
Pro Rata Share of such Advance (but in no way shall any other Lender
or the Agent be obliged to do so) in the place of the Defaulting
Lender. If more than one Lender gives notice that it is prepared to
make funds available in the place of a Defaulting Lender in such
circumstances and the aggregate of the funds which such Lenders
(each, a "CONTRIBUTING LENDER") are prepared to make available
exceeds the amount of the Advance which the Defaulting Lender failed
to make, then each Contributing Lender shall be deemed to have given
notice that it is prepared to make available its Pro Rata Share of
such Advance based on the Contributing Lenders' relative Individual
Commitments in such circumstances. If any Contributing Lender makes
funds available in the place of a Defaulting Lender in such
circumstances, then: (i) the Defaulting Lender shall pay to any such
Contributing Lender forthwith on demand, any amount advanced on its
behalf, together with interest thereon at the rate payable hereunder
by the Borrower in respect of such Advance for each day from the
date of Advance to the date of payment, against payment by such
Contributing Lender of all interest received in respect of the
Advance from the Borrower; and (ii) the Borrower shall pay all
amounts owing by the Borrower to the Defaulting Lender hereunder to
the Agent for the Contributing Lenders until such time as the
Defaulting Lender pays to the Agent for the Contributing Lenders all
amounts advanced by the Contributing Lenders on behalf of the
Defaulting Lender and interest thereon. The failure of any Lender to
make available to the Agent its Pro Rata Share of any Advance shall
not relieve any other Lender of its obligations to make available to
the Agent its Pro Rata Share of any Advance.
(b) If the Agent gives notice pursuant to SECTION 3.1(2)(A) of a
failure by any Defaulting Lender to make available to the Agent its
Pro Rata Share of any Advance, then the Borrower may notify the
Agent that it desires to replace the Defaulting Lender with one or
more of the other Lenders, and the Agent shall
<PAGE> 29
- 24 -
then forthwith give notice to the other Lenders that any Lender
or Lenders may, in the aggregate, acquire all (but not part) of the
Defaulting Lender's Individual Commitment, and all (but not part) of
the rights and obligations of the Defaulting Lender under each of
the other Credit Documents (but in no event shall any other Lender
or the Agent be obliged to do so), provided that any discount to the
price paid to such Defaulting Lender from the amounts outstanding
hereunder shall first be approved by such Defaulting Lender. If one
or more Lenders shall so agree in writing (each, a "REPLACEMENT
LENDER") each such Lender shall give notice to the Agent that it has
agreed to make such acquisition, and shall acquire its pro rata
share, determined on the basis of the relative Individual
Commitments of the Replacement Lenders, of such Individual
Commitment and of the rights and obligations under the Credit
Documents of the Defaulting Lender on a date and on other terms and
conditions mutually acceptable to the Replacement Lenders and the
Defaulting Lender. On the date of such acquisition, the Agent shall
give notice to each of the Replacement Lenders and the Borrower
setting out the amount of the Individual Commitments of each of the
Replacement Lenders and the amount of the Outstandings of the
Defaulting Lenders acquired by each of the Replacement Lenders and,
upon the completion of such acquisition and the giving of such
notice, the Defaulting Lender shall cease to be a "Lender" for
purposes of this Agreement and shall no longer have any rights or
obligations under the Credit Documents (other than its obligations
to the Agent and to any Contributing Lender with respect to the
Defaulting Lender's Pro Rata Share of any Advance not made available
to the Agent prior to the acquisition of the Defaulting Lender's
Individual Commitment and its rights and obligations under the
Credit Documents) and the Replacement Lenders shall have acquired
and assumed all of such rights and obligations. Upon the assumption
of the Defaulting Lender's Individual Commitment by a Replacement
Lender, SCHEDULE 1 shall be deemed to be amended to increase the
Individual Commitment of such Replacement Lender by the amount of
such assumption.
(3) Each Borrowing shall consist of one or more Types of Advances made to the
Borrower on the same day. Each Type of Advance shall be in the aggregate
minimum amount and in an integral multiple of the amount set forth below:
(a) a FLOATING RATE ADVANCE shall be in an aggregate amount not
less than $100,000 and in an integral multiple of $100,000;
(b) a US BASE RATE ADVANCE shall be in an aggregate amount not
less than US $100,000 and in an integral multiple of US $100,000;
and
(c) a LIBOR ADVANCE shall be in an aggregate amount not less than
US $500,000 and in an integral multiple of US $100,000.
(4) Until repaid in full or converted in accordance with this Agreement, each
Advance shall be: (i) the Type of Advance specified in the applicable Borrowing
Notice or Election Notice; or (ii) if no Borrowing Notice or Election Notice is
given, the Type of Advance specified in SECTIONS 3.3(1)(A) OR (B).
<PAGE> 30
- 25 -
3.2 PROCEDURE FOR BORROWING.
(1) Each Borrowing shall be made on notice (a "BORROWING NOTICE") given by the
Borrower to the Agent not later than 10:00 a.m. (Montreal time) at least one
Business Day for Floating Rate Advances and U.S. Base Rate Advances and three
Business Days for LIBOR Advances prior to the date of the proposed Borrowing,
which Borrowing Notice shall be irrevocable and binding on the Borrower. Each
Borrowing Notice shall be in substantially the form of SCHEDULE 5 and shall
specify: (i) the requested date of such Borrowing; (ii) the Type of Advances
comprising such Borrowing; (iii) the Credit Facility under which such Borrowing
is to be made; (iv) the aggregate amount of such Borrowing; and (v) in the case
of a LIBOR Advance, the initial Interest Period applicable to such Advance.
Upon fulfillment of the applicable conditions set forth in ARTICLE 5, the Agent
will make such funds available to the Borrower in immediately available funds
by crediting or causing the crediting of the Borrower's Canadian Dollar Account
or the Borrower's US Dollar Account, as applicable.
(2) The Borrower shall not in any Borrowing Notice select an Interest Period
which ends after the Relevant Maturity Date or which conflicts with the
definition of Interest Period or with the repayments or prepayments provided
for in this Agreement.
3.3 INTEREST ON ADVANCES.
(1) Each Advance shall bear interest at the rate applicable to such Type of
Advance determined in accordance with this SECTION 3.3(1), (i) in the case of a
Floating Rate Advance or US Base Rate Advance, from and including the date such
Advance is made or converted from another Type of Advance or Accommodation to
but excluding the date on which such Advance is repaid in full or is converted
to another Type of Advance or Accommodation in accordance with this Agreement;
and (ii) in the case of a LIBOR Advance, from and including the first day of
the applicable Interest Period to but excluding the last day of such Interest
Period. Subject to SECTIONS 3.3(2), 10.2 and 10.3, each Advance shall bear
interest, and such interest shall be calculated and payable, in the following
manner:
(a) FLOATING RATE ADVANCES. A Floating Rate Advance shall bear
interest at a rate per annum equal at all times to the Floating Rate
in effect from time to time. Such interest shall be calculated (but
not compounded) daily and payable for each calendar month period or
part thereof, as the case may be, in arrears on the first day of the
following month and on the Relevant Maturity Date.
(b) US BASE RATE ADVANCES. A US Base Rate Advance shall bear
interest at a rate per annum equal at all times to the US Base Rate
in effect from time to time. Such interest shall be calculated (but
not compounded) daily and payable for each calendar month period or
part thereof, as the case may be, in arrears on the first day of the
following month and on the Relevant Maturity Date.
(c) LIBOR ADVANCES. A LIBOR Advance shall bear interest at a rate
per annum equal, for each day during each Interest Period for such
LIBOR Advance, to the LIBOR Rate for such day. Such interest shall
be calculated (but not compounded) daily and paid in arrears: (i) on
the last day of each three month period, if any, during each
Interest Period and on the last day (if such day is not the last day
of a three month period) of such Interest Period; and (ii) on the
date
<PAGE> 31
- 26 -
such LIBOR Advance becomes due and payable in full. The
duration of each Interest Period shall be 1, 2, 3 or 6 months unless
the last day of an Interest Period would otherwise occur on a day
other than a Business Day, in which case the last day of such
Interest Period shall be extended to occur on the next Business Day,
or if such extension would cause the last day of such Interest
Period to occur in the next calendar month, the last day of such
Interest Period shall occur on the preceding Business Day.
(2) With each change in any of the variable rates of interest used as a
component for determining the Floating Rate, the US Base Rate or the LIBOR Rate
(but, for greater certainty, only the Variable Percentage applicable thereto
and not LIBOR), there shall be a corresponding change in the Floating Rate, the
US Base Rate or the LIBOR Rate (but, for greater certainty, only the Variable
Percentage applicable thereto and not LIBOR), all without necessity of prior
notice thereof to the Borrower or to any other Person.
3.4 CONVERSIONS AND ELECTIONS REGARDING TYPES OF ADVANCES AND INTEREST RATES.
(1) Advances may be converted from time to time from one Type of Advance to
another, at the election of the Borrower or automatically in accordance with
the provisions of this SECTION 3.4(1). The Borrower may from time to time
elect: (i) to convert any Advance to another Type of Advance by changing the
currency of such Advance or the type of interest rate applicable thereto; or
(ii) to have any LIBOR Advance continued as such Type of Advance by electing an
additional Interest Period, subject in each case to the provisions of SECTIONS
3.1(3) and 3.6 and to the following provisions:
(a) FLOATING RATE ADVANCES. The Borrower may elect to convert a
Floating Rate Advance as of any Business Day to a LIBOR Advance or a
US Base Rate Advance, in a principal amount equal to the Equivalent
US $ Amount of such Floating Rate Advance determined on the date of
such conversion.
(b) US BASE RATE ADVANCE. The Borrower may elect to convert a US
Base Rate Advance as of any Business Day to: (i) a Floating Rate
Advance, in a principal amount equal to the Equivalent Cdn. $ Amount
of such US Base Rate Advance determined on the date of such
conversion; or (ii) a LIBOR Advance.
(c) LIBOR ADVANCE. The Borrower may elect, effective on the last
day of the then current Interest Period applicable thereto: (i) to
convert a LIBOR Advance to (x) a Floating Rate Advance, in a
principal amount equal to the Equivalent Cdn. $ Amount of such LIBOR
Advance determined on the date of such conversion, or (y) a US Base
Rate Advance; or (ii) to have such LIBOR Advance continued as such
Type of Advance for an additional Interest Period. If the Borrower
has made no such election, on the expiry of the then current
Interest Period, such Advance shall be automatically converted to a
US Base Rate Advance, effective on the last day of such Interest
Period.
(2) Each such election shall be made on notice (an "ELECTION NOTICE") given by
the Borrower to the Agent not later than 11:00 a.m. (Montreal time) at least
three Business Days before the effective date of such election (which period,
for greater certainty, may run concurrently with the notice period provided for
in SECTION 4.7(I) with respect to the conversion
<PAGE> 32
- 27 -
of a Bankers' Acceptance or BA Equivalent Note which is to be converted
into the Floating Rate Advance converted hereunder). Each Election Notice shall
be substantially in the form of SCHEDULE 6 and shall specify, with respect to
the outstanding Advance to which such Election Notice applies: (i) if the Type
of such Advance is to be converted, the new Type of Advance selected, the
effective date of such conversion and, if the new Type of Advance selected is a
LIBOR Advance, the duration of the initial Interest Period applicable thereto;
or (ii) if such Advance is a LIBOR Advance which is to continue as such Type of
Advance for an additional Interest Period in whole or in part, the amount of
such Advance to be continued, the duration of the additional Interest Period
and, if part of such LIBOR Advance is to continue as a LIBOR Advance, the Type
of Advance into which the balance is to be converted.
(3) The Borrower shall not in any Election Notice select an Interest Period
which conflicts with the definition of Interest Period or with the repayments
or prepayments provided for in this Agreement.
(4) Any conversion of an Advance under this Section shall not constitute a
repayment under SECTION 2.5 or a prepayment under SECTIONS 2.6 or 2.7.
3.5 CONVERSIONS OF FLOATING RATE ADVANCES TO BANKERS' ACCEPTANCES OR BA
EQUIVALENT NOTES.
(1) The Borrower may, subject to the provisions of this Agreement, convert the
outstanding principal amount of a Floating Rate Advance, in whole or in part,
to Bankers' Acceptances or BA Equivalent Notes, by giving a Drawing Notice in
accordance with SECTION 4.2. The Borrower shall notify the Agent at the same
time as the Borrower gives the Drawing Notice of the amount of any Floating
Rate Advance to be converted. The Borrower may convert the Floating Rate
Advance on any Business Day. If the Floating Rate Advance to be converted
cannot be converted to an aggregate Face Amount of Bankers' Acceptances or BA
Equivalent Notes in an amount which may be drawn as Bankers' Acceptances or BA
Equivalent Notes under this Agreement, then the amount which cannot be so
converted shall thereafter continue to be outstanding as a Floating Rate
Advance, provided that if such amount is less than the minimum amount for
Floating Rate Advances set out in SECTION 3.1(3)(A), it shall be repaid to the
Agent for the Lenders.
(2) Where any Floating Rate Advances are to be converted, in whole or in part,
to Bankers' Acceptances or BA Equivalent Notes, the Borrower shall repay and
there shall become due and payable on the Drawing Date, the principal amount of
such Advances which are so converted.
(3) Any conversion of an Advance under this Section shall not constitute a
repayment under SECTION 2.5 or a prepayment under SECTION 2.6 or 2.7.
3.6 CIRCUMSTANCES REQUIRING US BASE RATE OR FLOATING RATE PRICING.
(1) If any Lender (the "DETERMINING LENDER") determines in good faith, and the
Agent notifies the Borrower that: (i) by reason of circumstances affecting
financial markets inside or outside Canada, deposits of US Dollars are
unavailable to the Determining Lender; (ii) adequate and fair means do not
exist for ascertaining the applicable interest rate on the basis provided in
the definition of LIBOR or US Base Rate, as the case may be; (iii) the making
<PAGE> 33
- 28 -
or continuation of any US Dollar Advances has been made impracticable (x) by
the occurrence of a contingency (other than a mere increase in rates payable by
the Determining Lender to fund the Advances) which materially adversely affects
the funding of the Credit Facilities at any interest rate computed on the basis
of the LIBOR or the US Base Rate, as the case may be, or (y) by reason of a
change since the date of this Agreement in any applicable Law or in the
interpretation or application thereof by any Governmental Entity which affects
the Determining Lender or any relevant financial market, and which results in
the LIBOR or the US Base Rate, as the case may be, no longer representing the
effective cost to the Determining Lender of deposits in such market for a
relevant Interest Period or for Advances outstanding as US Base Rate Advances;
or (iv) any change since the date of this Agreement to any present Law, or any
future Law, or any change since the date of this Agreement therein or in the
interpretation or application thereof by any Governmental Entity, has made it
unlawful for the Determining Lender to make or maintain or to give effect to
its obligation in respect of US Dollar Advances as contemplated hereby, then:
(a) the right of the Borrower to select any affected Type of
Advance in US Dollars from the Determining Lender shall be suspended
until the Determining Lender determines in good faith that the
circumstances causing such suspension no longer exist and the Agent
so notifies the Borrower;
(b) if any affected Type of Advance in US Dollars is not yet
outstanding, any applicable Borrowing Notice (i) requesting a LIBOR
Advance from the Determining Lender at any time when the right of
the Borrower to select LIBOR Advances from the Determining Lender is
suspended shall, if the Borrower has the right to select US Base
Rate Advances from the Determining Lender at such time, be deemed to
be amended to request a US Base Rate Advance or, if the Borrower
does not have the right to select US Base Rate Advances from the
Determining Lender at such time, such Borrowing Notice shall be
deemed to be amended to request a Floating Rate Advance from the
Determining Lender in a principal amount equal to the Equivalent
Cdn. $ Amount of the LIBOR Advance requested from the Determining
Lender determined on the date on which such Advance becomes
denominated in Canadian Dollars; or (ii) requesting a US Base Rate
Advance from the Determining Lender at any time when the right of
the Borrower to select US Base Rate Advances from the Determining
Lender is suspended, shall be deemed to be amended to request a
Floating Rate Advance from the Determining Lender in a principal
amount equal to the Equivalent Cdn. $ Amount of the US Base Rate
Advance requested from the Determining Lender determined on the date
on which such Advance becomes denominated in Canadian Dollars;
(c) if any LIBOR Advance from the Determining Lender is already
outstanding at any time when the right of the Borrower to
select LIBOR Advances or US Dollar Advances from the Determining
Lender is suspended, it and all other LIBOR Advances from the
Determining Lender shall, if the Borrower has the right to select US
Base Rate Advances from the Determining Lender at such time, become
US Base Rate Advances from the Determining Lender on the last day of
the then current Interest Period applicable thereto for, without
prejudice to SECTION 10.9, on such earlier date as may be required
to comply with any applicable Law) or, if the Borrower does not have
the right to select US Base
<PAGE> 34
- 29 -
Rate Advances from the Determining Lender at such time, such
LIBOR Advances shall become a Floating Rate Advance from the
Determining Lender on the last day of the then current Interest
Period applicable thereto (or, without prejudice to SECTION 10.9, on
such earlier date as may be required to comply with any applicable
Law) in a principal amount equal to the Equivalent Cdn. $ Amount of
such LIBOR Advances from the Determining Lender determined on the
date on which such Advance becomes denominated in Canadian Dollars;
and
(d) if any relevant US Base Rate Advance from the Determining
Lender is already outstanding at any time when the right of the
Borrower to select US Base Rate Advances or US Dollar Advances from
the Determining Lender is suspended, it and all other US Base Rate
Advances from the Determining Lender in the same Borrowing shall
become a Floating Rate Advance immediately, in a principal amount
equal to the Equivalent Cdn. $ Amount of such US Base Rate Advances
determined on the date on which such Advance becomes denominated in
Canadian Dollars.
(2) If any Determining Lender notifies the Borrower that the right of the
Borrower to select any Type of Advance in US Dollars from the Determining
Lender is suspended pursuant to SECTION 3.6(1), then the Borrower may notify
the Agent that it desires to replace the Determining Lender with one or more of
the other Lenders, and the Agent shall then forthwith give notice to the other
Lenders that any Lender or Lenders may, in the aggregate, acquire all (but not
part) of the Determining Lender's Individual Commitment and all (but not part)
of the rights and obligations of the Determining Lender under each of the other
Credit Documents (but in no event shall any other Lender or the Agent be
obliged to do so), provided that any discount to the price paid to such
Determining Lender from the amounts outstanding hereunder shall first be
approved by such Determining Lender. If one or more Lenders shall so agree in
writing (each, an "AGREEING LENDER") each such Lender shall give notice to the
Agent that it has agreed to make such acquisition, and shall acquire its pro
rata share, determined on the basis of the relative Individual Commitments of
the Agreeing Lenders, of such Individual Commitment and of the rights and
obligations under the Credit Documents of the Determining Lender on a date and
on other terms and conditions mutually acceptable to the Agreeing Lenders and
the Determining Lender. On the date of such acquisition, the Agent shall give
notice to each of the Agreeing Lenders and the Borrower setting out the amount
of the Individual Commitments of each of the Agreeing Lenders and the amount of
the Outstandings of the Determining Lenders acquired by each of the Agreeing
Lenders and, upon the completion of such acquisition and the giving of such
notice, the Determining Lender shall cease to be a "Lender" for purposes of
this Agreement and shall no longer have any rights or obligations under the
Credit Documents and the Agreeing Lenders shall have acquired and assumed all
of such rights and obligations. Upon the assumption of the Determining Lender's
Individual Commitment by an Agreeing Lender, SCHEDULE 1 shall be deemed to be
amended to increase the Individual Commitment of such Agreeing Lender by the
amount of such assumption.
<PAGE> 35
- 30 -
ARTICLE 4
BANKERS' ACCEPTANCES
4.1 ACCEPTANCES AND BA EQUIVALENT NOTES.
(1) Each of the Lenders agrees, on the terms and conditions of this Agreement
and subject to the Borrower paying the applicable Drawing Fee to the Agent for
the Lenders, (i) if such Lender is a BA Lender, to create acceptances
("BANKERS' ACCEPTANCES") by accepting Drafts of the Borrower, or (ii) if such
Lender is a Non-BA Lender, to purchase BA Equivalent Notes of the Borrower, in
each case if a Drawing is requested on the Closing and thereafter from time to
time on any Business Day prior to the Relevant Maturity Date, which Drafts or
BA Equivalent Notes have an aggregate Face Amount equal, subject to SECTION
4.2(2), to such Lender's Pro Rata Share of the total Accommodation being made
by way of Bankers' Acceptances or BA Equivalent Notes.
(2) Each Drawing shall be in an aggregate amount of not less than $500,000 and
in an integral amount of $100,000.
4.2 PROCEDURE FOR DRAWING.
(1) Each Drawing shall be made on notice (a "DRAWING NOTICE") given not later
than 11:00 a.m. (Montreal time) at least two Business Days prior to the date of
the proposed Drawing by the Borrower to the Agent. Each Drawing Notice shall be
in substantially the form of SCHEDULE 7 and shall specify: (i) the requested
date for such Drawing (the "DRAWING DATE"); (ii) the Credit Facility under
which such Drawing is to be made; (iii) the aggregate Face Amount of Drafts to
be accepted and BA Equivalent Notes to be purchased in Canadian Dollars; and
(iv) the contract maturity date for such Drafts and BA Equivalent Notes. The
Borrower shall not in any Drawing Notice select a contract maturity date which
ends after the Relevant Maturity Date or which conflicts with the repayments or
prepayments provided for in this Agreement.
(2) Upon receipt of a Drawing Notice, the Agent shall advise each BA Lender of
the aggregate Face Amount of the Bankers' Acceptances to be accepted by it, and
advise each Non-BA Lender of the aggregate Face Amount of the BA Equivalent
Note to be purchased by it. The aggregate Face Amount of the Bankers'
Acceptances to be accepted by each BA Lender, and the aggregate Face Amount of
the BA Equivalent Note to be purchased by each Non-BA Lender, shall be
determined by the Agent by reference to the Pro Rata Shares of the Lenders,
except that, if the Face Amount of a Bankers' Acceptance in the case of a BA
Lender or the Face Amount of a BA Equivalent Note in the case of a Non-BA
Lender would not be $100,000 or a whole multiple thereof, such Face Amount
shall be increased or reduced by the Agent in its sole discretion to the
nearest whole multiple of $100,000, even if, as a result of any such increase,
the Total Outstandings in respect of such BA Lender or Non-BA Lender shall
exceed its Individual Commitment.
4.3 AMOUNT AND TERM. Each Bankers' Acceptance or BA Equivalent Note (i) shall
be in a Face Amount of not less than $500,000 and in an integral multiple of
$100,000; and (ii) shall be dated the Drawing Date; and (iii) shall mature and
be payable by the Borrower on a Business Day which occurs no less than one
month and no more than six months after the Drawing Date.
<PAGE> 36
- 31 -
4.4 COMPLETION OF DRAFTS. The receipt by the Agent of a Drawing Notice shall be
each BA Lender's sufficient authority to complete, and each BA Lender shall,
subject to the terms and conditions of this Agreement, not later than 11:00
a.m. (Montreal time) on the Drawing Date specified in such Drawing Notice,
complete the pre-signed Drafts in accordance with such Drawing Notice and the
advice of the Agent given pursuant to SECTION 4.2(2), and in the case of the
Drafts so completed, such Drafts shall thereupon be deemed to have been
presented for acceptance.
4.5 MAKING OF ACCOMMODATIONS.
(1) Each Lender shall transfer to the Agent on each Drawing Date (i) if such
Lender is a BA Lender, the BA Discount Proceeds of all Bankers' Acceptances
accepted by it on such Drawing Date (net of the applicable Drawing Fee in
respect of such Bankers' Acceptances), or (ii) if such Lender is a Non-BA
Lender, the amount of the BA Discount Proceeds of the Bankers' Acceptance that
it would have been required to accept if it were a BA Lender (net of the
applicable Drawing Fee in respect of the BA Equivalent Note purchased by it).
The Agent shall make such amounts received by it from the Lenders available to
the Borrower by depositing the same for value on the applicable Drawing Date to
the Borrower's Canadian Dollar Account.
(2) Bankers' Acceptances accepted by a Lender hereunder may be held by it for
its own account until maturity or sold by it at any time prior thereto in the
relevant market therefor, in the Lender's sole discretion.
4.6 REIMBURSEMENT AT CONTRACT MATURITY DATE.
(1) Subject to SECTION 4.7, the Borrower shall pay to the Agent on behalf of a
Lender in same day funds, and there shall become due and payable at 11:00 a.m.
(Montreal time) on the contract maturity date for each Bankers' Acceptance or
BA Equivalent Note, an amount in Canadian Dollars equal to the Face Amount of
such Bankers' Acceptance accepted, or BA Equivalent Note purchased, by such
Lender. Any payment made by the Borrower in respect of the Term Facility
pursuant to this SECTION 4.6(1) shall be treated as an optional prepayment of
the Term Facility under SECTION 2.7.
(2) If the Borrower fails on the contract maturity date for a Bankers'
Acceptance or BA Equivalent Note to pay the Agent on behalf of any Lender
pursuant to SECTION 4.6(1), or to convert or renew the Face Amount of such
Bankers' Acceptance or BA Equivalent Note pursuant to SECTION 4.7, the unpaid
amount due and payable to such Lender in respect of such Bankers' Acceptance or
BA Equivalent Note shall automatically be converted to a Floating Rate Advance
on the contract maturity date, and shall bear interest at a rate per annum
equal to (i) until and including the third Business Day after such contract
maturity date, 115% of the Floating Rate, and (ii) thereafter, the Floating
Rate, in each case until such amount is paid in full.
(3) On each contract maturity date for a Bankers' Acceptance or BA Equivalent
Note accepted or purchased, respectively, by a particular Lender, if the
Drawing Fee Adjustment for such Bankers' Acceptance or BA Equivalent Note is
(i) a positive amount, the Agent on behalf of such Lender shall reimburse the
Borrower, on such day, on account of the Drawing Fee
<PAGE> 37
- 32 -
paid by it in respect of such Bankers' Acceptance or BA Equivalent
Note, an amount equal to such positive amount, or (ii) a negative amount, the
Borrower shall pay to the Agent on behalf of such Lender, on such day, as an
additional Drawing Fee for such Bankers' Acceptance or BA
Equivalent Note, the amount equal to such negative amount. The Agent may, at
its option, authorize the Borrower to deduct the amount described in Clause (i)
of this SECTION 4.6(3) from the Borrower's payment obligation pursuant to
SECTION 4.6(1) or SECTION 4.6(2) in respect of the relevant Bankers' Acceptance
or BA Equivalent Note. If the Agent on behalf of the relevant Lender pays the
amount described in Clause (i) of this SECTION 4.6(3) to the Borrower, such
Lender shall reimburse the Agent for the amount so paid by it on the date
notice of such payment is given by the Agent to such Lender and, if such Lender
fails to reimburse such amount to the Agent it shall bear interest at the rate
per annum determined by the Agent in accordance with its usual practice for
making similar loans to financial institutions of like standing as such Lender
until such amount is paid by such Lender in full to the Agent.
4.7 RENEWAL OR CONVERSION OF BANKERS' ACCEPTANCES.
(1) For effect on the contract maturity date of a Bankers' Acceptance or BA
Equivalent Note, the Borrower may elect: (i) to renew all or a portion of the
Face Amount of such Bankers' Acceptance or BA Equivalent Note by giving a
Drawing Notice in accordance with SECTION 4.2; or (ii) to have all or a portion
of the Face Amount of such Bankers' Acceptance or BA Equivalent Note converted
to a Floating Rate Advance, by giving a Borrowing Notice in accordance with
SECTION 3.2. If the Bankers' Acceptance or BA Equivalent Note to be converted
cannot be converted into a Floating Rate Advance in an amount which may be
outstanding as a Floating Rate Advance under this Agreement, then the amount
which cannot be so converted shall be repaid to the Agent on behalf of the
applicable Lender on the date of such conversion in accordance with SECTION
4.6.
(2) Any renewal or conversion of Bankers' Acceptances or BA Equivalent Notes
under this SECTION 4.7 shall not constitute a repayment under SECTION 2.5 or a
prepayment under SECTIONS 2.6 or 2.7.
4.8 WAIVER. The Borrower hereby renounces, and shall not claim, any days of
grace for the payment at maturity of any Bankers' Acceptances or BA Equivalent
Notes. The Borrower waives any defence to payment which might otherwise exist
if for any reason a Bankers' Acceptance or BA Equivalent Note shall be held by
a Lender in its own right at the maturity thereof, and the doctrine of merger
shall not apply to any Bankers' Acceptance or BA Equivalent Note that is at any
time held by a Lender in its own right.
4.9 OBLIGATIONS ABSOLUTE. The obligations of the Borrower with respect to
Bankers' Acceptances and BA Equivalent Notes under this Agreement shall be
unconditional and irrevocable, and shall be paid strictly in accordance with
the terms of this Agreement under all circumstances, including the following
circumstances:
(i) any lack of validity or enforceability of any Draft accepted
by a BA Lender as a Bankers' Acceptance or BA Equivalent Note
purchased by a Non-BA Lender; or
(ii) the existence of any claim, set-off, defence or other right
which the Borrower may have at any time against the holder of a
Bankers' Acceptance or BA
<PAGE> 38
- 33 -
Equivalent Note, a Lender or any other Person, whether in
connection with this Agreement or otherwise.
4.10 PREPAYMENTS. Except as required by SECTIONS 2.5, 2.6 or 9.1, no repayment
of a Bankers' Acceptance or BA Equivalent Note shall be made by the Borrower to
the Agent for the Lenders prior to the contract maturity date of such
Bankers' Acceptance or BA Equivalent Note. If the Borrower shall prepay any
Bankers' Acceptance accepted by a Lender as required by SECTIONS 2.5, 2.6 or
9.1, then (unless such prepayment has been rescinded or otherwise is required
to be returned by such Lender for any reason), as between the Borrower and such
Lender, such Lender shall thereafter be solely responsible for the payment of
the Face Amount of such Bankers' Acceptance to the holder thereof in accordance
with the terms thereof.
4.11 CIRCUMSTANCES MAKING BANKERS' ACCEPTANCES UNAVAILABLE. If any Lender
(other than a Non-BA Lender) determines in good faith, and the Agent notifies
the Borrower that by reason of circumstances affecting the money market there
is no market for Bankers' Acceptances, then the right of the Borrower to
request a Drawing from any of the Lenders (including any Non-BA Lenders) shall
be suspended until such Lender determines that the circumstances causing such
suspension no longer exist and so notifies the Agent and the Agent notifies the
Borrower. Any Drawing Notice which is outstanding at the time of such notice by
the Agent shall be deemed to be a Borrowing Notice requesting a Floating Rate
Advance in the principal amount equal to the requested Face Amount in such
Drawing Notice.
4.12 PRESIGNED DRAFT FORMS. To enable the BA Lenders to create Bankers'
Acceptances or complete Drafts in the manner specified in this ARTICLE 4, the
Borrower shall supply the Agent with an appropriate number of Drafts in the
form prescribed by each BA Lender, duly endorsed and executed in blank on
behalf of the Borrower by any one or more of its officers in accordance with
the Borrower's required signing authorities as evidenced by the Borrower's then
current borrowing by-law and resolution, certified copies of which shall have
been delivered to the Agent. Each BA Lender shall exercise such care in the
custody and safekeeping of Drafts as it would exercise in the custody and
safekeeping of similar property owned by it. The signatures of such officers
may be mechanically reproduced in facsimile and Drafts and Bankers' Acceptances
bearing such facsimile signatures shall be binding upon the Borrower as if they
had been manually signed by such officers. Notwithstanding that any of the
individuals whose manual or facsimile signature appears on any Draft as one of
such officers may no longer hold office at the date thereof or at the date of
its acceptance or purchase by a Lender hereunder or at any time thereafter, any
Draft or Bankers' Acceptance so signed shall be valid and binding upon the
Borrower. A Lender shall not be liable for its failure to accept a Bankers'
Acceptance as required hereunder if the cause of such failure is, in whole or
in part, due to the failure of the Borrower to provide Drafts, duly endorsed
and executed on behalf of the Borrower, on a timely basis and the Borrower
hereby agrees to indemnify and hold the Agent and each of the Lenders harmless
from and against all Claims and Losses arising out of payment or negotiation of
any Draft or Bankers' Acceptance which has not been duly endorsed and executed.
4.13 SCHEDULE 2 REFERENCE LENDERS. If only one Lender is a Schedule 2 BA
Lender, that Schedule 2 BA Lender shall be deemed to be the Schedule 2
Reference Lenders and any applicable BA Discount Rate hereunder shall be
determined on the basis of the BA Discount Rate provided by that Schedule 2 BA
Lender. If more than one Lender is a Schedule 2 BA
<PAGE> 39
- 34 -
Lender, then the Borrower and the Agent shall each designate a
different Schedule 2 BA Lender to be a Schedule 2 Reference Lender for the
purposes of this Agreement, provided that if the Borrower does not so
designate, the Agent shall designate two Schedule 2 Reference Lenders.
ARTICLE 5
CONDITIONS OF LENDING
5.1 CONDITIONS PRECEDENT TO FURTHER ACCOMMODATIONS UNDER REVOLVING FACILITY AND
TERM FACILITY. The obligation of each of the Lenders to make further
Accommodations under the Revolving Facility after the date hereof or the
obligation of The Bank of Nova Scotia to make its initial Accommodation under
the Term Facility is subject to the following conditions to be fulfilled or
performed at or prior to the time of making such initial Accommodation, which
conditions are for the exclusive benefit of the Agent and the Lenders and may
be waived in whole or in part by the Agent with the approval of each of the
Lenders in their sole discretion:
(1) DELIVERIES. The Agent shall have received, at or prior to the time of the
making of the above-mentioned initial Accommodation under the Term Facility the
following, each dated such day (or another day satisfactory to the Agent), in
form, scope and substance satisfactory to the Agent and its counsel, each
acting reasonably:
(a) copies, certified by a senior officer of the Borrower, of:
(i) the constating documents and the by-laws of each of the Borrower
and the Guarantors; (ii) the resolutions of the board of directors,
or any duly authorized committee thereof, of each of the Borrower
and the Guarantors approving the entering into of this Agreement and
each Ancillary Agreement to which the Borrower or the Guarantors are
a party; and (iii) all other instruments evidencing necessary
corporate action of each of the Borrower and the Guarantors and of
required Authorizations, if any, with respect to such matters (which
condition was met at Closing and which condition need not be met by
the Guarantors only in connection with the entering into and
execution of this Agreement);
(b) certificates of a senior officer of each of the Borrower and
the Guarantors certifying the names and true signatures of its
officers authorized to sign this Agreement and the Ancillary
Agreements to which the Borrower or the Guarantors are a party
(which condition was met at Closing and which condition need not be
met by the Guarantors only in connection with the entering into and
execution of this Agreement);
(c) a certificate of status, compliance, good standing or like
certificate with respect to each of the Borrower and the Guarantors
issued by appropriate government officials of the jurisdiction of
its incorporation and, to the extent such certificates are issued,
of each jurisdiction in which it carries on business (which
condition was met at Closing and which condition need not be met by
the Guarantors only in connection with the entering into and
execution of this Agreement);
<PAGE> 40
- 35 -
(d) a sworn declaration of a senior officer of the Borrower
confirming (i) that the Borrower and each of its Subsidiaries is in
compliance with all Environmental Laws (including Environmental
Permits) or Environmental Orders in Canada and in other
applicable foreign jurisdictions with environmental jurisdiction
over the Borrower or any of its Subsidiaries and (ii) that the
Borrower and its Subsidiaries shall have, all Environmental Permits
which were or are required, as the case may be, in order to carry on
their respective businesses and operations under such Environmental
Laws, except where, in the case of both (i) and (ii) above,
non-compliance therewith or failure to obtain same would not have
had nor does have, individually or in the aggregate, a Material
Adverse Effect (which condition was met at Closing);
(e) a sworn declaration of a senior officer of the Borrower
confirming no violation of, and compliance with, all applicable Laws
and Authorizations by the Borrower and its Subsidiaries which, if
breached, would have a Material Adverse Effect (which condition was
met at Closing);
(f) a sworn declaration of a senior officer of the Borrower
confirming no violation of, and compliance with, all agreements
(except where the violation or non-compliance would not singly or in
aggregate have a Material Adverse Effect) and that all applicable
consents and waivers required to consummate the Acquisition and the
transactions contemplated thereby have been obtained (except where
the failure to obtain such consents and waivers would not singly or
in aggregate have a Material Adverse Effect) (which condition was
met at Closing);
(g) copies, certified by a senior officer of the Borrower, of all
material documentation relating to the Acquisition, and all
applicable consents, waivers, agreements, instruments, certificates,
legal opinions and other documents relating to the Acquisition which
are requested by the Agent, acting reasonably (which condition was
met at Closing);
(h) any certificates of officers of the Borrower or public
officials, and any consents, acknowledgments, estoppel certificates,
waivers, priority agreements and intercreditor agreements which are
necessary or desirable in the opinion of the Agent, acting
reasonably, in relation to the Credit Facilities (including to
establish or confirm the rights or priorities of the Agent or any of
the Lenders under any of the Credit Documents);
(i) the Guarantees duly executed by each of the Guarantors and
the Security Documents duly executed by the Borrower and by each of
the Guarantors pursuant to ARTICLE 8 (which condition was met at
Closing) and a confirmation by each Guarantor in respect of such
Guarantees;
(j) confirmation from its counsel that the Liens constituted by
the Security Documents have been registered, filed and recorded in
all jurisdictions where such registration, filing or recording is
necessary or of advantage to the creation, perfection, preservation
or protection of such Liens;
<PAGE> 41
- 36 -
(k) evidence of the insurance policies required pursuant to
SECTION 7.1(4) (which condition was met at Closing);
(l) a legal opinion under the Laws of such jurisdictions as may
be requested by the Agent or its counsel, each acting reasonably,
subject to customary assumptions, qualifications, exclusions and
limitations as are acceptable to the Agent and its counsel, each
acting reasonably, of counsel to the Borrower and each of the
Guarantors as to the due authorization, execution, delivery,
legality, validity, binding nature and enforceability of this
Agreement and each of the Ancillary Agreements to which the Borrower
or any Guarantor is a party, the valid creation, the due perfection,
protection and preservation and, in such jurisdictions where such
opinions are customary, the applicable priority or ranking of the
Liens constituted by the Security Documents, and such other matters
as counsel to the Agent may reasonably request (which condition was
met at Closing and which condition need not be met by the Guarantors
only in connection with the entering into and execution of this
Agreement); and
(m) such other certificates and documentation as the Agent may
reasonably request to give effect to this Agreement.
(2) PROCEEDINGS. All proceedings to be taken in connection with the
transactions contemplated by this Agreement, any Ancillary Agreement or any
documentation relating to the Acquisition and to the Nomadic Acquisition shall
be reasonably satisfactory in form and substance to the Agent acting
reasonably, and the Agent shall have received copies of all such instruments
and other evidence as it may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
(3) NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default would occur
as a consequence of the consummation of the Acquisition or to the Nomadic
Acquisition and the transactions contemplated thereby.
(4) NO AMENDMENTS. There shall have been no material amendment to any of the
documentation relating to the Acquisition and to the Nomadic Acquisition which
has not been approved by the Agent, acting reasonably.
(5) ACQUISITION AND NOMADIC ACQUISITION. All conditions precedent to the
consummation of the Acquisition and to the Nomadic Acquisition shall have been
met and shall not have been waived.
(6) OTHER CONDITIONS. The conditions set forth in SECTION 5.2 shall have been
fulfilled or performed.
(7) FEES. First Chicago NBD Bank, Canada, The Chase Manhattan Bank of Canada
and The Bank of Nova Scotia shall have received payment from the Borrower of
all Fees payable at or prior to the date hereof in the respective amounts and
at the respective rates separately agreed between the Borrower and First
Chicago NBD Bank, Canada, The Chase Manhattan Bank of Canada and The Bank of
Nova Scotia.
<PAGE> 42
- 37 -
5.2 CONDITIONS OF ALL ACCOMMODATIONS. At any time, the obligation of each of
the Lenders to make an Accommodation and the right of the Borrower to deliver
an Accommodation Notice shall be subject to the conditions, which conditions
are for the exclusive benefit of the Agent and the Lenders and may be waived in
whole or in part by the Agent with the approval of the Majority Lenders in
their sole discretion, that on the date of such Accommodation, and after giving
effect thereto and to the application of proceeds therefrom:
(1) FACILITY LIMITS. The Outstandings under each Credit Facility shall not
exceed the limits specified in SECTION 2.2.
(2) TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Borrower contained in this Agreement or in any Ancillary
Agreement to which it is a party or in any report or other document delivered
to the Agent or any of the Lenders, and the representations and warranties of
each of the Guarantors contained in any Ancillary Agreement to which it is a
party or in any report or other document delivered to the Agent or any of the
Lenders, shall be true and correct in all material respects as of such date
with the same force and effect as if such representations and warranties had
been made on and as of such date, except to the extent that any such
representation or warranty related to an earlier date and except for changes
therein expressly permitted or expressly contemplated by this Agreement.
(3) NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default has occurred
and is continuing.
5.3 CONDITION PRECEDENT TO INITIAL ACCOMMODATION UNDER THE REVOLVING FACILITY.
The obligation of each of the Lenders to make further Accommodations under the
Revolving Facility after the date hereof is subject to the additional
condition, which condition is for the exclusive benefit of the Agent and the
Lenders under the Term Facility, that the initial Accommodation shall have been
made by The Bank of Nova Scotia in an amount equal to the full amount of the
Individual Commitment of The Bank of Nova Scotia under the Term Facility (or
are being made contemporaneously with the above-mentioned further
Accommodations under the Revolving Facility) to the Borrower.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 REPRESENTATIONS AND WARRANTIES. To induce the Agent and each of the Lenders
to make Accommodations available hereunder, the Borrower represents and
warrants to the Agent and each of the Lenders each of the representations and
warranties set out below. Each of the representations and warranties contained
in this SECTION 6.1 shall be deemed to be made and repeated by the Borrower at
the time and date of each Accommodation.
(1) STATUS AND POWER. The Borrower and each of its Subsidiaries is a
corporation duly incorporated and organized and validly subsisting under the
Laws of its jurisdiction of incorporation, and has full corporate power and
capacity to own its Property and to carry on the Business as now conducted by
it and its Subsidiaries. The Borrower and each of its Subsidiaries has
obtained all material Authorizations required in respect of its operations, and
<PAGE> 43
- 38 -
is not in default and has received no notice of any Claim or default, with
respect to any such material Authorizations. Each of the Borrower and its
Subsidiaries is duly qualified, licensed or registered to carry on business in
the jurisdictions in which the nature of its Property or the business carried
on by it make such qualification, licence or registration necessary except
where the failure to obtain such qualification, licence or registration would
not result in a Material Adverse Effect.
(2) CORPORATE AUTHORIZATION. Each of the Borrower and its Subsidiaries has full
corporate power and capacity and full legal right to enter into and perform its
obligations under this Agreement and all other Credit Documents and all
documents relating to the Acquisition and the Nomadic Acquisition to which it
is or will be a party and, in the case of the Borrower, to obtain
Accommodations hereunder, and each of the Borrower and its Subsidiaries has or
will have by Closing taken all corporate action necessary to be taken by it to
authorize such acts.
(3) ENFORCEABILITY OF AGREEMENT. This Agreement and any other Credit Documents
and all the documents relating to the Acquisition and to the Nomadic
Acquisition to which the Borrower or any of its Subsidiaries is a party
constitute legal, valid and binding obligations of each of the Borrower and its
Subsidiaries enforceable against them in accordance with their respective
terms, subject only to any limitation under applicable Laws relating to: (i)
bankruptcy, insolvency, reorganization, moratorium or creditors' rights
generally; and (ii) the discretion that a court may exercise in the granting of
equitable remedies.
(4) REAL ESTATE AND LEASEHOLD REAL ESTATE. EXHIBIT 6.1(4)(A) indicates as of
the date of this Agreement each location thereon which is not Real Estate of
the Borrower, the Landlord or the Depositary of such location and the address
of such Landlord or Depositary. All leases or other agreements with the
respective Landlord or Depositary relating to such locations are in good
standing and the Borrower is not in default in payment of rent or in the
performance of its material obligations thereunder. In addition, to the
knowledge of the Borrower, the Landlords or Depositaries thereunder are not in
material breach of any of their obligations thereunder. No set of facts exists
which after notice or lapse of time or both or otherwise would result in a
breach or default under any of the said leases or other agreements which would
result in a Material Adverse Effect if such lease or other agreement were
terminated by the Landlord or Depositary pursuant to such breach or default.
EXHIBIT 6.1(4)(B) indicates thereon as of the date of this Agreement each
location which is Real Estate of the Borrower or any of the Guarantors and
identifies the owner of such Real Estate.
(5) INSURANCE POLICIES. All of the Property of the Borrower and its
Subsidiaries is insured against loss or damage to the extent, and in the
manner, described in SECTION 7.1(4). The proceeds of such policies are payable
to the Borrower or the appropriate Subsidiary and, in respect of any insured
Collateral, to the Agent.
(6) ENVIRONMENTAL DISCLOSURE.
(a) COMPLIANCE WITH ENVIRONMENTAL LAWS. The Business has been and
is being operated, and the Leasehold Real Estate and the Real Estate
or any of the Property currently owned or leased by or under the
charge, management or control of the Borrower or any of its
Subsidiaries has been and are being owned, operated, managed and/or
controlled by the Borrower and its Subsidiaries in compliance with
all applicable Environmental Laws or
<PAGE> 44
- 39 -
Environmental Orders, except in each the foregoing instances
for such non-compliance which could not reasonably be expected to
have a Material Adverse Effect. Since June 25, 1997, none of the
Borrower, any of its Subsidiaries nor any of its directors or
officers has ever (i) been convicted of any offence for
non-compliance with any applicable Environmental Laws or
Environmental Orders, except for any such conviction which could not
reasonably be expected to have a Material Adverse Effect; (ii) been
fined an amount for non-compliance under any applicable
Environmental Laws or Environmental Orders, except for any such fine
which could not reasonably be expected to have a Material Adverse
Effect; or (iii) settled any prosecution short of conviction for an
amount for non-compliance under any applicable Environmental Laws or
Environmental Orders, except for any such amount which could not
reasonably be expected to have a Material Adverse Effect. Without
limiting the generality of the foregoing:
(i) ENVIRONMENTAL PERMITS. The Borrower and its Subsidiaries hold
and are conducting the Business in compliance with all Environmental
Permits which are required for the operation of such Business,
except for such absence or non-compliance which could not reasonably
be expected to have a Material Adverse Effect. All such
Environmental Permits are valid and in full force and effect and, no
notice of unremedied violation thereof has been formally issued by
any Governmental Entity pursuant to any applicable Environmental
Laws, and no material proceeding is pending or to the knowledge of
the Borrower, threatened, relating to a violation of any applicable
Environmental Laws or Environmental Orders, which will review, make
subject to additional limitations or conditions, suspend, revoke,
terminate or limit any such material Environmental Permits, except
for any absence, violation, proceeding which could not reasonably be
expected to have a Material Adverse Effect.
(ii) DEALING WITH SUBSTANCES. None of the Borrower nor any of its
Subsidiaries (A) has used or uses any of the Leasehold Real Estate
or the Real Estate to generate, manufacture, refine, treat,
transport, store, handle, recycle, dispose of, deposit, transfer,
produce or process Hazardous Substances, except in compliance with
all applicable Environmental Laws, Environmental Permits and
Environmental Orders, except for such non-compliance which could not
reasonably be expected to have a Material Adverse Effect; or (B)
disposed or disposes of, treats, transports or stores any waste or
other Substance except in compliance with all applicable
Environmental Laws, Environmental Permits and Environmental Orders,
except for such non-compliance which could not reasonably be
expected to have a Material Adverse Effect.
(iii) ENVIRONMENTAL REPORTS. Since June 25, 1997, the Borrower and
its Subsidiaries have made all reports required by any applicable
Environmental Laws or Environmental Orders to any appropriate
Governmental Entity on the happening of all events which are
required to be so reported pursuant to any applicable Environmental
Laws or Environmental Orders, except for such non-compliance which
could not reasonably be expected to have a Material Adverse Effect.
<PAGE> 45
- 40 -
(iv) RECORD KEEPING. Since June 25, 1997, the Borrower and its
Subsidiaries have maintained all environmental and operating
documents and records relating to the Leasehold Real Estate and Real
Estate and the Business in the manner and for the periods required
by all Environmental Laws and Environmental Permits, except for such
non-compliance which could not reasonably be expected to have a
Material Adverse Effect.
(b) ENVIRONMENTAL LIABILITIES. Except for expenses relating to
ordinary course of business, neither the Borrower nor any of
its Subsidiaries has any liability caused by the activities, acts or
omissions of the Borrower nor any of its Subsidiaries nor, to the
knowledge of the Borrower, caused by the activities, acts or
omissions of any other Person, arising under or in connection with
any applicable Environmental Laws or Environmental Orders, including
any Environmental Liabilities and Costs, which in each instance
could, singly or in the aggregate, reasonably be expected to result
in a Material Adverse Effect. To the knowledge of the Borrower,
there is no past fact, condition or circumstances caused by the
activities, acts or omissions of the Borrower nor any of its
Subsidiaries, or caused by any other Person, and relating to the
Business, the Leasehold Real Estate or the Real Estate or any other
Property currently or formerly owned or leased by the Borrower or
any of its Subsidiaries, that could result in any liability arising
under or in connection with Environmental Laws or Environmental
Orders, including any Environmental Liabilities and Costs, except
for expenses relating to the ordinary course of business and except
where such liabilities could not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Neither
the Borrower nor any of its Subsidiaries is currently subject to an
Environmental Notice concerning any liability caused by the
activities, acts or omissions of the Borrower or any of its
Subsidiaries in violation of any applicable Environmental Laws or
Environmental Orders, nor do, to the knowledge of the Borrower, any
reasonable grounds exist which would give rise to the issuance of
any Environmental Notice to the Borrower or any of its Subsidiaries
concerning liability due to the violation of any applicable
Environmental Laws, except for such Environmental Notices which
could not reasonably be expected to have a Material Adverse Effect.
(c) DISCLOSURE REGARDING PROPERTIES. None of the Leasehold Real
Estate or Real Estate or any other Property currently or formerly
owned or leased by the Borrower or any of its Subsidiaries or under
the charge, management or control of any of them has been used or is
used by the Borrower or any of its Subsidiaries or any Person
authorized to do so by any of the foregoing, as a landfill site, a
waste disposal site, or as a location for the disposal of Hazardous
Substances or waste in violation of any applicable Environmental
Laws or Environmental Orders, except for such non-compliance or
violation which could not reasonably be expected to have a Material
Adverse Effect.
(d) REMEDIAL ACTION. No Remedial Action is currently being taken
by the Borrower or any of its Subsidiaries and no Environmental
Notice given by any Governmental Entity has been received by the
Borrower or any of its Subsidiaries nor do, to the knowledge of the
Borrower, any reasonable grounds exist which would give rise to the
issuance of any Environmental Notice by any
<PAGE> 46
- 41 -
Governmental Entity, that any Remedial Action, resulting from
the activities, acts or omissions of the Borrower or any of its
Subsidiaries, is required to be taken by such entity as a condition
of continued compliance with any Environmental Permits,
Environmental Laws or Environmental Orders, except for such Remedial
Action which in each of the foregoing instances could not, singly or
in the aggregate, reasonably be expected to have a Material Adverse
Effect.
(e) SITE DESIGNATED FOR CLEAN-UP. To the knowledge of the
Borrower, without inquiry of any Governmental Entity, none of the
Leasehold Real Estate and Real Estate or Properties formerly owned
or leased by or under the management or control of the Borrower or
any of its Subsidiaries is identified by any Governmental Entity for
investigation out of the ordinary course of business or clean-up
pursuant to any Environmental Laws or Environmental Orders, which in
each of the foregoing instances could reasonably be expected to
result in a Material Adverse Effect.
(7) BANK ACCOUNTS. The only banks, trust companies and other financial
institutions (other than the Agent) in which any Collateral described in Clause
(iii) of the definition thereof is held or invested as of the date of this
Agreement, together with the numbers of all accounts in which such Collateral
is held or invested, are set out in EXHIBIT 6.1(7).
6.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All the representations and
warranties of the Borrower contained in SECTION 6.1 shall survive the execution
and delivery of this Agreement and shall continue in full force and effect and
be deemed made on the date of each Accommodation until all Outstandings
hereunder have been repaid and the Credit Facilities have been terminated
notwithstanding any investigation made at any time by or on behalf of the Agent
or any of the Lenders.
6.3 NO REPRESENTATIONS BY LENDERS. No representation, warranty or other
statement made by the Agent or any one or more of the Lenders in respect of the
Credit Facilities, the Credit Documents or any Accommodation made hereunder
shall be binding on such Person unless made by it in writing as a specific
amendment to this Agreement or any of the other Credit Documents, as the case
may be.
ARTICLE 7
COVENANTS OF THE BORROWER
7.1 AFFIRMATIVE COVENANTS. So long as there are any Outstandings hereunder or
the Credit Facilities have not been terminated, and unless the Agent with the
approval of the Majority Lenders shall otherwise consent, the Borrower shall:
(1) REPORTING AND DELIVERIES. Cause to be delivered to the Agent the following
documents, in form, scope and substance satisfactory to the Agent, acting
reasonably:
(a) the quarterly and annual consolidating financial statements
of Holdings in the same manner and within the same time periods
provided for in the Amended and Restated Credit Agreement.
<PAGE> 47
- 42 -
(b) after the occurrence of any Default which is continuing,
promptly upon receipt thereof, a copy of each management letter or
report submitted to the board of directors (or any committee
thereof) or senior management of the Borrower or any of its
Subsidiaries by the Borrower's independent auditors in connection
with any annual, interim or special audit made by them of the books
of the Borrower or any of its Consolidated Subsidiaries;
(c) promptly (after the chief executive officer, the chief
operating officer, the chief financial officer, the treasurer or the
controller of the Borrower or any Subsidiary becomes aware thereof)
of the occurrence of any Default or Event of Default and, upon
request of the Agent from time to time during the continuance of
such Event of Default, a statement of the chief financial officer or
other senior officer of the Borrower setting forth the details of
such Default or Event of Default and the action which the Borrower
proposes to take or has taken with respect thereto;
(d) promptly after receipt or the commencement thereof, notice of
all Claims, pending or, to the knowledge of the Borrower, threatened
in writing against (i) the Borrower or any of its Subsidiaries,
which Claims could reasonably be expected to have a Material Adverse
Effect or (ii) any of the Collateral in respect of an amount
exceeding $250,000; and
(e) such other information and reports relating to the Borrower,
any of its Subsidiaries, their respective Property (including the
Collateral), or the Business, as the Agent may from time to time
reasonably (with respect to frequency as well as scope) request.
(2) ENVIRONMENTAL REPORTING. Promptly, and in any event within five days of any
senior officer of the Borrower or any other officer of the Borrower responsible
for matters relating to the Environment becoming aware of its existence, notify
the Agent in writing of any Environmental Notice (providing available details
and further additional details if applicable, within a reasonable period of any
actions taken by the Borrower in response) which could reasonably be expected
to give rise to: (i) Environmental Liabilities and Costs of $250,000 or more,
or (ii) any violation of Environmental Laws involving the possible imposition
of a fine of $250,000 or more or where a Governmental Entity requires or
notifies the Borrower or any of its Subsidiaries that it may require the
shutting down of any facility forming part of the Property of the Borrower and
its Subsidiaries for a period in excess of 72 hours; and promptly from time to
time thereafter, notify the Agent in writing of each material change (whether
or not adverse) in the status of the foregoing.
(3) ENVIRONMENTAL AUDITS AND POLICY. Take, and shall cause each of its
Subsidiaries, in the exercise of its reasonable business judgment, to take
prompt and appropriate action to respond to any material non-compliance with
Environmental Laws, Environmental Permits or Environmental Orders or to any
Release or threatened Release of a Hazardous Substance which is in
contravention of applicable Environmental Laws, Environmental Permits or
Environmental Orders, and shall regularly report to the Agent on such response.
Have, and shall cause each of its Subsidiaries to have, a comprehensive
environmental management
<PAGE> 48
- 43 -
policy in place as well as ensure that all officers and employees of
the Borrower and its Subsidiaries comply with such policy in all material
respects in relation to the Business.
(4) INSURANCE. Maintain, and cause each of its Subsidiaries to maintain, such
insurance, to such extent and against such hazards and liabilities, as is
customarily maintained by Persons carrying on business in the same industry and
in the applicable country and in a similar location to the extent that such
insurance is available at commercially reasonable rates, and furnish to the
Agent in sufficient quantity for distribution to each Lender, upon written
request, certificates evidencing the insurance carried by the Borrower or any
Subsidiary of the Borrower. Notwithstanding the foregoing, all such insurance
shall have the following characteristics:
(i) insure the Inventory against loss or damage by fire and other
insurable hazards for the full insurable value thereof subject to a
reasonable deductible amount and name the Agent (for its own account
and for the account of the Lenders) as loss payee in respect of
property damage insurance covering the Inventory and as an
additional named insured in respect of third party liability
insurance; the whole as its interest may appear;
(ii) if it is cancelled or amended for any reason whatsoever, or
the same is allowed to lapse for non-payment of premium, notice of
such cancellation, amendment or lapse shall not be effective as to
the Agent or the Lenders for 30 days after receipt by them of notice
of such cancellation, amendment or lapse from the insurers, or as
otherwise agreed by the Agent; and
(iii) in respect of the interest of the Agent and the Lenders in
such insurance, the insurance shall not be invalidated by any action
or inaction of the Agent or the Lenders and shall (other than in the
case of liability insurance) insure the Agent and the Lenders
regardless of any breach or violation of any warranty, declaration
or condition contained in such policies by the Borrower or any of
its Subsidiaries.
(5) PROTECT LIENS. At all times take or cause to be taken, at the reasonable
request of the Agent, all action necessary or reasonably desirable to create,
maintain, register, record, file, perfect, protect and preserve the Liens
provided for under the Security Documents under all applicable Laws (including
the Laws of each jurisdiction in which each account debtor of each Account
included in Collateral is located) and obtain and deliver to the Agent, a
Landlord's Letter duly executed by each Landlord of premises that is Leasehold
Real Estate at which any Collateral is located at any time and a Depositary's
Letter duly executed by each Depositary of premises other than Leasehold Real
Estate and Real Estate at which any Collateral is located at any time.
(6) PAYMENTS. Pay all amounts of principal, interest, Fees, costs and expenses
owing hereunder by the Borrower on the dates, at the times and at the places
specified in this Agreement or under any other Credit Document.
(7) PROCEEDS. Obtain and deliver to the Agent a subordination and postponement
in favour of the Agent by each bank, trust company or other financial
institution in which any Collateral described in Clause (ii) of the definition
thereof is held or invested, including a waiver of all its rights of set-off
and compensation in respect thereof, all in form, scope and substance
<PAGE> 49
- 44 -
satisfactory to the Agent and its counsel, each acting reasonably. Deposit and
cause each of its Subsidiaries to deposit all proceeds of Dispositions of
Inventory and collections of Accounts in bank accounts maintained with First
Chicago NBD Bank, Canada, in the bank accounts listed in EXHIBIT 6.1(7) or in
bank accounts maintained with another bank acceptable to the Agent, acting
reasonably, all of which bank accounts will at all times be subject to a valid,
enforceable and perfected first priority Lien in favour of the Agent for itself
and the Lenders and a waiver of any right of the bank in question to exercise a
right of set-off or compensation against amounts standing to the credit of the
Borrower or such Subsidiary.
(8) FURTHER ASSURANCES. At its cost and expense, upon request of the Agent,
duly execute and deliver or cause to be duly executed and delivered to the
Agent such further instruments and other documents and do and cause to be done
such further acts as may be necessary or desirable in the reasonable opinion of
the Agent to carry out more effectually the provisions and purposes of the
Credit Documents.
ARTICLE 8
SECURITY
8.1 GUARANTEES. The Borrower shall cause each of the Guarantors to execute and
deliver to the Agent a Guarantee.
8.2 SECURITY. The Borrower shall execute and deliver the Security Documents in
form and substance satisfactory to the Agent, acting reasonably, to the Agent
and the Lenders as and when required hereunder or under the Ancillary
Agreements, and shall grant exclusive first priority perfected Liens in, on or
over all the Collateral in Canada and, if reasonably practicable, elsewhere, as
continuing collateral security for the payment and performance by the Borrower
of all of its obligations, indebtedness and liabilities, present and future,
under or relating to the Credit Facilities, whether hereunder or under any of
the other Credit Documents. The Borrower shall cause SportRack to execute and
deliver the pledge agreement forming a part of the Security Documents in form
and substance satisfactory to the Agent, acting reasonably, to the Agent and
the Lenders as and when required hereunder and to grant an exclusive first
priority perfected Lien in, on or over 100 Class A common shares in the capital
stock of the Borrower as continuing collateral security for the payment and
performance by SportRack of all of its obligations, indebtedness and
liabilities, present and future, under the Guarantee to which it is a party.
The Borrower shall cause each of SportRack and Holdings to execute the Security
Documents to which it is a party (other than the pledge agreement mentioned in
the preceding sentence) in form and substance satisfactory to the Agent, acting
reasonably, and shall deliver same to the Agent and Lenders as and when
required hereunder and to grant a perfected Lien in, on or over all of the
personal property of each of SportRack and Holdings as continuing collateral
security for the payment and performance by each of SportRack and Holdings of
all of its obligations, indebtedness and liabilities, present and future, under
the Guarantee to which it is a party.
8.3 REGISTRATIONS.
(1) The Agent may (without any obligation to do so), at the Borrower's
reasonable expense, register, file or record the Liens constituted by the
Security Documents in all
<PAGE> 50
- 45 -
jurisdictions where such registration, filing or recording is necessary
or of advantage to the creation, perfection, preservation or protection of such
Liens.
(2) The Agent may (without any obligation to do so), at the Borrower's
reasonable expense, renew such registrations, filings and recordings from time
to time as and when required or of advantage to keep them in full force and
effect. The Borrower acknowledges that the forms of the Security Documents have
been prepared based upon the Laws of the jurisdictions indicated therein as
being applicable thereto in effect at the date hereof and that such Laws may
change. The Borrower agrees that, following prior Notice to and consultation
with the Borrower, the Agent shall have the right (without any obligation to do
so) to require that the forms of the Security Documents be amended or
supplemented, at the reasonable expense of the Borrower, to reflect any changes
in such Laws, whether arising as a result of statutory amendments, court
decisions or other similar changes, in order to confer upon the Agent and the
Lenders under the Revolving Facility the Liens intended to be created thereby.
ARTICLE 9
EVENTS OF DEFAULT
9.1 EVENTS OF DEFAULT. If any of the following events, conditions or
circumstances (each an "EVENT OF DEFAULT") shall occur and be continuing:
(a) the Borrower shall fail to pay any portion of: (i) any
Outstandings due hereunder on the date when due hereunder; or (ii)
any interest, Fees or other amounts due hereunder within three
Business Days of notice being given by or on behalf of the Agent to
the Borrower to pay any such amount;
(b) any representation or warranty or certification made or
deemed to be made by the Borrower or any of the Guarantors (or any
director or officer thereof) pursuant to or in connection with any
of the Credit Documents delivered to the Agent or any one or more of
the Lenders shall prove to have been incorrect in any respect when
made or deemed to be made;
(c) the Borrower or any of the Guarantors shall fail to perform
or observe any other term, covenant or agreement contained in any of
the Credit Documents on its part to be performed or observed and
such failure shall remain unremedied for 30 days after the earlier
of (i) written notice thereof having been given to the Borrower by
the Agent or (ii) a senior officer of the Borrower or a Guarantor
having become aware thereof unless the Borrower has given written
notice to the Agent of such failure within five Business Days of
becoming aware thereof in which event the 30 day period shall begin
to run from the date referred to in Clause (i) of this SECTION
9.1(C);
(d) at any time and for any reason, (i) any Credit Document, as a
whole that materially affects the ability of the Agent or of any of
the Lenders to enforce the obligations and liabilities of the
Borrower under this Agreement or of the Borrower and the Guarantors
under any of the Ancillary Agreements or to enforce their rights
against the Collateral or against the shares in the share
<PAGE> 51
- 46 -
capital of the Borrower which are pledged in favour of the
Agent, ceases to be in full force and effect or any of the Borrower,
any of its Subsidiaries or any of the Guarantors seeks to repudiate
its obligations and liabilities thereunder and the Liens intended to
be created thereby are, or any of the Borrower or any such
Subsidiary or Guarantor seeks to render such Liens, invalid and
unprotected, or (ii) Liens on Collateral with a fair market value in
excess of $500,000 or on the shares in the share capital of the
Borrower pledged in favour of the Agent and contemplated by the
Security Documents shall, at any time and for any reason, be
invalidated or otherwise not be in full force and effect, or such
Liens shall not have the priority contemplated by this Agreement or
the Credit Documents;
(e) a Default (as defined in the Amended and Restated Credit
Agreement) occurs under the Amended and Restated Credit Agreement;
(f) the Borrower or any of its Subsidiaries shall: (i) become
insolvent (as such expression is defined in or construed under any
applicable Insolvency Law) or generally not pay its debts as
such debts become due; (ii) admit in writing its inability to pay
its debts generally or shall make a general assignment for the
benefit of creditors; (iii) file a notice of intention to file a
proposal under any applicable Insolvency Law; (iv) institute or have
instituted against it any proceeding seeking (x) to adjudicate it a
bankrupt or insolvent, (y) any liquidation, winding-up,
reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any applicable Insolvency Law,
or (z) the entry of an order for relief or the appointment of a
receiver, interim receiver, receiver and manager, assignee,
liquidator, sequestrator, trustee or other similar official for it
or for any substantial part of its Property; or (v) take any
corporate action to authorize any of the foregoing actions; unless
in the case of any proceeding instituted against the Borrower or any
of its Subsidiaries, as the case may be, and referred to in (iv),
(x), (y) or (z) above, such proceeding is stayed or dismissed within
60 days from the institution thereof; or
(g) a Change of Control occurs;
then, and in any such event, the Agent may and the Agent shall, if so
instructed by the Majority Lenders at any time, by written notice to the
Borrower: (i) terminate the obligation of the Lenders or any one or more of
them to make further Accommodations hereunder; and/or (ii) demand repayment of
all indebtedness of the Borrower to the Agent or any of the Lenders, whereupon
the principal amount of all outstanding Advances and an amount equal to the
Face Amount of each Bankers' Acceptance and BA Equivalent Note for which the
Agent or any of the Lenders is then contingently liable and all interest and
Fees accrued hereunder, and all other amounts payable under this Agreement
shall become forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower; and/or (iii) enforce its rights under the Guarantees and the Liens
constituted by the Security Documents and any other Lien now or hereafter held
by the Agent; PROVIDED, HOWEVER, that upon any Event of Default specified in
SECTION 9.1(F), the obligation of the Lenders or any one or more of them to
make further Accommodations hereunder shall automatically terminate and the
principal amount of all outstanding Advances and an amount equal to the Face
Amount of each Bankers' Acceptance and BA Equivalent
<PAGE> 52
- 47 -
Note for which the Agent or any of the Lenders is then contingently
liable and all interest and Fees accrued hereunder, and all other amounts
payable under this Agreement shall automatically become forthwith due and
payable, without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Borrower.
9.2 EXPENSE OF AGENT. Upon the occurrence of any Default or Event of Default
which has not been waived and is continuing, the Agent may take any action it
considers advisable in its sole discretion, and shall take any action the
Majority Lenders consider advisable in their sole discretion to remedy the
effect of such Default or Event of Default. The Borrower shall pay to the
Agent, upon demand, all reasonable expenses, costs and charges incurred by or
on behalf of the Agent in connection with: (i) any remedial action taken
pursuant to this Section; (ii) any obligation of the Borrower or any of the
Guarantors to the Agent or any one or more of the Lenders hereunder or under
any Ancillary Agreement; or (iii) the realization of the Collateral, including
all reasonable legal fees, court costs, appraisal fees, receiver's or agent's
remuneration and other expenses of taking possession of, repairing, protecting,
insuring, preparing for disposition, realizing, collecting, selling,
transferring, delivering or obtaining payment of the Collateral.
9.3 RIGHT TO COMBINE AND SET-OFF. Upon the occurrence and during the
continuance of any Default or Event of Default, the Agent or any one or more of
the Lenders is hereby authorized at any time and from time to time, to the
fullest extent permitted by Law, to combine, set-off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by the Agent or such Lender to or
for the credit or the account of the Borrower or any of the Guarantors with or
against any and all of the obligations of the Borrower or any of the Guarantors
now or hereafter existing under any of the Credit Documents, whether actual or
contingent, matured or not, irrespective of whether or not the Agent shall have
made any demand under any of the Credit Documents and although such obligations
may be unmatured. The Agent or such Lender agrees promptly to notify the
Borrower after any such combination or set-off and application made by the
Agent or such Lender provided that the failure to give such notice shall not
affect the validity of such combination or set-off and application. The rights
of the Agent and the Lenders under this SECTION 9.3 are in addition to other
rights and remedies (including other rights of combination and set-off) which
the Agent or the Lenders may have.
9.4 REMEDIES CUMULATIVE. The remedies provided for in this Agreement and each
Ancillary Agreement are cumulative and do not exclude any other right or remedy
provided by Law.
ARTICLE 10
PAYMENTS, COMPUTATIONS AND INDEMNITIES
10.1 TIMING OF PAYMENTS UNDER THIS AGREEMENT, ETC.
(1) Unless otherwise expressly provided in this Agreement, the Borrower shall
make any payment required to be made by it to the Agent not later than 11:00
a.m. (Montreal time) on the date such payment is due.
<PAGE> 53
- 48 -
(2) Unless otherwise expressly provided in this Agreement, the Agent shall make
any Accommodation or other payment to the Borrower hereunder by crediting or
causing the crediting of the Borrower's Canadian Dollar Account or the
Borrower's US Dollar Account, as the case may be, with the amount of such
Accommodation not later than 2:00 p.m. (Montreal time) on the date such
Accommodation is to be made.
(3) The Borrower hereby authorizes the Agent, if and to the extent payment owed
to the Agent by the Borrower is not made when due hereunder, to charge from
time to time against the Borrower's accounts with the Agent any amount so due.
(4) Unless otherwise expressly provided in this Agreement, each Lender shall
make any payment required to be made by it to the Agent hereunder at the
Agent's head office in Toronto not later than 11:00 a.m. (Montreal time) on the
date such payment is due.
10.2 PAYMENTS ON NON-BUSINESS DAYS. Whenever any payment hereunder shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of interest or Fees, as the case may be. If
any such extension would cause payment of interest on a LIBOR Advance to be
made in the next following calendar month, such payment shall be made on the
last preceding Business Day.
10.3 OVERDUE AMOUNTS. All amounts owed by the Borrower to the Agent or any of
the Lenders which are not paid when due (whether at stated maturity, on demand,
by acceleration or otherwise) shall bear interest (both before and after
judgment), from and including the date on which such amount is due until such
amount is paid in full, calculated daily and payable for each calendar month
period or part thereof, as the case may be, in arrears on the first day of the
following month, at a rate per annum equal at all times, in the case of amounts
payable in Canadian Dollars, to the rate per annum payable in respect of
Floating Rate Advances plus 2% per annum and, in the case of amounts payable in
US Dollars, to the rate per annum payable in respect of US Base Rate Advances
plus 2% per annum.
10.4 APPLICATION OF PROCEEDS.
(1) Subject to SECTION 2.10, all amounts received by the Agent after the
occurrence of an Event of Default from or in respect of the Borrower or any of
the Guarantors or as proceeds of the Collateral in connection with any
realization or enforcement proceedings under the Security Documents, in respect
of any contingent liability of the Agent or any of the Lenders which has not
yet become due or expired (i) shall be held by the Agent in trust until such
liability becomes due or expires, whichever is earlier; and (ii) shall be
applied at such time in accordance with SECTION 10.4(2).
(2) Subject to SECTION 2.10, all amounts received by the Agent after the
occurrence of an Event of Default from or in respect of the Borrower or any of
the Guarantors or as proceeds of the Collateral in connection with any
realization or enforcement proceedings under the Security Documents, and not
otherwise applied pursuant to this Agreement or any of the other Credit
Documents, shall be applied by the Agent and the Lenders as follows:
(a) first, in reduction of the Borrower's obligation to pay any
reasonable expenses, costs or charges referred to in SECTION 9.2;
<PAGE> 54
- 49 -
(b) second, in reduction of the Borrower's obligation to pay any
unpaid Drawing Fee and interest accrued on the principal amount of
Advances or on any other amount owing hereunder;
(c) third, in reduction of the Borrower's obligation to pay any
Fees which are due and owing, and any reasonable costs, expenses, or
Losses referred to in SECTIONS 10.7, 10.8, 10.9 OR 10.10;
(d) fourth, in reduction of the Borrower's obligation to pay any
amounts due and owing on account of any unpaid principal amount or
Face Amount of any Accommodation which is due and owing;
(e) fifth, in reduction of any other obligation of the Borrower
or the Guarantors under this Agreement or any of the other Credit
Documents; and
(f) sixth, to the Borrower, the Guarantors or such other Persons
as may lawfully be entitled to the remainder, or as any court of
competent jurisdiction may otherwise direct.
10.5 COMPUTATIONS OF INTEREST AND FEES.
(1) All computations of interest shall be made by the Agent according to its
practice daily, taking into account the actual number of days occurring in the
period for which such interest is payable pursuant to SECTION 3.3, and: (i) if
based on the Floating Rate or the US Base Rate, on the basis of a year of 365
days (or 366 days); or (ii) if based on the LIBOR, on the basis of a year of
360 days.
(2) All computations of Fees shall be made by the Agent on the basis of a year
of 365 days (or 366 days), taking into account the actual number of days
(including the first day but excluding the last day) occurring in the period
for which such Fees are payable.
(3) For purposes of the Interest Act (Canada): (i) whenever any interest under
this Agreement is calculated using a rate based on a year of 360 days, such
rate determined pursuant to such calculation, when expressed as an annual rate,
is equivalent to (x) the applicable rate based on a year of 360 days, (y)
multiplied by the actual number of days in the calendar year in which the
period for which such interest is calculated ends, and (z) divided by 360; (ii)
the principle of deemed reinvestment of interest shall not apply to any
interest calculation under this Agreement; and (iii) the rates of interest
stipulated in this Agreement are intended to be nominal rates and not effective
rates or yields.
(4) Notwithstanding any provision to the contrary contained in this Agreement,
in no event shall the aggregate "interest" (as defined in Section 347 of the
Criminal Code (Canada), as the same may be amended, replaced or re-enacted from
time to time) payable under this Agreement exceed the maximum amount of
interest on the "credit advanced" (as defined in that section) under this
Agreement lawfully permitted under that section and, if any payment, collection
or demand pursuant to this Agreement in respect of "interest" (as defined in
that section) is determined to be contrary to the provisions of that section,
such payment, collection or demand shall be deemed to have been made by mutual
mistake of the Borrower and the
<PAGE> 55
- 50 -
Agent and the Lenders and the amount of such payment or collection
shall be refunded to the Borrower. For purposes of this Agreement, the
effective annual rate of interest shall be determined in accordance with
generally accepted actuarial practices and principles over the term the Credit
Facilities are outstanding on the basis of annual compounding of the lawfully
permitted rate of interest and, in the event of any dispute, a certificate of a
Fellow of the Canadian Institute of Actuaries appointed by the Agent will be
conclusive for the purposes of such determination.
(5) Each determination by the Agent of any amount payable by the Borrower, the
Agent or any one or more of the Lenders shall be conclusive and binding for all
purposes absent manifest error.
10.6 JUDGMENT CURRENCY.
(1) If, for the purposes of obtaining judgment in any court, it is necessary to
convert any sum due or owing hereunder or under any other Credit Document to
the Agent or any one or more of the Lenders in any currency (the "ORIGINAL
CURRENCY") into another currency (the "OTHER CURRENCY"), the parties hereto
agree, to the fullest extent that they may effectively do so, that the rate of
exchange used shall be that at which in accordance with normal banking
procedures the Agent could purchase the Original Currency with the Other
Currency on the Business Day preceding that on which final judgment is granted.
(2) The obligations of the Borrower in respect of any sum due in the Original
Currency from it to the Agent or any one or more of the Lenders under any of
the Credit Documents shall, notwithstanding any judgment in any Other Currency,
be discharged only to the extent that on the Business Day following receipt by
the Agent of any sum adjudged to be so due or owing in such Other Currency, the
Agent may in accordance with normal banking procedures purchase the Original
Currency with such Other Currency. If the amount of the Original Currency so
purchased is less than the sum originally due or owing to the Agent or any one
or more of the Lenders in the Original Currency, the Borrower shall, as a
separate obligation and notwithstanding any such judgment, indemnify the Agent
or such Lender against such Loss, and if the amount of the Original Currency so
purchased exceeds the sum originally due or owing to the Agent or such Lender
in the Original Currency, the Agent or such Lender shall remit such excess to
the Borrower.
10.7 COSTS AND EXPENSES. The Borrower shall, whether or not the transactions
hereby contemplated are consummated, pay all reasonable costs and expenses,
including reasonable legal fees:
(a) of First Chicago NBD Bank, Canada, The Chase Manhattan Bank
of Canada and The Bank of Nova Scotia (until the date of this
Agreement) or the Agent in connection with the preparation,
execution, delivery, registration, filing, recording, or enforcement
of, and refinancing, renegotiation or restructuring of, the Credit
Documents (including the maintenance of the Liens provided for
therein and all future registrations, filings, recordings and other
actions in connection therewith);
(b) of First Chicago NBD Bank, Canada, The Chase Manhattan Bank
of Canada and The Bank of Nova Scotia (until the date of this
Agreement) or the Agent in
<PAGE> 56
- 51 -
connection with, prior to the Closing, all due diligence
relating to the Acquisition, the Nomadic Acquisition and the Credit
Facilities;
(c) of the Agent in connection with, from and after the Closing,
all reviews, monitoring, audits, examinations and inspections of the
Property and affairs of the Borrower and its Subsidiaries
contemplated hereby, including inspections and appraisals of the
Collateral and the Business at reasonable intervals, provided that
the Borrower shall not be responsible under this SECTION 10.7(C) for
costs and expenses of more than $50,000 in aggregate during any
Financial Year (excluding any costs and expenses incurred during the
continuance of any Default in respect of which such limitations
shall not apply); and
(d) of each of the Lenders in connection with the enforcement of
its rights under the Credit Documents after the occurrence of any
Default or Event of Default.
10.8 INDEMNITY FOR CHANGE IN CIRCUMSTANCES.
(1) If with respect to the Agent or any of the Lenders: (i) any change in Law,
or any change in the interpretation or application by any Governmental Entity
of any Law occurring or becoming effective after the date hereof; or (ii) any
compliance by the Agent or any of the Lenders with any direction, request or
requirement (whether or not having the force of Law and, if not having the
force of Law, the observance of which is in accordance with the practice of
banks generally in Canada or in the jurisdiction concerned) of any Governmental
Entity made or becoming effective after the date hereof, in either case shall
have the effect of causing Loss to the Agent or any of the Lenders by:
(a) increasing the cost to the Agent or any of the Lenders of
performing its obligations under this Agreement or in respect of any
Advance, Bankers' Acceptance or BA Equivalent Note (including the
costs of maintaining any capital, reserve or special deposit
requirements in connection therewith);
(b) requiring the Agent or any of the Lenders to maintain or
allocate any capital or additional capital or affecting its
allocation of capital in respect of its obligations under this
Agreement or in respect of any Advances, Bankers' Acceptances or BA
Equivalent Notes;
(c) reducing any amount payable to the Agent or any of the
Lenders under this Agreement or in respect of any Advance, Bankers'
Acceptance or BA Equivalent Note by any amount it deems material
(other than a reduction resulting from a higher rate of income tax
or other special tax relating to the Agent's or any Lender's income
in general); or
(d) causing the Agent or any of the Lenders to make any payment
or to forgo any return on, or calculated by reference to, any amount
received or receivable by the Agent or any of the Lenders under this
Agreement in respect of any Advance, Bankers' Acceptance or BA
Equivalent Note;
then the Agent may give notice to the Borrower within 90 days from the day on
which the Agent or any Affected Lender has obtained knowledge of the occurrence
giving rise to such
<PAGE> 57
- 52 -
Loss and specifying the nature of the event giving rise to such Loss
and the Borrower shall, on demand, pay such amounts as the Affected Lender or
the Agent may specify (and the Agent notifies the Borrower) to be necessary to
compensate the Agent or any of the Lenders for any such Loss incurred after the
date of such notice. A certificate as to the amount of any such Loss, submitted
in good faith by the Agent to the Borrower shall be conclusive and binding for
all purposes absent manifest error.
(2) If any Lender (the "AFFECTED LENDER") seeks additional
compensation pursuant to SECTION 10.8(1), then the Borrower may notify the
Agent that it desires to replace the Affected Lender with one or more of the
other Lenders, and the Agent shall then forthwith give notice to the other
Lenders that any Lender or Lenders may, in the aggregate, acquire all (but not
part) of the Affected Lender's Individual Commitment and all (but not part) of
the rights and obligations of the Affected Lender under each of the other
Credit Documents (but in no event shall any other Lender or the Agent be
obliged to do so), provided that any discount to the price paid to such
Affected Lender from the amounts outstanding hereunder shall first be approved
by such Affected Lender. If one or more Lenders shall so agree in writing
(each, an "ASSENTING LENDER"), each such Lender shall give notice to the Agent
that it has agreed to make such acquisition, and shall acquire its pro rata
share, determined on the basis of the relative Individual Commitments of the
Assenting Lenders, of such Individual Commitment and of the rights and
obligations hereunder of the Affected Lender under the Credit Document on a
date mutually and on other terms and conditions acceptable to the Assenting
Lenders and the Affected Lenders. On the date of such acquisition, the Agent
shall give notice to each of the Assenting Lenders and the Borrower setting out
the amount of the Individual Commitments of each of the Assenting Lenders and
the amount of the Outstandings of the Affected Lender acquired by each of the
Assenting Lenders and, upon the completion of such acquisition and the giving
of such notice, the Affected Lender shall cease to be a "LENDER" for purposes
of this Agreement and shall no longer have any rights or obligations under the
Credit Documents and the Assenting Lenders shall have acquired and assumed all
of such rights and obligations. Upon the assumption of the Affected Lender's
Individual Commitment by an Assenting Lender, Schedule 1 shall be deemed to be
amended to increase the Individual Commitment of such Assenting Lender by the
amount of such assumption.
10.9 INDEMNITY RELATING TO ACCOMMODATIONS. Upon notice from the Agent to the
Borrower (which notice shall be accompanied by a detailed calculation of the
amount to be paid by the Borrower), the Borrower shall pay to the Agent such
amount or amounts as will compensate the Agent or any of the Lenders for any
loss, cost or expense incurred by them: (i) in the liquidation or redeposit of
any funds acquired by the Agent or any of the Lenders to fund or maintain any
portion of a LIBOR Advance as a result of (A) the failure of the Borrower to
borrow or make repayments on the date specified under this Agreement or in any
notice from the Borrower to the Agent, or (B) the repayment or prepayment
(including under SECTIONS 2.5, 2.6, 2.7, 3.6, 8.2(2) OR 10.1) of any amounts on
a day other than the last day of the Interest Period applicable thereto; or
(ii) arising from any Claim with respect to any Bankers' Acceptance or BA
Equivalent Note, including reasonable legal fees and disbursements, respecting
the collection of amounts owing by the Borrower hereunder in respect of such
Bankers' Acceptance or BA Equivalent Note or the enforcement of the Agent's or
Lenders' rights hereunder in respect of such Bankers' Acceptance or BA
Equivalent Note, including legal proceedings attempting to restrain the Agent
or the Lenders from paying any amount under such Bankers' Acceptance or BA
Equivalent Note.
<PAGE> 58
- 53 -
10.10 INDEMNITY FOR TRANSACTIONAL AND ENVIRONMENTAL LIABILITY.
(1) The Borrower hereby agrees to indemnify, exonerate and hold the Agent and
each Lender and each of their respective officers, directors, employees, agents
and other representatives (collectively, the "INDEMNIFIED PARTIES") free and
harmless from and against any and all Claims and Losses, including all
documentary, recording, filing or stamp taxes or duties (collectively, in this
SECTION 10.10, the "INDEMNIFIED LIABILITIES") paid, incurred or suffered by, or
asserted against, the Indemnified Parties or any of them, irrespective of
whether such Indemnified Party is a party to the action for which such
indemnification hereunder is sought, with respect to, or as a direct or
indirect result of: (i) any transaction financed or to be financed in whole or
in part, directly or indirectly, with the proceeds of any Accommodation
obtained hereunder; (ii) the execution, delivery, performance or enforcement of
this Agreement or any Ancillary Agreement except for such Indemnified
Liabilities that a court of competent jurisdiction determines arose on account
of the relevant Indemnified Party's gross negligence or willful misconduct; or
(iii) any Environmental Liabilities and Costs.
(2) All obligations provided for in this SECTION 10.10 shall not be reduced or
impaired by any investigation made by or on behalf of the Agent or any of the
Lenders.
(3) The Borrower hereby agrees that, for the purposes of effectively allocating
the risk of loss placed on the Borrower by this SECTION 10.10, the Agent and
each of the Lenders shall be deemed to be acting as the agent or trustee on
behalf of and for the benefit of its officers, directors and agents.
(4) If, for any reason, the obligations of the Borrower pursuant to this
SECTION 10.10 shall be unenforceable, the Borrower agrees to make the maximum
contribution to the payment and satisfaction of each obligation that is
permissible under Law, except to the extent that a court of competent
jurisdiction determines such obligations arose on account of the gross
negligence or willful misconduct of any Indemnified Party.
(5) Any Indemnified Party claiming indemnification hereunder shall give the
Borrower prompt notice of any Claim asserted by third parties against it which
is covered by the indemnities provided for herein (provided that the failure to
give such notice shall not affect the Borrower's obligation to indemnify
hereunder, except to the extent that such failure materially and adversely
affects the right of the Borrower or the relevant Subsidiary to defend such
Claim), and the Borrower shall, within 30 days, give notice to such Indemnified
Party whether it wishes to defend such Claim at its sole cost and expense. No
Indemnified Party shall settle or compromise such Claim without the written
consent of the Borrower (which consent shall not be unreasonably withheld),
unless the said 30 day period has expired without the Borrower having given
notice of its intention to defend such Claim or, if such notice of intention is
given, unless the Borrower fails diligently to defend such Claim by appropriate
legal proceedings. If an Indemnified Party does not receive notice from the
Borrower, that it wishes to defend such Claim as aforesaid, the Indemnified
Party shall be entitled to defend, settle or otherwise deal with such Claim in
such manner as it, in the reasonable exercise of its judgment, deems
appropriate but at the sole risk and expense of the Borrower. If the Borrower
gives such notice to the Indemnified Party that it does wish to defend such
Claim, the Borrower shall have the obligation to contest or dispute such Claim
in the name of or on behalf of the Person against whom it is made, at the
Borrower's own cost and expense, and shall at its own cost and expense defend
expeditiously the Person against whom such Claim is made from all such
<PAGE> 59
- 54 -
actions or proceedings to which the said indemnity applies (but shall
not have the right to settle or compromise such Claim unless the prior written
consent of the Indemnified Party has been obtained (such consent not to be
unreasonably withheld)), and the Indemnified Party shall arrange that the
Borrower has the right to carry on such actions or proceedings in its name,
provided that counsel retained by the Borrower to prosecute such defence is
approved by the Indemnified Party (which approval shall not be unreasonably
withheld), and the Borrower shall keep the Indemnified Party fully advised as
to the course of the proceedings, and the Borrower furnishes to the Indemnified
Party such security or other assurances as such party may reasonably request in
connection therewith, and such dispute is prosecuted or negotiations conducted
by the Borrower in good faith and with due diligence. The Indemnified Party
shall be entitled to participate in the defence of such indemnified Claims and,
subject to the foregoing, shall make available to the Borrower all files,
books, records and documents, information and data in the possession and
control of the person against whom the Claim is made relevant to such actions
or proceedings for the purposes of such defence (other than those which it is
not entitled by Law to disclose) and shall cause such person to cooperate
without expense to itself in all reasonable respects and to assist in the
defence of any such actions or proceedings.
10.11 SURVIVAL OF INDEMNITIES: CONTRIBUTION.
(1) The provisions of SECTIONS 10.7, 10.8, 10.9, 10.10 AND THIS SECTION 10.11
shall survive the termination of this Agreement and the repayment of all
Outstandings. The Borrower acknowledges that neither its obligation to
indemnify, nor any actual indemnification by it, of the Agent or any of the
Lenders hereunder in respect of legal fees and disbursements shall in any way
affect the confidentiality or privilege relating to any information
communicated by the Agent or any Lender to its counsel.
(2) If any provision in any of the Credit Documents providing for
indemnification by the Borrower or any of the Guarantors (the "LNDEMNITOR") in
favour of any Indemnified Party is found by reason of the occurrence of an
event, other than the gross negligence or willful misconduct of the Indemnified
Party, to be unenforceable by a court of competent jurisdiction in a final
judgment that has become non-appealable, then the lndemnitor shall contribute
to the amount paid or payable by the Indemnified Party which is subject to the
indemnification provision in such proportion as is appropriate to reflect not
only the relative benefits received by the lndemnitor on the one hand and the
Indemnified Party on the other hand but also the relative fault of the
lndemnitor and the Indemnified Party. The rights of contribution herein
provided shall be in addition to and not in derogation of any other right to
contribution which the Indemnitee may have under this Agreement or applicable
Laws.
ARTICLE 11
GENERAL PROVISIONS
11.1 NOTICES.
(1) All Notices pursuant to this Agreement or the other Credit Documents shall
be in writing and shall be personally delivered or sent by facsimile, charges
prepaid, at or to the applicable addresses or facsimile numbers, as the case
may be, set out opposite the party's name in SCHEDULE 2 hereto or at or to such
other address or addresses or facsimile number or
<PAGE> 60
- 55 -
numbers as any party hereto may from time to time designate to the
other parties in such manner. Any communication which is personally delivered
as aforesaid shall be deemed to have been validly and effectively given on the
date of such delivery if such date is a Business Day and such delivery was made
during normal business hours of the recipient; otherwise, it shall be deemed to
have been validly and effectively given on the Business Day next following such
date of delivery. Any communication which is transmitted by facsimile as
aforesaid shall be deemed to have been validly and effectively given on the
date of transmission if such date is a Business Day and such transmission was
made during normal business hours of the recipient; otherwise, it shall be
deemed to have been validly and effectively given on the Business Day next
following such date of transmission.
(2) Each Accommodation Notice and any notice of a prepayment shall be
irrevocable and binding on the Borrower. With respect to any Accommodation
Notice, the Agent may act upon the basis of telephonic notice believed by it in
good faith to be from an authorized officer of the Borrower if the Borrower has
provided the Agent with a list of such authorized officers (or in any other
event, believed by it in good faith to be from the Borrower) prior to receipt
of an Accommodation Notice. In the event of conflict between the Agent's record
of the applicable terms of any Accommodation based on any such telephonic
notice and such Accommodation Notice, the Agent's record shall prevail and the
Borrower hereby irrevocably waives its rights, if any, to dispute the terms of
such Accommodation absent manifest error.
11.2 TIME OF THE ESSENCE. Time shall be of the essence of this Agreement.
11.3 THIRD PARTY BENEFICIARIES. Each party hereto intends that this Agreement
shall not benefit or create any right or cause of action in or on behalf of any
Person, other than the parties hereto, the Persons contemplated in SECTION
10.10 or any Eligible Assignee, and no Person, other than the parties hereto
and the Persons contemplated in SECTION 10.10 or any Eligible Assignee, shall
be entitled to rely on the provisions hereof in any action, suit, proceeding,
hearing or other forum.
11.4 ENUREMENT. This Agreement shall enure to the benefit of and be binding
upon the parties hereto and their successors and any Person becoming a party to
this Agreement. This Agreement shall be binding upon any assigns of the
parties hereto and enure to the benefit of any permitted assigns of the parties
hereto, including any Eligible Assignee.
11.5 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which, taken together,
shall constitute one and the same instrument.
11.6 KNOWLEDGE. Where any representation or warranty contained in this
Agreement or any Ancillary Agreement is expressly qualified by reference to the
knowledge of the Borrower, or where any other reference is made herein or in
any Ancillary Agreement to the knowledge of the Borrower, it shall be deemed to
refer to the knowledge of each of the Borrower and its Subsidiaries. The
Borrower confirms that it has made, and agrees that it shall hereafter at other
relevant times make, due and diligent inquiry of those of its officers, agents
and senior employees (including appropriate officers, agents and senior
employees of its Subsidiaries) as it considers necessary as to the matters that
are the subject of such representations, warranties or references.
<PAGE> 61
- 56 -
11.7 ASSIGNMENT. Except as otherwise provided in this Agreement, none of the
rights or obligations of the Borrower hereunder shall be assignable or
transferable to any party without the prior written consent of each of the
Lenders, which consent shall not be unreasonably withheld. Any Lender may
assign, in whole or in part, any of its interest in the Credit Facilities to
any Eligible Assignee. In such event, such Lender, the relevant Eligible
Assignee and the Borrower shall enter into and execute an Assumption Agreement.
11.8 NON-MERGER. Except as otherwise expressly provided in this Agreement, the
covenants, representations and warranties of the parties contained in this
Agreement and the Ancillary Agreements shall not merge on and shall survive the
Closing and the making of any Accommodation, and notwithstanding such Closing
or Accommodation, or any investigation made by or on behalf of any party, shall
continue in full force and effect. Neither the Closing nor the making of any
Accommodation shall prejudice any right of one party against any other party in
respect of anything done or omitted hereunder or under any of the Ancillary
Agreements or in respect of any right to damages or other remedies.
11.9 CERTIFICATES AND OPINIONS. Whenever the delivery of a certificate or
opinion is a condition precedent to the taking of any action by the Agent or
under any of the Credit Documents, the truth and accuracy of the facts and
opinion stated in such certificate or opinion shall in each case be conditions
precedent to the right of the Borrower to have such action taken, and each
statement of fact contained therein shall be deemed to be a representation and
warranty of the Borrower for the purpose of this Agreement. Except as
otherwise expressly provided in this Agreement, whenever any certificate or
declaration is to be delivered by an officer or a senior officer of the
Borrower, such certificate shall be signed on behalf of the Borrower by one or
more of the Chairman, President, Chief Financial Officer, Treasurer, Secretary
or any Vice President of the Borrower.
11.10 AMENDMENT. This Agreement may be amended only by written agreement of the
parties hereto, provided that ARTICLE 12 and any other provision of any of the
Credit Documents relating to arrangements among or the relative rights and
obligations of the Agent and/or any of the Lenders may be amended without the
agreement of the Borrower or any of the Guarantors.
11.11 AGENT'S AND LENDERS' CONFIDENTIALITY OBLIGATIONS. The Agent and each of
the Lenders agrees that it shall use reasonable efforts to keep confidential
all materials and information (other than publicly available material and
information) obtained by or provided to it pursuant to the Credit Documents
which are identified or designated by the Borrower in writing as confidential
and which were not previously in the possession of or known to the recipient
thereof on a non-confidential basis and that the Agent or such Lender, as the
case may be, will use its reasonable efforts not to disclose any such
information unless the same has previously been made public, provided that
nothing in this Agreement shall prohibit the Agent or such Lender, as the case
may be, from, or subject the Agent or such Lender to liability for, disclosing
any of such information (i) pursuant to any order, writ, judgment, decree,
injunction or ruling of any Governmental Entity (including any bank regulators)
to whose jurisdiction the Agent or such Lender may be subject, (ii) pursuant to
any applicable Law, (iii) to the auditors, counsel and other advisors of the
Agent or such Lender to the extent required in connection with their services
to the Agent or such Lender with respect to the Credit Documents or (iv) to the
extent necessary in the enforcement of the Credit Documents after the
occurrence of any Default.
<PAGE> 62
- 57 -
ARTICLE 12
THE AGENT
12.1 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender hereby irrevocably
appoints and authorizes, and hereby agrees that it will require any Eligible
Assignee of any of its interest in the Credit Documents to irrevocably appoint
and authorize, the Agent to take such actions as agent on its behalf and to
exercise such powers under the Credit Documents as are provided for therein,
together with such powers as are reasonably incidental thereto. Each Lender
hereby irrevocably appoints and authorizes the Agent to be its attorney in its
name and on its behalf to exercise all rights or powers granted to the Agent or
the Lenders under the Security Documents (including, without limitation, the
entering into and execution for and on behalf of the Lenders of an
intercreditor agreement of even date herewith with NBD Bank, as administrative
agent and collateral and documentation agent of the Lenders under the Amended
and Restated Agreement, it being understood however that the Agent may not
enter into and execute any amendment to such intercreditor agreement or waive
the execution of the obligations of NBD Bank thereunder, in whole or in part,
without the prior written consent of each of the Lenders). Neither the Agent
nor any of its directors, officers, employees or agents shall be liable to any
of the Lenders for any action taken or omitted to be taken by it or them
thereunder or in connection therewith, except for its own gross negligence or
willful misconduct and each Lender hereby acknowledges that the Agent is
entering into the provisions of this SECTION 12.1 on its own behalf and as
agent and trustee for its directors, officers, employees and agents.
12.2 INTEREST HOLDERS. The Agent and the Borrower may treat each Lender set
forth in SCHEDULE 1 or the Eligible Assignee designated in the last notice
delivered to it in connection with any assignment to such Eligible Assignee of
any Lender's rights hereunder as the holder of all of the interests of such
Lender under the Credit Documents.
12.3 CONSULTATION WITH COUNSEL. The Agent may consult with legal counsel
selected by it as counsel for the Agent and the Lenders and shall not be liable
for any action taken or not taken or suffered by it in good faith and in
accordance with the advice and opinion of such counsel.
12.4 DOCUMENTS. The Agent shall not be under any duty to the Lenders to
examine, enquire into or pass upon the validity, effectiveness or genuineness
of the Credit Documents or any instrument, document or communication furnished
pursuant to or in connection with the Credit Documents and the Agent shall, as
regards the Lenders, be entitled to assume that the same are valid, effective
and genuine, have been signed or sent by the proper parties and are what they
purport to be.
12.5 AGENT AS LENDER. With respect to those portions of the Credit Facilities
made available by it, the Agent shall have the same rights and powers under the
Credit Documents as any other Lender and may exercise the same as though it
were not the Agent. The Agent and its Affiliates may accept deposits from, lend
money to and generally engage in any kind of business with the Borrower and its
Affiliates and Persons doing business with the Borrower and any of its
Affiliates as if it were not the Agent and without any obligation to account
to the
<PAGE> 63
- 58 -
Lenders therefor and the Agent may exercise its rights and powers with
respect thereto as though it were not the Agent.
12.6 RESPONSIBILITY OF AGENT. The duties and obligations of the Agent to the
Lenders under the Credit Documents are only those expressly set forth herein.
The Agent shall not have any duty to the Lenders to investigate whether a
Default or an Event of Default has occurred. The Agent shall, as regards the
Lenders, be entitled to assume that no Default or Event of Default has occurred
and is continuing unless the Agent has actual knowledge or has been notified by
the Borrower of such fact or has been notified by a Lender that such Lender
considers that a Default or Event of Default has occurred and is continuing,
such notification to specify in detail the nature thereof. In the event that,
in the reasonable opinion of the Agent, there is any conflict or inconsistency
between or among any requests, consents, approvals, instructions, waivers or
other actions by the Majority Lenders at any time, the Agent may refrain from
complying with or implementing such consents, approvals, instructions, waivers
or actions until the conflict or inconsistency has been eliminated or resolved
to the Agent's satisfaction.
12.7 ACTION BY AGENT. The Agent shall be entitled to use its discretion with
respect to exercising or refraining from exercising any rights which may be
vested in it on behalf of the Lenders by and under this Agreement or any of the
other Credit Documents; except that, if the Majority Lenders have instructed
the Agent to exercise or refrain from exercising any particular right, in no
event shall the Agent act contrary to such instructions unless required by Law
to do so. Any rights of the Agent expressed to be on behalf of or with the
approval of the Majority Lenders shall be exercised by the Agent upon the
request or instructions of the Majority Lenders. The Agent shall incur no
liability to the Lenders under or in respect of any of the Credit Documents
with respect to anything which it may do or refrain from doing in the
reasonable exercise of its judgment or which may seem to it to be necessary or
desirable in the circumstances, except for its gross negligence or willful
misconduct. The Agent shall in all cases be fully protected in acting or
refraining from acting under any of the Credit Documents in accordance with the
instructions of the Majority Lenders and any action taken or failure to act
pursuant to such instructions shall be binding on all Lenders.
12.8 NOTICE OF EVENTS OF DEFAULT. In the event that the Agent shall acquire
actual knowledge or shall have been notified of any Default or Event of
Default, the Agent shall promptly notify the Lenders and shall take such action
and assert such rights under SECTION 9.1 of this Agreement and under the Credit
Documents as the Majority Lenders shall request in writing and the Agent shall
not be subject to any liability by reason of its acting pursuant to such
request. If the Majority Lenders shall fail for five Business Days after
receipt of the notice of any Default or Event of Default to request the Agent
to take such action or to assert such rights under any of the Credit Documents
in respect of such Default or Event of Default, the Agent may, but shall not be
required to, take such action or assert such rights as it deems in its
discretion to be advisable for the protection of the Lenders; except that, if
the Majority Lenders have instructed the Agent to take or to refrain from
taking any particular action or to assert or to refrain from asserting any
particular right, in no event shall the Agent act contrary to such instructions
unless required by Law to do so.
12.9 BENEFIT OF ARTICLE 12. Notwithstanding SECTION 10.5, the provisions of
this ARTICLE 12 (except those of this SECTION 12.9 and the Sections referred to
in SECTION 10.11) (including any obligations, restrictions and limitations
imposed upon the Agent hereunder) shall not enure to the benefit of the
Borrower or any of the Guarantors.
<PAGE> 64
- 59 -
12.10 RESPONSIBILITY DISCLAIMED. The Agent shall be under no liability or
responsibility whatsoever as agent hereunder:
(a) to the Borrower or any other Person as a consequence of any
failure or delay in the performance by, or any breach by, any Lender
or Lenders (other than the Agent in such capacity) of any of its or
their obligations under any of the Credit Documents;
(b) to any Lender or Lenders as a consequence of any failure or
delay in performance by, or any breach by, the Borrower of any of
its obligations under any of the Credit Documents; or
(c) to any Lender or Lenders for any statements, representations
or warranties in any of the Credit Documents or in any other
documents contemplated thereby, or in any other information provided
pursuant to any of the Credit Documents, or any other documents
contemplated thereby, or for the validity, effectiveness,
enforceability or sufficiency of any of the Credit Documents or any
other document contemplated thereby.
12.11 INDEMNIFICATION. The Lenders agree to indemnify the Agent (to the extent
not reimbursed by the Borrower) pro rata according to the Pro Rata Share of
each of them from and against any and all Claims and Losses and which may be
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of any of the Credit Documents or any other document contemplated
thereby or any action taken or omitted by the Agent under any of the Credit
Documents or any document contemplated thereby, except that no Lender shall be
liable to the Agent for any portion of such Claims and Losses resulting from
the gross negligence or wilful misconduct of the Agent.
12.12 CREDIT DECISION. Each Lender represents and warrants to the Agent that:
(a) in making its decision to enter into this Agreement and to
make its Pro Rata Share of either of the Credit Facilities available
to the Borrower, it is independently taking whatever steps it
considers necessary to evaluate the financial condition and affairs
of the Borrower and that it has made an independent credit judgment
without reliance upon any information furnished by the Agent; and
(b) so long as any portion of the Credit Facilities is being
utilized by the Borrower, it will continue to make its own
independent evaluation of the financial condition and affairs of the
Borrower.
12.13 SUCCESSOR AGENT. Subject to the appointment and acceptance of a successor
Agent as provided in this SECTION 12.13, the Agent: (i) may resign at any time
by giving 30 days written notice thereof to the Lenders; or (ii) may be removed
by the Borrower or the Majority Lenders at any time when any action taken or
omitted to be taken by it under the Credit Documents or in connection therewith
was taken or omitted to be taken in a manner which was grossly negligent or
exhibited wilful misconduct. Upon any such resignation or removal, the Majority
Lenders, with the consent of the Borrower (which consent shall not be
unreasonably
<PAGE> 65
- 60 -
withheld and, furthermore, such consent shall not be required if a
Default has occurred or is continuing at the time of such appointment) shall
have the right to appoint a successor Agent who shall be one of the Lenders
unless none of the Lenders wishes to accept such appointment. If no successor
Agent shall have been so appointed and shall have accepted such appointment by
the time of such resignation or removal, then the retiring or removed Agent
may, on behalf of the Lenders, appoint a successor Agent with the consent of
the Borrower (which shall not be unreasonably withheld and, furthermore, such
consent shall not be required if a Default has occurred or is continuing at the
time of such appointment) which shall be a Person organized under the Laws of
Canada. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges, duties and obligations of the
retiring or removed Agent (other than in its capacity as a Lender) and the
retiring or removed Agent shall be discharged from its duties and obligations
hereunder (other than in its capacity as a Lender). After any retiring or
removed Agent's resignation or removal hereunder as the Agent, the provisions
of this ARTICLE 12 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Agent.
12.14 DELEGATION BY AGENT. The Agent shall have the right to delegate any of
its duties or obligations hereunder as Agent to any Affiliate of the Agent so
long as the Agent shall not thereby be relieved of such duties or obligations.
12.15 WAIVERS AND AMENDMENTS.
(a) Subject to SECTIONS 12.15(B) AND (C), any term, covenant or
condition of any of the Credit Documents may only be amended with
the consent of the Borrower and the Majority Lenders or compliance
therewith by the Borrower may be waived (either generally or in a
particular instance and either retroactively or prospectively) by
the Majority Lenders and in any such event the failure to observe,
perform or discharge any such covenant, condition or obligation, so
amended or waived (whether such amendment is executed or such
consent or waiver is given before or after such failure), shall not
be construed as a breach of such covenant, condition or obligation
or as a Default or Event of Default.
(b) Notwithstanding any other provision of the Credit Documents,
without the prior written consent of each Lender, no such amendment
or waiver shall directly:
(i) increase the amount of either of the Credit Facilities or the
amount of the Individual Commitment of any Lender;
(ii) extend the term of either of the Credit Facilities or amend
the provisions of this Agreement dealing with the types of
Accommodations available hereunder;
(iii) extend the time for the payment of the interest or the
repayment or mandatory prepayment of principal under the Credit
Facilities, forgive any portion of principal or reduce the stated
rate of interest payable in respect of the Credit Facilities, or
amend the requirement that the Agent apply all amounts received by
it in respect of the Credit Facilities in accordance with the Pro
Rata Shares of the Lenders or as otherwise provided hereunder;
<PAGE> 66
- 61 -
(iv) change the percentage of the Lenders' requirement to
constitute the Majority Lenders or otherwise amend the definition of
Majority Lenders;
(v) reduce the stated amount of any Fees to be paid pursuant to
this Agreement or any additional compensation to be paid pursuant to
SECTION 10.8;
(vi) permit any subordination of the Indebtedness hereunder; or
(vii) alter the provisions of SECTION 5.1 hereof or the terms of
this SECTION 12.15; or
(viii) any amendment, waiver, release or discharge which relates to the
Guarantees or the Security Documents (including the Liens,
obligations and remedies thereunder) or the requirement to insure
Collateral in accordance with SECTION 7.1(5).
(c) Without the prior written consent of the Agent, no amendment
to or waiver of any provision of this Agreement to the extent it
affects the rights or obligations of the Agent shall be effective.
12.16 DETERMINATION BY AGENT CONCLUSIVE AND BINDING. Any determination to be
made by the Agent on behalf of or with the approval of the Lenders or the
Majority Lenders under this Agreement shall be made by the Agent in good faith
and, if so made, shall be binding on all parties, absent manifest error.
12.17 REMITTANCE OF PAYMENTS. Forthwith after receipt by the Agent of
any payment of principal, interest, Fees or other amounts for the benefit of
the Lenders pursuant to this Agreement or forthwith after receipt of amounts
received pursuant to the Guarantees or the Security Documents, the Agent shall,
subject to SECTIONS 2.12 AND 3.1(2), remit to each Lender, in immediately
available funds, such Lender's Pro Rata Share of such payment provided that if
the Agent, on the assumption that it will receive, on any particular date, a
payment of principal (including a prepayment), interest, Fees or other amount
hereunder, remits to each Lender its Pro Rata Share of such payment and the
Borrower fails to make such payment, each of the Lenders agrees to repay to the
Agent, forthwith on demand, to the extent that such amount is not recovered
from the Borrower on demand such Lender's Pro Rata Share of the payment made to
it pursuant to this SECTION 12.17, together with interest thereon at the rate
per annum determined by the Agent in accordance with its usual practice for
making loans to financial institutions of similar standing as such Lender for
each day from and including the date such amount is remitted to the Lenders
until the date such amount is paid or repaid to the Agent, the exact amount of
the repayment required to be made by the Lenders to this SECTION 12.17 to be as
set forth in a certificate delivered by the Agent to each Lender, which
certificate shall constitute prima facie evidence of such amount of repayment.
12.18 REDISTRIBUTION OF SET-OFF PAYMENT. If any Lender shall exercise any right
of counterclaim, set-off or banker's lien or similar right with respect to the
Property of the Borrower or any of the Guarantors or if under any applicable
Insolvency Law it receives a secured claim the security for which is a debt
owed by it to the Borrower or any of the Guarantors, it shall apportion the
amount thereof proportionately between:
<PAGE> 67
- 62 -
(a) amounts outstanding at such time owed by the Borrower or any
of the Guarantors to such Lender under or in respect of each of the
Credit Facilities, which amounts shall be applied in accordance with
this Agreement; and
(b) amounts otherwise owed to it by the Borrower or any of the
Guarantors.
If a Lender shall, through the exercise of a right, or the receipt of a secured
claim described above or otherwise receive payment (other than after the
occurrence of an Event of Default from any of the Guarantors pursuant to any of
the Guarantees or as proceeds of the Collateral in connection with any
realization or enforcement proceedings under the Security Documents) of a
portion of the aggregate amount of principal and interest due to it hereunder
(after excluding any amount apportioned to such Lender under Clause (b) of this
SECTION 12.18) which is greater than the proportion received by any other
Lender in respect of the aggregate amount of principal and interest due in
respect of either of the Credit Facilities (having regard to the respective
Individual Commitments of the Lenders thereunder), the Lender receiving such
proportionately greater payment shall purchase a participation (which shall be
deemed to have been done simultaneously with receipt of such payment) in that
portion of the aggregate Outstandings of the other Lender or Lenders under such
Credit Facility (for the full amount thereof) so that the respective receipts
shall be pro rata to their respective participation in the Outstandings under
such Credit Facility; PROVIDED, HOWEVER, that if all or part of such
proportionately greater payment received by such purchasing Lender shall be
recovered from the Borrower or any of the Guarantors, such purchase shall be
rescinded and the purchase price paid for such participation shall be returned
by such selling Lender or Lenders to the extent of such recovery, but without
interest. Each Lender shall exercise its rights in respect of any such secured
claim in a manner consistent with the rights of the Lenders entitled under this
SECTION 12.18 to share in the benefits of any recovery on such secured claims.
If any Lender does any act or thing permitted by this SECTION 12.18, it shall
promptly provide copies of particulars thereof to the other Lenders and to the
Borrower.
12.19 REDISTRIBUTION OF PAYMENT UNDER SECURITY. If a Lender, after the
occurrence of an Event of Default, receives any amount from any of the
Guarantors pursuant to any of the Guarantees or as proceeds of the Collateral
in connection with any realization or enforcement proceedings under the
Security Documents (including under any Lien under Section 427 of the Bank Act
(Canada)) in an aggregate amount of principal and interest due to it hereunder
which, after excluding any amount apportioned to such Lender under SECTION
12.18(B), is greater than the proportion received by any other Lender or
Lenders in respect of the aggregate amount of principal and interest due in
respect of the Credit Facilities (having regard to the respective Individual
Commitments of the Lenders thereunder), the Lender receiving such
proportionately greater amount shall purchase a participation (which shall be
deemed to have been done simultaneously with receipt of such payment) in that
portion of the aggregate Outstandings in respect of the Credit Facilities of
the other Lender or Lenders (for the full amount thereof) so that the
respective receipts shall be pro rata to their respective participations in the
Outstandings in respect of the Credit Facilities; PROVIDED, HOWEVER, that if
all or part of such proportionately greater amount received by such purchasing
Lender shall be recovered from the Borrower or any of the Guarantors, such
purchase shall be rescinded and the purchase price paid for such participation
shall be returned by such selling Lender or Lenders to the extent of such
recovery, but without interest. Each Lender shall exercise its rights in
respect of any such Guarantee or Security Document in a manner consistent with
the rights of the Lenders entitled under this SECTION 12.19 to share in the
<PAGE> 68
- 63 -
benefits of any recovery thereon. If any Lender does any act or thing permitted
by this SECTION 12.19, it shall promptly provide copies of particulars thereof
to the other Lenders.
12.20 DISTRIBUTION OF NOTICES. Promptly upon receipt by the Agent of any notice
or other document which is delivered to the Agent hereunder on behalf of the
Lenders, the Agent shall provide a copy of such notice or other document to
each of the Lenders, provided that the Agent shall deliver to each Lender a
copy of each Borrowing Notice and each Drawing Notice within one Business Day
of receipt thereof from the Borrower.
12.21 DEALINGS BETWEEN BORROWER AND AGENT.
(a) Except as otherwise provided in the Credit Documents, the
Borrower shall deal only with the Agent in respect of all matters
arising under this Agreement, and in no event shall be concerned to
inquire whether any notice provided by the Agent to the Borrower or
action taken or purported or intended to be taken by the Agent has
been duly authorized by all or any of the Lenders, or is otherwise
within the authority of the Agent, or otherwise as to the propriety
or regularity of any action taken or purported or intended to be
taken by the Agent hereunder, or to see to the application of any
monies paid to or realized by the Agent, and the Borrower shall be
entitled to rely upon the notice provided to the Borrower by the
Agent or action taken by the Agent acting within the scope of its
authority.
(B) Except as otherwise provided in the Credit Documents, any and
all notices or other communications required or permitted to be
given to the Borrower by any Lender pursuant to this Agreement shall
be given by the Agent and for greater certainty shall be expressly
subject to SECTION 12.21(A).
12.22 APPOINTMENT OF NBD BANK. Each Lender hereby irrevocably confirms, and
hereby agrees that it will require any Eligible Assignee of any of its interest
in the Credit Documents to irrevocably confirm, the appointment of NBD Bank as
its administrative, collateral and documentation agent in respect of the
Security Documents mentioned in Paragraphs 5 and 6 only of SCHEDULE 4 hereto,
the whole pursuant to and in accordance with the provisions of Article X of the
Amended and Restated Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SPORTRACK INTERNATIONAL INC.
Per:
-------------------------------------
Per:
-------------------------------------
<PAGE> 69
- 64 -
FIRST CHICAGO NBD BANK, CANADA, AS AGENT
Per:
-------------------------------------
Per:
-------------------------------------
FIRST CHICAGO NBD BANK, CANADA
Per:
-------------------------------------
Per:
-------------------------------------
THE CHASE MANHATTAN BANK OF CANADA
Per:
-------------------------------------
Per:
-------------------------------------
THE BANK OF NOVA SCOTIA
Per:
-------------------------------------
Per:
-------------------------------------
<PAGE> 70
SCHEDULE 1
INDIVIDUAL COMMITMENTS
<TABLE>
<CAPTION>
LENDER INDIVIDUAL COMMITMENT (CAN. $)
------ ------------------------------
TOTAL
REVOLVING INDIVIDUAL
FACILITY TERM FACILITY COMMITMENT
---------- ------------- ----------
<S> <C> <C> <C>
First Chicago NBD Bank, Canada $1,400,000 $7,000,000 $8,400,000
The Chase Manhattan Bank of Canada $1,400,000 $7,000,000 $8,400,000
The Bank of Nova Scotia $1,200,000 $6,000,000 $7,200,000
</TABLE>
<PAGE> 71
SCHEDULE 2
ADDRESSES FOR NOTICES
AGENT
To: First Chicago NBD Bank, Canada
161 Bay Street
Suite 4240
Toronto, Ontario
M5J 2S1
Attention: Lehong Zhang
Fax No.: (416) 363-7574
LENDERS
To: First Chicago NBD Bank, Canada
161 Bay Street
Suite 4240
Toronto, Ontario
M5J 2S1
Attention: Michael Tam
Fax No.: (416) 363-7574
The Chase Manhattan Bank of Canada
First Canadian Place
100 King Street West
Suite 6900
Toronto, Ontario
M5X 1A4
Attention: Arun Barry
Fax No.: (416) 216-4161
The Bank of Nova Scotia
1002 Sherbrooke Street West
Montreal, Quebec
H3A 3M3
Attention: Stephane Dupont
Fax No.: (514) 499-5504
<PAGE> 72
- 2 -
BORROWER
To: SportRack International Inc.
700 Bernard Street
Granby, Quebec
J2Q 9H7
Attention: President
Fax No.: (514) 777-3615
with copies to:
Advanced Accessory Systems, LLC
Sterling Town Center
12900 Hall Road
Suite 2000
Sterling Heights, Michigan
U.S.A. 48313
Attention: Chief Executive Officer
Fax No.: (810) 997-2900
SportRack, LLC
Sterling Town Center
12900 Hall Road
Suite 2000
Sterling Heights, Michigan
U.S.A. 48313
Attention: Chief Executive Officer
Fax No.: (810) 997-2900
<PAGE> 73
SCHEDULE 2.5
TERM LOAN REPAYMENT SCHEDULE
<TABLE>
<CAPTION>
YEAR DATE TERM LOAN
- ---- ---- ---------
<S> <C> <C>
1998 March 31 $534,726
June 30 $534,726
September 30 $534,726
December 31 $657,714
1999 March 31 $657,714
June 30 $657,714
September 30 $657,714
December 31 $862,692
2000 March 31 $862,692
June 30 $862,692
September 30 $862,692
December 31 $1,026,675
2001 March 31 $1,026,675
June 30 $1,026,675
September 30 $1,026,675
December 31 $1,026,675
2002 March 31 $1,026,675
June 30 $1,026,675
September 30 $1,026,675
December 31 $1,026,675
2003 March 31 $1,026,675
June 30 $1,026,675
October 30 $1,020,773
Total $20,000,000
</TABLE>
<PAGE> 74
SCHEDULE 3
VARIABLE PERCENTAGES
The Variable Percentages shall be as follows:
<TABLE>
<CAPTION>
REVOLVING FACILITY AND TERM FACILITY
- --------------------------------------------------------------------------------
Floating Rate LIBOR Advances, Bankers'
Advances and U.S. Acceptances or BA
Senior Debt Ratio Base Rate Advances Equivalent Notes
- --------------------------------------------------------------------------------
<S> <C> <C>
Greater or equal to 4.0 to 1.0 1.75% 2.75%
- --------------------------------------------------------------------------------
Less than 4.0 to 1.0 and
greater than or equal to 3.5 to
1.0 1.50% 2.50%
- --------------------------------------------------------------------------------
Less than 3.5 to 1.0 and
greater than or equal to 3.0 to
1.0 1.25% 2.25%
- --------------------------------------------------------------------------------
Less than 3.0 to 1.0 and
greater than or equal to 2.5 to
1.0 1.00% 2.00%
- --------------------------------------------------------------------------------
Less than 2.5 to 1.0 and
greater than or equal to 2.0 to
1.0 0.75% 1.75%
- --------------------------------------------------------------------------------
Less than 2.0 to 1.0 0.50% 1.50%
================================================================================
</TABLE>
<PAGE> 75
SCHEDULE 4
SECURITY DOCUMENTS
1. Liens under Section 427 of the Bank Act (Canada) in favour of each of the
Lenders, over all Inventory and other Collateral to which such Section is
applicable, of the Borrower.
2. Movable hypothec providing for Liens in favour of the Agent and each of the
Lenders on all the Collateral of the Borrower.
3. Pledge agreement made by SportRack in favour of the Agent over 100 Class A
common shares in the capital stock of the Borrower.
4. General Security Agreement providing for Liens in favour of the Agent over
the Accounts, the Inventory and all other Collateral of the Borrower.
5. Security agreement made by SportRack in favour of NBD Bank, as agent for the
Lenders, over all of the personal property of SportRack.
6. Security agreement made by Holdings in favour of NBD Bank, as agent for the
Lenders, over all of the personal property of Holdings.
<PAGE> 76
SCHEDULE 5
FORM OF BORROWING NOTICE
[Date]
First Chicago NBD Bank, Canada, as Agent
161 Bay Street
Suite 4240
Toronto, Ontario
M5J 2S1
Attention:
Dear Sirs:
The undersigned, SportRack International Inc. (the "BORROWER"), refers to
the First Amended and Restated Credit Agreement dated as of the 19th day of
March, 1998 (the "CREDIT AGREEMENT", the terms defined therein being used
herein as therein defined) among the Borrower, First Chicago NBD Bank, Canada,
as agent, and the lenders which are parties thereto, and hereby gives you
notice pursuant to Section 3.2 of the Credit Agreement that the Borrower hereby
requests a Borrowing under the Credit Agreement, and in that connection sets
forth below the information relating to such Borrowing (the "PROPOSED
BORROWING") as required by Section 3.2 of the Credit Agreement:
(i) The Business Day of the Proposed Borrowing is .
(ii) The aggregate amount of the Proposed Borrowing is [insert
currency, amount].
(iii) The type of Advance is a Floating Rate Advance or LIBOR
Advance or U.S. Base Rate Advance under the [Revolving] or [Term]
Facility.
(iv) The initial Interest Period for the LIBOR Advance is .*
The undersigned certifies that the conditions precedent under the Credit
Agreement to the giving of this Notice and the making of the Accommodation
contemplated hereby have been fully satisfied.
- -----------
* Omit Clause (iv) if the Advance is not a LIBOR Advance.
Yours truly,
SPORTRACK INTERNATIONAL INC.
By:
--------------------------------
Title:
<PAGE> 77
SCHEDULE 6
FORM OF ELECTION NOTICE
[Date]
First Chicago NBD Bank, Canada, as Agent
161 Bay Street
Suite 4240
Toronto, Ontario
M5J 2S1
Attention:
Dear Sirs:
The undersigned, SportRack International Inc. (the "BORROWER"), refers to
the First Amended and Restated Credit Agreement dated as of the 19th day of
March, 1998 (the "CREDIT AGREEMENT", the terms defined therein being used
herein as therein defined) among the Borrower, First Chicago NBD Bank, Canada,
as agent, and the lenders which are parties thereto, and hereby gives you
notice pursuant to Section 3.4 of the Credit Agreement that the Borrower hereby
[elects to convert Advances from one Type to another] or [elects an additional
Interest Period for certain LIBOR Advances], and in that connection sets forth
below the information relating to such election as required by Section 3.4 of
the Credit Agreement:
(i) The Business Day on which the conversion from one Type of
Advance to another is to be made is [ ].*
(ii) The type of Advance to be converted is [insert amount,
currency and Type of Advance] under the [Revolving] or [Term]
Facility.*
(iii) The new Type of Advance selected is [ ].*
(iv) The initial Interest Period for the LIBOR Advance is [ ].**
(v) The LIBOR Advance which is to be continued as a LIBOR Advance
is [specify amount].***
(vi) The current Interest Period for such LIBOR Advance expires on
[specify date].***
(vii) The additional Interest Period selected for such LIBOR
Advance is [ ].***
The undersigned certifies that the conditions precedent under the Credit
Agreement to the giving of this Notice and the making of the Accommodation
contemplated hereby have been fully satisfied.
- -----------
* and ** Omit Clauses (i), (ii), (iii) and (iv) if the election does not
involve a conversion of a Type of Advance.
** Omit Clause (iv) if the conversion of Type of Advance does not involve a
conversion to a LIBOR Advance.
*** Omit Clauses (v), (vi) and (vii) if the election does not involve the
selection of an additional Interest Period for a LIBOR Advance.
<PAGE> 78
- 2 -
Yours truly,
SPORTRACK INTERNATIONAL INC.
By:
-----------------------------
Title:
<PAGE> 79
SCHEDULE 7
FORM OF DRAWING NOTICE
[Date]
First Chicago NBD Bank, Canada, as Agent
161 Bay Street
Suite 4240
Toronto, Ontario
M5J 2S1
Attention:
Dear Sirs:
The undersigned, SportRack International Inc. (the "BORROWER"), refers to
the First Amended and Restated Credit Agreement dated as of the 19th day of
March, 1998 (the "CREDIT AGREEMENT", the terms defined therein being used
herein as therein defined) among the Borrower, First Chicago NBD Bank, Canada,
as agent, and the lenders which are parties thereto, and hereby gives you
notice pursuant to Section 4.2 of the Credit Agreement that the Borrower hereby
requests a Drawing under the Credit Agreement, and in that connection sets
forth below the information relating to such election as required by Section
4.2 of the Credit Agreement:
(i) The Business Day of the Proposed Drawing is [ ].
(ii) The aggregate Face Amount of Drafts to be accepted and BA
Equivalent Notes to be purchased is [insert amount in Canadian
dollars] under the [Revolving] or [Term] Facility.
(iii) The contract maturity date for such Drafts and BA Equivalent
Notes is [ ] (days).
The undersigned certifies that the conditions precedent under the Credit
Agreement to the giving of this Notice and the making of the Accommodation
contemplated hereby have been fully satisfied.
Yours truly,
SPORTRACK INTERNATIONAL INC.
By:
-------------------------------
Title:
<PAGE> 80
SCHEDULE 8
ASSUMPTION AGREEMENT
THIS AGREEMENT made the [] of [, 199.]
TO: []
(the "BORROWER")
AND TO: []
(collectively, the "LENDERS")
AND TO: First Chicago NBD Bank, Canada, as agent for the Lenders
(the "AGENT")
WHEREAS the Borrower, First Chicago NBD Bank, Canada, and the other
Lenders who are parties thereto (collectively, the "LENDERS") and First Chicago
NBD Bank, Canada, as agent for the Lenders, entered into a first amended and
restated credit agreement dated as of the 19th day of March, 1998 (the "CREDIT
AGREEMENT");
AND WHEREAS the Credit Agreement contemplates that any Lender may, subject
to the provisions of the Credit Agreement, assign all or any part of its
respective interest in the Credit Facilities to an Assignee;
AND WHEREAS SECTION 11.8 of the Credit Agreement provides that the
assigning Lender must, upon the assignment of all or any part of an interest in
the Credit Facilities, deliver an executed assumption agreement to the Borrower
and the Agent (with sufficient copies for distribution to the Lenders) pursuant
to which the Assignee shall assume the obligations and agree to be bound by all
the terms and conditions of the Credit Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
covenants herein contained and the mutual covenants contained in the Credit
Agreement, the undersigned hereby agrees as follows:
1. DEFINITIONS. In this Agreement, unless otherwise provided, all capitalised
terms shall have the meanings respectively ascribed thereto in the Credit
Agreement.
2. ASSUMPTION OF OBLIGATIONS. The undersigned hereby undertakes and agrees to
assume, perform and discharge, from and after the date hereof, all duties,
obligations, covenants and agreements of a Lender in accordance with the terms
contained in the Credit Agreement and to be bound by the terms of the Credit
Agreement in all respects as if the undersigned were a signatory thereto to the
extent of the amount of the Individual Commitment assigned by [] to the
undersigned, being [].
<PAGE> 81
- 2 -
3. NOTICES. The address and facsimile number for Notices to the undersigned
pursuant to the Credit Agreement shall be as set out below.
4. SUCCESSORS AND ASSIGNS. The terms of this Agreement shall be binding upon
the undersigned and its successors and assigns and shall enure to the benefit
of the Borrower, the Agent, the Lenders, the undersigned and their respective
successors and permitted assigns.
IN WITNESS WHEREOF this Agreement has been duly executed.
[ ]
By:
------------------------------
Authorised Signing Officer
Notices to:
Attention:
---------------------------------
Fax No.: ( )
<PAGE> 82
SCHEDULE 9
LANDLORD'S LETTER
NAME OF OWNER OF REAL PROPERTY
--------------------------------------------------
(the "LANDLORD")
ADDRESS OF REAL PROPERTY
--------------------------------------------------------
- --------------------------------------------------------------------------------
(the "PREMISES")
TO: First Chicago NBD Bank, Canada
acting as Agent for certain lenders,
including First Chicago NBD Bank, Canada as a lender
The Landlord is the owner of the Premises and has entered into a lease
transaction (the "LEASE") with [ ] (the "COMPANY") pursuant to which the
Company has acquired a leasehold interest in all or a portion of the Premises.
First Chicago NBD Bank, Canada, is acting as Agent (in such capacity, the
"AGENT") for certain lenders (the "LENDERS"), including First Chicago NBD Bank,
Canada, as a Lender, who will be providing a term acquisition facility and a
revolving facility (collectively, the "CREDIT FACILITIES") to the Company. As
security for the Credit Facilities, the Company has granted to the Agent, for
the benefit of itself and the Lenders, a security interest in, among other
things, all inventory and accounts, and general intangibles and books and
records of the Company related thereto including, without limitation, all such
inventory, accounts, general intangibles and books and records of the Company
related thereto which are now, or in the future may become, located at,
installed in, associated with or affixed to, the Premises (the "COLLATERAL").
As an inducement for the Agent and the Lenders to enter into such
financing transactions, in consideration of the Landlord, on the one hand, and
the Company, on the other hand, entering into the leases, agreements and
arrangements in connection with the Premises and for other good and valuable
consideration, the receipt and sufficiency of which each of the Landlord and
the Company hereby acknowledges, EACH OF THE LANDLORD AND THE COMPANY HEREBY
AGREES AS FOLLOWS:
1. The Collateral may be stored, placed, kept, utilized and/or located at or
associated with the Premises and shall not be deemed a fixture or part of any
immovable property but shall at all times be considered movable property,
whether or not any of the Collateral becomes so related to any immovable
property that an interest therein arises under law.
2. Until such time as the Credit Facilities have terminated and all of the
indebtedness, liabilities and obligations of the Company to the Agent and
Lenders are indefeasibly paid, performed and satisfied in full, the Landlord
disclaims any interest in the Collateral, confirms
<PAGE> 83
- 2 -
that it has no lien, hypothec, prior claim or security interest therein,
and agrees not to levy or distrain upon any of the Collateral or to assert any
claim against the Collateral.
3. The Agent, including its officers, employees and representatives, and any
agent, receiver, manager, receiver and manager, monitor, trustee, liquidator or
similar official acting on behalf of the Agent or the Lenders (each a
"Receiver"), shall have access to and may enter upon the Premises at any time
and from time to time during normal business hours to inspect, take possession
of, preserve, protect, repair, process, use, maintain, sell, lease, dispose of,
liquidate or remove the Collateral.
4. The Lease is in full force and effect and, to the best of the Landlord's
knowledge, the Company is not in default under the Lease. The Landlord agrees
to provide the Agent, for the benefit of itself and the Lenders and any
Receiver, with written notice of any default or claimed default by the Company
under the Lease upon or as soon as practicable after becoming aware thereof
and, prior to termination of the Lease, to permit the Agent, on behalf of
itself and the Lenders, and any Receiver, the same opportunity, without
obligation, to cure or cause to be cured such default as is granted the Company
under the Lease.
5. The Landlord will permit the Agent and any Receiver to remain on the
Premises for a period of up to one-hundred and fifty (150) days following
receipt by the Agent of written notice from the Landlord that the Landlord has
terminated the Lease, subject, however, to the payment to the Landlord by the
Agent, on behalf of the Lenders, or by the Receiver, as the case may be, of the
rent and other monetary amounts due under the Lease for the actual period of
occupancy by the Agent or the Receiver, as the case may be, prorated on a per
diem basis determined on the basis of a thirty (30) day month. The Agent's and
Receiver's right to occupy the Premises under the preceding sentence shall be
extended for any time period during which the Agent or Receiver is prohibited
from selling the Collateral or any part thereof due to the imposition of the
automatic stay by the filing of bankruptcy proceedings by or against the
Company or by the Company proposing an arrangement under the Companies'
Creditors Arrangement Act (Canada) or any similar legislation.
6. Notwithstanding any other provision of this agreement, none of the Agent,
Receiver or any Lender shall be under any obligation to make any payment or
cure any default by the Company under the Lease.
7. This agreement shall enure to the benefit of the Agent, the Lenders and any
Receiver, and each of their respective successors and assigns, and shall be
binding upon the Company and the Landlord, and each of their respective
successors and assigns.
8. Neither the Company nor the Landlord shall amend, modify, add to or
terminate this agreement without the prior written consent of the Agent.
9. All notices to the Agent hereunder shall be in writing and shall be
personally delivered to an officer or other responsible employee of the Agent
or sent by facsimile, charges prepaid, at or to the address or facsimile
number, as the case may be, set out below, or at or to such other address or
addresses or facsimile number or numbers as the Agent may from time to time
designate to the Landlord and the Company. Any communication which is
personally delivered as aforesaid shall be deemed to have been validly and
effectively given on the date of such delivery, if such date is a business day
in Montreal, Quebec (a "Business Day") and such delivery was made during normal
business hours of the Agent; otherwise, it shall be
<PAGE> 84
- 3 -
deemed to have been validly and effectively given on the Business Day
next following such date of delivery. Any communication which is transmitted by
facsimile as aforesaid shall be deemed to have been validly and effectively
given on the date of transmission if such date is a Business Day and such
transmission was made during normal business hours of the Agent; otherwise, it
shall be deemed to have been validly and effectively given on the Business Day
next following such date of transmission.
10. The parties hereto have requested that this agreement and all documents
relating thereto be drafted in the English Language. Les parties soussignees
ont exige que cette convention et tous documents y relatifs soient rediges en
langue anglaise.
First Chicago NBD Bank, Canada
Attention:
-------------------------------------
Telecopier No.: ( )
DATED this day of , 199 .
---------- ---------------
LANDLORD
By:
----------------------
Title:
By:
----------------------
Title:
<PAGE> 85
SCHEDULE 10
DEPOSITARY'S LETTER
[DEPOSITARY]
[ADDRESS]
Gentlemen:
The undersigned, [ ] (the "COMPANY"), has from time to time in the past
delivered and/or may from time to time in the future deliver certain inventory
or other goods owned by it (the "GOODS") to you for storage, deposit,
processing or use at your facilities located at the address shown above.
First Chicago NBD Bank, Canada, is acting as Agent (in such capacity, the
"AGENT") for certain lenders (the "LENDERS"), including First Chicago NBD Bank,
Canada, as a Lender, who will be providing a term acquisition facility and
revolving facility (collectively, the "CREDIT FACILITIES") to the Company. The
Credit Facilities will be secured by a hypothec and a security interest in,
among other things, all accounts and inventory of the Company, including,
without limitation, the Goods.
The Company has agreed that the Agent's hypothec and security interest in
the Goods, for the benefit of itself and the Lenders and the Lenders' hypothec
in the Goods shall rank prior to all other liens, prior claims, claims,
hypothecs and interests including, without limitation, any hypothecs under the
Civil Code of Quebec or other similar legislation. Until such time as the
Credit Facilities have terminated and all of the indebtedness, liabilities and
obligations of the Company to the Lenders have been indefeasibly paid,
performed and satisfied in full, you disclaim any interest in the Goods,
confirm that you have no lien, prior claim, claim, hypothec or security
interest in any of the Goods and agree not to levy or distrain on any of the
Goods or to assert any claim against any of the Goods, regardless of whether
any such Goods are installed in, affixed to or commingled with any other goods,
materials or substances, or manufactured, processed, assembled or otherwise
dealt with so as to result in any change to such Goods whatsoever.
To protect the Agent's hypothec and security interest in the Goods, for
the benefit of itself and the Lenders, and the Lenders' hypothec in the Goods,
if you issue storage receipts or other documents or title which evidence any
Goods now or hereafter delivered by the Company to you, you will make those
documents non-negotiable and clearly note on them that they are non-negotiable.
If at any time the Agent requests copies of any such documents, you agree to
provide them to it.
Until further notice, you may release any of the Goods to any authorised
agent of the Company upon the Company's request. However, upon written
direction from the Agent, you
<PAGE> 86
- 2 -
agree not to deliver the Goods to the Company or its designated agent
and, instead, you agree to hold the Goods subject to the Agent's further
direction and to deliver the Goods as may be directed by the Agent. The Agent,
including its officers, employees and representatives, and any agent, receiver,
manager, receiver and manager, monitor, trustee, liquidator or similar official
acting on behalf of the Agent or the Lenders (each, a "RECEIVER") shall have
access to the Goods at any time and from time to time during normal business
hours to inspect, take possession of, preserve, protect, repair, process, use,
maintain, sell, lease, dispose of, liquidate or remove the Goods.
The Company agrees that it will continue to pay all storage, processing or
manufacturing expenses related to the storage and/or processing of the Goods
upon its agreed terms with you. The Company further agrees that you shall have
no liability to the Company if you comply with any written direction from
Agent. Any failure of the Company to pay any of the foregoing expenses shall
not affect any of your obligations to the Agent hereunder.
All notices to the Agent hereunder shall be in writing and shall be
personally delivered to an officer or other responsible employee of the Agent
or sent by facsimile, charges prepaid, at or to the address or facsimile
number, as the case may be, set out below, or at or to such other address or
addresses or facsimile number or numbers as the Agent may from time to time
designate. Any communication which is personally delivered as aforesaid shall
be deemed to have been validly and effectively given on the date of such
delivery, if such date is a business day in MONTReAL, QUeBEC ("BUSINESS DAY")
and such delivery was made during normal business hours of the Agent;
otherwise, it shall be deemed to have been validly and effectively given on the
Business Day next following such date of delivery. Any communication which is
transmitted by facsimile as aforesaid shall be deemed to have been validly and
effectively given on the date of transmission if such date is a Business Day
and such transmission was made during normal business hours of the Agent;
otherwise, it shall be deemed to have been validly and effectively given on the
Business Day next following such date of transmission.
First Chicago NBD Bank, Canada
Attention:
-------------------------------------
Telecopier No.: ( )
Neither we nor you shall amend, modify, add to or terminate this agreement
without the prior written consent of the Agent.
Please confirm receipt of this letter and your agreement to the
instructions and other terms contained herein by signing the enclosed copy of
this letter as indicated and returning it
<PAGE> 87
- 3 -
to us as soon as possible. Your agreement hereto shall enure to the
benefit of the Agent, the Lenders and any Receiver, and each of their respective
successors and assigns, and shall be binding upon you and your successors and
assigns.
The parties hereto have requested that this agreement and all documents
relating thereto be drafted in the English language. Les parties soussignees
ont exige que cette convention et tous documents y relatifs soient rediges en
langue anglaise.
Yours very truly,
By:
--------------------------
Title:
ACKNOWLEDGED AND AGREED TO this day of , 199 .
----- ----------
[DEPOSITARY]
By:
------------------------------
Title:
<PAGE> 88
EXHIBIT 6.1(4)(A)
to the First Amended and Restated Credit Agreement
dated as of March 19, 1998
among SportRack International Inc., as borrower,
First Chicago NBD Bank, Canada, as agent, and
First Chicago NBD Bank, Canada,
The Chase Manhattan Bank of Canada
and The Bank of Nova Scotia, as lenders
LOCATIONS WHICH ARE NOT REAL ESTATE OF THE BORROWER
Location Address: 700 Bernard Street
Granby, Quebec
J2G 9H7
Name of Landlord: Societe Immobiliere Enertech Inc.
Name of Sub-Lessee: Bell Sports Canada Inc.
Landlord's Address: 448 Edward Street
Granby, Quebec
J2G 2Z8
<PAGE> 89
EXHIBIT 6.1(4)(B)
to the First Amended and Restated Credit Agreement
dated as of March 19, 1998
between SportRack International Inc., as borrower,
First Chicago NBD Bank, Canada, as agent, and
First Chicago NBD Bank, Canada,
The Chase Manhattan Bank of Canada
and The Bank of Nova Scotia, as lenders
LOCATIONS WHICH ARE REAL ESTATE OF THE BORROWER
NONE
<PAGE> 90
EXHIBIT 6.1(7)
to the First Amended and Restated Credit Agreement
dated as of March 19, 1998
between SportRack International Inc., as borrower,
First Chicago NBD Bank, Canada, as agent, and
First Chicago NBD Bank, Canada,
The Chase Manhattan Bank of Canada
and The Bank of Nova Scotia, as lenders
BANK ACCOUNTS OF THE BORROWER
National Bank of Canada
193 rue Principale
Granby, Quebec
J2G 2V5
Transit #: 0205-1
CDN $ Accounts #: 1-822-28
1-918-20
U.S. $ Account #: 117-68
<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT
AGREEMENT dated as of September 28,
1995, between ADVANCED
ACCESSORY SYSTEMS, LLC, a
Delaware limited liability company (the
"Company"), and RICHARD BORGHI
(the "Executive").
Reference is made to the Asset Purchase Agreement dated as of September
28, 1995, as amended (the "Purchase Agreement"), among MascoTech, Inc., a
Delaware corporation ("MascoTech"), the Company, AAS Holdings, LLC (the
"Parent") and the other parties thereto. Pursuant to the Purchase Agreement,
the Company is acquiring substantially all of the assets of the Accessories
Group of MascoTech Automotive Systems Group, Inc. and MascoTech Industrial
Components, Inc.
The Company desires to enter into this Agreement in order to assure itself
of the continued service of the Executive following the Closing (the "Closing")
under the Purchaser Agreement, and the Executive desires to accept employment
with the Company, upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties agree as follows:
Section 1. Employment. The Company hereby employs the Executive, and the
Executive hereby accepts employment by the Company, upon the terms and
conditions hereinafter set forth.
Section 2. Term. The employment of the Executive hereunder shall be for a
period commencing on the date hereof (the "Commencement Date") and ending on
December 31, 2000 (the "Initial Term") or such earlier date upon which the
employment of the Executive shall terminate in accordance with the provisions
hereof. Unless terminated earlier in accordance with the provisions hereof, at
the end of the Initial Term and at the end of each term thereafter, the
employment of the Executive hereunder shall automatically renew for successive
two-year periods unless the Company shall give the Executive written notice of
its desire not to renew the term or the Initial Term no later than 30 days
prior to the termination of the then current term. The period commencing on
the Commencement Date and ending on the date of termination of the Executive's
employment hereunder shall be called the "Term of Employment" for the
Executive, and the date on which the Executive's employment hereunder shall
terminate shall be called the "Termination Date".
Section 3. Duties. During the Term of Employment, the Executive shall be
employed as the Executive Vice President - Operations/Engineering of the
Company and shall perform such duties as are consistent therewith as the Board
of Managers of the Company (the "Board") or its designee shall designate. The
Executive
<PAGE> 2
shall use his best efforts to perform well and faithfully the foregoing
duties and responsibilities. The Executive shall not be required by the
Company to relocate his principal business office or his principal residence
outside the Southeast Michigan area.
Section 4. Time to be Devoted to Employment. During the Term of
Employment, the Executive shall devote all of his business time, attention and
energies to the business of the Company and its subsidiaries and the Parent
(except for vacations to which he is entitled pursuant to Section 6(b)) and
periods of illness or incapacity). During the Term of Employment, the
Executive shall not engage in any business activity which, in the reasonable
judgment of the Board, conflicts with the duties of the Executive hereunder,
whether or not such activity is pursued for gain, profit or other pecuniary
advantage.
Section 5. Compensation.
(a) The Company (or at the Company's option, any subsidiary or affiliate
thereof) shall pay to the Executive an annual base salary (the "Base Salary")
during the Term of Employment of not less than $161,200, payable in such
installments (but not less often than monthly) as is generally the policy of
the Company with respect to its executive officers, which Base Salary shall be
subject to such increases as the Board, in its sole discretion, may from time
to time determine. The Executive's performance shall be reviewed at least
annually by the Board.
(b) During the Term of Employment, the Executive shall be eligible to
participate in incentive compensation or bonus plans that are generally made
available to the Company's senior executives which will generally provide the
Executive the opportunity to receive an annual cash bonus in the range of
30-50% of the Base Salary subject to the achievement by the Company of
performance goals established by the Board in its sole discretion.
(c) In addition to the compensation provided under Sections 5(a) and 5(b),
the Company shall pay the Executive a bonus of $100,000 on the earlier of (i)
September 30, 2002, (ii) the Termination Date and (iii) a Sale of the Company
(as defined in the Members' Agreement dated the date hereof, among the Parent
and certain owners of membership units of the Parent).
Section 6. Business Expenses; Benefits. The Company (or, at the Company's
option, any subsidiary or affiliate thereof) shall reimburse the Executive, in
accordance with the practice from time to time for executive officers of the
Company, for all reasonable and necessary expenses and other disbursements
incurred by the Executive for or on behalf of the Company in the performance of
the Executive's duties hereunder. The Executive shall provide such appropriate
documentation of expenses and disbursements as may from time to time be
required by the Company.
(a) During the Term of Employment, the Executive shall be entitled to four
weeks vacation per year.
2
<PAGE> 3
(b) During the Term of Employment, the Company shall continue to provide
the Executive with the group health, life and disability insurance benefits
that were provided by MascoTech to the Executive prior to the Closing.
(c) It is further acknowledged that the Company shall be obligated to pay
on behalf of the Executive during the Term of Employment the annual premiums
with respect to a term life insurance policy (the "Insurance Policy") on the
life of the Executive providing for a payment of 300% of the Executive's
current Base Salary to the beneficiaries of such policy and appropriate
disability insurance (the "Disability Policy") for the Executive providing for
a payment of 60-70% of the Executive's current Base Salary to the beneficiaries
of such policy; provided, however, that the Company shall not be required to
spend more than $6,000 in the aggregate for the annual premiums with respect to
the Insurance Policy and the Disability Policy.
Section 7. Involuntary Termination.
(a) If the Executive is incapacitated or disabled (such condition being
hereinafter referred to as a "Disability") in a manner that would qualify the
Executive for benefits under the Disability Policy, the Term of Employment and
the employment of the Executive under this Agreement shall cease (such
termination, as well as a termination under Section 7(b), being hereinafter
referred to as an "Involuntary Termination") and the Executive shall be
entitled to receive the benefits payable under the Disability Policy.
(b) If the Executive dies during the Term of Employment, the Term of
Employment and the Executive's employment hereunder shall cease as of the date
of the Executive's death and the beneficiaries designated by the Executive
under the Insurance Policy shall be entitled to receive the proceeds of the
Insurance Policy.
Section 8. Termination For Cause. The Company may terminate the Term of
Employment and the employment of the Executive hereunder at any time for Cause
(as hereinafter defined) (such termination being referred to herein as a
"Termination For Cause") by giving the Executive written notice of such
termination, effective immediately upon the giving of such notice to the
Executive. As used in this Agreement, "Cause" means the Executive's (a)
commission of an act (i) constituting a felony or (ii) involving fraud, theft
or dishonesty which is not a felony and which materially adversely
affects the Company or could reasonably be expected to materially adversely
affect the Company, (b) repeated failure to be reasonably available to perform
his duties, which, if curable, shall not have been cured within 10 business
days of written notice thereof from the Company, (c) repeated failure to follow
the lawful directions of the Board, which, if curable, shall not have been
cured within 10 business days of written notice thereof from the Company, (d)
material breach of any agreement with the Company (including the noncompete
provisions) which, if curable, shall not have been cured within 10 business
days of written notice thereof from the Company or (e) resignation.
Section 9. Termination Without Cause. The Company may terminate the Term
of Employment and the employment of the Executive hereunder without Cause
3
<PAGE> 4
(such termination being hereinafter referred to as a "Termination
Without Cause") by giving the Executive written notice of such termination,
which notice shall be effective on the date specified therein but not earlier
than the date on which such notice is given.
Section 10. Effect of Termination.
(a) Upon the termination of the Term of Employment and the Executive's
employment hereunder due to an Involuntary Termination or Termination for
Cause, neither the Executive nor his beneficiary or estate shall have any
further rights or claims against the Company under this Agreement, except to
receive (i) the unpaid portion, if any, of the Base Salary provided for in
Section 5(a), computed on a pro rata basis to the Termination Date (based on
the actual number of days elapsed over the actual number of days of the year in
which such termination occurs), (ii) any unpaid accrued benefits of the
Executive, and (iii) reimbursement for any expenses for which the Executive
shall not have been reimbursed as provided in Section 6(a).
(b) Upon the termination of the Executive's employment hereunder due to an
Termination Without Cause, neither the Executive nor his beneficiary or estate
shall have any further rights or claims against the Company under this
Agreement except the right to receive (i) the amounts set forth in Section
10(a), (ii) the prorated portion of any bonus earned by the Executive in such
year under any Company incentive compensation plan in which the Executive
participates, (iii) the Base Salary through the date which is 12 months from
the Termination Date, payable in such installments over the applicable period
as the base salary is generally paid to the Executive and (iv) the costs to the
Executive under COBRA to receive insurance coverage from the Company during the
period commencing on the Termination Date through the date which is the earlier
to occur of (1) the first anniversary of the Termination Date and (2) the day
prior to the date on which the Executive shall be included in any insurance
program provided by any other employer. The Executive shall have no duty to
mitigate the Company's obligations under this Section 10(b).
Section 11. Insurance. The Company may, for its own benefit, in its sole
discretion, maintain "key-man" life and disability insurance policies
covering the Executive. The Executive will cooperate with the Company and
provide such information or other assistance as the Company may reasonably
request in connection with the Company's obtaining and maintaining such
policies.
Section 12. Disclosure of Information. The Executive shall not, at any
time during the Term of Employment or thereafter, disclose to any
person, firm, corporation or other business entity, except as required by law,
any non-public information (including, without limitation, non-public
information obtained prior to the date hereof) concerning the business, clients
or affairs of the Company or any subsidiary or affiliate thereof for any
reason or purpose whatsoever, nor shall the Executive make use of any of such
non-public information for his own purpose or for the benefit of any person,
firm, corporation or other business entity except the Company or any subsidiary
or affiliate thereof. Upon the termination of the Term of Employment, the
executive shall return to the Company all property of the Company or any
subsidiary or affiliate thereof
4
<PAGE> 5
then in the possession of the Executive and all books, records,
computer tapes or discs and all other material containing non-public
information concerning the business, clients or affairs of the Company or any
subsidiary or affiliate thereof.
Section 13. Right to Inventions. The Executive shall promptly disclose,
grant and assign to the Company for its sole use and benefit any and all marks,
designs, logos, inventions, improvements, technical information and suggestions
relating in any way to the business conducted by the Company, which he may
develop or which may be acquired by the Executive during the Term of Employment
(whether or not during usual working hours), together with all trademarks,
patent applications, letters patent, copyrights and reissues thereof that may
at any time be granted for or upon any such mark, design, logo, invention,
improvement or technical information. In connection therewith:
(i) the Executive shall without charge, but at the expense of the
Company, promptly at all times hereafter execute and deliver such
applications, assignments, descriptions and other instruments as may be
necessary or proper in the opinion of the Company to vest title to any
such marks, designs, logos, inventions, improvements, technical
information, trademarks, patent applications, patents, copyrights or
reissues thereof in the Company and to enable it to obtain and maintain
the entire right and title thereto throughout the world;
(ii) the Executive shall render to the Company at its expense
(including a reasonable payment for the time involved in case he is not
then in its employ based on his last per diem earnings) all such
assistance as it may require in the prosecution of applications for said
trademarks, patents, copyrights or reissues thereof, in the prosecution
or defense of interferences which may be declared involving any said
trademarks, applications, patents or copyrights and in any litigation in
which the Company may be involved relating to any such trademarks,
patents, inventions, improvements or technical information; and
(iii) for the avoidance of doubt, the foregoing provisions shall be
deemed to include an assignment of future copyright in accordance with
Section 37 of the Copyright Act of 1986 and any amendment or re-enactment
thereof.
Section 14. Restrictive Covenant.
(a) The Executive acknowledges and recognizes that the Business (as
defined in the Purchase Agreement) has been conducted, and substantial sales of
its products have been made, throughout the United States and Europe, and the
Executive further acknowledges and recognizes the highly competitive nature of
the industry in which the Business is involved. Accordingly, in consideration
of the premises contained herein, the consideration to be received hereunder,
stock options to be granted to the Executive and in consideration of and as an
inducement to the Company to consummate the transactions contemplated by the
Purchase Agreement, the Executive shall not during the Non-Competition Period
(as defined below) (i) directly or indirectly engage, whether or not such
engagement shall be as a partner, stockholder, affiliate or other participant,
in
5
<PAGE> 6
any Competitive Business, or represent in any way any Competitive Business,
whether or not such engagement or representation shall be for profit, (ii)
interfere with, disrupt or attempt to disrupt the relationship, contractual or
otherwise, between the Company and any other person or entity, including,
without limitation, any customer, supplier or employee of the Company, (iii)
induce any employee of the Company or the Business to terminate his employment
with the Company or the Business or to engage in any Competitive Business in
any manner described in the foregoing clause (i) (as well as an officer or
director of any Competitive Business), or (iv) affirmatively assist or induce
any other person or entity to engage in any Competitive Business in any manner
described in the foregoing clause (i) (as well as an officer or director of any
Competitive Business). Anything contained in this Section 14 to the contrary
notwithstanding, an investment by the Executive in any entity in which the
Executive and his affiliates exercise no operational or strategic control and
which constitutes less than 2% of the capital of such entity shall not
constitute a breach of this Section 14.
(b) As used herein, "Non-Competition Period" shall mean the period
commencing on the date hereof and terminating on the fifth anniversary of the
Termination Date; provided, however, that if the Term of Employment shall have
been terminated pursuant to Section 9, then "Non-Competition Period" shall mean
the period commencing on the date hereof and terminating on the later of (i)
the second anniversary of the Termination Date and (ii) the end of the period
following the Termination Date which is equal to the period of the Term of
Employment (assuming that the Term of Employment shall not exceed five years
for purposes of this clause (ii)); and "Competitive Business" shall mean any
business in any State of the United States or anywhere outside the United
States engaged in designing, engineering, manufacturing, selling or
distributing (x) systems or components thereof (such as roof racks, deck racks
and other systems) intended to facilitate the carriage or storage of cargo,
luggage, bicycles, skis, snowboards, sailboards, sailboats, and other items or
property on a vehicle or (y) drip rails for the Pontaic F-car or Chrysler XJ
vehicle.
(c) The Executive understands that the foregoing restrictions may limit
his ability to earn a livelihood in a business similar to the business of the
Company or any subsidiary or affiliate thereof, but he nevertheless believes
that he has received and will receive sufficient consideration and other
benefits as an employee of the Company and as otherwise provided hereunder and
pursuant to other agreements between the Company and the Executive to justify
clearly such restrictions which, in any event (given his education, skills and
ability), the Executive does not believe would prevent him from earning a
living.
6
<PAGE> 7
Section 15. Enforcement; Severability; Etc. It is the desire and intent
of the parties that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or
unenforceable, such provision shall be deemed amended to delete therefrom the
portion thus adjudicated to be invalid or unenforceable, such deletion to apply
only with respect to the operation of such provision in the particular
jurisdiction in which such adjudication is made.
Section 16. Remedies. The Executive acknowledges and understands that the
provisions of this Agreement are of a special and unique nature, the loss of
which cannot be adequately compensated for in damages by an action at law, and
that the breach or threatened breach of the provisions of this Agreement would
cause the Company irreparable harm. In the event of a breach or threatened
breach by the Executive of the provisions of this Agreement, the Company shall
be entitled to an injunction restraining him from such breach. Nothing
contained in this Agreement shall be construed as prohibiting the Company from
or limiting the Company in pursuing any other remedies available for any breach
or threatened breach of this Agreement.
Section 17. Notices. All notices, claims, certificates, requests, demands
and other communications hereunder shall be in writing and shall be deemed to
have been duly given and delivered if personally delivered or if sent by
nationally-recognized overnight courier, by telecopy, or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
if to the Company, to:
265 16th Street
Port Huron, MI 48060
Telecopier: (810) 987-2212;
with copies to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, NY 10112
Attention: John J. Suydam, Esq.
Telecopier: (212) 408-2420;
if to the Executive, to:
Richard Borghi
5128 Aintree
Rochester, MI 48306;
or to such other address as the party to whom notice is to be given may have
furnished to the other party or parties in writing in accordance herewith. Any
such notice or communication shall be deemed to have been received (a) in the
case of personal
7
<PAGE> 8
delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the
date when sent, (c) in the case of telecopy transmission, when received, and
(d) in the case of mailing, on the third business day following that on which
the piece of mail containing such communication is posted.
Section 18. Binding Agreement; Benefit. Subject to Section 23, the
provisions of this Agreement will be binding upon, and will inure to the
benefit of, the respective heirs, legal representatives, successors and assigns
of the parties.
Section 19. Governing Law. This Agreement will be governed by, and
construed and enforced in accordance with, the laws of the State of Michigan
(without giving effect to principles of conflicts of laws).
Section 20. Waiver of Breach. The waiver by either party of a breach of
any provision of this Agreement must be in writing and shall not operate or be
construed as a waiver of any other breach.
Section 21. Entire Agreement; Amendments. This Agreement contains the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements or understandings between the parties with
respect thereto. This Agreement may be amended only by an agreement in writing
signed by the parties.
Section 22. Headings. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 23. Assignment. This Agreement is personal in its nature and the
parties shall not, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder; provided, however, that the
Company may assign this Agreement to any of its subsidiaries and affiliates.
Section 24. Counterparts. This Agreement may be executed in counterparts,
and each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
Section 25. Gender. Any reference to the masculine gender shall be deemed
to include the feminine and neuter genders unless the context otherwise
requires.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Employment Agreement as of the date first written above.
ADVANCED ACCESSORY SYSTEMS, LLC
By:_____________________________
Name:
Title:
________________________________
RICHARD BORGHI
9
<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT dated as
of September 28, 1995, between
ADVANCED ACCESSORY SYSTEMS,LLC,
a Delaware limited liability
company (the "Company"), and
MARSHALL GLADCHUN (the "Executive").
Reference is made to the Asset Purchase Agreement dated as of September
28, 1995, as amended (the "Purchase Agreement"), among MascoTech, Inc.,
a Delaware corporation ("MascoTech"), the Company, AAS Holdings, LLC
(the "Parent") and the other parties thereto. Pursuant to the Purchase
Agreement, the Company is acquiring substantially all of the assets of the
Accessories Group of MascoTech Automotive Systems Group, Inc. and MascoTech
Industrial Components, Inc.
The Company desires to enter into this Agreement in order to assure
itself of the continued service of the Executive following the Closing (the
"Closing") under the Purchaser Agreement, and the Executive desires to accept
employment with the Company, upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties agree as follows:
SECTION 1. EMPLOYMENT. The Company hereby employs the Executive, and
the Executive hereby accepts employment by the Company, upon the terms and
conditions hereinafter set forth.
SECTION 2. TERM. The employment of the Executive hereunder shall be for
a period commencing on the date hereof (the "Commencement Date") and ending on
December 31, 2000 (the "Initial Term") or such earlier date upon which the
employment of the Executive shall terminate in accordance with the provisions
hereof. Unless terminated earlier in accordance with the provisions hereof, at
the end of the Initial Term and at the end of each term thereafter, the
employment of the Executive hereunder shall automatically renew for successive
two-year periods unless the Company shall give the Executive written notice of
its desire not to renew the term or the Initial Term no later than 30 days prior
to the termination of the then current term. The period commencing on the
Commencement Date and ending on the date of termination of the Executive's
employment hereunder shall be called the "Term of Employment" for the Executive,
and the date on which the Executive's employment hereunder shall terminate shall
be called the "Termination Date"
SECTION 3. DUTIES. During the Term of Employment, the Executive shall
be employed as the President and Chief Executive Officer of the Company and
shall perform such duties as are consistent therewith as the Board of Managers
of the Company (the "Board") or its designee shall designate. The Executive
shall use his best efforts to perform well and faithfully the foregoing duties
and responsibilities. The Executive shall not be
<PAGE> 2
required by the Company to relocate his principal business office or his
principal residence outside the Southeast Michigan area.
SECTION 4. TIME TO BE DEVOTED TO EMPLOYMENT. During the Term of
Employment, the Executive shall devote all of his business time, attention and
energies to the business of the Company and its subsidiaries and the Parent
(except for vacations to which he is entitled pursuant to Section 6(b) and
periods of illness or incapacity). During the Term of Employment, the Executive
shall not engage in any business activity which, in the reasonable judgment of
the Board, conflicts with the duties of the Executive hereunder, whether or not
such activity is pursued for gain, profit or other pecuniary advantage.
SECTION 5. COMPENSATION. (a) The Company (or at the Company's option,
any subsidiary or affiliate thereof) shall pay to the Executive an annual base
salary (the "Base Salary") during the Term of Employment of not less than
$277,304, payable in such installments (but not less often than monthly) as is
generally the policy of the Company with respect to its executive officers,
which Base Salary shall be subject to such increases as the Board, in its sole
discretion, may from time to time determine. The Executive's performance shall
be reviewed at least annually by the Board.
(b) During the Term of Employment, the Executive shall be eligible to
participate in incentive compensation or bonus plans that are generally made
available to the Company's senior executives which will generally provide the
Executive the opportunity to receive an annual cash bonus in the range of 50-70%
of the Base Salary subject to the achievement by the Company of performance
goals established by the Board in its sole discretion.
(c) In addition to the compensation provided under Sections 5(a) and
5(b), the Company shall pay the Executive a bonus of $400,000 on the earlier of
(i) September 30, 2002, (ii) the Termination Date and (iii) a Sale of the
Company (as defined in the Members Agreement dated the date hereof, among the
Parent and certain owners of membership units of the Parent).
SECTION 6. BUSINESS EXPENSES; BENEFITS. (a) The Company (or, at the
Company's option, any subsidiary or affiliate thereof) shall reimburse the
Executive, in accordance with the practice from time to time for executive
officers of the Company, for all reasonable and necessary expenses and other
disbursements incurred by the Executive for or on behalf of the Company in the
performance of the Executive's duties hereunder. The Executive shall provide
such appropriate documentation of expenses and disbursements as may from time to
time be required by the Company.
(b) During the Term of Employment, the Executive shall be entitled to
four weeks vacation per year.
-2-
<PAGE> 3
(c) During the Term of Employment, the Company shall continue to
provide the Executive with the group health, life and disability insurance
benefits that were provided by MascoTech to the Executive prior to the Closing.
(d) It is further acknowledged that the Company shall be obligated to
pay on behalf of the Executive during the Term of Employment the annual premiums
with respect to a term life insurance policy (the "Insurance Policy") on the
life of the Executive providing for a payment of 300% of the Executive's current
Base Salary to the beneficiaries of such policy and appropriate disability
insurance (the "Disability Policy") for the Executive providing for a payment of
60-70% of the Executive's current Base Salary to the beneficiaries of such
policy; provided, however, that the Company shall not be required to spend more
than $9,000 in the aggregate for the annual premiums with respect to the
Insurance Policy and the Disability Policy.
SECTION 7. INVOLUNTARY TERMINATION. (a) If the Executive is
incapacitated or disabled (such condition being hereinafter referred to as a
"Disability") in a manner that would qualify the Executive for benefits under
the Disability Policy, the Term of Employment and the employment of the
Executive under this Agreement shall cease (such termination, as well as a
termination under Section 7(b), being hereinafter referred to as an
"Involuntary Termination") and the Executive shall be entitled to receive the
benefits payable under the Disability Policy.
(b) If the Executive dies during the Term of Employment, the Term of
Employment and the Executive's employment hereunder shall cease as of the date
of the Executive's death and the beneficiaries designated by the Executive under
the Insurance Policy shall be entitled to receive the proceeds of the Insurance
Policy.
SECTION 8. TERMINATION FOR CAUSE. The Company may terminate the Term of
Employment and the employment of the Executive hereunder at any time for Cause
(as hereinafter defined) (such termination being referred to herein as a
"Termination For Cause") by giving the Executive written notice of such
termination, effective immediately upon the giving of such notice to the
Executive. As used in this Agreement, "Cause" means the Executive's (a)
commission of an act (i) constituting a felony or (ii) involving fraud, theft or
dishonesty which is not a felony and which materially adversely affects the
Company or could reasonably be expected to materially adversely affect the
Company, (b) repeated failure to be reasonably available to perform his duties,
which, if curable, shall not have been cured within 10 business days of written
notice thereof from the Company, (c) repeated failure to follow the lawful
directions of the Board, which, if curable, shall not have been cured within 10
business days of written notice thereof from the Company, (d) material breach of
any agreement with the Company (including the noncompete provisions) which, if
curable, shall not have been cured within 10 business days of written notice
thereof from the Company or (e) resignation.
SECTION 9. TERMINATION WITHOUT CAUSE. The Company may terminate the
Term of Employment and the employment of the Executive hereunder without Cause
(such termination being hereinafter referred to as a "Termination Without
Cause") by giving
-3-
<PAGE> 4
the Executive written notice of such termination, which notice shall be
effective on the date specified therein but not earlier than the date on which
such notice is given.
SECTION 10. EFFECT OF TERMINATION. (a) Upon the termination of the Term
of Employment and the Executive's employment hereunder due to an Involuntary
Termination or Termination for Cause, neither the Executive nor his beneficiary
or estate shall have any further rights or claims against the Company under this
Agreement, except to receive (i) the unpaid portion, if any, of the Base Salary
provided for in Section 5(a), computed on a pro rata basis to the Termination
Date (based on the actual number of days elapsed over the actual number of days
of the year in which such termination occurs), (ii) any unpaid accrued benefits
of the Executive, and (iii) reimbursement for any expenses for which the
Executive shall not have been reimbursed as provided in Section 6(a).
(b) Upon the termination of the Executive's employment hereunder due to
an Termination Without Cause, neither the Executive nor his beneficiary or
estate shall have any further rights or claims against the Company under this
Agreement except the right to receive (i) the amounts set forth in Section
10(a), (ii) the prorated portion of any bonus earned by the Executive in such
year under any Company incentive compensation plan in which the Executive
participates, (iii) the Base Salary through the date which is 12 months from the
Termination Date, payable in such installments over the applicable period as the
base salary is generally paid to the Executive, and (iv) the costs to the
Executive under COBRA to receive insurance coverage from the Company during the
period commencing on the Termination Date through the date which is the earlier
to occur of (1) the first anniversary of the Termination Date and (2) the day
prior to the date on which the Executive shall be included in any insurance
program provided by any other employer. The Executive shall have no duty to
mitigate the Company's obligations under this Section 10(b).
SECTION 11. INSURANCE. The Company may, for its own benefit, in its
sole discretion, maintain "key-man" life and disability insurance policies
covering the Executive. The Executive will cooperate with the Company and
provide such information or other assistance as the Company may reasonably
request in connection with the Company's obtaining and maintaining such
policies.
SECTION 12. DISCLOSURE OF INFORMATION. The Executive shall not, at any
time during the Term of Employment or thereafter, disclose to any person, firm,
corporation or other business entity, except as required by law, any non-public
information (including, without limitation, non-public information obtained
prior to the date hereof) concerning the business, clients or affairs of the
Company or any subsidiary or affiliate thereof for any reason or purpose
whatsoever, nor shall the Executive make use of any of such non-public
information for his own purpose or for the benefit of any person, firm,
corporation or other business entity except the Company or any subsidiary or
affiliate thereof. Upon the termination of the Term of Employment, the executive
shall return to the Company all property of the Company or any subsidiary or
affiliate thereof then in the possession of the Executive and all books,
records, computer tapes or discs and all other material containing non-public
information concerning the business, clients or affairs of the Company or any
subsidiary or affiliate thereof.
-4-
<PAGE> 5
SECTION 13. RIGHT TO INVENTIONS. The Executive shall promptly disclose,
grant and assign to the Company for its sole use and benefit any and all marks,
designs, logos, inventions, improvements, technical information and suggestions
relating in any way to the business conducted by the Company, which he may
develop or which may be acquired by the Executive during the Term of Employment
(whether or not during usual working hours), together with all trademarks,
patent applications, letters patent, copyrights and reissues thereof that may at
any time be granted for or upon any such mark, design, logo, invention,
improvement or technical information. In connection therewith:
(i) the Executive shall without charge, but at the expense
of the Company, promptly at all times hereafter execute and deliver
such applications, assignments, descriptions and other instruments as
may be necessary or proper in the opinion of the Company to vest title
to any such marks, designs, logos, inventions, improvements, technical
information, trademarks, patent applications, patents, copyrights or
reissues thereof in the Company and to enable it to obtain and maintain
the entire right and title thereto throughout the world;
(ii) the Executive shall render to the Company at its
expense (including a reasonable payment for the time involved in case
he is not then in its employ based on his last per diem earnings) all
such assistance as it may require in the prosecution of applications
for said trademarks, patents, copyrights or reissues thereof, in the
prosecution or defense of interferences which may be declared involving
any said trademarks, applications, patents or copyrights and in any
litigation in which the Company may be involved relating to any such
trademarks, patents, inventions, improvements or technical information;
and
(iii) for the avoidance of doubt, the foregoing provisions
shall be deemed to include an assignment of future copyright in
accordance with Section 37 of the Copyright Act of 1986 and any
amendment or re-enactment thereof.
SECTION 14. RESTRICTIVE COVENANT. (a) The Executive acknowledges and
recognizes that the Business (as defined in the Purchase Agreement) has been
conducted, and substantial sales of its products have been made, throughout the
United States and Europe, and the Executive further acknowledges and recognizes
the highly competitive nature of the industry in which the Business is involved.
Accordingly, in consideration of the premises contained herein, the
consideration to be received hereunder, stock options to be granted to the
Executive and in consideration of and as an inducement to the Company to
consummate the transactions contemplated by the Purchase Agreement, the
Executive shall not during the Non-Competition Period (as defined below) (i)
directly or indirectly engage, whether or not such engagement shall be as a
partner, stockholder, affiliate or other participant, in any Competitive
Business, or represent in any way any Competitive Business, whether or not such
engagement or representation shall be for profit, (ii) interfere with, disrupt
or attempt to disrupt the relationship, contractual or otherwise, between the
Company and any other person
-5-
<PAGE> 6
or entity, including, without limitation, any customer, supplier or employee of
the Company, (iii) induce any employee of the Company or the Business to
terminate his employment with the Company or the Business or to engage in any
Competitive Business in any manner described in the foregoing clause (i) (as
well as an officer or director of any Competitive Business), or (iv)
affirmatively assist or induce any other person or entity to engage in any
Competitive Business in any manner described in the foregoing clause (i) (as
well as an officer or director of any Competitive Business). Anything contained
in this Section 14 to the contrary notwithstanding, an investment by the
Executive in any entity in which the Executive and his affiliates exercise no
operational or strategic control and which constitutes less than 2% of the
capital of such entity shall not constitute a breach of this Section 14.
(b) As used herein, "Non-Competition Period" shall mean the period
commencing on the date hereof and terminating on the fifth anniversary of the
Termination Date; provided, however, that if the Term of Employment shall have
been terminated pursuant to Section 9, then "Non-Competition Period" shall mean
the period commencing on the date hereof and terminating on the later of (i) the
second anniversary of the Termination Date and (ii) the end of the period
following the Termination Date which is equal to the period of the Term of
Employment (assuming that the Term of Employment shall not exceed five years for
purposes of this clause (ii)); and "Competitive Business" shall mean any
business in any State of the United States or anywhere outside the United States
engaged in designing, engineering, manufacturing, selling or distributing (x)
systems or components thereof (such as roof racks, deck racks and other systems)
intended to facilitate the carriage or storage of cargo, luggage, bicycles,
skis, snowboards, sailboards, sailboats, and other items or property on a
vehicle or (y) drip rails for the Pontiac F-car or Chrysler XJ vehicle.
(c) The Executive understands that the foregoing restrictions may limit
his ability to earn a livelihood in a business similar to the business of the
Company or any subsidiary or affiliate thereof, but he nevertheless believes
that he has received and will receive sufficient consideration and other
benefits as an employee of the Company and as otherwise provided hereunder and
pursuant to other agreements between the Company and the Executive to justify
clearly such restrictions which, in any event (given his education, skills and
ability), the Executive does not believe would prevent him from earning a
living.
SECTION 15. ENFORCEMENT; SEVERABILITY; ETC. It is the desire and intent
of the parties that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such provision in the particular jurisdiction in
which such adjudication is made.
SECTION 16. REMEDIES. The Executive acknowledges and understands that
the provisions of this Agreement are of a special and unique nature, the loss of
which cannot be adequately compensated for in damages by an action at law, and
that the breach or
-6-
<PAGE> 7
threatened breach of the provisions of this Agreement would cause the Company
irreparable harm. In the event of a breach or threatened breach by the Executive
of the provisions of this Agreement, the Company shall be entitled to an
injunction restraining him from such breach. Nothing contained in this Agreement
shall be construed as prohibiting the Company from or limiting the Company in
pursuing any other remedies available for any breach or threatened breach of
this Agreement.
SECTION 17. NOTICES.
All notices, claims, certificates, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given and delivered if personally delivered or if sent by
nationally-recognized overnight courier, by telecopy, or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
if to the Company, to:
265 16th Street
Port Huron, MI 48060
Telecopier: (810) 987-2212;
with copies to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, NY 10112
Attention: John J. Suydam, Esq.
Telecopier: (212) 408-2420;
if to the Executive, to:
Marshall Gladchun
6050 Wild Rose Lane
Port Huron, MI 48059;
or to such other address as the party to whom notice is to be given may have
furnished to the other party or parties in writing in accordance herewith. Any
such notice or communication shall be deemed to have been received (a) in the
case of personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of telecopy transmission, when received, and (d) in
the case of mailing, on the third business day following that on which the piece
of mail containing such communication is posted.
SECTION 18. BINDING AGREEMENT; BENEFIT. Subject to Section 23, the
provisions of this Agreement will be binding upon, and will inure to the benefit
of, the respective heirs, legal representatives, successors and assigns of the
parties.
-7-
<PAGE> 8
SECTION 19. GOVERNING LAW. This Agreement will be governed by, and
construed and enforced in accordance with, the laws of the State of Michigan
(without giving effect to principles of conflicts of laws).
SECTION 20. WAIVER OF BREACH. The waiver by either party of a breach of
any provision of this Agreement must be in writing and shall not operate or be
construed as a waiver of any other breach.
SECTION 21. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements or understandings between the parties with
respect thereto. This Agreement may be amended only by an agreement in writing
signed by the parties.
SECTION 22. HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 23. ASSIGNMENT. This Agreement is personal in its nature and
the parties shall not, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder; provided, however, that the
Company may assign this Agreement to any of its subsidiaries and affiliates.
SECTION 24. COUNTERPARTS. This Agreement may be executed in
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 25. GENDER. Any reference to the masculine gender shall be
deemed to include the feminine and neuter genders unless the context otherwise
requires.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Employment Agreement as of the date first written above.
ADVANCED ACCESSORY SYSTEMS, LLC
By:
-----------------------------
Name: Donald J. Hofmann
Title: President
/s/ Marshall Gladchun
-----------------------------
MARSHALL GLADCHUN
<PAGE> 1
EXHIBIT 10.11
MANAGEMENT CONSULTING
AGREEMENT dated as of September 28, 1995,
between ADVANCED ACCESSORY SYSTEMS, LLC,
a Delaware limited liability company
(the "Company"), and BARRY BANDUCCI (the
"Consultant").
Reference is made to the Asset Purchase Agreement dated as of
September 28, 1995, as amended (the "Purchase Agreement"), among MascoTech,
Inc., a Delaware corporation ("MascoTech"), the Company and the other parties
thereto. Pursuant to the Purchase Agreement, the Company has acquired
substantially all of the assets of the Accessories Group of MascoTech Automotive
Systems Group, Inc. and MascoTech Industrial Components, Inc.
The Company desires to retain the Consultant to perform
management consulting services for the Company and its parent company, AAS
Holdings, LLC (the "Parent"), and the Consultant desires to perform such
management consulting services for the Company and the Parent, in each case,
upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties agree as follows:
SECTION 1 RETENTION OF CONSULTANT. The Company hereby
retains the Consultant as a consultant, and the Consultant hereby accepts
such retention by the Company, upon the terms and conditions hereinafter set
forth. The Consultant shall perform all such services as an independent
contractor to the Company and not as an employee, agent or representative of
the Company.
SECTION 2 TERM. The retention of the Consultant hereunder
shall be for a period commencing on the date hereof (the "Commencement Date")
and ending at the end of the eighteenth month after the date hereof or such
earlier date upon which the retention of the Consultant shall terminate in
accordance with the provisions hereof. Unless terminated earlier in accordance
with the provisions hereof, the retention of the Consultant hereunder shall
continue after the end of such eighteenth month for successive six-month periods
unless the Company shall give the Consultant notice to terminate such retention
no later than 30 days prior to the commencement of any such six-month period.
The period commencing on the Commencement Date and ending on the date of
termination of the Consultant's retention hereunder shall be called the "Term",
and the date on which the Consultant's retention hereunder shall terminate shall
be called the "Termination Date".
<PAGE> 2
SECTION 3 DUTIES. During the Term, the Consultant shall
advise the Company concerning such matters that relate to the business and
affairs of the Company and its affiliates, in each case as the Company shall
reasonably request, and shall perform such duties as are consistent therewith as
the Board of Managers of the Company (the "Board") shall designate. During the
Term, the Consultant shall also serve on the Board and on the Board of Managers
of the Parent. Following the Termination Date, the Consultant shall continue to
serve on such Boards in accordance with the provisions of the Members' Agreement
of even date herewith among the Parent, the Consultant and the other parties
named therein.
SECTION 4 TIME TO BE DEVOTED TO SERVICES. During the Term,
the Consultant shall not be required to devote any specified amount of time to
the provisions of services hereunder and shall only be required to devote such
reasonable amount of time to the business of the Company and its subsidiaries
and parent company as the Consultant shall reasonably determine to be necessary
to fulfill his duties hereunder.
SECTION 5 COMPENSATION. The Company (or at the Company's
option, any subsidiary or affiliate thereof) shall pay to the Consultant an
annual consulting fee (the "Fee") during the Term of $50,000, payable in equal
monthly installments.
(b) Anything contained in this Agreement to the contrary
notwithstanding, during the continuation of any payment default by the Company
under the Acquisition Indebtedness, the Company's obligation to pay the Fee
shall be accrued and deferred until such payment default shall have been cured.
Any portion of the Fee so deferred shall be paid as soon as practical after such
payment default shall be cured but in any event within one year thereafter. As
used herein, (i) "Acquisition Indebtedness" shall mean any indebtedness (a)
under the Credit Agreement dated the date hereof, among the Parent, the Company
and the financial institutions from time to time party thereto, as amended,
restated, modified or supplemented (the "Credit Agreement"), (b) under the
Senior Subordinated Loan Agreement dated the date hereof between the Company and
London Pacific Life & Annuity Company (the "Subordinated Loan Agreement") and
(c) used to refinance the indebtedness evidenced by the Credit Agreement and the
Subordinated Loan Agreement and (ii) "payment default" shall mean the failure to
pay any amount in a timely fashion.
(c) Following the Termination Date and for so long as the
Consultant shall continue to serve on the Boards of the Company and Parent, the
Consultant shall receive an annual Board fee of no less than 10% of the
aggregate purchase price for all Units of the Parent acquired by him, payable in
equal monthly installments.
SECTION 6 BUSINESS EXPENSES; BENEFITS. (a) The Company (or, at
the Company's option, any subsidiary or affiliate thereof) shall reimburse the
Consultant, in accordance with its practice from time to time, for all
reasonable and necessary expenses and other disbursements incurred by the
Consultant for or on behalf of the Company in the performance of the
Consultant's duties hereunder. The Consultant shall provide such appropriate
documentation of expenses and disbursements as may from time to time be required
by the Company.
-2-
<PAGE> 3
(b) The Company shall have no obligation to provide any
benefits to Consultant, including, without limitation, any health, life or
disability benefits.
SECTION 7 EARLY TERMINATION. (a) If the Consultant is
incapacitated or disabled in a manner that would prevent the Consultant from
performing his duties hereunder for a period of 90 consecutive days, the Term
and the retention of the Consultant under this Agreement shall cease and the
Company shall have no further obligations hereunder.
(b) If the Consultant dies during the Term, the Term and the
Consultant's retention hereunder shall cease as of the date of the Consultant's
death and the Company shall have no further obligations hereunder.
SECTION 8 DISCLOSURE OF INFORMATION. The Consultant shall not,
at any time during the Term or thereafter, disclose to any person, firm,
corporation or other business entity, except as required by law, any non-public
information (including, without limitation, non-public information obtained
prior to the date hereof) concerning the business, clients or affairs of the
Company or any subsidiary or affiliate thereof for any reason or purpose
whatsoever, nor shall the Consultant make use of any of such non-public
information for his own purpose or for the benefit of any person, firm,
corporation or other business entity except the Company or any subsidiary or
affiliate thereof. Upon the termination of the Term, the Consultant shall return
to the Company all property of the Company or any subsidiary or affiliate
thereof then in the possession of the Consultant and all books, records,
computer tapes or discs and all other material containing non-public information
concerning the business, clients or affairs of the Company or any subsidiary or
affiliate thereof. Notwithstanding the foregoing, the Consultant shall be
entitled to retain any records and information he would otherwise be entitled to
possess by virtue of his status as a Member of the Parent.
SECTION 9 NOTICES. All notices, claims, certificates,
requests, demands and other communications hereunder shall be in writing and
shall be deemed to have been duly given and delivered if personally delivered or
if sent by nationally-recognized overnight courier, by telecopy, or by
registered or certified mail, return receipt requested and postage prepaid,
addressed as follows:
if to the Company, to:
265 16th Street
Port Huron, MI 48060
Telecopier: (810) 987-2212;
-3-
<PAGE> 4
with copies to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, NY 10112
Attention: John J. Suydam, Esq.
Telecopier: (212) 408-2420;
if to the Consultant, to:
Barry Banducci
c/o The Equion Corporation
741 Boston Post Road, Suite 101
Guilford, CT 06437
or to such other address as the party to whom notice is to be given may have
furnished to the other party or parties in writing in accordance herewith. Any
such notice or communication shall be deemed to have been received (a) in the
case of personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of telecopy transmission, when received, and (d) in
the case of mailing, on the third business day following that on which the piece
of mail containing such communication is posted.
SECTION 10. BINDING AGREEMENT; BENEFIT. Subject to Section 15,
the provisions of this Agreement will be binding upon, and will inure to the
benefit of, the respective heirs, legal representatives, successors and assigns
of the parties.
SECTION 11. GOVERNING LAW. This Agreement will be governed by,
and construed and enforced in accordance with, the laws of the State of Michigan
(without giving effect to principles of conflicts of laws).
SECTION 12. WAIVER OF BREACH. The waiver by either party of a
breach of any provision of this Agreement must be in writing and shall not
operate or be construed as a waiver of any other breach.
SECTION 13. ENTIRE AGREEMENT; AMENDMENTS. This Agreement
contains the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements or understandings between the
parties with respect thereto. This Agreement may be amended only by an agreement
in writing signed by the parties.
SECTION 14. HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
-4-
<PAGE> 5
SECTION 15. ASSIGNMENT. This Agreement is personal in its
nature and the parties shall not, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder; provided,
however, that the Company may assign this Agreement to any of its subsidiaries
and affiliates.
SECTION 16. COUNTERPARTS. This Agreement may be executed in
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 17. GENDER. Any reference to the masculine gender
shall be deemed to include the feminine and neuter genders unless the context
otherwise requires.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Management Consulting Agreement as of the date first written
above.
ADVANCED ACCESSORY SYSTEMS, LLC
By: /s/ Max Liechtenstein
----------------------------
Name: M. Liechtenstein
Title: Vice President
/s/ Barry Banducci
----------------------------
Barry Banducci
-6-
<PAGE> 1
EXHIBIT 10.12
MANAGEMENT CONSULTING
AGREEMENT dated as of
September 28, 1995, between
ADVANCED ACCESSORY SYSTEMS,
LLC, a Delaware limited
liability company (the
"Company"), and F. ALAN
SMITH (the "Consultant").
Reference is made to the Asset Purchase Agreement dated as of
September 28, 1995, as amended (the "Purchase Agreement"), among MascoTech,
Inc., a Delaware corporation ("MascoTech"), the Company and the other parties
thereto. Pursuant to the Purchase Agreement, the Company has acquired
substantially all of the assets of the Accessories Group of MascoTech Automotive
Systems Group, Inc. and MascoTech Industrial Components, Inc.
The Company desires to retain the Consultant to perform
management consulting services for the Company and its parent company AAS
Holdings, LLC (the "Parent"), and the Consultant desires to perform such
management consulting services for the Company and the Parent, in each case,
upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties agree as follows:
SECTION 1. RETENTION OF CONSULTANT. The Company hereby retains
the Consultant as a consultant, and the Consultant hereby accepts such retention
by the Company, upon the terms and conditions hereinafter set forth. The
Consultant shall perform all such services as an independent contractor to the
Company and not as an employee, agent or representative of the Company.
SECTION 2. TERM. The retention of the Consultant hereunder
shall be for a period commencing on the date hereof (the "Commencement Date")
and ending at the end of the eighteenth month after the date hereof or such
earlier date upon which the retention of the Consultant shall terminate in
accordance with the provisions hereof. Unless terminated earlier in accordance
with the provisions hereof, the retention of the Consultant hereunder shall
continue after the end of such eighteenth month for successive six-month periods
unless the Company shall give the Consultant notice to terminate such retention
no later than 30 days prior to the commencement of any such six-month period.
The period commencing on the Commencement Date and ending on the date of
termination of the Consultant's retention hereunder shall be called the "Term",
and the date on which the Consultant's retention hereunder shall terminate shall
be called the "Termination Date".
<PAGE> 2
SECTION 3. DUTIES. During the Term, the Consultant shall serve
as the Chairman of the Board of Managers of the Company and the Parent and shall
advise the Company concerning such matters that relate to the business and
affairs of the Company and its affiliates, in each case as the Company shall
reasonably request, and shall perform such duties as are consistent therewith as
the Board of Managers of the Company (the "Board") shall designate. Following
the Termination Date, the Consultant shall continue to serve on such Boards in
accordance with the provisions of the Members Agreement of even date herewith
among the Parent, the Consultant and the other parties named therein.
SECTION 4. TIME TO BE DEVOTED TO SERVICES. During the Term,
the Consultant shall devote no less than five business days per month to the
business of the Company, its subsidiaries and the Parent.
SECTION 5. COMPENSATION. (a) The Company (or at the Company's
option, any subsidiary or affiliate thereof) shall pay to the Consultant an
annual consulting fee (the "Base Fee") during the Term of $150,000, payable in
equal monthly installments.
(b) During the Term, the Consultant shall be eligible to
participate in incentive compensation or bonus plans that the Board has
implemented for its senior executives which will generally provide the
Consultant the opportunity to receive an annual cash bonus in the range of
30-50% of the Base Fee subject to the achievement by the Company of performance
goals established by the Board in its sole discretion.
(c) Anything contained in this Agreement to the contrary
notwithstanding, during the continuation of any payment default by the Company
under the Acquisition Indebtedness, the Company's obligation to pay the Fee
shall be accrued and deferred until such payment default shall have been cured.
Any portion of the Fee so deferred shall be paid as soon as practical after such
payment default shall be cured but in any event within one year thereafter. As
used herein, (i) "Acquisition Indebtedness" shall mean any indebtedness (a)
under the Credit Agreement dated the date hereof, among the Parent, the Company
and the financial institutions from time to time party thereto, as amended,
restated, modified or supplemented (the "Credit Agreement"), (b) under the
Senior Subordinated Loan Agreement dated the date hereof between the Company and
London Pacific Life & Annuity Company (the "Subordinated Loan Agreement") and
(c) used to refinance the indebtedness evidenced by the Credit Agreement and the
Subordinated Loan Agreement and (ii) "payment default" shall mean the failure to
pay any amount in a timely fashion.
(d) Following the Termination Date and for so long as the
Consultant shall continue to serve on the Boards of the Company and Parent, the
Consultant shall receive an annual Board fee of no less than 10% of the
aggregate purchase price for all Units of the Parent acquired by him, payable in
equal monthly installments.
SECTION 6. BUSINESS EXPENSES; BENEFITS. (a) The Company (or,
at the Company's option, any subsidiary or affiliate thereof) shall reimburse
the Consultant, in accordance with its practice from time to time, for all
reasonable and necessary expenses and other disbursements incurred by the
Consultant for or on behalf of the Company in the
-2-
<PAGE> 3
performance of the Consultant's duties hereunder. The Consultant shall provide
such appropriate documentation of expenses and disbursements as may from time to
time be required by the Company.
(b) The Company shall have no obligation to provide any
benefits to Consultant, including, without limitation, any health, life or
disability benefits.
SECTION 7. INVOLUNTARY TERMINATION. (a) If the Consultant is
incapacitated or disabled in a manner that would prevent the Consultant from
performing his duties hereunder for a period of 90 consecutive days, the Term
and the retention of the Consultant under this Agreement shall cease and the
Company shall have no further obligation hereunder.
(b) If the Consultant dies during the Term, the Term and the
Consultant's retention hereunder shall cease as of the date of the Consultant's
death and the Company shall have no further obligation hereunder.
SECTION 8. DISCLOSURE OF INFORMATION. The Consultant shall
not, at any time during the Term or thereafter, disclose to any person, firm,
corporation or other business entity, except as required by law, any non-public
information (including, without limitation, non-public information obtained
prior to the date hereof) concerning the business, clients or affairs of the
Company or any subsidiary or affiliate thereof for any reason or purpose
whatsoever, nor shall the Consultant make use of any of such non-public
information for his own purpose or for the benefit of any person, firm,
corporation or other business entity except the Company or any subsidiary or
affiliate thereof. Upon the termination of the Term, the Consultant shall return
to the Company all property of the Company or any subsidiary or affiliate
thereof then in the possession of the Consultant and all books, records,
computer tapes or discs and all other material containing non-public information
concerning the business, clients or affairs of the Company or any subsidiary or
affiliate thereof. Notwithstanding the foregoing, the Consultant shall be
entitled to retain any records and information he would otherwise be entitled to
possess by virtue of his status as a Member of the Parent.
SECTION 9. NOTICES. All notices, claims, certificates,
requests, demands and other communications hereunder shall be in writing and
shall be deemed to have been duly given and delivered if personally delivered or
if sent by nationally-recognized overnight courier, by telecopy, or by
registered or certified mail, return receipt requested and postage prepaid,
addressed as follows:
if to the Company, to:
265 16th Street
Port Huron, MI 48060
Telecopier: (810) 987-2212;
-3-
<PAGE> 4
with copies to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, NY 10112
Attention: John J. Suydam, Esq.
Telecopier: (212) 408-2420;
if to the Consultant, to:
F. Alan Smith
674 Franklyn Avenue
Indialantic, FL 32903
or to such other address as the party to whom notice is to be given may have
furnished to the other party or parties in writing in accordance herewith. Any
such notice or communication shall be deemed to have been received (a) in the
case of personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of telecopy transmission, when received, and (d) in
the case of mailing, on the third business day following that on which the piece
of mail containing such communication is posted.
SECTION 10. BINDING AGREEMENT; BENEFIT. Subject to Section
15, the provisions of this Agreement will be binding upon, and will inure to the
benefit of, the respective heirs, legal representatives, successors and assigns
of the parties.
SECTION 11. GOVERNING LAW. This Agreement will be governed
by, and construed and enforced in accordance with, the laws of the State of
Michigan (without giving effect to principles of conflicts of laws).
SECTION 12. WAIVER OF BREACH. The waiver by either party of a
breach of any provision of this Agreement must be in writing and shall not
operate or be construed as a waiver of any other breach.
SECTION 13. ENTIRE AGREEMENT; AMENDMENTS. This Agreement
contains the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements or understandings between the
parties with respect thereto. This Agreement may be amended only by an agreement
in writing signed by the parties.
SECTION 14. HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 15. ASSIGNMENT. This Agreement is personal in its
nature and the parties shall not, without the consent of the other, assign or
transfer this Agreement or any
-4-
<PAGE> 5
rights or obligations hereunder; provided, however, that the Company may assign
this Agreement to any of its subsidiaries and affiliates.
SECTION 16. COUNTERPARTS. This Agreement may be executed in
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 17. GENDER. Any reference to the masculine gender
shall be deemed to include the feminine and neuter genders unless the context
otherwise requires.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Consulting Agreement as of the date first written above.
ADVANCED ACCESSORY SYSTEMS, LLC
By: /s/ M. Liechtenstein
----------------------------
Name: M. Liechtenstein
Title: Vice President
/s/ F. Alan Smith
--------------------------------
F. Alan Smith
-6-
<PAGE> 1
EXHIBIT 10.13
EMPLOYMENT
AGREEMENT dated as of
January 22, 1996, between
ADVANCED ACCESSORY SYSTEMS,
LLC, a Delaware limited
liability company (the
"Company"), and TERENCE C.
SEIKEL (the "Executive").
The Company desires to enter into this Agreement in order to assure itself
of the continued service of the Executive following the date hereof, and the
Executive desires to accept employment with the Company, upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties agree as follows:
Section 1. Employment. The Company hereby employs the Executive, and
the Executive hereby accepts employment by the Company, upon the terms and
conditions hereinafter set forth.
Section 2. Term. The employment of the Executive hereunder shall be
for a period commencing on the date hereof (the "Commencement Date") and
ending on December 31, 2000 (the "Initial Term") or such earlier date upon
which the employment of the Executive shall terminate in accordance with the
provisions hereof. Unless terminated earlier in accordance with the provisions
hereof, at the end of the Initial Term and at the end of each term thereafter,
the employment of the Executive hereunder shall automatically renew for
successive two-year periods unless the Company shall give the Executive written
notice of its desire not to renew the term or the Initial Term no later than 30
days prior to the termination of the then current term. The period commencing
on the Commencement Date and ending on the date of termination of the
Executive's employment hereunder shall be called the "Term of Employment" for
the Executive, and the date on which the Executive's employment hereunder shall
terminate shall be called the "Termination Date".
Section 3. Duties. During the Term of Employment, the Executive shall
be employed as the Chief Financial Officer of the Company and shall perform such
duties as are consistent therewith as the Board of Managers of the Company (the
"Board") or its designee shall designate. The Executive shall use his best
efforts to perform well and faithfully the foregoing duties and
responsibilities. The Executive shall not be required by the Company to
relocated his principal business office or his principal residence outside the
Southeast Michigan area.
Section 4. Time to be Devoted to Employment. During the Term of
Employment, the Executive shall devote all of his business time, attention and
energies to the business of the Company and its subsidiaries and the Parent
(except for vacations to which he is entitled pursuant to Section 6(b)) and
periods of illness or incapacity). During the Term of Employment, the Executive
shall not engage in any business activity
<PAGE> 2
which, in the reasonable judgment of the Board, conflicts with the duties of the
Executive hereunder, whether or not such activity is pursued for gain, profit or
other pecuniary advantage.
Section 5. Compensation.
(a) The Company (or at the Company's option, any subsidiary or affiliate
thereof) shall pay to the Executive an annual base salary (the "Base Salary")
during the Term of Employment of not less than $165,000, payable in such
installments (but not less often than monthly) as is generally the policy of the
Company with respect to its executive officers, which Base Salary shall be
subject to such increases as the Board, in its sole discretion, may from time to
time determine. The Executive's performance shall be reviewed at least annually
by the Board.
(b) During the Term of Employment, the Executive shall be eligible to
participate in incentive compensation or bonus plans that are generally made
available to the Company's senior executives which will generally provide the
Executive the opportunity to receive an annual cash bonus in the range of 30-50%
of the Base Salary subject to the achievement by the Company of performance
goals established by the Board in its sole discretion.
Section 6. Business Expenses; Benefits.
(a) The Company (or, at the Company's option, any subsidiary or affiliate
thereof) shall reimburse the Executive, in accordance with the practice from
time to time for executive officers of the Company, for all reasonable and
necessary expenses and other disbursements incurred by the Executive for or on
behalf of the Company in the performance of the Executive's duties hereunder.
The Executive shall provide such appropriate documentation of expenses and
disbursements as may from time to time be required by the Company.
(b) During the Term of Employment, the Executive shall be entitled to four
weeks vacation per year.
(c) During the Term of Employment, the Company shall continue to provide
the Executive with the option to either (i) elect to receive the group health,
life and disability insurance benefits that are presently provided by the
Company to the executives of the Company, or (ii) elect to receive the cash
equivalent of the group health, life and disability insurance benefits that are
presently provided by the Company to the senior executives of the Company.
(d) During the Term of Employment, the Executive shall be entitled to
reasonable reimbursement on a per mile basis for expenses incurred by the
Executive in connection with his use of an automobile pursuant to the
performance of his duties hereunder.
(e) It is further acknowledged that the Company shall be obligated to pay
2
<PAGE> 3
on behalf of the Executive during the Term of Employment the annual premiums
with respect to a term life insurance policy (the "Insurance Policy") on the
life of the Executive providing for a payment of 300% of the Executive's current
Base Salary to the beneficiaries of such policy and appropriate disability
insurance (the "Disability Policy") for the Executive providing for a payment of
60-70% of the Executive's current Base Salary to the beneficiaries of such
policy; provided, however, that the Company shall not be required to spend more
than $6,000 in the aggregate for the annual premiums with respect to the
Insurance Policy and the Disability Policy.
Section 7. Involuntary Termination.
(a) If the Executive is incapacitated or disabled (such condition being
hereinafter referred to as a "Disability") in a manner that would qualify the
Executive for benefits under the Disability Policy, the Term of Employment and
the employment of the Executive under this Agreement shall cease (such
termination, as well as a termination under Section 7(b), being hereinafter
referred to as an "Involuntary Termination") and the Executive shall be entitled
to receive the benefits payable under the Disability Policy.
(b) If the Executive dies during the Term of Employment, the Term of
Employment and the Executive's employment hereunder shall cease as of the date
of the Executive's death and the beneficiaries designated by the Executive under
the Insurance Policy shall be entitled to receive the proceeds of the Insurance
Policy.
Section 8. Termination For Cause. The Company may terminate the Term of
Employment and the employment of the Executive hereunder at any time for Cause
(as hereinafter defined) (such termination being referred to herein as a
"Termination For Cause") by giving the Executive written notice of such
termination, effective immediately upon the giving of such notice to the
Executive. As used in this Agreement, "Cause" means the Executive's (a)
commission of an act (i) constituting a felony or (ii) involving fraud, theft or
dishonesty which is not a felony and which materially adversely affects the
Company or could reasonably be expected to materially adversely affect the
Company, (b) repeated failure to be reasonably available to perform his duties,
which, if curable, shall not have been cured within 10 business days of written
notice thereof from the Company, (c) repeated failure to follow the lawful
directions of the Board, which, if curable, shall not have been cured within 10
business days of written notice thereof from the Company, (d) material breach of
any agreement with the Company (including the noncompete provisions) which, if
curable, shall not have been cured within 10 business days of written notice
thereof from the Company or (e) resignation.
Section 9. Termination Without Cause. The Company may terminate the Term of
Employment and the employment of the Executive hereunder without Cause (such
termination being hereinafter referred to as a "Termination Without Cause") by
giving the Executive written notice of such termination, which notice shall be
effective on the date specified therein but not earlier than the date on which
such notice is given.
3
<PAGE> 4
Section 10. Effect of Termination.
(a) Upon the termination of the Term of Employment and the Executive's
employment hereunder due to an Involuntary Termination or Termination for Cause,
neither the Executive nor his beneficiary or estate shall have any further
rights or claims against the Company under this Agreement, except to receive (i)
the unpaid portion, if any, of the Base Salary provided for in Section 5(a),
computed on a pro rata basis to the Termination Date (based on the actual number
of days elapsed over the actual number of days of the year in which such
termination occurs), (ii) any unpaid accrued benefits of the Executive, and
(iii) reimbursement for any expenses for which the Executive shall not have been
reimbursed as provided in Section 6(a).
(b) Upon the termination of the Executive's employment hereunder due to an
Termination Without Cause, neither the Executive nor his beneficiary or estate
shall have any further rights or claims against the Company under this Agreement
except the right to receive (i) the amounts set forth in Section 10(a), (ii) the
prorated portion of any bonus earned by the Executive in such year under any
Company incentive compensation plan in which the Executive participates, (iii)
the Base Salary through the date which is 12 months from the Termination Date,
payable in such installments over the applicable period as the base salary is
generally paid to the Executive and (iv) the costs to the Executive under COBRA
to receive insurance coverage from the Company during the period commencing on
the Termination Date through the date which is the earlier to occur of (1) the
first anniversary of the Termination Date and (2) the day prior to the date on
which the Executive shall be included in any insurance program provided by any
other employer. The Executive shall have no duty to mitigate the Company's
obligations under this Section 10(b).
Section 11. Insurance. The Company may, for its own benefit, in its sole
discretion, maintain "key-man" life and disability insurance policies covering
the Executive. The Executive will cooperate with the Company and provide such
information or other assistance as the Company may reasonably request in
connection with the Company's obtaining and maintaining such policies.
Section 12. Disclosure of Information. The Executive shall not, at any time
during the Term of Employment or thereafter, disclose to any person, firm,
corporation or other business entity, except as required by law or pursuant to
the ordinary course of conduct of the Executive's responsibilities under this
Agreement, any non-public information (including, without limitation, non-public
information obtained prior to the date hereof) concerning the business, clients
or affairs of the Company or any subsidiary or affiliate thereof for any reason
or purpose whatsoever, nor shall the Executive make use of any of such
non-public information for his own purpose or for the benefit of any person,
firm, corporation or other business entity except the Company or any subsidiary
or affiliate thereof. Upon the termination of the Term of Employment, the
executive shall return to the Company all property of the Company or any
subsidiary or affiliate thereof then in the possession of the Executive and all
books, records, computer tapes or discs
4
<PAGE> 5
and all other material containing non-public information concerning the
business, clients or affairs of the Company or any subsidiary or affiliate
thereof.
Section 13. Right to Inventions. The Executive shall promptly
disclose, grant and assign to the Company for its sole use and benefit any and
all marks, designs, logos, inventions, improvements, technical information and
suggestions relating in any way to the business conducted by the Company,
which he may develop or which may be acquired by the Executive during the Term
of Employment (whether or not during usual working hours), together with all
trademarks, patent applications, letters patent, copyrights and reissues
thereof that may at any time be granted for or upon any such mark, design,
logo, invention, improvement or technical information. In connection therewith:
(i) the Executive shall without charge, but at the expense
of the Company, promptly at all times hereafter execute and
deliver such applications, assignments, descriptions and other
instruments as may be necessary or proper in the opinion of the
Company to vest title to any such marks, designs, logos,
inventions, improvements, technical information, trademarks,
patent applications, patents, copyrights or reissues thereof in
the Company and to enable it to obtain and maintain the entire
right and title thereto throughout the world;
(ii) the Executive shall render to the Company at its
expense (including a reasonable payment for the time involved in
case he is not then in its employ based on his last per diem
earnings) all such assistance as it may require in the
prosecution of applications for said trademarks, patents,
copyrights or reissues thereof, in the prosecution or defense of
interferences which may be declared involving any said
trademarks, applications, patents or copyrights and in any
litigation in which the Company may be involved relating to any
such trademarks, patents, inventions, improvements or technical
information; and
(iii) for the avoidance of doubt, the foregoing provisions
shall be deemed to include an assignment of future copyright in
accordance with Section 37 of the Copyright Act of 1986 and any
amendment or re-enactment thereof.
Section 14. Restrictive Covenant.
(a) The Executive acknowledges and recognizes that the
Business (as defined in the Purchase Agreement) has been conducted, and
substantial sales of its products have been made, throughout the United
States and Europe, and the Executive further acknowledges and recognizes the
highly competitive nature of the industry in which the Business is involved.
Accordingly, in consideration of the premises contained herein, the
consideration to be received hereunder, stock options to be granted to the
Executive and in consideration of and as an inducement to the Company to
consummate the transactions contemplated by the Purchase Agreement, the
Executive shall not during the Non-Competition Period (as defined below) (i)
directly or indirectly engage, whether
5
<PAGE> 6
or not such engagement shall be as a partner, stockholder, affiliate or other
participant, in any Competitive Business, or represent in any way any
Competitive Business, whether or not such engagement or representation shall be
for profit, (ii) interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between the Company and any other person or entity,
including, without limitation, any customer, supplier or employee of the
Company, (iii) induce any employee of the Company or the Business to terminate
his employment with the Company or the Business or to engage in any Competitive
Business in any manner described in the foregoing clause (i) (as well as an
officer or director of any Competitive Business), or (iv) affirmatively assist
or induce any other person or entity to engage in any Competitive Business in
any manner described in the foregoing clause (i) (as well as an officer or
director of any Competitive Business). Anything contained in this Section 14 to
the contrary notwithstanding, an investment by the Executive in any entity in
which the Executive and his affiliates exercise no operational or strategic
control and which constitutes less than 2% of the capital of such entity shall
not constitute a breach of this Section 14.
(b) As used herein, "Non-Competition Period" shall mean the period
commencing on the date hereof and terminating on the fifth anniversary of the
Termination Date; provided, however, that if the Term of Employment shall have
been terminated pursuant to Section 9, then "Non-Competition Period" shall mean
the period commencing on the date hereof and terminating on the later of (i) the
second anniversary of the Termination Date and (ii) the end of the period
following the Termination Date which is equal to the period of the Term of
Employment (assuming that the Term of Employment shall not exceed five years for
purposes of this clause (ii)); and "Competitive Business" shall mean any
business in any State of the United States or anywhere outside the United States
engaged in designing, engineering, manufacturing, selling or distributing (x)
systems or components thereof (such as roof racks, deck racks and other systems)
intended to facilitate the carriage or storage of cargo, luggage, bicycles,
skis, snowboards, sailboards, sailboats, and other items or property on a
vehicle or (y) drip rails for the Pontiac F-car or Chrysler XJ vehicle.
(c) The Executive understands that the foregoing restrictions may
limit his ability to earn a livelihood in a business similar to the business of
the Company or any subsidiary or affiliate thereof, but he nevertheless
believes that he has received and will receive sufficient consideration and
other benefits as an employee of the Company and as otherwise provided
hereunder and pursuant to other agreements between the Company and the
Executive to justify clearly such restrictions which, in any event (given his
education, skills and ability), the Executive does not believe would prevent
him from earning a living.
Section 15. Enforcement; Severability; Etc. It is the desire and intent of
the parties that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or unenforceable,
such provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such
6
<PAGE> 7
deletion to apply only with respect to the operation of such provision in the
particular jurisdiction in which such adjudication is made.
Section 16. Remedies. The Executive acknowledges and understands that the
provisions of this Agreement are of a special and unique nature, the loss of
which cannot be adequately compensated for in damages by an action at law, and
that the breach or threatened breach of the provisions of this Agreement would
cause the Company irreparable harm. In the event of a breach or threatened
breach by the Executive of the provisions of this Agreement, the Company shall
be entitled to an injunction restraining him from such breach. Nothing contained
in this Agreement shall be construed as prohibiting the Company from or limiting
the Company in pursuing any other remedies available for any breach or
threatened breach of this Agreement. Section 17. Notices. All notices, claims,
certificates, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given and delivered if personally
delivered or if sent by nationally-recognized overnight courier, by telecopy, or
by registered or certified mail, return receipt requested and postage prepaid,
addressed as follows:
if to the Company, to:
Advanced Accessory Systems, LLC
2655 16th Street
Port Huron, MI 48060
Attention: President
Telecopier: (810) 987-2212;
with copies to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, NY 10112
Attention: John J. Suydam, Esq.
Telecopier: (212) 408-2420;
if to the Executive, to:
Terence C. Seikel
661 Heritage Lane
Rochester Hills, MI 48309
or to such other address as the party to whom notice is to be given may have
furnished to the other party or parties in writing in accordance herewith. Any
such notice or communication shall be deemed to have been received (a) in the
case of personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of telecopy transmission, when received, and (d) in
the case of mailing, on the third business day
7
<PAGE> 8
following that on which the piece of mail containing such communication is
posted.
Section 18. Binding Agreement; Benefit. Subject to Section 23, the
provisions of this Agreement will be binding upon, and will inure to the benefit
of, the respective heirs, legal representatives, successors and assigns of the
parties.
Section 19. Governing Law. This Agreement will be governed by, and
construed and enforced in accordance with, the laws of the State of Michigan
(without giving effect to principles of conflicts of laws).
Section 20. Waiver of Breach. The waiver by either party of a breach of
any provision of this Agreement must be in writing and shall not operate or be
construed as a waiver of any other breach.
Section 21. Entire Agreement; Amendments. This Agreement contains the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements or understandings between the parties with
respect thereto. This Agreement may be amended only by an agreement in writing
signed by the parties.
Section 22. Headings. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 23. Assignment. This Agreement is personal in its nature and the
parties shall not, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder; provided, however, that the
Company may assign this Agreement to any of its subsidiaries and affiliates.
Section 24. Counterparts. This Agreement may be executed in
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
Section 25. Gender. Any reference to the masculine gender shall be
deemed to include the feminine and neuter genders unless the context otherwise
requires.
8
<PAGE> 9
IN WITNESS WHEREOF, The parties hereto have executed and delivered this
Employment Agreement as of the date first written above.
ADVANCED ACCESSORY SYSTEMS, LLC
By:_____________________________
Name:
Title:
________________________________
TERENCE C. SEIKEL
<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
dated as of August 5, 1997 between VALLEY
INDUSTRIES, LLC, a Delaware limited
liability company (the "Company"), and
ROGER T. MORGAN (the "Executive").
Reference is made to the Asset, Purchase Agreement dated as of
the date hereof (as amended, the "Asset Purchase Agreement"), among the
Company, Valley Industries, Inc., a Delaware corporation ("Valley"), and
certain affiliates of Valley. Pursuant to the Asset Purchase Agreement, the
Company is, among other things, acquiring substantially all of the assets of
Valley.
The Company desires to enter into this Agreement in order to
assure itself of the continued service of the Executive following the Closing
(as such term is defined in the Asset Purchase Agreement), and the Executive
desires to accept employment with the Company, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, the parties agree as follows:
Section 1. Employment. The Company hereby employs the Executive, and the
Executive hereby accepts employment by the Company, upon the terms and
conditions hereinafter set forth.
Section 2. Term. The employment of the Executive hereunder shall be for a
period commencing on the date hereof (the "Commencement Date") and ending on
August 5, 2000 (the "Initial Term") or such earlier date upon which the
employment of the Executive shall terminate in accordance with the provisions
hereof. Unless terminated earlier in accordance with the provisions hereof, at
the end of the Initial Term and at the end of each term thereafter, the
employment of the Executive hereunder shall automatically renew for successive
one-year periods unless the Company or the Executive shall give the other
written notice of its desire not to renew the term or the Initial Term no later
than six months prior to the termination of the then current term. The period
commencing on the Commencement Date and ending on the date of termination of
the Executive's employment hereunder shall be called the "Term of Employment"
for the Executive, and the date on which the Executive's employment hereunder
shall terminate shall be called the "Termination Date."
Section 3. Duties. During the Term of Employment, the Executive shall be
employed as the President and Chief Executive Officer of the Company and shall
perform such duties as are consistent therewith as the respective Boards of
Directors of the Company and AAS Holdings, LLC, a Delaware limited liability
company ("Holdings") (each, a "Board" and together, the "Boards") or their
respective designees shall designate. The Executive shall use his best efforts
to perform well and faithfully the foregoing duties and responsibilities.
Section 4. Time to be Devoted to Employment. During the Term of
Employment, the Executive shall devote all of his business time,
attention and energies to the business of the Company and its subsidiaries
(except for vacations to which he is entitled pursuant to Section
<PAGE> 2
6(b)) and periods of illness or incapacity). During the Term of Employment,
the Executive shall not engage in any business activity which, in the
reasonable judgment of either of the Boards, conflicts with the duties of
the Executive hereunder, whether or not such activity is pursued for gain,
profit or other pecuniary advantage.
Section 5. Compensation.
(a) The Company (or at the Company's option, any subsidiary or
affiliate thereof) shall pay to the Executive an annual base salary (the "Base
Salary") during the Term of Employment of not less than $250,000, payable in
such installments (but not less often than monthly) as is generally the
policy of the Company with respect to its executive officers, which Base Salary
shall be subject to such increases as the Company's Board, in its sole
discretion, may from time to time determine. The Executive's performance shall
be reviewed at least annually by the Boards.
(b) During the Term of Employment, the Executive shall be eligible
to participate in a bonus plan in the range which will provide the Executive
with an annual cash bonus of 50%-70% of the Base Salary subject to the
achievement by the Company of performance goals established by Holdings'
Board in its sole discretion, provided, however, that the Executive shall be
eligible to receive an annual cash bonus of 20.8% - 29.2% of the Base Salary
for the fiscal year ending December 31, 1997, subject to the achievement of
such performance goals.
Section 6. Business Expenses; Benefits.
(a) The Company (or, at the Company's option, any subsidiary or
raffiliate thereof) shall reimburse the Executive, in accordance with the
practice from time to time for executive officers of the Company, for all
reasonable and necessary expenses and other disbursements incurred by the
Executive for or on behalf of the Company in the performance of the Executive's
duties hereunder. The Executive shall provide such appropriate documentation of
expenses and disbursements as may from time to time be required by the Company.
(b) During the Term of Employment, the Executive shall be entitled
to five weeks vacation per year.
(c) During the Term of Employment, the Company shall continue to
provide the Executive with the group health, life and disability insurance
benefits, and retirement plan benefits that were provided by the Company to the
Executive prior to the Closing. In the event that the Executive completes the
Term of Employment hereunder and is terminated (other than due to a Termination
for Cause), the Company shall, so long as it is permitted to provide benefits
to non-employees pursuant to its existing employee benefits plans, continue to
provide the Executive with his and his existing spouse's medical benefits on
substantially the same terms as provided during the Term of Employment until
each such person reaches the age of 65 ; provided that the Executive shall
reimburse the Company for its provision of such benefits in an amount no less
than the maximum amount that the Executive and/or his spouse would have to pay
for such benefits pursuant to the Congressional Omnibus Budget Reconciliation
Act of 1985, as may be amended from time to time.
2
<PAGE> 3
(d) During the Term of Employment, the Company shall continue to
reimburse the Executive for his membership expenses at the Great Oaks Country
Club.
(e) During the Term of Employment, the Company shall continue to
reimburse the Executive for his reasonable automobile expenses up to seven
hundred dollars ($700) per month.
Section 7. Involuntary Termination.
(a) If the Executive is incapacitated or disabled (such condition being
hereinafter referred to as a "Disability") in a manner that would qualify the
Executive for benefits under the disability policy of the Company (the
"Disability Policy"), the Term of Employment and the employment of the
Executive under this Agreement shall cease (such termination, as well as a
termination under Section 7(b), being hereinafter referred to as an
"Involuntary Termination") and the Executive shall be entitled to receive the
benefits payable under the Disability Policy.
(b) If the Executive dies during the Term of Employment, the Term of
Employment and the Executive's employment hereunder shall cease as of the date
of the Executive's death.
Section 8. Termination For Cause. The Company may terminate the Term of
Employment and the employment of the Executive hereunder at any time for Cause
(as hereinafter defined) (such termination being referred to herein as a
"Termination For Cause") by giving the Executive written notice of such
termination, effective immediately upon the giving of such notice to the
Executive. As used in this Agreement, "Cause" means the Executive's (a)
commission of an act (i) constituting a felony or (ii) involving fraud, theft
or dishonesty which is not a felony and which materially adversely affects the
Company or could reasonably be expected to materially adversely affect the
Company, (b) repeated failure to be reasonably available to perform his duties,
which, if curable, shall not have been cured within 10 business days of written
notice thereof from the Company, (c) repeated failure to follow the lawful
directions of the Boards, which, if curable, shall not have been cured within
10 business days of written notice thereof from the Company, (d) material
breach of any agreement with the Company (including any noncompete provisions
of this or any agreement between the Executive and the Company) which, if
curable, shall not have been cured within 10 business days of written notice
thereof from the Company, or (e) resignation.
Section 9. Termination Without Cause. The Company may terminate the Term
of Employment and the employment of the Executive hereunder without Cause (such
termination being hereinafter referred to as a "Termination Without Cause") by
giving the Executive written notice of such termination, which notice shall be
effective on the date specified therein but not earlier than the date on which
such notice is given.
Section 10. Effect of Termination.
(a) Upon the termination of the Term of Employment and the Executive's
employment hereunder due to an Involuntary Termination or Termination for
Cause, neither the Executive nor his beneficiary or estate shall have any
further rights or claims against the Company under this Agreement, except to
receive (i) the unpaid portion, if any, of the Base
3
<PAGE> 4
Salary provided for in Section 5(a), computed on a pro rata basis to
the Termination Date (based on the actual number of days elapsed over the
actual number of days of the year in which such termination occurs), (ii) any
unpaid accrued benefits of the Executive, and (iii) reimbursement for any
expenses for which the Executive shall not have been reimbursed as provided in
Section 6(a).
(b) Upon the termination of the Executive's employment hereunder due
to a Termination Without Cause, neither the Executive nor his beneficiary or
estate shall have any further rights or claims against the Company under this
Agreement except the right to receive (i) the amounts set forth in Section
10(a), (ii) the prorated portion of any bonus earned by the Executive in such
year under any Company incentive compensation plan in which the Executive
participates, (iii) the Base Salary through the date which is twelve (12)
months from the Termination Date, payable in such installments over the
applicable period as the base salary is generally paid to the Executive and
(iv) the costs to the Executive under COBRA to receive insurance coverage from
the Company during the period commencing on the Termination Date through the
date which is the earlier to occur of (1) the first anniversary of the
Termination Date and (2) the day prior to the date on which the Executive shall
be included in any insurance program provided by any other employer. The
Executive shall have no duty to mitigate the Company's obligations under this
Section 10(b).
Section 11. Insurance. The Company may, for its own benefit, in its sole
discretion, maintain "key-man" life and disability insurance policies covering
the Executive. The Executive will cooperate with the Company and provide such
information or other assistance as the Company may reasonably request in
connection with the Company's obtaining and maintaining such policies.
Section 12. Disclosure of Information. The Executive shall not, at any
time during the Term of Employment or thereafter, disclose to any person, firm,
corporation or other business entity, except as required by law, any non-public
information (including, without limitation, non-public information obtained
prior to the date hereof) concerning the business, clients or affairs of the
Company or any subsidiary or affiliate thereof for any reason or purpose
whatsoever, nor shall the Executive make use of any of such non-public
information for his own purpose or for the benefit of any person, firm,
corporation or other business entity except the Company or any subsidiary or
affiliate thereof. Upon the termination of the Term of Employment, the
executive shall return to the Company all property of the Company or any
subsidiary or affiliate thereof then in the possession of the Executive and all
books, records, computer tapes or discs and all other material containing
non-public information concerning the business, clients or affairs of the
Company or any subsidiary or affiliate thereof.
Section 13. Right to Inventions. The Executive shall promptly disclose,
grant and assign to the Company for its sole use and benefit any and
all marks, designs, logos, inventions, improvements, technical information and
suggestions relating in any way to the business conducted by the Company, which
he may develop or which may be acquired by the Executive during the Term of
Employment (whether or not during usual working hours), together with all
trademarks, patent applications, letters patent, copyrights and reissues
thereof that may at any time be granted for or upon any such mark, design,
logo, invention, improvement or technical information. In connection
therewith:
4
<PAGE> 5
(i) the Executive shall without charge, but at the expense of the
Company, promptly at all times hereafter execute and deliver such
applications, assignments, descriptions and other instruments as may be
necessary or proper in the opinion of the Company to vest title to any
such marks, designs, logos, inventions, improvements, technical
information, trademarks, patent applications, patents, copyrights or
reissues thereof in the Company and to enable it to obtain and maintain
the entire right and title thereto throughout the world;
(ii) the Executive shall render to the Company at its expense
(including a reasonable payment for the time involved in case he is not
then in its employ based on his last per diem earnings) all such
assistance as it may require in the prosecution of applications for said
trademarks, patents, copyrights or reissues thereof, in the prosecution
or defense of interferences which may be declared involving any said
trademarks, applications, patents or copyrights and in any litigation in
which the Company may be involved relating to any such trademarks,
patents, inventions, improvements or technical information; and
(iii) for the avoidance of doubt, the foregoing provisions shall
be deemed to include an assignment of future copyright in accordance with
Section 37 of the Copyright Act of 1986 and any amendment or re-enactment
thereof.
Section 14. Restrictive Covenant.
(a) The Company is in the business of designing, engineering
manufacturing, selling and distributing towing products including trailer
hitches, trailer bells, bell mounts, couples, tow bars and brush guards (the
"Business"). The Executive acknowledges and recognizes that the Business has
been conducted, and substantial sales of its products have been made,
throughout the United States, and the Executive further acknowledges and
recognizes the highly competitive nature of the industry in which the Business
is involved. Accordingly, in consideration of the premises contained herein,
the consideration to be received hereunder, stock options to be granted to the
Executive and in consideration of and as an inducement to the Company to
consummate the transactions contemplated by the Purchase Agreement, the
Executive shall not during the Non-Competition Period (as defined below) (i)
directly or indirectly engage, whether or not such engagement shall be as a
partner, stockholder, affiliate or other participant, in any Competitive
Business (as defined below), or represent in any way any Competitive Business,
whether or not such engagement or representation shall be for profit, (ii)
interfere with, disrupt or attempt to disrupt the relationship, contractual or
otherwise, between the Company and any other person or entity, including,
without limitation, any customer, supplier or employee of the Company, (iii)
induce any employee of the Company or the Business to terminate his employment
with the Company or the Business or to engage in any Competitive Business in
any manner described in the foregoing clause (i) (as well as an officer or
director of any Competitive Business), or (iv) affirmatively assist or induce
any other person or entity to engage in any Competitive Business in any manner
described in the foregoing clause (i) (as well as an officer or director of any
Competitive Business). Anything contained in this Section 14 to the contrary
notwithstanding, an investment by the Executive in any entity in which the
Executive and his affiliates exercise no operational or strategic control and
which constitutes less than 2% of the capital of such entity shall not
constitute a breach of this Section 14.
5
<PAGE> 6
(b) As used herein, "Non-Competition Period" shall mean the period
commencing on the date hereof and terminating on the fifth anniversary of the
Termination Date; provided, however, that if the Term of Employment shall have
been terminated pursuant to Section 9, then "Non-Competition Period" shall mean
the period commencing on the date hereof and terminating on the later of (i)
the second anniversary of the Termination Date and (ii) the end of the period
following the Termination Date which is equal to the period of the Term of
Employment (assuming that the Term of Employment shall not exceed five years
for purposes of this clause (ii)); and "Competitive Business" shall mean any
business in any State of the United States or anywhere outside the United
States engaged in designing, engineering, manufacturing, selling or
distributing systems or components thereof (such as trailer hitches, trailer
balls , ball mounts, couplers, tow bars and two brushes) intended to facilitate
towing.
(c) The Executive understands that the foregoing restrictions may limit
his ability to earn a livelihood in a business similar to the business of the
Company or any subsidiary or affiliate thereof, but he nevertheless believes
that he has received and will receive sufficient consideration and other
benefits as an employee of the Company and as otherwise provided hereunder and
pursuant to other agreements between the Company and the Executive to justify
clearly such restrictions which, in any event (given his education, skills and
ability), the Executive does not believe would prevent him from earning a
living.
Section 15. Enforcement; Severability; Etc. It is the desire and intent
of the parties that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any particular
provision of this Agreement shall be adjudicated to be invalid or
unenforceable, such provision shall be deemed amended to delete therefrom the
portion thus adjudicated to be invalid or unenforceable, such deletion to apply
only with respect to the operation of such provision in the particular
jurisdiction in which such adjudication is made.
Section 16. Remedies. The Executive acknowledges and understands that the
provisions of this Agreement are of a special and unique nature, the loss of
which cannot be adequately compensated for in damages by an action at law, and
that the breach or threatened breach of the provisions of this Agreement would
cause the Company irreparable harm. In the event of a breach or threatened
breach by the Executive of the provisions of this Agreement, the Company shall
be entitled to an injunction restraining him from such breach. Nothing
contained in this Agreement shall be construed as prohibiting the Company from
or limiting the Company in pursuing any other remedies available for any breach
or threatened breach of this Agreement.
Section 17. Notices. All notices, claims, certificates, requests, demands
and other communications hereunder shall be in writing and shall be
deemed to have been duly given and delivered if personally delivered or if sent
by nationally-recognized overnight courier, by telecopy, or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
if to the Company, to:
6
<PAGE> 7
Valley Industries, LLC
32501 Dequindre Road
Madison Heights, Michigan 48071
Telecopier: (810) 588-0027;
with copies to:
AAS Holdings, LLC
12900 Hall Road
Suite 200
Sterling Heights, Michigan 48313
Attention: Chief Executive Officer
Telecopier: (810) 997-6839
with copies to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: John J. Suydam, Esq.
Telecopier: (212) 408-2420;
if to the Executive, to:
Roger T. Morgan
3496 Summit Ridge
Rochester Hills, Michigan 48306
Telecopier: (810) 373-6949
with copies to:
David A. Widlak
P.O. Box 482
Washington, Michigan 48094
Telecopier: (810) 786-3933
or to such other address as the party to whom notice is to be given may
have furnished to the other party or parties in writing in accordance herewith.
Any such notice or communication shall be deemed to have been received (a) in
the case of personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the
date when sent, (c) in the case of telecopy transmission, when received, and
(d) in the case of mailing, on the third business day following that on which
the piece of mail containing such communication is posted.
Section 18. Binding Agreement; Benefit. Subject to Section 23, the
provisions of this Agreement will be binding upon, and will inure to the
benefit of, the respective heirs, legal representatives, successors and assigns
of the parties.
7
<PAGE> 8
Section 19. Governing Law. This Agreement will be governed by, and
construed and enforced in accordance with, the laws of the State of New York
(without giving effect to principles of conflicts of laws).
Section 20. Waiver of Breach. The waiver by either party of a breach of
any provision of this Agreement must be in writing and shall not operate or be
construed as a waiver of any other breach.
Section 21. Entire Agreement; Amendments. This Agreement contains the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements or understandings between the parties with
respect thereto. This Agreement may be amended only by an agreement in writing
signed by the parties.
Section 22. Headings. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 23. Assignment. This Agreement is personal in its nature and the
parties shall not, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder; provided, however, that the
Company may assign this Agreement to any of its subsidiaries and affiliates.
Section 24. Counterparts. This Agreement may be executed in counterparts,
and each such counterpart shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement.
Section 25. Gender. Any reference to the masculine gender shall be deemed
to include the feminine and neuter genders unless the context otherwise
requires.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Employment Agreement as of the date first written above.
VALLEY INDUSTRIES, LLC
By:_____________________________
Name:
Title:
________________________________
ROGER T. MORGAN
9
<PAGE> 1
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
The Undersigned:
1. The private limited liability company BRINK B.V., established and
having an office at Industrieweg 5, Staphorst and represented legally in this
matter by company director W. Rengelink who shall be referred to hereinafter
as; "the Company";
AND
2. G. de Graaf, born on September 27, 1963 and resident in Spakennburg and
who shall be referred to hereinafter as: "Employee":
WHEREAS:
- The shareholders in the Company have, in accordance with a
written decision taken by shareholders on 30 October 1996,
appointed the Employee as Managing Director under the Articles
of Association;
- The parties wish to record the employment agreement entered
into between the Employee and the Company in writing;
AGREEMENT HAVING BEEN REACHED AS FOLLOWS:
Article 1: Commencing date, duration and termination
1. The Employee will be employed with effect from November 1,
1996 for an indefinite period of time. The Employment can be
terminated by either party provided that 3 months notice is given.
Notice can only be given in writing.
2. Employment will in any case terminate without any notice of
termination being required on the last day of the month in which the
Employee becomes 65 years of age.
3. If the company terminates the employment of the Employee
either with a view to or within the framework of a merger or
take-over, or for other reasons, and this terminations is for the
Employee not voluntary, then the Company is obliged to pay the
Employee compensation which will be calculated as follows: (50% +
years in service x 20%) x (annual salary + holiday allowance +
bonus) with a maximum of 1 x (annual salary + holiday allowance +
bonus).
4. The Company will transfer its rights and obligations
resulting from this agreement to the company which will, within
the framework of the reorganisation of the Company proposed by
shareholder, continue to carry on the business of the Company and
its subsidiaries. The Employee already agrees now with the transfer
of rights and obligations and is prepared to accept dismissal as
Managing Director under the
<PAGE> 2
Articles of Association of the Company and to be appointed as
Managing Director under the Articles of Association of the new
company. Article 1.3 will not apply to this termination of
employment.
Article 2: Function
1. The Company will employ the Employee as Managing Director
under the Articles of Association.
2. The Employee is obliged to perform his duties to the best of
his ability in the expected of a conscientious Director; the
Employee will do everything in his power to promote expansion of the
Company.
3. The Employee has all the rights and obligations which are
granted to or imposed on, as the case may be, the Director by the
Articles of Association of the Company.
4. The Employee will not, without prior written permission from
the Company to do so, carry out any other work during the lifetime
of the employment agreement for which he is paid or establish a
company which completes with the Company, conduct business, conduct
business with others or, either directly or indirectly, have an
interest in such a company any way whatsoever or be employed in any
way whatsoever by such a company either for payment or for no
consideration.
5. The Employee is prepared if asked by the Company to do so to
work for a company associated with the Company.
Article 3: Salary
1. The Employee will be paid a salary of NLG 170.000, -- gross
per year including 8% holiday allowance. The salary will be paid
out minus the 8% holiday allowance in 13 equal instalments in
arrears.
2. The holiday allowance will be paid in arrears in the month of
May in the current year. If the Employee has only been employed for
part of the calendar year then the holiday allowance will be paid
proportionately.
3. In addition to the fixed salary the employee is granted a
non-fixed salary, which starting January 1, 1997 will be based upon
realisation of the goals as included in the Company's budget. This
non-fixed salary will amount to NLG 30.000 (gross) per year if full
achievement of the goals as included in the Company's budget has
been realised.
4. The payment of the non-fixed salary as mentioned in the
previous paragraph will be made as soon as possible after approval
of the statutory accounts by the general
2
<PAGE> 3
meeting of shareholders. For 1996, this non-fixed salary will
amount to NLG 7.500 (gross) which will be paid in the second quarter
of 1997.
Article 3: Salary
1. The Employee will be paid NLG 500, -- each month as
compensation for the expenses incurred by him in connection with carrying out
his duties.
2. The Employee will be reimbursed each month for the expenses incurred by
him in the interests of the Company. The Employee must, as far as possible,
pay the expenses meant by means of a Credit Card made available by the Company.
3. The expenses referred to in section 2 will only be paid on the basis of
a declaration approved by the Company.
4. The Company will compensate the Employee for the subscription charges
and telephone charges incurred by the Employee for the telephone connection t
his home but with the exception of that part which cannot be paid without being
taxed by the fiscal authorities.
5. The employee will be reimbursed for the moving expenses incurred by him
due to this appointment. The expenses will be paid on the basis of a
declaration. The reimbursement is in no case more than 12% of the fixed gross
salary per year. The reimbursement is related to the actual incurred expenses
for as long as the Employee has not been compensation for these expenses by any
other sources.
Article 5: Car
1. The Company will make a leased car (with a maximum catalogue value of
NLG 85.000,--incl. Sales Tax) available to the Employee for carrying out his
duties.
2. The conditions laid down in the Company's car-scheme will apply to use
of the leased car. The Employee has been given a copy of that car-scheme.
Article 6: Pension
1. The Company will take out pension insurance and industrial disability
insurance c over for the Employee. The cost of that insurance will be paid by
the Company and the Employee jointly. The Employee will pay 40% of the cost.
The Employee empowers the company to deduct his contribution in equal,
successive installments from each payment of salary. The Company will arrange
for payment of the total premium to the insurance company.
2. The above is based on the assumption that the fixed final salary of the
Employee is insured at 65 years of age. The insurance provides a widow's,
orphans and old age pension. That part of the premium paid by Employee is
tax-deductible.
3
<PAGE> 4
Article 7: Holidays
3. The Employee is entitled to 25 days holiday per year.
Article 8: Illness and Industrial Disability
1. The Employee is obliged if he is ill or if he cannot carry out his
duties for other reasons to notify the Company of that fact on the first day
that he is unable to work.
2. The Company will continue to pay the gross salary agreed together with
the emoluments in full for a maximum period of 52 weeks if the Employee is
unable to work because of illness.
3. If the illness or industrial disability should last longer than one
year then the Industrial Disability Act will come into effect. An extra
Industrial Disability Act will also be made for the employee. The combined
benefits paid in the case of illness or industrial disability will amount after
the first year to a maximum of 70% of the last salary earned. The premium for
the extra Industrial Disability Act arrangement will be paid by the Company.
That specified in this Article is subject to acceptance by the insurance
company concerned.
Article 9: Health Insurance
1. The Company will pay, in accordance with the regulations contained in
the guide, the Employee a contribution to the premium owed by him for health
insurance.
Article 10: Secrecy
1. The Employee is forbidden, both during the period when he is employed
by the Company as well as after that employment has terminated, to make known
in any form whatsoever either directly or indirectly information, which the
Employee understands or should understand within reason that the information
is not intended to be made known to third parties and which he has about the
business conducted by the Company or a company associated with the Company or
connected therewith or about any special circumstances, to third parties (which
also includes employees employed by the Company or companies associated with
it). The Employee will note, unless he has been given permission to do so,
keep in his possession or show to third parties or take outside the company any
texts, copies, drawings, models and other matters in the widest sense of the
word.
2. The Employee must, if he infringes that specified in section 1, pay the
company a fine which is payable on demand and which amounts to NLG
50.000 for every infringement and notwithstanding other claims made by the
company and including the right of the Company to claim full compensation.
Article 11: Non competition clause
4
<PAGE> 5
1. The employee is forbidden, unless he has prior written permission from
the Company to do so, for a period of 2 years after his employment with the
Company has terminated, to compete in any way whatsoever either directly or
indirectly with the Company or a company associated with the Company by
establishing a company which competes with the Company or to conduct business
or to jointly conduct business which competes with the Company or to have any
interest in such a company or to be employed in any way whatsoever by such
company either for payment or for consideration.
2. The employee is forbidden, unless he has prior written permission from
the Company to do so, for a period of 2 years after his employment with the
Company has terminated to encourage employees of the Company or a company
associated with it to terminate their employment contract for the purpose of
competing in any way whatsoever with the Company or a company associated with
it.
3. The employee must, if he fails to comply with any one of the
stipulations referred to above, pay the Company a fine which is payable on
demand and which amounts to NLG 50.000 for every infringement as well as NLG
1.000 for each day that he fails to comply and including the right of the
Company to claim full compensation.
4. The period of time referred to in sections 1 and 2 will be extended by
the duration of each infringement of one of the stipulations referred to above.
Article 12: Intellectual and industrial property rights
1. The Employee agrees to transfer herewith to the Company and transfers
as far as possible - for as far as the rights referred to below do not go to
the company according to law and which arise from the employment connection
existing between the parties - all rights of any kind whatsoever both in The
Netherlands as well as elsewhere pertaining to and resulting from inventions
made by the Employee while carrying out his duties.
2. The Employee acknowledges that the salary earned by him contains
reasonable compensation for the lack of intellectual and industrial property
rights.
Article 13: Regulations
1. The Employee declares that he has received a copy of the Company
Regulations.
Article 14: Relevant legislation
This agreement is subject of the laws of The Netherlands.
Agreed and drawn up in duplicate in Staphorst on 1 November 1996.
Brink B.V.
W. Rengelink G. de Graaf
5
<PAGE> 1
EXHIBIT 10.16
MANAGEMENT CONSULTING AGREEMENT dated
as of July 2, 1997, between ADVANCED
ACCESSORY SYSTEMS CANADA INC./LES SYSTEMES
D'ACCESSOIRE ADVANCED CANADA INC., a
corporation existing under the laws of
Quebec (the "Company") and LES PLACEMENTS
JEAN MAYNARD INC., a corporation existing
under the laws of Canada (the
"Consultant").
Reference is made to the Asset Purchase Agreement dated as of the date
hereof (as amended, the "Purchase Agreement"), among Bell Sports Corp., a
Delaware corporation ("Bell Sports"), Bell Sports Canada Inc., a corporation
existing under the laws of Quebec ("Bell Canada"), and the Company. Pursuant
to the Purchase Agreement, the Company has acquired substantially all of the
assets of the SportRack division of Bell Canada.
WHEREAS the Company desires to retain the Consultant to perform
management consulting services for the Company and the Consultant desires to
perform such management consulting services for the Company upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
SECTION 1. RETENTION OF CONSULTANT.
The Company hereby retains the Consultant as a consultant, and the
Consultant hereby accepts such retention by the Company, and hereby agrees to
perform such services for the Company in respect of its business, as directed
by the Board of Directors of the Company ("the Board").
SECTION 2. TERM.
The retention of the Consultant hereunder shall be for a period (the
"Initial Period") commencing on the date hereof (the "Commencement Date") and
ending on June 30, 2000 or such earlier date upon which the retention of the
Consultant shall terminate in accordance with the provisions hereof. Unless
terminated earlier in accordance with the provisions hereof, the retention of
the Consultant hereunder shall continue after the end of the Initial Period for
an additional two (2) year period upon thirty (30) days written notice to the
Company prior to the termination of the Initial Period from the Consultant and,
if the Consultant has so exercised its right to renew its retention for such
additional two (2) year period, for successive one (1) year periods unless the
Company or the Consultant shall give the other party written notice to
terminate such retention no later than thirty (30) days prior to the
commencement of any such one (1) year period. The period commencing on the
Commencement Date and ending on the date of termination of the Consultant's
retention hereunder shall be called the "Term", and the date on which the
Consultant's retention hereunder shall terminate shall be called the
"Termination Date".
<PAGE> 2
SECTION 3. DUTIES.
(a) The Consultant hereby acknowledges and agrees that it is an
essential condition of this Agreement that the Consultant make available
to the Company the services of an individual to be jointly designated in
writing by the Consultant and the Company (the "Designated Person") in
connection with the Consultant's performance of its services hereunder.
The Consultant shall make the Designated Person available to provide such
services throughout the Term and, subject to Section 3(b), on a full-time
basis.
(b) The Consultant covenants and agrees that it shall, and shall
cause the Designated Person to, faithfully and diligently serve the
Company during the Term and act in all respects as a good manager and
administrator of the affairs of the Company, and shall, and shall cause
the Designated Person to, use its/his best efforts to promote and advance
the interests of the Company and, in particular, to increase the profits
thereof. The Consultant shall cause the Designated Person to devote
substantially all of his business time, attention and ability to the
business of the Company and to be subject to and abide by the polices and
procedures generally applicable to employees of the Company and/or any of
its affiliates.
(c) During the Term, the Designated Person shall serve as the
President of the Company and shall advise the Company concerning such
matters that relate to the business and affairs of the Company and its
affiliates as the Company shall reasonably request, and shall perform
such duties as are consistent therewith as the Board shall designate.
SECTION 4. [INTENTIONALLY OMITTED]
SECTION 5. COMPENSATION.
(a) The Company (or, at the Company's option, any subsidiary or
affiliate thereof) shall pay to the Consultant an annual consulting fee
(the "Base Fee") during the Term of one hundred and seventy-six thousand
Canadian dollars (Cnd. $176,000), payable in equal monthly installments,
plus all applicable "GST" and "QST" (as such terms are defined in the
Purchase Agreement).
(b) During the Term, the Consultant shall be eligible to
participate in incentive compensation or bonus plans that the Board
shall implement for the Consultant, which will generally provide the
Consultant the opportunity to receive an annual cash bonus in the range
of up to fifty percent (50 %) of the Base Fee, subject to the achievement
by the Consultant of performance goals established by the Board in its
sole discretion.
- 2 -
<PAGE> 3
SECTION 6. BUSINESS EXPENSES: BENEFITS.
The Company (of, at the Company's option, any subsidiary or affiliate
thereof) shall reimburse the Consultant, in accordance with its practice from
time to time, for all reasonable and necessary documented expenses and other
disbursements incurred by the Designated Person for or on behalf of the Company
in the performance of the Consultant's duties hereunder.
SECTION 7. INVOLUNTARY TERMINATION.
(a) If the Designated Person is incapacitated or disabled in a
manner that would prevent him from performing the Consultant's duties
hereunder for a period of one hundred and eighty (180) consecutive days,
the Term and the retention of the Consultant under this Agreement shall
cease and the Company shall have no further obligation hereunder.
(b) If the Designated Person dies during the Term, the Term and the
Consultant's retention hereunder shall cease as of the date of the
Designated Person's death and the Company shall have no further
obligation hereunder.
SECTION 8. TERMINATION FOR CAUSE.
The Company may terminate the Term and the retention of the Consultant
hereunder at any time for Cause (as hereinafter defined) (such termination
being referred to herein as a "Termination For Cause") by giving the Consultant
written notice of such termination, effective immediately upon the giving of
such notice to the Consultant. As used in this Agreement, "Cause" means (a)
the Designated Person's (i) commission of an act (x) constituting a felony or
(y) involving fraud, theft or dishonesty which is not a felony and which
materially and adversely affects the Company or could reasonably be expected to
materially and adversely affect the Company, (ii) repeated failure to be
reasonably available to perform the Consultant's duties, which, if curable,
shall not have been cured within ten (10) business days of written notice
thereof from the Company, (iii) repeated failure to follow the lawful
directions of the Company, which, if curable, shall not have been cured within
ten (10) business days of written notice thereof from the Company, (iv)
material breach of any agreement with the Company (including the noncompete
provisions set forth in Section 14 hereof) which, if curable, shah not have
been cured within ten (10) business days of written notice thereof from the
Company, (v) the resignation from, or termination for any reason whatsoever by,
the Consultant or the Designated Person, or (b) the sale of all or
substantially all of the assets of the Consultant or the occurrence of a Change
of Control. As used herein, the term "Change of Control" shall mean the
Designated Person ceasing to own beneficially and of record fifty-one percent
(51%) of all classes of voting capital stock of the Consultant.
- 3 -
<PAGE> 4
SECTION 9. TERMINATION WITHOUT CAUSE.
The Company may terminate the Term and the retention of the Consultant
hereunder without Cause (such termination being hereinafter referred to as a
"Termination Without Cause") by giving the Consultant written notice of such
termination, which notice shall be effective on the date specified therein but
not earlier than the date on which such notice is given.
SECTION 10. EFFECT OF TERMINATION.
(a) Upon the termination of the Term and the retention of the
Consultant hereunder due to an Involuntary Termination or Termination for
Cause, neither the Consultant, the Designated Person nor his beneficiary
or estate shall have any, further rights or claims against the Company
under this Agreement, except to receive (i) the unpaid portion, if any,
of the Base Fee provided for in Section 5(a), computed on a pro rata
basis to the Termination Date (based on the actual number of days elapsed
over the actual number of days of the year in which such termination
occurs), (ii) any unpaid accrued benefits of the Designated Person due
hereunder, and (iii) reimbursement for any expenses for which the
Consultant or the Designated Person shall not have been reimbursed as
provided in Section 6.
(b) Upon the termination of the retention of the Consultant
hereunder due to a Termination Without Cause, neither the Consultant, the
Designated Person nor his beneficiary or estate shall have any further
rights or claims against the Company under this Agreement except the
right to receive (i) the amounts set forth in Section 10(a), (ii) the
prorated portion of any bonus earned by the Consultant in such year under
any Company incentive compensation or bonus plan in which the Consultant
participates, and (iii) the Base Fee through the date which is twelve
(12) months from the Termination Date, payable in such installments over
the applicable period as the Base Fee is generally paid to the
Consultant.
SECTION 11. INSURANCE.
The Company may, for its own benefit, in its sole discretion, maintain
"key-man" life and disability insurance policies covering the Designated
Person. The Designated Person will cooperate with the Company and provide such
information or other assistance as the Company may reasonably request in
connection with the Company's obtaining and maintaining such policies.
SECTION 12. DISCLOSURE OF INFORMATION.
The Consultant shall not, at any time during the Term or thereafter,
disclose to any person, firm, corporation or other business entity, except as
required by law, any non-public information (including, without limitation,
non-public information obtained prior to the date
- 4 -
<PAGE> 5
hereof) concerning the business, clients or affairs of the Company or any
subsidiary or affiliate thereof for any reason or purpose whatsoever (except as
incident to its performance of this Agreement), nor shall the Consultant make
use of any of such non-public information for its own purpose or for the
benefit of any person, firm, corporation or other business entity except the
Company or any subsidiary or affiliate thereof. Upon the termination of the
Term, the Consultant shall return to the Company all property of the Company or
any subsidiary or affiliate thereof then in its possession and all books,
records, computer tapes or discs and all other material containing non-public
information concerning the business, clients or affairs of the Company or any
subsidiary or affiliate thereof.
SECTION 13. RIGHT TO INVENTIONS.
The Consultant shall promptly disclose, grant and assign to the Company
for its sole use and benefit any and all marks, designs, logos, inventions,
improvements, technical information and suggestions relating in any way to the
Business (as defined in the Purchase Agreement) conducted by the Company, which
it may develop or which may be acquired by the Consultant during the Term
(whether or not during usual working hours), together with all trademarks,
patent applications, letters patent, copyrights and reissues thereof that may
at any time be granted for or upon any such mark, design, logo, invention,
improvement or technical information. In connection therewith:
(i) the Consultant shall, without charge, but at the expense
of the Company, promptly at all times hereafter execute and deliver
such applications, assignments, descriptions and other instruments as
may be necessary or proper in the opinion of the Company to vest title
to any such marks, designs, logos, inventions, improvements, technical
information, suggestions, trademarks, patent applications, patents,
copyrights or reissues thereof in the Company and to enable it to
obtain and maintain the entire right and title thereto throughout the
world;
(ii) the Consultant shall render to the Company at its expense
(including a reasonable payment for the time involved in case the
Consultant is no longer being retained by the Company based on the
appropriate pro rata portion of the Base Fee) all such assistance
as it may require in the prosecution of applications for said
trademarks, patents, copyrights or reissues thereof, in the
prosecution or defense of interferences which may be declared
involving any said trademarks, applications, patents or copyrights
and in any litigation in which the Company may be involved relating
to any such trademarks, patents, inventions, improvements or
technical information; and
(iii) for the avoidance of doubt, the foregoing provisions
shall be deemed to include an assignment of future copyright in
accordance with Section 37 of the Copyright Act of 1986 and any
amendment or re-enactment thereof or any similar Canadian law.
- 5 -
<PAGE> 6
SECTION 14. RESTRICTIVE COVENANT.
(a) The Consultant acknowledges and recognizes that the Business
(as defined in the Purchase Agreement) has been conducted, and substantial
sales of its products have been made, throughout the United States and
Europe, and further acknowledges and recognizes the highly competitive
nature of the industry in which the Business is involved. Accordingly,
in consideration of the premises contained herein, the consideration to
be received hereunder and in consideration of and as an inducement to the
Company to consummate the transactions contemplated by the Purchase
Agreement, the Consultant shall not, during the Non-Competition Period
(as defined below) (i) directly or indirectly engage, whether or not such
engagement shall be as a partner, stockholder, affiliate, director,
officer, employee, independent contractor or other participant, in any
Competitive Business, or represent in any way any Competitive Business,
whether or not such engagement or representation shall be for profit,
(ii) interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between the Company and any other person or
entity, including, without limitation, any customer, supplier or employee
of the Company, (iii) induce any employee of the Company or the Business
to terminate his or her employment with the Company or the Business or to
engage in any Competitive Business in any manner described in the
foregoing clause (i) (including as an officer or director of any
Competitive Business), or (iv) assist or induce any other person or
entity to engage in any Competitive Business in any manner described in
the foregoing clause (i) (including as an officer or director of any
Competitive Business).
(b) As used herein, the term "Non-Competition Period" shall mean
the period commencing on the date hereof and terminating on the fifth
anniversary of the Termination Date; and the term "Competitive Business"
shall mean any business in any State of the United States or anywhere in
the world outside the United States engaged in the Business.
(c) The Consultant understands that the foregoing restrictions may
limit its ability to earn a livelihood in a business similar to the
business of the Company or any subsidiary or affiliate thereof, but it
nevertheless believes that it has received and will receive sufficient
consideration and other benefits to justify clearly such restrictions.
SECTION 15. ENFORCEMENT: SEVERABILITY; ETC.
It is the desire and intent of the parties that the provisions of this
Agreement shall be enforced to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any particular provision of this Agreement shall be
adjudicated to be invalid or unenforceable, such provision shall be deemed
amended to delete therefrom the portion thus adjudicated to be invalid or
unenforceable, such deletion to apply only with respect to the operation of
such provision in the particular jurisdiction in which such adjudication is
made.
- 6 -
<PAGE> 7
SECTION 16. REMEDY.
The Consultant acknowledges and understands that the provisions of this
Agreement are of a special and unique nature, the loss of which cannot be
adequately compensated for in damages by an action at law, and that the breach
or threatened breach of the provisions of this Agreement would cause the
Company irreparable harm. In the event of a breach or threatened breach by the
Consultant of the provisions of this Agreement, the Company shall be entitled
to an injunction restraining it and the Designated Person from such breach.
Nothing contained in this Agreement shall be construed as prohibiting the
Company from or limiting the Company in pursuing any other remedies available
for any breach or threatened breach of this Agreement.
SECTION 17. NOTICES.
All notices, claims, certificates, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given and delivered if personally delivered or if sent by
nationally-recognized overnight courier, by telecopy, or by registered or
certified mail, return receipt requested and postage prepaid, addressed as
follows:
if to the Company, to the address set forth in the Purchase Agreement:
with copies to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, NY 10112
Attention: John J. Suydam, Esq.
Telecopier: (212) 408-2420;
if to the Consultant, to:
Les Placements Jean Maynard Inc.
100 de Gaspe Street
Suite 1101
Nuns Island, Quebec Canada
H3E 1E5
Telephone: (514) 766-7011
Telecopier: (514) 766-5227
or to such other address as the party to whom notice is to be given may have
furnished to the other party or parties in writing in accordance herewith. Any
such notice or communication shall be deemed to have been received (i) in the
case of personal delivery, on the date of such delivery, (ii) in the case of
nationally-recognized overnight courier, on the next business day after the
date when sent, (iii) in the case of telecopy transmission, when received, and
(iv) in the case of mailing, on the third business day following that on which
the piece of mail containing such communication is posted.
- 7 -
<PAGE> 8
SECTION 18. BINDING-AGREEMENT; BENEFIT.
The provisions of this Agreement will be binding upon, and will inure
to the benefit of, the respective heirs, legal representatives, successors and
assigns of the parties.
SECTION 19. GOVERNING LAW.
This Agreement will be governed by, and construed and enforced in
accordance with, the laws of the Province of Quebec and the laws of Canada
applicable therein (without giving effect to principles of conflicts of laws).
SECTION 20. WAIVER OF BREACH.
The waiver by either party of a breach of any provision of this
Agreement must be in writing and shall not operate or be construed as a waiver
of any other breach.
SECTION 21. ENTIRE AGREEMENT; AMENDMENTS.
This Agreement contains the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior agreements or
understandings between the parties with respect thereto. The parties hereto
hereby agree to terminate and cancel the Consulting Agreement between the
Consultant and Bell Sports Canada Inc. (as assigned to the Company by the
Purchase Agreement) dated May 12, 1995.
SECTION 22. HEADINGS.
The section headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
SECTION 23. ASSIGNMENT.
This Agreement is personal in its nature and the parties shall not,
without the consent of the other, assign or transfer this Agreement or any
rights or obligations hereunder; provided, however, that the Company may assign
this Agreement to any of its subsidiaries and affiliates.
SECTION 24. COUNTERPARTS.
This Agreement may be executed in counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
- 8 -
<PAGE> 9
SECTION 25. GENDER.
Any reference to the masculine gender shall be deemed to include the
feminine and neuter genders unless the context otherwise requires.
SECTION 26. GENERAL.
(a) The parties acknowledge and covenant to have been represented
by legal counsel in the discussion, negotiation and execution of this
Agreement. The parties further acknowledge and covenant that the
provisions of this Agreement have been freely and fully discussed and
negotiated and that the execution of this Agreement constitutes and is
deemed to constitute full and final proof of the foregoing. The parties
acknowledge and covenant to have read, examined, understood and approved
all the provisions of this Agreement, including, without restriction, any
schedules attached hereto and forming part hereof.
(b) The Consultant acknowledges having obtained all information
useful or necessary to take an enlightened decision to execute this
Agreement.
SECTION 27. CURRENCY.
All references herein to dollars or $ mean the lawful currency of
Canada.
SECTION 28. COMPLIANCE.
The Consultant, to the extent permissible under applicable law, hereby
covenants to cause the Designated Person to comply with all of the provisions
of this Agreement.
SECTION 29. LANGUAGE.
The parties acknowledge that they have requested that this Agreement be
drawn up in the English language only. Les parties reconnaissent avoir exige
que cette convention soit redigee en anglais seulement.
- 9 -
<PAGE> 10
IN WITNESS WHEREOF, the parties-hereto have executed and delivered this
Agreement as of the date first written above.
ADVANCED ACCESSORY SYSTEMS
CANADA INC./LES SYSTEMS
D'ACCESSOIRE ADVANCED CANADA INC.
By:
---------------------------------------
Name:
Title:
LES PLACEMENTS JEAN MAYNARD INC.
By:
---------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.17
LEASE
-----
THIS LEASE is made this 24th day of January, 1997, between VALLEY
INDUSTRIES
REALTY L.P., a Delaware limited partnership (hereinafter called the "Lessor")
and VALLEY INDUSTRIES, INC., a Delaware corporation (hereinafter called the
"Lessee").
WITNESSETH:
-----------
ARTICLE I - GRANT AND TERM
--------------------------
1.1 Premises. In consideration of the rents, covenants and agreements
herein contained, the Lessor hereby demises and leases unto the Lessee and the
Lessee rents from the Lessor those certain parcels of land known for street
location purposes as 32451 and 32501 DeQuindre Road, Madison Heights, Michigan
and more fully described on the attached Exhibit A incorporated herein by this
reference, along with all buildings, improvements and fixtures now or hereafter
placed in or on the property and all rights, easements and appurtenances
related thereto, which property is hereinafter referred to as the "Premises" or
"Leased Premises".
1.2 Purpose and Term. The Leased Premises shall be used by the Lessee for
office and manufacturing purposes. The term of this Lease shall commence on the
date hereof and ending on the 31st day of December, 2002. A "Lease Year" shall
mean a period of twelve (12) consecutive months commencing January 1st of each
year and ending December 31st of such year.
1.3 Replacement Lease. This Lease shall replace and supercede that certain
Lease between the Lessor and Lessee dated May 27, 1993 (the "Prior Lease")
which related solely to the property located at 32501 DeQuindre Road in Madison
Heights, Michigan. Notwithstanding the foregoing, the rights and obligations of
the Lessor and Lessee under the terms of the Prior Lease as related to events,
occurrences and conditions which occurred or otherwise arose during the term
thereof.
ARTICLE II
----------
RENT-TAXES-UTILITIES
--------------------
2.1 Minimum Rent. Lessee covenants and agrees with Lessor to pay as
minimum rent (the "Minimum Rent") the sum of Twenty-One Thousand and 00/100
Dollars ($21,000.00) per month, subject to adjustment as set forth in Sections
2.4 and 2.5 hereof, payable at such address as Lessor shall designate, in
advance, commencing on the date on which Lessor takes fee simple title to the
Premises (the "Rent Commencement Date") and thereafter on the 1st day of each
calendar month during the continuation of this Lease; provided, however, that
if the Rent Commencement Date occurs other
<PAGE> 2
than the first day of a calendar month, then the Minimum Rent Payment for the
first month shall be prorated according to the number of days remaining in the
first month.
2.2 Rent Tax and Real Estate Taxes. Lessee covenants and agrees to pay all
real estate taxes and assessments due or to become due on the Leased Premises
during the continuation of this Lease as and when such taxes and assessments
become due and payable. Any sales, gross rental, net rental or other duly
imposed tax which is measured by or imposed upon the rent and other charges
herein provided to be paid to Lessor, shall be borne by Lessee, except that
Lessee shall not thereby be required to pay any inheritance, franchise, income,
personal property or similar taxes levied on the business or operation of
Lessor.
2.3 Utilities. Lessee covenants and agrees with Lessor to pay for, as and
when due, all electric current, all gas, all water charges, including sewer
taxes, rentals and surcharges, and all rubbish removal charges, incurred in or
related to the Leased Premises during the term of this Lease, at the rates of
the utility company, municipality or other entity supplying the services and
according to the rules, readings of the meters or submeters measuring the
quantity furnished to the Leased Premises. Any failure to pay such utility
charges within ten (10) days of the date they are due shall constitute a
default by Lessee under the terms of this Lease.
2.4 Monthly Adjustments. The Minimum Rent due hereunder in respect of each
month during the term of this Lease shall be subject to monthly adjustment (the
"Monthly Adjustment") by an amount equal to the "Excess Interest." For purposes
of this Lease, Excess Interest shall mean any interest payable by Lessor
during the continuation of this Lease on any mortgage indebtedness encumbering
the Leased Premises to the extent such interest payment exceeds an interest
payment computed on a base rate of interest of nine percent (9%) per annum.
Lessor shall notify Lessee in writing of any Monthly Adjustment and the Minimum
Rent shall be increased by such Monthly Adjustment commencing with the next
succeeding Minimum Rent payment and continuing thereafter.
2.5 Increased Annual Adjustment. The Minimum Rent due hereunder shall
be further adjusted annually each Lease Year during the continuation of this
Lease as follows:
(a) On or before November 1st of each Lease Year, Lessor and Lessee
shall use their best efforts to agree on the amount of increased
rent, if any, to be paid by Lessee to Lessor during the next
succeeding Lease Year.
(b) If pursuant to paragraph (a) above, Lessor and Lessee fail to agree on
an amount of increased rent, then the Minimum Rent due hereunder
shall be increased annually as of January 1st of each Lease Year
during the continuation of this Lease in proportion to the increase,
if any, in the Detroit All Items Consumer Price Index for Urban
Consumers ("CPIU - 1967 = 100") (the "Index") for the month of
December of each year over the Index for the month of December of the
immediately preceding year, In the event the Indexes for December are
not available by January 1st, earlier corresponding monthly Indexes
-2-
<PAGE> 3
shall be used. In the event the Index is no longer available, the
Lessee agrees to accept any rent increase based upon comparable
statistics tending to fairly present such increases in the costs of
living in the Detroit area calculated by the Lessor acting in good
faith with respect thereto.
One twelfth (1/12) of the increased annual rent, if any, as determined
in this paragraph 2.5, shall be paid by Lessee to Lessor monthly
during the Lease Year for which such increased rent is so determined,
along with and in addition to the Minimum Rent, provided, however,
that in no event and at no time during the continuation of this
Lease, shall rent paid by Lessee to Lessor be less than the Minimum
Rent.
2.6 Security Deposit. Lessee shall deposit with Lessor the additional sum
of Ten Thousand Eight Hundred Seventy-Five and 00/100 Dollars ($10,875.00),
receipt of which is hereby acknowledged by Lessor, as security for the full and
faithful performance by Lessee of the terms, conditions, and covenants of this
Lease on Lessee's part to be performed and kept and for the cost of any repair
or correction of damage in excess of normal wear and tear. If at any time
during the term hereof Lessee shall be in default in the payment of rent or
other sums due hereunder, or any portion thereof, or of any other sums
expressly constituting rent hereunder, Lessor may appropriate and apply any
portion of the security deposit as may be necessary to the payment of the
overdue rent or other sums due hereunder. If at any time during the term hereof
Lessee should fail to repair any damage to the Premises that it is required to
repair pursuant to the terms hereof, Lessor may appropriate and apply any
portion of the security deposit as may be reasonably necessary to make such
repairs. The security deposit or any balance thereof shall be returned without
interest after the Lessee has surrendered the Premises in an acceptable
condition (following a personal inspection by Lessor). If Lessor determines
that any loss, damage, or injury chargeable to the Lessee hereunder exceeds the
security deposit, the Lessor, at its option, may retain the said sum as
liquidated damages or may apply the sum against any actual loss, damage, or
injury and the balance thereof will be the responsibility of Lessee. Lessor's
determination of the amount, if any, to be returned to the Lessee shall be
final. It is further understood and agreed that the said security deposit is
not to be considered as the last payment under the Lease.
-3-
<PAGE> 4
ARTICLE III
-----------
POSSESSION, USE AND SURRENDER OF PREMISES
-----------------------------------------
3.1 Possession and Surrender. Lessee shall take possession of the Premises,
in the condition in which they are at the beginning of the term, shall not
permit the Premises to be vacant during the term, and at the end of the term
shall deliver all keys to Lessor and leave the Premises broom clean and in as
good condition as received and/or thereafter improved by Lessor, except for
reasonable wear and tear, or damage arising from causes covered under standard
policies of fire and extended coverage insurance. Lessee shall be obligated to
remove any alterations or improvements to the Leased Premises done by Lessee
upon the written request of the Lessor and Lessee shall repair any damage
caused by such renewal. Any merchandise, material or waste left in the Premises
or adjacent interior or exterior areas by Lessee after the end of the term may
be summarily removed by Lessor without notice to Lessee, and Lessee agrees to
reimburse Lessor for the cost of such removal.
3.2 Use of Premises. Lessee shall use and occupy the Premises in a safe
and careful manner, conforming to good housekeeping practices in Lessee's trade
or industry and to reasonable recommendations of the fire insurance
underwriters insuring the Leased Premises. Lessee shall make all alterations or
improvements to the Leased Premises, necessary and proper for the conduct of
its business, in a good and workmanlike manner free of liens of contractors,
materialmen or laborers. Any structural alterations or improvements shall be at
Lessee's sole cost and expense and with the consent of the Lessor first
obtained. Lessee shall conform to and obey all laws, ordinances, rules,
regulations, requirements and orders of all governmental bodies or authorities
respecting its use of the Premises. Lessee agrees not to use the Premises in
any manner deemed specially hazardous because of fire risk or otherwise, or
unless Lessor shall first consent in writing for any purpose other than
hereinbefore stated. If Lessee installs equipment which unbalances or overloads
electrical equipment or wiring in or about the Premises, Lessee shall correct
such unbalanced or overloaded condition and replace equipment or wiring damaged
at Lessee's own expense. If Lessee deposits grease, toxic materials or other
substances in sewers or drains serving the Premises, Lessee shall have such
sewers and drains cleaned at Lessee's expense as often as Lessor considers
necessary for the continuous and unrestricted operation of such sewers.
Lessee warrants that it shall not make any use of the Premises or any
other portion of the Premises which may cause contamination of the soil, the
subsoil, air, or ground water.
Lessee shall keep and maintain the Premises in compliance with, and shall
not cause or permit the Premises to be in violation of any federal, state or
local laws, ordinances, rules or regulations pertaining to health, industrial
hygiene or the environmental conditions on, under or about the Premises,
including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et
seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section
6901 et seq. the Clean Air Act, 42 U.S.C. Section 7401 et seq., and such state
counterparts or supplements as may from time to time be enacted, and all
regulations pertaining thereto (herein collectively referred to as
"Environmental Laws").
-4-
<PAGE> 5
Lessee shall indemnify and hold harmless Lessor, its partners and their
officers, employees, agents, successors and assigns from and against any and
all loss, cost, damage, expense, liability and claims arising from Lessee's use
of the Premises for the conduct of its business or from any activity, work or
other things done or suffered by the Lessee in or about the Premises,
specifically including any violation of any Environmental Laws.
3.3 Removal of Trade Fixtures. If Lessee be not in default hereunder, all
trade fixtures and/or equipment installed in the Premises by Lessee may, and if
Lessor so requests, shall, be removed at the end of the term; provided,
however, that Lessee shall repair, at its own expense, any injury to the
Premises resulting from such removal. If removed equipment includes lighting
fixtures, Lessee shall restore and leave in operating order and with operating
bulbs or tubes the equivalent of the lighting equipment in the Premises at the
beginning of the term.
ARTICLE IV
----------
MAINTENANCE OF THE PREMISES
---------------------------
4.1 Maintenance by Lessee. Lessee covenants and agrees to keep and
maintain the Premises in good order, condition and repair, and, except as
provided in Article 4.3, to promptly make all repairs or replacements becoming
necessary during the term hereof including, but without limitation, repairs or
replacements of windows, doors, glass (which shall be replaced with glass of
the same size and quality), electrical, plumbing and sewage lines and fixtures
within the Premises, and all heating, air conditioning and ventilating
equipment and ducts and vents attached thereto, including any of such equipment
which may, with Lessor's consent, be mounted on the roof of the Premises; all
walls, floor covering, ceilings and roof and all fire extinguishers and
building appliances of every kind. Lessee shall make no alterations in or to
the Premises nor shall Lessee cause or permit any equipment or apparatus to be
installed or put upon or through the roof, walls or floors of the Premises
without, in each case, Lessor's prior written consent, which consent shall not
be unreasonably withheld. Lessee shall at all times maintain sufficient heat in
the Premises to prevent freezing of water lines. If Lessee installs or moves
partitions or walls in the Premises, Lessee shall also make, at its own expense
but subject to Lessor's approval, all additions to or changes in location of
heating, plumbing, sprinkler or electrical equipment in the Premises made
necessary by those installations.
4.2 Lessor's Right to Access. Lessee covenants and agrees to permit Lessor
to enter the Premises at all reasonable or necessary times to examine their
condition or to make repairs and improvements as provided hereunder. During the
last six (6) months of the term of this Lease, Lessor shall have the right to
show the Premises to prospective tenants at all reasonable times and to
maintain a "for rent" sign on the exterior thereof.
4.3 Casualty Damage. Lessor and Lessee agree that if the Premises shall
be materially damaged or destroyed by fire or other casualty covered under the
policies of fire and extended coverage insurance on the Leased Premises, and
such damage or destruction could reasonably be repaired within one hundred
twenty (120) days from the happening thereof, then Lessee shall proceed with
all reasonable speed to repair such damage or destruction and to restore the
Premises as nearly as practicable to their condition immediately preceding such
damage or destruction to the extent of the
-5-
<PAGE> 6
available net insurance proceeds and subject to the approval by Lessor of all
plans and specifications for such repair. If the Premises cannot reasonably be
restored within the number of days set forth above but can be restored within
one hundred eighty (180) days, then Lessee may, but shall not be required to,
restore the Premises in accordance with the foregoing. If Lessee does not elect
to restore the Premises pursuant to the preceding sentence, then Lessor may, by
prompt written notice to Lessee, elect to restore the Premises at its sole cost
and expense using the net insurance proceeds to apply to the cost and expense
necessary to restore the Premises. If neither party elects to restore the
Premises, then this Lease shall terminate as of the date of such damage or
destruction and both parties shall be released from further liability
hereunder, without prejudice, however, to any rights accruing to either party
prior to the date of such damage or destruction.
If in any case Lessee elects or is required to restore the Premises and
promptly commences and thereafter diligently pursues such restoration, this
Lease shall not terminate, notwithstanding that the actual time required for
such repairs or restoration may exceed that contemplated by the parties. The
rent for the Premises during the time Lessee is deprived of possession on
account of such damage or destruction or the repair or restoration thereof
shall be abated on a per diem basis.
4.4 Liens. The Lessee shall not have the power to do any act or make any
contract which may create or be the basis for any lien upon the interest,
reversion or other estate of the Lessor in the Leased Premises and, as relates
to construction, repairing, reconstruction, or the making of alterations or
additions to the Leased Premises, by Lessee, it is expressly understood and
agreed, and notice is hereby given, that no persons, firms, or corporations,
furnishing labor, material, or services for such construction, repair,
reconstruction, or the making of alternations or additions to the Leased
Premises at any time during the term hereof shall have any lien upon the
Lessor's interest in the Leased Premises or upon the appurtenances, equipment,
machinery and fixtures thereof. If, because of any act or omission of Lessee or
anyone claiming by, through, or under Lessee, any mechanic's or other lien or
order for the payment of money shall be filed against the Leased Premises, or
against Lessor (whether or not such lien or order is valid or enforceable as
such), Lessee shall, at its own cost and expense, cause the same to be
cancelled and discharged of record within thirty (30) days after the date of
filing thereof, excluding any delay due to cause(s) beyond the control of
Lessee, and shall also indemnify and save harmless Lessor from and against any
and all costs, expenses, claims, losses or damages, including reasonable
counsel fees, resulting therefrom or by reason thereof.
-6-
<PAGE> 7
ARTICLE V
---------
INSURANCE AND LIABILITY
-----------------------
5.1 Indemnification and Insurance. Lessee covenants and agrees to
indemnify and save Lessor free and harmless from and against any damage, loss
or liability for injury to or death of persons and/or loss or damage to
property, not compensated for by Lessor's insurance, occasioned by, growing out
of, or arising or resulting from Lessee's default hereunder or from any act or
omission of Lessee, its agents or employees. Lessee shall during the term
hereof and at its own expense carry public liability insurance with at least
$1,000,00.00 bodily injury and $500,000.00 property damage limits, with Lessor
named as an additional insured, and a copy of such policy, or certificate
thereof, shall be kept on deposit with Lessor. Lessee further covenants and
agrees that during the term of this Lease it shall carry fire and extended
coverage insurance on the Leased Premises at Lessee's expense, with companies
qualified in the State of Michigan and approved by Lessor and any mortgagee of
the Leased Premises, for the full insurable value of the building(s) and other
improvements on the Leased Premises, naming the Lessor and any mortgagee of the
Leased Premises as additional insureds. Lessee further agrees to exhibit such
policies or certificates of such policies to Lessor and any mortgagee of the
Leased Premises upon its request and agrees that such policies shall not be
subject to cancellation unless sixty (60) days prior written notice of such
cancellation is first provided Lessor and any mortgagee of the Leased Premises.
5.2 Lessor's Nonliabilitv. Lessor shall have no responsibility for the
care or safety of merchandise or other property kept on the Premises by Lessee,
and shall not be liable for any damage caused directly or indirectly by acts or
omissions of others, or by water or steam leaking, escaping or bursting from
any sprinkler equipment, water, steam or other pipes, washstands, tanks, water
closets or sewers in, above, under, upon or about the Premises, or by water,
snow or ice being upon or coming through the roof, skylights, windows,
trapdoors or otherwise.
5.3 Mutual Waiver of Subrogation. To the extent they may do so without
invalidating their respective policies of insurance, Lessor and Lessee each
agree to and hereby do waive all rights of recovery and cause of action against
the other for damage to property caused by any of the perils covered by any of
their respective policies of insurance as now or thereafter in force,
notwithstanding that any such damage or destruction may be due to the
negligence of either party, or person claiming under or through them.
5.4 Limited Liability of Lessor. Lessee agrees to look solely to Lessor
and Lessor's assets for the satisfaction of any claim, liability, or judgment
obtained against Lessor and arising out of this Lease, and no partner of
Lessor, whether general or limited, or his heirs, successors, personal
representatives or assigns, shall have any personal liability or responsibility
hereunder whatsoever. In the event of a sale of the Premises, or of the
property in which they are contained, during the term, and an assumption by the
purchaser of the Lessor's obligations hereunder, Lessor shall be immediately
and automatically released from further liability under this Lease.
-7-
<PAGE> 8
ARTICLE VI
EMINENT DOMAIN
6.1 Eminent Domain. Appropriation of all the Leased Premises shall
terminate this Lease as of the date thereof. If part, but not all, of the
Leased Premises be appropriated, and loss of the part appropriated would have a
significant detrimental effect on Lessee's use of the Premises, then Lessee
shall have the right to cancel this Lease by written notice to Lessor given
within fifteen (15) days after such appropriation. Cancellation shall be as of
the effective date of such appropriation. In the event Lessee elects to cancel
this Lease pursuant to this Article 6.1, Lessee shall vacate the Premises as of
the date the Premises are to be delivered to such appropriating agency or body
and upon such vacation this Lease shall terminate. If Lessee does not exercise
its cancellation right, Lessor shall, at the expiration of the fifteen (15) day
period, proceed with all reasonable dispatch to repair any damage to the
Premises caused by the appropriation, and Lessee shall be entitled to a
reasonable adjustment in the rent accruing hereunder from the date of
appropriation, proportionate to that part of the Premises so taken.
6.2 Allocation of Award. Lesee shall not be entitled to any part of an
award or settlement of damages representing the value of land and building
appropriated, or any estate therein, or damage to the residue of the Leased
Premises or other property of Lessor, it being agreed that as between Lessor
and Lessee any such award shall be the sole property of Lessor. However, in any
condemnation proceeding, Lessee may claim and receive compensation from the
condemning authority for damage to its fixtures, for the cost of removal and
damage by reason thereof, and for any other loss or damage it may suffer by
reason of the appropriation. No appropriation of part or all of the Leased
Premises, or cancellation of this Lease pursuant to this Article shall be
deemed an eviction of Lessee, or a breach of any covenant of Lessor hereunder.
6.3 Rent Reduction. For purposes of this Article, the terms
"appropriation" or appropriated" shall mean a taking in condemnation
proceedings by right of eminent domain, or a conveyance by Lessor to a public
or quasi-public authority under threat of condemnation, and the date of
appropriation shall be the date on which any such event occurs. Where a rent
adjustment is provided for in this Article, the amount of the reduction shall
be determined by agreement between Lessor and Lessee, or if they are unable to
agree within thirty (30) days after appropriation, shall be determined by an
arbitrator appointed under the rules of the American Arbitration Association,
as then in effect. Ihe decision of such arbitrator shall be final and binding
on the parties and the expense of arbitration shall be borne by them equally.
-8-
<PAGE> 9
ARTICLE VII
DEFAULT BY LESSEE
7.1 Default by Lessee. If Lessee shall at any time be in default in the
payment of rent or other charges or in the performance of any of its agreements
hereunder, and if such default relates to the payment of money, shall fail to
remedy it within ten (10) days after written notice from Lessor, or if the
default relates to matters other than the payment of money, fails to commence to
remedy it within thirty (30) days after written notice from Lessor and
thereafter diligently to pursue correction thereof, or if a receiver of any
property of Lessee on the Premises be appointed, or Lessee's interest in the
Premises is levied upon by legal process, or Lessee be adjudged bankrupt, and
Lessee fails within thirty (30) days to commence, and thereafter diligently to
pursue proceedings for the vacation of such appointment, levy or adjudication,
or if Lessee shall dispose of all or substantially all of its assets in bulk,
or make an assignment for the benefit of its creditors, then, and in any such
instance, without further notice to Lessee, Lessor may enter upon the Premises
notwithstanding the provisions of this Lease, and in the event of such entry,
Lessor may either:
(a) Terminate this Lease, in which event the obligations of Lessee
hereunder shall cease, without prejudice however to the right of
Lessor to recover from Lessee for rent or otherwise to the date of
entry, and in addition, as liquidated damages, a sum equal to any
deficiency between the then rental value of the Premises for the
unexpired portion of the term and the rent provided for that period,
discounted at four per cent (4%) per annum to present net worth,
plus the reasonable estimated expenses of reletting. If Lessee be
adjudicated a bankrupt, Lessor shall in lieu of such liquidated
damages be allowed a claim in the bankruptcy proceeding for future
rent to the extent permitted by bankruptcy laws; or
(b) Enter upon the Premises without terminating this Lease and relet them
in its own name for the account of Lessee for the remainder of the
term (and thereafter for its own account) at the highest rent then
attainable, and make such alterations and repairs as may be necessary
to effect reletting, and immediately recover from Lessee any
deficiency for the balance of the term between the amount for which
the Premises were relet and the rent provided hereunder discounted at
four per cent (4%) per annum to present net worth plus any expense of
reletting or alteration.
Upon any such entry, Lessor may remove all persons and property from the
Premises, and such property may be removed and stored at a public warehouse or
elsewhere at the cost of and for the account of Lessee, all without service of
notice or resort to legal process (all of which Lessee expressly waives), and
without being deemed guilty of trespass, or becoming liable for any loss or
damage which may be occasioned thereby. Upon default by Lessee, Lessor shall
have a lien for the payment of all
-9-
<PAGE> 10
sums agreed to be paid by Lessee hereunder upon all Lessee's property and
Lessee agrees to execute and deliver such financing statements as may be
required by law to confirm and perfect such lien.
ARTICLE VIII
MISCELLANEOUS
8.1 Quiet Enjoyment. Lessor covenants and agrees that if Lessee pays the
minimum and additional rent and other charges herein provided, and performs all
the covenants and agreements herein stipulated to be performed on Lessee's
part, Lessee shall, at all times during the term, have the peaceable and quiet
enjoyment and possession of the Premises without any manner of hindrance from
Lessor or from any other persons except as to any portion of the Premises that
may be taken by eminent domain.
8.2 Assignment and Subletting. Lessee shall not, in each instance, (i)
assign, convey, mortgage or hypothecate this Lease or any interest therein;
(ii) allow any transfer hereof or any lien upon Lessee's interest by operation
of law; (iii) sublet or license the Premises or any part thereof; or (iv)
permit the use or occupancy of the Premises or any part thereof by anyone other
than Lessee or for any purpose other than as provided herein. Any transfer of
this Lease by merger, consolidation or liquidation, or by any change in
ownership or power to vote a majority of its outstanding voting stock to a
surviving corporation or continuing corporation with a net worth of less then
Five Million Dollars ($5,000,000) shall constitute an assignment for purposes
of this Lease. Consent to any such assignment, conveyance or subletting by
Lessor shall not operate as a waiver of the necessity for a consent to any
subsequent assignment, conveyance or subletting and the terms of such consent
shall be binding upon any person holding by, under or through Lessee. Any such
consent shall not relieve Lessee from liability hereunder for the payment of
rental or performance or observance of any of the terms and conditions of this
Lease.
8.3 Short Form Lease. This Lease shall not be recorded, but upon the
request of Lessee, Lessor shall execute a short form or memorandum thereof for
recording purposes which shall contain sufficient information to protect the
leasehold estate of Lessee.
8.4 Subordination and Offset Certificate. Lessee covenants and agrees,
within ten (10) days after Lessor's written request, to execute and deliver to
Lessor:
(a) Any documents necessary to subordinate this Lease to the lien of any
mortgage Lessor desires to place on the Premises, provided the
mortgagee agrees to allow Lessee to remain in possession provided
Lessee is not in default under the terms of this Lease, and/or
(b) A certificate to any proposed mortgagee or purchaser of the Premises
certifying that this Lease is in full force and effect and that there
are no defenses or offsets thereto on Lessee's part, if such be the
case, or if not, stating those claimed by Lessee, and stating the
date to which rent has been paid.
-10-
<PAGE> 11
8.5 Relationship of Parties. Nothing contained in this Lease shall be
deemed or construed by the parties hereto or by any third party to create the
relationship of principal and agent or of partnership, or of joint venture, or
of any association whatsoever between Lessor and Lessee, it being expressly
understood and agreed that neither the computation of rent nor any other
provisions contained in this Lease, nor any act or acts of the parties hereto,
shall be deemed to crete any relationship between Lessor and Lessee other than
the relationship of landlord and tenant.
8.6 Holding Over. If Lessee shall remain in possession of all or any part
of the Premises after the expiration of the term of this Lease or any extension
or renewal thereof, then Lessee shall be deemed a Lessee of the Premises from
year to year. Any holding over by Lessee shall be upon and subject to all of
the terms and conditions of this Lease except as to the term of this Lease and
rent for the period of such hold over tenancy shall be at the highest rate
payable for any portion of the term.
8.7 No Waiver. No receipt of money by Lessor from Lessee with knowledge of
the breach of any covenants of this Lease, or after the termination hereof, or
after the service of any notice, or after the commencement of any suit, or
after final judgment for possession of said Premises shall be deemed a waiver
of such breach, nor shall it reinstate, continue or extend the term of this
Lease or affect any such notice, demand or suit. No consent or waiver, express
or implied, by Lessor to or for any other breach of any covenant, condition, or
duty of Lessee shall be construed as a consent or waiver to or for any other
breach of the same or any other covenant, condition or duty to be observed by
Lessee.
8.8 Notices. Any notice required or permitted to be given to Lessee
hereunder shall be sufficiently given if in writing, addressed to Lessee, and
mailed certified mail, return receipt requested, to such address as Lessee may
from time to time designate for that purpose in writing to Lessor, or in the
absence of designation, left on the Premises. Any notice required or permitted
to be given to Lessor hereunder shall be deemed sufficiently given if in
writing, addressed to Lessor, and mailed certified mail, return receipt
requested, or delivered to Lessor c/o Charles J. O'Toole, Esq., 1100 Huntington
Building, Cleveland, Ohio 44115 or to such other address as Lessor may from
time to time designate in writing to Lessee for that purpose.
8.9 Lessor's Consent. With respect to any consent of Lessor required
under the terms of the Lease, Lessor agrees that its consent shall be in
writing and not be unreasonably withheld.
8.10 Force Majeure. Except with respect to payment of rent, taxes, charges
for utilities and insurance premiums, in the event that either party
hereto shall be delayed or hindered in or prevented from the performance of
any act required hereunder by reason of strikes, lockouts, inability to procure
materials, failure of power, restrictive governmental laws or regulations,
riots, insurrection, war or any other reason of a like nature not the fault of
the party delayed in performing work or doing any act required under the terms
of this Lease, then performance of such act shall be excused from the period of
the delay and the period of the performance of any act shall be extended for a
period equivalent to the period of such delay.
-11-
<PAGE> 12
ARTICLE IX
----------
SPECIAL PROVISIONS
------------------
9.1 Parties and General Definitions. This Lease and all the covenants,
provisions, and conditions herein contained shall inure to the benefit of and
be binding upon the heirs, successors, and assigns of the parties; provided,
however, that no assignment by, from, through or under Lessee in violation of
any of the provisions hereof, shall vest in the assignee any right, title, or
interest whatever. Neuter pronouns shall be read as masculine or feminine, and
words in the singular person as plural, if the nature or number of the parties
require. The word "term" when used to refer to the period for which the
Premises are let and leased, including any period of holding over. Paragraph
headings are for convenience only, and their presence or absence shall not be
considered in the interpretation of this Lease.
9.2 Attorney's Fees. In the event it becomes necessary, for purposes of
enforcing the terms of this Lease, for either Lessor or Lessee to institute an
action at law or otherwise commence legal proceedings against the other, then,
at all trial and appellate levels respecting such proceedings, the prevailing
party shall be entitled to costs and attorney's fees from the other.
9.3 Governing Law and Venue. This Lease shall be construed in accordance
with the laws of the State of Michigan and venue shall lie in Oakland County,
Michigan.
IN WITNESS WHEREOF, this instrument has been executed by Lessor and Lessee
as of the day and year first above written.
Signed and acknowledged VALLEY INDUSTRIES REALTY L.P.,
in the presence of: a Delaware limited partnership
By: FISHER FINANCIAL SERVICES CORP.
General Partner
[SIG] By [SIG]
- ---------------------------- -----------------------------
[SIG] Its Secretary
- ---------------------------- ----------------------------
Lessor
VALLEY INDUSTRIES, INC.
[SIG] By [SIG]
- ---------------------------- ----------------------------
[SIG] Its VP-Finance & Administration
- ---------------------------- ----------------------------
Lessee
-12-
<PAGE> 13
STATE OF OHIO )
) SS.
COUNTY OF CUYAHOGA )
BEFORE ME, a Notary Public in and for said County and State, personally
appeared VALLEY INDUSTRIES REALTY L.P., a Delaware limited partnership, by
Charles J. O'Toole, the Secretary of FISHER FINANCIAL SERVICES CORP., the
general partner of said partnership, who acknowledged that he did sign the
foregoing instrument and that the same is his free act and deed and the free
act and deed of said partnership.
IN WITNESS WHEREOF, I have hereunder set my hand and official seal at
Cleveland, Ohio this 23rd day of January, 1997.
[SIG]
--------------------------
Notary Public
STATE OF MICHIGAN )
) SS.
COUNTY OF OAKLAND )
BEFORE ME, a Notary Public in and for said County and State, personally
appeared VALLEY INDUSTRIES, INC., a Delaware corporation, by Mark S. Moriary,
its VP-Finance & Admin, who acknowledged that he did sign the foregoing
instrument and that the same is his free act and deed and the free act and
deed of said corporation.
IN WITNESS WHEREOF, I have hereunder set my hand and official seal at
Madison Heights, Michigan this 24th day of January, 1997.
Tracey M. Besola
---------------------
Notary Public
This instrument prepared by: TRACEY M. BESOLA
Michael E. Elliott (Ohio Bar 0018761) NOTARY PUBLIC - MACOMB COUNTY, MI
ARTER & HADDEN MY COMMISSION EXPIRES 09/27/99
1100 Huntington Building
Cleveland, Ohio 44115
(216) 696-1100
205524.la
-13-
<PAGE> 1
EXHIBIT 10.18
ADDENDUM TO SUBLEASE MADE AS OF JULY 2, 1997 (the "Sublease")
BETWEEN BELL SPORTS CANADA INC. ("Sublessor") AND
SPORTRACK INTERNATIONAL INC. (previously known as ADVANCED
ACCESSORY SYSTEMS CANADA INC.) ("Sublessee")
Reference is hereby made to that certain Sublease agreement dated July 2,
1997 between Bell Sports Canada Inc. and Advanced Accessory Systems Canada Inc.
(hereinafter the "Sublease").
All defined terms used herein shall have the meanings ascribed thereto in the
Sublease.
The parties hereby agree to amend the Sublease as follows:
1.0 The Gross Leasable Area of the Sublease Area shall be 65,074 square feet
situated on the ground floor.
1.1 The Gross Leasable Area of the Sublease Area shall be made up of the
following areas:
<TABLE>
<CAPTION>
<S> <C>
a. Factory 46,772 sq. ft.
b. Office Space (as presently occupied) 3,008 sq. ft.
c. Cafeteria (Pro Rata Share) 1,149 sq. ft.
d. Compressor (Pro Rate Share) 229 sq. ft.
e. Tool Room 340 sq. ft.
f. Holding Area 2,400 sq. ft.
--------------
Subtotal A 53,898 sq. ft.
f. New Distribution Centre 11,176 sq. ft.
--------------
Subtotal B 11,176 sq. ft.
--------------
Total Gross Leasable Area 65,074 sq. ft.
==============
</TABLE>
<PAGE> 2
2.0 The total basic rent per annum for the Subleased area shall be
$254,510.39 plus GST and QST calculated on the basis of total Gross Leaseable
Area (as set out above) on the following square footage rental charges. The rent
is payable in equal consecutive monthly installments of $21,209.20 plus GST and
QST due on the first day of each month in advance.
<TABLE>
<S> <C> <C>
a. Factory $3.64/sq. ft. $170,250.08
b. Office Space $3.64/sq. ft. $ 10,949.12
Leasehold Improvement fee $2.76/sq. ft. $ 8,302.08
c. Cafeteria $3.64/sq. ft. $ 4,182.36
Leasehold Improvement fee $3.07/sq. ft. $ 3,527.43
d. Compressor Room $3.64 sq. ft. $ 833.56
e. Tool Room $3.64 sq. ft. $ 1,237.60
f. Holding Area $3.64 sq. ft. $ 8,736.00
g. New Distribution Centre $4.16 sq. ft. $ 46,492.16
-----------
Total basic rent per annum $254,510.39
===========
</TABLE>
2.1 In the event that the Sublease is extended beyond June 30, 1998 and for
each of the successive lease years thereafter the basic rent will be increased
as set out in Article III, section 3.1.2 of the Lease.
2.2 In the event that the Sublease extends beyond December 31st, 2003 the
Leasehold Improvement fees of $2.76 and $3.07 per square foot shall be canceled
effective December 31, 2003.
3.0 In addition to the basic rent as set out in 2.0 and 2.1, the Sublessee
shall pay to the Sublessor operating costs fixed at the sum of $1.12 per square
foot for the total Gross Leasable Area of Subleased Area. This annual operating
cost of $72,882.88 plus GST and QST shall be payable in equal consecutive
monthly installments of $6,073.57 plus GST and QST due on the first day of each
month in advance.
3.1 In the event that the Sublease is extended beyond June 30, 1998 and for
each of the successive lease years thereafter the operating costs will
be adjusted to reflect the actual increases of such operating costs to the
Sublessor including business taxes (based on the value of the entire Leased
Premises as assessed by the city of Granby), utilities, maintenance, etc.
Within thirty (30) days following the commencement of any renewal period the
Sublessor shall deliver to the Sublessee an estimate as to operating costs for
such renewal period taking into account any increase as herein provided. The
Sublessee
<PAGE> 3
shall pay to the Sublessor operating costs fixed in accordance with such
estimate which such estimate shall be reasonable in all regards. In the event
that the city of Granby directly charges the Sublessee its share of the business
taxes for the total Gross Leasable Area of the Subleased Area instead of
charging the Sublessor for the entire Leased Premises as set out in the Lease,
the Sublessor agrees to exclude the business taxes portion of the operating
costs chargeable to the Sublessee.
3.2 The operating costs cover business taxes, utilities (e.g. hydro, water,
gaz, etc.), building maintenance (internal and external) including but
not limited to snow removal, grass cutting, landscaping, office cleaning,
general garbage pickup (not including compactor charges or compactor garbage
pickup), general repairs needed to the building, general repairs to the alarm
system, repair to the air conditioning, ventilation and heating, and repairs to
the compressors, transformers, electrical wiring and air lines.
4.0 The term of the Sublease shall begin from the Effective Time and expire on
June 30, 1998.
4.1 The Sublease will be renewed for a further term of twelve (12) months from
the date of expiration under the same terms and conditions of the existing
Sublease as they exist on the date of expiration. Notwithstanding the foregoing,
each of the Sublessee and Sublessor may terminate the Sublease or any renewal
thereof by giving twelve (12) months prior written notice to the Sublessor or
Sublessee as the case may be in which event the Sublease shall terminate twelve
(12) months following the date of receipt of such notice. Written notice shall
be hand delivered to Al McCaughen or Josh Greenberg if such notice is coming
from the Sublessee and hand delivered to Jean Maynard or Richard Bedard if such
notice is coming from the Sublessor.
5.0 The Sublessor and Sublessee agree to share on a pro rata basis of 2/3 and
1/3 respectively the costs of mail delivery and pickup, a receptionist, and the
following office supplies: coffee and all coffee supplies such as cream, sugar,
cups, etc., water, soap, toilet paper, paper towels for washrooms.
6.0 The Sublessor agrees to move the compactor to the Sublessor's manufacturing
area at its own expense and costs. The Sublessee agrees not to use such
compactor after it has been moved and agrees to make all arrangements by the
time the compactor is moved to obtain a compactor for its own use including the
equipment and periodic pick up all at its own expense and costs.
7.0 The Sublessor agrees to provide Sublessee 17 parking spaces in front of the
building beginning from the north side of the main entrance doors and extending
to the north end of the parking lot to be used for parking only of its employees
and visitors without additional charge. The Sublessor shall use the remaining
parking spaces beginning directly in front of the door and extending to the
south end of the parking lot to be used only for its employees and visitors.
<PAGE> 4
7.0.1 The Sublessee shall have the right at its own expense to affix a door to
an opening of the drilling area and lock same door only after regular business
hours and on weekends provided that the door is approved by the Sublessor prior
to being affixed and that a key for the lock of same door be given to the
Sublessor. The Sublessor shall have unrestricted access to the drilling area
during regular business hours, and at other times upon prior request to the
Sublessee, which request shall not be unreasonably withheld by the Sublessee.
7.0.2 The Sublessee shall have the right at its own expense to erect walls to
close off the foam weighing area in a manner agreeable to the Sublessor subject
to Article X of the Lease. The Sublessee shall also have the right at its own
expense to extend the second floor, presently over the drilling area, over the
foam weighing area at the same height and specification as the existing second
floor subject to Article X of the Lease.
7.0.3 The Sublessee shall have the right at its own expense to make any
improvements, alterations, additions or repairs to the Subleased Area subject to
Article X of the Lease.
8.0 Throughout the term of this Sublease and any renewal thereof, Sublessee
shall take out and keep in force:
8.0.1 comprehensive general liability insurance with respect to the
business carried on in or from the Subleased Area and the use and
occupancy thereof for bodily injury and death and damage to property of
others in an amount of at least two millions dollars (2,000,000$) for
each occurrence or such greater amount as Sublessor may from time to
time reasonably require;
8.0.2 all risks insurance including the perils of fire, extended
coverage, leakage from sprinkler and other fire protective devices,
earthquake, collapse and flood in respect to furniture and other
movables, equipment, inventory, securities and stock-in-trade, fixtures
and leasehold improvements located within the Subleased Area and such
other property located in or forming part of the Subleased Area,
including all mechanical or electrical systems (or portions thereof)
installed by Sublessee in the Subleased Area, the whole for the full
replacement cost (without depreciation) in each such instance;
8.0.3 if any boiler or pressure vessel greater than fifteen (15) pounds
of pressure is operated in the Subleased Area, boiler and pressure vessel
insurance with respect thereto;
8.0.4 such additional insurance as Sublessor may request following a
request to this effect by a lending institution or any other event;
8.1 All policies of insurance shall:
8.1.1 be in form satisfactory to Sublessor;
<PAGE> 5
8.1.2 be placed with insurers reasonably acceptable to Sublessor; and
8.1.3 provide that they will not be canceled or permitted to lapse
unless the insurer notifies Sublessor and its Landlord in writing at
least thirty (30) days prior to the date of cancellation or lapse. Each
such policy shall name Sublessor and its Landlord and the hypothecary
creditor that the Sublessor may designate as additional named insured
as its interest may appear. Each comprehensive general liability
insurance policy will contain a provision of cross-liability or
severability of interests as between Sublessor and Sublessee. All other
policies referred to above shall contain a waiver of subrogation rights
which Sublessee's insurers may have against Sublessor, Sublessor's
insurers and persons under Sublessor's care and control. Sublessee
hereby releases and waives, and will hold the Sublessor harmless, any
and all claims against Sublessor and those for whom Sublessor is in law
responsible with respect to occurrences required to be insured against
by Sublessee hereunder, provided that the Sublessee shall retain its
recourses against the Sublessor to the extent that any claim of the
Sublessee is not covered by its insurance policies as herein
stipulated, and to the extent it should not have been covered pursuit
to this Sublease. Sublessee shall from time to time furnish Sublessor
with certified copies of all such insurance policies or certificates
thereof and the renewals thereof.
8.2 Sublessee agrees that should the Sublessee fail to take out or keep in
force such insurance, Sublessor will have the right to do so and to pay
the premiums therefor and in such event Sublessee shall repay to
Sublessor on demand the amount paid as premiums.
9.0 The Sublessee agrees that its employees who wish to smoke will be
restricted to smoking in their own offices, if they have an office, or in
the cafeteria, if they do not have an office.
10.0 Sublessee agrees to defend, indemnify, and hold harmless Sublessor from and
against any and all losses, damages, costs, claims, lawsuits, judgments,
settlements and expenses including without limitation attorney's fees and
court costs resulting from or in connection with any breach of this
agreement by the Sublessee or any actions or omissions by the Sublessee,
its directors, officers, employees, agents and other persons for which it
is at law responsible.
11.0 Sublessor agrees to defend, indemnify, and hold harmless Sublessee from and
against any and all losses, damages, costs, claims, lawsuits, judgments,
settlements and expenses including without limitation attorney's fees and
court costs resulting from or in connection with any breach of this
agreement by the Sublessor or any actions or omissions by the Sublessor,
its directors, officers, employees, agents and other persons for which it
is at law responsible.
<PAGE> 6
12.0 The Sublessor agrees and accepts to provide the Sublessee free usage and
utilization of the following equipment
a) compressor
b) alarm system
c) shipping doors #9 and #10
13.0 The Sublessor agrees and accepts that the Sublessee shall be allowed to
post a sign or billboard on the exterior of the leased premises in
conformity with zoning and municipal by-laws..
14.0 The Sublessor agrees that the Sublessee shall have access at all times to
its premises, without restrictions from the Sublessor.
15.0 If during the term of the Sublease, the building is completely or partially
destroyed or damaged by fire or other cause and that destruction or damage
prevents the Sublease to carry out business in the ordinary course for a
period of three months or more, the Sublessee shall have the right to
cancel the lease without having to pay compensation to the Sublessor, the
whole with effect as of the date of such damage or destruction.
Notwithstanding such right of cancellation, the Sublessee shall be
responsible for such damage or destruction if the damage or destruction is
determined to be caused by the Sublessee, its directors, officers,
employees, agents and other persons for which it is at law responsible,
through their actions, omissions, negligence or other.
16.0 The parties hereby agree that the provision of Article XX of the Lease
shall apply to this Sublease, mutatis mutandis, provided however that
section 20.1.8 shall be amended by inserting at the end of the phrase,
"following written notice of 15 days."
All of the terms and conditions of the Sublease shall remain in full force and
effect as amended hereby.
Signed this 23rd day of October, 1997, in the city of Granby, Quebec
Sublessor Sublessee
Bell Sports Canada Inc. SportRack International Inc.
per: /s/ Al McCaughen per: /s/ Jean Maynard
---------------------------- --------------------------
Al McCaughen, President Jean Maynard, President
<PAGE> 1
EXHIBIT 10.19
LEASE AGREEMENT
1. The Property: Part of Fregatten 20, as appears from
Exhibit 1 hereto.
Address: Industrigatan 10, Vanersborg
2. Landlord: VBG Produkter AB, corporate registration
number 556069-0751
3. Tenant: VBG Towbars AB, corporate registration
number 556259-0298
4. Purpose: The Tenant shall use the rented
property for industrial and office purposes.
5. Term of the
Lease: From the Closing Date of the Principal
Agreement entered into on this day
between the Landlord and Brink B.V.
until 31 May 2001.
6. Prolongation: The term shall be prolonged for further
consecutive periods of 36 months each
unless this Agreement is terminated by
either party giving written notice to
the other party not later than 9 months
before the expiry of the term.
7. The Rent: The rent shall be SEK 2.000.000 per
annum, payable quarterly in advance.
The first rent shall cover the period
from the commencement of the Term of
the Lease set forth in 5 above until
<PAGE> 2
2
June 30, 1994. The first rent shall be paid
not later than ten days after the
commencement of the Term of the Lease.
The rent shall be adjusted annually in
accordance with the following index formula:
50 per cent of the rent SEK 2.000.000 be
adjusted for each period of the term of the
lease of 12 months, such first term to
commence on 6 June 1995.
The said portion of the rent shall be
adjusted in accordance with the changes of
the Swedish Consumer Price Index of the
year 1980 using the said index as per the
month of the commencement of the Term of
the Lease as the base index.
In the event that the Consumer Price Index,
during any of the said 12 months periods
commencing after 6 June 1995, has changed
by more than three units compared to the
said base index, the said portion of the
rent shall be adjusted by the percentage of
the said change.
The rent adjusted as aforesaid shall apply as
from the first day of the fourth month
following the 12 months period giving rise
for the adjustment.
<PAGE> 3
3
8. VAT: The rent does not include VAT, which
shall be paid in excess of the rent.
9. Maintenance
and repair: The Landlord shall be responsible for
providing all necessary heating and
ventilating of the rented property as
well as for the supply of water, hot
water and sewage. However, the Tenant
shall bear all costs therefore.
The Tenant shall at its own cost be
responsible for providing electricity
and for cleaning and collecting garbage.
Whenever necessary the Tenant shall sand
traffic areas and side walks.
The Landlord shall at all times and
at its own expense insure that the external
of the rented property are properly
maintained and repaired and in good
operational condition. The Tenant shall be
responsible and bear the costs for the
inside maintenance of the rented property.
10. Insurance: The Landlord shall keep the rented property
fully insured.
11. New taxes: Should the rented property become subject to
a real estate tax not applicable at the date
of the commencement of the Term of the Lease
(other than income tax or VAT levied on the
rent) the Tenant shall accept an increase of
the rent by such portion
<PAGE> 4
4
and during such period in time the tax is
applicable to the rented property and is paid
by the Landlord.
12. Sub-lease: The Tenant shall not be entitled to
sub-lease the property or part of it
without written permission thereto from
the Landlord.
13. Collateral: In the event that Brink B.V. as a
result of its option under the
Principal Agreement referred to in 5
above becomes the owner of all shares
of the Tenant the Tenant shall as
collateral for its obligation to pay
rent hereunder pledge to the benefit of
the Landlord chattel mortgages of the
businesses of the Tenant of SEK
1.000.000 within SEK 11.000.000 (Fore-
tagshypotek a SEK 1.000.000 inom SEK
11.000.000). Such pledge shall be made
30 days after Brink B.V. has become the
owner of all shares of the Tenant.
Date: 25/5 1994
Place: Staphorst, NL
LANDLORD TENANT
VBG PRODUKTER AB VBG TOWBARS AB
[SIG] [SIG]
- --------------------------- -----------------------
<PAGE> 1
EXHIBIT 10.20
LEASE AGREEMENT FOR COMMERCIAL USE
With this confidential document, of which three copies shall be made, one for
each of the parties and one to be registered, between the following parties:
ELLEBI S.p.A., with headquarters in Reggio Emilia (RE) - Via Strada Statale 63,
No. 189, district of S. Vittoria, C.F. (tax code) and P.I. 00356930354, here
represented by the Legal Representative Mr. VITTORIO BENAGLIA, born in Gualtieri
(RE) on Feb. 3, 1931, Tax Code BNGVTR31B03E2321, hereinafter referred to as
the "Lessor";
and
BRINK ITALIA S.r.l, with headquarters in Milano (MI) - Piazza Meda No. 5,
C.F. (tax code) 12212400159, represented by its Deputy Administrator, Mr. Jan
Wellem Rengelink, born in ____________________on______________19__,
C.F., ____________, hereinafter referred to as the "Lessee":
THE FOLLOWING IS AGREED TO AND STIPULATED:
1) The above-mentioned ELLEBI S.p.A. company grants the use of the following
real properties to BRINK ITALIA S.r.l., which accepts and promises to lease
them:
a) A complex located in Gualtieri (RE), Santa Vittoria district, Via
Strada Statale 63 No. 189-consisting of an industrial building, a
two-story office building, and a meeting room, for a total of approx.
16,000 square meters, in addition to the boiler and storage rooms,
covered parking and a court area. The complex, registered in the urban
building cadastre on Page 31, maps 53, 309 and 310 (previously maps
3956, 8225, and 8226),
1
<PAGE> 2
is bounded to the south by Pellegrini company holdings; to the north
and east, by ELLEBI S.p.A. (surplus agricultural lands owned by the
company); and to the west, by state road Statale 63;
b) A complex located in San Giacomo di Guastalla (RE) - Via De Gasperi
No. 17-consisting of an industrial building with a total area of
approx. 10,000 square meters, an electrical equipment room, covered
parking and a court area. The complex, registered in the urban building
cadastre on Page 44, maps 159 sub 1-2-3-4-5, is bounded to the east
by other lands owned by ELLEBI S.p.A. (industrial area, currently
meadowland); to the north, by Via Togliatti; to the south, by Via de
Gasperi; and to the south, by Via Morandi.
2) The length of the lease is set for a term of 6 (six) years starting from
01/01/1998, unless one of the two parties gives notice of termination by
means of a registered letter sent at least 1 year before the lease
expiration date.
At the end of the first term on 12/31/2003, the Lessor shall be able to
deny renewal of the lease only for the reasons described in article 29 of
law L.27.07.78 no. 392. Early termination is expressly excluded, except as
specified in the last clause of article 27, law L.392/78.
3) The annual rental charge (aside from the increment described in article 4)
shall be Lire 1,000,000,000 (one billion) per annum plus IVA tax, to be paid
in quarterly installments, in advance, at a financial institution designated
by the Lessor. The parties agree that for the first 6 (six) years of the
lease, the rent shall be reduced to the annual amount of Lire 750,000.000.
2
<PAGE> 3
4) The above-described lease payment shall be automatically increased every
year starting from the beginning of the second year of the lease, by the
maximum percentage permitted by the laws currently in force. The entire
annual adjustment shall be paid as one single payment by the 1st of July of
each year of the lease.
5) Upon the signing of this Agreement, the Lessee shall pay to the Lessor a
deposit in the amount of Lire 200,000,000 (two hundred million) which will
be refunded at the expiration of the lease, after the property is
returned normally to the Lessor.
6) Failure to pay the rental charge, even partially, within the provisions of
the law and to the registered office of the Lessor, as well as illegal
subletting or changes in the stated use of the premises, will ipso jure
result in the termination of the Agreement by fault of the Lessee, without
prejudice to the obligation to pay the amount due and damage compensation to
the Lessor, in conformity with article 1456 of the civil code. Each time the
payment is late more than one month, the Lessee shall pay interest as
agreed; the amount shall be one third higher than the average overall
effective rate calculated in the previous trimester, according to law L.
07.03.96 no. 108, starting on the day after the payment due date, without
falling into arrears.
7) The premises are leased for industrial use; the Lessee is forbidden to
change the stated use, even temporarily. In addition, the Lessee shall not
sublet all or part of the premises, not even free of charge, without written
permission by the Lessor. The Lessor's silence regarding, or acquiescence
to,
3
<PAGE> 4
changes in the agreed use and any transfer or subletting, shall be construed
solely as tolerance without any favorable effects accruing to the Lessee.
Any activity which involves direct contact with the users or final
consumers is specifically prohibited.
8) The Lessee shall take custody of the leased premises and shall assume
responsibility for any direct or indirect damages arising from the use of
the leased premises, even when the damages involve a third party, therefore
exonerating the Lessor. The Lessee shall not undertake any alteration,
remodeling, addition or improvement, nor replace equipment without prior
written approval of the Lessor. The Lessor shall have the right to retain
any of the above without obligation to pay any indemnity or compensation.
The Lessor's explicit waiver of any additions or improvements shall obligate
the Lessee, to restore the premises to their original conditions, at the
Lessee's expense, even during the term of the lease.
9) The Lessee shall be responsible for maintenance, within the limits of and
in conformity with current legal regulations. In the event the Lessee does
not perform maintenance in a timely manner, the Lessor will take over for
the Lessee. The related costs shall be reimbursed by the Lessee within ten
days of the completion of the work; otherwise, an amount equal to the costs
incurred by the Lessor shall be withdrawn from the deposit, and the Lessee
shall immediately replace said amount.
10) The Lessee has the obligation to observe, and ensure that its employees
observe, a good neighbor policy and to not generate irritating noise. The
Lessee is prohibited to act or behave
4
<PAGE> 5
in a manner which could cause annoyance.
11) During the term of the lease the Lessor or his representative shall have the
right to inspect, or cause to be inspected, the leased premises, after
written notification, in order to verify the way the premises are used or to
check the equipment, within the limits specified by the uses of the premises
and by current regulations, and taking into account the needs of the
Lessee.
12) The Lessee declares that, having examined the leased premises and having
found them to be suitable for his purposes, in good conditions and free of
problems which could affect the health of the occupants, shall take full
possession upon delivery of the keys becoming therefore the custodian of
said premises. In addition, the Lessee promises to return the premises in
the same conditions at the expiration of the lease, except for normal wear
and tear due to ordinary use.
13) The Lessee shall assume the obligation to purchase from a major insurance
company, at his own expense, insurance policies relevant to his role of
tenant. The amount of such policies shall be equal to the market value of
the leased premises; in the event of a disagreement, the market value shall
be determined by an expert designated by the Presiding Judge of the Tribunal
of Reggio Emilia. The Lessor shall be named as beneficiary of said policy,
and the Lessee shall ensure that it remains in effect by paying the premiums
regularly, until the lease expires.
14) For topics not covered in this Agreement, refer to the provisions of the
law.
15) This Agreement cannot be altered in any way except in writing.
5
<PAGE> 6
16) This Agreement shall be liable to registration at a fixed tax rate because
the contractual payments are subject to the IVA tax in conformity with the
law; registration expenses shall be split equally between the Lessor and the
Lessee, but the Lessee shall be officially responsible for obtaining the
registration.
17) As required, the parties declare that with this Agreement even the terms
that are in departure from the provisions of law L.392/78 have been
settled.
Milano, this ______________day of__________________199_
Lessor Lessee
for ELLEBI S.p.A. For BRINK ITALIA S.r.l.
The Chairman of the Board The Deputy Administrator
(Vittorio Benaglia) (Jan Willem Rengelink)
6
<PAGE> 1
Exhibit 10.21
================================================================================
REGISTRATION RIGHTS AGREEMENT
among
ADVANCED ACCESSORY SYSTEMS, LLC,
AAS CAPITAL CORPORATION,
THE GUARANTORS NAMED HEREIN
and
CHASE SECURITIES INC.
and
FIRST CHICAGO CAPITAL MARKETS, INC.
DATED OCTOBER 1, 1997
================================================================================
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is
dated as of October 1, 1997, by and among ADVANCED ACCESSORY SYSTEMS, LLC, a
Delaware limited liability company (the "Company"), AAS Capital Corporation
("Capital Corp."), a newly formed Delaware corporation and each of the
Company's subsidiaries formed or acquired after the Closing Date required to
become a guarantor hereunder, the "Guarantors," and, together with the Company
and Capital Corp. the "Issuers", and CHASE SECURITIES INC. and FIRST CHICAGO
CAPITAL MARKETS, INC. (the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of September 25, 1997, by and among the Issuers and the
Initial Purchasers (the "Purchase Agreement") relating to the sale by the
Company and Capital Corp. to the Initial Purchasers of $125,000,000 aggregate
principal amount of the Company's and Capital Corp.'s 9 3/4% Senior Subordinated
Notes due 2007 (the "Notes"). The Notes have been guaranteed (the "Guarantees")
on a senior subordinated basis by each of the Guarantors. In order to induce the
Initial Purchasers to enter into the Purchase Agreement, the Issuers have agreed
to provide the registration rights set forth in this Agreement for the benefit
of the Initial Purchasers and their direct and indirect transferees. The
execution and delivery of this Agreement is a condition to the Initial
Purchasers' obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a).
Advice: See the last paragraph of Section 5.
Applicable Period: See Section 2(b).
Closing Date: The Closing Date as defined in the Purchase
Agreement.
Company: See the introductory paragraph to this Agreement.
Effectiveness Date: The 270th day after the Closing Date;
provided, however, that, with respect to the Initial Shelf Registration
Statement, (i) if the Filing Date in respect thereof is fewer than 60 days prior
to the 270th day after the Closing Date, then the Effectiveness Date in respect
thereof shall be the 60th day after such Filing Date and (ii) if the Filing Date
is after the filing of the Exchange Offer Registration Statement with the SEC,
then the Effectiveness Date in respect thereof shall be the 60th day after such
Filing Date.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(b).
Exchange Act: The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
<PAGE> 3
-2-
Exchange Offer: See Section 2(a).
Exchange Offer Registration Statement: See Section 2(a).
Exchange Securities: See Section 2(a).
Expiration Date: See Section 2(a).
Filing Date: The 210th day after the Closing Date; provided,
however, that, with respect to the Initial Shelf Registration Statement, (i) if
a Shelf Registration Event shall have occurred fewer than 60 days prior to the
210th day after the Closing Date, then the Filing Date in respect thereof shall
be the 60th day after such Shelf Registration Event and (ii) if a Shelf
Registration Event shall have occurred after the filing of the Exchange Offer
Registration Statement with the SEC, then the Filing Date in respect thereof
shall be the 30th day after such Shelf Registration Event.
Guarantees: See the second introductory paragraph to this
Agreement.
Guarantors: See the introductory paragraph to this
Agreement.
Holder: Any record holder of Registrable Securities.
Indemnified Person: See the third paragraph of Section 7.
Indemnifying Person: See the third paragraph of Section 7.
Indenture: The Indenture, dated as of October 1, 1997, among
the Company, Capital Corp., the Guarantors and First Union National Bank, as
trustee, pursuant to which the Notes are being issued, as amended or
supplemented from time to time in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraph to this
Agreement.
Initial Shelf Registration Statement: See Section 3(a).
Inspectors: See Section 5(o).
Issue Date: The date of original issuance of the Notes.
Issuers: Section introductory paragraph to this Agreement.
Market Maker: See Section 10.
NASD: See Section 5(t).
Notes: See the second introductory paragraph to this
Agreement.
Participant: See the first paragraph of Section 7.
Participating Broker-Dealer: See Section 2(b).
<PAGE> 4
-3-
Person: An individual, corporation, limited or general
partnership, limited liability company, joint venture, association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
Private Exchange: See Section 2(b).
Private Exchange Securities: See Section 2(b).
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act and a prospectus filed with the SEC pursuant to Section 10
hereof), as amended or supplemented by any prospectus supplement, with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement, and all other amendments and supplements
to the Prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
Purchase Agreement: See the second introductory paragraph
to this Agreement.
Records: See Section 5(o).
Registrable Securities: The Notes upon original issuance
thereof and at all times subsequent thereto, each Exchange Security as to which
Section 2(c)(v) hereof is applicable upon original issuance and at all times
subsequent thereto and, if issued, the Private Exchange Securities, until in the
case of any such Notes, Exchange Securities or Private Exchange Securities, as
the case may be, (i) a Registration Statement (other than, with respect to any
Exchange Security as to which Section 2(c)(v) hereof is applicable, the Exchange
Offer Registration Statement) covering such Notes, Exchange Securities or
Private Exchange Securities has been declared effective by the SEC and such
Notes, Exchange Securities or Private Exchange Securities, as the case may be,
have been disposed of in accordance with such effective Registration Statement,
(ii) such Notes, Exchange Securities or Private Exchange Securities, as the case
may be, are sold in compliance with Rule 144, (iii) such Note has been exchanged
for an Exchange Security pursuant to the Exchange Offer and Section 2(c)(v) is
not applicable thereto, or (iv) such Notes, Exchange Securities or Private
Exchange Securities, as the case may be, cease to be outstanding.
Registration Statement: Any registration statement of the
Issuers, including, but not limited to, the Exchange Offer Registration
Statement, that covers any of the Registrable Securities pursuant to the
provisions of this Agreement and any registration statement filed with the SEC
pursuant to Section 10 hereof, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
<PAGE> 5
-4-
Rule 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c).
Shelf Registration Statement: See Section 3(b).
Shelf Registration Event: See Section 2(c).
Subsequent Shelf Registration Statement: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if applicable,
the trustee under any indenture governing the Exchange Securities and Private
Exchange Securities (if any).
Underwritten registration or underwritten offering: A
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
2. EXCHANGE OFFER
(a) The Issuers agree to file with the SEC, on or before the
Filing Date, an offer to exchange (the "Exchange Offer") any and all of the
Registrable Securities for a like aggregate principal amount of senior
subordinated debt securities of the Company and Capital Corp. which are
identical to the Notes and are guaranteed, jointly and severally, by each of the
Guarantors with terms identical to the Guarantees (the "Exchange Securities")
(and which are entitled to the benefits of a trust indenture that is
substantially identical to the Indenture (other than such changes as are
necessary to comply with any requirements of the SEC to effect or maintain the
qualification of such trust indenture under the TIA) and which has been
qualified under the TIA), except that the Exchange Securities shall have been
registered pursuant to an effective Registration Statement under the Securities
Act and shall contain no restrictive legend thereon. The Exchange Offer will be
registered under the Securities Act on the appropriate form (the "Exchange Offer
Registration Statement") and will comply with all applicable tender offer rules
and regulations under the Exchange Act. Each of the Issuers agrees to use its
best efforts to (i) cause the Exchange Offer Registration Statement to become
effective and to commence the Exchange Offer on or prior to the Effectiveness
Date, (ii) keep the Exchange Offer open for 30 days (or longer if required by
applicable law) (the last day of such period, the "Expiration Date") and (iii)
exchange Exchange Securities for all Notes validly tendered and not withdrawn
pursuant to the Exchange Offer on or prior to the fifth day following the
Expiration Date.
Each Holder who participates in the Exchange Offer will be
deemed to represent that any Exchange Securities received by it will be acquired
in the ordinary course of its business, that at the time of the
<PAGE> 6
-5-
consummation of the Exchange Offer such Holder will have no arrangement with any
Person to participate in the distribution of the Exchange Securities in
violation of the provisions of the Securities Act and that such Holder is not an
affiliate of any of the Issuers within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with
this Section 2, the provisions of this Agreement shall continue to apply,
mutatis mutandis, solely with respect to Registrable Securities that are Private
Exchange Securities, Exchange Securities to which Section 2(c)(v) is applicable
and Exchange Securities held by Participating Broker-Dealers, and the Issuers
shall have no further obligation to register Registrable Securities (other than
Private Exchange Securities and other than Exchange Securities as to which
Section 2(c)(v) hereof applies) pursuant to Section 3 of this Agreement. No
securities other than the Exchange Securities shall be included in the Exchange
Offer Registration Statement.
(b) The Issuers shall include within the Prospectus contained
in the Exchange Offer Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchasers, which shall
contain a summary statement of the positions taken or policies made by the Staff
of the SEC (and publicly disseminated) with respect to the potential
"underwriter" status of any broker-dealer that is the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act) of Exchange Securities received by
such broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"). Such
"Plan of Distribution" section shall also allow the use of the prospectus by all
Persons subject to the prospectus delivery requirements of the Securities Act,
including all Participating Broker-Dealers, and include a statement describing
the means by which Participating Broker-Dealers may resell the Exchange
Securities.
Each of the Issuers shall use its best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be lawfully
delivered by all Persons subject to the prospectus delivery requirements of the
Securities Act for at least 180 days following the first bona fide offering of
securities under such Registration Statement (or such shorter time as such
Persons must comply with such requirements in order to resell the Exchange
Securities) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by it and having, or which are reasonably
likely to be determined to have, the status of an unsold allotment in the
initial distribution, the Issuers upon the request of the Initial Purchasers
shall, simultaneously with the delivery of the Exchange Securities in the
Exchange Offer, issue and deliver to the Initial Purchasers, in exchange (the
"Private Exchange") for the Notes held by the Initial Purchasers, a like
principal amount of debt securities of the Company and Capital Corp. that are
identical to the Exchange Securities and are guaranteed, jointly and severally,
by each of the Guarantors with terms identical to the Guarantees (the "Private
Exchange Securities") (and which are issued pursuant to the same indenture as
the Exchange Securities) (except for the placement of a restrictive legend on
such Private Exchange Securities). The Private Exchange Securities shall bear
the same CUSIP number as the Exchange Securities. Interest on the Exchange
Securities and Private Exchange Securities will accrue from the last interest
payment date on which interest was paid on the Notes surrendered in exchange
therefor or, if no interest has been paid on the Notes, from the Issue Date.
Any indenture under which the Exchange Securities or the
Private Exchange Securities will be issued shall provide that the holders of any
of the Exchange Securities and the Private Exchange Securities will vote and
consent together on all matters to which such holders are entitled to vote or
consent as one class and that none of the holders of the Exchange Securities and
the Private Exchange Securities will have the right to vote or consent as a
separate class on any matter.
<PAGE> 7
-6-
(c) If, (i) because of any change in law or in currently
prevailing interpretations of the Staff of the SEC, the Company reasonably
determines in good faith, after consultation with counsel, that it is not
permitted to effect the Exchange Offer, (ii) the Exchange Offer is not commenced
on or prior to the Effectiveness Date, (iii) the Exchange Offer is, for any
reason, not consummated on or prior to the 5th day after the Expiration Date,
(iv) any Holder of Private Exchange Securities so requests, or (v) in the case
of any Holder that participates in the Exchange Offer, such Holder does not
receive Exchange Securities on the date of the exchange that may be sold without
restriction under state and federal securities laws (the occurrence of any such
event set forth in the foregoing clauses (i) through (v), a "Shelf Registration
Event"), then, in the case of such events the Company shall promptly deliver to
the Holders and the Trustee notice thereof (the "Shelf Notice") and thereafter
the Issuers shall file an Initial Shelf Registration Statement pursuant to
Section 3.
3. SHELF REGISTRATION
If a Shelf Registration Event has occurred (and whether or not
an Exchange Offer Registration Statement has been filed with the SEC or has
become effective, or the Exchange Offer has been consummated), then:
(a) Initial Shelf Registration Statement. The Issuers shall
promptly prepare and file with the SEC a Registration Statement for an offering
to be made on a continuous basis pursuant to Rule 415 covering all of the
Registrable Securities (the "Initial Shelf Registration Statement"). The Issuers
shall file with the SEC the Initial Shelf Registration Statement on or prior to
the Filing Date. The Initial Shelf Registration Statement shall be on Form S-1
or another appropriate form, if available, permitting registration of such
Registrable Securities for resale by such holders in the manner designated by
them (including, without limitation, in one or more underwritten offerings). The
Issuers shall not permit any securities other than the Registrable Securities to
be included in the Initial Shelf Registration Statement or any Subsequent Shelf
Registration Statement (as defined below). Each of the Issuers shall use their
best efforts to cause the Initial Shelf Registration Statement to be declared
effective under the Securities Act on or prior to the Effectiveness Date, and to
keep the Initial Shelf Registration Statement continuously effective under the
Securities Act until the date which is 24 months from the Closing Date, or such
shorter period ending when (i) all Registrable Securities covered by the Initial
Shelf Registration Statement have been sold in the manner set forth and as
contemplated in the Initial Shelf Registration Statement or (ii) a Subsequent
Shelf Registration Statement covering all of the Registrable Securities has been
declared effective under the Securities Act (such 24 month or shorter period,
the "Effectiveness Period").
(b) Subsequent Shelf Registration Statements. If the Initial
Shelf Registration Statement or any Subsequent Shelf Registration Statement
ceases to be effective for any reason at any time during the Effectiveness
Period (other than because of the sale of all of the securities registered
thereunder), each of the Issuers shall use their best efforts to obtain the
prompt withdrawal of any order suspending the effectiveness thereof, and in any
event the Issuers shall within 30 days of such cessation of effectiveness amend
the Shelf Registration Statement in a manner reasonably expected to obtain the
withdrawal of the order suspending the effectiveness thereof, or file an
additional "shelf" Registration Statement pursuant to Rule 415 covering all of
the Registrable Securities (a "Subsequent Shelf Registration Statement"). If a
Subsequent Shelf Registration Statement is filed, each of the Issuers shall use
their best efforts to cause the Subsequent Shelf Registration Statement to be
declared effective as soon as reasonably practicable after such filing and to
keep such Registration Statement continuously effective until the end of the
Effectiveness Period. As used herein the term "Shelf Registration Statement"
means the Initial Shelf Registration Statement and any Subsequent Shelf
Registration Statement.
<PAGE> 8
-7-
(c) Supplements and Amendments. The Issuers shall promptly
supplement and amend the Shelf Registration Statement if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration Statement, if required by the Securities Act, or if
reasonably requested by the Holders of a majority in aggregate principal amount
of the Registrable Securities covered by such Registration Statement or by any
underwriter of such Registrable Securities.
4. ADDITIONAL INTEREST
(a) The Issuers and the Initial Purchasers agree that the
Holders of Notes will suffer damages if the Issuers fail to fulfill their
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Company and Capital Corp. agree to pay, as liquidated damages, additional
interest on the Notes ("Additional Interest") under the circumstances and to the
extent set forth below (each of which shall be given independent effect):
(i) if either the Exchange Offer Registration Statement
or the Initial Shelf Registration Statement has not been filed on or prior
to the Filing Date (unless, with respect to the Exchange Offer Registration
Statement, a Shelf Event described in clause (i) of Section 2(c) shall have
occurred prior to the Filing Date), Additional Interest shall accrue on the
Notes over and above the stated interest in an amount equal to $0.192 per
week (or any part thereof) per $1,000 principal amount of Notes;
(ii) if either the Exchange Offer Registration Statement
or the Initial Shelf Registration Statement is not declared effective by
the SEC on or prior to the Effectiveness Date (unless, with respect to the
Exchange Offer Registration Statement, a Shelf Event described in clause
(i) of Section 2(c) shall have occurred), Additional Interest shall accrue
on the Notes over and above the stated interest in an amount equal to
$0.192 per week (or any part thereof) per $1,000 principal amount of Notes;
and
(iii) if (A) the Issuers have not exchanged Exchange
Securities for all Notes validly tendered and not withdrawn in accordance
with the terms of the Exchange Offer on or prior to the fifth day after the
Expiration Date, or (B) the Exchange Offer Registration Statement ceases to
be effective at any time prior to the Expiration Date, or (C) if
applicable, any Shelf Registration Statement has been declared effective
and such Shelf Registration Statement ceases to be effective at any time
during the Effectiveness Period, then Additional Interest shall accrue on
the Notes over and above the stated interest in an amount equal to $0.192
per week (or any part thereof) per $1,000 principal amount of the Notes for
the first 90 days commencing on (x) the sixth day after the Expiration
Date, in the case of (A) above, or (y) the day the Exchange Offer
Registration Statement ceases to be effective in the case of (B) above, or
(z) the day such Shelf Registration Statement ceases to be effective in the
case of (C) above;
provided, however, that (1) upon the filing of the Exchange Offer Registration
Statement or a Shelf Registration Statement as required hereunder (in the case
of clause (i) of this Section 4(a)), (2) upon the effectiveness of the Exchange
Offer Registration Statement or the Shelf Registration Statement as required
hereunder (in the case of clause (ii) of this Section 4(a)) or (3) upon the
exchange of Exchange Securities for all Notes validly tendered and not withdrawn
(in the case of clause (iii)(A) of this Section 4(a)), or upon the effectiveness
of the Exchange Offer Registration Statement which had ceased to remain
effective (in the case of clause (iii)(B) of this Section 4(a)), or upon the
effectiveness of the Shelf Registration Statement which had ceased to remain
effective (in the case of clause (iii)(C) of this Section 4(a)), Additional
Interest on the Notes as a result of such
<PAGE> 9
-8-
clause (or the relevant subclause thereof), as the case may be, shall cease to
accrue (but any accrued amount shall be payable).
(b) The Company shall notify the Trustee within one business
day after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). The Company and
Capital Corp. shall pay the Additional Interest due on the Registrable
Securities by depositing with the Trustee, in trust, for the benefit of the
Holders thereof, on or before the applicable semi-annual interest payment date,
immediately available funds in sums sufficient to pay the Additional Interest
then due to Holders of Registrable Securities. Each obligation to pay Additional
Interest shall be deemed to accrue immediately following the occurrence of the
applicable Event Date. Any accrued Additional Interest amount shall be due and
payable on each interest payment date immediately after the applicable Event
Date to the record Holder of Registrable Securities entitled to receive the
interest payment to be made on such date as set forth in the Indenture. The
parties hereto agree that the Additional Interest provided for in this Section 4
constitutes a reasonable estimate of the damages that may be incurred by Holders
of Registrable Securities by reason of the failure of a Shelf Registration
Statement or Exchange Offer Registration Statement to be filed or declared
effective, or a Shelf Registration Statement or an Exchange Offer Registration
Statement to remain effective, as the case may be, in accordance with this
Section 4.
(c) Each of the Guarantors, jointly and severally, guarantees
the payment of the Additional Interest to the same extent and in the same manner
as the guarantee provisions set forth in the Indenture, which provisions are
incorporated herein by reference mutatis mutandis.
5. REGISTRATION PROCEDURES
In connection with the registration of any Registrable
Securities pursuant to Sections 2 or 3 hereof, each of the Issuers shall use
their best efforts to effect such registrations to permit the sale of such
Registrable Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Issuers shall:
(a) prepare and file with the SEC on or before the Filing
Date, a Registration Statement or Registration Statements as prescribed by
Section 2 or 3, and to use their best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein; provided,
however, that, if (1) such filing is pursuant to Section 3, or (2) a Prospectus
contained in an Exchange Offer Registration Statement filed pursuant to Section
2 is required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Securities during the Applicable
Period, before filing any Registration Statement or Prospectus or any amendments
or supplements thereto, the Issuers shall furnish to and afford the Holders of
the Registrable Securities and each such Participating Broker-Dealer, as the
case may be, covered by such Registration Statement, their counsel and the
managing underwriters, if any, a reasonable opportunity to review copies of all
such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (at least five
days prior to such filing); the Issuers shall not file any Registration
Statement or Prospectus or any amendments or supplements thereto in respect of
which the Holders must be afforded a reasonable opportunity to review prior to
the filing of such document, if the Holders of a majority in aggregate principal
amount of the Registrable Securities covered by such Registration Statement, or
each such Participating Broker-Dealer, as the case may be, their counsel, or the
managing underwriters, if any, shall reasonably object by notice to the Company
after a reasonable period to review unless the Company is advised by Counsel
that such amendment or supplement is legally required;
<PAGE> 10
-9-
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration Statement or Exchange Offer
Registration Statement, as the case may be, as may be necessary to keep such
Registration Statement continuously effective for the Effectiveness Period, in
the case of a Shelf Registration Statement, or until the later of the Expiration
Date and the Applicable Period, in the case of the Exchange Offer Registration
Statement; cause the related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) under the Securities Act; and comply
with the provisions of the Securities Act, the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to it with respect to
the disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus;
(c) if (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, notify the selling Holders of
Registrable Securities, or each such Participating Broker-Dealer, as the case
may be, their counsel and the managing underwriters, if any, promptly (but in
any event within five business days), and confirm such notice in writing, (i)
when a Prospectus or any prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective (including in such notice a
written statement that any Holder may, upon request, obtain, without charge, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules, documents incorporated or deemed
to be incorporated by reference and exhibits); (ii) of the issuance by the SEC
of any stop order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of any preliminary prospectus or the
initiation of any proceedings for that purpose; (iii) if at any time when a
prospectus is required by the Securities Act to be delivered in connection with
sales of the Registrable Securities the representations and warranties of any of
the Issuers contained in any agreement (including any underwriting agreement)
contemplated by Section 5(n) below cease to be true and correct; (iv) of the
receipt by any of the Issuers of any notification with respect to the suspension
of the qualification or exemption from qualification of a Registration Statement
or any of the Registrable Securities or the Exchange Securities to be sold by
any Participating Broker-Dealer for offer or sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose; (v) of the
occurrence of any event or any information becoming known that makes any
statement made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that such notification need not
specifically identify such event if notification of the occurrence thereof
would, in the Company's reasonable judgment, involve the disclosure of
confidential non-public information; and (vi) of the Company's reasonable
determination that a post-effective amendment to the Registration Statement
would be appropriate;
(d) if (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, use their best efforts to prevent the
issuance of any order suspending the effectiveness of
<PAGE> 11
-10-
a Registration Statement or of any order preventing or suspending the use of a
Prospectus or suspending the qualification (or exemption from qualification) of
any of the Registrable Securities or the Exchange Securities to be sold by any
Participating Broker-Dealer for sale in any jurisdiction, and, if any such order
is issued, to use their best efforts to obtain the withdrawal of any such order
at the earliest possible moment;
(e) if a Shelf Registration Statement is filed pursuant to
Section 3 and if requested by the managing underwriters, if any, or the Holders
of a majority in aggregate principal amount of the Registrable Securities being
sold in connection with an underwritten offering or any Participating
Broker-Dealer, (i) promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters, if any,
such Holders, any Participating Broker-Dealer or their respective counsel
reasonably request to be included therein; (ii) make all required filings of
such prospectus supplement or such post-effective amendment as soon as
reasonably practicable after the Company has received notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment and (iii) supplement or make amendments to such Registration
Statement;
(f) if (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, furnish to each selling Holder of
Registrable Securities and to each such Participating Broker-Dealer who so
requests and upon request to their respective counsel and each managing
underwriter, if any, without charge, one conformed copy of the Registration
Statement or Registration Statements and each post-effective amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits;
(g) if (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, deliver to each selling Holder of
Registrable Securities, or each such Participating Broker-Dealer, as the case
may be, their counsel, and the underwriters, if any, without charge, as many
copies of the Prospectus or Prospectuses (including each form of preliminary
prospectus) and each amendment or supplement thereto and any documents
incorporated by reference therein as such Persons may reasonably request; and,
subject to the last paragraph of this Section 5, each of the Issuers hereby
consents to the use of such Prospectus and each amendment or supplement thereto
by each of the selling Holders of Registrable Securities or each such
Participating Broker-Dealer, as the case may be, and the underwriters or agents,
if any, and dealers (if any), in connection with the offering and sale of the
Registrable Securities covered by or the sale by Participating Broker-Dealers of
the Exchange Securities pursuant to such Prospectus and any amendment or
supplement thereto;
(h) prior to any public offering of Registrable Securities or
any delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, use their best efforts to register or
qualify, and to cooperate with the selling Holders of Registrable Securities or
each such Participating Broker-Dealer, as the case may be, the underwriters, if
any, and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities or Exchange Securities, as the case may be, for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as any selling Holder, Participating Broker-Dealer, or the
managing underwriters reasonably request in writing, provided , however, that
where Exchange Securities held by Participating Broker-Dealers or Registrable
Securities are offered other than through an underwritten offering, the Issuers
shall cause their counsel to (i)
<PAGE> 12
-11-
perform Blue Sky investigations and file registrations and qualifications
required to be filed pursuant to this Section 5(h); (ii) use their best efforts
to keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to be kept
effective hereunder; and (iii) do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Exchange
Securities held by Participating Broker-Dealers or the Registrable Securities
covered by the applicable Registration Statement, provided, further, however,
that none of the Issuers shall in any case be required to (A) qualify generally
to do business in any jurisdiction where it is not then so qualified, (B) take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or (C) subject itself to taxation
in excess of a nominal dollar amount in any such jurisdiction;
(i) if a Shelf Registration Statement is filed pursuant to
Section 3, cooperate with the selling Holders of Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company; and enable such
Registrable Securities to be in such denominations and registered in such names
as the managing underwriter or underwriters, if any, or Holders may reasonably
request;
(j) use their best efforts to cause the Registrable Securities
covered by the Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Registrable Securities, except as may be required solely as
a consequence of the nature of such selling Holder's business, in which case the
Issuers will cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals;
(k) if (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) above, as promptly as practicable
prepare and (subject to Section 5(a) above) file with the SEC, solely at the
expense of the Issuers, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Securities being sold thereunder or to the purchasers of the
Exchange Securities to whom such Prospectus will be delivered by a Participating
Broker-Dealer, any such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the Issuers
shall not be required to amend or supplement a Registration Statement, any
related Prospectus or any document incorporated therein by reference, in the
event that, and for a period not to exceed an aggregate of 30 days in any
calendar year if, (i) an event occurs and is continuing as a result of which a
Shelf Registration Statement would, in the Company's good faith judgment,
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and (ii) (a) the
Company determines in its good faith judgment that the disclosure of such event
at such time would have a material adverse effect on the business, operations or
prospects of the Company or (b) the disclosure otherwise relates to a pending
material business transaction that has not been publicly disclosed;
(l) use their best efforts to cause the Registrable Securities
covered by a Registration Statement or the Exchange Securities, as the case may
be, to be rated with the appropriate rating agencies, if so
<PAGE> 13
-12-
requested by the Holders of a majority in aggregate principal amount of
Registrable Securities covered by such Registration Statement or a Participating
Broker-Dealer selling Exchange Securities, as the case may be, or the managing
underwriters, if any;
(m) prior to the effective date of the first Registration
Statement relating to the Registrable Securities, (i) provide the Trustee with
printed certificates for the Registrable Securities in a form eligible for
deposit with The Depository Trust Company; and (ii) provide a CUSIP number for
the Registrable Securities;
(n) in connection with an underwritten offering of Registrable
Securities pursuant to a Shelf Registration Statement, enter into an
underwriting agreement as is customary in underwritten offerings and take all
such other actions as are reasonably requested by the managing underwriters in
order to expedite or facilitate the registration or the disposition of such
Registrable Securities, and in such connection, (i) make such representations
and warranties to and covenants with, the underwriters, with respect to the
business of the Company and its subsidiaries and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if and when
reasonably requested; (ii) obtain the written opinions of counsel to the Issuers
and updates thereof in form and substance reasonably satisfactory to the
managing underwriters, addressed to the underwriters covering the matters
customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by underwriters; (iii) use their
best efforts to obtain "cold comfort" letters and updates thereof in form and
substance reasonably satisfactory to the managing underwriters from the
independent certified public accountants of the Issuers (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company or any of its subsidiaries for which
financial statements and financial data are, or are required to be, included in
the Registration Statement), addressed to each of the underwriters, such letters
to be in customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings and such other
matters as reasonably requested by underwriters; and (iv) if an underwriting
agreement is entered into, the same shall contain indemnification provisions and
procedures comparable to those set forth in Section 7 hereof (or such other
provisions and procedures reasonably acceptable to the Holders of a majority in
aggregate principal amount of Registrable Securities covered by such
Registration Statement and the managing underwriters or agents) with respect to
all parties to be indemnified pursuant to said Section, all of which shall be
done at each closing under such underwriting agreement, or as and to the extent
required thereunder;
(o) if (1) a Shelf Registration Statement is filed pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, subject to the prior receipt by the
Company of undertakings to use reasonable efforts to preserve the
confidentiality of any information disclosed by the Issuers pursuant hereto in
form and substance reasonably satisfactory to the Company, make available for
inspection by any selling Holder of such Registrable Securities being sold, or
each such Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Securities, if any, and any
attorney, accountant or other agent retained by any such selling Holder or each
such Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept, during
reasonable business hours, all relevant financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries
(collectively, the "Records") as shall be necessary to enable them to exercise
any applicable due diligence responsibilities, and cause the officers, directors
and employees of the Company and its subsidiaries to supply all information in
each case requested by any such Inspector in connection with such Registration
Statement;
<PAGE> 14
-13-
provided, however, that records which the Company determines, in good faith, to
be confidential and any Records which the Company notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
such Registration Statement; (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent jurisdiction;
(iii) the information in such Records has been made generally available to the
public; or (iv) release thereof is necessary or advisable in connection with any
action, suit or proceeding involving any Holder or other Inspector; provided,
further, however, that prior notice shall be provided as soon as practicable to
the Company of the potential disclosure of any information by such Inspector
pursuant to clauses (i), (ii), (iii) or (iv) of this sentence to permit the
Company to obtain a protective order (or waive the provisions of this paragraph
(o)) and that such Inspector shall take such actions as are reasonably necessary
to protect the confidentiality of such information (if practicable) to the
extent such action is otherwise not inconsistent with, an impairment of or in
derogation of the rights and interests of the Holder or any Inspector; each
selling Holder of such Registrable Securities and each such Participating
Broker-Dealer will be required to agree that information obtained by it as a
result of such inspections shall be deemed confidential and shall not be used by
it as the basis for any market transactions in the securities of the Issuers
unless and until such information is generally available to the public; each
selling Holder of such Registrable Securities and each such Participating
Broker-Dealer will be required to further agree that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company to undertake appropriate action to
prevent disclosure of the Records deemed confidential at the Company's sole
expense;
(p) provide for an indenture trustee for the Registrable
Securities or the Exchange Securities, as the case may be, and cause the
Indenture or the trust indenture provided for in Section 2(a), as the case may
be, to be qualified under the TIA not later than the effective date of the
Exchange Offer or the first Registration Statement relating to the Registrable
Securities; and in connection therewith, cooperate with the trustee under any
such indenture and the holders of the Registrable Securities to effect such
changes to such indenture as may be required for such indenture to be so
qualified in accordance with the terms of the TIA; and execute, and use their
best efforts to cause such trustee to execute, all documents as may be required
to effect such changes, and all other forms and documents required to be filed
with the SEC to enable such indenture to be so qualified in a timely manner;
(q) comply with all applicable rules and regulations of the
SEC to the extent and so long as they are applicable to the Exchange Offer
Registration Statement or the Shelf Registration Statement and make generally
available to their securityholders earning statements satisfying the provisions
of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar
rule promulgated under the Securities Act) no later than 45 days after the end
of any 12-month period (or 90 days after the end of any 12-month period if such
period is a fiscal year) (i) commencing at the end of any fiscal quarter in
which Registrable Securities are sold to underwriters in a firm commitment or
best efforts underwritten offering; and (ii) if not sold to underwriters in such
an offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which statements
shall cover said 12-month periods;
(r) upon consummation of an Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Issuers in customary form,
relating to the Exchange Securities or the Private Exchange Securities, as the
case may be, addressed to the Trustee for the benefit of all Holders of
Registrable Securities participating in the Exchange Offer or the Private
Exchange, as the case may be, and which includes an opinion that (i) each of the
Issuers have duly authorized, executed and delivered the Exchange Securities and
Private Exchange Securities, the Guarantees to be endorsed thereon and the
related indenture; and (ii) each of the Exchange Securities or the Private
Exchange Securities, as the case may be, the Guarantees endorsed thereon and the
related indenture and guarantees thereunder constitute valid and binding
obligations of each of the Issuers
<PAGE> 15
-14-
party thereto, enforceable against each of the Issuers party thereto in
accordance with their respective terms (with customary exceptions);
(s) if an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Securities by Holders to the
Company (or to such other Person as directed by the Company) in exchange for the
Exchange Securities or the Private Exchange Securities, as the case may be,
mark, or caused to be marked, on such Registrable Securities that such
Registrable Securities are being cancelled in exchange for the Exchange
Securities or the Private Exchange Securities, as the case may be; in no event
shall such Registrable Securities be marked as paid or otherwise satisfied;
(t) cooperate with each seller of Registrable Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD"); and
(u) use their best efforts to take all other steps necessary
to effect the registration of the Registrable Securities covered by a
Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Securities
or Participating Broker-Dealer as to which any registration is being effected to
furnish to the Issuers such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
as the Issuers may, from time to time, reasonably request. The Issuers may
exclude from such registration the Registrable Securities or Exchange Securities
of any selling Holder or Participating Broker-Dealer, as the case may be, who
unreasonably fails to furnish such information within a reasonable time after
receiving such request.
Each Holder of Registrable Securities and each Participating
Broker-Dealer agrees by acquisition of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
that, upon receipt of any notice from any Issuer of the happening of any event
of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v) or 5(c)(vi), such
Holder will forthwith discontinue disposition of such Registrable Securities
covered by such Registration Statement or Prospectus or Exchange Securities to
be sold by such Participating Broker-Dealer, as the case may be, until such
holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(k), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto. In the event that any
Issuer shall give any such notice, each of the Effectiveness Period and the
Applicable Period shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Securities covered by such Registration
Statement or Exchange Securities to be sold by such Participating Broker-Dealer,
as the case may be, shall have received (x) the copies of the supplemented or
amended Prospectus contemplated by Section 5(k) hereof or (y) the Advice.
6. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers shall be borne by the Issuers
whether or not the Exchange Offer Registration Statement or a Shelf Registration
Statement is filed or becomes effective, including, without limitation, (i) all
registration and filing fees (including, without limitation, (A) fees with
respect to filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue
<PAGE> 16
-15-
Sky laws (including, without limitation, reasonable fees and disbursements of
counsel) in such jurisdictions (x) where the holders of Registrable Securities
are located, in the case of the Exchange Securities, or (y) as provided in
Section 5(h), in the case of Registrable Securities to be sold in a public
offering or Exchange Securities to be sold by a Participating Broker-Dealer
during the Applicable Period)); (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Securities or
Exchange Securities in a form eligible for deposit with The Depository Trust
Company and of printing prospectuses if the printing of prospectuses is
requested by the managing underwriters, if any, or, in respect of Registrable
Securities or Exchange Securities to be sold by any Participating Broker-Dealer
during the Applicable Period, by the Holders of a majority in aggregate
principal amount of the Registrable Securities included in any Registration
Statement or a Participating Broker-Dealer selling Exchange Securities, as the
case may be); (iii) messenger, telephone and delivery expenses incurred by the
Issuers; (iv) fees and disbursements of counsel for the Issuers and reasonable
fees and disbursements of special counsel for the sellers of Registrable
Securities (subject to the provisions of Section 6(b)); (v) fees and
disbursements of all independent certified public accountants referred to in
Section 5(n)(iii) (including, without limitation, the expenses of any special
audit and "cold comfort" letters required by or incident to such performance);
(vi) the reasonable fees and expenses of any "qualified independent underwriter"
or other independent appraiser participating in an offering pursuant to Rule
2710 or Rule 2720 of the Conduct Rules of the NASD; (vii) rating agency fees;
(viii) the fees and expenses incurred by the Issuers in connection with the
listing of the Registrable Securities on any securities exchange; and (ix) the
expenses relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements, indentures and
any other documents necessary in order to comply with this Agreement.
(b) In connection with any Shelf Registration Statement
hereunder, the Issuers shall reimburse the Holders of the Registrable Securities
being registered in such registration for the reasonable fees and disbursements
of not more than one counsel (in addition to appropriate local counsel) chosen
by the Holders of a majority in aggregate principal amount of the Registrable
Securities to be included in such Registration Statement and other reasonable
out-of-pocket expenses of the Holders of Registrable Securities incurred in
connection with the registration of the Registrable Securities.
7. INDEMNIFICATION
Each of the Issuers, jointly and severally, agrees to
indemnify and hold harmless each Holder of Registrable Securities, each
Participating Broker-Dealer selling Exchange Securities during the Applicable
Period and Chase Securities Inc., in its capacity as Market Maker, the
affiliates, officers, directors, employees, representatives and agents of each
such Person, and each Person, if any, who controls any such Person within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act (each, a "Participant"), from and against any and all losses, claims,
damages and liabilities (including, without limitation, the reasonable legal
fees and other expenses actually incurred in connection with any suit, action or
proceeding or any claim asserted) caused by any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement (or
any amendment thereto) or Prospectus (as amended or supplemented if the Issuers
shall have furnished any amendments or supplements thereto) or any preliminary
prospectus, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, with respect to the Prospectus, in the light of the circumstances under
which they were made, not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information relating to such Holder of Registrable Securities or
<PAGE> 17
-16-
Participating Broker-Dealer, as the case may be, furnished to the Company in
writing by such Holder of Registrable Securities or Participating Broker-Dealer,
as the case may be, expressly for use therein; provided, however, that the
foregoing indemnity with respect to any preliminary prospectus shall not inure
to the benefit of any Holder of Registrable Securities or Participating
Broker-Dealer, as the case may be (or to the benefit of any officer or director
of, or of any Person controlling, such Holder of Registrable Securities or
Participating Broker-Dealer) from whom the Person asserting any such losses,
claims, damages or liabilities purchased Registrable Securities or Exchange
Securities, as the case may be, to the extent that such untrue statement or
omission or alleged untrue statement or omission made in such preliminary
prospectus is eliminated or remedied in the related Prospectus (as amended or
supplemented if the Issuers shall have furnished any amendments or supplements
thereto) and such Prospectus does not contain any other untrue statement or
omission or alleged untrue statement or omission of a material fact and, to the
extent required by applicable law, a copy of the related Prospectus (as so
amended or supplemented) shall not have been furnished to such Person at or
prior to the sale of such Registrable Securities or Exchange Securities, as the
case may be, to such Person, unless such failure to furnish was a result of
non-compliance by the Issuers with Section 5(g).
Each Holder of Registrable Securities, the Market Maker and
each Participating Broker-Dealer selling Exchange Securities during the
Applicable Period will be required to agree, severally and not jointly, to
indemnify and hold harmless each of the Issuers, its directors, officers,
employees, representatives and agents who sign the Registration Statement and
each Person who controls any Issuer within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Issuers to each Participant, but only with
reference to information relating to such Holder of Registrable Securities,
Market Maker or Participating Broker-Dealer, as the case may be, furnished to
the Company in writing by or on behalf of such Holder of Registrable Securities,
Market Maker or Participating Broker-Dealer, as the case may be, expressly for
use in any Registration Statement or Prospectus, any amendment or supplement
thereto, or any preliminary prospectus. The liability of any such Holder of
Registrable Securities, Market Maker or Participating Broker-Dealer, as the case
may be, under this paragraph shall in no event exceed the proceeds received by
such Holder of Registrable Securities, Market Maker or Participating
Broker-Dealer, as the case may be, from sales of Registrable Securities or
Exchange Securities, as the case may be, giving rise to such obligations.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
notify the Person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the
reasonable fees and expenses incurred by such counsel related to such
proceeding; provided, however, that the failure to so notify the Indemnifying
Person shall not relieve it of any obligation or liability which it may have
hereunder or otherwise (unless and only to the extent that the Indemnifying
Person was otherwise unaware that such suit, action, proceeding, claim, or
demand shall have been brought or asserted and such failure actually materially
prejudices the Indemnifying Person (through the forfeiture of substantive rights
or defenses)). In any such proceeding, any Indemnified Person shall have the
right to retain its own counsel, but, other than in circumstances involving a
conflict among Indemnified Persons, the fees and expenses of such counsel shall
be at the expense of such Indemnified Person unless (i) the Indemnifying Person
and the Indemnified Person shall have agreed to the contrary; (ii) the
Indemnifying Person has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person; or (iii) the named parties in
any such proceeding (including any impleaded parties) include both the
Indemnifying Person and the Indemnified Person and representation of both
parties by the same counsel would be inappropriate due to an actual or potential
conflict of interest. It is understood that, other than in circumstances
involving a conflict among Indemnified Persons, the Indemnifying Person shall
not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in
<PAGE> 18
-17-
addition to any local counsel) for all Indemnified Persons, and that all such
fees and expenses shall be reimbursed as they are incurred. Any such separate
firm for the Participants shall be designated in writing by the Holders of
Registrable Securities or Participating Broker-Dealers selling Exchange
Securities during the Applicable Period, as the case may be, who sold a majority
in interest of Registrable Securities or Exchange Securities, as the case may
be, sold by all such Holders of Registrable Securities or Participating
Broker-Dealers, as the case may be. Any such separate firm for the Issuers, its
directors, officers, employees, representatives and agents and such control
Persons of the Issuers shall be designated in writing by the Company.
The Indemnifying Person shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the Indemnifying
Person agrees to indemnify any Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. No Indemnifying Person
shall, without the prior written consent of the Indemnified Person, (which
consent shall not be unreasonably withheld or deleted) effect any settlement of
any pending or threatened proceeding in respect of which any Indemnified Person
is or could have been a party, and indemnity could have been sought hereunder by
such indemnified party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional written
release of such Indemnified Person in form and substance satisfactory to the
Indemnified Persons from all liability on claims that are the subject matter of
such proceeding and does not contain an admission of fault or culpability.
If the indemnification provided for in the first and second
paragraphs of this Section 7 is for any reason unavailable to, or insufficient
to hold harmless, an Indemnified Person in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Person under
such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and
in order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
(i) the relative benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other from the initial
offering of the Notes or (ii) if the allocation provided by the foregoing clause
(i) is not permitted by applicable law, not only such relative benefits but also
the relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative benefits received by the
Issuers on the one hand and the Holders of Registrable Securities or
Participating Broker-Dealers selling Exchange Securities during the Applicable
Period, as the case may be, on the other shall be deemed to be in the same
proportion as the total proceeds from the initial offering (net of discounts and
commissions but before deducting expenses) of the Notes received by the Issuers
bears to the total proceeds received by such Holders of Registrable Securities
or Participating Broker-Dealers, as the case may be, from the sale of
Registrable Securities or Exchange Securities, as the case may be. The relative
fault of the parties shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Issuers, on the one hand, or such Holder of Registrable
Securities or Participating Broker-Dealer, as the case may be, on the other, the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission, and any other equitable
considerations appropriate in the circumstances.
The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed
<PAGE> 19
-18-
to include, subject to the limitations set forth above, any reasonable legal
or other expenses actually incurred by such Indemnified Person in connection
with investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, in no event shall a Holder of Registrable
Securities or Participating Broker-Dealer be required to contribute any amount
in excess of the amount by which proceeds received by such Holder of
Registrable Securities or Participating Broker-Dealer, as the case may be, from
sales of Registrable Securities or Exchange Securities, as the case may be,
exceeds the amount of any damages that such Holder of Registrable Securities or
Participating Broker-Dealer, as the case may be, has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. RULE 144 AND RULE 144A
Each of the Issuers, for so long as the Registrable Securities
remain outstanding, covenants that it will file the reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner and, if at any time
any of the Issuers is not required to file such reports, it will, upon the
request of any Holder of Registrable Securities, make publicly available other
information so long as necessary to permit sales pursuant to Rule 144 and Rule
144A under the Securities Act. Each of the Issuers further covenants that it
will take such further action as any Holder of Registrable Securities may
reasonably request, to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144 and Rule 144A
under the Securities Act.
9. UNDERWRITTEN REGISTRATIONS
If any of the Registrable Securities covered by any Shelf
Registration Statement are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will manage
the offering will be selected by the Holders of a majority in aggregate
principal amount of such Registrable Securities included in such offering and
reasonably acceptable to the Company.
No Holder of Registrable Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements (however the terms applicable to each Holder shall be identical in
all respects) and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements applicable to all Holders.
10. MARKET MAKING
(a) The Issuers will, for the sole benefit of Chase Securities
Inc. (the "Market Maker"), and for so long as any of the Notes are outstanding
and the Market Maker or any of its Affiliates (as defined in the rules and
regulations of the SEC under the Securities Act) owns any equity securities of
the Company and proposes to make a market in the Notes as part of its business
in the ordinary course:
<PAGE> 20
-19-
(i) (A) Periodically amend the Registration Statement so that
the information contained in the Registration Statement complies with
the requirements of Section 19(a) under the Securities Act; (B) if
requested by the Market Maker, within 45 days following the end of the
Company's most recent fiscal quarter, file a supplement to the
Prospectus which sets forth the financial results of the Company for
the previous quarter; (C) amend the Registration Statement or
supplement the Prospectus when necessary to reflect any material
changes in the information provided therein; and (D) amend the
Registration Statement when required to do so in order to comply with
Section 10(a)(3) of the Securities Act; provided, however, that (1)
prior to filing any post-effective amendment to the Registration
Statement or any supplement to the Prospectus, the Company will furnish
to the Market Maker copies of all such documents proposed to be filed,
which documents will be subject to the review of the Market Maker and
its counsel, (2) the Issuers will not file any post-effective amendment
to the Registration Statement or any supplement to the Prospectus to
which the Market Maker and its counsel shall reasonably object by
notice to the Company after a reasonable period to review unless the
Company is advised by counsel that such amendment or supplement is
legally required and (3) the Company will provide the Market Maker and
its counsel with copies of each amendment or supplement filed.
(ii) Notify the Market Maker, and (if requested by the Market
Maker) confirm such advice in writing, (A) when any Prospectus
supplement or amendment or post-effective amendment to the Registration
Statement has been filed, and, with respect to any post-effective
amendment, when the same has become effective; (B) of any request by
the SEC for any post-effective amendment to the Registration Statement,
any supplement or amendment to the Prospectus or for additional
information; (C) the issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose; (D) of the receipt by any Issuer of
any notification with respect to the suspension of the qualification of
the Notes for sale in any jurisdiction or the initiation or threatening
of any proceedings for such purpose; (E) of the occurrence of any event
which makes any statement made in the Registration Statement, the
Prospectus or any amendment or supplement thereto untrue or which
requires the making of any changes in the Registration Statement, the
Prospectus or any amendment or supplement thereto, in order to make the
statements therein not misleading; and (F) of any advice from a
nationally recognized statistical rating organization that such
organization has placed the Company under surveillance or review with
negative implications or has determined to downgrade the rating of the
Notes or any other debt obligation of the Company whether or not such
downgrade shall have been publicly announced.
(iii) Furnish to the Market Maker, without charge, (i) at least
one conformed copy of any post-effective amendment to the Registration
Statement; and (ii) as many copies of any amendment or supplement to
the Prospectus as the Market Maker may reasonably request.
(iv) Consent to the use of the Prospectus or any amendment or
supplement thereto by the Market Maker in connection with the offering
and sale of the Notes.
(v) For so long as the Notes shall be outstanding, furnish to
the Market Maker (A) as soon as practicable after the end of each
fiscal year, the number of copies reasonably requested by the Market
Maker of the Company's annual report to stockholders for such year, (B)
as soon as available, the number of copies reasonably requested by the
Market Maker of each report (including, without limitation, Reports on
Forms 10-K, 10-Q and 8-K) or definitive proxy statements of the Company
filed under the Exchange Act or mailed to stockholders and (C) all
public reports and all reports and financial statements furnished by
the Company to the Nasdaq National Market System or any U.S. national
securities exchange or quotation service upon which the Notes may be
listed pursuant to requirements
<PAGE> 21
-20-
of or agreements with such exchange or quotation service or to the SEC
pursuant to the Exchange Act or any rule or regulation of the SEC
thereunder.
(vi) In the event of the issuance of any stop order suspending
the effectiveness of the Registration Statement or of any order
suspending the qualification of the Notes for sale in any jurisdiction,
to use promptly its best efforts to obtain its withdrawal.
(b) The Issuers represent that any post-effective amendments to
the Registration Statement, any amendments or supplements to the Prospectus and
any documents filed under the Exchange Act will, when they become effective or
are filed with the SEC, as the case may be, conform in all respects to the
requirements of the Securities Act and the rules and regulations of the SEC
thereunder and will not, as of the effective date of such post-effective
amendments and as of the filing date of amendments or supplements to the
Prospectus or filings under the Exchange Act contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
no representation or warranty is made as to information contained in or omitted
from the Registration Statement or the Prospectus in reliance upon and in
conformity with written information furnished to the Company by the Market Maker
specifically for inclusion therein, which information the parties hereto agree
will be limited to the statements concerning the market-making activities of the
Market Maker to be set forth on the cover page and in the "Plan of Distribution"
section of the Prospectus.
(c) Each time that the Registration Statement or Prospectus
shall be amended or the Prospectus shall be supplemented, the Company shall,
concurrently with such amendment or supplement, furnish the Market Maker and its
counsel with a certificate of its President or any Vice-President and its chief
financial or accounting officer to the effect that:
(i) The Registration Statement has been declared effective and
such amendment has become effective under the Securities Act as of the
date and time specified in such certificate; such amendment to the
Prospectus (or such supplement to the Prospectus, as the case may be)
was filed with the SEC pursuant to the subparagraph of Rule 424(b)
under the Securities Act specified in such certificate on the date
specified therein; and, to the knowledge of such officers, no stop
order suspending the effectiveness of the Registration Statement has
been issued and no proceeding for that purpose is pending or threatened
by the SEC; and
(ii) Such officers have carefully examined the Registration
Statement and the Prospectus and such amendment or supplement thereto
and, in their opinion, as of the date of such amendment or supplement,
the Registration Statement and the Prospectus, as amended or
supplemented, as the case may be, did not include any untrue statement
of a material fact and did not omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading, in the case of the Prospectus, in light of the
circumstances in which they were made.
(d) Each time that the Registration Statement or Prospectus
shall be amended, the Issuers, if reasonably requested by the Market Maker,
shall, concurrently with such amendment, furnish to the Market Maker and its
counsel (at the expense of the Market Maker) the written opinion of counsel for
the Issuers satisfactory to the Market Maker to the effect that:
(i) The Registration Statement has been declared effective and
such amendment has become effective under the Securities Act, as of the
date and time specified in such certificate; such amendment to the
Prospectus was filed with the SEC pursuant to the subparagraph Rule
424(b) under
<PAGE> 22
-21-
the Securities Act specified in such opinion on the date specified
therein; and, to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceeding for that purpose is pending or threatened in
writing by the SEC; and
(ii) Counsel for the Issuers has reviewed such amendment and
participated with the officers of the Issuers and independent public
accountants for the Issuers in the preparation of such amendment and
has no reason to believe that the Registration Statement (or any
post-effective amendment thereto), at the time of its effective date,
contained any untrue statement of a material fact, or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus contains any
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(e) Each time that the Registration Statement or Prospectus
shall be amended to include audited annual financial information, the Company,
if requested by the Market Maker, shall, concurrently with such amendment,
furnish the Market Maker and its counsel with a letter of Price Waterhouse, LLP
(or other independent public accountants for the Issuers of nationally
recognized standing), in form satisfactory to the Market Maker, addressed to the
Market Maker and dated the date of delivery of such letter, (i) confirming that
they are independent public accountants within the meaning of the Securities Act
and are in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the SEC and
(ii) a letter substantially in the form of the letter delivered to the Initial
Purchasers pursuant to Section5(f) of the Purchase Agreement with such changes
as may be necessary to reflect the amended financial information.
(f) The Issuers hereby agree to indemnify the Market Maker, and
if applicable, contribute to the Market Maker, in accordance with Section 7 of
this Agreement.
(g) The Issuers will comply with the provisions of this Section
10 at their own expense.
(h) The agreements contained in this Section 10 and the
representations, warranties and agreements contained in this Agreement shall
survive all offers and sales of the Notes and shall remain in full force and
effect, regardless of any termination or cancellation of this Agreement or any
investigation made by or on behalf of any indemnified party.
(i) For purposes of this Section 10, any reference to the terms
"amend", "amendment" or "supplement" with respect to the Registration Statement
or the Prospectus shall be deemed to refer to and include the filing under the
Exchange Act on or after the date the Registration Statement is converted to
Form S-3 of any document deemed to be incorporated therein by reference.
11. MISCELLANEOUS
(a) Remedies. In the event of a breach by any of the Issuers of
any of its obligations under this Agreement, each Holder of Registrable
Securities, in addition to being entitled to exercise all rights provided
herein, in the Indenture or, in the case of the Initial Purchasers, in the
Purchase Agreement or granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. The Issuers
agree that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of any of the provisions of this Agreement
and hereby further agrees that, in the event
<PAGE> 23
-22-
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. None of the Issuers has, as of
the date hereof, entered into and each shall not, after the date of this
Agreement, enter into any agreement with respect to any of its securities that
is inconsistent with the rights granted to the Holders of Registrable Securities
in this Agreement or otherwise conflicts with the provisions hereof.
(c) Adjustments Affecting Registrable Securities. The Issuers
shall not, directly or indirectly, take any action with respect to the
Registrable Securities as a class that would adversely affect the ability of the
Holders of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement.
(d) Joint and Several Obligations; Addition of Guarantors. The
Guarantors agree that their obligations under this agreement are joint and
several. So long as any Registrable Securities remain outstanding, the Company
shall cause each of its subsidiaries that becomes a guarantor of the Notes under
the Indenture to execute and deliver an instrument pursuant to which such
subsidiary agrees to be bound by the provisions of this agreement as a
Guarantor.
(e) Amendments and Waivers. Except as provided in paragraph (d)
above, the provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent of (A) the
Holders of not less than a majority in aggregate principal amount of the then
outstanding Registrable Securities and (B) in circumstances that would adversely
affect the Participating Broker-Dealers, the Participating Broker-Dealers
holding not less than a majority in aggregate principal amount of the Exchange
Securities held by all Participating Broker-Dealers; provided, however, that
Section 7 and this Section 11(e) may not be amended, modified or supplemented
without the prior written consent of each Holder and each Participating
Broker-Dealer (including any Person who was a Holder or Participating
Broker-Dealer of Registrable Securities or Exchange Securities, as the case may
be, disposed of pursuant to any Registration Statement) affected by any such
amendment, modification or supplement. Notwithstanding the foregoing, a waiver
or consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders of Registrable Securities whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable Securities may be given by Holders of at least a majority
in aggregate principal amount of the Registrable Securities being sold by such
Holders pursuant to such Registration Statement.
(f) Notices. All notices and other communications (including
without limitation any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Securities, at the most
current address given by the Trustee to the Company; and
(ii) if to the Issuers, at Advanced Accessory Systems, 12900
Hall Road, Suite 200, Sterling Heights, MI 48313, Attention: Chief
Financial Officer.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if
<PAGE> 24
-23-
mailed; one business day after being timely delivered to a next-day air courier;
and when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the trustee
under the Indenture at the address specified in such Indenture.
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Registrable Securities.
(h) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(j) Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the state of New York, as applied to
contracts made and performed within the state of New York, without regard to
principles of conflicts of law. Each of the parties hereto agrees to submit to
the jurisdiction of the courts of the state of New York in any action or
proceeding arising out of or relating to this agreement.
(k) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(l) Entire Agreement. This Agreement, together with the Purchase
Agreement, is intended by the parties as a final expression of their agreement,
and is intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein.
(m) Securities Held by the Issuers or Its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by any of the
Issuers or its affiliates (as such term is defined in Rule 405 under the
Securities Act) shall not be deemed to be not outstanding for purposes of
determining whether such consent or approval was given by the Holders of such
required percentage.
[Signature Pages Follow]
<PAGE> 25
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
ADVANCED ACCESSORY SYSTEMS, LLC
By:____________________________
Name:
Title:
AAS CAPITAL CORPORATION
By:____________________________
Name:
Title:
AAS HOLDINGS, INC.
By:____________________________
Name:
Title:
SPORTRACK, LLC
By:____________________________
Name:
Title:
VALLEY INDUSTRIES, LLC
By:____________________________
Name:
Title:
CHASE SECURITIES INC.
By:____________________________
Name:
Title:
<PAGE> 26
-2-
FIRST CHICAGO CAPITAL MARKETS, INC.
By:____________________________
Name:
Title:
<PAGE> 1
ADVANCED ACCESSORY SYSTEMS, LLC
EXHIBIT 12.1 -- STATEMENT REGARDING COMPUTATION OF RATIOS --
FIXED CHARGE COVERAGE RATIO
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996, AND THE PERIOD FROM SEPTEMBER
28, 1995 THROUGH DECEMBER 31, 1995
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 28,
TO DECEMBER 31, DECEMBER 31,
1995 1996 1997
--------------- ---- ----
<S> <C> <C> <C>
Pre-tax income (loss) from continuing operations..... $ 870,000 $ 6,409,000 $ 712,000
Minority interest in the income of subsidiary with
fixed charges...................................... 9,000 69,000 97,000
---------- ----------- -----------
879,000 6,478,000 809,000
---------- ----------- -----------
Fixed charges:
Interest expense and amortization of debt discount
and premium on all indebtedness................. 975,000 4,312,000 12,627,000
Rentals(1)........................................... 11,000 223,000 751,000
---------- ----------- -----------
Total fixed charges.................................. 986,000 4,535,000 13,378,000
---------- ----------- -----------
Earnings before income taxes, minority interest and
fixed charges...................................... $1,865,000 $11,013,000 $14,187,000
========== =========== ===========
Ratio of earnings to fixed charges(2)................ 1.89x 2.43x 1.06x
========== =========== ===========
</TABLE>
- -------------------------
(1) Amount included in fixed charges for rentals is considered by management to
be a reasonable approximation of the interest factor.
(2) The Exchange Offer will not have a material impact on the ratio of earnings
to fixed charges.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF ADVANCED ACCESSORY SYSTEMS, LLC
<TABLE>
<CAPTION>
COMPANY LOCATION
- ------- --------
<S> <C>
Valley Industries, LLC Madison Heights, Michigan
SportRack, LLC Sterling Heights, Michigan
Nomadic Sport, Inc. Hammer Bay, Canada
SportRack GmbH Sandhausen, Germany
SportRack International, Inc. Granby, Canada
Valtek, LLC Sterling Heights, Michigan
AAS Capital Corp. Sterling Heights, Michigan
AAS Holdings, Inc. Sterling Heights, Michigan
Brink International BV Staphorst, Netherlands
Brink BV Staphorst, Netherlands
Brink Trekhaken BV Hoogevaeen, Netherlands
Nordisk Komponent Holding A/S Naestved, Denmark
Brink, A/S Naestved, Denmark
Brink UK Ltd. Numeaton, United Kingdom
Brink Sverige AB Vanersborg, Sweden
Brink France Sarl Paris, France
SCI 1'Elmontaise Alglemont France
Societe de Fabrication Begheny, France
d'Equipements et d'
Accossries SA (SFEA)
Brink Italia Srl Milian, Italy
Brink Polska Sp. Z.o.o. Wolszyn, Poland
</TABLE>
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Advanced Accessory Systems, LLC and AAS
Capital Corporation of our report dated March 15, 1998 relating to the financial
statements of Advanced Accessory Systems, LLC, which appears in such Prospectus.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ PRICE WATERHOUSE LLP
Bloomfield Hills, Michigan
March 30, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Advanced Accessory Systems, LLC and AAS
Capital Corporation of our report dated August 25, 1997 relating to the
financial statements of MascoTech Accessories (the "Predecessor"), a division of
MascoTech, Inc., which appears in such Prospectus. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
Bloomfield Hills, Michigan
March 30, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Advanced Accessory Systems, LLC and AAS
Capital Corporation of our report dated December 5, 1997 relating to the
financial statements of Valley Industries, Inc., which appears in such
Prospectus. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
/s/ PRICE WATERHOUSE LLP
Bloomfield Hills, Michigan
March 30, 1998
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Advanced Accessory Systems, LLC and AAS
Capital Corporation of our report dated September 4, 1997 relating to the
financial statements of Brink International B.V., which appears in such
Prospectus. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
/s/ COOPERS & LYBRAND N.V.
Zwolle, The Netherlands
March 30, 1998
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 10, 1997, with respect to the financial
statements of Valley Industries Inc. included in the Registration Statement
(Form S-4 No. 333- ) and related Prospectus of Advanced Accessory Systems,
LLC and AAS Capital Corporation for the registration of $125,000,000 of their
9 3/4% Series B Senior Subordinated Notes due 2007.
/s/ ERNST & YOUNG LLP
Detroit, Michigan
March 30, 1998
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Advanced Accessory Systems, LLC and AAS
Capital Corporation of our report dated March 13, 1998 relating to the financial
statements of the towbar segment of Ellebi S.p.A., which appears in such
Prospectus. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
/s/ AXIS S.r.l.
Reggio Emelia, Italy
March 30, 1998
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM T-1
------------------
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF
1939, AS AMENDED, OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)_______
-------------------------
FIRST UNION NATIONAL BANK
(Exact name of trustee as specified in its charter)
United States National Bank 56-0900030
(State of incorporation if I.R.S. employer
not a national bank) identification no.)
First Union National Bank
230 South Tryon Street, 9th Floor
Charlotte, North Carolina 28288-1179
(Address of principal (Zip Code)
executive offices)
SAME AS ABOVE
(Name, address and telephone number, including
area code, of trustee's agent for service)
ADVANCED ACCESSORY SYSTEMS, LLC
AAS CAPITAL CORPORATION
(Exact name of co-obligors as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
13-3848156
13-3969422
(I.R.S. employer identification nos.)
12900 Hall Road, Suite 200
Sterling Heights, Michigan 48313
(810) 997-2900
(Address, including zip code, of principal executive offices)
-----------------------------------
US $125,000,000
ADVANCED ACCESSORY SYSTEMS, LLC
AAS CAPITAL CORPORATION
9 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
(Title of the indenture securities)
-----------------------------------
<PAGE> 2
Co-obligors as Guarantors on the 9 3/4% Series B Senior Subordinated Notes due
2007:
AAS HOLDINGS, INC.
(Exact name of obligors as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
38-3319226
(I.R.S. employer identification no.)
12900 Hall Road, Suite 200
Sterling Heights, Michigan 48313
(810) 997-2900
(Address, including zip code, of principal executive offices)
SPORTRACK, LLC
(Exact name of obligors as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
13-3848154
(I.R.S. employer identification no.)
12900 Hall Road, Suite 200
Sterling Heights, Michigan 48313
(810) 997-2900
(Address, including zip code, of principal executive offices)
VALLEY INDUSTRIES, LLC
(Exact name of obligors as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
38-3363492
(I.R.S. employer identification no.)
32501 Dequindre Road
Madison Heights, Michigan 48071
(248) 588-6900
(Address, including zip code, of principal executive offices)
2
<PAGE> 3
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
- -------------------------------------------------------------------------------
Name Address
- -------------------------------------------------------------------------------
Federal Reserve Bank of Richmond, VA Richmond, VA
Comptroller of the Currency Washington, D.C.
Securities and Exchange Commission
Division of Market Regulation Washington, D.C.
Federal Deposit Insurance Corporation Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR AND UNDERWRITERS.
If the obligor or any underwriter for the obligor is an affiliate of
the trustee, describe each such affiliation.
None. Inasmuch as this Form T-1 is filed prior to the ascertainment by
the Trustee of all facts on which to base a responsive answer this Item 2, the
answer to said Item is based on incomplete information. Item 2 may, however, be
considered correct unless amended by an amendment to this Form T-1.
ITEMS 3-15.
Not applicable
ITEM 16. LIST OF EXHIBITS.
All exhibits identified below are filed as a part of this statement of
eligibility.
1. A copy of the Articles of Association of First Union National Bank as
now in effect, which contain the authority to commence business and a grant of
powers to exercise corporate trust powers.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the Articles of Association.
3. A copy of the authorization of the trustee to exercise corporate trust
powers, if such authorization is not contained in the documents specified in
exhibits (1) or (2) above.
4. A copy of the existing By-laws of First Union National Bank, or
instruments corresponding thereto.
5. Inapplicable.
6. The consent of the trustee required by Section 321(b) of the Trust
Indenture Act of 1939. Included on signature page of this Form T-1 Statement.
3
<PAGE> 4
7. A copy of the latest report of condition of the trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
8. Inapplicable.
9. Inapplicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, First Union National Bank, a national association
organized and existing under the laws of the United States of America, has duly
caused this statement of eligibility and qualification to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Charlotte, and State of North Carolina, on the 30th day of March, 1998.
FIRST UNION NATIONAL BANK
(trustee)
By:/s/ S. Schwartz
----------------------------
Name: Shannon Schwartz
Title: Assistant Vice President
CONSENT OF TRUSTEE
Under section 321(b) of the Trust Indenture Act of 1939, as amended,
and in connection with the proposed issuance by Advanced Accessory Systems, LLC
and AAS Capital Corporation, as co-issuers of their 9 3/4% Series B Senior
Subordinated Notes Due 2007, First Union National Bank as the trustee herein
named, hereby consents that reports of examinations of said Trustee by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon requests therefor.
FIRST UNION NATIONAL BANK
By: /s/Shannon Schwartz
----------------------------
Name: Shannon Schwartz
Title: Assistant Vice President
Dated: March 30, 1998
4
<PAGE> 5
ARTICLES OF ASSOCIATION OF
FIRST UNION NATIONAL BANK
Charter No. 22693
As Restated Effective February 26, 1998
<PAGE> 6
Charter No. 22693
FIRST UNION NATIONAL BANK
ARTICLES OF ASSOCIATION
(as restated effective February 26, 1998)
For the purpose of organizing an Association to carry on the business of banking
under the laws of the United States, the undersigned do enter into the following
Articles of Association:
FIRST. The title of this Association shall be FIRST UNION NATIONAL BANK.
SECOND. The main office of the Association shall be in Charlotte, County
of Mecklenburg, State of North Carolina. The general business of the
Association shall be conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of not less
than five nor more than twenty-five directors, the exact number of directors
within such minimum and maximum limits to be fixed and determined from time to
time by resolution of a majority of the full Board of Directors or by resolution
of the shareholders at any annual or special meeting thereof. Unless otherwise
provided by the laws of the United States, any vacancy in the Board of Directors
for any reason, including an increase in the number thereof, may be filled by
action of the Board of Directors.
FOURTH. The annual meeting of the shareholders for the election of directors
and the transaction of whatever other business may be brought before said
meeting shall be held at the main office or such other place as the Board of
Directors may designate, on the day of each year specified therefor in the
By-Laws, but if no election is held on that day, it may be held on any
subsequent day according to the provisions of law; and all elections shall be
held according to such lawful regulations as may be prescribed by the Board of
Directors.
Nominations for election to the Board of Directors may be made by the Board
of Directors or by any stockholder of any outstanding class of capital stock of
the bank entitled to vote for election of directors. Nominations, other than
those made by or on behalf of the existing management of the bank, shall be made
in writing and shall be delivered or mailed to the President of the bank and to
the Comptroller of the Currency, Washington, D.C., not less than 14 days nor
more than 50 days prior to any meeting of stockholders called for the election
of directors, provided, however, that if less than 21 days' notice of the
meeting is given to shareholders, such nomination shall be mailed or delivered
to the President of the Bank and to the Comptroller of the Currency not later
than the close of business on the seventh day following the day on which the
notice of meeting was mailed. Such notification shall contain the following
information to the extent known to the notifying shareholder: (a) the name and
address of each proposed nominee; (b) the principal occupation of each proposed
nominee; (c) the total number of shares of capital stock of the bank that will
be voted for each proposed nominee; (d) the name and residence address of the
notifying shareholder; and (e) the number of shares of capital stock of the bank
owned by the notifying shareholder. Nominations not made in accordance herewith
may, in his discretion, be disregarded by the Chairman of the meeting, and upon
his instructions, the vote tellers may disregard all votes cast for each such
nominee.
FIFTH.
(a) General. The amount of capital stock of this Association shall be (i)
25,000,000 shares of common stock of the par value of twenty dollars ($20.00)
each (the "Common Stock") and (ii) 160,540 shares of preferred stock of the par
value of one dollar ($ 1. 00) each (the "Non-Cumulative Preferred Stock"),
having the rights, privileges and preferences set forth below, but said capital
stock may be increased or decreased from time to time in accordance with the
provisions of the laws of the United States.
(b) Terms of the Non-Cumulative Preferred Stock.
1. General. Each share of Non-Cumulative Preferred Stock shall be identical
in all respects with the other shares of Non-Cumulative Preferred Stock. The
authorized number of shares of Non-Cumulative Preferred Stock may from time
to time be increased or decreased (but not below the number then
outstanding) by the Board of Directors. Shares of Non-Cumulative Preferred
Stock redeemed by the Association shall be
<PAGE> 7
canceled and shall revert to authorized but unissued shares of Non-Cumulative
Preferred Stock.
2. Dividends.
(a) General. The holders of Non-Cumulative Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of
Directors, but only out of funds legally available therefor,
non-cumulative cash dividends at the annual rate of $83.75 per share,
and no more, payable quarterly on the first days of December, March,
June and September, respectively, in each year with respect to the
quarterly dividend period (or portion thereof) ending on the day
preceding such respective dividend payment date, to shareholders of
record on the respective date, not exceeding fifty days preceding such
dividend payment date, fixed for that purpose by the Board of Directors
in advance of payment of each particular dividend. Notwithstanding the
foregoing, the cash dividend to be paid on the first dividend payment
date after the initial issuance of Non-Cumulative Preferred Stock and
on any dividend payment date with respect to a partial dividend period
shall be $83.75 per share multiplied by the fraction produced by
dividing the number of days since such initial issuance or in such
partial dividend period, as the case may be, by 360.
(b) Non-cumulative Dividends. Dividends on the shares of Non-cumulative
Stock shall not be cumulative and no rights shall accrue to the holders
of shares of Non-Cumulative Preferred Stock by reason of the fact that
the Association may fail to declare or pay dividends on the shares of
Non-Cumulative Preferred Stock in any amount in any quarterly dividend
period, whether or not the earnings of the Association in any quarterly
dividend period were sufficient to pay such dividends in whole or in
part, and the Association shall have no obligation at any time to pay
any such dividend.
(c) Payment of Dividends. So long as any share of Non-Cumulative
Preferred Stock remains outstanding, no dividend whatsoever shall be
paid or declared and no distribution made on any junior stock other
than a dividend payable in junior stock, and no shares of junior stock
shall be purchased, redeemed or otherwise acquired for consideration by
the Association, directly or indirectly (other than as a result of a
reclassification of junior stock, or the exchange or conversion of one
junior stock for or into another junior stock, or other than through
the use of the proceeds of a substantially contemporaneous sale of
other junior stock), unless all dividends on all shares of
non-cumulative Preferred Stock and non-cumulative Preferred Stock
ranking on a parity as to dividends with the shares of Non-Cumulative
Preferred Stock for the most recent dividend period ended prior to the
date of such payment or declaration shall have been paid in full and
all dividends on all shares of cumulative Preferred Stock ranking on a
parity as to dividends with the shares of Non-Cumulative Stock
(notwithstanding that dividends on such stock are cumulative) for all
past dividend periods shall have been paid in full. Subject to the
foregoing, and not otherwise, such dividends (payable in cash, stock or
otherwise) as may be determined by the Board of Directors may be
declared and paid on any junior stock from time to time out of any
funds legally available therefor, and the Non-Cumulative Preferred
Stock shall not be entitled to participate in any such dividends,
whether payable in cash, stock or otherwise. No dividends shall be paid
or declared upon any shares of any class or series of stock of the
Association ranking on a parity (whether dividends on such stock are
cumulative or non-cumulative) with the Non-Cumulative Preferred Stock
in the payment of dividends for any period unless at or prior to the
time of such payment or declaration all dividends payable on the
Non-cumulative Preferred Stock for the most recent dividend period
ended prior to the date of such payment or declaration shall have been
paid in full. When dividends are not paid in full, as aforesaid, upon
the Non-Cumulative Preferred Stock and any other series of Preferred
Stock ranking on a parity as to dividends (whether dividends on such
stock are cumulative or non-cumulative) with the Non-Cumulative
Preferred Stock, all dividends declared upon the Non-Cumulative
Preferred Stock and any other series of Preferred Stock ranking on a
parity as to dividends with the Non-Cumulative Preferred Stock shall be
declared pro rata so that the amount of dividends declared per share on
the Non-cumulative Preferred Stock and such other Preferred Stock shall
in all cases bear to each other the same ratio that accrued dividends
per share on the Non-Cumulative Preferred Stock (but without any
accumulation in respect of any unpaid dividends for prior dividend
periods on the shares of Non-Cumulative Stock) and such other Preferred
Stock bear to each other. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or
payments on the Non-Cumulative Preferred Stock which may be in arrears.
3. Voting. The holders of Non-Cumulative Preferred Stock shall not have
any right to vote for the election of directors or for any other
purpose.
<PAGE> 8
4. Redemption.
(a) Optional Redemption. The Association, at the option of the Board of
Directors, may redeem the whole or any part of the shares of
Non-Cumulative Preferred Stock at the time outstanding, at any time or
from time to time after the fifth anniversary of the date of original
issuance of the Non-Cumulative Preferred Stock, upon notice given as
hereinafter specified, at the redemption price per share equal to
$1,000 plus an amount equal to the amount of accrued and unpaid
dividends from the immediately preceding dividend payment date (but
without any accumulation for unpaid dividends for prior dividend
periods on the shares of Non-Cumulative Preferred Stock) to the
redemption date.
(b) Procedures. Notice of every redemption of shares of Non-Cumulative
Preferred Stock shall be mailed by first class mail, postage prepaid,
addressed to the holders of record of the shares to be redeemed at
their respective last addresses as they shall appear on the books of
the Association. Such mailing shall be at least 10 days and not more
than 60 days prior to the date fixed for redemption. Any notice which
is mailed in the manner herein provided shall be conclusively presumed
to have been duly given, whether or not the shareholder receives such
notice, and failure duly to give such notice by mail, or any defect in
such notice, to any holder of shares of Non-Cumulative Preferred Stock
designated for redemption shall not affect the validity of the
proceedings for the redemption of any other shares of Non-Cumulative
Preferred Stock.
In case of redemption of a part only of the shares of Non-Cumulative
Preferred Stock at the time outstanding the redemption may be either
pro rata or by lot or by such other means as the Board of Directors of
the Association in its discretion shall determine. The Board of
Directors shall have full power and authority, subject to the
provisions herein contained, to prescribe the terms and conditions upon
which shares of the Non-Cumulative Preferred Stock shall be redeemed
from time to time.
If notice of redemption shall have been duly given, and, if on or
before the redemption date specified therein, all funds necessary for
such redemption shall have been set aside by the Association, separate
and apart from its other funds, in trust for the pro rata benefit of
the holders of the shares called for redemption, so as to be and
continue to be available therefor, then, notwithstanding that any
certificate for shares so called for redemption shall not have been
surrendered for cancellation, all shares so called for redemption shall
no longer be deemed outstanding on and after such redemption date, and
all rights with respect to such shares shall forthwith on such
redemption date cease and terminate, except only the right of the
holders thereof to, receive the amount payable on redemption thereof,
without interest.
If such notice of redemption shall have been duly given or if the
Association shall have given to the bank or trust company hereinafter
referred to irrevocable authorization promptly to give such notice,
and, if on or before the redemption date specified therein, the funds
necessary for such redemption shall have been deposited by the
Association with such bank or trust company in trust for the pro rata
benefit of the holders of the shares called for redemption, then,
notwithstanding that any certificate for shares so called for
redemption shall not have been surrendered for cancellation, from and
after the time of such deposit, all shares so called for redemption
shall no longer be deemed to be outstanding and all rights with respect
to such shares shall forthwith cease and terminate, except only the
right of the holders thereof to receive from such bank or trust company
at any time after the time of such deposit the funds so deposited,
without interest. The aforesaid bank or trust company shall be
organized and in good standing under the laws of the United States of
America or any state thereof, shall have capital, surplus and undivided
profits aggregating at least $50,000,000 according to its last
published statement of condition, and shall be identified in the notice
of redemption. Any interest accrued on such funds shall be paid to the
Association from time to time. In case fewer than all the shares of
Non-Cumulative Preferred Stock represented by a stock certificate are
redeemed, a new certificate shall be issued representing the unredeemed
shares without cost to the holder thereof.
Any funds so set aside or deposited, as the case may be, and unclaimed
at the end of the relevant escheat period under applicable state law
from such redemption date shall, to the extent permitted by law, be
released or repaid to the Association, after which repayment the
holders of the shares so called for redemption shall look only to the
Association for payment thereof.
<PAGE> 9
5. Liquidation.
(a) Liquidation Preference. In the event of any voluntary liquidation,
dissolution or winding up of the affairs of the Association, the
holders of Non-cumulative Preferred Stock shall be entitled, before any
distribution or payment is made to the holders of any junior stock, to
be paid in full an amount per share equal to an amount equal to $1,000
plus an amount equal to the amount of accrued and unpaid dividends per
share from the immediately preceding dividend payment date (but without
any accumulation for unpaid dividends for prior dividend periods on the
shares of Non-cumulative Preferred Stock) per share to such
distribution or payment date (the "liquidation amount").
In the event of any involuntary liquidation, dissolution or winding up
of the affairs of the Association, then, before any distribution or
payment shall be made to the holders of any junior stock, the holders
of Non-Cumulative Preferred Stock shall be entitled to be paid in full
an amount per share equal to the liquidation amount.
If such payment shall have been made in full to all holders of shares
of Non-Cumulative Preferred Stock, the remaining assets of the
Association shall be distributed among the holders of junior stock,
according to their respective rights and preferences and in each case
according to their respective numbers of shares.
(b) Insufficient Assets. In the event that, upon any such voluntary or
involuntary liquidation, dissolution or winding up, the available
assets of the Association are insufficient to pay such liquidation
amount on all outstanding shares of Non-cumulative Preferred Stock,
then the holders of Non-Cumulative Preferred Stock shall share ratably
in any distribution of assets in proportion to the full amounts to
which they would otherwise be respectively entitled.
(c) Interpretation. For the purposes of this paragraph 5, the
consolidation or merger of the Association with any other corporation
or association shall not be deemed to constitute a liquidation,
dissolution or winding up of the Association.
6. Preemptive Rights. The Non-Cumulative Preferred Stock is not entitled
to any preemptive, subscription, conversion or exchange rights in
respect of any securities of the Association.
7. Definitions. As used herein with respect to the Non-Cumulative
Preferred Stock, the following terms shall have the following meanings:
(a) The term "junior stock" shall mean the Common Stock and any other
class or series of shares of the Association hereafter authorized over
which the Non-Cumulative Preferred Stock has preference or priority in
the payment of dividends or in the distribution of assets on any
liquidation, dissolution or winding up of the Association.
(b) The term "accrued dividends", with respect to any share of any
class or series, shall mean an amount computed at the annual dividend
rate for the class or series of which the particular share is a part,
from, if such share is cumulative, the date on which dividends on such
share became cumulative to and including the date to which such
dividends are to be accrued, less the aggregate amount of all dividends
theretofore paid thereon and, if such share is noncumulative, the
relevant date designated to and including the date to which such
dividends are accrued, less the aggregate amount of all dividends
theretofore paid with respect to such period.
(c) The term "Preferred Stock" shall mean all outstanding shares of all
series of preferred stock of the Association as defined in this Article
Fifth of the Articles of Association, as amended, of the Association.
8. Restriction on Transfer. No shares of Non-Cumulative Preferred Stock,
or any interest therein, may be sold, pledged, transferred or otherwise
disposed of without the prior written consent of the Association. The
foregoing restriction shall be stated on any certificate for any shares
of Non-Cumulative Preferred Stock.
9. Additional Rights. The shares of Non-Cumulative Preferred Stock shall
not have any relative,
<PAGE> 10
participating, optional or other special rights and powers other than
as set forth herein.
SIXTH. The Board of Directors shall appoint one of its members President of
this Association, who shall be Chairman of the Board, unless the Board appoints
another director to be the Chairman. The Board of Directors shall have the power
to appoint one or more Vice Presidents; and to appoint a cashier or such other
officers and employees as may be required to transact the business of this
Association.
The Board of Directors shall have the power to define the duties of the
officers and employees of the Association, to fix the salaries to be paid to
them; to dismiss them, to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all By-Laws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a Board of
Directors to do and perform.
SEVENTH. The Board of Directors shall have the power to change the location
of the main office to any other place within the limits of Charlotte, North
Carolina, without the approval of the shareholders but subject to the approval
of the Comptroller of the Currency; and shall have the power to establish or
change the location of any branch or branches of the Association to any other
location, without the approval of the shareholders but subject to the approval
of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States.
NINTH. The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than 10 percent of the stock of
this Association, may call a special meeting of shareholders at any time. Unless
otherwise provided by the laws of the United States, a notice of the time,
place, and purpose of every annual and special meeting of the shareholders shall
be given by first-class mail, postage prepaid, mailed at least ten days prior to
the date of such meeting to each shareholder of record at his address as shown
upon the books of this Association.
TENTH. Each director and executive officer of this Association shall be
indemnified by the association against liability in any proceeding (including
without limitation a proceeding brought by or on behalf of the Association
itself) arising out of his status as such or his activities in either of the
foregoing capacities, except for any liability incurred on account of activities
which were at the time taken known or believed by such person to be clearly in
conflict with the best interests of the Association. Liabilities incurred by a
director or executive officer of the Association in defending a proceeding shall
be paid by the Association in advance of the final disposition of such
proceeding upon receipt of an undertaking by the director or executive officer
to repay such amount if it shall be determined, as provided in the last
paragraph of this Article Tenth, that he is not entitled to be indemnified by
the Association against such liabilities.
The indemnity against liability in the preceding paragraph of this Article
Tenth, including liabilities incurred in defending a proceeding, shall be
automatic and self-operative.
Any director, officer or employee of this Association who serves at the
request of the Association as a director, officer, employee or agent of a
charitable, not-for-profit, religious, educational or hospital corporation,
partnership, joint venture, trust or other enterprise, or a trade association,
or as a trustee or administrator under an employee benefit plan, or who serves
at the request of the Association as a director, officer or employee of a
business corporation in connection with the administration of an estate or trust
by the Association, shall have the right to be indemnified by the Association,
subject to the provisions set forth in the following paragraph of this Article
Tenth, against liabilities in any manner arising out of or attributable to such
status or activities in any such capacity, except for any liability incurred on
account of activities which were at the time taken known or believed by such
person to be clearly in conflict with the best interests of the Association, or
of the corporation, partnership, joint venture, trust, enterprise, Association
or plan being served by such person.
In the case of all persons except the directors and executive officers of
the Association, the determination of whether a person is entitled to
indemnification under the preceding paragraph of this Article Tenth shall be
made by and in the sole discretion of the Chief Executive Officer of the
Association. In the case of the directors and executive officers of the
Association, the indemnity against liability in the preceding paragraph of this
Article Tenth shall be automatic and self-operative.
<PAGE> 11
For purposes of this Article Tenth of these Articles of Association only,
the following terms shall have the meanings indicated:
(a) "Association" means First Union National Bank and its direct and
indirect wholly-owned subsidiaries.
(b) "Director" means an individual who is or was a director of the
Association.
(c) "Executive officer" means an officer of the Association who by
resolution of the Board of Directors of the Association has been determined to
be an executive officer of the Association for purposes of Regulation O of the
Federal Reserve Board.
(d) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable expenses, including counsel fees and expenses,
incurred with respect to a proceeding.
(e) "Party" includes an individual who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(f) "Proceeding" means any threatened, pending, or completed claim,
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.
The Association shall have no obligation to indemnify any person for an
amount paid in settlement of a proceeding unless the Association consents in
writing to such settlement.
The right to indemnification herein provided for shall apply to persons who
are directors, officers, or employees of banks or other entities that are
hereafter merged or otherwise combined with the Association only after the
effective date of such merger or other combination and only as to their status
and activities after such date.
The right to indemnification herein provided for shall inure to the benefit
of the heirs and legal representatives of any person entitled to such right.
No revocation of, change in, or adoption of any resolution or provision in
the Articles of Association or By-laws of the Association inconsistent with,
this Article Tenth shall adversely affect the rights of any director, officer,
or employee of the Association with respect to (i) any proceeding commenced or
threatened prior to such revocation, change, or adoption, or (ii) any proceeding
arising out of any act or omission occurring prior to such revocation, change,
or adoption, in either case, without the written consent of such director,
officer, or employee.
The rights hereunder shall be in addition to and not exclusive of any other
rights to which a director, officer, or employee of the Association may be
entitled under any statute, agreement, insurance policy, or otherwise.
The Association shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, or employee of the
Association, or is or was serving at the request of the Association as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, trade association, employee benefit plan, or other enterprise,
against any liability asserted against such director, officer, or employee in
any such capacity, or arising out of their status as such, whether or not the
Association would have the power to indemnify such director, officer, or
employee against such liability, excluding insurance coverage for a formal order
assessing civil money penalties against an Association director or employee.
Notwithstanding anything to the contrary provided herein, no person shall
have a right to indemnification with respect to any liability (i) incurred in an
administrative proceeding or action instituted by an appropriate bank regulatory
agency which proceeding or action results in a final order assessing civil money
penalties or requiring affirmative action by an individual or individuals in the
form of payments to the Association, (ii) to the extent such person is entitled
to receive payment therefor under any insurance policy or from any corporation,
partnership, joint venture, trust, trade association, employee benefit plan, or
other enterprise other than the Association, or (iii) to the extent that a court
of competent jurisdiction determines that such indemnification is void or
prohibited under state or federal law.
<PAGE> 12
ELEVENTH. These Articles of Association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of holders of a
greater amount of stock is required by law, and in that case, by the vote of the
holders of such greater amount.
<PAGE> 13
[LOGO]
Comptroller of the Currency
Administrator of National Banks
Bank Organization and Structure, 3-8
Washington, D.C. 20219-0001
February 20, 1998 OCC Control Nr. 97-ML-02-0050
Mr. Robert L. Andersen
Assistant General Counsel
First Union Corporation
301 South College Street
Charlotte, North Carolina 28288-0630
Dear Mr. Andersen:
This letter is the official certification of the Office of the Comptroller of
the Currency for the merger of First Union National Bank, Charlotte, North
Carolina, Charter Nr. 15650, into and under the charter and title of First Union
National Bank, Avondale, Pennsylvania, Charter Nr. 22693, with the resulting
bank located in Charlotte, North Carolina, effective February 26, 1998.
This letter also serves as the official authorization for First Union National
Bank, Charter Nr. 22693, to operate its former head office in Avondale,
Pennsylvania as a branch at the following location:
Popular Name : Avondale Branch
Certificate Nr : 111588A
Address : 102 Pennsylvania Avenue
Avondale, Pennsylvania
Branch authorizations previously granted to First Union National Bank, Charter
Nr. 15650 automatically convey to the resulting bank and will not be reissued.
Please furnish a copy of this certificate to personnel responsible for branch
administration. In the event of questions, please contact Senior Licensing
Analyst Cindy L. Hausch-Booth at (202) 874-5060.
Sincerely,
/s/ Richard T. Erb
Richard T. Erb
Licensing Manager [SEAL OF THE COMPTROLLER
OF THE CURRENCY]
<PAGE> 14
[LOGO]
Comptroller of the Currency
Administrator of National Banks
Bank Organization and Structure, 3-8
Washington, D.C. 20219-0001
CERTIFICATE
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
that the document hereto attached is a true and correct copy, as recorded in
this Office, of the Charter Certificate for "First Union National Bank,"
Charlotte, North Carolina, (Charter No. 22693).
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
office to be affixed to these
presents at the Treasury Department in the
City of Washington and District of
Columbia, this 4th day of March, 1998.
/s/ Eugene A. Ludwig
----------------------
Comptroller of the Currency
[SEAL OF THE COMPTROLLER
OF THE CURRENCY]
<PAGE> 15
[LOGO]
Comptroller of the Currency
Administrator of National Banks
Bank Organization and Structure, 3-8
Washington, D.C. 20219-0001
CERTIFICATE
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
that:
1. The Comptroller of the Currency, pursuant to Revised Statutes 324,
et seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody
and control of all records pertaining to the chartering of all National Banking
Associations.
2. "First Union National Bank," Charlotte, North Carolina,
(Charter No. 22693) is a National Banking Association formed under the laws of
the United States and is authorized thereunder to transact the business of
banking on the date of this Certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my
seal of office to be affixed to these
presents at the Treasury Department in the
City of Washington and District of
Columbia, this 4th day of March, 1998.
/s/ Eugene A. Ludwig
---------------------------
Comptroller of the Currency
[SEAL OF THE COMPTROLLER
OF THE CURRENCY]
<PAGE> 16
[LOGO]
Comptroller of the Currency
Administrator of National Banks
Bank Organization and Structure, 3-8
Washington, D.C. 20219-0001
Certificate of Fiduciary Powers
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
that:
1. The Comptroller of the Currency, pursuant to Revised Statutes 324,
et seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody
and control of all records pertaining to the chartering of all National Banking
Associations.
2. "First Union National Bank," Charlotte, North Carolina, (Charter No.
22693) was granted, under the hand and seal of the Comptroller, the right to act
in all fiduciary capacities authorized under the provisions of the Act of
Congress approved September 28, 1962, 76 Stat. 668, 12 U.S.C. 92a, and that the
authority so granted remains in full force and effect on the date of the
Certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused my seal of
office to be affixed to these presents at
the Treasury Department in the City of
Washington and District of Columbia, this
4th day of March, 1998.
/s/ Eugene A. Ludwig
--------------------
Comptroller of the Currency
[SEAL OF THE COMPTROLLER
OF THE CURRENCY]
<PAGE> 17
BY-LAWS OF
FIRST UNION NATIONAL BANK
Charter No. 22693
As Restated Effective February 26, 1998
<PAGE> 18
BY-LAWS OF
FIRST UNION NATIONAL BANK
ARTICLE I
Meetings of Shareholders
Section 1.1 Annual Meeting. The annual meeting of the shareholders for
the election of directors and for the transaction of such other business as may
properly come before the meeting shall be held on the third Tuesday of April in
each year, commencing with the year 1998, except that the Board of Directors
may, from time to time and upon passage of a resolution specifically setting
forth its reasons, set such other date for such meeting during the month of
April as the Board of Directors may deem necessary or appropriate; provided,
however, that if an annual meeting would otherwise fall on a legal holiday, then
such annual meeting shall be held on the second business day following such
legal holiday. The holders of a majority of the outstanding shares entitled to
vote which are represented at any meeting of the shareholders may choose persons
to act as Chairman and as Secretary of the meeting.
Section 1.2 Special Meetings. Except as otherwise specifically provided
by statute, special meetings of the shareholders may be called for any purpose
at any time by the Board of Directors or by any three or more shareholders
owning, in the aggregate, not less than ten percent of the stock of the
Association. Every such special meeting, unless otherwise provided by law, shall
be called by mailing, postage prepaid, not less than ten days prior to the date
fixed for such meeting, to each shareholder at his address appearing on the
books of the Association, a notice stating the purpose of the meeting.
Section 1.3 Nominations for Directors. Nominations for election to the
Board of Directors may be made by the Board of Directors or by any stockholder
of any outstanding class of capital stock of the bank entitled to vote for the
election of directors. Nominations, other than those made by or on behalf of the
existing management of the bank, shall be made in writing and shall be delivered
or mailed to the President of the Bank and to the Comptroller of the Currency,
Washington, D. C., not less than 14 days nor more than 50 days prior to any
meeting of stockholders called for the election of directors, provided however,
that if less than 21 days' notice of such meeting is given to shareholders, such
nomination shall be mailed or delivered to the President of the Bank and to the
Comptroller of the Currency not later than the close of business on the seventh
day following the day on which the notice of meeting was mailed. Such
notification shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of the bank that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the bank owned by the notifying
shareholder. Nominations not made in accordance herewith may, in his discretion,
be disregarded by the chairman of the meeting, and upon his instructions, the
vote tellers may disregard all votes cast for each such nominee.
Section 1.4 Judges of Election. The Board may at any time appoint from
among the shareholders three or more persons to serve as Judges of Election at
any meeting of shareholders; to act as judges and tellers with respect to all
votes by ballot at such meeting and to file with the Secretary of the meeting a
Certificate under their hands, certifying the result thereof.
Section 1.5 Proxies. Shareholders may vote at any meeting of the
shareholders by proxies duly authorized in writing, but no officer or employee
of this Association shall act as proxy. Proxies shall be valid only for one
meeting, to be specified therein, and any adjournments of such meeting. Proxies
shall be dated and shall be filed with the records of the meeting.
Section 1.6 Quorum. A majority of the outstanding capital stock,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders, unless otherwise provided by law; but less than a quorum may
adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice. A majority of the votes cast shall decide
every question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the Articles of Association.
<PAGE> 19
ARTICLE II
Directors
Section 2.1 Board of Directors. The Board of Directors (hereinafter
referred to as the "Board"), shall have power to manage and administer the
business and affairs of the Association. Except as expressly limited by law, all
corporate powers of the Association shall be vested in and may be exercised by
said Board.
Section 2.2 Number. The Board shall consist of not less than five nor
more than twenty-five directors, the exact number within such minimum and
maximum limits to be fixed and determined from time to time by resolution of a
majority of the full Board or by resolution of the shareholders at any meeting
thereof; provided, however, that a majority of the full Board of Directors may
not increase the number of directors to a number which, (1) exceeds by more than
two the number of directors last elected by shareholders where such number was
fifteen or less, and (2) to a number which exceeds by more than four the number
of directors last elected by shareholders where such number was sixteen or more,
but in no event shall the number of directors exceed twenty-five.
Section 2.3 Organization Meeting. The Secretary of the meeting upon
receiving the certificate of the judges, of the result of any election, shall
notify the directors-elect of their election and of the time at which they are
required to meet at the Main Office of the Association for the purpose of
organizing the new Board and electing and appointing officers of the Association
for the succeeding year. Such meeting shall be held as soon thereafter as
practicable. If, at the time fixed for such meeting, there shall not be a quorum
present, the directors present may adjourn the meeting from time to time, until
a quorum is obtained.
Section 2.4 Regular Meetings. Regular meetings of the Board of
Directors shall be held at such place and time as may be designated by
resolution of the Board of Directors. Upon adoption of such resolution, no
further notice of such meeting dates or the places or times thereof shall be
required. Upon the failure of the Board of Directors to adopt such a resolution,
regular meetings of the Board of Directors shall be held, without notice, on the
third Tuesday in February, April, June, August, October and December, commencing
with the year 1997, at the main office or at such other place and time as may be
designated by the Board of Directors. When any regular meeting of the Board
would otherwise fall on a holiday, the meeting shall be held on the next
business day unless the Board shall designate some other day.
Section 2.5 Special Meetings. Special meetings of the Board of
Directors may be called by the President of the Association, or at the request
of three (3) or more directors. Each member of the Board of Directors shall be
given notice stating the time and place, by telegram, letter, or in person, of
each such special meeting.
Section 2.6 Quorum. A majority of the directors shall constitute a
quorum at any meeting, except when otherwise provided by law; but a less number
may adjourn any meeting, from time to time, and the meeting may be held, as
adjourned, without further notice.
Section 2.7 Vacancies. When any vacancy occurs among the directors, the
remaining members of the Board, in accordance with the laws of the United
States, may appoint a director to fill such vacancy at any regular meeting of
the Board, or at a special meeting called for that purpose.
Section 2.8 Advisory Boards. The Board of Directors may appoint
Advisory Boards for each of the states in which the Association conducts
operations. Each such Advisory Board shall consist of as many persons as the
Board of Directors may determine. The duties of each Advisory Board shall be to
consult and advise with the Board of Directors and senior officers of the
Association in such state with regard to the best interests of the Association
and to perform such other duties as the Board of Directors may lawfully
delegate. The senior officer in such state, or such officers as directed by such
senior officer, may appoint advisory boards for geographic regions within such
state and may consult with the State Advisory Boards prior to such appointments.
<PAGE> 20
ARTICLE III
Committees of the Board
Section 3.1 The Board of Directors, by resolution adopted by a majority
of the number of directors fixed by these By-Laws, may designate two or more
directors to constitute an Executive Committee and other committees, each of
which, to the extent authorized by law and provided in such resolution, shall
have and may exercise all of the authority of the Board of Directors and the
management of the Association. The designation of any committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility or liability imposed
upon it or any member of the Board of Directors by law. The Board of Directors
reserves to itself alone the power to act on (1) dissolution, merger or
consolidation, or disposition of substantially all corporate property, (2)
designation of committees or filling vacancies on the Board of Directors or on a
committee of the Board (except as hereinafter provided), (3) adoption, amendment
or repeal of By-laws, (4) amendment or repeal of any resolution of the Board
which by its terms is not so amendable or repealable, and (5) declaration of
dividends, issuance of stock, or recommendations to stockholders of any action
requiring stockholder approval.
The Board of Directors or the Chairman of the Board of Directors of the
Association may change the membership of any committee at any time, fill
vacancies therein, discharge any committee or member thereof either with or
without cause at any time, and change at any time the authority and
responsibility of any such committee.
A majority of the members of any committee of the Board of Directors
may fix such committee's rules of procedure. All action by any committee shall
be reported to the Board of Directors at a meeting succeeding such action,
except such actions as the Board may not require to be reported to it in the
resolution creating any such committee. Any action by any committee shall be
subject to revision, alteration, and approval by the Board of Directors, except
to the extent otherwise provided in the resolution creating such committee;
provided, however, that no rights or acts of third parties shall be affected by
any such revision or alteration.
ARTICLE IV
Officers and Employees
Section 4.1 Officers. The officers of the Association may be a Chairman
of the Board, a Vice Chairman of the Board, one or more Chairmen or Vice
Chairmen (who shall not be required to be directors of the Association), a
President, one or more Vice Presidents, a Secretary, a Cashier or Treasurer, and
such other officers, including officers holding similar or equivalent titles to
the above in regions, divisions or functional units of the Association, as may
be appointed by the Board of Directors. The Chairman of the Board and the
President shall be members of the Board of Directors. Any two or more offices
may be held by one person, but no officer shall sign or execute any document in
more than one capacity.
Section 4.2 Election, Term of Office, and Qualification. Each officer
shall be chosen by the Board of Directors and shall hold office until the annual
meeting of the Board of Directors held next after his election or until his
successor shall have been duly chosen and qualified, or until his death, or
until he shall resign, or shall have been disqualified, or shall have been
removed from office.
Section 4.2(a) Officers Acting as Assistant Secretary. Notwithstanding
Section 1 of these By-laws, any Senior Vice President, Vice President, or
Assistant Vice President shall have, by virtue of his office, and by authority
of the By-laws, the authority from time to time to act as an Assistant Secretary
of the Bank, and to such extent, said officers are appointed to the office of
Assistant Secretary.
Section 4.3 Chief Executive Officer. The Board of Directors shall
designate one of its members to be the President of this Association, and the
officer so designated shall be an ex officio member of all committees of the
Association except the Examining Committee, and its Chief Executive Officer
unless some other officer is so designated by the Board of Directors.
Section 4.4 Duties of Officers. The duties of all officers shall be
prescribed by the Board of Directors. Nevertheless, the Board of Directors may
delegate to the Chief Executive Officer the authority to prescribe the duties of
other officers of the corporation not inconsistent with law, the charter, and
these By-laws, and to
<PAGE> 21
appoint other employees, prescribe their duties, and to dismiss them.
Notwithstanding such delegation of authority, any officer or employee also may
be dismissed at any time by the Board of Directors.
Section 4.5 Other Employees. The Board of Directors may appoint from
time to time such tellers, vault custodians, bookkeepers, and other clerks,
agents, and employees as it may deem advisable for the prompt and orderly
transaction of the business of the Association, define their duties, fix the
salary to be paid them, and dismiss them. Subject to the authority of the Board
of Directors, the Chief Executive Officer or any other officer of the
Association authorized by him, may appoint and dismiss all such tellers, vault
custodians, bookkeepers and other clerks, agents, and employees, prescribe their
duties and the conditions of their employment, and from time to time fix their
compensation.
Section 4.6 Removal and Resignation. Any officer or employee of the
Association may be removed either with or without cause by the Board of
Directors. Any employee other than an officer elected by the Board of Directors
may be dismissed in accordance with the provisions of the preceding Section 4.5.
Any officer may resign at any time by giving written notice to the Board of
Directors or to the Chief Executive Officer of the Association. Any such
resignation shall become effective upon its being accepted by the Board of
Directors, or the Chief Executive Officer.
ARTICLE V
Fiduciary Powers
Section 5.1 Capital Management Group. There shall be an area of this
Association known as the Capital Management Group which shall be responsible for
the exercise of the fiduciary powers of this Association. The Capital Management
Group shall consist of four service areas: Fiduciary Services, Retail Services,
Investments and Marketing. The Fiduciary Services unit shall consist of personal
trust, employee benefits, corporate trust and operations. The General Office for
the Fiduciary Services unit shall be located in Charlotte, N.C., with City Trust
Offices located in such cities within the State of North Carolina as designated
by the Board of Directors.
Section 5.2 Trust Officers. There shall be a General Trust Officer of
this Association whose duties shall be to manage, supervise and direct all the
activities of the Capital Management Group. Further, there shall be one or more
Senior Trust Officers designated to assist the General Trust Officer in the
performance of his duties. They shall do or cause to be done all things
necessary or proper in carrying out the business of the Capital Management Group
in accordance with provisions of applicable law and regulation.
Section 5.3 Capital Management/General Trust Committee. There shall be
a Capital Management/General Trust Committee composed of not less than four (4)
members of the Board of Directors or officers of this Association who shall be
appointed annually or from time to time by the Board of Directors of the
Association. The General Trust Officer shall serve as an ex-officio member of
the Committee. Each member shall serve until his successor is appointed. The
Board of Directors or the Chairman of the Board may change the membership of the
Capital Management/General Trust Committee at any time, fill vacancies therein,
or discharge any member thereof with or without cause at any time. The Committee
shall counsel and advise on all matters relating to the business or affairs of
the Capital Management Group and shall adopt overall policies for the conduct of
the business of the Capital Management Group including but not limited to:
general administration, investment policies, new business development, and
review for approval of major assignments of functional responsibilities. The
Committee shall meet at least quarterly or as called for by its Chairman or any
three (3) members of the Committee. A quorum shall consist of three (3) members.
In carrying out its responsibilities, the Capital Management/General Trust
Committee shall review the actions of all officers, employees and committees
utilized by this Association in connection with the activities of the Capital
Management Group and may assign the administration and performance of any
fiduciary powers or duties to any of such officers or employees or to the
Investment Policy Committee, Personal Trust Administration Committee, Account
Review Committee, Corporate and Institutional Accounts Committee, or any other
committees it shall designate. One of the methods to be used in the review
process will be the thorough scrutiny of the Report of Examination by the Office
of the Comptroller of the Currency and the reports of the Audit Division of
First Union Corporation, as they relate to the activities of the Capital
Management Group. These reviews shall be in addition to reviews of such reports
by the Audit Committee of the Board of Directors. The Chairman of the Capital
Management/General Trust Committee shall be appointed by the Chairman of the
Board of Directors. He shall cause to be recorded in appropriate minutes all
actions taken by the Committee. The minutes shall be signed by its Secretary and
approved by its Chairman. Further, the Committee shall
<PAGE> 22
summarize all actions taken by it and shall submit a report of its proceedings
to the Board of Directors at its next regularly scheduled meeting following a
meeting of the Capital Management/General Trust Committee. As required by
Section 9.7 of Regulation 9 of the Comptroller of the Currency, the Board of
Directors retains responsibility for the proper exercise of the fiduciary powers
of this Association.
The Fiduciary Services unit of the Capital Management Group will
maintain a list of securities approved for investment in fiduciary accounts and
will from time to time provide the Capital Management/General Trust Committee
with current information relative to such list and also with respect to
transactions in other securities not on such list. It is the policy of this
Association that members of the Capital Management/General Trust Committee
should not buy, sell or trade in securities which are on such approved list or
in any other securities in which the Fiduciary Services unit has taken, or
intends to take, a position in fiduciary accounts in any circumstances in which
any such transaction could be viewed as a possible conflict of interest or could
constitute a violation of applicable law or regulation. Accordingly, if any such
securities are owned by any member of the Capital Management/General Trust
Committee at the time of appointment to such Committee, the Capital Management
Group shall be promptly so informed in writing. If any member of the Capital
Management/General Trust Committee intends to buy, sell, or trade in any such
securities while serving as a member of the Committee, he should first notify
the Capital Management Group in order to make certain that any proposed
transaction will not constitute a violation of this policy or of applicable law
or regulation.
Section 5.4 Investment Policy Committee. There shall be an Investment
Policy Committee composed of not less than seven (7) officers and/or employees
of this Association who shall be appointed annually or from time to time by the
Board of Directors. Each member shall serve until his successor is appointed.
Meetings shall be called by the Chairman or any two (2) members of the
Committee. A quorum shall consist of five (5) members. The Investment Policy
Committee shall exercise such fiduciary powers and perform such duties as may be
assigned to it by the Capital Management/General Trust Committee. All actions
taken by the Investment Policy Committee shall be recorded in appropriate
minutes, signed by the Secretary thereof, approved by its Chairman and submitted
to the Capital Management/General Trust Committee at its next ensuing regular
meeting for its review and approval.
Section 5.5 Personal Trust Administration Committee. There shall be a
Personal Trust Administration Committee composed of not less than five (5)
officers, who shall be appointed annually or from time to time by the Board of
Directors. Each member shall serve until his successor is appointed. Meetings
shall be called by the Chairman or any three (3) members of the Committee. A
quorum shall consist of three (3) members. The Personal Trust Administration
Committee shall exercise such fiduciary powers and perform such duties as may be
assigned to it by the Capital Management/General Trust Committee. All action
taken by the Personal Trust Administration Committee shall be recorded in
appropriate minutes signed by the Secretary thereof, approved by its Chairman,
and submitted to the Capital Management/General Trust Committee at its next
ensuing regular meeting for its review and approval.
Section 5.6 Account Review Committee. There shall be an Account Review
Committee composed of not less than four (4) officers and/or employees of this
Association, who shall be appointed annually or from time to time by the Board
of Directors. Each member shall serve until his successor is appointed. Meetings
shall be called by the Chairman or any two (2) members of the Committee. A
quorum shall consist of three (3) members. The Account Review Committee shall
exercise such fiduciary powers and perform such duties as may be assigned to it
by the Capital Management/General Trust Committee. All actions taken by the
Account Review Committee shall be recorded in appropriate minutes, signed by the
Secretary thereof, approved by its Chairman and submitted to the Capital
Management/General Trust Committee at its next ensuing regular meeting for its
review and approval.
Section 5.7 Corporate and Institutional Accounts Committee. There shall
be a Corporate and Institutional Accounts Committee composed of not less than
five (5) officers and/or employees of this Association, who shall be appointed
annually, or from time to time, by the Capital Management/General Trust
Committee and approved by the Board of Directors. Meetings may be called by the
Chairman or any two (2) members of the Committee. A quorum shall consist of
three (3) members. The Corporate and Institutional Accounts Committee shall
exercise such fiduciary powers and duties as may be assigned to it by the
General Trust Committee. All actions taken by the Corporate and Institutional
Accounts Committee shall be recorded in appropriate minutes, signed by the
Secretary thereof, approved by its Chairman and made available to the General
Trust Committee at its next ensuing regular meeting for its review and approval.
<PAGE> 23
ARTICLE VI
Stock and Stock Certificates
Section 6.1 Transfers. Shares of stock shall be transferable on the books of
the Association, and a transfer book shall be kept in which all transfers of
stock shall be recorded. Every person becoming a shareholder by such transfer
shall, in proportion to his shares, succeed to all rights and liabilities of the
prior holder of such shares.
Section 6.2 Stock Certificates. Certificates of stock shall bear the
signature of the Chairman, the Vice Chairman, the President, or a Vice President
(which may be engraved, printed, or impressed), and shall be signed manually or
by facsimile process by the Secretary, Assistant Secretary, Cashier, Assistant
Cashier, or any other officer appointed by the Board of Directors for that
purpose, to be known as an Authorized Officer, and the seal of the Association
shall be engraved thereon. Each certificate shall recite on its face that the
stock represented thereby is transferable only upon the books of the Association
properly endorsed.
ARTICLE VII
Corporate Seal
Section 7.1 The President, the Cashier, the Secretary, or any Assistant
Cashier, or Assistant Secretary, or other officer thereunto designated by the
Board of Directors shall have authority to affix the corporate seal to any
document requiring such seal, and to attest the same. Such seal shall be
substantially in the following form.
ARTICLE VIII
Miscellaneous Provisions
Section 8.1 Fiscal Year. The fiscal year of the Association shall be
the calendar year.
Section 8.2 Execution of Instruments. All agreements, indentures,
mortgages, deeds, conveyances, transfers, certificates, declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, notices,
applications, schedules, accounts, affidavits, bonds, undertakings, proxies, and
other instruments or documents may be signed, executed, acknowledged, verified,
delivered or accepted in behalf of the Association by the Chairman of the Board,
the Vice Chairman of the Board, any Chairman or Vice Chairman, the President,
any Vice President or Assistant Vice President, the Secretary or any Assistant
Secretary, the Cashier or Treasurer or any Assistant Cashier or Assistant
Treasurer, or any officer holding similar or equivalent titles to the above in
any regions, divisions or functional units of the Association, or, if in
connection with the exercise of fiduciary powers of the Association, by any of
said officers or by any Trust Officer or Assistant Trust Officer (or equivalent
titles); provided, however, that where required, any such instrument shall be
attested by one of said officers other than the officer executing such
instrument. Any such instruments may also be executed, acknowledged, verified,
delivered or accepted in behalf of the Association in such other manner and by
such other officers as the Board of Directors may from time to time direct. The
provisions of this Section 8.2 are supplementary to any other provision of these
By-laws.
Section 8.3 Records. The Articles of Association, the By-laws, and the
proceedings of all meetings of the shareholders, the Board of Directors,
standing committees of the Board, shall be recorded in appropriate minute books
provided for the purpose. The minutes of each meeting shall be signed by the
Secretary, Cashier, or other officer appointed to act as Secretary of the
meeting.
ARTICLE IX
By-laws
Section 9.1 Inspection. A copy of the By-laws, with all amendments
thereto, shall at all times be kept in a convenient place at the Head Office of
the Association, and shall be open for inspection to all shareholders, during
banking hours.
<PAGE> 24
Section 9.2 Amendments. The By-laws may be amended, altered or
repealed, at any regular or special meeting of the Board of Directors, by a vote
of a majority of the whole number of Directors.
<PAGE> 25
Exhibit A
First Union National Bank
Article X
Emergency By-laws
In the event of an emergency declared by the President of the United
States or the person performing his functions, the officers and employees of
this Association will continue to conduct the affairs of the Association under
such guidance from the directors or the Executive Committee as may be available
except as to matters which by statute require specific approval of the Board of
Directors and subject to conformance with any applicable governmental directives
during the emergency.
OFFICERS PRO TEMPORE AND DISASTER
Section 1. The surviving members of the Board of Directors or the
Executive Committee shall have the power, in the absence or disability of any
officer, or upon the refusal of any officer to act, to delegate and prescribe
such officer's powers and duties to any other officer, or to any director, for
the time being.
Section 2. In the event of a state of disaster of sufficient severity
to prevent the conduct and management of the affairs and business of this
Association by its directors and officers as contemplated by these By-laws, any
two or more available members of the then incumbent Executive Committee shall
constitute a quorum of that Committee for the full conduct and management of the
affairs and business of the Association in accordance with the provisions of
Article II of these By-laws; and in addition, such Committee shall be empowered
to exercise all of the powers reserved to the General Trust Committee under
Section 5.3 of Article V hereof. In the event of the unavailability, at such
time, of a minimum of two members of the then incumbent Executive Committee, any
three available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Association in
accordance with the foregoing provisions of this section. This By-law shall be
subject to implementation by resolutions of the Board of Directors passed from
time to time for that purpose, and any provisions of these By-laws (other than
this section) and any resolutions which are contrary to the provisions of this
section or to the provisions of any such implementary resolutions shall be
suspended until it shall be determined by an interim Executive Committee acting
under this section that it shall be to the advantage of this Association to
resume the conduct and management of its affairs and business under all of the
other provisions of these By-laws.
Officer Succession
BE IT RESOLVED, that if consequent upon war or warlike damage or
disaster, the Chief Executive Officer of this Association cannot be located by
the then acting Head Officer or is unable to assume or to continue normal
executive duties, then the authority and duties of the Chief Executive Officer
shall, without further action of the Board of Directors, be automatically
assumed by one of the following persons in the order designated:
Chairman
President
Division Head/Area Administrator - Within this officer class, officers
shall take seniority on the basis of length of service in such office
or, in the event of equality, length of service as an officer of the
Association.
Any one of the above persons who in accordance with this resolution
assumes the authority and duties of the Chief Executive Officer shall continue
to serve until he resigns or until five-sixths of the other officers who are
attached to the then acting Head Office decide in writing he is unable to
perform said duties or until the elected Chief Executive Officer of this
Association, or a person higher on the above list, shall become available to
perform the duties of Chief Executive Officer of the Association.
BE IT FURTHER RESOLVED, that anyone dealing with this Association may
accept a certification by any three officers that a specified individual is
acting as Chief Executive Officer in accordance with this resolution; and that
anyone accepting such certification may continue to consider it in force until
notified in writing of a change, said notice of change to carry the signatures
of three officers of the Association.
<PAGE> 26
Alternate Locations
The offices of the Association at which its business shall be conducted
shall be the main office thereof in each city which is designated as a City
Office (and branches, if any), and any other legally authorized location which
may be leased or acquired by this Association to carry on its business. During
an emergency resulting in any authorized place of business of this Association
being unable to function, the business ordinarily conducted at such location
shall be relocated elsewhere in suitable quarters, in addition to or in lieu of
the locations heretofore mentioned, as may be designated by the Board of
Directors or by the Executive Committee or by such persons as are then, in
accordance with resolutions adopted from time to time by the Board of Directors
dealing with the exercise of authority in the time of such emergency, conducting
the affairs of this Association. Any temporarily relocated place of business of
this Association shall be returned to its legally authorized location as soon as
practicable and such temporary place of business shall then be discontinued.
Acting Head Offices
BE IT RESOLVED, that in case of and provided because of war or warlike
damage or disaster, the General Office of this Association, located in
Charlotte, North Carolina, is unable temporarily to continue its functions, the
Raleigh office, located in Raleigh, North Carolina, shall automatically and
without further action of this Board of Directors, become the "Acting Head
Office of this Association";
BE IT FURTHER RESOLVED, that if by reason of said war or warlike damage
or disaster, both the General Office of this Association and the said Raleigh
Office of this Association are unable to carry on their functions, then and in
such case, the Asheville Office of this Association, located in Asheville, North
Carolina, shall, without further action of this Board of Directors, become the
"Acting Head Office of this Association"; and if neither the Raleigh Office nor
the Asheville Office can carry on their functions, then the Greensboro Office of
this Association, located in Greensboro, North Carolina, shall, without further
action of this Board of Directors, become the "Acting Head Office of this
Association"; and if neither the Raleigh Office, the Asheville Office, nor the
Greensboro Office can carry on their functions, then the Lumberton Office of
this Association, located in Lumberton, North Carolina, shall, without further
action of this Board of Directors, become the "Acting Head Office of this
Association". The Head Office shall resume its functions at its legally
authorized location as soon as practicable.
<PAGE> 27
Legal Title of Bank: First Union National Bank Call Date: 12/31/97
Address: Two First Union Center ST-BK: 37-0351 FFIEC 031
City, State, Zip: Charlotte, NC 28288-0201 Page RC-1
FDIC Certificate #: 04885
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
C400
Dollar Amount in Thousands RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A): ///////////////////
a. Noninterest-bearing balances and currency and coin (1)........................ 0081 5,350,509 1.a.
b.Interest-bearing balances (2).................................................. 0071 527,082 1.b.
2. Securities: ///////////////////
a. Held-to-maturity securities (from Schedule RC-B, column A).................... 1754 1,679,050 2.a.
b.Available-for-sale securities (from Schedule RC-B, column D)................... 1773 16,948,015 2.b.
3. Federal funds sold and securities purchased under agreements to resell........... 1350 2,626,508 3.
4. Loans and lease financing receivables /////////////////
a. Loans and leases, net of unearned income (from Schedule RC-C). RCFD 2122 83,315,758 ///////////////// 4.a.
b. LESS: Allowance for loan and lease losses..................... RCFD 3123 1,005,217 ///////////////// 4.b.
c. LESS: Allocated transfer risk reserve......................... RCFD 3128 0 ///////////////// 4.c.
d. Loans and leases, net of unearned income, /////////////////
allowance, and reserve (item 4.a minus 4.b and 4.c)........................... 2125 82,310,541 4.d.
5. Trading assets (from Schedule RC-D).............................................. 3545 3,322,404 5.
6. Premises and fixed assets (including capitalized leases)......................... 2145 2,167,626 6.
7. Other real estate owned (from Schedule RC-M)..................................... 2150 70,835 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M)............................................................. 2130 181,970 8.
9. Customers' liability to this bank on acceptances outstanding..................... 2155 761,776 9.
10. Intangible assets (from Schedule RC-M)........................................... 2143 2,539,719 10.
11. Other assets (from Schedule RC-F)................................................ 2160 6,508,589 11.
12. Total assets (sum of items 1 through 11)......................................... 2170 124,994,624 12.
</TABLE>
- ----------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE> 28
Legal Title of Bank: First Union National Bank Call Date: 12/31/97
Address: Two First Union Center ST-BK: 37-0351 FFIEC 031
City, State, Zip: Charlotte, NC 28288-0201 Page RC-2
FDIC Certificate #: 04885
Schedule RC--Continued
<TABLE>
<CAPTION>
Dollar Amount in Thousands Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S><C> <C> <C> <C>
LIABILITIES /////////////////////
13. Deposits: /////////////////////
a.In domestic offices (sum of totals of columns A and C from Schedule RC-E, ///////////////////////////
part I)..................................................................... RCON 2200 79,161,386 13.a.
(1) Noninterest-bearing (1).......................RCON 6631 15,696,570 /////////////////////////13.a.(1)
(2) Interest-bearing..............................RCON 6636 63,464,816 /////////////////////////13.a.(2)
b.In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E,////////////////////
part II).................................................................... RCFN 2200 11,656,207 13.b.
(1) Noninterest-bearing...........................RCFN 6631 0 //////////////////////// 13.b.(1)
(2) Interest-bearing..............................RCFN 6636 11,656,207 //////////////////////// 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase...... RCFD 2800 13,333,348 14.
15. a. Demand notes issued to the U.S. Treasury..................................... RCON 2840 258,807 15.a.
b. Trading liabilities (from Schedule RC-D)..................................... RCFD 3548 3,030,911 15.b.
16. Other borrowed money (includes mortgage indebtedness and obligations under /////////////////////////////
capitalized leases):............................................................ ///////////////////////
a. With a remaining maturity of one year or less................................ RCFD 2332 2,092,679 16.a.
b. With a remaining maturity of more than one year through three years.......... RCFD A547 325,781 16.b.
c. With a remaining maturity of more than three years........................... RCFD A548 58,347 16.c.
17. Not applicable.................................................................. ///////////////////////
18. Bank's liability on acceptances executed and outstanding........................ RCFD 2920 761,776 18.
19. Subordinated notes and debentures (2)........................................... RCFD 3200 2,347,834 19.
20. Other liabilities (from Schedule RC-G).......................................... RCFD 2930 2,480,990 20.
21. Total liabilities (sum of items 13 through 20).................................. RCFD 2948 115,508,066 21.
22. Not applicable..................................................................////////////////////////
EQUITY CAPITAL ////////////////////////
23. Perpetual preferred stock and related surplus................................... RCFD 3838 0 23.
24. Common stock.................................................................... RCFD 3230 82,795 24.
25. Surplus (exclude all surplus related to preferred stock)........................ RCFD 3839 6,695,493 25.
26. a. Undivided profits and capital reserves....................................... RCFD 3632 2,498,515 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities....... RCFD 8434 209,755 26.b.
27. Cumulative foreign currency translation adjustments............................. RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27)............................... RCFD 3210 9,486,558 28.
29. Total liabilities and equity capital (sum of items 21 and 28)................... RCFD 3300 124,994,624 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the
most comprehensive level of auditing work performed for the bank by independent external Number
auditors as of any date during 1996............................................ RCFD 6724 N/A M.1.
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ----------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposit.
(2) Includes limited-life preferred stock and related surplus.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001057836
<NAME> ADVANCED ACCESSORY SYSTEMS LLC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 27,348
<SECURITIES> 0
<RECEIVABLES> 43,523
<ALLOWANCES> 1,699
<INVENTORY> 34,408
<CURRENT-ASSETS> 111,748
<PP&E> 55,928
<DEPRECIATION> 8,411
<TOTAL-ASSETS> 265,483
<CURRENT-LIABILITIES> 47,373
<BONDS> 197,126
0
0
<COMMON> 0
<OTHER-SE> 16,193
<TOTAL-LIABILITY-AND-EQUITY> 265,483
<SALES> 188,678
<TOTAL-REVENUES> 188,678
<CGS> 135,556
<TOTAL-COSTS> 135,556
<OTHER-EXPENSES> 57,067
<LOSS-PROVISION> 321
<INTEREST-EXPENSE> 12,627
<INCOME-PRETAX> 712
<INCOME-TAX> (2,856)
<INCOME-CONTINUING> 3,471
<DISCONTINUED> 0
<EXTRAORDINARY> 7,416
<CHANGES> 0
<NET-INCOME> (3,945)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
OF
ADVANCED ACCESSORY SYSTEMS, LLC
AND
AAS CAPITAL CORPORATION
PURSUANT TO THE PROSPECTUS
DATED ________ __, 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. , NEW YORK CITY TIME,
ON ________ __, 1998, UNLESS EXTENDED.
To: First Union National Bank, as Exchange Agent
230 S. Tryon Street, 9th Floor
Charlotte, North Carolina 23288-1179
Attention: Corporate Trust Administration
Confirm by Telephone:
(704) 374-2080
Confirm by Telecopier:
(704) 383-7316
Delivery of this instrument to an address other than as set forth above or
transmission via a facsimile number other than the one listed above will not
constitute a valid delivery. The instructions accompanying this Letter of
Transmittal should be read carefully before this Letter of Transmittal is
completed.
The undersigned acknowledges that he or she has received the Prospectus,
dated ________ __, 1998 (the "Prospectus"), of Advanced Accessory Systems, LLC
and AAS Capital Corporation (together, the "Issuers") and this Letter of
Transmittal (the "Letter of Transmittal"), which together constitute the
Issuers' offer (the "Exchange Offer") to exchange their 9 3/4% Series B Senior
Subordinated Notes due 2007 (the "New Notes") for an equal principal amount of
their 9 3/4% Senior Subordinated Notes due 2007 (the "Old Notes" and, together
with the New Notes, the "Notes"). The terms of the New Notes are identical in
all material respects to the Old Notes, except that the New Notes have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and, therefore, will not bear legends restricting their transfer and will not
contain certain provisions providing for the payment of liquidated damages to
the holders of the Old Notes under certain circumstances relating to the
Registration Rights Agreement (as defined in the Prospectus). The term
"Expiration Date" shall mean 5:00 p. m., New York City time, on ________, 1998,
unless the Exchange Offer is extended as provided in the Prospectus, in which
case the term "Expiration Date" shall mean the latest date and time to which
the Exchange Offer is extended. Capitalized terms used but not defined herein
have the meanings given to them in the Prospectus.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter
of Transmittal or an Agent's Message (as defined in the Prospectus) or any
other documents required by this Letter of Transmittal to the Exchange Agent
prior to the Expiration Date must tender their Old Notes according to the
guaranteed delivery procedures set forth under the caption "The Exchange Offer
- -- Guaranteed Delivery Procedures" in the Prospectus. See Instruction 5.
The term "Holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of the Issuers or any other
person who has obtained a properly completed bond power from the registered
holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must
complete this Letter of Transmittal in its entirety.
If the undersigned is a broker-dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (other than Old Notes acquired directly from the Issuers), the
undersigned may be deemed to be an "underwriter" under the Securities Act and
the undersigned acknowledges, therefore, that it will deliver a prospectus in
connection with any resale of such New Notes. By so
<PAGE> 2
acknowledging and by delivering a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY
BEFORE COMPLETING THIS LETTER OF TRANSMITTAL
DESCRIPTION OF 9 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
<TABLE>
<CAPTION>
Principal Amount Tendered
Names(s) and Addresses(es) of Aggregate Principal Amount in Integral
Registered Holders(s) Certificate Represented Multiples of
(Please Fill in, if Blank) Numbers By Certificate(s) $1,000)*
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Total
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of Old Notes will be deemed to have tendered the entire
aggregate principal amount represented by the column labeled "Aggregate
Principal Amount Represented by Certificate(s)."
If the space provided above is inadequate, list the certificate numbers
and principal amounts on a separate signed schedule and affix such schedule to
this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount. All other
tenders must be in integral multiples of $1,000.
[ ]CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING (SEE INSTRUCTION 5):
Name(s) of Registered Holder(s):
Window Ticket Number (if any):
Date of Execution of Notice of Guaranteed Delivery:
Name of Institution which Guaranteed Delivery:
[ ]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO
AND COMPLETE THE FOLLOWING:
Name:
----------------------------------------------------
(Please Print)
Address:
---------------------------------------------------
(Include Zip Code)
<PAGE> 3
SPECIAL REGISTRATION INSTRUCTIONS
(SEE INSTRUCTIONS 7, 8 AND 9)
To be completed ONLY if certificates for Old Notes in a principal amount
not tendered, or New Notes issued in exchange for Old Notes accepted for
exchange, are to be issued in the name of someone other than the undersigned.
Issue certificate(s) to:
Name
______________________________________________________
(Please Print)
Address
____________________________________________________
(Include Zip Code)
__________________________________________________________
(Tax Identification or Social Security Number)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 7, 8 AND 9)
To be completed ONLY if certificates for Old Notes in a principal amount
not tendered, or New Notes issued in exchange for Old Notes accepted for
exchange, are to be sent to someone other than the undersigned, or to the
undersigned at an address other than that shown above.
Deliver certificate(s) to:
Name
____________________________________________________
(Please Print)
Address
___________________________________________________
(Include Zip Code)
__________________________________________________________
(Tax Identification or Social Security Number)
<PAGE> 4
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Issuers the principal amount of Old Notes indicated
above. Subject to and effective upon the acceptance for exchange of the
principal amount of Old Notes tendered in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the order
of, the Issuers all right, title and interest in and to the Old Notes tendered
hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as its agent and attorney-in-fact (with full knowledge that the
Exchange Agent also acts as the agent of the Issuers) with respect to the
tendered Old Notes with full power of substitution (i) to deliver certificates
for such Old Notes to the Issuers and deliver all accompanying evidences of
transfer and authenticity to, or upon the order of, the Issuers and (ii) to
present such Old Notes for transfer on the books of the Issuers, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed to be irrevocable and coupled with an
interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, sell, assign and transfer the Old Notes tendered
hereby and that the Issuers will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim when the same are acquired by the Issuers. The
undersigned and any beneficial owner of Old Notes tendered hereby further
represent and warrant that (i) the New Notes acquired by the undersigned and
any such beneficial owner of Old Notes pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, (ii) neither the undersigned nor any such beneficial owner has an
arrangement with any person to participate in the distribution of such New
Notes, (iii) neither the undersigned nor any such beneficial owner nor any such
other person is engaging in or intends to engage in a distribution of such New
Notes and (iv) neither the undersigned nor any such other person is an
"affiliate," as defined under Rule 405 promulgated under the Securities Act, of
the Issuers. The undersigned and each beneficial owner acknowledge and agree
that any person who is an affiliate of the Issuers or who tenders in the
Exchange Offer for the purpose of participating in a distribution of the New
Notes must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a resale transaction of the New Notes
acquired by such person and may not rely on the position of the staff of the
Securities and Exchange Commission set forth in the no-action letters discussed
in the Prospectus under the caption "The Exchange Offer -- Purpose and Effect
of the Exchange Offer." The undersigned and each beneficial owner will, upon
request, execute and deliver any additional documents deemed by the Exchange
Agent or the Issuers to be necessary or desirable to complete the sale,
assignment and transfer of the Old Notes tendered hereby.
For purposes of the Exchange Offer, the Issuers shall be deemed to have
accepted validly tendered Old Notes when, as and if the Issuers have given oral
notice (confirmed in writing) or written notice thereof to the Exchange Agent.
If any tendered Old Notes are not accepted for exchange pursuant to the
Exchange Offer because of an invalid tender, the occurrence of certain other
events set forth in the Prospectus or otherwise, any such unaccepted Old Notes
will be returned, without expense, to the undersigned at the address shown
below or at a different address as may be indicated herein under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer -- Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Issuers upon the terms and
subject to the conditions of the Exchange Offer, subject only to withdrawal of
such tenders on the terms set forth in the Prospectus under the caption "The
Exchange Offer -- Withdrawal of Tenders."
Unless otherwise indicated under "Special Registration Instructions,"
please issue the certificates representing the New Notes issued in exchange for
the Old Notes accepted for exchange and any certificates for Old Notes not
tendered or not exchanged, in the name(s) of the undersigned. Similarly,
unless otherwise indicated under "Special Delivery Instructions," please send
the certificates representing the New Notes issued in exchange for the Old
Notes accepted for exchange and any certificates for Old Notes not tendered or
not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below the undersigned's signature(s). In the event that
both "Special Registration Instructions" and "Special Delivery Instructions"
are completed, please issue the certificates representing the New Notes issued
in exchange for the Old Notes accepted for exchange in the name(s) of, and
return any certificates for Old Notes not tendered or not exchanged to, the
person(s) so indicated. The undersigned understands that the Issuers have no
obligation pursuant to the "Special Registration Instructions" and "Special
Delivery Instructions" to transfer any Old Notes from the name of the
registered Holder(s) thereof if the Issuers do not accept for exchange any of
the Old Notes so tendered.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter
of Transmittal or an Agent's Message and any other documents required by this
Letter of Transmittal to the Exchange Agent prior to the Expiration Date may
tender their Old Notes according to the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed
Delivery Procedures. " See Instruction 5.
<PAGE> 5
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
X ________________________________ Date: ___________________________________
X ________________________________ Date: ___________________________________
(Signature(s) of Registered Holder(s) or Authorized Signatory
Area Code and Telephone Number:________________________________________________
The above lines must be signed by the registered holder(s) as his or her
name(s) appear(s) on the Old Notes or by person(s) authorized to become
registered holder(s) by a properly completed bond power from the registered
holder(s), a copy of which must be transmitted with this Letter of Transmittal.
If the Old Notes to which this Letter of Transmittal relate are held of record
by two or more joint holders, then all such holders must sign this Letter of
Transmittal. If this Letter of Transmittal or any Old Notes or bond powers are
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such person must (i) so indicate and set forth his or
her full title below and (ii) unless waived by the Issuers, submit evidence
satisfactory to the Issuers of such person's authority to so act. See
Instruction 7.
Name(s): _______________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity:_______________________________________________________________________
Address: _______________________________________________________________________
(Include Zip Code)
Signature(s) Guaranteed by an Eligible Institution:
(If required by Instruction 7)
________________________________________________________________________________
(Authorized Signature)
________________________________________________________________________________
(Title)
________________________________________________________________________________
(Name of Person
Date: ____________________, 1998
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Procedures for Tendering. This Letter of Transmittal or a facsimile
hereof, properly completed and duly executed, or an Agent's Message and any
other documents required by this Letter of Transmittal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. In addition, either (i) certificates for
tendered Old Notes must be received by the Exchange Agent along with the Letter
of Transmittal or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Old Notes, if such procedure is available,
into the Exchange Agent's account at DTC pursuant to the procedure for
book-entry transfer described below, must be received by the Exchange Agent
prior to the Expiration Date or (iii) the Holder must comply with the
guaranteed delivery procedures described below.
The method of delivery of Old Notes and this Letter of Transmittal and any
other required documents to the Exchange Agent is at the election and risk of
the Holder and, except as otherwise provided below, the delivery will be deemed
made only when actually received by the Exchange Agent. Instead of delivery by
mail, it is recommended that the Holder use an overnight or hand delivery
service. In the case of physical delivery of Old Notes, if sent by mail, it is
recommended that registered mail, return receipt requested, be used and proper
insurance be obtained. In all cases, sufficient time should be allowed to
assure delivery to the Exchange Agent before the Expiration Date. No Letter of
Transmittal or Old Notes should be sent to the Issuers.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Issuers in their sole discretion, which determination will be final and
binding. The Issuers reserve the absolute right to reject any and all Old
Notes not properly tendered or any Old Notes if the Issuers' acceptance of such
Old Notes would, in the opinion of counsel for the Issuers, be unlawful. The
Issuers also reserve the right to waive any defects, irregularities or
conditions of tender as to particular Old Notes. The Issuers' interpretation
of the terms and conditions of the Exchange Offer (including the instructions
in this Letter of Transmittal) shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of Old
Notes must be cured within such time as the Issuers shall determine. Although
the Issuers intend to notify Holders of defects or irregularities with respect
to tenders of Old Notes, neither the Issuers, the Exchange Agent nor any other
person shall be under any duty to give any such notification, nor shall any of
them incur any liability for failure to give such notification. Tenders of Old
Notes will not be deemed to have been made until such defects or irregularities
have been cured or waived. Any Old Notes received by the Exchange Agent that
the Issuers determine are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
2. Tender by Holder. Only a Holder of Old Notes may tender such Old
Notes in the Exchange Offer. Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact the registered holder
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such beneficial
owner's own behalf, such beneficial owner must, prior to completing and
executing this Letter of Transmittal and delivering such beneficial owner's Old
Notes, either make appropriate arrangements to register ownership of the Old
Notes in such beneficial owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered ownership may take
considerable time.
3. Partial Tenders. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Old Notes is tendered, the tendering Holder should fill in the principal amount
tendered in the fourth column of the box entitled "Description of 9 3/4% Senior
Subordinated Notes due 2007" above. The entire principal amount of any Old
Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of all Old Notes is
not tendered, then Old Notes for the principal amount of Old Notes not tendered
and a certificate or certificates representing New Notes issued in exchange for
any Old Notes accepted will be sent to the Holder at his or her registered
address, unless a different address is provided in the appropriate box on this
Letter of Transmittal, promptly after the Old Notes are accepted for exchange.
4. Book-Entry Transfer. Any financial institution that is a participant
in DTC's system may make book-entry delivery of Old Notes by causing DTC to
transfer such Old Notes into the Exchange Agent's account at DTC in accordance
with DTC's procedures for transfer. However, although delivery of Old Notes
may be effected through book-entry transfer at DTC, an Agent's Message must be
transmitted to and received by the Exchange Agent on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with. See "The Exchange Offer -- Procedures for Tendering" in the Prospectus.
5. Guaranteed Delivery Procedures. Holders who wish to tender their
Old Notes and (i) whose Old Notes are not immediately available or (ii) who
cannot deliver their Old Notes, this Letter of Transmittal or an Agent's Message
or any other documents required hereby to the Exchange Agent prior to the
Expiration Date must tender their Old Notes according to the guaranteed delivery
procedures set forth in the Prospectus. Pursuant to such procedure: (a) such
tender must be made through an Eligible Institution (as defined below); (b)
prior to the Expiration Date, the Exchange Agent must have received from the
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery)
<PAGE> 7
setting forth the name and address of the Holder, the certificate
number(s) of such Old Notes and the principal amount of Old Notes tendered,
stating that the tender is being made thereby and guaranteeing that, within five
New York Stock Exchange trading days after the Expiration Date, this Letter of
Transmittal (or facsimile hereof) or an Agent's Message together with the
certificate(s) representing the Old Notes, or a Book-Entry Confirmation, and any
other required documents will be deposited by the Eligible Institution with the
Exchange Agent; and (c) such properly completed and executed Letter of
Transmittal (or facsimile hereof) or an Agent's Message, as well as the
certificate(s) representing all tendered Old Notes in proper form for transfer,
or a Book-Entry Confirmation, as the case may be, and all other documents
required by this Letter of Transmittal must be received by the Exchange Agent
within five New York Stock Exchange trading days after the Expiration Date, all
as provided in the Prospectus under the caption "The Exchange Offer --
Guaranteed Delivery Procedures. "Any Holder who wishes to tender his or her
Old Notes pursuant to the guaranteed delivery procedures described above must
ensure that the Exchange Agent receives the Notice of Guaranteed Delivery prior
to 5:00 p.m., New York City time, on the Expiration Date. Upon request to
the Exchange Agent, a Notice of Guaranteed Delivery will be sent to Holders who
wish to tender their Old Notes according to the guaranteed delivery procedures
set forth above.
6. Withdrawal of Tenders. To withdraw a tender of Old Notes in the
Exchange Offer, a written or facsimile transmission notice of withdrawal must
be received by the Exchange Agent prior to 5:00 p.m., New York City time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes), (iii) be
signed by the Holder in the same manner as the original signature on the Letter
of Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to the Old Notes register the transfer of such
Old Notes into the name of the persons withdrawing the tender and (iv) specify
the name in which any such Old Notes are to be registered, if different from
that of the Depositor. If certificates for Old Notes have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of such
certificates, the withdrawing Holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such Holder is an
Eligible Institution. If Old Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal
must specify the name and number of the account at DTC to be credited with the
withdrawn Old Notes and otherwise comply with the procedures of such facility.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Issuers in their sole
discretion, which determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no New Notes will be issued with respect
thereto unless the Old Notes so withdrawn are validly retendered. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described above in Instruction 1, under Procedures for Tendering, at any time
prior to the Expiration Date.
7. Signatures on the Letter of Transmittal; Bond Powers and Endorsements;
Guarantee of Signatures. If this Letter of Transmittal (or facsimile hereof)
is signed by the registered holder(s) of the Old Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the Old
Notes without alteration, enlargement or any change whatsoever.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Old Notes tendered and the certificate or
certificates for New Notes issued in exchange therefor is to be issued (or any
untendered principal amount of Old Notes is to be reissued) to the registered
holder or holders and neither the "Special Delivery Instructions" nor the
"Special Registration Instructions" has been completed, then such holder or
holders need not and should not endorse any tendered Old Notes, nor provide a
separate bond power. In any other case, such holder or holders must either
properly endorse the Old Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal with the signatures on the
endorsement or bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person must so indicate when
signing, and, unless waived by the Issuers, submit evidence satisfactory to the
Issuers of such person's authority to so act with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 7 must be guaranteed by an Eligible Institution which is a member
of (a) the Securities Transfer Agents Medallion Program, (b) the New York Stock
Exchange Medallion Signature Program or (c) the Stock Exchange Medallion
Program.
Except as otherwise provided below, all signatures on this Letter of
Transmittal must be guaranteed by a firm that is a member of a registered
national securities exchange or the National Association of Securities Dealers,
Inc., a commercial bank or trust company having an office or correspondent in
the United States or an "eligible guarantor institution" within the meaning of
Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (an
"Eligible Institution"). Signatures on this Letter of Transmittal need
not be guaranteed if (a) this Letter of Transmittal is signed by the registered
holder(s) of the Old Notes tendered herewith and such holder(s) have not
completed the box set forth herein entitled "Special Registration Instructions"
or the box set forth herein entitled "Special Delivery Instructions" or (b)
such Old Notes are tendered for the account of an Eligible Institution.
<PAGE> 8
8. Special Registration and Delivery Information. Tendering holders
should indicate, in the applicable box or boxes, the name and address to which
New Notes or substitute Old Notes for principal amounts not tendered or not
accepted for exchange are to be issued or sent, if different from the name and
address of the person singing this Letter of Transmittal. In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated.
9. Transfer Taxes. The Issuers will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of the Old
Notes tendered hereby, or if tendered Old Notes are registered in the name of
any person other than the person signing this Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or on any other persons) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with this Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
Holder.
Except as provided in this Instruction 9, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
10. Waiver of Conditions. The Issuers reserve the right, in their sole
discretion, to amend, waive or modify specified conditions in the Exchange
Offer in the case of any Old Notes tendered.
11. Mutilated, Lost, Stolen or Destroyed Old Notes. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent by telephone at (__) ___-____ or by facsimile at (___)
___-____.
12. Requests for Assistance or Additional Copies. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
specified herein. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
<PAGE> 9
IMPORTANT TAX INFORMATION
The Holder is required to give the Exchange Agent the social security
number or employer identification number of the Holder of the Notes. If the
Notes are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidance on which number to
report.
Name of Holder (if joint, list first and circle the name of the person
or entity whose number you enter in Part I below). ___________________
Address (if Holder does not complete, signature below will constitute a
certification that the above address is correct.) ___________________
PAYER'S NAME: ADVANCED ACCESSORY SYSTEMS, LLC and AAS CAPITAL CORPORATION.
<TABLE>
<CAPTION>
<S> <C>
SUBSTITUTE Part I-PLEASE PROVIDE YOUR TIN IN THE BOX Social Security Number(s)
FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND ___-OR-___
DEPARTMENT OF THE TREASURY DATING BELOW. If you do not have a Employer Identification Number
INTERNAL REVENUE SERVICE number, see How to Obtain a "TIN" in
the enclosed Guidelines. Part
PAYER'S REQUEST II-FOR PAYEES EXEMPT FROM BACKUP ____________________________
FOR TAXPAYER WITHHOLDING, SEE THE ENCLOSED
IDENTIFICATION NUMBER GUIDELINES FOR CERTIFICATION OF
("TIN") TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9
CERTIFICATION-Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued for me), and
(2) I am not subject to backup withholding either because I have not
been notified by the Internal Revenue Service (IRS) that I am subject to
backup withholding as a result of a failure to report all interest
or dividends, or the IRS has notified me that I am no longer subject
to backup withholding.
CERTIFICATION INSTRUCTIONS. You must cross out item (2) above if you
have been notified by the IRS that you are subject to backup withholding
because of underreporting interest or dividends on your tax return.
However, if after being notified by the IRS that you were subject to
backup withholding you received another notification from the IRS that
you are no longer subject to backup withholding, do not cross out item
(2). (Also see instructions in the enclosed Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9.)
SIGNATURE _______________________________ DATE
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31 PERCENT OF ANY
PAYMENTS MADE TO YOU UNDER THE NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
(DO NOT WRITE IN SPACE BELOW)
Certificate Surrendered Old Notes Tendered Old Notes Accepted
_______________________________________________________________________________________________________________________________
_______________________________________________________________________________________________________________________________
_______________________________________________________________________________________________________________________________
_______________________________________________________________________________________________________________________________
Delivery Prepared By ________________________ Checked By __________________ Date ________________________
</TABLE>
<PAGE> 10
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card,
or form SS-4, Application for Employer Identification Number, at the local
office of the Social Security Administration or the Internal Revenue
Service and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments
include the following:
- A Corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under section
1441.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include
the following:
- Payments of interest on obligations issued by individuals.
<PAGE> 11
Note: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you
have not provided your correct taxpayer identification number to the
payer.
- Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
AND RETURN IT TO THE PAYER IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR
PATRONAGE DIVIDENDS ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041(a),
6045, and 6050A.
PRIVACY ACT NOTICE. --Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish
a taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. --If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. --If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. --If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CIVIL PENALTY FOR FALSIFYING INFORMATION. --Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
<PAGE> 1
EXHIBIT 99.2
ADVANCED ACCESSORY SYSTEMS, LLC
AND
AAS CAPITAL CORPORATION
Notice Of Guaranteed Delivery
Of
9 3/4% Senior Subordinated Notes Due 2007
As set forth in the Prospectus dated _________ __, 1998 (the
"Prospectus"), of Advanced Accessory Systems, LLC and AAS Capital Corporation.
(together, the "Issuers") under the caption "The Exchange Offer -- Guaranteed
Delivery Procedures," this form must be used to accept the Issuers' offer to
exchange their 9 3/4% Series B Senior Subordinated Notes due 2007 (the "New
Notes") for an equal principal amount of their 9 3/4% Senior Subordinated Notes
due 2007 (the "Old Notes"), by Holders who wish to tender their Old Notes and
(i) whose Old Notes are not immediately available or (ii) who cannot deliver
their Old Notes, the Letter of Transmittal or an Agent's Message (as defined in
the Prospectus) or any other documents required by the Letter of Transmittal to
the Exchange Agent prior to the Expiration Date. This form must be delivered
by an Eligible Institution by mail or hand delivery or transmitted, via
facsimile, to the Exchange Agent at its address set forth below not later than
the Expiration Date. All capitalized terms used herein but not defined herein
shall have the meanings ascribed to them in the Prospectus.
The Exchange Agent is:
First Union National Bank
230 S. Tryon Street, 9th Floor
Charlotte, North Carolina 28288-1179
Attention: Corporate Trust Administration
Confirm by Telephone:
(704) 374-2080
Confirm by Telecopier:
(704) 383-7316
Delivery Of This Instrument To An Address Other Than As
Set Forth Above Or Transmission Via A Facsimile Number
Other Than One Listed Above
Will Not Constitute A Valid Delivery.
Ladies And Gentlemen:
The undersigned hereby tenders for exchange to the Issuers, upon the terms
and subject to the conditions set forth in the Prospectus and the Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offer -- Guaranteed
Delivery Procedures. "
The undersigned understands and acknowledges that the Exchange Offer will
expire at 5:00 p.m., New York City time, on __________ __, 1998, unless
extended by the Issuers. The term "Expiration Date" shall mean 5:00 p.m.,
New York City time, on _______ __, 1998, unless the Exchange Offer is extended
as provided in the Prospectus, in which case the term "Expiration Date" shall
mean the latest date and time to which the Exchange Offer is extended.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
<PAGE> 2
SIGNATURE
___________________________________________________ Date: ________________
___________________________________________________ Date: ________________
SIGNATURE(S) OF HOLDER(S) OR AUTHORIZED SIGNATORY
Are Code and Telephone Number: ______________________________________________
Name(s): ____________________________________________________________________
_____________________________________________________________________________
(PLEASE PRINT)
Capacity (full title), if signing in a fiduciary or representative capacity:
_____________________________________________________________________________
Address:_____________________________________________________________________
(INCLUDING ZIP CODE)
Taxpayer Identification or
Social Security No.:_________________________________________________________
Principal Amount of Old Notes Tendered
(must be in integral multiples of $1,000): $ _________________________________
Certificate Number(s) of Old Notes (if available): __________________________
_____________________________________________________________________________
Aggregate Principal Amount
Represented by Certificate(s):$______________________________________________
IF TENDERED OLD NOTES WILL BE DELIVERED BY BOOK-ENTRY TRANSFER, PROVIDE THE
DEPOSITORY TRUST COMPANY ("DTC") ACCOUNT NO. AND TRANSACTION CODE NUMBER
(if available):
Account No.:_________________________________________________________________
Transaction Number:__________________________________________________________
GUARANTEE OF DELIVERY
(Not To Be Used For Signature Guarantee)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15
promulgated under the Securities Exchange Act of 1934, as amended, guarantees
deposit with the Exchange Agent of a properly completed and executed Letter of
Transmittal (or facsimile thereof) or an Agent's Message, as well as the
certificate(s) representing all tendered Old Notes in proper form for transfer,
or confirmation of the book-entry transfer of such Old Notes into the Exchange
Agent's account at DTC as described in the Prospectus under the caption "The
Exchange Offer -- Book-Entry Transfer" and any other documents required by the
Letter of Transmittal, all by 5:00 p.m., New York City time, on the fifth
New York Stock Exchange trading day following the Expiration Date.
Name of Eligible Institution:___________________________________________________
(AUTHORIZED SIGNATURE)
Address:________________________________________________________________________
Name:______________________________________________
Title:_____________________________________________
Area Code and
Telephone No.:_____________________________________
Date:______________________________________________
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE. ACTUAL SURRENDER OF OLD
NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, THE LETTER OF
TRANSMITTAL.
<PAGE> 3
SIGNATURE
______________________________________________ Date: ___________________________
______________________________________________ Date: ___________________________
Signature(s) Of Holder(s) Or Authorized Signatory
Area Code and Telephone Number:_________________________________________________
Name(s):
________________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity (full title), if signing in a fiduciary or representative capacity:
________________________________________________________________________________
Address:
________________________________________________________________________________
(Including Zip Code)
Taxpayer Identification or
Social Security No.:
________________________________________________________________________________
Principal Amount of Old Notes Tendered (must be in integral multiples of
$1,000): $_______________________________________
Certificate Number(s) of Old Notes (if available):
________________________________________________________________________________
Aggregate Principal Amount Represented
by Certificate(s):$__________________________________________________________
IF TENDERED OLD NOTES WILL BE DELIVERED BY BOOK-ENTRY TRANSFER, PROVIDE THE
DEPOSITORY TRUST COMPANY ("DTC") ACCOUNT NO. AND TRANSACTION CODE NUMBER (if
available):
Account No.:_________________________
Transaction Number:__________________
<PAGE> 1
EXHIBIT 99.3
ADVANCED ACCESSORY SYSTEMS, LLC
AND
AAS CAPITAL CORPORATION
Offer To Exchange Up To $125,000,000 Of Their
9 3/4% Series B Senior Subordinated Notes Due 2007
For Any And All Of Their Outstanding
9 3/4% Senior Subordinated Notes Due 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ______ __, 1998, UNLESS EXTENDED.
To Brokers, Dealers, Commercial Banks, _______ __ 1998
Trust Companies and Other Nominees:
Advanced Accessory Systems, LLC and AAS Capital Corporation (together, the
"Issuers"), are offering, upon the terms and subject to the conditions set
forth in the Prospectus dated _________ __, 1998 (the "Prospectus") and the
accompanying Letter of Transmittal enclosed herewith (which together constitute
the "Exchange Offer"), to exchange their 9 3/4% Series B Senior Subordinated
Notes due 2007 (the "New Notes") for an equal principal amount of their 9 3/4%
Senior Subordinated Notes due 2007 (the "Old Notes" and together with the New
Notes, the "Notes"). As set forth in the Prospectus, the terms of the New
Notes are identical in all material respects to the Old Notes, except that the
New Notes have been registered under the Securities Act of 1933, as amended,
and therefore will not bear legends restricting their transfer and will not
contain certain provisions providing for the payment of liquidated damages to
the holders of the Old Notes under certain circumstances relating to the
Registration Rights Agreement (as defined in the Prospectus).
THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CUSTOMARY CONDITIONS. SEE "THE
EXCHANGE OFFER -- CONDITIONS" IN THE PROSPECTUS.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. the Prospectus, dated ___________ __, 1998;
2. the Letter of Transmittal for your use (unless Old Notes are tendered
by an Agent's Message) and for the information of your clients (facsimile
copies of the Letter of Transmittal may be used to tender Old Notes);
3. a form of letter which may be sent to your clients for whose accounts
you hold Old Notes registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Exchange Offer;
4. a Notice of Guaranteed Delivery;
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
6. a return envelope addressed to First Union National Bank, the Exchange
Agent.
YOUR PROMPT ACTION IS REQUESTED. PLEASE NOTE THE EXCHANGE OFFER WILL
EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ________ __, 1998, UNLESS EXTENDED.
PLEASE FURNISH COPIES OF THE ENCLOSED MATERIALS TO THOSE OF YOUR CLIENTS FOR
WHOM YOU HOLD OLD NOTES REGISTERED IN YOUR NAME OR IN THE NAME OF YOUR NOMINEE
AS QUICKLY AS POSSIBLE.
In all cases, exchanges of Old Notes accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
(a) certificates representing such Old Notes, or a Book-Entry Confirmation (as
defined in the Prospectus), as the case may be, (b) the Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, or an Agent's
Message and (c) any other required documents.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or an Agent's Message and in either case together with any other
documents required by the
<PAGE> 2
Letter of Transmittal to the Exchange Agent prior to the Expiration Date must
tender their Old Notes according to the guaranteed delivery procedures set
forth under the caption "The Exchange Offer -- Guaranteed Delivery Procedures"
in the Prospectus.
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of Old Notes residing in any jurisdiction in which the
making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction.
The Issuers will not pay any fees or commissions to brokers, dealers or
other persons for soliciting exchanges of Notes pursuant to the Exchange Offer.
The Issuers will, however, upon request, reimburse you for customary clerical
and mailing expenses incurred by you in forwarding any of the enclosed
materials to your clients. The Issuers will pay or cause to be paid any
transfer taxes payable on the transfer of Notes to them, except as otherwise
provided in Instruction 9 of the Letter of Transmittal.
Questions and requests for assistance with respect to the Exchange Offer
or for copies of the Prospectus and Letter of Transmittal may be directed to
the Exchange Agent by telephone at (704) 374-2080 or by facsimile at (704)
383-7316.
Very truly yours,
ADVANCED ACCESSORY SYSTEMS, LLC
AAS CAPITAL CORPORATION
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE ISSUERS, OR ANY AFFILIATE THEREOF, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE> 1
EXHIBIT 99.4
ADVANCED ACCESSORY SYSTEMS, LLC
AND
AAS CAPITAL CORPORATION
OFFER TO EXCHANGE UP TO $125,000,000 OF THEIR
9 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
FOR ANY AND ALL OF THEIR OUTSTANDING
9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P. M. , NEW YORK CITY TIME, ON
_______ __, 1998 UNLESS EXTENDED.
To Our Clients:
Enclosed for your consideration is a Prospectus dated ________ __, 1998
(the "Prospectus") and a Letter of Transmittal (which together constitute the
"Exchange Offer") relating to the offer by Advanced Accessory Systems, LLC and
AAS Capital Corporation (together, the "Issuers") to exchange their 9 3/4%
Series B Senior Subordinated Note due 2007 (the "New Notes") for an equal
principal amount of their 9 3/4% Senior Subordinated Notes due 2007 (the "Old
Notes" and together with the New Notes, the "Notes"). As set forth in the
Prospectus, the terms of the New Notes are identical in all material respects
to the Old Notes, except that the New Notes have been registered under the
Securities Act of 1933, as amended, and therefore will not bear legends
restricting their transfer and will not contain certain provisions providing
for the payment of liquidated damages to the holders of the Old Notes under
certain circumstances relating to the Registration Rights Agreement (as defined
in the Prospectus). Old Notes may be tendered only in integral multiples of
$1,000.
The enclosed material is being forwarded to you as the beneficial owner of
Old Notes carried by us for your account or benefit but not registered in your
name. An exchange of any Old Notes may only be made by us as the registered
Holder and pursuant to your instructions. Therefore, the Issuers urge
beneficial owners of Old Notes registered in the name of a broker, dealer,
commercial bank, trust company or other nominee to contact such Holder promptly
if they wish to exchange Old Notes in the Exchange Offer.
Accordingly, we request instructions as to whether you wish us to exchange
any or all such Old Notes held by us for your account or benefit, pursuant to
the terms and conditions set forth in the Prospectus and Letter of Transmittal.
We urge you to read carefully the Prospectus and Letter of Transmittal before
instructing us to exchange your Old Notes.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to exchange Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer expires at 5:00 p.m.,
New York City time, on ________ __, 1998, unless extended. The term
"Expiration Date" shall mean 5:00 p.m., New York City time, on __________
__, 1998, unless the Exchange Offer is extended as provided in the Prospectus,
in which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended. A tender of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
Your attention is directed to the following:
1. The Exchange Offer is for the exchange of $1,000 principal amount of
the New Notes for each $1,000 principal amount of the Old Notes, of which
$125,000,000 aggregate principal amount was outstanding as of _________ __,
1998. The terms of the New Notes are identical in all respects to the Old
Notes, except that the New Notes have been registered under the Securities Act
of 1933, as amended, and therefore will not bear legends restricting their
transfer and will not contain certain provisions providing for the payment of
liquidated damages to the holders of the Old Notes under certain circumstances
relating to the Registration Rights Agreement.
2. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CUSTOMARY CONDITIONS. SEE
"THE EXCHANGE OFFER -- CONDITIONS" IN THE PROSPECTUS.
3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m.,
New York City time, on ________ __, 1998, unless extended.
4. The Issuers have agreed to pay the expenses of the Exchange Offer.
5. Any transfer taxes incident to the transfer of Old Notes from the
tendering Holder to the Issuers will be paid by the Issuers, except as provided
in the Prospectus and the Letter of Transmittal.
<PAGE> 2
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of Old Notes residing in any jurisdiction in which the
making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction.
If you wish us to tender any or all of your Old Notes held by us for your
account or benefit, please so instruct us by completing, executing and
returning to us the attached instruction form. The accompanying Letter of
Transmittal is furnished to you for informational purposes only and may not be
used by you to exchange Old Notes held by us and registered in our name for
your account or benefit.
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed material
referred to therein relating to the Exchange Offer of Advanced Accessory
Systems, LLC and AAS Capital Corporation.
This will instruct you to tender for exchange the aggregate principal amount of
Old Notes indicated below (or, if no aggregate principal amount is indicated
below, all Old Notes) held by you for the account or benefit of the
undersigned, pursuant to the terms of and conditions set forth in the
Prospectus and the Letter of Transmittal.
Aggregate Principal Amount of Old Notes to be tendered for exchange:
$________________________
* I (we) understand that if I (we) sign this instruction form without
indicating an aggregate principal amount of Old Notes in the space above, all
Old Notes held by you for my (our) account will be tendered for exchange.
________________________________________________________________________________
________________________________________________________________________________
Signature(s)
________________________________________________________________________________
Capacity (full title), if signing in a fiduciary or representative capacity
________________________________________________________________________________
Name(s) and address, including zip code
Date: _____________________________________
________________________________________________________________________________
Area Code and Telephone Number
________________________________________________________________________________
________________________________________________________________________________
Taxpayer Identification or Social Security No.
