<PAGE> 1
As filed with the Securities and Exchange Commission on June 9, 1998
REGISTRATION NO.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TALON AUTOMOTIVE GROUP, INC.
(Exact name of registrant as specified in its charter)
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MICHIGAN 3465 38-3382174
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
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900 WILSHIRE DRIVE
SUITE 203
TROY, MICHIGAN 48084
(248) 362-7600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
DAVID J. WOODWARD
VICE PRESIDENT OF FINANCE, CHIEF FINANCIAL OFFICER AND TREASURER
TALON AUTOMOTIVE GROUP, INC.
900 WILSHIRE DRIVE
SUITE 203
TROY, MICHIGAN 48084
(248) 362-7600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
WITH COPIES TO:
RICHARD M. BOLTON, ESQ.
MARK A. DENSMORE, ESQ.
DICKINSON WRIGHT PLLC
500 WOODWARD AVENUE
SUITE 4000
DETROIT, MICHIGAN 48226-3425
(313) 223-3500
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If 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. [ ]
CALCULATION OF REGISTRATION FEE
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=============================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------
9 5/8% Senior Subordinated Notes due 2008,
Series B................................. $120,000,000 100% $120,000,000 $35,400.00
- -----------------------------------------------------------------------------------------------------------------------------
Guarantees of 9 5/8% Senior Subordinated
Notes due 2008........................... (2) (2) (2) (2)
=============================================================================================================================
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(1) Estimated pursuant to Rule 457(f) solely for the purposes of calculating the
registration fee.
(2) Pursuant to Rule 457(n), no registration fee is required with respect to the
Guarantees of the Senior Subordinated Notes registered hereby.
------------------------
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.
------------------------
TABLE OF ADDITIONAL REGISTRANTS
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PRIMARY STANDARD
EXACT NAME OF GUARANTOR REGISTRANT AS I.R.S. EMPLOYER INDUSTRIAL
SPECIFIED IN ITS CHARTER JURISDICTION OF ORGANIZATION IDENTIFICATION NO. CLASSIFICATION CODE NO.
- ---------------------------------------------------------------------------------------------------------------------------
VS Holdings, Inc........................ Michigan 38-3382174 3465
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Veltri Holdings USA, Inc................ Indiana 35-1849474 3465
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Veltri Metal Products Co................ Nova Scotia 38-3354143 3465
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TALON AUTOMOTIVE GROUP, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
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FORM S-4 ITEM NUMBER HEADING OR SUBHEADING IN PROSPECTUS
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<S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1.
Forepart of Registration Statement and
Outside Front Cover Page of Prospectus.... Facing Page of Registration Statement; Cross Reference
Sheet; Outside Front Cover Page of Prospectus.
2.
Inside Front and Outside Back Cover Pages
of Prospectus............................. Inside Front Cover Page of Prospectus; Outside Back Cover
Page of Prospectus.
3.
Risk Factors, Ratio of Earnings to Fixed
Charges, and Other Information............ Prospectus Summary; Risk Factors; Selected Financial Data;
Unaudited Pro Forma Condensed Combined Financial
Information; Notes to Unaudited Pro Forma Condensed Combined
Financial Information; Unaudited Pro Forma Condensed
Combined Interim Financial Information; Notes to Unaudited
Pro Forma Condensed Combined Interim Financial Information
4.
Terms of the Transaction.................. Prospectus Summary; The Exchange Offer; Description of New
Notes; Certain Federal Income Tax Consequences Relating to
the Exchange Offer; Description of Senior Debt; Old Notes;
Registration Rights; Book Entry; Delivery and Form; Plan of
Distribution.
5.
Pro Forma Financial Information........... Prospectus Summary; Unaudited Pro Forma Condensed Combined
Financial Information; Notes to Unaudited Pro Forma
Condensed Combined Financial Information; Unaudited Pro
Forma Condensed Combined Interim Financial Information;
Notes to Unaudited Pro Forma Condensed Combined Interim
Financial Information
6.
Material Contracts With the Company Being
Acquired.................................. Not Applicable.
7.
Additional Information Required For
Reoffering by Persons and Parties Deemed
to be Underwriters........................ Not Applicable.
8.
Interests of Named Experts and Counsel.... Legal Matters; Experts.
9.
Disclosure of Commission Position on
Indemnification For Securities Act
Liabilities............................... Not Applicable.
B. INFORMATION ABOUT THE REGISTRANT
10.
Information With Respect to S-3
Registrants............................... Not Applicable.
11.
Incorporation of Certain Information by
Reference................................. Not Applicable.
12.
Information With Respect to S-2 or S-3
Registrants............................... Not Applicable.
13.
Incorporation of Certain Information by
Reference................................. Not Applicable.
14.
Information With Respect to Registrants
Other Than S-2 or S-3 Companies........... Prospectus Summary; Capitalization; Selected Financial Data;
Management's Discussion and Analysis of Financial Condition
and Results of Operations; Unaudited Pro Forma Condensed
Combined Financial Information; Notes to Unaudited Pro Forma
Condensed Combined Financial Information; Unaudited Pro
Forma Condensed Combined Interim Financial Information;
Notes to Unaudited Pro Forma Condensed Combined Interim
Financial Information; Business; Certain Relationships and
Related Transactions; Description of New Notes; Combined
Financial Statements.
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15.
Information With Respect to S-3
Companies................................. Not Applicable.
16.
Information With Respect to S-2 or S-3
Companies................................. Not Applicable.
17.
Information With Respect to Companies
Other Than S-2 or S-3 Companies........... Not Applicable.
D. VOTING AND MANAGEMENT INFORMATION
18.
Information if Proxies, Consents or
Authorizations Are to be Solicited........ Not Applicable.
19.
Information if Proxies, Consents or
Authorizations Are Not to be Solicited, or
in an Exchange Offer...................... Management.
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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 SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 9, 1998
PROSPECTUS
TALON AUTOMOTIVE GROUP, INC.
TALON LOGO OFFER TO EXCHANGE
9 5/8% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B FOR ALL
OUTSTANDING 9 5/8% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED
THE NOTES ARE GUARANTEED BY VELTRI METAL PRODUCTS CO., VS HOLDINGS, INC.
AND VELTRI HOLDINGS USA, INC.
------------------
Talon Automotive Group, Inc., a Michigan corporation (the "Company"),
hereby offers, upon the terms and subject to conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal" together with the Prospectus constitute the "Exchange
Offer"), to exchange up to an aggregate principal amount of $120 million of its
9 5/8% Senior Subordinated Notes Due 2008, Series B (the "New Notes") for up to
an aggregate principal amount of $120 million of its outstanding 9 5/8% Senior
Subordinated Notes Due 2008, Series A (the "Old Notes"). The terms of the New
Notes are identical in all material respects to those of the Old Notes, except
for certain transfer restrictions and registration rights relating to the Old
Notes. The New Notes will be issued pursuant to, and entitled to the benefits
of, the Indenture (as defined herein) governing the Old Notes. The New Notes and
the Old Notes are sometimes referred to herein collectively as the "Notes".
The New Notes will be unsecured obligations of the Company ranking
subordinate in right of payment to all existing and future Senior Debt (as
defined) of the Company. The New Notes will be guaranteed (the "Guarantees"), on
a senior subordinated basis, jointly and severally, fully and unconditionally,
by each of the Company's existing subsidiaries identified above (the
"Guarantors"). The Guarantee of each Guarantor will be subordinate in right of
payment to all Guarantor Senior Debt (as defined) of such Guarantor.
The New Notes will be subordinated in right of payment to all existing and
future secured indebtedness of the Company and its subsidiaries. The New Notes
will rank pari passu in right of payment with the Old Notes.
As of December 31, 1997, on a pro forma basis after giving effect to the
offering of the Old Notes (the "Offering"), the Company and the Guarantors would
have had approximately $5.1 million of Senior Debt and Guarantor Senior Debt
outstanding, and, in addition, would have had no amounts outstanding under the
$100.0 million Senior Credit Facility (as defined).
The New Notes will bear interest at the rate of 9 5/8% per annum, payable
semiannually on May 1 and November 1, commencing November 1, 1998. Holders of
the New Notes will receive interest on November 1, 1998 from the date of initial
issuance of the New Notes, plus an amount equal to the accrued interest on the
Old Notes from the most recent date to which interest has been paid to the date
of exchange thereof. Interest on the Old Notes accepted for exchange will cease
to accrue upon issuance of the New Notes.
The New Notes are subject to redemption on or after May 1, 2003, at the
option of the Company, in whole or in part, at the redemption prices set forth
herein, plus accrued and unpaid interest to the date of redemption. In addition,
prior to May 1, 2001, the Company may, at its option, redeem up to $35 million
aggregate principal amount of the Notes originally issued with the net proceeds
from one or more Public Equity Offerings (as defined) at the redemption price
set forth herein plus accrued and unpaid interest to the date of redemption;
provided that at least 65% of the principal amount of Notes originally issued
would remain outstanding after giving effect to any such redemption. In the
event of a Change of Control (as defined), the Company will be obligated to make
an offer to purchase all of the outstanding Notes at a purchase price equal to
101% of the principal amount thereof plus accrued and unpaid interest to the
date of purchase. In addition, the Company will be obligated to make an offer to
purchase the Notes at a purchase price equal to 100% of the principal amount
thereof plus accrued and unpaid interest to the date of purchase in the event of
certain asset sales. See "Description of New Notes."
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN FACTORS THAT
HOLDERS OF THE OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
<PAGE> 4
(Continued from Cover)
The Company 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 , 1998, unless extended by the Company in its sole
discretion (the "Expiration Date"). Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. In the
event the Company terminates the Exchange Offer and does not accept for exchange
any Old Notes with respect to the Exchange Offer, the Company will promptly
return the Old Notes to the holders thereof. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange, but is otherwise subject to certain customary conditions. The Old
Notes may be tendered only in integral multiples of $1,000.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company and the Guarantors contained in the Registration
Rights Agreement dated April 28, 1998 (the "Registration Rights Agreement") by
and among the Company, the Guarantors, Salomon Smith Barney Inc and Credit
Suisse First Boston Corporation as the initial purchasers (the "Initial
Purchasers"), with respect to the initial sale of the Old Notes. Based on
interpretations by the staff of the Securities and Exchange Commission (the
"Commission"), the New Notes issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and otherwise transferred by
respective holders thereof (other than any such holder which is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities Act, without
compliance with the registration and prospectus delivery provisions of the
Securities Act of 1933, as amended (the "Securities Act"), provided that the New
Notes are acquired in the ordinary course of such holder's business and such
holder has no arrangement or understanding with any person to participate in the
distribution of such New Notes and is not engaged in and does not intend to
engage in a distribution of the New Notes. 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 the New Notes received in exchange for Old Notes
if such New Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
Prior to the Exchange Offer, there has been no public market for the New
Notes. There can be no assurance as to the liquidity of any markets that may
develop for the New Notes, the ability of holders to sell the New Notes, or the
price at which holders would be able to sell 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 operating results and the
market for similar securities. Historically, the market for securities similar
to the New Notes, including non-investment grade debt, has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that any market for the New Notes, if such
market develops, will not be subject to similar disruptions. The Initial
Purchasers have advised the Company that they currently intend to make a market
in the New Notes offered hereby. However, the Initial Purchasers are not
obligated to do so and any market making may be discontinued at any time without
notice.
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to pay the expenses incident to the Exchange Offer.
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AVAILABLE INFORMATION
The Company and the Guarantors have filed with the Commission a
registration statement on Form S-4 (the "Registration Statement," which term
shall include all amendments, exhibits, annexes and schedules thereto) pursuant
to the Securities Act, and the rules and regulations promulgated thereunder,
covering the New Notes being offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to in the Registration Statement
are not necessarily complete. With respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to the exhibit for a more complete description of the matter involved, and
each such statement shall be deemed qualified in its entirety by such reference.
The Registration Statement, including the exhibits thereto, may be inspected at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, or at its regional offices located
at the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661 and 7 World Trade Center, 13th Floor, New York, New York 10007. Copies of
such material can be obtained from the Company or the Guarantors upon request.
In addition, the Commission maintains a Web site that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Commission. The address of such Web site is:
http://www.sec.gov.
As a result of the Exchange Offer, the Company will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will be required to file
periodic reports and other information and documents specified in Sections 13
and 15(d) of the Exchange Act, so long as the New Notes are outstanding, whether
or not the Company is subject to such informational requirements of the Exchange
Act. While any New Notes remain outstanding, the Company will make available,
upon request, to any holder of the New Notes, the information required pursuant
to Rule 144A(d)(4) under the Securities Act during any period in which the
Company is not subject to Section 13 or 15(d) of the Exchange Act. Any such
request should be directed to the Company's principal executive offices located
at 900 Wilshire Drive, Suite 203, Troy, Michigan 48084 (telephone number
248-362-7600), Attention: David J. Woodward, Vice President of Finance, Chief
Financial Officer and Treasurer.
FORWARD-LOOKING INFORMATION
This Prospectus contains certain forward-looking statements and information
relating to the Company that are based on beliefs of the Company and/or
management as well as assumptions made by the Company based on information
currently available to the Company's management. When used in this Prospectus,
the words "anticipate," "believe," "estimate," "expect" and "intend" and similar
expressions, as they relate to the Company, its subsidiaries or management, are
intended to identify forward-looking statements. The Company cautions holders of
the Notes and prospective purchasers of the Notes that such statements are not
guarantees of future events. Such statements reflect the current view of the
Company with respect to future events and are subject to certain risks,
uncertainties and assumptions, including, but not limited to, those set forth
under "Risk Factors." Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially and adversely from those described in this Prospectus as
anticipated, believed, estimated, expected or intended. The Company does not
intend to update these forward-looking statements.
Statements made concerning ongoing business strategies and possible future
action which the Company intends to pursue to achieve strategic objectives
constitute forward-looking information. The implementation of these strategies
and of such future action and the achievement of such financial performance are
each subject to numerous conditions, uncertainties, and risk factors.
Accordingly, no assurance can be given that the Company will be able to
successfully accomplish its strategic objectives or achieve such financial
performance. In addition to the specific risk factors described in this
Prospectus, other important risk factors which could cause actual performance
and future actions to differ materially from the forward-looking
2
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statements made in this Prospectus include domestic and international economic
conditions, product demand and market acceptance, government action,
competition, ability to achieve cost reductions and avoid cost increases in
supply and production, technological risk and interruptions to production
attributable to causes outside the Company's control.
In addition, market data used throughout this Prospectus were obtained from
industry publications and internal Company surveys. Industry publications
generally stated that the information contained therein has been obtained from
sources believed to be reliable. The Company has not independently verified
these market data. Similarly, internal Company surveys, while believed by the
Company to be reliable, have not been verified by any independent sources.
3
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PROSPECTUS SUMMARY
As used in this Prospectus, unless the context indicates otherwise, the
"Company" means (i) for periods prior to the Mergers (as defined), the business
and operations of each of Talon Automotive Group, L.L.C. ("Talon"), Hawthorne
Metal Products Company ("Hawthorne"), Production Stamping, Inc. ("PSI"), J&R
Manufacturing, Inc. ("J&R"), Veltri Metal Products Co. ("Veltri"), Veltri
Holdings USA, Inc., VS Holdings, Inc., and VS Holdings No. 2 Inc.,
(collectively, the "Talon Entities") and (ii) for periods after the Mergers,
Talon Automotive Group, Inc. and its subsidiaries, which will collectively own
the business and operations of the Talon Entities. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Mergers." The
following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and consolidated financial
statements of the Company and notes thereto appearing elsewhere in this
Prospectus.
THE COMPANY
GENERAL
The Company is a leading full-service Tier 1 designer and manufacturer of
high-quality, stamped metal components and assemblies used by North American
automotive original equipment manufacturers ("OEMs"). The Company specializes
in, and derives the majority of its revenue from, underbody/chassis and
unexposed body structure assemblies which constitute major structural components
of passenger cars, light trucks, and vans. The Company's products include frame
rail, inner quarter panel, crossmember, cowl, bumper, rear back panel, and
trailer hitch assemblies. On a pro forma basis, assuming the acquisition of PSI
(the "PSI Acquisition") had occurred on January 1, 1997, the Company would have
had net sales of $229.4 million and Adjusted EBITDA (as defined herein) of $26.2
million for the year ended December 31, 1997.
The Company believes its focus on underbody/chassis and unexposed body
structure assemblies, full-service capabilities, commitment to quality, and key
customer relationships has positioned it well to benefit from current industry
trends. OEMs are focusing their in-house stamping operations on the production
of Class A exposed surface panels and are increasingly relying on outside
suppliers with full-service engineering and program management capabilities to
design, engineer and manufacture complex underbody/chassis and unexposed body
structure assemblies. In addition, OEMs are reducing the number of their
stamping suppliers by focusing on companies that can manufacture high
value-added assemblies. The Company believes that its ability to anticipate and
respond to these trends was a significant factor in the award of major
assemblies on the 1998 Chrysler LH Concorde/Intrepid and the 2001 Chrysler KJ
Jeep Cherokee programs. Based on annual projected production volumes published
by CSM Forecasting, Inc., the 1998 Chrysler LH Concorde/Intrepid award could
generate approximately $50 to $55 million of sales by the Company during the
1999 model year, however, no assurance can be given that such sales will
actually be achieved. See "Forward-Looking Information."
In 1997, the Company's products were used on nine of the ten best selling
vehicles in North America. The Company's four largest customers, General Motors
Corporation ("General Motors"), Chrysler Corporation ("Chrysler"), Ford Motor
Company ("Ford"), and Honda Motor Co., Ltd. ("Honda"), accounted for
approximately 33%, 32%, 11% and 3%, respectively, of the Company's pro forma net
sales for the year ended December 31, 1997 assuming the PSI Acquisition had
occurred on January 1, 1997. The Company also sells its products to targeted
Tier 1 suppliers. Platforms on which the Company had its most significant
content in 1997 included: Chrysler's LH Concorde/Intrepid, NS Minivan and AB Ram
Van, General Motors' GMT 400 Full-size Pickup/Tahoe/Suburban and GMT 325/330
Blazer/Jimmy, Ford's Explorer and Lincoln Continental, and Honda's LS Accord and
VC Civic. The Company believes its products are present on every General Motors
truck platform, and also believes it is Chrysler's largest independent supplier
of front frame rail assemblies for passenger cars, vans, and sport utility
vehicles. The Company has received quality and delivery awards from its
customers, including, most recently, Chrysler's Platinum Pentastar Award in
1997.
The Company has grown rapidly through a combination of strategic
acquisitions and new platform awards. As a result of these efforts, net sales
have increased at a compound annual growth rate ("CAGR") of
4
<PAGE> 8
41.6% from approximately $39.5 million in 1993 to $158.7 million in 1997. On a
pro forma basis assuming the PSI Acquisition had occurred on January 1, 1997,
the Company would have had net sales of $229.4 million. Since 1996, the
Company's management team has completed three strategic acquisitions which it
believes have strengthened the Company's market position with key customers,
expanded its core product lines and enhanced its design, engineering and
manufacturing capabilities. The Company's acquisition strategy focuses on
companies with strong management which can strengthen the Company's position as
a Tier 1 supplier and allow it to further capitalize on industry trends.
The Company is a Michigan corporation. The principal executive offices of
the Company are located at 900 Wilshire Drive, Suite 203, Troy, Michigan 48084,
and its telephone number is (248) 362-7600.
BUSINESS STRATEGY
Based on pro forma 1997 net sales after giving effect to the PSI
Acquisition, the Company believes it is one of the leading independent suppliers
in its core product segment of underbody/chassis and unexposed body structure
assemblies. The Company's strategic objective is to become one of the top two
competitors in this market segment. The Company believes it has developed a
strategy to enhance its market position by capitalizing on industry trends and
leveraging its core competencies. Key elements of the Company's strategy include
the following:
Supply Complex High Value-Added Modules and Systems. In an effort to reduce
costs, OEMs are increasingly seeking suppliers capable of providing assemblies
and complete systems or modules, rather than suppliers which only provide
individual stampings. Typically, such complex products result in higher dollar
content per vehicle and generate higher margins as compared to simple,
individual stampings. After giving effect to the PSI Acquisition, value-added
assemblies represented approximately 75% of the Company's pro forma 1997 net
sales. The Company seeks to gain new business of modules and systems, which
typically include even greater content than assemblies. The Company believes its
capabilities and current industry trends have created an opportunity for it to
provide multiple assemblies and integrated modules such as front-end systems
(including frame rail, bumper, radiator support, wheel house inner panel, and
control arm assemblies), front floor pan systems (including floor pan,
crossmember, and tunnel reinforcement assemblies), and rear/back panel systems
(including back panel, quarter panel, rear frame rail, rear wheel house, and
rear floor pan assemblies). For example, the Company increased its dollar
content on the 1998 LH Concorde/Intrepid platform versus the 1993 platform from
approximately $115 per vehicle to $180 per vehicle. This was achieved primarily
through stamping and welding additional components, thereby producing a higher
value-added assembly.
Enhance Full-Service Engineering and Program Management Capabilities. The
Company seeks to continuously enhance its design, engineering, prototyping,
testing, program management, product development and assembly capabilities to
further strengthen its preferred position with key customers. The Company
believes these capabilities enable it to participate in the product development
process during the concept and prototype development stages as well as
throughout the design and manufacturing stages. As OEMs continue to outsource
complex, unexposed stamped assemblies to fewer suppliers, the Company believes
Tier 1 suppliers with proven full-service capabilities will be better positioned
to secure such business. To capitalize on this trend, in 1996 the Company
acquired J&R which enabled the Company to become one of a limited number of
independent full-service stamping suppliers with prototyping capabilities. The
Company believes that further expanding its full-service capabilities will
enable it to better manage larger programs, reduce time to market and customer
costs, and improve the Company's margins.
Focus on Key Customers. As OEMs continue to consolidate their supplier
base, the Company believes that strong customer relationships are increasingly
important. As a result, the Company focuses on a limited number of customers
which the Company believes will enable it to anticipate and better service such
customers' needs. Furthermore, the Company anticipates the need to follow its
key customers as they move to globally source their stampings. As examples of
its close relationships with its key customers, members of the Company's design
team are currently working on-site at Chrysler helping to complete the design of
the front-end system assemblies for the 2001 KJ Jeep Cherokee. In addition, the
Company proposed the successful
5
<PAGE> 9
redesign of General Motors' 1999 GMT 800 Full-size Pickup/Tahoe/Suburban trailer
hitch assembly. As further evidence of the Company's key customer business, the
Company believes its products are present on every General Motors truck
platform, and also believes it is Chrysler's largest independent supplier of
front frame rail assemblies for passenger cars, vans, and sport utility
vehicles.
Pursue Strategic Acquisitions. The Company intends to continue to seek
acquisitions of companies with strong management which will further improve the
Company's position as a Tier 1 supplier by creating opportunities for it to: (i)
strengthen its relationships with key customers; (ii) add new model platforms;
(iii) expand core product lines; (iv) enhance its full-service capabilities; and
(v) expand globally. Consistent with this strategy, the Company's management
team has completed three acquisitions since the beginning of 1996. See "--
Recent Acquisitions."
COMPETITIVE STRENGTHS
The Company believes it has the following competitive strengths:
Engineering and Product Expertise. The Company believes it has developed
expertise in the design, development, and production of underbody/chassis and
unexposed body structure assemblies, such as frame rail, inner quarter panel,
crossmember, cowl, bumper, rear back panel, and trailer hitch assemblies. This
expertise has contributed to its stature as a preferred full-service stamping
supplier to its key customers. For example, the Company's design involvement in
the 1998 Chrysler LH Concorde/Intrepid frame rail assembly produced significant
piece cost, tooling, and performance savings for Chrysler by eliminating twelve
part numbers. This was achieved by combining multiple parts and commonizing
right- and left-hand parts into identical stampings. The Company believes its
performance in producing complex frame rail assemblies for Chrysler's LH
Concorde/Intrepid vehicles and AB Ram Van, and its cooperative advance product
development efforts with Chrysler, contributed to the Company's award of frame
rail and other front-end system assemblies for the 2001 Chrysler KJ Jeep
Cherokee.
Successful Launch Performance Record. The Company has significant
experience in managing and executing new programs from the concept and prototype
development stages through the design and manufacturing stages. In 1997, the
Company successfully launched seven new programs comprising approximately 54
assemblies and 185 parts. These launches met all customer delivery requirements
and were within the Company's launch budget. The Company's most significant
launch, the 1998 Chrysler LH Concorde/ Intrepid, consisted of approximately 26
assemblies and 133 parts and had total defective parts per million ("PPM") of
only ten. The Company believes that the successful performance in the launch
phase of a new platform is a critical factor in satisfying its key customers and
securing additional platform work. The Company's program management organization
and methodology is being benchmarked by Chrysler.
Quality Commitment. The Company believes its quality performance in 1997 is
a significant competitive advantage. For example, the Company's 1998 model year
PPM performance with Chrysler through March 1998 was 26 PPM, which is below
Chrysler's benchmark of 50 PPM for world class suppliers. Partially as a result
of such performance, the Company has received certain quality and delivery
awards from its key OEM customers, including, most recently, Chrysler's Platinum
Pentastar Award in December 1997, awarded to only nine production suppliers.
Acquisition Track Record. Since 1996, the Company's management team has
completed three strategic acquisitions. The management team has a disciplined
approach to evaluating acquisition opportunities and believes that these
acquisitions have strengthened the Company's market position with its key
customers, expanded its core product lines and enhanced its design, engineering
and manufacturing capabilities. Through these acquisitions, the Company's
management team has gained experience in acquiring and integrating businesses
while incurring only minimal disruption in current operations.
6
<PAGE> 10
RECENT ACQUISITIONS
In December 1997, the Company acquired PSI, a supplier of automotive
stampings and finished assemblies, including trailer hitch, airbag canister,
crossmember and other welded assemblies. For its fiscal year ended June 30,
1997, PSI reported net sales of $72.0 million. Through the PSI Acquisition, the
Company added progressive and line die manufacturing capabilities and
state-of-the-art welding capabilities. PSI's expertise in these areas is
expected to enhance the Company's presence as a manufacturer of
underbody/chassis and unexposed body structure assemblies. As a result of the
PSI Acquisition, sales to General Motors represented approximately 33% of pro
forma 1997 net sales, as compared to 9% of 1997 historical net sales.
In addition, the Company completed two other strategic acquisitions in
1996:
- In November 1996, the Company acquired the Veltri Group, a manufacturer
of high value-added assemblies and detailed stampings, which recorded net
sales of $79.5 million for the fiscal year ended December 31, 1996. The
acquisition of the Veltri Group expanded the Company's product offering
of underbody/chassis and unexposed body structure assemblies, increased
its product content at Chrysler, and added new customers, including
Honda.
- In September 1996, the Company acquired J&R, a manufacturer of stamped
metal prototype parts and short-run production stampings, weldments and
assemblies which recorded net sales of $14.7 million for its fiscal year
ended October 31, 1996. J&R is an integrated prototyping company, capable
of managing a program from math data through soft tooling and production
of finished components and assemblies. The J&R acquisition enabled the
Company to become one of a limited number of independent full-service
stamping suppliers with in-house prototyping capabilities.
7
<PAGE> 11
THE EXCHANGE OFFER
THE NEW NOTES................. The forms and terms of the New Notes are
identical in all material respects to the terms
of the Old Notes for which they may be
exchanged pursuant to the Exchange Offer,
except for certain transfer restrictions and
registration rights relating to the Old Notes
described under "--Terms of New Notes."
THE EXCHANGE OFFER............ The Company is offering to exchange up to $120
million aggregate principal amount of 9 5/8%
Senior Subordinated Notes due 2008, Series B
(the "New Notes") for up to $120 million
aggregate principal amount of its outstanding
9 5/8% Senior Subordinated Notes due 2008,
Series A (the "Old Notes"). Old Notes may be
exchanged only in integral multiples of $1,000.
EXPIRATION DATE; WITHDRAWAL OF
TENDER........................ The Exchange Offer will expire at 5:00 p.m.,
New York City time, on ,
1998, or such later date and time to which it
is extended by the Company (the "Expiration
Date"). The tender of Old Notes pursuant to the
Exchange Offer may be withdrawn at any time
prior to the Expiration Date. Any Old Notes not
accepted for exchange for any reason will be
returned without expense to the tendering
holder thereof as promptly as practicable after
the expiration or termination of the Exchange
Offer.
CERTAIN CONDITIONS TO THE NOTE
EXCHANGE OFFER................ The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Company. See "The Exchange Offer--Certain
Conditions to the Exchange Offer."
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 such Old Notes and any
other required documentation to the Exchange
Agent (as defined) at the address set forth
herein. By executing the Letter of Transmittal,
each holder will represent to the Company that,
among other things, (i) any New Notes to be
received by it will be acquired in the ordinary
course of its business, (ii) it has no
arrangement or understanding with any person to
participate in the distribution of the New
Notes and (iii) it is not an "affiliate," as
defined in Rule 405 of the Securities Act, of
the Company or, if it is an affiliate, it will
comply with the registration and prospectus
delivery requirements of the Securities Act to
the extent applicable. 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, must acknowledge that it will
deliver a prospectus in connection with any
resale of such New Notes.
INTEREST ON THE NEW NOTES..... The New Notes will bear interest at the rate of
9 5/8% per annum, payable semiannually on May 1
and November 1, commencing November 1, 1998, to
holders of record on the immediately preceding
April 15 and October 15, respectively. Holders
of the
8
<PAGE> 12
New Notes will receive interest on November 1,
1998 from the date of initial issuance of the
New Notes, plus an amount equal to the accrued
interest on the Old Notes from the most recent
date to which interest has been paid to the
date of exchange thereof. Interest on the Old
Notes accepted for exchange will cease to
accrue upon issuance of the New Notes.
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 such Old Notes in the
Exchange Offer 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 owner's own behalf, such 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
owner's name or obtain a properly completed
bond power from the registered holder. The
transfer of registered ownership may take
considerable time and may not be able to be
completed prior to the Expiration Date.
GUARANTEED DELIVERY
PROCEDURES.................... Holders of 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."
REGISTRATION REQUIREMENTS..... The Company has agreed to use its best efforts
to consummate by September 25, 1998 the
registered Exchange Offer pursuant to which
holders of the Old Notes will be offered an
opportunity to exchange their Old Notes for the
New Notes which will be issued without legends
restricting the transfer thereof. In the event
that applicable interpretations of the staff of
the Commission do not permit the Company to
effect the Exchange Offer or in certain other
circumstances, the Company has agreed to file a
Shelf Registration Statement covering resales
of the Old Notes and to use its best efforts to
cause such Shelf Registration Statement to be
declared effective under the Securities Act
and, subject to certain exceptions, keep such
Shelf Registration Statement effective until
three years after the effective date thereof.
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS................ For a discussion of certain federal income tax
considerations relating to the exchange of the
New Notes for the Old Notes, see "Certain U.S.
Federal Income Tax Considerations Relating to
the Exchange Offer."
USE OF PROCEEDS............... There will be no proceeds to the Company from
the exchange of Notes pursuant to the Exchange
Offer.
EXCHANGE AGENT................ U.S. Bank Trust National Association is the
Exchange Agent. The address and telephone
number of the Exchange Agent are set forth in
"The Exchange Offer--Exchange Agent."
9
<PAGE> 13
PARTICIPATION BY
BROKER-DEALERS................ Any broker-dealer that resells New Notes that
were received by it for its own account
pursuant to the Exchange Offer and any broker
or 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.
10
<PAGE> 14
TERMS OF THE NEW NOTES
The form and terms of the New Notes are the same as the form and terms of
the Old Notes except that the New Notes are registered under the Securities Act
and, therefore, will not bear legends restricting the transfer thereof. See
"Description of the New Notes."
New Notes..................... $120 million aggregate principal amount of
9 5/8% Senior Subordinated Notes due 2008,
Series B of the Company.
Maturity Date................. May 1, 2008.
Interest Payment Dates........ May 1 and November 1 of each year, commencing
November 1, 1998.
Ranking....................... The New Notes will be general unsecured
obligations of the Company ranking subordinate
in right of payment with all existing and
future Senior Debt (as defined). As of December
31, 1997, on a pro forma basis after giving
effect to the Offering, the Company and the
Guarantors would have had approximately $5.1
million of Senior Debt and Guarantor Senior
Debt outstanding. See "Description of Senior
Debt."
Guarantors.................... The New Notes will be guaranteed, on a senior
subordinated basis, jointly and severally,
fully and unconditionally, (each, a
"Guarantee") by each of the Company's existing
subsidiaries and by certain of the Company's
future subsidiaries (the "Guarantors"). The
Guarantees will be subordinate in right of
payment to all Guarantor Senior Debt (as
defined), including all indebtedness under the
Senior Credit Facility. See "Description of New
Notes -- Certain Definitions -- Guarantors."
Optional Redemption........... Except as provided below, the New Notes are not
redeemable at the Company's option prior to May
1, 2003. Thereafter, the New Notes will be
redeemable, in whole or in part, at the option
of the Company, at the redemption prices set
forth herein plus accrued and unpaid interest
to the date of redemption. In addition, prior
to May 1, 2001, the Company may, at its option,
redeem up to an aggregate of 35% of the
principal amount of Notes originally issued
with the net proceeds from one or more Public
Equity Offerings (as defined herein) at the
redemption price set forth herein plus accrued
interest to the date of redemption. See
"Description of New Notes -- Redemption."
Change of Control............. In the event of a Change of Control (as
defined), the Company will be obligated to make
an offer to purchase all of the outstanding
Notes at a redemption price of 101% of the
principal amount thereof plus accrued and
unpaid interest to the date of purchase. In the
event a Change of Control were to occur, there
can be no assurance that the Company will have
available funds sufficient to repurchase all of
the Notes that holders elect to tender. See
"Description of New Notes -- Change of
Control."
Offer to Purchase............. The Company will be required in certain
circumstances to make an offer to purchase the
New Notes, at a purchase price equal to 100% of
the principal amount thereof plus accrued
interest to the date of
11
<PAGE> 15
purchase, with the net cash proceeds of certain
asset sales. See "Description of New Notes --
Certain Covenants -- Limitation on Asset
Sales."
Certain Covenants............. The indenture under which the Old Notes were
issued and the New Notes will be issued (the
"Indenture") contains covenants including, but
not limited to, covenants with respect to
limitations on the following matters: (i) the
incurrence of additional indebtedness, (ii) the
issuance of preferred stock by subsidiaries,
(iii) the creation of liens, (iv) restricted
payments, (v) the sales of assets and
subsidiary stock, (vi) incurrence of other
series subordinated indebtedness, (vii) mergers
and consolidations, (viii) payment restrictions
affecting subsidiaries and (ix) transactions
with affiliates. The covenants are subject to a
number of important exceptions and
qualifications. See "Description of New Notes
-- Certain Covenants."
Risk Factors.................. Holders of Old Notes should carefully consider
the matters set forth under the caption "Risk
Factors" prior to making a decision with
respect to the Exchange Offer. See "Risk
Factors."
12
<PAGE> 16
SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table sets forth (i) summary historical financial data of the
Company for the five years ended December 31, 1997 and the quarters ended April
4, 1998 and 1997 and (ii) summary pro forma financial data for the year ended
December 31, 1997 and the quarter ended April 4, 1998. The summary historical
financial data for the three year period ended December 31, 1997 and the summary
pro forma financial data for 1997 are derived from the audited combined
financial statements of the Company included elsewhere in this Prospectus. The
summary financial data for the two year period ended December 31, 1994 are
derived from audited combined financial statements not included herein. The
summary financial data for the quarters ended April 4, 1998 and 1997 are derived
from the unaudited combined interim 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 give effect to the
Offering and the PSI Acquisition as if each transaction had occurred on January
1, 1997, and the summary pro forma balance sheet data at December 31, 1997 gives
effect to the Offering as if it had occurred on such date. The summary pro forma
statement of operations data and other financial data for the fiscal first
quarter ended April 4, 1998 give effect to the Offering as if it had occurred on
January 1, 1998 and the summary pro forma balance sheet data at April 4, 1998
gives effect to the Offering as if it had occurred on such date. The unaudited
condensed pro forma summary financial data does not purport to represent what
the Company's results of operations or financial position would have actually
been had the transactions occurred on the dates indicated above, or to project
the Company's results of operations or financial position for any future date or
period. The following table should be read in conjunction with "Selected
Financial Data," "Unaudited Pro Forma Condensed Combined Financial Information,"
"Unaudited Pro Forma Condensed Combined Interim Financial Information,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical combined financial statements of the Company,
including the notes thereto, presented elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, QUARTER ENDED APRIL 4,
------------------------------------------------------------ -------------------------------
UNAUDITED UNAUDITED
AUDITED PRO FORMA HISTORICAL PRO FORMA
------------------------------------------------ --------- ------------------- ---------
1993 1994 1995 1996 1997 1997 1997 1998 1998
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net sales...................... $39,467 $43,035 $56,835 $71,029 $158,718 $229,417 $ 45,349 $ 71,071 $ 71,071
Gross profit................... 7,144 5,735 9,935 12,909 24,421 35,810 7,313 11,153 11,153
Selling, general and
administrative expenses(a)... 4,259 4,699 6,041 8,490 16,241 21,794 4,328 6,752 6,589
Special compensation(b)........ -- -- -- -- 1,343 2,702 -- -- --
Income from operations......... 2,886 1,036 3,894 4,419 6,837 11,314 2,985 4,401 4,564
Interest....................... 806 714 1,192 1,754 4,599 12,569 1,050 2,390 3,302
Income (loss) before income
taxes(c)..................... 2,023 610 2,702 2,363 2,121 (1,049) 2,153 2,055 1,306
Net income (loss).............. 2,023 610 2,702 2,269 796 (2,374) 1,456 1,284 535
BALANCE SHEET DATA (END OF
PERIOD)
Cash and cash equivalents...... $ 5 $ 6 $ 18 $ 1,090 $ 1,233 $ 3,208 $ 0 $ 7,046 $ 10,204
Total assets................... 29,345 33,618 37,206 91,110 166,494 173,264 124,889 174,586 182,395
Total debt..................... 10,480 14,089 17,555 49,468 107,315 125,106 52,114 106,459 125,796
Shareholders' equity........... 10,511 10,786 12,736 14,401 14,601 3,921 15,477 15,246 4,465
OTHER FINANCIAL DATA
Depreciation and
amortization................. $ 2,484 $ 2,639 $ 2,907 $ 3,419 $ 6,279 $ 10,586 $ 1,381 $ 2,705 $ 2,705
Capital expenditures........... 1,925 5,494 5,009 3,942 9,389 13,400 3,018 1,588 1,588
EBITDA(d)...................... 5,313 3,963 6,801 7,536 12,999 22,106 4,584 7,150 7,313
Adjusted EBITDA(e)............. 26,222
Ratio of earnings to fixed
charges(f)................... 3.5x 1.9x 2.9x 2.2x 1.4x -- 2.8x 1.8x 1.4x
Ratio of Adjusted EBITDA to
interest(e).................. 2.1x 2.2x
Ratio of debt to Adjusted
EBITDA(e).................... 4.8x
</TABLE>
13
<PAGE> 17
- -------------------------
(a) Included in historical selling, general and administrative expenses are
business services fees paid to Talon L.L.C., an affiliate of the Company, of
$1,150, $850, and $717 for 1997, 1996 and 1995, respectively. Effective
April 1, 1998, such fees were reduced to $500 annually. See "Certain
Relationships and Related Transactions." Business services fees paid to
Talon L.L.C. totalled $287 for the quarters ended April 4, 1998 and 1997,
respectively.
(b) Certain members of the Company's management team participate in a deferred
compensation arrangement which awards the employee for increases in
shareholder value. Approximately $1,343 was recorded in 1997 under this
arrangement. An additional amount of $1,359 was recorded upon consummation
of the Offering. Effective with the Offering, all future allocations under
these agreements were discontinued, excluding up to $300 in additional
deferred compensation which can be earned by Delmar O. Stanley, President
and Chief Executive Officer of the Company, and annual increases on all
vested amounts at the rate of 6% per year. See "Management -- Deferred
Compensation Agreements."
(c) Except for the Canadian subsidiary, the shareholders have elected under the
provisions of the Internal Revenue Code to be treated as S Corporations. As
a result, the taxable income of the companies is included in the taxable
income of the individual shareholders, and no provision for federal income
taxes has been included in income. The Canadian subsidiary is subject to
Canadian income tax.
(d) EBITDA is defined as income from continuing operations before the effect of
changes in accounting principles and extraordinary items plus interest,
income taxes, depreciation and amortization. EBITDA is presented because it
is a widely accepted financial indicator of a company's ability to incur and
service debt. However, EBITDA should not be considered in isolation as a
substitute for net income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of a company's
profitability or liquidity. For the fiscal first quarter of 1998, EBITDA
includes a $186 gain on sale of assets and a foreign currency exchange loss
of $142.
(e) The Company's EBITDA has been adjusted for certain expenses that the Company
believes are non-recurring in nature as well as certain increases in income
related to the synergies from the acquisitions. See "Unaudited Pro Forma
Condensed Combined Statement of Operations -- Note (i)."
(f) For purposes of computing the ratio of earnings to fixed charges, earnings
represent net income (loss) before income taxes and fixed charges. Fixed
charges consist of interest expense, the interest component of capital
leases, and the portion of rental expense that the Company believes to be
representative of interest. For pro forma 1997, earnings were insufficient
to cover fixed charges by $1,049.
14
<PAGE> 18
RISK FACTORS
This Prospectus contains statements which constitute forward-looking
statements. These statements appear in a number of places in this Prospectus and
include statements regarding intent, belief, outlook, estimates, anticipation or
expectations of the Company and management primarily with respect to future
events and actions of the Company. Holders of the Old Notes are cautioned that
any such forward-looking statements are not guarantees of future events or
performance and involve risks and uncertainties. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially and adversely from those described
in the forward-looking statements. In addition to other information included in
this Prospectus, Holders of the Old Notes should consider carefully the specific
considerations set forth below in connection with the Exchange Offer. For
information regarding forward-looking statements and information contained in
this Prospectus generally, see "Forward-Looking Information."
SUBSTANTIAL LEVERAGE
As of December 31, 1997, on a pro forma basis after giving effect to the
Offering, the Company would have had $125.1 million of combined indebtedness and
$3.9 million of combined shareholders' equity.
The Company's indebtedness will have several important consequences for the
holders of the Notes, including, but not limited to, the following: (i) a
substantial portion of the Company's cash flow from operations must be used for
debt service requirements on its indebtedness and will not be available for
other purposes; (ii) the Company's ability to obtain additional financing in the
future for any purpose may be impaired; (iii) the Company's leverage may
increase its vulnerability to economic downturns and limit its ability to
withstand competitive pressures; and (iv) the Company's ability to capitalize on
business opportunities may be limited.
The Company's ability to make payments with respect to the Notes and to
satisfy its other debt obligations will depend on its future operating
performance, which will be affected by prevailing economic conditions and
financial, competition, cost, business and other factors, some of which are
beyond the Company's control. The Company believes, based on current
circumstances, that its operating cash flow, together with available borrowings
under the Senior Credit Facility, will be sufficient to permit the Company to
meet its operating expenses and to service its debt requirements as they become
due. Significant assumptions underlie this belief, including, among other
things, that the Company will succeed in implementing its business strategy and
there will be no material adverse developments in the business, financial
condition, results of operations, liquidity or capital requirements of the
Company. If the Company is unable to service its indebtedness, it will be forced
to adopt an alternative strategy that may include actions such as reducing or
delaying capital expenditures, selling assets, restructuring or refinancing its
indebtedness (including the Notes) or seeking additional equity capital. There
can be no assurance that any of these strategies could be effected on terms
satisfactory to the Company, if at all. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The indenture under which the Old Notes were issued and the New Notes will
be issued (the "Indenture") restricts the ability of the Company and its
Restricted Subsidiaries to, among other things, incur additional indebtedness,
pay dividends or make certain other restricted payments or investments,
consummate certain asset sales, enter into certain transactions with affiliates,
incur liens, merge or consolidate with any other person or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of
their assets. In addition, the Senior Credit Facility contains other (and
sometimes more restrictive) covenants. The Senior Credit Facility requires the
Company to maintain specified financial ratios and satisfy certain financial
tests. The Company's ability to meet such financial ratios and tests may be
affected by events beyond its control, and there can be no assurance that the
Company will meet such ratios and tests. A breach of any of these covenants
could result in an event of default under the Senior Credit Facility. If an
event of default under the Senior Credit Facility occurs, the lenders thereunder
could elect to declare all amounts borrowed, together
15
<PAGE> 19
with accrued interest, to be immediately due and payable and the lenders under
the Senior Credit Facility could terminate all future commitments thereunder. If
any such indebtedness were to be accelerated, there can be no assurance that the
assets of the Company would be sufficient to repay in full such indebtedness and
the Notes. See "Description of Senior Debt" and "Description of New Notes --
Certain Covenants."
SUBORDINATION OF NOTES AND SUBSIDIARY GUARANTEES
The payment of principal and interest on, and any premium or other amounts
owing in respect of, the Notes will be subordinated to the prior payment in full
of all existing and future Senior Debt of the Company, including all amounts
owing or guaranteed under the Senior Credit Facility. The Guarantees will be
similarly subordinated to Guarantor Senior Debt. Consequently, in the event of a
bankruptcy, liquidation, dissolution, reorganization or similar proceeding with
respect to the Company or a Guarantor, assets of the Company or such Guarantor
will be available to pay obligations on the Notes or Guarantees only after all
Senior Debt of the Company or Guarantor Senior Debt of such Guarantor, as
applicable, has been paid in full, and there can be no assurance that there will
be sufficient assets to pay amounts due on any or all of the Notes. In addition,
neither the Company nor any Guarantor may pay principal, premium, interest or
other amounts on account of the Notes or any Guarantee in the event of a payment
default (or, with respect to a non-payment default, on Designated Senior Debt
(as defined), for a specified period) in respect of Senior Debt or the Guarantor
Senior Debt. See "Description of Notes -- Subordination." As of December 31,
1997, on a pro forma basis after giving effect to the Offering, the Company and
the Guarantors would have had $5.1 million of Senior Debt and Guarantor Senior
Debt outstanding.
DEPENDENCE ON PRINCIPAL CUSTOMERS
The Company's primary customers are General Motors, Chrysler and Ford,
which accounted for approximately 33%, 32% and 11%, respectively, of the
Company's 1997 pro forma net sales assuming the PSI Acquisition had occurred on
January 1, 1997. The loss of any one of such customers, or an unanticipated
significant reduction in business generated by them, would have a material
adverse effect on the Company's business, financial condition or results of
operations. See "Business -- Customers and Marketing." The Company's
arrangements with the OEMs are typically in the form of purchase orders, which
are generally competitively awarded for specific projects in the case of both
platform and factory assist work and which may be canceled by the OEMs. However,
the Company believes that cancellation of purchase orders is rare, due, in part,
to the OEM production interruptions likely to be caused by changing suppliers.
Strong customer relationships are critical to platform revenues, which are
increasingly contingent on whether the Company is chosen by an OEM to
participate on a platform development team. There can be no assurance that
business from these OEMs will continue at comparable levels in the future or
that any one of such customers will not experience setbacks in their operations,
such as labor difficulties, unsuccessful vehicle models, loss of business due to
foreign or domestic competition, or other unforeseen developments. Moreover,
changing consumer vehicle preferences could have a material adverse effect on
the Company's business, financial condition or results of operations.
PLATFORM CONCENTRATION
The Company currently expects to derive a substantial portion of its 1998
net sales from the Chrysler LH platform. As a result, the Company's future
operating results are significantly dependent upon continued market acceptance
of the LH platform vehicles, namely the Concorde, Intrepid, 300M and LHS
vehicles. There can be no assurance that these vehicles will achieve continued
market acceptance. A declining demand for, or acceptance of, these vehicles as a
result of competition, technical change or other factors would have a material
adverse effect on the Company's business, results of operation and financial
position. Additionally, the OEM manufactures these vehicles in a single
facility. There can be no assurance such facility will not experience downturns
related to labor relations issues, problems with critical suppliers and other
factors. The occurrence of one or more of such events could have a material
adverse affect on the Company's business, financial condition or results of
operations. Moreover, changing consumer vehicle preferences could also have
16
<PAGE> 20
a material adverse effect on the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business --
Products."
CYCLICALITY; OEM SUPPLIERS
The automobile industry is highly cyclical, dependent on consumer spending
and subject to the impact of domestic and international economic conditions. In
addition, automotive production and sales can be affected by labor relations
issues, regulatory requirements, trade agreements and other factors. There can
be no assurance that the automotive industry for which the Company supplies
components will not experience downturns in the future. An economic recession
may impact substantially leveraged companies such as the Company more than
similarly situated companies with less leverage. A decline in automotive sales
or production could materially adversely affect the Company's business,
financial condition or results of operations.
SEASONALITY
The Company's business is subject to seasonal fluctuations in sales and
profitability due to the impact of plant shutdowns in July and December for OEM
holidays and model changeovers.
COMPETITION
The automotive component supply industry in which the Company operates is
highly fragmented and highly competitive. The Company's ability to compete is
dependent upon successful implementation of its current and future business
strategies and ability to successfully adopt new strategies in response to
changes in the marketplace. The Company's competitors include companies that are
larger and have substantially greater resources than the Company as well as
divisions of OEMs with internal stamping and assembly operations. There can be
no assurance that the Company's business will not be adversely affected by
increased competition in the market in which it operates or that the Company's
products will be able to compete successfully with those of its competitors.
The automotive industry is characterized by a small number of OEMs that are
able to exert considerable pressure on component suppliers to reduce costs and
improve quality. In the past, OEMs have generally demanded and received price
reductions and measurable increases in quality by implementing competitive
selection processes, rating programs and various other arrangements. Also,
through increased partnering on platform work, OEMs have generally required
component suppliers to provide more design and engineering input at earlier
stages of the product development process, the costs of which, in some cases,
have been absorbed by the suppliers. There can be no assurance that the Company
will be able to improve or maintain its profit margins on sales to OEMs or that
future price reductions, increased quality standards or additional design and
engineering capabilities required by OEMs will not have a material adverse
effect on the business, financial condition or results of operations of the
Company. 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. Although the Company has been
successful in obtaining significant new business on new models, there can be no
assurance that the Company will continue to be able to obtain such new business.
Furthermore, although the general trend of the OEMs is to outsource component
manufacturing, OEMs have, from time to time, brought their stamping work back
in-house. There can be no assurance of the character and magnitude of the OEM's
stamping work which will be outsourced in the future. See "Business --
Competition."
CONTROL BY PRINCIPAL SHAREHOLDERS
Randolph J. Agley and Michael T. Timmis (the "Principal Shareholders"),
together with their family members, beneficially own or control approximately
98% of the Company's outstanding voting common stock. Circumstances may occur in
which the interests of the Principal Shareholders could be in conflict with the
interests of the holders of the Notes. For example, if the Company encounters
financial difficulties, or is
17
<PAGE> 21
unable to pay certain of its debts as they mature, the interests of the
Principal Shareholders might conflict with those of the holders of the Notes. In
addition, the Principal Shareholders may have an interest in pursuing
acquisitions, divestitures or other transactions that, in their judgment, could
enhance their equity investment, even though such transactions might involve
risks to the holders of the Notes. See "Principal Securityholders" and "Certain
Relationships and Related Transactions."
CONTINUING TRANSACTIONS WITH RELATED PARTIES
Following the Exchange Offer, the Company will continue to engage in
certain transactions with related parties and affiliates which include, among
other things, business and legal services arrangements, lease arrangements for
certain manufacturing facilities and offices, participation in insurance plans
and certain general contracting. While some of these current arrangements are
not the result of arms-length bargaining and may not reflect market prices, the
Company believes that transactions entered into in the future will be on terms
no less favorable to the Company than if such transactions were the result of
arms-length bargaining with non-affiliated persons. See "Certain Relationships
and Related Transactions."
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
The Company plans to continue to make selective strategic acquisitions to
further enhance its relationships with existing customers and augment its
product offerings with existing or new customers. There can be no assurance,
however, that the Company will be able to identify and complete additional
acquisitions that satisfy the Company's criteria or that, if identified and
completed, any anticipated benefits will be realized from such acquisitions. The
availability of additional acquisition financing cannot be assured and,
depending on the terms of such additional acquisitions, could be restricted by
the terms of the Senior Credit Facility and/or the Indenture. The process of
integrating acquired operations into the Company's existing operations may
result in unforeseen operating difficulties and may require significant
financial resources that would otherwise be available for the ongoing
development or expansion of the Company's existing operations. In addition,
successful completion of an acquisition may depend on consents from third
parties, including regulatory authorities and private parties, which consents
are beyond the control of the Company. Possible future acquisitions by the
Company could result in the incurrence of additional debt, costs, contingent
liabilities and amortization expenses related to goodwill and other intangible
assets, all of which could materially adversely affect the Company's business,
financial condition, and results of operations.
UNIONIZED WORKFORCE
Substantially all of the Company's hourly employees are covered by
collective bargaining agreements ("CBA") with either the United Automobile,
Aerospace and Agricultural Workers of America Union ("UAW"), the International
Union of Automobile, Aerospace and Agricultural Implement Workers Union of
Canada ("CAW") or the United Steel Workers of America Union ("USWA"). At the
present time, the Company believes that its relationship with these unions and
employees are good; however, there can be no assurance that this will continue
to be the case. Strikes or work stoppages could lead to an adverse impact on the
Company's relationship with customers which could in turn have a material
adverse effect on the Company's business, financial condition or results of
operations. The Company's CBAs with the above unions expire at various times at
each production facility. There can be no assurance that the Company will be
able to negotiate CBAs acceptable to it in the future.
FOREIGN OPERATIONS
The Company derived approximately 32.9% of its 1997 pro forma net sales,
adjusted for the PSI Acquisition, from its indirect Canadian subsidiary, Veltri
Metal Products Co., a Nova Scotia unlimited liability company. The Company's
Canadian operations are subject to risks inherent in international business
activities, including, in particular, foreign currency exchange rate
fluctuations, compliance with a variety of foreign laws and regulations,
unexpected changes in regulatory requirements, overlap of different tax
structures, foreign currency exchange rate fluctuations and general economic
conditions. See "Notes to the Company's Combined Financial Statements -- Note
16, Foreign Operations."
18
<PAGE> 22
ENVIRONMENTAL RISKS
The Company's operations and properties are subject to federal, state,
local and foreign laws, regulations and ordinances relating to the use, storage,
handling, generation, treatment, emission, release, discharge and disposal of
certain materials, substances and wastes. In many jurisdictions these laws are
complex and change frequently. Such laws, including but not limited to the
Comprehensive Environmental Response, Compensation & Liability Act ("CERCLA")
may impose joint and several liability and apply to remediation of contamination
at properties presently or formerly owned or operated by an entity or its
predecessors, as well as to conditions at properties at which wastes or other
contamination attributable to an entity or its predecessors have been sent or
otherwise come to be located. The nature of the Company's operations expose it
to the risk of liabilities or claims with respect to environmental matters,
including off-site disposal matters, and there can be no assurance that material
costs will not be incurred in connection with such liabilities or claims.
Based upon the Company's experience to date, the Company believes that the
future cost of compliance with existing environmental laws, regulations and
ordinances will not have a material adverse effect on the Company's business,
financial condition or results of operations. However, future events, such as
changes in existing laws and regulations or their interpretation, may give rise
to additional compliance costs or liabilities that could have a material adverse
effect on the Company's business, financial condition or results of operations.
Compliance with more stringent laws or regulations, as well as more vigorous
enforcement policies of regulatory agencies or stricter or different
interpretations of existing laws, may require additional expenditures that may
materially adversely affect the Company, its business, financial condition or
results of operations. See "Business -- Regulatory Matters."
CHANGE OF CONTROL
Upon the occurrence of a Change of Control (as defined), each holder of
Notes will have the right to require the Company to repurchase all or a portion
of such holder's Notes at a price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of repurchase. However, the Company's ability to repurchase the Notes upon a
Change of Control may be limited by the terms of then existing contractual
obligations of the Company and its subsidiaries. In addition, the occurrence of
a Change of Control will constitute an Event of Default under the Senior Credit
Facility. The Senior Credit Facility will prohibit the purchase of the Notes
unless and until such time as the indebtedness under the Senior Credit Facility
is paid in full. There can be no assurance that the Company will have the
financial resources to repay amounts due under the Senior Credit Facility, or to
repurchase or redeem the Notes. If the Company fails to repurchase all of the
Notes tendered for purchase upon the occurrence of a Change of Control, such
failure will constitute an Event of Default under the Indenture. See "--
Substantial Leverage."
With respect to the sale of assets referred to in the definition of Change
of Control, the phrase "all or substantially all" as used in such definition
varies according to the facts and circumstances of the subject transaction, has
no clearly established meaning under the relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of a person and
therefore it may be unclear whether a Change of Control has occurred and whether
the Notes are subject to an offer to purchase.
The Change of Control provision may not necessarily afford holders of the
Notes protection in the event of a highly leveraged transaction, including a
reorganization, restructuring, merger or other similar transaction involving the
Company that may materially adversely affect the holders, because such
transactions may not involve a shift in voting power or beneficial ownership or,
even if they do, may not involve a shift of the magnitude required under the
definition of Change of Control to trigger such provisions. Except as described
under "Description of New Notes -- Change of Control," the Indenture does not
contain provisions that permit the holders of the Notes to require the Company
to repurchase or redeem the Notes in the event of a takeover, recapitalization
or similar transaction.
19
<PAGE> 23
FRAUDULENT CONVEYANCE CONSIDERATIONS
Under the applicable provisions of the federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if any Guarantor, at the time it
incurs a Guarantee, (a)(i) was or is insolvent or rendered insolvent by reason
of such incurrence, (ii) was or is engaged in a business or transaction for
which the assets remaining with such Guarantor constituted unreasonably small
capital or (iii) intended or intends to incur, or believed or believes that it
would incur, debt beyond its ability to repay such debts as they mature and (b)
received or receives less than reasonably equivalent value or fair
consideration, the obligations of such Guarantor under its Guarantee could be
avoided or claims in respect of such Guarantee could be subordinated to all
other debts of such Guarantor. Among other things, a legal challenge of a
Guarantee on fraudulent conveyance grounds may focus on the benefits, if any,
realized by such Guarantor as a result of the issuance by the Company of the
Notes. To the extent that any Guarantee was a fraudulent conveyance or held
unenforceable for any other reason, the holders of the Notes would cease to have
any claim against a Guarantor and would be solely creditors of the Company and
any other Guarantors whose Guarantees were not avoided or held unenforceable. In
such event, the claims of the holders of the Notes would be subject to the prior
repayment of all liabilities of the Guarantor whose Guarantee was avoided or
held unenforceable. There can be no assurance that, after providing for all
prior claims, there would be sufficient assets to satisfy the claims of the
holders of the Notes relating to any avoided or unenforceable portion of a
Guarantee.
Each Guarantor will agree, jointly and severally with the other Guarantors,
to contribute to the obligations of any Guarantor under a Guarantee of the
Notes. Furthermore, the Guarantee of each Guarantor will provide that it is
limited to an amount that would not render the Guarantor thereunder insolvent.
The Company believes that the Guarantors will receive equivalent value at the
time the indebtedness is incurred under the Guarantees. In addition, the Company
believes that none of the Guarantors will be, at the time of or as a result of
the issuance of the Guarantees, insolvent, that none of the Guarantors is or
will be engaged in a business or transaction for which its remaining assets
constitute unreasonably small capital and that none of the Guarantors will have
intended or will intend to incur debts beyond its ability to repay such debts as
they mature. Since each of the components of the determination of whether a
Guarantee is a fraudulent conveyance is inherently fact based and fact specific,
there can be no assurance that a court passing on such questions would agree
with the Company.
CONSEQUENCES OF FAILURE TO EXCHANGE; POSSIBLE ADVERSE EFFECT ON TRADING MARKET
FOR OLD NOTES
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 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 and applicable state laws, or
pursuant to an exemption therefrom. Subject to the obligation by the Company to
file a Shelf Registration Statement covering resales of Old Notes in certain
circumstances, the Company does not intend to register the Old Notes under the
Securities Act and, after consummation of the Exchange Offer, will not be
obligated to do so. In addition, any holder of Old Notes who tenders in the
Exchange Offer for the purpose of participating in a distribution of the New
Notes may be deemed to have received restricted securities and, if so, will be
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Additionally, as a
result of the Exchange Offer, it is expected that a substantial decrease in the
aggregate principal amount of Old Notes outstanding will occur. As a result, it
is unlikely that a liquid trading market will exist for the Old Notes at any
time. This lack of liquidity will make transactions more difficult and may
reduce the trading price of the Old Notes. See "The Exchange Offer" and "Old
Notes; Registration Rights."
ABSENCE OF PUBLIC MARKET
There is no existing market for the New Notes and, although the Notes have
been approved for trading in the PORTAL Market upon issuance to "qualified
institutional buyers" (as defined in Rule 144A), there can be no assurance as to
the liquidity of any markets that may develop for the Notes, the ability of
holders to sell
20
<PAGE> 24
the Notes or the price at which holders would be able to sell the Notes. Future
trading prices of the New Notes will depend on many factors, including, among
other things, prevailing interest rates, the Company's operating results and the
market for similar securities. Historically, the market for securities similar
to the New Notes, including non-investment grade debt, has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that any market for the New Notes, if such
market develops, will not be subject to similar disruptions. The Initial
Purchasers have advised the Company that they currently intend to make a market
in the New Notes offered hereby. However, the Initial Purchasers are not
obligated to do so and any market making may be discontinued at any time without
notice.
21
<PAGE> 25
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain obligations of the
Company under the Registration Rights Agreement. The Company will not receive
any proceeds from the issuance of the New Notes offered hereby. In consideration
for issuing the New Notes as contemplated in this Prospectus, the Company will
receive, in exchange, Old Notes in like principal amount. The form and terms of
the New Notes are identical in all material respects to the form and terms of
the Old Notes, except as otherwise described herein under "The Exchange Offer --
Terms of the Exchange Offer." The Old Notes surrendered in exchange for the New
Notes will be retired and cancelled and cannot be reissued. Accordingly,
issuance of the New Notes will not result in any increase in the outstanding
debt of the Company.
The net proceeds from the sale of the Old Notes were used to retire certain
indebtedness, fund a distribution to shareholders, working capital and general
corporate purposes which may include future acquisitions, and to pay fees and
expenses as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
Sources:
Offering proceeds......................................... $120,000
--------
Total sources.......................................... $120,000
========
Uses:
Retire certain existing credit facilities................. $101,548
Shareholder Distribution.................................. 10,000
Estimated fees and expenses............................... 5,294
General corporate purposes................................ 3,158
--------
Total uses............................................. $120,000
========
</TABLE>
CAPITALIZATION
The following table sets forth the cash and cash equivalents and the
capitalization of the Company at April 4, 1998, on a historical basis, and of
the Company on an as adjusted basis after giving effect to the Offering and the
application of the net proceeds therefrom. The historical and as adjusted data
should be read in conjunction with "Unaudited Pro Forma Condensed Combined
Financial Information," "Unaudited Pro Forma Condensed Combined Interim
Financial Information," and the historical combined financial statements of the
Company, including the notes thereto, presented elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF
APRIL 4, 1998
-----------------------
ACTUAL AS ADJUSTED
------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 7,046 $ 10,204
======== ========
Long term debt, including current portion(1)................ $106,459 $ 5,795
Senior Credit Facility(2)................................... -- --
9 5/8% Senior Subordinated Notes due 2008................... -- 120,000
-------- --------
Total long term debt, including current portion........ 106,459 125,795
Shareholders' equity........................................ 15,246 4,465
-------- --------
Total capitalization................................... $121,705 $130,260
======== ========
</TABLE>
- -------------------------
(1) Includes capital leases and short-term borrowings.
(2) The Senior Credit Facility provides for borrowings of up to $100,000 of
revolving loans for working capital and general corporate purposes, which
may include future acquisitions, including up to $15,000 of tooling loans,
and will be secured by liens on substantially all of the assets of the
Company. See "Description of Senior Debt -- Senior Credit Facility."
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<PAGE> 26
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
Pursuant to the Registration Rights Agreement by and among the Company, the
Guarantors and the Initial Purchasers, the Company has agreed (i) to file a
registration statement with respect to an offer to exchange the Old Notes for
New Notes of the Company with terms substantially identical to the Old Notes
(except that the New Notes will not contain terms with respect to transfer
restrictions) within 60 days after the date of original issuance of the Old
Notes and (ii) to use best efforts to cause such registration statement to
become effective under the Securities Act within 150 days after such issue date.
In the event that applicable law or interpretations of the staff of the
Commission do not permit the Company to file the registration statement
containing this Prospectus or to effect the Exchange Offer, or if certain
holders of the Old Notes notify the Company that they are not permitted to
participate in, or would not receive freely tradeable New Notes pursuant to, the
Exchange Offer, the Company will use its best efforts to cause to become
effective a Shelf Registration Statement with respect to the resale of the Old
Notes and to keep the Shelf Registration Statement effective until the second
anniversary of the date of original issuance of the Old Notes or such shorter
period that will terminate when all the Transfer Restricted Notes covered by the
Shelf Registration Statement have been sold pursuant thereto. The interest rate
on the Old Notes is subject to increase under certain circumstances if the
Company is not in compliance with its obligations under the Registration Rights
Agreement. See "Old Notes; Registration Rights."
Each holder of the Old Notes who wishes to exchange such Old Notes for New
Notes in the Exchange Offer will be required to make certain representations,
including representations that (i) any New Notes to be received by it will be
acquired in the ordinary course of its business, (ii) it has no arrangement with
any person to participate in the distribution of the New Notes and (iii) it is
not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company
or, if it is an affiliate, it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable. See "Old
Notes; Registration Rights."
RESALE OF NEW NOTES
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third-parties, the Company believes that, except as
described below, 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 a holder which is an "affiliate" of the Company
within the meaning of Rule 405 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 and such holder does not intend to participate and has no
arrangement or understanding with any person to participate in the distribution
of such New Notes. Any holder who tenders in the Exchange Offer with the
intention or for the purpose of participating in a distribution of the New Notes
cannot rely on such interpretation by the staff of the Commission and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. Unless an
exemption from registration is otherwise available, any such resale transaction
should be covered by an effective registration statement containing the selling
security holders information required by Item 507 of Regulation S-K under the
Securities Act. This Prospectus may be used for an offer to resell, resale or
other retransfer of New Notes only as specifically set forth herein. 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, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. See
"Plan of Distribution."
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<PAGE> 27
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 Company will accept for exchange any and
all Old Notes properly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date. The Company will issue $1,000 principal
amount of New Notes in exchange for each $1,000 principal amount of outstanding
Old Notes surrendered pursuant to the Exchange Offer. Old Notes may be tendered
only in integral multiples of $1,000.
The form and terms of the New Notes will be the same as the form and terms
of the Old Notes except the New Notes will be registered under the Securities
Act and hence will not bear legends restricting the transfer thereof. The New
Notes will evidence the same debt as the Old Notes. The New Notes will be issued
under and entitled to the benefits of the Indenture, which also authorized the
issuance of the Old Notes, such that both series will be treated as a single
class of debt securities under the Indenture.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange.
As of the date of this Prospectus, $120 million aggregate principal amount
of the Old Notes are outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to all registered holders of Old Notes. There will be
no fixed record date for determining registered holders of Old Notes entitled to
participate in the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable requirements
of the Exchange Act, and the rules and regulations of the Commission thereunder.
Old Notes which are not tendered for exchange in the Exchange Offer will remain
outstanding and continue to accrue interest and will be entitled to the rights
and benefits such holders have under the Indenture and the Registration Rights
Agreement.
The Company shall be deemed to have accepted for exchange properly tendered
Old Notes when, as and if the Company shall have given oral or written notice
thereof to the Exchange Agent and complied with the provisions of Section 2 of
the Registration Rights Agreement. The Exchange Agent will act as agent for the
tendering holders for the purposes of receiving the New Notes from the Company.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions specified below under "--
Certain Conditions to the Exchange Offer."
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 Company will pay all charges and expenses,
other than certain applicable taxes described below, 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 Company, in its 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 Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders of Old Notes an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the then Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting for exchange any Old Notes, to extend the Exchange Offer or to
terminate the Exchange Offer if any of the conditions set forth below under "--
Certain Conditions to the Exchange Offer" shall not have been satisfied, by
giving oral or 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 oral or written notice thereof to the
registered holders of Old Notes. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the
24
<PAGE> 28
Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders, and the Company
will extend the Exchange Offer, 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 period.
INTEREST ON THE NEW NOTES
The New Notes will bear interest at a rate of 9 5/8% per annum, payable
semiannually in cash, on each May 1 and November 1, commencing November 1, 1998.
Holders of New Notes will receive interest on November 1, 1998 from the date of
initial issuance of the New Notes, plus an amount equal to the accrued interest
on the Old Notes from the most recent date to which interest has been paid to
the date of exchange thereof for New Notes. Interest on the Old Notes accepted
for exchange will cease to accrue upon issuance of the New Notes.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or exchange any New Notes for, any Old
Notes, and may terminate the Exchange Offer as provided herein before the
acceptance of any Old Notes for exchange, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the Company's sole judgment, might materially impair the ability
of the Company to proceed with the Exchange Offer; or
(b) any law, statute, rule or regulation is proposed, adopted or
enacted, or any existing law, statute, rule or regulation is interpreted by
the staff of the Commission, which, in the Company's sole judgment, might
materially impair the ability of the Company to proceed with the Exchange
Offer; or
(c) any governmental approval has not been obtained, which approval
the Company shall, in its sole discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the holders thereof. During any such
extensions, all Old Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Company. Any Old Notes
not accepted for exchange for any reason will be returned without expense to the
tendering holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified above under "-- Certain Conditions to the Exchange Offer." The Company
will give oral or written notice of any extension, amendment, non-acceptance or
termination to the holders of the Old Notes as promptly as practicable, such
notice in the case of any extension to be issued no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939 (the
"TIA").
25
<PAGE> 29
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or facsimile thereof, have the signature thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile to the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date. In addition, either
(i) Old Notes must be received by the Exchange Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of 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 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 tender by a holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES, 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. 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. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
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 of Old Notes to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such owner's own behalf, such owner
must, prior to completing and executing the Letter of Transmittal and delivering
such owner's Old Notes, either make appropriate arrangements to register
ownership of the Old Notes in such owner's name or obtain a properly completed
bond power from the registered holder of Old Notes. The transfer of registered
ownership may take considerable time and may not be able to be completed prior
to the Expiration Date.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below, as the case be, must be guaranteed by an Eligible Institution (as defined
below) unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Issuance
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 Transmittal or a notice of withdrawal, as the case may be, are required
to be guaranteed, such guarantor must be 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 under the Exchange Act which is a member of one of the recognized
signature guarantee programs identified in the Letter of Transmittal (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
with the signature thereon guaranteed by an Eligible Institution.
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
26
<PAGE> 30
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company 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 of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Old Notes. The Company's
interpretation 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 Company shall determine.
Although the Company intends to notify holders of defects or irregularities with
respect to tenders of Old Notes, neither the Company, 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 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.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of Notes or a timely Book-Entry Confirmation of such Old
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility, a
properly completed and duly executed Letter of Transmittal and all other
required documents. If any tendered Old Notes are not accepted for exchange for
any reason set forth in the terms and conditions of the Exchange Offer or if Old
Notes are submitted for a greater principal amount than the holder desires to
exchange, such unaccepted or non-exchanged Old Notes will be returned without
expense to the tendering holder thereof (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
below, such non-exchanged Notes will be credited to an account maintained with
such Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer.
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 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 the 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 the address
set forth below under "-- Exchange Agent" on or prior to the Expiration Date or,
if the guaranteed delivery procedures described below are to be complied with,
within the time period provided under such procedures. Delivery of documents to
the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
27
<PAGE> 31
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 registered 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 three
(3) New York Stock Exchange trading days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof) together with the Old Notes or
a Book-Entry Confirmation, as the case may be, 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 all tendered 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 three (3) 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
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which such
Old Notes were registered, if different from that of the withdrawing holder. 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 Company, whose determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Exchange Offer. Any Old
Notes which have been tendered for exchange but which are not exchanged for any
reason will be returned 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) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures described under "-- Procedures for Tendering" above at any
time on or prior to the Expiration Date.
EXCHANGE AGENT
U.S. Bank Trust National Association has been appointed as Exchange Agent
of the Exchange Offer. Questions and request for assistance, request for
additional copies of this Prospectus or of the Letter of
28
<PAGE> 32
Transmittal and requests for Notice of Guaranteed Delivery should be directed to
the Exchange Agent addressed as follows:
U.S. BANK TRUST NATIONAL ASSOCIATION
<TABLE>
<S> <C> <C>
By Registered/Certified
By First Class Mail: or Overnight Delivery: Hand Delivery:
U.S. Bank Trust N.A. U.S. Bank Trust N.A. U.S. Bank Trust N.A.
P.O. Box 64485 Attn: Specialized Finance 4th Floor Bond Drop Window
St. Paul, Minnesota 55164-9549 SPFT0414 180 East Fifth Street
180 East Fifth Street St. Paul, Minnesota 55101
St. Paul, Minnesota 55101
Telephone Number: Facsimile Number:
612-244-8161 612-244-1537
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. 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 Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to broker-dealers or others
soliciting acceptances of the Exchange Offer. The Company, 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 Company. Such expenses include registration fees, fees and
expenses of the Exchange Agent and Trustee, accounting and legal fees and
printing costs, and related fees and expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Notes pursuant to the Exchange Offer. If, however, certificates representing
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 Notes tendered, or if tendered 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 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.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
the Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
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 the exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In
29
<PAGE> 33
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, New
Notes issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 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 holders' business and such holders have no arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange Offer. Any holder who tenders in the Exchange Offer for
the purpose of participating in a distribution of the New Notes (i) could not
rely on the applicable interpretations of the staff of the Commission and (ii)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. In addition,
to comply with the securities laws of certain jurisdictions, if applicable, the
New Notes may not be offered or sold unless they have been registered or
complied with. The Company has agreed, pursuant to the Registration Rights
Agreement and subject to certain specified limitations therein, to register or
qualify the New Notes for offer or sale under the securities or blue sky laws of
such jurisdictions as any holder of the New Notes reasonably requests in
writing.
30
<PAGE> 34
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined statement of
operations of the Company for the year ended December 31, 1997, gives effect to
the Offering and the PSI Acquisition as if each transaction had occurred on
January 1, 1997. The following unaudited pro forma condensed combined balance
sheet at December 31, 1997, gives effect to the Offering as if it had occurred
on such date. The unaudited pro forma condensed combined financial information
does not purport to represent what the Company's results of operations or
financial position would have actually been had the transactions occurred on the
dates indicated above, or to project the Company's results of operations or
financial condition for any future date or period. This unaudited pro forma
condensed combined financial information should be read in conjunction with the
accompanying notes and the historical combined financial statements of the
Company and PSI, including the notes thereto, and the information set forth in
"Summary Financial Data," "Selected Financial Data," and "Management's
Discussion and Analysis of Operations and Financial Condition," all presented
elsewhere in this Prospectus.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
----------------------------------------------------------------
HISTORICAL PSI OFFERING
COMPANY PSI(A) ADJUSTMENTS ADJUSTMENTS PRO FORMA
------- ---------- ----------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales................................ $158,718 $70,699 -- -- $229,417
Cost of sales............................ 134,297 61,737 $(2,427)(d) -- 193,607
-------- ------- ------- ------- --------
Gross profit........................... 24,421 8,962 2,427 -- 35,810
Operating expenses
Selling, general and administrative
expenses............................ 16,241 6,493 (290)(e) $ (650)(g) 21,794
Special compensation(b)................ 1,343 -- -- 1,359 2,702
-------- ------- ------- ------- --------
Income from operations................. 6,837 2,469 2,717 (709) 11,314
Other expenses (income)
Interest............................... 4,599 1,254 2,927(f) 3,789(h) 12,569
Foreign currency....................... 117 -- -- -- 117
Other income........................... -- (323) -- -- (323)
-------- ------- ------- ------- --------
4,716 931 2,927 3,789 12,363
-------- ------- ------- ------- --------
Income (loss) before income taxes........ 2,121 1,538 (210) (4,498) (1,049)
Provision for income taxes............... 1,325 -- -- -- 1,325
-------- ------- ------- ------- --------
Net income (loss)(c)..................... $ 796 $ 1,538 $ (210) $(4,498) $ (2,374)
======== ======= ======= ======= ========
OTHER FINANCIAL DATA
Depreciation and amortization............ $ 10,586
Capital expenditures..................... 13,400
EBITDA(i)................................ 22,106
Adjusted EBITDA(i)....................... 26,222
Ratio of Adjusted EBITDA to
interest expense....................... 2.1x
Ratio of debt to Adjusted EBITDA......... 4.8x
</TABLE>
(see notes beginning on page 33)
31
<PAGE> 35
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------------
PRO FORMA PRO FORMA
COMPANY ADJUSTMENTS TOTAL
------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............................... $ 1,233 $ 1,975(j) $ 3,208
Accounts receivable..................................... 36,021 -- 36,021
Inventory............................................... 19,347 -- 19,347
Prepaid expenses........................................ 2,765 -- 2,765
-------- -------- --------
Total current assets............................... 59,366 1,975 61,341
Property, plant and equipment............................. 94,194 -- 94,194
Less accumulated depreciation........................... 31,723 -- 31,723
-------- -------- --------
Net property, plant and equipment.................. 62,471 -- 62,471
Goodwill.................................................. 43,298 -- 43,298
Deferred financing costs.................................. 680 4,795(k) 5,475
Other..................................................... 679 -- 679
-------- -------- --------
$166,494 $ 6,770 $173,264
-------- -------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank line of credit..................................... $ 2,651 $ (2,651)(l) --
Accounts payable........................................ 31,043 -- $ 31,043
Accrued liabilities..................................... 9,472 (341)(l) 9,131
Deferred tooling revenue................................ 1,423 -- 1,423
Current portion of capital leases....................... 720 -- 720
Current portion of long term debt....................... 33,463 (33,128)(l) 335
-------- -------- --------
Total current liabilities.......................... 78,772 (36,120) 42,652
Long term debt............................................ 67,844 53,570(l) 121,414
Capital leases............................................ 2,637 -- 2,637
Other liabilities......................................... 1,276 -- 1,276
Deferred income taxes..................................... 1,364 -- 1,364
SHAREHOLDERS' EQUITY
Common stock.............................................. 1,250 -- 1,250
Paid-in capital........................................... 1,413 -- 1,413
Retained earnings......................................... 12,168 (10,680)(m) 1,488
Accumulated translation adjustment........................ (230) -- (230)
-------- -------- --------
14,601 (10,680) 3,921
-------- -------- --------
$166,494 $ 6,770 $173,264
======== ======== ========
</TABLE>
(see notes beginning on page 33)
32
<PAGE> 36
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
(a) The historical financial information of PSI covers the period from January
1, 1997 through and including December 7, 1997, the day preceding the
consummation of the PSI Acquisition. The PSI Acquisition was accounted for
by the purchase method of accounting.
(b) To reflect amounts allocated to certain members of the management team who
participated in deferred compensation agreements with the Company as a
result of the $10,000 dividend to shareholders. Future allocations to these
accounts will be discontinued as a result of the Offering, excluding up to
$300 in additional deferred compensation which can be earned by Delmar O.
Stanley, President and Chief Executive Officer of the Company, and annual
increases on all vested amounts at the rate of 6% per year. See "Management
-- Deferred Compensation Agreements."
(c) The Company incurred an extraordinary loss resulting from the write-off of
$680 of deferred financing costs related to certain indebtedness retired as
a result of the Offering.
(d) Reflects the elimination of (i) $1,227 of sub-contracted manufacturing
expenses to a related party discontinued as a result of the PSI Acquisition,
and (ii) $1,200 in operating cost discontinued as a result of closing
certain warehouse facilities related to the PSI Acquisition.
(e) Reflects the elimination of (i) $1,162 of former owner compensation and
expenses discontinued as a result of the PSI Acquisition, and (ii) $872
incremental goodwill amortization over a period of 40 years as a result of
purchase method of accounting for the PSI Acquisition.
(f) Represents the incremental interest expense related to the PSI Acquisition,
using an weighted-average interest rate of 8.7%.
(g) To reflect the reduction of $650 in business services fees paid by the
Company to Talon L.L.C.
(h) Represents the incremental interest expense, using an interest rate of
9.625%, on the Notes, interest on other indebtedness, and $585 in additional
amortization of deferred financing costs related to the Notes and Senior
Credit Facility fees and expenses.
(i) EBITDA is defined as income from continuing operations before the effect of
changes in accounting principles and extraordinary items plus interest,
income taxes, depreciation and amortization. EBITDA is presented because it
is a widely accepted financial indicator of a company's ability to incur and
service debt. However, EBITDA should not be considered in isolation as a
substitute for net income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of a company's
profitability or liquidity. The Company's EBITDA has been adjusted for
certain expenses that the Company believes are non-recurring in nature as
well as certain increases in income related to the synergies from the
acquisitions of PSI, J&R, and Veltri.
<TABLE>
<S> <C>
EBITDA............................................... $ 22,106
Expenses under deferred compensation arrangements.
See "Management -- Deferred Compensation
Agreements."....................................... 2,702
Purchasing cost savings as a result of increased
volumes............................................ 130
Work force reduction................................. 1,284
--------
Adjusted EBITDA...................................... $ 26,222
========
</TABLE>
(j) Cash and cash equivalents have been adjusted to reflect the following:
<TABLE>
<S> <C>
Offering proceeds from issuance of Old Notes........ $ 120,000
Retirement of certain indebtedness including accrued
interest.......................................... (102,550)
Dividend to shareholders............................ (10,000)
Fees and expenses associated with the Offering...... (5,475)
---------
$ 1,975
=========
</TABLE>
33
<PAGE> 37
(k) Represents payment of approximately $4,600 of fees and expenses related to
the Offering and approximately $875 for fees and expenses related to the
Senior Credit Facility to be incurred concurrently with the Offering, net of
retirement of $680 of deferred financing costs related to debt retired as a
result of the Offering.
(l) Pro forma long term debt (including current portion) is derived by adjusting
actual long term debt of $107,315 for the addition of $120,000 resulting
from the Offering and the reduction of $102,550 for retirement of certain
indebtedness and accrued interest.
(m) Represents payment of $10,000 dividend to the shareholders and write-off of
$680 in deferred financing costs associated with certain indebtedness to be
retired.
34
<PAGE> 38
UNAUDITED PRO FORMA CONDENSED COMBINED INTERIM FINANCIAL INFORMATION
The following unaudited pro forma condensed combined interim statement of
operations of the Company for the fiscal quarter ended April 4, 1998, gives
effect to the Offering as if it had occurred on January 1, 1998. The following
unaudited pro forma condensed combined interim balance sheet at April 4, 1998,
gives effect to the Offering as if it had occurred on such date. The unaudited
pro forma condensed combined interim financial information does not purport to
represent what the Company's results of operations or financial position would
have actually been had the transactions occurred on the dates indicated above,
or to project the Company's results of operations or financial condition for any
future date or period. This unaudited pro forma condensed combined interim
financial information should be read in conjunction with the accompanying notes
and the unaudited combined interim financial statements of the Company,
including the notes thereto, and the information set forth in "Summary Financial
Data," "Selected Financial Data," and "Management's Discussion and Analysis of
Operations and Financial Condition," all presented elsewhere in this Prospectus.
UNAUDITED PRO FORMA CONDENSED COMBINED INTERIM
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED APRIL 4, 1998
----------------------------------------
OFFERING
COMPANY ADJUSTMENTS PRO FORMA
------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net Sales................................................... $71,071 -- $71,071
Cost of Sales............................................... 59,918 -- 59,918
------- ----- -------
Gross Profit.............................................. 11,153 -- 11,153
Selling, general & administrative expenses.................. 6,752 $(163)(a) 6,589
------- ----- -------
Income from operations...................................... 4,401 163 4,564
Other expenses (income)
Other income.............................................. (186) -- (186)
Interest.................................................. 2,390 912(b) 3,302
Foreign currency.......................................... 142 -- 142
------- ----- -------
Income before income taxes.................................. 2,055 (749) 1,306
Provision for income taxes.................................. 771 -- 771
------- ----- -------
Net income (loss)........................................... $ 1,284 $(749) $ 535
======= ===== =======
OTHER FINANCIAL DATA
Depreciation and amortization............................... 2,705
Capital expenditures........................................ 1,588
EBITDA...................................................... 7,150
Adjusted EBITDA............................................. 7,313
Ratio of Adjusted EBITDA to interest expense................ 2.2x
</TABLE>
(see notes beginning on page 37)
35
<PAGE> 39
UNAUDITED PRO FORMA CONDENSED COMBINED INTERIM BALANCE SHEET
<TABLE>
<CAPTION>
APRIL 4, 1998
-----------------------------------------
OFFERING
COMPANY ADJUSTMENTS PRO FORMA
------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................................. $ 7,046 $ 3,158(c) $ 10,204
Accounts receivable........................................ 36,505 -- 36,505
Inventories................................................ 21,165 -- 21,165
Prepaid expenses........................................... 4,303 -- 4,303
-------- -------- --------
Total Current Assets.................................. 69,019 3,158 72,177
Property, plant and equipment.............................. 95,407 -- 95,407
Less accumulated depreciation......................... 33,824 -- 33,824
-------- -------- --------
Net property, plant and equipment..................... 61,583 -- 61,583
Goodwill................................................... 42,815 -- 42,815
Deferred financing costs................................... 643 4,651(d) 5,294
Other assets............................................... 526 -- 526
-------- -------- --------
$174,586 $ 7,809 $182,395
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank line of credit........................................ $ 2,634 (2,634)(e) 0
Accounts payable........................................... 37,273 -- 37,273
Accrued liabilities........................................ 12,229 (747)(e) 11,482
Deferred tooling revenue................................... 1,444 -- 1,444
Current portion of capital leases.......................... 746 -- 746
Current portion of long term debt.......................... 33,871 (32,878)(e) 993
-------- -------- --------
Total current liabilities............................. 88,197 (36,259) 51,938
Long term debt............................................. 66,659 54,849(e) 121,508
Capital leases............................................. 2,549 -- 2,549
Other liabilities.......................................... 314 -- 314
Deferred income taxes...................................... 1,621 -- 1,621
SHAREHOLDER'S EQUITY
Common stock............................................... 1,250 -- 1,250
Paid in capital............................................ 1,412 -- 1,412
Retained earnings.......................................... 12,977 (10,781)(f) 2,196
Accumulated translation adjustment......................... (393) -- (393)
-------- -------- --------
15,246 (10,781) 4,465
-------- -------- --------
$174,586 $ 7,809 $182,395
======== ======== ========
</TABLE>
(see notes beginning on page 37)
36
<PAGE> 40
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED INTERIM FINANCIAL INFORMATION
FOR THE FISCAL QUARTER ENDED APRIL 4, 1998
(DOLLARS IN THOUSANDS)
(a) To reflect the reduction of $163 in business services fees paid by the
Company to Talon L.L.C.
(b) Represents the incremental interest expense, using an interest rate of
9.625% on the notes, interest on other indebtedness, and $110 in
additional amortization of deferred financing costs related to the
Notes and Senior Credit Facility fees and expenses.
(c) Cash and cash equivalents have been adjusted to reflect the following:
<TABLE>
<S> <C>
Offering proceeds........................................... $ 120,000
Retirement of certain indebtedness, including accrued
indebtedness.............................................. (101,548)
Dividend to shareholders.................................... (10,000)
Fees and expenses associated with the Offering.............. (5,294)
---------
$ 3,158
=========
</TABLE>
(d) Represents payment of approximately $4,483 of fees and expenses related
to the Offering and approximately $811 for fees and expenses related to
the Senior Credit Facility incurred concurrently with the Offering, net
of retirement of $643 of deferred financing costs related to debt
retired as a result of the Offering.
(e) Pro forma long term debt (including current portion) is derived by
adjusting actual long term debt of $103,164 (excluding capital leases)
for the addition of $120,000 resulting from the Offering and the
reduction of $101,548 for retirement of certain indebtedness and
accrued interest.
(f) Represents payment of $10,000 dividend to the shareholders, an
extraordinary loss resulting from the write-off of $643 in deferred
financing costs associated with certain indebtedness that was retired
and $138 in fees associated with the retirement of certain existing
indebtedness.
37
<PAGE> 41
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table sets forth selected historical financial data of the
Company for the five years ended December 31, 1997 and the fiscal quarters ended
April 4, 1998 and 1997. The selected financial data for the three year period
ended December 31, 1997 are derived from the audited combined financial
statements of the Company included elsewhere in this Prospectus. The selected
financial data for the two year period ended December 31, 1994 are derived from
the audited combined financial statements not included herein. The selected
financial data for the fiscal quarters ended April 4, 1998 and 1997 were derived
from the unaudited condensed combined interim financial statements of the
Company included elsewhere in this Prospectus. The following table should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the historical combined financial
statements of the Company, including the notes thereto, presented elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, QUARTER ENDED APRIL 4,
---------------------------------------------------- ----------------------
1993 1994 1995 1996 1997 1997 1998
---- ---- ---- ---- ---- ---- ----
UNAUDITED
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net sales................................ $39,467 $43,035 $56,835 $71,029 $158,718 $ 45,349 $ 71,071
Gross profit............................. 7,144 5,735 9,935 12,909 24,421 7,313 11,153
Selling, general and administrative
expenses(a)............................ 4,259 4,699 6,041 8,490 16,241 4,328 6,752
Special compensation(b).................. -- -- -- -- 1,343
Income from operations................... 2,886 1,036 3,894 4,419 6,837 2,985 4,401
Interest................................. 806 714 1,192 1,754 4,599 1,050 2,390
Income before income taxes(c)............ 2,023 610 2,702 2,363 2,121 2,153 2,055
Net income............................... 2,023 610 2,702 2,269 796 1,456 1,284
BALANCE SHEET DATA (END OF PERIOD)
Cash and cash equivalents................ $ 5 $ 6 $ 18 $ 1,090 $ 1,233 $ 0 $ 7,046
Total assets............................. 29,345 33,618 37,206 91,110 166,494 124,889 174,586
Total debt............................... 10,480 14,089 17,555 49,468 107,315 52,114 106,459
Shareholders' equity..................... 10,511 10,786 12,736 14,401 14,601 15,477 15,246
OTHER FINANCIAL DATA
Depreciation and amortization............ $ 2,484 $ 2,639 $ 2,907 $ 3,419 $ 6,279 $ 1,381 $ 2,705
Capital expenditures..................... 1,925 5,494 5,009 3,942 9,389 3,018 1,588
EBITDA(d)................................ 5,313 3,963 6,801 7,536 12,999 4,584 7,150
</TABLE>
- -------------------------
(a) Included in selling, general and administrative expenses are business
services fees paid to Talon L.L.C., an affiliate of the Company, of $1,150,
$850, and $717 for 1997, 1996 and 1995, respectively. Effective April 1,
1998, such fees were reduced to $500 annually. See "Certain Relationships
and Related Transactions." Business services fees paid to Talon L.L.C.
totalled $287 for the fiscal quarters ended April 4, 1998 and 1997,
respectively.
(b) Certain members of the Company's management team participate in deferred
compensation agreements which award the employee for increases in share
value. Approximately $1,343 was recorded in 1997 under these agreements. An
additional amount of $1,359 was recorded upon consummation of the Offering
on April 28, 1998. Effective with the Offering, all future contributions
under these agreements were discontinued, excluding up to $300 in additional
deferred compensation which can be earned by Delmar O. Stanley, President
and Chief Executive Officer of the Company, and annual increases on all
vested amounts at the rate of 6% per year. See "Management -- Deferred
Compensation Agreements."
(c) Except for the Canadian subsidiary, the shareholders have elected under the
provisions of the Internal Revenue Code to be treated as S Corporations. As
a result, the taxable income of the companies is included in the taxable
income of the individual shareholders, and no provision for federal income
taxes has been included in income. The Canadian subsidiary is subject to
Canadian income tax.
(d) EBITDA is defined as income from continuing operations before the effect of
changes in accounting principles and extraordinary items plus interest,
income taxes, depreciation and amortization. EBITDA is presented because it
is a widely accepted financial indicator of a company's ability to incur and
service debt. However, EBITDA should not be considered in isolation as a
substitute for net income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of a company's
profitability or liquidity. For the fiscal first quarter of 1998, EBITDA
includes a $186 gain on sale of assets and a foreign currency exchange loss
of $142.
38
<PAGE> 42
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the Company's financial condition and result of
operations contains forward-looking statements. Holders of the Notes are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties. Actual events may differ
materially from those discussed in the forward-looking statements as a result of
various factors, including, without limitation, the risk factors set forth under
"Risk Factors," "Forward-Looking Information," and the matters generally set
forth in this Prospectus. The following discussion should be read in conjunction
with "Unaudited Pro Forma Condensed Combined Financial Information," "Unaudited
Pro Forma Condensed Combined Interim Financial Information," "Selected Financial
Data," and the historical combined financial statements of the Company,
including the notes thereto, presented elsewhere in this Prospectus.
GENERAL
The Company is a leading full-service Tier 1 designer and manufacturer of
high-quality, stamped metal components and assemblies used by North American
automotive original equipment manufacturers ("OEMs"). The Company specializes
in, and derives the majority of its revenue from, underbody/chassis and
unexposed body structure assemblies which constitute major structural components
of passenger cars, light trucks, and vans. The Company's products include frame
rail, inner quarter panel, crossmember, cowl, bumper, rear back panel, and
trailer hitch assemblies. Since 1996, the Company has completed three
acquisitions: J&R on September 30, 1996, Veltri on November 8, 1996 and PSI on
December 8, 1997. On a pro forma basis, these acquisitions have contributed to
the increase in the Company's net sales from $56.8 million in 1995 to $229.4
million in 1997.
MERGERS
Immediately preceding the consummation of the Offering, Talon, Hawthorne,
and J&R merged with and into PSI, which changed its name to Talon Automotive
Group, Inc. ("TAG, Inc."). Hawthorne, J&R, and PSI each operate as separate
unincorporated divisions of TAG, Inc. Simultaneously, VS Holdings No. 2 Inc.
merged with and into VS Holdings, Inc., which became a wholly owned subsidiary
of TAG, Inc. as well as Veltri Holdings USA, Inc. Veltri became a wholly owned
subsidiary of VS Holdings, Inc. (collectively, the "Veltri Group").
Collectively, the above actions are referred to in this Prospectus as the
"Mergers." As used in this Prospectus, unless the context indicates otherwise,
the "Company" means (i) for periods prior to the Mergers, the business and
operations of the Talon Entities and (ii) for periods after the Mergers, TAG,
Inc. and its subsidiaries, which collectively owns the business and operations
of the Talon Entities.
RESULTS OF OPERATIONS
The following management's discussion and analysis of financial condition
and results of operations should be read in conjunction with the Company's
historical Combined Financial Statements (including the notes thereto) appearing
elsewhere in this Prospectus. The historical information for the year ended
December 31, 1997 includes the PSI results of operations for the period
subsequent to its acquisition. The historical information for the year ended
December 31, 1996 includes the J&R and Veltri results of operations for the
periods subsequent to each of their acquisition. Accordingly, the results of
operations for the year ended December 31, 1997 are not directly comparable to
the results of operations for the year ended December 31, 1996 and the results
of operations for the year ended December 31, 1996 are not directly comparable
to the results of operations for the year ended December 31, 1995 and the
results of operations for the quarter ended April 4, 1998 are not directly
comparable to the quarter ended April 4, 1997. The Company's performance is
expected to be dependent on automotive vehicle production. The Company's
business is subject to seasonal fluctuations in sales and profitability due to
the impact of OEM plant shutdowns in July and December for OEM holidays and
model changeovers. In addition to being awarded business for new platforms, the
Company has historically supplied its OEM customers with components which were
previously manufactured by such OEM or Tier 1 suppliers. Factory-assist work
approximated $14.7 million, $6.3 million and $1.5 million in 1997, 1996 and
1995, respectively. The shareholders of Hawthorne,
39
<PAGE> 43
J&R and PSI have elected to treat these companies as S Corporations for federal
income tax purposes under the Internal Revenue Code of 1986, as amended, and for
state income tax purposes. Veltri is a Nova Scotia unlimited liability company
and is subject to Canadian income tax.
The following table sets forth, for the periods indicated, certain
operating data as a percentage of net sales (table will not total due to
rounding):
<TABLE>
<CAPTION>
QUARTER ENDED APRIL 4,
-------------------------------
YEAR ENDED DECEMBER 31, UNAUDITED
------------------------------------------------- -------------------------------
1997 1996 1995 1998 1997
---- ---- ---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.................. $158.7 100.0% $71.0 100.0% $56.8 100.0% $71.1 100.0% $45.3 100.0%
Cost of sales.............. 134.3 84.6% 58.1 81.8% 46.9 82.5% 59.9 84.3% 38.0 83.9%
------ ------ ----- ------ ----- ------ ----- ------ ----- ------
Gross profit............. 24.4 15.4% 12.9 18.2% 9.9 17.5% 11.2 15.7% 7.3 16.1%
Operating expenses
Selling, general and
administrative
expenses............... 16.2 10.2% 8.5 12.0% 6.0 10.6% 6.8 9.5% 4.3 9.5%
Special compensation..... 1.3 0.8% -- -- -- -- -- -- -- --
------ ------ ----- ------ ----- ------ ----- ------ ----- ------
Income from
operations.......... 6.8 4.3% 4.4 6.2% 3.9 6.9% 4.4 6.2% 3.0 6.6%
Other income............... -- -- -- -- -- -- (0.2) (0.2%) -- 0.0%
Other expenses
Interest................. 4.6 2.9% 1.8 2.5% 1.2 2.1% 2.4 3.3% 1.0 2.3%
Foreign currency......... 0.1 0.1% 0.3 0.4% -- -- 0.1 0.2% (0.2) (0.5%)
------ ------ ----- ------ ----- ------ ----- ------ ----- ------
Income before income
taxes.................... 2.1 1.3% 2.4 3.3% 2.7 4.8% 2.1 2.9% 2.2 4.8%
Provision for income
taxes.................... 1.3 0.8% 0.1 0.1% -- -- 0.8 1.1% 0.7 1.6%
------ ------ ----- ------ ----- ------ ----- ------ ----- ------
Net income............. $ 0.8 0.5% $ 2.3 3.2% $ 2.7 4.8% $ 1.3 1.8% $ 1.5 3.2%
====== ====== ===== ====== ===== ====== ===== ====== ===== ======
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net Sales: Net sales for 1997 were $158.7 million. This was an increase of
approximately $87.7 million or 123.5% as compared to net sales for 1996 of $71.0
million. Approximately 85.0% of this increase is attributable to the
acquisitions of J&R, Veltri and PSI. The remaining 15.0% of the net sales
increase was due to new business awards, including business related to the
Chrysler NS Minivan and additional factory assist work.
Gross Profit: Gross profit was $24.4 million or 15.4% of net sales for 1997
as compared to $12.9 million or 18.2% of net sales for 1996. This represents an
increase of $11.5 million or 89.2% as compared to the prior year. The decrease
as a percentage of net sales was due to lower gross margin rates at J&R and
start-up expenses related to the 1998 Chrysler LH Concorde/Intrepid program, as
well as factory assist work at Hawthorne.
Selling, General and Administrative Expenses ("SG&A"): SG&A expenses were
$16.2 million or 10.2% of net sales for 1997 as compared to $8.5 million or
12.0% of net sales for 1996. The decrease in SG&A, as a percentage of net sales,
was the result of leveraging SG&A expenses over a larger net sales base. This
decrease was partially offset by increased amortization expense of $0.5 million
related to the Company's acquisition of J&R and Veltri. Included in the
Company's SG&A expense are business services fees paid to Talon L.L.C., an
affiliate of the Company. The Company incurred a business services fee of $1.2
million in 1997 and $0.9 million in 1996. Effective with the Offering, such fees
will be $0.5 million annually.
Special Compensation Expense: Included in 1997 results was a special
compensation expense of $1.3 million or 0.8% of net sales. There was no special
compensation expense in 1996 or 1995. See "Management -- Deferred Compensation
Agreements" and Note 10 to the Company's Combined Financial Statements.
Interest Expense: Interest expense for 1997 was $4.6 million or 2.9% of net
sales as compared to $1.8 million or 2.5% of net sales for 1996. This was an
increase of $2.8 million or 162.2% as compared to the prior year. The increase
in interest expense as a percentage of net sales is attributable to additional
borrowings related to the acquisitions of J&R, Veltri and PSI, partially offset
by a lower weighted average interest rate. Weighted average interest rates were
8.2% and 8.4% in 1997 and 1996, respectively.
40
<PAGE> 44
Income Taxes: The provision for income taxes for 1997 was $1.3 million with
an effective tax rate of 43.6%, compared to $0.1 million with an effective tax
rate of 35.8% in 1996. The Company's income taxes relate solely to its Canadian
operations. The increase in the effective rate is due primarily to
non-deductible amortization of cost in excess of assets acquired.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net Sales: Net sales for 1996 were $71.0 million. This was an increase of
approximately $14.2 million or 25.0% as compared to net sales for 1995 of $56.8
million. Substantially all of this increase was attributable to the acquisitions
of J&R and Veltri.
Gross Profit: Gross profit was $12.9 million or 18.2% of net sales for 1996
as compared to $9.9 million or 17.5% of net sales for 1995. This represents an
increase of $3.0 million or 29.9% as compared to the prior year. The increase as
a percentage of net sales was primarily a result of higher gross profit at
Hawthorne as compared to the prior year, offset slightly by lower gross margin
rates at J&R and Veltri.
Selling, General and Administrative Expenses: SG&A expenses were $8.5
million or 12.0% of net sales for 1996 as compared to $6.0 million or 10.6% of
net sales for 1995. The increase in SG&A, as a percentage of net sales, was
primarily a result of J&R's and Veltri's SG&A expenses as a percentage of net
sales being higher than other TAG companies. This increase was partially offset
by a larger net sales base to which corporate expenses were allocated.
Interest Expense: Interest expense for 1996 was $1.8 million, an increase
of $0.6 million as compared to 1995. The increase in interest expense is
attributable to increased debt related to the acquisitions of J&R and Veltri.
Income Taxes: The provision for income taxes for 1996 was $0.1 million with
an effective tax rate of 35.8%, as compared to no provision for income taxes in
1995. The Company's income tax expense is solely related to its Canadian
operation.
QUARTER ENDED APRIL 4, 1998 COMPARED TO QUARTER ENDED APRIL 4, 1997
Net Sales: Net sales for the fiscal quarter ended April 4, 1998 ("first
quarter 1998") were $71.1 million. This was an increase of approximately $25.8
million or 56.7% as compared to net sales for the fiscal quarter ended April 4,
1997 ("first quarter 1997") of $45.3 million. A net sales increase of
approximately 43.5% is attributable to the acquisition of PSI in December 1997.
The remaining 13.2% net sales increase was due to new factory assist business
that was awarded to Hawthorne, including business related to the Chrysler NS
Minivan and Dodge Neon, and increased content in the Chrysler LH
Concorde/Intrepid program at Veltri.
Gross Profit: Gross profit for the first quarter of 1998 was $11.2 million
or 15.7% of net sales as compared to $7.3 million or 16.1% of net sales for the
first quarter of 1997. This represents an increase of $3.9 million or 52.5% as
compared to the prior year. The decrease as a percentage of net sales was due to
short-term launch costs associated with additional factory assist business at
Hawthorne in the first quarter of 1998.
Selling, General and Administrative Expenses ("SG&A"): SG&A expenses for
the first quarter of 1998 were $6.8 million or 9.5% of net sales, compared to
$4.3 million or 9.5% of net sales for the first quarter of 1997. SG&A, as a
percentage of net sales, remained consistent between periods. Included in the
Company's SG&A expense is a business services fee paid to Talon L.L.C.
("Talon"), an affiliate of the Company. The Company incurred business services
fees of $0.3 million in the first quarter of 1998 compared to $0.2 million in
the first quarter of 1997. The Company's business services agreement with Talon
was modified on April 1, 1998 to limit fees to $0.5 million per year.
Other Income: Other income for the first quarter of 1998 was $0.2 million
and was related to a gain on the sale of assets. There were no such gains in the
first quarter of 1997.
Interest Expense: Interest expense for the first quarter of 1998 was $2.4
million or 3.3% of net sales, compared to $1.0 million or 2.3% of net sales for
the first quarter of 1997. This was an increase of $1.4 million
41
<PAGE> 45
or 127% as compared to the prior year. The increase in interest expense is
attributable to additional borrowings related to the acquisition of PSI in
December 1997.
Foreign Currency: The foreign currency exchange loss for the first quarter
of 1998 was $0.1 million compared to a foreign currency gain of $0.2 million for
the first quarter of 1997. Foreign currency gains and losses are all
attributable to the Company's Canadian operation. The foreign currency exchange
loss in the first quarter of 1998 was due to a combination of changes in
exchange rates and working capital positions.
Income Taxes: The provision for income taxes for the first quarter of 1998
was $0.8 million or 1.1% of net sales compared to $0.7 million or 1.6% of net
sales for the first quarter of 1997. The Company's income taxes relate solely to
its Canadian operation. The effective tax rate for the first quarter of 1998 was
40.8% compared to 39.8% for the first quarter of 1997. The increase in the
effective tax rate was due to an increase in non-deductible amortization
expenses for the Canadian operation in the first quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow from operating activities totaled $6.2 million for 1997, as
compared to $6.3 million for 1996 and $2.3 million for 1995. For the first
quarter of 1998, net cash flow from operating activities totaled $9.3 million as
compared to a $0.1 million for the first quarter of 1997. The increase, as
compared to the prior year, was the result of favorable changes in working
capital between the two quarters.
Net cash used in investing activities totaled $61.2 million for 1997, as
compared to $9.4 million for 1996 and $5.0 million for 1995. Investing
activities in 1997 consisted of $9.4 million in capital expenditures and $51.7
million for the PSI Acquisition. Investing activities in 1996 consisted of $3.9
million in capital expenditures and $5.5 million for the J&R and Veltri
acquisitions. Investing activities in 1995 related primarily to capital
expenditures. For the first quarter of 1998, net cash used in investing
activities totaled $1.3 million, as compared to $3.0 million for the first
quarter of 1997. Investing activities for the first quarter of 1998 and 1997
related primarily to capital expenditures.
Cash provided by financing activities for 1997 was $55.3 million compared
to $4.2 million for 1996 and $2.7 million for 1995. In 1997, additional
borrowings, less principal payments, provided $55.8 million. Net cash
distributions of $0.4 million were paid in 1997. For the first quarter of 1998,
net cash used in financing activities totaled $2.1 million compared to $2.1
million of net cash provided by financing activities for the first quarter of
1997. For the first quarter of 1998, debt principal payments totaled $1.6
million and net cash distributions were $0.5 million. In the first quarter of
1997 the Company received $2.6 million of net proceeds from short-term
borrowings and long-term debt and made net cash distributions of $0.5 million.
Capital expenditures for 1997 were $9.4 million, as compared to $3.9
million for 1996 and $5.0 million for 1995. In 1997, the Company completed four
significant projects that it commenced in 1996: (i) the refit of a 144 inch
press line ($2.3 million); (ii) the purchase of additional presses related to
the Company's involvement in the Honda BM Minivan and VC Civic programs ($1.2
million); (iii) the expansion of the Glencoe facility for the above programs
($0.6 million) and (iv) an automated die cart system ($0.9 million). Major
capital projects for 1996 included productivity improvement expenditures,
including a third five-axis cutter ($0.7 million), and the refit of the 144 inch
press line ($2.3 million). Major capital projects for 1995 related primarily to
various investments in machinery and equipment, including a transfer press
(approximately $5.0 million). Capital expenditures for the first quarter of 1998
were $1.6 million, as compared to $3.0 million for the first quarter of 1997.
Capital expenditures in the first quarter of 1998 and 1997 related to various
investments in machinery and equipment, including new press equipment.
The Company currently expects that its capital expenditures (inclusive of
maintenance amounts and exclusive of potential acquisitions) will be
approximately $9.5 million in 1998, $14.0 million in 1999, $25.0 million in 2000
and $15.0 million in 2001. Included in these figures, are capital expenditures
for the 2001 Chrysler KJ Jeep Cherokee launch and other potential business
awards of $4.0 million and $15.0 million in 1999 and 2000, respectively. The
Company believes that maintenance capital expenditures approximate $4.3 million
annually. However, the Company's capital expenditures will be affected by, and
may be greater or
42
<PAGE> 46
reflect different timing than currently anticipated depending upon, the size and
nature of new business opportunities and equipment availability.
As of December 31, 1997, on a pro forma basis after giving effect to the
Offering, the Company would have had approximately $125.1 million of debt
outstanding. The Company would also have the ability to borrow approximately an
additional $74.2 million under the Senior Credit Facility borrowing base and
could actually borrow up to $20.7 million given borrowing covenants. The Company
believes that cash generated from operations, together with amounts available
under the Senior Credit Facility and unused portions of the proceeds from the
Offering, will be adequate to meet its debt service requirements, capital
expenditures and working capital needs for the foreseeable future, although no
assurance can be given in this regard. The Company's ability to meet its working
capital and capital expenditure requirements and service its 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.
INFLATION
Inflation generally affects the Company by increasing the cost of labor,
equipment and raw materials. Management believes that inflation has not
significantly impacted the Company's business over the past twelve months.
However, because selling prices generally cannot be increased until a model
changeover, the effects of inflation must be offset by productivity improvements
and increased volumes from new business awards.
YEAR 2000 ISSUE
The Company is currently conducting a comprehensive review of its computer
systems to identify those systems that could be affected by the "Year 2000"
issue and is developing an implementation plan to resolve the issue. The Company
believes that, with modification of its existing computer systems, updates by
vendors and conversion to new software in the ordinary course of its business,
the Year 2000 issue will not pose significant operational problems for the
Company's computer systems. However, if such modifications and conversions are
not completed timely or properly, the Year 2000 issue may have a material
adverse impact on the business, financial condition and results of operations of
the Company. The costs of modifications and conversions are not anticipated to
be material, but will principally represent a redeployment of existing or
otherwise planned resources. However, there can be no guarantee that these
estimates will be achieved and actual results could differ materially from those
anticipated. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in this area, the ability to locate and correct all relevant computer codes and
similar uncertainties.
43
<PAGE> 47
BUSINESS
GENERAL
The Company is a leading full-service Tier 1 designer and manufacturer of
high-quality, stamped metal components and assemblies used by North American
automotive original equipment manufacturers ("OEMs"). The Company specializes
in, and derives the majority of its revenue from, underbody/chassis and
unexposed body structure assemblies which constitute major structural components
of passenger cars, light trucks, and vans. The Company's products include frame
rail, inner quarter panel, crossmember, cowl, bumper, rear back panel, and
trailer hitch assemblies. On a pro forma basis, assuming the PSI Acquisition had
occurred on January 1, 1997, the Company would have had net sales of $229.4
million and Adjusted EBITDA (as defined herein) of $26.2 million for the year
ended December 31, 1997.
The Company believes its focus on underbody/chassis and unexposed body
structure assemblies, full-service capabilities, commitment to quality, and key
customer relationships has positioned it well to benefit from current industry
trends. OEMs are focusing their in-house stamping operations on the production
of Class A exposed surface panels and are increasingly relying on outside
suppliers with full-service engineering and program management capabilities to
design, engineer and manufacture complex underbody/chassis and unexposed body
structure assemblies. In addition, OEMs are reducing the number of their
stamping suppliers by focusing on companies that can manufacture high
value-added assemblies. The Company believes that its ability to anticipate and
respond to these trends was a significant factor in the award of major
assemblies on the 1998 Chrysler LH Concorde/Intrepid and the 2001 Chrysler KJ
Jeep Cherokee programs. Based on annual projected production volumes published
by CSM Forecasting, Inc., the 1998 Chrysler LH Concorde/ Intrepid award could
generate approximately $50 to $55 million of sales by the Company during the
1999 model year, however, no assurance can be given that such sales will
actually be achieved. See "Forward-Looking Information."
In 1997, the Company's products were used on nine of the ten best selling
vehicles in North America. The Company's four largest customers, General Motors
Corporation ("General Motors"), Chrysler Corporation ("Chrysler"), Ford Motor
Company ("Ford"), and Honda Motor Co., Ltd. ("Honda"), accounted for
approximately 33%, 32%, 11% and 3%, respectively, of the Company's pro forma net
sales for the year ended December 31, 1997 assuming the PSI Acquisition had
occurred on January 1, 1997. The Company also sells its products to targeted
Tier 1 suppliers. Platforms on which the Company had its most significant
content in 1997 included: Chrysler's LH Concorde/Intrepid, NS Minivan and AB Ram
Van, General Motors' GMT 400 Full-size Pickup/Tahoe/Suburban and GMT 325/330
Blazer/Jimmy, Ford's Explorer and Lincoln Continental, and Honda's LS Accord and
VC Civic. The Company believes its products are present on every General Motors
truck platform, and also believes it is Chrysler's largest independent supplier
of front frame rail assemblies for passenger cars, vans, and sport utility
vehicles. The Company has received quality and delivery awards from its
customers, including, most recently, Chrysler's Platinum Pentastar Award in
1997.
The Company has grown rapidly through a combination of strategic
acquisitions and new platform awards. As a result of these efforts, net sales
have increased at a compound annual growth rate ("CAGR") of 41.6% from
approximately $39.5 million in 1993 to $158.7 million in 1997. On a pro forma
basis assuming the PSI Acquisition had occurred on January 1, 1997, the Company
would have had net sales of $229.4 million. Since 1996, the Company's management
team has completed three strategic acquisitions which it believes have
strengthened the Company's market position with key customers, expanded its core
product lines and enhanced its design, engineering and manufacturing
capabilities. The Company's acquisition strategy focuses on companies with
strong management which can strengthen the Company's position as a Tier 1
supplier and allow it to further capitalize on industry trends.
BUSINESS STRATEGY
Based on pro forma 1997 net sales after giving effect to the PSI
Acquisition, the Company believes it is one of the leading independent suppliers
in its core product segment of underbody/chassis and unexposed body structure
assemblies. The Company's strategic objective is to become one of the top two
competitors in
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<PAGE> 48
this market segment. The Company believes it has developed a strategy to enhance
its market position by capitalizing on industry trends and leveraging its core
competencies. Key elements of the Company's strategy include the following:
Supply Complex High Value-Added Modules and Systems. In an effort to reduce
costs, OEMs are increasingly seeking suppliers capable of providing assemblies
and complete systems or modules, rather than suppliers which only provide
individual stampings. Typically, such complex products result in higher dollar
content per vehicle and generate higher margins as compared to simple,
individual stampings. After giving effect to the PSI Acquisition, value-added
assemblies represented approximately 75% of the Company's pro forma 1997 net
sales. The Company seeks to gain new business of modules and systems, which
typically include even greater content than assemblies. The Company believes its
capabilities and current industry trends have created an opportunity for it to
provide multiple assemblies and integrated modules such as front-end systems
(including frame rail, bumper, radiator support, wheel house inner panel, and
control arm assemblies), front floor pan systems (including floor pan,
crossmember, and tunnel reinforcement assemblies), and rear/back panel systems
(including back panel, quarter panel, rear frame rail, rear wheel house, and
rear floor pan assemblies). For example, the Company increased its dollar
content on the 1998 LH Concorde/Intrepid platform versus the 1993 platform from
approximately $115 per vehicle to $180 per vehicle. This was achieved primarily
through stamping and welding additional components, thereby producing a higher
value-added assembly.
Enhance Full-Service Engineering and Program Management Capabilities. The
Company seeks to continuously enhance its design, engineering, prototyping,
testing, program management, product development and assembly capabilities to
further strengthen its preferred position with key customers. The Company
believes these capabilities enable it to participate in the product development
process during the concept and prototype development stages as well as
throughout the design and manufacturing stages. As OEMs continue to outsource
complex, unexposed stamped assemblies to fewer suppliers, the Company believes
Tier 1 suppliers with proven full-service capabilities will be better positioned
to secure such business. To capitalize on this trend, in 1996 the Company
acquired J&R which enabled the Company to become one of a limited number of
independent full-service stamping suppliers with prototyping capabilities. The
Company believes that further expanding its full-service capabilities will
enable it to better manage larger programs, reduce time to market and customer
costs, and improve the Company's margins.
Focus on Key Customers. As OEMs continue to consolidate their supplier
base, the Company believes that strong customer relationships are increasingly
important. As a result, the Company focuses on a limited number of customers
which the Company believes will enable it to anticipate and better service such
customers' needs. Furthermore, the Company anticipates the need to follow its
key customers as they move to globally source their stampings. As examples of
its close relationships with its key customers, members of the Company's design
team are currently working on-site at Chrysler helping to complete the design of
the front-end system assemblies for the 2001 KJ Jeep Cherokee. In addition, the
Company proposed the successful redesign of General Motors' 1999 GMT 800
Full-size Pickup/Tahoe/Suburban trailer hitch assembly. As further evidence of
the Company's key customer business, the Company believes its products are
present on every General Motors truck platform, and also believes it is
Chrysler's largest independent supplier of front frame rail assemblies for
passenger cars, vans, and sport utility vehicles.
Pursue Strategic Acquisitions. The Company intends to continue to seek
acquisitions of companies with strong management which will further improve the
Company's position as a Tier 1 supplier by creating opportunities for it to: (i)
strengthen its relationships with key customers; (ii) add new model platforms;
(iii) expand core product lines; (iv) enhance its full-service capabilities; and
(v) expand globally. Consistent with this strategy, the Company's management
team has completed three acquisitions since the beginning of 1996. See "--
Recent Acquisitions."
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<PAGE> 49
COMPETITIVE STRENGTHS
The Company believes it has the following competitive strengths:
Engineering and Product Expertise. The Company believes it has developed
expertise in the design, development, and production of underbody/chassis and
unexposed body structure assemblies, such as frame rail, inner quarter panel,
crossmember, cowl, bumper, rear back panel, and trailer hitch assemblies. This
expertise has contributed to its stature as a preferred full-service stamping
supplier to its key customers. For example, the Company's design involvement in
the 1998 Chrysler LH Concorde/Intrepid frame rail assembly produced significant
piece cost, tooling, and performance savings for Chrysler by eliminating
multiple part numbers. This was achieved by combining multiple parts and
commonizing right- and left-hand parts into identical stampings. The Company
believes its performance in producing complex frame rail assemblies for
Chrysler's LH Concorde/Intrepid vehicles and AB Ram Van, and its cooperative
advance product development efforts with Chrysler, contributed to the Company's
award of frame rail and other front-end system assemblies for the 2001 Chrysler
KJ Jeep Cherokee.
Successful Launch Performance Record. The Company has significant
experience in managing and executing new programs from the concept and prototype
development stages through the design and manufacturing stages. In 1997, the
Company successfully launched seven new programs comprising approximately 54
assemblies and 185 parts. These launches met all customer delivery requirements
and were within the Company's launch budget. The Company's most significant
launch, the 1998 Chrysler LH Concorde/ Intrepid, consisted of approximately 26
assemblies and 133 parts and had total defective parts per million ("PPM") of
only ten. The Company believes that the successful performance in the launch
phase of a new platform is a critical factor in satisfying its key customers and
securing additional platform work. The Company's program management organization
and methodology is being benchmarked by Chrysler.
Quality Commitment. The Company believes its quality performance in 1997 is
a significant competitive advantage. For example, the Company's 1998 model year
PPM performance with Chrysler through March 1998 was 26 PPM, which is below
Chrysler's benchmark of 50 PPM for world class suppliers. Partially as a result
of such performance, the Company has received certain quality and delivery
awards from its key OEM customers, including, most recently, Chrysler's Platinum
Pentastar Award in December 1997, awarded to only nine production suppliers.
Acquisition Track Record. Since 1996, the Company's management team has
completed three strategic acquisitions. The management team has a disciplined
approach to evaluating acquisition opportunities and believes that these
acquisitions have strengthened the Company's market position with its key
customers, expanded its core product lines and enhanced its design, engineering
and manufacturing capabilities. Through these acquisitions, the Company's
management team has gained experience in acquiring and integrating businesses
while incurring only minimal disruption in current operations.
RECENT ACQUISITIONS
In December 1997, the Company acquired PSI, a supplier of automotive
stampings and finished assemblies, including trailer hitch, airbag canister,
crossmember and other welded assemblies. For its fiscal year ended June 30,
1997, PSI reported net sales of $72.0 million. Through the PSI Acquisition, the
Company added progressive and line die manufacturing capabilities and
state-of-the-art welding capabilities. PSI's expertise in these areas is
expected to enhance the Company's presence as a manufacturer of
underbody/chassis and unexposed body structure assemblies. As a result of the
PSI Acquisition, sales to General Motors represented approximately 33% of pro
forma 1997 net sales, as compared to 9% of 1997 historical net sales.
In addition, the Company completed two other strategic acquisitions in
1996:
- In November 1996, the Company acquired the Veltri Group, a manufacturer
of high value-added assemblies and detailed stampings, which recorded net
sales of $79.5 million for the fiscal year ended December 31, 1996. The
acquisition of the Veltri Group expanded the Company's product offering of
underbody/chassis and unexposed body structure assemblies, increased its
product content at Chrysler,
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<PAGE> 50
and added new customers, including Honda. See Note 16, "Foreign
Operations" of the Notes to the Company's Combined Financial Statements.
- In September 1996, the Company acquired J&R, a manufacturer of stamped
metal prototype parts and short-run production stampings, weldments and
assemblies which recorded net sales of $14.7 million for its fiscal year
ended October 31, 1996. J&R is an integrated prototyping company, capable
of managing a program from math data through soft tooling and production
of finished components and assemblies. The J&R acquisition enabled the
Company to become one of a limited number of independent full-service
stamping suppliers with in-house prototyping capabilities.
AUTOMOTIVE INDUSTRY TRENDS
The Company's performance, growth and strategic plan are directly related
to current trends within the OEM market of the automotive industry. Since the
1980s, the Big Three have each been reducing their number of suppliers,
outsourcing an increasing percentage of their production requirements in certain
non-core product segments and sourcing increased value-added business to
suppliers capable of providing full-service capabilities. Tier 1 suppliers today
are expected to assume significant product management responsibility and to meet
increasingly expanded requirements. Suppliers are expected to control all
aspects of production and assembly, including not only manufacturing, but also
design, engineering, prototyping, component sourcing, quality assurance, testing
and delivery to the customer's assembly plant. The Company believes that these
requirements support the accelerating pace of consolidation of the OEM supplier
base as those suppliers that lack the full-service capabilities to meet the
OEMs' needs either cease to operate or are acquired by other suppliers.
Based on market data supplied by Harbour & Associates, Inc., the Company
believes the overall North American market for body and chassis stampings is
approximately $19.4 billion. This market is dominated by the OEM captive
suppliers, with approximately 20 major suppliers, including the Company, and
more than 80 small- to medium-size suppliers. The stamping segment of the
automotive industry is highly fragmented and undergoing accelerating
consolidation.
Stamping parts are generally classified into five categories:
(i) unexposed body structure assemblies that comprise inner body
structure beneath the Class A surface panels;
(ii) unexposed underbody/chassis assemblies that make up the lower
vehicle structure;
(iii) Class A exposed surface panels;
(iv) truck frames and engine cradles; and
(v) powertrain and other functional components.
The Company has formulated its operating and acquisition growth strategy by
focusing on underbody/chassis and unexposed body structure assemblies
(categories (i) and (ii), above) which the OEMs are increasingly outsourcing due
to the complex design, engineering and labor requirements of producing these
parts. The Company believes considerable outsourcing opportunities exist for
suppliers such as the Company which possess the considerable program management,
engineering, prototyping, tool development and testing expertise required by
OEMs.
In contrast, category (iii), Class A surface panels, tend to be very large
stampings which have stringent surface quality standards and involve
significantly less assembly than underbody/chassis and unexposed body structure
assemblies. These products are considered core stampings by the OEMs, require
highly capital intensive automated press lines and are usually produced by
in-house stamping operations. Category (iv), truck frames and engine cradles,
has significant barriers to entry, limited outsourcing opportunities, and is
dominated by three major OEM suppliers. Category (v), powertrain and other
functional components, is highly fragmented and a relatively minor portion of
the total stamping market, and does not offer significant growth opportunities.
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<PAGE> 51
PRODUCTS
The Company manufactures a broad range of complex, high value-added stamped
assemblies, with underbody/chassis and unexposed body structure assemblies as
its core products. After giving effect to the PSI Acquisition, approximately 75%
of the Company's 1997 pro forma net sales were from value-added assemblies.
Underbody/chassis and unexposed body structure assemblies are integrated at the
OEM assembly plant and constitute major structural components of passenger cars,
light trucks, and vans. Typically, these assemblies and their components are
manufactured using various grades and thicknesses of steel, including
hot-rolled, cold-rolled, galvanized, and aluminized steel. The Company produces
over 500 products on 41 different platforms, including frame rail, trailer
hitch, cowl, bumper, inner quarter panel, wheelhouse inner panel, crossmember,
airbag canister, rear back panel, suspension brace, body sill, pillar, heat
shield, battery tray, and roof bow assemblies.
The Company's press capabilities, including both small and extra-large
presses (up to 180 inches in width), allow it to produce not only small brackets
and supports, but also large underbody/chassis and body structure stampings such
as frame rail, quarter panel, bumper, inner door panel, and floor pan
assemblies. The Company believes it has the press capabilities to produce all
part sizes currently required by its customers. The Company's extra-large
presses also allow it to produce multiple parts at one time by combining, for
example, right and left hand parts into a single die set.
In addition to these high-volume production assemblies, the Company has the
capability to produce prototype, or pre-production, stamped assemblies. These
parts are made using soft, zinc-alloy tooling, and are used to confirm the
production process and design intent of both the sub-assemblies and final
vehicle. The Company believes it is one of a limited number of independent
full-service stamping suppliers with in-house prototyping capabilities. Such
prototyping capabilities include managing math data from the customer, building
soft tooling, stamping parts, laser trimming and piercing, and final
assembly/welding of all required components. The prototypes produced from this
operation are identical to those manufactured by the Company's production
operations. In addition, the Company has the capability to manufacture prototype
parts using a hydroforming process developed by the Company.
The following chart lists significant parts on major platforms supplied by
the Company in fiscal year 1997.
<TABLE>
<CAPTION>
CUSTOMER PART/ASSEMBLY VEHICLE TYPE MODEL/PLATFORM
-------- ------------- ------------ --------------
<S> <C> <C> <C>
CHRYSLER............ Front Frame Rail SUV/Light Truck/Van AB Ram Van
Underbody Rear Crossmember SUV/Light Truck/Van AB Ram Van
Side Step Sill SUV/Light Truck/Van AB Ram Van
Underbody Rear Support SUV/Light Truck/Van AB Ram Van
Roof Siderail Cover SUV/Light Truck/Van AB Ram Van
Front Frame Rail Passenger Car LH Concorde/Intrepid
Underbody Rear Crossmember Passenger Car LH Concorde/Intrepid
Bracket Strut Mounting Passenger Car LH Concorde/Intrepid
Body Side Sill Extension Passenger Car LH Concorde/Intrepid
Body Side Sill Passenger Car LH Concorde/Intrepid
Heat Shield Passenger Car LH Concorde/Intrepid
Quarter Extension Passenger Car LH Concorde/Intrepid
Body Front Floor Pan
Reinforcement Passenger Car LH Concorde/Intrepid
Rear Deck Panel Passenger Car LH Concorde/Intrepid
Headlamp Passenger Car LH Concorde/Intrepid
Rear Quarter Inner Panel Passenger Car Neon
Body Side Belt Reinforcement Passenger Car Neon
Suspension Cradle SUV/Light Truck/Van NS Minivan
Rear Bumper SUV/Light Truck/Van NS Minivan
Floor Pan Support SUV/Light Truck/Van NS Minivan
Body Inner Panel-B Pillar SUV/Light Truck/Van NS Minivan
Door Inner Panel SUV/Light Truck/Van NS Minivan
Wheelhouse Lower Extension SUV/Light Truck/Van NS Minivan
FORD................ Cowl Inner SUV/Light Truck/Van Explorer
Cowl Outer SUV/Light Truck/Van Explorer
</TABLE>
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<PAGE> 52
<TABLE>
<CAPTION>
CUSTOMER PART/ASSEMBLY VEHICLE TYPE MODEL/PLATFORM
-------- ------------- ------------ --------------
<S> <C> <C> <C>
Brake Pedal Support SUV/Light Truck/Van Ranger
Quarter Inner Passenger Car Lincoln Continental
Floor Extension Passenger Car Lincoln Continental
Windshield Header Passenger Car Lincoln Continental
Package Tray Support Passenger Car Lincoln Continental
Lower Back Panel Passenger Car Lincoln Continental
Drain Trough Reinforcement Passenger Car Lincoln Continental
GENERAL MOTORS...... Battery Tray SUV/Light Truck/Van M-Van/Astro/Safari
Trailer Hitch SUV/Light Truck/Van M-Van/Astro/Safari
Suspension Spring Hanger SUV/Light Truck/Van M-Van/Astro/Safari
Rear Spring Hanger SUV/Light Truck/Van M-Van/Astro/Safari
Rear Bumper SUV/Light Truck/Van 330 Jimmy
Battery Tray SUV/Light Truck/Van 325/330 Blazer/Jimmy
Floor Pan Reinforcement SUV/Light Truck/Van 325/330 Blazer/Jimmy
Brake Pedal SUV/Light Truck/Van 325/330 Blazer/Jimmy
Suspension Shackle SUV/Light Truck/Van 325/330 Blazer/Jimmy
Trailer Hitch SUV/Light Truck/Van GMT 600 Express
Suspension Tie Bar SUV/Light Truck/Van GMT 400 Full-size Pickup/
Tahoe/Suburban
Trailer Hitch SUV/Light Truck/Van GMT 400 Full-size Pickup/
Tahoe/Suburban
Body Mount Bracket SUV/Light Truck/Van GMT 400 Full-size Pickup/
Tahoe/Suburban
Control Arm Passenger Car Camaro/Firebird
Heat Shield Passenger Car Chevrolet J Cavalier
Heat Shield Passenger Car LeSabre/Bonneville/DeVille
Crossmember Passenger Car Grand Prix/Lumina
Front & Rear Bumper
Reinforcement Passenger Car Bonneville/LeSabre
HONDA............... Extension -- Rear Body SUV/Light Truck/Van BM Minivan
Stiffener -- Door Inner SUV/Light Truck/Van BM Minivan
Reinforcement -- Tailgate SUV/Light Truck/Van BM Minivan
Brake Pedal SUV/Light Truck/Van BM Minivan
Roof Panel Reinforcement Passenger Car LS Accord
Suspension Arm Support Passenger Car LS Accord
Underbody Rear Beam Passenger Car LS Accord
Fender Reinforcement Passenger Car VC Civic
Clutch Cover Case Passenger Car VC Civic
Body Structure Panel
Stiffener Passenger Car VC Civic
Tailgate Reinforcement Passenger Car VC Civic
</TABLE>
DESIGN AND ENGINEERING
OEMs have increasingly focused on shortening their design cycles and
reducing their design and production costs by involving component suppliers
earlier in the process of designing a vehicle. The Company has invested
substantial resources in developing engineering capabilities to meet these new
demands, including computer-aided design terminals that support Chrysler and
General Motors language formats, structural and fatigue (finite element or
"FEA") analysis and computer simulated analysis of the metal forming process.
The Company currently has over 30 engineers assigned to working on new advanced
programs. The Company continues to enhance its comprehensive and
customer-focused engineering department with capabilities in areas such as tool
and die processing, continuous cost reduction engineering, assembly and weld
engineering and simultaneous product engineering. These capabilities enable the
Company to provide the creative product design and manufacturing services that
result in cost and quality improvements. It is the objective of the Company to
maintain a competitive advantage through its product design, engineering and
development capabilities.
Recently, the Company, at its own initiative, performed significant
competitive benchmarking, product analysis, and metal forming simulation
analysis on frame rails for vehicles comparable to Chrysler's Jeep
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<PAGE> 53
Cherokee. The Company believes that the business award of the 2001 KJ Jeep
Cherokee frame rail assemblies to the Company was significantly aided by the
comprehensive technical study performed on this product. Presently, the Company
has designers on-site at Chrysler to assist in completing designs for the
assemblies. The Company believes it is one of a select group of companies with
the technical resources to assist its customers in the design and engineering of
passenger car, SUV, and van frame rail assemblies at Chrysler, and for trailer
hitch assemblies at General Motors Truck Group.
The Company's prototype stamping operation greatly enhances its capability
to provide one-stop engineering solutions to its customers. Full-service
suppliers are responsible for managing not only the prototype manufacturing of
parts and assemblies, but also the tool development process that results in
improved competitive pricing and efficient part designs. Having this capability
in-house significantly improves the Company's ability to manage these activities
with the rapid response times required by the customer.
CUSTOMERS AND MARKETING
The Company serves automotive OEMs in the North American market. The
Company's four largest customers, General Motors, Chrysler, Ford and Honda,
accounted for approximately 33%, 32%, 11%, and 3%, respectively, of the
Company's pro forma net sales for the year ended December 31, 1997 after giving
effect to the PSI Acquisition. The Company also sells its products to targeted
Tier 1 suppliers which in turn supply OEMs in the North American market. The
Company's history with its two largest customers, General Motors and Chrysler,
spans over 50 years. On a pro forma basis for the PSI Acquisition, 82% of the
Company's 1997 net sales were to domestic and transplant OEMs and the remaining
sales to targeted Tier 1 suppliers. See "Risk Factors -- Dependence on Principal
Customers."
General Motors. The Company has recently launched several assemblies for
General Motors, including the GMT 325/330 Blazer/Jimmy, GM M-Van/Astro/Safari
and Chevrolet J Cavalier platform, including trailer hitch, crossmember, bumper,
heat shield, suspension spring hanger, and floor panel reinforcement assemblies.
In addition, during 1998 and 1999, the Company plans to launch new business on
General Motors' GMT 800 Full-size Pickup/Tahoe/Suburban platform, including
trailer hitch, suspension, tie bar and floor pan reinforcement assemblies. Given
this new major truck program participation, the Company believes it is one of
the largest independent full-service stamping suppliers of medium-sized
stampings to the General Motors Truck Group.
Chrysler. The launch of the 1993 Chrysler LH Concorde/Intrepid
significantly increased the Company's presence at Chrysler. Since then, the
Company has received additional platform business on the NS Minivan and AB Ram
Van. The Company first developed its expertise in frame rail assemblies on the
LH Concorde/Intrepid and AB Ram Van vehicles. Based, in part, on the success of
previous model platform participation, the Company was awarded increased
business on the 1998 LH Concorde/Intrepid platform, will continue to have
significant participation on the 1998 AB Ram Van and 2001 RS Minivan, and was
awarded the frame rail and certain other front-end assemblies for the 2001 KJ
Jeep Cherokee.
Ford. It is widely known that Ford is insourcing a substantial portion of
its stamping needs and intends to further reduce the number of its outside
suppliers. Accordingly, Ford's future stamping strategy remains uncertain and,
although the Company continues to support Ford as a full-service stamping
supplier for certain current and carryover parts, Ford is not now requiring the
Company, and the Company does not expect, to expend technical resources on
gaining incremental business with Ford.
Honda. The Company believes that in the 1998 model year, it will be one of
Honda's leading independent stamping suppliers. The Company currently supplies
nine parts on the VC Civic, 24 parts on the LS Accord, and will begin supplying
13 parts on the new BM Minivan that is expected to be launched in August 1998.
The Company expects that its business with Honda will increase as Honda
increases its export volumes and expands capacity in North America.
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<PAGE> 54
The following table sets forth the Company's net sales to General Motors,
Chrysler, Ford and Honda as a percentage of the Company's net sales for 1995,
1996, 1997 and on a pro form basis for 1997, after giving effect to the PSI
Acquisition:
<TABLE>
<CAPTION>
PRO FORMA
1995 1996 1997 1997
---- ---- ---- ---------
<S> <C> <C> <C> <C>
General Motors..................................... 15% 15% 9% 33%
Chrysler........................................... 19 21 46 32
Ford............................................... 60 47 18 11
Honda.............................................. -- -- 5 3
</TABLE>
The Company competes for new business both in the new model development
phase and in the redesign of older existing models. New model development
generally begins two to four years prior to the planned introduction of a model.
New programs are generally awarded one to three years prior to the initial
production period. Once a supplier has been designated to supply parts to a new
program, an OEM will generally continue to purchase those parts from the
designated supplier for the life of the program, which typically lasts four to
five years for passenger cars and up to ten years for trucks.
MANUFACTURING AND FACILITIES
The Company conducts operations in 14 facilities in 8 locations, as
summarized below:
<TABLE>
<CAPTION>
LOCATION DESCRIPTION SQUARE FOOTAGE OWNED/LEASED
-------- ----------- -------------- ------------
<S> <C> <C> <C>
Celina, Tennessee............... Manufacturing 44,000 Leased
Glencoe, Ontario................ Manufacturing/Robotics 51,000 Owned
Harrison Township, Michigan..... Manufacturing/Prototyping 86,000 Leased
New Baltimore, Michigan......... Manufacturing/Office 105,000 Leased
Oxford, Michigan................ Manufacturing 62,000 Leased
Royal Oak, Michigan............. Manufacturing/Office 250,000 Owned
Troy, Michigan.................. Corporate Headquarters, Design 18,000 Leased
and Engineering
Windsor, Ontario, Canada........ Manufacturing/Robotics 105,000 Owned
Windsor, Ontario, Canada........ Manufacturing/Robotics 190,000 Leased
Windsor, Ontario, Canada........ Tooling 20,000 Leased
</TABLE>
The utilization and capacity of the Company's facilities fluctuates based
upon the mix of components the Company produces and the vehicle models for which
they are being produced. The Company believes that its facilities and equipment
are in good condition and are appropriate for present and anticipated future
operations. The leases expire at various times. The lease on the Company's
recently-acquired Celina, Tennessee facility, which has not yet commenced
operations, expires on August 31, 1998. The Company is currently in negotiations
to extend the lease term and expand the square footage being leased in this
facility, however no assurance can be given that the Company will be able to
reach satisfactory terms. The Harrison Township, Michigan and certain Windsor,
Ontario, Canada facilities are leased from affiliated parties. See "Certain
Relationships and Related Transactions."
The Company's production processes use precision single-stage, progressive
and line die, tandem line and transfer presses in a variety of sizes and
configurations. Many of the Company's stamping lines are fitted with automated
material handling equipment to enhance press line throughput and product
quality. The Company operates approximately 190 presses ranging from under 100
ton to 3,500 ton capabilities. The capabilities of the Company's facilities and
equipment allow it to produce components and assemblies from the smallest
brackets to the largest stampings required by its customers. The Company's Royal
Oak, Michigan facility, for example, houses the largest of its press lines,
consisting of six tandem 1,100 ton presses, 180 inches in width and capable of
producing the largest underbody/chassis and body structure components required
by its customers. The Company believes it is one of a limited number of stampers
with press sizes up to 180 inches in width.
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<PAGE> 55
As OEMs have increased quality standards and implemented just-in-time
management methods, consistency of quality and the timeliness and reliability of
shipments by OEM suppliers have become crucial in meeting logistical demands of
the OEMs. The Company has responded by employing a number of production systems
which utilize high-volume welding and fastening machines or flexible robotic
work cells. The Company's assembly operations include robotic spot and MIG wire
welding, automated turn-table welding and robotic sealer applications. The
Company designs many of its own welding and assembly systems in-house enabling
it to troubleshoot assembly problems and assess the manufacturability of
components.
QUALITY
The Company's operations are driven by a quality process that encompasses
the entire production cycle. First, the Company's design teams develop an
efficient manufacturing process. Next, extensive training is done at each work
cell to help develop lean manufacturing processing and part flow within that
cell. Finally, equipment is maintained on planned schedules, led by input from
the cell team members. Throughout the process, cell team members continue to
refine and improve all aspects of manufacturing and related equipment. An
example of this quality-driven process is the launch success of the Company's
1998 Chrysler LH Concorde/Intrepid. The Company believes that as a result of its
early involvement with part design and manufacturing process development, along
with its extensive training of all team members, the launch of the LH
Concorde/Intrepid occurred with only ten defective PPM. In partial recognition
of these practices, the Company has received the Chrysler Platinum Pentastar
Award in 1997, General Motors Metallic Supplier of the Year Award in 1996, Honda
Delivery Award in 1995 and achieved Ford's Q1 status initially in 1984.
Automotive suppliers are required to meet numerous quality standards to
qualify as a preferred and long-term supplier to the OEMs. For instance, the
QS-9000 standards were developed by international and domestic automobile and
truck OEMs to ensure that their suppliers would meet consistent quality
standards capable of independent audit. Four of the Company's six manufacturing
facilities eligible for QS-9000 certification are certified. The Company expects
the remaining two eligible facilities to be certified by mid-1998. The Company's
Tennessee facility will not be eligible for QS-9000 certification until
mid-1999. The Company's Harrison Township facility is ISO 9002 certified.
RAW MATERIALS
The Company's principal raw material is steel which represented
approximately 87% of the Company's raw material cost for 1997. The Company
expects to purchase approximately 270,000 tons of steel during 1998 for
production use. The remaining 13% of raw materials' purchases represents various
purchased parts such as tubular products, sealers, corrosion resistant coating,
and various fasteners.
The Company participates in steel purchase programs through Chrysler, Ford
and General Motors wherein the steel is purchased by the OEM from the steel mill
and sold to the Company at a price fixed by the OEM. These purchase programs
neutralize the Company's exposure to steel price increases, as price increases
from the steel mills are either absorbed by the OEM prior to the Company's
purchase of the steel or such increases are borne by the Company when it
purchases steel and are subsequently passed back to the OEM in higher product
pricing.
COMPETITION
The market for the Company's products is characterized by strong
competition from both captive OEM suppliers and external, non-captive suppliers.
The Company competes with a limited number of competitors that have the physical
assets and technical resources to produce large bed stampings, complex parts and
sub-assemblies. The number of the Company's competitors has decreased in recent
years and is expected to further decrease as the OEM supplier industry continues
to consolidate. Competitive factors in the market for the Company's products
include quality, cost, delivery, technical expertise, engineering capability and
customer service. The Company's competitors include Cosma Body and Chassis
Systems, a group within Magna International Inc.; Tower Automotive, Inc.; A.G.
Simpson Automotive, Inc.; Oxford Automotive,
52
<PAGE> 56
Inc.; Active Tool & Manufacturing Co.; L&W Engineering; Aetna Industries, Inc.;
The Narmco Group; and divisions of OEMs with internal stamping and assembly
operations.
EMPLOYEES
As of December 31, 1997, the Company had 1,818 employees, including 351
salaried and 1,467 hourly employees. Included in the hourly total are 455
employees represented by the UAW, 389 employees represented by the CAW, and 512
represented by the USWA. The remaining 111 hourly workers are not unionized and
the Company is not aware of any current organizing activity at any of its
non-union locations. The Company's CBAs with the above unions expire at various
times at each production facility. In recent years, the Company has not
experienced significant work interruptions resulting from serious labor
disputes. At the present time, the Company believes that its relationship with
its employees is generally good, however there can be no assurance that this
will continue to be the case.
PATENTS
The Company owns no patents and does not believe patents have a significant
role in the Company's industry or its business.
REGULATORY MATTERS
The Company's operations are subject to increasingly stringent
environmental laws and regulations governing air emissions, waste water
discharges, the generation, treatment, storage, disposal and remediation of
hazardous substances and wastes, and employee health and safety. Certain of
these laws can impose joint and several liability for releases or threatened
releases of material upon certain statutorily defined parties, including the
Company, regardless of fault or the lawfulness of the original activity or
disposal.
The Company believes it is currently in material compliance with applicable
environmental laws and regulations. The Company's compliance with environmental
laws and regulations has not materially affected the results of its operations
or the conduct of its business; however, the Company cannot predict the future
effects of such laws and regulations.
LEGAL PROCEEDINGS
The Company is, from time to time, involved in ordinary routine litigation
arising out of the ordinary course of its business. In management's opinion,
after reviewing available information with respect to such matters and
consulting with legal counsel, pending or threatened litigation is not expected
to have a material adverse effect on the business, financial condition or
results of operations of the Company.
53
<PAGE> 57
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Delmar O. Stanley......................... 57 President, Chief Executive Officer and Director
David J. Woodward......................... 40 Vice President of Finance, Chief Financial Officer,
Treasurer and Director
Randolph J. Agley......................... 55 Chairman of the Board
Michael T. Timmis......................... 58 Vice Chairman of the Board
Wayne C. Inman............................ 51 Secretary and Director
Michael T.J. Veltri....................... 42 Vice President
Kris R. Pfaehler.......................... 42 Vice President of Business Development
</TABLE>
Delmar O. Stanley serves as President, Chief Executive Officer and a
Director of the Company. Since 1996 until the Mergers, Mr. Stanley was President
and Chief Executive Officer of Talon Automotive Group, L.L.C., a predecessor
entity of the Company. Mr. Stanley holds similar positions with G&L Industries,
Inc. ("G&L"), an affiliate of the Company. From 1992 until 1996, Mr. Stanley was
Vice President of Operations for the Wiring Systems division of United
Technologies Automotive ("UTA"). Prior to joining UTA, he served as President of
Takata, Inc. for three years, a manufacturer of automotive safety systems and
automotive trim. Before joining Takata, Inc., Mr. Stanley held several executive
positions with TRW, Inc. over the course of over 20 years.
David J. Woodward serves as Vice President of Finance, Chief Financial
Officer, Treasurer and a Director of the Company. Mr. Woodward is Vice President
of Finance and Chief Financial Officer of G&L, an affiliate of the Company. From
1995 until the Mergers, Mr. Woodward was employed as Vice President of Finance
and Chief Financial Officer for the Talon Entities. Prior to 1995, Mr. Woodward
served as Vice President of Finance/Manufacturing for Talon Inc. Prior to
joining the Company, Mr. Woodward held positions at American Cyanamid
Corporation, Union Carbide Corporation and KPMG Peat Marwick.
Randolph J. Agley is a Principal Shareholder and Chairman of the Board of
the Company. Since 1982, Mr. Agley has been Chairman of the Board of Talon Inc.,
and, more recently, Talon L.L.C., each a privately-held affiliate of the Company
in which Mr. Agley is a principal equity holder.
Michael T. Timmis is a Principal Shareholder and Vice Chairman of the Board
of the Company. Mr. Timmis has been a partner in the law firm of Timmis & Inman,
L.L.P. since 1971, which firm serves as general counsel to the Company. Since
1982, Mr. Timmis has been Vice Chairman of the Board of Talon Inc. and, more
recently, Talon L.L.C., each a privately-held affiliate of the Company in which
Mr. Timmis is a principal equity holder.
Wayne C. Inman is a Shareholder and serves as Secretary and Director of the
Company. Mr. Inman is Vice President, Secretary and Treasurer of G&L, an
affiliate of the Company. Since 1994, Mr. Inman served as Executive Vice
President of Talon Inc. and, more recently, as President of Talon L.L.C., each a
privately-held affiliate of the Company in which Mr. Inman is an equity holder.
Mr. Inman was formerly a senior partner and Of Counsel in the law firm of Timmis
& Inman L.L.P. which serves as general counsel of the Company.
Michael T.J. Veltri is employed as Vice President of the Company, and
President of the Veltri Group. Mr. Veltri joined the Company in 1996 when it
acquired Veltri International, several affiliated stamping companies owned and
operated by Mr. Veltri, since 1983.
Kris R. Pfaehler is employed as Vice President of Business Development.
Since 1993, until the Mergers, Mr. Pfaehler was employed by Talon Automotive
Group L.L.C., a predecessor entity of the Company, in the same capacity. Prior
to 1994, Mr. Pfaehler was General Sales Manager of American Bumper &
Manufacturing, a Tier 1 supplier of bumper systems, for over 7 years.
54
<PAGE> 58
EXECUTIVE COMPENSATION
The following table sets forth certain information as to the compensation
paid to the Company's Chief Executive Officer and each of the three other
executive officers for the last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND TITLE YEAR SALARY BONUS COMPENSATION COMPENSATION(1)
-------------- ---- ------ ----- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Delmar O. Stanley,.......................... 1997 $250,000 $95,650 $ 8,108 $663,338
President & Chief Executive Officer(2) 1996 250,000 -- 13,072 145,000
1995 -- -- -- --
David J. Woodward,.......................... 1997 174,300 47,000 3,101 353,621
Vice President of Finance, Chief Financial 1996 162,000 44,000 10,293 --
Officer & Treasurer 1995 142,782 38,500 6,505 --
Michael T.J. Veltri,........................ 1997 380,000 -- 39,726 36,375
Vice President(3) 1996 55,178 -- 5,331 --
1995 -- -- -- --
Kris R. Pfaehler,........................... 1997 137,500 37,000 4,977 274,423
Vice President of Business Development 1996 125,000 25,000 10,019 --
1995 99,216 10,000 2,512 --
</TABLE>
- -------------------------
(1) Includes amounts earned under the Company's equity ownership plan, deferred
compensation agreements and profit sharing plans.
(2) Mr. Stanley's employment with the Company commenced on January 1, 1996.
(3) Mr. Veltri's employment with the Company commenced on November 8, 1996.
F&M DISTRIBUTORS BANKRUPTCY AND SECURITIES CLASS ACTION LAWSUIT
Messrs. Agley, Timmis and Inman, current shareholders and directors of the
Company also are or have been the principal shareholders and/or equity owners in
several other companies or business ventures. One such company, F&M
Distributors, Inc. ("F&M"), owned and operated a chain of deep discount retail
stores selling a variety of branded health and beauty aids and household supply
items.
In August, 1993, F&M issued approximately $75 million aggregate principal
amount of 11 1/2% senior subordinated notes ("F&M Notes") through an
underwritten public offering. As a result of adverse business developments, F&M
ultimately filed for voluntary bankruptcy protection in December, 1994, under
Chapter 11 of the United States Bankruptcy Code. A confirmed plan of
reorganization was approved in September, 1996. Under the confirmed plan of
reorganization, the holders of the F&M Notes received no distribution.
In April, 1995, an individual plaintiff on behalf of a class filed a
lawsuit seeking unspecified damages in the United States District Court for the
Eastern District of Michigan, Southern Division, In re F&M Distributors, Inc.
Securities Litigation, Case No. 95-CV-71778-DT, against Messrs. Agley, Timmis
and Inman and certain other former officers and/or directors of F&M, and the
underwriters. Subsequently, a similar lawsuit was filed in federal court and the
actions were later consolidated in federal court. The consolidated action is
characterized as a class action on behalf of persons who purchased F&M Notes and
alleges, among other things, that F&M's registration statement and prospectus
contained material misstatements and omissions and further alleges that the
defendants breached certain duties and obligations arising under federal and
state securities laws and common law. In December, 1996, a similar class action
was filed in Wayne County Circuit Court, State of Michigan, Acree, et al. v.
Talon Inc., et al., Case No. 96-648394-CZ, against Talon Inc., an affiliate of
the Company, also owned by Messrs. Agley, Timmis and Inman, and Timmis & Inman
L.L.P., a law firm affiliated with the Company which served as general counsel
to F&M, alleging, among other things, violations of state securities laws. The
state action was voluntarily dismissed in June 1997
55
<PAGE> 59
after the plaintiffs amended their complaint in the federal action to assert
claims substantially identical to those which were asserted in the state action.
As of the date of this Prospectus, the consolidated action is in the discovery
phase and liability, if any, has not been adjudicated.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Delmar O.
Stanley, President and Chief Executive Officer of the Company, dated November 27
1995, as amended January 1, 1998, pursuant to which Mr. Stanley is paid a base
annual salary of $400,000. Mr. Stanley is eligible for an annual bonus, not to
exceed 90.0% of his base annual salary. The amount of the bonus is determined by
the amount by which the Company's combined net income (as defined in the
agreement) meets or exceeds the Company's projected net income (as defined in
the agreement) and other non-financial objectives. Mr. Stanley has agreed in the
employment agreement not to compete with the Company anywhere within the United
States, Canada and Mexico for the period during which he is employed by the
Company or entitled to any payments from the Company, whichever is longer. The
agreement also provides that if the Company terminates Mr. Stanley's employment
without cause (as defined in the agreement) during the first three years of his
employment, the Company must pay Mr. Stanley $250,000 as severance pay, plus any
amounts owed to him under deferred compensation arrangements. Mr. Stanley is not
entitled to severance pay if his employment is terminated anytime after three
years or anytime for cause, or if he voluntarily terminates his employment at
any time.
The Company has entered into an employment agreement with Michael T. J.
Veltri, Vice President of the Company, dated November 8, 1996, pursuant to which
Mr. Veltri is paid an initial base annual salary of $380,000 (subject to
increase by the board of directors), plus a bonus pursuant to the Company's
Executive Bonus Program. The term of Mr. Veltri's employment agreement continues
through November 7, 2001, unless otherwise terminated in accordance with its
terms. Mr. Veltri receives additional amounts under the Earn-Out provisions of
the Company's Stock Purchase Agreement with the former shareholders of the
Veltri entities dated November 8, 1996. See "Certain Relationships and Related
Transactions." Mr. Veltri also entered into a non-compete Agreement with the
Company prohibiting him from competing with the Company anywhere within the
United States, Canada, and Mexico while employed by the Company and for 18
months thereafter or, if earlier, November 8, 2001. The agreement also provides
that if the Company or Mr. Veltri provides the other with a non-renewal notice
(as defined in the agreement), then Mr. Veltri is entitled to receive his base
salary for twelve months following the effective date of the termination, in
addition to any amounts owed to him under the deferred compensation, executive
bonus and stock option plans. If Mr. Veltri's employment is terminated by the
Company without just cause (as defined in the agreement), or in the event Mr.
Veltri terminates his employment pursuant to a default termination (as defined
in the agreement), then Mr. Veltri is entitled to receive his base salary for
the longer of eighteen months following the effective date of the termination or
November 8, 2001, in addition to any amounts due to Mr. Veltri under the
Company's deferred compensation, executive bonus and stock option plans.
Mr. Woodward and the Company are parties to a severance agreement dated
February 6, 1996, which provides that if Mr. Woodward is terminated without
cause, the Company will pay Mr. Woodward at least one year's base salary payable
in twelve equal, consecutive monthly installments. The payments are contingent
upon Mr. Woodward's executing a release of all claims for the benefit of the
Company. The amounts payable under the severance agreement are in addition to
any amounts owed Mr. Woodward under the Company's deferred compensation
arrangements.
Mr. Pfaehler and the Company are parties to a severance agreement dated
February 7, 1996, which provides that if Mr. Pfaehler is terminated without
cause, the Company will pay Mr. Pfaehler at least one year's base salary payable
in twelve equal, consecutive monthly installments. The payments are contingent
upon Mr. Pfaehler's executing a release of all claims for the benefit of the
Company. The amounts payable under the severance agreement are in addition to
any amounts owed Mr. Pfaehler under the Company's deferred compensation
arrangements.
See also "Certain Relationships and Related Transactions."
56
<PAGE> 60
EQUITY OWNERSHIP PLAN
Hawthorne, J&R and Veltri have each adopted an equity ownership plan (the
"Plans") in order to encourage certain executive employees to acquire an equity
interest in the companies and in order to provide additional incentives to such
executive employees to exert their best efforts on behalf of the companies.
Simultaneously with the Mergers, the Plans will be consolidated and outstanding
options will be converted to options to acquire shares of Class B Non-voting
Common Stock of the Company (the "Consolidated Plan").
The Consolidated Plan permits awards of incentive stock options,
non-qualified stock options, stock appreciation rights, stock awards, dividend
equivalent rights, performance unit awards or phantom share awards to eligible
employees, but only non-qualified stock options will have been awarded under the
Consolidated Plan. Non-qualified stock options have been awarded to the
following key management employees of the Company to purchase the number of
shares of Class B Non-voting Common Stock of the Company which are set forth
below opposite their respective names.
A maximum of 40,732 shares of Class B Non-voting Common Stock of the
Company are reserved for issuance under the Consolidated Plan. The number of
shares of Class B Non-voting Common Stock which are subject to options are as
follows:
<TABLE>
<CAPTION>
NUMBER OF
EMPLOYEE SHARES
-------- ---------
<S> <C>
Delmar O. Stanley........................................... 13,034
Wayne C. Inman.............................................. 8,146
David J. Woodward........................................... 4,073
Michael T. J. Veltri........................................ 4,073
Kris R. Pfaehler............................................ 3,421
------
Total.................................................. 32,747
======
</TABLE>
All of Mr. Inman's stock options were granted in one series, with an
exercise price equal to the fair market value at the time of the grant. All of
Mr. Inman's stock options are fully vested. The non-qualified stock options
which have been awarded under the Consolidated Plan to other employees were
granted in a series of six separate options, the first of which has an exercise
price equal to the fair market value of the Class B Non-voting Common Stock at
the time of the grant, and the remaining five series of which have higher
exercise prices. Upon certain conditions, the Company has the right to cause the
repurchase of such shares, in each case at the fair market value at the time of
repurchase.
Except for Mr. Inman, there is a six year vesting schedule for all options
granted under the Consolidated Plan, with immediate vesting upon the occurrence
of certain events such as death or disability of the employee or in the event of
a change of control of the Company.
DEFERRED COMPENSATION AGREEMENTS
The Company has entered into non-qualified deferred compensation agreements
with certain key executive employees of the Company to provide additional
incentives to such executive employees to exert their best efforts on behalf of
the Company. Deferred compensation agreements are in effect for the following
executive employees of the Company: Delmar O. Stanley, David J. Woodward,
Michael T. J. Veltri, and Kris R. Pfaehler.
The deferred compensation agreements allocate certain amounts to the
account of each such employee based upon, among other things, increase in the
value of the Company and its predecessors through the calendar year ending
December 31, 1996, the amount of dividends and distributions paid or payable to
shareholders of the Company in excess of certain thresholds, and the amount of
fees paid to Talon L.L.C. in excess of certain thresholds.
The agreements further provide that upon the earlier of a public stock or
debt offering, including the Offering ("Discontinuation Event"), that all future
allocations to the accounts will be discontinued (excluding up to $300,000 in
additional deferred compensation which can be earned by Mr. Stanley). The
agreements provide for immediate vesting for participants in the event of a
Discontinuation Event, subject to forfeiture
57
<PAGE> 61
under certain conditions, as defined in the agreements. The agreements also
provide for vested amounts to increase at 6% per annum until termination. The
vested amounts are paid upon a termination of employment, as defined in the
agreements.
DEFINED BENEFIT PLANS
The Company maintains the Hawthorne Metal Products Company -- UAW
Retirement Income Plan, which is a collectively bargained defined benefit plan
for the Company's union employees working at its Hawthorne Metal Products
Division, which plan is administered by a committee consisting of
representatives of the UAW and the Company.
The Company has maintained the Production Stamping, Inc. Defined Benefit
Plan and Trust, which is a defined benefit plan for the Company's employees
working at its Production Stamping Division. Further accruals under the plan
were suspended on June 30, 1997, and the Company is in the process of
terminating such plan.
PROFIT SHARING PLANS
The Company participates in the Talon L.L.C. 401(k) Plan, which is a 401(k)
plan with discretionary profit sharing and matching components administered for
the benefit of the Company's non-union employees, together with non-union
employees of other affiliates of Talon L.L.C.
The Company maintains the Hawthorne Metal Products Company 401(k) Plan,
which is a collectively bargained 401(k) plan with a discretionary matching
component administered for the benefit of the Company's union employees working
at its Hawthorne Metal Products Division, together with union employees working
at Allen-Stevens Corp., an affiliate of the Company.
The Company maintains the Production Stamping, Inc. Salaried 401(k) Plan
which is a 401(k) plan administered for the benefit of the Company's non-union
employees working at its Production Stamping Division.
The Company maintains the Production Stamping, Inc. Hourly 401(k) Savings
Plan, which is a collectively bargained 401(k) plan with matching components
administered for the benefit of the Company's union employees working at its
Production Stamping Division.
Veltri Holdings USA, Inc., a subsidiary of the Company, maintains the
Veltri Holdings USA, Inc. 401(k) Plan which is a 401(k) plan with a profit
sharing component administered for the benefit of Veltri Holdings USA, Inc.'s
non-union employees.
EXECUTIVE BONUS PLAN
Certain executives of the Company participate in an executive bonus plan.
The participants receive awards under the program based on attaining certain
annual financial and non-financial objectives. Objectives are established on a
Company-wide as well as on an individual basis. Participants can receive awards
under the plan on an annual basis ranging anywhere from 25% to 90% of their
respective base pay. The plan provides that no awards will be paid out if
certain minimum financial objectives are not achieved.
58
<PAGE> 62
PRINCIPAL SECURITYHOLDERS
The authorized capital stock of the Company consists of 25,000 shares of
Class A Voting Common Stock, of which 4,074 were issued and outstanding as of
the effectiveness of the Mergers, and 250,000 shares of Class B Non-voting
Common Stock, of which 158,853 were issued and outstanding as of the
effectiveness of the Mergers. The holders of Class A Common Stock are entitled
to one vote per share on all matters to be voted upon by the shareholders
generally, including the election of directors. The holders of Class B non-
voting Common Stock are not entitled to vote.
The following table sets forth information regarding beneficial ownership
of the common stock of the Company as of the Offering by each person known by
the Company to be the beneficial owner of more than 5% of its stock, each
director of the Company, each named executive officer of the Company and all
executive officers and directors of the Company as a group. The number of shares
of Class B Non-voting Common Stock allocated to Messrs. Stanley, Woodward,
Veltri and Pfaehler represents options under the Company's Equity Ownership
Plan.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES OF
CLASS A VOTING CLASS B NON-VOTING
COMMON STOCK COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER (% OF CLASS)* (% OF CLASS)+
------------------------------------ ------------------- -------------------
<S> <C> <C>
Randolph J. Agley........................................... 2,165(i)(ii) 33,540
c/o Talon L.L.C. (53.1%) (17.5%)
350 Talon Centre
Detroit, Michigan 48207
Judith A. Agley............................................. 1,328 24,227
c/o Talon L.L.C. (32.6%)(i) (12.6%)
350 Talon Centre
Detroit, Michigan 48207
James R. Agley.............................................. 354 10,585
c/o Talon L.L.C. (8.7%) (5.5%)
350 Talon Centre
Detroit, Michigan 48207
Joseph A. Agley............................................. 300(ii) 10,585
c/o Talon L.L.C. (7.4%) (5.5%)
350 Talon Centre
Detroit, Michigan 48207
Michael T. Timmis........................................... 1,473(iii) 679
c/o Talon L.L.C. (36.2%) (0.4%)
350 Talon Centre
Detroit, Michigan 48207
Nancy E. Timmis............................................. 1,428(iii) 41,214
c/o Talon L.L.C. (35.1%) (21.5%)
350 Talon Centre
Detroit, Michigan 48207
Wayne C. Inman.............................................. 41 9,735(iv)
c/o Talon L.L.C. (1.0%) (5.1%)
350 Talon Centre
Detroit, Michigan 48207
Delmar O. Stanley........................................... -- 13,034(v)
c/o Talon Automotive Group, Inc. (6.8%)
900 Wilshire Drive
Suite 203
Troy, Michigan 48084
David J. Woodward........................................... -- 4,073(vi)
c/o Talon Automotive Group, Inc. (2.1%)
900 Wilshire Drive
Suite 203
Troy, Michigan 48084
</TABLE>
59
<PAGE> 63
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES OF
CLASS A VOTING CLASS B NON-VOTING
COMMON STOCK COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER (% OF CLASS)* (% OF CLASS)+
------------------------------------ ------------------- -------------------
<S> <C> <C>
Michael T.J. Veltri......................................... -- 4,073(vii)
c/o Talon Automotive Group, Inc. (2.1%)
900 Wilshire Drive
Suite 203
Troy, Michigan 48084
Kris R. Pfaehler............................................ -- 3,421(viii)
c/o Talon Automotive Group, Inc.
900 Wilshire Drive (1.8%)
Suite 203
Troy, Michigan 48084
All current Executive Officers and Directors as a Group..... 3,679 79,395
(90.3%) (41.4%)
</TABLE>
- -------------------------
* Percentage calculations based on 4,074 shares of Class A Voting Common
Stock outstanding as of the effectiveness of the Mergers.
+ Percentage calculations based on 191,600 shares of Class B Non-voting
Common Stock, which consists of 158,853 shares Class B Non-voting Common
Stock outstanding as of the effectiveness of the Mergers and stock
options granted as of the effectiveness of the Mergers to acquire an
additional 32,747 such shares.
(i) Includes 1,328 shares held in trust for Judith Agley and subject to a
voting trust agreement which irrevocably grants Mr. Agley the power to
vote such shares.
(ii) Includes 300 shares held in trust for Mr. Agley's son, Joseph A. Agley,
for which Mr. Agley shares in the voting power as co-trustee.
(iii) Includes 1,428 shares held in trust for Nancy Timmis and subject to a
voting trust agreement which irrevocably grants Mr. Timmis the power to
vote such shares.
(iv) Includes 8,146 shares of Class B Non-voting Common Stock Mr. Inman has
the right to acquire pursuant to the exercise of outstanding stock
options.
(v) Mr. Stanley has the right to acquire these shares of Class B Non-voting
Common Stock pursuant to the exercise of outstanding stock options.
(vi) Mr. Woodward has the right to acquire these shares of Class B Non-voting
Common Stock pursuant to the exercise of outstanding stock options.
(vii) Mr. Veltri has the right to acquire these shares of Class B Non-voting
Common Stock pursuant to the exercise of outstanding stock options.
(viii) Mr. Pfaehler has the right to acquire these shares of Class B Non-voting
Common Stock pursuant to the exercise of outstanding stock options.
60
<PAGE> 64
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company uses the services of the law firm of Timmis & Inman L.L.P. as
general counsel. Michael T. Timmis is a senior partner in the firm, and Wayne C.
Inman was formerly a senior partner and Of Counsel. The Company believes that
its arrangements with Timmis & Inman L.L.P. for legal services are on terms at
least as favorable as could have been obtained from non-affiliated persons.
The Company leases certain of its manufacturing facilities from Maria
Veltri, the spouse of Michael T. J. Veltri, Vice President and Director of the
Company. The table below sets forth the locations, lease commencement dates,
lease termination dates and current annual base rental rates for such leases:
<TABLE>
<CAPTION>
AFFILIATED LEASE LEASE ANNUAL BASE
PERSON LOCATION COMMENCEMENT TERMINATION RENT
---------- -------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Maria Veltri................ Windsor, Ontario 1994 2002 $ 75,772
Maria Veltri................ Windsor, Ontario 1993 2002 37,368
</TABLE>
Although the terms of these leases are not the result of arms-length
bargaining, the Company believes that such leases are on terms no less favorable
to the Company than would have been obtained if such transactions or
arrangements were arms-length transactions with non-affiliated persons.
Talon L.L.C., an affiliate of the Company beneficially owned and controlled
by the Principal Shareholders, has previously provided certain consulting and
administrative services to the Company, including benefit plan administration
assistance, accounting/financial assistance, tax assistance and acquisition
support pursuant to a service agreement dated July 1, 1997. In 1997, the Company
paid Talon L.L.C. an annual fee of $1,150,000 for such services. Effective April
1, 1998, the Company entered into an amended services agreement with Talon
L.L.C. to provide, among other things, for a continuation of such services on a
year-to-year basis, subject to termination by either party and a fee of $500,000
annually.
The Company provides certain consulting and administrative services to G&L
Industries, Inc. ("G&L"), an affiliate of the Company, beneficially owned and
controlled by the Principal Shareholders. Services provided include
insurance/benefit plan administration assistance, accounting/financial
assistance, information systems support services, acquisition assistance, and
marketing and business development support services. During 1997, 1996 and 1995,
the Company received fees of approximately $1,600,000, $1,950,000 and
$1,700,000, respectively, for such services. Effective May 1, 1998, the Company
entered into a written agreement with G&L pursuant to which the Company will
continue to provide such services on a year-to-year basis, subject to
termination by either party, for a services fee of $450,000 annually. Effective
January 1, 1998, all G&L sales, engineering and program management personnel and
related expenses were transferred to G&L.
Certain of the Company's officers (i.e., Delmar O. Stanley, David J.
Woodward and Wayne C. Inman) are also officers of G&L. In addition, certain of
the Company's officers (i.e., Delmar O. Stanley, David J. Woodward, Michael T.
J. Veltri and Kris R. Pfaehler) perform some limited services for G&L and are
entitled to receive deferred compensation from G&L based upon the increase in
value of G&L over a certain threshold. Additionally, under the terms of the
agreement, Delmar O. Stanley, David J. Woodward, Michael T.J. Veltri and Kris R.
Pfaehler will devote a portion of their time to the management and operations of
G&L. In addition, Messrs. Stanley, Woodward, Veltri and Pfaehler have entered
into Deferred Incentive Compensation Agreements with G&L.
For a description of certain transactions relating to the Company and
Michael T.J. Veltri, see "Description of Senior Debt -- Veltri Indebtedness."
The Company participates in several group casualty and property insurance
plans with affiliated companies. Such plans include workers' compensation,
general/products liability, automobile liability, fiduciary liability,
umbrella/excess liability, property insurance and crime insurance.
The casualty insurance plans for workers' compensation, general/products
liability and automobile liability provide for specific loss retention.
Insurance is carried to limit self-insurance per occurrence to
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$250,000 for workers' compensation and general/products liability and $100,000
for automobile liability. For the current policy year ending April 1, 1999, the
aggregate annual loss retention for the group plans is $3,500,000 for
automobile, general/products liability and for workers' compensation. At
December 31, 1997, the self-insurance liability estimate for prior years, based
upon insurance carrier case reserves and internal loss development projections,
was $2,900,000. The Company's share of this liability estimate was $1,221,000
and this amount was fully accrued by the Company at December 31, 1997. One
hundred percent of each retained loss is allocated to the responsible affiliate
company. The Company has also caused letters of credit totaling $1,175,000 to be
issued based upon the Company's credit, which stand as sole security for such
retention. The affiliated companies in this program have, in the past, been
financially able to meet their commitments under the program but there can be no
assurance that they will continue to be able to do so in the future. The
affiliated companies in this program, excluding the Company, had annual sales of
approximately $82,000,000 for the calendar year 1997 and a combined book net
worth of approximately $6,200,000 at December 31, 1997. The Company believes it
receives substantial economic benefit as a result of participating in the group
insurance program. The Company will continue to review the cost of participation
in the group program on each renewal date to determine if its continued
participation in the group program is justified.
The Company insures a significant portion of its employee medical and
dental benefits. However, substantially all medical claims are self-funded and
paid out of the general assets of the Company. Insurance is carried to limit
self-insurance per occurrence to $150,000. Current claim experience indicates an
annual self-funded claim exposure of $1,600,000.
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DESCRIPTION OF SENIOR DEBT
SENIOR CREDIT FACILITY
Concurrently with the Offering, the Company will enter into a new senior
credit facility with Comerica Bank, on behalf of itself and as agent for a
syndicate of other lenders (the "Senior Credit Facility"). Funds under the
Senior Credit Facility will be available for working capital and general
corporate purposes, including future acquisitions. Consummation of the Offering
is conditioned upon implementation of the Senior Credit Facility.
Interest Rate. Interest on loans borrowed under the Senior Credit Facility
is payable quarterly or, if earlier, at the end of each interest period and
accrues at an annual rate equal to, at the option of the Company, (a) the US
Dollar Base Rate, which is the higher of (i) the prime rate of interest charged
by Comerica Bank plus the applicable margin, which is initially 0.25% and can
range from 0.00% to 0.75% based on the Company's ratio of funded debt to EBITDA
(as defined in the Senior Credit Facility), or (ii) the Federal Funds Rate plus
1.00%, or (b) the Canadian Dollar Base Rate, which is the higher of (i) the
Canadian Dollar prime rate or (ii) the Banker's Acceptance Rate plus 1.00%, or
(c) Comerica Bank's Eurocurrency Rate plus the applicable margin, which is
initially 2.00% and can range from 1.50% to 2.50% based on the Company's ratio
of funded debt to EBITDA (as defined in the Senior Credit Facility).
Borrowing Base. The Senior Credit Facility will provide the Company with
available credit of up to the lesser of (i) a certain percentage of eligible
accounts receivable, eligible inventory, fixed assets and tooling progress
payments or (ii) $100.0 million. Advances for tooling progress payments have a
sublimit of $15 million inclusive of advances under the EDC Facility.
Guarantee and Security Interest. The Senior Credit Facility is secured by a
first lien on substantially all of the assets of the Company. In addition, each
wholly owned domestic subsidiary and foreign subsidiary will guarantee all of
the Company's obligations under the Senior Credit Facility. The obligations of
the Company under the Senior Credit Facility rank senior to all other
indebtedness of the Company, including the Notes and the Veltri Indebtedness (as
defined).
Covenants. The Senior Credit Facility contains certain reporting covenants,
other customary affirmative covenants, and various negative covenants, including
but not limited to certain limitations on mergers, sales of assets,
acquisitions, liens, investments, indebtedness, contingent obligations,
dividends, leases, affiliate transactions and changes of business. The Senior
Credit Facility also contains certain financial covenants, including but not
limited to maintaining a ratio of total funded debt to EBITDA, a fixed charge
coverage ratio, and a minimum net worth requirement (each as defined in and
calculated pursuant to the Senior Credit Facility).
Events of Default. The Senior Credit Facility will contain customary events
of default including without limitation defaults for nonpayment of principal
when due, nonpayment of interest and fees within ten days when due, material
misrepresentations, default in the performance of any negative covenant, default
in performance of any other term or covenant, bankruptcy or insolvency, ERISA,
change of control, unstayed judgments in excess of a certain amount, and
cross-defaults to any indebtedness equal to or in excess of a certain amount in
the aggregate for the Company or any subsidiary, which default would permit the
holders of such indebtedness to cause such indebtedness to become due prior to
its stated maturity.
VELTRI INDEBTEDNESS
Michael T. J. Veltri, individually and/or as Trustee u/a/d December 17,
1992 ("Mr. Veltri"), is owed certain amounts by Veltri Metal Products Co., the
Company's Canadian Subsidiary, as follows:
On November 8, 1996, the Company purchased all of the outstanding capital
stock of several related companies constituting the Veltri Group, from Mr.
Veltri and Maria Veltri, his spouse, pursuant to a stock purchase agreement.
Pursuant to such stock purchase agreement, Mr. Veltri is to be paid certain
earn-out amounts, denominated in Canadian dollars, for each of the calendar
years 1998 and 1999, based upon the amount by which the combined EBIT (as
defined in the agreement) of the Veltri Group, exceeds a certain threshold. The
maximum aggregate earn-out amount payable to Mr. Veltri is not to exceed
$15,000,000
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(Canadian). The 1998 earn-out, if any, will be paid on March 31, 1999, including
interest at the prime rate from December 31, 1998. The 1999 earn-out, if any,
will be paid on March 31, 2000, including interest from December 31, 1999.
In connection with the stock purchase agreement, Veltri delivered to Mr.
Veltri a promissory note in the principal amount of $658,325, which is currently
outstanding. The principal amount, together with all accrued interest thereon,
is payable to Mr. Veltri on or before September 17, 1998.
In addition, pursuant to the stock purchase agreement, the Veltri Group
agreed not to engage in or take certain actions (without Mr. Veltri's consent
which shall not be unreasonably withheld), such as (a) amending each of their
articles of incorporation or similar charter documents, or by-laws, merging,
amalgamating, consolidating, entering into a share exchange, or being the
subject of any change in control, in each case in any manner which would
reasonably be expected to have a material adverse effect on the amount or
payment of the earn-out amounts to Mr. Veltri, or (b) conveying a significant
part of their assets to any person or entity, acquiring any material amount of
assets or stock of another person or entity, declaring or paying any dividends
or distributions on any stock, redeeming any stock, making any loans (including
the Offering and Senior Credit Facility) or advances to or becoming a guarantor,
surety or pledging its credit to become liable for the undertaking of any other
person or entity, or entering into any transactions with any affiliates.
The foregoing obligations to Mr. Veltri are guaranteed by the Company and
each Company within the Veltri Group and Mr. Veltri has been granted security
interests in all of the assets of such companies, including debentures on such
companies' real estate (which security interests are subordinated to the
Company's Senior Credit Facility), to secure the foregoing obligations, together
with certain obligations under his employment agreement, certain other
non-monetary obligations under the stock purchase agreement and the obligations
under such security agreements. In addition, such obligations contain customary
defaults, including cross-defaults to the Senior Credit Facility.
EXPORT DEVELOPMENT CORPORATION
The Company has a credit facility ("EDC Facility") through the Export
Development Corporation, a Canadian federal agency ("EDC"), to finance up to
$5.0 million (Canadian) of certain tooling costs. Pursuant to the EDC Facility
the Company has guaranteed up to $5.0 million (Canadian) of loans by the EDC to
manufacturers of tooling to be provided to the Company. The EDC Facility is
secured by a first priority security interest in the applicable tooling and
tooling receivables and is senior to the Senior Credit Facility and all other
indebtedness of the Company, including the Notes. As of December 31, 1997, funds
available under the EDC Facility were approximately $5.0 million (Canadian).
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DESCRIPTION OF NEW NOTES
The New Notes will be issued, and the Old Notes were issued, under an
indenture (the "Indenture") dated as of April 28, 1998 by and among the Company,
the Guarantors and U.S. Bank Trust National Association, as Trustee (the
"Trustee"). For purposes of the following summary, the Old Notes and the New
Notes shall be collectively referred to as the "Notes". 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 "TIA"), 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 TIA as in effect on the
date of the Indenture. A copy of the Indenture is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The definitions of
certain capitalized terms used in the following summary are set forth below
under "-- Certain Definitions." For purposes of this section, references to the
"Company" include only Talon Automotive Group, Inc. and not its Subsidiaries.
The Notes will be unsecured obligations of the Company, ranking subordinate
in right of payment to all Senior Debt of the Company.
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as Paying Agent and Registrar for the Notes. The Notes may be presented
for registration or transfer and exchange at the offices of the Registrar, which
initially will be the Trustee's corporate trust office. The Company may change
any Paying Agent and Registrar without notice to holders of the Notes (the
"Holders"). The Company will pay principal (and premium, if any) on the Notes at
the Trustee's corporate office in New York, New York. At the Company's option,
interest may be paid at the Trustee's corporate trust office or by check mailed
to the registered address of Holders. Any Notes that remain outstanding after
the completion of the Exchange Offer, together with the Exchange Notes issued in
connection with the Exchange Offer, will be treated as a single class of
securities under the Indenture.
Any Old Notes that remain outstanding after completion of the Exchange
Offer, together with the New Notes issued in connection with the Exchange Offer,
will be treated as a single class of securities under the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $170,000,000 of
which $120,000,000 were issued on the Issue Date, and will mature on May 1,
2008. Interest on the Notes will accrue at the rate of 9 5/8% per annum and will
be payable semiannually in cash on each May 1 and November 1 commencing on
November 1, 1998, to the persons who are registered Holders at the close of
business on the April 15 and October 15 immediately preceding the applicable
interest payment date. Interest on the Old Notes will accrue from and including
the most recent date to which interest has been paid or, if no interest has been
paid, from and including the date of issuance. Holders whose Old Notes are
accepted for exchange will receive accrued interest thereon to, but not
including, the date of issuance of the New Notes, such interest to be payable
with the first interest payment on the New Notes, but will not receive any
payment in respect of interest on the Old Notes accrued after the issuance of
the New Notes. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
The Notes will not be entitled to the benefit of any mandatory sinking
fund.
REDEMPTION
Optional Redemption. The Notes will be redeemable, at the Company's option,
in whole at any time or in part from time to time, on and after May 1, 2003,
upon not less than 30 nor more than 60 days' notice, at the following redemption
prices (expressed as percentages of the principal amount thereof) if redeemed
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during the twelve-month period commencing on May 1 of the applicable year set
forth below, plus, in each case, accrued and unpaid interest, if any, thereon to
the date of redemption:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003........................................................ 104.813%
2004........................................................ 103.208%
2005........................................................ 101.604%
2006 and thereafter......................................... 100.000%
</TABLE>
Optional Redemption upon Public Equity Offerings. At any time, or from time
to time, on or prior to May 1, 2001, the Company may, at its option, use the net
cash proceeds of one or more Public Equity Offerings (as defined below) to
redeem up to 35% of the Notes issued at a redemption price equal to 109.625% of
the principal amount thereof plus accrued and unpaid interest, if any, thereon
to the date of redemption; provided that at least 65% of the principal amount of
Notes originally issued remains outstanding immediately after any such
redemption. In order to effect the foregoing redemption with the proceeds of any
Public Equity Offering, the Company shall make such redemption not more than 180
days after the consummation of any such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Company pursuant
to a registration statement filed with the Commission in accordance with the
Securities Act.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any
time, 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 such Notes are listed or, if such Notes are not then listed on
a national securities exchange, on a pro rata basis, by lot or by such method as
the 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, that if a partial redemption is made with the proceeds of a Public
Equity Offering, selection of the Notes or portions thereof for redemption shall
be made by the Trustee only a pro rata basis or on as nearly a pro rata basis as
is practicable (subject to DTC procedures), 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 funds in
satisfaction of the applicable redemption price pursuant to the Indenture.
SUBORDINATION
The payment of all Obligations on the Notes is subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Debt. Upon any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due upon all Senior Debt shall first be paid in
full in cash or Cash Equivalents, or such payment duly provided for to the
satisfaction of the holders of Senior Debt, before any payment or distribution
of any kind or character is made on account of any Obligations on the Notes, or
for the acquisition of any of the Notes for cash or property or otherwise. If
any default occurs and is continuing in the payment when due, whether at
maturity, upon any redemption, by declaration or otherwise, of any principal of,
interest on, unpaid drawings for letters of credit
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issued in respect of, or regularly accruing fees with respect to, any Senior
Debt, no payment of any kind or character shall be made by or on behalf of the
Company or any other Person on its behalf with respect to any Obligations on the
Notes or to acquire any of the Notes for cash or property or otherwise. In
addition, if any other event of default occurs and is continuing with respect to
any Designated Senior Debt, as such event of default is defined in the
instrument creating or evidencing such Designated Senior Debt, permitting the
holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for such Designated Senior Debt gives
written notice of the event of default to the Trustee (a "Default Notice"),
then, unless and until all events of default with respect to such Designated
Senior Debt have been cured or waived or have ceased to exist or the Trustee
receives notice from the Representative for such Designated Senior Debt
terminating the Blockage Period (as defined below), during the 180 days after
the delivery of such Default Notice (the "Blockage Period"), neither the Company
nor any other Person on its behalf shall (x) make any payment of any kind or
character with respect to any Obligations on the Notes or (y) acquire any of the
Notes for cash or property or otherwise. Notwithstanding anything herein to the
contrary, in no event will a Blockage Period extend beyond 180 days from the
date the Default Notice was delivered to the Trustee and only one such Blockage
Period may be commenced within any 360 consecutive days. No event of default
which existed or was continuing on the date of the commencement of any Blockage
Period with respect to the Designated Senior Debt shall be, or be made, the
basis for commencement of a second Blockage Period by the Representative of such
Designated Senior Debt whether or not within a period of 360 consecutive days,
unless such event of default shall have been cured or waived for a period of not
less than 90 consecutive days (it being acknowledged that any subsequent action,
or any breach of any financial covenants for a period commencing after the date
of commencement of such Blockage Period that, in either case, would give rise to
an event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Debt, including
the Holders of the Notes, may recover less, ratably, than holders of Senior
Debt.
GUARANTORS
VS Holdings, Inc., Veltri Holdings USA, Inc. and Veltri Metal Products Co.,
subsidiaries of the Company (and any additional Subsidiary Guarantors pursuant
to the covenant described under "-- Certain Covenants -- Issuance of Subsidiary
Guarantees") have fully and unconditionally guaranteed, jointly and severally,
to each Holder and the Trustee the payment of principal, premium, if any, and
interest on the Notes. The Guarantee of each Guarantor will be subordinated to
all Guarantor Senior Debt of such Guarantor to the same extent as the Notes are
subordinated to all Senior Debt. In the event all of the Capital Stock of a
Guarantor owned by the Company and/or the Restricted Subsidiaries is sold by the
Company and/or one or more Restricted Subsidiaries or all or substantially all
of the assets of a Guarantor are sold by such Guarantor and the sale complies
with the provisions set forth under "-- Certain Covenants -- Limitation on Asset
Sales," such Guarantor's Guarantee will be released.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control,
each Holder will have the right to require that the Company purchase all or a
portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued interest, if any, thereon to the date of purchase.
The Indenture provides that, prior to the mailing of the notice referred to
below, but in any event within 30 days following any Change of Control, the
Company covenants to (i) repay in full and terminate all commitments under
Indebtedness under the Credit Agreement and all other Senior Debt the terms of
which require repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the Credit Agreement and
all other such Senior Debt and to repay the Indebtedness owed to each lender
which has accepted such offer or (ii) obtain the requisite consents under the
Credit Agreement and all other Senior Debt to permit the repurchase of the Notes
as provided below. The Company shall first
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comply with the covenant in the immediately preceding sentence before it shall
be required to repurchase Notes pursuant to the provisions described below.
Within 30 days following the date upon which the Change of Control
occurred, the Company must send, by first class mail, a notice to each Holder,
with a copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 60 days from the date such
notice is mailed, other than as may be required by law (the "Change of Control
Payment Date"). Holders electing to have a Note purchased pursuant to a Change
of Control Offer will be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third business day prior to the Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third party financing to the extent it does not have
available funds to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to require the purchase of Notes upon a
Change of Control. Restrictions in the Indenture described herein on the ability
of the Company and the Restricted Subsidiaries to incur additional Indebtedness,
to grant liens on its 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 any
such transaction in certain circumstances may require the purchase of the Notes,
and there can be no assurance that the Company or the acquiring party will have
sufficient financial resources to effect such purchase. 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 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 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.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any of the Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company or any Guarantor may incur
Indebtedness (including, without limitation, Acquired Indebtedness) and the
Restricted Subsidiaries may incur Acquired Indebtedness, in each case if on the
date of the incurrence of such Indebtedness, after giving effect to the
incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company
is greater than (a) 2.0 to 1.0 if such incurrence occurs on or prior to May 1,
2001 or (b) 2.25 to 1.0, if such incurrence occurs after May 1, 2001.
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No Indebtedness incurred pursuant to the Consolidated Fixed Charge Coverage
Ratio test of the preceding paragraph (including, without limitation,
indebtedness under the Credit Agreement) shall reduce the amount of Indebtedness
which may be incurred pursuant to any clause of the definition of Permitted
Indebtedness (including without limitation, Indebtedness under the Credit
Agreement pursuant to clause (ii) of the definition of Permitted Indebtedness).
Limitation on Restricted Payments. The Company will not, and will not cause
or permit any of the Restricted Subsidiaries to, directly or indirectly, (a)
declare or pay any dividend or make any distribution (other than dividends or
distributions, payable in Qualified Capital Stock of the Company) on or in
respect of shares of the Company's Capital Stock to holders of such Capital
Stock, (b) purchase, redeem or otherwise acquire or retire for value any Capital
Stock of the Company or any warrants, rights or options to purchase or acquire
shares of any class of such Capital Stock or (c) make any Investment (other than
Permitted Investments) (each of the foregoing actions set forth in clauses (a),
(b) and (c) being referred to as a "Restricted Payment"), if at the time of such
Restricted Payment or immediately after giving effect thereto, (i) a Default or
an Event of Default shall have occurred and be continuing or (ii) the Company is
not able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with the covenant described under
"-- Limitation on Incurrence of Additional Indebtedness" or (iii) the aggregate
amount of Restricted Payments (including such proposed Restricted Payment) made
subsequent to the Issue Date (the amount expended for such purpose, if other
than in cash, being the fair market value of such property as determined
reasonably and in good faith by the Board of Directors of the Company) shall
exceed the sum of: (w) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of
the Company earned subsequent to the Issue Date and on or prior to the date the
Restricted Payment occurs (the "Reference Date" (treating such period as a
single accounting period); plus (x) 100% of the fair market value of the
aggregate net proceeds received by the Company from any Person (other than a
Subsidiary of the Company) from the issuance and sale subsequent to the Issue
Date and on or prior to the Reference Date of Qualified Capital Stock of the
Company; plus (y) without duplication of any amounts included in clause (iii)(x)
above, 100% of the fair market value of the aggregate net proceeds of any
contribution to the common equity capital of the Company received by the Company
from a holder of the Company's Capital Stock (excluding, in the case of clauses
(iii)(x) and (y), any net proceeds from a Public Equity Offering to the extent
used to redeem the Notes); plus (z) an amount equal to the lesser of (A) the sum
of the fair market value of the Capital Stock of an Unrestricted Subsidiary
owned by the Company and the Restricted Subsidiaries and the aggregate amount of
all Indebtedness of such Unrestricted Subsidiary owed to the Company, the
Guarantors and each Unleveraged Restricted Subsidiary on the date of Revocation
of such Unrestricted Subsidiary as an Unrestricted Subsidiary in accordance with
the covenant described under "-- Limitation on Designations of Unrestricted
Subsidiaries" or (B) the Designation Amount with respect to such Unrestricted
Subsidiary on the date of the Designation of such Subsidiary as an Unrestricted
Subsidiary in accordance with the covenant described under "-- Limitation on
Designations of Unrestricted Subsidiaries."
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the dividend would have
been permitted on the date of declaration; (2) if no Default or Event of Default
shall have occurred and be continuing, the acquisition of any shares of Capital
Stock of the Company, either (i) solely in exchange for shares of Qualified
Capital Stock of the Company or (ii) through the application of net proceeds of
a substantially concurrent sale for cash (other than to a Subsidiary of the
Company) of shares of Qualified Capital Stock of the Company; (3) Permitted Tax
Payments; (4) so long as no Default or Event of Default shall have occurred and
be continuing, repurchases of Capital Stock of the Company from officers,
directors, employees or consultants pursuant to equity ownership or compensation
plans not to exceed $500,000 in any year; and (5) so long as no Default or Event
of Default shall have occurred and be continuing, other Restricted Payments in
an aggregate amount not to exceed $5.0 million. In determining the aggregate
amount of Restricted Payments made subsequent to the Issue Date in accordance
with clause (iii) of the immediately preceding paragraph, amounts expended
pursuant to clauses (1), (2), (4) and (5) shall be included in such calculation.
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Limitation on Asset Sales. The Company will not, and will not permit any of
the Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company
or the applicable 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 (as determined in good faith
by the Company's Board of Directors), (ii) at least 75% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be in the form of cash or Cash Equivalents and is received
at the time of such disposition; and (iii) upon the consummation of an Asset
Sale, the Company shall apply, or cause such Restricted Subsidiary to apply, the
Net Cash Proceeds relating to such Asset Sale within 360 days of receipt thereof
either (A) to prepay any Senior Debt or Guarantor Senior Debt and, in the case
of any Senior Debt or Guarantor Senior Debt under any revolving credit facility,
effect a permanent reduction in the availability under such revolving credit
facility, (B) to make an investment in properties and assets that will be used
in the business of the Company and its Restricted Subsidiaries as existing on
the Issue Date or in businesses reasonably related thereto, or (C) a combination
of prepayment and investment permitted by the foregoing clauses (iii)(A) and
(iii)(B). On the 361st day after an Asset Sale or such earlier date, if any, as
the Board of Directors of the Company or of such Restricted Subsidiary
determines not to apply the Net Cash Proceeds relating to such Asset Sale as set
forth in clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence
(each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash
Proceeds which have not been applied on or before such Net Proceeds Offer
Trigger Date as permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the next
preceding sentence (each a "Net Proceeds Offer Amount") shall be applied by the
Company to make an offer to purchase (the "Net Proceeds Offer") on a date (the
"Net Proceeds Offer Payment Date") not less than 30 nor more than 60 days
following the applicable Net Proceeds Offer Trigger Date, from all Holders on a
pro rata basis, that principal amount of Notes equal to the Net Proceeds Offer
Amount at a price equal to 100% of the principal amount of the Notes to be
purchased, plus accrued and unpaid interest, if any, thereon to the date or
purchase; provided, however, that if at any time any non-cash consideration
received by the Company or any Restricted Subsidiary, as the case may be, in
connection with any Asset Sale is converted into or sold or otherwise disposed
of for cash (other than interest received with respect to any such non-cash
consideration), then such conversion or disposition shall be deemed to
constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be
applied in accordance with this covenant. The Company may defer the Net Proceeds
Offer until there is an aggregate unutilized Net Proceeds Offer Amount equal to
or in excess of $5,000,000 resulting from one or more Asset Sales (at which
time, the entire unutilized Net Proceeds Offer Amount, and not just the amount
in excess of $5,000,000 shall be applied as required pursuant to this
paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and the Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "-- Merger, Consolidation
and Sale of Assets," the successor corporation shall be deemed to have sold the
properties and assets of the Company and the Restricted Subsidiaries not so
transferred for purposes of this covenant, and shall comply with the provisions
of this covenant with respect to such deemed sale as if it were an Asset Sale.
In addition, the fair market value of such properties and assets of the Company
or the Restricted Subsidiaries deemed to be sold shall be deemed to be Net Cash
Proceeds for purposes of this covenant.
Each Net Proceeds Offer will be mailed to the record Holders as shown on
the register of Holders within 30 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set forth
in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may
elect to tender their Notes in whole or in part in integral multiples of $1,000
in exchange for cash. To the extent Holders properly tender Notes in an amount
exceeding the Net Proceeds Offer Amount, Notes of tendering Holders will be
purchased on a pro rata basis (based on amounts tendered). A Net Proceeds Offer
shall remain open for a period of 20 business days or such longer period as may
be required by law.
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 Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the Indenture, the Company shall
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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.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit 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 on or in respect of its Capital Stock; (b) make loans or advances
or to pay any Indebtedness or other obligation owed to the Company or any other
Restricted Subsidiary; or (c) transfer any of its property or assets to the
Company or any other Restricted Subsidiary, except for such encumbrances or
restrictions existing under or by reasons of: (1) applicable law; (2) the
Indenture; (3) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of any Restricted Subsidiary; (4) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person or the properties or assets of the Person so acquired; (5) agreements
existing on the Issue Date to the extent and in the manner such agreements are
in effect on the Issue Date; (6) any other agreement entered into after the
Issue Date which contains encumbrances and restrictions which are no more
restrictive with respect to any Restricted Subsidiary than those in effect with
respect to such Restricted Subsidiary pursuant to agreements as in effect on the
Issue Date; and (7) an agreement governing Refinancing Indebtedness incurred to
Refinance the Indebtedness issued, assumed or incurred pursuant to an agreement
referred to in clause (2), (4) or (5) above; provided, however, that the
provisions relating to such encumbrance or restriction contained in any such
Refinancing Indebtedness are no more restrictive than the provisions relating to
such encumbrance or restriction contained in agreements referred to in such
clause (2), (4) or (5).
Limitation on Preferred Stock of Restricted Subsidiaries. The Company will
not permit any of the Restricted Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Restricted Subsidiary) or permit any Person
(other than the Company or a Restricted Subsidiary) to own any Preferred Stock
of any Restricted Subsidiary.
Limitation on Liens. The Company will not, and will not cause or permit any
of the Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or permit or suffer to exist any Liens of any kind against or upon any property
or assets of the Company or any of the Restricted Subsidiaries whether owned on
the Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless (i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the Notes, the Notes are secured by
a Lien on such property, assets or proceeds that is senior in priority to such
Liens and (ii) in all other cases, the Notes are equally and ratably secured,
except for (A) Liens existing as of the Issue Date to the extent and in the
manner such Liens are in effect on the Issue Date; (B) Liens securing Senior
Debt and Liens securing Guarantor Senior Debt; (C) Liens securing the Notes and
any Guarantees; (D) Liens in favor of the Company, a Guarantor or an Unleveraged
Restricted Subsidiary; (E) Liens securing Refinancing Indebtedness which is
incurred to Refinance any Indebtedness which has been secured by a Lien
permitted under the Indenture and which has been incurred in accordance with the
provisions of the Indenture; provided, however, that such Liens do not extend to
or cover any property or assets of the Company or any of the Restricted
Subsidiaries not securing the Indebtedness so Refinanced; and (F) Permitted
Liens.
Prohibition on Incurrence of Senior Subordinated Debt. The Company will
not, and will not permit any Guarantor to, incur or suffer to exist Indebtedness
(other than Veltri Indebtedness) that is senior in right of payment to the Notes
or the Guarantee of such Guarantor and subordinate in right of payment to any
other Indebtedness of the Company or such Guarantor, as the case may be.
Merger, Consolidation and Sale of Assets. The Company will not, in a single
transaction or series of related transactions, consolidate or merge with or into
any Person, or sell, assign, transfer, lease, convey or otherwise dispose of (or
cause or permit any Restricted Subsidiary to sell, assign, transfer, lease,
convey or otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and the Restricted
Subsidiaries) whether as an entirety or substantially as an entirety to any
Person unless: (i) either (1) the Company shall be the surviving or continuing
corporation or (2) the Person
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(if other than the Company) formed by such consolidation or into which the
Company is merged or the Person which acquires by sale, assignment, transfer,
lease, conveyance or other disposition the properties and assets of the Company
and the Restricted Subsidiaries substantially as an entirety (the "Surviving
Entity") (x) shall be a corporation organized and validly existing under the
laws of the United States or any State thereof or the District of Columbia and
(y) shall expressly assume, by supplemental indenture (in form and substance
satisfactory to the Trustee), executed and delivered to the Trustee, the due and
punctual payment of the principal of, and premium, if any, and interest on all
of the Notes and the performance of every covenant of the Notes, the Indenture
and the Registration Rights Agreement on the part of the Company to be performed
or observed; (ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving effect to
any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company or
such Surviving Entity, as the case may be, shall be able to incur at least $1.00
of additional Indebtedness (other than Permitted Indebtedness) pursuant to the
covenant described under "-- Limitation on Incurrence of Additional
Indebtedness;" (iii) immediately before and immediately after giving effect to
such transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred and any Lien granted in
connection with or in respect of the transaction), no Default or Event of
Default shall have occurred or be continuing; and (iv) the Company or the
Surviving Entity shall have delivered to the Trustee an officers' certificate
and an opinion of counsel, each stating that such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of the Indenture
and that all conditions precedent in the Indenture relating to such transaction
have been satisfied.
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 of the properties or assets of one or more Restricted
Subsidiaries the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
The Indenture provides that upon any consolidation, combination or merger
or any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, in which the Company is not the continuing
corporation, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, lease or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture and the Notes with the same effect as if such
surviving entity had been named as such.
No Guarantor (other than any Guarantor whose Guarantee is to be released in
accordance with the terms of the Guarantee and Indenture in connection with any
transaction complying with the provisions of the covenant described under "--
Limitation on Asset Sales") will, and the Company will not cause or permit any
Guarantor to, consolidate with or merge with or into any Person other than the
Company or any other Guarantor unless: (i) the entity formed by or surviving any
such consolidation or merger (if other than the Guarantor) is a corporation
organized and existing under the laws of the United States or any State thereof
or the District of Columbia; (ii) such entity assumes by supplemental indenture
all of the obligations of the Guarantor under the Indenture, such Guarantor's
Guarantee and the Registration Rights Agreement; (iii) immediately after giving
effect to such transaction, no Default or Event of Default shall have occurred
and be continuing; (iv) immediately after giving effect to such transaction and
the use of any net proceeds therefrom on a pro forma basis, the Company could
satisfy the provisions of clause (ii) of the first paragraph of this covenant;
and (v) the Company shall have delivered to the Trustee an officers' certificate
and Opinion of Counsel, each stating that such consolidation or merger and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of the Indenture
and that all conditions precedent in the Indenture relating to such transaction
have been satisfied.
Limitations on Transactions with Affiliates. (a) The Company will not, and
will not permit any of the Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the
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rendering of any service) with, or for the benefit of, any of its Affiliates
(each an "Affiliate Transaction"), other than (x) Affiliate Transactions
permitted under paragraph (b) below and (y) Affiliate Transactions on terms that
are no less favorable than those that might reasonably have been obtained in a
comparable transaction at such time on an arm's-length basis from a Person that
is not an Affiliate of the Company or such Restricted Subsidiary. All Affiliate
Transactions (and each series of related Affiliate Transactions which are
similar or part of a common plan) involving aggregate payments or other property
with a fair market value in excess of $1.0 million shall be approved by the
Board of Directors of the Company or such Restricted Subsidiary, as the case may
be, such approval to be evidenced by a Board Resolution stating that such Board
of Directors has determined that such transaction complies with the foregoing
provisions. If the Company or any Restricted Subsidiary enters into an Affiliate
Transaction (or series of related Affiliate Transactions related to a common
plan) that involves an aggregate fair market value of more than $10.0 million,
the Company or such Restricted Subsidiary, as the case may be, shall, prior to
the consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the relevant
Restricted Subsidiary, as the case may be, from a financial point of view, from
an Independent Financial Advisor and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
employment, consulting, option and compensation arrangements and agreements of
the Company as in effect on the Issue Date; (ii) reasonable fees and
compensation paid to and indemnity provided on behalf of, officers, directors,
employees or consultants of the Company or any Restricted Subsidiary as
determined in good faith by the Company's Board of Directors or senior
management; (iii) consulting fees paid by the Company consistent with past
practice; (iv) transactions exclusively between or among the Company and any of
the Restricted Subsidiaries or exclusively between or among such Restricted
Subsidiaries, provided such transactions are not otherwise prohibited by the
Indenture; (v) transactions pursuant to the Existing Agreements; and (vi)
Restricted Payments permitted by the Indenture.
Issuance of Subsidiary Guarantees. If (a) any Domestic Wholly Owned
Restricted Subsidiary incurs any Indebtedness or (b) any Restricted Subsidiary
(whether or not a Domestic Wholly Owned Restricted Subsidiary) guarantees any
Indebtedness of the Company or any of its Restricted Subsidiaries (other than a
Subsidiary of such Restricted Subsidiary) then, in either case, the Company
shall cause such Domestic Wholly Owned Restricted Subsidiary or such Restricted
Subsidiary, as the case may be, to (i) execute and deliver to the Trustee a
supplemental indenture in form reasonably satisfactory to the Trustee pursuant
to which such Domestic Wholly Owned Restricted Subsidiary or such Restricted
Subsidiary, as the case may be, shall unconditionally guarantee (each, a
"Guarantee") all of the Company's obligations under the Notes and the Indenture
on the terms set forth in the Indenture and (ii) deliver to the Trustee an
opinion of counsel (which may contain customary exceptions) that such
supplemental indenture has been duly authorized, executed and delivered by such
Domestic Wholly Owned Restricted Subsidiary or such Restricted Subsidiary, as
the case may be, and constitutes a legal, valid, binding and enforceable
obligation of such Domestic Wholly Owned Restricted Subsidiary or such
Restricted Subsidiary, as the case may be. Thereafter, such Domestic Wholly
Owned Restricted Subsidiary or such Restricted Subsidiary, as the case may be,
shall be a Guarantor for all purposes of the Indenture. The Company may cause
any other Restricted Subsidiary of the Company to issue a Guarantee and become a
Guarantor.
Each Guarantee will be subordinated to Guarantor Senior Debt on the same
basis as the Notes are subordinated to Senior Debt. In the event all of the
Capital Stock of a Guarantor owned by the Company and the Restricted
Subsidiaries is sold by the Company and/or one or more of the Restricted
Subsidiaries and the sale complies with the provisions set forth under "--
Limitation on Asset Sales," such Guarantor's Guarantee will be released.
Conduct of Business. The Company and the Restricted Subsidiaries will not
engage in any businesses which are not either: (i) the same, similar or related
to the businesses in which the Company or any of the Restricted Subsidiaries are
engaged on the Issue Date; (ii) Permitted Investments; or (iii) businesses
acquired through an acquisition after the Issue Date which are not material to
the Company and the Restricted Subsidiaries, taken as a whole.
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Payments for Consent. The Company will not, and will not cause or permit
any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any Notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the Indenture, the Notes or the Guarantees unless
such consideration is offered to be paid to all Holders of the Notes who so
consent, waive or agree to amend in the time frame set forth in solicitation
documents relating to such consent, waiver or agreement.
Limitation on Designations of Unrestricted Subsidiaries. The Company may
designate any Subsidiary of the Company (other than a Subsidiary of the Company
which owns Capital Stock of a Restricted Subsidiary) as an "Unrestricted
Subsidiary" under the Indenture (a "Designation") only if:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation; and
(b) the Company would be permitted under the Indenture to make an
Investment at the time of Designation (assuming the effectiveness of such
Designation) in an amount (the "Designation Amount") equal to the sum of
(i) fair market value of the Capital Stock of such Subsidiary owned by the
Company and the Restricted Subsidiaries on such date and (ii) the aggregate
amount of Indebtedness of such Subsidiary owed to the Company and the
Restricted Subsidiaries on such date; and
(c) the Company would be permitted to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to the covenant
described under "-- Limitation on Incurrence of Additional Indebtedness" at
the time of Designation (assuming the effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment in the Designation Amount
pursuant to the covenant described under "-- Limitation on Restricted Payments"
for all purposes of the Indenture. The Indenture will further provide that the
Company shall not, and shall not permit any Restricted Subsidiary to, at any
time (x) provide direct or indirect credit support for or a guarantee of 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 (including any right to take enforcement action
against such Unrestricted Subsidiary), except, in the case of clause (x) or (y),
to the extent permitted under the covenant described under "-- Limitation on
Restricted Payments."
The Indenture further provides that the Company may revoke any Designation
of a Subsidiary as an Unrestricted Subsidiary ("Revocation"), whereupon such
Subsidiary shall then constitute a Restricted Subsidiary, if
(a) no Default shall have occurred and be continuing at the time and
after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiaries
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of the
Indenture.
All Designations and Revocations must be evidenced by Board Resolutions of
the Company delivered to the Trustee certifying compliance with the foregoing
provisions.
Reports to Holders. The Indenture provides that the Company will deliver to
the Trustee within 15 days after the filing of the same with the Commission,
copies of the quarterly and annual reports and of the information, documents and
other reports, if any, which the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture further
provides that, notwithstanding that the Company may not be subject to the
reporting requirements of Sections 13 or 15(d) of the Exchange Act, the Company
will file with the Commission, to the extent permitted, and provide the Trustee
and Holders with such annual and quarterly reports and such information,
documents and other reports specified in
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Section 13 and 15(d) of the Exchange Act. The Company will also comply with the
other provisions of TIA sec. 314(a).
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default."
(i) the failure to pay interest on any Notes when the same becomes due
and payable and the default continues for a period of 30 days (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture);
(ii) the failure to pay the principal on any Notes, when such
principal becomes due and payable, at maturity, upon redemption or
otherwise (including the failure to make a payment to purchase Notes
tendered pursuant to a Change of Control Offer or a Net Proceeds Offer)
(whether or not such payment shall be prohibited by the subordination
provision of the Indenture);
(iii) a default in the observance or performance of any other covenant
or agreement contained in the Indenture which default continues for a
period of 30 days (with respect to the covenants described under "--
Certain Covenants -- Limitation on Incurrence of Additional Indebtedness,"
"-- Limitation on Restricted Payments," "-- Limitation on Asset Sales," and
"-- Limitation on Liens") or 60 days (with respect to the other covenants
set forth above under "-- Certain Covenants"), as the case may be, after
the Company receives written notice specifying the default (and demanding
that such default be remedied) from the Trustee or the Holders of at least
25% of the outstanding principal amount of the Notes (except in the case of
a default with respect to the covenant described under "-- Certain
Covenants -- Merger, Consolidation and Sale of Assets," which will
constitute an Event of Default with such notice requirement but without
such passage of time requirement);
(iv) a default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness of the Company or of any Restricted Subsidiary (or the payment
of which is guaranteed by the Company or any Restricted Subsidiary),
whether such Indebtedness now exists or is created after the Issue Date,
which default (a) is caused by a failure to pay principal of such
Indebtedness after any applicable grace period provided in such
Indebtedness on the date of such default (a "payment default") or (b)
results in the acceleration of such Indebtedness prior to its express
maturity (and such acceleration is not rescinded, or such Indebtedness is
not repaid, within 30 days) and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a payment default or the maturity
of which has been so accelerated (and such acceleration is not rescinded,
or such Indebtedness is not repaid, within 30 days), aggregates $5.0
million;
(v) one or more judgments in an aggregate amount in excess of $5.0
million shall have been rendered against the Company or any of the
Restricted Subsidiaries and such judgments remain undischarged, unpaid or
unstayed for a period of 60 days after such judgment or judgments become
final and nonappealable;
(vi) certain events of bankruptcy affecting the Company or any of the
Restricted Subsidiaries; or
(vii) any Guarantee ceases to be in full force and effect or any
Guarantee declared to be null and void and unenforceable or any Guarantee
is found to be invalid or any of the Guarantors denies its liability under
its Guarantee (other than by reason of release of a Guarantor in accordance
with the terms of the Indenture).
If an Event of Default (other than an Event of Default specified in clause
(vi) above) shall occur and be continuing, the Trustee or the Holders of at
least 25% in principal amount of outstanding Notes may declare the principal of,
premium, if any, and accrued interest on all the Notes to be due and payable by
notice in writing to the Company and the Trustee specifying the respective
Events of Default and that it is a "notice of acceleration," and the same shall
become immediately due and payable. If an Event of Default specified in clause
(vi) above occurs and is continuing, then all unpaid principal of, premium, if
any, and accrued and
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unpaid interest on all of the outstanding Notes shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.
The Indenture provides that, at any time after a declaration of
acceleration with respect to the Notes as described in the preceding paragraph,
the Holders of a majority in principal amount of the Notes may rescind and
cancel such declaration and its consequences (i) if the rescission would not
conflict with any judgment or decree, (ii) if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration, (iii) to the extent the payment
of such interest is lawful, interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in clause (vi) of the description above
of Events of Default, the Trustee shall have received an officers' certificate
and an opinion of counsel that such Event of Default has been cured or waived.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto.
The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its consequences,
except a default in the payment of the principal of or interest on any Notes.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding Notes 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 the Trustee.
Under the Indenture, the Company is required to provide an officers'
certificate to the Trustee promptly upon the Company obtaining knowledge of any
Default or Event of Default (provided that the Company shall provide such
certification at least annually whether or not it knows of any Default or Event
of Default) that has occurred and, if applicable, describe such Default or Event
of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the obligations of any 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 or failure to comply with
such obligations shall not constitute a Default or 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 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 U.S. 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 of
payment thereof or on the applicable redemption date, as the case
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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 Trustees 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 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 Debt, including, without limitation, those arising under
the Indenture and (B) 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 laws affecting creditors' rights generally; and (ix)
certain other customary conditions precedent are satisfied.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of 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
heretofore 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.
MODIFICATION OF THE INDENTURE
From time to time, the Company and the Trustee, without the consent of the
Holders, may amend the Indenture for certain specified purposes, including
curing ambiguities, defects or inconsistencies, so long as such charge does not,
in the opinion of the Trustee, adversely affect the rights of any of the Holders
in any material respect. In formulating its opinion on such matters, the Trustee
will be entitled to rely on such evidence as it deems appropriate, including,
without limitation, solely on an opinion of counsel. Other
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modifications and amendments of the Indenture may be made with the consent of
the Holders of a majority in principal amount of the then outstanding Notes
issued under the Indenture, except that, without the consent of each Holder
affected thereby, no amendment may: (i) reduce the amount of Notes whose holders
must consent to an amendment; (ii) reduce the rate of or change or have the
effect of changing the time for payment of interest, including defaulted
interest, on any Notes; (iii) reduce the principal of or change or have the
effect of changing the fixed maturity of any Notes, or change the date on which
any Notes may be subject to redemption or repurchase, or reduce the redemption
of repurchase price therefor; (iv) make any Notes payable in money other than
that stated in the Notes; (v) make any change in provisions of the Indenture
protecting the right of each Holder to receive payment or principal of and
interest on such Notes on or after the due date thereof or to bring suit to
enforce such payment, or permitting Holders of a majority in principal amount of
Notes to waive Defaults or Events of Default; (vi) amend, change or modify in
any material respect the obligation of the Company to make and consummate a
Change of Control Offer after the occurrence of a Change of Control or make and
consummate a Net Proceeds Offer with respect to any Asset Sale that has been
consummated or modify any of the provisions or definitions with respect thereto;
(vii) modify or change any provision of the Indenture or the related definitions
affecting the subordination or ranking of the Notes or any Guarantee in a manner
which adversely affects the Holders; or (viii) release any Guarantor from any of
its obligations under its Guarantee or the Indenture otherwise than in
accordance with the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it, the Notes and any Guarantees will be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be required
thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it by the Indenture, and use the same
degree of care and skill in its exercise as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
Trustee will be permitted to engage in other transactions; provided that if the
Trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or
at the time it merges or consolidates with the Company or any of the Restricted
Subsidiaries or assumed in connection with the acquisition of assets from such
Person and in each case not incurred by such Person in connection with, or in
anticipation or contemplation of, such Person becoming a Restricted Subsidiary
or such acquisition, merger or consolidation.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting
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securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative of the foregoing.
"Affiliate Transaction" has the meaning set forth under "-- Certain
Covenants -- Limitation on Transactions with Affiliates."
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary, or shall be merged with or into the Company or
any Restricted Subsidiary, or (b) the acquisition by the Company or any
Restricted Subsidiary of the assets of any Person (other than a Restricted
Subsidiary) which constitute all or substantially all of the assets of such
Person or comprises any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary course
of business), assignment or other transfer for value by the Company or any of
the Restricted Subsidiaries (including any Sale and Leaseback Transaction) to
any Person other than the Company or a Restricted Subsidiary of (a) any Capital
Stock of any Restricted Subsidiary; or (b) any other property or assets of the
Company or any Restricted Subsidiary other than in the ordinary course of
business; provided, however, that Asset Sales shall not include (i) a
transaction or series of related transactions for which the Company or the
Restricted Subsidiaries receive aggregate consideration of less than $1.0
million and (ii) the sale, lease, conveyance, disposition or other transfer of
all or substantially all of the assets of the Company as permitted by the
covenant described under "-- Certain Covenants -- Merger, Consolidation and Sale
of Assets."
"Blockage Period" has the meaning set forth under "-- Subordination."
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to any
Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
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 Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any bank organized under the laws of
the United States of America or any state thereof or the District of Columbia or
any U.S. branch of a foreign bank having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000; (v) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and
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(vi) investments in money market funds which invest substantially all their
assets in securities of the types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group"), together with any Affiliates thereof (whether
or not otherwise in compliance with the provisions of the Indenture); (ii) the
approval by the holders of Capital Stock of the Company of any plan or proposal
for the liquidation or dissolution of the Company (whether or not otherwise in
compliance with the provisions of the Indenture); or (iii) any Person or Group
(other than the Permitted Holder(s)) shall become the beneficial owner, directly
or indirectly, of shares representing more than 50% of the aggregate ordinary
voting power represented by the issued and outstanding Capital Stock of the
Company.
"Change of Control Offer" has the meaning set forth under "-- Change of
Control."
"Change of Control Payment Date" has the meaning set forth under "-- Change
of Control."
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, with respect to the Company, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes
and tax expense under the Michigan Single Business Tax of the Company and the
Restricted Subsidiaries paid or accrued in accordance with GAAP for such period
(other than income taxes attributable to extraordinary, unusual or nonrecurring
gains or losses or taxes attributable to sale or dispositions outside the
ordinary course of business), (B) Consolidated Interest Expense, (C)
Consolidated Non-cash Charges, (D) the amount of Permitted Tax Payments made
during such period and (E) compensation expense of the Company during fiscal
1998 under the Company's deferred compensation agreements not to exceed $1.4
million, less any non-cash items increasing Consolidated Net Income for such
period, all as determined on a consolidated basis for the Company and the
Restricted Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to the
Company, the ratio of Consolidated EBITDA of the Company during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
the Company for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of the Company or any of the Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter period and (ii) any
Asset Sales or other disposition or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company or one of the Restricted Subsidiaries
(including any person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any Consolidated EBITDA (provided that such
Consolidated EBITDA shall be included only to the extent includable pursuant to
the definition of "Consolidated Net Income" attributable to the assets which are
the subject of the Asset Acquisition or Asset Sale or other disposition during
the Four Quarter Period) occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date as if such
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Asset Sale or other disposition or Asset Acquisition (including the incurrence,
assumption or liability for any such Acquired Indebtedness) occurred on the
first day of the Four Quarter Period. For purposes of clause (ii) of the
immediately preceding sentence, in calculating the effect of any such Asset
Acquisition or Asset Sale or other disposition, the Company may include in any
such calculation reasonable cost savings which the Company believes in good
faith will be achieved as a result of any such Asset Acquisition or Asset Sale
or other disposition. If the Company or any of the Restricted Subsidiaries
directly or indirectly guarantees Indebtedness of a third Person, the preceding
sentence shall give effect to the incurrence of such guaranteed Indebtedness as
if the Company or any Restricted Subsidiary had directly incurred or otherwise
assumed such guaranteed Indebtedness. Furthermore, in calculating "Consolidated
Fixed Charges" for purposes of determining the denominator (but not the
numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on
outstanding Indebtedness determined on a fluctuating basis as of the Transaction
Date and which will continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
"Consolidated Fixed Charges" means, with respect to the Company for any
period, the sum, without duplication, of (i) Consolidated Interest Expense, plus
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of the Company (other than dividends paid in Qualified Capital
Stock) 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
income tax rate of the Company, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to the Company for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of the Company and the Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount (other than any such
amortization relating to Indebtedness repaid on the Issue Date), (b) the net
costs under Interest Swap Obligations, (c) all capitalized interest and (d) the
interest portion of any deferred payment obligation; 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, with respect to the Company, for any
period, the aggregate net income (or loss) of the Company and the Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
and losses from Asset Sales or abandonments or reserves relating thereto, (b)
extraordinary or nonrecurring gains, (c) the net income of any Person acquired
in a "pooling of interests" transaction accrued prior to the date it becomes a
Restricted Subsidiary or is merged or consolidated with the Company or any
Restricted Subsidiary, (d) the net income (but not loss) of any Restricted
Subsidiary to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is restricted by a
contract, operation of law or otherwise, (e) the net income of any Person, other
than a Restricted Subsidiary, except to the extent of cash dividends or
distributions paid to the Company or to a Restricted Subsidiary by such person,
(f) any restoration to income of any contingency reserve, except to the extent
that provision for such reserve was made out of Consolidated Net Income accrued
at any time following the Issue Date or to the extent that all such restorations
after the Issue Date do not exceed $250,000 in the aggregate, (g) income or loss
attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued), (h) the amount of Permitted Tax Payments made
during such period, (i) non-cash expenses relating to a conversion of the
Company to a subchapter C corporation for U.S. federal income tax purposes not
to exceed $4.0 million and (j) in the case
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of a successor to the Company by consolidation or merger or as a transferee of
the Company's assets, any earnings of the successor corporation prior to such
consolidation, merger or transfer of assets.
"Consolidated Non-cash Charges" means, with respect to the Company, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
the Company and the Restricted Subsidiaries reducing Consolidated Net Income of
the Company for such period, determined on a consolidated basis in accordance
with GAAP (excluding any such charge which requires an accrual of or a reserve
for cash charges for any future period).
"Covenant Defeasance" has the meaning set forth under "-- Legal Defeasance
and Covenant Defeasance."
"Credit Agreement" means the Credit Agreement dated as of the Issue Date,
among the Company, the Guarantors, the lenders party thereto in their capacities
as lenders thereunder and Comerica Bank, as agent, together with the related
documents thereto (including, without limitation, any guarantee agreements and
security documents), in each case as such agreements may be amended (including
any amendment and restatement thereof), supplemented or otherwise modified from
time to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including increasing the amount of
available borrowings thereunder (provided that such increase in borrowings is
permitted by the covenant described under "-- Certain Covenants -- Limitation on
Incurrence of Additional Indebtedness") or adding Restricted Subsidiaries as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"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 against fluctuations in currency values.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice of both would be, an Event of Default.
"Default Notice" has the meaning set forth under "-- Subordination."
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Credit Agreement and (ii) any other Indebtedness constituting Senior Debt which,
at the time of determination, has an aggregate principal amount of at least
$10,000,000 and is specifically designated in the instrument evidencing such
Senior Debt as "Designated Senior Debt" by the Company.
"Designation" has the meaning set forth under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries."
"Designation Amount" has the meaning set forth under "-- Certain
Covenants -- Limitations on Designations of Unrestricted Subsidiaries."
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is mandatorily exchangeable for Indebtedness, or is redeemable, or exchangeable
for Indebtedness, at the sole option of the holder thereof on or prior to the
final maturity date of the Notes.
"Domestic Wholly Owned Restricted Subsidiary" means a Wholly Owned
Restricted Subsidiary incorporated or otherwise organized or existing under the
laws of the United States, any state thereof or any territory or possession of
the United States.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"Existing Agreements" means the following agreements as amended and in
effect on the Issue Date: (i) Agreement dated July 1, 1997 between the Company
and Talon L.L.C. pursuant to which Talon L.L.C.
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provides certain administrative and consulting services to the Company in
exchange for an annual fee equal to $500,000; (ii) Agreement dated the Issue
Date pursuant to which the Company provides certain administrative and
consulting services to G&L Industries, Inc.; (iii) Leases between the Company
and Dude Investments L.L.C. and Dude Investments dated September 30, 1996, as
amended; (iv) Leases between the Company and Maria Veltri dated August 1, 1994,
as amended, and July 1, 1993, as amended, including Option to Purchase dated
November 8, 1996; (v) Stock Purchase Agreement dated November 8, 1996 among
Veltri Metal Products Co., the Company's subsidiary, and Michael T.J. Veltri,
individually and as trustee u/a/d December 17, 1992, and Maria Veltri, and all
documents executed pursuant thereto, including, without limitation, that certain
Subordination Agreement, Memorandum of Agreement, Agreements Not to Compete,
Security Agreements, General Security Agreements, Debentures, Promissory Note by
Veltri Metal Products Co. in the amount of $658,325 in favor of Michael Veltri,
Unconditional Guaranty by Veltri Holdings USA, Inc.; and (vi) Purchase Agreement
dated September 30, 1996 among the Company, J&R Manufacturing, Inc., Roger H.
DuCoffre and Theodore H. Dezenski, and all documents executed pursuant thereto.
"Fair market value" means, with respect to any asset or property, the price
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 whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accounts and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting profession
of the United States, which are in effect as of the Issue Date.
"Guarantee" has the meaning set forth under "-- Certain
Covenants -- Issuance of Subsidiary Guarantees."
"Guarantor" means (i) each Subsidiary of the Company as of the Issue Date
and (ii) each other Person that in the future executes a Guarantee pursuant to
the covenant described under "-- Certain Covenants -- Issuance of Subsidiary
Guarantees" or otherwise; provided that any Person constituting a Guarantor as
described above shall cease to constitute a Guarantor when its Guarantee is
released in accordance with the terms of the Indenture.
"Guarantor Senior Debt" means, with respect to any Guarantor, (i) the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of such Guarantor,
whether outstanding on the Issue Date or thereafter created, incurred or
assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Guarantee of such Guarantor. Without limiting the generality of
the foregoing, "Guarantor Senior Debt" shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the documentation
with respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of, (x) all Interest
Swap Obligations, (y) all obligations under Currency Agreements and (z) Veltri
Indebtedness, in each case whether outstanding on the Issue Date or thereafter
incurred. Notwithstanding the foregoing (except with respect to Veltri
Indebtedness), "Guarantor Senior Debt" shall not include (i) any Indebtedness of
such Guarantor owing to a Subsidiary of such Guarantor or any Affiliate of such
Guarantor or any of such Affiliate's Subsidiaries, (ii) Indebtedness to, or
guaranteed on behalf of, any shareholder, director, officer or employee of such
Guarantor or any Subsidiary of such Guarantor (including, without limitation,
amounts owed for compensation), (iii) Indebtedness to trade creditors and other
amounts incurred in connection with obtaining goods, materials or services, (iv)
Indebtedness represented by Disqualified Capital Stock, (v) any liability for
federal, state, local or other taxes owed or owing by such Guarantor, (vi)
Indebtedness incurred in violation of the covenant described
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under "-- Certain Covenants -- Limitation on Incurrence of Additional
Indebtedness", (vii) Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of Title 11, United States Code, is without
recourse to such Guarantor, and (viii) any Indebtedness which is, by its express
terms, subordinated in right of payment to any other Indebtedness of such
Guarantor.
"incur" has the meaning set forth under "-- Certain Covenants -- Limitation
on Incurrence on Additional Indebtedness."
"Indebtedness" means, with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all Capitalized Lease Obligations of such Person, (iv) all Obligations of such
Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all Obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any Lien on any property or asset
of such Person, the amount of such Obligation being deemed to be the lesser of
the fair market value of such property or asset or the amount of the Obligation
so secured, (viii) all Obligations under currency agreements and interest swap
agreements of such Person and (ix) all Disqualified Capital Stock issued by such
Person with the amount of Indebtedness represented by such Disqualified Capital
Stock being equal to the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding accrued
dividends, if any. For purposes hereof, the "maximum fixed repurchase price" of
any Disqualified Capital Stock which does not have a fixed repurchase price
shall be calculated in accordance with the terms of such Disqualified Capital
Stock as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to the Indenture, and
if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be determined
reasonably and in good faith by the Board of Directors of the issuer of such
Disqualified Capital Stock. "Indebtedness," shall not be deemed to include
customary indemnity obligations of the Company or a Restricted Subsidiary
incurred in connection with an Asset Sale.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees and Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Initial Purchasers" means Salomon Brothers Inc and Credit Suisse First
Boston Corporation.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"Investment" means, with respect to any Person, (i) any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by the
Company and the Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. If the Company or any Restricted Subsidiary
sells or otherwise disposes of any Capital Stock of any Restricted Subsidiary
(the "Referent Subsidiary") such that, after giving effect to any such sale or
disposition the Referent Subsidiary shall cease to
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be a 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 the Capital Stock of the Referent Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the Notes.
"Legal Defeasance" has the meaning set forth under "-- Legal Defeasance and
Covenant Defeasance."
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents, including payments in respect of deferred
payment obligations, when received in the form of cash or Cash Equivalents
(other than the portion of any such deferred payment constituting interest)
received by the Company or any of the Restricted Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions), (b) taxes paid or payable after taking into
account any reduction in consolidated tax liability due to available tax credits
or deductions and any tax sharing arrangements, (c) repayments of Indebtedness
secured by the property or assets subject to such Asset Sale that is required to
be repaid in connection with such Asset Sale and (d) appropriate amounts to be
provided by the Company or any Restricted Subsidiary, as the case may be, as a
reserve, in accordance with GAAP, against any liabilities associated with such
Asset Sale and retained by the Company or any Restricted Subsidiary, as the case
may be, after 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.
"Net Proceeds Offer" has the meaning set forth under "-- Certain Covenants
- -- Limitation on Asset Sales."
"Net Proceeds Offer Amount" has the meaning set forth under "-- Certain
Covenants -- Limitation on Asset Sales."
"Net Proceeds Offer Payment Date" has the meaning set forth under "--
Certain Covenants -- Limitation on Asset Sales."
"Net Proceeds Offer Trigger Date" has the meaning set forth under "--
Certain Covenants -- Limitation on Asset Sales."
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Permitted Holders" means (i) Randolph J. Agley, Judith A. Agley, James R.
Agley, Joseph A. Agley, James J. Agley, Michael T. Timmis, Nancy E. Timmis,
Michael T.O. Timmis, Wayne C. Inman or Amelia P. Inman, (ii) any relative,
family member or any Person controlled by any of the persons listed in
subparagraph (i) above, (iii) any trust including, without limitation, a
charitable remainder trust, created by or for the benefit of any of the persons
listed in subparagraphs (i) or (ii) above and (iv) any private foundation
created by any of the persons listed in subparagraphs (i) or (ii) above.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Notes, the Indenture and any Guarantees not
to exceed $120,000,000 in the aggregate;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed the
greater of (x) $100,000,000, reduced by any required permanent repayments
with the proceeds of Asset Sales (which are accompanied by a corresponding
permanent commitment reduction) thereunder and (y) the sum of (a) 85% of
the net book value of accounts receivable of the Company and the Restricted
Subsidiaries, (b) 50% of the net book value of the
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inventory of the Company and the Restricted Subsidiaries, (c) 75% of the
fair market value of real estate and of the orderly liquidation value shown
in appraisals for fixed assets of the Company and the Restricted
Subsidiaries for which appraisals exist and (d) 65% of the net book value
of fixed assets of the Company and the Restricted Subsidiaries for which no
appraisals exist;
(iii) other Indebtedness of the Company and the 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 thereon;
(iv) Interest Swap Obligations of the Company covering Indebtedness of
the Company or any Guarantor and Interest Swap Obligations of any
Restricted Subsidiary covering Indebtedness of such Restricted Subsidiary;
provided, however, that such Interest Swap Obligations are entered into to
protect the Company and the Restricted Subsidiaries from fluctuations in
interest rates on Indebtedness incurred in accordance with the Indenture to
the extent the notional principal amount of such Interest Swap Obligations
does not exceed the principal amount of the Indebtedness to which such
Interest Swap Obligations relates;
(v) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and the
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;
(vi) Indebtedness of a Restricted Subsidiary to the Company, a
Guarantor or an Unleveraged Restricted Subsidiary for so long as such
Indebtedness is held by the Company, a Guarantor or an Unleveraged
Restricted Subsidiary, in each case subject to no Lien held by a Person
other than the Company, a Guarantor or an Unleveraged Restricted
Subsidiary; provided that if as of any date any Person other than the
Company, a Guarantor or an Unleveraged Restricted Subsidiary owns or holds
any such Indebtedness or holds a Lien in respect of such Indebtedness, such
date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Guarantor or an Unleveraged
Restricted Subsidiary for so long as such Indebtedness is held by a
Guarantor or an Unleveraged Restricted Subsidiary, in each case subject to
no Lien; provided that (a) any Indebtedness of the Company to any Guarantor
or Unleveraged Restricted Subsidiary is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations under the
Indenture and the Notes and (b) if as of any date any person other than a
Guarantor or Unleveraged Restricted Subsidiary owns or holds any such
Indebtedness or any Person holds a Lien in respect of such Indebtedness,
such date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the Company;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within five business days of incurrence;
(ix) Indebtedness of the Company or any of the 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;
(x) Refinancing Indebtedness;
(xi) Tooling Indebtedness;
(xii) Veltri Indebtedness (and any Indebtedness incurred to Refinance
any Veltri Indebtedness) not to exceed $15.0 million at any one time
outstanding;
(xiii) additional Indebtedness of the Company and the Guarantors in an
aggregate principal amount not to exceed $10.0 million at any one time
outstanding;
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(xiv) Purchase Money Indebtedness and Capitalized Lease Obligations
(and any Indebtedness incurred to Refinance such Purchase Money
Indebtedness or Capitalized Lease Obligations) not to exceed $15.0 million
at any one time outstanding; and
(xv) Indebtedness of Restricted Subsidiaries that are not Guarantors
in an aggregate principal amount not to exceed $5.0 million at any one time
outstanding.
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary in any Person that is or will become immediately after
such Investment a Guarantor or an Unleveraged Restricted Subsidiary or that will
merge or consolidate into the Company or a Guarantor or an Unleveraged
Restricted Subsidiary; (ii) investments in the Company by any Restricted
Subsidiary; provided that any Indebtedness evidencing such Investment is
unsecured and subordinated, pursuant to a written agreement, to the Company's
obligations under the Notes and the Indenture; (iii) investments in cash and
Cash Equivalents; (iv) loans and advances to employees and officers of the
Company and the Restricted Subsidiaries in the ordinary course of business for
bona fide business purposes not in excess of $1.0 million at any time
outstanding; (v) Currency Agreements and Interest Swap Obligations entered into
in the ordinary course of the Company's or a Restricted Subsidiary's businesses
and otherwise in compliance with the Indenture; (vi) Investments in Restricted
Subsidiaries that are not Guarantors or Unleveraged Restricted Subsidiaries not
to exceed $5.0 million at any one time outstanding; (vii) Investments in
securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers; (viii) Investments made by the Company or the
Restricted Subsidiaries as a result of consideration received in connection with
an Asset Sale made in compliance with the covenant described under "-- Certain
Covenants -- Limitation on Asset Sales"; and (ix) Investments in Persons,
including, without limitation, Unrestricted Subsidiaries and joint ventures,
engaged in a business similar or related to the businesses in which the Company
and the Restricted Subsidiaries are engaged on the Issue Date not to exceed
$10.0 million at any one time outstanding.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or the Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP, shall have been made in
respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with 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
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceeds which may
have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of the Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
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(vii) purchase money Liens securing Indebtedness to finance property
or assets of the Company or any Restricted Subsidiary acquired in the
ordinary course of business, and Liens securing Indebtedness which
Refinances any such Indebtedness; provided, however, that (A) the related
purchase money Indebtedness (or Refinancing Indebtedness) shall not exceed
the cost of such property or assets and shall not be secured by any
property assets of the Company or any Restricted Subsidiary other than the
property and assets so acquired and (B) the Lien securing the purchase
money Indebtedness shall be created within 90 days of such acquisition;
(viii) 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;
(ix) 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;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of the Company
or any of the Restricted Subsidiaries, including rights of offset and
set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations related to Indebtedness that is otherwise permitted under the
Indenture;
(xii) Liens securing Indebtedness under Currency Agreement; and
(xiii) Liens securing Acquired Indebtedness (and any Indebtedness
which Refinances such Acquired Indebtedness) incurred in accordance with
the covenant described under "-- Certain Covenants -- Limitation on
Incurrence of Additional Indebtedness"; provided that (A) such Liens
secured the Acquired Indebtedness at the time of and prior to the
incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary and were not granted in connection with, or in anticipation of
the incurrence of such Acquired Indebtedness by the Company or a Restricted
Subsidiary and (B) such Liens do not extend to or cover any property or
assets of the Company or of any of the Restricted Subsidiaries other than
the property or assets that secured the Acquired Indebtedness prior to the
time such Indebtedness became Acquired Indebtedness of the Company or a
Restricted Subsidiary.
"Permitted Tax Payments" means distributions to the stockholders of the
Company to reimburse them for federal and state income taxes at the maximum
applicable individual tax rate attributable to the income of the Company for any
tax period during which the Company is not a taxable entity for federal or
state, as the case may be, income tax purposes.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Public Equity Offering" has the meaning set forth under "-- Redemption --
Optional Redemption upon Public Equity Offerings."
"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 construction or improvement of any property,
provided 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.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Reference Date" has the meaning set forth under "-- Certain Covenants --
Limitation on Restricted Payments."
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"Refinance" means in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of Indebtedness incurred in accordance with the covenant
described under "-- Certain Covenants -- Limitation on Incurrence of Additional
Indebtedness" (other than pursuant to clause (ii), (iv), (v), (vi), (vii),
(viii), (ix), (xi), (xii), (xiii), (xiv) or (xv) of the definition of Permitted
Indebtedness), in each case that does not (1) result in an increase in the
aggregated principal amount of any Indebtedness of such Person as of the date of
such proposed Refinancing (plus the amount of any premium required to be paid
under the terms of the instrument governing such Indebtedness and plus the
amount of reasonable expenses incurred by the Company in connection with such
Refinancing) or (2) create Indebtedness with (A) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or (B) a final maturity earlier than the final
maturity of the Indebtedness being Refinanced; provided that if such
Indebtedness being Refinanced is Indebtedness of the Company or a Guarantor,
then such Refinancing Indebtedness shall be Indebtedness solely of the Company
and/or Guarantors.
"Registration Rights Agreement" means the Registration Rights Agreement
dated the Issue Date among the Company, the Guarantors and the Initial
Purchasers.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt: provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
stockholders of a majority in outstanding principal amount of such Designated
Senior Debt in respect of any Designated Senior Debt.
"Restricted Payment" has the meaning set forth under "-- Certain Covenants
- -- Limitations on Restricted Payments."
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a Board Resolution
delivered to the Trustee, as an Unrestricted Subsidiary pursuant to and in
compliance with the covenant described under "-- Certain Covenants -- Limitation
on Designations of Unrestricted Subsidiaries." Any such Designation may be
revoked by a Board Resolution of the Company delivered to the Trustee, subject
to the provisions of such covenant.
"Revocation" has the meaning set forth under "-- Certain Covenants --
Limitation on Designations of Unrestricted Subsidiaries."
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Senior Debt" shall also include the principal of, premium, if
any, interest (including any interest accruing subsequent to the filing of a
petition of bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of, (w) all monetary
obligations of every nature of the Company under the Credit Agreement,
including, without limitation, obligations to pay principal and interest
reimbursement obligations under letters of credit, fees, expenses and
indemnities, (x) all
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Interest Swap Obligations, (y) all obligations under Currency Agreements, and
(z) the Veltri Indebtedness, in each case whether outstanding on the Issue Date
or thereafter incurred. Notwithstanding the foregoing (except with respect to
Veltri Indebtedness), "Senior Debt" shall not include (i) any Indebtedness of
the Company to a Restricted Subsidiary or any Affiliate of the Company or any of
such Affiliate's Subsidiaries, (ii) Indebtedness to, or guaranteed on behalf of,
any shareholder, director, officer or employee of the Company or any Restricted
Subsidiary (including without limitation, amounts owed for compensation), (iii)
Indebtedness to trade creditors and other amounts incurred in connection with
obtaining goods, materials or services, (iv) Indebtedness represented by
Disqualified Capital Stock, (v) any liability for federal, state, local or other
taxes owned by the Company, (vi) Indebtedness incurred in violation of the
covenant described under "-- Certain Covenants -- Limitation on Incurrence of
Additional Indebtedness", (vii) Indebtedness which, when incurred and without
respect to any election under Section 1111(b) of Title 11, United States Code,
is without recourse to the Company and (viii) any Indebtedness which is, by its
express terms, subordinated in right of payment to any other Indebtedness of the
Company.
"Subsidiary," with respect to any Person, means (i) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (ii) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Tooling Indebtedness" means all present and future Indebtedness of the
Company and any Restricted Subsidiary the proceeds of which are utilized to
finance dies, molds, tooling and similar items (collectively, "Tooling") for
which sales of such Tooling is covered under specific written purchase orders or
agreements between the Company or any Restricted Subsidiary and the purchaser of
such Tooling.
"Surviving Entity" has the meaning set forth under "-- Certain Covenants --
Merger, Consolidation and Sale of Assets."
"Unleveraged Restricted Subsidiary" means a Restricted Subsidiary that has
no Indebtedness outstanding (other than Indebtedness owned to the Company, a
Guarantor or another Unleveraged Restricted Subsidiary).
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such pursuant to and in compliance with the covenant described under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries." Any such
designation may be revoked by a Board Resolution of the Company delivered to the
Trustee, subject to the provisions of such covenant.
"Veltri Indebtedness" means Indebtedness owing to Michael T.J. Veltri,
individually and/or as trustee u/a/d December 17, 1992, pursuant to (a) that
certain Stock Purchase Agreement dated November 8, 1996, (b) that certain
Employment Agreement dated November 8, 1996, (c) that certain Promissory Note
dated November 8, 1996 in the amount of $658,325, and (d) those certain Security
Agreements, General Security Agreements and Debentures dated November 8, 1996,
all as amended through the Issue Date.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other requirement payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date the making of such payment.
"Wholly Owned Restricted Subsidiary" of the Company means any Restricted
Subsidiary of which all the outstanding voting securities (other than in the
case of a foreign Restricted Subsidiary, directors' qualifying shares or an
immaterial amount of shares required to be owned by other Persons pursuant to
applicable law) are owned by the Company or any Wholly Owned Restricted
Subsidiary.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
RELATING TO THE EXCHANGE OFFER
The following summary of the material anticipated federal income tax
consequences of the issuance of New Notes and the Exchange Offer is based upon
the provisions of the Internal Revenue Code of 1986, as amended, the final,
temporary and proposed regulations promulgated thereunder, and administrative
rulings and judicial decisions now in effect, all of which are subject to change
(possibly with retroactive effect) or different interpretations. The following
summary is not binding on the Internal Revenue Service ("IRS") and there can be
no assurance that the IRS will take a similar view with respect to the tax
consequences described below. No ruling has been or will be requested by the
Company from the IRS on any tax matters relating to the New Notes or the
Exchange Offer. This discussion is for general information only and does not
purport to address all of the possible federal income tax consequences or any
state, local or foreign tax consequences of the acquisition, ownership and
disposition of the Old Notes, the New Notes or the Exchange Offer. It is limited
to investors who will hold the Old Notes and the New Notes as capital assets and
does not address the federal income tax consequences that may be relevant to
particular investors in light of their unique circumstances or to certain types
of investors (such as dealers in securities; insurance companies; financial
institutions; foreign corporations; partnerships; trusts; nonresident
individuals; and tax-exempt entities) who may be subject to special treatment
under federal income tax laws.
INDEBTEDNESS
The Old Notes and the New Notes should be treated as indebtedness of the
Company. In the unlikely event the Old Notes or the New Notes were treated as
equity, the amount treated as a distribution on any such Old Note or New Note
would first be taxable to the holder as dividend income to the extent of the
Company's current and accumulated earnings and profits, and would next be
treated as a return of capital to the extent of the holder's tax basis in the
Old Notes or New Notes, with any remaining amount treated as a gain from the
sale of an Old Note or a New Note. In addition, in the event of equity
treatment, amounts received in retirement of an Old Note or a New Note might in
certain circumstances be treated as a dividend, and the Company could not deduct
amounts paid as interest on such Old Notes or New Notes. The remainder of this
discussion assumes that the Old Notes and the New Notes will constitute
indebtedness.
EXCHANGE OFFER
The exchange of the Old Notes for New Notes pursuant to the Exchange Offer
should not be treated as an "exchange" because the New Notes should not be
considered to differ materially in kind or extent from the Old Notes. Rather,
the New Notes received by a holder of the Old Notes should be treated as a
continuation of the Old Notes in the hands of such holder. As a result, there
should be no federal income tax consequences to holders exchanging the Old Notes
for the New Notes pursuant to the Exchange Offer.
INTEREST
A holder of an Old Note or a New Note will be required to report stated
interest on the Old Note and the New Note as interest income in accordance with
the holder's method of accounting for tax purposes. Because the Old Notes were
issued at 100.00% of par there is no original issue discount pursuant to the de
minimis exception to the "original issue discount" rules.
TAX BASIS IN OLD NOTES AND NEW NOTES
A holder's tax basis in an Old Note will be the holder's purchase price for
the Old Note. If a holder of an Old Note exchanges the Old Note for a New Note
pursuant to the Exchange Offer, the tax basis of the New Note immediately after
such exchange should equal the holder's tax basis in the Old Note immediately
prior to the exchange.
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<PAGE> 95
DISPOSITION OF OLD NOTES OR NEW NOTES
The sale, exchange, redemption or other disposition of an Old Note or a New
Note, except in the case of an exchange pursuant to the Exchange Offer (see the
above discussion), generally will be a taxable event. A holder generally will
recognize gain or loss equal to the difference between (i) the amount of cash
plus the fair market value of any property received upon such sale, exchange,
redemption or other taxable disposition of the Old Note or the New Note (except
to the extent attributable to accrued interest) and (ii) the holder's adjusted
tax basis in such debt instrument. Such gain or loss will be capital gain or
loss, and will be long term if the Old Notes have been held for more than one
year at the time of the sale or other disposition.
PURCHASERS OF OLD NOTES AT OTHER THAN ORIGINAL ISSUANCE PRICE
The foregoing does not discuss special rules which may affect the treatment
of purchasers that acquired Old Notes other than at par, including those
provisions of the Internal Revenue Code relating to the treatment of "market
discount," and "amortizable bond premium." Any such purchaser should consult its
tax advisor as to the consequences to him of the acquisition, ownership, and
disposition of Old Notes.
BACKUP WITHHOLDING
Unless a holder provides its correct taxpayer identification number
(employer identification number or social security number) to the Company and
certifies that such number is correct, generally under the federal income tax
backup withholding rules, 31% of (1) the interest paid on the Old Notes and the
New Notes, and (2) proceeds of sale of the Old Notes and the New Notes, must be
withheld and remitted to the United States Treasury. Therefore, each holder
should complete and sign the Substitute Form W-9 included so as to provide the
information and certification necessary to avoid backup withholding. However,
certain holders (including, among others, certain foreign individuals) are not
subject to these backup withholding and reporting requirements. For a foreign
individual to qualify as an exempt foreign recipient, that exchanging holder
must submit a statement, signed under penalties of perjury, attesting to that
individual's exempt foreign status. Such statements can be obtained from the
Company. For further information concerning backup withholding and instructions
for completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the Substitute
Form W-9 if the Old Notes are held in more than one name), contact the Company
at 900 Wilshire Drive, Suite 203, Troy, Michigan 48084 or telephone number
248-362-7600.
Backup withholding is not an additional federal income tax. Rather, the
federal income tax liability of a person subject to withholding will be reduced
by the amount of tax withheld. If withholding results in an overpayment of
taxes, a refund may be obtained from the IRS.
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<PAGE> 96
OLD NOTES; REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement, the Company agreed to file
with the Commission the Exchange Offer Registration Statement on the appropriate
form under the Securities Act with respect to an offer to exchange the Old Notes
for the New Notes. Upon the effectiveness of the Exchange Offer Registration
Statement, the Company will offer to the holders of Old Notes who are able to
make certain representations the opportunity to exchange their Old Notes for New
Notes. If (i) the Company is not permitted to file the Exchange Offer
Registration Statement or to consummate the Exchange Offer because the Exchange
Offer is not permitted by applicable law or Commission policy or (ii) any holder
of Old Notes notifies the Company within the specified time period that (A) due
to a change in law or policy it is not entitled to participate in the Exchange
Offer, (B) due to a change in law or policy it may not resell the New Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such holder or (C)
it is a broker-dealer and owns Old Notes acquired directly from the Company or
an affiliate of the Company, the Company will file with the Commission the Shelf
Registration Statement to cover resales of the Transfer Restricted Notes (as
defined) by the holders thereof. The Company will use its best efforts to cause
the applicable registration statement to be declared effective as promptly as
possible by the Commission. For purposes of the foregoing, "Transfer Restricted
Notes" means each Old Note until (i) the date on which such Old Note has been
exchanged by a person other than a broker-dealer for a New Note in the Exchange
Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of
an Old Note for a New Note, the date on which such New Note is sold to a
purchaser who receives from such broker-dealer on or prior to the date of such
sale a copy of the prospectus contained in the Exchange Offer Registration
Statement, (iii) the date on which such Old Note has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Old Note is distributed to
the public pursuant to Rule 144 under the Securities Act.
Under existing Commission interpretations, the New Notes would, in general,
be freely transferable after the Exchange Offer without further registration
under the Securities Act; provided that in the case of broker-dealers
participating in the Exchange Offer, a prospectus meeting the requirements of
the Securities Act will be delivered upon resale by such broker-dealer in
connection with resales of the New Notes. The Company has agreed, for a period
of 180 days after consummation of the Exchange Offer, to make available a
prospectus meeting the requirements of the Securities Act to any such
broker-dealer for use in connection with any resale of any New Notes acquired in
the Exchange Offer. A broker-dealer which delivers such a prospectus to
purchasers in connection with such resales will be subject to certain of the
civil liability provisions under the Securities Act and will be bound by the
provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations).
Each holder of the Old Notes who wishes to exchange such Old Notes for New
Notes in the Exchange Offer will be required to make certain representations,
including representations that (i) any New Notes to be received by it will be
acquired in the ordinary course of its business, (ii) it has no arrangement with
any person to participate in the distribution of the New Notes and (iii) it is
not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company
or, if it is an affiliate, it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
New Notes. If the holder is a broker-dealer that will receive New Notes for its
own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes.
The Registration Rights Agreement provides that: (i) unless the Exchange
Offer would not be permitted by applicable law or Commission policy, the Company
will file an Exchange Offer Registration Statement with the Commission on or
prior to 60 days after the date of original issuance of the Old Notes (the
"Issue Date"), (ii) unless the Exchange Offer would not be permitted by
applicable law or Commission policy, the Company will use its best efforts to
have the Exchange Offer Registration Statement declared effective by the
93
<PAGE> 97
Commission on or prior to 150 days after the Issue Date, (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company will commence the Exchange Offer and use its best efforts to issue,
on or prior to 20 business days after the date on which the Exchange Offer
Registration Statement was declared effective by the Commission, New Notes in
exchange for all Notes tendered prior thereto in the Exchange Offer and (iv) if
obligated to file the Shelf Registration Statement, the Company will file the
Shelf Registration Statement prior to the later of (w) 60 days after the Issue
Date or (x) 30 days after such filing obligation arises, and use its best
efforts to cause the Shelf Registration Statement to be declared effective by
the Commission prior to (y) the later of 150 days after the Issue Date or (z) 90
days after such obligation arises; provided that if the Company has not
consummated the Exchange Offer within 180 days of the Issue Date, then the
Company will, upon the request of any holder of Notes, file the Shelf
Registration Statement with the Commission on or prior to the 181st day after
the Issue Date. The Company shall use its best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended until
the second anniversary of the Issue Date or such shorter period that will
terminate when all the Transfer Restricted Notes covered by the Shelf
Registration Statement have been sold pursuant thereto. If (a) the Company fails
to file any of the registration statements required by the Registration Rights
Agreement on or before the date specified for such filing, (b) any of such
registration statements are not declared effective by the Commission on or prior
to the date specified for such effectiveness (the "Effectiveness Target Date"),
(c) the Company fails to consummate the Exchange Offer within 20 business days
of the Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but, thereafter, subject to certain
exceptions, ceases to be effective or usable in connection with the Exchange
Offer or resales of Transfer Restricted Notes, as the case may be, during the
periods specified in the Registration Rights Agreement (each such event referred
to in clauses (a) through (d) above, a "Registration Default"), then the
interest rate on Transfer Restricted Notes will increase ("Additional
Interest"), with respect to the first 90-day period immediately following the
occurrence of such Registration Default by 0.50% per annum and will increase by
an additional 0.50% per annum with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of 1.50%
per annum. Following the cure of all Registration Defaults, the accrual of
Additional Interest will cease and the interest rate will revert to the original
rate.
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 reference to, all 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 is a part.
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<PAGE> 98
BOOK ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, the New Note initially will be
represented by a single, permanent global certificate in definitive, fully
registered form (the "Global Note"). The Global Note will be deposited with, or
on behalf of, DTC and registered in the name of a nominee of DTC.
Notes (i) originally purchased by or transferred to "foreign purchasers"
who are not QIBs or (ii) held by QIBs who elect to take physical delivery of
their certificates instead of holding their interest through the Global Note
(and which are thus ineligible to trade through DTC) (collectively referred to
herein as the "Non-Global Purchasers") will be issued in registered certificated
form ("Certificated Securities"). Upon the transfer to a QIB of any Certificated
Security initially issued to a Non-Global Purchaser, such Certificated Security
will, unless the transferee requests otherwise or the Global Note has previously
been exchanged in whole for Certificated Securities, be exchanged for an
interest in the Global Note.
THE GLOBAL NOTE
The Company expects that pursuant to procedures established by DTC (i) upon
the issuance of the Global Note, DTC or its custodian will credit, on its
internal system, the principal amount of Notes of the individual beneficial
interest represented by such Global Note to the respective accounts for persons
who have accounts with DTC and (ii) ownership of beneficial interest in the
Global Note will be shown on, and the transfer of such ownership will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants). Such accounts initially will be
designated by or on behalf of the Initial Purchasers and ownership of beneficial
interests in the Global Note will be limited to persons who have accounts with
DTC ("participants") or persons who hold interest through participants. QIBs
hold their interests in the Global Note directly through DTC, if they are
participants in such system, or indirectly through organizations which are
participants in such system.
So long as DTC or its nominee is the registered owner or holder of the New
Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the New Notes represented by such Global Note for all
purposes under the Indenture. No beneficial owner of an interest in any Global
Note will be able to transfer that interest except in accordance with DTC's
procedures, in addition to those provided for under the Indenture.
Payments of the principal of, premium, if any, and interest (including
Additional Interest) on, the Global Note will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company, the
Trustee or any paying agent of the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest (including Additional Interest) in
respect of the Global Note, will credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the Global Note as shown on the records of DTC or its nominee. The
Company also expects that payments by participants to owners of beneficial
interest in the Global Note held through such participants will be governed by
standing instructions and customary practice, as is now the case with securities
held for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in clearinghouse funds. If a
holder requires physical delivery of a Certificated Security for any reason,
including to sell Notes to persons in states which require physical delivery of
the Certificated Securities, or to pledge such securities, such holder must
transfer its interest in the Global Note in accordance with the normal
procedures of DTC and with the procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of New Notes (including the presentation of New Notes for
exchange as described below) only at the direction of one
95
<PAGE> 99
or more participants to whose account the DTC interests in the Global Note are
credited and only in respect of such portion of the aggregate principal amount
of Notes as to which such participant or participants has or have given such
direction. However, if there is an Event of Default under the Indenture, DTC
will exchange the Global Note for Certificated Securities, which it will
distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. None of the Company, the Initial Purchasers or the
Trustee will have any responsibility for the performance by DTC or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
CERTIFICATED SECURITIES
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Note and a successor depositary is not appointed by the Company
within 90 days, Certificated Securities will be issued in exchange for the
Global Note.
PLAN OF DISTRIBUTION
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Company believes that New Notes issued pursuant to the
Exchange Offer in exchange for the Old Notes may be offered for resale, resold
and otherwise transferred by holders thereof (other than any holder which is (i)
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, (ii) a broker-dealer who acquired Notes directly from the
Company or (iii) broker-dealers who acquired Notes as a result of market-making
or other trading activities) 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 holders' business, and such
holders are not engaged in, and do not intend to engage in, and have no
arrangement or understanding with any person to participate in, a distribution
of such New Notes; provided that broker-dealers ("Participating Broker-Dealers")
receiving New Notes in the Exchange Offer will be subject to a prospectus
delivery requirement with respect to resales of such New Notes. To date, the
Staff has taken the position that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to transactions involving an
exchange of securities such as the exchange pursuant to the Exchange Offer
(other than a resale of an unsold allotment from the sale of the Old Notes to
the Initial Purchasers) with the Prospectus contained in the Exchange Offer
Registration Statement. Pursuant to the Registration Rights Agreement, the
Company has agreed to permit Participating Broker-Dealers and other persons, if
any, subject to similar prospectus delivery requirements to use this Prospectus
in connection with the resale of such New Notes. The Company and the Guarantors
have agreed that, for a period of 180 days after the Expiration Date, they will
make this Prospectus, and any amendment or supplement to this Prospectus,
available to any broker-dealer that requests such documents in the Letter of
Transmittal.
Each holder of the Old Notes who wishes to exchange its Old Notes for New
Notes in the Exchange Offer will be required to make certain representations to
the Company as set forth in "The Exchange Offer--Purpose and Effect of the
Exchange Offer." In addition, each holder who is a broker-dealer and who
receives New Notes for its own account in exchange for Old Notes that were
acquired by it as a result of market-
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<PAGE> 100
making activities or other trading activities, will be required to acknowledge
that it will deliver a prospectus in connection with any resale by it of such
New Notes.
The Company 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 at 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 or 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, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Old Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act, as set
forth in the Registration Rights Agreement.
LEGAL MATTERS
Certain legal matters with respect to the validity of the New Notes offered
hereby will be passed on by securities counsel to the Company, Dickinson Wright
PLLC, Detroit, Michigan.
EXPERTS
The combined financial statements of Talon Automotive Group as of December
31, 1997 and 1996 and for each of the three years in the period ended December
31, 1997, the financial statements of Production Stamping, Inc. as of June 30,
1997 and 1996 and for each of the three years in the period ended June 30, 1997
and the combined financial statements of the Veltri Group as of November 8, 1996
and for the period from January 1, 1996 to November 8, 1996 included in this
Prospectus have been audited by Ernst & Young L.L.P., independent auditors, as
set forth in their reports thereon appearing elsewhere herein, and are included
in reliance upon such reports given upon the authority of such firm as experts
in accounting and auditing.
The combined balance sheet of Veltri International as of December 31, 1995,
and the related combined statements of operations and accumulated deficit, and
cash flows for the year ended December 31, 1995, have been included herein and
in the registration statement in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.
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<PAGE> 101
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
TALON AUTOMOTIVE GROUP, INC.
Report of Independent Auditors.............................. F-2
Combined Statements of Operations for the Three Years Ended
December 31, 1997......................................... F-3
Combined Balance Sheets at December 31, 1997 and 1996....... F-4
Combined Statements of Changes in Shareholders' Equity for
the Three Years Ended December 31, 1997................... F-5
Combined Statements of Cash Flows for the Three Years Ended
December 31, 1997......................................... F-6
Notes to the Combined Financial Statements.................. F-7
Condensed Combined Interim Statements of Operations for the
Quarter Ended April 4, 1998 and 1997 (Unaudited).......... F-18
Condensed Combined Interim Balance Sheets as of April 4,
1998 and 1997 (Unaudited)................................. F-19
Condensed Combined Interim Statements of Cash Flows for the
Quarter Ended April 4, 1998 and 1997 (Unaudited).......... F-20
Condensed Combined Interim Statements of Changes in
Shareholders' Equity for the Quarter Ended April 4, 1998
(Unaudited)............................................... F-21
Notes to Condensed Combined Interim Financial Statements
(Unaudited)............................................... F-22
PRODUCTION STAMPING, INC.
Report of Independent Auditors.............................. F-24
Statements of Operations for the Three Years Ended June 30,
1997...................................................... F-25
Balance Sheets at June 30, 1997 and 1996.................... F-26
Statements of Changes in Stockholders' Equity for the Three
Years Ended June 30, 1997................................. F-27
Statements of Cash Flows for the Three Years Ended June 30,
1997...................................................... F-28
Notes to the Financial Statements........................... F-29
VELTRI GROUP
Report of Independent Auditors.............................. F-35
Combined Statement of Operations for the Period from January
1, 1996 to November 8, 1996............................... F-36
Combined Balance Sheet at November 8, 1996.................. F-37
Combined Statement of Changes in Net Capital Deficiency for
the Period from January 1, 1996 to November 8, 1996....... F-38
Combined Statement of Cash Flows for the Period from January
1, 1996 to November 8, 1996............................... F-39
Notes to Combined Financial Statements...................... F-40
VELTRI INTERNATIONAL
Independent Auditors Report................................. F-45
Combined Balance Sheet as of December 31, 1995.............. F-46
Combined Statement of Operations and Accumulated Deficit for
the Year Ended December 31, 1995.......................... F-47
Combined Statement of Cash Flows for the Year Ended December
31, 1995.................................................. F-48
Notes to Combined Financial Statements for the Year Ended
December 31, 1995......................................... F-49
</TABLE>
F-1
<PAGE> 102
REPORT OF INDEPENDENT AUDITORS
Boards of Directors and Shareholders
Talon Automotive Group
We have audited the accompanying combined balance sheets of Talon
Automotive Group as of December 31, 1997 and 1996, and the related combined
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of the companies' 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 combined financial position of Talon Automotive
Group at December 31, 1997 and 1996, and the combined results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Detroit, Michigan
March 20, 1998
F-2
<PAGE> 103
TALON AUTOMOTIVE GROUP
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales................................................... $158,718 $71,029 $56,835
Cost of sales............................................... 134,297 58,120 46,900
-------- ------- -------
Gross profit.............................................. 24,421 12,909 9,935
Operating expenses
Selling, general and administrative expenses.............. 16,241 8,490 6,041
Special compensation...................................... 1,343 -- --
-------- ------- -------
Income from operations................................. 6,837 4,419 3,894
Other expenses
Interest.................................................. 4,599 1,754 1,192
Foreign currency.......................................... 117 302 --
-------- ------- -------
4,716 2,056 1,192
-------- ------- -------
Income before income taxes.................................. 2,121 2,363 2,702
Provision for income taxes.................................. 1,325 94 --
-------- ------- -------
Net income............................................. $ 796 $ 2,269 $ 2,702
======== ======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE> 104
TALON AUTOMOTIVE GROUP
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
---- ----
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 1,233 $ 1,090
Accounts receivable, less allowance of $267 ($241 in
1996).................................................. 36,021 26,650
Inventory................................................. 19,347 7,012
Prepaid expenses.......................................... 2,765 2,188
-------- -------
Total current assets................................... 59,366 36,940
Property, plant and equipment............................... 94,194 70,114
Less accumulated depreciation............................. 31,723 29,178
-------- -------
Net property, plant and equipment......................... 62,471 40,936
Goodwill, less amortization of $465 ($115 in 1996).......... 43,298 11,631
Deferred financing costs, less amortization of $187 ($23 in
1996)..................................................... 680 665
Other....................................................... 679 938
-------- -------
$166,494 $91,110
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank line of credit....................................... $ 2,651 $ 2,355
Accounts payable.......................................... 31,043 17,609
Accrued liabilities....................................... 9,472 6,688
Deferred tooling revenue.................................. 1,423 2,122
Current portion of capital leases......................... 720 342
Current portion of long term debt......................... 33,463 5,176
-------- -------
Total current liabilities.............................. 78,772 34,292
Long term debt.............................................. 67,844 40,782
Capital leases.............................................. 2,637 813
Other liabilities........................................... 1,276 547
Deferred income taxes....................................... 1,364 275
SHAREHOLDERS' EQUITY
Common stock................................................ 1,250 1,150
Paid-in capital............................................. 1,413 538
Retained earnings........................................... 12,168 12,789
Accumulated translation adjustment.......................... (230) (76)
-------- -------
14,601 14,401
-------- -------
$166,494 $91,110
======== =======
</TABLE>
See accompanying notes.
F-4
<PAGE> 105
TALON AUTOMOTIVE GROUP
COMBINED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL ACCUMULATED
COMMON PAID-IN RETAINED TRANSLATION
STOCK CAPITAL EARNINGS ADJUSTMENT TOTAL
------ ---------- -------- ----------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995................... $ 2 $ 498 $10,286 $ -- $10,786
Capital contribution......................... -- 138 -- -- 138
Net income for 1995.......................... -- -- 2,702 -- 2,702
Distribution to shareholders................. -- -- (890) -- (890)
------ ------ ------- ----- -------
Balance at December 31, 1995................. 2 636 12,098 -- 12,736
Recapitalization............................. 98 (98) -- -- --
Capital contribution......................... 1,050 -- -- -- 1,050
Net Income for 1996.......................... -- -- 2,269 -- 2,269
Foreign exchange adjustments................. -- -- -- (76) (76)
Distribution to shareholders................. -- -- (1,578) -- (1,578)
------ ------ ------- ----- -------
Balance at December 31, 1996................. 1,150 538 12,789 (76) 14,401
Capital contribution......................... 100 875 -- -- 975
Net income for 1997.......................... -- -- 796 -- 796
Foreign exchange adjustments................. -- -- -- (154) (154)
Distribution to shareholders................. -- -- (1,417) -- (1,417)
------ ------ ------- ----- -------
Balance at December 31, 1997................. $1,250 $1,413 $12,168 $(230) $14,601
====== ====== ======= ===== =======
</TABLE>
See accompanying notes.
F-5
<PAGE> 106
TALON AUTOMOTIVE GROUP
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996 1995
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 796 $ 2,269 $ 2,702
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 6,279 3,419 2,907
Deferred income tax....................................... 465 93 --
Changes in operating asset and liabilities:
Accounts receivable....................................... (1,507) (2,715) (460)
Inventories............................................... (6,477) 1,339 (72)
Prepaid expenses.......................................... 124 1,427 (858)
Accounts payable.......................................... 3,287 485 (2,074)
Accrued liabilities....................................... 3,602 -- 143
Other liabilities......................................... (403) -- --
-------- -------- -------
Net cash provided by operating activities................... 6,166 6,317 2,288
INVESTING ACTIVITIES
Acquisitions, less cash acquired............................ (51,739) (5,462) --
Additions to property and equipment......................... (9,389) (3,942) (5,009)
Proceeds from sale of equipment............................. (43) 2 29
-------- -------- -------
Net cash used in investing activities....................... (61,171) (9,402) (4,980)
FINANCING ACTIVITIES
Net increase (decrease) in short term borrowings............ 295 (15,769) 1,185
Proceeds from long term borrowings.......................... 63,345 45,271 3,646
Payments on long term debt.................................. (7,792) (24,053) (1,375)
Capital contribution........................................ 975 1,050 138
Deferred financing costs.................................... (104) (688) --
Distributions to shareholders............................... (1,417) (1,578) (890)
-------- -------- -------
Net cash provided by financing activities................. 55,302 4,233 2,704
Translation adjustment...................................... (154) (76) --
-------- -------- -------
NET INCREASE IN CASH........................................ 143 1,072 12
Cash at of beginning of year................................ 1,090 18 6
-------- -------- -------
Cash at end of year......................................... $ 1,233 $ 1,090 $ 18
======== ======== =======
</TABLE>
See accompanying notes.
F-6
<PAGE> 107
TALON AUTOMOTIVE GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(IN THOUSANDS)
1. ORGANIZATION AND BASIS OF PRESENTATION
The combined financial statements of the Company include the accounts of
Talon Automotive Group, L.L.C. ("TAG"), Hawthorne Metal Products Company
("Hawthorne"), J&R Manufacturing, Inc. ("J&R"), Veltri Metal Products Company,
Veltri Holdings, Inc., and Veltri Holdings USA (collectively "Veltri Group") and
Production Stamping, Inc. ("PSI"). The companies are affiliated through common
ownership. All significant intercompany transactions and account balances have
been eliminated in combination.
2. DESCRIPTION OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF OPERATIONS
TAG functions as the group headquarters and was organized to coordinate all
sales, marketing, engineering and other administrative functions for companies
owned by the Shareholders.
The primary business of the Talon Automotive Group is the manufacture of
automotive stampings and assemblies used as original equipment components by
North American automotive manufacturers in the production of sport utility
vehicles, mini-vans, other light trucks and passenger cars. The companies
primarily operate from seven plants in the United States and Canada. The hourly
employees of the companies are represented by various locals of the United Auto
Workers, Canadian Auto Workers and United Steel Workers.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The companies consider cash on hand, deposits in banks and short-term
marketable securities with maturities of 90 days or less as cash and cash
equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the combined balance sheets for cash and
cash equivalents, accounts receivable and accounts payable approximate fair
value. The fair value of the companies' bank lines of credit and long-term debt
approximates the reported amounts at December 31, 1997 since their respective
interest rates approximate the December 31, 1997 market rates for similar debt
instruments.
CUSTOMER TOOLING AND OTHER DESIGN COSTS
Customer tooling represents costs incurred by the Company in the
development of new tooling used in the manufacture of the Company's products.
Once customer approval is obtained for the manufacture of a new product, the
Company is reimbursed by its customers for the cost of certain of the tooling,
at which time the tooling becomes the property of the customer.
INVENTORIES
Inventories are stated at cost, not in excess of market, using the
first-in, first-out (FIFO) method.
F-7
<PAGE> 108
TALON AUTOMOTIVE GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. The companies provide for
depreciation, principally using the straight-line method, over 30 years for
building improvements and over 5 to 15 years for machinery and equipment. Upon
retirement or disposal, the asset cost and related accumulated depreciation is
removed from the accounts and the net amount, less proceeds, is charged or
credited to income. Expenditures for renewals and betterments are capitalized.
Expenditures for maintenance and repairs are charged against income as incurred.
DEFERRED FINANCING COSTS
Deferred financing costs are amortized over the term of the debt using the
straight-line method.
GOODWILL
Goodwill represents the excess of cost over the fair value of tangible net
assets acquired and is amortized over 40 years using the straight-line method.
IMPAIRMENT OF ASSETS
Impairment losses related to long lived assets and goodwill related to
those assets, are recognized when expected future cash flows are less than the
carrying value of the assets. If indications of impairment are present, the
Company evaluates the carrying value of the assets in relationship to the future
undiscounted cash flows of the underlying operations. The Company adjusts the
net book value of the assets to fair value if the sum of the expected future
cash flows is less than book value.
REVENUE RECOGNITION
Revenue from sales is recorded upon shipment of product to the customer.
The companies recognize revenue with respect to pre-production tooling contracts
on the completed contract basis. Provisions are made for losses in the year in
which the losses are first determinable.
FOREIGN CURRENCY TRANSLATION
All balance sheet items denominated in a foreign currency (i.e. Canadian
dollars) are translated into United States dollars at the rate of exchange in
effect as of the balance sheet date. For revenues, expenses, gains and losses,
an appropriately weighted average exchange rate for the respective periods is
used.
3. ACQUISITIONS
The following acquisitions were completed during 1996 and 1997:
<TABLE>
<CAPTION>
COMPANY DATE ACQUIRED AGGREGATE PURCHASE PRICE
------- ------------- ------------------------
<S> <C> <C>
J&R.................................. September 30, 1996 $ 6,278
Veltri Group......................... November 8, 1996 $25,844
PSI.................................. December 8, 1997 $49,713
</TABLE>
Acquisitions have historically been financed through bank lines of credit
and long-term borrowings. All acquisitions have been accounted for by the
purchase method of accounting. The purchase price, including acquisition costs,
is allocated to the assets and liabilities acquired based upon their respective
fair values. The excess of the purchase price over the fair value of the net
tangible assets acquired is classified as goodwill and
F-8
<PAGE> 109
TALON AUTOMOTIVE GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
amortized over 40 years. The accompanying combined financial statements include
the results of operations for acquired entities from their respective dates of
acquisition.
The Veltri Group purchase agreement provides for additional payments based
on the earnings of the Veltri Group, as defined, for 1997, 1998 and 1999. Such
additional consideration is accounted for as additional purchase price
(goodwill) and will be amortized over the then remaining goodwill amortization
period. Additional consideration amounted to $700 in 1997.
The purchase price for PSI will be finalized upon completion of the closing
process. The allocation of purchase price is preliminary and will be finalized
in 1998.
The following pro forma financial information represents the results of
operations on a pro forma basis, as if the acquisitions referred to above had
occurred at the beginning of the year of acquisition and the preceding year
after giving effect to certain adjustments including increased depreciation and
amortization of property and equipment and interest expense for acquisition
debt. These pro forma results have been prepared for comparative purposes only
and do not purport to be indicative of the results of operations which would
have been achieved had these acquisitions been completed as of these dates nor
are the results indicative of the Company's future results of operations.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net sales....................................... $229,417 $219,205 $139,870
Net income (loss)............................... 2,124 1,955 (759)
</TABLE>
4. MAJOR CUSTOMERS
Sales are made primarily to automotive original equipment manufacturers and
their suppliers. Following is a summary of net production sales to such key
customers as a percentage of total net production sales:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Chrysler............................................ 45.8% 21.3% 19.4%
General Motors...................................... 8.8% 15.4% 14.8%
Ford................................................ 18.1% 47.3% 60.3%
Other............................................... 27.3% 16.0% 5.5%
------ ------ ------
100.0% 100.0% 100.0%
====== ====== ======
</TABLE>
Accounts receivable from these customers at December 31 is as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Chrysler................................................... $17,749 $12,892
General Motors............................................. 5,202 1,949
Ford....................................................... 3,533 4,484
Other...................................................... 9,537 7,325
------- -------
$36,021 $26,650
======= =======
</TABLE>
F-9
<PAGE> 110
TALON AUTOMOTIVE GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
5. INVENTORIES
Inventory is comprised of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Raw material................................................ $ 5,031 $2,821
Work in process............................................. 3,996 2,368
Finished goods.............................................. 3,992 1,637
Pre-production tooling...................................... 6,328 186
------- ------
$19,347 $7,012
======= ======
</TABLE>
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is comprised of the following at December 31:
<TABLE>
<S> <C> <C>
Land and improvements....................................... $ 1,414 $ 1,419
Buildings and improvements.................................. 16,834 13,534
Machinery and equipment..................................... 74,120 53,705
Furniture and fixtures...................................... 1,826 1,456
------- -------
94,194 70,114
Less accumulated depreciation............................... 31,723 29,178
------- -------
Net carrying amount......................................... $62,471 $40,936
======= =======
</TABLE>
7. SELF-INSURANCE
Certain of the companies participate in a self-insurance pool for workers'
compensation, general and automobile liability. Insurance is carried to limit
self-insurance per occurrence to $250 for workers' compensation, $250 for
general liability and $100 for automobile liability. Aggregate retention is
established by policy year to pool total loss experience with affiliated
companies. The companies provided $928, $592, and $515 in 1997, 1996, and 1995,
respectively, for claims reported and claims incurred but not reported. The
companies self-insurance reserves totaled $1,221 and $610 at December 31, 1997
and 1996, respectively. These amounts are included in accrued liabilities in the
balance sheets.
Certain of the companies are also self-insured for health care. Insurance
is carried to limit self-insurance per occurrence to $150. The companies
provided $1,633, $961, and $1,112 in 1997, 1996, and 1995, respectively, for
employee group health insurance.
8. BANK LINE OF CREDIT
J&R has a $4,000 short-term secured bank line of credit, with interest at
.50% above the prime rate (9.0% at December 31, 1997) due April 1998. Borrowings
under the agreement amounted to $2,651 at December 31, 1997. Borrowings of up to
$500 are guaranteed by Hawthorne.
Veltri has a $5.0 million credit facility through the Export Development
Corporation (EDC Facility). Funds under the EDC Facility are available only to
support tooling programs. $0.0 are outstanding at December 31, 1997.
F-10
<PAGE> 111
TALON AUTOMOTIVE GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
9. LONG TERM DEBT
Long term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
HAWTHORNE:
Term note payable in quarterly installments including
interest at 2.25% above the Eurodollar rate (8.4375% as of
December 31, 1997) due October 2003....................... $ 8,285 $ 9,785
Acquisition Loan payable in quarterly installments including
interest at 3.25% above the Eurodollar rate (9.4375% as of
December 31, 1997) due October 2003....................... 8,214 9,643
Mortgage note payable in quarterly installments including
interest at 2.25% above the Eurodollar rate (8.4375% as of
December 31, 1997) due October 2011....................... 4,247 4,441
Equipment term loan with a bank, payable quarterly,
including interest, at the Eurodollar rate plus the
applicable margin as defined by the agreement (8.4375% as
of December 31, 1997)..................................... 3,736 --
$8,500 line of credit agreement and a swing loan agreement
with maximum borrowings totaling the lesser of $500 and
the amount by which the maximum line of credit exceeds the
current outstanding line of credit balance. Borrowings for
the line of credit and the swing loan bear interest at the
Eurodollar rate plus 2.25% ($2,000 at 8.4375% at December
31, 1997) and at the prime rate plus .50% ($3,368 at 9.0%
at December 31, 1997). The loans are due in October 1999.
On a quarterly basis, the loans provide for a commitment
fee of 0.375% of the average amount by which the maximum
line of credit amount exceeds the daily amount of unused
credit and outstanding letters of credit.................. 5,368 --
VELTRI GROUP:
$17,326 line of credit agreement and a swing loan agreement
with maximum borrowings totaling the lesser of $500 and
the amount by which the line of credit maximum exceeds the
current outstanding line of credit balance. Borrowings
under the line of credit bear interest based on the prime
rate (ranging from 6.3% to 8.5% at December 31, 1997). The
loans are due in November 1999 and provides for a
commitment fee of 0.25% of the average daily amount of
unused credit and outstanding letters of credit........... 12,371 8,983
Bank term note payable in quarterly installments including
interest at 2.0% above the Eurodollar rate (6.71% as of
December 31, 1997) due November 2003...................... 8,175 10,076
Note payable to former owner of Veltri Group, due in monthly
installments including interest at the prime rate (8.5% at
December 31, 1997) commencing on March 1, 2001, due March
2004...................................................... 658 658
$4,954 equipment acquisition line of credit with a bank,
payable quarterly, including interest at the Eurodollar or
prime rate plus an applicable margin, as defined in the
agreement (8.0% at December 31, 1997)..................... 1,800 --
</TABLE>
F-11
<PAGE> 112
TALON AUTOMOTIVE GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
J&R:
Term note payable to bank in monthly installments plus
interest at 0.75% above the prime rate, (9.25% as of
December 31, 1997), due October 2001...................... $ 731 $ 926
Employment obligation to former owners payable monthly
through September 2001, discounted at 8.5%. The obligation
is guaranteed by Hawthorne................................ 945 1,196
Promissory note payable to former owners in quarterly
installments plus interest at 2.0% above the prime rate,
(10.5% as of December 31, 1997) due September 1999........ 146 250
PSI:
Bank term note with interest at the Eurodollar or prime rate
(8.5% at December 31, 1997), payable quarterly beginning
March 1998 with final balance due December 2001........... 8,000 --
Equipment note payable to bank with interest at the
Eurodollar or prime rate (8.5% at December 31, 1997),
payable quarterly beginning March 1998 with final balance
due December 2004......................................... 6,775 --
Promissory notes payable to shareholders with interest of
1.0% above the prime rate (9.5% at December 31, 1997), due
July 1998................................................. 24,500 --
$11,500 revolving note payable to bank with interest at the
Eurodollar or prime rate (8.5% at December 31, 1997)
expiring December 1999.................................... 7,356 --
-------- -------
Total long term debt........................................ $101,307 $45,958
Less current portion........................................ (33,463) (5,176)
-------- -------
$ 67,844 $40,782
======== =======
</TABLE>
Long term debt is secured by substantially all assets of the respective
companies. The bank lines of credit and term note agreements contain certain
covenants, the more restrictive of which require the maintenance of leverage and
debt service coverage ratios. The agreements also places limits on the purchase
or sale of property and equipment, and restrict distributions of earnings to
shareholders. Retained earnings in the amount of $1,050 at December 31, 1997
were restricted.
Scheduled maturities of long term debt for the companies are as follows:
<TABLE>
<CAPTION>
TOTAL
-----
<S> <C>
1998........................................................ $ 33,463
1999........................................................ 34,354
2000........................................................ 9,710
2001........................................................ 13,658
Thereafter.................................................. 10,122
--------
Total....................................................... $101,307
========
</TABLE>
The companies paid interest of $3,152, $1,614 and $1,459 in 1997, 1996 and
1995, respectively, of which $0, $54 and $275 was capitalized as construction in
progress in 1997, 1996 and 1995, respectively.
F-12
<PAGE> 113
TALON AUTOMOTIVE GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
10. EMPLOYEE BENEFIT ARRANGEMENTS
DEFINED BENEFIT PLANS
Hawthorne has a noncontributory defined benefit retirement plan covering
substantially all hourly employees. Benefits under the plan are based upon years
of service multiplied by a specified amount. The companies general funding
policy is to make contributions based on the plan's normal cost plus
amortization of prior service costs over a period not to exceed 30 years. Plan
assets are held in the Talon Group Profit Sharing Trust, which invests in
various debt and equity securities.
PSI has a noncontributory defined benefit retirement plan covering
substantially all hourly employees. The plan was frozen as of June 30, 1997 and
is expected to be terminated in 1998. All benefits under this plan are expected
to be distributed to participants by June 30, 1998.
The following table sets forth the funded status of the plans as of
December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Actuarial present value of benefit obligation:
Accumulated and projected benefit obligation, including
vested benefits of $4,389 in 1997 and $1,899 in 1996...... $4,624 $2,072 $1,979
Plan assets at fair market value............................ 3,753 1,714 1,599
------ ------ ------
Unfunded projected benefit obligation....................... 871 358 380
Unrecognized net gain (loss) from past experience different
from that assumed......................................... 146 150 (15)
Unrecognized transition amount at the beginning of the year
resulting from initial application of SFAS No. 87......... 44 49 55
Unrecognized prior service cost............................. (184) (161) (34)
------ ------ ------
Accrued pension cost........................................ $ 877 $ 396 $ 386
====== ====== ======
Net pension expense includes the following components:
Service cost--benefits earned during the year............... $ 93 $ 85 $ 65
Interest cost on projected benefit obligation............... 154 148 138
Actual return on plan assets................................ (363) (121) (231)
Net amortization and deferral............................... 221 (14) 108
------ ------ ------
Pension expense............................................. $ 105 $ 98 $ 80
====== ====== ======
</TABLE>
The weighted average discount rate used to determine the actuarial present
value of the projected benefit obligations was 7.5% in 1997 and 1996, and 7.25%
in 1995. The expected long-term rate of return on plan assets was 8.5% in 1997,
1996 and 1995.
PROFIT SHARING PLAN
Hawthorne, J&R and TAG have defined contribution profit sharing plans
covering substantially all salaried employees. The Plans allow eligible
employees to make voluntary, tax-deferred contributions up to 7.5% of
compensation not to exceed statutory limits. The companies match up to 50% of
the employees' contributions, limited to $200 dollars annually per participant.
Additionally, the Plans provide for discretionary employer contributions as
determined by the applicable Board of Directors. Employer contributions to the
plans amounted to $115, $147 and $106 in 1997, 1996 and 1995, respectively.
F-13
<PAGE> 114
TALON AUTOMOTIVE GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
DEFERRED COMPENSATION
Effective January 1, 1997, TAG has agreements with certain key employees,
which provide for deferred compensation benefits based on increases in the value
of the companies, as defined, through December 31, 1996 and based on a
percentage of shareholder distributions, as defined, made during 1997 and
thereafter. The companies accrue deferred compensation as amounts are allocated
to the accounts of participants under the terms of the agreement. Balances in
the participants accounts are subject to forfeiture of 33% per year during 1998
and 1999 in the event of the employee's voluntary termination or termination for
cause. Amounts allocated to accounts in 1998 and thereafter are vested after
three years. Vesting of the 1998 allocation will be accelerated in the case of a
bond offering subject to a forfeiture of 33% percent per year during 1999 and
2000. Deferred compensation expense charged to operations amounted to $1,343 in
1997 (none in 1996 and 1995). Deferred compensation amounting to $1,359 is
expected to be incurred in 1998 in connection with the distribution to
shareholders expected to be made in April 1998 (See Note 17).
11. STOCK OPTIONS
Under equity ownership agreements dated December 31, 1996, Hawthorne,
Veltri Group and J&R each granted stock options to certain key employees for
20,000 shares of their common stock and twenty percent of the options become
exercisable annually beginning January 1, 1999. The exercise prices for 11,200
of the options range from 100% to 140% of the fair market value of the shares at
the date of grant and the exercise price of the remaining 8,800 shares is at
120% of fair market value plus an amount ranging from $10 to $170. The options
expire January 1, 2018.
12. INCOME TAXES
The Shareholders of the companies, except the Canadian subsidiaries, have
elected under the provisions of the Internal Revenue Code to be treated as S
Corporations. As a result, the taxable income of these companies is included in
the taxable income of the individual shareholders, and no provision for federal
income taxes has been included in the statement of income. At December 31, 1997
the carrying amount of the companies' net assets exceeded the tax basis by
$5,452. The Canadian subsidiaries are subject to Canadian income tax.
The components of the provision for income taxes is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current................................................... $ 143 $-- $--
Deferred.................................................. 1,182 94 --
------ --- --
$1,325 $94 $--
====== === ==
</TABLE>
F-14
<PAGE> 115
TALON AUTOMOTIVE GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
The components of deferred income taxes is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
---- ----
<S> <C> <C>
Liabilities:
Depreciation.............................................. $1,585 $1,393
Other..................................................... 176 100
------ ------
1,761 1,493
Assets:
Loss carry forward........................................ 246 1,029
Product warranty.......................................... 146 189
Other..................................................... 5 --
------ ------
397 1,218
------ ------
Net deferred tax liability.................................. $1,364 $ 275
====== ======
</TABLE>
The reconciliation of income taxes computed at the statutory tax rates and
the provision for income taxes is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Taxes at statutory rates............................... $ 997 $ 850 $ 972
Income not subject to corporate tax.................... (4) (846) (972)
Effect of foreign tax.................................. 152 -- --
Non-deductible items................................... 121 90 --
Other.................................................. 59 -- --
------ ----- -----
$1,325 $ 94 $ --
====== ===== =====
</TABLE>
Veltri Group had income tax loss carry forwards of approximately $690 at
December 31, 1997, which expire in 2001.
Veltri Group paid income taxes of $94 and $183 in 1997 and 1996.
13. CAPITAL STRUCTURE
The capitalization of the companies as of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
CLASS A -- VOTING CLASS B -- NON-VOTING
------------------- --------------------- PAID-IN
COMPANY SHARES AMOUNT SHARES AMOUNT CAPITAL TOTAL
------- ------ ------ ------ ------ ------- -----
<S> <C> <C> <C> <C> <C> <C>
Hawthorne......................... 50,000 $ 50 50,000 $ 50 $ 400 $ 500
J&R............................... 50,000 275 50,000 275 -- 550
PSI............................... 100,000 100 -- -- 900 1,000
TAG............................... -- -- -- -- 113 113
Veltri Group...................... 100,000 500 -- -- -- 500
------- ---- ------- ---- ------ ------
Total........................ 300,000 $925 100,000 $325 $1,413 $2,663
======= ==== ======= ==== ====== ======
</TABLE>
F-15
<PAGE> 116
TALON AUTOMOTIVE GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
14. COMMITMENTS AND CONTINGENCIES
The companies lease certain warehouse space, automobiles, trucks and
trailers and machinery and equipment under operating and capital leases expiring
on various dates through December 1, 1999. As of December 31, 1997, minimum
lease rental payments due under these leases are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
--------- -------
<S> <C> <C>
1998....................................................... $2,394 $ 1,080
1999....................................................... 2,006 779
2000....................................................... 1,012 665
2001....................................................... 710 502
Thereafter................................................. 495 1,357
------ -------
Total minimum lease payments.......................... $6,617 $ 4,383
======
Amount representing interest............................... (1,026)
-------
Present value of net minimum lease payments................ $ 3,357
=======
</TABLE>
The companies incurred rent expense for all operating leases of $1,565,
$874 and $617 in 1997, 1996 and 1995, respectively. The companies had
outstanding letters of credit amounting to $1,615 and $1,075 in 1997 and 1996,
respectively.
15. RELATED PARTY TRANSACTIONS
The companies have a business services agreement with Talon L.L.C., an
affiliated company owned by the Shareholders, under which the companies receive
services of risk management, benefits management, tax preparation and other
services from Talon L.L.C. Fees incurred under the agreement aggregated $1,150,
$850 and $717 in 1997, 1996 and 1995, respectively.
The Company provides certain consulting and administrative services to G&L
Industries, Inc., an affiliate of the Company, beneficially owned and controlled
by the shareholders. The Company received fees of approximately $1,600, $1,950
and $1,700 in 1997, 1996 and 1995, respectively for such services which are
included as an offset against selling, general and administrative expenses.
16. FOREIGN OPERATIONS
The operations of Veltri Group are conducted in Canada. Information with
respect to such foreign operations, since the acquisition in November 1996, are
as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
As of December 31:
Current assets............................................ $25,886 $21,226
Non-current assets........................................ 26,937 24,787
Current liabilities....................................... 17,546 17,032
Non-current liabilities................................... 33,727 28,639
For the period ended December 31:
Net sales................................................. 75,710 11,808
Net income (loss)......................................... 1,362 (83)
</TABLE>
F-16
<PAGE> 117
TALON AUTOMOTIVE GROUP
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
17. SUBSEQUENT EVENTS -- REORGANIZATION, REFINANCING AND SHAREHOLDER
DISTRIBUTION
The companies are expected to be reorganized in April 1998, in
contemplation of the issue of senior subordinated indebtedness in the amount of
$120,000. A special distribution aggregating $10,000 is anticipated to be made
concurrent with the debt placement. To effect the reorganization, Hawthorne will
acquire the capital stock of TAG for an amount equivalent to its contributed
capital. Subsequently, Hawthorne and J&R will be merged into PSI which will be
renamed Talon Automotive Group, Inc. ("TAG, Inc.") and Veltri will become a
wholly owned subsidiary of TAG, Inc. The reorganization will be accounted for
retroactively as if it were a pooling of interest with no change made to the
carrying bases of the assets and liabilities of the combined entities.
The equity ownership agreements of the companies (See Note 11) will be
restated such that the resultant stock options in TAG, Inc. will be equivalent
to those currently existing in each of the affiliated companies. The deferred
compensation agreements of the companies (See Note 10) will be amended to
discontinue further allocations of deferred compensation to participants except
for one participant who may earn up to $300, as defined in an agreement. The
period, if and when this amount is earned, is currently undeterminable. When
determined this amount will be recorded when earned.
The senior subordinated indebtedness will be guaranteed, fully and
unconditionally, by Veltri Metal Products Co., VS Holdings, Inc. and Veltri
Holdings USA, Inc. (the "Guarantor Subsidiaries"). Separate financial statements
of the Guarantor Subsidiaries are not presented because management has
determined that such information is not material to investors. See Note 16 for
summarized financial information of the Veltri Group.
Subsequent to December 31, 1997, the Company made a $1,500 non-cash
dividend to the shareholders by distributing amounts due from an affiliate.
F-17
<PAGE> 118
TALON AUTOMOTIVE GROUP
CONDENSED COMBINED INTERIM STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
QUARTER ENDED
APRIL 4,
-----------------
1998 1997
---- ----
UNAUDITED
(IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $71,071 $45,349
Cost of sales............................................... 59,918 38,036
------- -------
Gross profit.............................................. 11,153 7,313
Selling, general & administrative expenses.................. 6,752 4,328
------- -------
Income from operations...................................... 4,401 2,985
Other expenses (income)
Other income.............................................. (186) --
Interest.................................................. 2,390 1,050
Foreign currency.......................................... 142 (218)
------- -------
Income before income taxes.................................. 2,055 2,153
Provision for income taxes.................................. 771 697
------- -------
Net income.................................................. $ 1,284 $ 1,456
======= =======
</TABLE>
See accompanying notes.
F-18
<PAGE> 119
TALON AUTOMOTIVE GROUP
CONDENSED COMBINED INTERIM BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 4,
--------------------
1998 1997
---- ----
UNAUDITED
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash........................................................ $ 7,046 $ 0
Accounts receivable, less allowance of $267 ($243 in
1997)..................................................... 36,505 35,178
Inventories................................................. 21,165 32,534
Prepaid expenses............................................ 4,303 2,048
-------- --------
Total current assets................................... 69,019 69,760
Property, plant and equipment............................... 95,407 73,140
Less accumulated depreciation............................... 33,824 30,434
-------- --------
Net property, plant and equipment........................... 61,583 42,706
Goodwill, less amortization of $505 ($156 in 1997).......... 42,815 11,439
Deferred financing costs, less amortization of $227 ($53 in
1997)..................................................... 643 633
Other assets................................................ 526 351
-------- --------
$174,586 $124,889
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank line of credit......................................... $ 2,634 $ 2,699
Accounts payable............................................ 37,273 28,077
Accrued liabilities......................................... 12,229 7,837
Deferred tooling revenue.................................... 1,444 20,559
Current portion of capital leases........................... 746 342
Current portion of long term debt........................... 33,871 3,929
-------- --------
Total current liabilities.............................. 88,197 63,443
Long term debt.............................................. 66,659 44,388
Capital leases.............................................. 2,549 757
Other liabilities........................................... 314 186
Deferred income taxes....................................... 1,621 638
SHAREHOLDER'S EQUITY
Common stock................................................ 1,250 1,150
Paid in capital............................................. 1,412 537
Retained earnings........................................... 12,977 14,059
Accumulated translation adjustment.......................... (393) (269)
-------- --------
15,246 15,477
-------- --------
$174,586 $124,889
======== ========
</TABLE>
See accompanying notes.
F-19
<PAGE> 120
TALON AUTOMOTIVE GROUP
CONDENSED COMBINED INTERIM STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
QUARTER ENDED
APRIL 4,
------------------
1998 1997
---- ----
UNAUDITED
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 1,284 $ 1,456
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization............................. 2,705 1,381
Deferred income taxes..................................... 257 379
Gain on sale of assets.................................... (186) --
Change in operating assets and liabilities:
Accounts receivable....................................... (538) (7,797)
Inventories............................................... (1,818) (25,521)
Prepaids.................................................. (1,887) 112
Other assets.............................................. 150 564
Accounts payable.......................................... 6,599 9,739
Accrued liabilities....................................... 2,758 2,139
Other liabilities......................................... 21 17,611
------- --------
Net cash provided by operating activities................... 9,344 63
INVESTING ACTIVITIES
Additions to property and equipment......................... (1,588) (3,018)
Proceeds from sale of equipment............................. 315 --
------- --------
Net cash used in investing activities....................... (1,273) (3,018)
FINANCING ACTIVITIES
Net increase (decrease) in short term borrowings............ (21) 346
Proceeds from long term debt................................ -- 3,170
Payments on long term debt.................................. (1,599) (983)
Distributions to shareholders............................... (475) (475)
------- --------
Net cash provided by financing activities................... (2,095) 2,058
Translation adjustment...................................... (164) (193)
NET INCREASE IN CASH........................................ 5,812 (1,090)
Cash as of beginning of the period.......................... 1,234 1,090
------- --------
Cash at end of period....................................... $ 7,046 $ 0
======= ========
</TABLE>
See accompanying notes.
F-20
<PAGE> 121
TALON AUTOMOTIVE GROUP
CONDENSED COMBINED INTERIM STATEMENT
OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
COMMON PAID-IN RETAINED TRANSLATION COMPREHENSIVE
STOCK CAPITAL EARNINGS ADJUSTMENT INCOME
------ ------- -------- ----------- -------------
UNAUDITED
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Beginning balance at January 1, 1997...... $1,150 $ 537 $13,078 $ (76)
Comprehensive income
Net income.............................. 1,456 $1,456
Other comprehensive income
Foreign currency translation
adjustments........................ (193) (193)
Tax benefit.......................... 69
------
Comprehensive income...................... $1,332
======
Distribution to shareholders.............. (475)
------ ------ ------- -----
Ending balance at April 4, 1997........... $1,150 $ 537 $14,059 $(269)
====== ====== ======= =====
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED APRIL 4, 1998
---------------------------------------------------------
ACCUMULATED
COMMON PAID-IN RETAINED TRANSLATION COMPREHENSIVE
STOCK CAPITAL EARNINGS ADJUSTMENT INCOME
------ ------- -------- ----------- -------------
UNAUDITED
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Beginning balance at January 1, 1998...... $1,250 $1,412 $12,168 $(230)
Comprehensive income
Net income.............................. 1,284 $ $1,284
Other comprehensive income
Foreign currency translation
adjustments........................ (163) (163)
Tax benefit.......................... 67
------
Comprehensive income...................... $1,188
======
Distribution to shareholders.............. (475)
------ ------ ------- -----
Ending balance at April 4, 1998........... $1,250 $1,412 $12,977 $(393)
====== ====== ======= =====
</TABLE>
See accompanying notes.
F-21
<PAGE> 122
TALON AUTOMOTIVE GROUP
NOTES TO CONDENSED COMBINED INTERIM FINANCIAL STATEMENTS
(IN THOUSANDS)
1. ORGANIZATION AND BASIS OF PRESENTATION
The combined financial statements include the accounts of Talon Automotive
Group, LLC (TAG), Hawthorne Metal Products Company (Hawthorne), J&R
Manufacturing, Inc. (J&R), Veltri Metal Products Company (Veltri) and Production
Stamping, Inc. (PSI). The companies are affiliated through common ownership and
are referred to herein collectively as "the Company". All significant
intercompany transactions and account balances have been eliminated in
combination.
The quarter ended April 4, 1998 consists of 94 days and is consistent with
the prior year. The Company reports quarterly financial information in
thirteen-week increments and ends each respective quarter on the Saturday
following the thirteenth week with the fiscal year ending December 31.
The accompanying unaudited combined financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the quarter ended April 4, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. For further information, refer to the combined financial
statements and footnotes thereto included in the Company's annual financial
statements included elsewhere herein.
2. IMPACT OF NEW ACCOUNTING STANDARD -- COMPREHENSIVE INCOME
In December 1997, the Financial Accounting Standards Board issued Statement
No. 130, Reporting Comprehensive Income, which requires and establishes
standards for reporting comprehensive income and its components. Comprehensive
income includes all changes in equity during a reporting period except those
resulting from investments by owners and distributions to owners. The Company
adopted this new accounting standard effective January 1, 1998 and has shown
foreign currency translation adjustments, as they relate to their Canadian
operations, as a component of comprehensive income in the Condensed Combined
Interim Statement of Changes in Stockholders' Equity.
3. INVENTORIES
Inventory is comprised of the following at April 4:
<TABLE>
<CAPTION>
1998 1997
---- ----
UNAUDITED
<S> <C> <C>
Raw material................................................ $ 5,861 $ 4,257
Work in process............................................. 3,139 1,875
Finished goods.............................................. 4,676 2,156
Pre-production tooling...................................... 7,489 24,245
------- -------
Total Inventory............................................. $21,165 $32,534
======= =======
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
As of April 4, 1998, there were no significant changes to the status of
commitments and contingencies presented in the footnotes to the financial
statements for the fiscal year ended December 31, 1997.
F-22
<PAGE> 123
TALON AUTOMOTIVE GROUP
NOTES TO CONDENSED COMBINED INTERIM FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS)
5. SUBSEQUENT EVENTS
The companies were reorganized on April 28, 1998, in connection with the
issue of senior subordinated indebtedness in the amount of $120,000. A special
distribution aggregating $10,000 was made concurrent with the debt placement and
deferred compensation amounting to $1,359 was incurred in connection with the
distribution to shareholders. To effect the reorganization, Hawthorne acquired
the capital stock of TAG for an amount equivalent to its contributed capital.
Subsequently, Hawthorne and J&R merged into PSI which was renamed Talon
Automotive Group, Inc. (TAG, Inc.) and Veltri became a wholly owned subsidiary
of TAG Inc. The reorganization was accounted for retroactively as if it were a
pooling of interest with no change made to the carrying base of the assets and
liabilities of the combined entities.
On April 28, 1998, the Company also completed a refinancing. Concurrently
with the refinancing, the Company retired substantially all existing long-term
debt and recorded a $525 extraordinary loss, net of $111 tax benefit, on the
early extinguishment of debt.
The equity ownership agreements of the companies were restated such that
the resultant stock options in TAG, Inc. were equivalent to those currently
existing in each of the affiliated companies. The deferred compensation
agreements of the companies were amended to suspend further allocations of
deferred compensation to participants.
The senior subordinated indebtedness is guaranteed, fully and
unconditionally by Veltri. Separate financial statements of Veltri are not
presented because management has determined that such information is not
material to investors. Summarized financial information relating to Veltri is
shown as follows:
<TABLE>
<CAPTION>
1998
----
UNAUDITED
<S> <C>
As of April 4:
Current assets............................................ $31,240
Non-current assets........................................ 26,920
Current liabilities....................................... 22,229
Non-current liabilities................................... 33,455
For the quarter period ended April 4:
Net sales................................................. 27,427
Net income................................................ 1,091
</TABLE>
The companies have a business services agreement with Talon L.L.C., an
affiliated company owned by the Shareholders. Total fees incurred under this
agreement were $287 for the quarters ended April 4, 1998 and 1997. Effective
April 1, 1998, fees under this agreement were reduced from $1,150 to $500 per
year.
The Company also provides certain consulting and administrative services to
G&L Industries, Inc., an affiliate of the Company. Total fees received under
this agreement were $125 for the quarters ended April 4, 1998 and 1997.
Effective May 1, 1998, fees under this consulting agreement were reduced from
$500 to $450 per year.
F-23
<PAGE> 124
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Production Stamping, Inc.
We have audited the accompanying balance sheets of Production Stamping,
Inc. as of June 30, 1997 and 1996 and the related statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended June 30, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on the 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 Production Stamping, Inc. as
of June 30, 1997 and 1996 and the results of its operations and its cash flows
for each of the three years in the period ended June 30, 1997, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Detroit, Michigan
March 20, 1998
F-24
<PAGE> 125
PRODUCTION STAMPING, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
JULY 1, 1997 JULY 1, 1996
YEAR ENDED JUNE 30, TO TO
----------------------------------------- DECEMBER 7, DECEMBER 31,
1997 1996 1995 1997 1996
---- ---- ---- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales..................... $72,032,412 $68,839,438 $69,593,662 $32,015,243 $33,315,411
Cost of sales................. 61,857,664 62,358,188 65,961,624 28,222,225 28,354,360
----------- ----------- ----------- ----------- -----------
Gross profit................ 10,174,748 6,481,250 3,632,038 3,793,018 4,961,051
General and administrative
expenses.................... 7,218,595 4,019,094 3,545,403 3,502,131 4,029,639
----------- ----------- ----------- ----------- -----------
Income (loss) from
operations............... 2,956,153 2,462,156 86,635 290,887 931,412
Other income (expense):
Interest expense............ (1,136,342) (1,244,822) (1,080,143) (703,025) (601,652)
Other income................ 643,620 211,463 406,865 25,441 8,250
----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes and cumulative effect
of change in accounting
principle................... 2,463,431 1,428,797 (586,643) (386,697) 338,010
Provision for income taxes:
Current..................... 550,000 380,000 10,000 5,957 123,000
Deferred.................... 309,771 220,068 (295,322) 185,090 --
----------- ----------- ----------- ----------- -----------
859,771 600,068 (285,322) 191,047 123,000
Income before cumulative
effect of change in
accounting principle........ 1,603,660 828,729 (301,321) (577,744) 215,010
Cumulative effect of change in
accounting principle, net of
income tax of $96,000....... -- -- 187,255 -- --
----------- ----------- ----------- ----------- -----------
Net income (loss)............. $ 1,603,660 $ 828,729 $ (114,066) $ (577,744) $ 215,010
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-25
<PAGE> 126
PRODUCTION STAMPING, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
-------------------------
1997 1996
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 4,186 $ 2,699
Accounts receivable:
Trade.................................................. 7,557,809 7,700,733
Related party.......................................... 316,093 142,354
Inventories............................................... 5,410,885 4,019,647
Prepaid expenses.......................................... 337,725 89,865
Notes and accounts receivable from officers............... 66,918 98,564
Deferred income taxes..................................... 481,483 453,253
----------- -----------
Total current assets................................. 14,175,099 12,507,115
Property and equipment, net................................. 15,214,640 12,973,416
Other assets................................................ 47,176 41,223
----------- -----------
$29,436,915 $25,521,754
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank line of credit....................................... $ 6,211,508 $ 6,134,576
Accounts payable.......................................... 12,538,176 10,682,724
Accrued liabilities....................................... 1,067,671 1,285,692
Current portion of long term debt......................... 1,231,593 907,831
Current portion of capital leases......................... 176,902 163,299
----------- -----------
Total current liabilities............................ 21,225,850 19,174,122
Long term debt.............................................. 2,856,898 2,617,294
Capital leases.............................................. 158,127 211,560
Deferred income taxes....................................... 544,000 206,000
Other liabilities........................................... 11,502 245,900
STOCKHOLDERS' EQUITY
Common stock, $1 par value, 50,000 shares authorized, 30,000
shares issued and outstanding............................. 30,000 30,000
Paid-in-capital............................................. 522,944 522,944
Retained earnings........................................... 4,087,594 2,513,934
----------- -----------
4,640,538 3,066,878
----------- -----------
$29,436,915 $25,521,754
=========== ===========
</TABLE>
See accompanying notes.
F-26
<PAGE> 127
PRODUCTION STAMPING, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
----------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1994.................. 30,000 $30,000 $522,944 $1,829,271 $2,382,215
Net loss.................................. (114,066) (114,066)
------ ------- -------- ---------- ----------
Balance at June 30, 1995.................. 30,000 30,000 522,944 1,715,205 2,268,149
Dividend.................................. (30,000) (30,000)
Net income................................ 828,729 828,729
------ ------- -------- ---------- ----------
Balance at June 30, 1996.................. 30,000 30,000 522,944 2,513,934 3,066,878
Dividend.................................. (30,000) (30,000)
Net income................................ 1,603,660 1,603,660
------ ------- -------- ---------- ----------
Balance at June 30, 1997.................. 30,000 $30,000 $522,944 $4,087,594 $4,640,538
====== ======= ======== ========== ==========
</TABLE>
See accompanying notes.
F-27
<PAGE> 128
PRODUCTION STAMPING, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
CONDENSED
------------------------------
JULY 1, 1997 JULY 1, 1996
YEAR ENDED JUNE 30, TO TO
----------------------------------------- DECEMBER 7, DECEMBER 31,
1997 1996 1995 1997 1996
---- ---- ---- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............. $ 1,603,660 $ 828,729 $ (114,066) $ (577,744) $ 215,010
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Depreciation................ 3,364,549 3,000,058 2,126,842
Gain on disposal of property
and equipment............ (354,427) (43,197) (29,334)
Deferred taxes.............. 309,770 220,069 (295,322)
Change in operating assets and
liabilities:
Accounts and notes
receivable............... 831 854,185 (2,608,000)
Inventories................. (1,391,238) 471,619 (254,478)
Prepaid expenses............ (247,860) (7,510) 31,123
Other assets................ (5,953) (5,923) 21,698
Accounts payable............ 1,855,452 (878,883) 3,496,756
Accrued liabilities......... (218,023) 386,047 128,134
Other liabilities........... (234,398) 12,311 32,035
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
operating activities........ 4,682,363 4,837,505 2,535,388 (4,194,600) 1,923,051
INVESTING ACTIVITIES
Purchase of property and
equipment................ (5,605,844) (4,856,749) (4,528,906)
Proceeds from the sale of
property and equipment... 354,500 105,202 53,500
----------- ----------- ----------- ----------- -----------
Net cash used in investing
activities.................. (5,251,344) (4,751,547) (4,475,406) (3,009,988) (2,352,981)
FINANCING ACTIVITIES
Net borrowings (payments) on
line of credit........... 76,932 (1,009,800) 2,311,529
Issuance of term debt....... 4,861,007 1,531,295 1,163,816
Repayment of term debt...... (4,337,471) (768,986) (1,619,277)
Dividend.................... (30,000) (30,000) (15,000)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities........ 570,468 (277,491) 1,841,068 7,204,295 (1,493,473)
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN
CASH AND EQUIVALENTS........ 1,487 (191,533) (98,950) (293) (176)
Cash and equivalents at
beginning of year........... 2,699 194,232 293,182 4,186 2,699
----------- ----------- ----------- ----------- -----------
Cash and equivalents at end of
year........................ $ 4,186 $ 2,699 $ 194,232 $ 3,893 $ 2,523
=========== =========== =========== =========== ===========
SUPPLEMENTAL CASH FLOW
INFORMATION
Interest paid................. $ 1,142,825 $ 1,258,886 $ 1,033,691
=========== =========== ===========
Income taxes paid............. $ 865,123 $ 373,567 $ 148,091
=========== =========== ===========
</TABLE>
See accompanying notes.
F-28
<PAGE> 129
PRODUCTION STAMPING, INC.
NOTES TO THE FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Production Stamping, Inc. is a manufacturer of metal stampings with
production facilities located in New Baltimore and Oxford, Michigan. The
company's primary customer is General Motors Corporation.
CASH AND CASH EQUIVALENTS
The company considers all short term investments with an original maturity
of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market (first-in, first-out
method), except for tooling in progress, which is determined on a specific
identification basis.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization
are determined by the straight-line method over the following estimated useful
lives:
<TABLE>
<S> <C>
Machinery and equipment..................................... 3 - 20
Forklifts and shop vehicles................................. 1 - 7
Vehicles.................................................... 3 - 8
Furniture and fixtures...................................... 5 - 8
Leasehold improvements...................................... 3 - 40
Tools, dies and fixtures.................................... 3 - 10
</TABLE>
REVENUE RECOGNITION
Revenue from sales is recorded upon shipment of product to the customer.
The companies recognize revenue with respect to pre-production tooling contracts
on the completed contract basis. Provisions are made for losses in the year in
which the losses are first determinable.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the balance sheets for cash and cash
equivalents, accounts receivable and accounts payable approximate fair value.
The fair value of the Company's bank line of credit and long term debt
approximates the reported amounts at June 30, 1997 since their respective
interest rates approximate the June 30, 1997 market rates for similar debt
instruments.
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 reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
2. ACCOUNTS RECEIVABLE
The allowance for doubtful accounts was $38,688 and $1,688 at June 30, 1997
and 1996, respectively.
F-29
<PAGE> 130
PRODUCTION STAMPING, INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
3. NOTES AND ACCOUNTS RECEIVABLE -- OFFICERS
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Note receivable from officer/stockholder, payable in
monthly installments of $1,245 including interest at 10%,
due in 1997.............................................. $ 6,073 $19,659
Note receivable from officer/stockholder, payable in
monthly installments of $804 including interest at 9%,
due in 1998.............................................. 9,202 17,616
Loan from officer, payable in weekly installments of $200
with no interest, due in 1998............................ 31,643 41,289
Loan from officer, due on demand with no interest.......... 20,000 20,000
------- -------
$66,918 $98,564
======= =======
</TABLE>
4. INVENTORIES
Inventories consist of the following at June 30:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Raw material and supplies............................. $2,324,869 $1,390,611
Work-in-process....................................... 644,300 743,758
Finished goods........................................ 1,495,389 1,319,515
Tooling in progress................................... 946,327 565,763
---------- ----------
$5,410,885 $4,019,647
========== ==========
</TABLE>
In 1995, the Company changed its method of accounting for supplies and
packaging inventories. The Company previously expensed supplies and packaging
materials as they were purchased.
5. PROPERTY AND EQUIPMENT
Property, plant and equipment consists of the following at June 30:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Property and equipment:
Machinery and equipment......................... $ 20,774,817 $ 17,111,495
Forklifts and shop vehicles..................... 593,896 589,184
Tools, dies and fixtures........................ 2,235,846 1,692,488
Leasehold improvements.......................... 3,278,794 2,816,075
Office furniture and fixtures................... 1,700,606 1,311,871
Vehicles........................................ 36,687 70,791
Construction in progress........................ 786,776 871,150
Property under capital leases................... 682,833 512,246
------------ ------------
30,090,255 24,975,300
Less: accumulated depreciation and amortization (14,875,615) (12,001,884)
------------ ------------
$ 15,214,640 $ 12,973,416
============ ============
</TABLE>
6. BANK LINE OF CREDIT
The Company's bank line of credit, which has a balance of $6,211,508 as of
June 30, 1997, provides for a maximum borrowing base of the lesser of (A)
$13,500,000 or (B) 85% of eligible accounts receivable plus 60% of the eligible
inventories (capping at $2,225,000), plus an additional borrowing base that
fluctuates
F-30
<PAGE> 131
PRODUCTION STAMPING, INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
during the year. The line of credit bears interest at 0.50% over prime, and is
secured by substantially all assets of the Company.
The line of credit agreement requires the company to maintain specified
current and long term debt to net worth ratios, and a minimum net worth. The
Company is in compliance with all covenants as of June 30, 1997.
7. LONG TERM DEBT
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Note payable in monthly installments of $82,452 plus
interest at 0.75% over prime (9.25% at June 30, 1997),
secured by equipment, due in 2000......................... $ 3,113,870 $ --
Note payable in monthly installments of $12,561 plus
interest at 0.75% over prime (9.25% at June 30, 1997),
secured by equipment, due in 2001......................... 475,871 --
Note payable in monthly installments of $8,313 plus interest
at 0.75% over prime (9.25% at June 30, 1997), secured by
equipment, due in 2002.................................... 498,750 --
Note payables with monthly installments ranging from $3,583
to $32,898 through 2001, plus interest ranging from 0.25%
to 0.75% over prime, secured by equipment................. -- 3,525,125
----------- ----------
4,088,491 3,525,125
Less: current portion....................................... (1,231,593) (907,831)
----------- ----------
$ 2,856,898 $2,617,294
=========== ==========
</TABLE>
Annual maturities of long term debt are as follows:
<TABLE>
<S> <C>
1998...................................................... $1,231,593
1999...................................................... 1,239,905
2000...................................................... 1,239,906
2001...................................................... 269,024
2002 and thereafter....................................... 108,063
----------
$4,088,491
==========
</TABLE>
8. CAPITAL LEASES
Property under capital leases is as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Equipment................................................. $ 682,833 $ 512,246
Less: accumulated depreciation............................ (343,959) (131,696)
--------- ---------
$ 338,874 $ 380,550
========= =========
</TABLE>
Future minimum lease payments under capital leases are as follows:
<TABLE>
<S> <C>
1998...................................................... $213,495
1999...................................................... 179,678
2000...................................................... 14,941
--------
Total minimum lease payments.............................. 408,114
Less: amounts representing interest....................... (73,085)
--------
Present value of net minimum lease payments............... $335,029
========
</TABLE>
F-31
<PAGE> 132
PRODUCTION STAMPING, INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES
The components of deferred income taxes is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Deferred tax asset:
Capitalized start-up costs................................ $ 312,493 $ 350,264 $453,322
AMT credit................................................ 163,000 126,000 2,000
Other..................................................... 5,990 (23,011) 86,600
--------- --------- --------
Total net deferred tax asset.............................. 481,483 453,253 541,922
Deferred tax liability:
Property and equipment.................................... (544,000) (206,000) (74,600)
--------- --------- --------
Net deferred tax liability................................ $ (62,517) $ 247,253 $467,322
========= ========= ========
</TABLE>
The reconciliation of income taxes computed at the statutory tax rates and
the provision for income taxes is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Taxes at statutory rates.................................... $ 837,507 $485,791 $(199,459)
Other....................................................... 22,204 114,277 (85,863)
--------- -------- ---------
$ 859,771 $600,068 $(285,322)
========= ======== =========
</TABLE>
10. DEFINED BENEFIT PENSION PLAN
The Company has a defined benefit pension plan which covers all of its
employees not covered under the terms of a collective bargaining agreement and
who meet the minimum qualifications. The benefits are based on years of service
and the employee's compensation during employment. The Company's funding policy
is to contribute annually the maximum amount that can be deducted for federal
income tax purposes. Contributions were intended to provide not only for
benefits attributed to service to date but also for those expected to be earned
in the future.
The pension plan was frozen as of June 30, 1997. At that date, all
participants became 100% vested in the accumulated benefits, but would not
accrue any future benefits based on increases in compensation or additional
years of service. The Company intends to terminate the plan and all benefits
under the plan are expected to be paid to participants by June 30, 1998.
The following table sets forth the plan's funded status and amounts
recognized in the Company's balance sheet at June 30:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation. (all vested).............. $1,718,743 $1,513,471
========== ==========
Projected benefit obligation for service rendered to date... $1,718,743 $1,918,268
Plan assets at fair value, primarily listed stocks and U.S.
bonds..................................................... 1,707,241 1,275,914
---------- ----------
Projected benefit obligation in excess of plan assets....... 11,502 642,354
Unrecognized net gain from past experience different from
that assumed and effects of changes in assumptions........ -- (148,593)
Unrecognized net obligation at July 1, 1995 being recognized
over 15 years............................................. -- (247,861)
---------- ----------
Unfunded accrued pension cost............................... $ 11,502 $ 245,900
========== ==========
</TABLE>
F-32
<PAGE> 133
PRODUCTION STAMPING, INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
Net pension expense includes the following components:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost-benefits earned during the
period..................................... $ 179,412 $ 141,549 $ 143,616
Interest cost on projected benefit
obligation................................. 159,685 151,393 131,186
Actual return on plan assets................. (212,744) (180,226) (142,069)
Net amortization and deferral................ 131,999 92,580 75,533
--------- --------- ---------
Net period pension cost before curtailment... 258,352 205,296 208,266
Effect of curtailment........................ (242,480) -- --
--------- --------- ---------
Net period pension cost...................... $ 15,872 $ 205,296 $ 208,266
========= ========= =========
</TABLE>
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 8.0% and 6.0%, in 1997 and 1996. The expected
long term rate of return on plan assets was 8.0% in each year.
11. DEFINED CONTRIBUTION PLANS
The Company sponsors two defined contribution plans with deferred
compensation (401k) provisions, one covering union employees, and one covering
non-union employees. In May, 1996, the Company began matching 10% of certain
union employee contributions, up to a maximum of $20 per employee per month.
Total Company contributions for 1997, 1996 and 1995 aggregated $9,160, $2,900,
and $2,900, respectively. There is no matching provision in the non-union plan.
12. LEASE COMMITMENTS
The Company leases two of its buildings from an officer of the Company. The
leases, which provide for monthly rents of $30,238 and $3,800 plus taxes and
insurance, expire November 1, 1998 and November 30, 2004, respectively. Rent
expense for the years ended June 30, 1997, 1996 and 1995 aggregated $408,456 for
each fiscal year.
The Company has also guaranteed the related mortgage and land contract
secured by the buildings it leases. Balances outstanding under these obligations
at June 30, 1997 amounted to $2,286,200.
The Company also leases two other facilities from unrelated parties. The
leases provide for monthly rents of $30,578 and $6,160, plus taxes and insurance
with provisions for annual increases. The leases expire on March 31, 2000 and
June 30, 1998, respectively. Rent expense for 1997, 1996 and 1995 aggregated
$426,980, $408,483, and $295,235, respectively.
The Company also leases a warehouse from a related corporation which
expires August 1, 1999 with a monthly rent of $12,000. Rent expense for 1997,
1996 and 1995 aggregated $144,000, $144,000, and $119,000, respectively.
Minimum rentals due under operating leases:
<TABLE>
<S> <C>
1998........................................................ $1,006,177
1999........................................................ 827,319
2000........................................................ 504,544
2001........................................................ 15,200
----------
$2,353,240
==========
</TABLE>
F-33
<PAGE> 134
PRODUCTION STAMPING, INC.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
13. EQUIPMENT PURCHASE COMMITMENTS
The Company has committed to the purchase of two pieces of equipment for
$1,800,000 to be delivered in September, 1997.
14. CONCENTRATION OF CREDIT RISK
At June 30, 1997 and 1996, respectively, $4,652,000 and $6,007,000 of the
Company's accounts receivable were from General Motors Corporation.
15. RELATED PARTY TRANSACTIONS
The Company subcontracts certain painting, welding and stamping activities
to two entities owned by certain officers of the Company. The subcontract costs
amounted to $1,222,000, $434,000 and $0 for the years ended June 30, 1997, 1996
and 1995, respectively. The related accounts payable amounted to $69,000 and
$91,000 at June 30, 1997 and 1996, respectively. In addition, the Company has
made advances to the subcontractors which amounted to $316,093 and $142,354 as
of June 30, 1997 and 1996, respectively. The Company also leases two of its
buildings and a warehouse from an officer of the Company and a related
corporation, respectively (See Note 12).
F-34
<PAGE> 135
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Veltri Group
We have audited the accompanying combined balance sheet of Veltri Group as
of November 8, 1996, and the related combined statements of operations, net
capital deficiency, and cash flows for the period from January 1, 1996 to
November 8, 1996. These financial statements are the responsibility of the
Group's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Veltri Group at
November 8, 1996, and the results of its operations and its cash flows for the
period January 1, 1996 to November 8, 1996 in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Detroit, Michigan
March 17, 1998
F-35
<PAGE> 136
VELTRI GROUP
COMBINED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 1996 TO NOVEMBER 8, 1996
<TABLE>
<S> <C>
Net sales................................................... $67,680,901
Cost of products sold....................................... 55,581,817
-----------
Gross profit........................................... 12,099,084
Selling, general and administrative expenses................ 7,128,377
-----------
Income from operations................................. 4,970,707
Other expenses (income):
Interest.................................................. 3,988,044
Foreign currency.......................................... (455,799)
Other..................................................... 563,344
-----------
Income before income taxes.................................. 875,118
Provision for income taxes--deferred........................ 272,062
-----------
Net income............................................. $ 603,056
===========
</TABLE>
See accompanying notes.
F-36
<PAGE> 137
VELTRI GROUP
COMBINED BALANCE SHEET
NOVEMBER 8, 1996
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash...................................................... $ 10,337,972
Accounts receivable, less allowance of $167,300........... 13,463,360
Inventory................................................. 3,974,637
Income taxes receivable................................... 95,188
Prepaid expenses and other assets......................... 151,144
------------
Total current assets................................. 28,022,301
Property, plant and equipment............................... 23,924,965
Less accumulated depreciation............................. (11,379,627)
------------
12,545,338
------------
$ 40,567,639
============
LIABILITIES AND NET CAPITAL DEFICIENCY
CURRENT LIABILITIES
Note payable to bank...................................... $ 14,458,101
Accounts payable.......................................... 11,135,589
Deferred tooling revenue.................................. 2,045,946
Accrued liabilities....................................... 4,257,797
Current portion of long term debt......................... 1,445,243
------------
Total current liabilities............................ 33,342,676
Long term debt.............................................. 8,399,916
Deferred income tax......................................... 186,301
Due to shareholder.......................................... 186,145
NET CAPITAL DEFICIENCY
Common stock................................................ 144,867
Retained earnings (deficit)................................. (1,701,223)
Accumulated translation adjustment.......................... 8,957
------------
(1,547,399)
------------
$ 40,567,639
============
</TABLE>
See accompanying notes.
F-37
<PAGE> 138
VELTRI GROUP
COMBINED STATEMENT OF CHANGES IN NET CAPITAL DEFICIENCY
FOR THE PERIOD FROM JANUARY 1, 1996 TO NOVEMBER 8, 1996
<TABLE>
<CAPTION>
RETAINED
COMMON EARNINGS TRANSLATION
STOCK (DEFICIT) ADJUSTMENT TOTAL
------ --------- ----------- -----
<S> <C> <C> <C> <C>
Balance at January 1, 1996..................... $144,867 $(2,757,393) $12,799 $(2,599,727)
Capital contribution........................... -- 453,114 -- 453,114
Net income..................................... -- 603,056 -- 603,056
Foreign currency translation................... -- -- (3,842) (3,842)
-------- ----------- ------- -----------
Balance at November 8, 1996.................... $144,867 $(1,701,223) $ 8,957 $(1,547,399)
======== =========== ======= ===========
</TABLE>
See accompanying notes.
F-38
<PAGE> 139
VELTRI GROUP
COMBINED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1996 TO NOVEMBER 8, 1996
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 603,056
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation.............................................. 1,309,254
Deferred taxes............................................ (13,102)
Changes in operating assets and liabilities:
Accounts receivable....................................... 2,668,122
Inventories............................................... 2,361,073
Prepaid expenses.......................................... 78,977
Income tax receivable..................................... 370,465
Accounts payable.......................................... (253,669)
Accrued liabilities....................................... 3,940,526
-----------
Net cash provided by operating activities................... 11,064,702
INVESTING ACTIVITIES
Additions to property and equipment....................... (1,111,228)
Proceeds from sale of equipment........................... 223,436
-----------
Net cash used in investing activities....................... (887,792)
FINANCING ACTIVITIES
Payments on long term borrowings.......................... (7,426,432)
Net increase in short term borrowings..................... 7,138,222
Capital contribution...................................... 453,114
-----------
Net cash provided by financing activities................... 164,904
-----------
Translation adjustment...................................... (3,842)
NET INCREASE IN CASH........................................ 10,337,972
Cash at beginning of period................................. --
-----------
Cash at end of period....................................... $10,337,972
===========
SUPPLEMENTAL CASH FLOW INFORMATION
Note receivable from shareholder contributed to capital..... $ 453,114
===========
</TABLE>
See accompanying notes.
F-39
<PAGE> 140
VELTRI GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
NOVEMBER 8, 1996
1. BASIS OF ACCOUNTING
The combined financial statements of Veltri Group (the Group) are presented
in United States dollars and are prepared in accordance with accounting
principles generally accepted in the United States. The Group conducts its
operations in Canada and its functional currency is the Canadian dollar. The
Group includes the accounts of the following companies, all of which are
affiliated through common ownership:
- Veltri Holdings Limited, and its subsidiary companies Veltri
Stamping Corporation, Veltri Glencoe Ltd. and Talbot Assembly, Ltd.
- North American Precision Tool Ltd.
- Veltri Holdings U.S.A., Inc. (a U.S.A. Corporation)
- MTJ Enterprises Inc. (a U.S.A. Corporation)
- Andrea-Teresa-Frank, Inc. (a U.S.A. Corporation)
2. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The Group is a manufacturer of metal stampings that are sold primarily to
customers in the automotive industry. Sales to one customer accounted for
approximately 82% of sales for the period.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand, deposits in banks and
short-term marketable securities with maturities of 90 days or less.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reported in the combined balance sheets for cash and
cash equivalents, accounts receivable and accounts payable approximate fair
value. The fair value of the Group's bank line of credit and long-term debt
approximates the reported amounts at November 8, 1996 since their respective
interest rates approximate current market rates for similar debt instruments.
INVENTORIES
Finished goods, work in process and pre-production tooling costs are stated
at the lower of cost or net realizable value. Raw materials are valued at the
lower of cost or replacement cost.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Depreciation is
provided in amounts sufficient to relate the cost of depreciable assets to
operations over their estimated service lives. Straight-line and accelerated
methods of depreciation are used for both financial reporting and income tax
purposes.
REVENUE RECOGNITION
The Group recognizes revenue with respect to pre-production tooling
contracts on the completed contract basis. Provisions are made for losses in the
year in which the losses are first determinable. Deferred tooling revenue
includes progress billings of $18,841,015, net of pre-production tooling costs
of $16,795,069 at November 8, 1996.
F-40
<PAGE> 141
VELTRI GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOVEMBER 8, 1996
FOREIGN CURRENCY TRANSLATION
All balance sheet items have been translated from Canadian dollars into
United States dollars at the rate of exchange in effect as of the balance sheet
date. For revenues, expenses, gains and losses, an appropriate weighted average
exchange rate for the period was used.
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.
3. INVENTORY
Inventory consisted of the following at November 8 1996:
<TABLE>
<S> <C>
Raw materials............................................... $ 956,889
Work in process............................................. 1,003,592
Finished goods.............................................. 974,034
Pre-production tooling...................................... 1,040,122
----------
$3,974,637
==========
</TABLE>
4. PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment is comprised of the following:
<TABLE>
<S> <C>
Land........................................................ $ 138,185
Buildings and leasehold improvements........................ 3,815,815
Machinery and equipment..................................... 19,576,953
Furniture and fixtures...................................... 394,012
-----------
23,924,965
Less accumulated depreciation............................... (11,379,627)
-----------
Net carrying amount......................................... $12,545,338
===========
</TABLE>
5. BANK LINE OF CREDIT AND LONG TERM DEBT
The Group has a $16,504,000 line of credit with a bank. The line of credit
is secured by substantially all assets of the Group and bears interest at a base
rate plus one percent (9.75% at November 8, 1996). The balance outstanding is
$14,458,101 at November 8, 1996.
F-41
<PAGE> 142
VELTRI GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOVEMBER 8, 1996
Long term debt consisted of the following:
<TABLE>
<S> <C>
Equipment capital lease obligation, bearing interest at an
effective rate of 9.37% maturing in June, 1997. Interest
and principal are payable monthly......................... $ 145,256
Term notes secured by the assets of the Group maturing in
December 2000 and December 2001. The notes bear interest
at the prime rate plus 1.0% (9.75% on November 8,
1996)..................................................... 9,699,903
----------
9,845,159
Amounts due within one year................................. (1,445,243)
----------
Total long term debt........................................ $8,399,916
==========
</TABLE>
The amount due to shareholder bears interest at a Canadian chartered bank's
prime rate plus 2.0% and is payable on demand. The shareholder's intention is
not to seek repayment within the next fiscal period.
The aggregate annual maturities of long-term debt over the next five years,
are as follows:
<TABLE>
<S> <C>
1997........................................................ $1,445,243
1998........................................................ 1,924,981
1999........................................................ 2,024,980
2000........................................................ 2,070,654
2001 and thereafter......................................... 2,379,301
----------
$9,845,159
==========
</TABLE>
6. COMMITMENTS
The Group leases facilities and equipment under operating leases with
minimum rental commitments as of November 8, 1996 as follows:
<TABLE>
<S> <C>
1997........................................................ $ 549,245
1998........................................................ 153,463
1999........................................................ 177,618
2000........................................................ 290,200
2001........................................................ 302,086
Thereafter.................................................. 402,781
----------
Total minimum lease payments................................ $1,875,393
==========
</TABLE>
Rent expense aggregated $229,393 for the period ended November 8, 1996.
F-42
<PAGE> 143
VELTRI GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOVEMBER 8, 1996
7. CAPITAL STOCK
Capital Stock is comprised of the following:
<TABLE>
<S> <C>
Veltri Holdings Limited 6.0%, non-cumulative, non voting
redeemable Class A shares. Authorized 995,000 shares and
issued 187,292 shares -- stated value..................... $140,432
Veltri Holdings Limited variable rate to 12.0%, redeemable,
retractable, non-voting, non-cumulative Class shares.
Authorized 1,000 shares and issued 1,000 shares -- stated
value..................................................... 1,312
Veltri Holdings Limited common shares. Authorized unlimited
number of shares and issued 100 shares -- stated value.... 75
North American Precision Tool Ltd. common shares. Authorized
unlimited number and issued 100 shares -- stated value.... 75
Veltri Holdings U.S.A., Inc. $0.75 par value common shares.
Authorized 1,000 shares and issued 1,000 shares........... 991
MTJ Enterprises, Inc. $0.75 par value common shares.
Authorized and issued 1,000 shares........................ 991
Andrea-Teresa-Frank, Inc. $0.75 par value common shares.
Authorized and issued 1,000 shares........................ 991
--------
$144,867
========
</TABLE>
The Veltri Holdings Limited Class B shares are redeemable at a price of
$5,400 per share.
The Veltri Holdings Class A shares are redeemable at a price of $0.75 per
share.
8. INCOME TAXES
The shareholder of the U.S.A. corporations included in these financial
statements has elected to be treated under Subchapter S of the Internal Revenue
Code, whereby any tax liability or tax recovery is the responsibility of the
shareholder or is the shareholder's personal credit. The remainder of the Group
is incorporated as a C Corporation and is subject to Canadian income tax.
The components of deferred income taxes is as follows:
<TABLE>
<S> <C>
Liabilities:
Depreciation.............................................. $1,336,641
Other..................................................... 95,665
----------
1,432,306
Assets:
Loss carry forward........................................ 1,051,468
Product warranty.......................................... 194,537
----------
1,246,005
----------
Net deferred tax liability.................................. $ 186,301
==========
</TABLE>
The reconciliation of income taxes computed at the statutory tax rate and
the provision for income taxes is as follows:
<TABLE>
<S> <C>
Taxes at statutory rates.................................... $311,717
Income not subject to corporate tax......................... (39,655)
--------
$272,062
========
</TABLE>
F-43
<PAGE> 144
VELTRI GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
NOVEMBER 8, 1996
The Group had income tax loss carry forwards of approximately $3,084,000 at
November 8, 1996, which expire in 2001.
9. SALE OF GROUP
On November 8, 1996, the outstanding capital stock of all the entities
constituting the Veltri Group, except MTJ Enterprises, Inc. and
Andrea-Teresa-Frank, Inc., was acquired by Talon Automotive Group. The Group was
amalgamated into Veltri Metal Products Co.
F-44
<PAGE> 145
INDEPENDENT AUDITORS' REPORT
The Shareholders
Veltri International:
We have audited the accompanying combined balance sheet of Veltri
International as of December 31, 1995, and the related combined statements of
operations and accumulated deficit, and cash flows for the year then ended.
These combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Veltri International
as of December 31, 1995, and the results of their operations and their cash
flows for the year then ended in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Detroit, Michigan
April 24, 1998
F-45
<PAGE> 146
VELTRI INTERNATIONAL
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------
<S> <C>
ASSETS (NOTE 5)
Current assets:
Accounts receivable....................................... $16,131,481
Inventory (note 2)........................................ 4,289,765
Income taxes recoverable and deferred (note 8)............ 266,250
Prepaid expenses and other assets......................... 230,122
-----------
20,917,618
Property, plant and equipment, net (note 3)................. 12,966,800
-----------
$33,884,418
===========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities:
Bank overdraft (note 5)................................... $ 7,319,879
Accounts payable.......................................... 8,178,315
Accrued liabilities....................................... 3,528,214
Current portion of long-term debt (note 5)................ 16,692,913
-----------
35,719,321
Long-term debt (note 5)..................................... 107,286
Due to shareholder (note 4)................................. 657,538
Shareholders' deficiency:
Capital stock (note 6).................................... 144,867
Accumulated deficit....................................... (2,757,393)
Currency translation adjustment........................... 12,799
-----------
(2,599,727)
Commitments (note 9)........................................
-----------
$33,884,418
===========
</TABLE>
See accompanying notes to combined financial statements.
F-46
<PAGE> 147
VELTRI INTERNATIONAL
COMBINED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
------------
<S> <C>
Net sales................................................... $70,331,139
Cost of goods sold.......................................... 59,227,501
-----------
Gross profit........................................... 11,103,638
Selling, general and administrative......................... 8,481,102
Restructuring (note 7)...................................... 3,840,740
-----------
Loss from operations........................................ (1,218,204)
Other expense (income):
Interest, net............................................. 2,630,530
Foreign exchange gain..................................... (458,917)
-----------
Loss before taxes........................................... (3,389,817)
Income tax benefit (note 8):
Current................................................... 67,960
Deferred.................................................. 846,630
-----------
914,590
-----------
Net loss.................................................... (2,475,227)
Accumulated deficit, beginning of year...................... (282,166)
-----------
Accumulated deficit, end of year............................ $(2,757,393)
===========
</TABLE>
See accompanying notes to combined financial statements.
F-47
<PAGE> 148
VELTRI INTERNATIONAL
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
------------
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $(2,475,227)
Adjustments of reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 2,152,773
Deferred income taxes.................................. (846,630)
Gain on sale of property, plant and equipment.......... (35,692)
Write down of property, plant and equipment............ 1,678,917
Foreign currency gain.................................. (307,764)
Net changes in non-cash operating working capital
balances:
Accounts receivable.................................. (750,764)
Inventory............................................ 5,727
Prepaid expenses and other assets.................... 7,240
Accounts payable and accrued liabilities............. 1,698,316
Income taxes recoverable............................. 324,967
-----------
Net cash provided by operating activities....... 1,451,863
Cash flows from investing activities:
Purchase of capital assets................................ (1,728,264)
Proceeds on disposal of capital assets.................... 194,153
-----------
Net cash used in investing activities........... (1,534,111)
Cash flows from financing activities:
Decrease in due to shareholder............................ (64,644)
Repayments of long-term debt.............................. (181,161)
-----------
Net cash used in financing activities........... (245,805)
-----------
Increase in bank overdraft.................................. (328,053)
Bank overdraft, beginning of year........................... (6,991,826)
-----------
Bank overdraft, end of year................................. $(7,319,879)
===========
</TABLE>
See accompanying notes to combined financial statements.
F-48
<PAGE> 149
VELTRI INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1995
1. SIGNIFICANT ACCOUNTING POLICIES
(a) Business
Veltri International (the "Company") is primarily engaged in the
manufacture of metal stampings for the automotive industry. Sales to one
customer represented approximately 75% of sales for the year.
(b) Basis of Presentation
The combined financial statements include the accounts of the
following companies, all of which are affiliated through common ownership:
- Veltri Holdings Limited, and its subsidiary companies Veltri Stamping
Corporation, Veltri Glencoe Ltd. and Talbot Assembly, Ltd.
- North American Precision Tool Ltd.
- Veltri Holdings U.S.A., Inc. (a U.S.A. Corporation)
- MTJ Enterprises Inc. (a U.S.A. Corporation)
- Andrea-Teresa-Frank, Inc. (a U.S.A. Corporation)
(c) Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with an
original maturity of three months or less to be a cash equivalent.
(d) Inventory
Finished goods, work in process and pre-production tooling are valued
at the lower of cost or net realizable value. Raw materials are valued at
the lower of cost or replacement cost.
(e) Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is
calculated on a straight-line or accelerated basis over the estimated
useful lives of the assets.
(f) Revenue recognition
The company recognizes revenue with respect to pre-production tooling
contracts on the completed contract basis. A provision is made for the
amount of any losses on these contracts in the year in which the losses are
first determinable.
(g) Foreign Currency Translation
The functional currency of the Company's Canadian operations is the
Canadian dollar. Assets and liabilities of these entity's are translated at
the rates of exchange on the balance sheet data. Income and expense items
are translated at average monthly rates of exchange.
(h) Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
F-49
<PAGE> 150
VELTRI INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1995
2. INVENTORY
Inventory consisted of the following at December 31, 1995:
<TABLE>
<S> <C>
Raw materials............................................... $1,128,097
Work in process............................................. 788,490
Finished goods.............................................. 1,234,335
Pre-production tooling...................................... 933,685
Returnable containers....................................... 205,158
----------
$4,289,765
==========
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is comprised of the following at December 31,
1995:
<TABLE>
<S> <C>
Land........................................................ $ 300,871
Buildings and leasehold improvements........................ 4,616,282
Machinery and equipment..................................... 17,848,853
Furniture and fixtures...................................... 398,665
------------
23,164,671
Less accumulated depreciation............................... (10,197,871)
------------
$ 12,966,800
============
</TABLE>
4. DUE TO SHAREHOLDER
The amount due to shareholder bears interest at a Canadian chartered bank's
prime rate plus 2% and is payable on demand. The shareholder's intention is not
to seek repayment within one year of the balance sheet date.
5. LONG-TERM DEBT
Long-term debt is comprised of the following at December 31, 1995:
<TABLE>
<S> <C>
Canadian currency 12.55% Bankers' Acceptance, due January
1996...................................................... $ 733,138
Canadian currency 14.32% Bankers' acceptance, due January
1996...................................................... 1,466,276
LIBOR loan bearing interest at the LIBOR rate plus 2.5%, due
February 1998............................................. 4,000,000
LIBOR loans bearing interest at the LIBOR rate plus 2.5%,
due March 1996............................................ 4,200,000
LIBOR loan bearing interest at the LIBOR rate plus 3%, due
January 1996.............................................. 5,000,000
10.5% demand mortgage payable............................... 1,094,233
Canadian currency equipment capital lease obligation,
bearing interest at an effective rate of 9.37%, repayable
monthly in blended payments of $25,062, due June 1997..... 306,552
------------
16,800,199
Less current portion of long-term debt...................... (16,692,913)
------------
Long term debt, excluding current portion................... $ 107,286
============
</TABLE>
At December 31, 1995 the Company was not in compliance with several
covenants in its banking agreement. As a result, all of the debt, excluding a
portion of the capital lease obligation, has been deemed to be on a demand basis
and is classified as a current liability on the balance sheet.
F-50
<PAGE> 151
VELTRI INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1995
5. LONG-TERM DEBT -- (CONTINUED)
The bankers' acceptances and LIBOR loans are secured by inventory, accounts
receivable, and certain real estate holdings. Operating advances made to the
Company from time to time, which are disclosed as part of cash overdraft on the
balance sheet, bear interest at a Canadian chartered bank's prime rate plus 1.5%
and are secured as previously described.
The mortgage payable is secured by real property in the United States and
the capital lease obligation is secured by the equipment to which it relates.
Principal repayments required over the next three years on all long-term
debt except the capital lease obligation are approximately as follows:
<TABLE>
<S> <C>
1996........................................................ $13,993,647
1997........................................................ 1,000,000
1998........................................................ 1,500,000
</TABLE>
The following is a schedule of future minimum lease payments under the
capital lease obligation expiring June 1997 together with the balance of the
obligation under capital lease.
<TABLE>
<S> <C>
1996........................................................ $220,487
1997........................................................ 110,243
--------
330,730
Less amount representing interest at 9.37%.................. (24,178)
--------
Balance of the obligation................................... $306,552
========
</TABLE>
6. CAPITAL STOCK
Capital stock is comprised of the following at December 31, 1995:
<TABLE>
<S> <C>
Veltri Holdings Limited 6%, non-cumulative, non-voting
redeemable Class A shares. Authorized 995,000 shares and
issued 187,292 shares -- stated value..................... $140,432
Veltri Holdings Limited variable rate to 12%, redeemable,
retractable, non-voting, non-cumulative Class B shares.
Authorized 1,000 shares and issued 1,000 shares -- stated
value..................................................... 1,312
Veltri Holdings Limited common shares. Authorized unlimited
number of shares and issued 100 shares -- stated value.... 75
North American Precision Tool Ltd. common shares. Authorized
an unlimited number and issued 100 shares -- stated
value..................................................... 75
Veltri Holdings U.S.A., Inc. $1 par value common shares.
Authorized 1,000 shares and issued 1,000 shares........... 991
MTJ Enterprises, Inc. $1 par value common shares. Authorized
and issued 1,000 shares................................... 991
Andrea-Teresa-Frank, Inc. $1 par value common shares.
Authorized and issued 1,000 shares........................ 991
--------
$144,867
========
</TABLE>
The Veltri Holdings Limited Class B shares are redeemable at a price of
$5,400 per share. The Veltri Holdings Limited Class A shares are redeemable at a
price of $0.75 per share.
F-51
<PAGE> 152
VELTRI INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1995
7. RESTRUCTURING
During 1995, the Company decided to cease operations at its plant in
Indianapolis, Indiana and relocate certain of its business activities to plants
in Windsor and Glencoe, Ontario. The restructuring costs associated with the
shut-down and relocation of these operations, aggregating $3,840,740 are
comprised of the following:
<TABLE>
<S> <C>
Contract settlement......................................... $1,070,004
Write down of property, plant and equipment to estimated net
realizable value.......................................... 1,678,917
Severance................................................... 237,008
Other closing costs......................................... 854,811
----------
$3,840,740
==========
</TABLE>
8. INCOME TAXES
The shareholder of the U.S.A. corporations included in these financial
statements has elected to be treated under Subchapter S of the Internal Revenue
Code, whereby any tax liability or tax recovery is the responsibility of the
shareholder.
The components of deferred income taxes are as follows:
<TABLE>
<S> <C>
Assets:
Loss carryforward......................................... $351,000
Restructuring reserve..................................... 466,000
--------
Less: valuation allowance................................... (66,000)
--------
751,000
--------
Liabilities:
Depreciation.............................................. 663,000
Other..................................................... 2,000
--------
665,000
--------
$ 86,000
========
</TABLE>
At December 31, 1995, the Company had income tax loss carryforwards of
approximately $975,000 which expire in 2000.
The reconciliation of income taxes computed at the statutory rate and the
provision for income taxes is as follows:
<TABLE>
<S> <C>
Tax benefit at statutory rates.............................. $1,207,000
Losses not subject to corporate tax......................... (292,000)
----------
$ 915,000
==========
</TABLE>
9. COMMITMENTS
The Company leases several premises and is committed to the following
approximate annual costs over the next three years:
<TABLE>
<S> <C>
1996........................................................ $422,000
1997........................................................ 276,000
1998........................................................ 67,000
--------
</TABLE>
F-52
<PAGE> 153
VELTRI INTERNATIONAL
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31, 1995
10. SUBSEQUENT EVENT
On November 8, 1996, the outstanding capital stock of all the entities
comprising Veltri International, except MTJ Enterprises Inc. and
Andrea-Teresa-Frank, Inc., was acquired by Talon Automotive Group. The Company
was amalgamated into Veltri Metal Products Co.
F-53
<PAGE> 154
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information....................... 2
Forward-Looking Information................. 2
Prospectus Summary.......................... 4
Risk Factors................................ 15
Use of Proceeds............................. 22
Capitalization.............................. 22
The Exchange Offer.......................... 23
Unaudited Pro Forma Condensed Combined
Financial Information..................... 31
Notes to Unaudited Proforma Condensed
Combined Financial Information............ 33
Unaudited Proforma Condensed Combined
Interim Financial Information............. 36
Notes to Unaudited Proforma Condensed
Combined Interim Financial Information.... 37
Selected Financial Data..................... 38
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................ 39
Business.................................... 44
Management.................................. 54
Principal Securityholders................... 59
Certain Relationships and Related
Transactions.............................. 61
Description of Senior Debt.................. 63
Description of New Notes.................... 65
Certain U.S. Federal Income Tax
Considerations Relating to the Exchange
Offer..................................... 91
Old Notes; Registration Rights.............. 93
Book Entry; Delivery and Form............... 95
Plan of Distribution........................ 96
Legal Matters............................... 97
Experts..................................... 97
Index to Financial Statements............... F-1
</TABLE>
UNTIL , 1998, (40 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NOTES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
$120,000,000
[TALON AUTOMOTIVE GROUP, INC. LOGO]
TALON AUTOMOTIVE GROUP, INC.
9 5/8% SENIOR SUBORDINATED NOTES DUE 2008
------------------
PROSPECTUS
------------------
OFFER TO EXCHANGE
9 5/8% SENIOR SUBORDINATED
NOTES DUE 2008, SERIES A
FOR 9 5/8% SENIOR SUBORDINATED
NOTES DUE 2008, SERIES B
, 1998
======================================================
<PAGE> 155
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 561 through 571 of the Michigan Business Corporation Act (the
"MBCA") govern the indemnification of officers, directors and other persons. In
this regard, the MBCA provides for indemnification of directors and officers
acting in good faith and in a manner they reasonably believe to be in, or not
opposed to, the best interest of the Company or its shareholders (and, with
respect to a criminal proceeding, if they have no reasonable cause to believe
their conduct to be unlawful). Such indemnification may be made against (a)
expenses (including attorney's fees), judgments, penalties, fines and amounts
paid in settlement actually and reasonably incurred in connection with any
threatened, pending or completed action, suit or proceeding (other than an
action by, or in the right of, the Company) arising by reason of the fact that
they were serving as a director, officer, employee or agent of the Company (or
some other entity at the Company's request), and (b) expenses (including
attorney's fees) and amounts paid in settlement actually and reasonably incurred
in connection with a threatened, pending or completed action or suit by, or in
the right of, the Company, unless the director or officer is found liable to the
Company and an appropriate court does not determine that he or she is
nevertheless fairly and reasonably entitled to indemnification. The MBCA
requires indemnification for expenses to the extent that a director or office is
successful in defending against any such action, suit or proceeding, and
otherwise requires in general that the indemnification provided for in (a) and
(b) above be made only on a determination by a majority vote of a quorum of the
Board of Directors comprised of members who were not parties to or threatened to
be made parties to such action. In certain circumstances, the MBCA further
permits advances to cover such expenses before a final determination that
indemnification is permissible, upon receipt of (i) a written affirmation by the
director or officer of his or her good faith belief that he or she has met the
applicable standard of conduct set forth in the MBCA, and (ii) a written
undertaking by or on behalf of the director or officer to repay such amounts
unless it shall ultimately be determined that he or she is entitled to
indemnification and a determination that the facts then known to those making
the advance would not preclude indemnification. The Company's Articles of
Incorporation do not provide indemnification rights.
The Company's Bylaws contain indemnification provisions which provide that
the Company shall, to the greatest extent permitted by Sections 561 through 569
of the MBCA, as amended, or any successor provisions thereto, indemnify any and
all persons whom it shall have the power to indemnify under said sections from
and against any and all expenses, liabilities or other matters referred to in or
covered by said sections. The Bylaws also provide that the indemnification
authorized by the Bylaws shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under any statute, by-law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of such a person; provided, however, that
such indemnification shall not be mandatory for any person seeking indemnity in
connection with a proceeding voluntarily initiated by such person unless the
proceeding was authorized by a majority vote of the entire Board of Directors.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to officers and directors pursuant to the foregoing provisions,
the Company has been informed 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.
II-1
<PAGE> 156
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF EXHIBITS PAGE NO.
- ------- ----------------------- ----------
<C> <S> <C>
3.1 Articles of Incorporation of Talon Automotive Group, Inc.
(the "Company"), as amended, including Certificate of Merger
dated as of November 27, 1997, Certificate of Assumed name
dated as of April 9, 1998, Certificate of
Merger/Consolidation dated as of April 28, 1998, and
Certificates of Share Exchange dated as of April 28, 1998
3.2 Articles of Incorporation of VS Holdings, Inc. ("VS
Holdings"), as amended, including Certificate of
Merger/Consolidation dated as of April 28, 1998, Certificate
of Share Exchange dated as of April 28, 1998, and Articles
of Share Exchange dated as of April 28, 1998
3.3 Articles of Incorporation of Veltri Holdings USA, Inc.
("Veltri Holdings"), including Certificate of Share Exchange
dated as of April 28, 1998
3.4 Certificate of Status and Order of Amalgamation of Veltri
Metal Products Co. ("Veltri Metal Products")
3.5 By-laws of the Company
3.6 By-laws of VS Holdings
3.7 By-laws of Veltri Holdings
3.8 Articles of Association of Veltri Metal Products Co.
3.9 Agreement and Plan of Merger dated as of April 28, 1998 by
and between VS Holdings and VS Holdings No. 2, Inc.
3.10 Agreement and Plan of Merger dated as of April 28, 1998 by
and between Production Stamping, Inc. ("PSI"), Hawthorne
Metal Products Company ("Hawthorne"), and J&R Manufacturing
Inc. ("J&R")
3.11 Agreement and Plan of Merger dated as of April 28, 1998 by
and between the Company and TAG L.L.C.
3.12 Agreement and Plan of Share Exchange dated as of April 28,
1998 by and between the Company and VS Holdings
3.13 Agreement and Plan of Share Exchange dated as of April 28,
1998 by and between the Company and Veltri Holdings
4 Indenture dated as of April 28, 1998 by and among the
Company, as Issuer, VS Holdings, Veltri Holdings, and Veltri
Metal Products, as Guarantors, and U.S. Bank Trust National
Association, as Trustee
4.1 Form of 9 5/8% Senior Subordinated Note Due 2008, Series B
4.2 Form of Guarantee
5 Opinion of Dickinson Wright PLLC*
10.1 Credit Agreement dated as of April 28, 1998 by and between
the Company, as Borrower, and Comerica Bank, as Agent for
the Lenders
10.2 Pledge Agreement dated as of April 28, 1998 by and between
the Company and Comerica Bank
10.3 Mortgage Agreement dated as of April 28, 1998 by and between
the Company and Comerica Bank
10.4 Security Agreements dated as of April 28, 1998 between each
of the Company, VS Holdings, and Veltri Holdings and
Comerica Bank
</TABLE>
II-2
<PAGE> 157
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF EXHIBITS PAGE NO.
- ------- ----------------------- ----------
<C> <S> <C>
10.5 Guaranty Agreements dated as of April 28, 1998 between each
of the Company, VS Holdings, Veltri Metal Products and
Veltri Holdings and Comerica Bank
10.6 Debenture Agreement dated as of April 28, 1998 by and
between Veltri Metal Products and Comerica Bank
10.7 Debenture Pledge Agreement dated as of April 28, 1998 by and
between Veltri Metal Products and Comerica Bank
10.8 Agreement dated as of April 28, 1998 by and among Michael T.
J. Veltri ("Mr. Veltri"), Veltri Metal Products, VS
Holdings, Veltri Holdings and the Company
10.9 Amended and Restated Promissory Note dated as of April 28,
1998 by Veltri Metal Products in favor of Mr. Veltri
10.10 Unconditional Guaranty dated as of April 28, 1998 by the
Company, VS Holdings, and Veltri Holdings in favor of Mr.
Veltri
10.11 Security Agreement dated as of April 28, 1998 by the
Company, its subsidiaries, VS Holdings and Veltri Holdings
in favor of Mr. Veltri
10.12 Mortgage dated as of April 28, 1998 by and between the
Company, as mortgagor, and Mr. Veltri, as mortgagee
10.13 First Amendment to Stock Purchase Agreement dated as of
April 28, 1998 by and among Mr. Veltri, Veltri Metal
Products, VS Holdings and Veltri Holdings
10.14 Intercreditor Agreement dated as of April 28, 1998 between
and among Mr. Veltri and Comerica Bank
10.15 Registration Rights Agreement dated as of April 28, 1998 by
and among the Company, VS Holdings, Veltri Holdings, and
Veltri Metal Products, Salomon Brothers Inc and Credit
Suisse First Boston Corporation
10.16 Stock Purchase Agreement dated as of November 8, 1996 by and
among Mr. Veltri, Maria Veltri and the Company
10.17 Stock Purchase Agreement dated as of October 17, 1997, as
amended, by and among the former shareholders of PSI and the
Company
10.18 Purchase Agreement dated as of September 30, 1996 by and
among the former shareholders of J&R and the Company
10.19 Employment Agreement dated as of November 27, 1995, as
amended on January 1, 1998, by and between the Company and
Delmar O. Stanley ("Mr. Stanley")
10.20 Employment Agreement dated as of November 8, 1996 by and
between the Company and Mr. Veltri
10.21 Non-Compete Agreement dated as of November 8, 1996 by and
between the Company and Mr. Veltri
10.22 Severance Agreement dated as of February 6, 1996 by and
between the Company and David Woodward ("Mr. Woodward")
10.23 Severance Agreement dated as of February 7, 1996 by and
between the Company and Kris Pfaehler
10.24 Consolidated Equity Ownership Plan and Agreements thereunder
by and between the Company and each of Mr. Stanley, Mr.
Woodward, Mr. Pfaehler, and Wayne C. Inman ("Mr. Inman")
10.25 Deferred Compensation Agreements by and between the Company
and each of Mr. Stanley, Mr. Woodward, and Mr. Pfaehler
10.26 Talon L.L.C. 401(k) Plan, as amended
</TABLE>
II-3
<PAGE> 158
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF EXHIBITS PAGE NO.
- ------- ----------------------- ----------
<C> <S> <C>
10.27 Veltri Holdings 401(k) Plan
10.28 Executive Bonus Program of the Company
10.29 Lease Agreement by and between the Company and Maria Veltri
dated August 1, 1994
10.30 Lease Agreement by and between the Company and Maria Veltri
dated July 1, 1993
10.31 Amended and Restated Agreement dated as of April 28, 1998,
by and between the Company and Talon L.L.C.
10.32 Loan and Facility Agreements dated as of April, 1997 between
and among Veltri Metal Products and Export Development
Corporation
12.1 Statement of Ratio of Earnings to Fixed Charges
12.2 Pro Forma Computation of Ratio of Earnings to Fixed Charges
21 Subsidiaries and Affiliates of the Company
23.1 Consent of Dickinson Wright PLLC (included in Exhibit 5)
23.2 Consent of Ernst & Young for the Company
23.3 Consent of KPMG Peat Marwick for Veltri Metal Products
25 Statement of Eligibility and Qualification, Form T-1, of
U.S. Bank Trust National Association
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
</TABLE>
- -------------------------
* To be filed by amendment.
(b) Financial Statement Schedules
None.
All financial statement schedules have been omitted since the required
information is not present, is not present in amounts sufficient to require
submission of the schedule or because the required information is included in
the financial statements or notes thereto.
II-4
<PAGE> 159
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 20 or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question 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.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 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.
(c) The undersigned registrant hereby undertakes 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.
II-5
<PAGE> 160
SIGNATURES
Pursuant to the requirements of the Securities Act, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Troy, State
of Michigan on the 9th day of June, 1998.
TALON AUTOMOTIVE GROUP, INC.
By: /s/ DAVID J. WOODWARD
------------------------------------
David J. Woodward
Vice President of Finance,
Chief Financial Officer and
Treasurer
Pursuant to the requirements of the Securities Act, as amended, this
registration statement has been signed below by the following persons in the
capacities indicated and on June 9, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ DELMAR O. STANLEY President, Chief Executive Officer and Director
- --------------------------------------------- (Principal Executive Officer)
Delmar O. Stanley
/s/ DAVID J. WOODWARD Vice President of Finance, Chief Financial Officer,
- --------------------------------------------- Treasurer and Director
David J. Woodward (Principal Financial and Accounting Officer)
/s/ RANDOLPH J. AGLEY Chairman of the Board
- ---------------------------------------------
Randolph J. Agley
/s/ MICHAEL T. TIMMIS Vice Chairman of the Board
- ---------------------------------------------
Michael T. Timmis
/s/ WAYNE C. INMAN Secretary and Director
- ---------------------------------------------
Wayne C. Inman
</TABLE>
II-6
<PAGE> 161
SIGNATURES
Pursuant to the requirements of the Securities Act, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Troy, State
of Michigan on the 9th day of June, 1998.
VELTRI METAL PRODUCTS CO.
By: /s/ DAVID J. WOODWARD
------------------------------------
David J. Woodward
Vice President of Finance
and Treasurer
Pursuant to the requirements of the Securities Act, as amended, this
registration statement has been signed below by the following persons in the
capacities indicated and on June 9, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ MICHAEL T. J. VELTRI President
- --------------------------------------------- (Principal Executive Officer)
Michael T. J. Veltri
/s/ DAVID J. WOODWARD Vice President of Finance and, Treasurer
- --------------------------------------------- (Principal Financial and Accounting Officer)
David J. Woodward
/s/ RANDOLPH J. AGLEY Director
- ---------------------------------------------
Randolph J. Agley
/s/ MICHAEL T. TIMMIS Director
- ---------------------------------------------
Michael T. Timmis
/s/ WAYNE C. INMAN Vice President, Secretary and Director
- ---------------------------------------------
Wayne C. Inman
</TABLE>
II-7
<PAGE> 162
SIGNATURES
Pursuant to the requirements of the Securities Act, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Troy, State
of Michigan on the 9th day of June, 1998.
VELTRI HOLDINGS USA, INC.
By: /s/ DAVID J. WOODWARD
------------------------------------
David J. Woodward
Vice President and Treasurer
Pursuant to the requirements of the Securities Act, as amended, this
registration statement has been signed below by the following persons in the
capacities indicated and on June 9, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ MICHAEL T. J. VELTRI President (Principal Executive Officer)
- ---------------------------------------------
Michael T. J. Veltri
/s/ DAVID J. WOODWARD Vice President, Treasurer and Director
- --------------------------------------------- (Principal Financial and Accounting Officer)
David J. Woodward
/s/ RANDOLPH J. AGLEY Director
- ---------------------------------------------
Randolph J. Agley
/s/ MICHAEL T. TIMMIS Director
- ---------------------------------------------
Michael T. Timmis
/s/ WAYNE C. INMAN Vice President, Secretary and Director
- ---------------------------------------------
Wayne C. Inman
/s/ DELMAR O. STANLEY Director
- ---------------------------------------------
Delmar O. Stanley
</TABLE>
II-8
<PAGE> 163
SIGNATURES
Pursuant to the requirements of the Securities Act, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Troy, State
of Michigan on the 9th day of June, 1998.
VS HOLDINGS, INC.
By: /s/ DAVID J. WOODWARD
------------------------------------
David J. Woodward
Vice President of Finance and
Treasurer
Pursuant to the requirements of the Securities Act, as amended, this
registration statement has been signed below by the following persons in the
capacities indicated and on June 9, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ DELMAR O. STANLEY President, Chief Executive Officer and Director
- --------------------------------------------- (Principal Executive Officer)
Delmar O. Stanley
/s/ DAVID J. WOODWARD Vice President of Finance, Treasurer and Director
- --------------------------------------------- (Principal Financial and Accounting Officer)
David J. Woodward
/s/ RANDOLPH J. AGLEY Director
- ---------------------------------------------
Randolph J. Agley
/s/ MICHAEL T. TIMMIS Director
- ---------------------------------------------
Michael T. Timmis
/s/ WAYNE C. INMAN Vice President, Secretary and Director
- ---------------------------------------------
Wayne C. Inman
</TABLE>
II-9
<PAGE> 164
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
3.1 Articles of Incorporation of Talon Automotive Group, Inc.
(the "Company"), as amended, including Certificate of Merger
dated as of November 27, 1997, Certificate of Assumed name
dated as of April 9, 1998, Certificate of
Merger/Consolidation dated as of April 28, 1998, and
Certificates of Share Exchange dated as of April 28, 1998
3.2 Articles of Incorporation of VS Holdings, Inc. ("VS
Holdings"), as amended, including Certificate of
Merger/Consolidation dated as of April 28, 1998, Certificate
of Share Exchange dated as of April 28, 1998, and Articles
of Share Exchange dated as of April 28, 1998
3.3 Articles of Incorporation of Veltri Holdings USA, Inc.
("Veltri Holdings"), including Certificate of Share Exchange
dated as of April 28, 1998
3.4 Certificate of Status and Order of Amalgamation of Veltri
Metal Products Co. ("Veltri Metal Products")
3.5 By-laws of the Company
3.6 By-laws of VS Holdings
3.7 By-laws of Veltri Holdings
3.8 Articles of Association of Veltri Metal Products Co.
3.9 Agreement and Plan of Merger dated as of April 28, 1998 by
and between VS Holdings and VS Holdings No. 2, Inc.
3.10 Agreement and Plan of Merger dated as of April 28, 1998 by
and between Production Stamping, Inc. ("PSI"), Hawthorne
Metal Products Company ("Hawthorne"), and J&R Manufacturing
Inc. ("J&R")
3.11 Agreement and Plan of Merger dated as of April 28, 1998 by
and between the Company and TAG L.L.C.
3.12 Agreement and Plan of Share Exchange dated as of April 28,
1998 by and between the Company and VS Holdings
3.13 Agreement and Plan of Share Exchange dated as of April 28,
1998 by and between the Company and Veltri Holdings
4 Indenture dated as of April 28, 1998 by and among the
Company, as Issuer, VS Holdings, Veltri Holdings, and Veltri
Metal Products, as Guarantors, and U.S. Bank Trust National
Association, as Trustee
4.1 Form of 9 5/8% Senior Subordinated Note Due 2008, Series B
4.2 Form of Guarantee
5 Opinion of Dickinson Wright PLLC
10.1 Credit Agreement dated as of April 28, 1998 by and between
the Company, as Borrower, and Comerica Bank, as Agent for
the Lenders
10.2 Pledge Agreement dated as of April 28, 1998 by and between
the Company and Comerica Bank
10.3 Mortgage Agreement dated as of April 28, 1998 by and between
the Company and Comerica Bank
10.4 Security Agreements dated as of April 28, 1998 between each
of the Company, VS Holdings, and Veltri Holdings and
Comerica Bank
10.5 Guaranty Agreements dated as of April 28, 1998 between each
of the Company, VS Holdings, Veltri Metal Products and
Veltri Holdings and Comerica Bank
</TABLE>
<PAGE> 165
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
10.6 Debenture Agreement dated as of April 28, 1998 by and
between Veltri Metal Products and Comerica Bank
10.7 Debenture Pledge Agreement dated as of April 28, 1998 by and
between Veltri Metal Products and Comerica Bank
10.8 Agreement dated as of April 28, 1998 by and among Michael T.
J. Veltri ("Mr. Veltri"), Veltri Metal Products, VS
Holdings, Veltri Holdings and the Company
10.9 Amended and Restated Promissory Note dated as of April 28,
1998 by Veltri Metal Products in favor of Mr. Veltri
10.10 Unconditional Guaranty dated as of April 28, 1998 by the
Company, VS Holdings, and Veltri Holdings in favor of Mr.
Veltri
10.11 Security Agreement dated as of April 28, 1998 by the
Company, its subsidiaries, VS Holdings and Veltri Holdings
in favor of Mr. Veltri
10.12 Mortgage dated as of April 28, 1998 by and between the
Company, as mortgagor, and Mr. Veltri, as mortgagee
10.13 First Amendment to Stock Purchase Agreement dated as of
April 28, 1998 by and among Mr. Veltri, Veltri Metal
Products, VS Holdings and Veltri Holdings
10.14 Intercreditor Agreement dated as of April 28, 1998 between
and among Mr. Veltri and Comerica Bank
10.15 Registration Rights Agreement dated as of April 28, 1998 by
and among the Company, VS Holdings, Veltri Holdings, and
Veltri Metal Products, Salomon Brothers Inc and Credit
Suisse First Boston Corporation
10.16 Stock Purchase Agreement dated as of November 8, 1996 by and
among Mr. Veltri, Maria Veltri and the Company
10.17 Stock Purchase Agreement dated as of October 17, 1997, as
amended, by and among the former shareholders of PSI and the
Company
10.18 Purchase Agreement dated as of September 30, 1996 by and
among the former shareholders of J&R and the Company
10.19 Employment Agreement dated as of November 27, 1995, as
amended on January 1, 1998, by and between the Company and
Delmar O. Stanley ("Mr. Stanley")
10.20 Employment Agreement dated as of November 8, 1996 by and
between the Company and Mr. Veltri
10.21 Non-Compete Agreement dated as of November 8, 1996 by and
between the Company and Mr. Veltri
10.22 Severance Agreement dated as of February 6, 1996 by and
between the Company and David Woodward ("Mr. Woodward")
10.23 Severance Agreement dated as of February 7, 1996 by and
between the Company and Kris Pfaehler
10.24 Consolidated Equity Ownership Plan and Agreements thereunder
by and between the Company and each of Mr. Stanley, Mr.
Woodward, Mr. Pfaehler, and Wayne C. Inman ("Mr. Inman")
10.25 Deferred Compensation Agreements by and between the Company
and each of Mr. Stanley, Mr. Woodward, and Mr. Pfaehler
10.26 Talon L.L.C. 401(k) Plan, as amended
10.27 Veltri Holdings 401(k) Plan
10.28 Executive Bonus Program of the Company
10.29 Lease Agreement by and between the Company and Maria Veltri
dated August 1, 1994
</TABLE>
<PAGE> 166
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
10.30 Lease Agreement by and between the Company and Maria Veltri
dated July 1, 1993
10.31 Amended and Restated Agreement dated as of April 28, 1998,
by and between the Company and Talon L.L.C.
10.32 Loan and Facility Agreements dated as of April,1997 between
and among Veltri Metal Products and Export Development
Corporation
12.1 Statement of Ratio of Earnings to Fixed Charges
12.2 Pro Forma Computation of Ratio of Earnings to Fixed Charges
21 Subsidiaries and Affiliates of the Company
23.1 Consent of Dickinson Wright PLLC (included in Exhibit 5)
23.2 Consent of Ernst & Young for the Company
23.3 Consent of KPMG Peat Marwick for Veltri Metal Products
25 Statement of Eligibility and Qualification, Form T-1, of
U.S. Bank Trust National Association
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
</TABLE>
<PAGE> 1
EXHIBIT 3.1
UNITED STATES OF AMERICA
THE STATE [SEAL] MICHIGAN
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES
LANSING, MICHIGAN
This is to Certify that the Annexed copy has been compared by me with the
record on file in this Department and that the same is a true copy thereof.
In testimony whereof, I have hereunto set my
hand and affixed the Seal of the Department,
in the City of Lansing, this 27th day
of April, 1998.
Julie Croll, Director
Corporation, Securities and Land Development Bureau
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 2
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
Date Received (FOR BUREAU USE ONLY)
ADJUSTED PURSUANT TO FILED
TELEPHONE AUTHORIZATION
OCT 10 1997
PH. 517-663-2525 Ref#76092 Administrator
Attn: Cheryl J. Bixby MI DEPARTMENT OF CONSUMER & INDUSTRY SERVICES
MICHIGAN RUNNER SERVICE CORPORATION SECURITIES & LAND DEVELOPMENT BUREAU
P.O. BOX 266 EFFECTIVE DATE:
Eaton Rapids, MI. 48827-0266
Document will be returned to the name and address you enter above.
500-580
---------
ARTICLES OF INCORPORATION
For use by Domestic Profit Corporations
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, the undersigned
corporation executes the following Articles:
ARTICLE I
The name of the corporation is: Production Acquisition Inc.
ARTICLE II
The purpose or purposes for which the corporation is formed is to engage in any
activity within the purposes for which corporations may be formed under the
Business Corporation Act of Michigan.
ARTICLE III
The total authorized shares:
1. Common shares Class A 25,000
-----------------------------------------------------------
Class B 125,000
-----------------------------------------------------------
2. Preferred shares
------------------------------------------------------
3. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
The total number of shares of stock which the Corporation is authorized to
issue is One Hundred Fifty Thousand (150,000) shares, 25,000 shares
of which shall be designated as the Class A Voting Common Capital Stock of
the Corporation, and 125,000 shares of which shall be designated as the
Class B Nonvoting Common Capital Stock of the Corporation. The Class A
Voting Common Capital Stock and the Class B Nonvoting Common Capital Stock
shall be identical in all respects, except that holders of the Class B
Nonvoting Common Capital Stock have no voting power for any purpose
whatsoever, and the holders of Class A Voting Common Capital Stock shall, to
the exclusion of the holders of Class B Nonvoting Common Capital Stock, have
full voting power for all purposes.
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 3
ARTICLE IV
1. The address of the current registered office is:
200 TALON CENTRE, DETROIT , MICHIGAN 48207
------------------------------------------------ ---------------------
(Street Address) (City) (State) (Zip Code)
2. The mailing address of the registered office, if different than above:
MICHIGAN *
------------------------------------------------ ---------------------
(Street Address) (City) (State) (Zip Code)
3. The name of the resident agent at the registered office is: WAYNE C. INMAN
ARTICLE V
The name(s) and address(es) of the incorporator(s) is (are) as follows:
Name Residence or Business Address
RICHARD M. MIETTINEN, 300 TALON CENTRE, DETROIT, MI 48207
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 4
Use space below for additional Articles of for continuation of previous
Articles. Please identify any Article being continued or added. Attach
additional pages if needed.
ARTICLE VI:
Each director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for a breach of the
director's fiduciary duty as a director; provided, however, this Article does
not eliminate or limit any liability a director may otherwise have for any of
the following:
(i) A breach of such director's duty of loyalty to the corporation
or its shareholders;
(ii) Acts or omissions not in good faith or that involve intentional
misconduct or knowing violation of law;
(iii) A violation of Section 551(1) of the Michigan Business
Corporation Act; or
(iv) A transaction from which such director derived an improper
personal benefit.
Any repeal or modification of the foregoing paragraph by the
shareholders 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.
I (We), the incorporator(s) sign my (our) name(s) this 8th day of October, 1997.
--- -------
/s/ Richard M. Miettinen
- -------------------------------- --------------------------------
Richard M. Miettinen
- -------------------------------- --------------------------------
- -------------------------------- --------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 5
Date Received
Dec 05, 1997 (FOR BUREAU USE ONLY)
FILED
PH. 517-663-2525 Ref# 77347
Attn: Cheryl J. Bixby Dec 08, 1997
MICHIGAN RUNNER SERVICE
P.O. Box 266 Administrator
Eaton Rapids, MI. 48827-0266 MI DEPT OF CONSUMER & INDUSTRY SERVICES
CORPORATION, SECURITIES & LAND DEVELOPMENT BUREAU
EFFECTIVE DATE:
Document will be returned to the name and address you enter above
CERTIFICATE OF MERGER
FOR USE BY PARENT AND SUBSIDIARY PROFIT CORPORATIONS
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, the undersigned
corporations execute the following Certificate:
1. a. The name of each constituent corporation and its identification number
is/are:
Production Acquisition Inc. 500-580
Production Stamping, Inc. 351-392
b. The name of the surviving corporation and its identification number is:
Production Acquisition Inc. 500-580
c. For each subsidiary corporation, state:
<TABLE>
<CAPTION>
Number of outstanding Number of share owned by the
Number of corporation shares in each class parent corporation in each class
Production Stamping, Inc. 30,000 common 30,000 common
<S> <C> <C>
- ------------------------- ------------- -------------------------------
- ------------------------- ------------- -------------------------------
- ------------------------- ------------- -------------------------------
- ------------------------- ------------- -------------------------------
- ------------------------- ------------- -------------------------------
- ------------------------- ------------- -------------------------------
</TABLE>
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 6
d. The manner and basis of converting the shares of each constituent
corporation is as follows:
a. The issued and outstanding common stock of Production Stamping, Inc.
shall be cancelled and retired, without conversion and no new shares of
Production Acquisition Inc. shall be issued with respect thereto.
b. All authorized shares of the common stock of Production Stamping,
Inc., other than those which are issued and outstanding on the effective
date hereof, shall be cancelled and retired, without conversion, and no new
shares of Production Acquisition Inc. shall be issued with respect thereof.
c. Each share of the common stock of Production Acquisition Inc. issued
and outstanding on the effective date hereof shall remain outstanding
without any change or alteration in the ownership, voting powers or other
rights as set forth in the Articles of Incorporation of Production
Acquisition Inc.
e. The amendments to the Articles of Incorporation of the surviving
corporation to be effected by the merger are as follows:
Article I
The name of the corporation is: Production Stamping, Inc.
f. Other provisions with respect to the merger are as follows:
N/A
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 7
Signed this 26th day of Nov., 1997.
---- ----
PRODUCTION ACQUISITION INC.
--------------------------------------------------
(Name of parent corporation)
By: WAYNE C. INMAN
----------------------------------------------
(Only Signature of: President, Vice-President,
Chairperson, Vice-Chairperson)
WAYNE C. INMAN, VICE PRESIDENT
--------------------------------------------------
(Type or Print Name and Title)
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 8
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
Date Received APR 09 1998 (FOR BUREAU USE ONLY)
FILED
APR 09 1998
Name Linda M. Bierl, Legal Asst. Administrator
Address Timmis & Inman MI DEPT OF CONSUMER & INDUSTRY SERVICES
300 Talon Centre CORPORATION, SECURITIES & LAND DEVELOPMENT BUREAU
City State Zip Expiration Date: 12-31-2003
Detroit MI 48207
DOCUMENT WILL BE RETURNED TO NAME AND ADDRESS INDICATED ABOVE
CERTIFICATE OF ASSUMED NAME
FOR USE BY CORPORATIONS, LIMITED PARTNERSHIPS AND LIMITED LIABILITY COMPANIES
(Please read information and instructions on reverse side)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), or Act
213, Public Acts of 1982 (limited partnerships), or Act 23, Public Acts of 1993
(limited liability companies), the corporation, limited partnership, or limited
liability company in item one below executes the following Certificate:
1. The true name of the corporation, limited partnership, or limited liability
company is: PRODUCTION STAMPING, INC.
2. The identification number assigned by the Bureau is: 500-580
-----------------------
3. The location of the corporation or limited liability company registered
office in Michigan or the office at which the limited partnership records are
maintained is:
350 Talon Centre Detroit Michigan 48207
---------------------------------------------------------------------------
(Street Address) (City) (State) (Zip Code)
4. The assumed name under which business is to be transacted is:
TALON AUTOMOTIVE GROUP
COMPLETE ITEM 5 ON LAST PAGE IF THIS NAME IS ASSUMED BY MORE THAN ONE ENTITY.
Signed this 7th day of April, 1998
------- ------ --
By: Wayne C. Inman
----------------------------------------------
Wayne C. Inman, Vice President
--------------------------------------------------
(Type or Print Name and Title
---------------------------------------------------
Limited Partnerships Only - Indices Name of General
Partner if a Corporation or Other Entity
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 9
MICIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
Date Received (FOR BUREAU USE ONLY)
APR 24 1998 APR 24, 1998
Name Linda M. Bierl, Legal Asst.
Timmis & Inman L.L.P.
Administrator
Address 300 Talon Centre
MI DEPT OF CONSUMER & INDUSTRY SERVICES
City State Zip CORPORATION, SECURITIES & LAND DEVELOPMENT BUREAU
Detroit MI 48207
EFFECTIVE DATE: 4-28-98
Document will be returned to the name and address you enter above
CERTIFICATE OF MERGER/CONSOLIDATION
FOR USE BY DOMESTIC OR FOREIGN CORPORATIONS
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, (profit
corporations), and/or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following Certificate:
1. The Plan of Merger (Consolidation) is as follows: See attached Exhibit A.
a. The name of each constituent corporation and its identification number
is:
J & R Manufacturing Inc., CID 418-827
Hawthorne Metal Products Company, CID 610-836
Production Stamping, Inc., CID 500-580
b. The name of the surviving (new) corporation and its identification
number is:
Production Stamping, Inc., CID 500-580
c. For each constituent stock corporation, state:
<TABLE>
<CAPTION>
Name of Corporation Designation and number of Indicate class or Indicate class or
outstanding shares in each series of shares series entitled to
class or series entitled to vote vote as a class
<S> <C> <C> <C>
J & R Manufacturing Inc. Class A Voting, 50,000 Class A N/A
Class B Non Voting, 50,000
Hawthorne Metal Class A Voting, 50,000 Class A N/A
Products Company
Class B Non-Voting, 50,00
Production Stamping, Inc. Class A Voting, 2,500 Class A N/A
Class B Non Voting, 97,500
</TABLE>
If the number of shares is subject to change prior to the effective date of the
merger or consolidation, the manner in which the change may occur is as follows:
n/a
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 10
d. For each constituent nonstock corporation
(i) If it is organized on a membership basis, state (a) the name of the
corporation, (b) a description of its members, and (c) the number,
classification and voting rights of its members.
n/a
(ii) if it is organized on a directorship basis, state (a) the name of the
corporation, (b) a description of the organization of its board, and (c)
the number, classification and voting rights of its directors.
n/a
e. The terms and conditions of the proposed merger (consolidation), including
the manner and basis of converting the shares of, or membership or other
interests in, each constituent corporation into shares, bonds, or other
securities of, or membership or other interest in, the surviving
(consolidated) corporation, or into cash or other consideration, are as
follows: See attached Exhibit A
f. If a consolidation, the Articles of Incorporation of the consolidated
corporation are attached to this Certificate and are incorporated herein.
If a merger, the amendments to the Articles, or a restatement of the
Articles, of the surviving corporation to be effected by the merger are as
follows:
See attached Exhibit A.
g. Other provisions with respect to the merger (consolidation) are as follows:
The Plan of Merger will be furnished by the surviving corporation, on
request and without cost, to any shareholder of any constituent
corporation.
2. (Complete this for any foreign corporation only)
This merger (consolidation) is permitted by the laws of the State of
Delaware
the jurisdiction under which Hawthorne Metal Products Company
(name of foreign corporation)
is organized and the plan of merger (consolidation) was adopted and
approved by such corporation pursuant to and in accordance with the laws of
that jurisdiction.
3. (Complete only if an effective date is desired other than the date of
filing. This date must be no more than 90 days after receipt of this
document in this office.)
The merger (consolidation) shall be effective on the *28th day of April,
1998. at 10:01 a.m. Eastern Daylight Savings Time
4. The plan of merger was adopted by the Board of Directors of the following
constituent corporations: Hawthorne Metal Products Company, J & R
Manufacturing, Inc. and Production Stamping, Inc., and was approved by the
shareholders of those corporations in accordance with Section 703a.
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 11
Signed this * 23rd day of April , 1998
------- -------------- -----
HAWTHORNE METAL PRODUCTS COMPANY
---------------------------------------------------
(Name of Corporation)
By: /s/ David J. Woodward
------------------------------------------------
(Only signature of: President, Vice President,
Chairperson or Vice-Chairperson)
* David J. Woodward, Vice President
-----------------------------------------------
(Type or Print Name and Title)
Signed this * 23rd day of April , 1998
-------- -------------- -----
J & R MANUFACTURING INC.
---------------------------------------------------
(Name of Corporation)
By: /s/ David J. Woodward
------------------------------------------------
(Only signature of: President, Vice-President,
Chairperson or Vice-Chairperson)
* David J. Woodward, Vice President
-----------------------------------------------
(Type or Print Name and Title)
Signed this * 23rd day of April , 1998
-------- -------------- -----
PRODUCTION STAMPING, INC.
---------------------------------------------------
(Name of Corporation)
By: /s/ David J. Woodward
------------------------------------------------
(Only signature of: President, Vice-President,
Chairperson or Vice-Chairperson)
* David J. Woodward, Vice President
-----------------------------------------------
(Type or Print Name and Title)
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 12
EXHIBIT A
A. CONTINUATION OF ITEM 1(E):
1. Conversion of Production Stamping, Inc. ("PSI") Stock:
(a) Class A Common Stock. On the Effective Date, each share
of the PSI Class A Common Stock outstanding on the Effective Date shall, by
operation of law and by virtue of the Merger and without any action on the part
of any person, be converted into .1 Class A Shares of PSI.
(b) Class B Common Stock. On the Effective Date, each share
of the PSI Class B Common Stock outstanding on the Effective Date shall, by
operation of law and by virtue of the Merger and without any action on the part
of any person, be converted into .1 Class B Shares of PSI.
2. Conversion of Hawthorne Metal Products Company ("HAWTHORNE") Stock:
(a) Class A Common Stock. On the Effective Date, each share
of the HAWTHORNE Class A Common Stock outstanding on the Effective Date shall,
by operation of law and by virtue of the Merger and without any action on the
part of any person, be converted into .0365 Class A Shares of PSI and .694
Class B Shares of PSI.
(b) Class B Common Stock. On the Effective Date, each share
of the HAWTHORNE Class B Common Stock outstanding on the Effective Date shall,
by operation of law and by virtue of the Merger and without any action on the
part of any person, be converted into .730 Class B Shares of PSI.
3. Conversion of J & R Manufacturing Inc. ("J & R") Stock:
(a) Class A Common Stock. On the Effective Date, each share
of the J & R Class A Common Stock outstanding on the Effective Date shall, by
operation of law and by virtue of the Merger and without any action on the part
of any person, be converted into .00002 Class A Shares of PSI.
(b) Class B Common Stock. On the Effective Date, each share
of the J & R Class B Common Stock outstanding on the Effective Date shall, by
operation of law and by virtue of the Merger and without any action on the part
of any person, be converted into .00002 Class B Shares of PSI.
4. Cancellation of Authorized Shares. All authorized shares of
HAWTHORNE Class A Common Stock, HAWTHORNE Class B Common Stock, J & R Class A
Common Stock and J & R Class B Common Stock, other than those outstanding on the
Effective Date, shall, by operation of law and by nature of the merger and
without action on the part of any person, be
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 13
canceled and retired, without conversion, and no new shares of the Surviving
Corporation shall be issued with respect thereto.
5. Any fractional shares resulting from the distribution of shares pursuant
to Section 3.5 shall be rounded to the nearest whole number.
B. CONTINUATION OF ITEM 1(F):
(a) Article I of such Articles of Incorporation shall be and the same
hereby is amended and restated in its entirety to read as follows:
Article I
The name of the Corporation is TALON AUTOMOTIVE GROUP, INC.
(b) Article III of such Articles of Incorporation shall be and the
same hereby is amended and restated in its entirety to read as follows:
Article III
The total authorized shares:
1. Common shares (Class A) 25,000
2. Common shares (Class B) 250,000
3. Preferred shares none
A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
The total number of shares of stock which the Corporation is
authorized to issue is Two Hundred Seventy-five Thousand (275,000)
shares, Twenty-five Thousand (25,000) shares of which shall be
designated as the Class A Voting Common Capital Stock of the
Corporation, and Two Hundred Fifty Thousand (250,000) shares of which
shall be designated as the Class B Nonvoting Common Capital stock of
the Corporation. The Class A Voting Common Capital Stock and the Class
B Nonvoting Common Capital Stock shall be identical in all respects,
except that holders of the Class B Nonvoting Common Capital Stock
shall have no voting power for any purpose whatsoever, and the holders
of Class A Voting Common Capital Stock shall, to the exclusion of the
holders of Class B Nonvoting Common Capital Stock, have full voting
power for all purposes.
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 14
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
Date Received 988B#34650407 ORG&FI $125.00 (FOR BUREAU USE ONLY)
APR 24 1998 FILED
Name Linda M. Bierl, Legal Asst. APR 24 1998
Timmis & Inman L.L.P. Administrator
Address MI DEPT OF CONSUMER & INDUSTRY SERVICES
300 Talon Centre CORPORATION, SECURITIES & LAND
DEVELOPMENT BUREAU
City State Zip
Detroit MI 48207 EFFECTIVE DATE: 4-28-98
Document will be returned to the name and address vou enter above
CERTIFICATE OF SHARE EXCHANGE
FOR USE BY DOMESTIC PROFIT OR FOREIGN ACQUIRING PROFIT CORPORATIONS
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, (profit
corporations), the undersigned corporation executes the following Certificate:
1. a. The name of each corporation whose shares will be acquired and its
identification number is:
VS Holdings Inc. 418-825
---------------------------------- -----------------
*
---------------------------------- -----------------
b. The name of the acquiring corporation and its identification number is:
Talon Automotive Group, Inc. 500-580
----------------------------------------- -----------------
2. The manner and basis of exchanging the shares to be acquired as set forth
in the plan of exchange:
(a) On the Effective Date, the holders of the outstanding shares
of the capital stock of VS Holdings Inc. Class A Common Stock (the "VS
Class A Shareholders") shall cause the certificate(s) representing such
shares to be surrendered to Talon Automotive Group, Inc. ("TAG"). Upon
the surrender of such certificate(s), TAG shall exchange the same for
.791 Shares of TAG Class A stock and shall thereupon cause new
certificates representing such TAG Class A Shares to be executed and
delivered to the VS Class A Shareholders in accordance with the terms of
this Article III.
(b) On the Effective Date, the holders of the outstanding shares
of the capital stock of VS Class B Common Stock (the "VS Class B
Shareholders") shall cause the certificate(s) representing such shares to
be surrendered to TAG. Upon the surrender of such certificate(s), TAG
shall exchange the same for .791 Shares of TAG Class B Shares and shall
thereupon cause new certificates representing such TAG Class B Shares to
be executed and delivered to the VS Class B Shareholders.
(c) Upon the surrender of all shares of VS Class A Common Stock
and VS Class B Common Stock to TAG by the VS Class A Shareholders and the
VS Class B Shareholders, TAG shall submit the same to VS Holdings Inc.
which shall, on the effective date, reissue new certificates representing
such stock to TAG.
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 15
3. (Complete for any foreign corporation only)
This share exchange is permitted by the laws of the state of
-----------
the jurisdiction under which *
-----------------------------
(name of foreign corporation)
is organized and the plan of share exchange was adopted and approved by
such corporation pursuant to and in accordance with the laws of that
jurisdiction.
4. (Complete only if an effective date is desired other than the date of
filing. This date must be no more than 90 days after receipt by the
administrator.)
The share exchange shall be effective at 10:04 a.m. Eastern Daylight
Savings Time on the * 28th day of * April, 1998.
------ ------- -
5. (Complete applicable section for each constituent corporation)
a. The plan of share exchange has been adopted by the Board of Directors of
the following corporations in accordance with Section 702 of the Act:
VS Holdings Inc.
Talon Automotive Group, Inc.
b. The plan of share exchange was approved by the shareholders of the
following constituent corporations in accordance with Section 703a.
VS Holdings Inc.
Talon Automotive Group, Inc.
6. The plan of share exchange will be furnished by the acquiring
corporation, on request and without cost, to any shareholder of any
constituent corporation.
Signed this * day of April , 1998
------ ---------------- --
* VS Holdings Inc.
---------------------------------------------
(Name of Corporation)
By: David J. Woodward
---------------------------------------------
(Only Signature of: President, Vice-President,
Chairperson or Vice-Chairperson)
David J. Woodward, Vice President
Signed this * day of April , 1998
------ ---------------- --
* Talon Automotive Group, Inc.
---------------------------------------------
(Name of Corporation)
By: David J. Woodward
---------------------------------------------
(Only Signature of: President, Vice-President,
Chairperson or Vice-Chairperson)
David J. Woodward, Vice President
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 16
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
Date Received (FOR BUREAU USE ONLY)
988B#3465 0407 ORG&FI $62.50
APR 24 1998 FILED
Name Linda M. Bierl, Legal Asst. APR 24 1998
Timmis & Inman L.L.P. Administrator
Address MI DEPT OF CONSUMER & INDUSTRY SERVICES
300 Talon Centre CORPORATION, SECURITIES & LAND
DEVELOPMENT BUREAU
City State Zip
Detroit MI 48207 EFFECTIVE DATE: 4-28-98
Document will be returned to the name and address you enter above
CERTIFICATE OF SHARE EXCHANGE
FOR USE BY DOMESTIC PROFIT OR FOREIGN ACQUIRING PROFIT CORPORATIONS
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, (profit
corporations), the undersigned corporation executes the following Certificate:
1. a. The name of each corporation whose shares will be acquired and its
identification number is:
Veltri Holdings USA, Inc. 629-575
---------------------------------- -----------------
*
---------------------------------- -----------------
b. The name of the acquiring corporation and its identification number is:
Talon Automotive Group, Inc. 500-580
----------------------------------------- -----------------
2. The manner and basis of exchanging the shares to be acquired as set forth
in the plan of exchange:
(a) On the Effective Date, the holders of the outstanding shares
of the Common stock of Veltri Holdings USA, Inc. stock (the "Veltri
Shareholders") shall cause the certificate(s) representing such shares
to be surrendered to Talon Automotive Group, Inc. ("TAG"). Upon the
surrender of such certificate(s), TAG shall exchange the same for .001
TAG Class A Shares only and shall thereupon cause new certificates
representing such TAG Class A Shares to be executed and delivered to the
Veltri Shareholders.
(b) Upon the surrender of all shares of Veltri Common Stock to
TAG by the Veltri Shareholders, TAG shall submit the same to Veltri
which shall, on the effective date, reissue new certificates
representing such stock to TAG.
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 17
3. (Complete for any foreign corporation only)
This share exchange is permitted by the laws of the state of Indiana
-------
the jurisdiction under which Veltri Holdings USA, Inc.
-----------------------------
(name of foreign corporation)
is organized and the plan of share exchange was adopted and approved by
such corporation pursuant to and in accordance with the laws of that
jurisdiction.
4. (Complete only if an effective date is desired other than the date of
filing. This date must be no more than 90 days after receipt by the
administrator.)
at 10:03 a.m. Eastern Daylight Savings Time
The share exchange shall be effective/on the * 28th day of April, 1998.
------ ----- -
5. (Complete applicable section for each constituent corporation)
a. The plan of share exchange has been adopted by the Board of Directors of
the following corporations in accordance with Section 702 of the Act:
Talon Automotive Group, Inc.
b. The plan of share exchange was approved by the shareholders of the
following constituent corporations in accordance with Section 703a.
Talon Automotive Group, Inc.
6. The plan of share exchange will be furnished by the acquiring
corporation, on request and without cost, to any shareholder of any
constituent corporation.
Signed this *23rd day of April , 1998
----- ---------------- --
* Veltri Holdings USA, Inc.
---------------------------------------------
(Name of Corporation)
By: David J. Woodward
---------------------------------------------
(Only Signature of: President, Vice-President,
Chairperson or Vice-Chairperson)
David J. Woodward, Vice President
Signed this *23rd day of April , 1998
------ ---------------- --
* Talon Automotive Group, Inc.
---------------------------------------------
(Name of Corporation)
By: David J. Woodward
---------------------------------------------
(Only Signature of: President, Vice-President,
Chairperson or Vice-Chairperson)
David J. Woodward, Vice President
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 1
EXHIBIT 3.2
UNITED STATES OF AMERICA
THE STATE (SEAL) OF MICHIGAN
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES
LANSING, MICHIGAN
This is to Certify that the Annexed copy has been compared by me with the
record on file in this Department and that the same is a true copy thereof.
In testimony whereof, I have hereunto set my
hand and affixed the Seal of the Department, in
the City of Lansing, this 27th day of
April, 1998.
Julie Croll, Director
Corporation, Securities and Land Development Bureau
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 2
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
Date Received (FOR BUREAU USE ONLY)
SEP 12, 1996 FILED
SEP 12, 1996
Name Administrator
Linda M. Bierl, Legal Asst. MI DEPARTMENT OF CONSUMER & INDUSTRY SERVICES
Timmis & Inman L.L.P. CORPORATION, SECURITIES & LAND DEVELOPMENT BUREAU
Address
300 Talon Centre EFFECTIVE DATE:
City State Zip
Detroit MI 48207
DOCUMENT WILL BE RETURNED TO NAME AND ADDRESS INDICATED ABOVE
CORPORATION IDENTIFICATION NUMBER
418-825
-------
ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT CORPORATIONS
(PLEASE READ INFORMATION AND INSTRUCTIONS ON LAST PAGE)
Pursuant to the provisions of Act 284, Public Acts of 1972, the
undersigned corporation executes the following Articles:
ARTICLE I
The name of the corporation is: VS HOLDINGS INC.
ARTICLE II
The purpose or purposes for which the corporation is formed is to engage in any
activity within the purposes for which corporations may be formed under the
Business Corporation Act of Michigan.
ARTICLE III
The total authorized shares:
1. Common shares (Class A) 30,000
Common shares (Class B) 30,000
Preferred shares none
2.
A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
See continuation page.
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 3
ARTICLE IV
1. The address of the current registered office is:
200 Talon Centre Detroit MICHIGAN 48207
------------------------------------------------ -----------------------
(Street Address) (City) (State) (zip Code)
2. The mailing address of the registered office if different than above is:
MICHIGAN
------------------------------------------ -----------------------
(Street Address) (City) (State) (Zip Code)
3. The name of the resident agent at the registered office: Wayne C. Inman
ARTICLE V
The name and address of the incorporator is as follows:
Name Residence or Business Address
Richard M. Miettinen 300 Talon Centre, Detroit, MI 48207
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 4
Use space below for additional Articles of for continuation of previous
Articles. Please identify any Article being continued or added. Attach
additional pages if needed.
ARTICLE III, 3.
The total number of shares of stock which the Corporation is authorized to
issue is Sixty Thousand (60,000) shares, Thirty Thousand (30,000) shares of
which shall be designated as the Class A Voting Common Capital Stock of the
Corporation, and Thirty Thousand (30,000) shares of which shall be designated
as the Class B Nonvoting Common Capital stock of the Corporation. The Class A
Voting Common Capital Stock and the Class B Nonvoting Common Capital Stock
shall have no voting power for any purpose whatsoever, and the holders of Class
A Voting Common Capital Stock shall, to the exclusion of the holders of Class B
Nonvoting Common Capital Stock, have full voting power for all purposes.
ARTICLE VI:
Each director of the Corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for the breach of the
director's fiduciary duty as a director; provided, however, this Article does
not eliminate or limit any liability a directory may otherwise have for any of
the following:
(i) A breach of such director's duty of loyalty to the corporation
or its shareholders;
(ii) Acts or omissions not in good faith or that involve intentional
misconduct or knowing violation of law;
(iii) A violation of Section 551(1) of the Michigan Business
Corporation Act; or
(iv) A transaction from which such director derived an improper
personal benefit.
Any repeal or modification of the foregoing paragraph by the
shareholders 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.
I, the incorporator, sign my name this 11th day of September , 1996 .
/s/ Richard M. Miettinen
- ------------------------ --------------------------------------
Richard M. Miettinen
- ------------------------ --------------------------------------
- ------------------------ --------------------------------------
- ------------------------ --------------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 5
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
Date Received (FOR BUREAU USE ONLY)
OCT 16, 1996 FILED
OCT 16, 1996
Name Administrator
Linda M. Bierl, Legal Asst. MI DEPARTMENT OF CONSUMER & INDUSTRY SERVICES
Timmis & Inman L.L.P. CORPORATION, SECURITIES & LAND DEVELOPMENT BUREAU
Address
300 Talon Centre EFFECTIVE DATE:
City State Zip
Detroit MI 48207
DOCUMENT WILL BE RETURNED TO NAME AND ADDRESS INDICATED ABOVE
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC CORPORATIONS
(PLEASE READ INFORMATION AND INSTRUCTIONS ON LAST PAGE)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following Certificate:
1. The present name of the corporation is: VS HOLDING INC.
2. The identification number assigned by the Bureau is 418-825
-----------------------
3. The location of its registered office is:
200 Talon Centre Detroit MICHIGAN 48207
--------------------------------------------------- ---------------------
(Street Address) (City) (Zip Code)
4. Article III of the Articles of Incorporation is hereby amended to
read as follows:
SEE EXHIBIT A, ATTACHED.
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 6
5. COMPLETE SECTION (a) IF THE AMENDMENT WAS ADOPTED BY THE UNANIMOUS CONSENT
OF THE INCORPORATORS BEFORE THE FIRST MEETING OF THE BOARD OF DIRECTORS;
OTHERWISE, COMPLETE SECTION (b). DO NOT COMPLETE BOTH.
a. x The foregoing amendment to the Articles of Incorporation were duly
--- adopted on the 14th day of October, 1996, in accordance with the
provision of Section 642 of the Act by the unanimous consent of the
incorporators before the first meeting of the Board of Directors.
Signed this 15th day of October , 1996
------- -------------------------- --------
/s/ Richard M. Miettinen
------------------------ ------------------------------------
(Signature) (Signature)
Richard M. Miettinen
------------------------ ------------------------------------
(Type or Print Name) (Type or Print Name)
------------------------ ------------------------------------
(Signature) (Signature)
------------------------ ------------------------------------
(Type or Print Name) (Type or Print Name)
b.
--- The foregoing amendment to the Articles of Incorporation were duly
adopted on day of , 19 in accordance with the
provisions of Section 642 of the Act and: (check one of the following)
--- was duly adopted in accordance with Section 611(2) of the Act by the
vote of the shareholders if a profit corporation, or by the vote of
the directors if a nonprofit corporation organized on a non-stock
directorship basis. The necessary votes were cast in favor of the
amendment.
--- was duly adopted by the written consent of all the directors pursuant
to Section 525 of the Act and the corporation is a nonprofit
corporation organized on a non-stock directorship basis.
--- was duly adopted by the written consent of the shareholders having
not less than the minimum number of votes required by statue in
accordance with Section 407(1) and (2) of the Act if a nonprofit
corporation, and Section 407(1) of the Act if a profit corporation.
Written notice to shareholders who have not consented in writing has
been given. (Note: Written consent by less than all of the
shareholders is permitted only if such provision appears in the
Articles of Incorporation.)
--- was duly adopted by the written consent of all the shareholders or
members entitled to vote in accordance with Section 407(3) of the
Act if a non-profit corporation, and Section 407(2) of the Act if a
profit corporation.
Signed this day of , 199
------------ --------------- ----
By:
----------------------------------------------------
(Signature)
-------------------------------------------------------
(Type or Print Name and Title)
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 7
EXHIBIT A
1. The total authorized capital stock is:
CLASS OF STOCK NUMBER OF SHARES
-------------- ----------------
Class A Voting Common 75,000
Class B Non-Voting Common 75,000
2. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
The rights, preferences and limitations of the Class A Voting Common Stock
and the Class B Non-Voting Common Stock shall be identical in all respects,
except that the holders of the Class B Non-Voting Common Stock shall have
no voting rights for any purpose whatsoever, and the holders of the Class A
Voting Common Stock shall have full voting rights for all purposes.
<PAGE> 8
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
Date Received (FOR BUREAU USE ONLY)
OCT 31, 1996 FILED
OCT 31, 1996
Name Administrator
Linda M. Bierl, Legal Asst. MI DEPARTMENT OF CONSUMER & INDUSTRY SERVICES
Timmis & Inman L.L.P. CORPORATION, SECURITIES & LAND DEVELOPMENT BUREAU
Address
300 Talon Centre EFFECTIVE DATE:
City State Zip
Detroit MI 48207
DOCUMENT WILL BE RETURNED TO NAME AND ADDRESS INDICATED ABOVE
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC CORPORATIONS
(PLEASE READ INFORMATION AND INSTRUCTIONS ON LAST PAGE)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporation), or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following Certificate:
1. The present name of the corporation is: VS HOLDING INC.
2. The identification number assigned by the Bureau is 418-825
-----------------------
3. The location of its registered office is:
200 Talon Centre Detroit MICHIGAN 48207
--------------------------------------------------- ---------------------
(Street Address) (City) (Zip Code)
4. Article III of the Articles of Incorporation is hereby amended to
read as follows:
SEE EXHIBIT A, ATTACHED.
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 9
5. COMPLETE SECTION (a) IF THE AMENDMENTS WAS ADOPTED BY THE UNANIMOUS CONSENT
OF THE INCORPORATORS BEFORE THE FIRST MEETING OF THE BOARD OF DIRECTORS;
OTHERWISE, COMPLETE SECTION (b). DO NOT COMPLETE BOTH.
a. x The foregoing amendment to the Articles of Incorporation were duly
--- adopted on the day of 19 , in accordance with the
provision of Section 642 of the Act by the unanimous consent of the
incorporators before the first meeting of the Board of Directors.
Signed this day of , 19
------- -------------------------- --------
------------------------ ------------------------------------
(Signature) (Signature)
------------------------ ------------------------------------
(Type or Print Name) (Type or Print Name)
------------------------ ------------------------------------
(Signature) (Signature)
------------------------ ------------------------------------
(Type or Print Name) (Type or Print Name)
b. X
--- The foregoing amendment to the Articles of Incorporation were duly
adopted on 30th day of October, 1996, in accordance with the
provision of Section 642 of the Act and: (check one of the following)
--- was duly adopted in accordance with Section 611(2) of the Act by the
vote of the shareholders if a profit corporation, or by the vote of
the Shareholders or members if a nonprofit corporation, or by the
vote of the directors if a nonprofit corporation organized on a
non-stock directorship basis. The necessary votes were cast in favor
of the amendment.
--- was duly adopted by the written consent of all the directors pursuant
to Section 525 of the Act and the corporation is a nonprofit
corporation organized on a non-stock directorship basis.
--- was duly adopted by the written consent of the shareholders having
not less than the minimum number of votes required by statue in
accordance with Section 407(1) and (2) of the Act if a nonprofit
corporation, and Section 407(1) of the Act if a profit corporation.
Written notice to shareholders who have not consented in writing has
been given. (Note: Written consent by less than all of the
shareholders is permitted only if such provision appears in the
Articles of Incorporation.)
X
--- was duly adopted by the written consent of all the shareholders or
members entitled to vote in accordance with Section 407(3) of the
Act if a non-profit corporation, and Section 407(2) of the Act if a
profit corporation.
Signed this 30th day of October , 1996
By: /s/ Wayne C. Inman
----------------------------------------------------
(Signature)
Wayne C. Inman, Vice President
-------------------------------------------------------
(Type or Print Name and Title)
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 10
EXHIBIT A
1. The total authorized capital stock is:
CLASS OF STOCK NUMBER OF SHARES
-------------- ----------------
Class A Voting Common 75,000
Class B Non-Voting Common 100,000
2. A Statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
The rights, preferences and limitations of the Class A Voting Common Stock
and the Class B Non-Voting Common Stock shall be identical in all respects,
except that the holders of the Class B Non-Voting Common Stock shall have
no voting rights for any purpose whatsoever, and the holders of the Class A
Voting Common Stock shall have full voting rights for all purposes.
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 11
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
Date Received (FOR BUREAU USE ONLY)
DEC 17, 1996 FILED
DEC 17, 1996
Name Administrator
Linda M. Bierl, Legal Asst. MI DEPARTMENT OF CONSUMER & INDUSTRY SERVICES
Timmis & Inman L.L.P. CORPORATION, SECURITIES & LAND DEVELOPMENT BUREAU
Address
300 Talon Centre EFFECTIVE DATE:
City State Zip
Detroit MI 48207
DOCUMENT WILL BE RETURNED TO NAME AND ADDRESS INDICATED ABOVE
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC CORPORATIONS
(PLEASE READ INFORMATION AND INSTRUCTIONS ON LAST PAGE)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporation), or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following Certificate:
1. The present name of the corporation is: VS HOLDING INC.
2. The identification number assigned by the Bureau is 418-825
-----------------------
3. The location of its registered office is:
200 Talon Centre Detroit MICHIGAN 48207
--------------------------------------------------- ---------------------
(Street Address) (City) (Zip Code)
4. Article III of the Articles of Incorporation is hereby amended to
read as follows:
SEE EXHIBIT A, ATTACHED.
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 12
5. COMPLETE SECTION (a) IF THE AMENDMENT WAS ADOPTED BY THE UNANIMOUS
CONSENT OF THE INCORPORATORS BEFORE THE FIRST MEETING OF THE BOARD OF
DIRECTORS; OTHERWISE, COMPLETE SECTION (b). DO NOT COMPLETE BOTH.
a. The foregoing amendment to the Articles of Incorporation were duly
--- adopted on the day of , 19 , in accordance with the
provisions of Section 642 of the Act by the unanimous consent of the
incorporators before the first meeting of the Board of Directors.
Signed this day of , 19
------- ------------------------------ ---
---------------------------------- --------------------------------
(Signature) (Signature)
---------------------------------- --------------------------------
(Type or Print Name) (Type or Print Name)
---------------------------------- --------------------------------
(Signature) (Signature)
---------------------------------- --------------------------------
(Type or Print Name) (Type or Print Name)
b. X The foregoing amendment to the Articles of Incorporation were duly
--- adopted on 13th day of December, 1996, in accordance with the
provisions of Section 642 of the Act and: (check one of the
following)
was duly adopted in accordance with Section 611(2) of the Act by the
--- vote of the shareholders if a profit corporation, or by the vote of
the shareholders or members if a nonprofit corporation, or by the
vote of the directors if a nonprofit corporation organized on a
non-stock directorship basis. The necessary votes were cast in favor
of the amendment.
was duly adopted by the written consent of all the directors pursuant
--- to Section 525 of the Act and the corporation is a nonprofit
corporation organized on a non-stock directorship basis.
was duly adopted by the written consent of the shareholders having
--- not less than the minimum number of votes required by statue in
accordance with Section 407(1) and (2) of the Act if a nonprofit
corporation, and Section 407(1) of the Act if a profit corporation.
Written notice to shareholders who have not consented in writing has
been given. (Note: Written consent by less than all of the
shareholders is permitted only if such provision appears in the
Articles of Incorporation.)
X was duly adopted by the written consent of all the shareholders or
--- members entitled to vote in accordance with Section 407(3) of the
Act if a non-profit corporation, and Section 407(2) of the Act if
a profit corporation.
Signed this 13th day of December, 1996
By: Wayne C. Inman
-----------------------------------
(Signature)
Wayne C. Inman, Vice President
---------------------------------------
(Type or Print Name and Title)
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 13
EXHIBIT A
1. The total authorized capital stock is:
CLASS OF STOCK NUMBER OF SHARES
-------------- ----------------
Class A Voting Common 75,000
Class B Non-Voting Common 125,000
2. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
The rights, preferences and limitations of the Class A Voting Common
Stock and the Class B Non-Voting Common Stock shall be identical in all
respects, except that the holders of the Class B Non-Voting Common
Stock shall have no voting rights for any purpose whatsoever, and the
holders of the Class A Voting Common Stock shall have full voting rights
for all purposes.
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 14
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
(FOR BUREAU USE ONLY)
Date Received
APR 24 1998 FILED
- ------------- APR 24 1998
Name Linda M. Bierl, Legal Asst. Administrator
Timmis & Inman L.L.P. MI DEPT CONSUMER & INDUSTRY
- ---------------------------------------------- SERVICES CORPORATION, SECURITIES
Address 300 Talon Centre & LAND DEVELOPMENT BUREAU
- ----------------------------------------------
City State Zip EFFECTIVE DATE: 4-28-98
Detroit MI 48207
- ----------------------------------------------
Document will be returned to the name and address you enter above
CERTIFICATE OF MERGER/CONSOLIDATION
FOR USE BY DOMESTIC OR FOREIGN CORPORATIONS
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, (profit
corporations), and/or Act 162, Public Acts of 1982 (nonprofit corporations),
the undersigned corporation executes the following Certificate:
1. The Plan of Merger (Consolidation) is as follows:
a. The name of each constituent corporation and its identification number
is:
VS Holdings No. 2 Inc., CID 418-828
-----------------------------------
VS Holdings Inc., CID 418-825
-----------------------------
b. The name of the surviving (new) corporation and its identification
number is:
VS Holdings Inc., CID 418-825
-----------------------------
c. For each constituent stock corporation, state:
<TABLE>
<CAPTION>
Designation and number
of outstanding shares in Indicate class or series of Indicate class or
each class or series shares entitled to vote series entitled to
vote as a class
<S> <C> <C> <C>
Name of corporation
VS Holdings Inc. 2,500 voting common Class A 5,000 voting common n/a
97,500 non-voting common Class B 5,000 non-voting common n/a
VS Holdings No. 2 Inc. 5,000 voting common 5,000 voting common n/a
5,000 non-voting common 5,000 non-voting common n/a
</TABLE>
If the number of shares is subject to change prior to the effective date of the
merger or consolidation, the manner in which the change may occur is as follows:
n/a
<PAGE> 15
d. For each constituent nonstock corporation
(i) If it is organized on a membership basis, state (a) the name of the
corporation, (b) a description of its members, and (c) the number,
classification and voting rights of its members.
n/a
(ii) if it is organized on a directorship basis, state (a) the name of
the corporation, (b) a description of the organization of its board,
and (c) the number, classification and voting rights of its directors.
n/a
e. The terms and conditions of the proposed merger (consolidation),
including the manner and basis of converting the shares of, or
membership or other interests in, each constituent corporation into
shares, bonds, or other securities of, or membership or other interest
in, the surviving (consolidated) corporation, or into cash or other
consideration, are as follows:
(a) Class A Common Stock. On the Effective Date, each share of
the VS Holdings No. 2, Inc. Class A Common Stock outstanding on the
Effective Date shall, by operation of law and by virtue of the Merger
and without any action on the part of any person, be converted into .005
Class A Shares of VS Holdings Inc. and .096 Class B Shares of VS
Holdings Inc.
(b) Class B Common Stock. On the Effective Date, each share of
the VS Holdings No.2, Inc. Class B Common Stock outstanding on the
Effective Date shall, by operation of law and by virtue of the Merger
and without any action on the part of any person, be converted into .096
Class B Shares of VS Holdings Inc.
(c) All authorized shares of VS Holdings No. 2 Inc. Class A
Common Stock and VS Holdings No. 2 Inc. Class B Common Stock, other than
those outstanding on the Effective Date, shall, by operation of law and
by nature of the merger and without action on the part of any person, be
canceled and retired, without conversion, and no new shares of the
Surviving Corporation shall be issued with respect thereto.
f. If a consolidation, the Articles of Incorporation of the consolidated
corporation are attached to this Certificate and are incorporated herein.
If a merger, the amendments to the Articles, or a restatement of the
Articles, of the surviving corporation to be effected by the merger are as
follows: n/a
g. Other provisions with respect to the merger (consolidation) are as follows:
The plan of merger will be furnished by the surviving corporation, on
request and without cost, to any shareholder of any constituent corporation.
(The following statement must be added. However, you may attach a rider,
if additional space is needed.) The plan of merger will be furnished by the
surviving corporation, on request and without cost, to any shareholder of
any constituent corporation.
<PAGE> 16
2. (Complete this for any foreign corporation only) n/a
This merger (consolidation) is permitted by the laws of the State of
*__________________________
the jurisdiction under which *______________________________________
(name of foreign corporation)
is organized and the plan of merger (consolidation) was adopted and
approved by such corporation pursuant to and in accordance with the laws
of that jurisdiction.
3. (Complete only if an effective date is desired other than the date of
filing. This date must be no more than 90 days after receipt of this
document in this office.)
The merger (consolidation) shall be effective on the *28th day of April,
1998 at 10:00 a.m. Eastern Daylight Savings Time.
4. (Complete applicable section for each constituent corporation)
a. (For domestic profit corporations only)
The plan of merger was adopted by the Board of Directors of the
following constituent corporations:
VS Holdings Inc.
VS Holdings No. 2 Inc.
and was approved by the shareholders of those corporations in accordance
with Section 703a.
Signed this *23rd day of April, 1998*
* VS Holdings, Inc.
-------------------------------------------------------
(Name of Corporation)
By: David J. Woodward
-------------------------------------------------------
(Only signature of: President, Vice-President,
Chairperson or Vice-Chairperson)
* David J. Woodward, Vice President
-------------------------------------------------------
(Type or Print Name and Title)
Signed this * 23rd day of April, 1998
* VS Holdings No. 2, Inc.
-------------------------------------------------------
By: David J. Woodward
---------------------------------------------------
(Only signature of: President, Vice-President,
Chairperson or Vice-Chairperson)
* David J. Woodward, Vice President
-------------------------------------------------------
(Type or Print Name and Title)
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 17
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
DATE RECEIVED (FOR BUREAU USE ONLY)
- ------------------------------------------
APR 24 1998 FILED
- ------------------------------------------
Name APR 24 1998
Linda M. Bierl, Legal Asst.
Timmis & Inman L.L.P. ADMINISTRATOR
- ------------------------------------------ MI DEPT OF CONSUMER & INDUSTRY
Address SERVICES CORPORATION, SECURITIES &
300 Talon Centre LAND DEVELOPMENT BUREAU
- ------------------------------------------
City State Zip EFFECTIVE DATE: 4-28-98
Detroit MI 48207
- --------------------------------------------------------------------------------
Document will be returned to the name and address you enter above
CERTIFICATE OF SHARE EXCHANGE
FOR USE BY DOMESTIC PROFIT OR FOREIGN ACQUIRING PROFIT CORPORATIONS
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, (profit
corporations), the undersigned corporation executes the following Certificate:
1. a. The name of each corporation whose shares will be acquired and its
identification number is:
VS Holdings Inc. 418-825
----------------------------- ----------------
*
----------------------------- ----------------
b. The name of the acquiring corporation and its identification number
is:
Talon Automotive Group, Inc. 500-580
----------------------------- ----------------
2. The manner and basis of exchanging the shares to be acquired as set
forth in the plan of exchange:
(a) On the Effective Date, the holders of the outstanding
shares of the capital stock of VS Holdings Inc. Class A Common Stock
(the "VS Class A Shareholders") shall cause the certificate(s)
representing such shares to be surrendered to Talon Automotive Group,
Inc. ("TAG"). Upon the surrender of such certificate(s), TAG shall
exchange the same for .791 Shares of TAG Class A stock and shall
thereupon cause new certificates representing such TAG Class A Shares
to be executed and delivered to the VS Class A Shareholders in
accordance with the terms of this Article III.
(b) On the Effective Date, the holders of the outstanding shares
of the capital stock of VS Class B Common Stock (the "VS Class B
shareholders") shall cause the certificate(s) representing such shares
to be surrendered to TAG. Upon the surrender of such certificate(s),
TAG shall exchange the same for .791 Shares of TAG Class B Shares and
shall thereupon cause new certificates representing such TAG Class B
Shares to be executed and delivered to the VS Class B Shareholders.
(c) Upon the surrender of all shares of VS Class A Common Stock
and VS Class B Common Stock to TAG by the VS Class A Shareholders and
the VS Class B Shareholders, TAG shall submit the same to VS Holdings
Inc. which shall, on the effective date, reissue new certificates
representing such stock to TAG.
<PAGE> 18
3. (Complete for any foreign corporation only)
This share exchange is permitted by the laws of the state of ___________
the jurisdiction under which *_____________________________________
(name of foreign corporation)
is organized and the plan of share exchange was adopted and approved by
such corporation pursuant to and in accordance with the laws of that
jurisdiction.
4. (Complete only if an effective date is desired other than the date of
filing. This date must be no more than 90 days after receipt by the
administrator.)
The share exchange shall be effective at 10:04 a.m. Eastern Daylight
Savings Timeon the * 28th day of * April, 1998.
5. (Complete applicable section for each constituent corporation)
a. The plan of share exchange has been adopted by the Board of
Directors of the following corporations in accordance with Section
702 of the Act:
VS Holdings Inc.
Talon Automotive Group, Inc.
b. The plan of share exchange was approved by the shareholders of the
following constituent corporations in accordance with Section 703a.
VS Holdings Inc.
Talon Automotive Group, Inc.
6. The plan of share exchange will be furnished by the acquiring
corporation, on request and without cost, to any shareholder of any
constituent corporation.
Signed this *________ day of April, 1998
* VS Holdings Inc.
-------------------------------------------------------
(Name of Corporation)
By: David J. Woodward
-----------------------------------------------------
(Only Signature of: President, Vice-President,
Chairperson or Vice-Chairperson)
David J. Woodward, Vice President
Signed this *________ day of April, 1998
* Talon Automotive Group, Inc.
-------------------------------------------------------
(Name of Corporation)
By: David J. Woodward
-----------------------------------------------------
(Only Signature of: President, Vice-President,
Chairperson or Vice-Chairperson)
David J. Woodward, Vice President
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 1
EXHIBIT 3.3
UNITED STATES OF AMERICA
THE STATE OF [SEAL] MICHIGAN
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES
LANSING, MICHIGAN
This is to Certify that the Annexed copy has been compared by me with the
record on file in this Department and that the same is a true copy thereof.
In testimony whereof, I have hereunto set my
hand and affixed the Seal of the Department,
in the City of Lansing, this 27th day
of April, 1998.
Julie Croll, Director
Corporation, Securities and Land Development Bureau
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 2
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
(FOR BUREAU USE ONLY) FILED Date Received
APR 16, 1992
APR 20, 1992
ADMINISTRATOR
MICHIGAN DEPT OF COMMERCE
CORPORATION & SECURITIES BUREAU
CORPORATION IDENTIFICATION NUMBER 629-575
APPLICATION FOR CERTIFICATE OF AUTHORITY
TO TRANSACT BUSINESS OR CONDUCT AFFAIRS IN MICHIGAN
FOR USE BY FOREIGN CORPORATIONS
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), the
undersigned corporation executes the following Application:
1. The name of the corporation is:
Veltri Holdings USA, Inc.
2. (Complete this item only if the corporate name in item 1 is not
available for use in Michigan)
The assumed name of the corporation to be used in all its dealings with
the Bureau and in the transaction of its business or the conduct of its
affairs in Michigan is:
3. It is incorporated under the laws of Indiana. The date of its
incorporation is February 8, 1992, and the period of its duration
(corporate term) is perpetual.
4.a. The address of the main business of headquarters office of the
corporation is:
Wilshire Plaza-North, 900 Wilshire Drive, Troy, Michigan 48084
-------------------------------------------------------------------
(Street Address) (City) (State) (ZIP Code)
b. The mailing address if different than above is:
-------------------------------------------------------------------
(Street Address) (City) (State) (ZIP Code)
<PAGE> 3
5. The address of its registered office in Michigan is:
500 Woodward Avenue
One Detroit Center, Suite 2500 Detroit , Michigan 48226
----------------------------------------------------------------------------
(Street Address) (City) (ZIP Code)
and the name of the resident agent at the registered office is:
George J. Christopoulos
----------------------------------------------------------------------------
The resident agent is an agent of the corporation upon whom process against
the corporation may be served.
6. The specific business or affairs which the corporation is to transact or
conduct in Michigan is as follows:
Manufacture and sale of industrial stampings and assemblies
The corporation is authorized to transact such business or conduct such
affairs in the jurisdiction of its incorporation.
7. (To be completed by profit corporations only)
The total authorized shares of the corporation is:
Common Shares 1,000 shares
---------------------------------------------------------------
Preferred Shares
------------------------------------------------------------
Signed this 1st day of April , 1992
By /s/ Ross Vincent
------------------------------------------------------
(Signature)
Ross Vincent Vice President Finance
--------------------------------------------------------
(Type or Print Name) (Type or Print Title)
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 4
DOCUMENT WILL BE RETURNED TO NAME AND MAILING ADDRESS INDICATED IN THE BOX
BELOW. Include name, street and number (or P.O. box), city, state and ZIP code.
George J. Christopoulos, Esq.
Kerr, Russell and Weber
One Detroit Center
Suite 2500
500 Woodward Avenue
Detroit, Michigan 48226
Name of person or organization remitting fees:
Kerr, Russell and Weber
- -----------------------
- -----------------------
PREPARER'S NAME AND BUSINESS TELEPHONE NUMBER:
George J. Christopoulos
- -----------------------
(313) 961-0200
- -----------------------
- --------------------------------------------------------------------------------
INFORMATION AND INSTRUCTIONS
1. The application for certificate of authority to transact business or
conduct affairs cannot be filed until this form, or a comparable document,
is submitted.
2. Submit one original copy of this document. Upon filing, a microfilm copy
will be prepared for the records of the Corporation and Securities Bureau.
The original copy will be returned to the address appearing in the box
above as evidence of filing.
Since this document must be microfilmed, it is important that the filing
be legible. Documents with poor black and white contrast, or otherwise
illegible, will be rejected.
3. This document is to be used pursuant to the provisions of chapter 10 of the
Act by a foreign corporation for the purpose of obtaining a certificate of
authority to transact business or conduct its affairs in this state. If the
foreign profit corporation subsequently changes any of the information
set forth in the Application for Certificate of Authority, it must file an
Amended Application for Certificate of Authority to Transact Business in
Michigan (from C&S-562) with the Bureau not later than 30 days after the
time a change becomes effective. If a foreign nonprofit corporation amends
its articles or is a party to a merger, a certified copy of the amendment
or Certificate of Merger must be submitted within 60 days after the
effective date.
4. Profit and nonprofit corporations - Attach to this application a
certificate stating that the corporation is in good standing under the laws
of the jurisdiction of its incorporation; dated no earlier than 30 days
prior to the date of receipt in this office. The certificate must
be executed by the official of the jurisdiction having custody of corporate
records.
5. Nonprofit corporations only - Attach to this application a copy of article
of incorporation and all amendments thereto certified by the proper
officer of the jurisdiction of incorporation.
6. Item 2 - A foreign corporation whose true name is not available for use in
Michigan is permitted to apply for a certificate of authority under an
assumed name which is available for use. Item 2 of the application for
certificate of authority to transact business or conduct affairs in
Michigan is to be completed for this purpose only. Corporations may also
transact business or conduct affairs under other assumed names by filing
separate certificates of assumed name.
7. Item 6 - This item should state only the specific activities or affairs to
be conducted in Michigan. An all purpose activities statement is not
permitted.
8. The application must be signed in ink by an authorized officer or agent of
the corporation.
9. This document is effective on the date indorsed "Filed" by the Bureau. A
later effective date, no more than 90 days after the date of delivery, may
be stated.
10. FEES: (Make remittance payable to State of Michigan, include corporation
name and CID Number on check or money order)
<TABLE>
<CAPTION>
Profit Corporations Nonprofit Corporations
<S> <C> <C> <C>
Nonrefundable Fee...................$10.00 Filing Fee.....................$10.00
Minimum Franchise Fee...............$50.00 Franchise Fee..................$10.00
TOTAL Admittance Fees...............$60.00 TOTAL Admittance Fees..........$20.00
</TABLE>
11. Mail form and fee to: Michigan Department of Commerce, Corporation and
Securities Bureau, Corporation Division, P.O. Box 30054, 6546 Merchantile
Way, Lansing, Michigan 48909, Telephone: (517)334-6302
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 5
STATE OF INDIANA
FILED
OFFICE OF THE SECRETARY OF STATE
RECEIVED APR 20 1992
APR 16 1992 ADMINISTRATOR
CERTIFICATE OF EXISTENCE MICHIGAN DEPT OF COMMERCE
MICHIGAN DEPT. OF COMMERCE CORPORATION & SECURITIES
BUREAU
To Whom These Presents Come, Greeting:
I, JOSEPH H. HOGSETT, Secretary of State of Indiana, do hereby certify
that I am, by virtue of the laws of the State of Indiana, the custodian of
the corporate records and the proper office to execute this certificate.
I further certify that records of this office disclose that
VELTRI HOLDINGS USA, INC.
filed Articles of Incorporation on February 18, 1992, and is a
corporation duly organized and existing under and by virtue of the Laws of
the State of Indiana.
I further certify this corporation has filed its most recent annual report
required by law with the Secretary of State, or is not yet required to file
such annual reports; and that Articles of Dissolution have not been filed,
thus making the corporation in existence in the State of Indiana.
In Witness Whereof, I have hereunto set my
hand and affixed the seal of the State of
Indiana, at the City of Indianapolis, this
First day of April , 1992
SEAL OF THE STATE OF INDIANA Joseph H. Hogsett
1816 -------------------------------------
JOSEPH H. HOGSETT, Secretary of State
By Carrie Runiers
-----------------------------------
Deputy
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 6
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
(FOR BUREAU USE ONLY) DATE RECEIVED
AUG 4 1992
-----------------
FILED
SEP 21 1992
OCT 2 1992 -----------------
Administrator
MICHIGAN DEPARTMENT OF COMMERCE -----------------
Corporations & Securities Bureau
EXPIRATION DATE: December 31, 1997 -----------------
- --------------------------------------------------------------------------------
CERTIFICATE OF ASSUMED NAME
For use by Corporations and Limited Partnerships
(Please read information and instructions on reverse side)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), Act 162, Public Acts of 1982 (nonprofit corporations), or Act
213, Public Acts of 1982 (limited partnerships), the corporation or limited
partnership in item one below executes the following Certificate:
1. The true name of the corporation or limited partnership is:
Veltri Holdings USA, Inc.
2. The identification number assigned by the Bureau is: 629-575
3. The location of the corporation registered office or the office at which
the limited partnership records are maintained is:
One Detroit Center, Suite 2500, Woodward Avenue, Detroit, MI 48226-3406
-----------------------------------------------------------------------
(Street Address) (City) (State) (ZIP Code)
4. The assumed name under which business is to be transacted is:
Veltri International
Signed this 30 day of June , 1992
By /s/ Ross Vincent
------------------------------------------------------
(Signature)
Ross Vincent Vice President-Finance
--------------------------------------------------------
(Type or print name) (Type or print title)
--------------------------------------------------------
(Limited Partnerships Only - Indicate Name of General
Partner or corporation or other entity)
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 7
DOCUMENT WILL BE RETURNED TO NAME AND MAILING ADDRESS INDICATED IN THE BOX
BELOW. Include name, street and number (or P.O. box), city, state and ZIP code.
Peggy M. Polo, Legal Assistant
KERR, RUSSELL and WEBER
One Detroit Center
500 Woodward Ave., Ste. 2500
Detroit, Michigan 48226-3406
Name of person or organization remitting fees:
Kerr, Russell and Weber
- -------------------------------------
- -------------------------------------
Preparer's name and business telephone number:
George J. Christopoulos
- -------------------------------------
(313) 961-0200
- -------------------------------------
INFORMATION AND INSTRUCTIONS
1. In order to file an assumed name with this agency this form, or a comparable
document, must be submitted. This certificate of assumed name is to be used
by a corporation or limited partnership desiring to transact business under
an assumed name other than the true name of the corporation or limited
partnership.
2. Submit one original copy of this document. Upon filing, a microfilm copy
will be prepared for the records of the Corporation and Securities Bureau.
The original copy will be returned to the address appearing in the box above
as evidence of the filing.
Since this document must be microfilmed, it is important that the filing be
legible. Documents with poor black and white contrast, or otherwise
illegible, will be rejected.
3. The certificate shall be effective for a period expiring on December 31 of
the fifth full calendar year following the year in which it was filed,
unless a certificate of termination is filed.
4. The same name may be assumed by two or more limited partnerships
participating together in any partnership or joint venture. The same-name
may be assumed by two or more corporations, or by one or more corporations
and one or more limited partnerships or other enterprises, in the case of
corporations and other enterprises participating together in a partnership
or joint venture. Each participant corporation or limited partnership shall
file a certificate under this section.
5. Item 1 -- For domestic corporations and limited partnerships, the true name
is the name contained in its current articles of incorporation or
certificate of limited partnership (as amended or restated.) For foreign
corporations and limited partnerships the true name is that name under
which it obtained its authority to transact business or conduct affairs in
Michigan.
6. Item 2 -- Enter the identification number previously assigned by the Bureau.
If this number is unknown, leave it blank.
7. Item 3 -- If a foreign limited partnership, this address must be that shown
in Item 6 of the application for registration to transact business in
Michigan.
8. If a corporation, this certificate must be signed in ink by an authorized
officer or agent of the corporation. If a limited partnership, it must be
signed in ink by at least one general partner.
9. FEES: (Make remittance payable to State of Michigan. Include corporate or
limited partnership name and ID number on check or money order)....$10.00
10. Mail form and fee to:
Michigan Department of Commerce, Corporation and Securities Bureau,
Corporation Division, P.O. Box 30054, 6546 Mercantile Way, Lansing, MI
48909, Telephone: (517) 334-6302
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 8
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
Date Received (FOR BUREAU USE ONLY)
FEB 12, 1998
FILED
FEB 19 1998
Administrator
MI DEPARTMENT OF CONSUMER & INDUSTRY SERVICES
CORPORATION, SECURITIES & LAND DEVELOPMENT BUREAU
EXPIRATION DATE:
12-31-2003
Name Linda M. Bierl, Legal Asst.
TIMMIS & INMAN LLP
Address
300 Talon Centre
City State Zip
Detroit MI 48207
Document will be returned to the name and address you enter above
CERTIFICATE OF ASSUMED NAME
FOR USE BY CORPORATIONS, LIMITED PARTNERSHIPS AND LIMITED LIABILITY COMPANIES
(Please read information and instructions on reverse side)
Pursuant to the provisions of Act 284, Public Acts of 1972 (profit
corporations), or Act 162, Public Acts of 1982 (nonprofit corporations), or Act
213, Public Act of 1982 (limited partnerships), or Act 23, Public Acts of 1993
(limited liability companies), the corporation, limited partnership, or limited
liability company in item one executes the following Certificate:
1. The true name of the corporation, limited partnership, or limited liability
company is:
VELTRI HOLDINGS USA, INC.
2. The identification number assigned by the Bureau is 629575
3. The location of the corporation or limited liability company registered
office in Michigan or the office at which the limited partnership records
are maintained is:
One Detroit Center, Suite 2500, 500 Woodward Detroit MI 48226
-------------------------------------------------------------------------------
(Street Address) (City) (State) (Zip Code)
4. The assumed name under which business is to be transacted is:
VELTRI INTERNATIONAL
COMPLETE ITEM 5 ON LAST PAGE IF THIS NAME IS ASSUMED BY MORE THAN ON ENTITY.
Signed this 5th day of February, 1998
By: Richard M. Miettinen
---------------------------------------------------
(Signature)
Richard M. Miettinen, Assistant Secretary
-----------------------------------------------
(Type or Print Name and Title)
*
------------------------------------------------------
(Limited Partnerships Only - Indicate Name of General
Partner if a Corporation or Other Entity)
<PAGE> 9
<TABLE>
<CAPTION>
<S><C>
MICHIGAN INFORMATION UPDATE
FOREIGN PROFIT CORPORATION
IDENTIFICATION 1997
NUMBER - 629575
This Report must be filed on or before May 15 FOR BUREAU USE ONLY
/ / If there are no changes from your previous filing, check this box and skip to Item 8. FILING FEE - $15.00
If there are changes from your previous filing, you must complete Items 1 through Item 8.
1. Corporate Name
VELTRI HOLDINGS USA, INC.
WILSHIRE PLAZA-NORTH
900 WILSHIRE DRIVE
TROY, MI 48084 1.a Main business address if changed.
350 TALON CENTRE
DETROIT, MI 48207
2. Resident Agent 2a. Resident Agent if different than 2
GEORGE J. CHRISTOPOULOS WAYNE C. INMAN
3. Registered office Address in Michigan - 3a. Address of registered office if different than 3 -
NO., STREET, CITY, ZIP NO., STREET, CITY, ZIP
ONE DETROIT CENTER, SUITE 2500 350 TALON CENTRE
500 WOODWARD AVENUE DETROIT, MI 48207
DETROIT 48226
The corporation states that the address of its registered office and the
address of the business office of its resident agent are identical. Any FILED BY DEPARTMENT MAR 30, 1998
changes were authorized by resolution duly adopted by its board of directors.
4. Describe the general nature and kind of business in which the corporation 5. Total Authorized Shares:
is engaged:
MANAGEMENT OF MARKETING & ENGINEERING SERVICES 1,000.000
6. Single business Tax Apportionment Percentage (In lieu of filing an amended application you may complete the enclosed
worksheet and remit any additional admission fees with this report).
Most recent 100% for year ending 1997
Previous attributable shares 60,000.000 Previous period _______% for year ending ____
If space is insufficient, you may include additional pages. PLEASE DO NOT STAPLE ADDITIONAL PAGES TO THIS REPORT.
7. NAME BUSINESS OR RESIDENCE ADDRESS
President
Michael T. J. Veltri, 900 Wilshire Drive, Suite 150, Troy, MI 48084
Vice President
If Wayne c. Inman, 350 Talon Centre, Detroit, MI 48207
different
than Secretary
President Wayne C. Inman, 350 Talon Centre, Detroit, MI 48207
Treasurer
David J. Woodward, 900 Wilshire, Drive, Suite 203, Troy, MI 48084
Director
If
different
than Director
Officers
Director
SIGNATURE: Report must be signed in ink by an authorized officer or agent of the corporation.
8. Signature Title Date
W.C. Inman Vice-Pres/Secretary 2/23/98
Required by Section 911, Act 234, Enclose $15.00 payable to the State of Michigan and return to:
Public Act of 1972, as amended. MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES THE OFFICE IS LOCATED AT:
Failure to file this report may result CORPORATION, SECURITIES AND LAND DEVELOPMENT BUREAU 6546 MERCANTILE WAY
in the revocation of the corporation's P.O. BOX 30057 LANSING, MI 48910
Certificate of Authority to Transact LANSING, MI 48909-7557 TELEPHONE (517) 334-6300
Business in Michigan.
C&S 2500f (Rev. 1/98)
</TABLE>
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 10
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
Date Received (FOR BUREAU USE ONLY)
FILED
Name Linda M. Bierl, Legal Asst. APR 24 1998
Timmis & Inman L.L.P.
Address Administrator
300 Talon Centre MI DEPT OF CONSUMER & INDUSTRY SERVICES
CORPORATION, SECURITIES & LAND DEVELOPMENT BUREAU
City State Zip
Detroit MI 48207 EFFECTIVE DATE: 4/28/98
Document will be returned to the name and address you enter above
CERTIFICATE OF SHARE EXCHANGE
FOR USE BY DOMESTIC PROFIT OR FOREIGN ACQUIRING PROFIT CORPORATIONS
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, (profit
corporations), the undersigned corporation executes the following Certificate:
1. a. The name of each corporation whose shares will be acquired and its
identification number is:
Veltri Holdings USA, Inc. 629-575
*
b. The name of the acquiring corporation and its identification number is:
Talon Automotive Group, Inc. 500-580
2. The manner and basis of exchanging the shares to be acquired as set
forth in the plan of exchange:
(a) On the Effective Date, the holders of the outstanding shares
of the Common stock of Veltri Holdings USA, Inc. stock (the "Veltri
Shareholders") shall cause the certificate(s) representing such
shares to be surrendered to Talon Automotive Group, Inc. ("TAG"). Upon
the surrender of such certificate(s), TAG shall exchange the same for
.001 TAG Class A Shares only and shall thereupon cause new certificates
representing such TAG Class A Shares to be executed and delivered to
the Veltri Shareholders.
(b) Upon the surrender of all shares of Veltri Common Stock to TAG
by the Veltri Shareholders, TAG shall submit the same to Veltri which
shall, on the effective date, reissue new certificates representing
such stock to TAG.
SEAL APPEARS ONLY ORIGINAL
<PAGE> 11
3. (Complete for any foreign corporation only)
This share exchange is permitted by the laws of the state of Indiana
the jurisdiction under which Veltri Holdings USA, Inc.
(name of foreign corporation)
is organized and the plan of share exchange was adopted and approved
by such corporation pursuant to and in accordance with the laws of that
jurisdiction.
4. (Complete only if an effective date is desired other than the date of
filing. This date must be no more than 90 days after receipt by the
administrator.)
The share exchange shall be effective at 10:03 a.m. Eastern Daylight
Savings Time on the *28th day of April , 1998.
5. (Complete applicable section for each constituent corporation)
a. The plan of share exchange has been adopted by the Board of Directors of
the following corporations in accordance with Section 702 of the Act:
Talon Automotive Group, Inc.
b. The plan of share exchange was approved by the shareholders of the
following constituent corporations in accordance with Section 703a.
Talon Automotive Group, Inc.
6. The plan of share exchange will be furnished by the acquiring corporation,
on request and without cost, to any shareholder of any constituent
corporation.
Signed this *23rd day of April , 1998
* Veltri Holdings USA, Inc.
-------------------------------------------------
(Name of Corporation)
By: David J. Woodward
----------------------------------------------
(Only Signature of: President, Vice
President, Chairperson or Vice-Chairperson)
David J. Woodward, Vice President
Signed this * 23rd day of April , 1998
* Talon Automotive Group, Inc.
--------------------------------------------------
(Name of Corporation)
By: David J. Woodward
----------------------------------------------
(Only Signature of: President, Vice
President, Chairperson or Vice-Chairperson)
David J. Woodward, Vice President
SEAL APPEARS ONLY ON ORIGINAL
<PAGE> 12
[LOGO] ARTICLES OF MERGER SUE ANNE GILROY
State Form 39036 (R4/6-95) SECRETARY OF STATE
State Board of Accounts CORPORATIONS DIVISION
Approved 1995 302 W. Washington Street, Rm. E018
Indianapolis, IN 46202
Telephone: (317) 232-6576
Indiana Code 23-1-40-1 et.seq.
FILING FEE: $90.00
INSTRUCTIONS: Use 8 1/2" x 11" white paper for inserts.
Present original and two (2) copies to address in upper right
corner of this form.
Please TYPE or PRINT.
Upon completion of filing the Secretary of State will issue a
receipt.
ARTICLES OF SHARE EXCHANGE
OF
VELTRI HOLDINGS USA, INC.
------------------------------------------------------------------------
(hereinafter "the nonsurviving corporation(s)")
- --------------------------------------------------------------------------------
INTO
TALON AUTOMOTIVE GROUP, INC.
------------------------------------------------------------------------
(hereinafter "the surviving corporation")
- --------------------------------------------------------------------------------
ARTICLE I - SURVIVING CORPORATION
The name of the corporation surviving the merger is: TALON AUTOMOTIVE GROUP,
INC. and such name [ ] has [X] has not (designed which) been changed as a
result of the merger.
- --------------------------------------------------------------------------------
a. The surviving corporation is a domestic corporation existing pursuant to
the provisions of the Indiana Business Corporation Law incorporated on N/A.
b. The surviving corporation is a foreign corporation incorporated under the
laws of the State of Michigan and [ ] qualified [X] not qualified (designate
which) to do business in Indiana.
If the surviving corporation is qualified to do business in Indiana, state the
date of qualification: N/A.
(If Application for Certificate of Authority is filed concurrently herewith
state "Upon approval of Application for Certificate of Authority".)
- --------------------------------------------------------------------------------
ARTICLE II - NONSURVIVING CORPORATION(S)
The name, state of incorporation, and date of incorporation or qualification
(if applicable) respectively, of each Indiana domestic corporation and Indiana
qualified foreign corporation, other than the survivor, which is party to the
merger are as follows:
Name of Corporation
VELTRI HOLDINGS USA, INC.
State of Domicile Date of Incorporation or qualification in
Indiana (if applicable)
Indiana 2/18/92
Name of Corporation
State of Domicile Date of Incorporation or qualification in
Indiana (if applicable)
Name of Corporation
State of Domicile Date of Incorporation or qualification in
Indiana (if applicable)
ARTICLE III - PLAN OF MERGER OR SHARE EXCHANGE
The Plan of Merger or Share Exchange, containing such information as
required by Indiana Code 23-1-40-1(b), is set forth in "Exhibit A",
attached hereto and made a part hereof.
<PAGE> 13
<TABLE>
<CAPTION>
<S><C>
ARTICLE IV - MANNER OF ADOPTION AND VOTE OF SURVIVING CORPORATION (Must complete Section 1 or 2)
SECTION 1: / / Shareholder vote not required.
The merger/share exchange was adopted by the incorporators or board of directors without shareholder action and shareholder
action was not required.
SECTION 2: /X/ Vote of shareholders.
The designation (i.e., common, preferred or any classification where different classes of stock exist), number of outstanding
shares, number of votes entitled to be cast by each voting group entitled to vote separately on the share exchange and the
number of votes of each voting group represented at the meeting is set forth below:
* **
TOTAL A B C
DESIGNATION OF EACH VOTING GROUP (i.e. preferred and common)
NUMBER OF OUTSTANDING SHARES 162,926 4,073 158,853
NUMBER OF VOTES ENTITLED TO BE CAST 4,073 4,073
NUMBER OF VOTES REPRESENTED AT MEETING 162,926 4,073 158,853
SHARES VOTED IN FAVOR 162,926 4,073 158,853
SHARES VOTED AGAINST 0 0 0
* Common Voting ** Common Non-Voting
ARTICLE V - MANNER OF ADOPTION AND VOTE OF NONSURVIVING CORPORATION (Must complete Section 1 or 2)
SECTION 3: / / Shareholder vote not required.
The merger/share exchange was adopted by the incorporators or board of directors without shareholder action and shareholder
action was not required.
SECTION 4: /X/ Vote of shareholders.
The designation (i.e., common, preferred or any classification where different classes of stock exist), number of
outstanding shares, number of votes entitled to be cast by each voting group entitled to vote separately on the
merger/share exchange and the number of votes of each voting group represented at the meeting is set forth below:
TOTAL A B C
DESIGNATION OF EACH VOTING GROUP (i.e. preferred and common)
NUMBER OF OUTSTANDING SHARES 1,000
NUMBER OF VOTES ENTITLED TO BE CAST 1,000
NUMBER OF VOTES REPRESENTED AT MEETING 1,000
SHARES VOTED IN FAVOR 1,000
SHARES VOTED AGAINST 0
In Witness Whereof, the undersigned being the Vice President of the surviving corporation executes these
--------------
(Title)
Articles of Merger/Share Exchange and verifies, subject to penalities of perjury that the statements
contained herein are true, this day of April, 1998.
----------
Signature Printed name
/s/ David J. Woodward David J. Woodward
------------------------- -------------------------------
</TABLE>
<PAGE> 14
EXHIBIT A
PLAN OF SHARE EXCHANGE
ARTICLE I
EFFECTIVE DATE AND CORPORATE EXISTENCE
1.1 Effective Date. The Share Exchange shall be effective as of .m.,
Detroit, Michigan local time on April, , 1998 (the "Effective Date") upon the
terms and conditions hereinafter set forth.
1.2 Corporate Existence. At all times the separate existence of both TAG
and Veltri shall continue, except that, on and after the effective date, Veltri
shall be a wholly-owned subsidiary of TAG.
ARTICLE II
EXCHANGE OF SHARES
The manner and basis of exchanging the shares of the capital stock of
Veltri, and amount of Class A voting common stock ("Exchanged Class A Shares")
of TAG which the holders of shares of the capital stock of Veltri are to receive
in exchange for such shares are as follows:
3.1 Exchange of shares of Veltri Stock: On the Effective Date, the holders
of the outstanding shares of the Common stock of Veltri (the "Veltri
Shareholders") shall cause the certificate(s) representing such shares to be
surrendered to TAG. Upon the surrender of such certificate(s), TAG shall
exchange the same for .001 Exchanged Class A Shares only and shall thereupon
cause new certificates representing such Exchanged Class A Shares to be executed
and delivered to the Veltri Shareholders in accordance with the terms of this
Article III.
3.2 Reissuance of Veltri Shares to TAG. Upon the surrender to all shares of
Veltri Common Stock to TAG by the Veltri Shareholders, TAG shall submit the same
to Veltri which shall, on the effective date, reissue new certificates
representing such stock to TAG.
3.3 Fractional Shares. Any fractional shares resulting from the
distribution of shares pursuant to Section 3.1 shall be rounded to the nearest
whole number.
ARTICLE III
DIRECTORS AND OFFICERS
4.1 The Board of Directors and both Veltri and TAG prior to the effective
date of the Share Exchange shall serve as the Board of Directors of the
respective corporation following the Effective Date of the Share Exchange and
until the next Annual Meeting, or until their respective
<PAGE> 15
successors shall be elected and qualified, in accordance with their respective
By-Laws.
4.2 The Officers of of both Veltri and TAG in office prior to the
effective date of the Share Exchange shall serve as the Officers of the
respective corporation, following the Effective Date of the Share Exchange and
until the next Annual Meeting, or until their respective successors shall be
elected and qualified, in accordance with their respective By-Laws.
ARTICLE IV
MISCELLANEOUS
5.1 The parties acknowledge and agree that the transactions contemplated
by this Agreement are intended to be, for tax purposes, a reorganization within
the meaning of Section 368(a)(1)(D) of the Code, and all rules and regulations
promulgated thereunder. The parties covenant and agree that they shall execute
all other documents and perform all such additional acts as may be reasonably
necessary to cause the transaction contemplated by this Agreement to comply with
the provisions of Section 368(a)(1)(D) of the Code.
5.2 This Agreement and Plan of Share Exchange may be terminated and the
proposed actions abandoned at any time before the Effective Date of the Share
Exchange, if the Board of Directors of either corporation duly adopts a
resolution abandoning the Agreement and Plan of Share Exchange.
5.3 This Agreement and Plan of Share Exchange may be amended, modified or
terminated, or any provision thereof may be waived only by an instrument in
writing signed by the duly authorized officers of both parties hereto.
5.4 This Agreement and Plan of Share Exchange constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as set forth specifically herein.
5.5 This Agreement and Plan of Share Exchange shall be construed,
interpreted and the rights of the parties determined in accordance with the laws
of the Michigan.
5.6 All of the terms and provisions of this Agreement and Plan of Share
Exchange by or for the benefit of the parties shall be binding upon and inure to
the benefit of their successors and assigns. The rights and obligations provided
by this agreement shall not be assignable by any party.
5.7 This Agreement and Plan of Share Exchange may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE> 1
EXHIBIT 3.4
Nova Scotia
CERTIFICATE OF STATUS
Registry Number
3003385
I hereby certify that according to the records of this office
VELTRI METAL PRODUCTS CO.
was formed by virtue of amalgamation on November 19, 1996 under the Companies
Act of Nova Scotia as an unlimited liability company
and is a valid and subsisting company.
I further certify that according to the records of this office
VELTRI METAL PRODUCTS CO.
was registered under the Corporations Registration Act of Nova Scotia on
November 19, 1996 and the certificate is still in force.
I further certify that according to the records of this office, there are no
encumbrances filed with respect to the company under the Corporations Securities
Registration Act.
/s/ N.M. Homans April 22, 1998
----------------------------------------- ---------------
Deputy Registrar of Joint Stock Companies Date of Issue
Page 1 of 1
<PAGE> 2
1996 S.H. No. 133351
IN THE SUPREME COURT OF NOVA SCOTIA
IN THE MATTER OF: Section 134 of the Companies Act (Nova
Scotia), being Chapter 81 of the
Revised Statutes of Nova Scotia, 1989
as amended
- - and -
IN THE MATTER OF: The application of VS Acquisition Co.,
Veltri Stamping Corporation Limited,
Veltri Holdings Limited and North
American Precision Tool Limited for an
Order of Amalgamation
[STAMP]
RECEIVED
NOV 19 1996
OFFICE OF REGISTRAR
of Joint Stock Companies
NOVA SCOTIA
Sgd
SMH
J
ORDER OF AMALGAMATION
BEFORE THE HONOURABLE JUSTICE S.M. HOOD IN CHAMBERS.
UPON HAVING READ the Affidavit of Richard M. Miettinen, sworn November 13,
1996, and the Affidavit (Re: Financial Statements) of Richard M. Miettinen,
sworn November 13, 1996;
AND UPON HAVING READ the amalgamation agreement dated November 13, 1996
between VS Acquisition Co., Veltri Stamping Corporation Limited, Veltri Holdings
Limited and North American Precision Tool Limited (the "Amalgamation Agreement")
a copy of which is annexed hereto as Schedule A;
AND UPON IT APPEARING that the shareholders of VS Acquisition Co., Veltri
Stamping Corporation Limited, Veltri Holdings Limited and North American
Precision Tool Limited have approved the Amalgamation Agreement and that none of
the creditors will be affected by the amalgamation provided for in the
Amalgamation Agreement;
AND UPON IT APPEARING that the material creditors of the Applicants have
consented to the Amalgamation Agreement;
AND UPON IT APPEARING that the Applicants are not companies whose shares
are publicly traded and no useful purpose would be served by having the
financial statements of the Applicants on
<PAGE> 3
-2-
file herein produced as public documents after being examined by the Court at
the hearing of this Application;
AND UPON HEARING Andrew V. Burke, counsel for the applicants;
AND UPON MOTION:
IT IS HEREBY ORDERED that the Amalgamation Agreement be and the same is
hereby approved.
IT IS FURTHER ORDERED that none of VS Acquisition Co., Veltri Stamping
Corporation Limited, Veltri Holdings Limited and North American Precision Tool
Limited shall be required to give notice to their creditors, if any, of the time
and place of an application for an order of this Honourable Court approving the
Amalgamation Agreement and that such notice be and the same is hereby dispensed
with pursuant to subsection (7) of Section 134 of the Companies Act.
IT IS FURTHER ORDERED that the filing with the Registrar of Joint Stock
Companies of a copy of this order certified under the hand of the Prothonotary
be sufficient compliance with the provisions of subsection (9) of Section 134 of
the Companies Act.
IT IS FURTHER ORDERED that the Affidavit (Re: Financial Statements) of
Richard M. Miettinen, sworn November 13, 1996, filed herein, be sealed by the
Prothonotary and not opened except upon further order of this Honourable Court.
DATED at Halifax, Nova Scotia, this 19th day of November, 1996.
/s/ Gretchen G. Pohlkamp
IN THE SUPREME COURT GRETCHEN G. POHLKAMP
COUNTY OF HALIFAX, N.S. ---------------------------
I hereby certify that the foregoing document, Prothonotary
identified by the Seal of the Court, is a true
copy of the original document on file herein,
Dated the 19 day of November A.D., 1996
/s/ Gretchen G. Pohlkamp
GRETCHEN G. POHLKAMP
- ------------------------
Prothonotary
<PAGE> 4
SCHEDULE "A"
THIS AGREEMENT OF AMALGAMATION dated the 13th day of November, 1996.
BETWEEN:
VS ACQUISITION CO., a body corporate ("VSAC")
OF THE FIRST PART
- and -
VELTRI STAMPING CORPORATION LIMITED, a body corporate
Veltri Stamping")
OF THE SECOND PART
- and -
VELTRI HOLDINGS LIMITED, a body corporate ("Veltri Holdings")
OF THE THIRD PART
- and -
NORTH AMERICAN PRECISION TOOL LIMITED, a body corporate
("Precision Tool")
OF THE FOURTH PART
WHEREAS VSAC was incorporated under the laws of Nova Scotia on October 16,
1996 and has an authorized capital consisting of 1,000,000 common shares without
nominal or par value;
<PAGE> 5
AND WHEREAS Veltri Stamping was continued under the laws of Nova Scotia on
November 13, 1996 and has an authorized capital consisting of 100,000,000 common
shares without nominal or par value;
AND WHEREAS Veltri Holdings was continued under the laws of Nova Scotia on
November 13, 1996 and has an authorized capital consisting of 100,000,000 common
shares without nominal or par value, 995,000 Class A preferred shares without
nominal or par value and 1,000 Class B preferred shares without nominal or par
value;
AND WHEREAS Precision Tool was continued under the laws of Nova Scotia on
November 13, 1996 and has an authorized capital consisting of 100,000,000 common
shares without nominal or par value and 100,000,000 Class A preferred shares
without nominal or par value;
AND WHEREAS the shareholders of VSAC, Veltri Stamping, Veltri Holdings and
Precision Tool deem it desirable and in the best interests of each of them that
they be amalgamated pursuant to the provisions of s. 134 of the Companies Act of
Nova Scotia;
NOW THEREFORE THIS INDENTURE WITNESSETH that in consideration of the
premises, the parties hereto agree as follows:
1. VSAC, Veltri Stamping, Veltri Holdings and Precision Tool shall be
amalgamated and continue as one company (the "Amalgamated Company")
pursuant to Section 134 of the Companies Act of Nova Scotia.
2. The attributes and characteristics of the Amalgamated Company shall be
as follows:
<PAGE> 6
(a) The name of the Amalgamated Company shall be "Veltri Metal
Products CO.".
(b) The registered office of the Amalgamated Company shall be
situated at Suite 800,1959 Upper Water Street, P.O. Box 997,
Halifax, Nova Scotia, B3J 2X2.
(c) The authorized capital of the Amalgamated Company shall consist
of 1,000,000 common shares without nominal or par value.
(d) The liability of the members of the Amalgamated Company shall be
unlimited.
(e) The Memorandum of Association of the Amalgamated Company shall be
as set forth in Schedule "A" attached hereto and the objects of
the Company shall be as set forth therein.
(f) The names, occupations and places of residence of the first
directors of the Amalgamated Company are as follows:
Name Occupation Place of Residence
---- ---------- ------------------
Randolph J. Agley Businessman 200 Talon Centre
Detroit, Michigan
U.S.A. 48207
Wayne C. Inman Businessman 200 Talon Centre
Detroit, Michigan
U.S.A. 48207
<PAGE> 7
-4-
Michael T. Timmis Businessman 200 Talon Centre
Detroit, Michigan
U.S.A. 48207
Such directors are to hold office until the first annual meeting
of the shareholders of the Amalgamated Company.
(g) Subsequent directors are to be elected at the first annual
general meeting of the shareholders of the Amalgamated Company
and are to hold office while qualified until their successors are
from time to time elected in the manner provided for in the
Articles of Association of the Amalgamated Company.
(h) The manner of converting the authorized and issued capital of
VSAC, Veltri Stamping, Veltri Holdings and Precision Tool into
that of the Amalgamated Company shall be as follows:
(i) Each registered holder of common shares of VSAC shall be
entitled to one fully paid and non-assessable common
share of the Amalgamated Company for each common share in
the capital stock of VSAC held by such registered
shareholder.
(ii) All authorized shares, whether issued or unissued, of all
classes of Veltri Stamping, Veltri Holdings and Precision
Tool, shall be cancelled.
<PAGE> 8
-5-
3. THE ARTICLES of Association of the Amalgamated Company shall be as
attached and marked Schedule "B" to this Agreement until repealed,
amended, altered or added to.
4. The Amalgamated Company shall posses all the property rights,
privileges and franchises, and shall be subject to all the
liabilities, contracts and debts of VSAC, Veltri Stamping, Veltri
Holdings and Precision Tool.
5. All rights of creditors against the property, rights and assets of
VSAC, Veltri Stamping, Veltri Holdings and Precision Tool,
respectively, and all mortgages, Hens or claims upon their respective
properties, rights and assets shall be unimpaired by the proposed
amalgamation and all debts, contracts, liabilities and duties of VSAC,
Veltri Stamping, Veltri Holdings and Precision Tool, respectively,
shall thenceforth attach to the Amalgamated Company and may be
enforced against it to the same extent as if the said debts,
contracts, liabilities and duties had been incurred or contracted by
it.
6. No action or proceeding by or against VSAC, Veltri Stamping, Veltri
Holdings or Precision Tool shall abate or be affected by the proposed
amalgamation but for all purposes of such action or proceeding by or
against VSAC, Veltri Stamping, Veltri Holdings or Precision Tool, as
the case may be, they shall be deemed still to exist and the
Amalgamated Company may be substituted in such action or proceeding in
the place thereof.
7. None of VSAC, Veltri Stamping, Veltri Holdings or Precision Tool
shall, subsequent to the date hereof, unless this Agreement shall fail
of confirmation by
<PAGE> 9
-6-
the shareholders of any of VSAC, Veltri Stamping, Veltri Holdings or
Precision Tool, or not be approved by a Judge of the Supreme Court of
Nova Scotia, in Chambers:
(a) Issue any unissued shares of its capital stock, redeem or reduce
any shares of its capital stock now outstanding or otherwise
alter its existing capital structure; or
(b) Declare or pay any dividends or make any other distribution in
respect of any shares of its outstanding capital stock.
8. VSAC, Veltri Stamping, Veltri Holdings and Precision Tool may by
resolution of their Boards of Directors assent to such alterations or
modifications of this Agreement which the shareholders of the
respective companies at meetings duly called to consider the same
approve or as a Judge of the Supreme Court of Nova Scotia may require,
and the expression "this Agreement" as used herein shall be read and
construed to mean and include this Agreement as so altered or
modified.
<PAGE> 10
-7-
IN WITNESS WHEREOF the parties hereto have caused the same to be executed
in their names and on their behalf and their corporate seals to be thereunto
affixed by their proper officers duly authorized in that behalf.
SIGNED, SEALED AND DELIVERED ) VS ACQUISITION CO.
in the presence of: )
)
[SIG] Eric D. Anderson ) By: [SIG] David Woodward
- --------------------------------- ) -----------------------------
Witness )
)
) VELTRI STAMPING CORPORATION
) LIMITED
)
)
[SIG] Eric D. Anderson ) By: [SIG] David Woodward
- --------------------------------- ) -----------------------------
Witness )
)
) VELTRI HOLDINGS LIMITED
)
)
[SIG] Eric D. Anderson ) By: [SIG] David Woodward
- --------------------------------- ) -----------------------------
Witness )
)
) NORTH AMERICAN PRECISION
) TOOL LIMITED
)
)
[SIG] Eric D. Anderson ) By: [SIG] David Woodward
- --------------------------------- ) -----------------------------
Witness )
<PAGE> 11
SCHEDULE "A"
MEMORANDUM OF ASSOCIATION
OF
VELTRI METAL PRODUCTS CO.
1. The name of the Company is VELTRI METAL PRODUCTS CO.
2. There are no restrictions on the objects and powers of the Company and the
Company shall expressly have the following powers:
(i) to sell or dispose of its undertaking, or a substantial part thereof;
(ii) to distribute any of its property in specie among its members; and
(iii) to amalgamate with any company or other body of persons.
3. The liability of the members is unlimited.
4. Article 12 of the Articles of Association of the Company shall not be
amended, modified or altered and no article inconsistent with Article 12 shall
be adopted or added to the Articles of Association in each case without the
unanimous consent of the members of the Company.
<PAGE> 1
EXHIBIT 3.5
BYLAWS
of
TALON AUTOMOTIVE GROUP, INC., F/K/A
PRODUCTION STAMPING, INC.
AMENDED AND RESTATED MARCH 13,1998
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office of the Corporation shall
be located in the City of Detroit, County of Wayne, State of Michigan.
The Corporation may also have offices at such other places as the Board of
Directors may from time to time appoint or the business of the Corporation may
require.
ARTICLE H
STOCKHOLDERS MEETINGS
Section 1. Annual Meeting of Stockholders. The Annual Meeting of the
Stockholders of the Corporation shall be held at its registered offices in
Detroit, Michigan on the fourth Thursday in October in each year, commencing in
1998, at which meeting the Stockholders shall elect, by a plurality vote, a
Board of Directors and transact such other business as may properly be brought
before the meeting.
It shall be the duty of the Secretary to cause a written notice of each
Annual Meeting to be mailed to each of the Stockholders of record of the
Corporation, such notice to be directed to each Stockholder at his or her last
known post office address at least ten (10) days immediately preceding said
meeting. Nevertheless, failure to mail such notice or any irregularity in the
same shall not affect the validity of any such meeting.
Section 2. Special Meeting of Stockholders. Special Meetings of the
Stockholders may be called at the office of the Corporation or elsewhere in the
State of Michigan upon the request in writing or the vote of a majority of the
Board of Directors, or upon the demand in writing of Stockholders of record
owning a majority of the entire issued and outstanding common capital stock of
the Corporation. A notice indicating briefly the object or objects of such
Special Meeting shall be mailed to each Stockholder of record at his or her last
known post office address at least ten (10) days prior to the date of such
meeting.
<PAGE> 2
Nevertheless, if all the Stockholders shall waive notice of a Special
Meeting, no notice of such meeting shall be required, and whenever all the
Stockholders shall meet in person or by proxy, such meeting shall be valid for
all purposes without call or notice, and at such meeting any corporate action
may be taken.
Section 3. Quorum at Stockholders Meeting. At any meeting of the
Stockholders, the holders of a majority of all the shares of record of the
common capital stock of the Corporation present in person or represented by
proxy shall constitute a quorum of the Stockholders for all purposes. If the
holders of the amount of stock necessary to constitute a quorum shall fail to
attend in person or by proxy at the time and place fixed by these By-Laws for an
Annual Meeting or fixed by notice as above provided for a Special Meeting, then
a majority in interest of the Stockholders present in person or represented by
proxy may adjourn such meeting from time to time without notice other than by
announcement at the meeting, until holders of the amount of stock requisite to
constitute a quorum shall attend. 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 for which notice was originally given.
Section 4. Voting at Stockholders Meetings. At each meeting of the
Stockholders every Stockholder of record, except as herein provided, shall be
entitled to vote, in person or by proxy appointed by instrument in writing
subscribed by such Stockholder or by his or her duly authorized attorney, and
such stockholder shall have one vote for each share of stock standing registered
in his or her name at the time of the closing of the transfer books for such
meeting.
Only the persons in whose name shares of stock stand registered on the
books of the Corporation at the time of the closing of the transfer books for
such meeting shall be entitled to vote in person or by proxy on the shares so
standing in their name.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Directors - Number and Term of Office. The property and business
of the Corporation shall at all times be managed and controlled by a Board of
not less than one (1) Director.
The Directors shall hold office for one year and until their successors are
elected and have qualified. If the office of any Director becomes or is vacant
by reason of death, resignation, disqualification or otherwise, the remaining
Director(s) may elect a successor who shall hold office for the unexpired term
and until a successor is elected and has qualified.
Section 2. Meeting of Directors. The Board of Directors elected at any
Annual Meeting of the Stockholders shall meet at the registered office of the
Corporation in Detroit,
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Michigan immediately after the adjournment of such Annual Meeting and elect
officers of the Corporation for the ensuing year.
Regular Meetings of the Directors may be held at such time and place as may
be fixed by resolution of the Board.
Special Meetings of the Board may be called by the President on three (3)
days notice mailed to each Director or delivered to him or her personally or
left at the Director's residence or usual place of business, or such Special
Meetings may be called in like manner upon the written request of such number of
Directors as is necessary to constitute a quorum of the Board.
Nevertheless, if all of the Directors shall waive notice of a Special
Meeting, no notice of such meeting shall be required, and whenever all of the
Directors shall assemble for the purpose of holding a Special Meeting of the
Board of Directors, such meeting shall be valid for all purposes without call or
notice and at such meeting any corporate action may be taken.
A majority of Directors shall be necessary to constitute a quorum for the
transaction of business.
ARTICLE IV
OFFICERS
Section 1. Executive Officers. The Board of Directors shall elect a
President and shall also elect a Treasurer and a Secretary. The Board may also
elect a Chairman of the Board, Vice Chairman of the Board, one or more Executive
Vice Presidents, one or more Vice Presidents and any Assistant Treasurers and/or
Assistant Secretaries as the Board may deem advisable. Such officers shall have
such authority and shall perform such duties as set forth herein and as may from
time-to-time be conferred upon such officers by the Board. The same person may
hold any two (2) or more of such offices, except that the offices of the
President and Vice President shall not be held by the same person. In its
discretion the Board of Directors, by vote of a majority thereof, may leave
unfilled for any period as may be fixed by resolution any office except those of
President, Treasurer and Secretary.
Section 2. Powers and Duties of Chairman of the Board. If the Board of
Directors shall elect a Chairman of the Board, such officer shall preside at all
Meetings of the Stockholders and of the Board of Directors and shall have the
responsibility of establishing corporate policies and objectives.
Section 3. Powers and Duties of Vice Chairman of the Board. If the Board of
Directors shall elect a Vice Chairman of the Board, such officer shall have the
powers and duties vested in him or her by the Board of Directors, by law or by
these bylaws. In the absence or inability to act of the Chairman of the Board,
or upon request of the Chairman of the Board, the Vice
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Chairman shall have and exercise such powers and duties of the Chairman of the
Board as may from time to time be delegated to such officer by the Chairman of
the Board.
Section 4. Powers and Duties of President. The President shall be the Chief
Executive Officer of the Corporation, shall have responsibility for management
of the day-to-day operations of the Corporation and shall see that all orders
and resolutions of the Board are carried into effect.
The President may sign and execute in the name of the Corporation all
contracts, agreements and other obligations of the Corporation and may, with the
Secretary, Treasurer, Assistant Secretary or Assistant Treasurer, sign all
certificates of the shares of the capital stock of the Corporation.
The President shall submit a report of the operations of the Corporation to
the Shareholders at each Annual Meeting and from time to time shall report to
the Board of Directors all matters within such officer's knowledge which, in the
interest of the Corporation, may require to be brought to their notice.
The President shall do and perform such other duties as from time to time
may be assigned to such officer by the Board of Directors.
Section 5. Powers and Duties of Vice Presidents. In the absence of the
president or in the event of a vacancy in such office, the vice president (or in
the event there be more than one vice president, the vice presidents in the
order designated at the time of their election or, in the absence of any
designation, then in the order of their election) shall have all the powers of
and be subject to all the restrictions upon the president; and shall perform
such other duties as from time to time may be assigned to him by the president
or by the Board of Directors. The Board of Directors may designate one or more
vice presidents as executive vice president or as vice president for particular
areas of responsibility.
Section 6. Powers and Duties of Secretary and Assistant Secretary. The
Secretary and/or Assistant Secretary shall keep the Minutes of all Stockholders
and the all Board of Directors meetings, the stock register and the stock
transfer book and shall be the custodian of the corporate seal and of all
records, papers, files and books of the Corporation, except the account books.
The Secretary and/or Assistant Secretary shall affix the corporate seal to
all documents to which it should be attached and attest the same when necessary
by signature.
The Secretary and/or Assistant Secretary may sign, with the President or
such other person as may be designated by the Board of Directors, all bills of
exchange or promissory notes of the Corporation.
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The Secretary and/or Assistant Secretary may sign, together with the
President or the Vice President, all certificates of shares of the capital stock
of the Corporation.
The Secretary and/or Assistant Secretary shall perform generally all the
duties usually appertaining to the office of Secretary of a corporation, subject
to the control and direction of the Board of Directors.
Section 7. Powers and Duties of Treasurer and Assistant Treasurer. The
Treasurer and/or Assistant Treasurer shall have the custody of all of the funds
of the Corporation and shall .deposit the same to the credit of the Corporation
in such bank or banks as the Board of Directors may designate.
The Treasurer and/or Assistant Treasurer may sign, with the President or
such other person as may be designated by the Board of Directors, all bills of
exchange, promissory notes or other evidences of indebtedness of the
Corporation.
The Treasurer and/or Assistant Treasurer may sign, together with the
President or the Vice President, all certificates of shares of the capital stock
of the Corporation.
The Treasurer and/or Assistant Treasurer shall cause to be entered
regularly in the books of the Corporation to be kept for that purpose, a fun and
accurate account of monies received and paid by such officer(s) on account of
the Corporation, and whenever required by the Board of Directors shall render a
statement of the cash accounts.
The Treasurer and/or Assistant Treasurer shall at all times exhibit the
books and accounts to any Director of the Corporation upon application, and
shall perform generally all the duties usually appertaining to the office of
Treasurer of a corporation, subject to the control and direction of the Board of
Directors. The Treasurer shall also have such powers and duties as may, from
time to time, be conferred on such officer by the Board.
Section 8. Other Officers. The Board of Directors may also appoint such
other officers and agents as it may deem necessary for the transaction of the
business of the Corporation. Such officers and agents shall hold office for such
period, have such authority and perform such duties as shall be determined from
time to time by the Board.
ARTICLE V
CAPITAL STOCK
Section 1. Certificates for Shares. The certificates for shares of the
capital stock of the Corporation shall be in such form as shall be prepared or
approved by the Board of Directors.
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The certificates shall be signed by the President or the Vice President and
also by the Secretary, Assistant Secretary, Treasurer or Assistant Treasurer,
and no certificates shall be valid unless so signed.
Section 2. Transfer of Shares. Shares of the capital stock of this
Corporation shall be transferred only on the books of the Corporation by the
holder thereof in person or by the holder's legal representative or duly
authorized attorney upon the surrender and cancellation of certificates for a
like number of shares, and the Corporation shall at all times have a lien upon
all of the stock and property of its Stockholders invested therein for all debts
of whatsoever .nature that may be due from them to the Corporation, whether
payable presently or in the future.
Section 3. Transfer and Registration of Certificates. The Board of
Directors shall have the power and authority to make all such rules and
regulations as it may deem expedient concerning the issue, transfer and
registration of certificates of shares of the capital stock of the Corporation.
Section 4. Closing of Transfer Books. The stock transfer books shall be
closed for the meetings of Stockholders and for the payment of dividends during
such periods as from time to time may be fixed by the Board of Directors.
ARTICLE VI
INDEMNIFICATION AND INSURANCE
Section 1. Indemnification. The Corporation shall, to the fullest extent
permitted by Sections 561-569 of the Michigan Business Corporation Act, as
amended, or any successor provisions thereto, indemnify any and all persons whom
it shall have the power to indemnify under said sections from and against any
and all expenses, liabilities or other matters referred to in or covered by said
sections.
The indemnification provided by this section shall not be deemed exclusive
of any other rights to which those seeking indemnification may be entitled under
any statute, by-law, agreement, vote of stockholders or disinterested directors
or otherwise, both as to action in his or her official capacity and as to action
in another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent ahd shall inure to
the benefit of the heirs, executors and administrators of such a person;
provided however that such indemnification shall not be mandatory for any person
seeking indemnity in connection with a proceeding voluntarily initiated by such
person unless the proceeding was authorized by a majority vote of the entire
Board of Directors.
Section 2. Insurance. The Board of Directors of the Corporation may, in its
discretion, authorize the Corporation to purchase and maintain insurance on
behalf of any person
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who is or was a director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against or incurred by such
person in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify such person
against such liability under provisions of Section 1 of Article VI.
ARTICLE VII
GENERAL PROVISIONS
Section 1. By-Law Amendments. These By-Laws may be added to, amended or
repealed in whole or in part at any Annual Meeting of the Stockholders or Board
of Directors of the Corporation or at any Special Meeting of the Stockholders or
Board of Directors called for such purpose, provided, however, that the Board of
Directors shall not add to, amend or repeal in whole or in part any By-Laws
fixing their number, qualifications or term of office.
Section 2. Delegation of Duties. Whenever, by a majority vote, the Board of
Directors shall declare an emergency exists, the Board may delegate the powers
and duties of any officer to any other officer or to any other Director for the
time being.
Section 3. Deferred Meetings. If the date for any Stockholders and Board of
Directors meetings provided for in these By-Laws or by resolution of the Board
of Directors shall fall upon a legal holiday, such meeting shall be held on the
next succeeding day not a legal holiday, at the same hour and place.
Section 4. Corporate Seal. The corporate seal of the Corporation shall be a
circular device within which shall be the word "seal", which may be surrounded
by the words constituting the name of the Corporation and the word "Michigan".
The seal may be used by causing it, or a facsimile thereof, to be imprinted,
affixed or reproduced.
Section 5. Disbursement of Corporate Funds. All checks or warrants for the
disbursement of funds of the Corporation, or demands for money and notes of the
Corporation, shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 6. Fiscal Year. The Fiscal year of the Corporation shall be as
determined from January 1 through December 31, or as amended from time to time
by the Board of Directors.
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EXHIBIT 3.6
BYLAWS
OF
VS HOLDINGS INC.
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office of the Corporation shall
be located in the City of Detroit, County of Wayne, State of Michigan.
The Corporation may also have offices at such other places as the Board of
Directors may from time to time appoint or the business of the Corporation may
require.
ARTICLE II
STOCKHOLDERS MEETINGS
Section 1. Annual Meeting of Stockholders. The Annual Meeting of the
Stockholders of the Corporation shall be held at its registered offices in
Detroit, Michigan on the second Monday in February of each year, commencing in
1999, at which Meeting the Stockholders shall elect, by a plurality vote, a
Board of Directors and transact such other business as may properly be brought
before the Meeting.
It shall be the duty of the Secretary to cause a written notice of each
Annual Meeting to be mailed to each of the Stockholders of record of the
Corporation, such notice to be directed to each Stockholder at his or her last
known post office address at least ten (10) days immediately preceding said
Meeting. Nevertheless, failure to mail such notice or any irregularity in the
same shall not affect the validity of any such Meeting.
Section 2. Special Meeting of Stockholders. Special Meetings of the
Stockholders may be called at the office of the Corporation or elsewhere in the
State of Michigan upon the request in writing or the vote of a majority of the
Board of Directors, or upon the demand in writing of Stockholders of record
owning a majority of the entire issued and outstanding common capital stock of
the Corporation. A notice indicating briefly the object or objects of such
Special Meeting shall be mailed to each Stockholder of record at his or her last
known post office, address at least ten (10) days prior to the date of such
Meeting.
Nevertheless, if all the Stockholders shall waive notice of a Special
Meeting, no notice of such Meeting shall be required, and whenever all the
Stockholders shall meet in person or by proxy, such Meeting shall be valid for
all purposes without call or notice, and at such Meeting any corporate action
may be taken.
Section 3. Quorum at Stockholders Meeting. At any Meeting of the
Stockholders, the
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holders of a majority of all the shares of record of the common
capital stock of the Corporation present in person or represented by
proxy shall constitute a quorum of the Stockholders for all purposes.
If the holders of the amount of stock necessary to constitute a quorum
shall fail to attend in person or by proxy at the time and place fixed
by these Bylaws for an Annual Meeting or fixed by notice as above
provided for a Special Meeting, then a majority in interest of the
Stockholders present in person or represented by proxy may adjourn such
Meeting from time to time without notice other than by announcement at
the Meeting, until holders of the amount of stock requisite to
constitute a quorum shall attend. 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 for which notice was
originally given.
Section 4. Voting at Stockholders Meetings. At each Meeting
of the Stockholders every Stockholder of record, except as herein
provided, shall be entitled to vote, in person or by proxy appointed by
instrument in writing subscribed by such Stockholder or by his or her
duly authorized attorney, and such stockholder shall have one vote for
each share of stock standing registered in his or her name at the time
of the closing of the transfer books for such Meeting.
Only the persons in whose name shares of stock stand
registered on the books of the Corporation at the time of the closing
of the transfer books for such Meeting shall be entitled to vote in
person or by proxy on the shares so standing in their name.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Directors - Number and Term of Office. The property
and business of the Corporation shall at all times be managed and
controlled by a Board of not less than one (1) Director.
The Directors shall hold office for one year and until their
successors are elected and have qualified. If the office of any
Director becomes or is vacant by reason of death, resignation,
disqualification or otherwise, the remaining Director(s) may elect a
successor who shall hold office for the unexpired term and until a
successor is elected and has qualified.
Section 2. Meeting of Directors. The Board of Directors
elected at any Annual Meeting of the Stockholders shall meet at the
registered office of the Corporation in Detroit, Michigan immediately
after the adjournment of such Annual Meeting and elect Officers of the
Corporation for the ensuing year.
Regular Meetings of the Directors may be held at such time and
place as may be fixed by resolution of the Board.
Special Meetings of the Board may be called by the President
on three (3) days notice mailed to each Director or delivered to him
or her personally or left at the Director's residence or usual place
of business, or such Special Meetings may be called in like manner
upon the
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written request of such number of Directors as is necessary to constitute a
quorum of the Board.
Nevertheless, if all of the Directors shall waive notice of a Special
Meeting, no notice of such Meeting shall be required, and whenever all of the
Directors shall assemble for the purpose of holding a Special Meeting of the
Board of Directors, such Meeting shall be valid for all purposes without call or
notice and at such Meeting any corporate action may be taken.
A majority of Directors shall be necessary to constitute a quorum for the
transaction of business.
ARTICLE IV
OFFICERS
Section 1. Executive Officers. The Officers of this Corporation shall
consist of a President, Vice President Secretary and Treasurer.
The Board of Directors shall elect a President, Treasurer and Secretary.
The Board may also elect one or more Vice Presidents and any Assistant
Treasurers and/or Assistant Secretaries as the Board may deem advisable. Such
officers shall have such authority and shall perform such duties as set forth
herein and as may from time-to-time be conferred upon such officers by the
Board. The same person may hold any two (2) or more of such offices, except that
the offices of the President and Vice President shall not be held by the same
person. In its discretion the Board of Directors, by vote of a majority thereof,
may leave unfilled for any period as may befixed by resolution any office except
those of President, Treasurer and Secretary.
Section 4. Powers and Duties of President. The President shall be the Chief
Executive Officer of the Corporation, shall have responsibility for management
of the day-to-day operations of the Corporation and shall see that all orders
and resolutions of the Board are carried into effect.
The President may sign and execute in the name of the Corporation all
contracts, agreements and other obligations of the Corporation and may, with the
Secretary, Treasurer, Assistant Secretary or Assistant Treasurer, sign all
certificates of the shares of the capital stock of the Corporation.
The President shall submit a report of the operations of the Corporation to
the Shareholders at each Annual Meeting and from time to time shall report to
the Board of Directors all matters within such officer's knowledge which, in the
interest of the Corporation, may require to be brought to their notice.
The President shall do and perform such other duties as from time to time
may be assigned to such officer by the Board of Directors.
Section 5. Powers and Duties of Vice President. In the absence or
disability of the
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President, the Vice President, whenever designated by the Board of
Directors, shall have all the powers and be subject to all the duties
of the President so long as such absence or disability continues. The
Vice President shall have such powers and duties as may from time to
time be conferred on him by the Board.
Section 6. Powers and Duties of Secretary and Assistant
Secretary. The Secretary and/or Assistant Secretary shall keep the
Minutes of all Stockholders and the all Board of Directors Meetings,
the stock register and the stock transfer book and shall be the
custodian of the corporate seal and of all records, papers, files and
books of the Corporation, except the account books.
The Secretary and/or Assistant Secretary shall affix the
corporate seal to all documents to which it should be attached and
attest the same when necessary by signature.
The Secretary and/or Assistant Secretary may sign, with the
President or such other person as may be designated by the Board of
Directors, all bills of exchange or promissory notes of the
Corporation.
The Secretary and/or Assistant Secretary may sign, together
with the President or the Vice President, all certificates of
shares of the capital stock of the Corporation.
The Secretary and/or Assistant Secretary shall perform
generally all the duties usually appertaining to the office of
Secretary of a corporation, subject to the control and direction of
the Board of Directors.
Section 7. Powers and Duties of Treasurer and Assistant
Treasurer. The Treasurer and/or Assistant Treasurer shall have the
custody of all of the funds of the Corporation and shall deposit the
same to the credit of the Corporation in such bank or banks as the
Board of Directors may designate.
The Treasurer and/or Assistant Treasurer may sign, with the
President or such other person as may be designated by the Board of
Directors, all bills of exchange, promissory notes or other evidences
of indebtedness of the Corporation.
The Treasurer and/or Assistant Treasurer may sign, together
with the President or the Vice President, all certificates of shares
of the capital stock of the Corporation.
The Treasurer and/or Assistant Treasurer shall cause to be
entered regularly in the books of the Corporation to be kept for that
purpose, a full and accurate amount of monies received and paid by
such officer(s) on account of the Corporation, and whenever required
by the Board of Directors shall render a statement of the cash
accounts.
The Treasurer and/or Assistant Treasurer shall at all times
exhibit the books and accounts to any Director of the Corporation upon
application, and shall perform generally all the duties usually
appertaining to the office of Treasurer of a corporation, subject to
the control and direction of the Board of Directors. The Treasurer
shall also have such powers and duties as
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may, from time to time, be conferred on such officer by the Board.
Section 8. Other Officers. The Board of Directors may also appoint such
other officers and agents as it may deem necessary for the transaction of the
business of the Corporation. Such officers and agents shall hold office for such
period, have such authority and perform such duties as shall be determined from
time to time by the Board.
ARTICLE V
CAPITAL STOCK
Section 1. Certificates for Shares. The certificates for shares of the
capital stock of the Corporation shall be in such form as shall be prepared or
approved by the Board of Directors.
The certificates shall be signed by the President or the Vice President and
also by the Secretary, Assistant Secretary, Treasurer or Assistant Treasurer,
and no certificates shall be valid unless so signed.
Section 2. Transfer of Shares. Shares of the capital stock of this
Corporation shall be transferred only on the books of the Corporation by the
holder thereof in person or by the holder's legal representative or duly
authorized attorney upon the surrender and cancellation of certificates for a
like number of shares, and the Corporation shall at all times have a lien upon
all of the stock and property of its Stockholders invested therein for all debts
of whatsoever nature that may be due from them to the Corporation, whether
payable presently or in the future.
Section 3. Transfer and Registration of Certificates. The Board of
Directors shall have the power and authority to make all such rules and
regulations as it may deem expedient concerning the issue, transfer and
registration of certificates of shares of the capital stock of the Corporation.
Section 4. Closing of Transfer Books. The stock transfer books shall be
closed for the Meetings of Stockholders and for the payment of dividends during
such periods as from time to time may be fixed by the Board of Directors.
ARTICLE VI
INDEMNIFICATION AND INSURANCE
Section 1. Indemnification. The Corporation shall, to the fullest extent
permitted by Sections 561-569 of the Michigan Business Corporation Act, as
amended, or any successor provisions thereto, indemnify any and all persons whom
it shall have the power to indemnify under said sections from and against any
and all expenses, liabilities or other matters referred to in or covered by said
sections.
For purposes of construing the foregoing indemnification in conjunction
with Sections
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561-569 of the Michigan Business Corporation Act, as amended, or any
successor provisions thereto, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the
corporation" shall include any service as a director, officer,
employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with
respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner
he or she reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests
of the corporation" as referred to in Sections 561-569 of the
Michigan Business Corporation Act.
The indemnification provided by this section shall not be
deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any statute, bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another
capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators
of such a person; provided however that such indemnification shall not
be mandatory for any person seeking indemnity in connection with a
proceeding voluntarily initiated by such person unless the proceeding
was authorized by a majority vote of the entire Board of Directors.
Section 2. Insurance. The Board of Directors of the
Corporation may, in its discretion, authorize the Corporation
to purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted
against or incurred by such person in any such capacity, or arising
out of his or her status as such, whether or not the Corporation
would have the power to indemnify such person against such liability
under provisions of Section 1 of Article VI.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Bylaw Amendments. These Bylaws may be added to,
amended or repealed in whole or in part at any Annual Meeting of the
Stockholders or Board of Directors of the Corporation or at any
special meeting of the Stockholders or Board of Directors called for
such purpose, provided, however, that the Board of Directors shall not
add to, amend or repeal in whole or in part any Bylaws fixing their
number, qualifications or term of office.
Section 2. Delegation of Duties. Whenever, by a majority vote,
the Board of Directors shall declare an emergency exists, the Board
may delegate the powers and duties of any officer to any other officer
or to any other Director for the time being.
Section 3. Deferred Meetings. If the date for any Stockholders
and Board of Directors
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Meetings provided for in these Bylaws or by resolution of the Board of Directors
shall fall upon a legal holiday, such Meeting shall be held on the next
succeeding day not a legal holiday, at the same hour and place.
Section 4. Corporate Seal. The corporate seal of the Corporation shall be a
circular device within which shall be the word "seal", which may be surrounded
by the words constituting the name of the Corporation and the word "Michigan".
The seal may be used by causing it, or a facsimile thereof, to be imprinted,
affixed or reproduced.
Section 5. Disbursement of Corporate Funds. All checks or warrants for the
disbursement of funds of the Corporation, or demands for money and notes of the
Corporation, shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 6. Fiscal Year. The Fiscal year of the Corporation shall be from
January 1 through December 31, or as shall be amended from time to time by the
Board of Directors.
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EXHIBIT 3.7
BYLAWS
OF
VELTRI HOLDINGS USA, INC.
ARTICLE I
RECORDS PERTAINING TO SHARE OWNERSHIP
Section 1. Recognition of Shareholders. Veltri Holdings USA, Inc. (the
"Corporation") is entitled to recognize a person registered on its books as the
owner of shares of the Corporation as having the exclusive right to receive
dividends and to vote those shares, notwithstanding any other person's equitable
or other claim to, or interest in, those shares.
Section 2. Transfer of Shares. Shares are transferable only on the books of
the Corporation, subject to any transfer restrictions imposed by the Articles of
Incorporation, these Bylaws, or an agreement among shareholders and the
Corporation. Shares may be so transferred upon presentation of the certificate
representing the shares, endorsed by the appropriate person or persons, and
accompanied by (a) reasonable assurance that those endorsements are genuine and
effective, and (b) a request to register the transfer. Transfers of shares are
otherwise subject to the provisions of the Indiana Business Corporation Law (the
"Act") and Article 8 of the Indiana Uniform Commercial Code.
Section 3. Certificates. Each shareholder is entitled to a certificate
signed (manually or in facsimile) by the President and the Secretary or an
Assistant Secretary, setting forth (a) the name of the Corporation and that it
was organized under Indiana law, (b) the name of the person to whom issued, and
(c) the number of shares represented. The Board of Directors shall prescribe the
form of the certificate.
Section 4. Lost or Destroyed Certificates. A new certificate may be issued
to replace a lost or destroyed certificate. Unless waived by the Board of
Directors, the shareholder in whose name the certificate was issued shall make
an affidavit or affirmation of the fact that his certificate is lost or
destroyed, shall advertise the loss or destruction in such manner as the Board
of Directors may require, and shall give the Corporation a bond of indemnity in
the amount and form which the Board of Directors may prescribe.
ARTICLE II
Meetings of the Shareholders
Section 1. Annual Meetings. Annual meetings of the shareholders shall be
held on the third Wednesday in February of each year, or on such other date as
may be designated by the Board of Directors.
<PAGE> 2
Section 2. Special Meetings. Special meetings of the shareholders may be
called by the President or by the Board Of Directors. Special meetings of the
shareholders shall be called upon delivery to the Secretary of the Corporation
of one or more written demands for a special meeting of the shareholders
describing the purposes of that meeting and signed and dated by the holders of
at least 25 % of all the votes entitled to be cast on any issue proposed to be
considered at that meeting.
Section 3. Notice of Meetings. The Corporation shall deliver or mail
written notice stating the date, time, and place of any shareholders' meeting
and, in the case of a special shareholders' meeting or when otherwise required
by law, a description of the purposes for which the meeting is called, to each
shareholder of record entitled to vote at the meeting, at such address as
appears in the records of the Corporation and at least 10, but no more than 60,
days before the date of the meeting.
Section 4. Waiver of Notice. A shareholder may waive notice of any meeting,
before or after the date and time of the meeting as stated in the notice, by
delivering a signed waiver to the Corporation for inclusion in the minutes. A
shareholder's attendance at any meeting, in person or by proxy (a) waives
objection to lack of notice or defective notice of the meeting, unless the
shareholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting, and (b) waives objection to consideration
of a particular matter at the meeting that is not within the purposes described
in the meeting notice, unless the shareholder objects to considering the matter
when it is presented.
Section 5. Record Date. The Board of Directors may fix a record date, which
may be a future date, for the purpose of determining the shareholders entitled
to notice of a shareholders' meeting, to demand a special meeting, to vote, or
to take any other action. A record date may not exceed 70 days before the
meeting or action requiring a determination of shareholders. If the Board of
Directors does not fix a record date, the record date shall be the 10th day
prior to the date of the meeting or other action.
Section 6. Voting by Proxy. A shareholder may appoint a proxy to vote or
otherwise act for the shareholder pursuant to a written appointment form
executed by the shareholder or the shareholder's duly authorized
attorney-in-fact. An appointment of a proxy is effective when received by the
Secretary or other officer or agent of the Corporation authorized to tabulate
votes. The general proxy of a fiduciary is given the same effect as the general
proxy of any other shareholder. A proxy appointment is valid for 11 months
unless otherwise expressly stated in the appointment form.
Section 7. Voting Lists. After a record date for a shareholders' meeting
has been fixed, the Secretary shall prepare an alphabetical list of all
shareholders entitled to notice of the meeting showing the address and number of
shares held by each shareholder. The list shall be kept on file at the principal
office of the Corporation or at a place identified in the meeting notice in the
city where the meeting will be held. The list shall be available for inspection
and copying by any shareholder entitled to vote at the meeting, or by the
shareholder's agent or
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<PAGE> 3
attorney authorized in writing, at any time during regular business hours,
beginning 5 business days before the date of the meeting through the meeting.
The list shall also be made available to any shareholder, or to the
shareholder's agent or attorney authorized in writing, at the meeting and any
adjournment thereof. Failure to prepare or make available a voting list with
respect to any shareholder's meeting shall not affect the validity of any action
taken at such meeting.
Section 8. Quorum; Approval. At any meeting of shareholders, a majority of
the votes entitled to be cast on a matter at the meeting constitutes a quorum.
If a quorum is present when a vote is taken, action on a matter is approved if
the votes cast in favor of the action exceed the votes cast in opposition to the
action, unless a greater number is required by law, the Articles of
Incorporation, or these Bylaws.
Section 9. Action by Consent. Any action required or permitted to be taken
at a shareholders' meeting may be taken without a meeting if the action is taken
by all the shareholders entitled to vote on the action. The action must be
evidenced by one or more written consents describing the action taken, signed by
all the shareholders entitled to vote on the action, and delivered to the
Corporation for inclusion in the minutes. If not otherwise determined pursuant
to Section 5 of this Article II, the record date for determining shareholders
entitled to take action without a meeting is the date the first shareholder
signs the consent to such action.
Section 10. Presence. Any or all shareholders may participate in any annual
or special shareholders' meeting by, or through the use of, any means of
communication by which all shareholders participating may simultaneously hear
each other during the meeting. A shareholder so participating is deemed to be
present in person at the meeting.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers and Duties. All corporate powers are exercised by or
under the authority of, and the business and affairs of the Corporation are
managed under the direction of, the Board of Directors, unless otherwise
provided in the Articles of Incorporation.
Section 2. Number and Terms of Office; Qualifications. The Corporation
shall have one (1) director. Directors are elected at each annual shareholders'
meeting and serve for a term expiring at the following annual shareholders'
meeting. A director who has been removed pursuant to Section 3 of this Article
III ceases to serve immediately upon removal; otherwise, a director whose term
has expired continues to serve until a successor is elected and qualifies or
until there is a decrease in the number of directors. A person need not be a
shareholder or an Indiana resident to qualify to be a director.
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<PAGE> 4
Section 3. Removal. Any director may be removed with or without cause by
action of the shareholders taken at any meeting the notice of which states that
one of the purposes of the meeting is removal of the director.
Section 4. Vacancies. If a vacancy occurs on the Board of Directors,
including a vacancy resulting from an increase in the number of directors, the
Board of Directors may fill the vacancy. If the directors remaining in office
constitute fewer than a quorum of the Board, the directors remaining in office
may fill the vacancy by the affirmative vote of a majority of those directors.
Any director elected to fill a vacancy holds office until the next annual
meeting of the shareholders and until a successor is elected and qualifies.
Section 5. Annual Meetings. Unless otherwise agreed by the Board of
Directors, the annual meeting of the Board of Directors shall be held
immediately following the annual meeting of the shareholders, at the place where
the meeting of shareholders was held, for the purpose of electing officers and
considering any other business which may be brought before the meeting. Notice
is not necessary for any annual meeting.
Section 6. Regular and Special Meetings. Regular meetings of the Board of
Directors may be held pursuant to a resolution of the Board of Directors
establishing a method for determining the date, time, and place of those
meetings. Notice is not necessary for any regular meeting. Special meetings of
the Board of Directors may be held upon the call of the President or of any
director and upon 24 hours' written or oral notice specifying the date, time,
and place of the meeting. Notice of a special meeting may be waived in writing
before or after the time of the meeting. The waiver must be signed by the
director entitled to the notice and filed with the minutes of the meeting.
Attendance at or participation in a meeting waives any required notice of the
meeting, unless at the beginning of the meeting (or promptly upon the director's
arrival) the director objects to holding the meeting or transacting business at
the meeting and does not thereafter vote for or assent to action taken at the
meeting.
Section 7. Quorum. A quorum for the transaction of business at any meeting
of the Board of Directors consists of a majority of the number of directors
specified in Section 2 of this Article III. If a quorum is present when a vote
is taken, action on a matter is approved if the action receives the affirmative
vote of a majority of the directors present.
Section 8. Action by Consent. Any action required or permitted to be taken
at any meeting of the Board of Directors may be taken without a meeting if the
action is taken by all directors then in office. The action must be evidenced by
one or more written consents describing the action taken, signed by each
director, and included in the minutes. Action of the Board of Directors taken by
consent is effective when the last director signs the consent, unless the
consent specifies a prior or subsequent effective date.
Section 9. Committees. The Board of Directors may create one or more
committees and appoint members of the Board of Directors to serve on them. Each
committee may have one or more members, who serve at the pleasure of the Board
of Directors. The creation of a
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<PAGE> 5
committee and appointment of members to it must be approved by the greater of
(i) a majority of all the directors in office when the action is taken, or (ii)
the number of directors required under Section 7 of this Article III to take
action. All rules applicable to action by the Board of Directors apply to
committees and their members. The Board of Directors may specify the authority
that a committee may exercise; however, a committee may not (a) authorize
distributions, except a committee may authorize or approve a reacquisition of
shares if done according to a formula or method prescribed by the Board of
Directors, (b) approve or propose to shareholders action that must be approved
by shareholders, (c) fill vacancies on the Board of Directors or on any of its
committees, (d) amend the Articles of Incorporation, (e) adopt, amend, or repeal
these Bylaws, (f) approve a plan of merger not requiring shareholder approval,
or (g) authorize or approve the issuance or sale or a contract for the sale of
shares, or determine the designation and relative rights, preferences, and
limitations of a class or series of shares, except the Board of Directors may
authorize a committee to so act within limits prescribed by the Board of
Directors.
Section 10. Presence. The Board of Directors may permit any or all
directors to participate in any annual, regular, or special meeting by any means
of communication by which all directors participating may simultaneously hear
each other during the meeting. A director so participating is deemed to be
present in person at the meeting.
Section 11. Compensation. Each director shall receive such compensation for
service as a director as may be fixed by the Board of Directors.
ARTICLE IV
OFFICERS
Section 1. Officers. The Corporation shall have a President, a Vice
President, a Secretary, a Treasurer, and such assistant officers as the Board of
Directors or the President designates. The same individual may simultaneously
hold more than one office.
Section 2. Terms of Office. Officers are elected at each annual meeting of
the Board of Directors and serve for a term expiring at the following annual
meeting of the Board of Directors. An officer who has been removed pursuant to
Section 4 of this Article IV ceases to serve as an officer immediately upon
removal; otherwise, an officer whose term has expired continues to serve until a
successor is elected and qualifies.
Section 3. Vacancies. If a vacancy occurs among the officers, the Board of
Directors may fill the vacancy. Any officer elected to fill a vacancy holds
office until the next annual meeting of the Board of Directors and until a
successor is elected and qualifies.
Section 4. Removal. Any officer may be removed by the Board of Directors at
any time with or without cause.
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<PAGE> 6
Section 5. Compensation. Each officer shall receive such compensation for
service in office as may be fixed by the Board of Directors.
Section 6. President. The President is the chief executive officer of the
Corporation and is responsible for managing and supervising the affairs and
personnel of the Corporation, subject to the general control of the Board of
Directors. The President presides at all meetings of shareholders and directors.
The President, or proxies appointed by the President, may vote shares of other
corporations owned by the Corporation. The President has authority to execute,
with the Secretary, powers of attorney appointing other corporations,
partnerships, or individuals as the agents of the Corporation, subject to law,
the Articles of Incorporation, and these Bylaws. The President has such other
powers and duties as the Board of Directors may from time to time prescribe.
Section 7. Secretary. The Secretary is responsible for (a) attending all
meetings of the shareholders and the Board of Directors, (b) preparing true and
complete minutes of the proceedings of all meetings of the shareholders, the
Board of Directors, and all committees of the Board of Directors, (c)
maintaining and safeguarding the books (except books of account) and records of
the Corporation, and (d) authenticating the records of the Corporation. If
required, the Secretary attests the execution of deeds, leases, agreements,
powers of attorney, certificates representing shares of the Corporation, and
other official documents by the Corporation. The Secretary serves all notices of
the Corporation required by law, the Board of Directors, or these Bylaws. The
Secretary has such other duties as the Board of Directors may from time to time
prescribe.
Section 8. Assistant Officers. The Board of Directors or the President may
from time to time designate and elect assistant officers who shall have such
powers and duties as the officers whom they are elected to assist specify and
delegate to them, and such other powers and duties as the Board of Directors or
the President may from time to time prescribe. An Assistant Secretary may,
during the absence or disability of the Secretary, discharge all
responsibilities imposed upon the Secretary of the Corporation, including,
without limitation, attest the execution of all documents by the Corporation.
ARTICLE V
Miscellaneous
Section 1. Records. The Corporation shall keep as permanent records minutes
of all meetings of the shareholders, the Board of Directors, and all committees
of the Board of Directors, and a record of all actions taken without a meeting
by the shareholders, the Board of Directors, and all committees of the Board of
Directors. The Corporation or its agent shall maintain a record of the
shareholders in a form that permits preparation of a list of the names and
addresses of all shareholders, in alphabetical order showing the number of
shares held by each. The Corporation shall maintain its records in written form
or in a form capable of conversion into written form within a reasonable time.
The Corporation shall keep a copy of
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<PAGE> 7
the following records at its principal office: (a) the Articles of Incorporation
then currently in effect, (b) the Bylaws then currently in effect, (c) minutes
of all shareholders' meetings, and records of all actions taken by shareholders
without a meeting, for the past 3 years, (d) all written communications to
shareholders generally during the past 3 years, including annual financial
statements furnished upon request of the shareholders, (e) a list of the names
and business addresses of the current directors and officers, and (f) the most
recent annual report filed with the Indiana Secretary of State.
Section 2. Execution of Contracts and Other Documents. Unless otherwise
authorized or directed by the Board of Directors, all written contracts and
other documents entered into by the Corporation shall be executed on behalf of
the Corporation by the President, and, if required, attested by the Secretary or
an Assistant Secretary.
Section 3. Accounting Year. The accounting year of the Corporation begins
on November 1 of each year and ends on the October 31 immediately following.
Section 4. Coporate Seal. The Corporation has no seal.
ARTICLE VI
Amendment
These Bylaws may be amended or repealed only by the Board of Directors. The
affirmative vote of a majority of all the directors is necessary to amend or
repeal these Bylaws.
----------------------------------
Secretary's Initials
March 4, 1992
----------------------------------
Date
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<PAGE> 1
EXHIBIT 3.8
ARTICLES OF ASSOCIATION
OF
VELTRI METAL PRODUCTS CO.
INTERPRETATION
1. In these Articles, unless there be something in the subject or
context inconsistent therewith:
(1) "Act" means the Companies Act (Nova Scotia);
(2) "Articles" means these Articles of Association of the
Company and all amendments hereto;
(3) "Company" means the company named above;
(4) "Designated Representative" means (a) with respect to a
L.L.C. which is a member, the manager or authorized member
of such LLC. designated by written notice sent to the
office of the Company; (b) with respect to a body
corporate which is a member, the individual authorized by
the body corporate to act as its representative and
designated by written notice sent to the office of the
Company; and (c) with respect to a trust which is a
member, the individual authorized by the Trustees thereof
to act as its representative shall be designated by
written notice sent to the office of the Company. The
Designated Representative shall be entitled to exercise
the same powers on behalf of the entity which the
individual represents as that entity could exercise if it
were an individual member. The authorization of a
Designated Representative may be revoked by written notice
deposited at the office of the Company;
(5) "director" means a director of the Company;
(6) "Memorandum" means the Memorandum of Association of the
Company and all amendments thereto;
(7) "month" means calendar month;
(8) "Office" means the registered office of the Company;
(9) "person" includes a body corporate;
(10) "proxyholder" includes an alternate proxyholder;
(11) "Register" means the register of members kept pursuant to
the Act and, where the context permits, includes a branch
register of shareholders;
(12) "Registrar" means the Registrar as defined in the Act;
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(13) "Secretary" includes any person appointed to perform the
duties of the Secretary temporarily;
(14) "shareholder" means member as that term is used in the Act in
connection with an unlimited company having share capital and,
where the context requires, means a shareholder acting through
its duly authorized officer or officers;
(15) "special resolution" has the meaning assigned by the Act;
(16) "in writing" and "written" includes printing, lithography and
other modes of representing or reproducing words in visible
form;
(17) words importing number or gender include all numbers and
genders unless the context otherwise requires.
2. The regulations in Table A in the First Schedule to the Act shall not
apply to the Company.
3. The shareholders may enter into and carry into effect or adopt and
carry into effect any agreement made by the promoters of the Company on
behalf of the Company and may agree to any modification in the terms of
any such agreement, either before or after its execution.
4. The shareholders may, out of the funds of the Company, pay all
expenses incurred for the incorporation and organization of the
Company.
5. The Company may commence business as soon after incorporation as the
shareholders think fit, notwithstanding that part only of the shares
has been allotted.
SHARES
6. The authorized capital of the Company consists of one million
(1,000,000) common shares without nominal or par value.
7. The shareholders shall control the shares subject to the restrictions
on transfer set forth in Article 12 hereof and all other provisions of
these Articles.
8. Save as herein otherwise provided, the Company may treat the
registered holder of any share as the absolute owner thereof and
accordingly shall not, except as ordered by a court of competent
jurisdiction or required by statute, be bound to recognize any
equitable or other claim to or interest in such share on the part of
any other person.
<PAGE> 3
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CERTIFICATES
9. Certificates of title to shares shall comply with the Act and may
otherwise be in such form as the shareholders may from time to time
determine. Every certificate of title to shares shall be signed
manually by the President and Secretary. All such certificates when
signed as provided in this Article shall be valid and binding upon the
Company.
10. Except as the shareholders may determine, each shareholder's shares may
be evidenced by any number of certificates so long as the aggregate of
the shares stipulated in such certificates equals the aggregate
registered in the name of the shareholder.
11. Any certificate that has become worn, damaged or defaced may, upon its
surrender to the Company, be cancelled and replaced by a new
certificate. Any certificate that has become lost or destroyed may be
replaced by a new certificate upon proof of such loss or destruction
to the satisfaction of the shareholders and the furnishing to the
Company of such undertakings of indemnity as the shareholders deem
adequate.
RESTRICTION ON TRANSFER OF SHARES
12. No share of any class or series shall be transferable directly or
indirectly. The Company shall decline to register any other purported
transfer of shares by any person in any circumstances.
PRIVATE COMPANY
13. The Company is a private company, and:
(1) no transfer of shares or prescribed securities of the
Company, other than the transfer by an individual who has
become a shareholder upon subscribing to the Memorandum on
incorporation of shares so subscribed, shall be effective;
(2) the number of holders of issued and outstanding prescribed
securities or shares of the Company, exclusive of persons who
are in the employment of the Company and exclusive of persons
who, having been formerly in the employment of the Company,
were, while in that employment, and have continued after
termination of that employment, to own at least one prescribed
security or share of the Company, shall not exceed 50 in
number, two or more persons or companies who are the joint
registered owners of one or more prescribed securities or
shares being counted as one holder, and
(3) the Company shall not invite the public to subscribe for any
of its securities.
<PAGE> 4
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In this Article "private company" and "securities" have the meanings
ascribed to those terms in the Securities Act (Nova Scotia), and
"prescribed security" means any of the securities prescribed by the Nova
Scotia Securities Commission from time to time for the purpose of the
definition of "private company" in the Securities Act (Nova Scotia).
INCREASE AND REDUCTION OF CAPITAL
14. Subject to the Act, the Company may by resolution of its shareholders
increase its share capital by the creation of new shares of such amount as
the shareholders think expedient.
15. Subject to the Act and the restrictions on transferability in these
Articles, the new shares may be issued upon such term and conditions and
with such rights, privileges, limitations, restrictions and conditions
attached thereto as the Company by resolution of its shareholders
determines.
16. Except as otherwise provided by the conditions of issue, or by these
Articles, any capital raised by the creation of new shares shall be
considered part of the original capital and shall be subject to the
provisions herein contained.
17. Except for the redemption, repurchase or acquisition of preference shares,
the Company shall not reduce its share capital in any way and, without
limiting the generality of the foregoing shall not redeem, repurchase or
acquire any shares of any class or series in the Company.
CLASSES AND SERIES OF SHARES
18. Subject to the Act, and without prejudice to any special rights previously
conferred on the holders of existing shares, any share may be issued with
such preferred, deferred or other special rights, or with such
restrictions, whether in regard to dividends, voting, return of share
capital or otherwise, as the Company may from time to time determine by
special resolution.
MEETING AND VOTING BY CLASS OR SERIES
19. Where the holders of shares of a class or series have, under the Act, the
Memorandum, the terms or conditions attaching to such shares or otherwise,
the right to vote separately as a class in respect of any matter then,
except as provided in the Act, the Memorandum, these Articles, or such
terms or conditions, all the provisions in these Articles concerning
general meetings (including without limitation, provisions respecting
notice, quorum and procedure) shall, mutatis mutandis, apply to every
meeting of holders of such class or series of shares convened for the
purpose of such vote.
20. Unless the rights, privileges, terms or conditions attached to a class or
series of shares provide otherwise, such class or series of shares shall
not have the right to vote separately as a class or series upon an
amendment to these Articles to:
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(1) increase or decrease any maximum number of authorized shares of such
class of series, or increase any maximum number of authorized shares
of a class or series having rights or privileges equal or superior to
the shares of such class or series;
(2) effect an exchange, reclassification or cancellation of all or part of
the shares of such class or series; or
(3) create a new class or series of shares equal or superior to the
shares of such class or series.
BORROWING POWERS
21. The shareholders on behalf of the Company may:
(1) raise or borrow money for the purposes of the Company or any of them;
(2) secure, subject to the sanction of a special resolution of the
Shareholders where required by the Act, the repayment of funds
so raised or borrowed in such manner and upon such terms and
conditions in all respects as they think fit, and in
particular by the execution and delivery of mortgages of the
Company's real or personal property, or by the issue of bonds,
debentures or other securities of the Company secured by
mortgage or other charge upon all or any part of the property
of the Company, both present and future including its
uncalled capital for the time being;
(3) sign or endorse bills, notes, acceptances, cheques, contracts,
and other evidence of or securities for funds borrowed or to be
borrowed for the purposes aforesaid;
(4) pledge debentures as security for loans;
(5) guarantee obligations of any person.
22. Bonds, debentures and other debt securities (but not shares or
securities convertible into shares) may be made assignable, free from
any equities between the Company and the person to whom such securities
were issued.
23. Any bonds, debentures and other securities may be issued at a discount,
premium or otherwise and with special privileges as to redemption,
surrender, drawings, allotment of shares and other matters.
GENERAL MEETINGS
24. Ordinary general meetings of the Company shall be held at least once in
every calendar year at such time and place as may be determined by the
shareholders and not later than 15 months after the preceding ordinary
general meeting. All other meetings of the Company shall be
<PAGE> 6
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called special general meetings. Ordinary or special general meetings
may be held either within or without the Province of Nova Scotia.
25. Any shareholder may at any time convene a special general meeting.
26. At least seven clear days' notice, or such longer period of notice as
may be required by the Act, of every general meeting, specifying the
place, day and hour of the meeting and, when special business is to be
considered, the general nature of such business, shall be given to the
shareholders entitled to be present at such meeting by notice given as
permitted by these Articles. With the consent in writing of all the
shareholders entitled to vote at such meeting, a meeting may be
convened by a shorter notice and in any manner they think fit or
notice of the time, place and purpose of the meeting may be waived by
all of the shareholders.
27. When it is proposed to pass a special resolution, the two meetings may
be convened by the same notice, and it shall be no objection to such
notice that it only convenes the second meeting contingently upon the
resolution being passed by the requisite majority at the first meeting.
28. The accidental omission to give notice to a shareholder, or non-receipt
of notice by a shareholder, shall not invalidate any resolution passed
at any general meeting.
PROCEEDINGS AT GENERAL MEETINGS
29. The business of an ordinary general meeting shall be to receive and
consider the financial statements of the Company and the report of the
directors and the report, if any, of the auditors, to elect directors
in the place of those retiring and to transact any other business which
under these Articles ought to be transacted at an ordinary general
meeting.
30. No business shall be transacted at any general meeting unless the
requisite quorum is present at the commencement of the business. A
shareholder of the Company that has a duly authorized agent or
Designated Representative present at any such meeting shall, for the
purpose of this Article, be deemed to be personally present at such
meeting.
31. One person, being a proxyholder or Designated Representative of a
shareholder, present and entitled to vote shall constitute a quorum for
a general meeting, and may hold a meeting.
32. The shareholders present entitled to vote at the meeting shall choose
one of their number to be chairman.
33. Subject to the Act, at any general meeting a resolution put to the
meeting shall be decided by a show of hands unless, either before or on
the declaration of the result of the show of hands, a poll is demanded
by the chairman, a shareholder or a proxyholder, and unless a poll is
so demanded, a declaration by the chairman that the resolution has been
carried, carried by a particular majority, lost or not carried by a
particular majority and an entry to that effect in
<PAGE> 7
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the Company's book of proceedings shall be conclusive evidence of the
fact without proof of the number or proportion of the votes recorded
in favour or against such resolution.
34. When a poll is demanded, it shall be taken in such manner and at such
time and place as the chairman of the meeting directs, and either at
once or after an interval or adjournment or otherwise. The result of
the poll shall be the resolution of the meeting at which the poll was
demanded. The demand of a poll may be withdrawn. When any dispute
occurs over the admission or rejection of a vote, it shall be resolved
by the chairman and such determination made in good faith shall be
final and conclusive.
35. The chairman of the meeting shall not have a casting vote in addition
to any vote or votes that the chairman has as a shareholder.
36. The chairman of a general meeting may with the consent of the meeting
adjourn the meeting from time to time and from place to place, but no
business shall be transacted at any adjourned meeting other than the
business left unfinished at the meeting that was adjourned.
37. Any poll demanded on the election of a chairman or on a question of
adjournment shall be taken forthwith without adjournment.
38. The demand of a poll shall not prevent the continuance of a meeting for
the transaction of any business other than the question on which a poll
has been demanded.
VOTES OF SHAREHOLDERS
39. Subject to the Act
(1) on a show of hands every shareholder, including every duly
authorized representative of a shareholder, and, if not prevented
from voting by the Act, every proxyholder, shall have one vote;
and
(2) on a poll every shareholder, including every duly authorized
representative of a shareholder, and every proxyholder, shall
have one vote for every share held.
40. Votes may be cast by proxy or, in the case of a corporate shareholder,
by a representative duly authorized under the Act or by a Designated
Representative duly authorized under these Articles.
41. A proxy shall be in writing and executed in the manner provided in the
Act. A proxy or other authority of a corporate shareholder does not
require its seal.
42. A proxy and the power of attorney or other authority, if any, under
which it is signed or a notarially certified copy of that power or
authority shall be deposited at the Office of the Company or at such
other place as the directors may direct. The directors may, by
resolution,
<PAGE> 8
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fix a time not exceeding 48 hours excluding Saturdays and holidays
preceding any meeting or adjourned meeting before which time proxies to
be used at that meeting must be deposited with the Company at its
Office or with an agent of the Company. Notice of the requirement for
depositing proxies shall be given in the notice calling the meeting.
The chairman of the meeting shall determine all questions as to
validity of proxies and other instruments of authority.
43. A vote given in accordance with the terms of a proxy shall be valid
notwithstanding the revocation of the proxy provided no intimation in
writing of the revocation is received at the Office of the Company
before the meeting or by the chairman of the meeting before the vote is
given.
44. A resolution, including a special resolution, in writing and signed by
every shareholder who would be entitled to vote on the resolution at a
meeting is as valid as if it were passed by such shareholders at a
meeting and satisfies all of the requirements of the Act respecting
meetings of shareholders.
SHAREHOLDERS' MANAGEMENT
45. The business and affairs of the Company shall be managed by the
shareholders exclusively in their membership capacity, and any document
or act which is signed or done by any shareholder or shareholders on
behalf of the Company shall bind the Company.
46. The shareholders shall cause minutes to be entered in books designated
for the purpose:
(1) of any appointment of an officer of the Company;
(2) of the names of persons present at each meeting of the
shareholders and of any committees thereof;
(3) of all orders made by the shareholders;
(4) of all resolutions and proceedings of meetings of shareholders;
47. No shareholder shall be disqualified by reason of the management duties
and responsibilities conferred by these Articles from contracting with
the Company, either as vendor, purchaser, or otherwise, nor shall any
such contract, or any contract or arrangement entered into or proposed
to be entered into by or on behalf of the Company in which any
shareholder is in any way interested, either directly or indirectly, be
avoided, nor shall any shareholder so contracting or being so
interested be liable to account to the Company for any profit realized
by any such contract or arrangement by reason only of such shareholder
carrying out duties and responsibilities.
<PAGE> 9
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DIRECTORS
48. The directors shall exercise only such powers and authorities as are
expressly conferred upon them by and shall be subject only to such
obligations and liabilities as are imposed upon them by, the Act or
these Articles and in particular the directors shall have the
following ministerial powers and responsibilities:
(1) to convene a meeting of the Company if requisitioned by
shareholders in accordance with the Act;
(2) to fix a time before which time proxies to be used at a meeting
of the Company must be deposited with the Company;
(3) to furnish the shareholders a statement showing the remuneration
of the directors during the last preceding three years if
required in accordance with the Act;
(4) if the members fail to appoint or unanimously waive the
appointment of an auditor at an ordinary meeting, to appoint an
auditor of the Company to hold office until the next ordinary
meeting, and to fill any casual vacancy in the office of the
auditor,
(5) to notify the auditor of any significant mis-statement, of which
the directors become aware, in a financial statement that the
auditor has reported upon, and to prepare and issue revised
financial statements or otherwise inform the shareholders and any
debenture holder of the Company;
(6) to send to the shareholders financial statements together with
the report of the auditor of the Company, if any, as required by
the Act; and
(7) to approve the financial statements of the Company by signing the
foot of the balance sheet.
49. Unless otherwise determined by resolution of shareholders, the number
of directors shall not be less than one or more than seven.
50. The continuing directors may act notwithstanding any vacancy in their
body.
51. A director may, in conjunction with the office of director, and on
such terms as to remuneration and otherwise as the shareholders
arrange or determine, hold any other office or place of profit under
the Company or under any company in which the Company is a shareholder
or is otherwise interested.
52. The office of a director shall ipso facto be vacated, if the director:
(1) becomes bankrupt or makes an assignment for the benefit of
creditors;
<PAGE> 10
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(2) is, or is found by a court of competent jurisdiction to be, of
unsound mind,
(3) by notice in writing to the Company, resigns the office of
director, or
(4) is removed in the manner provided by these Articles.
53. No director shall be disqualified by holding the office of director from
contracting with the Company, either as vendor, purchaser, or otherwise,
nor shall any such contract, or any contract or arrangement entered into or
proposed to be entered into by or on behalf of the Company in which any
director is in any way interested, either directly or indirectly, be
avoided, nor shall any director so contracting or being so interested be
liable to account to the Company for any profit realized by any such
contract or arrangement by reason only of such director holding that office
or of the fiduciary relations thereby established, provided the director
makes a declaration or gives a general notice in accordance with the Act.
No director shall, as a director, vote in respect of any contract or
arrangement in which the director is so interested, and if the director
does so vote, such vote shall not be counted. This prohibition may at any
time or times be suspended or relaxed to any extent by a resolution of the
shareholders and shall not apply to any contract by or on behalf of the
Company to give to the directors or any of them any security for advances
or by way of indemnity.
ELECTION OF DIRECTORS
54. At the dissolution of every ordinary general meeting at which their
successors are elected, all the directors shall retire from office and be
succeeded by the directors elected at such meeting. Retiring directors
shall be eligible for re-election.
55. If at any ordinary general meeting at which an election of directors ought
to take place no such election takes place, or if no ordinary general
meeting is held in any year or period of years, the retiring directors
shall continue in office until their successors are elected.
56. The Company may by resolution of its shareholders elect any number of
directors permitted by these Articles and may determine or alter their
qualification.
57. The Company may, by special resolution or in any other manner permitted by
statute, remove any director before the expiration of such director's
period of office and may, if desired, appoint a replacement to hold office
during such time only as the director so removed would have held office.
PRESIDENT AND VICE-PRESIDENTS
58. The shareholders shall elect the President of the Company, who need not be
a director, and may determine the period for which the President is to hold
office. The President shall have general supervision of the business of the
Company and shall perform such duties as may be
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assigned from time to time by the shareholders.
59. The shareholders may also elect vice-presidents, who need not be directors,
and may determine the periods for which they are to hold office. A
vice-president shall, at the request of the President or the shareholders
and subject to the directions of the shareholders, perform the duties of
the President during the absence, illness or incapacity of the President,
and shall also perform such duties as may be assigned by the President or
the shareholders.
SECRETARY AND TREASURER
60. The shareholders shall appoint a Secretary of the Company to keep minutes
of shareholders' and directors' meetings and perform such other duties as
may be assigned by the shareholders. The shareholders may also appoint a
temporary substitute for the Secretary who shall, for the purposes of these
Articles, be deemed to be the Secretary.
61. The shareholders may appoint a treasurer of the Company to carry out such
duties as the shareholders may assign.
OFFICERS
62. The shareholders may elect or appoint such other officers of the Company,
having such powers and duties, as they think fit.
63. If the shareholders so decide the same person may hold more than one of the
offices provided for in these Articles.
PROCEEDINGS OF DIRECTORS
64. The directors may meet together for the dispatch of business, adjourn and
otherwise regulate their meetings and proceedings, as they think fit, and
may determine the quorum necessary for the transaction of business. Until
otherwise determined, one director shall constitute a quorum and may hold a
meeting.
65. If all directors of the Company entitled to attend a meeting either
generally or specifically consent, a director may participate in a meeting
of directors or of a committee of directors by means of such telephone or
other communications facilities as permit all persons participating in the
meeting to hear each other, and a director participating in such a meeting
by such means is deemed to be present at that meeting for purposes of these
Articles.
66. Meetings of directors may be held either within or without the Province of
Nova Scotia and the directors may from time to time make arrangements
relating to the time and place of holding directors' meetings, the notices
to be given for such meetings and what meetings may be held without notice.
Unless otherwise provided by such arrangements:
<PAGE> 12
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(1) A meeting of directors may be held at the close of every ordinary
general meeting of the Company without notice.
(2) Notice of every other directors' meeting may be given as
permitted by these Articles to each director at least two hours
before the time fixed for the meeting.
(3) A meeting of directors may be held without formal notice if all
the directors are present or if those absent have signified their
assent to such meeting or their consent to the business
transacted at such meeting.
67. Any director may at any time summon a meeting of the directors to be
held at the Office of the Company. A majority of the directors may at
any time summon a meeting of directors to be held elsewhere.
68. Questions arising at any meeting of directors shall be decided by a
majority of votes. The chairman of the meeting may vote as a director
but shall not have a second or casting vote.
69. At any meeting of directors the chairman shall receive and
count the vote of any director not present in person at such meeting on
any question or matter arising at such meeting whenever such absent
director has indicated by telegram, letter or other writing lodged
with the chairman of such meeting the manner in which the absent
director desires to vote on such question or matter and such question
or matter has been specifically mentioned in the notice calling the
meeting as a question or matter to be discussed or decided thereat. In
respect of any such question or matter so mentioned in such notice any
director may give to any other director a proxy authorizing such other
director to vote for such first named director at such meeting, and the
chairman of such meeting, after such proxy has been so lodged, shall
receive and count any vote given in pursuance thereof notwithstanding
the absence of the director giving such proxy
70. The directors present shall choose some one of their number to be
chairman of the meeting.
71. A meeting of the directors at which a quorum is present shall be
competent to exercise all or any of the authorities, powers and
discretions for the time being vested in or exercisable by the
directors generally.
72. All acts done at any meeting of the directors or by any person acting
as a director shall, notwithstanding that it is afterwards discovered
that there was some defect in the appointment of the director or person
so acting, or that they or any of them were disqualified, be as valid
as if every such person had been duly appointed and was qualified to
be a director.
73. A resolution in writing and signed by every director who would be
entitled to vote on the resolution at a meeting is as valid as if it
were passed by such directors at a meeting.
<PAGE> 13
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SOLICITORS
74. The Company may employ or retain solicitors any of whom may, at the
request or on the instruction of the shareholders, attend meetings of
the shareholders, whether or not the solicitor is a shareholder of the
Company.
THE SEAL
75. The shareholders shall arrange for the safe custody of the common seal
of the Company (the "Seal"). The Seal may be affixed to any instrument
in the presence of and contemporaneously with the attesting signature
of (i) any individual who is a shareholder, or (ii) any duly
authorized officer or representative of a shareholder.
76. The Company may have facsimiles of the Seal which may be used
interchangeably with the Seal.
DIVIDENDS
77. The shareholders may from time to time declare such dividends as they
deem proper upon shares of the Company, and may determine the date
upon which such dividend will be payable.
78. No dividends shall be payable except out of the profits, retained
earnings or contributed surplus of the Company and no interest shall
be payable on any dividend.
79. The declaration of the shareholders as to the amount of the profits,
retained earnings or contributed surplus of the Company shall be
conclusive.
80. The shareholders may from time to time pay such interim dividends as
in their judgment the position of the Company justifies.
81. The shareholders may declare that a dividend be paid by the
distribution of cash, paid-up shares (at par or at a premium),
debentures, bonds or other securities of the Company or of any other
company or any other specific assets held or to be acquired by the
Company or in any one or more of such ways.
ACCOUNTS
82. The shareholders shall cause proper books of account to be kept of the
amounts received and expended by the Company, the matters in respect
of which such receipts and expenditures take place, all sales and
purchases of goods by the Company, and the assets, credits and
liabilities of the Company.
<PAGE> 14
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83. The books of account shall be kept at the head office of the Company or
at such other place or places as the shareholders may direct.
84. At the ordinary general meeting in every year, the shareholders shall
lay before the Company such financial statements and reports in
connection therewith as may be required by the Act or other applicable
statute or regulation thereunder and shall distribute copies thereof at
such times and to such persons as may be required by statute or
regulation.
AUDITORS AND AUDIT
85. Except in respect of a financial year for which the Company is exempt
pursuant to Section 118 of the Act, the Company shall at each ordinary
general meeting appoint an auditor or auditors to hold office until the
next ordinary general meeting.
86. The first auditors of the Company may be appointed by the shareholders
at any time before the first ordinary general meeting and the auditors
so appointed shall hold office until such meeting unless previously
removed by a resolution of the shareholders, in which event the
shareholders may appoint auditors.
87. The shareholders may fill any casual vacancy in the office of the
auditor but while any such vacancy continues the surviving or
continuing auditor or auditors, if any, may act.
88. The Company may appoint as auditor any person, including a
shareholder, not disqualified by statute.
89. An auditor may be removed or replaced in the circumstances and in the
manner specified in the Act.
90. The remuneration of the auditors shall be fixed by the shareholders.
91. The auditors, if any, shall conduct such audit as may be required by
the Act and their report, if any, shall be dealt with by the Company as
required by the Act.
NOTICES
92. A notice (including any communication or document) shall be
sufficiently given, delivered or served by the Company upon a
shareholder, or auditor by personal delivery at such person's
registered address (or, in the case of the Secretary or auditor, last
known address) or by prepaid mail telegraph, telex, facsimile machine
or other electronic means of communication addressed to such person at
such address.
93. Shareholders having no registered address shall not be entitled to
receive notice.
<PAGE> 15
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94. Any notice sent by mail shall be deemed to be given, delivered or
served on the earlier of actual receipt and the third business day
following that upon winch it is mailed, and in proving such service it
shall be sufficient to prove that the notice was property addressed and
mailed with the postage prepaid thereon. Any notice given by electronic
means of communication shall be deemed to be given when entered into
the appropriate transmitting device for transmission. A certificate in
writing signed on behalf of the Company that the notice was so
addressed and mailed or transmitted shall be conclusive evidence
thereof.
95. Any notice may bear the name or signature, manual or reproduced, of the
person giving the notice written or printed.
96. When a given number of days' notice or notice extending over any other
period is required to be given, the day of service and the day upon
which such notice expires shall not, unless it is otherwise provided,
be counted in such number of days or other period.
INDEMNITY
97. Every director, proxyholder, other shareholder representative or
officer, former director, proxyholder, other shareholder
representative or officer, or person who acts or acted at the
Company's request, as a director or officer of the Company, a body
corporate, partnership or other association of which the Company is or
was a shareholder, partner, member or creditor, and the heirs and
legal representatives of such person, in the absence of any dishonesty
on the part of such person, shall be indemnified by the Company
against, and it shall be the duty of the shareholders out of the funds
of the Company to pay, all costs, losses and expenses, including an
amount paid to settle an action or claim or satisfy a judgment, that
such director, officer or person may incur or become liable to pay in
respect of any claim made against such person or civil, criminal or
administrative action or proceeding to which such person is made a
party by reason of being or having been a director, proxyholder, other
shareholder representative or officer of the Company or such body
corporate, partnership or other association, whether the Company is a
claimant or party to such action or proceeding or otherwise; and the
amount for which such indemnity is proved shall immediately attach as
a lien on the property of the Company and have priority as against the
shareholders over all other claims.
98. No director, proxyholder, other shareholder representative or officer,
former director proxyholder, other shareholder representative or
officer, or person who acts or acted at the Company's request, as a
director or officer of the Company, a body corporate, partnership or
other association of which the Company is or was a shareholder,
partner, member or creditor, in the absence of any dishonesty on such
person's part, shall be liable for the acts, receipts, neglects or
defaults of any other director, officer or such person, or for
joining in any receipt or other act for conformity, or for any loss,
damage or expense happening to the Company through the insufficiency
or deficiency of title to any property acquired for or on behalf of
the Company, or through the insufficiency or deficiency of any
security in or upon which any of the funds of the Company are
invested, or for any loss or damage arising from the bankruptcy,
<PAGE> 16
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insolvency or tortious acts of any person with whom any funds,
securities or effects are deposited, or for any loss occasioned by
error of judgment or oversight on the part of such person, or for any
other loss, damage or misfortune whatsoever which happens in the
execution of the duties of such person or in relation thereto.
REMINDERS
99. The shareholders shall comply with the following provisions of the Act
or the Corporations Registration Act (Nova Scotia) where indicated:
(1) Keep current registers of shareholders, directors, the Secretary,
holders of bonds, debentures and other securities, and such other
registers as may be required, and send to the Registrar a copy of
all such registers and notice of all changes therein (Sections
42, 98, 111 and Third Schedule).
(2) Send notice to the Registrar of any redemption or purchase of
preference shares (Section 50).
(3) Send notice to the Registrar of any consolidation, division,
conversion or reconversion of the share capital or stock of the
Company (Section 53).
(4) Send notice to the Registrar of any increase of capital (Section
55).
(5) Call a general meeting every year within the proper time (Section
83). Meetings must be held not later than 15 months after the
preceding general meeting.
(6) Send to the Registrar copies of all special resolutions (Section
88).
(7) When shares are issued for a consideration other than cash, file
a copy of the contract with the Registrar on or before the date
on which the shares are issued (Section 109).
(8) Send to the Registrar notice of the address of the Company's
registered Office and of all changes in such address (Section
79).
(9) Keep proper minutes of all shareholders' meetings in the
Company's minute book kept at the Company's registered Office
(Sections 89 and 90).
(10) Obtain a certificate under the Corporations Registration Act
(Nova Scotia) as soon as business is commenced.
(11) Send notice of recognized agent to the Registrar under the
Corporations Registration Act (Nova Scotia).
<PAGE> 1
EXHIBIT 3.9
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of April ____,
1998, is by and between VS HOLDINGS INC. and VS HOLDINGS NO. 2 INC., both
Michigan corporations.
WITNESSETH:
WHEREAS, the respective Boards of Directors and shareholders of each of
the parties hereto have duly adopted resolutions approving this Agreement and
Plan of Merger, in each case by unanimous vote, and have declared it desirable
and in the best interests of their respective corporations that VS HOLDINGS NO.
2 INC. ("Discontinuing Corporation") be merged into VS HOLDINGS INC., which
shall be the Surviving Corporation ("Surviving Corporation") in the manner and
upon the terms and conditions hereinafter set forth and with the effect provided
by and pursuant to application sections of the Michigan Business Corporation Act
and Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended;
WHEREAS, the authorized capital stock of Surviving Corporation consists
of 125,000 Class A Voting Common Stock without par value ("Surviving Corporation
Class A Common Stock"), of which 2,500 shares are issued and outstanding, and
125,000 Class B Non-Voting Common Stock without par value ("Surviving
Corporation Class B Common Stock"), of which 97,500 shares are currently issued
or outstanding; and
WHEREAS, the authorized capital stock of Discontinuing Corporation
consists of 30,000 shares of Class A Voting Common Stock without par value
("Discontinuing Corporation Class A Common Stock"), of which 5,000 shares have
been issued and are outstanding, and 30,000 shares of Class B Non-Voting Common
Stock without par value ("Discontinuing Corporation Class B Common Stock"), of
which 5000 shares have been issued and are outstanding; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, and subject to the terms and conditions hereinafter
set forth, the parties hereto hereby agree as follows:
ARTICLE I
MERGER
1.1 Merger. Effective on the Effective Date (as defined in Section
1.2, below) and upon compliance with the applicable laws of the State
of of Michigan, Discontinuing Corporation shall be merged with and into
Surviving Corporation, a Michigan corporation, which shall be the Surviving
Corporation, and the separate existence and corporate organization of
Discontinuing Corporation shall thereupon cease, all upon the terms and
conditions hereinafter set forth ("Merger").
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<PAGE> 2
1.2 Effective Date. The Merger shall be effective as of _____ __.m.,
Detroit, Michigan local time on April 28, 1998 (the "Effective Date").
1.3 Corporate Existence of Discontinuing Corporation . On the Effective
Date, the separate existence of Discontinuing Corporation shall cease, except as
may be otherwise continued by law, and Discontinuing Corporation shall be merged
with and into Surviving Corporation. Surviving Corporation shall possess all the
rights, privileges, powers, and franchises, of a public as well as of a private
nature, and be subject to all the restrictions, disabilities, and duties of
Discontinuing Corporation , and all property, real, personal, and mixed, and all
debts due to Discontinuing Corporation on whatever account, as well as for stock
subscriptions; and all other things in action or belonging to Discontinuing
Corporation shall be vested in the Surviving Corporation; and all property,
rights, privileges, powers, and franchises, and all and every other interest
shall be thereafter as effectually the property of the Surviving Corporation as
they were of Discontinuing Corporation, and the tide to any real estate vested
in Discontinuing Corporation by deed or otherwise, under the laws of Michigan or
any other jurisdiction, shall not revert or be in any way impaired; but all
rights of creditors and all liens upon any property of Discontinuing Corporation
shall be preserved unimpaired, and all debts, liabilities, and duties of
Discontinuing Corporation shall thenceforth attach to the Surviving Corporation
and may be enforced against it to the same extent as if said debts, liabilities,
and duties had been incurred or contracted by it.
1.4 Coporate Existence of Surviving Corporation. Except as otherwise
set forth herein, the identity, existence, purposes, objects, properties, real,
personal and mixed, rights, privileges, immunities, powers, franchises and
authority of VS Holdings Inc., as the Surviving Corporation, shall continue
unaffected and unimpaired by the Merger.
1.5 Further Action. At any time, or from time to time, after the
Effective Date, the last acting officers of Discontinuing Corporation or the
corresponding officers of the Surviving Corporation, may, in the name of
Discontinuing Corporation, execute and deliver all such proper deeds,
assignments, and other instruments and take or cause to be taken all such
further or other action as the Surviving Corporation may deem necessary or
desirable in order to vest, perfect, or confirm in the Surviving Corporation
title to and possession of all Discontinuing Corporation property, rights,
privileges, powers, franchises, immunities, and interest and otherwise to carry
out the purposes of this Agreement and Plan of Merger.
ARTICLE II
NAME OF SURVIVING CORPORATION;
CERTIFICATE OF INCORPORATION; BY-LAWS
2.1 Name of Surviving Corporation. The name of the Surviving
Corporation from and after the Effective Date shall be VS, HOLDINGS INC.
2.2 Articles of Incorporation. The Articles of Incorporation
of Surviving Corporation as in effect on the date hereof shall from and after
the Effective Date be, and continue
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<PAGE> 3
to be, the Articles of Incorporation of the Surviving Corporation until changed
or amended as provided by law.
2.3 By-Laws. The By-Laws of Surviving Corporation, as in
effect immediately before the Effective Date, shall from and after the Effective
Date be the By-Laws of the Surviving Corporation.
ARTICLE III
STATUS AND CONVERSION OF SECURITIES
The manner and basis of converting the shares of the capital stock of
Discontinuing Corporation, and amount of Class A voting common stock ("Converted
Class A Shares") and the Class B non-voting common stock ("Converted Class B
Shares") of the Surviving Corporation which the holders of shares of the capital
stock of Discontinuing Corporation are to receive in exchange for such shares
are as follows:
3.1 Conversion of Stock:
(a) Class A Common Stock. On the Effective Date, each share of
the Discontinuing Corporation Class A Common Stock outstanding on the Effective
Date shall, by operation of law and by virtue of the Merger and without any
action on the part of any person, be converted into .005 Converted Class A
Shares and .096 Converted Class B Shares.
(b) Class B Common Stock. On the Effective Date, each share of
the Discontinuing Corporation Class B Common Stock outstanding on the Effective
Date shall, by operation of law and by virtue of the Merger and without any
action on the part of any person, be converted into .101 Converted Class B
Shares.
c. Each share of the common stock of the Surviving Corporation
issued and outstanding on the Effective Date shall remain outstanding without
any change or alteration in the ownership, voting powers or other rights as set
forth in the Articles of Incorporation of the Surviving Corporation.
3.2 Cancellation of Authorized Shares. All authorized shares of
Discontinuing Corporation Class A Common Stock and Discontinuing Corporation
Class B Common Stock, other than those outstanding on the Effective Date, shall,
by operation of law and by nature of the merger and without action on the part
of any person, be canceled and retired, without conversion, and no new shares of
the Surviving Corporation shall be issued with respect thereto.
3.3 Exchange of Shares,
(a) Discontinuing Corporation Shares. On the Effective Date,
the holders of the outstanding shares of the capital stock of Discontinuing
Corporation (the "Discontinuing Corporation Shareholders") shall cause the
certificate(s) representing such shares to be surrendered to the Surviving
Corporation. Upon the surrender of such certificate(s), the Discontinuing
Corporation
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<PAGE> 4
Shareholders shall be entitled to receive certificates representing the
Converted Class A Shares or Converted Class B Shares as set forth in Section 3.1
above. The Surviving Corporation shall thereupon cause certificates
representing such shares to be executed and delivered to the Discontinuing
Corporation Shareholders in accordance with the terms of this Article III. Any
resulting fractional shares shall be rounded to the nearest whole number.
ARTICLE IV
DIRECTORS AND OFFICERS
4.1 The Board of Directors of VS Holdings Inc. prior to the
effective date of the Merger shall serve as the Board of Directors of the
Surviving Corporation, following the Effective Date of the Merger and until the
next Annual Meeting, or until their respective successors shall be elected and
qualified, in accordance with the By-Laws of the Surviving Corporation.
4.2 The Officers of VS Holdings Inc. in office prior to the
effective date of the Merger shall serve as the Officers of the Surviving
Corporation, following the Effective Date of the Merger and until the next
Annual Meeting, or until their respective successors shall be elected and
qualified, in accordance with the By-Laws of the Surviving Corporation.
ARTICLE V
MISCELLANEOUS
5.1 This Agreement and Plan of Merger may be terminated and
the proposed Merger abandoned at any time before the Effective Date of the
Merger, if the Board of Directors of Discontinuing Corporation or of Surviving
Corporation duly adopt a resolution abandoning the Agreement and Plan of Merger.
5.2 This Agreement and Plan of Merger may be amended, modified
or terminated, or any provision thereof may be waived only by an instrument in
writing signed by the duly authorized officers of both parties hereto.
5.3 This Agreement and Plan of Merger constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as set forth specifically herein.
5.4 This Agreement and Plan of Merger shall be construed,
interpreted and the rights of the parties determined in accordance with the laws
of the Michigan.
5.5 All of the terms and provisions of this Agreement and Plan
of Merger by or for the benefit of the parties shall be binding upon and inure
to the benefit of their successors and
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<PAGE> 5
assigns. The rights and qbligations provided by this agreement shall not be
assignable by any party
5.6 This Agreement and Plan of Merger may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement and Plan of Merger has been executed
by the parties hereto as of the date first written above.
VS HOLDINGS INC. VS HOLDINGS NO. 2 INC.
By: David J. Woodward By: David J. Woodward
------------------------------ ------------------------------
David J. Woodward, Secretary David J. Woodward, Secretary
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<PAGE> 1
EXHIBIT 3.10
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of April ___,
1998, is by and between PRODUCTION STAMPING, INC. ("PSI"), a Michigan
corporation, HAWTHORNE METAL PRODUCTS COMPANY ("HAWTHORNE"), a Delaware
corporation and J & R MANUFACTURING INC. ("J & R"), a Michigan corporation.
WITNESSETH:
WHEREAS, the respective Boards of Directors and shareholders of each of
the parties hereto have duly adopted resolutions approving this Agreement and
Plan of Merger, in each case by unanimous vote, and have declared it desirable
and in the best interests of their respective corporations that HAWTHORNE and J
& R be merged into PSI, a Michigan corporation, which shall be the Surviving
Corporation (hereinafter either "PSI" or the "Surviving Corporation") in the
manner and upon the terms and conditions hereinafter set forth and with the
effect provided by and pursuant to applicable sections of the Michigan Business
Corporation Act, Section 252 of the General Corporation Law of Delaware and
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended;
WHEREAS, the authorized capital stock of PSI consists of 25,000 Class A
Voting Common Stock without par value ("PSI Class A Common Stock"), of which
2,500 shares are issued and outstanding, and 125,000 Class B Non-Voting Common
Stock without par value ("PSI Class B Common Stock"), of which 97,500 shares are
currently issued or outstanding; and
WHEREAS, the authorized capital stock of HAWTHORNE consists of 75,000
shares of Class A Voting Common Stock with a par value of $1.00 per share
("HAWTHORNE Class A Common Stock"), of which 50,000 shares have been issued and
are outstanding, and 75,000 shares of Class B Non-Voting Common Stock with a par
value of $1.00 per share ("HAWTHORNE Class B Common Stock"), of which 50,000
shares have been issued and are outstanding; and
WHEREAS, the authorized capital stock of J & R consists of 75,000
shares of Class A Voting Common Stock without par value ("J & R Class A Common
Stock"), of which 50,000 shares have been issued and are outstanding, and 75,000
shares of Class B Non-Voting Common Stock without par value ("J & R Class B
Common Stock"), of which 50,000 shares have been issued and are outstanding; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, and subject to the terms and conditions hereinafter
set forth, the parties hereto hereby agree as follows:
ARTICLE I
MERGER
1.1 Merger. Effective on the Effective Date (as defined in Section
1.2, below) and upon compliance with the applicable laws of the States of of
Michigan and Delaware, HAWTHORNE and
<PAGE> 2
J & R shall be merged with and into PSI, a Michigan corporation, which shall be
the Surviving Corporation, and the separate existence and corporate organization
of HAWTHORNE and J & R shall thereupon cease, all upon the terms and conditions
hereinafter set forth ("Merger").
1.2 Effective Date. The Merger shall be effective as of _____ __.m.,
Detroit, Michigan local time on April 28, 1998 (the "Effective Date").
1.3 Corporate Existence of HAWTHORNE and J & R. On the Effective Date,
the separate existence of HAWTHORNE and J & R shall cease, except as may be
otherwise continued by law, and HAWTHORNE and J & R shall be merged with and
into PSI. PSI, as the Surviving Corporation, shall possess all the rights,
privileges, powers, and franchises, of a public as well as of a private nature,
and be subject to all the restrictions, disabilities, and duties of HAWTHORNE
and J & R, and all property, real, personal, and mixed, and all debts
due to HAWTHORNE and J & R on whatever account, as well as for stock
subscriptions; and all other things in action or belonging to HAWTHORNE and J &
R shall be vested in the Surviving Corporation; and all property, rights,
privileges, powers, and franchises, and all and every other interest shall be
thereafter as effectually the property of the Surviving Corporation as they
were of HAWTHORNE and J & R, and the title to any real estate vested in
HAWTHORNE and J & R by deed or otherwise, under the laws of Michigan, Delaware
or any other jurisdiction, shall not revert or be in any way impaired; but all
rights of creditors and all liens upon any property of HAWTHORNE and J & R
shall be preserved unimpaired, and all debts, liabilities, and duties of
HAWTHORNE and J & R shall thenceforth attach to the Surviving Corporation and
may be enforced against it to the same extent as if said debts, liabilities,
and duties had been incurred or contracted by it.
1.4 Corporate Existence of Surviving Corporation. Except as
otherwise set forth herein, the identity, existence, purposes, objects,
properties, real, personal and mixed, rights, privileges, immunities, powers,
franchises and authority of PSI, as the Surviving Corporation, shall continue
unaffected and unimpaired by the Merger.
1.5 Further Action. At any time, or from time to time, after the
Effective Date, the last acting officers of HAWTHORNE and J & R or the
corresponding officers of the Surviving Corporation, may, in the name of
HAWTHORNE and J & R, execute and deliver all such proper deeds, assignments,
and other instruments and take or cause to be taken all such further or other
action as the Surviving Corporation may deem necessary or desirable in order to
vest, perfect, or confirm in the Surviving Corporation title to and possession
of all HAWTHORNE and J & R property, rights, privileges, powers, franchises,
immunities, and interest and otherwise to carry out the purposes of this
Agreement and Plan of Merger.
ARTICLE II
NAME OF SURVIVING CORPORATION;
CERTIFICATE OF INCORPORATION; BY-LAWS
2.1 Name of Surviving Corporation. The name of the Surviving
Corporation from and after the Effective Date shall be TALON AUTOMOTIVE GROUP,
INC.
-2-
<PAGE> 3
2.2 Articles of Incorporation. The Articles of Incorporation
of PSI as in effect on the date hereof shall from and after the Effective Date
be, and continue to be, the Articles of Incorporation of the Surviving
Corporation until changed or amended as provided by law, except as follows:
(a) Article I of such Articles of Incorporation shall be and
the same hereby is amended and restated in its entirety to read as
follows:
Article I
The name of the Corporation is Talon Automotive Group, INC.
(b) Article III of such Articles of Incorporation shall be and
the same hereby is amended and restated in its entirety to read as
follows:
Article III
The total authorized shares:
1. Common shares (Class A) 25,000
2. Common shares (Class B) 250,000
Preferred shares none
A statement of all or any of the relative rights,
preferences and limitations of the shares of each
class is as follows:
The total number of shares of stock which the
Corporation is authorized to issue is Two Hundred
Seventy-five Thousand (275,000) shares, Twenty-five
Thousand (25,000) shares of which shall be designated
as the Class A Voting Common Capital Stock of the
Corporation, and Two Hundred Fifty Thousand (250,000)
shares of which shall be designated as the Class B
Nonvoting Common Capital stock of the Corporation.
The Class A Voting Common Capital Stock and the Class
B Nonvoting Common Capital Stock shall be identical
in all respects, except that holders of the Class B
Nonvoting Common Capital Stock shall have no voting
power for any purpose whatsoever, and the holders of
Class A Voting Common Capital Stock shall, to the
exclusion of the holders of Class B Nonvoting Common
Capital Stock, have full voting power for all
purposes.
2.3 By-Laws. The By-Laws of PSI, as in effect immediately
before the Effective Date, shall from and after the Effective Date be the
By-Laws of the Surviving Corporation.
-3-
<PAGE> 4
ARTICLE III
STATUS AND CONVERSION OF SECURITIES
THE manner and basis of converting the shares of the capital stock of
PSI, HAWTHORNE and J & R, and the amount of Class A voting common stock (the
"Converted Class A Shares") and the Class B non-voting common stock (the
"Converted Class B Shares") of the Surviving Corporation which the holders of
shares of the capital stock of PSI, HAWTHORNE and J & R are to receive in
exchange for such shares are as follows:
3.1 Conversion of PSI Stock:
(a) Class A Common Stock. On the Effective Date, each share of
the PSI Class A Common Stock outstanding on the Effective Date shall, by
operation of law and by virtue of the Merger and without any action on the part
of any person, be converted into .1 Converted Class A Shares.
(b) Class B Common Stock. On the Effective Date each share of
the PSI Class B Common Stock outstanding on the Effective Date shall, by
operation of law and by virtue of the Merger and without any action on the part
of any person, be converted into .1 Converted Class B Shares.
3.2 Conversion of HAWTHORNE Stock:
(a) Class A Common Stock. On the Effective Date, each share of
the HAWTHORNE Class A Common Stock outstanding on the Effective Date shall, by
operation of law and by virtue of the Merger and without any action on the part
of any person, be converted into .0365 Converted Class A Shares and .694
Converted Class B Shares.
(b) Class B Common Stock. On the Effective Date, each share of
the HAWTHORNE Class B Common Stock outstanding on the Effective Date shall, by
operation of law and by virtue of the Merger and without any action on the part
of any person, be converted into .730 Converted Class B Shares.
3.3 Conversion of J & R Stock:
(a) Class A Common Stock. On the Effective Date, each share of
the J & R Class A Common Stock outstanding on the Effective Date shall, by
operation of law and by virtue of the Merger and without any action on the part
of any person, be converted into .00002 Converted Class A Shares.
(b) Class B Common Stock. On the Effective Date, each share of
the J & R Class B Common Stock outstanding on the Effective Date shall, by
operation of law and by virtue of the Merger and without any action on the part
of any person, be converted into .00002 Converted Class B Shares.
-4-
<PAGE> 5
3.4 Cancellation of Authorized Shares. All authorized shares of
HAWTHORNE Class A Common Stock, HAWTHORNE Class B Common Stock, J & R
Class A Common Stock and J & R Class B Common Stock, other than those
outstanding on the Effective Date, shall, by operation of law and by nature of
the merger and without action on the part of any person, be canceled and
retired, without conversion, and no new shares of the Surviving Corporation
shall be issued with respect thereto.
3.5 Exchange of Shares.
(a) PSI Shares. On the Effective Date, the holders of the
outstanding shares of the capital stock of PSI (the "PSI Shareholders") shall
cause the certificate(s) representing such shares to be surrendered to the
Surviving Corporation. Upon the surrender of such certificate(s), the PSI
Shareholders shall be entitled to receive certificates representing the
Converted Class A Shares or Converted Class B Shares as set forth in Section 3.1
above. The Surviving Corporation, shall thereupon cause certificates
representing such shares to be executed and delivered to the PSI Shareholders in
accordance with the terms of this Article III.
(b) HAWTHORNE Shares. On the Effective Date, the holders of
the outstanding shares of the capital stock of HAWTHORNE (the "HAWTHORNE
Shareholders") shall cause the certificate(s) representing such shares to be
surrendered to the Surviving Corporation. Upon the surrender of such
certificate(s), the HAWTHORNE Shareholders shall be entitled to receive
certificates representing the Converted Class A Shares or Converted Class B
Shares as set forth in Section 3.2 above. The Surviving Corporation shall
thereupon cause certificates representing such shares to be executed and
delivered to the HAWTHORNE Shareholders in accordance with the terms of this
Article III.
(c) J & R Shares. On the Effective Date, the holders of the
outstanding shares of the capital stock of J & R (the "J & R Shareholders")
shall cause the certificate(s) representing such shares to be surrendered to the
Surviving Corporation. Upon the surrender of such certificate(s), the J & R
Shareholders shall be entitled to receive certificates representing the
Converted Class A Shares or Converted Class B Shares as set forth in Section 3.3
above. The Surviving Corporation shall thereupon cause certificates representing
such shares to be executed and delivered to the J & R Shareholders in
accordance with the terms of this Article III.
3.6 Any fractional shares resulting from the distribution of shares
pursuant to Section 3.5 shall be rounded to the nearest whole number.
ARTICLE IV
DIRECTORS AND OMCERS
4.1 Following the Effective Date of the Merger and until the
next Annual Meeting, or until their respective successors shall be elected and
qualified, the following persons shall serve as Directors of the Surviving
Corporation, in accordance with the By-Laws of the Surviving Corporation:
-5-
<PAGE> 6
Randolph J. Agley
Michael T. Timmis
Wayne C. Inman
Delmar O. Stanley
David J. Woodward
4.2 Following the Effective Date of the Merger and until the
next Annual Meeting, or until their respective successors shall be elected and
qualified, the following persons shall serve as Executive Officers of the
Surviving Corporation, in accordance with the By-Laws of the Surviving
Corporation:
Randolph J. Agley Chairman of the Board
Michael T. Timmis Vice Chairman of the Board
Delmar O. Stanley President and Chief Executive Officer
Wayne C. Inman Secretary
David J. Woodward Vice President of Finance, Chief
Financial Officer and Treasurer
Michael T.J. Veltri Vice President
Kris R. Pfaehler Vice President of Business Development
ARTICLE V
MISCELLANEOUS
5.1 This Agreement and Plan of Merger may be terminated and
the proposed Merger abandoned at any time before the Effective Date of the
Merger, if the Board of Directors of HAWTHORNE and J & R or of PSI duly adopt a
resolution abandoning the Agreement and Plan of Merger.
5.2 This Agreement and Plan of Merger may be amended, modified
or terminated, or any provision thereof may be waived only by an instrument in
writing signed by the duly authorized officers of both parties hereto.
5.3 This Agreement and Plan of Merger constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as set forth specifically herein.
5.4 This Agreement and Plan of Merger shall be construed,
interpreted and the rights of the parties determined in accordance with the
laws of the Michigan.
5.5 All of the terms and provisions of this Agreement and Plan
of Merger by or for the benefit of the parties shall be binding upon and inure
to the benefit of their successors and assigns. The rights and obligations
provided by this agreement shall not be assignable by any party.
-6-
<PAGE> 7
5.6 This Agreement and Plan of Merger may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement and Plan of Merger has been executed
by the parties hereto as of the date first written above.
PRODUCTION STAMPING, INC. HAWTHORNE METAL PRODUCTS COMPANY
By: David J. Woodward By: David J. Woodward
----------------------------------- ----------------------------------
David J. Woodward, Vice President David J. Woodward, Vice President
J & R MANUFACTURING INC.
By: David J. Woodward
----------------------------------
David J. Woodward, Vice President
<PAGE> 1
EXHIBIT 3.11
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of April ___,
1998, is by and between Talon Automotive Group, Inc., a Michigan corporation
("Surviving Corporation") and TAG L.L.C., a Michigan limited liability company
("Discontinuing entity").
WITNESSETH:
WHEREAS, Surviving Corporation is the owner of 100% of the Membership
Interests of the Discontinuing Entity;
WHEREAS, the authorized capital stock of Surviving Corporation
consists of 25,000 shares of Class A voting common stock without par value and
250,000 shares of Class B non-voting common stock, without par value,
("Surviving Common Stock"), of which 2,076 shares of Class A voting common stock
and 80,951 shares of Class B non-voting Common Stock have been issued and are
outstanding; and
WHEREAS, the Board of Directors of the Surviving Corporation has duly
adopted resolutions approving this Agreement and Plan of Merger by unanimous
vote, and has declared it desirable and in the best interests of the respective
business entities that the Discontinuing Entity be merged into Surviving
Corporation in the manner and upon the terms and conditions hereinafter set
forth and with the effect provided by and pursuant to the applicable laws of the
State of Michigan and Section 368(a)(1)(A) of the Internal Revenue Code of
1986, as amended;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, and subject to the terms and conditions hereinafter
set forth, the parties hereto hereby agree as follows:
ARTICLE I
MERGER
1.1 Merger. Effective on the Effective Date (as defined in Section
1.2) and upon compliance with the applicable laws of the state of Michigan, the
Discontinuing Entity shall be merged with and into the Surviving Corporation,
and the separate existence and corporate organization of the Discontinuing
Entity shall cease, upon the terms and conditions hereinafter set forth
("Merger").
1.2 Effective Date. The Merger shall be effective (the "Effective
Date") on _________, 1998 and upon the filing of the Certificate of Merger with
the Michigan Corporation, Securities And Land Development Bureau.
1.3 Corporate Existence of Discontinuing Entity. On the Effective
Date, the separate existence of Discontinuing Entity shall cease, except as may
be otherwise continued by law, and Discontinuing Entity shall be merged with and
into Surviving Corporation. Surviving Corporation shall possess all the rights,
privileges, powers, and franchises, of a public as well as of a private nature,
and be subject to all the restrictions, disabilities, and duties of
Discontinuing Entity, and all property, real, personal, and mixed, and all debts
due to Discontinuing Entity on whatever account
-1-
<PAGE> 2
and all other things in action or belonging to Discontinuing Entity shall be
vested in the Surviving Corporation; and all property, rights, privileges,
powers, and franchises, and all and every other interest shall be the property
of the Surviving Corporation as they were of Discontinuing Entity, and the title
to any real estate vested in Discontinuing Entity by deed or otherwise, under
the laws of Michigan or any other jurisdiction, shall not revert or be in any
way impaired; but all rights of creditors and all liens upon any property of
Discontinuing Entity shall be preserved unimpaired, and all debts, liabilities,
and duties of Discontinuing Entity shall thenceforth attach to the Surviving
Corporation and may be enforced against it to the same extent as if said debts,
liabilities, and duties had been incurred or contracted by it.
1.4 Corporate Existence of Surviving Corporation. Except as otherwise
set forth herein, the identity, existence, purposes, objects, properties, real,
personal and mixed, rights, privileges, immunities, powers, franchises and
authority of Surviving Corporation shall continue unaffected and unimpaired by
the Merger.
1.5 Further Action. At any time, or from time to time, after the
Effective Date, the last acting officers of Discontinuing Entity or the
corresponding officers of the Surviving Corporation, may, in the name of
Discontinuing Entity, execute and deliver all such proper deeds, assignments,
and other instruments and take or cause to be taken all such further or other
action as the Surviving Corporation may deem necessary or desirable in order to
vest, perfect, or confirm in the Surviving Corporation title to and possession
of all Discontinuing Entity property, rights, privileges, powers, franchises,
immunities, and interest and otherwise to carry out the purposes of this
Agreement and Plan of Merger.
ARTICLE II
NAME OF SURVIVING CORPORATION;
ARTICLE OF INCORPORATION; BYLAWS
2.1 Name of Surviving Corporation. The name of the Surviving
Corporation from and after the Effective Date shall be TALON AUTOMOTIVE GROUP,
INC.
2.2 Articles of Incorporation. The Articles of Incorporation of Talon
Automotive Group, Inc. as in effect immediately before the Effective Date of the
Merger, a copy of which is attached hereto as Exhibit A, shall be the Articles
of Incorporation of the Surviving Corporation following the Effective Date of
the Merger.
2.3 Bylaws. The Bylaws of Talon Automotive Group, Inc., as in effect
immediately before the Effective Date, shall from and after the Effective Date
be, and continue to be, the Bylaws of the Surviving Corporation.
ARTICLE III
CONVERSION OF SHARES
3.1 Conversion and Cancellation
On the Effective Date:
-2-
<PAGE> 3
a. Membership interests in the Discontinuing Entity shall, by
operation of law and by virtue of the Merger and without any action on
the part of any person or entity, be cancelled, without conversion,
and no new shares of the Surviving Corporation shall be issued with
respect thereto.
b. Each share of the common stock of Talon Automotive Group,
Inc., a Michigan corporation, issued and outstanding on the Effective
Date shall remain outstanding without any change or alteration in the
ownership, voting powers or other rights as set forth in the Articles
of Incorporation of Talon Automotive Group, Inc.
3.2 Surrender of Membership Interests.
On the Effective Date Talon Automotive Group, Inc., as the holder of
all of the outstanding membership interests of TAG L.L.C., shall be deemed to
have surrendered its membership interests to the Surviving Corporation and such
interests shall have been deemed cancelled.
ARTICLE IV
DIRECTORS AND OFFICERS
4.1 The Board of Directors of Talon Automotive Group, Inc., a Michigan
corporation, prior to the effective date of the Merger shall continue as the
Board of Directors of the Surviving Corporation, following the Effective Date of
the Merger and until the next Annual Meeting, or until their respective
successors shall be elected and qualified, in accordance with the Bylaws of the
Surviving Corporation.
4.2 The Executive Officers of Talon Automotive Group, Inc., a Michigan
corporation, in office prior to the effective date of the Merger shall continue
as the Executive Officers of the Surviving Corporation, following the Effective
Date of the Merger and until the next Annual Meeting, or until their respective
successors shall be elected and qualified, in accordance with the Bylaws of the
Surviving Corporation.
ARTICLE V
MISCELLANEOUS
5.1 This Agreement and Plan of Merger may be terminated and the
proposed Merger abandoned at any time before the Effective Date of the Merger,
if the Board of Directors of Discontinuing Entity or of Surviving Corporation
duly adopt a resolution abandoning the Agreement and Plan of Merger.
5.2 This Agreement and Plan of Merger may be amended, modified or
terminated, or any provision thereof may be waived only by an instrument in
writing signed by the duly authorized officers of both parties hereto.
5.3 This Agreement and Plan of Merger constitutes the entire agreement
among the parties pertaining to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties,
-3-
<PAGE> 4
representations or other agreements between the parties in connection with the
subject matter hereof except as set forth specifically herein.
5.4 This Agreement and Plan of Merger shall be construed, interpreted
and the rights of the parties determined in accordance with the laws of the
State of Michigan.
5.5 All of the terms and provisions of this Agreement and Plan of
Merger by or for the benefit of the parties shall be binding upon and inure to
the benefit of their successors and assigns. The rights and obligations provided
by this agreement shall not be assignable by any party.
5.6 This Agreement and Plan of Merger may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement and Plan of Merger has been executed
by TAG L.L.C. and Talon Automotive Group, Inc. as of the date first written
above.
ATTEST: TAG L.L.C.
By: Kris R. Pfaeler
- ----------------------------- --------------------------------------
Kris R. Pfaeler, Vice President
Talon Automotive Group, Inc., Member
ATTEST: Talon Automotive Group, Inc.
By: David J. Woodward
- ----------------------------- --------------------------------------
David J. Woodward, Vice President
-4-
<PAGE> 1
EXHIBIT 3.12
AGREEMENT AND PLAN OF SHARE EXCHANGE
THIS AGREEMENT AND PLAN OF SHARE EXCHANGE ("Agreement") made this ____
day of April, 1998, is by and among VS Holdings, Inc. ("VS"), a Michigan
corporation and Talon Automotive Group, Inc. ("TAG"), a Michigan corporation.
WHEREAS, the respective Boards of Directors and shareholders of each of
the parties hereto have duly adopted resolutions approving this Agreement and
Plan of Share Exchange, in each case by unanimous vote, and have declared it
desirable and in the best interests of their respective corporations that the
shares of VS be exchanged for shares of TAG (the "Share Exchange") in the manner
and upon the terms and conditions hereinafter set forth and with the effect
provided by and pursuant to application sections of the Michigan Business
Corporation Act and Section 368(a)(1)(D) of the Internal Revenue Code of 1986,
as amended;
WHEREAS, the authorized capital stock of TAG consists of 25,000 Class A
Voting Common Stock without par value ("TAG Class A Common Stock"), of which
2,076 shares are issued and outstanding, and 250,000 Class B Non-Voting Common
Stock without par value ("TAG Class B Common Stock"), of which 80,951 shares are
currently issued or outstanding; and
WHEREAS, the authorized capital stock of VS consists of 125,000 Class A
Voting Common Stock without par value ("VS Class A Common Stock"), of which
2,525 shares are issued and outstanding, and 125,000 Class B Non-Voting Common
Stock without par value ("VS Class B Common Stock"), of which 985,485 shares are
currently issued or outstanding; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, and subject to the terms and conditions hereinafter
set forth, the parties hereto hereby agree as follows:
ARTICLE I
EFFECTIVE DATE AND CORPORATE EXISTENCE
1.1 Effective Date. The Share Exchange shall be effective as of
______.m., Detroit, Michigan local time on April 28, 1998 (the "Effective
Date") upon the terms and conditions hereinafter set forth.
1.2 Corporate Existence. At all times the separate existence of both
TAG and VS shall continue, except that, on and after the effective date, VS
shall be a wholly-owned subsidiary of TAG.
<PAGE> 2
ARTICLE II
EXCHANGE OF SHARES
The manner and basis of exchanging the shares of the capital stock of
VS, and amount of Class A voting common stock ("Exchanged Class A Shares") and
Class B non-voting common stock ("Exchanged Class B Shares") of TAG which the
holders of shares of the capital stock of VS are to receive in exchange for such
shares are as follows:
3.1 Exchange of shares of VS Stock:
(a) Class A Common Stock. On the Effective Date, the holders
of the outstanding shares of the capital stock of VS Class A Common Stock (the
VS Class A Shareholders") shall cause the certificate(s) representing such
shares to be surrendered to TAG. Upon the surrender of such certificate(s), TAG
shall exchange the same for .791 Exchanged Class A Shares and shall thereupon
cause new certificates representing such Exchanged Class A Shares to be executed
and delivered to the VS Class A Shareholders in accordance with the terms of
this Article III.
(b) Class B Common Stock. On the Effective Date, the holders
of the outstanding shares of the capital stock of VS Class B Common Stock (the
VS Class B Shareholders") shall cause the certificate(s) representing such
shares to be surrendered to TAG. Upon the surrender of such certificate(s), TAG
shall exchange the same for .791 Exchanged Class B Shares and shall thereupon
cause new certificates representing such Exchanged Class B Shares to be executed
and delivered to the VS Class B Shareholders in accordance with the terms of
this Article III.
3.2 Reissuance of VS Shares to TAG. Upon the surrender of all shares of
VS Class A Common Stock and VS Class B Common Stock to TAG by the VS Class A
Shareholders and the VS Class B Shareholders, TAG shall submit the same to VS
which shall, on the effective date, reissue new certificates representing such
stock to TAG.
3.3 Fractional Shares. Any fractional shares resulting from the
distribution of shares pursuant to Section 3.1 shall be rounded to the nearest
whole number.
ARTICLE III
DIRECTORS AND OFFICERS
4.1 The Board of Directors of both VS and TAG prior to the
effective date of the Share Exchange shall serve as the Board of Directors of
the respective corporation following the Effective Date of the Share Exchange
and until the next Annual Meeting, or until their respective successors shall be
elected and qualified, in accordance with their respective By-Laws.
4.2 The Officers of of both VS and TAG in office prior to the
effective date of the Share Exchange shall serve as the Officers of the
respective corporation, following the Effective Date of the Share Exchange and
until the next Annual Meeting, or until their respective successors
<PAGE> 3
shall be elected and qualified, in accordance with their respective By-Laws.
ARTICLE IV
MISCELLANEOUS
5.1 The parties acknowledge and agree that the transactions
contemplated by this Agreement are intended to be, for tax purposes, a
reorganization within the meaning of Section 368(a)(1)(D) of the Code, and all
rules and regulations promulgated thereunder. The parties covenant and agree
that they shall execute all other documents and perform all such additional acts
as may be reasonably necessary to cause the transaction contemplated by this
Agreement to comply with the provisions of Section 368(a)(1)(D) of the Code.
5.2 This Agreement and Plan of Share Exchange may be
terminated and the proposed actions abandoned at any time before the Effective
Date of the Share Exchange, if the Board of Directors of either corporation duly
adopts a resolution abandoning the Agreement and Plan of Share Exchange.
5.3 This Agreement and Plan of Share Exchange may be amended,
modified or terminated, or any provision thereof may be waived only by an
instrument in writing signed by the duly authorized officers of both parties
hereto.
5.4 This Agreement and Plan of Share Exchange constitutes the
entire agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as set forth specifically herein.
5.5 This Agreement and Plan of Share Exchange shall be
construed, interpreted and the rights of the parties determined in accordance
with the laws of the Michigan.
5.6 All of the terms and provisions of this Agreement and Plan
of Share Exchange by or for the benefit of the parties shall be binding upon and
inure to the benefit of their successors and assigns. The rights and obligations
provided by this agreement shall not be assignable by any party.
5.7 This Agreement and Plan of Share Exchange may be executed
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
<PAGE> 4
IN WITNESS WHEREOF, this Agreement and Plan of Share Exchange has been
executed by the parties hereto as of the date first written above.
TALON AUTOMOTIVE GROUP, INC. VS HOLDINGS INC.
By: David J. Woodward By: David J. Woodward
------------------------------------- ----------------------------------
David J. Woodward, Vice President David J. Woodward, Vice President
<PAGE> 1
EXHIBIT 3.13
AGREEMENT AND PLAN OF SHARE EXCHANGE
THIS AGREEMENT AND PLAN OF SHARE EXCHANGE ("Agreement") made this ____
day of April, 1998, is by and among Veltri Holdings USA, Inc. (Veltri"), an
Indiana corporation and Talon Automotive Group, Inc. ("TAG"), a Michigan
corporation.
WHEREAS, the respective Boards of Directors and shareholders of each of
the parties hereto have duly adopted resolutions approving this Agreement and
Plan of Share Exchange, in each case by unanimous vote, and have declared it
desirable and in the best interests of their respective corporations that the
shares of Veltri be exchanged for shares of TAG (the "Share Exchange") in the
manner and upon the terms and conditions hereinafter set forth and with the
effect provided by and pursuant to application sections of the Michigan Business
Corporation Act, the Indiana Code and Section 368(a)(1)(D) of the Internal
Revenue Code of 1986, as amended;
WHEREAS, the authorized capital stock of TAG consists of 25,000 Class A
Voting Common Stock without par value ("TAG Class A Common Stock"), of which
4,073.275 shares are issued and outstanding, and 250,000 Class B Non-Voting
Common Stock without par value ("TAG Class B Common Stock"), of which
158,852.635 shares are currently issued or outstanding; and
WHEREAS, the authorized capital stock of Veltri consists of 1,000
Shares of Common Stock without par value ("Veltri Common Stock"), of which 1,000
shares are issued and outstanding; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, and subject to the terms and conditions hereinafter
set forth, the parties hereto hereby agree as follows:
ARTICLE I
EFFECTIVE DATE AND CORPORATE EXISTENCE
1.1 Effective Date. The Share Exchange shall be effective as of
_____ __.m., Detroit, Michigan local time on April 28, 1998 (the "Effective
Date") upon the terms and conditions hereinafter set forth,
1.2 Corporate Existence. At all times the separate existence of both
TAG and Veltri shall continue, except that, on and after the effective date,
Veltri shall be a wholly-owned subsidiary of TAG.
<PAGE> 2
ARTICLE II
EXCHANGE OF SHARES
The manner and basis of exchanging the shares of the capital stock of
Veltri, and amount of Class A voting common stock ("Exchanged Class A Shares")
of TAG which the holders of shares of the capital stock of Veltri are to receive
in exchange for such shares are as follows:
3.1 Exchange of shares of Veltri Stock: On the Effective Date, the
holders of the outstanding shares of the Common stock of Veltri (the "Veltri
Shareholders") shall cause the certificate(s) representing such shares to be
surrendered to TAG. Upon the surrender of such certificate(s), TAG shall
exchange the same for .001 Exchanged Class A Shares only and shall thereupon
cause new certificates representing such Exchanged Class A Shares to be executed
and delivered to the Veltri Shareholders in accordance with the terms of this
Article III.
3.2 Reissuance of Veltri Shares to TAG. Upon the surrender of all
shares of Veltri Common Stock to TAG by the Veltri Shareholders, TAG shall
submit the same to Veltri which shall, on the effective date, reissue new
certificates representing such stock to TAG.
3.3 Fractional Shares. Any fractional shares resulting from the
distribution of shares pursuant to Section 3.1 shall be rounded to the nearest
whole number.
ARTICLE III
DIRECTORS AND OFFICERS
4.1 The Board of Directors of both Veltri and TAG prior to the
effective date of the Share Exchange shall serve as the Board of Directors of
the respective corporation following the Effective Date of the Share Exchange
and until the next Annual Meeting, or until their respective successors shall be
elected and qualified, in accordance with their respective By-Laws.
4.2 The Officers of both Veltri and TAG in office prior to
the effective date of the Share Exchange shall serve as the Officers of the
respective corporation, following the Effective Date of the Share Exchange and
until the next Annual Meeting, or until their respective successors shall be
elected and qualified, in accordance with their respective By-Laws.
ARTICLE IV
MISCELLANEOUS
5.1 The parties acknowledge and agree that the transactions
contemplated by this Agreement are intended to be, for tax purposes, a
reorganization within the meaning of Section 368(a)(1)(D) of the Code, and all
rules and regulations promulgated thereunder. The parties covenant and agree
that they shall execute all other documents and perform all such additional acts
as may be reasonably necessary to cause the transaction contemplated by this
Agreement to comply
<PAGE> 3
with the provisions of Section 368(a)(1)(D) of the Code.
5.2 This Agreement and Plan of Share Exchange may be
terminated and the proposed actions abandoned at any time before the Effective
Date of the Share Exchange, if the Board of Directors of either corporation duly
adopts a resolution abandoning the Agreement and Plan of Share Exchange.
5.3 This Agreement and Plan of Share Exchange may be amended,
modified or terminated, or any provision thereof may be waived only by an
instrument in writing signed by the duly authorized officers of both parties
hereto.
5.4 This Agreement and Plan of Share Exchange constitutes the
entire agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as set forth specifically herein.
5.5 This Agreement and Plan of Share Exchange shall be
construed, interpreted and the rights of the parties determined in accordance
with the laws of the Michigan.
5.6 All of the terms and provisions of this Agreement and Plan
of Share Exchange by or for the benefit of the parties shall be binding upon and
inure to the benefit of their successors and assigns. The rights and obligations
provided by this agreement shall not be assignable by any party.
5.7 This Agreement and Plan of Share Exchange may be executed
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement and Plan of Share Exchange has been
executed by the parties hereto as of the date first written above.
TALON AUTOMOTIVE GROUP, INC. VELTRI HOLDINGS USA, Inc.
By: David J. Woodward BY: David J. Woodward
---------------------------------- ----------------------------------
David J. Woodward, Vice President David J. Woodward, Vice President
<PAGE> 1
EXHIBIT 4
INDENTURE
Dated as of April 28, 1998
among
TALON AUTOMOTIVE GROUP, INC.,
as Issuer,
VS HOLDINGS, INC.,
VELTRI HOLDINGS USA, INC.
and
VELTRI METAL PRODUCTS CO.,
as Guarantors,
and
U.S. Bank Trust National Association,
as Trustee
________________
up to $170,000,000
9.625% Senior Subordinated Notes due 2008, Series A
9.625% Senior Subordinated Notes due 2008, Series B
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
TIA Indenture
Section Section
------------ ---------
<S> <C>
310(a)(1) .............................................. 7.10
(a)(2) .............................................. 7.10
(a)(3) .............................................. N.A.
(a)(4) .............................................. N.A.
(a)(5) .............................................. 7.10
(b) ................................................. 7.08; 7.10
(c) ................................................. N.A.
311(a) ................................................. 7.11
(b) ................................................. 7.11
(c) ................................................. N.A.
312(a) ................................................. 2.05
(b) ................................................. 11.03
(c) ................................................. 11.03
313(a) ................................................. 7.06
(b)(1) .............................................. 7.06
(b)(2) .............................................. 7.06; 7.07
(c) ................................................. 7.05; 7.06; 11.02
(d) ................................................. 7.06
314(a) ................................................. 4.08; 4.10; 11.02
(b) ................................................. N.A.
(c)(1) .............................................. 4.08; 11.04
(c)(2) .............................................. 11.04
(c)(3)............................................... 4.08; 11.04
(d) ................................................. N.A.
(e) ................................................. 11.05
(f) ................................................. N.A.
315(a) ................................................. 7.01(b)
(b) ................................................. 7.05; 11.02
(c) ................................................. 7.01(a)
(d) ................................................. 7.01(c)
(e) ................................................. 6.11
316(a)(last sentence) .................................. 2.09
(a)(1)(A) ........................................... 6.05
(a)(1)(B) ........................................... 6.04
(a)(2) .............................................. N.A.
(b) ................................................. 6.07; 9.04
(c) ................................................. 9.04
317(a)(1) .............................................. 6.08
(a)(2) .............................................. 6.09
(b) ................................................. 2.04
318(a) ................................................. 11.01
(c) ................................................. 11.01
_______________
</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
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
<TABLE>
<S> <C> <C>
SECTION 1.01. Definitions.................................... 1
SECTION 1.02. Incorporation by Reference of TIA..............28
SECTION 1.03. Rules of Construction..........................28
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating................................29
SECTION 2.02. Execution and Authentication...................30
SECTION 2.03. Registrar and Paying Agent.....................31
SECTION 2.04. Paying Agent To Hold Assets in Trust...........31
SECTION 2.05. Securityholder Lists...........................32
SECTION 2.06. Transfer and Exchange..........................32
SECTION 2.07. Replacement Securities.........................33
SECTION 2.08. Outstanding Securities.........................33
SECTION 2.09. Treasury Securities............................34
SECTION 2.10. Temporary Securities...........................34
SECTION 2.11. Cancellation...................................34
SECTION 2.12. Defaulted Interest.............................35
SECTION 2.13. CUSIP Number...................................35
SECTION 2.14. Deposit of Moneys..............................35
SECTION 2.15. Book-Entry Provisions for Global Securities....35
SECTION 2.16. Registration of Transfers and Exchanges........37
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.............................42
SECTION 3.02. Selection of Securities To Be Redeemed.........42
SECTION 3.03. Notice of Redemption...........................42
SECTION 3.04. Effect of Notice of Redemption.................43
SECTION 3.05. Deposit of Redemption Price....................44
SECTION 3.06. Securities Redeemed in Part....................44
</TABLE>
-i-
<PAGE> 4
Page
----
ARTICLE FOUR
COVENANTS
<TABLE>
<S> <C> <C>
SECTION 4.01. Payment of Securities..........................44
SECTION 4.02. Maintenance of Office or Agency................45
SECTION 4.03. Limitation on Incurrence of Additional
Indebtedness...................................45
SECTION 4.04. Limitation on Restricted Payments..............46
SECTION 4.05. Corporate Existence............................48
SECTION 4.06. Payment of Taxes and Other Claims..............48
SECTION 4.07. Maintenance of Properties and Insurance........48
SECTION 4.08. Compliance Certificate; Notice of Default......49
SECTION 4.09. Compliance with Laws...........................50
SECTION 4.10. SEC Reports....................................50
SECTION 4.11. Waiver of Stay, Extension or Usury Laws........51
SECTION 4.12. Limitation on Asset Sales......................51
SECTION 4.13. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted
Subsidiaries...................................54
SECTION 4.14. Limitation on Preferred Stock of Restricted
Subsidiaries...................................55
SECTION 4.15. Limitation on Liens............................55
SECTION 4.16. [Intentionally Omitted]........................56
SECTION 4.17. Prohibition on Incurrence of Senior
Subordinated Debt..............................56
SECTION 4.18. Limitations on Transactions with Affiliates....56
SECTION 4.19. Issuance of Subsidiary Guarantees..............57
SECTION 4.20. [Intentionally Omitted]........................58
SECTION 4.21. Lines of Business..............................58
SECTION 4.22. Payments for Consent...........................58
SECTION 4.23. Limitation on Designations of Unrestricted.....58
Subsidiaries.
SECTION 4.24. Change of Control..............................64
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Consolidations and Sales of Assets....62
SECTION 5.02. Successor Corporation Substituted..............74
</TABLE>
-ii-
<PAGE> 5
Page
----
ARTICLE SIX
DEFAULT AND REMEDIES
<TABLE>
<S> <C> <C>
SECTION 6.01. Events of Default..............................65
SECTION 6.02. Acceleration...................................67
SECTION 6.03. Other Remedies.................................68
SECTION 6.04. Waiver of Past Defaults........................68
SECTION 6.05. Control by Majority............................69
SECTION 6.06. Limitation on Suits............................69
SECTION 6.07. Rights of Holders To Receive Payment...........70
SECTION 6.08. Collection Suit by Trustee.....................70
SECTION 6.09. Trustee May File Proofs of Claim...............70
SECTION 6.10. Priorities.....................................71
SECTION 6.11. Undertaking for Costs..........................71
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee..............................72
SECTION 7.02. Rights of Trustee..............................73
SECTION 7.03. Individual Rights of Trustee...................74
SECTION 7.04. Trustee's Disclaimer...........................75
SECTION 7.05. Notice of Default..............................75
SECTION 7.06. Reports by Trustee to Holders..................75
SECTION 7.07. Compensation and Indemnity.....................76
SECTION 7.08. Replacement of Trustee.........................77
SECTION 7.09. Successor Trustee by Merger, Etc...............78
SECTION 7.10. Eligibility; Disqualification..................79
SECTION 7.11. Preferential Collection of
Claims Against Company.........................79
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. Legal Defeasance and Covenant Defeasance.......79
SECTION 8.02. Satisfaction and Discharge.....................83
SECTION 8.03. Survival of Certain Obligations................84
SECTION 8.04. Acknowledgment of Discharge by Trustee.........85
SECTION 8.05. Application of Trust Assets....................85
SECTION 8.06. Repayment to the Company or Guarantors;
Unclaimed Money................................85
SECTION 8.07. Reinstatement..................................86
</TABLE>
-iii-
<PAGE> 6
Page
----
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders..................... 86
SECTION 9.02. With Consent of Holders........................ 87
SECTION 9.03. Compliance with TIA............................ 89
SECTION 9.04. Revocation and Effect of Consents.............. 89
SECTION 9.05. Notation on or Exchange of Securities.......... 90
SECTION 9.06. Trustee To Sign Amendments, Etc................ 90
ARTICLE TEN
GUARANTEE
SECTION 10.01. Unconditional Guarantee....................... 90
SECTION 10.02. Severability.................................. 92
SECTION 10.03. Release of a Guarantor........................ 92
SECTION 10.04. Limitation of a Guarantor's Liability......... 92
SECTION 10.05. Contribution.................................. 93
SECTION 10.06. Waiver of Subrogation......................... 93
SECTION 10.07. Execution of Guarantees....................... 94
SECTION 10.08. Waiver of Stay, Extension or Usury Laws....... 94
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.................................. 95
SECTION 11.02. Notices....................................... 95
SECTION 11.03. Communications by Holders with Other
Holders....................................... 96
SECTION 11.04. Certificate and Opinion as to Conditions
Precedent..................................... 97
SECTION 11.05. Statements Required in Certificate or
Opinion....................................... 97
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar..... 98
SECTION 11.07. Legal Holidays................................ 98
SECTION 11.08. Governing Law................................. 98
SECTION 11.09. No Adverse Interpretation of Other
Agreements.................................... 98
SECTION 11.10. No Recourse Against Others.................... 98
SECTION 11.11. Successors.................................... 98
SECTION 11.12. Duplicate Originals........................... 99
SECTION 11.13. Severability.................................. 99
SECTION 11.14. Table of Contents, Headings, Etc.............. 99
-iv-
<PAGE> 7
Page
----
ARTICLE TWELVE
SUBORDINATION
<TABLE>
<S> <C> <C>
SECTION 12.01. Securities Subordinated to Senior Debt;
Guarantees Subordinated to Guarantor
Senior Debt................................... 99
SECTION 12.02. No Payment on Securities in Certain
Circumstances.................................100
SECTION 12.03. Payment Over of Proceeds upon Dissolution,
Etc...........................................102
SECTION 12.04. Payments May Be Paid Prior to Dissolution.....104
SECTION 12.05. Subrogation...................................104
SECTION 12.06. Obligations of the Company Unconditional......105
SECTION 12.07. Notice to Trustee.............................105
SECTION 12.08. Reliance on Judicial Order or Certificate of
Liquidating Agent.............................106
SECTION 12.09. Trustee's Relation to Senior Debt or Guarantor
Senior Debt...................................106
SECTION 12.10. Subordination Rights Not Impaired by Acts or
Omissions of the Company or a Guarantor or
Holders of Senior Debt........................107
SECTION 12.11. Holders Authorize Trustee To Effectuate
Subordination of Securities...................108
SECTION 12.12. This Article Twelve Not To Prevent Events of
Default.......................................109
SECTION 12.13. Trustee's Compensation Not Prejudiced.........109
SIGNATURES....................................................110
Exhibit A - Form of Series A Security
Exhibit B - Form of Series B Security
Exhibit C - Form of Legend for Global Securities
Exhibit D - Transfer Certificate
Exhibit E - Transferee Certificate for Institutional Accredited
Investors
Exhibit F - Transferee Certificate for Regulation S Transfers
Exhibit G - Form of Guarantee
Note: This Table of Contents shall not, for any purpose, be
deemed to be a part of the Indenture.
</TABLE>
-v-
<PAGE> 8
INDENTURE dated as of April 28, 1998, among TALON AUTOMOTIVE GROUP, INC.,
a Michigan corporation (the "Company"), as Issuer, VS HOLDINGS, INC., a
Michigan corporation, VELTRI HOLDINGS USA, INC., an Indiana corporation, and
VELTRI METAL PRODUCTS CO., a Nova Scotia unlimited liability company, as
Guarantors, and U.S. Bank Trust National Association, as Trustee (the
"Trustee").
The Company has duly authorized the issue of 9.625% Senior Subordinated
Notes due 2008, Series A (the "Series A Securities"), and 9.625% Senior
Subordinated Notes due 2008, Series B (the "Series B Securities"), to be issued
in exchange for the Series A Securities, pursuant to the Registration Rights
Agreement and, to provide therefor, the Company has duly authorized the
execution and delivery of this Indenture. All things necessary to make the
Securities, when duly issued and executed by the Company and authenticated and
delivered hereunder, the valid and binding obligations of the Company, and to
make this Indenture a valid and binding agreement of the Company, have been
done.
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 or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
or at the time it merges or consolidates with the Company or any of the
Restricted Subsidiaries or assumed in connection with the acquisition of assets
from such Person and in each case not incurred by such Person in connection
with, or in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary or such acquisition, merger or consolidation.
"Adjusted Net Assets" has the meaning provided in Section 10.05.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or
<PAGE> 9
-2-
more intermediaries controls, or is controlled by, or is under common control
with, such specified Person. The term "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative of the foregoing.
"Affiliate Transaction" has the meaning provided in Section 4.18.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Acquisition" means (a) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary, or shall be merged with or into the Company or
any Restricted Subsidiary, or (b) the acquisition by the Company or any
Restricted Subsidiary of the assets of any Person (other than a Restricted
Subsidiary) which constitute all or substantially all of the assets of such
Person or comprises any division or line of business of such Person or any
other properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by the Company or
any of the Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Restricted Subsidiary of
(a) any Capital Stock of any Restricted Subsidiary; or (b) any other property
or assets of the Company or any Restricted Subsidiary other than in the
ordinary course of business; provided, however, that Asset Sales shall not
include (i) a transaction or series of related transactions for which the
Company or the Restricted Subsidiaries receive aggregate consideration of less
than $1.0 million and (ii) the sale, lease, conveyance, disposition or other
transfer of all or substantially all of the assets of the Company as permitted
by Article Five hereof.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal, state
or foreign law for the relief of debtors.
<PAGE> 10
-3-
"Blockage Period" has the meaning provided in Section 12.02.
"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day other than a Saturday, Sunday or any other
day on which banking institutions in the City of New York or the City of
Detroit are required or authorized by law or other governmental action to be
closed.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate stock, including
each class of Common Stock and Preferred Stock of such Person and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
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 Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation
<PAGE> 11
-4-
thereof and, at the time of acquisition, having a rating of at least A-1 from
S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers'
acceptances maturing within one year from the date of acquisition thereof
issued by any bank organized under the laws of the United States of America or
any state thereof or the District of Columbia or any U.S. branch of a foreign
bank having at the date of acquisition thereof combined capital and surplus of
not less than $250,000,000; (v) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clause (i)
above entered into with any bank meeting the qualifications specified in clause
(iv) above; and (vi) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(i) through (v) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets of
the Company to any Person or group of related Persons for purposes of Section
13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof
(whether or not otherwise in compliance with the provisions of this Indenture);
(ii) the approval by the holders of Capital Stock of the Company of any plan or
proposal for the liquidation or dissolution of the Company (whether or not
otherwise in compliance with the provisions of this Indenture); or (iii) any
Person or Group (other than the Permitted Holder(s)) shall become the
beneficial owner, directly or indirectly, of shares representing more than 50%
of the aggregate ordinary voting power represented by the issued and
outstanding Capital Stock of the Company.
"Change of Control Offer" has the meaning provided in Section 4.24.
"Change of Control Payment Date" has the meaning provided in Section 4.24.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
<PAGE> 12
-5-
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means such
successor.
"Consolidated EBITDA" means, with respect to the Company, for any period,
the sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes
and tax expense under the Michigan Single Business Tax of the Company and the
Restricted Subsidiaries paid or accrued in accordance with GAAP for such period
(other than income taxes attributable to extraordinary, unusual or nonrecurring
gains or losses or taxes attributable to sale or dispositions outside the
ordinary course of business), (B) Consolidated Interest Expense, (C)
Consolidated Non-cash Charges, (D) the amount of Permitted Tax Payments made
during such period and (E) compensation expense of the Company during fiscal
1998 under the Company's deferred compensation agreements not to exceed $1.4
million, less any non-cash items increasing Consolidated Net Income for such
period, all as determined on a consolidated basis for the Company and the
Restricted Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to the
Company, the ratio of Consolidated EBITDA of the Company during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of
the Company for the Four Quarter Period. In addition to and without limitation
of the foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence or
repayment of any Indebtedness of the Company or any of the Restricted
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the
proceeds thereof), occurred on the first day of the Four Quarter period and
(ii) any Asset Sales or other dispositions or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make
<PAGE> 13
-6-
such calculation as a result of the Company or one of the Restricted
Subsidiaries (including any person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or otherwise being liable
for Acquired Indebtedness and also including any Consolidated EBITDA (provided
that such Consolidated EBITDA shall be included only to the extent includable
pursuant to the definition of "Consolidated Net Income" attributable to the
assets which are the subject of the Asset Acquisition or Asset Sale or other
disposition during the Four Quarter Period) occurring during the Four Quarter
Period or at any time subsequent to the last day of the Four Quarter Period and
on or prior to the Transaction Date as if such Asset Sale or other disposition
or Asset Acquisition (including the incurrence, assumption or liability for any
such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. For purposes of clause (ii) of the immediately preceding sentence, in
calculating the effect of any such Asset Acquisition or Asset Sale or other
disposition, the Company may include in any such calculation reasonable cost
savings which the Company believes in good faith will be achieved as a result
of any such Asset Acquisition, Asset Sale or other disposition. If the Company
or any of the Restricted Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the second preceding sentence shall give effect
to the incurrence of such guaranteed Indebtedness as if the Company or any
Restricted Subsidiary had directly incurred or otherwise assumed such
guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate,
a eurocurrency interbank offered rate, or other rates, then the interest rate
in effect on the Transaction Date will be deemed to have been in effect during
the Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
<PAGE> 14
-7-
"Consolidated Fixed Charges" means, with respect to the Company for any
period, the sum, without duplication, of (i) Consolidated Interest Expense,
plus (ii) the product of (x) the amount of all dividend payments on any series
of Preferred Stock of the Company (other than dividends paid in Qualified
Capital Stock) 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 income tax rate of the Company, expressed as a decimal.
"Consolidated Interest Expense" means, with respect to the Company for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of the Company and the Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including without
limitation, (a) any amortization of debt discount (other than any such
amortization relating to Indebtedness repaid on the Issue Date), (b) the net
costs under Interest Swap Obligations, (c) all capitalized interest and (d) the
interest portion of any deferred payment obligation; 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, with respect to the Company, for any
period, the aggregate net income (or loss) of the Company and the Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
and losses from Asset Sales or abandonments or reserves relating thereto, (b)
extraordinary or nonrecurring gains, (c) the net income of any Person acquired
in a "pooling of interests" transaction accrued prior to the date it becomes a
Restricted Subsidiary or is merged or consolidated with the Company or any
Restricted Subsidiary, (d) the net income (but not loss) of any Restricted
Subsidiary to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is restricted by a
contract, operation of law or otherwise, (e) the net income of any Person,
other than a Restricted Subsidiary, except to the extent of cash dividends or
distributions paid to the Company or to a Restricted Subsidiary by such person,
(f) any restoration to income of any contingency reserve, except to the extent
that provision for such reserve was made out of Consolidated Net Income accrued
at any time following the Issue Date or to the extent that all such
restorations after the Issue Date do not ex-
<PAGE> 15
-8-
ceed $250,000 in the aggregate, (g) income or loss attributable to discontinued
operations (including, without limitation, operations disposed of during such
period whether or not such operations were classified as discontinued), (h) the
amount of Permitted Tax Payments made during such period, (i) non-cash expenses
relating to a conversion of the Company to a subchapter C corporation for U.S.
federal income tax purposes not to exceed $4.0 million and (j) in the case of a
successor to the Company by consolidation or merger or as a transferee of the
Company's assets, any earnings of the successor corporation prior to such
consolidation, merger or transfer of assets.
"Consolidated Non-cash Charges" means, with respect to the Company, for
any period, the aggregate depreciation, amortization and other non-cash
expenses of the Company and the Restricted Subsidiaries reducing Consolidated
Net Income of the Company for such period, determined on a consolidated basis
in accordance with GAAP (excluding any such charge which requires an accrual of
or a reserve for cash charges for any future period).
"Covenant Defeasance" has the meaning provided in Section 8.01.
"Credit Agreement" means the Credit Agreement dated as of the Issue Date,
among the Company, the Guarantors, the lenders party thereto in their
capacities as lenders thereunder and Comerica Bank, as agent, together with the
related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder (provided that such
increase in borrowings is permitted by Section 4.03 hereof) or adding
Restricted Subsidiaries as additional borrowers or guarantors thereunder) all
or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"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 against fluctuations in currency values.
<PAGE> 16
-9-
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Default Notice" has the meaning provided in Section 12.02.
"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.
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Credit Agreement and (ii) any other Indebtedness constituting Senior Debt
which, at the time of determination, has an aggregate principal amount of at
least $10,000,000 and is specifically designated in the instrument evidencing
such Senior Debt as "Designated Senior Debt" by the Company.
"Designation" has the meaning provided in Section 4.23.
"Designation Amount" has the meaning provided in Section 4.23.
"Disqualified Capital Stock" means that portion of any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is mandatorily exchangeable for Indebtedness, or is
redeemable, or exchangeable for Indebtedness, at the sole option of the holder
thereof on or prior to the final maturity date of the Securities.
"Domestic Wholly Owned Restricted Subsidiary" means a Wholly Owned
Restricted Subsidiary incorporated or otherwise organized or existing under the
laws of the United States, any state thereof or any territory or possession of
the United States.
<PAGE> 17
-10-
"Event of Default" has the meaning provided in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto.
"Existing Agreements" means the following agreements as amended and in
effect on the Issue Date: (i) Agreement dated July 1, 1997 between the Company
and Talon L.L.C. pursuant to which Talon L.L.C. provides certain administrative
and consulting services to the Company in exchange for an annual fee equal to
$500,000; (ii) Agreement dated the Issue Date pursuant to which the Company
provides certain administrative and consulting services to G&L Industries,
Inc.; (iii) Leases between the Company and Dude Investments L.L.C. and Dude
Investments dated September 30, 1996, as amended; (iv) Leases between the
Company and Maria Veltri dated August 1, 1994, as amended, and July 1, 1993, as
amended, including Option to Purchase dated November 8, 1996; (v) Stock
Purchase Agreement dated November 8, 1996 among Veltri Metal Products Co., the
Company's subsidiary, and Michael Veltri, individually and as trustee u/a/d
December 17, 1992, and Maria Veltri, and all documents executed pursuant
thereto, including, without limitation, that certain Subordination Agreement,
Memorandum of Agreement, Agreements Not to Compete, Security Agreements,
General Security Agreements, Debentures, Promissory Note by Veltri Metal
Products Co. in the amount of $658,325 in favor of Michael Veltri,
Unconditional Guaranty by Veltri Holdings USA, Inc.; and (vi) Purchase
Agreement dated September 30, 1996 among the Company, T&R Manufacturing, Inc.,
Roger H. Ducoffre and Theodore H. Dezenski, and all documents executed pursuant
thereto.
"Fair market value" means, with respect to any asset or property, the
price 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
whom is under undue pressure or compulsion to complete the transaction. Fair
market value shall be determined by the Board of Directors of the Company
acting reasonably and in good faith and shall be evidenced by a Board
Resolution of the Board of Directors of the Company delivered to the Trustee.
"Final Maturity Date" means May 1, 2008.
"Four Quarter Period" has the meaning provided in the definition of
"Consolidated Fixed Charge Coverage Ratio" above.
<PAGE> 18
-11-
"Funding Guarantor" has the meaning provided in Section 10.05.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accounts and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting profession
of the United States, which are in effect as of the Issue Date.
"Global Security" means a security evidencing all or a part of the
Securities issued to the Depository in accordance with Section 2.01 and bearing
the legend prescribed in Exhibit C.
"Guarantee" has the meaning provided in Section 4.19.
"Guarantor" means (i) each Subsidiary of the Company as of the Issue Date
and (ii) each other Person that in the future executes a Guarantee pursuant to
Section 4.19 hereof or otherwise; provided that any Person constituting a
Guarantor as described above shall cease to constitute a Guarantor when its
Guarantee is released in accordance with the terms of this Indenture.
"Guarantor Senior Debt" means, with respect to any Guarantor, (i) the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for
in the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of such Guarantor,
whether outstanding on the Issue Date or thereafter created, incurred or
assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Guarantee of such Guarantor. Without limiting the generality of
the foregoing, "Guarantor Senior Debt" shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) on, and all other amounts owing in respect of, (x)
all Interest Swap Obligations, (y) all obligations under Currency Agreements
and (z) Veltri Indebtedness, in each case whether outstanding on the Issue Date
or
<PAGE> 19
-12-
thereafter incurred. Notwithstanding the foregoing (except will respect to
Veltri Indebtedness), "Guarantor Senior Debt" shall not include (i) any
Indebtedness of such Guarantor owing to a Subsidiary of such Guarantor or any
Affiliate of such Guarantor or any of such Affiliate's Subsidiaries, (ii)
Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer
or employee of such Guarantor or any Subsidiary of such Guarantor (including,
without limitation, amounts owed for compensation), (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed or owing
by such Guarantor, (vi) Indebtedness incurred in violation Section 4.03 hereof,
(vii) Indebtedness which, when incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, is without recourse to
such Guarantor and (viii) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of such Guarantor.
"Holder" or "Securityholder" means a Person in whose name a Security is
registered on the Registrar's books.
"incur" has the meaning provided in Section 4.03.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all Obligations of such Person for borrowed money, (ii) all Obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person, (iv) all Obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations and all Obligations under any title retention
agreement (but excluding trade accounts payable and other accrued liabilities
arising in the ordinary course of business that are not overdue by 90 days or
more or are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted), (v) all Obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (vi) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (i) through (v) above and clause (viii)
below, (vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) which are secured by any Lien on any property or asset
of such Person, the amount of such Obligation being deemed to be the lesser of
the fair market value of such property or asset or the amount of the Obligation
so secured, (viii) all Obligations under currency agreements and interest
<PAGE> 20
-13-
swap agreements of such Person and (ix) all Disqualified Capital Stock issued
by such Person with the amount of Indebtedness represented by such Disqualified
Capital Stock being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price, but excluding
accrued dividends, if any. For purposes hereof, the "maximum fixed repurchase
price" of any Disqualified Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Disqualified
Capital Stock as if such Disqualified Capital Stock were purchased on any date
on which Indebtedness shall be required to be determined pursuant to this
Indenture, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock, such fair market value shall be
determined reasonably and in good faith by the Board of Directors of the issuer
of such Disqualified Capital Stock. "Indebtedness" shall not be deemed to
include customary indemnity obligations of the Company or a Restricted
Subsidiary incurred in connection with an Asset Sale.
"Indenture" means this Indenture, as amended or supplemented from time to
time in accordance with the terms hereof.
"Independent" when used with respect to any specified Person means such a
Person who (a) is in fact independent; (b) does not have any direct financial
interest or any material indirect financial interest in the Company or any of
its Subsidiaries, or in any Affiliate of the Company or any of its
Subsidiaries; and (c) is not an officer, employee, promoter, underwriter,
trustee, partner, director or Person performing similar functions for the
Company or any of its Subsidiaries. Whenever it is provided in this Indenture
that any Independent Person's opinion or certificate shall be furnished to the
Trustee, such Person shall be appointed by the Company, and such opinion or
certificate shall state that the signer has read this definition and that the
signer is Independent within the meaning hereof.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees and Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified
to perform the task for which it is to be engaged.
"Initial Purchasers" means Salomon Brothers Inc and Credit Suisse First
Boston Corporation.
<PAGE> 21
-14-
"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 Payment Date" means the stated maturity of an installment of
interest on the Securities.
"Interest Swap Obligations" means the obligations of any Person pursuant
to any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated
by applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"Investment" means, with respect to any Person, (i) any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit
by the Company and the Restricted Subsidiaries on commercially reasonable terms
in accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. If the Company or any Restricted Subsidiary
sells or otherwise disposes of any Capital Stock of any Restricted Subsidiary
(the "Referent Subsidiary") such that, after giving effect to any such sale or
disposition the Referent Subsidiary shall cease to be a 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 the Capital Stock of the
Referent Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of the Securities.
"Legal Defeasance" has the meaning provided in Section 8.01.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agree-
<PAGE> 22
-15-
ment, any lease in the nature thereof and any agreement to give any security
interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents, including payments in respect of deferred
payment obligations, when received in the form of cash or Cash Equivalents
(other than the portion of any such deferred payment constituting interest)
received by the Company or any of the Restricted Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions), (b) taxes paid or payable after taking
into account any reduction in consolidated tax liability due to available tax
credits or deductions and any tax sharing arrangements, (c) repayments of
Indebtedness secured by the property or assets subject to such Asset Sale that
is required to be repaid in connection with such Asset Sale and (d) appropriate
amounts to be provided by the Company or any Restricted Subsidiary, as the case
may be, as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or any Restricted
Subsidiary, as the case may be, after 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.
"Net Proceeds Offer" has the meaning provided in Section 4.12.
"Net Proceeds Offer Amount" has the meaning provided in Section 4.12.
"Net Proceeds Offer Payment Date" has the meaning provided in Section
4.12.
"Net Proceeds Offer Trigger Date" has the meaning provided in Section
4.12.
"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the Presi-
<PAGE> 23
-16-
dent, any Vice President, the Chief Financial Officer, the Controller, or the
Secretary of such Person.
"Officers' Certificate" means a certificate signed by two Officers of the
Company.
"Opinion of Counsel" means a written opinion from legal counsel which and
who are acceptable to the Trustee.
"Participants" has the meaning provided in Section 2.15.
"Paying Agent" has the meaning provided in Section 2.03.
"Permitted Holders" means (i) Randolph J. Agley, Judith A. Agley, James R.
Agley, Joseph A. Agley, James J. Agley, Michael T. Timmis, Nancy E. Timmis,
Michael T.O. Timmis, Wayne C. Inman or Amelia P. Inman, (ii) any relative,
family member or any Person controlled by any of the persons listed in
subparagraph (i) above, (iii) any trust, including, without limitation, a
charitable remainder trust, created by or for the benefit of any of the persons
listed in subparagraphs (i) or (ii) above and (iv) any private foundation
created by any of the persons listed in subparagraphs (i) or (ii) above.
"Permitted Indebtedness" means, without duplication, each of the
following:
(i) Indebtedness under the Securities, this Indenture and any
Guarantees not to exceed $120,000,000 in the aggregate;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed the
greater of (x) $100,000,000, reduced by any required permanent repayments
with the proceeds of Asset Sales (which are accompanied by a
corresponding permanent commitment reduction) thereunder and (y) the sum
of (a) 85% of the net book value of accounts receivable of the Company
and the Restricted Subsidiaries, (b) 50% of the net book value of the
inventory of the Company and the Restricted Subsidiaries, (c) 75% of the
fair market value of real estate and of the orderly liquidation value
shown in appraisals for fixed assets of the Company and the Restricted
Subsidiaries for which appraisals exist and (d) 65% of the net book value
of fixed assets of the
<PAGE> 24
-17-
Company and the Restricted Subsidiaries for which no appraisals exist;
(iii) other Indebtedness of the Company and the 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 thereon;
(iv) Interest Swap Obligations of the Company covering Indebtedness
of the Company or any Guarantor and Interest Swap Obligations of any
Restricted Subsidiary covering Indebtedness of such Restricted
Subsidiary; provided, however, that such Interest Swap Obligations are
entered into to protect the Company and the Restricted Subsidiaries from
fluctuations in interest rates on Indebtedness incurred in accordance
with this Indenture to the extent the notional principal amount of such
Interest Swap Obligations does not exceed the principal amount of the
Indebtedness to which such Interest Swap Obligations relates;
(v) Indebtedness under Currency Agreements; provided that in the
case of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and the
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;
(vi) Indebtedness of a Restricted Subsidiary to the Company, a
Guarantor or an Unleveraged Restricted Subsidiary for so long as such
Indebtedness is held by the Company, a Guarantor or an Unleveraged
Restricted Subsidiary, in each case subject to no Lien held by a Person
other than the Company, a Guarantor or an Unleveraged Restricted
Subsidiary; provided that if as of any date any Person other than the
Company, a Guarantor or an Unleveraged Restricted Subsidiary owns or
holds any such Indebtedness or holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness
not constituting Permitted Indebtedness by the issuer of such
Indebtedness.
(vii) Indebtedness of the Company to a Guarantor or an Unleveraged
Restricted Subsidiary for so long as such Indebtedness is held by a
Guarantor or an Unleveraged Restricted Subsidiary, in each case subject
to no Lien; pro-
<PAGE> 25
-18-
vided that (a) any Indebtedness of the Company to any Guarantor or
Unleveraged Restricted Subsidiary is unsecured and subordinated, pursuant
to a written agreement, to the Company's obligations under this Indenture
and the Securities and (b) if as of any date any person other than a
Guarantor or Unleveraged Restricted Subsidiary owns or holds any such
Indebtedness or any Person holds a Lien in respect of such Indebtedness,
such date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the Company;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided, however,
that such Indebtedness is extinguished within five business days of
incurrence;
(ix) Indebtedness of the Company or any of the 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;
(x) Refinancing Indebtedness;
(xi) Tooling Indebtedness;
(xii) Veltri Indebtedness (and any Indebtedness incurred to
Refinance any Veltri Indebtedness) not to exceed $15.0 million at any one
time outstanding;
(xiii) additional Indebtedness of the Company and the Guarantors in
an aggregate principal amount not to exceed $10.0 million at any one time
outstanding;
(xiv) Purchase Money Indebtedness and Capitalized Lease Obligations
(and any Indebtedness incurred to Refinance such Purchase Money
Indebtedness or Capitalized Lease Obligations) not to exceed $15.0
million at any one time outstanding; and
(xv) Indebtedness of Restricted Subsidiaries that are not Guarantors
in an aggregate principal amount not to exceed $5.0 million at any one
time outstanding.
<PAGE> 26
-19-
"Permitted Investments" means (i) Investments by the Company or any
Restricted Subsidiary in any Person that is or will become immediately after
such Investment a Guarantor or an Unleveraged Restricted Subsidiary or that
will merge or consolidate into the Company or a Guarantor or an Unleveraged
Restricted Subsidiary; (ii) investments in the Company by any Restricted
Subsidiary; provided that any Indebtedness evidencing such Investment is
unsecured and subordinated, pursuant to a written agreement, to the Company's
obligations under the Securities and this Indenture; (iii) investments in cash
and Cash Equivalents; (iv) loans and advances to employees and officers of the
Company and the Restricted Subsidiaries in the ordinary course of business for
bona fide business purposes not in excess of $1.0 million at any time
outstanding; (v) Currency Agreements and Interest Swap Obligations entered into
in the ordinary course of the Company's or a Restricted Subsidiary's businesses
and otherwise in compliance with this Indenture; (vi) Investments in Restricted
Subsidiaries that are not Guarantors or Unleveraged Restricted Subsidiaries not
to exceed $5.0 million at any one time outstanding; (vii) Investments in
securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
trade creditors or customers; (viii) Investments made by the Company or the
Restricted Subsidiaries as a result of consideration received in connection
with an Asset Sale made in compliance with Section 4.12 hereof; and (ix)
Investments in Persons, including, without limitation, Unrestricted
Subsidiaries and joint ventures, engaged in a business similar or related to
the businesses in which the Company and the Restricted Subsidiaries are engaged
on the Issue Date not to exceed $10.0 million at any one time outstanding.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or the Restricted Subsidiaries
shall have set aside on its books such reserves as may be required
pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other
Liens imposed by law incurred in the ordinary course of business for sums
not yet delinquent or being contested in good faith, if such reserve or
other appropriate provision, if any, as shall be required by GAAP shall
have been made in respect thereof;
<PAGE> 27
-20-
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with 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
practice in connection therewith, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
(iv) judgment Liens not giving rise to an Event of Default so long
as such Lien is adequately bonded and any appropriate legal proceeds
which may have been duly initiated for the review of such judgment shall
not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in
any material respect with the ordinary conduct of the business of the
Company or any of the Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(vii) purchase money Liens securing Indebtedness to finance property
or assets of the Company or any Restricted Subsidiary acquired in the
ordinary course of business, and Liens securing Indebtedness which
Refinances any such Indebtedness; provided, however, that (A) the related
purchase money Indebtedness (or Refinancing Indebtedness) shall not
exceed the cost of such property or assets and shall not be secured by
any property assets of the Company or any Restricted Subsidiary other
than the property and assets so acquired and (B) the Lien securing the
purchase money Indebtedness shall be created within 90 days of such
acquisition;
(viii) 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
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purchase, shipment or storage of such inventory or other goods;
(ix) 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;
(x) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty requirements of the
Company or any of the Restricted Subsidiaries, including rights of offset
and set-off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations related to Indebtedness that is otherwise permitted under
this Indenture;
(xii) Liens securing Indebtedness under Currency Agreement; and
(xiii) Liens securing Acquired Indebtedness (and any Indebtedness
which Refinances such Acquired Indebtedness) incurred in accordance with
Section 4.03; provided that (A) such Liens secured the Acquired
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary and were not
granted in connection with, or in anticipation of the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary and (B)
such Liens do not extend to or cover any property or assets of the
Company or of any of the Restricted Subsidiaries other than the property
or assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company or a Restricted
Subsidiary.
"Permitted Tax Payments" means distributions to the stockholders of the
Company to reimburse them for federal and state income taxes at the maximum
applicable individual tax rate attributable to the income of the Company for
any tax period during which the Company is not a taxable entity for federal or
state, as the case may be, income tax purposes.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
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"Physical Securities" has the meaning provided in Section 2.01.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights to any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"Private Placement Legend" means the legend initially set forth on the
Securities in the form set forth on Exhibit A.
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms of this Indenture, a calculation in accordance with
Article 11 of Regulation S-X under the Securities Act as interpreted by the
Company's Board of Directors in consultation with its independent certified
public accountants.
"Public Equity Offering" has the meaning provided in Paragraph 6 of the
Securities.
"Purchase Agreement" means the purchase agreement dated as of April 23,
1998 by and among the Company, the Guarantors and the Initial Purchasers.
"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 construction or improvement of any property,
provided 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.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have the meaning specified
in Rule 144A under the Securities Act.
"Record Date" means the Record Dates specified in the Securities; provided
that if any such date is not a Business Day, the Record Date shall be the first
day immediately preceding such specified day that is a Business Day.
"Redemption Date," when used with respect to any Security to be redeemed,
means the date fixed for such redemption pursuant to this Indenture and the
Securities.
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"Redemption Price," when used with respect to any Security to be redeemed,
means the price fixed for such redemption, payable in immediately available
funds, pursuant to this Indenture and the Securities.
"Reference Date" has the meaning provided in Section 4.04.
"Refinance" means in respect of any security or Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue a security or Indebtedness in exchange or replacement for, such
security or Indebtedness in whole or in part. "Refinanced" and "Refinancing"
shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of Indebtedness incurred in accordance with Section 4.03
hereof (other than pursuant to clause (ii), (iv), (v), (vi), (vii), (viii),
(ix), (xi), (xii), (xiii), (xiv) or (xv) of the definition of Permitted
Indebtedness), in each case that does not (1) result in an increase in the
aggregated principal amount of any Indebtedness of such Person as of the date
of such proposed Refinancing (plus the amount of any premium required to be
paid under the terms of the instrument governing such Indebtedness and plus the
amount of reasonable expenses incurred by the Company in connection with such
Refinancing) or (2) create Indebtedness with (A) a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or (B) a final maturity earlier than the final
maturity of the Indebtedness being Refinanced; provided that if such
Indebtedness being Refinanced is Indebtedness of the Company or a Guarantor,
then such Refinancing Indebtedness shall be Indebtedness solely of the Company
and/or Guarantors.
"Registrar" has the meaning provided in Section 2.03.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Issue Date among the Company, the Guarantors and the Initial
Purchasers.
"Regulation S" means Regulation S under the Securities Act.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then-
the Repre-
<PAGE> 31
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sentative for such Designated Senior Debt shall at all times constitute the
stockholders of a majority in outstanding principal amount of such Designated
Senior Debt in respect of any Designated Senior Debt.
"Responsible Officer" shall mean, when used with respect to the Trustee,
any officer in the Corporate Trust Department of the Trustee including any vice
president, assistant vice president or any other officer of the Trustee who
customarily performs functions similar to those performed by the Persons who at
the time shall be such officers, respectively, and to whom any corporate trust
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.
"Restricted Payment" has the meaning provided in Section 4.04.
"Restricted Security" has the meaning set forth in Rule 144(a)(3) under
the Securities Act; provided 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 Directors of the Company, by a Board Resolution
delivered to the Trustee, as an Unrestricted Subsidiary pursuant to and in
compliance with Section 4.23 hereof. Any such Designation may be revoked by a
Board Resolution of the Company delivered to the Trustee, subject to the
provisions of such covenant.
"Revocation" has the meaning provided in Section 4.23.
"Rule 144A" means Rule 144A under the Securities Act.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such Person or to any other Person from whom funds
have been or are to be advanced by such Person on the security of such
Property.
"SEC" means the Securities and Exchange Commission.
<PAGE> 32
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"Securities" means the Series A Securities and the Series B Securities
treated as a single class of securities, as amended or supplemented from time
to time in accordance with the terms hereof, that are issued pursuant to this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Securities. Without limiting the
generality of the foregoing, "Senior Debt" shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the
documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law) on, and all other amounts owing in respect of, (w)
all monetary obligations of every nature of the Company under the Credit
Agreement, including, without limitation, obligations to pay principal and
interest reimbursement obligations under letters of credit, fees, expenses and
indemnities, (x) all Interest Swap Obligations, (y) all obligations under
Currency Agreements and (z) the Veltri Indebtedness, in each case whether
outstanding on the Issue Date or thereafter incurred. Notwithstanding the
foregoing (except with respect to Veltri Indebtedness), "Senior Debt" shall not
include (i) any Indebtedness of the Company to a Restricted Subsidiary or any
Affiliate of the Company or any of such Affiliate's Subsidiaries, (ii)
Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer
or employee of the Company or any Restricted Subsidiary (including without
limitation, amounts owed for compensation), (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owned by the
Company, (vi) Indebtedness incurred in violation of Section 4.03, (vii)
Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is with-
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out recourse to the Company and (viii) any Indebtedness which is, by its
express terms, subordinated in right of payment to any other Indebtedness of
the Company.
"Series A Securities" means the 9.625% Senior Subordinated Notes due 2008,
Series A, of the Company issued pursuant to this Indenture and sold pursuant to
the Purchase Agreement.
"Series B Securities" means the 9.625% Senior Subordinated Notes due 2008,
Series B, of the Company to be issued in exchange for the Series A Securities
pursuant to the Registered Exchange Offer and the Registration Rights
Agreement.
"Subsidiary", with respect to any Person, means (a) any corporation of
which the outstanding Capital Stock having at least a majority of the votes
entitled to be cast in the election of directors under ordinary circumstances
shall at the time be owned, directly or indirectly, by such Person or (b) any
other Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Surviving Entity" has the meaning provided in Section 5.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb), as amended, as in effect on the date of the execution of this
Indenture 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, except as otherwise provided in Section 9.03.
"Tooling Indebtedness" means all present and future Indebtedness of the
Company and any Restricted Subsidiary the proceeds of which are utilized to
finance dies, molds, tooling and similar items (collectively, "Tooling") for
which sales of such Tooling are covered under specific written purchase orders
or agreements between the Company or any Restricted Subsidiary and the
purchaser of such Tooling.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Unleveraged Restricted Subsidiary" means a Restricted Subsidiary that has
no Indebtedness outstanding (other
<PAGE> 34
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than Indebtedness owed to the Company, a Guarantor or another Unleveraged
Restricted Subsidiary).
"Unrestricted Subsidiary" means any Subsidiary of the Company designated
as such pursuant to and in compliance with Section 4.23. Any such designation
may be revoked by a Board Resolution of the Company delivered to the Trustee,
subject to the provisions of such covenant.
"U.S. Government Obligations" shall have the meaning provided in Section
8.01.
"U.S. Legal Tender" means such coin or currency in immediately available
funds of the United States of America as at the time of payment shall be legal
tender for the payment of public and private debts.
"U.S. Physical Securities" shall have the meaning set forth in Section
2.01.
"Veltri Indebtedness" means Indebtedness owing to Michael Veltri,
individually and/or as trustee u/a/d December 17, 1992, pursuant to (a) that
certain Stock Purchase Agreement dated November 8, 1996, (b) that certain
Employment Agreement dated November 8, 1996, (c) that certain Promissory Note
dated November 8, 1996 in the amount of $658,325, and (d) those certain
Security Agreements, General Security Agreements and Debentures dated November
8, 1996, all as amended through the Issue Date.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the sum of
the total of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other requirement
payment of principal, including payment at final maturity, in respect thereof,
by (ii) the number of years (calculated to the nearest one-twelfth) which will
elapse between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of the Company means any Restricted
Subsidiary of which all the outstanding voting securities (other than in the
case of a foreign Restricted Subsidiary, directors' qualifying shares or an
immaterial amount of shares required to be owned by other Persons pursuant to
applicable law) are owned by the Company or any Wholly Owned Restricted
Subsidiary.
<PAGE> 35
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SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such 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 or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, any Guarantor and
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;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with 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.
<PAGE> 36
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ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Series A Securities and the Trustee's certificate of authentication
thereof shall be substantially in the form of Exhibit A annexed hereto, which
is hereby incorporated in and expressly made a part of this Indenture. The
Series B Securities and the Trustee's certificate of authentication thereof
shall be substantially in the form of Exhibit B annexed hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Securities
may have notations, legends or endorsements (including notations relating to
any Guarantees, stock exchange rule or usage). The Company and the Trustee
shall approve the form of the Securities and any notation, legend or
endorsement (including notations relating to any Guarantees) on them. Each
Security shall be dated the date of its issuance and shall be authenticated by
the Trustee.
Securities offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent Global Securities in registered
form, substantially in the form set forth in Exhibit A, deposited with the
Trustee, as custodian for the Depository, and shall bear the legend set forth
on Exhibit C. The aggregate principal amount of any Global Security 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.
Securities offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of certificated Securities in
registered form in substantially the form set forth in Exhibit A (the "Offshore
Physical Securities"). Securities offered and sold in reliance on any other
exemption from registration under the Securities Act other than as described in
the preceding paragraph shall be issued, and Securities offered and sold in
reliance on Rule 144A may be issued, in the form of certificated Securities in
registered form in substantially the form set forth in Exhibit A (the "U.S.
Physical Securities"). The Offshore Physical Securities and the U.S. Physical
Securities are sometimes collectively herein referred to as the "Physical
Securities."
<PAGE> 37
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SECTION 2.02. Execution and Authentication.
Two Officers, or an Officer and an Assistant Secretary, shall sign, or one
Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Securities for the Company by manual or facsimile
signature. The Company's seal shall also be reproduced on the Securities.
If an Officer or Assistant Secretary whose signature is on a Security was
an Officer or Assistant Secretary at the time of such execution but no longer
holds that office at the time the Trustee authenticates the Security, the
Security shall be valid nevertheless. Each Guarantor shall execute its
Guarantee in the manner set forth in Section 10.07.
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) Series A Securities for original issue
in the aggregate principal amount not to exceed $120,000,000 and (ii) Series B
Securities in the aggregate amount not to exceed $120,000,000, in each case
upon a written order of the Company in the form of an Officers' Certificate and
an Opinion of Counsel in a form reasonably required by the Trustee as to the
compliance with applicable law of the exchange of Series B Securities for
Series A Securities. The Officers' Certificate shall specify the amount of
Securities to be authenticated, the series of Securities and the date on which
the Securities are to be authenticated. The aggregate principal amount of
Securities outstanding at any time may not exceed $170,000,000, except as
provided in Section 2.07. Upon receipt of a written order of the Company in
the form of an Officers' Certificate, the Trustee shall authenticate Securities
in substitution for Securities originally issued to reflect any name change of
the Company.
The Trustee may appoint an authenticating agent reasonably acceptable to
the Company 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 authenticat-
<PAGE> 38
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ing agent has the same rights as an Agent to deal with the Company and
Affiliates of the Company.
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 Company shall maintain an office or agency 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 ("Registrar"), (b)
Securities may be presented or surrendered for payment ("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 Company, upon written notice to the Trustee, may
have one or more co-Registrars and one or more additional Paying Agents
reasonably acceptable to the Trustee. The term "Paying Agent" includes any
additional Paying Agent. The Company initially appoints the Trustee as
Registrar and Paying Agent until such time as the Trustee has resigned or a
successor has been appointed. Neither the Company nor any Affiliate of the
Company may act as Paying Agent except as otherwise expressly provided in the
form of the Security.
SECTION 2.04. Paying Agent To Hold Assets in Trust.
The Company 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, premium if any, or interest on, the Securities, and shall notify
the Trustee in writing of any Default by the Company in making any such
payment. The Company 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, but shall be under no obligation to, 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 Company to the Paying Agent,
the Paying Agent shall have no further liability for such assets.
<PAGE> 39
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SECTION 2.05. Securityholder 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 Company shall furnish to the
Trustee before each 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 Company 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 Company 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 registration of
transfer or exchange, but the Company 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, 4.12,
4.24 or 9.05). The Registrar or co-Registrar shall not be required to register
the transfer of 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,
except the unredeemed portion of any Security being redeemed in part.
Any Holder of a Global Security shall, by acceptance of such 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),
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and that ownership of a beneficial interest in a Global Security shall be
required to be reflected in a book entry system.
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 Company shall issue and the Trustee shall authenticate upon written
notice from the Company a replacement Security if the Trustee's requirements
are met. If required by the Trustee or the Company, such Holder must provide
an indemnity bond or other indemnity, sufficient in the judgment of both the
Company and the Trustee, to protect the Company, the Trustee and any Agent from
any loss which any of them may suffer if a Security is replaced. The Company
and the Trustee may charge such Holder for their respective 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 Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities that have been
authenticated by the Trustee except those cancelled by it, those delivered to
it for cancellation and those described in this Section as not outstanding.
Subject to Section 2.09, a Security does not cease to be outstanding because
the Company or any of its Affiliates 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 or the Final Maturity Date the Paying Agent holds
U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the
principal and interest due on the Securities payable on that date, then on and
after that date such Securities cease to be outstanding and interest on them
ceases to accrue.
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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 the Company, any Guarantor 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 Responsible Officer of the Trustee actually knows are so
owned shall be disregarded.
The Trustee may require an Officers' Certificate listing Securities owned
by the Company, any Guarantor or any of their respective Affiliates.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities upon receipt of
a written order of the Company 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 Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate upon receipt of a written
order of the Company pursuant to Section 2.02 definitive Securities in exchange
for temporary Securities.
SECTION 2.11. Cancellation.
The Company 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 Company,
shall dispose of all Securities surrendered for transfer, exchange, payment or
cancellation. Subject to Section 2.07, the Company may not issue new
Securities to replace Securities that it has paid or delivered to the Trustee
for cancellation. If the Company or any Guarantor 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.
<PAGE> 42
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SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it
shall pay interest on overdue principal and on overdue installments of interest
(without grace periods) from time to time on demand at the rate of 2% per annum
in excess of the rate shown on the Security.
SECTION 2.13. CUSIP Number.
The Company in issuing the Securities will use a "CUSIP" number, and if
so, the Trustee shall use the CUSIP number in notices of redemption or exchange
as a convenience to Holders; provided 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.
SECTION 2.14. Deposit of Moneys.
Prior to 11:00 a.m. New York City time on each Interest Payment Date and
the Final Maturity Date, the Company shall deliver by wire transfer to the
Paying Agent in immediately available funds money sufficient to make cash
payments due on such Interest Payment Date or the 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 or the 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 Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of the Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or
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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. In
addition, Physical Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in Global Securities if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for any Global Security and a successor depositary is not appointed
by the Company within 90 days of such notice or (ii) an Event of Default 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 Company shall execute, and the Trustee shall upon written instructions
from the Company 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 (b) or (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.
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SECTION 2.16. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Physical Securities. When Physical
Securities are presented to the Registrar with a request:
(i) to register the transfer of the Physical Securities; or
(ii) to exchange such Physical Securities for an equal number of
Physical Securities of other authorized denominations,
the 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 by an Opinion of Counsel addressed to the
Registrar to the effect that such transfer and exchange is in compliance
with applicable securities law and, in the sole discretion of the
Company, by the following additional information and documents, as
applicable:
(A) if such Physical Security is being delivered to the
Registrar by a holder for registration in the name of such holder,
without transfer, a certification from such holder to that effect
(in substantially the form of Exhibit D hereto); or
(B) if such Physical Security is being transferred to a
Qualified Institutional Buyer in accordance with Rule 144A under
the Securities Act, a certification to that effect (in
substantially the form of Exhibit D hereto); or
(C) if such Physical Security is being transferred to an
Institutional Accredited Investor, delivery of a certification to
that effect (in substan-
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tially the form of Exhibit D hereto) and a Transferee Certificate
for Institutional Accredited Investors in substantially the form of
Exhibit E hereto; or
(D) if such Physical Security is being transferred in reliance
on Regulation S, delivery of a certification to that effect (in
substantially the form of Exhibit D hereto) and a Transferee
Certificate for Regulation S Transfers in substantially the form of
Exhibit F hereto and an Opinion of Counsel reasonably satisfactory
to the Company 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 Rule 144 under the Securities Act, delivery of a certification
to that effect (in substantially the form of Exhibit D hereto) and
an Opinion of Counsel reasonably satisfactory to the Company to the
effect that such transfer is in compliance with the Securities Act;
or
(F) 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 (in substantially
the form of Exhibit D hereto) and an Opinion of Counsel reasonably
satisfactory to the Company 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 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 of a Physical
Security, duly endorsed or accompanied by appropriate instruments of transfer,
in form satisfactory to the Registrar, together with:
(A) a certification, in substantially the form of Exhibit D
hereto, that such Physical Security is being transferred to a
Qualified Institutional Buyer; and
(B) written instructions directing the Registrar to make, or
to direct the Depository to make, an endorsement on the Global
Security to reflect an in-
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crease in the aggregate amount of the Securities represented by the
Global Security,
then the 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, the number of
Securities represented by the Global Security to be increased accordingly. If
no Global Security is then outstanding, the Company shall issue and the Trustee
shall upon written instructions from the Company authenticate a new Global
Security in the appropriate 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.
(d) Transfer of a Beneficial Interest in a Global Security for a Physical
Security.
(i) Any Person having a beneficial interest in a Global Security may
upon request exchange such beneficial interest for a Physical Security.
Upon receipt by the 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 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 to the
Person designated by the Depository as being the beneficial owner,
a certification from such Person to that effect (in substantially
the form of Exhibit D hereto); or
(B) if such beneficial interest is being transferred to a
Qualified Institutional Buyer in accordance with Rule 144A under
the Securities Act, a cer-
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tification to that effect (in substantially the form of Exhibit D
hereto); or
(C) if such beneficial interest is being transferred to an
Institutional Accredited Investor, delivery of a certification to
that effect (in substantially the form of Exhibit D hereto) and a
Certificate for Institutional Accredited Investors in substantially
the form of Exhibit E hereto; or
(D) if such beneficial interest is being transferred in
reliance on Regulation S, delivery of a certification to that
effect (in substantially the form of Exhibit D hereto) and a
Transferee Certificate for Regulation S Transfers in substantially
the form of Exhibit F hereto and an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer is in
compliance with the Securities Act; or
(E) if such beneficial interest is being transferred in
reliance on Rule 144 under the Securities Act, delivery of a
certification to that effect (in substantially the form of Exhibit
D hereto) and an Opinion of Counsel reasonably satisfactory to the
Company to the effect that such transfer is in compliance with the
Securities Act; or
(F) 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 (in
substantially the form of Exhibit D hereto) and an Opinion of
Counsel reasonably satisfactory to the Company to the effect that
such transfer is in compliance with the Securities Act,
then the Registrar will cause, in accordance with the standing
instructions and procedures existing between the Depository and the
Registrar, the aggregate amount of the Global Security to be reduced and,
following such reduction, the Company will execute and, upon receipt of
an authentication order in the form of an Officers' Certificate, the
Trustee will authenticate and deliver to the transferee a Physical
Security.
(ii) Securities issued in exchange for a beneficial interest in a
Global Security pursuant to this Sec-
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tion 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 the Registrar in
writing. The 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 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 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 Company 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 or (ii) such Security has been sold pursuant to an effective
registration statement under the Securities Act.
(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 Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section 2.16.
The Company 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.
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ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company elects to redeem Securities pursuant to Paragraph 5 or
Paragraph 6 of the Securities, it shall notify the Trustee in writing of the
Redemption Date, the Redemption Price and the principal amount of Securities to
be redeemed. The Company shall give notice of redemption to Trustee at least
45 days but not more than 60 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 fewer than all of the Securities are to be redeemed, the Trustee shall
select the Securities to be redeemed, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate; provided, however, that
if the Securities are redeemed pursuant to Paragraph 6 of the Securities, the
Securities shall be redeemed solely on a pro rata basis or on as nearly a pro
rata basis as is practicable (subject to the procedures of the Depository)
unless the securities exchange, if any, on which the Securities are listed
requires a different method. If the Securities are listed on any national
securities exchange, the Company shall notify the Trustee in writing of the
requirements of such exchange in respect of any redemption. The Trustee shall
make the selection from the Securities outstanding and not previously called
for redemption and shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Security selected
for partial redemption, the principal amount thereof to be redeemed. The
Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Securities that have denominations larger
than $1,000. 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
Company shall mail or cause to be mailed a
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notice of redemption by first-class mail, postage prepaid, to each Holder whose
Securities are to be redeemed. At the Company's written request, the Trustee
shall give the notice of redemption in the Company's name and at the Company's
expense. Each notice for redemption shall identify the Securities to be
redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price plus accrued interest, if
any;
(5) that, unless the Company defaults 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 of such Securities is to receive payment of the Redemption Price
and accrued interest, if any, to the Redemption Date upon surrender to
the Paying Agent of the Securities redeemed;
(6) 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, and upon surrender of such Security, a new Security or
Securities in aggregate principal amount equal to the unredeemed portion
thereof will be issued;
(7) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be
outstanding after such partial redemption; and
(8) the Paragraph of the Securities pursuant to which the Securities
are to be redeemed.
SECTION 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price
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plus accrued interest, if any. Upon surrender to the Paying Agent, such
Securities called for redemption shall be paid at the Redemption Price (which
shall include accrued interest thereon to the Redemption Date), but
installments of interest, the maturity of which is on or prior to the
Redemption Date, shall be payable to Holders of record at the close of business
on the relevant Record Dates.
SECTION 3.05. Deposit of Redemption Price.
Prior to 11:00 a.m. New York City time on the Redemption Date, the Company
shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay the
Redemption Price plus accrued interest, if any, of all Securities to be
redeemed on that date.
If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price plus accrued interest,
if any, interest on the Securities to be redeemed will cease to accrue on and
after the applicable Redemption Date, whether or not such Securities are
presented for payment.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in part, the Trustee
shall authenticate for the Holder a new Security or Securities equal in
principal amount to the unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the Securities in
the manner provided in the Securities. An installment of principal of or
interest on the Securities shall be considered paid on the date it is due if
the Trustee or Paying Agent holds on that date U.S. Legal Tender designated for
and sufficient to pay the installment.
The Company shall pay, to the extent such payments are lawful, interest on
overdue principal and it shall pay interest on overdue installments of interest
(without regard to
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any applicable grace periods) from time to time on demand at the rate borne by
the Securities plus 2% per annum. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The City of New
York, the office or agency required under Section 2.03. The Company 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 Company 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
Section 11.02. The Company hereby initially designates the office of the
Trustee at 100 Wall Street, Corporate Trust Services, New York, New York
10005, as its office or agency in the Borough of Manhattan, The City of New
York.
SECTION 4.03. Limitation on Incurrence of Additional Indebtedness.
The Company will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect to, or
otherwise become responsible for payment of (collectively, "incur") any
Indebtedness (other than Permitted Indebtedness); provided, however, that if no
Default or Event of Default shall have occurred and be continuing at the time
of or as a consequence of the incurrence of any such Indebtedness, the Company
or any Guarantor may incur Indebtedness (including, without limitation,
Acquired Indebtedness) and the Restricted Subsidiaries may incur Acquired
Indebtedness, in each case if on the date of the incurrence of such
Indebtedness, after giving effect to the incurrence thereof, the Consolidated
Fixed Charge Coverage Ratio of the Company is greater than 2.0 to 1.0 if such
incurrence occurs on or prior to May 1, 2001 or 2.25 to 1.0, if such incurrence
occurs after May 1, 2001.
No Indebtedness incurred pursuant to the Consolidated Fixed Charge
Coverage Ratio test of the preceding paragraph (including, without limitation,
Indebtedness under the Credit Agreement) shall reduce the amount of
Indebtedness which may be incurred pursuant to any clause of the definition of
Permitted Indebtedness (including, without limitation, Indebtedness under
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the Credit Agreement pursuant to clause (ii) of the definition of Permitted
Indebtedness).
Indebtedness of a Person existing at the time such Person becomes a
Restricted Subsidiary or which is secured by a Lien on an asset acquired by the
Company or a Restricted Subsidiary (whether or not such Indebtedness is assumed
by the acquiring Person) shall be deemed incurred at the time the Person
becomes a Restricted Subsidiary or at the time of the asset acquisition, as the
case may be.
SECTION 4.04. Limitation on Restricted Payments.
The Company will not, and will not cause or permit any of the Restricted
Subsidiaries to, directly or indirectly, (a) declare or pay any dividend or
make any distribution (other than dividends or distributions, payable in
Qualified Capital Stock of the Company) on or in respect of shares of the
Company's Capital Stock to holders of such Capital Stock, (b) purchase, redeem
or otherwise acquire or retire for value any Capital Stock of the Company or
any warrants, rights or options to purchase or acquire shares of any class of
such Capital Stock or (c) make any Investment (other than Permitted
Investments) (each of the foregoing actions set forth in clauses (a), (b) and
(c) being referred to as a "Restricted Payment"), if at the time of such
Restricted Payment or immediately after giving effect thereto, (i) a Default or
an Event of Default shall have occurred and be continuing or (ii) the Company
is not able to incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with Section 4.03 or (iii) the aggregate
amount of Restricted Payments (including such proposed Restricted Payment) made
subsequent to the Issue Date (the amount expended for such purpose, if other
than in cash, being the fair market value of such property as determined
reasonably and in good faith by the Board of Directors of the Company) shall
exceed the sum of: (w) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of
the Company earned subsequent to the Issue Date and on or prior to the date the
Restricted Payment occurs (the "Reference Date" (treating such period as a
single accounting period); plus (x) 100% of the fair market value of the
aggregate net proceeds received by the Company from any Person (other than a
Subsidiary of the Company) from the issuance and sale subsequent to the Issue
Date and on or prior to the Reference Date of Qualified Capital Stock of the
Company; plus (y) without duplication of any amounts included in clause
(iii)(x) above, 100% of the fair market value of the aggregate
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net proceeds of any contribution to the common equity capital of the Company
received by the Company from a holder of the Company's Capital Stock
(excluding, in the case of clauses (iii)(x) and (y), any net proceeds from a
Public Equity Offering to the extent used to redeem the Securities); plus (z)
an amount equal to the lesser of (A) the sum of the fair market value of the
Capital Stock of an Unrestricted Subsidiary owned by the Company and the
Restricted Subsidiaries and the aggregate amount of all Indebtedness of such
Unrestricted Subsidiary owed to the Company, the Guarantors and each
Unleveraged Restricted Subsidiary on the date of Revocation of such
Unrestricted Subsidiary as an Unrestricted Subsidiary in accordance with
Section 4.23 or (B) the Designation Amount with respect to such Unrestricted
Subsidiary on the date of the Designation of such Subsidiary as an Unrestricted
Subsidiary in accordance with Section 4.23.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the dividend would have
been permitted on the date of declaration; (2) if no Default or Event of
Default shall have occurred and be continuing, the acquisition of any shares of
Capital Stock of the Company, either (i) solely in exchange for shares of
Qualified Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of shares of Qualified Capital Stock of the Company;
(3) Permitted Tax Payments; (4) so long as no Default or Event of Default shall
have occurred and be continuing, repurchases of Capital Stock of the Company
from officers, directors, employees or consultants pursuant to equity ownership
or compensation plans not to exceed $500,000 in any year; and (5) so long as no
Default or Event of Default shall have occurred and be continuing, other
Restricted Payments in an aggregate amount not to exceed $5.0 million. In
determining the aggregate amount of Restricted Payments made subsequent to the
Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1), (2), (4) and (5) shall be
included in such calculation.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an officers' certificate stating that such
Restricted Payment complies with this Indenture and setting forth in reasonable
detail the basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available internal
quarterly financial statements.
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SECTION 4.05. Corporate Existence.
Except as otherwise permitted by Article Five, the Company shall do or
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 of the Restricted Subsidiaries in accordance with the
respective organizational documents of each Restricted Subsidiary and the
rights (charter and statutory) and material franchises of the Company and each
of its 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 its Restricted Subsidiaries, taken as a
whole, and that the loss thereof is not, and will not be, adverse in any
material respect to the Holders.
SECTION 4.06. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments
and governmental charges levied or imposed upon it or any of the Restricted
Subsidiaries or upon the income, profits or property of it or any of the
Restricted Subsidiaries and (ii) all lawful claims for labor, materials and
supplies which, in each case, if unpaid, might by law become a material
liability or Lien upon the property of it or any of the Restricted
Subsidiaries; provided, however, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings and for which appropriate provision has been
made.
SECTION 4.07. Maintenance of Properties and Insurance.
(1) The Company shall cause all material properties owned by or leased by
it or any of the Restricted Subsidiaries used in the conduct of its business or
the business of any of the Restricted Subsidiaries to be improved or maintained
and kept in normal condition, repair and working order (reasonable wear and
tear excepted) and supplied with all necessary equipment and shall cause to be
made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in its judgment may be necessary, so that the
business carried on in connection therewith may be properly and advantageously
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conducted at all times; provided, however, that nothing in this Section 4.07
shall prevent the Company or any of the Restricted Subsidiaries from
discontinuing the use, operation or maintenance of any of such properties, or
disposing of any of them, if such discontinuance or disposal is, in the
judgment of the Board of Directors of the Company or of the Board of Directors
of any Restricted Subsidiary, or of an officer (or other agent employed by the
Company or of any of the Restricted Subsidiaries) of the Company or any of its
Restricted Subsidiaries having managerial responsibility for any such property,
desirable in the conduct of the business of the Company or any Restricted
Subsidiary, and if such discontinuance or disposal is not adverse in any
material respect to the Holders.
(2) The Company shall maintain, and shall cause the Restricted
Subsidiaries to maintain, insurance with responsible carriers against such
risks and in such amounts, and with such deductibles, retentions, self-insured
amounts and co-insurance provisions, as are customarily carried by similar
businesses of similar size, including property and casualty loss, workers'
compensation and interruption of business insurance.
SECTION 4.08. Compliance Certificate; Notice of Default.
(1) The Company shall deliver to the Trustee, within 100 days after the
close of each fiscal year an Officers' Certificate stating that a review of the
activities of the Company has been made under the supervision of the signing
officers with a view to determining whether it has kept, observed, performed
and fulfilled its obligations under this Indenture and further stating, as to
each such Officer signing such certificate, that to the best of his knowledge
the Company during such preceding fiscal year has kept, observed, performed and
fulfilled each and every such covenant and no Default or Event of Default
occurred during such year and at the date of such certificate no Default or
Event of Default has occurred and is continuing or, if such signers do know of
such Default or Event of Default, the certificate shall describe its status
with particularity. The Officers' Certificate shall also notify the Trustee
should the Company elect to change the manner in which it fixes its fiscal year
end.
(2) The annual financial statements delivered pursuant to Section 4.10
shall be accompanied by a written report of the Company's independent
accountants (who shall be a firm of established national reputation) that in
conducting their audit of such financial statements nothing has come to their
attention that would lead them to believe that the Company has vio-
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lated any provisions of Article Four, Five or Six of this Indenture insofar as
they relate to accounting matters or, if any such violation has occurred,
specifying the nature and period of existence thereof, it being understood that
such accountants shall not be liable directly or indirectly to any Person for
any failure to obtain knowledge of any such violation.
(3) The Company shall deliver to the Trustee, within ten days of becoming
aware of any Default or Event of Default in the performance of any covenant,
agreement or condition contained in this Indenture, an Officers' Certificate
specifying the Default or Event of Default and describing its status with
particularity.
SECTION 4.09. Compliance with Laws.
The Company shall comply, and shall cause each of the Restricted
Subsidiaries to comply, with all applicable statutes, rules, regulations,
orders and restrictions of the United States of America, all states and
municipalities thereof, and of any governmental department, commission, board,
regulatory authority, bureau, agency and instrumentality of the foregoing, in
respect of the conduct of their respective businesses and the ownership of
their respective properties, except for such noncompliances as would not in the
aggregate have a material adverse effect on the financial condition or results
of operations of the Company and the Restricted Subsidiaries taken as a whole.
SECTION 4.10. SEC Reports.
(1) The Company will file with the SEC all information documents and
reports to be filed with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act, whether or not the Company is subject to such filing requirements
so long as the SEC will accept such filings. The Company (at its own expense)
will file with the Trustee within 15 days after it files them with the SEC,
copies of the annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as the SEC may by
rules and regulations prescribe) which the Company files with the SEC pursuant
to Section 13 or 15(d) of the Exchange Act. Upon qualification of this
Indenture under the TIA, the Company shall also comply with the provisions of
TIA Section 314(a).
(2) At the Company's expense, regardless of whether the Company is
required to furnish such reports to its stockholders pursuant to the Exchange
Act, the Company shall cause
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its consolidated financial statements, comparable to that which would have been
required to appear in annual or quarterly reports, to be delivered to the
Trustee and the Holders. The Company will also make such reports available to
prospective purchasers of the Securities, securities analysts and
broker-dealers upon their request.
(3) For so long as any of the Securities remain outstanding the Company
will make available to any prospective purchaser of the Securities or
beneficial owner of the Securities in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act during any
period when the Company is not subject to Section 13 or 15(d) under the
Exchange Act.
SECTION 4.11. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of and/or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture, and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
SECTION 4.12. Limitation on Asset Sales.
The Company will not, and will not permit any of the Restricted
Subsidiaries to, consummate on Asset Sale unless (i) the Company or the
applicable 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 (as determined in good faith by the
Company's Board of Directors), (ii) at least 75% of the consideration received
by the Company or the Restricted Subsidiary, as the case may be, from such
Asset Sale shall be in the form of cash or Cash Equivalents and is received at
the time of such disposition; and (iii) upon the consummation of an Asset Sale,
the Company shall apply, or cause such Restricted Subsidiary to apply, the Net
Cash Proceeds relating to such Asset Sale within
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360 days of receipt thereof either (A) to prepay any Senior Debt or Guarantor
Senior Debt and, in the case of any Senior Debt or Guarantor Senior Debt under
any revolving credit facility, effect a permanent reduction in the availability
under such revolving credit facility, (B) to make an investment in properties
and assets that will be used in the business of the Company and its Restricted
Subsidiaries as existing on the Issue Date or in businesses reasonably related
thereto, or (C) a combination of prepayment and investment permitted by the
foregoing clauses (iii)(A) and (iii)(B). On the 361st day after an Asset Sale
or such earlier date, if any, as the Board of Directors of the Company or of
such Restricted Subsidiary determines not to apply the Net Cash Proceeds
relating to such Asset Sale as set forth in clauses (iii)(A), (iii)(B) and
(iii)(C) of the next preceding sentence (each, a "Net Proceeds Offer Trigger
Date"), such aggregate amount of Net Cash Proceeds which have not been applied
on or before such Net Proceeds Offer Trigger Date as permitted in clauses
(iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence (each, a "Net
Proceeds Offer Amount") shall be applied by the Company to make an offer to
purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment
Date") not less than 30 nor more than 60 days following the applicable Net
Proceeds Offer Trigger Date, from all Holders on a pro rata basis, that
principal amount of Securities equal to the Net Proceeds Offer Amount at a
price equal to 100% of the principal amount of the Securities to be purchased,
plus accrued and unpaid interest, if any, thereon to the date or purchase;
provided, however, that if at any time any non-cash consideration received by
the Company or any Restricted Subsidiary, as the case may be, in connection
with any Asset Sale is converted into or sold or otherwise disposed of for cash
(other than interest received with respect to any such non-cash consideration),
then such conversion or disposition shall be deemed to constitute an Asset Sale
hereunder and the Net Cash Proceeds thereof shall be applied in accordance with
this covenant. The Company may defer the Net Proceeds Offer until there is an
aggregate unutilized Net Proceeds Offer Amount equal to or in excess of
$5,000,000 resulting from one or more Asset Sales (at which time, the entire
unutilized Net Proceeds Offer Amount, and not just the amount in excess of
$5,000,000 shall be applied as required pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and the Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under Section 5.01, the
successor corporation shall be deemed to have sold the properties and assets of
the
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Company and the Restricted Subsidiaries not so transferred for purposes of this
covenant, and shall comply with the provisions of this covenant with respect to
such deemed sale as if it were an Asset Sale. In addition, the fair market
value of such properties and assets of the Company or the Restricted
Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for
purposes of this covenant.
Notice of each Net Proceeds Offer pursuant to this Section 4.12 will be
mailed or caused to be mailed, by first class mail, by the Company within 30
days following the Net Proceeds Offer Trigger Date to all Holders at their last
registered addresses, with a copy to the Trustee. The notice shall contain all
instructions and materials necessary to enable such Holders to tender
Securities pursuant to the Net Proceeds Offer and shall state the following
terms:
(1) that the Net Proceeds Offer is being made pursuant to Section
4.12 and that all Securities tendered in whole or in part in integral
multiples of $1,000 will be accepted for payment; provided, however, that
if the principal amount of Securities tendered in a Net Proceeds Offer
exceeds the aggregate amount of the Net Cash Proceeds Offer Amount, the
Company shall select the Securities to be purchased on a pro rata basis;
(2) the purchase price (including the amount of accrued interest, if
any) and the Net Proceeds Offer Payment Date (which shall be at least 20
Business Days from the date of mailing of notice of such Net Proceeds
Offer, or such longer period as required by law);
(3) that any Security not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor,
any Security accepted for payment pursuant to the Net Proceeds Offer
shall cease to accrue interest after the Net Proceeds Offer Payment Date;
(5) that Holders electing to have a Security purchased pursuant to a
Net Proceeds Offer will be required to surrender the Security, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the Net Proceeds Offer Payment
Date;
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(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the Business Day prior to the Net
Proceeds Offer Payment Date, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security the
Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Security purchased; and
(7) that Holders whose Securities are purchased only in part will be
issued new Securities in a principal amount equal to the unpurchased
portion of the Securities surrendered.
On or before the Net Proceeds Offer Payment Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to the Net
Proceeds Offer which are to be purchased in accordance with item (1) above,
(ii) deposit with the Paying Agent in accordance with Section 2.14 U.S. Legal
Tender sufficient to pay the purchase price plus accrued interest, if any, of
all Securities to be purchased and (iii) deliver to the Trustee Securities so
accepted together with an Officers' Certificate stating the Securities or
portions thereof being purchased by the Company. The Paying Agent shall
promptly mail to the Holders of Securities so accepted payment in an amount
equal to the purchase price plus accrued interest, if any. For purposes of
this Section 4.12, the Trustee shall act as the Paying Agent.
The Company shall and shall cause its Subsidiaries to comply with all
tender offer rules under state and Federal securities laws, including, but not
limited to, Section 14(e) under the Exchange Act and Rule 14e-1 thereunder, to
the extent applicable to such offer. To the extent that the provisions of any
securities laws or regulations conflict with the foregoing provisions of this
Indenture, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
foregoing provisions of this Indenture by virtue thereof.
SECTION 4.13. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries.
The Company will not, and will not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or permit to exist or become effective any encumbrance or restriction on the
ability of any Re-
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stricted Subsidiary to (a) pay dividends or make any other distributions on or
in respect of its Capital Stock; (b) make loans or advances or to pay any
Indebtedness or other obligation owed to the Company or any other Restricted
Subsidiary; or (c) transfer any of its property or assets to the Company or any
other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reasons of: (1) applicable law; (2) this Indenture; (3)
customary non-assignment provisions of any contract or any lease governing a
leasehold interest of any Restricted Subsidiary; (4) any instrument governing
Acquired Indebtedness, which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the Person or
the properties or assets of the Person so acquired; (5) agreements existing on
the Issue Date to the extent and in the manner such agreements are in effect on
the Issue Date; (6) any other agreement entered into after the Issue Date which
contains encumbrances and restrictions which are no more restrictive with
respect to any Restricted Subsidiary than those in effect with respect to such
Restricted Subsidiary pursuant to agreements as in effect on the Issue Date;
and (7) an agreement governing Refinancing Indebtedness incurred to Refinance
the Indebtedness issued, assumed or incurred pursuant to an agreement referred
to in clause (2), (4) or (5) above; provided, however, that the provisions
relating to such encumbrance or restriction contained in any such Refinancing
Indebtedness are no more restrictive than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such clause
(2), (4) or (5).
SECTION 4.14. Limitation on Preferred Stock of Restricted
Subsidiaries.
The Company will not permit any of the Restricted Subsidiaries to issue
any Preferred Stock (other than to the Company or to a Wholly Owned Restricted
Subsidiary) or permit any Person (other than the Company or to a Restricted
Subsidiary) to own any Preferred Stock of any Restricted Subsidiary.
SECTION 4.15. Limitation on Liens.
The Company will not, and will not cause or permit any of the Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or permit or
suffer to exist any Liens of any kind against or upon any property or assets of
the Company or any of the Restricted Subsidiaries whether owned on the Issue
Date or acquired after the Issue Date, or any proceeds therefrom, or assign or
otherwise convey any right to receive
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income or profits therefrom unless (i) in the case of Liens securing
Indebtedness that is expressly subordinate or junior in right of payment to the
Securities, the Securities are secured by a Lien on such property, assets or
proceeds that is senior in priority to such Liens and (ii) in all other cases,
the Securities are equally and ratably secured, except for (A) Liens existing
as of the Issue Date to the extent and in the manner such Liens are in effect
on the Issue Date; (B) Liens securing Senior Debt and Liens securing Guarantor
Senior Debt; (C) Liens securing the Securities and any Guarantees; (D) Liens in
favor of the Company, a Guarantor or an Unleveraged Restricted Subsidiary; (E)
Liens securing Refinancing Indebtedness which is incurred to Refinance any
Indebtedness which has been secured by a Lien permitted under this Indenture
and which has been incurred in accordance with the provisions of this
Indenture; provided, however, that such Liens do not extend to or cover any
property or assets of the Company or any of the Restricted Subsidiaries not
securing the Indebtedness so Refinanced; and (F) Permitted Liens.
SECTION 4.16. [Intentionally Omitted]
SECTION 4.17. Prohibition on Incurrence of Senior Subordinated Debt.
The Company will not, and will not permit any Guarantor to, incur or
suffer to exist Indebtedness (other than Veltri Indebtedness) that is senior in
right of payment to the Securities or the Guarantee of such Guarantor and
subordinate in right of payment to any other Indebtedness of the Company or
such Guarantor, as the case may be.
SECTION 4.18. Limitations on Transactions with Affiliates.
(a) The Company will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates (each, an
"Affiliate Transaction"), other than (x) Affiliate Transactions permitted under
paragraph (b) below and (y) Affiliate Transactions on terms that are no less
favorable than those that might reasonably have been obtained in a comparable
transaction at such time on an arm's-length basis from a Person that is not an
Affiliate of the Company or such Restricted Subsidiary. All Affiliate
Transactions (and each se-
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ries of related Affiliate Transactions which are similar or part of a common
plan) involving aggregate payments or other property with a fair market value
in excess of $1.0 million shall be approved by the Board of Directors of the
Company or such Restricted Subsidiary, as the case may be, such approval to be
evidenced by a Board Resolution stating that such Board of Directors has
determined that such transaction complies with the foregoing provisions. If
the Company or any Restricted Subsidiary enters into an Affiliate Transaction
(or series of related Affiliate Transactions related to a common plan) that
involves an aggregate fair market value of more than $10.0 million, the Company
or such Restricted Subsidiary, as the case may be, shall, prior to the
consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the relevant
Restricted Subsidiary, as the case may be, from a financial point of view, from
an Independent Financial Advisor and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
employment, consulting and compensation arrangements and agreements of the
Company as in effect on the Issue Date; (ii) reasonable fees and compensation
paid to and indemnity provided on behalf of, officers, directors, employees or
consultants of the Company or any Restricted Subsidiary as determined in good
faith by the Company's Board of Directors or senior management; (iii)
consulting fees paid by the Company consistent with past practice; (iv)
transactions exclusively between or among the Company and any of the Restricted
Subsidiaries or exclusively between or among such Restricted Subsidiaries,
provided such transactions are not otherwise prohibited by this Indenture; (v)
transactions pursuant to the Existing Agreements; and (vi) Restricted Payments
permitted by this Indenture.
SECTION 4.19. Issuance of Subsidiary Guarantees.
If (a) any Domestic Wholly Owned Restricted Subsidiary incurs any
Indebtedness or (b) any Restricted Subsidiary (whether or not a Domestic Wholly
Owned Restricted Subsidiary) guarantees any Indebtedness of the Company or any
of its Restricted Subsidiaries (other than a Subsidiary of such Restricted
Subsidiary) then, in either case, the Company shall cause such Domestic Wholly
Owned Restricted Subsidiary or such Restricted Subsidiary, as the case may be,
to (i) execute and deliver to the Trustee a supplemental indenture in form
reasonably satisfactory to the Trustee pursuant to which such Domestic Wholly
Owned Restricted Subsidiary or such Restricted
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Subsidiary, as the case may be, shall unconditionally guarantee (each, a
"Guarantee") all of the Company's obligations under the Securities and this
Indenture on the terms set forth in Article Ten and (ii) deliver to the Trustee
an Opinion of Counsel (which may contain customary exceptions) that such
supplemental indenture has been duly authorized, executed and delivered by such
Domestic Wholly Owned Restricted Subsidiary or such Restricted Subsidiary, as
the case may be, and constitutes a legal, valid, binding and enforceable
obligation of such Domestic Wholly Owned Restricted Subsidiary or such
Restricted Subsidiary, as the case may be. Thereafter, such Domestic Wholly
Owned Restricted Subsidiary or such Restricted Subsidiary, as the case may be,
shall be a Guarantor for all purposes of this Indenture. The Company may cause
any other Restricted Subsidiary of the Company to issue a Guarantee and become
a Guarantor.
SECTION 4.20. [Intentionally Omitted].
SECTION 4.21. Lines of Business.
The Company and the Restricted Subsidiaries will not engage in any
businesses which are not either (i) the same, similar or related to the
businesses in which the Company and the Restricted Subsidiaries are engaged on
the Issue Date, (ii) Permitted Investments or (iii) businesses acquired through
an acquisition after the Issue Date which are not material to the Company and
the Restricted Subsidiaries, taken as a whole.
SECTION 4.22. Payments for Consent.
The Company will not, and will not cause or permit any of its Subsidiaries
to, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Securities for or as
an inducement to any consent, waiver or amendment of any of the terms or
provisions of this Indenture, the Securities or the Guarantees unless such
consideration is offered to be paid to all Holders of the Securities who so
consent, waive or agree to amend in the time frame set forth in solicitation
documents relating to such consent, waiver or agreement.
SECTION 4.23. Limitation on Designations of Unrestricted
Subsidiaries.
The Company may designate any Subsidiary of the Company (other than a
Subsidiary of the Company which owns Capital Stock of a Restricted Subsidiary)
as an "Unrestricted Subsidiary" under this Indenture (a "Designation") only if:
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(a) no Default shall have occurred and be continuing at the time of
or after giving effect to such Designation; and
(b) the Company would be permitted under this Indenture to make an
Investment at the time of Designation (assuming the effectiveness of such
Designation) in an amount (the "Designation Amount") equal to the sum of
(i) fair market value of the Capital Stock of such Subsidiary owned by
the Company and the Restricted Subsidiaries on such date and (ii) the
aggregate amount of Indebtedness of such Subsidiary owed to the Company
and the Restricted Subsidiaries on such date; and
(c) the Company would be permitted to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.03
hereof at the time of Designation (assuming the effectiveness of such
Designation).
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment in the Designation Amount
pursuant to Section 4.04 hereof for all purposes of this Indenture. The
Company shall not, and shall not permit any Restricted Subsidiary to, at any
time (x) provide direct or indirect credit support for or a guarantee of any
Indebtedness of any Unrestricted Subsidiary (including of 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 (including any right to take
enforcement action against such Unrestricted Subsidiary), except, in the case
of clause (x) or (y), to the extent permitted under Section 4.04 hereof.
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary ("Revocation"), whereupon such Subsidiary shall then constitute a
Restricted Subsidiary, if
(a) no Default shall have occurred and be continuing at the time
and after giving effect to such Revocation; and
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(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of this
Indenture.
All Designations and Revocations must be evidenced by Board Resolutions of
the Company delivered to the Trustee certifying compliance with the foregoing
provisions.
SECTION 4.24. Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall within
30 days of the Change of Control either (i) repay in full and terminate all
commitments under Indebtedness under the Credit Agreement and all other Senior
Debt the terms of which require repayment upon a Change of Control or offer to
repay in full and terminate all commitments under all Indebtedness under the
Credit Agreement and all other such Senior Debt and to repay the Indebtedness
owed to each lender which has accepted such offer or (ii) obtain the requisite
consents under the Credit Agreement and all other Senior Debt to permit the
repurchase of the Securities as provided below. After the Company complies
with the covenant in the immediately preceding sentence, the Company shall make
an offer to purchase (a "Change of Control Offer"), and shall purchase, on a
Business Day not more than 60 nor less than 30 days following the occurrence of
the Change of Control (the "Change of Control Payment Date"), all of the then
outstanding Securities at a purchase price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, thereon to the Change
of Control Payment Date. The Change of Control Offer shall remain open for 20
Business Days (or such longer period as may be required by law) and until the
close of business on the Change of Control Payment Date.
(b) Within 30 days following the date upon which the Change of Control
occurred (the "Change of Control Date"), the Company shall mail, or cause to be
mailed, by first class mail, a notice to each Holder, with a copy to the
Trustee, which notice shall govern the terms of the Change of Control Offer.
The notice to the Holders shall contain all instructions and materials
necessary to enable such Holders to tender Securities pursuant to the Change of
Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.24 and that all Securities tendered and not withdrawn will be
accepted for payment;
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(2) the purchase price (including the amount of accrued interest)
and the Change of Control Payment Date;
(3) that any Security not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor,
any Security accepted for payment pursuant to the Change of Control Offer
shall cease to accrue interest after the Change of Control Payment Date;
(5) that Holders electing to have a Security purchased pursuant to a
Change of Control Offer will be required to surrender the Security, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Security completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the Change of Control
Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the Business Day prior to the
Change of Control Payment Date, a facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the
Securities the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Securities purchased;
(7) that Holders whose Securities are purchased only in part will be
issued new Securities in a principal amount equal to the unpurchased
portion of the Securities surrendered; and
(8) the circumstances and relevant facts regarding such Change of
Control.
On or before the Change of Control Payment Date, the Company shall (i)
accept for payment Securities or portions thereof tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent in accordance with
Section 2.14 U.S. Legal Tender sufficient to pay the purchase price plus
accrued interest, if any, of all Securities so tendered and (iii) deliver to
the Trustee Securities so accepted together with an Officers' Certificate
stating the Securities or portions thereof being purchased by the Company.
Upon receipt by the Paying Agent of the monies specified in clause (ii) above
and a copy of the Officers' Certificate specified in clause (iii) above, the
Paying Agent shall promptly mail to the
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Holders of Securities so accepted payment in an amount equal to the purchase
price plus accrued interest, if any, and the Trustee shall promptly
authenticate and mail to such Holders new Securities equal in principal amount
to any unpurchased portion of the Securities surrendered. Any Securities not
so accepted shall be promptly mailed by the Company to the Holder thereof. For
purposes of this Section 4.24, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of all validly tendered and not
validly withdrawn Securities pursuant to a Change of Control Offer shall be
returned by the Trustee to the Company.
The Company shall and shall cause its Subsidiaries to comply with all
tender offer rules under state and Federal securities laws, including, but not
limited to, Section 14(e) under the Exchange Act and Rule 14e-1 thereunder, to
the extent applicable to such offer. To the extent that the provisions of any
securities laws or regulations conflict with this Section 4.24, the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under this Section 4.24 by virtue
thereof.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Consolidations and Sales of Assets.
(a) The Company will not, in a single transaction or series of related
transactions, consolidate or merge with or into any Person, or sell, assign,
transfer, lease, convey or otherwise dispose of (or cause or permit any
Restricted Subsidiary to sell, assign, transfer, lease, convey or otherwise
dispose of) all or substantially all of the Company's assets (determined on a
consolidated basis for the Company and the Restricted Subsidiaries) whether as
an entirety or substantially as an entirety to any Person unless: (i) either
(1) the Company shall be the surviving or continuing corporation or (2) the
Person (if other than the Company) formed by such consolidation or into which
the Company is merged or the Person which acquires by sale, assignment,
transfer, lease, conveyance or other disposition the properties and assets of
the Company and the Restricted Subsidiaries substantially as an entirety
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(the "Surviving Entity") (x) shall be a corporation organized and validly
existing under the laws of the United States or any State thereof or the
District of Columbia and (y) shall expressly assume, by supplemental indenture
(in form and substance satisfactory to the Trustee), executed and delivered to
the Trustee, the due and punctual payment of the principal of, and premium, if
any, and interest on all of the Securities and the performance of every
covenant of the Securities, this Indenture and the Registration Rights
Agreement on the part of the Company to be performed or observed; (ii)
immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including giving effect to any
Indebtedness and Acquired Indebtedness incurred or anticipated to be incurred
in connection with or in respect of such transaction), the Company or such
Surviving Entity, as the case may be, shall be able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to Section
4.03 hereof; (iii) immediately before and immediately after giving effect to
such transaction and the assumption contemplated by clause (i)(2)(y) above
(including, without limitation, giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred and any Lien granted in
connection with or in respect of the transaction), no Default or Event of
Default shall have occurred or be continuing; and (iv) the Company or the
Surviving Entity shall have delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger, sale,
assignment, transfer, lease, conveyance or other disposition and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of this Indenture
and that all conditions precedent in this Indenture relating to such
transaction have been satisfied.
(b) 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 of the properties or assets of one or more Restricted
Subsidiaries, the Capital Stock of which constitutes all or substantially all
of the properties and assets of the Company, shall be deemed to be the transfer
of all or substantially all of the properties and assets of the Company.
(c) No Guarantor (other than any Guarantor whose Guarantee is to be
released in accordance with the terms of the Guarantee and this Indenture in
connection with any transaction complying with the provisions of Section 4.12
will, and the Company will not cause or permit any Guarantor to, consolidate
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with or merge with or into any Person other than the Company or any other
Guarantor unless: (i) the entity formed by or surviving any such consolidation
or merger (if other than the Guarantor) is a corporation organized and existing
under the laws of the United States or any State thereof or the District of
Columbia; (ii) such entity assumes by supplemental indenture all of the
obligations of the Guarantor under this Indenture, such Guarantor's Guarantee
and the Registration Rights Agreement; (iii) immediately after giving effect to
such transaction, no Default or Event of Default shall have occurred and be
continuing; (iv) immediately after giving effect to such transaction and the
use of any net proceeds therefrom on a pro forma basis, the Company could
satisfy the provisions of clause (a)(ii) of this Section 5.01; and (v) the
Company shall have delivered to the Trustee an Officers' Certificate and
Opinion of Counsel, each stating that such consolidation or merger and, if a
supplemental indenture is required in connection with such transaction, such
supplemental indenture comply with the applicable provisions of this Indenture
and that all conditions precedent in this Indenture relating to such
transaction have been satisfied.
SECTION 5.02. Successor Corporation Substituted.
In accordance with the foregoing, upon any such consolidation, merger,
conveyance, lease or transfer of all or substantially all of the assets of the
Company in which the Company is not the continuing corporation, the Surviving
Entity formed by such consolidation or into which the Company is merged or to
which such conveyance, lease or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture and the Securities with the same effect as if such successor had
been named as the Company herein, and thereafter (except in the case of a sale,
assignment, transfer, lease, conveyance or other disposition) the predecessor
corporation will be relieved of all further obligations and covenants under
this Indenture, the Securities and the Registration Rights Agreement; provided
that solely for purposes of computing amounts described in subclause (iii) of
Section 4.04, any such Surviving Entity shall only be deemed to have succeeded
to and be substituted for the Company with respect to periods subsequent to the
effective time of such merger, consolidation or transfer of assets.
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ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs if:
(1) the Company fails to pay interest on any Security for a period
of 30 days after the same becomes due and payable (whether or not such
payment shall be prohibited by Article Twelve); or
(2) the Company fails to pay the principal of any Security, when
such principal becomes due and payable, whether at maturity, upon
redemption or otherwise (including the failure to make a payment to
purchase Securities tendered pursuant to a Change of Control Offer or Net
Proceeds Offer) (whether or not such payment shall be prohibited by
Article Twelve); or
(3) the Company or any Guarantor defaults in the observance or
performance of any other covenant or agreement contained in this
Indenture, the Securities or any Guarantee, which default continues for a
period of 30 days (with respect to the covenants set forth in Sections
4.03, 4.04, 4.12 and 4.15) or 60 days (with respect to any other covenant
or agreement), as the case may be, after (x) the Company receives written
notice specifying the default and requiring the Company to remedy the
same from the Trustee or (y) the Company and the Trustee receive such a
notice from Holders of at least 25% in principal amount of outstanding
Securities (except in the case of a default with respect to Article Five,
which will constitute an Event of Default with such notice requirement
but without such passage of time requirement); or
(4) the Company or a Restricted Subsidiary defaults under any
mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness of the Company
or of any Restricted Subsidiary (or the payment of which is guaranteed by
the Company or any Restricted Subsidiary) which default (a) is caused by
a failure to pay principal of such Indebtedness after any applicable
grace period provided in such Indebtedness on the date of such default (a
"principal payment default"), or (b) results in the accel-
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eration of such Indebtedness prior to its express maturity (and such
acceleration is not rescinded, or such Indebtedness is not repaid, within
30 days) and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a principal payment default or
the maturity of which has been so accelerated (and such acceleration is
not rescinded, or such Indebtedness is not repaid, within 30 days),
aggregates $5.0 million; or
(5) the Company or any of its Significant Subsidiaries (A) admits in
writing its inability to pay its debts generally as they become due, (B)
commences a voluntary case or proceeding under any Bankruptcy Law with
respect to itself, (C) consents to the entry of a judgment, decree or
order for relief against it in an involuntary case or proceeding under
any Bankruptcy Law, (D) consents to the appointment of a Custodian of it
or for substantially all of its property, (E) consents to or acquiesces
in the institution of a bankruptcy or an insolvency proceeding against
it, (F) makes a general assignment for the benefit of its creditors, or
(G) takes any corporate action to authorize or effect any of the
foregoing; or
(6) a court of competent jurisdiction enters a judgment, decree or
order for relief in respect of the Company or any of its Significant
Subsidiaries in an involuntary case or proceeding under any Bankruptcy
Law, which shall (A) approve as properly filed a petition seeking
reorganization, arrangement, adjustment or composition in respect of the
Company or any of its Significant Subsidiaries, (B) appoint a Custodian
of the Company or any of its Significant Subsidiaries or for
substantially all of any of their property or (C) order the winding-up or
liquidation of its affairs; and such judgment, decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or
(7) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent jurisdiction for the
payment of money in excess of $5.0 million, either individually or in the
aggregate, shall be entered against the Company or any Restricted
Subsidiary of the Company or any of their respective properties and shall
not be discharged or fully bonded and there shall have been a period of
60 days after the date on which any period for appeal has expired and
during which a stay of
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enforcement of such judgment, order or decree shall not be in effect; or
(8) any Guarantee of a Significant Subsidiary ceases to be in full
force and effect, or any Guarantee of a Significant Subsidiary is
declared to be null and void and unenforceable or any Guarantee of a
Significant Subsidiary is found to be invalid or any Guarantor which is a
Significant Subsidiary denies its liability under its Guarantee (other
than by reason of release of a Guarantor in accordance with the terms of
this Indenture).
The Trustee shall, within 30 days after the occurrence of any Default
actually known to a Responsible Officer of the Trustee, give to the holders of
Securities notice of such Default; provided that, except in the case of a
Default in the payment of principal of or interest on any of the Securities,
the Trustee shall be protected in withholding such notice if and so long as a
Responsible Officer of the Trustee in good faith determines that the
withholding of such notice is in the interest of the Holders of Securities.
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in clause
(5) or (6) above) occurs and is continuing, then the Trustee or the Holders of
not less than 25% in aggregate principal amount of the then outstanding
Securities may declare the unpaid principal of, premium, if any, and accrued
and unpaid interest on, all the Securities then outstanding to be immediately
due and payable, by a notice in writing to the Company (and to the Trustee, if
given by Holders) specifying the respective Event(s) of Default and that it is
a "notice of acceleration" and upon such declaration such principal amount,
premium, if any, and accrued and unpaid interest will become immediately due
and payable. If an Event of Default specified in clause (5) or (6) above
occurs, all unpaid principal of, and premium, if any, and accrued and unpaid
interest on, the Securities then outstanding will ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.
At any time after a declaration of acceleration with respect to the
Securities as described in the preceding paragraph, the Holders of a majority
in principal amount of the Securities then outstanding may rescind and cancel
such declaration and its consequences (a) if the rescission would not conflict
with any judgment or decree, (b) if all existing Events
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of Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration, (c) to the extent the
payment of such interest is lawful, interest on overdue installments of
interest and overdue principal, which has become due otherwise than by such
declaration of acceleration, has been paid, (d) if the Company has paid the
Trustee its reasonable compensation and reimbursed the Trustee for its
expenses, disbursements and advances and (e) in the event of the cure or waiver
of an Event of Default of the type described in clauses (5) and (6) of the
description of Events of Default above, the Trustee shall have received an
Officers' Certificate and an Opinion of Counsel that such Event of Default has
been cured or waived. 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, this Indenture or any Guarantee.
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 Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute 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 Defaults.
Subject to Sections 6.02, 6.07 and 9.02, the Holders of not less than a
majority in 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, premium or
interest on any Security as specified in clauses (1) and (2) of Section 6.01.
The Company 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 upon which the Trustee may conclusively rely. When a
Default or Event of Default is waived, it is cured and ceases.
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SECTION 6.05. Control by Majority.
The Holders of not less than 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. Subject to Section 7.01, however, the Trustee may
refuse to follow any direction that conflicts with any law or this Indenture,
that the Trustee determines may be unduly prejudicial to the rights of another
Securityholder, or that may involve the Trustee in personal liability; provided
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
from the Company satisfactory to it in its sole discretion against any fees,
loss, liability, cost or expense caused by taking such action or following such
direction.
SECTION 6.06. Limitation on Suits.
A Securityholder may not pursue any remedy with respect to this Indenture,
the Securities or any Guarantee unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holder or Holders of at least 25% in principal amount of the
outstanding Securities make a written request to the Trustee to pursue
the remedy;
(3) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 30 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(5) during such 30-day period the Holder or 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.
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A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of, premium and interest on a Security,
on or after the respective due dates expressed in such 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, premium or interest
specified in clause (1) or (2) of Section 6.01 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or any other obligor on the Securities for the whole amount
of principal and accrued interest remaining unpaid, together with interest on
overdue 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, legal fees,
disbursements and advances of the Trustee, its agents, nominees, custodians,
counsel, accountants and experts) and the Securityholders allowed in any
judicial proceedings relating to the Company, 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
Securityholder 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
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, legal fees, disbursements and advances of the
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Trustee, its agents, nominees, custodians 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 Securityholder 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
Securityholder in any such proceeding.
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:
First: to the Trustee for amounts owing under Section 7.07;
Second: if the Holders are forced to proceed against the Company, a
Guarantor or any other obligor on the Securities directly without the
Trustee, to Holders for their collection costs;
Third: to Holders for amounts due and unpaid on the Securities for
principal, premium and interest, ratably, without preference or priority
of any kind, according to the amounts due and payable on the Securities
for principal, premium and interest, respectively; and
Fourth: to the Company or any Guarantors, as their respective
interests may appear.
The Trustee, upon prior notice to the Company, may fix a record date and
payment date for any payment to Securityholders 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.
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This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in
principal amount of the outstanding Securities.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default actually known to a Responsible Officer of the
Trustee 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 person would exercise or use
under the circumstances in the conduct of his own affairs. Subject to such
provisions, the Trustee shall be under no obligation to exercise any of its
rights or powers under this Indenture at the request of any of the holders of
Securities, unless they shall have offered to the Trustee security and
indemnity satisfactory to it in its sole discretion.
(b) Except during the continuance of an Event of Default actually known
to a Responsible Officer of the Trustee:
(1) The Trustee need perform only those duties as are specifically
set forth herein and no others and no implied covenants or obligations
shall be read into this Indenture against the Trustee.
(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 and such
other documents delivered to it pursuant to Section 11.04 hereof
furnished to the Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
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(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 Responsible Officer of the Trustee, unless it is
proved that the Trustee was negligent in ascertaining the pertinent
facts.
(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 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 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 Company. 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 conclusively rely and shall be protected in
acting or refraining from acting 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 an Opinion of Counsel, which shall conform
to the provisions of Section 11.05. The Trustee shall not be liable for
any action it
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takes or omits to take in good faith in reliance on such certificate or
opinion.
(c) The Trustee may act through its attorneys, agents, custodians
and nominees and shall not be responsible for the misconduct or
negligence of any attorney, agent, custodian or nominee (other than such
a person 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) The Trustee may consult with counsel and the advice or opinion
of such counsel as to matters of law shall be full and complete
authorization and protection 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) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this
Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the fees, costs, expenses and
liabilities which may be incurred therein or thereby.
(g) Except with respect to Section 4.01, the Trustee shall not have
any duty as to inquire as to the performance by the Company of its
covenants or obligations under this Indenture. The Trustee shall not be
deemed to have notice or any knowledge of any matter (including without
limitation Defaults or Events of Default) unless a Responsible Officer
assigned to and working in the Trustee's Corporate Trust Administration
has actual knowledge thereof or unless written notice thereof is received
by the Trustee, attention: Corporate Trust Administration and such
notice references the Securities generally, the Company or this
Indenture.
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 Company, its
Subsidiaries, any Guarantors and
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their respective Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee
must comply with 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 Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company in this Indenture or
any document issued in connection with the sale of Securities (including
without limitation any preliminary or final offering memorandum) or any
statement in the Securities other than the Trustee's certificate of
authentication. The Trustee makes no representations with respect to the
effectiveness or adequacy of this Indenture. The Trustee shall not be
responsible for independently ascertaining or maintaining such validity, if
any, and shall be fully protected in relying upon certificates and opinions
delivered to it in accordance with the terms of this Indenture.
SECTION 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing and a
Responsible Officer of the Trustee receives actual notice of such event, the
Trustee shall mail to each Securityholder, as their names and addresses appear
on the Securityholder list described in Section 2.05, notice of the uncured
Default or Event of Default within 30 days after the Trustee receives such
notice. Except in the case of a Default or an Event of Default in payment of
principal of, premium or interest on, any Security, including the failure to
make payment on (i) the Change of Control Payment Date pursuant to a Change of
Control Offer or (ii) the Excess Proceeds Payment Date pursuant to an Asset
Sale Offer, the Trustee may withhold the notice if and so long as the board of
directors, the executive committee, or a trust committee of directors, of the
Trustee in good faith determines that withholding the notice is in the interest
of the Securityholders.
SECTION 7.06. Reports by Trustee to Holders.
This Section 7.06 shall not be operative as a part of this Indenture until
this Indenture is qualified under the TIA, and, until such qualification, this
Indenture shall be construed as if this Section 7.06 were not contained herein.
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Within 60 days after each May 15 of each year beginning with 1998, the
Trustee shall, to the extent that any of the events described in TIA Section
313(a) occurred within the previous twelve months, but not otherwise, mail to
each Securityholder a brief report dated as of such date that complies with TIA
Section 313(a). The Trustee also shall comply with TIA Section Section
313(b), 313(c) and 313(d).
A copy of each report at the time of its mailing to Securityholders shall
be mailed to the Company and filed with the SEC and each securities exchange,
if any, on which the Securities are listed.
The Company shall notify a Responsible Officer of the Trustee if the
Securities become listed on any securities exchange or of any delisting
thereof.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder. The Trustee's compensation shall not
be limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances (including reasonable fees and expenses of
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 bad faith. Such expenses shall
include the reasonable compensation, legal fees, disbursements and expenses of
the Trustee's agents, accountants, experts, nominees, custodians and counsel
and any taxes or other expenses incurred by a trust created pursuant to Section
8.01 hereof.
The Company shall indemnify the Trustee, its directors, officers and
employees and each predecessor trustee for, and hold it harmless against, any
loss, liability or expense incurred by the Trustee without negligence or bad
faith on its part arising out of or in connection with the administration of
this trust and its duties under this Indenture, including the reasonable
expenses and attorneys' fees of defending itself against any claim of liability
arising hereunder. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity. However, the
failure by the Trustee to so notify the Company shall not relieve the Company
of its obligations hereunder. The Company shall defend the claim and the
Trustee shall cooperate in the defense (and may employ its own counsel) at the
Company's ex-
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pense. The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld or delayed. The
Company need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee as a result of the violation of this
Indenture by the Trustee if such violation arose from the Trustee's negligence
or bad faith.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a senior claim and lien prior to the Securities against all
money or property held or collected by the Trustee, in its capacity as Trustee.
When the Trustee incurs expenses or renders services after an Event of
Default specified in clause (5) or (6) of Section 6.01 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 Company's obligations
under this Section 7.07 and any claim arising hereunder shall survive the
resignation or removal of any Trustee, the discharge of the Company's
obligations pursuant to Article Eight 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 Company in writing.
The Holders of a majority in principal amount of the outstanding Securities
may remove the Trustee by so notifying the Company and the Trustee in writing
and may appoint a successor trustee with the Company's consent. The Company
may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes legally incapable of acting with respect to
its duties hereunder.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company
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shall notify each Holder of such event and 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 Company.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately 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 all the rights, powers and duties of the Trustee
under this Indenture; provided, however, that no Trustee under this Indenture
shall be liable for any act or omission of any successor Trustee. A successor
Trustee shall mail notice of its succession to each Securityholder.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the outstanding Securities
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder 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 Company's obligations under Section 7.07 shall continue for the benefit of
the retiring Trustee and the Company shall pay to any such replaced or removed
Trustee all amounts owed under Section 7.07 upon such replacement or removal.
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, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee. In case any Securities
shall have been authenticated, but not delivered, by
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the Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such authentication and
deliver the Securities so authenticated with the same effect as if such
successor Trustee had itself authenticated such Securities.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the requirement
of TIA Section Section 310(a)(1) and 310(a)(5). 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. The Trustee shall comply with TIA
Section 310(b); provided, however, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities, or certificates of interest or participation in other
securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims Against Company.
The Trustee, in its capacity as Trustee hereunder, shall comply with TIA
Section 311(a), excluding any creditor relationship listed in TIA Section
311(b). A Trustee who has resigned or been removed shall be subject to TIA
Section 311(a) to the extent indicated.
ARTICLE EIGHT
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 8.01. Legal Defeasance and Covenant Defeasance.
(a) The Company may, at its option by Board Resolution, at any time, with
respect to the Securities, elect to have either paragraph (b) or paragraph (c)
below be applied to the outstanding Securities upon compliance with the
conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company shall be deemed to have been
released and discharged from its obligations with respect to the outstanding
Securities on the date the conditions set forth below are satisfied
(hereinafter,
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"Legal Defeasance"). For this purpose, such Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding Securities, which shall thereafter be deemed to
be "outstanding" only for the purposes of the Sections and matters under this
Indenture referred to in (i) and (ii) below, and to have satisfied all its
other obligations under such Securities and this Indenture insofar as such
Securities are concerned, except for the following, which shall survive until
otherwise terminated or discharged hereunder: (i) the rights of the Holders of
outstanding Securities to receive payment in respect of the principal of,
premium, if any, and interest on such Securities when such payments are due,
(ii) the Company's obligations to issue temporary Securities, register the
transfer or exchange of any Securities, replace mutilated, destroyed, lost or
stolen Securities and maintain an office or agency for payments in respect of
the Securities, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and (iv) the Legal Defeasance provisions of this Indenture. The
Company may exercise its option under this paragraph (b) notwithstanding the
prior exercise of its option under paragraph (c) below with respect to the
Securities.
(c) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (c), the Company shall be released and discharged
from its obligations under any covenant contained in Article Five and in
Sections 4.03 through 4.24 with respect to the outstanding Securities on and
after the date the conditions set forth below are satisfied (hereinafter,
"Covenant Defeasance"), and the Securities shall thereafter be deemed to be not
"outstanding" for the purpose of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder. For this purpose, such Covenant Defeasance means that, with respect
to the outstanding Securities, the Company and any Guarantor may omit to comply
with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any
other document and such omission to comply shall not constitute a Default or an
Event of Default under Section 6.01(3), nor shall any event referred to in
Section 6.01(4) or (7) thereafter constitute a Default or an Event of Default
thereunder but, except as specified above, the remainder of this Indenture and
such Securities shall be unaffected thereby.
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(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
(1) The Company shall have irrevocably deposited in trust with the
Trustee, pursuant to an irrevocable trust and security agreement in form
and substance satisfactory to the Trustee, U.S. Legal Tender or direct
non-callable obligations of, or non-callable obligations guaranteed by,
the United States of America for the payment of which obligation or
guarantee the full faith and credit of the United States of America is
pledged ("U.S. Government Obligations") maturing as to principal and
interest in such amounts and at such times as are sufficient, without
consideration of the reinvestment of such interest and principal and
after payment of all Federal, state and local taxes or other charges or
assessments in respect thereof payable by the Trustee, in the opinion of
a nationally recognized firm of Independent public accountants expressed
in a written certification thereof (in form and substance reasonably
satisfactory to the Trustee) delivered to the Trustee, to pay the
principal of, premium, if any, and interest on all the outstanding
Securities on the dates on which any such payments are due and payable in
accordance with the terms of this Indenture and of the Securities;
(2) Such deposits shall not cause the Trustee to have a conflicting
interest as defined in and for purposes of the TIA;
(3) The Trustee shall have received Officers' Certificates stating
that No Default of Event of Default or event which with notice or lapse
of time or both would become a Default or an Event of Default with
respect to the Securities shall have occurred and be continuing on the
date of such deposit or, insofar as Section 6.01(5) or (6) is concerned,
at any time during the period ending on the 91st day after the date of
such deposit (it being understood that this condition shall not be deemed
satisfied until the expiration of such period);
(4) The Trustee shall have received Officers' Certificates stating
that such deposit will not result in a Default under this Indenture or a
breach or violation of, or constitute a default under, any other material
instrument or agreement to which the Company or any of its Sub-
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sidiaries is a party or by which it or its property is bound;
(5) (i) In the event the Company elects paragraph (b) hereof, the
Company shall deliver to the Trustee an Opinion of Counsel, in form and
substance reasonably satisfactory to the Trustee to the effect that (A)
the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the Issue Date, 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 state
that Holders of the Securities will not recognize income gain or loss for
Federal income tax purposes as a result of such deposit and the
defeasance contemplated hereby and will be subject to Federal income
taxes in the same manner and at the same times as would have been the
case of such deposit and defeasance had not occurred, or (ii) in the
event the Company elects paragraph (c) hereof, the Company shall deliver
to the Trustee an Opinion of Counsel, in form and substance reasonably
satisfactory to the Trustee, to the effect that, Holders of the
Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit and the defeasance contemplated
hereby and will be subject to Federal income tax in the same amounts and
in the same manner and at the same times as would have been the case if
such deposit and defeasance had not occurred;
(6) The Company shall have delivered to the Trustee an Opinion of
Counsel stating that as a result of the Legal Defeasance or Covenant
Defeasance, neither the Trustee nor the trust have become or are deemed
to have become an "investment company" under the Investment Company Act
of 1940, as amended;
(7) The Company shall have delivered to the Trustee an Officers'
Certificate, in form and substance reasonably satisfactory to the
Trustee, stating that the deposit under clause (1) was not made by the
Company, a Guarantor or any Subsidiary of the Company with the intent of
defeating, hindering, delaying or defrauding any other creditors of the
Company, a Guarantor, or any Subsidiary of the Company or others;
(8) The Company shall have delivered to the Trustee an Opinion of
Counsel, in form and substance reasonably satisfactory to the Trustee, to
the effect that, (A) the
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trust funds will not be subject to the rights of holders of Indebtedness
of the Company or any Guarantor other than the Securities and (B)
assuming no intervening bankruptcy of the Company between the date of
deposit and the 91st day following the deposit and that no Holder of
Securities is an insider of the Company, after the passage of 90 days
following the deposit, the trust funds will not be subject to any
applicable bankruptcy, insolvency, reorganization or similar law
affecting creditors' rights generally; and
(9) The Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent specified herein relating to the defeasance contemplated by
this Section 8.01 have been complied with; provided, however, that no
deposit under clause (1) above shall be effective to terminate the
obligations of the Company under the Securities or this Indenture prior
to 90 days following any such deposit; and
(10) The Company shall have paid all amounts owing to the Trustee
pursuant to Section 7.07.
Notwithstanding the foregoing, the Opinion of Counsel required by
paragraph (5) above need not be delivered if all Securities not theretofore
delivered to the Trustee for cancellation (i) have become due and payable, (ii)
will become due and payable on the maturity date for the securities within one
year, or (iii) 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.
In the event all or any portion of the Securities are to be redeemed
through such irrevocable trust, the Company must make arrangements satisfactory
to the Trustee, at the time of such deposit, for the giving of the notice of
such redemption or redemptions by the Trustee in the name and at the expense of
the Company.
SECTION 8.02. Satisfaction and Discharge.
In addition to the Company's rights under Section 8.01, the Company may
terminate all of its obligations under this Indenture (subject to Section 8.03)
when:
(1) all Securities theretofore authenticated and delivered (other
than Securities which have been destroyed,
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lost or stolen and which have been replaced or paid as provided in
Section 2.07) have been delivered to the Trustee for cancellation; or
(2) all Securities not theretofore delivered to the Trustee for
cancellation (except lost, stolen or destroyed Securities which have been
replaced or paid) have been called for redemption pursuant to the terms
of the Securities or have otherwise 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 Securities not 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 Company directing the Trustee to apply such funds to the payment
thereof at maturity or redemption, as the case may be; and
(3) the Company has paid or caused to be paid all other sums payable
hereunder and under the Securities by the Company; and
(4) there exists no Default or Event of Default under this
Indenture; and
(5) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent specified herein relating to the satisfaction and discharge of
this Indenture have been complied with; and
(6) the Company shall have paid all amounts owing to the Trustee
pursuant to Section 7.07.
SECTION 8.03. Survival of Certain Obligations.
Notwithstanding the satisfaction and discharge of this Indenture and of
the Securities referred to in Section 8.01 or 8.02, the respective obligations
of the Company and the Trustee under Sections 2.02, 2.03, 2.04, 2.05, 2.06,
2.07, 2.10, 2.12, 2.13, 4.01, 4.02 and 6.07, Article Seven and Sections 8.05,
8.06 and 8.07 shall survive until the Securities are no longer outstanding, and
thereafter the obligations of the Company and the Trustee under Sections 7.07,
8.05, 8.06 and 8.07 shall survive. Nothing contained in this Article Eight
shall abrogate any of the rights, obligations or duties of the Trustee under
this Indenture.
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SECTION 8.04. Acknowledgment of Discharge by Trustee.
Subject to Section 8.07, after (i) the conditions of Section 8.01 or 8.02
have been satisfied, (ii) the Company has paid or caused to be paid all other
sums payable hereunder by the Company and (iii) the Company has delivered to
the Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent referred to in clause (i) above relating to the
satisfaction and discharge of this Indenture have been complied with, the
Trustee upon written request shall acknowledge in writing the discharge of the
Company's obligations under this Indenture except for those surviving
obligations specified in Section 8.03.
SECTION 8.05. Application of Trust Assets.
The Trustee shall hold any U.S. Legal Tender or U.S. Government
Obligations deposited with it in the irrevocable trust established pursuant to
Section 8.01. The Trustee shall apply the deposited U.S. Legal Tender or the
U.S. Government Obligations, together with earnings thereon, through the Paying
Agent, in accordance with this Indenture and the terms of the irrevocable trust
agreement established pursuant to Section 8.01, to the payment of principal of
and interest on the Securities. The U.S. Legal Tender or U.S. Government
Obligations so held in trust and deposited with the Trustee in compliance with
Section 8.01 shall not be part of the trust estate under this Indenture, but
shall constitute a separate trust fund for the benefit of all Holders entitled
thereto.
SECTION 8.06. Repayment to the Company or Guarantors; Unclaimed
Money.
Subject to Sections 7.07 and 8.01, the Trustee shall promptly pay to the
Company, or if deposited with the Trustee by any Guarantor, to such Guarantor,
upon receipt by the Trustee of an Officers' Certificate, any excess money,
determined in accordance with Section 8.01, held by it at any time. The
Trustee and the Paying Agent shall pay to the Company or any Guarantor, as the
case may be, upon receipt by the Trustee or the Paying Agent, as the case may
be, of an Officers' Certificate, any money held by it for the payment of
principal, premium, if any, or interest that remains unclaimed for two years
after payment to the Holders is required; provided, however, that the Trustee
and the Paying Agent before being required to make any payment may, but need
not, 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 enti-
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tled to such money notice that such money remains unclaimed and that after a
date specified therein (which shall not be less than 30 days from the date of
such mailing or publication), which shall be at least 2 years from the date of
such publication or mailing, any unclaimed balance of such money then remaining
will be repaid to the Company. After payment to the Company or any Guarantor,
as the case may be, Security 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 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Indenture 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,
then and only then the Company's and each Guarantor's, if any, obligations
under this Indenture and the Securities shall be revived and reinstated as
though no deposit had been made pursuant to this Indenture until such time as
the Trustee is permitted to apply all such money or U.S. Government Obligations
in accordance with this Indenture; provided, however, that if the Company or
the Guarantors, as the case may be, have made any payment of principal of,
premium, if any, or interest on any Securities because of the reinstatement of
their obligations, the Company or the Guarantors, as the case may be, shall be,
subrogated to the rights of the holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
The Company and any Guarantors (when authorized by Board Resolutions), and
the Trustee, together, may amend or supplement this Indenture or the Securities
without notice to or consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency;
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(2) to evidence the succession in accordance with Article Five
hereof of another Person to the Company or a Guarantor and the assumption
by any such successor of the covenants of the Company or a Guarantor
herein and in the Securities or a Guarantee, as the case may be;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(4) to make any other change that does not materially adversely
affect the rights of any Securityholders hereunder; or
(5) to comply with any requirements of the SEC in connection with
the qualification of this Indenture under the TIA; or
(6) to add or release any Guarantor pursuant to the terms of this
Indenture;
provided that each of the Company and any Guarantors has delivered to the
Trustee an Opinion of Counsel and an Officers' Certificate, each stating that
such amendment or supplement complies with the provisions of this Section 9.01.
SECTION 9.02. With Consent of Holders.
Subject to Section 6.07, the Company and any Guarantors (when authorized
by Board Resolutions) and the Trustee, together, with the written consent of
the Holder or Holders of at least a majority in aggregate principal amount of
the outstanding Securities, may amend or supplement this Indenture, the
Securities and any Guarantees without notice to any other Securityholders.
Subject to Section 6.07, the Holder or Holders of a majority in aggregate
principal amount of the outstanding Securities may waive compliance by the
Company with any provision of this Indenture or the Securities without notice
to any other Securityholder. Without the consent of each Securityholder
affected, however, no amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, may:
(1) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver of any provision of this
Indenture, the Securities or any Guarantees;
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(2) reduce the rate or change or have the effect of changing the
time for payment of interest, including default interest, on any
Security;
(3) reduce the principal amount of any Security;
(4) change or have the effect of changing the Final Maturity Date of
any Security, or alter the redemption or repurchase provisions contained
in this Indenture or the Securities in a manner adverse to any Holder;
(5) make any change in provisions of this Indenture protecting the
right of each Holder to receive payment of principal of and interest on
such Security on or after the due date thereof or to bring suit to
enforce such payment, or permitting Holders of a majority in principal
amount of the Securities to waive Defaults or Events of Default;
(6) make any changes in Section 6.04, 6.07 or this Section 9.02;
(7) make the principal of, premium or the interest on any Security
payable in money other than as provided for in this Indenture as in
effect on the date hereof;
(8) affect the ranking of the Securities or any Guarantee, in each
case in a manner adverse to the Holders;
(9) amend, modify or change the obligation of the Company to make or
consummate a Change of Control Offer after the occurrence of a Change of
Control or make or consummate a Net Proceeds Offer with respect to any
Asset Sale that has been consummated or waive any default in the
performance thereof or modify any of the provisions or definitions with
respect to any such offers; or
(10) release any Guarantor from any of its obligations under its
Guarantee or this Indenture otherwise than in accordance with the terms
of this Indenture.
It shall not be necessary for the consent of the Holders under this
Section 9.02 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 9.02 becomes
effective, the Company shall mail to the
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Holders affected thereby a notice briefly describing the amendment, supplement
or waiver. Any failure of the Company to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.
SECTION 9.03. Compliance with TIA.
From the date on which this Indenture is qualified under the TIA, every
amendment, waiver or supplement of this Indenture or the Securities shall
comply with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, waiver or supplement becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made
on any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by notice to the Trustee
or the Company received before the date on which the Trustee receives an
Officers' Certificate certifying that the Holders of the requisite principal
amount of Securities have consented (and not theretofore revoked such consent)
to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the last
sentence of the immediately preceding paragraph, those Persons who were Holders
at such record date (or their duly designated proxies), and only those Persons,
shall be entitled to revoke any consent previously given, whether or not such
Persons continue to be Holders after such record date. No such consent shall
be valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall bind
every Securityholder, unless it makes a change described in any of clauses (1)
through (10) of Section 9.02, in which case, the amendment, supplement or
waiver shall bind only 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; provided that any such
waiver shall not impair or affect the right of any Holder to receive payment of
principal of and
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interest on a Security, on or after the respective due dates expressed in such
Security, or to bring suit for the enforcement of any such payment on or after
such respective dates without the consent of such Holder.
SECTION 9.05. 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 Company or the
Trustee so determines, the Company 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 to issue a new Security shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. Trustee To Sign Amendments, Etc.
The Trustee shall execute any amendment, supplement or waiver authorized
pursuant to this Article Nine; provided that 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. The
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel and an Officers' Certificate each stating that the
execution of any amendment, supplement or waiver authorized pursuant to this
Article Nine is authorized or permitted by this Indenture and constituted the
legal, valid and binding obligations of the Company enforceable in accordance
with its terms. Such Opinion of Counsel shall be at the expense of the
Company, and the Trustee shall have a lien under Section 7.07 for any such
expense.
ARTICLE TEN
GUARANTEE
SECTION 10.01. Unconditional Guarantee.
Each Guarantor agrees to unconditionally, jointly and severally, guarantee
to each Holder of a Security authenticated and delivered by the Trustee, and to
the Trustee and its suc-
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cessors and assigns, that: (i) the principal of, premium 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, if any, and interest on any interest, to the extent
lawful, of the Securities and all other Obligations of the Company to the
Holders or the Trustee hereunder or thereunder will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (ii) in
case of any extension of time of payment or renewal of any Securities or of any
such other Obligations, the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, subject to
any applicable grace period, whether at stated maturity, by acceleration or
otherwise, subject, however, in the case of clauses (i) and (ii) above, to the
limitations set forth in Section 10.03. Each Guarantor 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 Company, 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 waives diligence, presentment, demand
of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever and covenants that its
Guarantee will not be discharged except by complete performance of the
obligations contained in the Securities, this Indenture and each Guarantee. If
any Securityholder or the Trustee is required by any court or otherwise to
return to the Company, any Guarantor or any custodian, trustee, liquidator or
other similar official acting in relation to the Company or any Guarantor, any
amount paid by the Company or any Guarantor to the Trustee or such
Securityholder, each 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 purposes of each 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 forthwith become
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due and payable by each Guarantor for the purpose of its Guarantee.
SECTION 10.02. Severability.
In case any provision of a 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.
SECTION 10.03. Release of a Guarantor.
If all or substantially all of the assets of any Guarantor or all of the
Capital Stock of any Guarantor owned by the Company and the Restricted
Subsidiaries is sold (including by issuance or otherwise) by the Company and/or
any of its Subsidiaries in a transaction constituting an Asset Sale, and if the
Net Cash Proceeds from such Asset Sale are used in accordance with Section
4.12, then such Guarantor (in the event of a sale or other disposition of all
of the Capital Stock of such Guarantor) or the corporation or other entity
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 Obligations under its Guarantee.
The Trustee shall deliver an appropriate instrument evidencing such
release upon receipt of a request by the Company accompanied by an Officers'
Certificate and Opinion of Counsel certifying as to the compliance with this
Section 10.03. Any Guarantor not so released remains liable for the full
amount of principal of an interest on the Securities as provided in this
Article Ten.
SECTION 10.04. Limitation of a Guarantor's Liability.
Each Guarantor and, by its acceptance hereof, each Holder 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 any Bankruptcy Law, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal or
state law. To effectuate the foregoing intention, the Holders and each
Guarantor 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, 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
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such other Guarantor under its Guarantee, or pursuant to Section 10.05, result
in the obligations of such Guarantor under its Guarantee not constituting such
fraudulent transfer or conveyance.
SECTION 10.05. 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 its
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount based on the Adjusted Net Assets of each
Guarantor (including the Funding Guarantor) for all payments, damages and
expenses incurred by that Funding Guarantor in discharging the Company's
obligations with respect to the Securities or any other Guarantor's obligations
with respect to its Guarantee. "Adjusted Net Assets" of a Guarantor at any
date shall mean the lesser of the amount by which (x) the fair value of the
property of such Guarantor exceeds the total amount of liabilities, including,
without limitation, contingent liabilities (after giving effect to all other
fixed and contingent liabilities incurred or assumed on such date), but
excluding liabilities under the Guarantee of such Guarantor at such date and
(y) the present fair salable value of the assets of such Guarantor at such date
exceeds the amount that will be required to pay the probable liability of such
Guarantor on its debts (after giving effect to all other fixed and contingent
liabilities incurred or assumed on such date), excluding debt in respect of the
Guarantee of such Guarantor as they become absolute and matured.
SECTION 10.06. Waiver of Subrogation.
Until all Guarantee Obligations are paid in full, each Guarantor hereby
irrevocably waives any claims or other rights which it may now or hereafter
acquire against the Company that arise from the existence, payment, performance
or enforcement of such Guarantor's obligations under its Guarantee and this
Indenture, including, without limitation, any right of subrogation,
reimbursement, exoneration, indemnification, and any right to participate in
any claim or remedy of any Holder of Securities against the Company, whether or
not such claim, remedy or right arises in equity, or under contract, statute or
common law, including, without limitation, the right to take or receive from
the Company, directly or indirectly, in cash or other property or by set-off or
in any other manner, payment or security on account of such claim or other
rights. If any
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amount shall be paid to any Guarantor in violation of the preceding sentence
and the Securities shall not have been paid in full, such amount shall have
been deemed to have been paid to such Guarantor for the benefit of, and held in
trust for the benefit of, the Holders of the Securities, and shall forthwith
be paid to the Trustee for the benefit of such Holders to be credited and
applied upon the Securities, in accordance with the terms of this Indenture.
Each Guarantor acknowledges that it will receive direct and indirect benefits
from the financing arrangements contemplated by this Indenture and that the
waiver set forth in this Section 10.06 is knowingly made in contemplation of
such benefits.
SECTION 10.07. Execution of Guarantees.
To evidence its guarantee to the Securityholders set forth in this Article
Ten, each Guarantor shall execute a Guarantee in substantially the form of
Exhibit G attached hereto, which shall be endorsed on each Security ordered to
be authenticated and delivered by the Trustee. Each Guarantor agrees that its
Guarantee set forth in this Article Ten shall remain in full force and effect
notwithstanding any failure to endorse on each Security a notation of such
Guarantee. Each such Guarantee shall be signed on behalf of each Guarantor by
two Officers, or an Officer and an Assistant Secretary or one Officer shall
sign and one Officer or an Assistant Secretary (each of whom shall, in each
case, have been duly authorized by all requisite corporate actions) shall
attest to such Guarantee 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
Guarantee on behalf of such Guarantor. Such signatures upon the Guarantee may
be by manual or facsimile signature of such officers and may be imprinted or
otherwise reproduced on the Guarantee, and in case any such officer who shall
have signed the Guarantee shall cease to be such officer before the Security on
which such Guarantee is endorsed shall have been authenticated and delivered by
the Trustee or disposed of by the Company, such Security nevertheless may be
authenticated and delivered or disposed of as though the person who signed the
Guarantee had not ceased to be such officer of the Guarantor.
SECTION 10.08. Waiver of Stay, Extension or Usury Laws.
Each Guarantor covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or
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advantage of, any stay or extension law or any usury law or other law that
would prohibit or forgive each such Guarantor from performing its Guarantee as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this Indenture; and (to
the extent that it may lawfully do so) each such Guarantor hereby expressly
waives all benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts with
the duties imposed by operation of Section 318(c) of the TIA, the imposed
duties shall control.
SECTION 11.02. Notices.
Any notices or other communications required or permitted hereunder shall
be in writing, and shall be sufficiently given if made by hand delivery, by
telex, by telecopier or registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
if to the Company or a Guarantor:
Talon Automotive Group, Inc.
900 Wilshire Drive
Suite 203
Troy, MI 48084
Attention: David J. Woodward
Facsimile: (248) 362-7612
Telephone: (248) 362-7600
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if to the Trustee:
U.S. Bank Trust National Association
Buhl Building
Suite 740
535 Griswold Street
Detroit, MI 48226
Attention: Corporate Trust Services
Facsimile: (313) 963-9428
Telephone: (313) 234-4713
Each of the Company and the Trustee by written notice to each other such
person may designate additional or different addresses for notices to such
person. Any notice or communication to the Company or a Guarantor or the
Trustee, shall be deemed to have been given or made as of the date so delivered
if personally delivered; when answered back, if telexed; when receipt is
acknowledged, if telecopied; and five (5) calendar days after mailing if sent
by registered or certified mail, postage prepaid (except that a notice of
change of address shall not be deemed to have been given until actually
received by the addressee).
Any notice or communication mailed to a Securityholder shall be mailed to
him by first class mail or other equivalent means at his address as it appears
on the registration books of the Registrar and shall be sufficiently given to
him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.03. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture, the
Securities or any Guarantees. The Company, the Trustee, the Registrar and any
other Person shall have the protection of TIA Section 312(c).
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SECTION 11.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee at the
request of the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory to
the Trustee, stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 11.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture, other than the Officers' Certificate
required by Section 4.08, shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
person, such condition or covenant has been complied with; provided,
however, that with respect to matters of fact an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
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SECTION 11.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee, Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 11.07. Legal Holidays.
If a payment date is not a Business Day, payment may be made on the next
succeeding day that is a Business Day with the same force and effect as if made
on such payment date.
SECTION 11.08. Governing Law.
THIS INDENTURE, THE SECURITIES AND ANY GUARANTEES 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 Indenture.
SECTION 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of any of the Company or any of its Subsidiaries or any
Guarantor. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 11.10. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as such, of
the Company or any of its Subsidiaries or any Guarantor shall not have any
liability for any obligations of the Company or any Guarantor under the
Securities, this Indenture or any Guarantee or for any claim based on, in
respect of or by reason of such obligations or their creations. Each
Securityholder by accepting a Security waives and releases all such liability.
Such waiver and release are part of the consideration for the issuance of the
Securities.
SECTION 11.11. Successors.
All agreements of the Company and any Guarantors in this Indenture, the
Securities and any Guarantees shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successor.
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SECTION 11.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each signed
copy or counterpart shall be an original, but all of them together shall
represent the same agreement.
SECTION 11.13. Severability.
In case any one or more of the provisions in this Indenture, in the
Securities or in any Guarantee shall be held invalid, illegal or unenforceable,
in any respect for any reason, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions shall not
in any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permitted by law.
SECTION 11.14. Table of Contents, Headings, Etc.
The table of contents, cross-reference sheet and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, and are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.
ARTICLE TWELVE
SUBORDINATION
SECTION 12.01. Securities Subordinated to Senior Debt; Guarantees
Subordinated to Guarantor Senior Debt.
The Company and each Guarantor covenants and agrees, and each Holder of
the Securities, by its acceptance thereof, likewise covenants and agrees, that
all Securities and Guarantees 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
the payment of all Obligations on the Securities and Guarantees by the Company
and any Guarantors shall, to the extent and in the manner herein set forth, be
subordinated and junior in right of payment to the prior payment in full in
cash or Cash Equivalents (or such payment shall be duly provided for to the
satisfaction of the holders of the Senior Debt and Guarantor Senior Debt, as
the case may
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be) of all Obligations on the Senior Debt and Guarantor Senior Debt, as the
case may be; that the subordination is for the benefit of, and shall be
enforceable directly by, the holders of Senior Debt and Guarantor Senior Debt,
as the case may be, and that each holder of Senior Debt and Guarantor Senior
Debt, as the case may be, whether now outstanding or hereafter created,
incurred, assumed or guaranteed shall be deemed to have acquired Senior Debt
and Guarantor Senior Debt, as the case may be, in reliance upon the covenants
and provisions contained in this Indenture.
SECTION 12.02. No Payment on Securities in Certain Circumstances.
(a) If any default occurs and is continuing in the payment when due,
whether at maturity, upon any redemption, by declaration or otherwise, of any
principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Senior Debt or
Guarantor Senior Debt, no payment of any kind or character shall be made by or
on behalf of the Company or the applicable Guarantor or any other Person on the
Company's or such Guarantor's, as the case may be, behalf with respect to any
Obligations on the Securities or the Guarantee of such Guarantor, as the case
may be, or to acquire any of the Securities for cash or property or otherwise.
In addition, if any other event of default occurs and is continuing with
respect to any Designated Senior Debt, as such event of default is defined in
the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives written notice of the event of default to the
Trustee (a "Default Notice"), then neither the Company nor any other Person on
its behalf shall (x) make any payment of any kind or character with respect to
any Obligations on the Securities or (y) acquire any of the Securities for cash
or property or otherwise for a period of time (the "Blockage Period")
terminating on the earliest to occur of (1) the date all events of default have
been cured or waived or shall have ceased to exist and the Company and the
Trustee receive written notice thereof from the Representative for the
applicable issue of Designated Senior Debt, (2) the Trustee receives written
notice from the Representative for the applicable issue of Designated Senior
Debt terminating the Blockage Period or the benefits of this sentence are
waived by the Representative for the applicable issue of Designated Senior
Debt, (3) the applicable issue of Designated Senior Debt is discharged or paid
in full in cash or Cash
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Equivalents or (4) the expiration of the 180-day consecutive period commencing
on the date of the giving of such Default Notice. Upon the termination of such
Blockage Period, the Company shall (to the extent not otherwise prohibited by
this Article Twelve) promptly resume making all payments on the Securities,
including all payments not made during such Blockage Period. Notwithstanding
anything herein to the contrary, in no event shall a Blockage Period extend
beyond 180 days from the date the payment on the Securities was due and only
one such Blockage Period may be commenced within any 360 consecutive days. No
event of default which existed or was continuing on the date of the
commencement of any Blockage Period with respect to the Designated Senior Debt
shall be, or be made, the basis for commencement of a second Blockage Period by
the Representative of such Designated Senior Debt, whether or not within a
period of 360 consecutive days, unless such event of default shall have been
cured or waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such
Blockage Period that, in either case, would give rise to an event of default
pursuant to any provisions under which an event of default previously existed
or was continuing shall constitute a new event of default for this purpose).
(b) In the event that, notwithstanding the foregoing, any payment shall
be received by 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 to, the holders of Senior Debt or Guarantor
Senior Debt, as the case may be, (pro rata to such holders on the basis of the
respective amount of Senior Debt or Guarantor Senior Debt, as the case may be,
held by such holders) as their respective interests may appear. The Trustee
shall be entitled to conclusively rely on information regarding amounts then
due and owing on the Senior Debt or Guarantor Senior Debt, as the case may be,
if any, received from the holders of Senior Debt or Guarantor Senior Debt (or
their Representatives), as the case may be, or, if such information is not
received from such holders or their Representatives, from the Company and only
amounts included in the information provided to the Trustee shall be paid to
the holders of Senior Debt or Guarantor Senior Debt, as the case may be. The
Company shall keep complete and accurate records of the names, addresses and
amounts owed to all holders of Senior Debt and Guarantor Senior Debt, shall
produce such records to the Trustee upon request and the Trustee shall be
absolutely protected in relying on
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such records in paying over or delivering moneys pursuant to this Article
Twelve.
Nothing contained in this Article Twelve shall limit or compromise the
right of the Trustee or the Holders to take any action to accelerate the
maturity of the Securities pursuant to Section 6.02 or to pursue any rights or
remedies hereunder or otherwise; provided, however, that all Senior Debt and
Guarantor Senior Debt of the applicable Guarantor thereafter due or declared to
be due shall first be paid in full in cash or Cash Equivalents before the
Holders are entitled to receive any payment of any kind or character with
respect to Obligations on the Securities or the Guarantee of the applicable
Guarantor, as the case may be.
SECTION 12.03. Payment Over of Proceeds upon Dissolution, Etc.
(a) Upon any payment or distribution of assets of the Company or a
Guarantor of any kind or character, whether in cash, property or securities to
creditors upon any liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or such Guarantor or in a bankruptcy, reorganization, insolvency, receivership
or other similar proceeding relating to the Company or its property or such
Guarantor or its property, whether voluntary or involuntary, all Obligations
due or to become due upon all Senior Debt or Guarantor Senior Debt of such
Guarantor, as the case may be, shall first be paid in full in cash or Cash
Equivalents, or such payment shall be duly provided for to the satisfaction of
the holders of Senior Debt or Guarantor Senior Debt of such Guarantor, as the
case may be, before any payment or distribution of any kind or character is
made on account of any Obligations on the Securities or the Guarantee of such
Guarantor, as the case may be, or for the acquisition of any of the Securities
for cash or property or otherwise. Upon any such dissolution, winding-up,
liquidation, reorganization, receivership or similar proceeding, any payment or
distribution of assets of the Company or a Guarantor of any kind or character,
whether in cash, property or securities, to which the Holders or the Trustee
under this Indenture would be entitled, except for the provisions hereof, shall
be paid by the Company or such Guarantor or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, or by the Holders or by the Trustee under this Indenture if
received by them, directly to the holders of Senior Debt or Guarantor Senior
Debt of such Guarantor, as the case may be (pro rata to such holders on the
basis of the re-
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spective amounts of Senior Debt or Guarantor Senior Debt of such Guarantor, as
the case may be, held by such holders) or their respective Representatives, or
to the trustee or trustees under any indenture pursuant to which any of such
Senior Debt or Guarantor Senior Debt of such Guarantor, as the case may be, may
have been issued, as their respective interests may appear, for application to
the payment of Senior Debt or Guarantor Senior Debt of such Guarantor, as the
case may be, remaining unpaid until all such Senior Debt or Guarantor Senior
Debt of such Guarantor, as the case may be, has been paid in full in cash or
Cash Equivalents after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of Senior Debt or Guarantor Senior
Debt of such Guarantor, as the case may be.
(b) To the extent any payment of Senior Debt or Guarantor Senior Debt
(whether by or on behalf of the Company or a Guarantor, as proceeds of security
or enforcement of any right of setoff or otherwise) is declared to be
fraudulent or preferential, set aside or required to be paid to any receiver,
trustee in bankruptcy, liquidating trustee, agent or other similar Person under
any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law,
then, if such payment is recovered by, or paid over to, such receiver, trustee
in bankruptcy, liquidating trustee, agent or other similar Person, the Senior
Debt or Guarantor Senior Debt or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company or a Guarantor of any kind or character,
whether in cash, property or securities, shall be received by any Holder when
such payment or distribution is prohibited by Section 12.03(a), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Debt or Guarantor Senior Debt of such
Guarantor, as the case may be (pro rata to such holders on the basis of the
respective amount of Senior Debt or Guarantor Senior Debt of such Guarantor, as
the case may be, held by such holders) or their respective Representatives, or
to the trustee or trustees under any indenture pursuant to which any of such
Senior Debt or Guarantor Senior Debt of such Guarantor, as the case may be, may
have been issued, as their respective interests may appear, for application to
the payment of Senior Debt or Guarantor Senior Debt of such Guarantor, as the
case may be, remaining unpaid until all such Senior Debt or Guarantor Senior
Debt of such Guarantor, as the case may be, has been paid in full in
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cash or Cash Equivalents, after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of such Senior Debt
or Guarantor Senior Debt of such Guarantor, as the case may be.
(d) The consolidation of the Company with, or the merger of the Company
with or into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of all or substantially all of its
assets, to another corporation upon the terms and conditions provided in
Article Five hereof shall not be deemed a dissolution, winding-up, liquidation
or reorganization for the purposes of this Section if, in the event the Company
is not the surviving corporation, such other corporation shall, as a part of
such consolidation, merger, conveyance or transfer, assume the Company's
obligations hereunder in accordance with Article Five hereof.
SECTION 12.04. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article Twelve or elsewhere in this Indenture
shall prevent (i) the Company, except under the conditions described in
Sections 12.02 and 12.03, from making payments at any time for the purpose of
making payments of principal of and interest on the Securities, or from
depositing with the Trustee any monies for such payments, or (ii) in the
absence of actual knowledge by a Responsible Officer of the Trustee that a
given payment would be prohibited by Section 12.02 or 12.03, the application by
the Trustee of any monies 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 one Business Day prior to the date upon which
such payment would otherwise become due and payable, the Trustee shall have
received the written notice provided for in Section 12.02(a) or in Section
12.07. The Company shall give prompt written notice to the Trustee of any
dissolution, winding-up, liquidation or reorganization of the Company.
SECTION 12.05. Subrogation.
Subject to the payment in full in cash or Cash Equivalents of all Senior
Debt and Guarantor Senior Debt, the Holders shall be subrogated to the rights
of the holders of Senior Debt and Guarantor Senior Debt to receive payments or
distributions of cash, property or securities of the Company and such Guarantor
applicable to the Senior Debt and Guarantor Senior Debt until the Securities
shall be paid in full; and,
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for the purposes of such subrogation, no such payments or distributions to the
holders of the Senior Debt and Guarantor Senior Debt by or on behalf of the
Company or any Guarantor or by or on behalf of the Holders by virtue of this
Article Twelve which otherwise would have been made to the Holders shall, as
between the Company or any Guarantor and the Holders, be deemed to be a payment
by the Company or any Guarantor to or on account of the Senior Debt or
Guarantor Senior Debt, as the case may be, it being understood that the
provisions of this Article Twelve are and are intended solely for the purpose
of defining the relative rights of the Holders, on the one hand, and the
holders of the Senior Debt or Guarantor Senior Debt, as the case may be, on the
other hand.
SECTION 12.06. Obligations of the Company Unconditional.
Nothing contained in this Article Twelve or elsewhere in this Indenture or
in the Securities or Guarantees is intended to or shall impair, as among the
Company, any Guarantor, their respective creditors other than the holders of
Senior Debt or Guarantor Senior Debt, and the Holders, the obligation of the
Company and any Guarantors, which is absolute and unconditional, to pay to the
Holders the principal of and any 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 and creditors of
the Company and any Guarantors other than the holders of any Senior Debt or
Guarantor Senior Debt, nor shall anything herein or therein prevent the Holder
or the Trustee on its 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 Senior Debt or Guarantor
Senior Debt in respect of cash, property or securities of the Company or any
Guarantor received upon the exercise of any such remedy.
SECTION 12.07. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company 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. Regardless of anything to the contrary contained in this
Article Twelve or elsewhere in this Indenture, the Trustee shall not be charged
with knowledge of the existence of any default or event of default with respect
to any Senior Debt or Guarantor Senior Debt or of any other facts which would
pro-
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hibit the making of any payment to or by the Trustee unless and until the
Trustee shall have received notice in writing from the Company, or from a
holder of Senior Debt or Guarantor Senior Debt or a Representative therefor,
and, prior to the receipt of any such written notice, the Trustee shall be
entitled to assume (in the absence of actual knowledge of a Responsible Officer
to the contrary) that no such facts exist.
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 Debt
or Guarantor Senior Debt 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 amounts of Senior Debt
or Guarantor Senior Debt 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 12.08. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets of the Company or Guarantor
referred to in this Article Twelve, the Trustee, subject to the provisions of
Article Seven hereof, and the Holders 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 the Holders, for the purpose of ascertaining the persons
entitled to participate in such distribution, the holders of the Senior Debt or
Guarantor Senior Debt and other Indebtedness of the Company, 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 12.09. Trustee's Relation to Senior Debt or Guarantor Senior
Debt.
The Trustee and any agent of the Company or the Trustee shall be entitled
to all the rights set forth in this Article Twelve with respect to any Senior
Debt or Guarantor Senior Debt which may at any time be held by it in it
individual
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or any other or Guarantor capacity to the same extent as any other holder of
Senior Debt and nothing in this Indenture shall deprive the Trustee or any such
agent of any of its rights as such holder. The Trustee shall not be liable to
any holder of Senior Debt or Guarantor Senior Debt if it shall mistakenly pay
over or deliver to the Holders, the Company or any other Person monies or
assets to which any such holder of the Senior Debt or Guarantor Senior Debt
shall be entitled by virtue of this Article Twelve.
With respect to the holders of Senior Debt or Guarantor Senior Debt, 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 Senior Debt or
Guarantor Senior Debt 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 Debt or Guarantor Senior Debt.
Whenever a distribution is to be made or a notice given to holders or
owners of Senior Debt or Guarantor Senior Debt, the distribution may be made
and the notice may be given to their Representative, if any.
SECTION 12.10. Subordination Rights Not Impaired by Acts or
Omissions of the Company or a Guarantor or Holders of Senior
Debt.
No right of any present or future holders of any Senior Debt or Guarantor
Senior Debt 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 Company or a Guarantor or by any act or failure to act, in good faith, by
any such holder, or by any noncompliance by the Company or a Guarantor with the
terms of this Indenture, regardless of any knowledge thereof which any such
holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Debt or a Guarantor may, at any time and from time to time,
without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders and without impairing or releasing
the subordination provided in this Article Twelve or the obligations hereunder
of the Holders to the holders of the Senior Debt or Guarantor Senior Debt, do
any one or more of the following: (i) change the manner, place or terms of
payment or
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extend the time of payment of, or renew or alter, Senior Debt or Guarantor
Senior Debt, or otherwise amend or supplement in any manner Senior Debt or
Guarantor Senior Debt, or any instrument evidencing the same or any agreement
under which Senior Debt or Guarantor Senior Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged
otherwise securing Senior Debt or Guarantor Senior Debt; (iii) release any
Person liable in any manner for the payment or collection of Senior Debt or
Guarantor Senior Debt; and (iv) exercise or refrain from exercising any rights
against the Company or a Guarantor or any other Person.
SECTION 12.11. Holders Authorize Trustee To Effectuate Subordination
of Securities.
Each Holder by its acceptance of them authorizes and expressly directs the
Trustee on its behalf to take such action as may be necessary or appropriate to
effectuate, as between the holders of Senior Debt or Guarantor Senior Debt and
the Holders, the subordination provided in this Article Twelve, and appoints
the Trustee its attorney-in-fact for such purposes, including, in the event of
any dissolution, winding-up, liquidation or reorganization of the Company or a
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 the
Company or a Guarantor, the filing of a claim for the unpaid balance of its
Securities and accrued interest in the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in the form
required in such proceeding prior to 30 days before the expiration of the time
to file such claim or claims, then the holders of the Senior Debt or Guarantor
Senior Debt or their Representative are or is hereby authorized to have the
right to file and are or is hereby authorized to file an appropriate claim for
and on behalf of the Holders of said Securities. Nothing herein contained
shall be deemed to authorize the Trustee or the holders of Senior Debt or
Guarantor Senior Debt or their Representative 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 or the holders of Senior
Debt or Guarantor Senior Debt or their Representative to vote in respect of the
claim of any Holder in any such proceeding.
<PAGE> 116
-109-
SECTION 12.12. This Article Twelve 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 will not be
construed as preventing the occurrence of an Event of Default.
SECTION 12.13. Trustee's Compensation Not Prejudiced.
Nothing in this Article Twelve will apply to amounts due to the Trustee
pursuant to other Sections in this Indenture.
<PAGE> 117
-110-
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the date first written above.
TALON AUTOMOTIVE GROUP, INC.
By:
-------------------------------------
Name:
Title:
VS HOLDINGS, INC.
By:
-------------------------------------
Name:
Title:
VELTRI HOLDINGS USA, INC.
By:
-------------------------------------
Name:
Title:
VELTRI METAL PRODUCTS CO.
By:
-------------------------------------
Name:
Title:
U.S. BANK TRUST NATIONAL ASSOCIATION, as
Trustee
By:
-------------------------------------
Name: James Khami
Title: Vice President
<PAGE> 118
EXHIBIT A
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN
TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH
RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES
TO PERSONS OTHER THAN U.S. PERSONS IN OFFSHORE TRANSACTIONS MEETING THE
REQUIREMENTS OF RULE 904 UNDER REGULATION S UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
A-1
<PAGE> 119
TALON AUTOMOTIVE GROUP, INC.
9.625% Senior Subordinated Notes
due May 1, 2008, Series A
<TABLE>
<S> <C>
CUSIP No.:
No. [ ] $[ ]
</TABLE>
TALON AUTOMOTIVE GROUP, INC., a Michigan corporation (the "Company", which
term includes any successor corporation), for value received promises to pay to
CEDE & CO. or registered assigns, the principal sum of $[ ] Dollars, on
May 1, 2008.
Interest Payment Dates: May 1 and November 1, commencing November 1, 1998
Record Dates: April 15 and October 15
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at
this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Dated:
TALON AUTOMOTIVE GROUP, INC.
By:
Name:
Title:
By:
Name:
Title:
A-2
<PAGE> 120
This is one of the 9.625% Senior Subordinated Notes due 2008, Series A,
described in the within-mentioned Indenture.
<TABLE>
<S> <C> <C>
Dated: U.S. BANK TRUST NATIONAL ASSOCIATION, as
Trustee
By:
--------------------
Authorized Signatory
</TABLE>
A-3
<PAGE> 121
(REVERSE OF SECURITY)
TALON AUTOMOTIVE GROUP, INC.
9.625% Senior Subordinated Notes
due May 1, 2008, Series A
1. Interest.
TALON AUTOMOTIVE GROUP, INC., a Michigan corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. The Company will pay interest semi-annually on May 1
and November 1 of each year (an "Interest Payment Date"), commencing November 1,
1998. Interest on the Securities will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from April 28,
1998. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
The Company shall pay interest on overdue principal from time to time on
demand at the rate borne by the Securities plus 2% and on overdue installments
of interest (without regard to any applicable grace periods) to the extent
lawful.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of
business on the Record Date immediately preceding the Interest Payment Date
even if the Securities are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company shall
pay principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts. The Company
may deliver any such interest payment to the Paying Agent or to a Holder at the
Holder's registered address.
3. Paying Agent and Registrar.
Initially, U.S. Bank Trust National Association (the "Trustee") will act
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders.
A-4
<PAGE> 122
4. Indenture.
The Company issued the Securities under an Indenture, dated as of April
28, 1998 (the "Indenture"), among the Company, the Guarantors and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Section Section 77aaa-77bbbb) (the "TIA"), as
in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and the TIA for a statement of them. The
Securities are limited in aggregate principal amount to $170,000,000.
5. Optional Redemption.
The Securities will be redeemable, at the Company's option, in whole at
any time or in part from time to time, on and after May 1, 2003 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on May 1 of the years set
forth below, plus, in each case, accrued interest thereon to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2003............... 104.813%
2004............... 103.208%
2005............... 101.604%
2006 and thereafter 100.000%
</TABLE>
6. Optional Redemption upon Public Equity Offering.
At any time, or from time to time, on or prior to May 1, 2001, the Company
may, at its option, use the net cash proceeds of one or more Public Equity
Offerings (as defined) to redeem up to 35% of the Securities issued at a
redemption price equal to 109.625% of the principal amount thereof plus accrued
and unpaid interest, if any, to the date of redemption; provided that at least
65% of the principal amount of Securities remains outstanding immediately after
giving effect to any such redemption. In order to effect the foregoing
redemption with the net cash proceeds of a Public Equity Offering, the Company
shall send the redemption notice not later than 180 days after the consummation
of such Public Equity Offering.
A-5
<PAGE> 123
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Company pursuant
to a registration statement filed with and declared effective by the SEC in
accordance with the Securities Act.
7. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Securities to be redeemed at
such Holder's registered address. Securities in denominations of $1,000 may be
redeemed only in whole. The Trustee may select for redemption portions (equal
to $1,000 or any integral multiple thereof) of the principal of Securities that
have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of redemption
that relates to such Security shall state the portion of the principal amount
thereof to be redeemed. A new Security 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 Security. On and after the Redemption Date,
interest will cease to accrue on Securities or portions thereof called for
redemption.
8. Change of Control Offer.
Upon the occurrence of a Change of Control, the Company will be required
to offer to purchase all of the outstanding Securities at a purchase price
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of repurchase.
9. Limitation on Disposition of Assets.
The Company is subject to certain conditions, obligated to make an offer
to purchase Securities at 100% of their principal amount plus accrued and
unpaid interest to the date of repurchase with certain net cash proceeds of
certain sales or other dispositions of assets in accordance with the Indenture.
10. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in denominations
of $1,000 and integral multiples of $1,000. A Holder shall register the
transfer of or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or
similar governmental charges payable in connection
A-6
<PAGE> 124
therewith as permitted by the Indenture. The Registrar need not register the
transfer of or exchange any Securities or portions thereof selected for
redemption, except the unredeemed portion of any security being redeemed in
part.
11. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it
for all purposes.
12. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for two
years, the Trustee and the Paying Agent will repay the funds to the Company at
its request. After that, all liability of the Trustee and such Paying Agent
with respect to such funds shall cease.
13. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the Indenture and
the Securities except for certain provisions thereof, and may be discharged
from its obligations to comply with certain covenants contained in the
Indenture and the Securities, in each case upon satisfaction of certain
conditions specified in the Indenture.
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may
be waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of
certificated Securities or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Security.
15. Restrictive Covenants.
The Indenture contains certain covenants that, among other things, limit
the ability of the Company and certain of its subsidiaries to make restricted
payments, to incur indebt-
A-7
<PAGE> 125
edness, to create liens, to issue preferred or other capital stock of
subsidiaries, to sell assets, to permit restrictions on dividends and other
payments by subsidiaries to the Company, to consolidate, merge or sell all or
substantially all of its assets, to engage in transactions with affiliates or
to engage in certain businesses. The limitations are subject to a number of
important qualifications and exceptions.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of
Securities may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of any continuing Default or Event of Default
(except a Default in payment of principal, premium or interest, including an
accelerated payment) if it determines that withholding notice is in their
interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Securities and may otherwise deal with the
Company, its Subsidiaries, any Guarantor and their respective Affiliates as if
it were not the Trustee.
18. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
the Company shall have any liability for any obligation of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of, such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
A-8
<PAGE> 126
19. Authentication.
This Security shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on this Security.
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Security
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities.
No representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Registration Rights.
Pursuant to the Registration Rights Agreement, the Company will be
obligated upon the occurrence of certain events to consummate an exchange offer
pursuant to which the Holder of this Security shall have the right to exchange
this Series A Security for the Company's 9.625% Senior Subordinated Notes due
2008, Series B (the "Series B Securities"), which have been registered under
the Securities Act, in like principal amount and having terms identical in all
material respects as the Series A Securities. The Holders shall be entitled to
receive certain additional interest payments in the event such exchange offer
is not consummated and upon certain other conditions, all pursuant to and in
accordance with the terms of the Registration Rights Agreement.
23. Subordination.
The Securities are subordinated in right of payment, in the manner and to
the extent set forth in the Indenture, to the prior payment in full in cash or
Cash Equivalents of all Senior Debt of the Company, whether outstanding on the
date of the Indenture or thereafter created, incurred, assumed or guaranteed.
Each Holder by his acceptance hereof agrees to be bound by such provisions and
authorizes and expressly directs the Trustee, on his behalf, to take such
action as may be nec-
A-9
<PAGE> 127
essary or appropriate to effectuate the subordination provided for in the
Indenture and appoints the Trustee his attorney-in-fact for such purposes.
The Company will furnish to any Holder of a Security upon written request
and without charge a copy of the Indenture. Requests may be made to: David J.
Woodward, Talon Automotive Group, Inc., 900 Wilshire Drive, Suite 203, Troy, MI
48084.
A-10
<PAGE> 128
GUARANTEE
Each undersigned Guarantor (as defined in the Indenture referred to in the
Security upon which this notation is endorsed and each referred to as the
"Guarantor," which term includes any successor person under the Indenture)
unconditionally guarantees on a senior subordinated basis as set forth in
Article Twelve of the Indenture (such guarantee by the Guarantor being referred
to herein as a "Guarantee") (i) the due and punctual payment of the principal
of and interest on the Securities, whether at maturity, by acceleration or
otherwise, the due and punctual payment of interest on the overdue principal
and interest, if any, on the Securities, to the extent lawful, and the due and
punctual performance of all other obligations of the Company to the Holders or
the Trustee all in accordance with the terms set forth in Article Ten of the
Indenture and (ii) in case of any extension of time of payment or renewal of
any Securities or any of such other obligations, that the same will be promptly
paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
No stockholder, officer, director or incorporator, as such, past, present
or future, of the Guarantor shall have any liability under the Guarantee by
reason of his or its status as such stockholder, officer, director or
incorporator.
The Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Securities upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
VS HOLDINGS, INC.
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
A-11
<PAGE> 129
VELTRI HOLDINGS USA, INC.
By:____________________________
Name:
Title:
By:_____________________________
Name:
Title:
VELTRI METAL PRODUCTS CO.
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
A-12
<PAGE> 130
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 Company.
The agent may substitute another to act for him.
Dated: _________________ Signed: ____________________
(Sign 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
reasonably acceptable to the Trustee)
A-13
<PAGE> 131
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.12 or Section 4.24 of the Indenture, check the
appropriate box:
Section 4.12 [ ] Section 4.24 [ ]
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 4.12 or Section 4.24 of the Indenture, state the
amount: $_____________
Date: ________________ Your Signature:________________________________________
(Sign exactly as
your name appears
on the other side
of this Security)
Signature Guarantee:__________________________________________________________
A-14
<PAGE> 132
EXHIBIT B
[FORM OF SERIES B SECURITY]
TALON AUTOMOTIVE GROUP, INC.
9.625% Senior Subordinated Notes
due May 1, 2008, Series B
CUSIP No.: [ ]
No. [ ] $[ ]
TALON AUTOMOTIVE GROUP, INC., a Michigan corporation (the "Company", which
term includes any successor corporation), for value received promises to pay to
CEDE & CO. or registered assigns, the principal sum of $[ ] Dollars,
on May 1, 2008.
Interest Payment Dates: May 1 and November 1, commencing November 1, 1998
Record Dates: April 15 and October 15
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at
this place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Dated:
TALON AUTOMOTIVE GROUP, INC.
By:_______________________________
Name:
Title:
By:_______________________________
Name:
Title:
B-1
<PAGE> 133
This is one of the 9.625% Senior Subordinated Notes due 2008, Series B,
described in the within-mentioned Indenture.
Dated: U.S. BANK TRUST NATIONAL ASSOCIATION, as
Trustee
By:
------------------------
Authorized Signatory
B-2
<PAGE> 134
(REVERSE OF SECURITY)
TALON AUTOMOTIVE GROUP, INC.
9.625% Senior Subordinated Notes
due May 1, 2008, Series B
1. Interest.
TALON AUTOMOTIVE GROUP, INC., a Michigan corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. The Company will pay interest semi-annually on May 1
and November 1 of each year (an "Interest Payment Date"), commencing November
1, 1998. Interest on the Securities will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from April 28,
1998. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
The Company shall pay interest on overdue principal from time to time on
demand at the rate borne by the Securities plus 2% and on overdue installments
of interest (without regard to any applicable grace periods) to the extent
lawful.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of
business on the Record Date immediately preceding the Interest Payment Date
even if the Securities are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company shall
pay principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts. The Company
may deliver any such interest payment to the Paying Agent or to a Holder at the
Holder's registered address.
B-3
<PAGE> 135
3. Paying Agent and Registrar.
Initially, U.S. Bank Trust National Association (the "Trustee") will act
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders.
4. Indenture.
The Company issued the Securities under an Indenture, dated as of April
28, 1998 (the "Indenture"), among the Company, the Guarantors and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Section Section 77aaa-77bbbb) (the "TIA"), as
in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and the TIA for a statement of them. The
Securities are limited in aggregate principal amount to $170,000,000.
5. Optional Redemption.
The Securities will be redeemable, at the Company's option, in whole at
any time or in part from time to time, on and after May 1, 2003 at the
following redemption prices (expressed as percentages of the principal amount)
if redeemed during the twelve-month period commencing on May 1 of the years set
forth below, plus, in each case, accrued interest thereon to the date of
redemption:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2003............... 104.813%
2004............... 103.208%
2005............... 101.604%
2006 and thereafter 100.000%
</TABLE>
6. Optional Redemption upon Public Equity Offering.
At any time, or from time to time, on or prior to May 1, 2001, the Company
may, at its option, use the net cash proceeds of one or more Public Equity
Offerings (as defined) to redeem up to 35% of the Securities issued at a
redemption price equal to 109.625% of the principal amount thereof plus accrued
and unpaid interest, if any, to the date of redemption; provided that at least
65% of the principal amount of Securities
B-4
<PAGE> 136
remains outstanding immediately after giving effect to any such redemption. In
order to effect the foregoing redemption with the net cash proceeds of a Public
Equity Offering, the Company shall send the redemption notice not later than
180 days after the consummation of such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Company pursuant
to a registration statement filed with and declared effective by the SEC in
accordance with the Securities Act.
7. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Securities to be redeemed at
such Holder's registered address. Securities in denominations of $1,000 may be
redeemed only in whole. The Trustee may select for redemption portions (equal
to $1,000 or any integral multiple thereof) of the principal of Securities that
have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of redemption
that relates to such Security shall state the portion of the principal amount
thereof to be redeemed. A new Security 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 Security. On and after the Redemption Date,
interest will cease to accrue on Securities or portions thereof called for
redemption.
8. Change of Control Offer.
Upon the occurrence of a Change of Control, the Company will be required
to offer to purchase all of the outstanding Securities at a purchase price
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of repurchase.
9. Limitation on Disposition of Assets.
The Company is subject to certain conditions, obligated to make an offer
to purchase Securities at 100% of their principal amount plus accrued and
unpaid interest to the date of repurchase with certain net cash proceeds of
certain sales or other dispositions of assets in accordance with the Indenture.
B-5
<PAGE> 137
10. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in denominations
of $1,000 and integral multiples of $1,000. A Holder shall register the
transfer of or exchange Securities in accordance with the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay certain transfer taxes or
similar governmental charges payable in connection therewith as permitted by
the Indenture. The Registrar need not register the transfer of or exchange any
Securities or portions thereof selected for redemption, except the unredeemed
portion of any security being redeemed in part.
11. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it
for all purposes.
12. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for two
years, the Trustee and the Paying Agent will repay the funds to the Company at
its request. After that, all liability of the Trustee and such Paying Agent
with respect to such funds shall cease.
13. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the Indenture and
the Securities except for certain provisions thereof, and may be discharged
from its obligations to comply with certain covenants contained in the
Indenture and the Securities, in each case upon satisfaction of certain
conditions specified in the Indenture.
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may
be waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of
certificated Securities or comply with any requirements of the SEC in
connection with the qualification of the
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Indenture under the TIA, or make any other change that does not materially
adversely affect the rights of any Holder of a Security.
15. Restrictive Covenants.
The Indenture contains certain covenants that, among other things, limit
the ability of the Company and certain of its subsidiaries to make restricted
payments, to incur indebtedness, to create liens, to issue preferred or other
capital stock of subsidiaries, to sell assets, to permit restrictions on
dividends and other payments by subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its assets, to engage in transactions
with affiliates or to engage in certain businesses. The limitations are
subject to a number of important qualifications and exceptions.
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of
Securities may not enforce the Indenture or the Securities except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of any continuing Default or Event of Default
(except a Default in payment of principal, premium or interest, including an
accelerated payment) if it determines that withholding notice is in their
interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Securities and may otherwise deal with the
Company, its Subsidiaries, any Guarantor and their respective Affiliates as if
it were not the Trustee.
19. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such, of
the Company shall have any liability for any obligation of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason
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of, such obligations or their creation. Each Holder of a Security by accepting
a Security waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Securities.
19. Authentication.
This Security shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on this Security.
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a Security
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities.
No representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Subordination.
The Securities are subordinated in right of payment, in the manner and to
the extent set forth in the Indenture, to the prior payment in full, in cash or
Cash Equivalents of all Senior Debt of the Company, whether outstanding on the
date of the Indenture or thereafter created, incurred, assumed or guaranteed.
Each Holder by his acceptance hereof agrees to be bound by such provisions and
authorizes and expressly directs the Trustee, on his behalf, to take such
action as may be necessary or appropriate to effectuate the subordination
provided for in the Indenture and appoints the Trustee his attorney-in-fact for
such purposes.
The Company will furnish to any Holder of a Security upon written request
and without charge a copy of the Indenture. Requests may be made to: David J.
Woodward, Talon Automotive Group, Inc., 900 Wilshire Drive, Suite 203, Troy, MI
48084.
B-8
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GUARANTEE
Each undersigned Guarantor (as defined in the Indenture referred to in the
Security upon which this notation is endorsed and each referred to as the
"Guarantor," which term includes any successor person under the Indenture)
unconditionally guarantees on a senior subordinated basis as set forth in
Article Twelve of the Indenture (such guarantee by the Guarantor being referred
to herein as a "Guarantee") (i) the due and punctual payment of the principal
of and interest on the Securities, whether at maturity, by acceleration or
otherwise, the due and punctual payment of interest on the overdue principal
and interest, if any, on the Securities, to the extent lawful, and the due and
punctual performance of all other obligations of the Company to the Holders or
the Trustee all in accordance with the terms set forth in Article Ten of the
Indenture and (ii) in case of any extension of time of payment or renewal of
any Securities or any of such other obligations, that the same will be promptly
paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
No stockholder, officer, director or incorporator, as such, past, present
or future, of the Guarantor shall have any liability under the Guarantee by
reason of his or its status as such stockholder, officer, director or
incorporator.
The Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Securities upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
VS HOLDINGS, INC.
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
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<PAGE> 141
VELTRI HOLDINGS USA, INC.
By:___________________________
Name:
Title:
By:_________________________
Name:
Title:
VELTRI METAL PRODUCTS CO.
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
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<PAGE> 142
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 Company.
The agent may substitute another to act for him.
Dated: _________________ Signed: ____________________
(Sign 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)
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<PAGE> 143
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.12 or Section 4.24 of the Indenture, check the
appropriate box:
Section 4.12 [ ] Section 4.24 [ ]
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 4.12 or Section 4.24 of the Indenture, state the
amount: $_____________
Date: ________________ Your Signature:_______________________________________
(Sign exactly as
your name appears
on the other side
of this Security)
Signature Guarantee:_________________________________________________________
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<PAGE> 144
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 ISSUER OR ITS 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.
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<PAGE> 145
EXHIBIT D
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 9.625% Senior Subordinated Notes
due 2008, Series A, and 9.625% Senior
Subordinated Notes due 2008, Series B (the
"Securities"), of Talon Automotive Group,
Inc.
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 this Security 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(a)(II)(A) or Section
2.16(d)(i)(A) 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 subparagraphs (a)(1), (2), (3) or (7) of Rule
501 under the Act.
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<PAGE> 146
[ ] Such Security is being transferred in reliance on Regulation S under
the Act
[ ] 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 or Regulation S under the Act to a person other than an
institutional "accredited investor."
______________________________
[INSERT NAME OF TRANSFEROR]
<TABLE>
<S> <C> <C>
By: _________________________
[Authorized Signatory]
Date:______________
*Check applicable box.
</TABLE>
D-2
<PAGE> 147
EXHIBIT E
Form of Certificate To Be
Delivered in Connection with
Transfers to Institutional Accredited Investors
_______________, ____
U.S. Bank Trust National Association
Buhl Building
Suite 740
535 Griswold Street
Detroit, MI 48226
Attention: Corporate Trust Services
Re: Talon Automotive Group, Inc. (the
"Company") Indenture (the "Indenture") relating
to 9.625% Senior Subordinated Notes due 2008,
Series A, or 9.625% Senior Subordinated Notes due
2008, Series B
Ladies and Gentlemen:
In connection with our proposed purchase of 9.625% Senior Subordinated
Notes due 2008, Series A, or 9.625% Senior Subordinated Notes due 2008, Series
B (the "Securities"), of Talon Automotive Group, Inc. (the "Company"), we
confirm that:
1. We have received such information as we deem necessary in order to make
our investment decision.
2. We understand that any subsequent transfer of the Securities is subject
to certain restrictions and conditions set forth in the Indenture and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Securities except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Securities have not been
registered under the Securities Act, and that the Securities may not be offered
or sold within the United States or to, or for the account or benefit of, U.S.
persons except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Securities, we will do so only (A) to the
Company or
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<PAGE> 148
any subsidiary thereof, (B) inside the United States in accordance with Rule
144A under the Securities Act to a "qualified institutional buyer" (as defined
therein), (C) inside the United States to an institutional "accredited
investor" (as defined below) that, prior to such transfer, furnishes (or has
furnished on its behalf by a U.S. broker-dealer) to the Trustee a signed letter
substantially in the form hereof, (D) outside the United States in accordance
with Regulations S under the Securities Act, (E) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available), or
(F) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing Securities from us a
notice advising such purchaser that resales of the Securities are restricted as
stated herein.
4. We understand that, on any proposed resale of Securities, we will be
required to furnish to the Trustee and the Company, such certification, legal
opinions and other information as the Trustee and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Securities purchased by us will
bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Securities,
and we and any accounts for which we are acting are each able to bear the
economic risk of our or their investment, as the case may be.
6. We are acquiring the Securities purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited investor")
as to each of which we exercise sole investment discretion.
E-2
<PAGE> 149
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[Name of Transferor]
By: ---------------------------
[Authorized Signatory]
E-3
<PAGE> 150
EXHIBIT F
Form of Certificate To Be
Delivered in Connection
with Regulation S Transfers
_______________, ____
U.S. Bank Trust National Association
Buhl Building
Suite 740
535 Griswold Street
Detroit, MI 48226
Attention: Corporate Trust Services
Re: Talon Automotive Group, Inc. (the
"Company") 9.625% Senior Subordinated Notes due
2008, Series A, and 9.625% Senior Subordinated
Notes due 2008, Series B (the "Securities")
Dear Sirs:
In connection with our proposed sale of $____________ aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States, or (b)
the transaction was executed in, on or through the facilities of a designated
off-shore securities market and neither we nor any person acting on our behalf
knows that the transaction has been pre-arranged with a buyer in the United
States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S, as applicable;
F-1
<PAGE> 151
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions applicable
to the Securities.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Defined terms used herein without
definition have the respective meanings provided in Regulation S.
Very truly yours,
[Name of Transferor]
By: -----------------------------
[Authorized Signatory]
F-2
<PAGE> 152
EXHIBIT G
[FORM OF GUARANTEE]
Each undersigned Guarantor (as defined in the Indenture referred to in the
Security upon which this notation is endorsed and each referred to as the
"Guarantor," which term includes any successor person under the Indenture)
unconditionally guarantees on a senior subordinated basis as set forth in
Article Twelve of the Indenture (such guarantee by the Guarantor being referred
to herein as a "Guarantee") (i) the due and punctual payment of the principal
of and interest on the Securities, whether at maturity, by acceleration or
otherwise, the due and punctual payment of interest on the overdue principal
and interest, if any, on the Securities, to the extent lawful, and the due and
punctual performance of all other obligations of the Company to the Holders or
the Trustee all in accordance with the terms set forth in Article Ten of the
Indenture and (ii) in case of any extension of time of payment or renewal of
any Securities or any of such other obligations, that the same will be promptly
paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
No stockholder, officer, director or incorporator, as such, past, present
or future, of the Guarantor shall have any liability under the Guarantee by
reason of his or its status as such stockholder, officer, director or
incorporator.
The Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Securities upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
G-1
<PAGE> 1
EXHIBIT 4.1
[FORM OF SERIES B SECURITY]
TALON AUTOMOTIVE GROUP, INC.
9.625% Senior Subordinated Notes
due May 1, 2008, Series B
CUSIP NO.: [ ]
No. [ ] $[ ]
TALON AUTOMOTIVE GROUP, INC., a Michigan corporation (the "Company",
which term includes any successor corporation), for value received promises to
pay to [ ] or registered assigns, the principal sum of $[ ] Dollars, on May 1,
2008.
Interest Payment Dates: May 1 and November 1, commencing November 1,
1998
Record Dates: April 15 and October 15
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers.
Dated:
TALON AUTOMOTIVE GROUP, INC.
By:
---------------------------------
Name: Delmar O. Stanley
Title: President
By:
---------------------------------
Name: David J. Woodward
Title: Vice President
<PAGE> 2
[FORM OF TRUSTEE'S CERTIFICATION OF AUTHENTICATION]
This is one of the 9.625% Senior Subordinated Notes due 2008,
Series B, described in the within-mentioned Indenture.
Dated: U.S. BANK TRUST NATIONAL ASSOCIATION,
as Trustee
By:
----------------------------------
Authorized Signatory
<PAGE> 3
(REVERSE OF SECURITY)
TALON AUTOMOTIVE GROUP, INC.
9.625% Senior Subordinated Notes
due May 1, 2008, Series B
1. Interest.
TALON AUTOMOTIVE GROUP, INC., a Michigan corporation (the "Company"),
promises to pay interest on the principal amount of this Security at the rate
per annum shown above. The Company will pay interest semi-annually on May 1 and
November 1 of each year (an "Interest Payment Date"), commencing November 1,
1998. Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from April 28, 1998.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
The Company shall pay interest on overdue principal from time to time
on demand at the rate borne by the Securities plus 2% and on overdue
installments of interest (without regard to any applicable grace periods) to the
extent lawful.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date if the
Securities are canceled on registration of transfer or registration of exchange
after such Record Date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company shall pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. The Company may deliver any such interest
payment to the Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Register.
Initially, U.S. Bank Trust National Association (the "Trustee") will
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders.
<PAGE> 4
4. Indenture.
The Company issued the Securities under an Indenture, dated as of April
28, 1998 (the "Indenture"), among the Company, the Guarantors and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Securities include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstanding anything to the contrary
herein, the Securities are subject to all such terms, and Holders of Securities
are referred to the Indenture and the TIA for a statement of them. The
Securities are limited in aggregate principal amount to $170,000,000.
5. Optional Redemption.
The Securities will be redeemable, at the Company's option, in whole at
any time or in part from time to time, on and after May 1, 2003 at the following
redemption prices (expressed as percentages of the principal amount) if redeemed
during the twelve-month period commencing on May 1 of the years set forth below,
plus, in each case, accrued interest thereon to the date of redemption:
Year Percentage
---- ----------
2003. . . . . . . . . . . . . . . . . . . . 104.813%
2004. . . . . . . . . . . . . . . . . . . . 103.208%
2005. . . . . . . . . . . . . . . . . . . . 101.604%
2006 and thereafter.. . . . . . . . . . . . 100.000%
6. Optional Redemption upon Public Equity Offering.
At any time, or from time to time, on or prior to May 1, 2001, the
Company may, at its option, use the net cash proceeds of one or more Public
Equity Offerings (as defined) to redeem up to 35% of the Securities issued at a
redemption price equal to 109.625% of the principal amount thereof plus accrued
and unpaid interest, if any, to the date of redemption; provided that at least
65% of the principal amount of Securities remains outstanding immediately after
giving effect to any such redemption. In order to effect the foregoing
redemption with the net cash proceeds of a Public Equity Offering, the Company
shall send the redemption notice not later than 180 days after the consummation
of such Public Equity Offering.
<PAGE> 5
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Company pursuant
to a registration statement filed with and declared effective by the SEC in
accordance with the Securities Act.
7. Notice of Redemption.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each Holder of Securities to be redeemed
at such Holder's registered address. Securities in denominations of $1,000 may
be redeemed only in whole. The Trustee may select for redemption portions (equal
to $1,000 or any integral multiple thereof) of the principal of Securities that
have denominations larger than $1,000.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security 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 Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption.
8. Change of Control Offer.
Upon the occurrence of a Change of Control, the Company will be
required to offer to purchase all of the outstanding Securities at a purchase
price equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of repurchase.
9. Limitation on Disposition of Assets.
The Company is subject to certain conditions, obligated to make an
offer to purchase Securities at 100% of their principal amount plus accrued and
unpaid interest to the date of repurchase with certain net cash proceeds of
certain sales or other dispositions of assets in accordance with the Indenture.
10. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion or any security being redeemed in part.
<PAGE> 6
11. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the owner of it
for all purposes.
12. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed for
two years, the Trustee and the Paying Agent will repay the funds to the Company
at its request. After that, all liability of the Trustee and such Paying Agent
with respect to such funds shall cease.
13. Legal Defeasance and Covenant Defeasance.
The Company may be discharged from its obligations under the Indenture
and the Securities except for certain provisions thereof, and may be discharged
from its obligations to comply with certain covenants contained in the Indenture
and the Securities, in each case upon satisfaction of certain conditions
specified in the Indenture.
14. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
provide for uncertificated Securities in addition to or in place of certificated
Securities or comply with any requirements of the SEC in connection with the
qualification of the Indenture under the TIA, or make any other change that does
not materially adversely affect the rights of any Holder of a Security.
15. Restrictive Covenants.
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and certain of its subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to issue preferred
or other capital stock of subsidiaries, to sell assets, to permit restrictions
on dividends and other payments by subsidiaries to the Company, to consolidate,
merge or sell all or substantially all of its assets, to engage in transactions
with affiliates or to engage in certain businesses. The limitations are subject
to a number of important qualifications and exceptions.
<PAGE> 7
16. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of any continuing Default or Event of Default
(except a Default in payment of principal, premium or interest, including an
accelerated payment) if it determines that withholding notice is in their
interest.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, its Subsidiaries, any Guarantor and their respective
Affiliates as if it were not the Trustee.
18. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator, as such,
of the Company shall have any liability for any obligation of the Company under
the Securities or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder of a Security by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Securities.
19. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
<PAGE> 8
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Registration Rights.
Pursuant to the Registration Rights Agreement, the Company will be
obligated upon the occurrence of certain events to consummate an exchange offer
pursuant to which the Holder of this Security shall have the right to exchange
this Series A Security for the Company's 9.625% Senior Subordinated Notes due
2008, Series B (the "Series B Securities"), which have been registered under the
Securities Act, in like principal amount and having terms identical in all
material respects as the Series A Securities. The Holders shall be entitled to
receive certain additional interest payments in the event such exchange offer is
not consummated and upon certain other conditions, all pursuant to and in
accordance with the terms of the Registration Rights Agreement.
23. Subordination.
The Securities are subordinated in right of payment, in the manner and
to the extent set forth in the Indenture, to the prior payment in full in cash
or Cash Equivalents of all Senior Debt of the Company, whether outstanding on
the date of the Indenture or thereafter created, incurred, assumed or
guaranteed. Each Holder by his acceptance hereof agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on his behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purposes.
The Company will furnish to any Holder of a Security upon written
request and without charge a copy of the Indenture. Requests may be made to:
David J. Woodward, Talon Automotive Group, Inc., 900 Wilshire Drive, Suite 203,
Troy, MI 48084.
<PAGE> 1
EXHIBIT 4.2
[FORM OF GUARANTEE]
Each undersigned Guarantor (as defined in the Indenture referred to in
the Security upon which this notation is endorsed and each referred to as the
"Guarantor," which term includes any successor person under the Indenture)
unconditionally guarantees on a senior subordinated basis as set forth in
Article Twelve of the Indenture (such guarantee by the Guarantor being referred
to herein as a "Guarantee") (i) the due and punctual payment of the principal of
and interest on the Securities, whether at maturity, by acceleration or
otherwise, the due and punctual payment of interest on the overdue principal and
interest, if any, on the Securities, to the extent lawful, and the due and
punctual performance or all other obligations of the Company to the Holders or
the Trustee all in accordance with the terms set forth in Article Ten of the
Indenture and (ii) in case of any extension of time of payment or renewal of any
Securities or any of such other obligations, that the same will be promptly paid
in full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise.
No stockholder, officer, director or incorporator, as such, past,
present or future, of the Guarantor shall have any liability under the Guarantee
by reason of his or its status as such stockholder, officer, director or
incorporator.
The Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Securities upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
VS HOLDINGS, INC.
By:
--------------------------------
Name: David J. Woodward
Title: Vice President
By:
--------------------------------
Name: Wayne C. Inman
Title: Secretary
VELTRI HOLDINGS USA, INC.
By:
---------------------------------
Name: David J. Woodward
Title: Vice President
By:
----------------------------------
Name: Wayne C. Inman
Title: Secretary
<PAGE> 2
VELTRI METAL PRODUCTS CO.
By:
-------------------------------
Name: Wayne C. Inman
Title: Secretary
-2-
<PAGE> 3
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 Company.
The agent may substitute another to act for him.
Dated:____________________________ Signed:______________________
(Sign 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 reasonably acceptable
to the Trustee)
-3-
<PAGE> 4
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.12 or Section 4.24 of the Indenture, check the
appropriate box:
Section 4.12 [ ] Section 4.24 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.12 or Section 4.24 of the Indenture, state the
amount: $________________
Date:_________________________ Your Signature:_____________
(Sign exactly as your name
appears on the other side of
this Security)
Signature Guarantee:___________________________________________________
-4-
<PAGE> 1
EXHIBIT 10.1
================================================================================
TALON AUTOMOTIVE GROUP, INC.
$100,000,000
CREDIT AGREEMENT
WITH
COMERICA BANK
AS AGENT
April 28, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS ....................................................................-1-
2. THE INDEBTEDNESS ..............................................................-22-
2.1 Commitments ...........................................................-23-
2.2 Swing Loan ............................................................-23-
2.3 Notes .................................................................-23-
2.4 Types of Loans and Maturity ...........................................-23-
2.5 Requests for Loans ....................................................-23-
2.6 Disbursement of Loans .................................................-25-
2.7 Facility Fees .........................................................-25-
2.8 Optional Reduction or Termination of Revolving Loan Commitment ........-26-
2.9 Extensions of Maturity Date ...........................................-26-
2.10 Purpose of Loans ......................................................-27-
2.11 Prepayment and Readvances .............................................-27-
2.12 Currency Appreciation; Reduction of Indebtedness ......................-27-
2.13 Swing Loan Refunding ..................................................-27-
2.14 Account Netting .......................................................-28-
3. LETTERS OF CREDIT .............................................................-29-
3.1 Letters of Credit .....................................................-29-
3.2 Conditions to Issuance ................................................-29-
3.3 Participations in Letters of Credit ...................................-30-
3.4 Letter of Credit Fees .................................................-30-
3.5 Issuance Fees .........................................................-30-
3.6 Draws Under Letters of Credit .........................................-30-
3.7 Funding of Letter of Credit Payment as Advance ........................-31-
3.8 Obligations Irrevocable ...............................................-32-
3.9 Risk Under Letters of Credit ..........................................-33-
3.10 Indemnification .......................................................-34-
3.11 Right of Reimbursement ................................................-34-
4. INTEREST, FEES AND INTEREST CALCULATION, INTEREST PERIODS, CONVERSIONS,
PREPAYMENTS ...................................................................-34-
4.1 Interest ..............................................................-34-
4.2 Basis of Computation ..................................................-35-
4.3 Conversion and Renewal of Loans .......................................-35-
4.4 Prepayments ...........................................................-35-
5. SPECIAL PROVISIONS FOR LOANS ..................................................-36-
5.1 Reimbursement of Prepayment Costs .....................................-36-
5.2 Eurocurrency Lending Offices ..........................................-36-
5.3 Circumstances Affecting Eurocurrency-based Availability ...............-36-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
5.4 Laws Affecting Eurocurrency-based Loan Availability ...................-36-
5.5 Increased Costs .......................................................-37-
5.6 Availability of Alternative Currency ..................................-38-
5.7 Refunding Advances in Same Currency ...................................-38-
5.8 Judgment Currency .....................................................-38-
6. PAYMENTS ......................................................................-39-
6.1 Payment Procedure .....................................................-39-
6.2 Application of Proceeds ...............................................-40-
6.3 Pro-rata Recovery .....................................................-40-
6.4 Deposits and Accounts .................................................-40-
6.5 Net Payments ..........................................................-40-
6.6 Tax Treaty Certificate ................................................-41-
6.7 Replacement of Banks ..................................................-41-
7. CONDITIONS ....................................................................-42-
7.1 Conditions Precedent To Initial Loans and Closing Date ................-42-
(a) Documents Executed and Filed ..................................-42-
(b) Certified Resolutions .........................................-42-
(c) Certified Articles ............................................-42-
(d) Certified Bylaws ..............................................-43-
(e) Certificate of Status .........................................-43-
(f) Certificate of Incumbency .....................................-43-
(g) Lien Search ...................................................-43-
(h) Survey ........................................................-43-
(i) Casualty Insurance ............................................-43-
(j) Appraisals ....................................................-43-
(k) Opinion of Borrower's Counsel .................................-43-
(1) Approval of Agent's Counsel ...................................-44-
(m) Merger and Restructuring ......................................-44-
(n) Taxes .........................................................-44-
(o) Termination of Existing Credit Agreements .....................-44-
(p) Subordinated Debt .............................................-44-
(q) Services Agreement ............................................-45-
(r) Agent's Fee ...................................................-45-
7.2 Conditions Precedent to All Loans .....................................-45-
(a) Effectiveness .................................................-45-
(b) No Default; Representations and Warranties ....................-45-
(c) Adverse Change, etc ...........................................-45-
(d) Enforceability of Documents ...................................-45-
8. REPRESENTATIONS AND WARRANTIES ................................................-45-
8.1 Corporate Status ......................................................-45-
8.2 Corporate Power and Authority; Business ...............................-46-
8.3 No Violation ..........................................................-46-
8.4 Litigation ............................................................-46-
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
8.5 Use of Proceeds .......................................................-46-
8.6 Governmental Approvals, etc ...........................................-46-
8.7 True and Complete Disclosure ..........................................-46-
8.8 Financial Statements ..................................................-47-
8.9 Security Interests ....................................................-47-
8.10 Tax Returns and Payments ..............................................-47-
8.11 Patents, etc ..........................................................-47-
8.12 Compliance with Laws, etc .............................................-47-
8.13 Properties ............................................................-47-
8.14 Collective Bargaining Agreements ......................................-47-
8.15 Indebtedness Outstanding ..............................................-48-
8.16 Environmental Protection ..............................................-48-
8.17 Senior Subordinated Debt Documents ....................................-49-
8.18 ERISA .................................................................-50-
8.19 Addressing the Year 2000 Issue ........................................-51-
8.20 Survival of Representations and Warranties ............................-51-
9. AFFIRMATIVE COVENANTS .........................................................-51-
9.1 Reporting Requirements Covenants ......................................-51-
9.2 Insurance .............................................................-53-
9.3 Books, Records and Inspections ........................................-53-
9.4 Payment of Taxes and Utilities ........................................-53-
9.5 Compliance with Statutes, etc .........................................-54-
9.6 Performance of Obligations ............................................-54-
9.7 End of Fiscal Years; Fiscal Quarters ..................................-54-
9.8 Environmental Events ..................................................-54-
9.9 Further Guarantees and Liens ..........................................-54-
9.10 Compliance with Formula Amount ........................................-55-
9.11 Construction Liens ....................................................-55-
9.12 Defend Title ..........................................................-55-
9.13 ERISA .................................................................-55-
10. NEGATIVE COVENANTS ............................................................-56-
10.1 Changes in Business ...................................................-56-
10.2 Liens .................................................................-56-
10.3 Indebtedness ..........................................................-56-
10.4 Financial Covenants ...................................................-57-
10.5 Dividends .............................................................-58-
10.6 Stock Acquisition .....................................................-58-
10.7 Extension of Credit ...................................................-58-
10.8 Guarantee Obligations .................................................-58-
10.9 Subordinate Indebtedness ..............................................-59-
10.10 Property Transfer, Merger or Lease-Back ...............................-59-
10.11 Acquisitions ..........................................................-59-
10.12 Sale or Discount of Receivables .......................................-59-
10.13 Other Agreements ......................................................-60-
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
10.14 Use of Loan Proceeds ..................................................-60-
10.15 Management Fees .......................................................-60-
11. DEFAULTS ......................................................................-60-
11.1 Failure to Pay Monies Due .............................................-60-
11.2 Misrepresentation .....................................................-60-
11.3 Noncompliance with Agreement ..........................................-60-
11.4 Other Defaults ........................................................-60-
11.5 Judgments .............................................................-61-
11.6 Business Suspension, Bankruptcy, Etc ..................................-61-
11.7 Change of Control .....................................................-61-
11.8 Repudiation, Revocation ...............................................-61-
11.9 Inadequate Funding or Termination of Employee Benefit Plan(s) .........-61-
11.10 Occurrence of Certain Reportable Events ...............................-61-
11.11 Exercise of Remedies ..................................................-61-
11.12 Waiver of Defaults ....................................................-62-
12. AGENT .......................................................................-62-
12.1 Appointment of Agent ..................................................-62-
12.2 Deposit Account with Agent ............................................-62-
12.3 Exculpatory Provisions ................................................-63-
12.4 Successor Agents ......................................................-63-
12.5 Right of Agent as Bank ................................................-63-
12.6 Credit Decisions ......................................................-63-
12.7 Notices by Agent ......................................................-63-
12.8 Agent's Fees ..........................................................-63-
12.9 Nature of Agency ......................................................-64-
12.10 Actions; Confirmation of Agent's Authority to Act in Event of Default..-64-
12.11 Authority of Agent to Enforce Notes And This Agreement ................-64-
13. MISCELLANEOUS .................................................................-64-
13.1 Law of Michigan; Submission to Jurisdiction ...........................-64-
13.2 Agent's Costs and Expenses ............................................-65-
13.3 Notices ...............................................................-65-
13.4 Further Action ........................................................-65-
13.5 Successors and Assigns ................................................-65-
(a) Assignments .....................................................-66-
(b) Participations ..................................................-66-
13.6 Indulgence ............................................................-67-
13.7 Counterparts ..........................................................-67-
13.8 Entire Agreement; Amendments; Waivers; Consents .......................-67-
13.9 Confidentiality .......................................................-68-
13.10 Interest ..............................................................-68-
13.11 Jury Waiver ...........................................................-68-
13.12 Conflicts .............................................................-69-
13.13 Effective Upon Execution ..............................................-69-
</TABLE>
-iv-
<PAGE> 6
TALON AUTOMOTIVE GROUP, INC.
CREDIT AGREEMENT
THIS AGREEMENT, made as of the 28th day of April 1998, between TALON
AUTOMOTIVE GROUP, INC. a Michigan corporation ("TAG"), VELTRI METAL PRODUCTS
CO., a Nova Scotia corporation ("Veltri", called together with TAG, the
"Borrowers" and either one referred to individually herein as a "Borrower")
each of the " Banks " from time to time party hereto, and COMERICA BANK, a
Michigan banking corporation as agent for the Banks (in such capacity, "Agent").
WHEREAS, Borrowers have requested Agent and the Banks to make certain loans
and extensions of credit to them, and
WHEREAS, Agent and the Banks are willing to do so, but only on the terms
and conditions of this Agreement;
NOW, Therefore, IT IS AGREED:
1. DEFINITIONS
For the purposes of this Agreement the following terms (when capitalized)
will have the following meanings:
1.1 "Accounts" means, with respect to any Person, all accounts
receivables, monies and book debts at any time owed to such Person, and all
instruments, chattel paper and other documents evidencing or securing any such
accounts receivable, monies or book debts.
1.2 "Acknowledgement of Leasehold Mortgage" shall mean, with respect to
any Leasehold Real Estate of any Person, an agreement between the landlord, the
registered encumbrancers with respect to the landlord's title to such Leasehold
Real Estate, the Agent and such Person (in its capacity as tenant) with respect
to the priority of, and the enforcement procedures relating to, the Mortgage
registered against such Leasehold Real Estate.
1.3 "Advance" shall mean a borrowing requested by a Borrower and made by
the Banks (or, in the case of the Swing Loans, made by Agent or the Canadian
Swingline Lender, as applicable), or otherwise made by Banks in the absence of
such a request pursuant to Section 2.11 hereof.
1.4 "Affiliate" shall mean, when used with respect to any Person, any
other Person which, directly or indirectly, controls or is controlled by or is
under common control with such Person. For purposes of this definition,
"control" (including the correlative meanings of the terms "controlled by" and
"under common control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.
-1-
<PAGE> 7
1.5 "Affiliate Loans" shall mean the following described unsecured loans
from time to time made by a Borrower to another Loan Party, to the extent that
the obligation with respect to such Loan is pledged to Agent on behalf of the
Banks and is subordinated to such Loan Party's obligations under the Documents,
all pursuant to documents and agreements satisfactory to Agent:
(a) a loan not in excess of Ten Million Dollar ($10,000,000) loan
owing by Veltri to VS as of the date of this Agreement;
(b) up to Twenty Five Million Dollars ($25,000,000) of the proceeds
of Senior Subordinated Notes borrowed by Veltri from TAG as of
even date herewith for the purpose of repaying existing
indebtedness of Veltri; and
(c) additional Affiliate Loans in aggregate amount at any time
outstanding not to exceed Fifteen Million Dollars ($15,000,000).
1.6 "Agent" shall mean Comerica Bank in its capacity as Agent hereunder or
any successor appointed in accordance with Section 12.4 hereof.
1.7 "Agent's Fees" shall mean those fees and expenses required to be paid
by Borrowers to Agent for Agent's sole account under Section 12.8 hereof.
1.8 "Agreement" shall mean this Agreement as amended from time to time in
accordance with the terms hereof.
1.9 "Alternate Base Rate" shall mean, for any day, one percent (1 %) plus:
(a) in the case of any calculation of the Prime-based Rate for an
Advance denominated in Dollars, the Federal Funds Effective Rate;
and
(b) in the case of any calculation of the Prime-based Rate for an
Advance denominated in Canadian Dollars, the BA Rate.
1.10 "Alternative Currency" shall mean Canadian Dollars or any other
currency approved in writing by all of the Banks.
1.11 "Applicable Interest Rate" shall mean:
(a) in the case of any Swing Loan, the Prime-based Rate; and
(b) with respect to all other Loans, the Eurocurrency-based Rate or
the Prime- based Rate, as selected by a Borrower from time to
time or otherwise determined pursuant to the terms and conditions
of this Agreement.
-2-
<PAGE> 8
1.12 "Applicable Margin" shall mean, with respect to any Prime-based Loan,
Eurocurrency-based Loan, Letter of Credit Fee or Facility Fee the per annum
rate (expressed as a percentage) determined in accordance with the following:
<TABLE>
<CAPTION>
Prime-based Loans Prime-based Loans
denominated in denominated in Eurocurrency-based Loans Facility
Leverage Ratio U.S. Dollars Canadian Dollars and Letter of Credit Fees Fees
-------------- ----------------- ----------------- ------------------------- --------
<S> <C> <C> <C> <C>
Level I 0.75% 1.75% 2.00% 0.50%
>= 5. 0
Level II 0.50% 1.50% 1.75% 0.50%
>= 4.5 but < 5. 0
Level III 0.25% 1.25% 1.55% 0.45%
>= 3.5 but < 4.5
Level IV 0.0% 1.00% 1.375% 0.375%
>= 3. 0 but < 3.5
Level V 0.0% 1.00% 1.175% 0.325%
< 3.00
</TABLE>
The Applicable Margin shall be based upon the Leverage Ratio most recently
determined on the basis of financial statements delivered by Borrowers to Bank
pursuant to Section 9. 1 (a) and (b) hereof. Any change in the Applicable
Margin resulting from any such determination shall be effective immediately
following the date of delivery of the relevant financial statement; provided
however, that (i) in the event such financial statements are not delivered as
and when required pursuant to Section 9.1 (and without prejudice to the rights
of Agent and Majority Banks to declare an Event of Default as a consequence
thereof) any increase in the Applicable Margin determined to be applicable upon
the receipt of such financial statements shall be applicable retroactively to
the date such financial statement was required to be delivered under Section 9.
1 (a) or (b), as applicable, but any decrease in the Applicable Margin based
thereon shall be applicable only prospectively, from the date of the actual
delivery thereof, (ii) in the event that on the date for adjustment of the
Applicable Margin, there exists an Event of Default hereunder, the Applicable
Margin shall not be reduced (but may be increased) until such time as such
Event of Default has been cured or waived, notwithstanding any reduction in the
Leverage Ratio on such date, and (iii) with respect to each Eurocurrency-based
Loan, the Applicable Margin applicable as of the first day of its Interest
Period shall remain in effect with respect to such Advance until the last day
of such Interest Period. Notwithstanding anything to the contrary herein, the
Applicable Margin shall be based on a Level III Leverage Ratio until it is
adjusted based on the financial statements of Borrowers for the Borrower's
fiscal quarter ending October 3, 1998.
1.13 "Assignment Agreement" shall mean an assignment agreement executed by
a Bank and delivered to Agent pursuant to Section 13.5(a) hereof, in the form
attached as Exhibit "A" hereto.
-3-
<PAGE> 9
1.14 "BA Rate" shall mean, for any day, the arithmetic average of the
bankers acceptance rates for one month periods which appear on the Reuter's
Screen CDOR Page at 10:00 a.m. Toronto time (as determined by Agent), or if such
day is not a Business Day then on the immediately preceding Business Day.
1.15 "Banks" shall mean each Bank signatory hereto, and each other Person
who becomes a Bank pursuant to Section 13.5(a) hereof.
1.16 "Borrowing Base" shall mean, as of any date, the sum of:
(a) eighty five percent (85%) of the value of Eligible Accounts
Receivable, plus
(b) fifty percent (50%) of the value of Eligible Inventory, plus
(c) the lesser of Fifteen Million Dollars ($15,000,000) or fifty
percent (50%) of the Eligible Tooling Invoices, plus
(d) seventy five percent (75%) of the fair market value of Eligible
Real Estate and of the orderly liquidation value of Eligible
Equipment, to the extent Agent has obtained an appraisal in form
and content satisfactory to Agent for such Eligible Real Estate
or Eligible Equipment, plus
(e) sixty five percent (65%) of the net book value (adjusted
quarterly upon the delivery of financial statements) of Eligible
Equipment for which Agent has not obtained an appraisal
satisfactory to Agent; provided, however that with respect to
Eligible Equipment acquired in connection with a Permitted
Acquisition, (i) only fifty percent (50%) of the net book value
thereof shall be included in the Borrowing Base until Agent has
obtained an appraisal thereof in form and content satisfactory to
Agent, (ii) the net book value of such assets will be the higher
of the net book value immediately prior to such Permitted
Acquisition or immediately after such Permitted Acquisition, and
(iii) so long as the value is determined by reference to the net
book value of such assets, the Borrowers shall depreciate such
assets in accordance with GAAP.
1.17 "Buildings and Fixtures" means all plant, buildings, structures,
erections, improvements, appurtenances and fixtures (including fixed machinery
and fixed equipment) situate on the Leasehold Real Estate or on the Real Estate,
or both, as the context requires.
1.18 "Business Day" shall mean any day on which commercial banks are open
for domestic and international business in Detroit, Michigan and: (a) when used
in reference to any Eurocurrency-based Loan, also a day on which dealings are
made in deposits in the relevant eurocurrency in the London interbank market;
and (b) when used in reference to any Swing Loan to be made by the Canadian
Swingline Lender, also a day on which the Canadian Swingline Lender is open for
commercial business in Toronto, Ontario.
-4-
<PAGE> 10
1.19 "Canadian Dollars" and "$Cd" shall mean lawful currency of Canada.
1.20 "Canadian Swingline Lender" shall mean in the event and so long as so
appointed hereunder a Bank (or an Affiliate of a Bank) which is chartered under
the laws of Canada and is hereafter designated as Canadian Swingline Lender by
Veltri and Agent.
1.21 "Change in Control" shall mean:
(a) Permitted Holders shall cease to control, directly or indirectly,
in each case free and clear of all Liens, a majority (on a fully
diluted basis) of the issued and outstanding shares of voting
stock of TAG; and
(b) any "Change of Control" as defined in the Senior Subordinated
Note Indenture.
1.22 "Closing Date" shall mean the date, on or before April 30, 1998, on
which the conditions of Section 7.1 hereof have been satisfied.
1.23 "Collateral" means all Stock, Accounts, Inventory, Intellectual
Property, Equipment, Buildings and Fixtures, Leasehold Real Estate, Real Estate,
and all books, records, instruments, chattel paper, negotiable documents of
title, intangibles and proceeds of each Loan Party, including any bank accounts
and deposits therein, and any substitutions for, or replacements of, any of the
foregoing.
1.24 "Default" shall mean an event, occurrence or circumstance which, with
the giving of notice and/or passage of time, would constitute an Event of
Default.
1.25 "Default Rate" shall mean, with respect to any Loan, two percent (2%)
plus its Applicable Interest Rate.
1.26 "Documents" shall mean this Agreement, the Notes, the Guaranties, the
Security Documents, the Financing Statements, the Letter of Credit Agreements,
and all other documents, agreements and instruments delivered to Agent and/or
the Canadian Swingline Lender, in connection with this Agreement as the same may
be amended or modified from time to time.
1.27 "Dollars" and the sign "$" shall mean lawful money of the United
States of America.
1.28 "Dollar Amount" shall mean (i) with respect to each Advance made or
carried (or to be carried) in Dollars, the principal amount thereof and (ii)
with respect to each Advance made or carried (or to be made or carried) in an
Alternative Currency, the amount of Dollars which is equivalent to such amount
of Alternate Currency at the spot exchange rate determined by the Agent to be
available to it for the sale of Dollars for such Alternative Currency at
approximately 11:00 a.m. (Detroit time) two (2) Business Days before such
Advance is made, as such Dollar Amount may be adjusted from time to time
pursuant to Section 2.12 or 5.8 hereof. When used with respect to Alternative
Currency portion of an Advance being repaid
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or remaining outstanding at any time or other amount of Dollars to be
determined from an asset or other item initially expressed as an amount of
Alternative Currency, "Dollar Amount" shall mean the amount of Dollars which is
equivalent to the principal amount of such Advance or other amount initially
expressed as an amount of Alternative Currency at the most favorable spot
exchange rate determined by the Agent to be available to it for the sale of
Dollars for such Alternative Currency at the relevant time.
1.29 "EBITDA" shall mean, as of the last day of any fiscal quarter, Net
Income plus the aggregate amounts deducted in determining Net Income for such
period in respect of taxes based on income, Michigan single business tax,
interest expense and depreciation and amortization, all determined in accordance
with GAAP determined (i) with respect to any calculation of EBITDA as of April
4, 1998, by multiplying EBITDA calculated for the quarter then ended by four (4)
(ii) with respect to any calculation of EBITDA as of July 4, 1998, by
multiplying EBITDA for the two quarter period then ended by two (2), (iii) with
respect to any calculation of EBITDA as of October 3, 1998, by multiplying
EBITDA for the three quarters then ended by four thirds (4/3), and (iv) with
respect to any subsequent determination thereof, on a rolling four quarter
basis, provided however, solely for the purpose of calculating Leverage Ratio
during any four quarter period during which a Permitted Acquisition has occurred
(x) EBITDA determined for the entity or business acquired in such Permitted
Acquisition (without any annualization pursuant to clauses (i) through (iv)
above) shall be included in the calculation hereof, as if such Permitted
Acquisition occurred on the first day of such four quarter period, and (y) any
Permitted Adjustments related to a Permitted Acquisition shall be added back
during the rolling four quarter period which includes the date of the Permitted
Acquisition.
1.30 "EDC" shall mean the Export Development Corporation, an agency of the
Canadian government.
1.31 "EDC Financing" shall mean loans and advances provided to Veltri by
the EDC for the purposes and on the terms and conditions described in that
certain loan agreement dated as of December 17, 1997 between the EDC and Veltri.
1.32 "EDC Financing Collateral" shall mean those items delineated on
Schedule I and II attached to the Confirmation dated April __, 1997 by EDC to
Agent.
1.33 "EDC Indemnification" shall mean the indemnification of the EDC by
Veltri for the purposes and on the terms and conditions described in that
certain indemnification agreement dated as of December 17, 1997 between the EDC
and Veltri.
1.34 "Eligible Accounts" shall mean an Account arising in the ordinary
course of the business of a Loan Party which meets each of the following
requirements:
(a) it is not owing more than ninety (90) days after the date of the
original invoice or other writing evidencing such Account;
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(b) it arises from the sale or lease of goods and such goods have
been shipped or delivered to the account debtor; or it arises
from services rendered and such services have been performed;
(c) it is evidenced by an invoice, dated not later than the date of
shipment or performance, rendered to such account debtor, or some
other evidence of billing acceptable to Agent;
(d) it is not evidenced by any note, trade acceptance, draft or other
negotiable instrument or by any chattel paper, unless such note
or other document or instrument previously has been endorsed and
delivered to Agent;
(e) it is a valid, legally enforceable obligation of the account
debtor thereunder, and is not subject to any offset, counterclaim
or other defense on the part of such account debtor or to any
claim on the part of such account debtor denying liability
thereunder in whole or in part;
(f) it is not an Account billed in advance, payable on delivery, for
consigned goods, for guaranteed sales, for unbilled sales, for
progress billings, payable at a future date in accordance with
its terms, subject to a retainage or holdback by the account
debtor or insured by a surety company;
(g) the Account is subject to a duly perfected Lien in favor of the
Agent on behalf of the Banks pursuant to the Security Documents
ranking in priority to all other Liens, which Lien has been duly
registered, filed or recorded in all applicable jurisdictions and
all other steps necessary or of advantage have been taken to
create, perfect, preserve and protect such Lien;
(h) the Account does not constitute an obligation of: (i) any
Governmental Entity, unless such Account may be assigned to the
Agent under applicable law and all steps required by the Agent in
connection therewith in order that all monies due and to become
due thereunder have been assigned to the Agent in accordance with
such laws, including notice to the applicable Governmental
Entity, have been duly taken or (ii) any Person organized, or
located in, a jurisdiction other than a state or territory of the
United States or a Province of Canada unless (x) the Account
Debtor with respect thereto is a subsidiary of General Motors
Corporation, Ford Motor Company or Chrysler Motor Company
organized under the laws of and located within the Republic of
Mexico or (y) the Account is insured by export credit insurance
policies acceptable to Agent, the proceeds of which have been
assigned to Agent; and
(i) the Account has not arisen out of a written order or contract
with or from an account debtor which by its nature or terms
prevents, restricts, forbids or makes void or unenforceable the
assignment to the Agent of such Account, or requires notice to,
or the consent of, the account debtor.
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An Account which is at any time an Eligible Account, but which subsequently
fails to meet any of the foregoing requirements, shall forthwith cease to be an
Eligible Account.
1.35 "Eligible Equipment" shall mean Equipment owned by a Loan Party which
is:
(a) used in the ordinary course of such Loan Party's business;
(b) owned subject to a first perfected security interest granted to
Agent on behalf of the Banks and no other Liens other than
Subordinate Liens; and
(c) subject to a duly perfected Lien in favor of the Agent ranking in
priority to all other Liens, which Lien has been duly registered,
filed or recorded in all applicable jurisdictions and all other
steps necessary or of advantage have been taken to create,
perfect, preserve and protect such Lien.
1.36 "Eligible Inventory" shall mean all Inventory of a Loan Party which is
in good and merchantable condition and is not obsolete or discontinued, would
properly be classified as "finished goods", "work-in-process" or "raw
materials" under GAAP, excluding:
(a) Inventory covered by or subject to a title retention agreement or
a seller's right to repurchase, or any consensual or
nonconsensual Lien (including without limitation purchase money
security interests) other than Liens in favor of Agent on behalf
of Banks and the Subordinate Liens;
(b) any Inventory which is not subject to a duly perfected Lien in
favor of the Agent ranking in priority to all other Liens, which
Lien has been duly registered, filed or recorded in all
applicable jurisdictions and all other steps necessary or of
advantage have been taken to create, perfect, preserve and
protect such Liens; and
(c) tooling inventory which is the subject of an Eligible Tooling
Invoice.
Inventory shall be valued at the lesser of cost or market value on a FIFO
basis and Inventory which is at any time Eligible Inventory, but which
subsequently fails to meet any of the foregoing requirements, shall forthwith
cease to be Eligible Inventory.
1.37 "Eligible Tooling Invoices" shall mean invoices rendered and paid by a
Loan Party for payment in connection with a supplier's production of tooling for
such Loan Party, provided that (i) such Loan Party has in force a contract for
the sale of such tooling to a purchaser who is an automobile manufacturer, a
first tier supplier to an automobile manufacturer or other Person acceptable to
Agent, and (upon any request by Agent therefor) provides a copy of such contract
to Agent (ii) such tooling is owned by such Loan Party; (iii) if such actions
have been requested by Agent or the Majority Banks, all steps deemed necessary
by Agent to perfect a first priority Lien on the relevant tooling in favor of
Agent on behalf of Banks shall have been taken, and (iv) each Eligible Tooling
Invoice shall cease to be an Eligible Tooling Invoice upon the earliest to occur
of the following:
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(a) 240 days after the date of such invoice,
(b) delivery of the tooling related thereto to the Person purchasing
such tooling,
(c) default under or revocation or termination of the contract or
agreement pursuant to which such tooling is to be purchased from
Loan Party,
(d) bankruptcy or insolvency of the Person purchasing such tooling
from the Loan Party or the supplier producing such tooling for
such Loan Party, or
(e) such tooling or Eligible Tooling Invoice becomes, or is
determined to be included within, Eligible Accounts Receivable,
Eligible Inventory or Eligible Equipment. For purposes of this
definition, all goods or invoices which would otherwise
constitute "Eligible Tooling Invoices" which are financed other
than by Advances (including, without limitation, under the EDC
Financing) shall be excluded from this definition.
1.38 "Environmental Laws" shall mean the common law and all federal, state,
local and foreign laws or regulations, codes, orders, decrees, judgments or
injunctions issued, promulgated, approved or entered thereunder, now or
hereafter in effect, relating to pollution or protection of public or employee
health and safety or the environment, including, without limitation, laws
relating to (i) emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
constituent substances or wastes, including, without limitation, petroleum,
including crude oil or any fraction thereof, or any petroleum product
(collectively referred to as "Hazardous Materials"), into the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), (ii) the manufacture, processing, distribution,
use, generation, treatment, storage, disposal, transport or handling of
Hazardous Materials, and (iii) underground storage tanks, and related piping,
and emissions, discharges, releases or threatened releases therefrom.
1.39 "Eligible Real Estate" shall mean Leasehold Real Estate and Real
Property of a Loan Party:
(a) which is used in the ordinary course of a Loan Party's business;
(b) subject to a first perfected mortgage, deed of trust or leasehold
mortgage granted to Agent on behalf of Banks and no other Liens
other than Permitted Liens and Subordinate Liens and (in the case
of Leasehold Real Estate) Liens on the owner's interests therein
securing obligations of such owner; and
(c) for which Agent has received such surveys, appraisals, title
insurance, flood plain certificates, title opinions,
environmental report and other
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assurances and due diligence documentation as Agent shall require
in connection therewith.
1.40 "Equipment" means, with respect to any Person, all tools, machinery,
equipment, furniture, chattels, motor vehicles and accessories now owned or
hereafter acquired or reacquired by such Person, whether or not conditionally or
unconditionally sold to such Person.
1.41 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, or any successor act or code. Section references to ERISA are
to ERISA as in effect as of the date of this Agreement and any subsequent
amendment, supplement or substitution thereof.
1.42 "ERISA Affiliates" shall mean any entity, whether or not incorporated,
which is under common control or would be considered a single employer with a
Borrower within the meaning of Section 414(b),(c) or (in) of the internal
revenue code and regulations promulgated under those sections or within the
meaning of Section 4001(b) of ERISA and regulations promulgated under that
section.
1.43 "Equity Ownership Plan" shall mean the Talon Automotive Group, Inc.
Amended and Restated Equity Ownership Plan dated as of April 28, 1998.
1.44 "Eurocurrency-based Loan" shall mean a Loan which bears interest at a
rate based on the Eurocurrency-based Rate.
1.45 "Eurocurrency-based Rate" shall mean a per annum interest rate equal
to the Eurocurrency Rate for the relevant Loan, plus the Applicable Margin from
time to time in effect.
1.46 "Eurocurrency Lending Office" shall mean Agent's office located at
Grand Cayman or such other branch of Agent, domestic or foreign, as it may
hereafter designate as its Eurocurrency Lending Office by notice to Borrower.
1.47 "Eurocurrency Rate" shall mean:
(a) the per annum interest rate at which the Eurocurrency Lending
Office offers deposits in the relevant eurocurrency to prime
banks in the eurocurrency market in an amount comparable to the
relevant Eurocurrency-based Loan and for a period equal to the
relevant Interest Period at approximately 11:00 a.m. Detroit
time two (2) Business Days prior to the first day of such
Interest Period; divided by,
(b) a percentage (expressed as a decimal) equal to one hundred
percent (100%) minus that percentage which is in effect on the
date for an Advance of a Eurocurrency-based Loan, as prescribed
by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirements for a
member bank of the
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Federal Reserve System with deposits exceeding five billion
dollars in respect of "Eurocurrency Liabilities" (or in respect
of any other category of liabilities which includes deposits by
reference to which the interest rate on Eurocurrency-based Loans
is determined or any category of extensions of credit or other
assets which includes loans by a non-United States Eurocurrency
Lending Office of such a bank to United States residents).
1.48 "Event of Default" shall mean the Events of Default specified in
Sections 11.1 through 11.10 hereof.
1.49 "Extension Request" shall mean a request for an extension of the
Maturity Date made by Borrowers to the Agent in the form attached as Exhibit "B"
hereof.
1.50 "Facility Fee" shall mean the facility fees payable by Borrowers to
Agent for the account of the Banks pursuant to Section 2.7 hereof.
1.51 "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 for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, 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
received by Agent from three Federal funds brokers of recognized standing
selected by it.
1.52 "Financing Statements" shall mean financing statements filed in
accordance with the UCC, the Personal Property Security Act (Ontario) and any
other statutes deemed advisable by the Agent, in such filing offices as the
Agent deems advisable, describing the Agent (in its capacity as agent for the
Banks) as secured party and a Loan Party as debtor, covering the Collateral.
1.53 "GAAP" shall mean, at any time, generally accepted accounting
principles applied in a manner consistent with the application thereof used in
the financial statements of Borrowers referred to in Section 8.8 hereof.
1.54 "Guaranty" shall mean the TAG Guaranty, the Veltri Guaranty, the VS
Guaranty, the USA Guaranty and each other guaranty hereafter executed and
delivered to Agent and the Banks by a Loan Party pursuant to Section 9.9 hereof,
in each case guarantying payment and performance of all indebtedness and
obligations of the Borrowers hereunder.
1.55 "Hedging Agreements" shall mean any currency hedging agreement, rate
or currency sway or forward exchange agreement, or other rate protection or
foreign exchange agreement from time to time entered between a Borrower and one
or more of the Banks and, for the purposes of each Guaranty and other Security
Document, the obligations of the Borrowers under each such Hedging Agreement
shall be deemed to be obligations hereunder.
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1.56 "Highest Lawful Rate" shall mean, with respect to each Bank, the
maximum nonusurious interest rate, if any, that at any time or from time to time
may be contracted for, taken, reserved, charged or received on its Notes or
other indebtedness under laws applicable to such Bank which are in effect as of
the date hereof or, to the extent allowed by law, under such laws applicable to
such Bank which may hereafter be in effect and which allow a higher maximum
nonusurious interest rate than applicable laws allow as of the date hereof.
1.57 "Indebtedness" shall mean, with respect to any Person, without
duplication, (i) all indebtedness of such Person for borrowed money, (ii) the
deferred purchase price of assets or services which in accordance with GAAP
would be shown on the liability side of the balance sheet of such Person, (iii)
the face amount of all letters of credit issued for the account of such Person
and, without duplication, all drafts drawn thereunder, (iv) all obligations of
any other Person secured by any Lien on any property owned by such first Person,
whether or not such obligations have been assumed by such first Person, and (v)
all capitalized lease obligations of such Person, (vi) all obligations of such
Person under interest rate agreements; provided, however, that the term
Indebtedness shall not include Affiliate Loans.
1.58 "Intellectual Property" means, with respect to any Person, any and all
issued patents and patent applications, industrial design registrations, trade
marks, registrations and applications therefor, trade names and styles, logos,
copyright registrations and applications therefor, all of the foregoing owned by
or licensed to such Person.
1.59 "Interest Coverage Ratio" shall mean, as of the date of any
determination thereof a ratio, the numerator of which is EBITDA and the
denominator of which is Interest Expense for the four quarter period then ended.
1.60 "Interest Expense" shall mean, for any Person, consolidated interest
expense plus interest expense on capital lease obligations, capitalized
interest, non-cash interest expense (except for capitalized loan financing costs
and non-cash interest expense on indebtedness with respect to which no payment
of principal is required to be made prior to the Maturity Date in effect at the
time of the relevant calculation of Interest Expense), all Facility Fees or
other recurring fees associated with this Agreement, less interest expense
associated with Tooling Loans and EDC Financing, provided however, that during
the first four quarters ending after the date of this Agreement interest expense
(except to the extent attributable to a Person acquired pursuant to a Permitted
Acquisition) shall be annualized as if this Agreement and the Senior
Subordinated Notes were in effect at all times during the four quarter period of
calculation hereof, using actual interest rates and Facility Fee rates in effect
as of the Closing Date.
1.61 "Interest Period" shall mean:
(a) in the case of any Prime-based Loan, an initial period beginning
on the date of the Advance thereof and ending on the next
occurring Quarterly Date and thereafter, successive Interest
Periods beginning on the day after each Quarterly Date and ending
on each succeeding Quarterly Date; and
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(b) in the case of any Loan which is a Eurocurrency-based Loan one
(1), two (2), three (3) or six (6) months as selected by a
Borrower.
provided however, that:
(i) any Interest Period which would otherwise end on a day
which is not a Business Day shall be extended to the next
succeeding Business Day unless the next succeeding Business
Day falls in another calendar month, in which case, such
Interest Period shall end on the immediately preceding
Business Day;
(ii) when an Interest Period for a Eurocurrency-based Loan
begins on a day which has no numerically corresponding day
in another calendar month during which such Interest Period
is to end, it shall end on the last Business Day of such
other calendar month; and
(iii) no Interest Period for any Loan shall extend beyond the
Maturity Date.
1.62 "Initial Public Offering" shall mean a primary sale or sales of
capital stock of TAG pursuant to which not more than forty nine percent (49%) of
the capital stock of TAG is offered for sale pursuant to a public offering
thereof.
1.63 "Inventory" means, with respect to any Person, all inventory now owned
or hereafter acquired by such Person, including: (i) finished goods,
work-in-progress, raw materials, new and unused production, packing and shipping
supplies; (ii) all new and unused maintenance items; and (iii) all other
materials and supplies on hand to be used or consumed or which might be used or
consumed in connection with the manufacture, packing, shipping, advertising,
selling, or furnishing of goods.
1.64 "Leasehold Real Estate" means, with respect to any Person, real estate
held under a lease, agreement to lease or other right of occupation.
1.65 "Letter(s) of Credit" shall mean any standby letters of credit
hereafter issued by Agent at the request of TAG and for the account of a Loan
Party pursuant to Article 3 hereof.
1.66 "Letter of Credit Agreement" shall mean in respect of each Letter of
Credit issued pursuant to this Agreement, the application of TAG requesting
Agent to issue such Letter of Credit (including the terms and conditions on the
reverse side thereof or otherwise provided therein), in the form and substance
acceptable to Agent.
1.67 "Letter of Credit Fees" shall mean the fees payable to Agent for the
account of the Banks in connection with Letters of Credit pursuant to Section
3.4 hereof.
1.68 "Letter of Credit Maximum" shall mean, as of any date, the lesser of:
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(a) Ten Million Dollars ($10,000,000); or
(b) the Revolving Maximum minus the sum of the aggregate principal
amount of outstanding Revolving Loans and Swing Loans.
1.69 "Letter of Credit Notice" shall mean Agent's notice of the issuance of
a Letter of Credit in the form attached hereto as Exhibit "C".
1.70 "Letter of Credit Obligation" shall mean the obligation of TAG under
each Letter of Credit Agreement to reimburse the Agent for each payment made by
the Agent under the Letter of Credit issued pursuant to such Letter of Credit
Agreement, together with all other sums, fees, charges and amounts which may be
owing under such Letter of Credit Agreement.
1.71 "Letter of Credit Payment" shall mean any amount paid or required to
be paid by the Agent in its capacity as issuer of a Letter of Credit as a result
of a draw against any Letter of Credit.
1.72 "Leverage Ratio" shall mean, as of any date, the ratio of:
(a) an amount equal to the difference between the Borrowers
Indebtedness less a sum equal to the Tooling Loans then
outstanding and cash and cash equivalents then on hand; to
(b) EBITDA.
1.73 "Lien" means, with respect to any Property, any charge, mortgage,
pledge, hypothecation, security interest, lien, conditional sale (or other title
retention agreement or lease in the nature thereof), lease, servitude,
assignment, adverse claim, defect of title, restriction, trust, right to set-off
or other encumbrance of any kind in respect of such Property (including any Lien
accounted for as a capitalized lease obligation for purposes of a balance sheet
prepared in accordance with GAAP), whether or not filed, recorded or otherwise
perfected under applicable law.
1.74 "Loan" shall mean any one or more Swing Loan, Revolving Loan and/or
Letter of Credit Obligation, or all of them, as the context indicates.
1.75 "Loan Party" shall mean each Borrower and each Subsidiary of a
Borrower.
1.76 "Majority Banks" shall mean, so long as the Revolving Commitment is in
effect, banks whose Percentages are, in aggregate, in excess of fifty percent
(50%) and thereafter, Banks having outstanding Loans in excess of fifty percent
(50%) of all Loans then outstanding.
1.77 "Material Adverse Effect" shall mean:
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(a) any materially adverse effect with respect to the operations,
business, properties, assets, nature of assets, liabilities
(contingent or otherwise), financial condition or prospects of a
Borrower; or
(b) any facts or circumstance as to which singly or in the aggregate,
create a reasonable likelihood of such a materially adverse
change, or a reasonable likelihood that a Borrower will be
rendered unable to perform obligations under any of the
Documents, or a reasonable likelihood that Agent or the Banks
will be rendered unable to enforce in any material respect rights
or remedies purported to be granted them under any of the
Documents.
1.78 "Merger" shall mean (i) the corporate merger of Production Stamping,
Inc., J & R Manufacturing, Inc., Hawthorne Metal Products, Inc. and Talon
Automotive Group, L.L.C., with Production Stamping, Inc. as the surviving
corporation and (ii) the adoption of such surviving entity of the name "Talon
Automotive Group, Inc."
1.79 "Maturity Date" shall mean, April 27, 2003, or such later date to
which it may be extended at the request of Borrower, and in the sole discretion
of Agent and the Banks, pursuant to Section 2.9 hereof.
1.80 "Mortgages" shall mean mortgages, deeds of trust or debentures
executed by a Loan Party pursuant to which such Person grants Agent (in its
capacity as agent for the Banks) a first priority mortgage on the Real Property
and/or Leasehold Real Estate of such Loan Party.
1.81 "Multiemployer Plans" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA with respect to which Borrower or any ERISA
Affiliate is or has been required to contribute.
1.82 "Net Income" shall mean, for any period of any determination thereof,
the net income before extraordinary items (reduced by the amount of any dividend
paid during the period of determination pursuant to clause (b) of Section 10.5
hereof) all determined in accordance with GAAP.
1.83 "Net Proceeds" shall mean, with respect to any issuance of equity
interests of a Borrower or any Subsidiary, the net proceeds of such event after
reasonable expenses associated with such issuance (including reasonable
commissions, legal and accounting fees and expenses) and, when used in
connection with the Initial Public Offering, shall also be net of (x) any tax
expense incurred in connection with TAG's revocation of its election to be
treated as an S corporation, to the extent such revocation is made in connection
with the Initial Public Offering, and (y) any dividend payable out of proceeds
of the Initial Public Offering to the extent approved by the Majority Banks in
writing acting in their sole discretion.
1.84 "Net Worth" shall mean, as of any date, the amount of any capital
stock, paid in capital and similar equity accounts plus (or minus in the case of
a deficit) the capital surplus and retained earnings of a Person and the amount
of any foreign currency translation adjustment
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account shown as a capital account of such Person, less treasury stock, all as
determined under GAAP.
1.85 "Notes" shall mean any one or more of the promissory notes made by
Borrower to the Banks as evidence of Loans pursuant to Section 2.2 hereof, or
all of them, as the context indicates.
1.86 "Pension Plans" shall mean any pension plan as defined in Section 3(2)
of ERISA (other than a Multiemployer Plan) which is or has been maintained by or
to which contributions are or have been made by a Borrower or any ERISA
Affiliate.
1.87 "Percentage" shall mean, with respect to any Bank, the percentage set
forth opposite its name on Exhibit "D" hereto, as such Percentages may change
from time to time pursuant to Section 13.5(a) hereto.
1.88 "Permitted Acquisition" shall mean the merger of a Borrower or a
Subsidiary with another Person, or the acquisition by a Borrower or a Subsidiary
of a majority of the Stock of, or all or substantially all of the assets of, any
Person or of an operating division of any Person, or to the extent allowed under
clause (j) below, the investment by a Borrower or a Subsidiary of a Borrower in
a Person who is not a Borrower or a Subsidiary of a Borrower so long as:
(a) No Default or Event of Default shall exist immediately before and
after giving effect of such merger or acquisition;
(b) if a Borrower is party to such transaction, it shall be the
surviving entity in any such transaction;
(c) prior to the consummation of such merger or acquisition, the
Borrowers shall have provided to the Agent an opinion of counsel
that such merger or acquisition complies with this Agreement, all
laws and regulations and that any other conditions under this
Agreement relating to such transaction have been satisfied, such
certificate shall contain such other information and
certifications as requested by the Agent and be in form and
substance satisfactory to the Agent;
(d) at least seven (7) Business Days prior to the consummation of
such merger or acquisition, the relevant Borrower shall have
delivered all acquisition documents and other agreements and
documents or information relating to such merger or acquisition
reasonably requested by Agent in form and substance satisfactory
to Agent, and a certificate of Chief Financial Officer or
Treasurer of the relevant Borrower together with pro forma
computations acceptable to Agent which demonstrate compliance
with all financial covenants hereunder from the consummation date
of the acquisition through the Maturity Date and the Agent shall
have completed a satisfactory review thereof and completed such
other due diligence reasonably satisfactory to the Agent;
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(e) the Leverage Ratio (calculated on a proforma basis and giving
affect to such transaction) shall be at least 0.25 below the
level required under Section 10.4 of this Agreement and the
Interest Coverage Ratio shall be not less than 2.0:1.0;
(f) both before and after giving effect to such merger or acquisition
and any Advances to be utilized in connection therewith, the
Revolving Maximum in effect shall exceed the Loans and Letters of
Credit outstanding by not less than Ten Million Dollars
($10,000,000);
(g) the target of such merger or acquisition shall be in the same
line of business as the Borrowers;
(h) the target of such merger or acquisition shall not be or ever
have been in any bankruptcy proceeding;
(i) total purchase price (including seller notes and assumed or
subsidiary indebtedness, but excluding reasonable transaction
fees) for any particular Permitted Acquisition shall not exceed
Sixty Million Dollars ($60,000,000);
(j) the total amount expended or invested in the case of Permitted
Acquisitions of interests in Persons who are not (and will not be
upon consummation thereof) Subsidiaries of a Borrower shall not
exceed Five Million Dollars ($5,000,000) in aggregate amount.
1.89 "Permitted Adjustment" shall mean an amount determined by Agent, from
its review of information provided it in connection with a Permitted
Acquisition, to be demonstrable savings to be achieved with respect to the
operations, entity or business to be acquired which, in Agent's sole judgment,
will be appropriate to add back to the calculation of EBITDA pursuant to clause
(y) of the definition thereof.
1.90 "Permitted Holders" shall mean (i) Randolph J. Agley, Judith A. Agley,
James R. Agley, Joseph A. Agley, James J. Agley, Michael T. Timmis, Nancy E.
Timmis, Michael T.O. Timmis, Wayne C. Inman or Amelia P. Inman, (ii) any
relative, family member or any Person controlled by any of the persons listed in
subparagraph (i) above, (iii) any trust including, without limitation, a
charitable remainder trust, created by or for the benefit of any of the persons
listed in subparagraphs (i) or (ii) above and (iv) any private foundation
created by any of the persons listed in subparagraphs (i) or (ii) above.
1.91 "Permitted Liens" shall mean:
(a) Liens for taxes, assessments or governmental charges or claims
not yet delinquent, or Liens for taxes, assessments or
governmental charges being contested in good faith and by
appropriate proceedings for which adequate reserves, (to the
extent required by GAAP) have been established;
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(b) Liens in respect of property or assets of a Loan Party which were
imposed by law in the ordinary course of business, such as
carriers', warehousemen's and construction Liens and other
similar Liens arising in the ordinary course of business, which
are not delinquent or which are being contested in good faith by
appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the property or asset
subject to such Lien;
(c) Liens (other than any Lien imposed by ERISA or pursuant to
Environmental Laws) incurred or deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other type of social security, or to
secure the performance of tenders, statutory obligations, surety
bonds, bids, leases, governmental contracts, performance and
return-of-money bonds and other similar obligations incurred in
the ordinary course of business (exclusive of obligations in
respect of the payment for borrow money or the equivalent);
(d) Easements, rights of way, restrictions, minor defects or
irregularities in title not interfering in any material respect
with the business of a Loan Party, in each case incurred in the
ordinary course of business and which do not materially impair
for its intended purposes the Real Property to which it relates
and which do not materially adversely affect the value of the
Real Property to which it relates;
(e) The Lien of any judgment rendered which does not give rise to a
Default or Event of Default and Liens created by deposits of cash
or cash equivalents permitting the relevant Loan Party to appeal
court judgments that are being contested in good faith by
appropriate proceedings and do not give rise to a Default or an
Event of Default; and
(f) Assignments, leases or subleases granted to others not
interfering in any material respect with the ordinary conduct of
the relevant Loan Party's business and not materially affecting
the value of the Collateral.
1.92 "Person" shall mean an individual, corporation, partnership, trust,
incorporated or unincorporated organization, association, syndicate, joint
venture, joint stock company, or a government or any agent or political
subdivision thereof or other entity of any kind, and pronouns have a similarly
extended meaning.
1.93 "Prime Rate" shall mean:
(a) for all purposes other than those specified in clause (b) below,
the per annum interest rate established by Agent as its prime
rate for its borrowers as such rate may vary from time to time,
which rate is not necessarily the lowest rate on loans made by
Agent at any such time, and
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(b) with respect to Swing Loans made by the Canadian Swingline
Lender, and Canadian Dollar denominated Advances under the
Revolving Loan to the extent and so long as they are carried as
Prime-based Loans pursuant to Section 5.3 or 5.4 hereof, the
Canadian Swingline Lender's reference rate of interest for loans
made in Canadian Dollars to Canadian customers and designated as
its "prime rate,"
which rates are set by the Agent and Canadian Swingline Lender as their prime
rates for borrowers, based on their respective costs, desired return and
general economic conditions as such rates may vary from time to time, which
rates are not necessarily the lowest rate on loans made by the Lender or
Canadian Swingline Lender at any such time.
1.94 "Prime-based Loan" shall mean a Loan which bears interest at the
Prime-based Rate.
1.95 "Prime-based Rate" shall mean, as of any day:
(a) that rate of interest which is the greater of: (i) the Prime
Rate; or (ii) the Alternate Base Rate; plus
(b) the Applicable Margin then in effect.
1.96 "Property" means, with respect to any Person, any interest of such
Person in any land or property or asset, wherever situated, whether real or
immovable, personal, movable or mixed, tangible or corporeal, intangible or
incorporeal, including capital stock in any other Person.
1.97 "Quarterly Date" shall mean the last Business Day of each March,
June, September and December.
1.98 "Real Property" shall mean all right, title and interest of a Loan
Party in the real property (including, without limitation, that real property
described in Exhibit "E" hereto), whether as owner, lessee or otherwise, and
whether now existing or hereafter arising.
1.99 "Request for Loan" shall mean a request for an Advance under a Note
issued by a Borrower under this Agreement in the form annexed hereto as Exhibit
"F".
1.100 "Restructuring" shall mean the exchange of shares by the former
shareholders of the constituent corporations to the Merger and the prior direct
and indirect shareholders of Veltri pursuant to which (i) each such shareholder
exchanges its prior shares in such corporations for shares in TAG; and (H) VS
and USA become wholly owned direct Subsidiaries of TAG and Veltri becomes a
wholly owned indirect Subsidiary of TAG.
1.101 "Revolving Loan" shall mean the revolving credit loans to be advanced
and readvanced to Borrowers pursuant to Section 2.1 hereof.
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1.102 "Revolving Loan Commitment" shall mean One Hundred Million Dollars
($100,000,000) or such lesser amount to which it may be reduced pursuant to
Section 2.8 hereof.
1.103 "Revolving Loan Subcommitment" shall mean Thirty Million Canadian
Dollars (Cdn $30,000,000) or such lesser amount to which the Revolving Loan
Commitment is reduced pursuant to Section 2.8 hereof.
1.104 "Revolving Maximum" shall mean, as of any date, the lesser of: (a)
Revolving Loan Commitment, or (b) the Borrowing Base.
1.105 "Security Documents" means those agreements and other documents in
favor of the Agent for the benefit of itself and the Banks described in Sections
7.1(a) and 9.9 hereof, as such documents may be amended or supplemented from
time to time, and any other agreement or instrument which the Agent for the
benefit of itself and the Banks may from time to time deem necessary for the
purpose of obtaining, creating, perfecting, preserving or protecting any of the
Liens in favor of the Agent in any of the Collateral.
1.106 "Senior Subordinated Debt Documents" shall mean the Senior
Subordinated Note Indenture, the Senior Subordinated Notes and all agreements
and documents executed in connection therewith.
1.107 "Senior Subordinated Notes" shall mean the Senior Subordinated Notes
issued by TAG pursuant to the Senior Subordinated Note Indenture in the
aggregate principal amount not less than One Hundred Twenty Million Dollars
($120,000,000) or greater than One Hundred Twenty Five Million Dollars
($125,000,000) due May 1, 2008.
1.108 "Senior Subordinated Note Indenture" shall mean the Senior
Subordinated Indenture between the TAG and U.S. Bank Trust National Association
as trustee, dated as of even date herewith, as amended or modified from time to
time.
1.109 "Services Agreement" shall mean that certain business services
agreement dated as of July 1, 1997, as amended and restated as of April 1, 1998,
between TAG and Talon L.L.C.
1.110 "Stock" shall mean, with respect to any Loan Party, any shares of
capital stock of any Person, or other equity or ownership interest in, any other
Person owned, held or otherwise controlled by such Loan Party.
1.111 "Subordinate Liens" shall mean the Liens which are subject to the
Veltri Subordination Agreement.
1.112 "Subordination Agreement" shall mean a subordination agreement in
form and content satisfactory to Agent, subordinating payment of the Affiliate
Loans to the prior payment of all of the Indebtedness owing by Borrower to Agent
and the Banks.
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1.113 "Subordinated Debt" of any Person shall mean, as of any date, that
Indebtedness of such Person for borrowed money which is expressly subordinate
and junior in right and priority of payment to the Advances and other
Indebtedness of such Person to the Agent and the Banks in manner and by
agreement satisfactory in form and substance to the Agent and subject to such
other terms and provisions, including without limitation maturities, covenants,
defaults, rates and fees, acceptable to the Agent, and shall include, without
limitation, all indebtedness owing pursuant to the Senior Subordinated Debt
Documents.
1.114 "Subsidiary" shall mean any corporation, limited partnership, joint
venture or other business entity in which a Borrower or a Subsidiary of Borrower
now or hereafter holds direct or indirect ownership of fifty percent (50%) or
more of the voting interests or equity interests.
1.115 "Swing Loan" shall mean the swing loans to be advanced and readvanced
to a Borrower from time to time pursuant to Section 2.2 hereof.
1.116 "Swing Loan Commitment" shall mean, as of any date,
(a) With respect to Swing Loans made by Agent to TAG, Five Million
Dollars ($5,000,000);
(b) with respect to Swing Loans made by the Canadian Swingline
Lender to Veltri, Five Million Canadian Dollars ($5,000,000
Cdn); and
(c) with respect to all Swing Loans outstanding at any time (whether
advanced by Agent or the Canadian Swingline Lender, or both of
them) the principal amount by which the Revolving Maximum
exceeds the aggregate amount of Revolving Loans and Letters of
Credit then outstanding.
1.117 "TAG Guaranty" shall mean a guaranty agreement executed and delivered
by the TAG to Agent and the Banks, pursuant to which the TAG unconditionally
guaranties payment and performance of the indebtedness and obligations of Veltri
under this Agreement and the other Documents.
1.118 "Termination Event" shall mean, (i) a "reportable event" described in
Section 4043 of ERISA or in the regulations thereunder (excluding events for
which the requirement for notice of such reportable event has been waived by the
PBGC) with respect to a Title IV Plan, or (ii) the withdrawal of a Borrower or
any ERISA Affiliate from a Title IV Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the
filing of a notice of intent to terminate a Title IV Plan or the treatment of a
Title IV Plan amendment as a termination under Section 4041 of ERISA, or (iv)
the institution of proceedings by the PBGC to terminate a Title IV Plan or to
appoint a trustee to administer a Title IV Plan, or (v) any other event or
condition which might constitute reasonable grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Title IV Plan, or (vi) the complete or partial withdrawal (within the meaning
of Section 4203 and 4205, respectively, of ERISA) of a Borrower or any ERISA
Affiliate from a
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Multiemployer Plan, or (vii) the insolvency or reorganization (within the
meaning of Section 4245 and 4241, respectively, or ERISA) or termination of any
Multiemployer Plan, or (viii) the failure to make any payment or contribution to
any Pension Plan or Multiemployer Plan or the making of any amendment to any
Pension Plan which could reasonably be expected to result in the imposition of a
Lien or the posting of a bond or other security.
1.119 "Tooling Loan" shall mean all Advances at any time made and
outstanding hereunder for the purpose of financing dies, molds, tooling and
similar items to be produced for or by a Loan Party in connection with an
Eligible Tooling Invoice.
1.120 "Tooling Maximum" shall mean Fifteen Million Dollars ($15,000,000).
1.121 "UCC" shall mean Public Act 174 of 1962 of State of Michigan, as
amended.
1.122 "USA" shall mean Veltri Holdings USA, Inc., an Indiana corporation
and a wholly owned Subsidiary of TAG.
1.123 "USA Guaranty" shall mean a guaranty agreement executed and delivered
by USA to Agent and the Banks, pursuant to which USA unconditionally guarantees
payment and performance of the indebtedness and obligations of Borrowers under
this Agreement and the other Documents.
1.124 "Veltri Guaranty" shall mean a guaranty agreement executed and
delivered by Veltri to Agent and the Banks, pursuant to which Veltri
unconditionally guarantees payment and performance of the indebtedness and
obligations of TAG under this Agreement and the other Documents.
1.125 "Veltri Subordination Agreement" shall mean an agreement in form and
content satisfactory to Agent pursuant to which Michael Veltri (individually and
as trustee under trust agreement dated December 17, 1992) agrees that all Liens
granted as security for Indebtedness of Veltri are and shall be subordinate to,
and postponed in favor of Liens granted to Agent as security for Indebtedness to
Agent and the Banks.
1.126 "VS" shall mean VS Holdings, Inc., a Michigan corporation and a
wholly owned subsidiary of TAG.
1.127 "VS Guaranty" shall mean a guaranty agreement executed and delivered
by VS to Agent and the Banks pursuant to which VS unconditionally guaranties
payment and performance of the obligations of Borrowers under this Agreement and
the other Documents.
1.128 "Year 2000 Issue" shall mean any significant risk that computer
hardware or software used in Borrowers' or their Subsidiaries' businesses or
operation will not, in the case of dates or time periods occurring after
December 31, 1999, function at least as effectively as in the case of dates or
time periods occurring prior to January 1, 2000.
2. THE INDEBTEDNESS
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2.1 COMMITMENTS. Subject to the terms and conditions of this Agreement,
each Bank severally agrees to lend to Borrowers from time to time from the date
of this Agreement until the Maturity Date, such Bank's respective Percentage of
each Revolving Loan, with such Advances to be made in Dollars (in the case of
Advances to TAG) or Alternative Currency (in the case of Advances to Veltri), in
aggregate principal Dollar Amount outstanding at any time not to exceed the
Revolving Maximum, and (b) in the case of Advances outstanding to Veltri, the
Revolving Loan Subcommitment.
2.2 SWING LOAN. Subject to the terms and conditions of this Agreement,
Agent and Canadian Swingline Lender agree to Lend to Borrowers, in Dollars (in
the case of Agent) or Alternative Currency (in the case of the Canadian
Swingline Lender), at any time, Swing Loans in aggregate principal amount
outstanding from time to time not to exceed the Swing Loan Commitments
applicable to Agent and Canadian Swingline Lender. Subject to the terms and
conditions of this Agreement, Canadian Swingline Lender may, at the request of
Veltri, at any time and from time to time from the Closing Date until the third
(3rd) Business Day prior to the Maturity Date, issue Canadian Dollar denominated
letters of credit in an aggregate amount outstanding not to exceed One Million
Dollars ($1,000,000), for the account of Veltri. Such letters of credit shall
constitute use of the Swing Loan Commitment of the Canadian Swingline Lender.
2.3 NOTES. The Loans shall be evidenced by promissory notes made:
(a) in the case of the Revolving Loan, in the form attached as
Exhibit "G" (i) made by TAG to each Bank in principal amounts
equal to each Bank's Percentage of the Revolving Loan Commitment,
and (ii) made by Veltri to each Bank in principal amounts equal
to each Bank's Percentage of the Revolving Loan Subcommitment;
(b) in the case of the Swing Loans, (i) advanced by Agent, in the
form attached as Exhibit "H" it made by TAG to Agent in the
principal amount of Five Million Dollars ($5,000,000) and (ii)
advanced by Canadian Swingline Lender, in the form attached as
Exhibit "I" made by Veltri to the Canadian Swingline Lender in
the principal amount of Five Million Canadian Dollars ($5,000,000
Cdn).
2.4 TYPES OF LOANS AND MATURITY. Each of the Notes, and all principal and
interest then outstanding thereunder, shall mature and become due and payable in
full on the Maturity Date. Each Loan from time to time outstanding shall be
either a Prime-based Loan or a Eurocurrency-based Loan as the relevant Borrower
may elect or as otherwise applicable pursuant to the provisions hereof;
provided, however, that the Applicable Interest Rate for all Swing Loans shall
be the Prime-based Rate. The amount and date of each Loan, its Applicable
Interest Rate, its Interest Period, and the amount and date of any repayment
shall be noted on Agent's records, which records will be presumed correct absent
manifest error.
2.5 REQUESTS FOR LOANS. Borrower may request Loans by delivery to Agent
(and, in the case of a request by Veltri for a Swing Loan from Canadian
Swingline Lender,
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simultaneous delivery to the Canadian Swingline Lender) of a Request for Loan
executed by an authorized officer and subject to the following:
(a) each such Request for Loan shall indicate the Loan to which it
relates and shall set forth all other information required on the
Request for Loan form;
(b) each such Request for Loan shall be delivered to Agent by 10:00
a.m. (Detroit time) three (3) Business Days prior to the proposed
date of Loan, except in the case of a Prime-based Loan, for which
the Request for Loan must be delivered by 10:00 a.m. (Detroit
time) on such proposed date;
(c) the principal amount of such Advance, plus the amount of any
outstanding Advance under the same Notes having the same
Applicable Interest Rate and Interest Period shall be at least:
(i) in the case of a Prime-based Loan (other than a Swing Loan),
One Million Dollars ($1,000,000), or a greater integral multiple
of One Hundred Thousand Dollars ($100,000); (ii) in the case of a
Eurocurrency-based Loan, Two Million Dollars ($2,000,000) or a
greater integral multiple of One Hundred Thousand Dollars
($100,000) or an equivalent Dollar Amount of Alternative
Currency; and (iii) in the case of a request for a Swing Loan,
Two Hundred Fifty Thousand Dollars ($250,000) if made to Agent
and Two Hundred Fifty Thousand Canadian Dollars ($250,000 Cdn) if
made to the Canadian Swingline Leader;
(d) a Request for Loan, once delivered to Agent, shall not be
revocable by Borrower;
(e) upon the making of the Advance for which the Request for Loan
relates Eurocurrency-based Loans in effect shall not exceed six
(6);
(f) each Request for Loan shall constitute a certification by the
Borrower as of the date thereof that all of the conditions set
forth in Section 7.2 hereof are satisfied as of the date of such
request and shall be satisfied as of the date such Advance is
requested;
(g) the principal amount requested, together with the principal
amount of all other Advances and Letter of Credit Obligations
then outstanding shall not exceed the Revolving Maximum;
(h) if such Request for Loan is for a Tooling Loan, the principal
amount requested, together with the principal amount of all other
Tooling Loans outstanding will not exceed the Tooling Maximum;
and
(i) if the Requests for Loan is made by Veltri (i) the Advance
requested shall be denominated in Canadian Dollars, (ii) upon the
making thereof, there shall be no more than three (3) Interest
Periods in effect with respect to
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Advances denominated in Canadian Dollars, (iii) the Advance
requested shall not exceed, when added to the aggregate amount of
all other Advances to Veltri then outstanding, the Revolving Loan
Subcommitment and (iv) the Advances requested shall be a
Eurocurrency-based Loan (if it is to be made by the Bank under
Revolving Notes) or a Prime-based Loan (if it is to be made by
the Canadian Swingline Lender).
2.6 DISBURSEMENT OF LOANS. Upon receiving any Request for Loan under
Section 2.5 hereof or upon Agent's or Canadian Swingline Lender's exercise of
its discretion to have their respective Swing Loans refunded by the Banks with
Revolving Loans pursuant to Section 2.13 hereof, Agent shall promptly notify
each Bank by wire, telex or by telephone, including facsimile transmission
(confirmed by wire or telex) of the date for such Advance, its Applicable
Interest Rate and the amount and currency of the Advance to be made by said Bank
pursuant to its Percentage of the relevant Loan. Each Bank shall, not later than
2:00 p.m. (Detroit time) on the date of such Advance, make available the amount
of its Percentage of the Advance in immediately available funds in the currency
of the Advance to Agent, at the office of Agent located at 500 Woodward Avenue,
Detroit, Michigan. Subject to submission of an executed Request for Loan without
exceptions noted in the compliance certification therein, Agent shall: (i) in
the case of a Revolving Loan made for the purpose of refunding a Swing Loan,
apply the proceeds of the Advance toward payment of the relevant Swing Loan, and
(ii) in each other case make available to Borrower, not later than 4:00 p.m.
(Detroit time) on such date, the aggregate of the amounts so received by it in
like funds by credit to an account of Borrower, maintained with Agent or to such
other account or third party as Borrower may direct. Unless Agent shall have
been notified by any Bank prior to the funding of any proposed Advance that such
Bank does not intend to make its Percentage of the Advance available, Agent may
assume that such Bank has made such amount available on such date and may, in
reliance upon such assumption, make available to Borrower a corresponding
amount. If such amount is not in fact made available to Agent by such Bank,
Agent shall be entitled to recover such amount on demand from such Bank. If such
Bank does not pay such amount forthwith upon Agent's demand therefor, the Agent
shall promptly notify Borrower and Borrower shall repay such amount to Agent.
Agent shall also be entitled to recover from such Bank or Borrower interest on
such amount in respect of each day from the date such amount was made available
by Agent to the date such amount is recovered by Agent, at a rate per annum
equal to the Applicable Interest Rate, in the case of Borrower and the Federal
Funds Effective Rate in the case of a Bank. The obligation of any Bank to make
any Advance shall not be affected by the failure of any other Bank to make any
Advance and no Bank shall have any liability to Borrower, the Agent, or any
other Bank for another Bank's failure to make any Advance hereunder.
2.7 FACILITY FEES. On even date herewith and on each Quarterly Date
hereafter, the Borrowers shall pay to the Agent on behalf of Banks, Facility
Fees in the amount of the Applicable Margin for Facility Fees then in effect
multiplied by the Revolving Loan Commitment. Upon receipt of such payment, Agent
shall make prompt payment to each Bank of its share of such Facility Fees, based
upon the Percentages of the Revolving Loan Commitment of each Bank during the
applicable period.
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2.8 OPTIONAL REDUCTION OR TERMINATION OF REVOLVING LOAN COMMITMENT. Upon
at least five (5) Business Days' prior written notice to the Agent, Borrowers
may permanently reduce the Revolving Loan Commitment, in whole or in part,
provided that:
(a) each partial reduction of the Revolving Loan Commitment shall be
in an amount equal to Five Million Dollars ($5,000,000) or an
integral multiple thereof;
(b) each reduction or termination shall be accompanied by the payment
of the Facility Fee accrued on the amount of the Revolving Loan
Commitment so reduced through the date of such reduction or
termination;
(c) the Revolving Loan Commitment as so reduced shall not be less
than the sum of undrawn face amount of outstanding Letters of
Credit; and
(d) the Borrowers shall prepay Revolving Loans and/or Swing Loans in
the amount, if any, by which the principal amount of Revolving
Loans and Swing Loans, plus the aggregate face amount of all
unexpired Letters of Credit as of the date of such reduction
exceeds the amount of the Revolving Loan Commitment as so
reduced, together with interest thereon to the date of prepayment
and any additional amounts required thereon pursuant to Section
5.1 hereof.
2.9 EXTENSIONS OF MATURITY DATE. Provided that no Default or Event of
Default has occurred and is continuing, Borrowers may, by delivery of an
Extension Request to Agent and each Bank (which Extension Request shall be
irrevocable, shall not be deemed effective unless actually received by Agent and
each Bank and shall be accompanied by delivery of audited financial statements
for the fiscal year most recently ended and financial projections for the
Borrowers for the period from the date of such Extension Request through the
date to which Borrowers request the Maturity Date to be extended to):
(a) prior to April 15, 1999, but not before March 15, 1999, request
that the Banks extend the then Maturity Date to May 15, 2004
(such request, the "Initial Request"); and
(b) prior to April 15, but not before March 15, of each year
beginning in 2000 (if the Initial Request is made and approved by
the Banks), request that the Banks extend the then applicable
Maturity Date to a date that is one year later than the Maturity
Date then in effect (each such request, a "Subsequent Request").
Each Bank shall, not later than thirty (30) calendar days following the date of
its receipt of the Initial Request or any Subsequent Request, as the case may
be, give written notice to the Agent stating whether such Bank is willing to
extend the Maturity Date as requested. If Agent has received the aforesaid
written approvals of such Initial Request or Subsequent Request, as the case may
be, from each of the Banks, then, so long as no Default or Event of Default has
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occurred and is continuing, effective upon such Maturity Date, the Revolving
Credit Maturity Date shall be so extended, in the case of the Initial Request to
May 15, 2004 and in the case of any Subsequent Request for an additional one
year period, the term Maturity Date shall mean such extended date and Agent
shall promptly notify the Borrowers and the Banks that such extension has
occurred. If (i) any Bank gives the Agent written notice that it is unwilling to
extend the Maturity Date as requested or (ii) any Bank fails to provide written
approval to Agent of such the Initial Request or any Subsequent Request within
thirty (30) calendar days of the date of Agent's receipt of such Request, then
(x) the Banks shall be deemed to have declined to extend the Maturity Date, (y)
the then-current Maturity Date shall remain in effect (with no further right on
the part of Company to request extensions thereof under this Section 2.9, unless
such non-extension relates to the Initial Request) and (z) the commitments of
the Banks to make Advances shall terminate on the Maturity Date then in effect,
and Agent shall promptly notify Borrowers and the Banks thereof.
2.10 PURPOSE OF LOANS. As of the Closing Date, an initial Revolving Loan
shall be made primarily for the purpose of refinancing existing indebtedness
under the credit agreements described in Section 7.1(o) hereof. Thereafter Swing
Loans and Revolving Loans shall be available to and used by Borrowers for their
general corporate purposes, including without limitation, financing of Permitted
Acquisitions.
2.11 PREPAYMENT AND READVANCES. Each of the Loans from time to time
outstanding hereunder may be prepaid (subject to Sections 4.4 and 5. 1) from
time to time in accordance with the terms of this Agreement. Amounts so prepaid
shall be available for readvance. Notwithstanding anything to the contrary
herein, in the event of an Initial Public Offering or any private sale or
issuance of equity of a Borrower's or any Subsidiary, Borrowers shall prepay
Loans by an amount not less than the Net Proceeds of such Initial Public
Offering or other sale or issuance of equity immediately upon Borrowers or such
Subsidiaries receipt thereof (other than pursuant to the Equity Ownership Plan).
2.12 CURRENCY APPRECIATION; REDUCTION OF INDEBTEDNESS. If at any time the
Dollar Amount of Advances outstanding added to the outstanding Letter of Credit
Obligations, calculated as of the last day of any Interest Period applicable to
any Advance exceeds the Revolving Maximum, the Borrowers shall, immediately on
demand by Agent, repay Advances of Revolving Loans or Swing Loans, or reduce any
requests for Advances of Revolving Loans or Swing Loans pending on such day, by
an amount equal to such excess.
2.13 SWING LOAN REFUNDING.
(a) The Agent or the Canadian Swingline Lender may at any time in
their sole and absolute discretion require that their respective
Swing Loans be refunded by a Revolving Loan which is a
Prime-based Loan, and upon notice thereof by the Agent or the
Canadian Swingline Lender (as applicable) to the Borrowers and
the Banks, TAG shall be deemed to have requested a Revolving Loan
bearing interest at the Prime-based Rate in an amount equal to
the Dollar Amount of any such Swing Loan, and such Revolving Loan
shall be made to refund such Swing Loan. Such
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Revolving Loan shall be disbursed, and each Bank shall make its
Percentage thereof available, notwithstanding any failure to
satisfy any conditions for disbursement of any Loan set forth in
Section 7.2 hereof or any other condition; provided, however,
that such disbursement: (A) shall not be deemed to be a
waiver of any Event of Default or Default, if any, and (B) shall
be made by each Bank on the Business Day after such notice is
made to the Bank. If for any reason (including without
limitation as a result of the occurrence of a bankruptcy
filing), Revolving Loans may not be made and the Agent is then
requiring that any Swing Loan be refunded by a Revolving Loan,
effective on the date each Revolving Loan would otherwise have
been made under this Section 2.13, each Bank severally agrees
that it shall unconditionally and irrevocably, without regard to
the occurrence of any Default or Event of Default, in lieu of a
disbursement of any Revolving Loan, to the extent of such Bank's
Percentage, purchase a participation interest in such Swing
Loan.
(b) Each Bank's obligation to comply with the terms of this
Section 2.13, shall be absolute and unconditional
and shall not be affected by any circumstance,
including, without limitation, (i) any set-off, counterclaim,
recoupment, defense or other right which such Bank or any
Borrower may have against the Agent, any Borrower or any
other Person for any reason whatsoever; (ii) the occurrence
or continuance of a Default or an Event of Default; (iii)
any adverse change in the condition (financial or otherwise)
of any Borrower; (iv) any breach of this Agreement by a
Borrower or any other Bank; or (v) any other circumstance,
happening or event whatsoever, whether or not similar to
any of the foregoing.
2.14 ACCOUNT NETTING. Veltri authorizes the Canadian Swingline Lender,
daily or otherwise as and when determined by the Canadian Swingline Lender from
time to time, to ascertain the position or net position (as the case may be)
between Veltri and the Canadian Swingline Lender in respect to any deposit
accounts maintained by Veltri with the Canadian Swingline Lender and that:
(a) if such position or net position is a credit in favor of
Veltri, the Canadian Swingline Lender may apply the amount of
such credit or any part thereof as a repayment of the
Swing Loan provided by the Canadian Swingline Lender and the
Canadian Swingline Lender will debit such account with the
amount of such repayment; and
(b) if such position or net position is a debit in favor of
the Canadian Swingline lender, the Canadian Swingline Lender
will make an Advance under its Swing Loan in an amount as may be
required to place such account in such credit or net
credit position as has been agreed between Veltri and Canadian
Swingline Lender from time to time, and the Canadian Swingline
Lender may increase the unpaid balance owing under its Swing
Loan, and credit such account with the amount of such advance.
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3. LETTERS OF CREDIT
3.1 LETTERS OF CREDIT. Subject to the terms and conditions of this
Agreement, Agent may, at the request of TAG, at any time and from time to time
from the Closing Date until the third (3rd) Business Day prior to the Maturity
Date, issue Letters of Credit for the accounts of Loan Parties, in an aggregate
amount at any one time outstanding not to exceed the Letter of Credit Maximum.
Each Letter of Credit shall provide an initial expiration date not later than
the earlier of (a) one (1) year from its date of issuance (subject to renewals)
and that it is available by drafts drawn at sight and presentation of documents;
and (b) three (3) Business Days prior to the Maturity Date.
3.2 CONDITIONS TO ISSUANCE. No Letter of Credit shall be issued
pursuant to Section 3.1 hereof unless, as of the date the issuance of such
Letter of Credit is requested:
(a) the face amount of the Letter of Credit requested, plus the
undrawn face amount of all other outstanding Letters of Credit
will not exceed the Letter of Credit Maximum;
(b) the face amount of the Letter of Credit requested, plus the
principal amount of all Loans then outstanding, will not exceed
the Revolving Maximum;
(c) the execution of the Letter of Credit Agreement with respect to
the Letter of Credit requested will not violate the terms
and conditions of any contract, agreement or other borrowing of
TAG;
(d) TAG shall have delivered to Agent, not less than five (5)
Business Days prior to the requested date for issuance, the
Letter of Credit Agreement related thereto, together with such
other documents and materials as may be required pursuant to the
terms thereof, and the terms of the proposed Letter of Credit
shall be satisfactory to Agent;
(e) no order, judgment or decree of any court, arbitrator or
governmental authority shall purport by its terms to enjoin or
restrain Agent from issuing the Letter of Credit, or any
Bank from taking an acquiring of its interest pursuant to
Section 3.3 hereof, and no law, rule, regulation, request or
directive (whether or not having the force of law) of or from
any governmental authority shall prohibit or request that
Agent refrain from issuing, or any Bank refrain from taking an
assignment of its interest in the Letter of Credit requested or
letters of credit generally;
(f) Agent shall have received the issuance fee required in
connection with the issuance of such Letter of Credit pursuant
to Section 3.5 hereof; and
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(g) all of the conditions set forth in Section 7.2 hereof are
satisfied as of the date of such request and shall be satisfied
as of the date requested for issuance of such Letter of Credit.
Each Letter of Credit Agreement submitted to Agent pursuant hereto shall
constitute the certification by TAG of the matters set forth in this Section
3.2(a) through (g).
3.3 PARTICIPATIONS IN LETTERS OF CREDIT. Immediately upon the
issuance of any Letter of Credit, each Bank shall be deemed to have, without
further action on the part of Agent or any Bank, irrevocably and unconditionally
purchased and received, without recourse or warranty, a participation in and
assignment of Agent's engagement under such Letter of Credit in an amount equal
to each such Bank's then Percentage of the face amount of such Letter of Credit,
and Banks hereby absolutely and unconditionally assume, as primary obligors and
not sureties, and unconditionally agree to pay and discharge when due in
accordance with the terms hereof, their respective Percentages of the Letter of
Credit Payments under such Letters of Credit. Agent shall deliver to each Bank a
Letter of Credit Notice with respect to the issuance of each Letter of Credit,
not later than three (3) Business Days after issuance of each Letter of Credit,
specifying the amount thereof and each Bank's Percentage thereof.
3.4 LETTER OF CREDIT FEES. TAG agrees to pay to Agent, for the
accounts of the Banks, Letter of Credit Fees with respect to the undrawn face
amount of each Letter of Credit at a per annum rate equal to the Applicable
Margin with respect to Letters of Credit. Such fees shall be payable quarterly
in arrears on each Quarterly Date and shall be assessed for the actual number of
days elapsed from the date of the issuance of each Letter of Credit until the
earlier of the date of expiration of such Letter of Credit, or the date of
surrender of such Letter of Credit. Upon receipt of such payment, Agent shall
make prompt payment to each Bank of its share of the Letter of Credit Fees,
based upon the Percentage interests of each such Bank in the Letters of Credit
to which such Letters of Credit Fees relate.
3.5 ISSUANCE FEES. In connection with the Letters of Credit, TAG will
pay, for the sole account of the Agent, letter of credit issuance fees in the
amount of one-quarter percent (1/4%) of the face amount of each Letter of Credit
(payable on issuance) and standard administration, payment and cancellation
charges assessed by Agent, at the times, in the amounts and on the terms
separately agreed upon (or to be separately agreed upon from time to time)
between Agent and Borrower.
3.6 DRAWS UNDER LETTERS OF CREDIT.
(a) Upon receipt of any draw against a Letter of Credit, Agent
shall promptly notify TAG of the amount of such draw and the
date for payment of such draw. TAG hereby agrees to deposit
with Agent, on the first Business Day subsequent to such
notice, funds sufficient to pay all Letter of Credit
Obligations with respect to such draws. So long as all of the
conditions set forth in Sections 2.5 and 7.2 hereof are
complied with, TAG shall be entitled to fund such deposit with
proceeds of an Advance requested in accordance with Section
2.5 hereof. In the event that sufficient funds are
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not deposited with Agent on or before the date for payment of a
draw, Agent shall so notify Banks and, immediately upon
Agent's payment under any Letter of Credit and for all
purposes of this Agreement and the Documents, the amount paid
as a result of such draw: (i) shall constitute a Revolving
Loan made by Banks in accordance with the Percentages in
effect on such date, whether or not TAG is then entitled to
request Advances under this Agreement or is in default
hereunder or otherwise (and TAG shall not be entitled to
refuse any such Advance); (ii) shall be evidenced by the
Notes evidencing the Revolving Loans; (iii) shall bear
interest at the Default Rate applicable to Prime-based Loans
which are Revolving Loans until repaid; and (iv) shall be due
and payable on demand.
(b) Any amounts so paid by Agent pursuant to a draft against
any Letter of Credit (regardless of whether it is considered
to be an Advance), with interest thereon as aforesaid, shall
be considered to be a Revolving Loan for all purposes of this
Agreement and the Documents, and shall be covered thereby to
the full extent thereof.
(c) In the event that TAG fails to deposit with Agent funds
sufficient to pay Letter of Credit Obligations with respect to
any draw (whether through an Advance requested pursuant to
Section 2.5 or otherwise) on a timely basis, from the date of
Agent's payment on such draw until such Letter of Credit
Obligations resulting from such draw shall have been paid,
Borrowers shall not be entitled to request or receive any
direct Advance under Notes or to request or receive any other
Loans or the issuance of Letters of Credit hereunder.
3.7 FUNDING OF LETTER OF CREDIT PAYMENT AS ADVANCE. By or before 11:00
a.m. (Detroit Time) on the date for payment of any draw on any Letter of Credit,
Agent shall promptly notify each Bank by wire, telex or by telephone (confirmed
by wire, telecopy or telex) of the amount of such draw (providing each Bank with
a copy of the draft and accompanying certificate), and, if applicable, the
amount of resulting Advances to be made pursuant to Section 3.6(a) hereof. If
such an Advance is required pursuant to Section 3.6(a) hereof, each Bank hereby
irrevocably and unconditionally agrees to make available the amount of its
Percentage of such Advance in immediately available funds in Dollars to Agent,
at the office of Agent located at 500 Woodward Avenue, Detroit, Michigan, no
later than 2:00 p.m. (Detroit time) on the date the Letter of Credit Payments
are to be made in connection with such draw. In the event such draw is not
considered to be or is subsequently determined not to constitute an Advance
hereunder, each Bank shall nevertheless be obligated to purchase from Agent a
participation interest in its Percentage of the draw, for an amount equal to its
Percentage thereof. If such amount is not in fact made available to Agent by
such Bank, as aforesaid, Agent shall be entitled to recover such amount on
demand from such Bank. If such Bank does not pay such amount forthwith upon
Agent's demand therefor, the Agent shall promptly notify TAG, and TAG shall
immediately repay such amount to Agent. Agent shall also be entitled to recover
from such Bank or TAG, as the case may be, interest on such amount in respect of
each day
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from the date such amount was paid by Agent pursuant to the draft related
thereto, at a rate per annum equal to: (i) in the case of TAG, the Default Rate
applicable to Prime-based Loans which are Revolving Loans; and (ii) in the case
of a Bank, the Federal Funds Effective Rate until two (2) Business Days after
such amount was paid by Agent and thereafter, the rate provided for TAG in
clause (i) of this sentence. The obligation of any Bank to make any Advance
hereunder shall not be affected by the failure of any other Bank to make any
Advance hereunder, or to fund its Percentage of any Letter of Credit Payment, as
the case may be, and no Bank shall have any liability to either Borrower, the
Agent, or any other Bank for another Bank's failure to make any such Advance
hereunder, or to fund the Percentage of any other Bank.
3.8 OBLIGATIONS IRREVOCABLE. The obligations to make payments to Agent
with respect to Letter of Credit Obligations under Section 3.6 hereof, and the
obligations of Banks to make Advances with respect to and purchase interests in,
Letter of Credit Payments pursuant to Section 3.7 hereof, shall be irrevocable
and not subject to any qualification or exception whatsoever, including:
(a) invalidity or unenforceability of this Agreement or any other
Documents or any portions hereof or thereof;
(b) the existence of any claim, set-off, defense or other right
which any Borrower or any Bank may have against a
beneficiary named in a Letter of Credit, Agent, any Bank or any
other Person;
(c) any draft, certificate or any other document presented in
connection with a Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
(d) the occurrence of any Default or Event of Default;
(e) payment by the Agent (other than as a result of its gross
negligence or willful misconduct) under any Letter of Credit
against presentation of a draft or accompanying certificate
which does not comply with the terms of the Letter of Credit;
(f) any failure, omission, delay or lack on the part of Agent or
any party to this Agreement or any of the Documents to enforce,
assert or exercise any right, power or remedy conferred
upon Agent or any such party under this Agreement or any
Documents, or any other acts or omissions on the part of the
Agent or any such party;
(g) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all the assets of any
Borrower or other Loan Party; the receivership, insolvency,
bankruptcy, assignment for the benefit of creditors,
reorganization, arrangements, composition with creditors or
readjustment or other similar proceedings affecting any
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Borrower, or any of its assets, or any allegation or contest
of the validity of this Agreement or any of the Documents, in
any such proceedings; and
(h) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, and any other event or action
that would, in the absence of this clause, result in the release
or discharge by operation of law of any Borrower from the
performance or observance of any obligation, covenant or
agreement contained in this Agreement or any of the Documents.
3.9 RISK UNDER LETTERS OF CREDIT.
(a) In assigning and handling of Letters of Credit and any security
therefor, or any documents or instruments given in
connection therewith, Agent shall (as among Agent and the
Banks) have the sole right to take or refrain from taking
any and all actions under or upon the Letters of Credit;
provided, however, that without the prior written
concurrence of the Banks, Agent shall not: (i) amend, modify,
terminate or release any of the obligations of Loan Parties
respecting Letters of Credit or under any of said documents or
instruments or any security interest, mortgage or guaranty
given with respect thereto; (ii) compromise any claim or waive
any right or privilege against Loan Parties; or (iii) settle
any litigation respecting any Letter of Credit or any of said
documents and instruments.
(b) Subject to other terms and conditions of this Agreement, Agent
shall hold the Letter of Credit Agreements and the documents
related thereto in its own name and shall make all collections
thereunder and otherwise administer the Letters of Credit in
accordance with Agent's regularly established practices and
procedures and Agent will have no further obligation with
respect thereto. In the administration of Letters of Credit,
Agent shall not be liable (except for the consequences solely
resulting from its own willful misconduct or gross negligence)
for any action taken or omitted, and shall be entitled at all
times to rely upon on the advice of counsel, accountants,
appraisers and other experts selected by Agent and Agent may
rely upon any notice, communication, certificate or other
statement from Borrowers, beneficiaries of Letters of Credit, or
any other Person which Agent believes to be authentic. Agent
will, upon request, furnish the Banks with copies of Letter of
Credit Agreements, Letters of Credit and Documents related
thereto.
(c) In connection with the issuance and administration of Letters of
Credit and the assignments hereunder, Agent makes no
representation and shall have no responsibilities with respect
to: (i) the obligations of the Loan Parties or, the validity,
sufficiency or enforceability of any document or instrument
given in connection therewith, or the taking of any action with
respect to same; (ii) the financial condition of, any
representations made
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by, or any act or omission of the Loan Parties or any other
Person; or (iii) any failure or delay in exercising any
rights or powers possessed by Agent in its capacity as issuer of
Letters of Credit.
(d) If at any time Agent shall recover any part of any unreimbursed
amount for any Letter of Credit Obligation, or any interest
thereon, Agent shall receive same for the pro rata benefit of
the Banks in accordance with their respective Percentage
interests therein and shall promptly deliver to each Bank its
share thereof, less Bank's pro rata share of the costs of
such recovery, including court costs and reasonable
attorney's fees. If at any time any Bank shall receive from any
source whatsoever any payment on any such unreimbursed amount
or interest thereon in excess of such Bank's share of such
payment, such Bank will promptly pay over such excess to Agent
for redistribution in accordance with this Agreement.
3.10 INDEMNIFICATION. The Borrowers hereby indemnify and hold Agent and
each of the Banks harmless from and against any and all claims, damages, losses,
liabilities, costs or expenses whatsoever which any such party may incur (or
which may be claimed against any such party by any person) by reason of or in
connection with the execution and delivery or transfer of, or payment or failure
to pay under, any Letter of Credit; provided, however, that the Borrowers shall
not be required to indemnify Agent or the Banks pursuant to this Section 3.10
for claims, damages, losses, liabilities, costs or expenses to the extent, but
only to the extent, caused by the willful and wrongful failure or willful and
wrongful misconduct or gross negligence of the Agent or such Bank. Nothing in
this Section 3.10 is intended nor shall be deemed to limit, reduce or otherwise
affect in any manner whatsoever the reimbursement obligation of TAG contained in
Section 3.6 hereof.
3.11 RIGHT OF REIMBURSEMENT. Each Bank agrees to reimburse the Agent
on demand, pro rata in accordance with their Percentages, for: (i) the
out-of-pocket costs and expenses of the Agent to be reimbursed by TAG pursuant
to any Letter of Credit Agreement or any Letter of Credit, to the extent not
reimbursed by TAG; and (ii) any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, fees, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against Agent (in its capacity as issuer of any Letter
of Credit) in any way relating to or arising out of this Agreement, any Letter
of Credit, any Letter of Credit Agreement, except to the extent that such
liabilities, losses, costs or expenses were incurred by Agent as a result of
Agent's gross negligence or willful misconduct.
4. INTEREST, FEES AND INTEREST CALCULATION, INTEREST PERIODS,
CONVERSIONS, PREPAYMENTS
4.1 INTEREST. The Notes and the Loans hereunder shall bear interest
from the date thereof on the unpaid principal balance thereof from time to time
outstanding at the Applicable Interest Rates, as selected by a Borrower or as
otherwise applicable pursuant to the provisions of this Agreement from time to
time, provided, however, that in no event shall any Notes or Loans bear interest
at a rate greater than its Highest Lawful Rate. Interest with respect to each
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type of Loan shall be payable on the last day of each Interest Period applicable
thereto, provided however, (i) that if such Interest Period is longer than three
(3) months, interest shall also be payable three (3) months following the first
day of such Interest Period. Notwithstanding the foregoing, in the event and so
long as an Event of Default shall exist, all principal outstanding under the
Notes shall bear interest, payable on demand, from the date of such Event of
Default or acceleration at a rate per annum equal to the Default Rate, provided,
however, that in no event shall any Bank's Notes, Loans or other Indebtedness
bear interest at a rate greater than the Highest Lawful Rate applicable to such
Bank.
4.2 BASIS OF COMPUTATION. The amount of all interest and fees hereunder
shall be computed for the actual number of days elapsed on the basis of a year
consisting of three hundred sixty (360) days. For the purposes hereof, whenever
interest is calculated on the basis of a year of 360 days or 365 days, each rate
of interest determined pursuant to such calculation expressed as an annual rate
for the purposes of the Interest Act (Canada) is equivalent to such rate as so
determined multiplied by the actual number of days in the calendar year in which
the same is to be ascertained and divided by 360 or 365 days as the case may be.
The principle of deemed reinvestment of interest shall not apply to any interest
calculation under this Agreement, and the rates of interest stipulated in this
Agreement are intended to be nominal rates and not effective rates or yields.
4.3 CONVERSION AND RENEWAL OF LOANS. Providing that no Event of Default
shall have occurred and be continuing each outstanding Loan may be either paid
or renewed or converted into another Loan, in each case as of the last day of
its Interest Period for the Advance being paid, renewed or converted; provided
that any conversion of a Eurocurrency based Loan shall be made only on the last
Business Day of the Interest Period applicable thereto unless the Borrower pays
the prepayment costs required under Section 5.1 hereof; provided, however, that
each conversion or renewal of an Advance made in Alternative Currency shall be
made with a new Advance in the same Alternative Currency. Eurocurrency-based
Rates may be selected only for portions of Loans which are an amount of Two
Million Dollars ($2,000,000) or greater integral multiples of One Hundred
Thousand Dollars ($100,000). The Borrowers may select the Applicable Interest
Rate and Interest Periods for such renewals and conversions by giving the Agent
not less than three (3) Business Days' prior notice in the manner provided in
Section 2.5 hereof, specifying the date of such renewal or conversion, the
Advances to be converted, the type of Advance elected and, the duration of the
Interest Period therefor. The Agent shall promptly notify each Bank of each such
request by wire, telex or telephone (including facsimile transmission, confirmed
by wire or telex) specifying the date of such renewal or conversion, the Advance
to be converted, the type of Advance elected, the Applicable Interest Rate, the
duration of the Interest Period therefor and each Percentage of such Advance. If
with respect to any Advance outstanding at any time, the Agent does not receive
notice of the election three (3) or more Business Days prior to the last day of
the Interest Period therefor Borrower shall be deemed to have elected to convert
such Advance to a Prime-based Loan at the end of the then current Interest
Period.
4.4 PREPAYMENTS. Upon not less than two (2) Business Days' prior
written notice to the Agent, the Borrowers may prepay Revolving Loans or Swing
Loans in whole at any time or in part from time to time, without premium or
penalty but with accrued interest on the
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principal being prepaid to the date of such prepayment, provided that: (i) each
partial prepayment shall be in an amount not less than Two Million Dollars
($2,000,000) or greater integral multiples of One Hundred Thousand Dollars
($100,000), (ii) in the case of a Eurocurrency-based Loan such prepayment may
only be made either on the last Business Day of the Interest Period with respect
thereto or, together with payment of the additional amount applicable to such
payment pursuant to Section 5.1. Each prepayment under this Section 4.4 shall
be made to the Agent, and promptly upon receipt thereof, the Agent shall (except
in the case of a payment on a Swing Loan) remit to each Bank its share thereof
in accordance with its Percentage. In each notice of prepayment under this
Section 4.4, the Borrowers shall specify the date of prepayment, the amount of
the prepayment and the Advances to be prepaid.
5. SPECIAL PROVISIONS FOR LOANS
5.1 REIMBURSEMENT OF PREPAYMENT COSTS. As to any Eurocurrency-based
Loan, if any prepayment thereof shall occur on any day other than the last day
of an Interest Period (whether pursuant to this Article, or by acceleration, or
otherwise), or if an Applicable Interest Rate shall be changed (other than as a
result of a change in the Applicable Margin occurring pursuant to the terms
hereof) during any Interest Period pursuant to this Article, or if a Borrower
shall fail to borrow any such Advance on the date requested therefor, Borrowers
hereby agree to reimburse Banks on demand for any costs incurred by Banks as a
result of the timing thereof including but not limited to any net costs incurred
in liquidating or employing deposits from third parties, to each Bank which
shall have delivered to Borrowers a certificate setting forth in reasonable
detail the basis for determining such costs, which certificate shall be
conclusively presumed correct save for manifest error.
5.2 EUROCURRENCY LENDING OFFICES. For any Loan for which the Applicable
Interest Rate is the Eurocurrency-based Rate, if Agent shall designate a
Eurocurrency Lending Office which maintains books separate from those of the
rest of Agent or if any Bank shall designate as its eurodollar lending office an
office which maintains books separate from those of the rest of such Bank, Agent
or such Bank shall have the option of maintaining and carrying the relevant Loan
on the books of such office.
5.3 CIRCUMSTANCES AFFECTING EUROCURRENCY-BASED AVAILABILITY. If with
respect to any Interest Period for a Eurocurrency-based Loan, Agent or any Bank
determines that, by reason of circumstances affecting the foreign exchange and
interbank markets generally, deposits in the relevant eurocurrency in the
applicable amounts are not being offered to any Bank for such Interest Period,
then Agent shall forthwith give notice thereof to the Borrowers. Thereafter, the
obligations of Banks to make Eurocurrency-based Loans for such Interest Periods,
and the right of Borrowers to convert an Advance to or refund an Advance as a
Eurocurrency-based Loan for such Interest Period shall be suspended until the
Agent notifies Borrower that such circumstance no longer exists.
5.4 LAWS AFFECTING EUROCURRENCY-BASED LOAN AVAILABILITY. If, after the
date hereof, the introduction of, or any change in, any applicable law, rule or
regulation or in the interpretation or administration thereof by any
governmental authority charged with the interpretation or administration
thereof, or compliance by any of the Banks (or any of their
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respective eurocurrency lending offices) with any request or directive (whether
or not having the force of law) of any such authority, shall make it unlawful or
impossible for any of the Banks (or any of their respective eurocurrency lending
offices) to honor its obligations hereunder to make or maintain any Loan or
Advance with interest at the Eurocurrency-based Rate, such Bank shall forthwith
give notice thereof to Borrowers and to Agent. Thereafter: (a) the obligations
of Banks to make Eurocurrency-based Loans and the right of Borrowers to convert
an Advance or refund an Advance as a Eurocurrency-based Loan shall be suspended;
and (b) if any of the Banks may not lawfully continue to maintain a
Eurocurrency-based Loan to the end of the then current Interest Period, the
Prime-based Rate shall be the Applicable Interest Rate for such Bank's
Eurocurrency-based Loans for the remainder of such Interest Period.
Each Bank agrees that, as promptly as practicable after it becomes
aware of the occurrence of any event or the existence of a condition that would
make it unlawful or impossible to maintain any Loan or Advance with interest at
the Eurocurrency-based Rate, it will, to the extent not inconsistent with such
Bank's internal policies or otherwise disadvantageous to such Bank, use
reasonable efforts to make, fund or maintain the affected Eurocurrency-based
Loans of such Bank through another lending office of such Bank if, as a result
thereof, such illegality or impossibility would cease to exist, and if, as
determined by such Bank, in its reasonable discretion, the making, funding or
maintaining of such Loans through such other lending office would not otherwise
materially adversely affect such Loans or such Bank. Borrower hereby agrees to
pay all reasonable expenses incurred by any Bank in utilizing such other lending
office of such Bank pursuant to this Section 5.4.
5.5 INCREASED COSTS. In the event that any change after the date hereof
in applicable law, treaty or governmental regulation, or in the interpretation
or application thereof, or compliance by Agent or any Bank with any request or
directive (whether or not having the force of law) from any central bank or
other financial, monetary or other authority:
(a) shall subject any of the Banks or Agent (or any of their
respective eurodollar lending offices) to any tax, duty or
other charge with respect to any Loan or any Note or shall
change the basis of taxation of payments to any of the Banks (or
any of their respective eurodollar lending offices) of the
principal of or interest on any Loan or any Note or any Letter
of Credit or any other amounts due under this Agreement (except
for changes in the rate of tax on the overall net income or
gross receipts of any of the Banks or Agent or any of their
respective eurocurrency lending offices imposed by the
jurisdiction in which Agent's or such Bank's principal
executive office or eurocurrency lending office is located); or
(b) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of
Governors of the Federal Reserve System but excluding with
respect to any Eurocurrency-based Loan any such requirement
included in an applicable Eurodollar Reserve Requirement),
risk-based capital requirement, liquidity ratio or special
deposit, or similar requirement against assets of, deposits
with or for the account of, or credit extended by any of the
Banks or Agent (or any of
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their respective eurocurrency lending offices) or shall impose
on any of the Banks or Agent (or any of their respective
eurocurrency lending offices) or the foreign exchange and
interbank markets or other condition affecting any Loan or
any of the Notes or any Letter of Credit or any commitment of
Agent or any Bank under this Agreement;
and the result of any of the foregoing is to increase the costs to any of the
Banks or Agent of making, renewing or maintaining any part of the Loans or its
commitments hereunder or to reduce the amount or rate of return on any sum
received or receivable by, or the rate of return on the capital of, Agent or any
of the Banks under this Agreement, or under the Notes or under any Letter of
Credit Agreement, then such Bank (if applicable) shall promptly notify Agent,
and Agent shall promptly notify Borrowers and (if applicable) such Bank or Banks
of such fact and demand compensation therefor and, Borrowers hereby agree to pay
to Agent or such Bank such additional amount or amounts as will compensate such
Agent or Bank or Banks for such increased costs or reduced return within thirty
(30) days of such notice. A certificate of a Bank demanding such compensation
setting forth in reasonable detail the basis for determining such additional
amount or amounts necessary to compensate shall be conclusively presumed to be
correct save for manifest error.
5.6 AVAILABILITY OF ALTERNATIVE CURRENCY. The Agent and the Banks shall
not be required to make any Advance requested to be made in Alternative Currency
if, at any time prior to making such Advance, the Agent shall determine, in its
sole discretion, that (i) deposits in the Alternative Currency in the amounts
and maturities required to fund such Advance will not be available to the Agent
or any Bank; (ii) a fundamental change has occurred in the foreign exchange or
interbank markets with respect to the applicable Alternative Currency
(including, without limitation, changes in national or international financial,
political or economic conditions or currency exchange rates or exchange
controls); or (iii) it has become otherwise materially impractical for the Agent
or any Bank to make such Advance in the applicable Alternative Currency. The
Agent shall promptly notify the Borrowers and Banks of any such determination.
5.7 REFUNDING ADVANCES IN SAME CURRENCY. If pursuant to any provisions
of this Agreement, the Borrower repays one or more Advances and on the same day
borrows an amount in the same currency, the Agent shall apply the proceeds of
such new borrowing to repay the principal of the Advance or Advances being
repaid and only an amount equal to the difference (if any) between the amount
being borrowed and the amount being repaid shall be remitted by the Agent to the
relevant Borrower, or by such Borrower to the Agent, as the case may be.
5.8 JUDGMENT CURRENCY. The obligation of Borrowers to make payments of
the principal of and interest on the Notes and any other amounts payable
hereunder in the currency specified for such payment herein or in the Notes
shall not be discharged or satisfied by any tender, or any recovery pursuant to
any judgment, which is expressed in or converted into any other currency, except
to the extent that such tender or recovery shall result in the actual receipt by
the Bank of the full amount of the particular currency expressed to be payable
herein or in the Notes. The Agent shall, using all amounts obtained or received
from Borrowers pursuant to any such tender or recovery in payment of principal
of and interest on the Notes, promptly purchase the applicable currency at the
most favorable spot exchange rate determined by the
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Agent to be available to it. The obligation of Borrowers to make payments in the
applicable currency shall be enforceable as an alternative or additional cause
of action solely for the purpose of recovering in the applicable currency the
amount, if any, by which such actual receipt shall fall short of the full amount
of the currency expressed to be payable herein or in the Notes.
6. PAYMENTS
6.1 PAYMENT PROCEDURE.
(a) Except as specifically set forth herein with respect to
payments to be made to the Canadian Swingline Lender in
connection with Swing Loans made by it, all payments by the
Borrowers of principal of, or interest on, the Notes or of
Facility Fees, or of Letter of Credit Obligations or Letter of
Credit Fees and Agent's Fees, shall be made without setoff,
deduction or counterclaim on the date specified for payment
under this Agreement not later than 11:00 a.m. (Detroit time) in
immediately available funds to Agent. Upon receipt of each such
payment, the Agent shall make payment to each Bank in like funds
on the same day of all amounts received by it to the extent
received for the account of such Bank.
(b) Unless the Agent shall have been notified by the Borrowers
prior to the date on which any payment to be made by
Borrowers is due, that the relevant Borrower does not intend to
remit such payment, the Agent may, in its discretion, assume
such payment has been remitted when so due and the Agent may, in
reliance upon such assumption, make available to each Bank on
such payment date an amount equal to such Bank's share of such
assumed payment. If such payment has not in fact been remitted
to the Agent, each Bank shall forthwith on demand, repay to the
Agent the amount of such assumed payment made available to such
Bank, together with the interest thereon, in respect of each day
from and including the date such amount was made available by
the Agent to such Bank to the date such amount is repaid to the
Agent at a rate equal to the Federal Funds Effective Rate, as
the same may vary from time to time.
(c) Whenever any payment to be made shall otherwise be due on a
day which is not a Business Day, such payment shall be made
(except as specifically indicated to the contrary herein)
on the next succeeding Business Day and such extension of
time shall be included in computing interest, if any, in
connection with such payment.
(d) All payments of principal and interest on each Advance shall
be payable in the currency in which such Advance was
originally made. All other payments of, fees and
reimbursements by Borrowers to Agent and/or the Banks shall
be made in Dollars.
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6.2 APPLICATION OF PROCEEDS. Notwithstanding anything to the contrary
in this Agreement, after an Event of Default, the proceeds of any offsets,
voluntary payments by Borrowers or others and any other sums received or
collected in respect of the indebtedness hereunder, shall be applied first to
the costs and expenses of Agent in enforcement and collection and, second, to
payment in full of Swing Loans, third, to the other indebtedness and obligations
of Borrowers hereunder in accordance with the respective aggregate principal
amounts of each Bank's Loans and risk participations in Letters of Credit
outstanding, and then, if there is any excess, to Borrowers.
6.3 PRO-RATA RECOVERY. If any Bank shall obtain any payment or other
recovery (whether voluntary, involuntary, by application of offset or otherwise)
on account of principal of, or interest on, any of the indebtedness and
obligations of Borrowers hereunder in excess of its pro rata share of payments
then or thereafter obtained by all Banks upon all such indebtedness and
obligations, such Bank shall purchase from the other Banks such participations
in the Notes and/or Letter of Credit Obligations held by them as shall be
necessary to cause such purchasing Bank to share the excess payment or other
recovery ratably in accordance with the respective aggregate principal amounts
of each Bank's Loans and risk participations in Letters of Credit outstanding as
of the date of the Event of Default; provided, however, that if all or any
portion of the excess payment or other recovery is thereafter recovered from
such purchasing holder, the purchase shall be rescinded and the purchase price
restored to the extent of such recovery, but without interest.
6.4 DEPOSITS AND ACCOUNTS. In addition to and not in limitation of any
rights of any Agent, Bank or other holder of any Note or assignee of Letter of
Credit Agreements and Letter of Credit Obligations under applicable law, Agent,
each Bank and each other such holder shall, in the event and so long as there
exists an Event of Default and without notice or demand of any kind, have the
right to liquidate and collect all property or assets of any Borrower (including
deposits and other credits), whether presently owned or hereafter acquired, in
possession or control of (or owing by) Agent or such Bank or other holder for
any purpose, and to apply the proceeds of any such liquidations and collections,
and offset any amounts owing to Borrowers (or either of them) against
obligations hereunder and under the Notes and the Documents, provided, however,
that any such amount so applied by Agent or such Bank or other holder on any of
the Notes shall be subject to the provisions of Section 6.2 and 6.3.
6.5 NET PAYMENTS. All payments by Loan Parties under this Agreement or
any Document shall be made in such amounts as may be necessary in order that all
such payments (after deduction or withholding for or on account of any present
or future taxes, levies, imposts, duties or other charges of whatsoever nature
imposed by any government or any political subdivision or taxing authority
thereof, other than any tax on or measured by the net income of a Bank pursuant
to the income tax laws of the United States or of the jurisdiction in which it
is incorporated or the jurisdiction where such Bank's lending office is located
or in which it has any other contacts or connection that would subject it to
taxation therein (collectively, "Taxes")), shall not be less than the amounts
otherwise specified to be paid under this Agreement and/or the Documents. A
certificate as to the calculation of any additional amounts payable to a Bank
under this Section 6.5 submitted to the Borrowers by such Bank shall, absent
manifest error, be presumed correct for all purposes. With respect to each
deduction or withholding for or on
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account of any Taxes, the relevant Loan Party shall promptly furnish to each
Bank such certificates, receipts and other documents as may be required (in the
judgment of such Bank) to establish any tax credit to which such Bank may be
entitled. Borrowers agree to reimburse each Bank, upon the written request of
such Bank, for taxes imposed on or measured by the net income of such Bank
pursuant to the laws of the United States of America, any State or political
subdivision thereof, or the jurisdiction in which such Bank is incorporated, or
a jurisdiction in which the principal office or lending office of such Bank is
located, or under the laws of any political subdivision or taxing authority of
any such jurisdiction, as such Bank shall determine are or were payable by such
Bank in respect of amounts payable to such Bank pursuant to this Section 6.5.
6.6 TAX TREATY CERTIFICATE. Each Bank (and each Person who becomes a
Bank pursuant to Section 13.5 hereof) that is not incorporated under the laws of
the United States of America or a state thereof, or which is lending from a
lending office that is not incorporated under the laws of the United States of
America or a state thereof agrees that, on or prior to the date it becomes a
Bank hereunder, it will deliver to Borrowers and the Agent duly completed copies
of United States Internal Revenue Service Form 1001 or 4224, or any successor
applicable form (a "Form 1001 or 4224"), certifying that such Bank is entitled
to receive payments hereunder payable to it without deduction or withholding of
any United States Federal taxes. Each Bank that delivers a Form 1001 or 4224
pursuant to the immediately preceding sentence further agrees to deliver to
Borrowers and Agent further copies of such Form 1001 or 4224 or other manner of
certification, as the case may be, on or before the date that any such form or
certification expires or becomes obsolete or upon the occurrence of any event
requiring a change in the most recent form or certification previously delivered
by it, unless in any such case there has occurred, on or prior to the date on
which any such delivery would otherwise be required, any change in law, rule,
regulation, treaty, convention or directive, or any change in the interpretation
or application of any thereof, that renders all such forms inapplicable or which
would prevent such Bank from duly completing and delivering any such form or
certification with respect to it. Notwithstanding any provision of Section 6.5
to the contrary, Loan Parties shall not have any obligation to pay any Taxes
(except to the extent required by law) pursuant to Section 6.5 to the extent
that such Taxes result from: (i) the failure of any Bank to comply with its
obligations pursuant to this Section 6.6; or (ii) any representation made on
Form 1001 or 4224 by such Bank proving to have been incorrect, false or
misleading in any material respect when made or deemed to be made.
6.7 REPLACEMENT OF BANKS. In the event and so long as any Bank shall
require Borrower to pay additional amounts pursuant to Section 5.5 or 6.5 hereof
or shall have its obligations to make Eurocurrency-based Loans suspended
pursuant to Section 5.3 or 5.4 hereof, or its obligation to make Loans
denominated in Alternative Currency suspended pursuant to Section 5.6 hereof, so
long as there does not exist any Event of Default hereunder, Borrower shall be
entitled to (without prejudice to such Bank's right to receive such additional
amounts) require such Bank to assign its interests hereunder and in the Loans
(in accordance with the procedures and subject to the restrictions set forth in
Section 13.5(a) hereof) to such other bank or financial institution as may be
selected by Borrower and approved by Agent.
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7. CONDITIONS
7.1 CONDITIONS PRECEDENT TO INITIAL LOANS AND CLOSING DATE. The right
of Borrowers to request the initial Loans and Letters of Credit pursuant to this
Agreement is subject to, and the Closing Date of this Agreement shall be, the
date of satisfaction of the following conditions:
(a) DOCUMENTS EXECUTED AND FILED. The Borrowers shall have executed
(or caused to be executed) and delivered to the Agent and, as
appropriate, there shall have been registered, filed or
recorded with such registration, filing or recording offices as
the Agent shall deem necessary or of advantage to preserve the
priority of the Security Documents or otherwise appropriate, the
following:
(i) The Notes;
(ii) The Mortgages;
(iii) The Financing Statements;
(iv) The Acknowledgements of Leasehold Mortgage;
(v) The Subordination Agreement;
(vi) The Guaranty;
(vii) The Veltri Subordination Agreement; and
(viii) the other Security Documents.
(b) CERTIFIED RESOLUTIONS. The Borrowers shall have furnished to the
Agent a copy of resolutions of the Board of Directors
(i) of each Borrower authorizing the execution, delivery and
performance of this Agreement, the borrowing hereunder, the
Notes and the other Documents, and (ii) of each other Loan Party
authorizing the execution, delivery and performance of the
Documents to which they are party, which in each case shall have
been certified by the Secretary or Assistant Secretary of the
relevant Loan Party as being complete, accurate and in effect.
(c) CERTIFIED ARTICLES. The Borrowers shall have furnished to the
Agent a copy of the Articles of Incorporation or Amalgamation,
including all amendments thereto and restatements thereof,
and all other charter documents of each Loan Party, all of which
shall have been certified by the jurisdiction of organization of
the respective parties thereto.
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(d) Certified ByLaws. The Borrowers shall have furnished to the
Agent a copy of the Bylaws of each Loan Party, including all
amendments thereto and restatements thereof, which shall have
been certified by the Secretary or Assistant Secretary of the
relevant Loan Party, as being complete, accurate and in effect.
(e) CERTIFICATE OF STATUS. A certificate of status, compliance, good
standing or like certificate with respect to each Loan Party
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.
(f) CERTIFICATE OF INCUMBENCY. The Borrower shall have furnished to
the Agent a certificate of the Secretary or Assistant Secretary
of each Loan Party, as to the incumbency and signatures of the
officers of each Loan Party signing Documents.
(g) LIEN SEARCH. The Agent shall have received records and copy
searches, evidencing the appropriate filing and recording of the
Financing Statements and disclosing no notice of any
liens filed against any of the Collateral other than Liens
permitted by Section 10.2 hereof.
(h) SURVEY. The Agent shall have received, with respect to the
Mortgages and the Real Property, each in form and content
satisfactory to Agent;
(i) title insurance and/or title opinion with respect to the
Mortgages;
(ii) up to date surveys of the Real Property.
(iii) flood plain certification or insurance with respect to each
parcel of Real Property;
(iv) environmental reports with respect to each parcel of real
property;
(i) CASUALTY INSURANCE. The Borrowers shall have furnished to the
Agent, in form, content and amounts and with companies
satisfactory to the Agent, casualty insurance policies with
loss payable clauses in favor of the Agent on behalf of the
Banks, relating to the assets and properties (including, but not
limited to, the Collateral) of the Loan Parties.
(j) APPRAISALS. Agent shall have received appraisals of the
Equipment and Real Property in form and content satisfactory to
Agent.
(k) OPINION OF BORROWER'S COUNSEL. Agent shall have received, with
signed copies thereof for each Bank, opinions of counsel to the
Loan Parties
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addressed to Agent and the Banks covering such matters as
Agent shall require.
(l) APROVAL OF AGENT'S COUNSEL. All actions, proceedings,
instruments and documents required to carry out the
transactions contemplated by this Agreement or
incidental thereto and all other related legal matters shall
have been satisfactory to and approved by legal counsel for
the Agent, and said counsel shall have been furnished with
such certified copies of actions and proceedings and such
other instruments and documents as they shall have reasonably
requested.
(m) MERGER AND RESTRUCTURING. Agent shall have received, in form
and content satisfactory to Agent, such evidence as Agent shall
require of completion of the Merger and Restructuring,
including opinion letters from Borrower's general counsel
with respect to completion of the Merger and Restructuring.
(n) TAXES. Agent shall have received evidence satisfactory to it
that all taxes in respect of the Real Property have been paid,
including without limitation, a certificate from the
applicable municipal office, and that no water, utility or sewer
levies, charges, taxes or assessments in respect of the Real
Property are due and unpaid.
(o) TERMINATION OF EXISTING CREDIT AGREEMENTS. Evidence in form and
substance satisfactory to the Agent regarding the termination of
all commitments and other credit facilities under the
Credit Agreement dated as of November 8, 1996 among Veltri,
the lenders party thereto, and Comerica Bank, as Agent, the
Credit Agreement dated as of October 16, 1996 among Hawthorne
Metal Products Co., the lenders party thereto, and Comerica
Bank, as Agent, the Credit Agreement dated September 30, 1996
between J&R Manufacturing Co. and Comerica Bank, and the Credit
Agreement dated December 8, 1997 among Production Stamping, Inc.
and Comerica Bank, together with the payment of all indebtedness
and liabilities owing pursuant thereto, and it is acknowledged
and agreed that this Agreement is in substitution and
replacement for such credit agreements and all liens and
security interests granted pursuant thereto shall continue
hereunder and all financing statements filed in connection
therewith shall remain in effect with respect to the Loan
Documents executed in connection herewith.
(p) SUBORDINATED DEBT. Evidence satisfactory to the Agent that TAG
has incurred Subordinated Debt in an amount equal to or greater
than One Hundred Twenty Million Dollars ($120,000,000) in
accordance with the Senior Subordinated Debt Documents, all
Senior Subordinated Debt Documents shall have been delivered to
the Agent and shall be satisfactory
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to the Agent and all transactions contemplated pursuant to the
Senior Subordinated Debt Documents shall have been completed.
(q) SERVICES AGREEMENT. Evidence satisfactory to Agent that the
Services Agreement is in full force and effect on terms and
conditions satisfactory to Agent.
(r) AGENT'S FEE. Borrowers shall have paid to the Agent all fees,
expenses and other amounts then due Agent under Section 12.8
hereof.
7.2 CONDITIONS PRECEDENT TO ALL LOANS. The obligation of the Agent and
the Banks to make Advances and Loans (other than Revolving Loans required for
the purpose of refunding Swing Loans) and the obligation of Agent to issue any
Letter of Credit shall be subject to the satisfaction of the following
conditions:
(a) EFFECTIVENESS. This Agreement shall have become effective as
provided in Section 7.1.
(b) NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of the
making of such Loan or Advance or the issuance of such Letter of
Credit and after giving effect thereto: (i) there shall
exist no Default or Event of Default; and (ii) all
representations and warranties contained herein or in the other
Documents shall be true and correct in all material respects.
(c) ADVERSE CHANGE, ETC. Since December 31, 1997, nothing shall have
occurred or become known which the Agent or the Banks shall have
determined has a Materially Adverse Effect.
(d) ENFORCEABILITY OF DOCUMENTS. Both before and after such Advance,
the obligations of the Borrowers in the Documents shall be
valid, binding and enforceable.
8. REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Banks to enter into this Agreement
and to make Loans and Advances hereunder, the Borrowers represent and warrant to
the Agent and the Banks:
8.1 CORPORATE STATUS. Each Loan Party is a duly organized and validly
existing corporation in good standing under the laws of the jurisdiction of its
organization, has the corporate or other organizational power and authority and
has obtained all requisite governmental licenses, authorizations, consents and
approvals necessary to own and operate its property and assets and to transact
the business in which it is engaged and presently proposes to engage, including,
without limitation, those required by the Environmental Laws, and is duly
qualified and is authorized to do business in, and is in good standing in, all
jurisdictions where by virtue
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of the nature of its activities or extent of its properties it is required to be
so qualified and where the failure to be so qualified would have a Material
Adverse Effect.
8.2 CORPORATE POWER AND AUTHORITY; BUSINESS. Each Loan Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Documents to which they are party and each of them has taken
all necessary corporate action to authorize the execution, delivery and
performance of the Documents to which they are party and to effectuate the
Merger and Restructuring and has duly executed and delivered each Document to
which it is a party and each such Document constitutes the legal, valid and
binding obligation of the Borrowers and/or other Loan Party thereto enforceable
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency or by equitable principles relating to enforceability,
good faith and fair dealing.
8.3 NO VIOLATION. Neither the execution, delivery or performance by the
Loan Parties of the Documents or of the Transaction, nor compliance with the
terms and provisions thereof, nor the consummation of the transactions
contemplated therein will result in a material contravention of any applicable
provision of any law, statute, rule, regulation, order, writ, injunction or
decree of any court or governmental instrumentality, or will conflict or be
inconsistent, in any material respect, with or result in any breach of any of
the terms, covenants, conditions or provisions of, or constitute a default
under, or result in the creation or imposition of any Lien upon any of the
property or assets of any of them pursuant to the terms of, any indenture,
mortgage, deed of trust, material agreement or other material instruments to
which any of them are parties.
8.4 LITIGATION. There are no actions, judgments, suits or proceedings
pending or, to the Borrowers' knowledge, threatened against any Loan Party that
are likely to have a Material Adverse Effect.
8.5 USE OF PROCEEDS. Neither the making of any Loan hereunder, nor the
use of the proceeds thereof, will violate or be inconsistent with the provisions
of Regulation G, T, U or X of the Board of Governors of the Federal Reserve
System.
8.6 GOVERNMENTAL APPROVALS, ETC. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any third party or any foreign or domestic governmental or public
body or authority, or by any subdivision thereof, is required to authorize or is
required in connection with the execution, delivery and performance of any
Document or the transactions contemplated therein, or the legality, validity,
binding effect or enforceability of any Document other than certain consents
from landlords of Borrowers, the absence of which will not have a Material
Adverse Effect.
8.7 TRUE AND COMPLETE DISCLOSURE. All factual information heretofore or
contemporaneously furnished by or on behalf of Borrowers in writing to Agent or
any Bank for purposes of or in connection with this Agreement or any transaction
contemplated herein is, and all other such factual information hereafter
furnished to Agent or any Bank will be, true and accurate in all material
respects on the date as of which such information is dated or certified and not
incomplete by omitting to state any material fact necessary to make such
information not
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misleading. There is no fact known to Borrowers which affects the business,
operations, property, assets, nature of assets, liabilities, condition
(financial or otherwise) or prospects of any other Loan Party which would have a
Material Adverse Effect and which has not been disclosed herein.
8.8 FINANCIAL STATEMENTS. The Borrowers have heretofore delivered to
the Agent pro forma balance sheets (giving effect to the Merger and
Restructuring) dated as of December 31, 1997, and statements of operations,
stockholders' equity and cash flow for the entities being consolidated in the
Merger and Restructuring for the fiscal year ended December 31, 1997. The pro
forma balance sheets and the other financial statements referred to in the
preceding sentence were prepared in accordance with GAAP, and fairly present in
all material respects the financial position of the entities described therein
and the results of its operations and cash flows for the periods covered
thereby.
8.9 SECURITY INTERESTS. There exist no Liens, in the property or assets
of the other Loan Parties except to the extent specifically permitted under
Section 10.2 hereof.
8.10 TAX RETURNS AND PAYMENTS. Except as set forth on Schedule 8.10
hereto, each Loan Party has filed all tax returns required to be filed by it and
has paid all taxes and assessments payable by it which have become due, other
than those not yet delinquent and except for those contested in good faith and
for which adequate reserves have been established to the extent required by
GAAP.
8.11 PATENTS, ETC. Except as set forth on Schedule 8.11 hereto, each
Loan Party has all material patents, trademarks, servicemarks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the operation of its respective businesses as presently
conducted and as proposed to be conducted.
8.12 COMPLIANCE WITH LAWS, ETC. Except as set forth on Schedule 8.12
hereto, each Loan Party is in compliance, in all material respects, with all
applicable laws and regulations, including without limitation those relating to
pollution and environmental control, equal employment opportunity and employee
safety, in all jurisdictions in which it is presently doing business, and will
comply, in all material respects, with all such laws and regulations which may
be imposed in the future in jurisdictions in which any of them may then be doing
business.
8.13 PROPERTIES. Each Loan Party has good and marketable title to
and beneficial ownership of all properties owned by it (subject only to Liens
permitted by Section 10.2 hereof), as reflected in the balance sheets mentioned
in Section 8.8 above and hold all material licenses, certificates of occupancy
or operation and similar certificates and clearances of municipal and other
authorities necessary to own and operate its properties in the manner and for
the purposes currently operated.
8.14 COLLECTIVE BARGAINING AGREEMENTS. Set forth on Schedule 8.14
hereto is a list and description (including dates of termination) of all
collective bargaining or similar agreements to which the Loan Parties are party
or are subject as of the date hereof and any union, labor organization or other
bargaining agent in respect of their respective employees on the date
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indicated in Schedule 8.14 hereto. There are no strikes pending or, to
Borrowers' knowledge, threatened against any Loan Party that are likely to have
a Material Adverse Effect.
8.15 INDEBTEDNESS OUTSTANDING. Set forth on Schedule 8.15 hereto is a
list and description of all Indebtedness of Borrowers (other than the Loans)
that are outstanding immediately as of the Closing Date.
8.16 ENVIRONMENTAL PROTECTION. Except as set forth on Schedule 8.16
hereto and except to the extent such failure or circumstance would not have a
Material Adverse Effect:
(a) The Loan Parties have all permits, licenses and other
authorizations which are required with respect to the
operation of their businesses under any Environmental
Law and each such authorization is in full force and
effect.
(b) The Loan Parties are compliance with all terms
and conditions of the permits, licenses and
authorizations specified in Subsection 8.16(a) above,
and are also in compliance with all other
limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules
and timetables contained in any Environmental Law
applicable to them and their businesses, assets,
operations and properties (including, without
limitation, compliance with standards, schedules and
timetables therein), including without limitation
those arising under the Resource Conservation and
Recovery Act of 1976, as amended, the Comprehensive
Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986 ("CERCLA"), the
Federal Water Pollution Control Act, the Federal
Clean Air Act, and the Toxic Substances Control Act.
(c) There is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice of
violation, investigation, proceeding, notice or
demand letter or request for information pending or,
to the knowledge of Borrowers threatened against any
Loan Party under any Environmental Law.
(d) No Loan Party has received notice that it has
been identified as a potentially responsible party
under CERCLA or any comparable state law nor have any
of them received any notification that any hazardous
substances or any pollutant or contaminant, as
defined in CERCLA and its implementing regulations,
or any toxic substance, hazardous waste, hazardous
constituents, hazardous materials, asbestos or
asbestos containing materials, petroleum, including
crude oil and any fractions thereof, or other wastes,
chemicals, substances or materials regulated by any
Environmental Laws (collectively "Hazardous
Materials") that it or any of their respective
predecessors in interest has used, generated, stored,
tested, handled, transported or disposed of, has been
found at any site at
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which any governmental agency or private party is
conducting a remedial investigation or other action
pursuant to any Environmental Law.
(e) To the best knowledge of Borrowers, there have
been no releases (i.e., any past or present
releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping) of Hazardous
Materials by any Loan Party on, upon, into or from
any of the real properties owned or operated by them
at any time. To the best knowledge of Borrowers there
has been no such releases on, upon, under or into any
such real property or in the vicinity of any of such
real property that, through soil, surface water or
groundwater migration or contamination, may be
located on, in or under such real properties.
(f) To the best knowledge of Borrowers, there is no
friable asbestos in, on, or at the respective real
properties or any facility or equipment of any Loan
Party.
(g) To the best knowledge of Borrowers, no real
property owned or operated by any Loan Party is: (i)
listed or proposed for listing on the National
Priorities List under CERCLA; or (ii) listed in the
Comprehensive Environmental Response, Compensation,
Liability Information System List promulgated
pursuant to CERCLA, or on any comparable list
maintained by any governmental authority.
(h) To the best of Borrowers' knowledge, there are no
past or present events, conditions, circumstances,
activities, practices, incidents, actions or plans
which may interfere with or prevent compliance by any
Loan Party with any Environmental Law, or which may
give rise to any common law or legal liability,
including, without limitation, liability under CERCLA
or similar state, local or foreign laws, or otherwise
form the basis of any claim, action, demand, suit,
proceeding, hearing or notice of violation, study or
investigation, based on or related to the
manufacture, processing, distribution, use,
generation, treatment, storage, disposal, transport,
shipping or handling, or the emission, discharge,
release or threatened release into the environment,
of any pollutant, contaminant, chemical or
industrial, toxic or hazardous substance or waste.
8.17 SENIOR SUBORDINATED DEBT DOCUMENTS. All representations and
warranties of the Borrowers contained in any Senior Subordinated Debt
Document are true and correct in all material respects. TAG will receive net
proceeds in the approximate amount of One Hundred Sixteen Million Four Hundred
Thousand Dollars ($116,400,000) on from its issuance of the Senior Subordinated
Notes, and all agreements, instruments and documents executed or delivered
pursuant to the issuance of the Senior Subordinated Notes are described on
Schedule 8.17 hereto. All Advances and all other present and future
indebtedness, obligations and liabilities pursuant to this Agreement and the
Loan Documents, is "Senior Debt" as defined in the Senior
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Subordinated Debt Documents and, other than the Advances and all other present
and future indebtedness, obligations and liabilities pursuant to the Loan
Documents, there is, as of the date of this Agreement, no other "Designated
Senior Debt" thereunder. There is no Event of Default or event or condition
which could become an Event of Default with notice or lapse of time or both,
under the Senior Subordinated Debt Documents and each of the Senior Subordinated
Debt Documents is in full force and effect. Other than pursuant to the Senior
Subordinated Notes, there is no obligation pursuant to any Senior Subordinated
Debt Document or other document or agreement evidencing or relating to any
Subordinated Debt outstanding or to be outstanding which obligates either
Borrower to pay any principal or interest or redeem any of its capital stock or
incur any other monetary obligation.
8.18 ERISA. Except as specifically set forth in Schedule 8.18 hereof:
(a) Each of the Borrowers and the ERISA Affiliates is in
compliance in all material respects with all
applicable provisions of ERISA and the regulations
and published interpretations thereunder with respect
to all employee benefit plans, Pension Plans and
Multiemployer Plans.
(b) No Termination Event has occurred or is reasonably
expected to occur with respect to any Pension Plan
which resulted or would result in a liability to a
Borrower or any ERISA Affiliate.
(c) The sum of the amount of unfunded benefit
liabilities (determined in accordance with Statement
of Financial Accounting Standards No. 35) under all
Title IV Plans (excluding each Title IV Plan with an
amount of unfunded benefit liabilities of zero or
less) is not more than Zero Dollars ($0) as of the
Closing Date.
(d) Neither of the Borrowers nor any ERISA Affiliate
has any obligation to contribute to or any liability
or potential liability (including, but not limited
to, actual or potential withdrawal liability) with
respect to any Multiemployer Plan or any employee
benefit plan of the type described in Sections 4063
and 4064 of ERISA or in Section 413(c) of the Code.
Neither of the Borrowers nor any ERISA Affiliate has
incurred or reasonably expects to incur any
withdrawal liability under Section 4201 et seq. of
ERISA to any Multiemployer Plan or any employee
benefit plan of the type described in Sections 4063
and 4064 of ERISA or in Section 413(c) of the Code.
(e) Neither of the Borrowers nor any ERISA Affiliate
has incurred any accumulated funding deficiency
(whether or not waived) with respect to any Pension
Plan.
(f) Neither of the Borrowers nor any ERISA Affiliate
has or reasonably expects to become subject to a Lien
in favor of any Pension Plan under
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Section 302(f) or 307 of ERISA or Section 401(a)(29)
or 412(n) of the Code.
(g) The execution, performance and delivery of the
Documents by Borrower will not involve any prohibited
transaction within the meaning of Section 406 of
ERISA or Section 4975 of the Code for which an
exemption therefrom is not available.
8.19 ADDRESSING THE YEAR 2000 ISSUE. Each Borrower has reviewed its
operations and those of its Subsidiaries and major commercial counterparts with
a view to assessing whether it or its Subsidiaries' respective businesses will,
in the receipt, transmission, processing, manipulation, storage, retrieval,
retransmission or other utilization of data, be vulnerable to a Year 2000 Issue.
Based on such review, each Borrower has no reason to believe that a Material
Adverse Effect will occur with respect to its or its Subsidiaries' businesses or
operations resulting from a Year 2000 Issue.
8.20 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All the
representations and warranties of the Borrower contained in Section 8.1 through
8.19, inclusive, shall survive the execution and delivery of this Agreement and
shall continue in full force and effect until all amounts owing hereunder have
been repaid and the credit facilities made available hereunder have been
terminated, notwithstanding any investigation made at any time by or on behalf
of the Agent or any of the Banks.
9. AFFIRMATIVE COVENANTS
Borrowers covenant and agree that, for so long as this Agreement is in
effect and until the Commitments are fully terminated and the Loans and Letter
of Credit Obligations together with interest, fees and all other obligations
incurred hereunder or under the Loan Documents are paid in full it will and,
will cause each other Loan Party to:
9.1 REPORTING REQUIREMENTS COVENANTS. Furnish or cause to be
furnished to Agent (with a copy for each Bank):
(a) as soon as available and in any event within one
hundred twenty (120) days after the close of each
fiscal year of TAG, balance sheets of TAG (i) as at
the end of such fiscal year and the related
statements of operations, stockholders equity and
cash flows for such fiscal year, setting forth
comparative figures for the preceding fiscal year,
and a report on such balance sheets and financial
statements by independent certified public
accountants of recognized national standing, which
report shall not be qualified as to the scope of
audit or as to the status of Borrowers as a going
concern, and shall state that such financial
statements fairly present, in all material respects,
the financial position of Borrowers as at the dates
indicated and the results of their operations and
their cash flows for the periods indicated, in
conformity with GAAP, and (ii) copies of tax returns
filed for the Borrowers for the fiscal year then
ended;
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(b) as soon as available and in any event within
forty five (45) days after the end of each quarter in
each fiscal year of TAG, (i) the balance sheet of TAG
as at the end of such quarterly period and the
related statements of operations, of stockholders'
equity and of cash flows for such period and for the
elapsed portion of the fiscal year ended with the
last day of such period, and in each case setting
forth comparative figures for the related periods in
the prior fiscal year, subject to normal year-end
audit adjustment;
(c) at the time of the delivery of the financial
statements provided for in Subsections 9.1(a) and
(b),(i) a certificate of the chief financial officer,
controller or chief accounting officer of TAG to the
effect that no Default or Event of Default exists,
or, if any Default or Event of Default does exist,
specifying the nature and extent thereof, which
certificate shall be accompanied, on a quarterly
basis, by a compliance certificate in a form
reasonably acceptable to the Agent setting forth the
calculations required to establish whether Borrowers
were in compliance with the covenants in this
Agreement as at the end of such period, and (ii) a
compliance certificate from the chief financial
officer, controller or chief accounting officer of
Veltri dated as of the end of the quarter ended
immediately prior thereto, in a form reasonably
acceptable to the Agent, setting forth the
calculations required to establish whether Veltri was
in compliance with the terms and conditions for EDC
Financing;
(d) within thirty (30) days after the end of each
month, a Borrowing Base calculation and certification
and consolidated reports on the Loan Parties'
Inventory and an aging of the Loan Parties' Accounts
Receivable, in each case, in form and content
satisfactory to Agent and certified by the chief
financial officer, controller or chief accounting
officer of Borrowers;
(e) promptly upon receipt thereof, a copy of each
annual "management letter" submitted to Borrowers by
its independent accountants in connection with any
annual audit made by them of the books of Borrowers;
(f) promptly upon any officer of a Borrower obtaining
knowledge of any condition or event which constitutes
a Default or Event of Default, or becoming aware that
any Bank has given any notice or taken any other
action with respect to a claimed Default or Event of
Default under this Agreement, an officers'
certificate specifying the nature and period of
existence of any such condition or event, or
specifying the nature of such claimed Default or
Event of Default, and explaining the action Borrowers
have taken or proposes to take with respect thereto;
and
(g) with reasonable promptness, such other
information and data with respect to Loan Parties as
from time to time may be reasonably requested by any
Bank.
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9.2 INSURANCE. Keep its insurable properties (including but not limited
to the Collateral) adequately insured and maintain (a) insurance against fire
and other risks customarily insured against under an "all-risk" policy and such
additional risks customarily insured against by companies engaged in the same or
a similar business to that of the relevant Loan Party, (b) necessary worker's
compensation insurance, (c) public liability and product liability insurance,
and (d) such other insurance as may be required by law or as may be reasonably
required in writing by the Agent or the Majority Banks, all of which Insurance
shall be in such amounts, containing such terms, in such form, for such
purposes, prepaid for such time period, and written by such companies as shall
be satisfactory to the Agent and the Majority Banks. All such policies shall
contain a provision whereby they may not be canceled or amended except upon
thirty (30) days' prior written notice to the Agent. The Borrowers will promptly
deliver to the Agent, at the Agent's request, evidence satisfactory to the Agent
that such insurance has been so procured and, with respect to casualty
insurance, made payable to the Agent. If the relevant Loan Party fails to
maintain satisfactory insurance as herein provided, the Agent shall have the
option to do so, and the Borrowers agree to repay the Agent upon demand, with
interest at the Prime-based Rate then in effect for the Revolving Loan, all
amounts so expended by the Agent. The Borrowers hereby appoint the Agent or any
employee or agent of the Agent as attorney-in-fact, which appointment is coupled
with an interest and irrevocable, and authorizes the Agent or any employee or
agent of the Agent, on behalf of the Borrowers or the relevant Loan Party, to
adjust and compromise any loss under said insurance (which adjustment or
compromise shall only be made with the Borrowers' consent if an Event of Default
has not occurred and is not continuing hereunder) and to endorse any check or
draft payable in connection with returned or unearned premiums on said insurance
or the proceeds of said insurance, and any amount so collected shall be applied
toward repair and/or replacement of the Collateral to which such casualty
occurred or satisfaction of the Indebtedness in accordance in accordance with
the provisions governing such application in the Documents pursuant to which
Agent's Liens on such Collateral were granted.
9.3 BOOKS, RECORDS AND INSPECTIONS. Each Loan Party will keep true
books of records and accounts of all its business transactions in accordance
with GAAP or (with respect to activities and transactions in foreign
jurisdictions) such other accounting principals as may be required in such
foreign jurisdiction and shall permit, upon reasonable prior notice by Agent to
any authorized officer of Borrowers, officers and designated representatives of
the Agent and/or any Banks to visit and inspect properties or assets of each
Loan Party and to examine the books of account of each Loan Party and to discuss
the affairs, finances and accounts of Borrower and with its and their officers
and independent accountants, all at such times and intervals as the Agent may
reasonably request, including, without limitation audits of Inventory and
Accounts Receivable to be performed at Borrowers' expense, semi-annually by, or
on Agent's behalf.
9.4 PAYMENT OF TAXES AND UTILITIES. Each Loan Party will pay and
discharge all taxes, assessments and governmental charges or levies imposed upon
it or upon its income or profits, or upon any properties belonging to it, and
all utility charges, dues, rates and assessments of whatever nature or kind and
to whomever assessed now or hereafter charged or payable with respect to the
Real Property, prior to the date on which material penalties attach thereto, and
all lawful claims which, if unpaid, might become a Lien or charge upon any
properties of any Loan Party or cause a failure or forfeiture of title thereto;
provided that neither
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Borrower shall not be required to pay any such tax, assessment, charge, levy or
claim that is being contested in good faith and by proper proceedings promptly
instituted and diligently conducted if it has maintained adequate reserves with
respect thereto in accordance with GAAP.
9.5 COMPLIANCE WITH STATUTES, ETC. Each Loan Party will comply with all
applicable statutes, regulations and orders of, and all applicable restrictions
imposed by, all governmental bodies, domestic or foreign, in respect of the
conduct of its business and the ownership of its property other than
non-compliance which would not reasonably be expected to have a Material Adverse
Effect.
9.6 PERFORMANCE OF OBLIGATIONS. TAG and each Acquired Entity will
perform in all material respects all of its obligations under the terms of each
mortgage, indenture, security agreement, other debt instrument, their respective
trade obligations and material contracts by which they are bound or to which
they are parties, except where such nonperformance would not have a Material
Adverse Effect.
9.7 END OF FISCAL YEARS; FISCAL QUARTERS. Borrower will have its fiscal
years end on December 31 and the first three fiscal quarters of each year end on
each of the thirteenth (13th), twenty sixth (26th) and thirty ninth (39th) week
of each year.
9.8 ENVIRONMENTAL EVENTS.
(a) The Borrowers will promptly give notice to the Agent upon
becoming aware of any of the following which would reasonably
be expected to result in liability under any Environmental
Law: (i) of any violation of any Environmental Law; (ii) of
any inquiry, proceeding, investigation or other action,
including a request for information or a notice of potential
environmental liability from any foreign, federal, state or
local environmental agency or board; or (iii) of the
discovery of the release of any Hazardous Material at, on,
under or from any of the real properties owned or operated by
any Loan Party or any facility or equipment thereat in excess
of reportable or allowable standards or levels under any
Environmental Law.
(b) In the event of the presence of any Hazardous Material on any
of the real properties owned or operated by any Loan Party
which is in violation of, or which could reasonably be
expected to result in liability under, any Environmental law,
in each case which would have a Material Adverse Effect, upon
discovery thereof and the determination of its materiality,
shall take all necessary steps to initiate and expeditiously
complete all remedial, corrective and other action to
mitigate and eliminate any such adverse effect, and shall
keep the Agent informed of their actions and the results.
9.9 FURTHER GUARANTEES AND LIENS. To the extent not prohibited by
applicable law, Borrowers will, immediately after any Person at any time
becoming a direct or indirect
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Subsidiary of a Borrower, deliver or cause to be delivered to the Agent a pledge
of all of the issued capital stock of such Person, and a guarantee from such
Person, together with all Security Documents applicable to such Person in the
Agent's opinion, and evidence of the registration, filing and recording of the
Liens on the property of such Person constituted by such Security Documents in
all jurisdictions where such registration, filing or recording is necessary or
of advantage to the creation, perfection, preservation or protection of such
Liens, all in form, scope and substance acceptable to the Agent.
9.10 COMPLIANCE WITH FORMULA AMOUNT. In the event that, at any time,
the principal amount of the Loans and Letters of Credit exceeds the Borrowing
Base, pay to Agent, for application on Swing Loans and/or Revolving Loans, an
amount sufficient to eliminate such excess.
9.11 CONSTRUCTION LIENS. Upon receiving notice or obtaining knowledge
of a construction lien registered upon title to the Real Property, the Borrowers
will forthwith discharge, or cause to be discharged, such lien.
9.12 DEFEND TITLE. Each Loan Party shall warrant and defend its title
to the Real Property and ensure that each document relating to the Real Property
to which it is a party constitutes a legal, valid, and binding obligation
enforceable against it in accordance with its terms.
9.13 ERISA. Borrower will furnish to each of the Banks:
(a) promptly upon knowing or having reason to know of the
occurrence of any: (i) Termination Event; or (ii)
"prohibited transaction," within the meaning of Section 406
of ERISA or Section 4975 of the Code, in connection with any
Pension Plan or any trust created thereunder, which in the
case of all such events described in clause (i) or (ii)
results or could reasonably be expected to result in a
liability of a Borrower or any ERISA Affiliates in the
aggregate in excess of Five Hundred Thousand Dollars
($500,000), a written notice specifying the nature thereof,
what action Borrower or ERISA Affiliates have taken, are
taking or propose to take with respect thereto, and, when
known, any action taken or threatened by the Internal
Revenue Service, Department of Labor, PBGC or Multiemployer
Plan sponsor with respect thereto; and
(b) if requested by Agent or any Bank, copies of: (i) all notices
received by a Borrower or ERISA Affiliates of PBGC's intent
to terminate any Title IV Plan or to have a trustee
appointed to administer any Title IV Plan, the notice of
which event is required pursuant to the preceding paragraph
(a); (ii) upon the request of the Agent each Schedule B
(Actuarial Information) to the annual report (Form 5500
Series) filed by a Borrower or any of its ERISA Affiliates
with the Internal Revenue Service with respect to each
Pension Plan; (iii) the most recent actuarial valuation
report for each Title IV Plan; and (iv) all notices received
by a Borrower or any ERISA
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Affiliates from a Multiemployer Plan sponsor concerning the imposition
or amount of withdrawal liability pursuant to Section 4202 of ERISA.
10. NEGATIVE COVENANTS
Borrower hereby covenants and agrees that so long as this Agreement is
in effect and until the Commitments are fully terminated and the Loans together
with interest, fees and all other obligations incurred hereunder or under the
Documents are paid in full, it will not and, it will not permit any Loan Party
to:
10.1 CHANGES IN BUSINESS. Materially alter the character of its primary
businesses from, or enter into or acquire businesses materially different from
its business as conducted as of the Closing Date.
10.2 LIENS. Create, incur, assume or suffer to exist any Lien upon or
with respect to any of its property or assets, whether now owned or hereafter
acquired, or sell any such property or assets subject to an understanding or
agreement, contingent or otherwise, to repurchase such property or assets or
assign any right to receive income, or file or permit the filing of any
financing statement under the UCC or any other similar notice of Lien under any
similar recording or notice statute, except:
(a) to Agent on behalf of the Banks;
(b) Permitted Liens;
(c) Liens upon real or tangible personal property acquired by a
Loan Party provided that: (i) any such Lien either encumbers
such property prior to the acquisition thereof or is created
solely for the purpose of securing indebtedness incurred to
finance the acquisition thereof; (ii) the principal amount of
the indebtedness secured by such Lien does not exceed the
fair value of the property at the time such Lien was created;
(iii) such Lien does not extend to or cover any other
property other than the assets so acquired; and (iv) the
incurrence of the indebtedness secured by such Lien is
permitted by Section 10.3(c) or (j) hereof;
(d) Liens upon the EDC Financing Collateral granted by Veltri to
the EDC as security for the EDC Financing; and
(e) the Subordinate Liens.
10.3 INDEBTEDNESS. Contract, create, incur, assume or suffer to exist
any Indebtedness, except:
(a) pursuant to this Agreement and the Documents;
(b) existing Indebtedness described on Schedule 8.15 hereto;
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(c) Indebtedness incurred to finance the cost of its acquisitions
and capital leases of personal tangible property not to exceed
One Million Two Hundred Fifty Thousand Dollars ($1,250,000)
annually;
(d) trade indebtedness incurred and paid in the ordinary course
of business;
(e) the Affiliate Loans;
(f) the Earn-Out Amounts;
(g) the EDC Financing and EDC Indemnifications to the extent that
the obligations thereunder (i) do not exceed Five Million Dollars
($5,000,000) and (ii) when added to the Tooling Loans, do not
exceed the Tooling Maximum;
(h) the Indebtedness under the Senior Subordinated Debt
Documents;
(i) obligations under Hedging Agreements; and
(j) in connection with any Permitted Acquisition by assumption of
purchase money indebtedness and capital lease obligations
encumbering tangible personal property acquired in such Permitted
Acquisition or tangible personal property of the Person acquired
in such Permitted Acquisition, not to exceed, in any case, ten
percent (10%) of the aggregated purchase price of such Permitted
Acquisition.
10.4 FINANCIAL COVENANTS. Permit:
(a) the Interest Coverage Ratio, to be less than:
(i) from the date hereof to and including December 31, 2001:
2.00:1; and
(ii) at all times thereafter: 2.25:1.
(b) the Leverage Ratio to exceed, at any time during the following
described periods, the ratio set forth opposite the respective
periods:
(i) from the date hereof to and including December 31, 2001:
5.50:1;
(ii) at all times thereafter: 5.0:1.
(c) the Net Worth to be less than the sum of (i) Two Million Dollars
plus (h) fifty percent (50%) of Net Income for each quarter of
Borrowers in which Net Income is a positive amount commencing the
quarter ended
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April 4, 1998, plus (iv) one hundred percent (100%) of Net
Proceeds of the Initial Public Offering.
10.5 DIVIDENDS. Declare or pay any dividend (other than dividends
payable solely in shares of its capital stock) on, or make any other
distribution with respect to (whether by reduction of capital or otherwise) any
shares of its capital stock, other than:
(a) a dividend payable in TAG's 1998 fiscal year, in aggregate
amount not in excess of Ten Million Dollars ($10,000,000);
(b) so long as TAG is taxed as an S Corporation, dividends
declared by TAG for the purpose of funding (and in such
amounts as are necessary for the funding of) the payment of
income taxes incurred by shareholders of TAG as a result of
TAG's election to be taxed as an S Corporation;
provided however, (x) that dividends and distributions otherwise permitted
hereunder may only be declared and/or paid if, upon giving effect to such
declaration and/or payment, no Default or Event of Default shall exist, and (y)
for the purpose of clause (b) above, it shall be assumed that income recognized
by the shareholders of TAG as a result of TAG's election to be taxed as an S
corporation is subject to Federal and State of Michigan income tax at the
highest marginal rates in effect for individuals.
10.6 STOCK ACQUISITION. Purchase, redeem, retire or otherwise acquire
any of the shares of its capital stock, or make any commitment to do so other
than redemptions of TAG stock in accordance with the terms of the Equity
Ownership Plan to the extent that, upon giving effect thereto, no Default or
Event of Default shall exist.
10.7 EXTENSION OF CREDIT. Make loans, advances or extensions of credit
to any Person, except for: (a) sales on open account in the ordinary course of
business; and (b) loans to employees or officers of Loan Parties not exceeding
Five Hundred Thousand Dollars ($500,000) in the aggregate at any time
outstanding, (c) Affiliate Loans, and (d) promissory notes issued to TAG
pursuant to the Equity Ownership Plan.
10.8 GUARANTEE OBLIGATIONS. Guarantee or otherwise be or become
responsible for obligations of any other Person, whether by agreement to
purchase the indebtedness of any other Person, agreement for the furnishing of
funds, goods, supplies or services for the purpose of paying or discharging
indebtedness of any other person, or otherwise, except for:
(a) by endorsement of negotiable instruments in the ordinary
course of business for deposit or collection,
(b) the Guaranties,
(c) the EDC Indemnification, and
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(d) guaranties by Loan Parties of the Indebtedness of Veltri
which is subject to the Veltri Subordination Agreement.
10.9 SUBORDINATE INDEBTEDNESS. Subordinate any indebtedness due to it
from a Person to indebtedness of other creditors of such Person.
10.10 PROPERTY TRANSFER, MERGER OR LEASE-BACK. (a) Sell, lease,
transfer or otherwise dispose of properties or assets having an aggregate book
value of more than One Million Dollars ($1,000,000) during any calendar year,
except for (i) sales and transfers among Loan Parties, (ii) sales of Inventory
in the ordinary course of business and (iii) sales of machinery and equipment
which is simultaneously replaced with machinery and equipment of at least
equivalent value or used to repay debt related thereto, (b) change its name,
consolidate with or merge into any other corporation, permit another corporation
to merge into it, acquire all or substantially all the properties or assets of
any other person, enter into any reorganization or recapitalization or
reclassify its capital stock except for the Transaction and to the extent
contemplated by the definition of Permitted Acquisitions, or (c) enter into any
sale-leaseback transaction.
10.11 ACCUISITIONS. Purchase or hold beneficially any Stock or other
securities of, or make any investment or acquire any interest whatsoever in, any
other Person or acquire all or substantially all of the assets of any Person, or
of any operating or business unit of any person except for:
(a) investments in obligations issued by the Government of
Canada or the United States of America, or an
instrumentality or agency of either such country, maturing
within 365 days of the date of acquisition of such
obligation, and guaranteed fully as to principal, premium,
if any, and interest by the Government of Canada or the
United States of America;
(b) investments in certificates of deposits issued or
acceptances accepted by or guaranteed by any bank to which
the Bank Act (Canada) applies or by any company licensed
to carry on the business of a trust company in one or more
provinces of Canada or by a bank or trust company
organized under the laws of the United States or any state
thereof or the District of Columbia having combined
capital and surplus of not less than $100,000,000,
maturing within 365 days of the date of purchase;
(c) investments in commercial paper given the highest rating
by two established national credit rating agencies in
Canada or the United States and maturing not more than 90
days from the date of acquisition thereof;
(d) existing investments in and loans and advances to Loan
Parties; and
(e) Permitted Acquisitions.
10.12 SALE OR DISCOUNT OF RECEIVABLES. Sell or discount, notes or
accounts receivables which exceed, in aggregate face value at any time, Five
Hundred Thousand Dollars ($500,000).
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10.13 OTHER AGREEMENTS. Agree to any amendment or revision to the
Services Agreement, or to any Agreement related to the debt secured by the
Veltri Subordination Agreement, which would have the effect of increasing the
amount or accelerating the date for, any payments thereunder.
10.14 USE OF LOAN PROCEEDS. Use or permit use of the proceeds of Loans
for purposes other than those permitted under this Agreement and will not use or
permit the use of any such Loan proceeds in violation of Regulation U or G of
the Federal Reserve Board as now or hereafter in effect, or for any other
purpose which violates provisions of regulations of the Federal Reserve Board.
10.15 MANAGEMENT FEES. Pay any management, consulting, business
services or similar fees or amounts to any Affiliate other than pursuant to the
Services Agreement, without giving effect to any amendment or thereof, provided
that no such management, consulting or similar fees or amounts (other than out
of pocket expenses) shall be paid if any Event of Default or Default exists or
would be caused thereby.
11. DEFAULTS
11.1 FAILURE TO PAY MONIES DUE. If a Borrower shall fail to pay, when
due, (a) any principal, interest, or fee under any Note or this Agreement and
ten (10) days shall pass after the due date therefor without cure, or (b) any
Letter of Credit Obligation to be paid hereunder or under any Letter of Credit
Agreement in accordance with the terms hereof and thereof and ten (10) days
shall pass after the due date without cure.
11.2 MISREPRESENTATION. If any warranty or representation of any Loan
Party in connection with or contained in this Agreement or any other Document,
or if any financial data or other information now or hereafter furnished to the
Agent or the Banks by or on behalf of a Loan Party shall prove to be false or
misleading in any material respect and, in the case of any such circumstance
which is capable of being cured within a period of thirty (30) days, the
continuation thereof for a period of thirty (30) days after the earlier of: (i)
Borrowers' actual knowledge thereof, or (ii) written notice by Bank to
Borrowers.
11.3 NONCOMPLIANCE WITH AGREEMENT. If any Loan Party shall fail to
perform any of its obligations and covenants under, or shall fail to comply with
any of the provisions of, this Agreement or any of the other Documents and, in
the case of any such circumstance which is capable of being cured within a
period of thirty (30) days, the continuation thereof for a period of thirty (30)
days after the earlier of: (i) Borrowers' actual knowledge thereof, or (ii)
written notice by Bank to Borrowers.
11.4 OTHER DEFAULTS. If any Loan Party shall default in the due payment
of any of its indebtedness (other than the Indebtedness) which is in the
aggregate in an amount greater than Five Hundred Dollars ($500,000) or in the
observance or performance of any term, covenant or condition in any agreement or
instrument evidencing, securing or relating to such indebtedness, and such
default shall not be waived and shall be continued for a period sufficient to
permit acceleration of the indebtedness.
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11.5 JUDGMENTS. If there shall be rendered against any Loan Parties
one or more judgments or decrees involving an aggregate liability of Five
Hundred Thousand Dollars ($500,000) or more, which has or have become
non-appealable and shall remain undischarged, unsatisfied by insurance and
unstayed for more than thirty (30) days, whether or not consecutive; or if a
writ of attachment or garnishment against the property of any Loan Party shall
be issued and levied and not released or appealed and bonded in a manner
reasonably satisfactory to the Agent.
11.6 BUSINESS SUSPENSION, BANKRUPTCY, ETC. If any Loan Party shall
voluntarily suspend transaction of its business, shall not pay its debts as they
mature or shall make a general assignment for the benefit of creditors; or
proceedings in bankruptcy, or for reorganization or liquidation of such Loan
Party, under the Bankruptcy Code or under any other state or federal law for the
relief of debtors shall be commenced by any Loan Party or shall be commenced
against any Loan Party and shall not be discharged within forty-five (45) days
of commencement; or a receiver, trustee or custodian shall be appointed for any
Loan Party or for any substantial portion of its properties or assets
involuntarily and shall not be terminated within forty-five (45) days of such
appointment.
11.7 CHANGE OF CONTROL. If any Change of Control occurs, whether by
reason of death, merger, consolidation or sale and such Change of Control
adversely impacts, in the sole judgment of the Banks, upon the ability of the
Borrowers to carry on business as theretofore conducted.
11.8 REPUDIATION, REVOCATION. If there is any repudiation, revocation
or any attempt to repudiate or revoke any Document by any Loan Party.
11.9 INADEQUATE FUNDING OR TERMINATION OF EMPLOYEE BENEFIT PLAN(S). If
a Borrower or ERISA Affiliate shall fail to meet its minimum funding
requirements under ERISA with respect to any Pension Plan or if any Termination
Event occurs with respect to any such Pension Plan and such event continues for
thirty (30) days and there shall result therefrom a liability which is likely to
have a Material Adverse Effect.
11.10 OCCURRENCE OF CERTAIN REPORTABLE EVENTS. If there shall occur,
with respect to any Pension Plan maintained by a Borrower or any ERISA
Affiliate, any reportable event (within the meaning of Section 4043(b) of ERISA)
which constitutes a ground for the termination of any such plan, and such event
continues for thirty (30) days, provided that termination of such plan or
appointment of such trustee would have a Material Adverse Effect.
11.11 EXERCISE OF REMEDIES. If an Event of Default has occurred and is
continuing hereunder:
(a) Banks' commitment to make Advances and the Agent's
commitment to issue Letters of Credit hereunder shall
immediately and automatically terminate;
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(b) the Agent may, (i) declare the entire unpaid balance
of the indebtedness hereunder, including the Notes,
immediately due and payable, without presentment,
notice or demand, all of which are hereby expressly
waived by Borrower, and/or (ii) require the payment by
Borrowers into a restricted demand deposit account
with Agent of an amount equal to the undrawn face
amount of any outstanding Letters of Credit;
(c) immediately and automatically upon the occurrence of
any Event of Default specified in Subsection 11.6
above, and notwithstanding the lack of any declaration
by Agent under preceding clause (b), the entire unpaid
principal of the Loans and other indebtedness
hereunder, including the Notes, shall become
automatically due and payable;
(d) Agent may, on behalf of all of the Banks, exercise any
remedy permitted by this Agreement, the other
Documents or law.
11.12 WAIVER OF DEFAULTS. No Event of Default shall be waived by the
Banks except in a writing made in accordance with Section 13.8 hereof. No single
or partial exercise of any right, power or privilege hereunder, nor any delay in
the exercise thereof, shall preclude other or further exercise of Agent's rights
or of Banks' rights by Agent. No waiver of any Event of Default shall extend to
any other or future Event of Default. No forbearance on the part of the Agent in
enforcing Agent's or any of Banks' rights shall constitute a waiver of any of
their respective rights. Borrowers expressly agree that this Section may not be
waived or modified by Banks or Agent by course of performance, estoppel or
otherwise.
12. AGENT
12.1 APPOINTMENT OF AGENT. Each Bank appoints and authorizes Agent to
act on behalf of such Bank or holder under the Documents and to exercise the
respective powers hereunder and thereunder as are specifically delegated to or
required of them by the terms hereof and thereof, together with such powers as
may be reasonably incidental thereto, including, the power to execute financing
or similar statements or notices and other documents. Each Bank agrees (which
agreement shall survive any termination of this Agreement) to reimburse Agent
(to the extent Agent is not reimbursed by Borrowers), for all reasonable
out-of-pocket expenses (including house and outside attorneys' fees) incurred by
Agent hereunder or in connection herewith or with an Event of Default or in
enforcing the obligations of Loan Parties under this Agreement or the Documents
or any other instrument executed pursuant hereto, pro rata according to such
Bank's Percentage of the Loans. Agent shall not be required to take any action
under the Documents, or to prosecute or defend any suit in respect of the
Documents, unless indemnified to its satisfaction by the Banks against loss,
costs, liability and expense. If any indemnity furnished pursuant hereto shall
become impaired, it may call for additional indemnity and cease to do the acts
indemnified against until such additional indemnity is given.
12.2 DEPOSIT ACCOUNT WITH AGENT. Borrowers hereby authorize Agent to
charge its general deposit account, if any, maintained with Agent for the amount
of any principal, interest or other payment due under this Agreement, the Notes,
any Letter of Credit Agreement or other
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Document when the same becomes due and payable under the terms of this
Agreement, the Notes, and Letter of Credit Agreement or the other Documents.
12.3 EXCULPATORY PROVISIONS. Agent agrees to exercise its rights and
powers, and to perform its duties as Agent hereunder and under the Documents in
accordance with its usual customs and practices in bank-agency transactions, but
only upon and subject to the express terms and conditions of this Section 12.3
(and no implied covenants or other obligations shall be read into this Agreement
against the Agent). Agent shall not be liable to any Bank for any action taken
or omitted to be taken by it under this Agreement or any document executed
pursuant hereto, or in connection herewith or therewith, except for its own
willful misconduct or gross negligence, nor be responsible for any recitals or
warranties herein or therein, nor for the effectiveness, enforceability,
validity or due execution of this Agreement or any document executed pursuant
hereto, or any security thereunder, nor to make any inquiry respecting the
performance by Borrowers of obligations hereunder or thereunder, and each of
them shall be entitled to rely upon advice of counsel concerning legal matters
and upon any notice, consent, certificate, statement or writing which is
believes to be genuine and to have been presented by a proper person.
12.4 SUCCESSOR AGENTS. Agent may resign as such at any time upon at
least thirty (30) days prior notice to Borrowers and all Banks. If Agent at any
time shall resign, Majority Banks may appoint a successor Agent which shall
thereupon become Agent hereunder and shall be entitled to receive from the prior
Agent such documents of transfer and assignment as such successor Agent may
reasonably request.
12.5 RIGHT OF AGENT AS BANK. Agent, in its capacity as a Bank, shall
have the same rights and powers with respect to the credit extended by it, and
the Notes held by it, and with respect to participation interests in Letters of
Credit issued and Letter of Credit Agreements entered pursuant hereto, as any
Bank, and may exercise the same as if it were not Agent, or the issuer of
Letters of Credit, and the term "Bank" and, when appropriate, "holder" shall
include Agent its individual capacity.
12.6 CREDIT DECISIONS. Each Bank acknowledges that it has and shall,
independently of Agent and each other Bank and based on the financial statements
of Loan Parties and such other documents, information and investigations as it
has deemed appropriate, made its own credit decision to extend credit hereunder
from time to time. Each Bank also acknowledges that it will, independently of
Agent and each other Bank and based on such other documents, information and
investigations as it shall deem appropriate at any time, continue to make its
own credit decisions as to exercising or not exercising from time to time any
rights and privileges available to it under this Agreement or any document
executed pursuant hereto.
12.7 NOTICES BY AGENT. Agent shall give prompt notice to each Bank of
each notice or request required or permitted to be given to Agent by Borrower
pursuant to the terms of this Agreement and of any litigation commenced by or
against Agent with respect to this Agreement.
12.8 AGENT'S FEES. The Borrowers shall pay to Agent the Agent's Fees at
the times and in the amount set forth (or to be set forth from time to time) in
a letter agreement between
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Agent and Borrowers. The Agent's Fees described in this Section are not
refundable under any circumstances.
12.9 NATURE OF AGENCY. The appointment of Agent as agent is for the
convenience of Banks and the Borrowers in making Advances of the Loans, issuing
Letters of Credit, collecting fees and principal and interest on the Loans and
dealing with Borrower. No Bank is purchasing the Loans from Agent and this
Agreement is not intended to be a purchase or participation agreement.
12.10 ACTIONS; CONFIRMATION OF AGENT'S AUTHORITY TO ACT IN EVENT OF
DEFAULT. Subject to Section 13.8 hereof, Agent is hereby expressly authorized to
act in all litigation and in all other respects as the representative of Banks
where Agent considers it to be necessary or desirable in order to carry out the
purposes of this Agreement or any of the Documents. In conducting such
litigation hereunder on behalf of Banks, Agent shall at all times be indemnified
by Banks as provided in Section 12.1 hereof. Agent shall undertake to give each
Bank prompt notice of any litigation commenced against Agent and/or Banks with
respect to this Agreement the Documents or any matter referred to herein or
therein.
12.11 AUTHORITY OF AGENT TO ENFORCE NOTES AND THIS AEREERNENT. Each
Bank, subject to the terms and conditions of this Agreement, authorizes the
Agent with full power and authority as attorney-in-fact to institute and
maintain actions, suits or proceedings for the collection and enforcement of the
Notes, this Agreement and the Documents (or any of them) and to file such proofs
of debt or other documents as may be necessary to have the claims of the Banks
allowed in any proceeding relative to the Borrowers or its creditors or
affecting its properties, and to take such other actions which Agent considers
to be necessary or desirable for the protection, collection and enforcement of
the Notes, this Agreement or the Documents (or any of them).
13. MISCELLANEOUS
13.1 LAW OF MICHIGAN; SUBMISSION TO JURISDICTION. This Agreement, the
Notes and Documents have been delivered at Detroit, Michigan, and shall be
governed by and construed and enforced in accordance with the laws of the State
of Michigan except in the case of certain of the Documents executed by Loan
Parties organized in Canada, which Documents expressly state that they are to be
governed by the laws of Ontario, Canada. Whenever possible each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
Any legal action or proceeding with respect to this Agreement or any
other Document may be brought in the courts of the State of Michigan or of the
United States District Court for the Eastern District of Michigan, or in the
courts of the Province of Ontario, and, by execution and delivery of this
Agreement, each party hereto hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the non-exclusive
jurisdiction of the
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aforesaid courts. Borrowers further irrevocably consent to the service of
process out of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to its address for notices pursuant to Section 13.3 hereof, such
service to become effective three (3) Business Days after such mailing. Nothing
herein shall affect the rights of the Agent or any Bank to serve process in any
other manner permitted by law.
Borrowers hereby irrevocably waive any objection which they may now or
hereafter have to the laying of venue of any proceedings arising out of or in
connection with this Agreement or any Document brought in the courts referred to
above and hereby further irrevocably waive and agree not to plead or claim in
any such court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum.
13.2 AGENT'S COSTS AND EXPENSES. Borrowers shall pay all costs and
expenses, including, by way of description and not limitation, reasonable
attorney fees and out-of-pocket expenses and lien and title search fees incurred
by Agent in connection with the commitment, consummation, and closing of the
loans contemplated hereby and in the exercise and enforcement of its rights and
prerogatives hereunder and under the Documents. All costs, including attorney
fees, incurred by Agent in revising, protecting, exercising or enforcing any of
its rights hereunder and under the Documents, or otherwise incurred by Agent in
connection with an Event of Default or incurred by Agent or any of the Banks in
connection with the enforcement hereof, including by way of description and not
limitation, such charges in any court or bankruptcy proceedings or arising out
of any claim or action by any person against Agent or any Bank which would not
have been asserted were it not for Agent's or such Bank's relationship with
Borrower hereunder or under the Documents, shall also be paid by Borrowers.
13.3 NOTICES. Except as otherwise provided herein, all notices
hereunder shall be sufficient if made in writing and delivered to the mailing
and delivery address of the respective parties indicated on the signature pages
to this Agreement, or transmitted to the facsimile or telex numbers set forth on
their respective signature pages to this Agreement. All such notices shall be
deemed received (i) two (2) Business Days after deposit thereof in the mails, if
given by mail, (ii) one (1) Business Day after deposit with express courier
service, or (iii) if by facsimile or telex transmission, the Business Day of
transmission if transmitted during customary business hours of the addressee
and, if not transmitted during such business hours, the following Business Day,
provided, however, that notices to the Agent shall not be effective until actual
receipt thereof.
13.4 FURTHER ACTION. Borrowers, from time to time, upon written request
of Agent will make, execute, acknowledge and deliver or cause to be made,
executed, acknowledged and delivered, all such further and additional
instruments, and take all such further action as may be required to carry out
the intent and purpose of this Agreement and the Documents, and to provide for
Loans under and payment of the Notes, according to the intent and purpose herein
and therein expressed.
13.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of Borrowers, Agent and Banks and their respective
successors and assigns,
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provided that the foregoing shall not authorize any assignment by Borrowers of
any rights or duties hereunder. Any Bank may sell, assign, grant participations
in, or otherwise transfer to any other Person all or part of the interests of
such Bank under this Agreement and the Notes and the Documents (including its
participation interests in Letters of Credit), and Loans made and to be made by
such Bank, subject to the following terms and conditions:
(a) ASSIGNMENTS. Each Bank, with the written consent of the
Agent (which consent shall not be unreasonably
withheld) may assign all or a portion of its Loans,
Notes and other interests and obligations under this
Agreement and the Documents pursuant to an Assignment
Agreement to another Bank or (with the consent of TAG,
which consent shall not unreasonably be withheld) to
other commercial banks or financial institutions,
provided that the aggregate amount of the Commitments
and Loans so assigned, and the portion thereof retained
by such assigning Bank (if any), shall in each case be
not less than Five Million Dollars ($5,000,000) after
giving effect to such assignment. Any such assignment
will become effective five (5) Business Days after the
Agent's receipt of a copy of the Assignment Agreement
executed by the assigning Bank and the assignee Bank,
payment to Agent of a processing and recordation fee in
the amount of Three Thousand Five Hundred Dollars
($3,500) for Agent's sole account, and delivery to
Agent (in escrow, pending issuance of Notes pursuant to
the following sentence) of the assigning Bank's then
effective Note. On or before such effective date (x)
Agent shall provide TAG with written notice of such
assignment, (y) Borrowers shall execute and deliver to
Agent new Notes made payable to the assignee and
assignor, and (z) Agent shall prepare and deliver to
Borrowers and the Banks a new Exhibit "D" to this
Agreement (which new Exhibit "D" shall automatically
and without further action or consent be
deemed to amend and restate the prior Exhibit "D")
setting forth the Percentages in effect as a result of
such assignment, whereupon the assignee
will become a "Bank" for all purposes of this Agreement
and the other Documents, to the extent of such
assignment.
(b) PARTICIPATIONS. Each Bank may transfer or grant
participating interests in its Loans, Notes and other
interests and obligations hereunder to any Person
("Participants") provided that, as between such
transferring Bank and its Participant, such Bank shall
retain all of its power, authority and discretion to
grant or participate in the granting of any waiver,
consent or other approval hereunder and to participate
in the approval of any amendment to this Agreement,
such Bank's Notes, the Documents or any other
instrument or agreement delivered hereunder or in
connection herewith, except that such Bank may agree
with any Participant that during the existence of the
Participant's interest, such Bank will not, without
consent of such Participant, agree to any amendment,
modification, waiver, release or consent which pursuant
to the terms hereof, requires the consent of all Banks.
All amounts payable by
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Borrower hereunder shall be determined as if the Bank
had not sold such participation.
13.6 INDULGENCE. No delay or failure of Agent and Banks in exercising
any right, power or privilege hereunder shall affect such right, power or
privilege nor shall any single or partial exercise thereof preclude any further
exercise thereof, nor the exercise of any other right, power or privilege. The
rights of Agent and Banks hereunder are cumulative and are not exclusive of any
rights or remedies which Agent and Banks would otherwise have.
13.7 COUNTERPARTS. This Agreement may be executed in several
counterparts, and each executed copy shall constitute an original instrument,
but such counterparts shall together constitute but one and the same instrument.
13.8 ENTIRE AGREEMENT; AMENDMENTS; WAIVERS; CONSENTS. This Agreement,
the Notes, the Letter of Credit Agreements and Letters of Credit, the Documents,
and any agreements certificates, or other documents given pursuant to the
foregoing, contain and will contain the entire agreement of the parties hereto,
and none of the parties shall be bound by anything not expressed in writing,
except that Borrowers shall be bound by telephonic requests for Loans made
hereunder. No amendment or waiver of any provision of this Agreement or any
Document, nor consent to any departure by Borrowers therefrom, shall in any
event be effective unless the same shall be in writing and signed by the Agent
and the Majority Banks and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall:
(a) unless in writing and signed by all Banks;
(i) postpone a Maturity Date or any other date fixed for any
payment of principal of, or interest on, any Loans,
Letter of Credit Obligation or any fees payable
hereunder;
(ii) reduce the principal of, or interest on, any Note or any
Letter of Credit Obligation or any fees or other amounts
payable hereunder;
(iii) subject Banks to any additional obligations, increase
the aggregate amount of principal indebtedness which may
be incurred under the Notes, or (except as specifically
set forth in Section 13.5(a) hereof) change the
Percentages;
(iv) release any Collateral for any of Borrowers' obligations
and indebtedness to Agent and the Bank;
(v) change this Section 13.8; and
(b) unless in writing and signed by the Agent in addition to all
Banks, affect the rights or duties of the Agent under this
Agreement or any Document.
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13.9 CONFIDENTIALITY. Each Bank agrees that all documentation and other
information made available by Borrower to such Bank under the terms of this
Agreement shall (except to the extent required by regulatory authority or legal
or governmental process or otherwise by governmental authority or law, or if
such documentation and other information is publicly available or hereafter
becomes publicly available other than by action of such Bank, or was theretofore
known or hereafter becomes known to such Bank independent of any disclosure
thereto by a Borrower) be held in the strictest confidence by such Bank and used
solely in administration and enforcement of Loans from time to time outstanding
from such Bank to Borrowers and in the prosecution or defense of legal
proceedings arising in connection herewith; provided that: (i) such Bank may
disclose such documentation and information to the Agent and/or to any other
Bank which is a party to this Agreement; and (ii) such Bank may disclose such
documentation and other information to any other bank or other Person to which
such Bank sells or proposes to sell a participation in its Loans hereunder if
such other bank or Person, prior to such disclosure, agrees for the benefit of
Borrower to comply with the provisions of this Section 13.9.
13.10 INTEREST. It is the intention of the parties hereto that each
Bank and the Agent shall conform to usury laws applicable to them, if any.
Accordingly, if the transactions with any Bank or Agent contemplated hereby
would be usurious under such applicable laws, then, notwithstanding anything to
the contrary in the Notes or Documents payable to Agent or such Bank, this
Agreement or any other agreement entered into in connection with or as security
for or guaranteeing this Agreement or the Indebtedness, it is agreed as follows:
(i) the aggregate of all consideration which constitutes interest under
applicable law that is contracted for, taken, reserved, charged or received by
Agent or such Bank under the Notes payable to Agent or such Bank, this
Agreement, the Documents or under any other agreement entered into in connection
with or as security for or guaranteeing this Agreement or such Notes or
Documents shall under no circumstances exceed the Highest Lawful Rate and any
excess shall be credited automatically, if theretofore paid, on the principal
amount of Loans owed to such Agent or Bank or, if it has Loans outstanding,
shall be refunded to Borrower by such Bank; and (ii) in the event that the
maturity of any such Note or other Indebtedness hereunder is accelerated or in
the event of any required or permitted prepayment, then such consideration that
constitutes interest under law applicable to such Bank may never include more
than the Highest Lawful Rate and excess interest, if any, to Agent or such Bank
shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by Agent or such Bank (as
applicable) on the principal amount of the Indebtedness owed to Agent or such
Bank (as applicable) by the Borrower or, if no such Indebtedness is then
outstanding, shall be refunded to the Borrower. Without limiting the foregoing,
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 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).
13.11 JURY WAIVER. Each of the parties to this agreement hereby
irrevocably waives all right to a trial by jury in any action, proceeding or
counterclaim arising out of or relating to this Agreement, the Documents or the
transactions contemplated hereby or thereby.
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13.12 CONFLICTS. In the event of direct conflict between the provision
of this Agreement and any term of any Security Document, the relevant term of
this Agreement shall control.
13.13 EFFECTIVE UPON EXECUTION. This Agreement shall become effective
upon the later of the execution hereof by Banks, Agent and Borrowers and the
Closing Date, and shall remain effective until all Loans and obligations
hereunder have been repaid and discharged in full and no commitment to fund any
Loan hereunder remains outstanding.
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WITNESS the due execution hereof as of the day and year first above written.
TALON AUTOMOTIVE GROUP INC.
By: David J. Woodward
------------------------------------
Its:
-----------------------------------
900 Wilshire, Suite 203
Troy, Michigan 48084
Attn: David J. Woodward
Telephone No. (248) 362-7600
Facsimile No. (248) 362-7612
VELTRI METAL PRODUCTS CO.
By: David J. Woodward
------------------------------------
Its:
-----------------------------------
900 Wilshire, Suite 203
Troy, Michigan 48084
Attn: David J. Woodward
Telephone No. (248) 362-7600
Facsimile No. (248) 362-7612
COMERICA BANK, as Agent and Bank
By: Russell A. Stolles
------------------------------------
Its: Assistant Vice President
-----------------------------------
500 Woodward Avenue
Detroit, MI 48226-3241
Attn: Russell A. Stolles
---------------------------------
Telephone No. (313) 222-0242
Facsimile No. (313) 222-5759
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SCHEDULE 8.10
Tax Returns and Payments
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SCHEDULE 8.11
Patents
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SCHEDULE 8.12
Compliance with Laws
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SCHEDULE 8.14
Collective Bargaining Agreements
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SCHEDULE 8.15
Indebtedness Outstanding
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SCHEDULE 8.16
Enviromnental Protection
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SCHEDULE 8.17
Senior Subordinated Debt Documents
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EXHIBIT "A"
ASSIGNMENT AGREEMENT
This Assignment Agreement is dated as of the day of
, among ("Assignor"), and
("Assignee").
Capitalized terms used herein and not otherwise defined shall have the
meanings given them in the Credit Agreement, dated as of April _, 1998, as
amended from time to time in accordance with its terms, ("Loan Agreement"), by
and among Talon Automotive Group, Inc., a Michigan corporation ("TAG"), Veltri
Metal Products Co., a Nova Scotia corporation ("Veltri" called together with
TAG, the "Borrowers" and either one referred to individually herein as a
"Borrower"), Comerica Bank, a Michigan banking corporation as Agent for the
Banks named therein, and the Banks (including Assignor);
WHEREAS, Assignor's current Percentage under the Loan Agreement is ___%
and in accordance with such Percentage, Assignor has pro rata interests in the
Loan and each of the Commitments ("Assignor Commitment");
WHEREAS, Assignee desires to acquire from Assignor, and Assignor
desires to assign to Assignee, that portion of the Assignor Commitment so that,
upon completion of the assignment, Assignee will be a Bank for all purposes
under the Loan Agreement with a Percentage under the Loan Agreement of percent
( %) and commensurate interests in each of the Loans and each Commitment.
NOW, THEREFORE, IT IS AGREED:
1. Assignment
Effective on the Assignment Effective Date, Assignor hereby
assigns to Assignee, without recourse or representation or warranty (other than
as expressly provided herein), that portion described on Annex I hereto as the
Assignee's share ("Assignee's Share") of all of Assignor's rights, title and
interest arising under or in connection with the Loan Agreement and Documents
including, without limitation, all rights with respect to the Loans, to the
extent attributable to Assignee's Share. It is the intent of this Assignment
Agreement that from and after the Assignment Effective Date the Assignee shall
be deemed a "Bank", as defined in the Loan Agreement and shall benefit from and
be subject to all of the rights and obligations of a "Bank" under the Loan
Agreement and shall further be a Bank, as defined in the Voting Agreement dated
by Agent and the Banks contemporaneolisly with the Loan Agreement.
2. Assumption
Effective on the Assionment Effective Date, Assignee hereby assumes
from Assinor all of Assinor's obligations arising under the Loan Aareement
relating to Assignee's Share or in connection with the Assignee's Share of all
outstanding Loans and Commitments
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now or hereafter outstanding or issued under the Loan Agreement, and Assignor
shall be released from all of its obligations under the Loan Agreement relating
to Assignee's Share of Loans and Commitments now or hereafter outstanding or
issued pursuant to the terms of the Loan Agreement.
3. Effectiveness
This Assignment Agreement shall become effective on the date (the
"Assignment Effective Date") which is five (5) Business Days subsequent to the
Agent's receipt of an originally executed copy of this Assignment Agreement and
the processing and recording fee due together therewith, in the amount of
$3,500, in accordance with Section 13.5(a) of the Loan Agreement. In the event
that, due to any Advance or payment on Loans, or of any Advancc occurring,
between the date hereof and the Assignment Effective Date, the amount of
outstanding Z:. Z:1 Loans indicated as assigned to Assignee and retained by
Assignor on Annex I hereto does not accurately reflect the actual principal
balance of Loans to be acquired in accordance with the Percentage interests in
Loans acquired by Assignee and retained by Assignor, Agent shall be authorized,
on such Assignment Effective Date to, without further consent of any party, make
such corrections to Annex I hereto as are necessary to accurately reflect the
principal balance of then outstanding Loans assigned and retained hereby, in
accordance with such Percentages.
4. Payment of interest and Fees to Assignee
(a) It is agreed that, between Assignor and Assignee,
Assignee shall be entitled to all interest on any Loan
and all Commitment Fees which accrue on the Assignee's
Share subsequent to the Assignment Effective Date.
Notwithstanding the foregoing, with respect to payments
of such interest and Commitment Fees attributable to
Assignee's Share which are received by Agent for
distribution to the Banks subsequent to the Assignment
Effective Date, Agent is hereby entitled and instructed
to remit such amounts directly to Assignee, without
regard to the period during which such amounts accrued,
and Assignor and Assionee shall promptly make such
adjustments between themselves as are necessary for
proper application of interest and Commitment Fees
accrued prior to the Assignment Effective Date, in
accordance with subsections (b) and (c) below.
(b) In the event that Assignor receives or collects any
interest on any Loan attributable to Assignee's Share
which accrued subsequent to the Assignment
Effective Date, or any Commitment Fees which are
attributable to Assignee's Share and which accrued
subsequent to the Assignment Effective Date, Assignor
shall promptly distribute such ID payment to
Assignee.
(c) In the event Assignee receives or collects any interest
on any Loan which accrued other than on Assignee's Share
or prior to the Assignment Effective Date or any
Commitment Fees which accrued other than on
A - 2
<PAGE> 85
Assignee's Share or prior to the Assignment Effective
Date, Assignee shall promptly distribute such payment to
Assignor.
(f) To the extent payments under clause (b) or (c) above are
not made within two (2) Business Days of receipt, the
Person to which such payment is owing shall be entitled
to recover such amount together with interest thereon
at a rate per annum equal to the Federal Funds Rate from
the date such amounts were received by such other
Person, to and including the date of payment.
(e) The Agent, by acceptance of this Assignment Agreement,
consents to the assignments described above and agrees to
make payments in respect of interest and Fees as
described in clause (a) above.
5. Payments on Assignment Effective Date. In consideration of the
assignment of Assignee's Share: (i) Assignee agrees to pay to Assignor, on the
Assignment Effective Date, an amount in U.S. Dollars which represents the
principal amount of the Loans attributable to Assignee's Share outstanding as
of the Assignment Effective Date; and (ii) Assignor agrees to pay to Assignee
the assignment fee (if any) specified in Annex I hereto on the Assignment
Effective Date.
6. Representations and Warranties
(a) Assignor and Assignee each represent and warrant:
(i) it has full power and authority, and has taken
all action necessary, to execute and deliver
this Assignment Agreement and to fulfill its
obligations under, and to consummate the
transactions contemplated by, this Assignment
Agreement;
(ii) the making and performance by it of this
Assignment Agreement and all documents required
to be executed and delivered by it hereunder do
not and will not violate any law or regulation
of the jurisdiction of its incorporation or any
other law or regulation applicable to it;
(iii) this Assignment Agreement has been duly
executed and delivered by it and constitutes
its legal, valid and binding obligation,
enforceable in accordance with its terms; and
(iv) all approvals, authorizations, or other actions
by, or filing with, any governmental authority
necessary for the validity or enforceability of
its obligations under this Assignment Agreement
have been obtained.
A - 3
<PAGE> 86
(b) Assignor represents and warrants to Assignee that: (i)
Assignor owns the Assignor Commitment and the Loans that
are the subject of this Assignment Agreement and the
Assignee's Share and the Loans attributable to
Assignee's Share are subject to no liens or security
interests created by Assignor; (ii) the assignment
contemplated by this Assignment Agreement complies with
the provisions of Section 13.5 of the Loan Agreement;
(iii) Assignor has, prior hereto, delivered to Assignee
a complete and true set of copies of Loan Agreement and
all of the Documents in Assignor's possession.
(c) Assignee represents and warrants that it has made its
own independent investigation of the financial condition
and affairs of the Company and other parties to the
Documents and of the Loans and Letters of Credit
attributable to Assignee's Share and has made and shall
continue to make its own appraisal of the
creditworthiness of the Company and other parties to the
Documents.
7. Expenses
Assignor and Assignee agree that each of them shall bear its
own expenses in connection with the preparation and execution of this Assignment
Agreement, provided, however, that the processing and recordation fee payable to
Agent pursuant to Section 13.5(a) of the Loan Agreement shall be paid by ______.
8. Miscellaneous
(a) Neither Agent nor any Bank (including Assignor) shall be
responsible to Assignee for the execution,
effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of the Loan Agreement or
Documents or for any representations, warranties,
recitals or statements made therein or in any written or
oral statement or in any financial or other statements,
instruments, reports, certificates or any other
documents made or furnished or made available to
Assignee or by or on behalf of the Company or any other
person obligated under the Documents to Assignor or
Assignee in connection with the Documents and the
transactions contemplated thereby nor shall any such
Person be required to ascertain or inquire as to the
performance or observance of any of the terms,
conditions, provisions, covenants or agreements
contained in any of the Documents or as to the use of
the proceeds of the Loans or as to the existence or
possible existence of any Default or Event of Default.
(b) Neither Agent nor the Bank (including Assignor) shall
have any duty or responsibility either initially or on a
continuing basis to make any investigation of the
financial condition and affairs of Company or any
Subsidiary in connection with the making of the Loans or
Assignee's acquisition of Assignee's Share or to provide
Assignee with any credit or
A - 4
<PAGE> 87
other information with respect thereto, whether coming
into its possession before the making of the Loans or at
any time or times thereafter, and shall further have no
responsibility with respect to the accuracy of, or the
completeness of, any information provided to Assignee by
or on behalf of Company.
(c) The Assignee appoints and authorizes the Agent to take
such action on its behalf and to exercise such powers
under the Loan Agreement and the Documents as are
delegated to the Agent by the terms thereof, together
with such powers as are reasonably incidental thereto.
(d) The validity, construction and enforceability of this
Assignment Agreement shall be governed by the laws of,
and enforceable in, the State of Michigan.
(e) No term or provision of this Assignment Agreement may be
changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the parties
to this Assignment Agreement.
(f) This Assignment Agreement may be executed in one or more
counterparts, each of which shall be an original but all
of which, taken together, shall constitute one and the
same instrument.
(g) All payments hereunder or in connection herewith shall
be made in U.S. Dollars and in immediately available
funds by wire transfer, if payable by Assignee to
Assignor, to the account of Assignor as designated in
Annex I hereto, and if payable by Assignor to Assignee,
to the account of Assignee, as designated in Annex I
hereto, and, if payable by Agent, in accordance with the
applicable provisions of the Loan Agreement. The address
of the Assignee for notice purposes under the Loan
Agreement shall be as set forth in Annex I hereto.
(h) This Assignment Agreement shall be binding upon and
inure to the benefit of the parties hereto and their
respective successors and assigns. Neither Assignee nor
Assignor may assign or transfer any of its rights or
obligations under this Assignment Agreement except in
accordance with Section 13.5 of the Loan Agreement.
(i) In case any provision in this Assignment Agreement shall
be held invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions
hereof will not in any way be affected or impaired
thereby.
A - 5
<PAGE> 88
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement as of the date first written above.
ASSIGNOR:
------------------------------------------
By:
-------------------------------------
Its:
-------------------------------------
ASSIGNEE:
------------------------------------------
By:
---------------------------------------
Its:
--------------------------------------
Received and Acknowledged:
COMERICA BANK, as Agent
By:
-------------------------------
Its:
-------------------------------
A - 6
<PAGE> 89
ANNEX I
To
Assignment & Assumption Agreement
1. Borrowers:
Talon Automotive Group, Inc.
Veltri Metal Products Co.
2. Date of Credit Agreement:
April 28, 1998
3. Assignor:
4. Assignee:
5. Date of Assignment Agreement:
6. Assignee's Share:
<TABLE>
<S><C>
(a) Assignee's Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . .____________%
(b) Dollar Amount of Assignee's Percentage of Revolving Loans . . . . . . . . . .$___________
(c) Dollar Amount of Assignee's Share of Assignor's Swing Loans. . . . . . . . . $___________
(d) Total Principal Amount of Outstanding Loans Assigned . . . . . . . . . . . . $___________
7. Assignor's Remaining Interests:
(a) Assignor's Retained Percentage . . . . . . . . . . . . . . . . . . . . . . . ____________%
(b) Dollar Amount of Assignor's Retained Percentage of Revolving
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$___________
(c) Dollar Amount of Assignors Retained Swing Loans . . . . . . . . . . . . . . .$___________
(d) Total Principal Amount of Outstanding Loans Retained by Assignor. . . . . . .$___________
</TABLE>
A - 1
<PAGE> 90
8. Payment Instructions:
Assignor:
ABA No.
Attention:
Reference:
Assignee:
ABA No.:
Attention:
Reference:
9. Assignee's Notice Instructions:
Accepted and Agreed:
ASSIGNOR: ASSIGNEE:
------------------------------- ---------------------------------
By: By:
--------------------------- ----------------------------
Its: Its:
--------------------------- ----------------------------
A - 2
<PAGE> 91
EXHIBIT "B"
MATURITY EXTENSION REQUEST
The undersigned authorized officers of TALON AUTOMOTIVE GROUP, INC., a
Michigan corporation ("Talon"), and VELTRI METAL PRODUCTS CO., a Nova Scotia
corporation ("Veltri", together with Talon, the "Borrowers"), pursuant to
Section 2.9 of that certain $100,000,000 Credit Agreement dated April 28, 1998
between and among Borrowers, the Banks (as defined therein) and COMERICA BANK,
as Agent for the Banks (the "Agreement") hereby requests an extension of the
Maturity Date from 1/ to
2/
Attached hereto are financial projections for the Borrowers from the
date hereof through the requested extension date set forth above.
In accordance with Section 2.9 of the Agreement, Company hereby
requests Agent to promptly notify the Banks hereof, and to request that the
Bank's deliver their responses hereto on or before , .3/
Dated as of this day of , .
TALON AUTOMOTIVE GROUP, INC.
By:
----------------------------------------
Its:
----------------------------------------
VELTRI METAL PRODUCTS CO.
By:
----------------------------------------
Its:
----------------------------------------
- ---------------
1/ Insert Maturity Date in effect as of the date of the Extension
Request.
2/ Insert May 15, 2004 or date one year subsequent to the existing
Maturity Date, as applicable.
3/ Insert date 30 days subsequent to the Extension Request.
B-1
<PAGE> 92
Consented To:
COMERICA BANK
By:
----------------------------------------
Its:
----------------------------------------
Dated:
------------------------------
B-2
<PAGE> 93
EXHIBIT "C"
LETTER OF CREDIT NOTICE
To: The Banks party to the $100,000,000 Credit Agreement dated as of April
28, 1998 ("Agreement") between Talon Automotive Group, Inc.
("Company"), certain other borrowers, Comerica Bank as Agent and the
financial institutions defined as Banks therein.
Capitalized terms used herein and not defined to the contrary have
the meanings given them in the Agreement
Pursuant to Section 3.3 of the Agreement you are hereby notified that:
a. On ____________________, __________, pursuant to Section 3.1
of the Agreement, Agent issued the following described Letter
of Credit:
<TABLE>
<S><C>
Letter of Credit Face Initial
No/Type - Beneficiary Amount Expiration
---------------- ----------- ------ ----------
</TABLE>
b. The risk participations acquired by the Banks in connection with
the issuance of such Letter of Credit in accordance with the
Percentages pursuant to Section 3.3 of the Agreement are as
follows:
Comerica Bank . . . . . . . . . . . . . . . . . . . . . . . 100%
C. The Letter of Credit Fees with respect to the above-mentioned
Letter of Credit payable at the rate per annum equal to
____________________________________1/
Dated this __________ day of ______________________, ________.
COMERICA BANK, as Agent
By:
------------------------------
Its:
------------------------------
- ---------------
1/ Insert "the Applicable Margin" for standby Letters of Credit.
<PAGE> 94
EXHIBIT "D"
PERCENTAGES
BANK PERCENTAGE
---- ----------
Comerica Bank 100%
D - 1
<PAGE> 95
EXHIBIT "E"
REAL ESTATE
<PAGE> 96
EXHIBIT "F"
REQUEST FOR LOAN
A. Request
-------
The undersigned authorized officer of 1/("Company"),
pursuant to that certain Credit Agreement dated April 28, 1998 between and among
Company, certain other borrowrers, the Banks, and COMERICA BANK, as Agent for
the Banks (the "Agreement"). hereby requests an Advance on ,
2/ in the amount of Dollars ($ )3/ under
the Note(s) ("Notes") made by the undersigned to said Banks evidencing the
4/ Loans.
The Applicable Interest Rate for the requested Advance shall be the
5/, and the Interest Period for the requested
Advance shall: (a) end on the next Quarterly Payment Date, if a Prime-based
Loan; or (b) be 6/, if a Eurocurrency-based Loan.
B. Application of Proceeds
-----------------------
1. The proceeds of this Advance shall be applied (if applicable) to
convert or renew the following outstanding Advances:
Type of Last Day of Principal
Advance Interest Period Outstanding
------- --------------- ------------
C. Request Irrevocable
-------------------
- ---------------
1/ Insert Talon Automotive Group, Inc. or Veltri Metal Products Co. as
applicable.
2/ Insert date at least three (3) Business Days prior to date of Request
if Request is for Eurocurrency-based Loan and, if request involves conversion or
renewal of outstanding Eurocurrency-based Loan, the last Business Day of the
Interest Period applicable thereto.
3/ This amount shall not be less than $500,000, for a Prime-based Loan
(other than a Swing Loan) or $800,000 for a Eurocurrency-based Loan.
4/ Insert "Revolving Loan" or "Swing Loan" as applicable.
5/ Insert either Eurocurrency-based Rate or Prime-based Rate.
6/ If a Eurocurrency-based Loan, insert "1 month", "2 months", "3 months"
or "6 months".
F - 1
<PAGE> 97
Upon Agent's receipt of this Request for Loan, this Request for Loan
shall be irrevocable.
D. Certification
The undersigned hereby certifies that all conditions set forth in the
Agreement for the Advance requested hereby are satisfied and shall be satisfied
both as of the date of this request and the date requested for the Advance
requested hereby.
E. Defined Terms
Capitalized terms used herein, unless specifically defined to the
contrary herein, have the meanings given them in the Agreement.
Dated this ____ day of ___________________, _____.
By:
----------------------------------
Its:
----------------------------------
F - 2
<PAGE> 98
EXHIBIT "G"
REVOLVING NOTE
U.S. $___________________1/ Detroit, Michigan
April __, 1998
FOR VALUE RECEIVED, TALON AUTOMOTIVE GROUP, INC., a Michigan corporation
("Company") promises to pay to the order of ____________________________________
2/ ("Bank"), in lawful money of the United States of America in immediately
available funds, at 500 Woodward Avenue, Detroit, Michigan, care of the Agent,
the principal sum of _____________________________ Dollars ($_________________),
or so much of such amount as has then been advanced and is outstanding hereunder
pursuant to Section 2.1 of that certain Credit Agreement of even date herewith
between Company and certain other borrowers, Comerica Bank as Agent and the
lenders signatory thereto, including the Bank, ("Agreement"), on the Maturity
Date for the Revolving Loan.
Capitalized terms used herein and not defined to the contrary herein
have the meanings given them in the Agreement.
Interest shall accrue on the unpaid principal balance of this Note from
time to time outstanding at the Applicable Interest Rates, as selected by the
Company or as otherwise applicable pursuant to the provisions of the Agreement;
provided, however, that in the event and so long as an Event of Default shall
exist, or in the event that the indebtedness hereunder shall be accelerated as
the result of an Event of Default, interest shall accrue (subject to limitations
thereon specifically described in the Agreement) at the per annum rate equal to
the Default Rate.
Interest shall be payable on the last day of every Interest Period and
(if such Interest Period is longer than three (3) months) on the date which is
three (3) months following the first day of such Interest Period, and all such
interest shall be computed on the basis of a 360 day year and assessed for the
actual number of days elapsed. In computation of interest effect shall be given
to any change in the Prime-based Rate resulting from a change in the Prime Rate
or Alternate Base Rate (as applicable) on the date of such change in the Prime
Rate and/or Alternate Base Rate and on the effective date of any adjustment of
the Applicable Margin. The interest rate with respect to all Eurocurrency-based
Loans shall change on the effective date of any adjustment of the Applicable
Margin.
This Note is a note under which advances, repayments and readvances may
be made from time to time, in accordance with the terms and conditions of the
Agreement, and is one of the
- ---------------
1/ Insert amount equal to applicable Percentage of $100,000,000.
2/ Insert name of Bank.
<PAGE> 99
Notes referred to in the Agreement, and may be accelerated or matured pursuant
to the terms of the Agreement, to which reference is hereby made.
All borrowings evidenced by this Note and all payments and prepayments
of the principal hereof and interest hereon and the respective dates thereof
shall be endorsed by the holder hereof on the schedule attached hereto and made
a part hereof, or on a continuation thereof which shall be attached hereto and
made a part hereof, or otherwise recorded by such holder in its internal
records; provided, however, that the failure of the holder hereof to make such a
notation or any error in such a notation shall not affect the obligations of the
Company under this Note.
As additional security for this Note, Company grants Bank a lien on all
property and assets, including deposits and other credits, of the Company, at
any time in possession or control of or owing by Bank for any purpose.
This Note shall be interpreted and the rights of the parties hereunder
shall be determined under the laws of, and enforceable in, the State of
Michigan.
Company hereby waives presentment for payment, demand, protest and
notice of protest and notice of dishonor and nonpayment of this Note and agrees
that no obligation hereunder shall be discharged by reason of any extension,
indulgence, release or forbearance granted by any holder of this Note to any
party now or hereafter liable hereon or any present or subsequent owner of any
property, real or personal, which is now or hereafter security for this Note.
Any transferees of, or endorser, guarantor or surety paying this Note in full
shall succeed to all rights of Bank, and Bank shall be under no further
responsibility for the exercise thereof or the loan evidenced hereby.
Nothing herein shall limit any right granted Bank by any other
instrument or by law.
TALON AUTOMOTIVE GROUP, INC.
By:
----------------------------------------
Its:
----------------------------------------
G-2
<PAGE> 100
TRANSACTIONS
ON
REVOLVING CREDIT NOTE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Amount of Outstanding
Type of Amount of Principal or Principal
Loan Made Loan Made Interest Paid Balance Notation
Date This Date This Date This Date This Date Made By
</TABLE>
G-3
<PAGE> 101
EXHIBIT "H"
SWING LINE NOTE
U.S. $5,000,000 Detroit, Michigan
April , 1998
FOR VALUE RECEIVED, TALON AUTOMOTIVE GROUP, INC., a Michigan
corporation ("Company"), promises to pay to the order of Comerica Bank ("Bank"),
in lawful money of the United States of America in immediately available funds,
at 500 Woodward Avenue, Detroit, Michigan, care of the Agent, the principal sum
of Five Million Dollars ($5,000,000), or so much of such amount as has then been
advanced and is outstanding hereunder pursuant to Section 2.2 of that certain
Credit Agreement of even date herewith between Company and certain other
borrowers, Comerica Bank as Agent and the lenders signatory thereto, including
the Bank, ("Agreement"), on the Maturity Date for the Swing Loan.
Capitalized terms used herein and not defined to the contrary herein
have the meanings given them in the Agreement.
Interest shall accrue on the unpaid principal balance of this Note from
time to time outstanding at the Applicable Interest Rates, as selected by the
Company or as otherwise applicable pursuant to the provisions of the Agreement;
provided, however, that in the event and so long as an Event of Default shall
exist, or in the event that the indebtedness hereunder shall be accelerated as
the result of an Event of Default, interest shall accrue (subject to limitations
thereon specifically described in the Agreement) at the per annum rate equal to
the Default Rate.
Interest shall be payable on the last day of every Interest Period and
(if such Interest Period is longer than three (3) months) on the date which is
three (3) months following the first day of such Interest Period, and all such
interest shall be computed on the basis of a 360 day year and assessed for the
actual number of days elapsed. In computation of interest effect shall be given
to any change in the Prime-based Rate resulting from a change in the Prime Rate
or Alternate Base Rate (as applicable) on the date of such change in the Prime
Rate and/or Alternate Base Rate.
This Note is a note under which advances, repayments and readvances may
be made from time to time, in accordance with the terms and conditions of the
Agreement, and is one of the Notes referred to in the Agreement, and may be
accelerated or matured pursuant to the terms of the Agreement, to which
reference is hereby made.
All borrowings evidenced by this Note and all payments and prepayments
of the principal hereof and interest hereon and the respective dates thereof
shall be endorsed by the holder hereof on the schedule attached hereto and made
a part hereof, or on a continuation thereof which shall be attached hereto and
made a part hereof, or otherwise recorded by such holder in its internal
records; provided, however, that the failure of the holder hereof to make such a
notation or any error in such a notation shall not affect the obligations of the
Company under this Note.
<PAGE> 102
As additional security for this Note, Company grants Bank a lien on all
property and assets, including deposits and other credits, of the Company, at
any time in possession or control of or owing by Bank for any purpose.
This Note shall be interpreted and the rights of the parties hereunder
shall be determined under the laws of, and enforceable in, the State of
Michigan.
Company hereby waives presentment for payment, demand, protest and
notice of protest and notice of dishonor and nonpayment of this Note and agrees
that no obligation hereunder shall be discharged by reason of any extension,
indulgence, release or forbearance granted by any holder of this Note to any
party now or hereafter liable hereon or any present or subsequent owner of any
property, real or personal, which is now or hereafter security for this Note.
Any transferees of, or endorser, guarantor or surety paying this Note in full
shall succeed to all rights of Bank, and Bank shall be under no further
responsibility for the exercise thereof or the loan evidenced hereby.
Nothing herein shall limit any right granted Bank by any other
instrument or by law.
TALON AUTOMOTIVE GROUP, INC.
By:
----------------------------------------
Its:
----------------------------------------
H - 2
<PAGE> 103
TRANSACTIONS
ON
SWING LINE CREDIT NOTE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Amount of Outstanding
Type of Amount of Principal or Principal
Loan Made Loan Made Interest Paid Balance Notation
Date This Date This Date This Date This Date Made By
</TABLE>
H - 3
<PAGE> 104
EXHIBIT "I"
CANADIAN SWING LINE NOTE
Cn $5,000,000 Detroit, Michigan
April , 1998
FOR VALUE RECEIVED, VELTRI METAL PRODUCTS CO., a Nova Scotia
corporation ("Company"), promises to pay to the order of
("Bank"), in lawful money of Canada in immediately available funds, at
2/, the principal sum of Five Million Canadian Dollars ($5,000,000), or so much
of such amount as has then been advanced and is outstanding hereunder pursuant
to Section 2.2 of that certain Credit Agreement of even date herewith between
Company and certain other borrowers, Comerica Bank as Agent and the lenders
signatory thereto, including the Bank, ("Agreement"), on the Maturity Date.
Capitalized terms used herein and not defined to the contrary herein
have the meanings given them in the Agreement.
Interest shall accrue on the unpaid principal balance of this Note from
time to time outstanding at the Applicable Interest Rates, as selected by the
Company or as otherwise applicable pursuant to the provisions of the Agreement;
provided, however, that in the event and so long as an Event of Default shall
exist, or in the event that the indebtedness hereunder shall be accelerated as
the result of an Event of Default, interest shall accrue (subject to limitations
thereon specifically described in the Agreement) at the per annum rate equal to
the Default Rate.
Interest shall be payable on the last day of every Interest Period and
(if such Interest Period is longer than three (3) months) on the date which is
three (3) months following the first day of such Interest Period, and all such
interest shall be computed on the basis of a 360 day year and assessed for the
actual number of days elapsed. In computation of interest effect shall be given
to any change in the Prime-based Rate resulting from a change in the Prime Rate
or Alternate Base Rate (as applicable) on the date of such change in the Prime
Rate and/or Alternate Base Rate.
This Note is a note under which advances, repayments and readvances may
be made from time to time, in accordance with the terms and conditions of the
Agreement, and is one of the Notes referred to in the Agreement, and may be
accelerated or matured pursuant to the terms
- --------------------
1/ Insert name of Canadian Swingline Lender.
2/ Insert address of Canadian Swingline Lender.
1-1
<PAGE> 105
of the Agreement, to which reference is hereby made.
All borrowings evidenced by this Note and all payments and prepayments
of the principal hereof and interest hereon and the respective dates thereof
shall be endorsed by the holder hereof on the schedule attached hereto and made
a part hereof, or on a continuation thereof which shall be attached hereto and
made a part hereof, or otherwise recorded by such holder in its internal
records; provided, however, that the failure of the holder hereof to make such a
notation or any error in such a notation shall not affect the obligations of the
Company under this Note-
As additional security for this Note, Company grants Bank a lien on all
property and assets, including deposits and other credits, of the Company, at
any time in possession or control of or owing by Bank for any purpose.
This Note shall be interpreted and the rights of the parties hereunder
shall be determined under the laws of, and enforceable in, the State of
Michigan.
Company hereby waives presentment for payment, demand, protest and
notice of protest and notice of dishonor and nonpayment of this Note and agrees
that no obligation hereunder shall be discharged by reason of any extension,
indulgence, release or forbearance granted by any holder of this Note to any
party now or hereafter liable hereon or any present or subsequent owner of any
property, real or personal, which is now or hereafter security for this Note.
Any transferees of, or endorser, guarantor or surety paying this Note in full
shall succeed to all rights of Bank, and Bank shall be under no further
responsibility for the exercise thereof or the loan evidenced hereby.
Nothing herein shall limit any right granted Bank by any other
instrument or by law.
VELTRI METAL PRODUCTS CO.
By:
----------------------------------------
Its:
----------------------------------------
I-2
<PAGE> 106
TRANSACTIONS
ON
SWING LINE CREDIT NOTE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Amount of Outstanding
Type of Amount of Principal or Principal
Loan Made Loan Made Interest Paid Balance Notation
Date This Date This Date This Date This Date Made By
</TABLE>
I-3
<PAGE> 1
EXHIBIT 10.2
PLEDGE AGREEMENT
The undersigned, Talon Automotive Group, Inc. (called "Debtor" herein ),
in consideration of financial accommodations to be extended or continued to
Borrower pursuant to that certain Credit Agreement of even date herewith by and
between Talon Automotive Group, Inc. and certain other borrowers (collectively,
"Borrower"), Comerica Bank, as Agent ("Agent") and the lenders signatory
thereto ("Credit Agreement") and to secure payment and performance of any and
all indebtedness and liabilities of the Borrower (including Debtor) (and any
successors in interest, including without limit any debtor in possession or
trustee in bankruptcy for or any of them) to the Agent, due or to become due,
whether now existing or later arising, and however evidenced, whether direct or
indirect, absolute or contingent, and whether joint, several or joint and
several, including without limit obligations under the Credit Agreement or any
Note (as defined in the Agreement), and any post bankruptcy petition interest
and attorneys' fees (the "Indebtedness"),hereby assigns, transfers, delivers
and pledges to the Agent the following shares of stock listed on Exhibit A
attached hereto.
Debtor grants the Agent a security interest in all of the above-described
property, and all other property of Debtor coming into Agent's possession in
any manner whatsoever, including, without limitation, all property substituted
therefor or for any part thereof, all records (including computer software)
pertaining thereto and all interest, dividends, increase, profits, new
securities or other increments, distributions or rights of any kind received on
account of this property, products or proceeds thereof (whether cash or
non-cash proceeds) resulting from any sale or exchange or transfer thereof or
arising by virtue of ownership thereof (such as, but not limited to, the rights
to additional or other securities or property upon any corporate
reorganization, merger, consolidation, liquidation or dissolution, offering of
stock rights, stock split or stock or liquidating dividend or the rights to any
goods evidenced by such property or insurance proceeds with respect thereto),
and all subscription, voting and preferential rights (all said property,
products and proceeds herein called the "Collateral"). The creation of a
security interest in proceeds is not to be construed to give Debtor any right
to dispose of the Collateral. Debtor warrants that Debtor has clear title to
the Collateral, free from any liens, claims or encumbrances except the security
interest created by this Pledge Agreement, and has full power and authority to
execute and perform this Pledge Agreement.
Except as otherwise provided herein, all other terms used in this Pledge
Agreement shall have the meanings given under Article 9 of the Michigan Uniform
Commercial Code, or in any other article, if not defined in Article 9.
Michigan Uniform Commercial Code shall mean Act 174 of the Michigan Public Acts
of 1962, as amended from time to time.
Debtor agrees to keep the Collateral free at all times from any and all
claims, liens, security interests, and encumbrances other than those in favor
of Agent.
The Agent agrees to use reasonable care in the custody and preservation of
Collateral in its possession but assumes no duty to take steps necessary to
preserve rights against prior parties.
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<PAGE> 2
If any Default (as defined in the Agreement) shall occur, or if Debtor
shall default in performance of any obligation under this Pledge Agreement for
a period of ten days after written notice thereof by Agent to Debtor (any of
the foregoing being an "Event of Default") then the Agent may enforce its
security interest in the Collateral by retaining the Collateral in satisfaction
of the Indebtedness, by public or private sale of all or any part of the
Collateral or by exercising any other remedy provided by law or applicable
agreement. The parties agree that thirty (30) days written notice sent by
ordinary mail to the undersigned at the address designated below shall be
deemed reasonable notice of any disposition of the Collateral, should notice be
required by law.
Notwithstanding anything contained herein to the contrary, so long as no
Event of Default shall have occurred and be continuing:
a. Debtor shall be entitled to exercise any and all
voting and/or consensual rights and powers relating or
pertaining to the Collateral or any part thereof; provided,
however, upon the occurrence and during the continuance of an
Event of Default, all rights of Debtor to exercise such voting
and/or consensual rights and powers shall cease, and all such
rights shall thereupon become vested in the Agent which shall
then have the sole and exclusive right and authority to
exercise such voting and/or consensual rights;
b. The Debtor shall be entitled to receive and
retain cash dividends payable on the Collateral, but any and
all other dividends, cash or stock liquidating dividends,
distributions in property, returns of capital, rights of any
kind received on account of the Collateral or other
distributions made on or in respect of the Collateral, whether
resulting from a subdivision, combination or reclassification
of the outstanding capital stock of the issuing corporation,
or received in exchange for the Collateral or any part thereof
or as a result of any merger, consolidation, acquisition or
other exchange of assets to which the corporation issuing such
Collateral may be a party or otherwise, and any and all cash
and other property received in exchange for or redemption of
any of the Collateral, shall be and become part of the
Collateral and, if received by Debtor, shall be held in trust
for the benefit of the Agent and shall forthwith be delivered
to the Agent to be held subject to the terms of this Security
Agreement; provided, however, upon the occurrence and during
the continuance of an Event of Default, all rights of Debtor
to receive and retain such cash dividends shall cease, and all
such rights shall thereupon become vested in the Agent which
shall then have the sole and exclusive right and authority to
receive or collect by legal proceedings or otherwise and
retain such dividends and hold the same as Collateral, or
apply the same to the Indebtedness, the manner and
distribution of the application to be in the sole discretion
of the Agent;
c. The Agent shall execute and deliver (or cause to
be executed and delivered) to the Debtor all such proxies,
powers of attorney, dividend
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<PAGE> 3
orders, and other instruments as Debtor may request for
the purpose of enabling Debtor to exercise the voting and/or
consensual rights and powers which Debtor is entitled to
exercise pursuant to paragraph (i) above and/or to receive the
dividends which Debtor is authorized to
receive and retain pursuant to paragraph (ii) above.
The Agent may cause the Collateral or any portion of it to be transferred
to its name or to the name of its nominee or nominees; provided, however, that
the Agent will not cause any such transfer until the earlier of (i) an Event of
Default, or (ii) the Collateral is no longer represented by an instrument which
is in Agent's possession and by which Agent's interest therein is perfected by
such possession.
The Agent may assign any of the Indebtedness and deliver all or any part
of the Collateral to its assignee, who then shall have with respect to the
Collateral so delivered all the rights and powers of the Agent under this
Pledge Agreement and after that the Agent shall be fully discharged from all
liability and responsibility with respect to the Collateral so delivered.
If Agent, acting in its sole discretion, redelivers Collateral to Debtor
or Debtor's designee for the purpose of
(a) the ultimate sale or exchange thereof, or
(b) presentation, collection, renewal, or
registration of transfer thereof, or
(c) loading, unloading, storing, shipping,
transshipping, manufacturing, processing or otherwise dealing
therewith preliminary to sale or exchange,
such redelivery shall be in trust for the benefit of Agent and shall not
constitute a release of Agent's security interest therein or in the proceeds or
products thereof unless Agent specifically so agrees in writing. If Debtor
requests any such redelivery, Debtor will deliver with such request a duly
executed financing statement in form and substance satisfactory to Agent. Any
proceeds of Collateral coming into Debtor's possession as a result of any such
redelivery shall be held in trust for Agent and forthwith delivered to Agent
for application on the Indebtedness. Agent may (if, in its sole discretion, it
elects to do so) deliver the Collateral or any part of the Collateral to
Debtor, and such delivery by Agent shall discharge Agent from any and all
liability or responsibility for such Collateral.
Debtor waives notice of acceptance of this Pledge Agreement and
presentment, demand, protest, notice of protest, dishonor, notice of dishonor,
notice of demand, notice of intent to demand, notice of acceleration, notice of
intent to accelerate, notice of default and diligence in collecting any
Indebtedness, and agrees that the Agent may modify the terms of borrowing,
compromise, extend, increase, accelerate, renew or forbear to enforce payment
of any part or all of any Indebtedness, or permit any Borrower to incur
additional Indebtedness, all without notice to Debtor (except such notice as is
specifically required under the Agreement, if any) and without affecting in any
manner the Agent's rights under this Pledge Agreement. Debtor further waives
any and all other notices to which Debtor might otherwise be entitled. Debtor
acknowledges and
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<PAGE> 4
agrees that the Agent's rights under this Pledge Agreement are not
conditioned upon pursuit by the Agent of any remedy the Agent may have against
any Borrower (including Debtor) or any other person or any other security. No
invalidity, irregularity or unenforceability of any part or all of the
Indebtedness or any documents evidencing the same, by reason of any bankruptcy,
insolvency or other law or order of any kind or for any other reasons, and no
defense or setoff available at any time to the Debtor, shall impair, affect or
be a defense or setoff to the Agent's rights under this Pledge Agreement.
Debtor delivers this Pledge Agreement based solely on the Debtor's
independent investigation of (or decision not to investigate) the financial
condition of the Borrower and is not relying on any information furnished by
the Agent. Debtor assumes full responsibility for obtaining any further
information concerning the financial condition of the Borrower, the status of
the Indebtedness or any other matter which Debtor may deem necessary or
appropriate now or later. Debtor waives any duty on the part of the Agent, and
agrees that it is not relying upon nor expecting the Agent to disclose any fact
now or later known by the Agent, whether relating to the operations or
condition of any Borrower, the existence, liabilities or financial condition of
any co-guarantor of the Indebtedness, the occurrence of any Default, or
otherwise, notwithstanding any effect such fact may have upon Debtor's risk
under this Pledge Agreement or rights against any of the Borrower. Debtor
knowingly accepts the full range of risk encompassed in this Pledge Agreement,
which risk includes without limit the possibility that any of the Borrower may
incur Indebtedness to the Agent after the financial condition of the Borrower,
or their respective abilities to pay debts as they mature, has deteriorated.
Debtor represents that: (a) the Agent has made no representation to the
undersigned as to the creditworthiness of the any Borrower; and (b) Debtor has
established adequate means of obtaining from the Borrower on a continuing basis
financial and other information pertaining to their financial conditions.
Debtor agrees to keep adequately informed of any facts, events or circumstances
which might in any way affect the risks of the undersigned under this Pledge
Agreement.
Debtor acknowledges that the effectiveness of this Pledge Agreement is not
conditioned on any or all of the Indebtedness being guaranteed by anyone else.
The Agent, in its sole discretion, without notice to Debtor, may release,
exchange, enforce and otherwise deal with any security now or later held by the
Agent for payment of the Indebtedness without affecting in any manner the
Agent's rights under this Pledge Agreement. Debtor acknowledges and agrees
that the Agent has no obligation to acquire or perfect any lien on or security
interest in any assets, whether realty or personalty, to secure payment of the
Indebtedness, and Debtor is not relying upon assets in which the Agent has or
may have a lien or security interest for payment of the Indebtedness.
Until the Indebtedness is irrevocably paid in full, Debtor waives any and
all rights to be subrogated to the position of the Agent or to have the benefit
of any lien, security interest or other guaranty now or later held by the Agent
for the Indebtedness or to enforce any remedy which the Agent now has or later
may have against any Borrower or any other person. Until the Indebtedness is
irrevocably paid in full, Debtor shall have no right of reimbursement,
indemnity, contribution or other right or recourse to or with respect to any
Borrower or any other person.
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<PAGE> 5
Debtor agrees to indemnify and hold harmless the Agent from and against
any and all claims, actions, damages, costs and expenses, including without
limit reasonable attorneys' fees, incurred by the Agent in connection with
Debtor's exercise of any right of subrogation, contribution, indemnification or
recourse with respect to this Pledge Agreement. The Agent has no duty to
enforce or protect any rights which Debtor may have against any Borrower or any
other person, and Debtor assumes full responsibility for enforcing and
protecting any of these rights.
Debtor may terminate the Agent's rights under this Pledge Agreement as to
future Indebtedness (except as provided below) by (and only by) delivering
written notice to an officer of the Agent and receiving from an officer of the
Agent written acknowledgment of the delivery; provided, the termination shall
not be effective until the opening of business on the forty-fifth (45th) day
following written acknowledgement of delivery. Any termination shall not
affect in any way the Agent's rights under this Pledge Agreement as to any
Indebtedness existing at the effective date of termination of any Indebtedness
created after that pursuant to any commitment or agreement of the Agent or any
Borrower with the Agent existing at the effective date of such termination
(whether later advances or readvances by the Agent are optional or obligatory),
or any modifications, extensions or renewals of any Indebtedness, whether in
whole or in part, and as to all this Indebtedness and modifications, renewals
and extensions of it, this Pledge Agreement shall continue to be effective
until the same shall have been fully paid. Debtor shall indemnify the Agent
against all claims, damages, costs and expenses, including without limit
reasonable attorneys' fees, incurred by the Agent in connection with any suit,
claim or action against the Agent arising out of any modification or
termination of any Borrower's loans or any refusal by the Agent to extend
additional credit in connection with a termination under this Pledge Agreement.
Notwithstanding any prior revocation, termination, surrender, or discharge
of this Pledge Agreement in whole or part, the effectiveness of this Pledge
Agreement shall automatically continue or be reinstated, as the case may be, in
the event that (a) any payment received or credit given by the Agent in respect
of the Indebtedness is returned, disgorged, or rescinded as a preference,
impermissible setoff, fraudulent conveyance, diversion of trust funds, or
otherwise under any applicable state or federal law, including, without
limitation, laws pertaining to bankruptcy or insolvency, in which case this
Pledge Agreement shall be enforceable against Debtor as if the returned,
disgorged, or rescinded payment or credit had not been received or given by the
Agent, and whether or not the Agent relied upon this payment or credit or
changed its position as a consequence of it; or (b) any liability is imposed,
or sought to be imposed, against the Agent relating to the environmental
condition of, or the presence of hazardous or toxic substances on, in or about,
any property given as collateral to the Agent for the Indebtedness, whether
this condition is known or unknown, now exists or subsequently arises
(excluding only conditions which arise after any acquisition by the Agent of
any such property, by foreclosure, in lieu of foreclosure or otherwise, to the
extent due to the wrongful act or omission of the Agent), in which case this
Pledge Agreement shall be enforceable to the extent of all liability, costs and
expenses (including without limit reasonable attorneys' fees) incurred by the
Agent as the direct or indirect result of any environmental condition or
hazardous or toxic substances. For purposes of this Pledge Agreement,
"environmental condition" includes, without limitation, conditions existing
with respect to the surface or ground water, drinking water supply, land
surface or subsurface and the air; and "hazardous or toxic substances" shall
include any and
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<PAGE> 6
all substances now or subsequently determined by any federal, state or local
authority to be hazardous or toxic, or otherwise regulated by any of these
authorities.
Debtor shall take or cause to be taken and execute or cause to be
executed all financing statements, endorsements, assignments and other writings
requested by Agent to establish, maintain, reinstate, and/or continue the
perfected and first priority status of the security interest of Agent in the
Collateral or implement or further effectuate the terms or purpose of this
Pledge Agreement, although the failure of Debtor to do so shall not affect in
any way Agent's perfected and first priority security interest in the
Collateral, and will on demand pay all costs and expenses of filing and
recording, including the costs of any record searches, deemed necessary by
Agent from time to time, to establish or determine the validity and the
priority of Agent's security interest. Debtor further makes, constitutes and
appoints Agent its true and lawful attorney-in-fact with full power of
substitution to take any action in furtherance of this Pledge Agreement,
including, without limitation, the signing of financing statements, endorsing
of instruments, and the execution and delivery of all documents and agreements
necessary to obtain or accomplish any protection for or collection or
disposition of any part of the Collateral. Such appointment shall be deemed
irrevocable and coupled with an interest.
Debtor waives any right to require the Agent to: (a) proceed against any
person, including without limit any Borrower; (b) proceed against or exhaust
any security held from any Borrower or any other person; (c) give notice of the
terms, time and place of any public or private sale of personal property
security held from the Debtor or any other person, or comply with the
provisions of Section 9-504 of the Michigan or other applicable Uniform
Commercial Code; (d) pursue any other remedy in the Agent's power; or (e) make
any presentments or demands for performance, or give any notices of
nonperformance, protests, notices of protest or notices of dishonor in
connection with any obligations or evidences of Indebtedness held by the Agent
as security, in connection with any other obligations or evidences of
Indebtedness which continues in whole or in part of the Indebtedness secured
under this Pledge Agreement, or in connection with the creation of new or
additional Indebtedness.
Debtor waives any defense based upon or arising by reason of (a) any
disability or other defense of the Debtor, any other Borrower, or any other
person; (b) the cessation or limitation from any cause, other than final and
irrevocable payment in full, of the Indebtedness; (c) any lack of authority of
any officer, director, partner, agent or any other person acting or purporting
to act on behalf of the Debtor which is a corporation, partnership or other
type of entity, or any defect in the formation of any Borrower; (d) the
application by any Borrower of the proceeds of any Indebtedness for purposes
other than the purposes represented by such Borrower to the Agent or intended
or understood by the Agent or Debtor; (e) any act or omission by the Agent
which directly or indirectly result in or aids the discharge of the Debtor or
any Indebtedness by operation of law or otherwise; or (f) any modification of
the Indebtedness, in any form, including without modification of the
Indebtedness, in any form, including without limit the renewal, extension,
acceleration or other change in time for payment of the Indebtedness, or other
change in the terms of Indebtedness or any part of it, including without limit
increase or decrease of the rate of interest. Debtor waives any defense Debtor
may have based upon any election of remedies by the Agent which destroys
Debtor's subrogation rights or Debtor's right to proceed against any Borrower
for reimbursement, including without limit any loss of rights Debtor may
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<PAGE> 7
suffer by reason of any rights, powers or remedies of the Debtor in
connection with any anti-deficiency laws or any other laws limiting, qualifying
or discharging the Indebtedness.
Debtor acknowledges that the Agent has the right to sell, assign,
transfer, negotiate or grant participation or any interest in, any or all of
the Indebtedness and any related obligations, including without limit this
Pledge Agreement. In connection with the above, but without limiting its
ability to make other disclosures to the full extent allowable, the Agent may
disclose all documents and information which the Agent now has or later
acquires relating to Debtor, the Indebtedness or this Pledge Agreement, however
obtained.
No waiver, consent, modification, or change of the terms of this Pledge
Agreement shall bind Debtor or the Agent unless in writing and signed by the
waiving party or an authorized officer of the waiving party, and then such
waiver, consent, modification, or change shall be effective only in the
specific instance and for the specific purpose given.
This Pledge Agreement shall inure to the benefit of the Agent and its
successors and assigns. This Pledge Agreement shall be binding on the
undersigned and the undersigned's heirs, legal representatives, successors, and
assigns, including without limit any debtor in possession or trustee in
bankruptcy for any of the undersigned.
Debtor has entered into this Pledge Agreement in good faith for the
purpose of inducing the Agent to extend credit to make other financial
accommodations to the Borrower (including Debtor) and acknowledges that the
terms of this Pledge Agreement are reasonable. If any provision of this Pledge
Agreement is unenforceable in whole or in part for any reason, the remaining
provisions shall continue to be effective.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF MICHIGAN.
Debtor agrees to reimburse the Agent for any and all costs and expenses
(including without limit court costs, legal fees, and reasonable attorney fees
whether inside or outside counsel is used, whether or not suit is instituted
and, if instituted, whether at the trial court level, appellate level, in a
bankruptcy, probate or administrative proceeding or otherwise and audit
expenses) incurred in enforcing any of the duties and obligations of Debtor, or
rights of the Agent, under this Pledge Agreement.
Debtor will give Agent not less than 90 days prior written notice of all
contemplated changes in the location of the Collateral or Debtor's records
concerning same and, prior to making any such changes, file or cause to be
filed all financing statements or amendments necessary or appropriate to
establish and maintain a valid first priority security interest in all the
Collateral for Agent.
Any notice from the Agent to Debtor, if mailed, shall be deemed given when
mailed, postage paid, addressed to Debtor either at the address shown below.
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<PAGE> 8
THE UNDERSIGNED AND THE AGENT ACKNOWLEDGE THAT THE RIGHT TO
TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH
PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL
OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT,
WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE
PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE
INDEBTEDNESS.
Executed for delivery at Detroit, Michigan as of the 28th day of April,
1998.
TALON AUTOMOTIVE GROUP, INC.
By:
------------------------------
Its:
------------------------------
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<PAGE> 9
EXHIBIT "A"
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<PAGE> 1
EXHIBIT 10.3
MORTGAGE
THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND LEASES,
FIXTURE FILING AND FINANCING STATEMENT ("Mortgage") is made and granted this
28th day of April, 1998, by TALON AUTOMOTIVE GROUP, INC., a Michigan
corporation, whose address is 900 Wilshire, Suite 203, Troy, Michigan
48084("Mortgagor"), and COMERICA BANK, a Michigan banking corporation, as Agent
under the Credit Agreement (defined below), whose address is Comerica Tower at
Detroit Center, 500 Woodward Avenue, Detroit, Michigan 48226 ("Mortgagee").
Mortgagor is or may become indebted to Mortgagee in the amount of ONE
HUNDRED MILLION DOLLARS ($100,000,000) pursuant to that certain Credit Agreement
of even date herewith between Mortgagor, certain other Borrowers, Mortgagee and
the Banks from time to time party thereto (the "Credit Agreement") and various
promissory notes and letter of credit agreements executed or to be executed
pursuant to the Credit Agreement the ("Notes"). The principal and interest on
the Notes are payable in accordance with their respective terms.
THIS MORTGAGE SECURES FUTURE ADVANCES AND IS A FUTURE ADVANCE MORTGAGE
UNDER ACT 348 OF THE PUBLIC ACTS OF 1990 (MCLA 565.901 ET SEQ.). THE MAXIMUM
PRINCIPAL AMOUNT EXCLUDING PROTECTIVE ADVANCES, THAT MAY BE SECURED BY THIS
MORTGAGE IS ONE HUNDRED MILLION DOLLARS ($100,000,000).
GRANTING CLAUSE
In order to secure payment of the Indebtedness (hereinafter defined)
and the performance of the covenants, terms and conditions hereof and of any of
the other Loan Documents (hereinafter defined), Mortgagor does MORTGAGE AND
WARRANT to Mortgagee, subject only to the Permitted Encumbrances (hereinafter
defined), real estate owned by Mortgagor situated in the CITY OF ROYAL OAK,
COUNTY OF OAKLAND, STATE OF MICHIGAN described more particularly on Exhibit A
attached hereto.
Together with all buildings and improvements now or hereafter existing
upon the real estate or any part thereof, and all heretofore or hereafter
vacated alleys, streets and sidewalks abutting the real estate and all
easements, licenses, rights-of-way and privileges benefitting the real estate
or in anywise appertaining thereto, if any, and together with all Fixtures
(hereinafter
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<PAGE> 2
defined); and
Together with all of the rents, profits and leases of the Premises
(hereinafter defined) and all of the tenements, hereditaments, and appurtenances
thereto belonging or in anywise appertaining and any and all reversions and
remainders, and all of the estate, right, title, interest, property, claim and
demand whatsoever of Mortgagor in and to the Premises and any part thereof; and
Mortgagor grants to Mortgagee a security interest in all of the
Fixtures, but if the same be deemed to be part of the real estate then Mortgagor
mortgages and warrants such Fixtures to Mortgagee. Mortgagor grants to Mortgagee
a security interest in the Goods, Accounts and General Intangibles (all
hereinafter defined), and all proceeds of the foregoing.
This Mortgage is given to secure an obligation incurred by the
Mortgagor under the Notes, and grants the Mortgagee a first priority on the
Royal Oak, Michigan real property described herein.
DEFINITIONS
FOR THE PURPOSE OF THIS MORTGAGE UNLESS THE CONTEXT SHALL OTHERWISE REQUIRE:
A. "ACCOUNTS" are any right to payment owned by Mortgagor or in which
Mortgagor has an interest arising out of ownership, maintenance or use of the
Premises and include all rents, profits and income of the Premises (to the
extent the same are or may hereafter be subject to the Michigan Uniform
Commercial Code) and all accounts receivable which are any part of or arise from
such rents, profits and income or which otherwise relate in any way to the
Premises.
B. "ASBESTOS" shall have the meanings provided under the Relevant
Environmental Laws, and shall include, but not be limited to, asbestos fibers
and friable asbestos, as such terms are defined under the Relevant Environmental
Laws.
C. "EVENT OF DEFAULT" shall have the meaning set forth in paragraph 11.
D. "FIXTURES" are all goods and equipment which are or may hereafter
become fixtures and are located upon or within the Premises or are now or
hereafter attached to, or installed in, or used in connection with, any of the
Premises or Fixtures, including, but not limited to, any and all partitions,
dynamos, screens, awnings, motors, engines, boilers, furnaces,
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<PAGE> 3
pipes, plumbing, cleaning, call and sprinkler systems, fire extinguishing
apparatus and equipment, water tanks, heating, ventilating, air-conditioning and
air-handling equipment, built-in refrigerated rooms, gas and electric machinery,
elevators and elevator equipment, appurtenances and equipment, whether or not
permanently affixed to the real estate and all replacements thereof and all
proceeds of such Fixtures.
E. "GENERAL INTANGIBLES" are any and all of the right, title and
interest of Mortgagor in and to (i) all insurance policies and the proceeds
thereof or claims paid or to be paid thereunder relating in any manner to the
Premises or to the rents, profits and income thereof, and any return of
premiums, (ii) the rents, profits and income of the Premises to the extent the
same are subject to the Michigan Uniform Commercial Code and are not Accounts,
(iii) any awards or settlements of an eminent domain proceeding involving a
taking of the Premises or any part thereof or any awards or settlements made in
an eminent domain proceeding arising out of any claim of diminution in value of
the Premises, (iv) any damage awards or settlements arising out of or connected
with any lease or the breach of any lease or any damages to the Premises or to
Mortgagor's interest therein, (v) any damages awards or settlements arising out
of any act or omission by any insurance company or agency with respect to the
Premises or any part thereof, (vi) any and all claims, actions or causes of
action relating in any manner to the operation of the Premises, (vii) all
refunds on any ad valorem real property taxes or personal property taxes levied
upon the Premises, and (viii) chooses in action, including, but not limited to,
limited partnership subscription receivables, and Mortgagor's rights to
performance under its contracts for architectural, engineering or construction
services relating to the Project.
F. "GOODS" are all items of personal property of every kind, nature and
description which are not Fixtures, and which are now or hereafter owned by
Mortgagor and are located upon or acquired for use in connection with the
Premises and include, but are not limited to, equipment, uninstalled building
materials, plans and specifications relating to improvements on the Premises,
furniture and furnishings and all household appliances placed upon the Premises
by Mortgagor and all replacements thereof or additions of any of the foregoing
and all proceeds of such Goods. Goods do not include personal property owned by
a tenant of the Premises which may be removed by tenant upon termination of such
tenant's lease.
G. "HAZARDOUS WASTES" shall mean any of the following as defined by the
Relevant Environmental Laws: solid wastes; toxic or hazardous substances,
wastes, or contaminants (including, but not limited to, polychlorinated
biphenyls ("PCB's"), paint containing lead, and urea formaldehyde foam
insulation); and discharges of sewage or effluent.
H. Any reference to "INDEBTEDNESS" means the principal and interest and
all other sums evidenced by the Note and all renewals, extensions and
modifications thereof, and all other amounts at any time due or to become due
under the Loan Documents, and all sums, with interest thereon, advanced to
protect the security of this Mortgage, and all other indebtedness and
liabilities of Mortgagor or any guarantor to Mortgagee, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising and howsoever evidenced.
I. "CREDIT AGREEMENT" is the Credit Agreement executed by Mortgagor and
Mortgagee contemporaneously herewith.
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<PAGE> 4
J. "LOAN DOCUMENTS" are the Notes, this Mortgage, the Credit Agreement
and any other instrument or agreement now or hereafter executed by Mortgagor in
connection with the Indebtedness or as security therefor, and all renewals,
extensions, substitutions, and modifications thereof.
K. "PERMITTED ENCUMBRANCES" are the encumbrances set forth on Exhibit B
attached hereto.
L. Any reference to "PREMISES" shall be deemed to apply without
limitation to all of the above described real estate, and to all buildings and
improvements now or hereafter located thereon, and to all heretofore or
hereafter vacated alleys, streets and sidewalks, easements, licenses,
privileges, right-of-ways, reversions, remainders and all rights, titles,
interests, property, claims and demands of Mortgagor therein and to the rents,
profits, income and leases of the Premises and to the Fixtures and all the Goods
now or hereafter located thereon.
N. "RELEVANT ENVIRONMENTAL LAWS" shall mean all applicable federal,
state and local laws, rules, regulations, orders, judicial determinations, and
decisions or determinations by any judicial, legislative or executive body of
any governmental or quasi-governmental entity, whether in the past, the present
or the future, with respect to: (A) the installation, existence, or removal of,
or exposure to, Asbestos on the Premises; (B) the existence on, discharge from,
or removal from the Premises of Hazardous Wastes; and (C) the effects on the
environment of the Premises or of any activity now, previously, or hereafter
conducted on the Premises. The Relevant Environmental Laws shall include, but
not be limited to, the following: (1) the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Sections 9601 et seq.; the Superfund
Amendments and Reauthorization Act, Public Law 99-499, 100 Stat. 1613; the
Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq.; the
National Environmental Policy Act, 42 U.S.C. Section 4321; the Safe Drinking
Water Act, 42 U.S.C. Sections 300F et seq.; the Toxic Substances Control Act, 15
U.S.C. Section 2601; the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801; the Federal Water Pollution Control Act, 33 U.S.C. Sections 1251
et seq.; the Clean Air Act, 42 U.S.C. Sections 7401 et seq.; and the regulations
promulgated in connection therewith; (2) Environmental Protection Agency
regulations pertaining to Asbestos (including 40 C.F.R. Part 61, Subpart M);
Occupational Safety and Health Administration regulations pertaining to Asbestos
(including 29 C.F.R. Sections 1910.1001 and 1926.58); as each may now or
hereafter be amended; and (3) any state and local laws and regulations
pertaining to Hazardous Wastes and/or Asbestos.
MORTGAGOR DOES HEREBY COVENANT AS FOLLOWS:
1. PAYMENT OF INDEBTEDNESS. Mortgagor shall pay the Indebtedness
according to the terms of the Notes, this Mortgage and the other Loan Documents
and shall perform all the terms, covenants and conditions hereof and of each of
the Loan Documents.
2. TITLE. At the time of the execution and delivery of this Mortgage,
Mortgagor is well and truly seized of the Premises in fee simple, free of all
liens, encumbrances and easements whatsoever, whether prior or subordinate
hereto, except Permitted Encumbrances.
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Mortgagor shall forever warrant and defend the Premises against any and
all claims whatsoever, including all security interests. Except and to the
extent of the Permitted Encumbrances, the lien created hereby is and shall be
kept a first lien upon the Premises and the security interests created hereby
shall be kept as first security interests in and upon the Fixtures, Goods,
Accounts and General Intangibles and every part thereof. Mortgagor shall pay
when due all amounts which might become a lien upon the Premises prior to this
Mortgage. Mortgagor shall not grant or suffer a security interest in any of the
Goods, Fixtures, Accounts or General Intangibles prior to the security interest
granted to Mortgagee. Mortgagor specifically agrees that all after-acquired
Fixtures and Goods shall be owned by Mortgagor free of all liens, encumbrances,
claims of lessors and security interests other than the security interests and
liens created by this Mortgage or the Permitted Encumbrances. Mortgagor, upon
Mortgagee's request, shall execute all other instruments necessary to confirm or
protect the lien of this Mortgage and the security interests granted herein
including, without limitation, security agreements, financing statements and
renewals thereof.
3. TAXES. Except as specifically provided to the contrary in the Credit
Agreement, Mortgagor shall pay forthwith prior to the imposition of any penalty
or interest all taxes and assessments that may be levied upon the Premises and
shall promptly deliver to Mortgagee receipts showing payment thereof. Mortgagor
shall pay when due all taxes and assessments that may be levied upon or on
account of this Mortgage or the Indebtedness secured hereby or upon the interest
or estate in the Premises created or represented by this Mortgage, whether
levied against Mortgagor or otherwise. If at any time internal revenue stamps
are required to be affixed to the Notes or this Mortgage, Mortgagor shall pay
for the same with any interest or penalties imposed in connection therewith. In
the event that payment by Mortgagor, even if voluntarily made, of any tax
referred to in this paragraph would be contrary to public policy or would result
in the payment of interest in excess of the rate permitted by law, then
Mortgagor shall have no obligation to pay the portion of such tax which would
result in the violation of public policy or the payment of such excess interest;
provided, however, in any such event, at any time after the enactment of the law
providing for such tax, Mortgagee, at its election, may declare the entire
principal balance of the Indebtedness secured hereby, together with interest
thereon, to be due and payable immediately.
4. WASTE, ALTERATIONS, COMPLIANCE WITH LAW. Mortgagor shall abstain
from and shall not suffer the commission of waste on the Premises and shall keep
the same in good repair (reasonable wear and tear excepted) and shall make
replacements thereto as and when the same become necessary. Mortgagor shall
promptly notify Mortgagee, in writing, of the occurrence of any material loss or
damage to the Premises. Mortgagor shall not materially alter the Premises,
Fixtures or Goods, or remove the Fixtures or Goods from the Premises, or permit
any tenant or other person to do so, without the prior written consent of
Mortgagee; provided, however, Mortgagor may replace any Fixtures or Goods which
require replacement in the exercise of Mortgagor's business judgment, with
Fixtures and Goods of like or better quality than those replaced. Mortgagor
shall not replace any Fixtures or Goods in which Mortgagee has been granted a
security interest hereby with leased property. Mortgagor shall not permit any
portion of the Premises to be used for any unlawful purpose. Mortgagor shall
comply in all material respects with all laws, ordinances, regulations and
orders of all public authorities having
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jurisdiction thereof and all covenants, conditions and restrictions relating to
the Premises or the use, occupancy and maintenance thereof. Mortgagor shall
permit Mortgagee at any time, and from time to time, to enter the Premises for
the purpose of inspecting the same during normal business hours.
5. HAZARDOUS WASTES.
A. Representations and Warranties. Except as specifically described in
the environmental report previously delivered to Mortgagee, the Mortgagor
represents, warrants and covenants to the Mortgagee as follows:
(i) At all times since the vesting of title to the Premises in
the Mortgagor and (to the best of Mortgagor's knowledge) at all times
prior to the vesting of title to the Premises in the Mortgagor, there
are no and have been no violations of the Relevant Environmental Laws
respecting the Premises and no consent orders have been entered with
respect thereto.
(ii) At all times since the vesting of title to the Premises in
the Mortgagor and (to the best of Mortgagor's knowledge) at all times
prior to the vesting of title to the Premises in the Mortgagor, there
are no and have been no Hazardous Wastes or Asbestos either at, upon,
under or within, or discharged or emitted at or from, the Premises,
including, but not limited to, the air, soil, surface, and ground
water; no Hazardous Wastes or Asbestos have flowed, blown or otherwise
become present at the Premises from neighboring land; and no Hazardous
Wastes or Asbestos have been removed from the Premises other than those
Hazardous Wastes which are necessary and commercially reasonable for
the conduct of the Mortgagor's business operated on the Premises and
which Hazardous Wastes have been, at all times prior to the date
hereof, and at all times hereafter shall be, handled and disposed of in
compliance with all Relevant Environmental Laws and industry standards
and in a commercially reasonable manner by the Mortgagor.
(iii) The Premises will not be used for the purpose of storing
Hazardous Wastes, and no such storage or use will otherwise be allowed
on the Premises which will cause or increase the likelihood of causing
the release of Hazardous Wastes onto the Premises. There are no
underground storage tanks located on the Premises.
(iv) The Mortgagor is not aware of any claims or litigation, and
has not received any communication from any person (including any
governmental authority), concerning the presence or possible presence
of Hazardous Wastes or Asbestos at the Premises or concerning any
violation or alleged violation of the Relevant Environmental Laws
respecting the Premises. The Mortgagor shall promptly notify the
Mortgagee of any such claims and shall furnish Mortgagee with a copy of
any such communications received by Mortgagor.
(v) The Mortgagor shall notify Mortgagee promptly and in
reasonable detail in the event that the Mortgagor becomes aware of or
suspects the presence of Hazardous Wastes (other than those Hazardous
Wastes which are necessary and commercially reasonable for the conduct
of the Mortgagor's business operated on the Premises and which
Hazardous Wastes have been, at all times prior to the date hereof, and
at all times
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hereafter shall be, handled and disposed of in compliance with all
Relevant Environmental Laws and industry standards and in a
commercially reasonable manner by the Mortgagor) or Asbestos or a
violation of the Relevant Environmental Laws at the Premises.
(vi) The Mortgagor shall ensure that the Premises complies and
continues to comply in all respects with the Relevant Environmental
Laws.
(vii) If the Premises are used or maintained so as to subject the
Mortgagor, the Mortgagee or the user of the Premises to a claim of
violation of the Relevant Environmental Laws (unless contested in good
faith by appropriate proceedings), the Mortgagor shall immediately
cease or cause a cessation of such use or operations and shall remedy
and fully cure any conditions arising therefrom, at its own cost and
expense.
B. Mortgagor's Obligations. At its sole cost and expense, the Mortgagor
shall:
(i) Pay when due the cost of compliance with the Relevant
Environmental Laws.
(ii) Keep the Premises free of any lien imposed pursuant to the
Relevant Environmental Laws.
C. Mortgagee's Options. In the event that the Mortgagor fails to comply
with the requirements of this paragraph 5., after notice to the Mortgagor and
the earlier of the expiration of any applicable cure period hereunder, the
expiration of the cure period permitted under the Relevant Environmental Laws,
if any, or such earlier time if Mortgagee determines that life, person or
property is in jeopardy, Mortgagee may, but shall not be obligated to, exercise
its right to do one or more of the following: (i) declare that such failure
constitutes an Event of Default under paragraph 11. herein; and/or (ii) take any
and all actions, at the Mortgagor's expense, that Mortgagee deems necessary or
desirable to cure said failure of compliance.
All costs incurred pursuant to this paragraph 5. shall become
immediately due and payable without notice and with interest thereon at the rate
at which interest accrues in the Notes on amounts after the same become due, and
the amount thereof, including any such interest, shall, if incurred prior to the
foreclosure of this Mortgage or the delivery of a deed in lieu of foreclosure,
be added to the Indebtedness and shall be secured by this Mortgage.
D. Indemnity. Mortgagee shall not be liable for and the Mortgagor shall
immediately pay to Mortgagee when incurred and shall indemnify, defend and hold
Mortgagee harmless from and against, all loss, cost, liability, damage and
expense (including, but not limited to, reasonable attorneys' fees and costs
incurred in the investigation, defense and settlement of claims) that the
Mortgagee may suffer or incur (as holder of this Mortgage, as mortgagee in
possession or as successor in interest to the Mortgagor as owner of the Premises
by virtue of foreclosure or acceptance of a deed in lieu of foreclosure) as a
result of or in connection in any way with any of the Relevant Environmental
Laws (including the assertion that any lien existing pursuant to the Relevant
Environmental Laws takes priority over the lien of this Mortgage), any
environmental assessment or study from time to time undertaken or requested by
the Mortgagor or Mortgagee, or breach of any covenant or undertaking by the
Mortgagor herein; provided, however, the
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Mortgagor shall have no obligation hereunder to the Mortgagee with respect to
indemnified liabilities arising solely from the gross negligence or willful
misconduct of the Mortgagee. Any environmental audit conducted at the
Mortgagee's request shall not be deemed a waiver or relinquishment of the
Mortgagee's right to rely on the covenants, representations, warranties or
agreements made herein and in any other Loan Document, or to receive the
protection and indemnity outlined above. If at any time during the term of the
Loan the Mortgagee reasonably believes that any Relevant Environmental Law has
been or is being violated, the Mortgagee shall have the right to cause an
environmental audit to be conducted at Mortgagor's sole expense or to require
Mortgagor, at Mortgagor's expense, to have an environmental audit done and to
furnish evidence satisfactory to the Mortgagee that no such violation has
occurred.
E. Survival. The provisions of this paragraph 5. shall survive the
foreclosure of this Mortgage, the delivery of a deed in lieu of foreclosure, and
the payment of the Indebtedness.
6. INSURANCE. Mortgagor shall maintain the insurance required under the
Credit Agreement.
7. ESCROWS FOR TAXES AND INSURANCE. At Mortgagee's request upon the
occurrence and during the continuance of an Event of Default, Mortgagor shall
pay to Mortgagee monthly, at the times provided in the Notes for payment of
principal and/or interest, installments for the purpose of paying taxes,
assessments and insurance premiums. The amount of the installments to be paid
may change from year to year as taxes, assessments and insurance premiums
change. To determine the monthly installment, the amount and due date of each
separate tax, assessment and insurance premium are first determined. The amount
of the monthly installment is calculated by dividing each separate tax,
assessment and insurance premium by twelve (12) and adding the resulting
figures. Such computation will provide the total monthly installment. The
installments will be so timed as to assure to Mortgagee that it will have
sufficient funds to pay each respective tax, assessment or insurance premium one
month before the due date. A due date is the first date on which a taxing
authority or applicable law states that the payment is due and not the date
after which a penalty accrues. In an Event of Default, Mortgagor will deposit
with Mortgagee a sufficient sum for each tax, assessment or insurance premium,
computed independently as set forth above, which, when added to the installments
that come due before the next due date for such tax, assessment or premium, will
give Mortgagee sufficient funds to pay the same one month before the due date.
All amounts paid to Mortgagee hereunder will be held by Mortgagee as additional
security for the Indebtedness and may be commingled by Mortgagee with any other
funds. Mortgagor shall not be entitled to receive interest on account of any
sums held hereunder. Nothing contained herein shall in any manner limit the
obligation of Mortgagor to pay taxes and assessments; provided, however, if no
Event of Default has occurred hereunder nor any act occurred which with the
giving of notice or passage of time or both would constitute an Event of Default
hereunder and provided Mortgagor delivers to Mortgagee at least thirty (30) days
before the same become due all invoices, bills and statements respecting the
foregoing items, the payments made under this paragraph shall be applied by
Mortgagee for the purposes for which they are made. In addition to the escrows
for taxes and insurance, Mortgagor shall deposit with Mortgagee, in Mortgagor's
account all security deposits relating to the Premises which shall be returned
as and when tenants are entitled thereto. Upon and during the continuance of an
Event of Default by Mortgagor, Mortgagee may, at its option, but without
obligation on its part so to
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do, apply all amounts held (other than security deposits which shall be held for
the purpose intended) toward the payment of taxes, assessments and insurance
premiums and/or toward the payment of any amounts payable by Mortgagor to
Mortgagee under this Mortgage and/or toward the payment of the Indebtedness or
any portion thereof, whether or not the same is then due and payable.
8. PERFORMANCE BY MORTGAGEE. If an Event of Default shall occur and be
continuing with respect to the obligations of Mortgagor in the payment of any
taxes or assessments or in making repairs or replacements or in procuring and
maintaining insurance and paying the premiums therefor, or in keeping or
performing any other covenant, term or condition hereof, Mortgagee may, at its
option and without any obligation on its part so to do, pay the taxes and
assessments, make such repairs and replacements, effect such insurance, pay the
premiums, and perform any other covenant, term or condition of Mortgagor herein.
All amounts expended by Mortgagee hereunder shall be secured hereby and shall be
due and payable by Mortgagor to Mortgagee forthwith on demand, with interest
thereon at the rate at which interest accrues in the Notes on amounts after the
same become due.
9. STATUTORY WASTE. Nonpayment of any taxes or assessments levied or
assessed upon the Premises, except to the extent being contested by an
appropriate proceedings being diligently pursued by Mortgagor, or nonpayment of
any insurance premium upon any insurance policy relating to the Premises, or any
part thereof, shall constitute waste, and shall entitle Mortgagee to exercise
the remedies afforded by Section 600.2927 of the Michigan Revised Judicature Act
of 1961, as now or hereafter amended, and by any other statute or law now or
hereafter in effect. Mortgagor hereby consents to the appointment of a receiver
should Mortgagee elect such remedy.
10. PAYMENT OF MORTGAGEE COSTS. In the event that Mortgagee is made a
party to any suit or proceedings instituted after the date hereof by reason of
the interest of Mortgagee in the Premises, or if Mortgagee is required to
arbitrate or negotiate any claim asserted against it by reason of its interest
in the Premises, whether or not such claim results in a suit or proceeding,
Mortgagor shall reimburse Mortgagee for all costs and expenses, including
reasonable attorneys' fees. All amounts incurred by Mortgagee hereunder shall be
secured hereby and shall be due and payable by Mortgagor to Mortgagee forthwith
on demand, with interest thereon at the rate at which interest accrues on the
Notes on amounts after the same become due. Wherever in this Mortgage or in any
other Loan Document an obligation is imposed upon Mortgagor to pay the
reasonable attorney's fees of Mortgagee, such fees shall be deemed to include
all reasonable fees incurred, whether such fees are incurred in consulting an
outside or in-house attorney or in a proceeding of any kind and if in a
proceeding, whether at the trial or appellate stages.
11. DEFAULT AND REMEDIES.
A. Any Event of Default as defined in the Credit Agreement, shall
constitute an Event of Default hereunder.
B. Mortgagee may at any time after the occurrence and during the
continuance of any Events of Default (i) without further notice, declare the
Indebtedness, including the then
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applicable prepayment premium, if any, (acceleration being the same as voluntary
prepayment) to be due and payable immediately; (ii) exercise any and all other
rights and remedies provided by this Mortgage or the Notes or by any other
document, instrument or agreement executed in connection herewith, or by law,
including appointment of a receiver to which appointment Mortgagor consents.
Mortgagor acknowledges that the commencement of foreclosure proceedings shall be
deemed acceleration. Mortgagee shall have the right from time to time to sue for
any sums whether interest, damages for failure to pay principal or any
installment thereof, taxes, installments of principal, or any other sums
required to be paid under the terms of this Mortgage, as the same become due,
without regard to whether or not the principal sum secured or any other sums
evidenced by the Notes or secured by this Mortgage shall be due, and without
prejudice to the right of Mortgagee thereafter to bring an action of
foreclosure, or any other action, for a default or defaults by the Mortgagor
existing at the time such earlier action was commenced. Any payment made in
accordance with the terms of this Mortgage by any person at any time liable for
the payment of the whole or any part of the sums now or hereafter secured by
this Mortgage, or by any subsequent owner of the Premises, or by any other
person whose interest in the Premises might be prejudiced in the event of a
failure to make such payment, or by any stockholder, officer or director of a
corporation which at any time may be liable for such payment or may own or have
such an interest in the Premises, shall be deemed, as between the Mortgagee and
all persons who at any time may be liable as aforesaid or may own the Premises,
to have been made on behalf of all such persons.
C. Any failure by the Mortgagee to insist upon the strict performance
by the Mortgagor of any of the terms and provisions hereof shall not be deemed
to be a waiver of any of the terms and provisions hereof, and the Mortgagee,
notwithstanding any such failure, shall have the right thereafter to insist upon
the strict performance by the Mortgagor of any and all of the terms and
provisions of this Mortgage to be performed by the Mortgagor.
D. Neither the Mortgagor nor any other person now or hereafter
obligated for the payment of the whole or any part of the Indebtedness shall be
relieved of such obligation by reason of the failure of the Mortgagee to comply
with any request of the Mortgagor or of any other person so obligated to take
action to foreclose this Mortgage or otherwise enforce any of the provisions of
this Mortgage or of any obligations secured by this Mortgage, or by reason of
the release, regardless of consideration, of the whole or any part of the
security held for the Indebtedness, or by reason of any agreement or stipulation
between any subsequent owner or owners of the Premises and the Mortgagee
extending the time of payment or modifying the terms of the Loan Documents
without first having obtained the consent of the Mortgagor or such other person.
In the latter event, the Mortgagor and all such other persons shall continue to
be liable to make such payments according to the terms of any such agreement of
extension or modification unless expressly released and discharged in writing by
the Mortgagee.
E. Regardless of consideration, and without the necessity for any
notice to or consent by the holder of any subordinate lien on the Premises, the
Mortgagee may release the obligation of anyone at any time liable for any of the
Indebtedness or any part of the security held for the Indebtedness and may
extend the time of payment or otherwise modify the terms of the Loan Documents
without, as to the security or the remainder thereof, in anywise impairing or
affecting the lien of this Mortgage or the priority of such lien, as security
for the payment of the
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Indebtedness as it may be so extended or modified, over any subordinate lien.
Mortgagee may resort for the payment of the Indebtedness to any other security
therefor held by the Mortgagee in such order and manner as the Mortgagee may
elect.
12. POWER OF SALE. Upon and during the continuance of an Event of
Default, power is granted to Mortgagee to sell the Premises or any part thereof
at public auction, and to convey same to the purchaser after notice as required
by the statutes of the State of Michigan for foreclosure of mortgages by
advertisement being Sections 600.3201 et seq., Michigan Compiled Laws, as
amended. Upon and during the continuance of an Event of Default, Mortgagee shall
have the remedies of a secured party under the Michigan Uniform Commercial Code,
including without limitation, the right to notify account debtors and to collect
or compromise or sue for collection of all or any Accounts and General
Intangibles and Goods by any lawful means. For the purpose of taking possession
of the Fixtures and Goods, Mortgagee may enter upon any premises on which the
Fixtures and Goods or any part thereof may be situated and hold the Fixtures and
Goods upon the Premises (without charge to Mortgagee), or dispose of the
Fixtures or Goods on the Premises, or remove the same to such other place or
places as Mortgagee shall determine. Upon demand by Mortgagee, Mortgagor shall
assemble the Fixtures and Goods and make them available to Mortgagee at the
Premises. Any requirement of notice under the Michigan Uniform Commercial Code
shall be met if such notice is mailed to Mortgagor, postage prepaid, at least
ten (10) days before the event with respect to which notice is required.
Mortgagee shall be entitled to recover all expenses incurred by Mortgagee in
retaking, holding, preparing for sale, selling and collecting the Fixtures,
Goods, Accounts and General Intangibles, together with reasonable attorneys'
fees and other expenses incurred by Mortgagee in protecting and enforcing its
rights and remedies with respect to the Indebtedness, the Fixtures, Goods,
Accounts and General Intangibles.
WARNING - THIS PARAGRAPH 12. CONTAINS A WAIVER OF IMPORTANT LEGAL RIGHTS.
This Mortgage contains a power of sale which permits the Mortgagee to
cause the Premises to be sold in the event of a default. The Mortgagee may elect
to cause the Premises to be sold by advertisement rather than pursuant to court
action, and Mortgagor hereby voluntarily and knowingly waives any right
Mortgagor may have by virtue of any applicable constitutional provision or
statute to any notice or court hearing prior to the exercise of the power of
sale, except as may be expressly required by the Michigan statute governing
foreclosures by advertisement. In addition, Mortgagor, to the extent permitted
by law, hereby knowingly and voluntarily waives any right Mortgagor may have to
remain in possession of the Premises or to collect any rents or income therefrom
during the pendency of any foreclosure proceedings and during any applicable
redemption period. Also, paragraph 17. entitles the Mortgagee to require
immediate payment of the balance of the Indebtedness in full if the Premises are
sold or otherwise transferred without the prior written consent of Mortgagee. By
execution of this Mortgage, the Mortgagor represents and acknowledges that the
meaning and consequences of this paragraph have been discussed as fully as
desired by the Mortgagor with the Mortgagor's legal counsel.
13. DISTRIBUTION UPON SALE. Upon a foreclosure sale of the Premises or
any part thereof, the proceeds of such sale shall, subject to applicable law, be
applied in such order as Mortgagee elects:
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(a) To the payment of all costs of the suit or foreclosure,
including reasonable attorneys' fees and the cost of title
searches and abstracts;
(b) To the payment of all other expenses of Mortgagee, including
all monies expended by Mortgagee and all other amounts payable
by Mortgagor to Mortgagee hereunder, with interest thereon;
(c) To the payment of all other Indebtedness including the
interest thereon;
(d) To the payment of the surplus, if any, to Mortgagor or to
whomsoever shall be entitled thereto.
14. SALE IN PARCELS. Upon any foreclosure sale of the Premises, the
same may be sold either as a whole or in parcels, as Mortgagee may elect and, if
in parcels, the same may be divided as Mortgagee may elect and, at the election
of Mortgagee, may be offered first in parcels, in any manner or order as
Mortgagee may elect in its sole discretion, and then as a whole, any law,
statutory or otherwise, to the contrary notwithstanding, and Mortgagor hereby
waives the right to require any such sale to be made in parcels or the right to
select such parcels.
15. EMINENT DOMAIN. In the event there is a proceeding relating to the
Premises or any part thereof under the power of eminent domain, the entire award
rendered in such proceeding or any settlement of such proceeding shall be paid
to Mortgagee to be applied in accordance with the Credit Agreement.
16. ASSIGNMENT OF LEASES AND RENTS. A. As additional security for the
payment of the Indebtedness and the performance of the covenants, terms and
conditions contained herein and in any other Loan Document, Mortgagor does
hereby assign, mortgage and warrant to Mortgagee, all rents, income and profits
of the Premises and all present and future leases pertaining thereto and all
guarantees of the tenant's obligations thereunder, together with the right in
the Mortgagee to enforce the leases, to take possession of the Premises and
every part thereof, and to collect the rents and profits and to apply the same,
as hereinafter provided. Notwithstanding this assignment, until an Event of
Default occurs, Mortgagor shall have the right to collect the rents, profit and
income of the Premises.
B. Mortgagor shall not, without the prior written consent of Mortgagee,
accept any prepaid rent under any lease of the Premises except for the then
current month and security deposits; nor shall Mortgagor enter into any new
lease of the Premises or any part thereof except in accordance with a form of
lease approved in advance by Mortgagee. Mortgagor shall not take or suffer any
actions which would effectuate a merger of a lease with a fee so as to terminate
the lessee's obligations. Any act in violation of this paragraph 16. B. shall be
void and of no effect.
C. Mortgagor shall perform all of the obligations of the lessor under
all leases of the Premises or any part thereof in accordance with the terms and
provisions thereof and shall not suffer or permit any impairment of the security
thereof. Mortgagor shall manage the Premises and every part thereof in
accordance with sound business practices. Mortgagor shall promptly
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take such actions as are reasonable and prudent to enforce the lessee's
obligations under any lease. Mortgagee shall have no obligations, responsibility
or liability of lessor under any lease assigned hereby, and shall have no
obligation to account for any security deposit unless the same has been actually
deposited with Mortgagee.
D. Mortgagor shall deliver to Mortgagee within ten (10) days after
written request from Mortgagee a statement in writing setting forth the names of
the tenants of the Premises, the expiration dates of the leases, and the amounts
of rents and any other sums due thereunder, and together therewith shall furnish
to Mortgagee copies of all such leases. Mortgagor shall, upon written request,
execute and deliver to Mortgagee such other and further documents as may be
reasonably appropriate to confirm the assignment of rents, profits, and leases
made hereby.
E. Upon an Event of Default, Mortgagee may, pursuant to the assignment
herein contained, and in addition to exercising any and all other rights and
remedies provided by this Mortgage or by law, including the appointment of a
receiver (to which appointment Mortgagor consents), or by any other Loan
Document, with or without foreclosure or entry upon the Premises, demand,
collect, sue for, receive, compromise, and compound all rents, income and
arrears of rent as may then or thereafter be due and owing from the tenants,
occupiers, lessees or assignees of any lessees of the Premises and Mortgagor
hereby authorizes and directs the tenants, occupiers, lessees or assignees of
any lessees of the Premises to make payment to Mortgagee of rent and any other
sums then due and to become due under the leases upon receipt of written demand
therefor by Mortgagee, without liability for the determination of Mortgagee's
rights thereto. In such event, Mortgagee shall have the power, either directly
or through a rental agent selected by Mortgagee, to operate, maintain and repair
the Premises, and to amend any lease and to exercise any and all rights of
Mortgagor with respect to any lease; and out of the rents and income thus
received, after the payment of all costs and expenses of Mortgagee, to retain
all sums then or thereafter due hereunder, and also a commission of six percent
(6%) upon all such rents and income thus collected as compensation for its
services in making such collections. The rights and powers of Mortgagee
hereunder shall continue and remain in full force and effect until all amounts
due Mortgagee hereunder, including any deficiency resulting from foreclosure
sale, are paid in full, and shall continue after commencement of foreclosure and
after foreclosure sale and until expiration of any applicable period of
redemption, notwithstanding the sale of the Premises to a purchaser other than
Mortgagee. Mortgagee shall not be liable to Mortgagor or anyone claiming under
or through Mortgagor by reason of anything done or left undone by Mortgagee
hereunder, except for damage resulting from willful misconduct of Mortgagee.
F. Mortgagor covenants, represents and warrants to Mortgagee that
Mortgagor has not executed any prior assignment of the leases of the Premises,
or of the rents, profits and income of the Premises except to Mortgagee and
Mortgagor covenants it will not hereafter execute any such assignment until such
time as all Indebtedness secured hereby is fully paid and satisfied.
G. Mortgagor agrees that no holder of any subordinate lien shall have
any right to terminate any lease of any portion of the Premises whether or not
such lease is subordinate to this Mortgage.
- 13 -
<PAGE> 14
17. TRANSFER OF MORTGAGOR'S INTEREST. Except to the extent provided in
the Credit Agreement, it shall be an Event of Default hereunder if, without
Mortgagee's prior written consent, Mortgagor shall at any time cease to be the
holder of the entire record title to and beneficial interest in the Premises or
any part thereof, whether by sale or any other means whatsoever, or any lien or
encumbrance is placed upon the Premises, even if inferior hereto, or Mortgagor
executes any contract of sale or transfers possession of the Premises or any
part thereof or assigns the right to receive the Rents.
18. SECURITY AGREEMENT/FINANCING STATEMENT. This Mortgage is a
continuing collateral mortgage, security agreement, fixture filing and financing
statement under the Michigan Uniform Commercial Code. This instrument is also to
be indexed in the index of fixture filings and financing statements. This
instrument covers goods which are or are to become fixtures on the Premises. The
names of the debtor and the secured party, the mailing address of the secured
party from which information concerning this security interest may be obtained,
the mailing address of the debtor and a statement indicating the types, or
describing the items, of collateral, are as described herein, in compliance with
the requirements of the Michigan Uniform Commercial Code. The Mortgagor's
taxpayer identification number is 38-3382174. A copy of this Mortgage may be
filed as a financing statement.
19. CUMULATIVE REMEDIES. Each and every one of the rights, remedies and
benefits provided to Mortgagee herein or in any other Loan Document shall be
separate, distinct and cumulative and shall not be exclusive of any other of
said rights, remedies or benefits, or of any other rights, remedies or benefits
allowed by law. Any waiver by Mortgagee of any default shall not constitute a
waiver of any similar or other default. No act of the Mortgagee shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provision.
20. BINDING EFFECT. All of the covenants and conditions hereof shall
run with the land and shall be binding upon the successors and assigns of
Mortgagor, and shall inure to the benefit of the successors and assigns of
Mortgagee. Any reference herein to "Mortgagee" and "Mortgagor" shall include the
successors and assigns of each.
21. SEVERABILITY. The invalidity of any of the covenants, phrases or
clauses in this Mortgage shall not affect the remaining portions hereof, and
this Mortgage shall be construed as if such invalid covenant, phrase or clause
had not been contained herein.
22. JOINT AND SEVERAL LIABILITY. If Mortgagor consists of more than one
party, the term "Mortgagor" shall include all such parties and they shall be
jointly and severally liable under any and all obligations, covenants and
agreements of the Mortgagor contained herein.
23. MORTGAGOR'S CERTIFICATE. Mortgagor, upon Mortgagee's request, shall
certify, by a writing duly acknowledged, to the Mortgagee or to any proposed
assignee of this Mortgage, the amount of the Indebtedness then owing and whether
any offsets, counterclaims or defenses exist against the Indebtedness, within
ten (10) days after the request is made.
24. EFFECT OF HEADINGS. The headings of each paragraph are descriptive
only and have
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<PAGE> 15
no legal effect.
25. COUNTERPARTS. This Mortgage may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which shall
together constitute one and the same instrument.
26. GOVERNING LAW. This Mortgage shall be governed by and construed and
interpreted in accordance with the laws of the State of Michigan.
In the Presence of: TALON AUTOMOTIVE GROUP, INC.
By:
- ------------------------------------ -------------------------------
Its:
- ------------------------------------ ------------------------------
COMERICA BANK, as Agent under the
Credit Agreement
By:
- ------------------------------------ -----------------------------------
Its:
- ------------------------------------ ----------------------------------
- 15 -
<PAGE> 16
STATE OF MICHIGAN )
: ss.
COUNTY OF WAYNE )
The foregoing instrument was acknowledged before me this ____ day of
April, 1998, by ____________________, the _________________________ of Talon
Automotive Group, Inc., a Michigan corporation, on behalf of said entity.
__________________________________________
Notary Public, Wayne County, Michigan
My Commission Expires: ___________________
STATE OF MICHIGAN )
: ss.
COUNTY OF WAYNE )
The foregoing instrument was acknowledged before me this ____ day of
April, 1998, by ____________________, a Vice President of Comerica Bank, as
Agent under the Credit Agreement, on behalf of said entity.
__________________________________________
Notary Public, Wayne County, Michigan
My Commission Expires: ___________________
Drafted by and when recorded return to:
Kristin A. Hermann, Esq.
Miller, Canfield, Paddock and Stone
150 West Jefferson, Suite 2500
Detroit, Michigan 48226
- 16 -
<PAGE> 17
EXHIBIT A
LEGAL DESCRIPTION
PARCEL I:
Part of the Northwest 1/4 of Section 5, Town 1 North, Range 11 East, more
particularly described as, beginning at a point in the East and West 1/4 line of
Section 5, distant North 88 degrees 37 minutes 30 seconds East 180 feet from the
West 1/4 corner of Section 5; thence North 88 degrees 37 minutes 30 seconds East
513.81 feet along the East and West 1/4 line of Section 5; thence North 1 degree
28 minutes 40 seconds West 1346.13 feet; thence South 88 degrees 38 minutes 00
seconds West 520.02 feet to a point which is 180 feet East of the West line of
Section 5; thence South 01 degrees 47 minutes 0 seconds East 1346.27 feet
parallel to and 180 feet East of the West line of Section 5 to the point of
beginning, and except the North 60 feet thereof.
Parcel Identification No. 25-05-153-006
PARCEL II:
Land in the City of Royal Oak, Oakland County, Michigan, described as: Part of
the Northwest 1/4 of Section 5, Town 1 North, Range 11 East, described as:
Beginning on the West line of Section 5, South 1 degree 07 minutes East 703.5
feet from the Northwest corner of the Section; thence North 88 degrees 38
minutes East 120 feet; thence South 1 degree 07 minutes East 620.78 feet; thence
South 88 degrees 38 minutes West 120 feet to the West line of the section;
thence North 1 degree 07 minutes West 620.78 feet to the point of beginning.
Parcel Identification No. 25-05-102-001
PARCEL III:
Part of the Northwest 1/4 of Section 5, beginning on the West line of Section,
South 1 degree 07 minutes East 1384.28 feet from the Northwest corner of
section, thence North 88 degrees 38 minutes, East 120 feet, South 1 degree 07
minutes East, 616 feet, South 88 degrees 38 minutes West 120 feet to West line
of section, North 1 degree 07 minutes West 616 feet to the point of beginning.
Parcel Identification No. 25-05-151-001
- 17 -
<PAGE> 18
EXHIBIT B
PERMITTED ENCUMBRANCES
Those encumbrances listed on Schedule B of Lawyer Title Insurance
Coporation Commitment for Title Insurance No. 018268.
Mortgage dated April 28, 1998, to Michael T.J. Veltri, individually amd
as Trustee for the Michael T.J. Veltri Revocable Living Trust u/a/d December 17,
1996.
- 18 -
<PAGE> 1
EXHIBIT 10.4
SECURITY AGREEMENT
THIS AGREEMENT made as of April 28, 1998, by and between Talon
Automotive Group, Inc. (herein called "Company") and Comerica Bank, a Michigan
banking association, in its capacity as Agent ("Agent") under the Credit
Agreement of even date herewith by and between Talon Automotive Group, Inc. and
certain other borrowers, Agent and the lenders signatory thereto ("Credit
Agreement").
Capitalized terms used herein and not defined to the contrary, have the
meanings given them in the Credit Agreement.
For and in consideration of certain loans and extensions of credit now
or hereafter made pursuant to the terms of the Credit Agreement by Agent, on
behalf of the Banks, to or for the benefit or account of Borrowers, and for
other good and valuable consideration, Company agrees as follows:
1. GRANT OF SECURITY INTEREST
1.1 Company hereby assigns, transfers, mortgages, pledges, delivers,
conveys and grants to Agent, on behalf of Agent and the Banks, a continuing
security interest in the following described property of Company whether it is
now owned or existing or hereafter arising or acquired (all of which is herein
called "Collateral"):
(a) all accounts, accounts receivable, rights under contracts,
chattel paper, tax refunds, general intangibles, instruments,
and all obligations due Company for goods sold or to be sold,
or leased or to be leased, or services rendered or to be
rendered, ("Accounts");
(b) all inventory, whether raw materials, work-in-process,
finished goods, parts or supplies or otherwise; all goods,
merchandise and other property held for sale or lease or to be
furnished under any contract of service; and all documents of
title covering any goods which are or are to become inventory
("Inventory");
(c) all leases and rental agreements for personal property between
Company as lessor (whether by origination or derivation) and
any and all persons or parties as lessee(s), and all rentals,
purchase option amounts, and other sums due thereunder
("Chattel Paper");
(d) all machinery, equipment, furniture, fixtures, tools, motor
vehicles, and all accessories, parts and equipment now or
hereafter affixed thereto or used in connection therewith, and
all other tangible personal property (all of the foregoing
being herein called "Equipment"); and
(e) all cash and non-cash proceeds of any of the foregoing
received upon the sale, exchange, collection or other
disposition of same including without limitation all insurance
payable by reason of loss or damage to any of the foregoing.
<PAGE> 2
2. OBLIGATIONS
2.1 The Collateral shall be security for the following described
obligations of Company and all full or part extensions and renewals thereof (all
of which is herein called "Indebtedness"):
(a) all liabilities and obligations of Company under the Credit
Agreement and all present and future amendments thereto;
(b) the Notes made by Company payable to any of the Banks pursuant
to the Credit Agreement and all present and future amendments
thereto or extensions thereof;
(c) all of the obligations and liabilities of Company under or in
connection with any Letters of Credit now existing or
hereafter arising, executed and delivered by Company to Agent
and/or any of the Banks, and any extensions or renewals
thereof, and any agreements or instruments given in connection
therewith or in substitution therefor and all other
obligations and liabilities of Company to repay Agent and/or
any of the Banks for any and all drafts and/or demands for
payment honored;
(d) any and all other present and future liabilities and
obligations of Company to Agent or any of the Banks, howsoever
evidenced, existing, arising, or acquired, whether direct or
indirect, joint or several, absolute or contingent, due or to
become due, now existing or hereafter arising; including
without limitation all present or future amendments thereto;
(e) any and all of Agent's costs and expenses (including
reasonable attorneys' fees and legal expenses) incurred in the
preparation hereof, the filing or recording of any financing
statement or other document, and all of the costs and expenses
of Agent and any of the Banks (including reasonable attorneys
fees and legal expenses) incurred in the protection or
preservation of the Collateral, the collection and/or
repossession of the Collateral, or the enforcement of its
rights hereunder.
3. REPRESENTATIONS AND WARRANTIES
Company represents and warrants that:
3.1 Except as specifically permitted by the Credit Agreement, Company
owns the Collateral free and clear of all liens, encumbrances and security
interests other than in favor of Bank and no financing statements other than to
Agent, on behalf of the Banks has been given or has been filed with any
recording officer with respect to any of the Collateral.
3.2 The Collateral and all records concerning the Collateral are
located as specified in the Credit Agreement.
- 2 -
<PAGE> 3
3.3 The accounts and accounts receivable included in the Accounts are
genuine and valid obligations due or to become due to Company, and Company
hereby confirms that the value of same is as has been represented to the Agent
and the Banks and that, when taken as a whole, said accounts and accounts
receivable are not subject to offsets or counterclaims materially reducing the
aggregate value thereof.
3.4 The Equipment is and will continue to be used by Company in the
operation of its business and is not held for sale or lease and does not
constitute inventory or fixtures as such terms are defined in the Uniform
Commercial Code as adopted in Michigan.
4. PERFECTION OF SECURITY INTEREST
4.1 Company agrees to furnish such financing statements (and amendments
thereto and continuations thereof) as Agent may at any time request, to cause
same to be filed in all public offices deemed necessary by Agent, to pay all
costs of filing, and to do such other acts and things as Agent may at any time
reasonably request to establish and maintain for Agent on behalf of the Banks
valid, first priority, perfected security interests in the Collateral.
4.2 Company agrees to notify Agent of all changes in Company's name,
legal structure, or chief executive office, or in the location of the Collateral
or Company's records concerning same and to file or cause to be filed all
financing statements or amendments necessary or appropriate to establish and
maintain a valid first priority security interest in all the Collateral for
Agent on behalf of the Banks.
4.3 Company agrees that Agent may change the registration of any
registerable Collateral to any other name or form and hereby authorizes Agent to
endorse sign, date or otherwise complete any of the Collateral or papers in
connection with the transfer thereof in Company's name or otherwise, all as
Agent reasonably deems necessary or appropriate.
5. COVENANTS
Company covenants and agrees that so long as the Agent or the Banks
have any obligation or commitment to lend or extend credit to Company and so
long thereafter as any part of the Indebtedness remains unpaid it will:
5.1 Keep the Collateral and all records concerning the Collateral at
the locations set forth in the Credit Agreement.
5.2 Maintain insurance on the Inventory and the Equipment with an
insurance company satisfactory to Agent and the Banks against such risks and in
such amounts as Agent and the Banks may require (or if they shall make no
specific requirement, against such risks and in such amounts as are customary
and prudent for businesses similar to Company in size and nature) with the loss
payable under any such policy to Company and Agent on behalf of the Banks as
their interests may appear; all said policies or copies thereof, with all
endorsements
- 3 -
<PAGE> 4
thereon, to be deposited with Agent. The proceeds of any such insurance shall be
applied, at the option of Agent, on behalf of the Banks, to replacement of the
Collateral or payment of the Indebtedness, whether or not then due.
5.3 Maintain the Inventory and the Equipment in good condition, subject
to processing and waste and other matters generally affecting Company's type of
inventory, and subject to normal wear, tear and obsolescence and use with
respect to Equipment, pay all taxes and assessments applicable thereto, and not
use them or permit their use for any unlawful purpose.
5.4 Timely perform its obligations and take all other necessary actions
under any and all contracts and agreements which are or will be part of the
Collateral to insure that all persons or parties obligated to Company thereon
may not avail themselves of defense, offsets or counterclaims, and take all
action necessary and appropriate to enforce and collect all obligations due
Company on the Accounts or any other part of the Collateral.
5.5 Not sell, transfer, assign or otherwise dispose of any part of the
Collateral (other than inventory, but in such case only in the ordinary course
of Company's business) or give up possession or control thereof or create or
permit to exist any lien or encumbrance on or security interest in any part
thereof except to Agent on behalf of the Banks and except as permitted or
contemplated by the Credit Agreement.
5.6 Furnish the Agent and/or Banks such information concerning Company
and the Collateral as either of them may at any time reasonably request.
5.7 Permit Agent and/or the Banks, through their respective attorneys,
accountants, and representatives, at all reasonable times and upon reasonable
notice to examine and inspect the Collateral and to inspect, audit and make
copies of and extracts from all records and documents pertaining to the
Collateral.
5.8 Promptly notify Agent and the Banks of any fact or circumstance
materially and adversely affecting the value of the Accounts or Inventory,
except routine market fluctuations, payments of Accounts in the ordinary course
of the Company's business, or sales of Inventory in the ordinary course of the
Company's business.
5.9 Immediately upon Agent's request deliver to Agent, appropriately
endorsed to the order of Agent on behalf of the Banks, any note, trade
acceptance, chattel paper or other instrument or writing for the payment of
money which shall be received by Company arising from any of the Accounts.
5.10 Reimburse Agent and the Banks for all costs and expenses
(including reasonable attorneys' fees and legal expenses) incurred by them in
preserving or protecting the Collateral (including without limitation payment of
taxes, insurance premiums, and costs of maintenance and repairs, provided that
the Company has received notice and a 30 day period to cure such default unless
the Agent, in its sole discretion, must act promptly in order to preserve or
protect the Collateral) or in seeking to collect or enforce any rights under the
Collateral or collecting the
- 4 -
<PAGE> 5
Indebtedness and enforcing its rights hereunder, together with interest thereon
from the date of advance thereof at the highest rate per annum then borne by any
part of the Indebtedness.
6. REMITTANCE BASIS LOANS
6.1 So long as any Event of Default exists, at the sole discretion of
Agent, the Indebtedness may be put on a Remittance Basis, and the following
provisions shall be applicable:
(a) Company will: (i) establish (at its own expense) and maintain
at all times lockbox arrangements; (ii) notify account debtors
to make payments of receivables only to the lockbox accounts
established and maintained pursuant to such arrangements;
(iii) continue to transfer (or cause to be transferred) all
funds deposited into such lockbox accounts directly into the
Company's account or, into accounts designated by the Agent at
such bank but under the sole dominion and control of the
Agent; and (iv) direct each bank (each, a "lockbox bank") that
maintains such lockboxes to transfer to an account designated
by the Agent under the sole dominion and control of the Agent
on a daily basis, all funds deposited from time to time in the
accounts of the Company maintained with the lockbox bank, and
to confirm to the Agent that the Company has no access to the
funds in any such account.
(b) All items or accounts which are delivered to Agent pursuant to
subparagraph (a) above, or any other amount payable with
respect to, any of the Collateral shall, at Agent's option, be
applied to payment of the Indebtedness whether then due or
not, in such order of applications as Agent may determine or,
at Agent's option, shall be deposited to the credit of a
deposit account (herein called the "Assignee Deposit Account")
of Company with Agent, as security for payment of the
Indebtedness. Company shall have no right to withdraw any
funds deposited in the Assignee Deposit Account. Agent may,
from time to time, in its discretion, and shall upon request
of Company made not more than once in any week, apply all or
any of the balance then representing collected funds in the
Assignee Deposit Account, toward payment of the Indebtedness,
whether or not then due, in such order of application as Agent
may determine, and from time to time, in its discretion, may
release all or any of such balance to Company.
(c) Whenever Company obtains possession (by return, repossession
or otherwise) of any goods, the sale or lease of which by
Company shall have given rise to any of the Collateral, it
will (unless Agent otherwise consents in writing) segregate,
label and hold such goods as subject to the security interest
of Agent hereunder, and will, at its own expense, dispose of
such goods in such manner as Agent may from time to time
request. Company will, not later than ten days after obtaining
possession of such goods, pay to Agent, on behalf of the
Banks, in addition to all amounts payable by Company
hereunder, an amount equal to the greater of the unpaid
purchase price or lease rental of such goods or any rebate,
refund or adjustment granted by Company in connection with
obtaining possession of such goods, and if at the time of such
payment no default exists, such goods shall be discharged of
any security interest hereunder.
- 5 -
<PAGE> 6
7. DEFAULTS
7.1 Any Event of Default under the Credit Agreement shall be a default
under this Agreement.
8. REMEDIES
8.1 In the event of a default hereunder and the continuation thereof,
in addition to any rights Agent or the Banks may have under any other agreement
or by law, Agent may, upon the direction of the Banks, take any or all of the
following actions subject to notice and expiration of the applicable cure period
(if any) set forth in the Credit Agreement:
(a) declare all of the Indebtedness immediately due and payable;
(b) require Company to assemble the Collateral or any part thereof
and deliver same to Agent at a place designated by Agent
reasonably convenient to Company;
(c) take possession of the Collateral and any records concerning
same wherever it or they may be found, with or without process
of law, using such force as may be necessary, and at Agent's
option, leave any part of the Collateral on Company's premises
(rendered unusable, if Agent shall so elect, by any reasonable
means which causes no damage to the Collateral) and dispose of
the Collateral from said premises;
(d) sell, transfer and otherwise dispose of the Collateral or any
part thereof in any way permitted or not prohibited by
applicable law;
(e) notify, or require Company, at Company's expense, to notify,
any person or party obligated on any of the Collateral to make
payment to Agent on behalf of the Banks of any amounts due or
to become due thereunder; enforce collection of any of the
Collateral by suit or otherwise; and surrender, release or
exchange all or any part thereof or settle, adjust or
compromise or extend or renew for any period (whether or not
longer than the original period) any claim or indebtedness
thereunder or evidenced thereby; and endorse Company's name on
any commercial paper given in payment, and generally do in
Company's name, place and stead anything which Company could
do itself, all as the Banks, in their sole discretion, shall
deem necessary or appropriate to realize on the Collateral;
(f) complete, in Agent's sole discretion, any work in process
prior to disposition thereof;
(g) make or effect any necessary repairs to or maintenance on any
of the Collateral;
(h) obtain insurance coverage, conforming to the requirements of
this Agreement, on
- 6 -
<PAGE> 7
any of the Collateral;
(i) pay any taxes applicable to any of the Collateral.
8.2 Any disposition by Agent of the Collateral or any part thereof
shall be deemed made with reasonable and sufficient notice thereof, if Agent, at
least seven (7) days prior to the specified date of disposition, shall deposit
in the mail, postage prepaid, addressed to Company's last address known to
Agent, a notice of the time, place and manner of such disposition. Company
agrees that no such notice need be given if Agent in its sole discretion
determines that the Collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a stock or commodity exchange or other
recognized market.
8.3 Any proceeds of any collection or disposition by Agent of any of
the Collateral may be applied by Agent to the reasonable expenses of retaking,
conserving, collecting (by suit or otherwise) or disposing of (by sale or
otherwise) the Collateral, including reasonable attorneys' fees and legal
expenses incurred, and then to the satisfaction of the Indebtedness in such
order of application as the Banks elect. After such application, Agent will
account to Company for any surplus and Company shall remain liable to Agent and
the Banks for any deficiency.
9. MISCELLANEOUS
9.1 Agent and the Banks shall have no duty to protect, preserve or
enforce rights under or to the Collateral or with respect to any goods evidenced
thereby, other than a duty of reasonable customary care of the Collateral in its
possession.
9.2 Company hereby makes, constitutes and appoints Agent its true and
lawful attorney-in-fact with full power of substitution to take any action, in
the event of a default under this Agreement and the continuation thereof, in
furtherance of this Agreement, including, without limitation, the signing of
financing statements, endorsing of instruments, and the execution and delivery
of all documents and agreements necessary to obtain or accomplish any protection
for or collection or disposition of any part of the Collateral. Such appointment
shall be deemed irrevocable and coupled with an interest.
9.3 Any transferee of, or endorser, guarantor or surety or any pledgor
or other party providing security paying the Indebtedness secured hereby may
take over all or any part of the Collateral subject hereto, and shall succeed to
all rights of the Agent and the Banks in respect thereto, and the Agent and the
Banks shall be under no further responsibility therefor, but no party shall
succeed to any of such rights so long as any part of the Indebtedness remains
unpaid.
9.4 Except as provided in the Credit Agreement, Company hereby waives
all defenses otherwise available to parties secondarily or in any other degree
liable or whose property stands as security, including, without being limited
to, presentment, demand, protest and notice of dishonor and nonpayment with
respect to any of the Indebtedness, the enforcement and preservation of any lien
or right of setoff otherwise held by the Agent or either of the Banks, nd the
enforcement and preservation of any of the Indebtedness or of any guaranty or
other
- 7 -
<PAGE> 8
undertaking. Company agrees that the security interests granted hereunder may be
enforced without any other security interest, mortgage, guaranty or other
source of collection whether granted by Company or any other person.
9.5 This Agreement shall not be construed in any way to obligate Agent
or the Banks to take any action with respect to any of Company's obligations or
duties for or under any part of the Collateral, including without limitation all
of Company's obligations under this Agreement or under any contract or agreement
which is a will be or will give rise to any part of the Collateral.
9.6 No delay on the part of Agent or the Banks in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by Agent or the Banks of any right or remedy shall preclude other or
further exercise thereof or the exercise of any other right or remedy.
9.7 This Agreement has been delivered at Detroit, Michigan, and shall
be construed in accordance with the laws of the State of Michigan.
9.8 Whenever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
9.9 The rights granted hereunder are cumulative and in addition to any
other rights which Agent or the Banks may have by other agreement or under
applicable law.
9.10 Any notice to Company, if mailed, shall be deemed to be completed
two (2) Business Days after deposit in the mail, postage prepaid, addressed to
Company at its chief executive office, or the address set forth below, or at any
other address of Company appearing on Agent's records.
9.11 This Agreement shall be binding upon Company and its successors
and assigns and shall inure to the benefit of Agent and the Banks and their
respective successors and assigns.
9.12 This Security Agreement shall be deemed to amend and restate the
Prior Security Agreements, and nothing herein shall impair or otherwise affect
the liens and security interests created thereunder, which liens and security
interests continue in full force and effect.
- 8 -
<PAGE> 9
WITNESS the due execution hereof as of the day and year first above written.
TALON AUTOMOTIVE GROUP, INC.
By:
---------------------------------
Its:
---------------------------------
900 Wilshire Drive, Suite 203
Troy, Michigan 48084
Attn: David Woodward
Telephone No. (248) 362-7600
Facsimile No. (248) 362-7612
COMERICA BANK, as Agent and Bank
By:
---------------------------------
Its:
---------------------------------
500 Woodward Avenue
M.C. 3241
Detroit, MI 48226
Attn: ______________________
Telephone No. (313) 222-0242
Facsimile No. (313) 222-5759
- 9 -
<PAGE> 10
SECURITY AGREEMENT
THIS AGREEMENT made as of April 28, 1998, by and between Veltri
Holdings USA, Inc. (herein called "Company") and Comerica Bank, a Michigan
banking association, in its capacity as Agent ("Agent") under the Credit
Agreement of even date herewith by and between Talon Automotive Group, Inc. and
certain other borrowers, Agent and the lenders signatory thereto ("Credit
Agreement").
Capitalized terms used herein and not defined to the contrary, have the
meanings given them in the Credit Agreement.
For and in consideration of certain loans and extensions of credit now
or hereafter made pursuant to the terms of the Credit Agreement by Agent, on
behalf of the Banks, to or for the benefit or account of Borrowers, and for
other good and valuable consideration, Company agrees as follows:
1. GRANT OF SECURITY INTEREST
1.1 Company hereby assigns, transfers, mortgages, pledges, delivers,
conveys and grants to Agent, on behalf of Agent and the Banks, a continuing
security interest in the following described property of Company whether it is
now owned or existing or hereafter arising or acquired (all of which is herein
called "Collateral"):
(a) all accounts, accounts receivable, rights under contracts,
chattel paper, tax refunds, general intangibles, instruments,
and all obligations due Company for goods sold or to be sold,
or leased or to be leased, or services rendered or to be
rendered, ("Accounts");
(b) all inventory, whether raw materials, work-in-process,
finished goods, parts or supplies or otherwise; all goods,
merchandise and other property held for sale or lease or to be
furnished under any contract of service; and all documents of
title covering any goods which are or are to become inventory
("Inventory");
(c) all leases and rental agreements for personal property between
Company as lessor (whether by origination or derivation) and
any and all persons or parties as lessee(s), and all rentals,
purchase option amounts, and other sums due thereunder
("Chattel Paper");
(d) all machinery, equipment, furniture, fixtures, tools, motor
vehicles, and all accessories, parts and equipment now or
hereafter affixed thereto or used in connection therewith, and
all other tangible personal property (all of the foregoing
being herein called "Equipment"); and
(e) all cash and non-cash proceeds of any of the foregoing
received upon the sale, exchange, collection or other
disposition of same including without limitation all insurance
payable by reason of loss or damage to any of the foregoing.
<PAGE> 11
2. OBLIGATIONS
2.1 The Collateral shall be security for the following described
obligations of Company and all full or part extensions and renewals thereof (all
of which is herein called "Indebtedness"):
(a) all liabilities and obligations of Company under the Credit
Agreement and all present and future amendments thereto;
(b) the Notes made by Company payable to any of the Banks pursuant
to the Credit Agreement and all present and future amendments
thereto or extensions thereof;
(c) all of the obligations and liabilities of Company under or in
connection with any Letters of Credit now existing or
hereafter arising, executed and delivered by Company to Agent
and/or any of the Banks, and any extensions or renewals
thereof, and any agreements or instruments given in connection
therewith or in substitution therefor and all other
obligations and liabilities of Company to repay Agent and/or
any of the Banks for any and all drafts and/or demands for
payment honored;
(d) any and all other present and future liabilities and
obligations of Company to Agent or any of the Banks, howsoever
evidenced, existing, arising, or acquired, whether direct or
indirect, joint or several, absolute or contingent, due or to
become due, now existing or hereafter arising; including
without limitation all present or future amendments thereto;
(e) any and all of Agent's costs and expenses (including
reasonable attorneys' fees and legal expenses) incurred in the
preparation hereof, the filing or recording of any financing
statement or other document, and all of the costs and expenses
of Agent and any of the Banks (including reasonable attorneys
fees and legal expenses) incurred in the protection or
preservation of the Collateral, the collection and/or
repossession of the Collateral, or the enforcement of its
rights hereunder.
3. REPRESENTATIONS AND WARRANTIES
Company represents and warrants that:
3.1 Except as specifically permitted by the Credit Agreement, Company
owns the Collateral free and clear of all liens, encumbrances and security
interests other than in favor of Bank and no financing statements other than to
Agent, on behalf of the Banks has been given or has been filed with any
recording officer with respect to any of the Collateral.
3.2 The Collateral and all records concerning the Collateral are
located as specified in the Credit Agreement.
- 2 -
<PAGE> 12
3.3 The accounts and accounts receivable included in the Accounts are
genuine and valid obligations due or to become due to Company, and Company
hereby confirms that the value of same is as has been represented to the Agent
and the Banks and that, when taken as a whole, said accounts and accounts
receivable are not subject to offsets or counterclaims materially reducing the
aggregate value thereof.
3.4 The Equipment is and will continue to be used by Company in the
operation of its business and is not held for sale or lease and does not
constitute inventory or fixtures as such terms are defined in the Uniform
Commercial Code as adopted in Michigan.
4. PERFECTION OF SECURITY INTEREST
4.1 Company agrees to furnish such financing statements (and amendments
thereto and continuations thereof) as Agent may at any time request, to cause
same to be filed in all public offices deemed necessary by Agent, to pay all
costs of filing, and to do such other acts and things as Agent may at any time
reasonably request to establish and maintain for Agent on behalf of the Banks
valid, first priority, perfected security interests in the Collateral.
4.2 Company agrees to notify Agent of all changes in Company's name,
legal structure, or chief executive office, or in the location of the Collateral
or Company's records concerning same and to file or cause to be filed all
financing statements or amendments necessary or appropriate to establish and
maintain a valid first priority security interest in all the Collateral for
Agent on behalf of the Banks.
4.3 Company agrees that Agent may change the registration of any
registerable Collateral to any other name or form and hereby authorizes Agent to
endorse sign, date or otherwise complete any of the Collateral or papers in
connection with the transfer thereof in Company's name or otherwise, all as
Agent reasonably deems necessary or appropriate.
5. COVENANTS
Company covenants and agrees that so long as the Agent or the Banks
have any obligation or commitment to lend or extend credit to Company and so
long thereafter as any part of the Indebtedness remains unpaid it will:
5.1 Keep the Collateral and all records concerning the Collateral at
the locations set forth in the Credit Agreement.
5.2 Maintain insurance on the Inventory and the Equipment with an
insurance company satisfactory to Agent and the Banks against such risks and in
such amounts as Agent and the Banks may require (or if they shall make no
specific requirement, against such risks and in such amounts as are customary
and prudent for businesses similar to Company in size and nature) with the loss
payable under any such policy to Company and Agent on behalf of the Banks as
their interests may appear; all said policies or copies thereof, with all
endorsements
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<PAGE> 13
thereon, to be deposited with Agent. The proceeds of any such insurance shall be
applied, at the option of Agent, on behalf of the Banks, to replacement of the
Collateral or payment of the Indebtedness, whether or not then due.
5.3 Maintain the Inventory and the Equipment in good condition, subject
to processing and waste and other matters generally affecting Company's type of
inventory, and subject to normal wear, tear and obsolescence and use with
respect to Equipment, pay all taxes and assessments applicable thereto, and not
use them or permit their use for any unlawful purpose.
5.4 Timely perform its obligations and take all other necessary actions
under any and all contracts and agreements which are or will be part of the
Collateral to insure that all persons or parties obligated to Company thereon
may not avail themselves of defense, offsets or counterclaims, and take all
action necessary and appropriate to enforce and collect all obligations due
Company on the Accounts or any other part of the Collateral.
5.5 Not sell, transfer, assign or otherwise dispose of any part of the
Collateral (other than inventory, but in such case only in the ordinary course
of Company's business) or give up possession or control thereof or create or
permit to exist any lien or encumbrance on or security interest in any part
thereof except to Agent on behalf of the Banks and except as permitted or
contemplated by the Credit Agreement.
5.6 Furnish the Agent and/or Banks such information concerning Company
and the Collateral as either of them may at any time reasonably request.
5.7 Permit Agent and/or the Banks, through their respective attorneys,
accountants, and representatives, at all reasonable times and upon reasonable
notice to examine and inspect the Collateral and to inspect, audit and make
copies of and extracts from all records and documents pertaining to the
Collateral.
5.8 Promptly notify Agent and the Banks of any fact or circumstance
materially and adversely affecting the value of the Accounts or Inventory,
except routine market fluctuations, payments of Accounts in the ordinary course
of the Company's business, or sales of Inventory in the ordinary course of the
Company's business.
5.9 Immediately upon Agent's request deliver to Agent, appropriately
endorsed to the order of Agent on behalf of the Banks, any note, trade
acceptance, chattel paper or other instrument or writing for the payment of
money which shall be received by Company arising from any of the Accounts.
5.10 Reimburse Agent and the Banks for all costs and expenses
(including reasonable attorneys' fees and legal expenses) incurred by them in
preserving or protecting the Collateral (including without limitation payment of
taxes, insurance premiums, and costs of maintenance and repairs, provided that
the Company has received notice and a 30 day period to cure such default unless
the Agent, in its sole discretion, must act promptly in order to preserve or
protect the Collateral) or in seeking to collect or enforce any rights under the
Collateral or collecting the
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<PAGE> 14
Indebtedness and enforcing its rights hereunder, together with interest thereon
from the date of advance thereof at the highest rate per annum then borne by any
part of the Indebtedness.
6. REMITTANCE BASIS LOANS
6.1 So long as any Event of Default exists, at the sole discretion of
Agent, the Indebtedness may be put on a Remittance Basis, and the following
provisions shall be applicable:
(a) Company will: (i) establish (at its own expense) and maintain
at all times lockbox arrangements; (ii) notify account debtors
to make payments of receivables only to the lockbox accounts
established and maintained pursuant to such arrangements;
(iii) continue to transfer (or cause to be transferred) all
funds deposited into such lockbox accounts directly into the
Company's account or, into accounts designated by the Agent at
such bank but under the sole dominion and control of the
Agent; and (iv) direct each bank (each, a "lockbox bank") that
maintains such lockboxes to transfer to an account designated
by the Agent under the sole dominion and control of the Agent
on a daily basis, all funds deposited from time to time in the
accounts of the Company maintained with the lockbox bank, and
to confirm to the Agent that the Company has no access to the
funds in any such account.
(b) All items or accounts which are delivered to Agent pursuant to
subparagraph (a) above, or any other amount payable with
respect to, any of the Collateral shall, at Agent's option, be
applied to payment of the Indebtedness whether then due or
not, in such order of applications as Agent may determine or,
at Agent's option, shall be deposited to the credit of a
deposit account (herein called the "Assignee Deposit Account")
of Company with Agent, as security for payment of the
Indebtedness. Company shall have no right to withdraw any
funds deposited in the Assignee Deposit Account. Agent may,
from time to time, in its discretion, and shall upon request
of Company made not more than once in any week, apply all or
any of the balance then representing collected funds in the
Assignee Deposit Account, toward payment of the Indebtedness,
whether or not then due, in such order of application as Agent
may determine, and from time to time, in its discretion, may
release all or any of such balance to Company.
(c) Whenever Company obtains possession (by return, repossession
or otherwise) of any goods, the sale or lease of which by
Company shall have given rise to any of the Collateral, it
will (unless Agent otherwise consents in writing) segregate,
label and hold such goods as subject to the security interest
of Agent hereunder, and will, at its own expense, dispose of
such goods in such manner as Agent may from time to time
request. Company will, not later than ten days after obtaining
possession of such goods, pay to Agent, on behalf of the
Banks, in addition to all amounts payable by Company
hereunder, an amount equal to the greater of the unpaid
purchase price or lease rental of such goods or any rebate,
refund or adjustment granted by Company in connection with
obtaining possession of such goods, and if at the time of such
payment no default exists, such goods shall be discharged of
any security interest hereunder.
- 5 -
<PAGE> 15
7. DEFAULTS
7.1 Any Event of Default under the Credit Agreement shall be a default
under this Agreement.
8. REMEDIES
8.1 In the event of a default hereunder and the continuation thereof,
in addition to any rights Agent or the Banks may have under any other agreement
or by law, Agent may, upon the direction of the Banks, take any or all of the
following actions subject to notice and expiration of the applicable cure period
(if any) set forth in the Credit Agreement:
(a) declare all of the Indebtedness immediately due and payable;
(b) require Company to assemble the Collateral or any part thereof
and deliver same to Agent at a place designated by Agent
reasonably convenient to Company;
(c) take possession of the Collateral and any records concerning
same wherever it or they may be found, with or without process
of law, using such force as may be necessary, and at Agent's
option, leave any part of the Collateral on Company's premises
(rendered unusable, if Agent shall so elect, by any reasonable
means which causes no damage to the Collateral) and dispose of
the Collateral from said premises;
(d) sell, transfer and otherwise dispose of the Collateral or any
part thereof in any way permitted or not prohibited by
applicable law;
(e) notify, or require Company, at Company's expense, to notify,
any person or party obligated on any of the Collateral to make
payment to Agent on behalf of the Banks of any amounts due or
to become due thereunder; enforce collection of any of the
Collateral by suit or otherwise; and surrender, release or
exchange all or any part thereof or settle, adjust or
compromise or extend or renew for any period (whether or not
longer than the original period) any claim or indebtedness
thereunder or evidenced thereby; and endorse Company's name on
any commercial paper given in payment, and generally do in
Company's name, place and stead anything which Company could
do itself, all as the Banks, in their sole discretion, shall
deem necessary or appropriate to realize on the Collateral;
(f) complete, in Agent's sole discretion, any work in process
prior to disposition thereof;
(g) make or effect any necessary repairs to or maintenance on any
of the Collateral;
(h) obtain insurance coverage, conforming to the requirements of
this Agreement,
- 6 -
<PAGE> 16
any of the Collateral;
(i) pay any taxes applicable to any of the Collateral.
8.2 Any disposition by Agent of the Collateral or any part thereof
shall be deemed made with reasonable and sufficient notice thereof, if Agent, at
least seven (7) days prior to the specified date of disposition, shall deposit
in the mail, postage prepaid, addressed to Company's last address known to
Agent, a notice of the time, place and manner of such disposition. Company
agrees that no such notice need be given if Agent in its sole discretion
determines that the Collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a stock or commodity exchange or other
recognized market.
8.3 Any proceeds of any collection or disposition by Agent of any of
the Collateral may be applied by Agent to the reasonable expenses of retaking,
conserving, collecting (by suit or otherwise) or disposing of (by sale or
otherwise) the Collateral, including reasonable attorneys' fees and legal
expenses incurred, and then to the satisfaction of the Indebtedness in such
order of application as the Banks elect. After such application, Agent will
account to Company for any surplus and Company shall remain liable to Agent and
the Banks for any deficiency.
9. MISCELLANEOUS
9.1 Agent and the Banks shall have no duty to protect, preserve or
enforce rights under or to the Collateral or with respect to any goods evidenced
thereby, other than a duty of reasonable customary care of the Collateral in its
possession.
9.2 Company hereby makes, constitutes and appoints Agent its true and
lawful attorney-in-fact with full power of substitution to take any action, in
the event of a default under this Agreement and the continuation thereof, in
furtherance of this Agreement, including, without limitation, the signing of
financing statements, endorsing of instruments, and the execution and delivery
of all documents and agreements necessary to obtain or accomplish any protection
for or collection or disposition of any part of the Collateral. Such appointment
shall be deemed irrevocable and coupled with an interest.
9.3 Any transferee of, or endorser, guarantor or surety or any pledgor
or other party providing security paying the Indebtedness secured hereby may
take over all or any part of the Collateral subject hereto, and shall succeed to
all rights of the Agent and the Banks in respect thereto, and the Agent and the
Banks shall be under no further responsibility therefor, but no party shall
succeed to any of such rights so long as any part of the Indebtedness remains
unpaid.
9.4 Except as provided in the Credit Agreement, Company hereby waives
all defenses otherwise available to parties secondarily or in any other degree
liable or whose property stands as security, including, without being limited
to, presentment, demand, protest and notice of dishonor and nonpayment with
respect to any of the Indebtedness, the enforcement and preservation of any lien
or right of setoff otherwise held by the Agent or either of the Banks,
and the enforcement and preservation of any of the Indebtedness or of any
guaranty or other
- 7 -
<PAGE> 17
undertaking. Company agrees that the security interests granted hereunder may be
enforced without any other security interest, mortgage, guaranty or other source
of collection whether granted by Company or any other person.
9.5 This Agreement shall not be construed in any way to obligate Agent
or the Banks to take any action with respect to any of Company's obligations or
duties for or under any part of the Collateral, including without limitation all
of Company's obligations under this Agreement or under any contract or agreement
which is a will be or will give rise to any part of the Collateral.
9.6 No delay on the part of Agent or the Banks in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by Agent or the Banks of any right or remedy shall preclude other or
further exercise thereof or the exercise of any other right or remedy.
9.7 This Agreement has been delivered at Detroit, Michigan, and shall
be construed in accordance with the laws of the State of Michigan.
9.8 Whenever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
9.9 The rights granted hereunder are cumulative and in addition to any
other rights which Agent or the Banks may have by other agreement or under
applicable law.
9.10 Any notice to Company, if mailed, shall be deemed to be completed
two (2) Business Days after deposit in the mail, postage prepaid, addressed to
Company at its chief executive office, or the address set forth below, or at any
other address of Company appearing on Agent's records.
9.11 This Agreement shall be binding upon Company and its successors
and assigns and shall inure to the benefit of Agent and the Banks and their
respective successors and assigns.
9.12 This Security Agreement shall be deemed to amend and restate the
Prior Security Agreements, and nothing herein shall impair or otherwise affect
the liens and security interests created thereunder, which liens and security
interests continue in full force and effect.
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<PAGE> 18
WITNESS the due execution hereof as of the day and year first above written.
VELTRI HOLDINGS USA, INC.
By:
-----------------------------------
Its:
-----------------------------------
900 Wilshire Drive, Suite 203
Troy, Michigan 48084
Attn: David Woodward
Telephone No. (248) 362-7600
Facsimile No. (248) 362-7612
COMERICA BANK, as Agent and Bank
By:
-----------------------------------
Its:
-----------------------------------
500 Woodward Avenue
M.C. 3241
Detroit, MI 48226
Attn: ______________________
Telephone No. (313) 222-0242
Facsimile No. (313) 222-5759
- 9 -
<PAGE> 19
SECURITY AGREEMENT
THIS AGREEMENT made as of April 28, 1998, by and between VS Holdings,
Inc. (herein called "Company") and Comerica Bank, a Michigan banking
association, in its capacity as Agent ("Agent") under the Credit Agreement of
even date herewith by and between Talon Automotive Group, Inc. and certain other
borrowers, Agent and the lenders signatory thereto ("Credit Agreement").
Capitalized terms used herein and not defined to the contrary, have the
meanings given them in the Credit Agreement.
For and in consideration of certain loans and extensions of credit now
or hereafter made pursuant to the terms of the Credit Agreement by Agent, on
behalf of the Banks, to or for the benefit or account of Borrowers, and for
other good and valuable consideration, Company agrees as follows:
1. GRANT OF SECURITY INTEREST
1.1 Company hereby assigns, transfers, mortgages, pledges, delivers,
conveys and grants to Agent, on behalf of Agent and the Banks, a continuing
security interest in the following described property of Company whether it is
now owned or existing or hereafter arising or acquired (all of which is herein
called "Collateral"):
(a) all accounts, accounts receivable, rights under contracts,
chattel paper, tax refunds, general intangibles, instruments,
and all obligations due Company for goods sold or to be sold,
or leased or to be leased, or services rendered or to be
rendered, ("Accounts");
(b) all inventory, whether raw materials, work-in-process,
finished goods, parts or supplies or otherwise; all goods,
merchandise and other property held for sale or lease or to be
furnished under any contract of service; and all documents of
title covering any goods which are or are to become inventory
("Inventory");
(c) all leases and rental agreements for personal property between
Company as lessor (whether by origination or derivation) and
any and all persons or parties as lessee(s), and all rentals,
purchase option amounts, and other sums due thereunder
("Chattel Paper");
(d) all machinery, equipment, furniture, fixtures, tools, motor
vehicles, and all accessories, parts and equipment now or
hereafter affixed thereto or used in connection therewith, and
all other tangible personal property (all of the foregoing
being herein called "Equipment"); and
(e) all cash and non-cash proceeds of any of the foregoing
received upon the sale, exchange, collection or other
disposition of same including without limitation all insurance
payable by reason of loss or damage to any of the foregoing.
<PAGE> 20
2. OBLIGATIONS
2.1 The Collateral shall be security for the following described
obligations of Company and all full or part extensions and renewals thereof (all
of which is herein called "Indebtedness"):
(a) all liabilities and obligations of Company under the Credit
Agreement and all present and future amendments thereto;
(b) the Notes made by Company payable to any of the Banks pursuant
to the Credit Agreement and all present and future amendments
thereto or extensions thereof;
(c) all of the obligations and liabilities of Company under or in
connection with any Letters of Credit now existing or
hereafter arising, executed and delivered by Company to Agent
and/or any of the Banks, and any extensions or renewals
thereof, and any agreements or instruments given in connection
therewith or in substitution therefor and all other
obligations and liabilities of Company to repay Agent and/or
any of the Banks for any and all drafts and/or demands for
payment honored;
(d) any and all other present and future liabilities and
obligations of Company to Agent or any of the Banks, howsoever
evidenced, existing, arising, or acquired, whether direct or
indirect, joint or several, absolute or contingent, due or to
become due, now existing or hereafter arising; including
without limitation all present or future amendments thereto;
(e) any and all of Agent's costs and expenses (including
reasonable attorneys' fees and legal expenses) incurred in the
preparation hereof, the filing or recording of any financing
statement or other document, and all of the costs and expenses
of Agent and any of the Banks (including reasonable attorneys
fees and legal expenses) incurred in the protection or
preservation of the Collateral, the collection and/or
repossession of the Collateral, or the enforcement of its
rights hereunder.
3. REPRESENTATIONS AND WARRANTIES
Company represents and warrants that:
3.1 Except as specifically permitted by the Credit Agreement, Company
owns the Collateral free and clear of all liens, encumbrances and security
interests other than in favor of Bank and no financing statements other than to
Agent, on behalf of the Banks has been given or has been filed with any
recording officer with respect to any of the Collateral.
3.2 The Collateral and all records concerning the Collateral are
located as specified in the Credit Agreement.
- 2 -
<PAGE> 21
3.3 The accounts and accounts receivable included in the Accounts are
genuine and valid obligations due or to become due to Company, and Company
hereby confirms that the value of same is as has been represented to the Agent
and the Banks and that, when taken as a whole, said accounts and accounts
receivable are not subject to offsets or counterclaims materially reducing the
aggregate value thereof.
3.4 The Equipment is and will continue to be used by Company in the
operation of its business and is not held for sale or lease and does not
constitute inventory or fixtures as such terms are defined in the Uniform
Commercial Code as adopted in Michigan.
4. PERFECTION OF SECURITY INTEREST
4.1 Company agrees to furnish such financing statements (and amendments
thereto and continuations thereof) as Agent may at any time request, to cause
same to be filed in all public offices deemed necessary by Agent, to pay all
costs of filing, and to do such other acts and things as Agent may at any time
reasonably request to establish and maintain for Agent on behalf of the Banks
valid, first priority, perfected security interests in the Collateral.
4.2 Company agrees to notify Agent of all changes in Company's name,
legal structure, or chief executive office, or in the location of the Collateral
or Company's records concerning same and to file or cause to be filed all
financing statements or amendments necessary or appropriate to establish and
maintain a valid first priority security interest in all the Collateral for
Agent on behalf of the Banks.
4.3 Company agrees that Agent may change the registration of any
registerable Collateral to any other name or form and hereby authorizes Agent to
endorse sign, date or otherwise complete any of the Collateral or papers in
connection with the transfer thereof in Company's name or otherwise, all as
Agent reasonably deems necessary or appropriate.
5. COVENANTS
Company covenants and agrees that so long as the Agent or the Banks
have any obligation or commitment to lend or extend credit to Company and so
long thereafter as any part of the Indebtedness remains unpaid it will:
5.1 Keep the Collateral and all records concerning the Collateral at
the locations set forth in the Credit Agreement.
5.2 Maintain insurance on the Inventory and the Equipment with an
insurance company satisfactory to Agent and the Banks against such risks and in
such amounts as Agent and the Banks may require (or if they shall make no
specific requirement, against such risks and in such amounts as are customary
and prudent for businesses similar to Company in size and
nature) with the loss payable under any such policy to Company and Agent on
behalf of the Banks as their interests may appear; all said policies or copies
thereof, with all endorsements
- 3 -
<PAGE> 22
thereon, to be deposited with Agent. The proceeds of any such insurance shall be
applied, at the option of Agent, on behalf of the Banks, to replacement of the
Collateral or payment of the Indebtedness, whether or not then due.
5.3 Maintain the Inventory and the Equipment in good condition, subject
to processing and waste and other matters generally affecting Company's type of
inventory, and subject to normal wear, tear and obsolescence and use with
respect to Equipment, pay all taxes and assessments applicable thereto, and not
use them or permit their use for any unlawful purpose.
5.4 Timely perform its obligations and take all other necessary actions
under any and all contracts and agreements which are or will be part of the
Collateral to insure that all persons or parties obligated to Company thereon
may not avail themselves of defense, offsets or counterclaims, and take all
action necessary and appropriate to enforce and collect all obligations due
Company on the Accounts or any other part of the Collateral.
5.5 Not sell, transfer, assign or otherwise dispose of any part of the
Collateral (other than inventory, but in such case only in the ordinary course
of Company's business) or give up possession or control thereof or create or
permit to exist any lien or encumbrance on or security interest in any part
thereof except to Agent on behalf of the Banks and except as permitted or
contemplated by the Credit Agreement.
5.6 Furnish the Agent and/or Banks such information concerning Company
and the Collateral as either of them may at any time reasonably request.
5.7 Permit Agent and/or the Banks, through their respective attorneys,
accountants, and representatives, at all reasonable times and upon reasonable
notice to examine and inspect the Collateral and to inspect, audit and make
copies of and extracts from all records and documents pertaining to the
Collateral.
5.8 Promptly notify Agent and the Banks of any fact or circumstance
materially and adversely affecting the value of the Accounts or Inventory,
except routine market fluctuations, payments of Accounts in the ordinary course
of the Company's business, or sales of Inventory in the ordinary course of the
Company's business.
5.9 Immediately upon Agent's request deliver to Agent, appropriately
endorsed to the order of Agent on behalf of the Banks, any note, trade
acceptance, chattel paper or other instrument or writing for the payment of
money which shall be received by Company arising from any of the Accounts.
5.10 Reimburse Agent and the Banks for all costs and expenses
(including reasonable attorneys' fees and legal expenses) incurred by them in
preserving or protecting the Collateral (including without limitation payment of
taxes, insurance premiums, and costs of maintenance and repairs, provided that
the Company has received notice and a 30 day period to cure such default unless
the Agent, in its sole discretion, must act promptly in order to preserve or
protect the Collateral) or in seeking to collect or enforce any rights under the
Collateral or collecting the
- 4 -
<PAGE> 23
Indebtedness and enforcing its rights hereunder, together with interest thereon
from the date of advance thereof at the highest rate per annum then borne by any
part of the Indebtedness.
6. REMITTANCE BASIS LOANS
6.1 So long as any Event of Default exists, at the sole discretion of
Agent, the Indebtedness may be put on a Remittance Basis, and the following
provisions shall be applicable:
(a) Company will: (i) establish (at its own expense) and maintain
at all times lockbox arrangements; (ii) notify account debtors
to make payments of receivables only to the lockbox accounts
established and maintained pursuant to such arrangements;
(iii) continue to transfer (or cause to be transferred) all
funds deposited into such lockbox accounts directly into the
Company's account or, into accounts designated by the Agent at
such bank but under the sole dominion and control of the
Agent; and (iv) direct each bank (each, a "lockbox bank") that
maintains such lockboxes to transfer to an account designated
by the Agent under the sole dominion and control of the Agent
on a daily basis, all funds deposited from time to time in the
accounts of the Company maintained with the lockbox bank, and
to confirm to the Agent that the Company has no access to the
funds in any such account.
(b) All items or accounts which are delivered to Agent pursuant to
subparagraph (a) above, or any other amount payable with
respect to, any of the Collateral shall, at Agent's option, be
applied to payment of the Indebtedness whether then due or
not, in such order of applications as Agent may determine or,
at Agent's option, shall be deposited to the credit of a
deposit account (herein called the "Assignee Deposit Account")
of Company with Agent, as security for payment of the
Indebtedness. Company shall have no right to withdraw any
funds deposited in the Assignee Deposit Account. Agent may,
from time to time, in its discretion, and shall upon request
of Company made not more than once in any week, apply all or
any of the balance then representing collected funds in the
Assignee Deposit Account, toward payment of the Indebtedness,
whether or not then due, in such order of application as Agent
may determine, and from time to time, in its discretion, may
release all or any of such balance to Company.
(c) Whenever Company obtains possession (by return, repossession
or otherwise) of any goods, the sale or lease of which by
Company shall have given rise to any of the Collateral, it
will (unless Agent otherwise consents in writing) segregate,
label and hold such goods as subject to the security interest
of Agent hereunder, and will, at its own expense, dispose of
such goods in such manner as Agent may from time to time
request. Company will, not later than ten days after obtaining
possession of such goods, pay to Agent, on behalf of the
Banks, in addition to all amounts payable by Company
hereunder, an amount equal to the greater of the unpaid
purchase price or lease rental of such goods or any rebate,
refund or adjustment granted by Company in connection with
obtaining possession of such goods, and if at the time of such
payment no default exists, such goods shall be discharged of
any security interest hereunder.
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<PAGE> 24
7. DEFAULTS
7.1 Any Event of Default under the Credit Agreement shall be a default
under this Agreement.
8. REMEDIES
8.1 In the event of a default hereunder and the continuation thereof,
in addition to any rights Agent or the Banks may have under any other agreement
or by law, Agent may, upon the direction of the Banks, take any or all of the
following actions subject to notice and expiration of the applicable cure period
(if any) set forth in the Credit Agreement:
(a) declare all of the Indebtedness immediately due and payable;
(b) require Company to assemble the Collateral or any part thereof
and deliver same to Agent at a place designated by Agent
reasonably convenient to Company;
(c) take possession of the Collateral and any records concerning
same wherever it or they may be found, with or without process
of law, using such force as may be necessary, and at Agent's
option, leave any part of the Collateral on Company's premises
(rendered unusable, if Agent shall so elect, by any reasonable
means which causes no damage to the Collateral) and dispose of
the Collateral from said premises;
(d) sell, transfer and otherwise dispose of the Collateral or any
part thereof in any way permitted or not prohibited by
applicable law;
(e) notify, or require Company, at Company's expense, to notify,
any person or party obligated on any of the Collateral to make
payment to Agent on behalf of the Banks of any amounts due or
to become due thereunder; enforce collection of any of the
Collateral by suit or otherwise; and surrender, release or
exchange all or any part thereof or settle, adjust or
compromise or extend or renew for any period (whether or not
longer than the original period) any claim or indebtedness
thereunder or evidenced thereby; and endorse Company's name on
any commercial paper given in payment, and generally do in
Company's name, place and stead anything which Company could
do itself, all as the Banks, in their sole discretion, shall
deem necessary or appropriate to realize on the Collateral;
(f) complete, in Agent's sole discretion, any work in process
prior to disposition thereof;
(g) make or effect any necessary repairs to or maintenance on
any of the Collateral;
(h) obtain insurance coverage, conforming to the requirements of
this Agreement, on
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<PAGE> 25
any of the Collateral;
(i) pay any taxes applicable to any of the Collateral.
8.2 Any disposition by Agent of the Collateral or any part thereof
shall be deemed made with reasonable and sufficient notice thereof, if Agent, at
least seven (7) days prior to the specified date of disposition, shall deposit
in the mail, postage prepaid, addressed to Company's last address known to
Agent, a notice of the time, place and manner of such disposition. Company
agrees that no such notice need be given if Agent in its sole discretion
determines that the Collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a stock or commodity exchange or other
recognized market.
8.3 Any proceeds of any collection or disposition by Agent of any of
the Collateral may be applied by Agent to the reasonable expenses of retaking,
conserving, collecting (by suit or otherwise) or disposing of (by sale or
otherwise) the Collateral, including reasonable attorneys' fees and legal
expenses incurred, and then to the satisfaction of the Indebtedness in such
order of application as the Banks elect. After such application, Agent will
account to Company for any surplus and Company shall remain liable to Agent and
the Banks for any deficiency.
9. MISCELLANEOUS
9.1 Agent and the Banks shall have no duty to protect, preserve or
enforce rights under or to the Collateral or with respect to any goods evidenced
thereby, other than a duty of reasonable customary care of the Collateral in its
possession.
9.2 Company hereby makes, constitutes and appoints Agent its true and
lawful attorney-in-fact with full power of substitution to take any action, in
the event of a default under this Agreement and the continuation thereof, in
furtherance of this Agreement, including, without limitation, the signing of
financing statements, endorsing of instruments, and the execution and delivery
of all documents and agreements necessary to obtain or accomplish any protection
for or collection or disposition of any part of the Collateral. Such appointment
shall be deemed irrevocable and coupled with an interest.
9.3 Any transferee of, or endorser, guarantor or surety or any pledgor
or other party providing security paying the Indebtedness secured hereby may
take over all or any part of the Collateral subject hereto, and shall succeed to
all rights of the Agent and the Banks in respect thereto, and the Agent and the
Banks shall be under no further responsibility therefor, but no party shall
succeed to any of such rights so long as any part of the Indebtedness remains
unpaid.
9.4 Except as provided in the Credit Agreement, Company hereby waives
all defenses otherwise available to parties secondarily or in any other degree
liable or whose property stands as security, including, without being limited
to, presentment, demand, protest and notice of dishonor and nonpayment with
respect to any of the Indebtedness, the enforcement and preservation of any lien
or right of setoff otherwise held by the Agent or either of the Banks, and the
enforcement and preservation of any of the Indebtedness or of any guaranty or
other
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<PAGE> 26
undertaking. Company agrees that the security interests granted hereunder may be
enforced without any other security interest, mortgage, guaranty or other source
of collection whether granted by Company or any other person.
9.5 This Agreement shall not be construed in any way to obligate Agent
or the Banks to take any action with respect to any of Company's obligations or
duties for or under any part of the Collateral, including without limitation all
of Company's obligations under this Agreement or under any contract or agreement
which is a will be or will give rise to any part of the Collateral.
9.6 No delay on the part of Agent or the Banks in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by Agent or the Banks of any right or remedy shall preclude other or
further exercise thereof or the exercise of any other right or remedy.
9.7 This Agreement has been delivered at Detroit, Michigan, and shall
be construed in accordance with the laws of the State of Michigan.
9.8 Whenever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
9.9 The rights granted hereunder are cumulative and in addition to any
other rights which Agent or the Banks may have by other agreement or under
applicable law.
9.10 Any notice to Company, if mailed, shall be deemed to be completed
two (2) Business Days after deposit in the mail, postage prepaid, addressed to
Company at its chief executive office, or the address set forth below, or at any
other address of Company appearing on Agent's records.
9.11 This Agreement shall be binding upon Company and its successors
and assigns and shall inure to the benefit of Agent and the Banks and their
respective successors and assigns.
9.12 This Security Agreement shall be deemed to amend and restate the
Prior Security Agreements, and nothing herein shall impair or otherwise affect
the liens and security interests created thereunder, which liens and security
interests continue in full force and effect.
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<PAGE> 27
WITNESS the due execution hereof as of the day and year first above written.
VS HOLDINGS, INC.
By:
-----------------------------
Its:
-----------------------------
900 Wilshire Drive, Suite 203
Troy, Michigan 48084
Attn: David Woodward
Telephone No. (248) 362-7600
Facsimile No. (248) 362-7612
COMERICA BANK, as Agent and Bank
By:
-----------------------------
Its:
-----------------------------
500 Woodward Avenue
M.C. 3241
Detroit, MI 48226
Attn: ______________________
Telephone No. (313) 222-0242
Facsimile No. (313) 222-5759
- 9 -
<PAGE> 1
EXHIBIT 10.5
GUARANTY
The undersigned, for value received, unconditionally and absolutely
guarantees to Comerica Bank, in its capacity as Agent for the Banks under the
Credit Agreement (defined below) ("Agent"), a Michigan banking corporation of
One Detroit Center, Detroit, Michigan 48226 and to Agent's successors and
assigns, payment when due, whether by stated maturity, demand, acceleration or
otherwise, of all existing and future indebtedness to the Agent of VELTRI METAL
PRODUCTS CO., a Nova Scotia corporation whose address is 900 Wilshire, Suite
203, Troy, Michigan 48084, and also of any successor in interest, including
without limit any debtor-in-possession or trustee in bankruptcy which succeeds
to the interests of this party or person (jointly and severally the "Borrower")
incurred or evidenced by or under that certain Credit Agreement of even date
herewith between Borrower, certain other borrowers, Agent, and any of the Banks
from time to time party thereto ("Credit Agreement") and/or under any
agreements, notes, mortgages, assignments or instruments provided to Agent in
connection with the Credit Agreement, including Hedging Agreements (as defined
in the Credit Agreement), and: (a) any and all of the above-described
Indebtedness for which Borrower would otherwise be liable to Agent were it not
for the invalidity, irregularity or unenforceability of them by reason of any
bankruptcy, insolvency or other law or order of any kind, or for any other
reason, including without limit liability for interest and attorney fees on, or
in connection with, any of the Indebtedness from and after the filing by or
against Borrower of a bankruptcy petition; (b) any and all amendments,
modifications, renewals and/or extensions of any of the above, including without
limit amendments, modifications, renewals and/or extensions which are evidenced
by new or additional instruments, documents or agreements; and (c) all interest
on such principal amounts and costs of collecting Indebtedness, including
without limit reasonable attorney fees. (the "Indebtedness").
The undersigned waives notice of acceptance of this Guaranty and
presentment, demand, protest, notice of protest, dishonor, notice of dishonor,
notice of default, notice of intent to accelerate or demand payment of any
Indebtedness, and diligence in collecting any Indebtedness, and agrees that
Agent may modify the terms of any Indebtedness, compromise, extend, increase,
accelerate, renew or forbear to enforce payment of any or all Indebtedness, or
permit Borrower to incur additional Indebtedness, all without notice to the
undersigned and without affecting in any manner the unconditional obligation of
the undersigned under this Guaranty. The undersigned further waives any and all
other notices to which the undersigned might otherwise be entitled. The
undersigned acknowledges and agrees that the liabilities created by this
Guaranty are direct and are not conditioned upon pursuit by Agent of any remedy
Agent may have against Borrower or any other person or any security. No
invalidity, irregularity or unenforceability of any part or all of the
Indebtedness or any documents evidencing the same, by reason of any bankruptcy,
insolvency or other law or order of any kind or for any other reason, and no
defense or setoff available at any time to Borrower, shall impair, affect or be
a defense or setoff to the obligations of the undersigned under this Guaranty.
The undersigned delivers this Guaranty based solely on the
undersigneds' independent investigation of the financial condition of Borrower
and are not relying on any information furnished by Agent. The undersigned
assumes full responsibility for obtaining any further
- 1 -
<PAGE> 2
information concerning Borrower's financial condition, the status of the
Indebtedness or any other matter which the undersigned may deem necessary or
appropriate from time to time. The undersigned waives any duty on the part of
Agent, and agrees that it is not relying upon nor expecting Agent to disclose to
the undersigned any fact now or later known by Agent, whether relating to the
operations or condition of Borrower, the existence, liabilities or financial
condition of any co-guarantor of the Indebtedness, the occurrence of any default
with respect to the Indebtedness, or otherwise, notwithstanding any effect these
facts may have upon the undersigneds' risks under this Guaranty or the
undersigneds' rights against Borrower. The undersigned knowingly accepts the
full range of risk encompassed in this Guaranty, which risk includes without
limit the possibility that Borrower may incur Indebtedness to Agent after the
financial condition of Borrower, or its ability to pay its debts as they mature,
has deteriorated.
The undersigned represents and warrants that: (a) Agent has made no
representation to the undersigned as to the creditworthiness of Borrower; and
(b) the undersigned has established adequate means of obtaining from the
Borrower on a continuing basis financial and other information pertaining to
Borrower's financial condition. The undersigned agrees to keep adequately
informed of any facts, events or circumstances which might in any way affect the
risks of the undersigned under this Guaranty.
The undersigned grants to Agent a security interest in and the right of
setoff as to any and all property of the undersigned now or later in the
possession of Agent. The undersigned subordinates any claim of any nature that
the undersigned now or later has against the Borrower to and in favor of all
Indebtedness and agrees not to accept payment or satisfaction of any claim that
the undersigned now or later may have against Borrower without the prior written
consent of Agent in the event and so long as any default exists with respect to
Indebtedness. Upon an event of default with respect to the Indebtedness, and the
giving of any required notice and expiration of any applicable cure period,
should any payment, distribution, security, or proceeds, be received by the
undersigned upon or with respect to any claim that the undersigned now or may
later have against Borrower, the undersigned shall immediately deliver the same
to the Agent in the form received (except for endorsement or assignment by the
undersigned where required by the Agent) for application on the Indebtedness,
whether matured or unmatured, and until delivered the same shall be held in
trust by the undersigned as the property of the Agent. The undersigned further
assigns to the Agent as collateral for the obligations of the undersigned under
this Guaranty all claims of any nature that the undersigned now or later have
against the Borrower with full right on the part of the Agent, in its own name
or in the name of the undersigned, upon an event of default with respect to the
Indebtedness, and the giving of any required notice and expiration of any
applicable cure period, to collect and enforce these claims.
The undersigned agrees that no security now or later held by Agent for
payment of any Indebtedness, whether from Borrower, any guarantor, or otherwise,
and whether in the nature of a security interest, pledge, lien, assignment,
setoff, suretyship, guaranty, indemnity, insurance or otherwise, shall affect in
any manner the unconditional obligation of the undersigned under this Guaranty,
and Agent, in its sole discretion, without notice to the undersigned, may
release, exchange, enforce and otherwise deal with any security without
affecting in any manner the unconditional obligation of the undersigned under
this Guaranty. The undersigned acknowledges and agrees that Agent has no
obligation to acquire or perfect any lien on or security interest in
- 2 -
<PAGE> 3
any assets, whether realty or personalty, to secure payment of the Indebtedness,
and the undersigned is not relying upon any assets in which Agent has or may
have a lien or security interest for payment of the Indebtedness.
The undersigned acknowledges that the effectiveness of this Guaranty is
not conditioned on any or all of the Indebtedness being guaranteed by anyone
else.
Until the Indebtedness is irrevocably paid in full, the undersigned
waives any and all rights to be subrogated to the position of the Agent or to
have the benefit of any lien, security interest or other guaranty now or later
held by the Agent for the Indebtedness or to enforce any remedy which the Agent
now or later has against the Borrower or any other person. Until the
Indebtedness is irrevocably paid in full, the undersigned shall have no right of
reimbursement, indemnity, contribution or other right of recourse to or with
respect to the Borrower or any other person. The undersigned agrees to indemnify
and hold Agent harmless from and against any and all claims, actions, damages,
costs and expenses, including without limit reasonable attorneys' fees, incurred
by Agent in connection with the exercise of any right of subrogation,
contribution, indemnification or recourse with respect to this Guaranty by any
of the undersigned. The Agent has no duty to enforce or protect any rights which
the undersigned may have against the Borrower or any other person and the
undersigned assumes full responsibility for enforcing and protecting these
rights.
The Agent, in its sole discretion, may release any guarantor of
Indebtedness for any consideration which it deems adequate, and may fail or
elect not to prove a claim against the estate of any bankrupt, insolvency,
incompetent or deceased guarantor; and after that, without notice to any other
of the undersigned, the Agent may extend or renew any or all Indebtedness and
may permit the Borrower to incur additional Indebtedness, without affecting in
any manner the unconditional obligation of the undersigned. This action by the
Agent shall not, however, be deemed to affect any right to contribution which
may exist among the guarantors.
The undersigned may terminate its obligation under this Guaranty as to
future Indebtedness (except as provided below) by (and only by) delivering
written notice of termination to an officer of the Agent and receiving from an
officer of the Agent written acknowledgement of delivery; provided, the
termination shall not be effective until the opening of business on the
forty-fifth (45th) day following written acknowledgement of delivery. Any
termination shall not affect in any way the unconditional obligations of the
remaining guarantors, whether or not the determination is known to the remaining
guarantors. Any termination shall not affect in any way the unconditional
obligations of the terminating guarantors as to any Indebtedness existing at the
effective date of termination or any Indebtedness created after that pursuant to
any commitment or agreement of the Agent or any Borrower loan with the Agent
existing at the effective date of termination (whether advances or readvances by
the Agent are optional or obligatory), or any modifications, extensions or
renewals of any of this Indebtedness, whether in whole or in part, and as to all
of this Indebtedness and modifications, extensions or renewals of it, this
Guaranty shall continue effective until the same shall have been fully paid. The
Agent has no duty to give notice of termination by any guarantor to any
remaining guarantor. The undersigned shall indemnify the Agent against all
claims, damages, costs and expenses, including without limit reasonable attorney
fees, incurred by the Agent in connection with any suit, claim or action
- 3 -
<PAGE> 4
against the Agent arising out of any modification or termination of a Borrower
loan or any refusal by the Agent to extend additional credit arising, in either
event, in connection with the termination of this Guaranty.
Notwithstanding any prior revocation, termination, surrender or
discharge of this Guaranty (or of any lien, pledge or security interest securing
this Guaranty) in whole or in part, the effectiveness of this Guaranty, and of
all liens, pledges and security interests securing this Guaranty, shall
automatically continue or be reinstated, as the case may be, in the event that
any payment received or credit given by the Agent in respect of the Indebtedness
is returned, disgorged or rescinded as a preference, impermissible setoff,
fraudulent conveyance, diversion of trust funds, or otherwise under any
applicable state or federal law, including, without limitation, laws pertaining
to bankruptcy or insolvency, in which case this Guaranty, and all liens, pledges
and security interests securing this Guaranty, shall be enforceable against the
undersigned as if the returned, disgorged or rescinded payment or credit had not
been received or given by the Agent, and whether or not the Agent relied upon
this payment or credit or changed its position as a consequence of it. In the
event of continuation or reinstatement of this Guaranty and the liens, pledges
and security interests securing it, the undersigned agrees upon demand by the
Agent to execute and deliver to the Agent those documents which the Agent
determines are appropriate to further evidence (in the public records or
otherwise) this continuation or reinstatement, although the failure of the
undersigned to do so shall not affect in any way the reinstatement of
continuation. If the undersigned does not execute and deliver to the Agent upon
demand such documents, the Agent and each Agent officer is irrevocably appointed
(which appointment is coupled with an interest) the true and lawful attorney of
the undersigned (with full power of substitution) to execute and deliver such
documents in the name and on behalf of the undersigned.
The undersigned waives any right to require the Agent to: (a) proceed
against any person, including without limit the Borrower; (b) proceed against or
exhaust any security held from the Borrower or any other person; (c) give notice
of the terms, time and place of any public or private sale of personal property
security held from the Borrower or any other person, or otherwise comply with
the provisions of Section 9-504 of the Michigan or other applicable Uniform
Commercial Code; (d) pursue any other remedy in the Agent's power; or (e) make
any presentments or demands for performance, or give any notices of
nonperformance, protests, notices of protest, or notices of dishonor in
connection with any obligations or evidences of Indebtedness held by the Agent
as security, in connection with any other obligations or evidences of
indebtedness which constitute in whole or in part Indebtedness, or in connection
with the creation of new or additional Indebtedness.
The undersigned authorizes Agent, either before or after termination of
this Guaranty, without notice to or demand on the undersigned and without
affecting the undersigneds' liability under this Guaranty, from time to time to:
(a) apply any security and direct the order or manner of sale of it, including
without limit, a nonjudicial sale permitted by the terms of the controlling
security agreement, mortgage or deed of trust, as Agent in its discretion may
determine; (b) release or substitute any one or more of the endorsers or any
other guarantors of the Indebtedness; and (c) apply payments received by the
Agent from the Borrower to any indebtedness of the Borrower to the Agent, in
such order as the Agent shall determine in its sole discretion, whether or not
this indebtedness is covered by this Guaranty, and the undersigned
- 4 -
<PAGE> 5
waives any provision of law regarding application of payments which specifies
otherwise. The Agent may without notice assign this Guaranty in whole or in
part. Upon the Agent's request, the undersigned agrees to provide to the Agent
copies of the undersigned's financial statements.
The undersigned waives any defense based upon or arising by reason of
(a) any disability or other defense of Borrower or any other person; (b) the
cessation or limitation from any cause whatsoever, other than final and
irrevocable payment in full, of the Indebtedness; (c) any lack of authority of
any officer, director, partner, agent or any other person acting or purporting
to act on behalf of Borrower which is a corporation, partnership or other type
of entity, or any defect in the formation of Borrower; (d) the application by
Borrower of the proceeds of any Indebtedness for purposes other than the
purposes represented by Borrower to Agent or intended or understood by Agent or
the undersigned; (e) any act or omission by Agent which directly or indirectly
results in or aids the discharge of Borrower or any Indebtedness by operation of
law or otherwise; or (f) any modification of the Indebtedness, in any form
whatsoever including without limit any modification made after effective
termination, and including without limit the renewal, extension, acceleration or
other change in time for payment of the Indebtedness, or other change in the
terms of any Indebtedness, including without limit increase or decrease of the
interest rate. The undersigned waives any defense they may have based upon any
election of remedies by Agent which destroys the undersigneds' subrogation
rights or undersigneds' right to proceed against Borrower for reimbursement,
including without limit any loss of rights the undersigned may suffer by reason
of any rights, powers or remedies of Borrower in connection with any anti-
deficiency, appraisement or valuation laws or any other laws limiting,
qualifying or discharging any Indebtedness.
The undersigned acknowledges that Agent has the right to sell, assign,
transfer, negotiate, or grant participations in all or any part of the
Indebtedness and any related obligations, including without limit this Guaranty.
In connection with that right, the Agent may disclose any documents and
information which the Agent now or later acquire relating to the undersigned and
this Guaranty, whether furnished by the Borrower, the undersigned or otherwise.
The undersigned further agrees that Agent may disclose these documents and
information to Borrower.
The obligation under this Guaranty shall include any and all interest
on all Indebtedness and any and all costs and expenses of any kind, including
without limit reasonable attorney fees, incurred by Agent at any time for any
reason in enforcing any of the duties and obligations of the undersigned under
this Guaranty or otherwise incurred by Agent in any way connected with this
Guaranty, the Indebtedness or any other guaranty of the Indebtedness (including
without limit reasonable attorney fees and other expenses incurred in any suit
involving the conduct, Borrower or the undersigned). All of these costs and
expenses shall be payable immediately by the undersigned when incurred by Agent,
upon demand, and until paid shall bear interest at the highest per annum rate
applicable to any of the Indebtedness, but not in excess of the maximum rate
permitted by law. Any reference in this Guaranty to attorney fees shall be
deemed a reference to fees, charges, costs and expenses of both inhouse and
outside counsel and paralegals, whether or not a suit or action is instituted,
and to court costs if a suit or action is instituted, and whether attorney fees
or court costs are incurred at the trial court level, on appeal, in a
bankruptcy, administrative or probate proceeding or otherwise.
- 5 -
<PAGE> 6
The undersigned unconditionally and irrevocably waives each and every
defense and setoff of any nature which, under principles of guaranty or
otherwise, would operate to impair or diminish in any way the obligation of the
undersigned under this Guaranty, and acknowledges that each such waiver is by
this reference incorporated into each security agreement, collateral assignment,
pledge and/or other document from the undersigned now or later securing this
Guaranty and/or the Indebtedness, and acknowledges that as of the date of this
Guaranty no such defense or setoff exists. The undersigned acknowledges that the
effectiveness of this Guaranty is subject to no conditions of any kind.
This Guaranty shall remain effective with respect to successive
transactions which shall continue the Indebtedness until this Guaranty is
terminated in the manner and to the extent provided above.
The undersigned warrants and agrees that each of the waivers set forth
above are made with the undersigneds' full knowledge of their significance and
consequences, and that under the circumstances, the waivers are reasonable and
not contrary to public policy or law. If any of these waivers are determined to
be contrary to any applicable law or public policy, these waivers shall be
effective to the fees extent permitted by law.
This Guaranty constitutes the entire agreement of the undersigned and
Agent with respect to the subject matter of this Guaranty. No waiver, consent,
modification or change of the terms of this Guaranty shall bind any of the
undersigned or Agent unless in writing and signed by the waiving party or an
authorized officer of the waiving party, and then this waiver, consent,
modification or change shall be effective only in the specific instance and for
the specific purpose given. This Guaranty shall inure to the benefit of Agent
and its successors and assigns. This Guaranty shall be binding on the
undersigned and the undersigneds' respective heirs, legal representatives,
successors and assigns including, without limit, any debtor in possession or
trustee in bankruptcy for any of the undersigned. The undersigned has knowingly
and voluntarily entered into this Guaranty in good faith for the purpose of
inducing Agent to extend credit or make other financial accommodations to
Borrower, and the undersigned acknowledges that the terms of this Guaranty are
reasonable. If any provision of this Guaranty is unenforceable in whole or in
part for any reason, the remaining provisions shall continue to be effective.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF MICHIGAN.
THE UNDERSIGNED AND AGENT ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY
IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING
(OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE,
KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO
TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS GUARANTY OR THE INDEBTEDNESS.
<PAGE> 7
IN WITNESS WHEREOF, the undersigned has signed this Guaranty on April 28, 1998.
TALON AUTOMOTIVE GROUP, INC.
By:_______________________________
Its:______________________________
- 7 -
<PAGE> 8
GUARANTY
The undersigned, for value received, unconditionally and absolutely
guarantees to Comerica Bank, in its capacity as Agent for the Banks under the
Credit Agreement (defined below) ("Agent"), a Michigan banking corporation of
One Detroit Center, Detroit, Michigan 48226 and to Agent's successors and
assigns, payment when due, whether by stated maturity, demand, acceleration or
otherwise, of all existing and future indebtedness to the Agent of TALON
AUTOMOTIVE GROUP, INC., a Michigan corporation, and VELTRI METAL PRODUCTS CO., a
Nova Scotia corporation, both of whose address is 900 Wilshire, Suite 203, Troy,
Michigan 48084, and also of any successor in interest, including without limit
any debtor-in-possession or trustee in bankruptcy which succeeds to the
interests of this party or person (jointly and severally the "Borrower")
incurred or evidenced by or under that certain Credit Agreement of even date
herewith between Borrower, certain other borrowers, Agent, and any of the Banks
from time to time party thereto ("Credit Agreement") and/or under any
agreements, notes, mortgages, assignments or instruments provided to Agent in
connection with the Credit Agreement, including Hedging Agreements (as defined
in the Credit Agreement), and: (a) any and all of the above-described
Indebtedness for which Borrower would otherwise be liable to Agent were it not
for the invalidity, irregularity or unenforceability of them by reason of any
bankruptcy, insolvency or other law or order of any kind, or for any other
reason, including without limit liability for interest and attorney fees on, or
in connection with, any of the Indebtedness from and after the filing by or
against Borrower of a bankruptcy petition; (b) any and all amendments,
modifications, renewals and/or extensions of any of the above, including without
limit amendments, modifications, renewals and/or extensions which are evidenced
by new or additional instruments, documents or agreements; and (c) all interest
on such principal amounts and costs of collecting Indebtedness, including
without limit reasonable attorney fees. (the "Indebtedness").
The undersigned waives notice of acceptance of this Guaranty and
presentment, demand, protest, notice of protest, dishonor, notice of dishonor,
notice of default, notice of intent to accelerate or demand payment of any
Indebtedness, and diligence in collecting any Indebtedness, and agrees that
Agent may modify the terms of any Indebtedness, compromise, extend, increase,
accelerate, renew or forbear to enforce payment of any or all Indebtedness, or
permit Borrower to incur additional Indebtedness, all without notice to the
undersigned and without affecting in any manner the unconditional obligation of
the undersigned under this Guaranty. The undersigned further waives any and all
other notices to which the undersigned might otherwise be entitled. The
undersigned acknowledges and agrees that the liabilities created by this
Guaranty are direct and are not conditioned upon pursuit by Agent of any remedy
Agent may have against Borrower or any other person or any security. No
invalidity, irregularity or unenforceability of any part or all of the
Indebtedness or any documents evidencing the same, by reason of any bankruptcy,
insolvency or other law or order of any kind or for any other reason, and no
defense or setoff available at any time to Borrower, shall impair, affect or be
a defense or setoff to the obligations of the undersigned under this Guaranty.
The undersigned delivers this Guaranty based solely on the
undersigneds' independent investigation of the financial condition of Borrower
and are not relying on any information
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<PAGE> 9
furnished by Agent. The undersigned assumes full responsibility for obtaining
any further information concerning Borrower's financial condition, the status of
the Indebtedness or any other matter which the undersigned may deem necessary or
appropriate from time to time. The undersigned waives any duty on the part of
Agent, and agrees that it is not relying upon nor expecting Agent to disclose to
the undersigned any fact now or later known by Agent, whether relating to the
operations or condition of Borrower, the existence, liabilities or financial
condition of any co-guarantor of the Indebtedness, the occurrence of any default
with respect to the Indebtedness, or otherwise, notwithstanding any effect these
facts may have upon the undersigneds' risks under this Guaranty or the
undersigneds' rights against Borrower. The undersigned knowingly accepts the
full range of risk encompassed in this Guaranty, which risk includes without
limit the possibility that Borrower may incur Indebtedness to Agent after the
financial condition of Borrower, or its ability to pay its debts as they mature,
has deteriorated.
The undersigned represents and warrants that: (a) Agent has made no
representation to the undersigned as to the creditworthiness of Borrower; and
(b) the undersigned has established adequate means of obtaining from the
Borrower on a continuing basis financial and other information pertaining to
Borrower's financial condition. The undersigned agrees to keep adequately
informed of any facts, events or circumstances which might in any way affect the
risks of the undersigned under this Guaranty.
The undersigned grants to Agent a security interest in and the right of
setoff as to any and all property of the undersigned now or later in the
possession of Agent. The undersigned subordinates any claim of any nature that
the undersigned now or later has against the Borrower to and in favor of all
Indebtedness and agrees not to accept payment or satisfaction of any claim that
the undersigned now or later may have against Borrower without the prior written
consent of Agent in the event and so long as any default exists with respect to
Indebtedness. Upon an event of default with respect to the Indebtedness, and the
giving of any required notice and expiration of any applicable cure period,
should any payment, distribution, security, or proceeds, be received by the
undersigned upon or with respect to any claim that the undersigned now or may
later have against Borrower, the undersigned shall immediately deliver the same
to the Agent in the form received (except for endorsement or assignment by the
undersigned where required by the Agent) for application on the Indebtedness,
whether matured or unmatured, and until delivered the same shall be held in
trust by the undersigned as the property of the Agent. The undersigned further
assigns to the Agent as collateral for the obligations of the undersigned under
this Guaranty all claims of any nature that the undersigned now or later have
against the Borrower with full right on the part of the Agent, in its own name
or in the name of the undersigned, upon an event of default with respect to the
Indebtedness, and the giving of any required notice and expiration of any
applicable cure period, to collect and enforce these claims.
The undersigned agrees that no security now or later held by Agent for
payment of any Indebtedness, whether from Borrower, any guarantor, or otherwise,
and whether in the nature of a security interest, pledge, lien, assignment,
setoff, suretyship, guaranty, indemnity, insurance or otherwise, shall affect in
any manner the unconditional obligation of the undersigned under this Guaranty,
and Agent, in its sole discretion, without notice to the undersigned, may
release, exchange, enforce and otherwise deal with any security without
affecting in any manner the unconditional obligation of the undersigned under
this Guaranty. The undersigned acknowledges
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<PAGE> 10
and agrees that Agent has no obligation to acquire or perfect any lien on or
security interest in any assets, whether realty or personalty, to secure payment
of the Indebtedness, and the undersigned is not relying upon any assets in which
Agent has or may have a lien or security interest for payment of the
Indebtedness.
The undersigned acknowledges that the effectiveness of this Guaranty is
not conditioned on any or all of the Indebtedness being guaranteed by anyone
else.
Until the Indebtedness is irrevocably paid in full, the undersigned
waives any and all rights to be subrogated to the position of the Agent or to
have the benefit of any lien, security interest or other guaranty now or later
held by the Agent for the Indebtedness or to enforce any remedy which the Agent
now or later has against the Borrower or any other person. Until the
Indebtedness is irrevocably paid in full, the undersigned shall have no right of
reimbursement, indemnity, contribution or other right of recourse to or with
respect to the Borrower or any other person. The undersigned agrees to indemnify
and hold Agent harmless from and against any and all claims, actions, damages,
costs and expenses, including without limit reasonable attorneys' fees, incurred
by Agent in connection with the exercise of any right of subrogation,
contribution, indemnification or recourse with respect to this Guaranty by any
of the undersigned. The Agent has no duty to enforce or protect any rights which
the undersigned may have against the Borrower or any other person and the
undersigned assumes full responsibility for enforcing and protecting these
rights.
The Agent, in its sole discretion, may release any guarantor of
Indebtedness for any consideration which it deems adequate, and may fail or
elect not to prove a claim against the estate of any bankrupt, insolvency,
incompetent or deceased guarantor; and after that, without notice to any other
of the undersigned, the Agent may extend or renew any or all Indebtedness and
may permit the Borrower to incur additional Indebtedness, without affecting in
any manner the unconditional obligation of the undersigned. This action by the
Agent shall not, however, be deemed to affect any right to contribution which
may exist among the guarantors.
The undersigned may terminate its obligation under this Guaranty as to
future Indebtedness (except as provided below) by (and only by) delivering
written notice of termination to an officer of the Agent and receiving from an
officer of the Agent written acknowledgement of delivery; provided, the
termination shall not be effective until the opening of business on the
forty-fifth (45th) day following written acknowledgement of delivery. Any
termination shall not affect in any way the unconditional obligations of the
remaining guarantors, whether or not the determination is known to the remaining
guarantors. Any termination shall not affect in any way the unconditional
obligations of the terminating guarantors as to any Indebtedness existing at the
effective date of termination or any Indebtedness created after that pursuant to
any commitment or agreement of the Agent or any Borrower loan with the Agent
existing at the effective date of termination (whether advances or readvances by
the Agent are optional or obligatory), or any modifications, extensions or
renewals of any of this Indebtedness, whether in whole or in part, and as to all
of this Indebtedness and modifications, extensions or renewals of it, this
Guaranty shall continue effective until the same shall have been fully paid. The
Agent has no duty to give notice of termination by any guarantor to any
remaining guarantor. The undersigned shall indemnify the Agent against all
claims, damages, costs and expenses, including without limit
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<PAGE> 11
reasonable attorney fees, incurred by the Agent in connection with any suit,
claim or action against the Agent arising out of any modification or termination
of a Borrower loan or any refusal by the Agent to extend additional credit
arising, in either event, in connection with the termination of this Guaranty.
Notwithstanding any prior revocation, termination, surrender or
discharge of this Guaranty (or of any lien, pledge or security interest securing
this Guaranty) in whole or in part, the effectiveness of this Guaranty, and of
all liens, pledges and security interests securing this Guaranty, shall
automatically continue or be reinstated, as the case may be, in the event that
any payment received or credit given by the Agent in respect of the Indebtedness
is returned, disgorged or rescinded as a preference, impermissible setoff,
fraudulent conveyance, diversion of trust funds, or otherwise under any
applicable state or federal law, including, without limitation, laws pertaining
to bankruptcy or insolvency, in which case this Guaranty, and all liens, pledges
and security interests securing this Guaranty, shall be enforceable against the
undersigned as if the returned, disgorged or rescinded payment or credit had not
been received or given by the Agent, and whether or not the Agent relied upon
this payment or credit or changed its position as a consequence of it. In the
event of continuation or reinstatement of this Guaranty and the liens, pledges
and security interests securing it, the undersigned agrees upon demand by the
Agent to execute and deliver to the Agent those documents which the Agent
determines are appropriate to further evidence (in the public records or
otherwise) this continuation or reinstatement, although the failure of the
undersigned to do so shall not affect in any way the reinstatement of
continuation. If the undersigned does not execute and deliver to the Agent upon
demand such documents, the Agent and each Agent officer is irrevocably appointed
(which appointment is coupled with an interest) the true and lawful attorney of
the undersigned (with full power of substitution) to execute and deliver such
documents in the name and on behalf of the undersigned.
The undersigned waives any right to require the Agent to: (a) proceed
against any person, including without limit the Borrower; (b) proceed against or
exhaust any security held from the Borrower or any other person; (c) give notice
of the terms, time and place of any public or private sale of personal property
security held from the Borrower or any other person, or otherwise comply with
the provisions of Section 9-504 of the Michigan or other applicable Uniform
Commercial Code; (d) pursue any other remedy in the Agent's power; or (e) make
any presentments or demands for performance, or give any notices of
nonperformance, protests, notices of protest, or notices of dishonor in
connection with any obligations or evidences of Indebtedness held by the Agent
as security, in connection with any other obligations or evidences of
indebtedness which constitute in whole or in part Indebtedness, or in connection
with the creation of new or additional Indebtedness.
The undersigned authorizes Agent, either before or after termination of
this Guaranty, without notice to or demand on the undersigned and without
affecting the undersigneds' liability under this Guaranty, from time to time to:
(a) apply any security and direct the order or manner of sale of it, including
without limit, a nonjudicial sale permitted by the terms of the controlling
security agreement, mortgage or deed of trust, as Agent in its discretion may
determine; (b) release or substitute any one or more of the endorsers or any
other guarantors of the Indebtedness; and (c) apply payments received by the
Agent from the Borrower to any indebtedness of the Borrower to the Agent, in
such order as the Agent shall determine in its sole
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<PAGE> 12
discretion, whether or not this indebtedness is covered by this Guaranty, and
the undersigned waives any provision of law regarding application of payments
which specifies otherwise. The Agent may without notice assign this Guaranty in
whole or in part. Upon the Agent's request, the undersigned agrees to provide to
the Agent copies of the undersigned's financial statements.
The undersigned waives any defense based upon or arising by reason of
(a) any disability or other defense of Borrower or any other person; (b) the
cessation or limitation from any cause whatsoever, other than final and
irrevocable payment in full, of the Indebtedness; (c) any lack of authority of
any officer, director, partner, agent or any other person acting or purporting
to act on behalf of Borrower which is a corporation, partnership or other type
of entity, or any defect in the formation of Borrower; (d) the application by
Borrower of the proceeds of any Indebtedness for purposes other than the
purposes represented by Borrower to Agent or intended or understood by Agent or
the undersigned; (e) any act or omission by Agent which directly or indirectly
results in or aids the discharge of Borrower or any Indebtedness by operation of
law or otherwise; or (f) any modification of the Indebtedness, in any form
whatsoever including without limit any modification made after effective
termination, and including without limit the renewal, extension, acceleration or
other change in time for payment of the Indebtedness, or other change in the
terms of any Indebtedness, including without limit increase or decrease of the
interest rate. The undersigned waives any defense they may have based upon any
election of remedies by Agent which destroys the undersigneds' subrogation
rights or undersigneds' right to proceed against Borrower for reimbursement,
including without limit any loss of rights the undersigned may suffer by reason
of any rights, powers or remedies of Borrower in connection with any anti-
deficiency, appraisement or valuation laws or any other laws limiting,
qualifying or discharging any Indebtedness.
The undersigned acknowledges that Agent has the right to sell, assign,
transfer, negotiate, or grant participations in all or any part of the
Indebtedness and any related obligations, including without limit this Guaranty.
In connection with that right, the Agent may disclose any documents and
information which the Agent now or later acquire relating to the undersigned and
this Guaranty, whether furnished by the Borrower, the undersigned or otherwise.
The undersigned further agrees that Agent may disclose these documents and
information to Borrower.
The obligation under this Guaranty shall include any and all interest
on all Indebtedness and any and all costs and expenses of any kind, including
without limit reasonable attorney fees, incurred by Agent at any time for any
reason in enforcing any of the duties and obligations of the undersigned under
this Guaranty or otherwise incurred by Agent in any way connected with this
Guaranty, the Indebtedness or any other guaranty of the Indebtedness (including
without limit reasonable attorney fees and other expenses incurred in any suit
involving the conduct, Borrower or the undersigned). All of these costs and
expenses shall be payable immediately by the undersigned when incurred by Agent,
upon demand, and until paid shall bear interest at the highest per annum rate
applicable to any of the Indebtedness, but not in excess of the maximum rate
permitted by law. Any reference in this Guaranty to attorney fees shall be
deemed a reference to fees, charges, costs and expenses of both inhouse and
outside counsel and paralegals, whether or not a suit or action is instituted,
and to court costs if a suit or action is instituted, and whether attorney fees
or court costs are incurred at the trial court level, on appeal, in a
bankruptcy, administrative or probate proceeding or otherwise.
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<PAGE> 13
The undersigned unconditionally and irrevocably waives each and every
defense and setoff of any nature which, under principles of guaranty or
otherwise, would operate to impair or diminish in any way the obligation of the
undersigned under this Guaranty, and acknowledges that each such waiver is by
this reference incorporated into each security agreement, collateral assignment,
pledge and/or other document from the undersigned now or later securing this
Guaranty and/or the Indebtedness, and acknowledges that as of the date of this
Guaranty no such defense or setoff exists. The undersigned acknowledges that the
effectiveness of this Guaranty is subject to no conditions of any kind.
This Guaranty shall remain effective with respect to successive
transactions which shall continue the Indebtedness until this Guaranty is
terminated in the manner and to the extent provided above.
The undersigned warrants and agrees that each of the waivers set forth
above are made with the undersigneds' full knowledge of their significance and
consequences, and that under the circumstances, the waivers are reasonable and
not contrary to public policy or law. If any of these waivers are determined to
be contrary to any applicable law or public policy, these waivers shall be
effective to the fees extent permitted by law.
This Guaranty constitutes the entire agreement of the undersigned and
Agent with respect to the subject matter of this Guaranty. No waiver, consent,
modification or change of the terms of this Guaranty shall bind any of the
undersigned or Agent unless in writing and signed by the waiving party or an
authorized officer of the waiving party, and then this waiver, consent,
modification or change shall be effective only in the specific instance and for
the specific purpose given. This Guaranty shall inure to the benefit of Agent
and its successors and assigns. This Guaranty shall be binding on the
undersigned and the undersigneds' respective heirs, legal representatives,
successors and assigns including, without limit, any debtor in possession or
trustee in bankruptcy for any of the undersigned. The undersigned has knowingly
and voluntarily entered into this Guaranty in good faith for the purpose of
inducing Agent to extend credit or make other financial accommodations to
Borrower, and the undersigned acknowledges that the terms of this Guaranty are
reasonable. If any provision of this Guaranty is unenforceable in whole or in
part for any reason, the remaining provisions shall continue to be effective.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF MICHIGAN.
THE UNDERSIGNED AND AGENT ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY
IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING
(OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE,
KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO
TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS GUARANTY OR THE INDEBTEDNESS.
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<PAGE> 14
IN WITNESS WHEREOF, the undersigned has signed this Guaranty on April 28, 1998.
VS HOLDINGS, INC.
By:______________________________
Its:_____________________________
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<PAGE> 15
GUARANTY
The undersigned, for value received, unconditionally and absolutely
guarantees to Comerica Bank, in its capacity as Agent for the Banks under the
Credit Agreement (defined below) ("Agent"), a Michigan banking corporation of
One Detroit Center, Detroit, Michigan 48226 and to Agent's successors and
assigns, payment when due, whether by stated maturity, demand, acceleration or
otherwise, of all existing and future indebtedness to the Agent of TALON
AUTOMOTIVE GROUP, INC., a Michigan corporation, and VELTRI METAL PRODUCTS CO., a
Nova Scotia corporation, both of whose address is 900 Wilshire, Suite 203, Troy,
Michigan 48084, and also of any successor in interest, including without limit
any debtor-in-possession or trustee in bankruptcy which succeeds to the
interests of this party or person (jointly and severally the "Borrower")
incurred or evidenced by or under that certain Credit Agreement of even date
herewith between Borrower, certain other borrowers, Agent, and any of the Banks
from time to time party thereto ("Credit Agreement") and/or under any
agreements, notes, mortgages, assignments or instruments provided to Agent in
connection with the Credit Agreement, including Hedging Agreements (as defined
in the Credit Agreement), and: (a) any and all of the above-described
Indebtedness for which Borrower would otherwise be liable to Agent were it not
for the invalidity, irregularity or unenforceability of them by reason of any
bankruptcy, insolvency or other law or order of any kind, or for any other
reason, including without limit liability for interest and attorney fees on, or
in connection with, any of the Indebtedness from and after the filing by or
against Borrower of a bankruptcy petition; (b) any and all amendments,
modifications, renewals and/or extensions of any of the above, including without
limit amendments, modifications, renewals and/or extensions which are evidenced
by new or additional instruments, documents or agreements; and (c) all interest
on such principal amounts and costs of collecting Indebtedness, including
without limit reasonable attorney fees. (the "Indebtedness").
The undersigned waives notice of acceptance of this Guaranty and
presentment, demand, protest, notice of protest, dishonor, notice of dishonor,
notice of default, notice of intent to accelerate or demand payment of any
Indebtedness, and diligence in collecting any Indebtedness, and agrees that
Agent may modify the terms of any Indebtedness, compromise, extend, increase,
accelerate, renew or forbear to enforce payment of any or all Indebtedness, or
permit Borrower to incur additional Indebtedness, all without notice to the
undersigned and without affecting in any manner the unconditional obligation of
the undersigned under this Guaranty. The undersigned further waives any and all
other notices to which the undersigned might otherwise be entitled. The
undersigned acknowledges and agrees that the liabilities created by this
Guaranty are direct and are not conditioned upon pursuit by Agent of any remedy
Agent may have against Borrower or any other person or any security. No
invalidity, irregularity or unenforceability of any part or all of the
Indebtedness or any documents evidencing the same, by reason of any bankruptcy,
insolvency or other law or order of any kind or for any other reason, and no
defense or setoff available at any time to Borrower, shall impair, affect or be
a defense or setoff to the obligations of the undersigned under this Guaranty.
The undersigned delivers this Guaranty based solely on the
undersigneds' independent investigation of the financial condition of Borrower
and are not relying on any information
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<PAGE> 16
furnished by Agent. The undersigned assumes full responsibility for obtaining
any further information concerning Borrower's financial condition, the status of
the Indebtedness or any other matter which the undersigned may deem necessary or
appropriate from time to time. The undersigned waives any duty on the part of
Agent, and agrees that it is not relying upon nor expecting Agent to disclose to
the undersigned any fact now or later known by Agent, whether relating to the
operations or condition of Borrower, the existence, liabilities or financial
condition of any co-guarantor of the Indebtedness, the occurrence of any default
with respect to the Indebtedness, or otherwise, notwithstanding any effect these
facts may have upon the undersigneds' risks under this Guaranty or the
undersigneds' rights against Borrower. The undersigned knowingly accepts the
full range of risk encompassed in this Guaranty, which risk includes without
limit the possibility that Borrower may incur Indebtedness to Agent after the
financial condition of Borrower, or its ability to pay its debts as they mature,
has deteriorated.
The undersigned represents and warrants that: (a) Agent has made no
representation to the undersigned as to the creditworthiness of Borrower; and
(b) the undersigned has established adequate means of obtaining from the
Borrower on a continuing basis financial and other information pertaining to
Borrower's financial condition. The undersigned agrees to keep adequately
informed of any facts, events or circumstances which might in any way affect the
risks of the undersigned under this Guaranty.
The undersigned grants to Agent a security interest in and the right of
setoff as to any and all property of the undersigned now or later in the
possession of Agent. The undersigned subordinates any claim of any nature that
the undersigned now or later has against the Borrower to and in favor of all
Indebtedness and agrees not to accept payment or satisfaction of any claim that
the undersigned now or later may have against Borrower without the prior written
consent of Agent in the event and so long as any default exists with respect to
Indebtedness. Upon an event of default with respect to the Indebtedness, and the
giving of any required notice and expiration of any applicable cure period,
should any payment, distribution, security, or proceeds, be received by the
undersigned upon or with respect to any claim that the undersigned now or may
later have against Borrower, the undersigned shall immediately deliver the same
to the Agent in the form received (except for endorsement or assignment by the
undersigned where required by the Agent) for application on the Indebtedness,
whether matured or unmatured, and until delivered the same shall be held in
trust by the undersigned as the property of the Agent. The undersigned further
assigns to the Agent as collateral for the obligations of the undersigned under
this Guaranty all claims of any nature that the undersigned now or later have
against the Borrower with full right on the part of the Agent, in its own name
or in the name of the undersigned, upon an event of default with respect to the
Indebtedness, and the giving of any required notice and expiration of any
applicable cure period, to collect and enforce these claims.
The undersigned agrees that no security now or later held by Agent for
payment of any Indebtedness, whether from Borrower, any guarantor, or otherwise,
and whether in the nature of a security interest, pledge, lien, assignment,
setoff, suretyship, guaranty, indemnity, insurance or otherwise, shall affect in
any manner the unconditional obligation of the undersigned under this Guaranty,
and Agent, in its sole discretion, without notice to the undersigned, may
release, exchange, enforce and otherwise deal with any security without
affecting in any manner the unconditional obligation of the undersigned under
this Guaranty. The undersigned acknowledges
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<PAGE> 17
and agrees that Agent has no obligation to acquire or perfect any lien on or
security interest in any assets, whether realty or personalty, to secure payment
of the Indebtedness, and the undersigned is not relying upon any assets in which
Agent has or may have a lien or security interest for payment of the
Indebtedness.
The undersigned acknowledges that the effectiveness of this Guaranty is
not conditioned on any or all of the Indebtedness being guaranteed by anyone
else.
Until the Indebtedness is irrevocably paid in full, the undersigned
waives any and all rights to be subrogated to the position of the Agent or to
have the benefit of any lien, security interest or other guaranty now or later
held by the Agent for the Indebtedness or to enforce any remedy which the Agent
now or later has against the Borrower or any other person. Until the
Indebtedness is irrevocably paid in full, the undersigned shall have no right of
reimbursement, indemnity, contribution or other right of recourse to or with
respect to the Borrower or any other person. The undersigned agrees to indemnify
and hold Agent harmless from and against any and all claims, actions, damages,
costs and expenses, including without limit reasonable attorneys' fees, incurred
by Agent in connection with the exercise of any right of subrogation,
contribution, indemnification or recourse with respect to this Guaranty by any
of the undersigned. The Agent has no duty to enforce or protect any rights which
the undersigned may have against the Borrower or any other person and the
undersigned assumes full responsibility for enforcing and protecting these
rights.
The Agent, in its sole discretion, may release any guarantor of
Indebtedness for any consideration which it deems adequate, and may fail or
elect not to prove a claim against the estate of any bankrupt, insolvency,
incompetent or deceased guarantor; and after that, without notice to any other
of the undersigned, the Agent may extend or renew any or all Indebtedness and
may permit the Borrower to incur additional Indebtedness, without affecting in
any manner the unconditional obligation of the undersigned. This action by the
Agent shall not, however, be deemed to affect any right to contribution which
may exist among the guarantors.
The undersigned may terminate its obligation under this Guaranty as to
future Indebtedness (except as provided below) by (and only by) delivering
written notice of termination to an officer of the Agent and receiving from an
officer of the Agent written acknowledgement of delivery; provided, the
termination shall not be effective until the opening of business on the
forty-fifth (45th) day following written acknowledgement of delivery. Any
termination shall not affect in any way the unconditional obligations of the
remaining guarantors, whether or not the determination is known to the remaining
guarantors. Any termination shall not affect in any way the unconditional
obligations of the terminating guarantors as to any Indebtedness existing at the
effective date of termination or any Indebtedness created after that pursuant to
any commitment or agreement of the Agent or any Borrower loan with the Agent
existing at the effective date of termination (whether advances or readvances by
the Agent are optional or obligatory), or any modifications, extensions or
renewals of any of this Indebtedness, whether in whole or in part, and as to all
of this Indebtedness and modifications, extensions or renewals of it, this
Guaranty shall continue effective until the same shall have been fully paid. The
Agent has no duty to give notice of termination by any guarantor to any
remaining guarantor. The undersigned shall indemnify the Agent against all
claims, damages, costs and expenses, including without limit
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<PAGE> 18
reasonable attorney fees, incurred by the Agent in connection with any suit,
claim or action against the Agent arising out of any modification or termination
of a Borrower loan or any refusal by the Agent to extend additional credit
arising, in either event, in connection with the termination of this Guaranty.
Notwithstanding any prior revocation, termination, surrender or
discharge of this Guaranty (or of any lien, pledge or security interest securing
this Guaranty) in whole or in part, the effectiveness of this Guaranty, and of
all liens, pledges and security interests securing this Guaranty, shall
automatically continue or be reinstated, as the case may be, in the event that
any payment received or credit given by the Agent in respect of the Indebtedness
is returned, disgorged or rescinded as a preference, impermissible setoff,
fraudulent conveyance, diversion of trust funds, or otherwise under any
applicable state or federal law, including, without limitation, laws pertaining
to bankruptcy or insolvency, in which case this Guaranty, and all liens, pledges
and security interests securing this Guaranty, shall be enforceable against the
undersigned as if the returned, disgorged or rescinded payment or credit had not
been received or given by the Agent, and whether or not the Agent relied upon
this payment or credit or changed its position as a consequence of it. In the
event of continuation or reinstatement of this Guaranty and the liens, pledges
and security interests securing it, the undersigned agrees upon demand by the
Agent to execute and deliver to the Agent those documents which the Agent
determines are appropriate to further evidence (in the public records or
otherwise) this continuation or reinstatement, although the failure of the
undersigned to do so shall not affect in any way the reinstatement of
continuation. If the undersigned does not execute and deliver to the Agent upon
demand such documents, the Agent and each Agent officer is irrevocably appointed
(which appointment is coupled with an interest) the true and lawful attorney of
the undersigned (with full power of substitution) to execute and deliver such
documents in the name and on behalf of the undersigned.
The undersigned waives any right to require the Agent to: (a) proceed
against any person, including without limit the Borrower; (b) proceed against or
exhaust any security held from the Borrower or any other person; (c) give notice
of the terms, time and place of any public or private sale of personal property
security held from the Borrower or any other person, or otherwise comply with
the provisions of Section 9-504 of the Michigan or other applicable Uniform
Commercial Code; (d) pursue any other remedy in the Agent's power; or (e) make
any presentments or demands for performance, or give any notices of
nonperformance, protests, notices of protest, or notices of dishonor in
connection with any obligations or evidences of Indebtedness held by the Agent
as security, in connection with any other obligations or evidences of
indebtedness which constitute in whole or in part Indebtedness, or in connection
with the creation of new or additional Indebtedness.
The undersigned authorizes Agent, either before or after termination of
this Guaranty, without notice to or demand on the undersigned and without
affecting the undersigneds' liability under this Guaranty, from time to time to:
(a) apply any security and direct the order or manner of sale of it, including
without limit, a nonjudicial sale permitted by the terms of the controlling
security agreement, mortgage or deed of trust, as Agent in its discretion may
determine; (b) release or substitute any one or more of the endorsers or any
other guarantors of the Indebtedness; and (c) apply payments received by the
Agent from the Borrower to any indebtedness of the Borrower to the Agent, in
such order as the Agent shall determine in its sole
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<PAGE> 19
discretion, whether or not this indebtedness is covered by this Guaranty, and
the undersigned waives any provision of law regarding application of payments
which specifies otherwise. The Agent may without notice assign this Guaranty in
whole or in part. Upon the Agent's request, the undersigned agrees to provide to
the Agent copies of the undersigned's financial statements.
The undersigned waives any defense based upon or arising by reason of
(a) any disability or other defense of Borrower or any other person; (b) the
cessation or limitation from any cause whatsoever, other than final and
irrevocable payment in full, of the Indebtedness; (c) any lack of authority of
any officer, director, partner, agent or any other person acting or purporting
to act on behalf of Borrower which is a corporation, partnership or other type
of entity, or any defect in the formation of Borrower; (d) the application by
Borrower of the proceeds of any Indebtedness for purposes other than the
purposes represented by Borrower to Agent or intended or understood by Agent or
the undersigned; (e) any act or omission by Agent which directly or indirectly
results in or aids the discharge of Borrower or any Indebtedness by operation of
law or otherwise; or (f) any modification of the Indebtedness, in any form
whatsoever including without limit any modification made after effective
termination, and including without limit the renewal, extension, acceleration or
other change in time for payment of the Indebtedness, or other change in the
terms of any Indebtedness, including without limit increase or decrease of the
interest rate. The undersigned waives any defense they may have based upon any
election of remedies by Agent which destroys the undersigneds' subrogation
rights or undersigneds' right to proceed against Borrower for reimbursement,
including without limit any loss of rights the undersigned may suffer by reason
of any rights, powers or remedies of Borrower in connection with any anti-
deficiency, appraisement or valuation laws or any other laws limiting,
qualifying or discharging any Indebtedness.
The undersigned acknowledges that Agent has the right to sell, assign,
transfer, negotiate, or grant participations in all or any part of the
Indebtedness and any related obligations, including without limit this Guaranty.
In connection with that right, the Agent may disclose any documents and
information which the Agent now or later acquire relating to the undersigned and
this Guaranty, whether furnished by the Borrower, the undersigned or otherwise.
The undersigned further agrees that Agent may disclose these documents and
information to Borrower.
The obligation under this Guaranty shall include any and all interest
on all Indebtedness and any and all costs and expenses of any kind, including
without limit reasonable attorney fees, incurred by Agent at any time for any
reason in enforcing any of the duties and obligations of the undersigned under
this Guaranty or otherwise incurred by Agent in any way connected with this
Guaranty, the Indebtedness or any other guaranty of the Indebtedness (including
without limit reasonable attorney fees and other expenses incurred in any suit
involving the conduct, Borrower or the undersigned). All of these costs and
expenses shall be payable immediately by the undersigned when incurred by Agent,
upon demand, and until paid shall bear interest at the highest per annum rate
applicable to any of the Indebtedness, but not in excess of the maximum rate
permitted by law. Any reference in this Guaranty to attorney fees shall be
deemed a reference to fees, charges, costs and expenses of both inhouse and
outside counsel and paralegals, whether or not a suit or action is instituted,
and to court costs if a suit or action is instituted, and whether attorney fees
or court costs are incurred at the trial court level, on appeal, in a
bankruptcy, administrative or probate proceeding or otherwise.
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<PAGE> 20
The undersigned unconditionally and irrevocably waives each and every
defense and setoff of any nature which, under principles of guaranty or
otherwise, would operate to impair or diminish in any way the obligation of the
undersigned under this Guaranty, and acknowledges that each such waiver is by
this reference incorporated into each security agreement, collateral assignment,
pledge and/or other document from the undersigned now or later securing this
Guaranty and/or the Indebtedness, and acknowledges that as of the date of this
Guaranty no such defense or setoff exists. The undersigned acknowledges that the
effectiveness of this Guaranty is subject to no conditions of any kind.
This Guaranty shall remain effective with respect to successive
transactions which shall continue the Indebtedness until this Guaranty is
terminated in the manner and to the extent provided above.
The undersigned warrants and agrees that each of the waivers set forth
above are made with the undersigneds' full knowledge of their significance and
consequences, and that under the circumstances, the waivers are reasonable and
not contrary to public policy or law. If any of these waivers are determined to
be contrary to any applicable law or public policy, these waivers shall be
effective to the fees extent permitted by law.
This Guaranty constitutes the entire agreement of the undersigned and
Agent with respect to the subject matter of this Guaranty. No waiver, consent,
modification or change of the terms of this Guaranty shall bind any of the
undersigned or Agent unless in writing and signed by the waiving party or an
authorized officer of the waiving party, and then this waiver, consent,
modification or change shall be effective only in the specific instance and for
the specific purpose given. This Guaranty shall inure to the benefit of Agent
and its successors and assigns. This Guaranty shall be binding on the
undersigned and the undersigneds' respective heirs, legal representatives,
successors and assigns including, without limit, any debtor in possession or
trustee in bankruptcy for any of the undersigned. The undersigned has knowingly
and voluntarily entered into this Guaranty in good faith for the purpose of
inducing Agent to extend credit or make other financial accommodations to
Borrower, and the undersigned acknowledges that the terms of this Guaranty are
reasonable. If any provision of this Guaranty is unenforceable in whole or in
part for any reason, the remaining provisions shall continue to be effective.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF MICHIGAN.
THE UNDERSIGNED AND AGENT ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY
IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING
(OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE,
KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO
TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS GUARANTY OR THE INDEBTEDNESS.
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<PAGE> 21
IN WITNESS WHEREOF, the undersigned has signed this Guaranty on April 28, 1998.
VELTRI HOLDINGS USA, INC.
By:________________________________________
Its:_______________________________________
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<PAGE> 22
EXHIBIT 10.5 (PART IV)
GUARANTEE
THIS AGREEMENT made as of the day of April, 1998.
BY:
VELTRI METAL PRODUCTS CO., an unlimited liability
company formed under the laws of the Province of
Nova Scotia
(the "Guarantor")
IN FAVOUR OF:
COMERICA BANK, as agent for the Banks under the
Credit Agreement (as hereinafter defined)
(the "Agent")
WHEREAS Talon Automotive Group, Inc. (the "Borrower") is or will become
indebted, liable and obligated to the Agent and the Banks (as hereinafter
defined) pursuant to a credit agreement dated as of the date hereof among the
Borrower, the Guarantor, the Agent and the Banks (as amended, supplemented,
restated or replaced from time to time, the "Credit Agreement");
AND WHEREAS the Guarantor will receive direct economic and financial
benefits from accommodations made available to the Borrower under the Credit
Agreement;
AND WHEREAS the Guarantor has determined that it is in its best interests
to enter into this Guarantee;
AND WHEREAS the Guarantor's entry into this Guarantee is an inducement to
the Agent and the Banks to enter into the Credit Agreement;
<PAGE> 23
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NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the Guarantor, the Guarantor hereby covenants and agrees with
the Agent, on its own behalf and as agent for the Banks, as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINED TERMS. Capitalized terms used and not otherwise defined herein
shall have the meanings ascribed thereto in the Credit Agreement. In this
Guarantee, the following terms shall have the following meanings:
"AFFECTED" means limited, lessened, prejudiced, mitigated, impaired,
released, discharged or otherwise affected in any way whatsoever and
"AFFECT" and "AFFECTING" have corresponding meanings;
"BANKS" means those financial institutions whose names appear as "Banks"
on the signature pages to the Credit Agreement, together with any
assignees thereof pursuant to Section 13.5 of the Credit Agreement, and
shall include the Canadian Swingline Lender under the Credit Agreement;
and "BANK" shall mean any one of the foregoing Banks.
"OBLIGATIONS" means all obligations, indebtedness and liabilities
of the Borrower to the Agent and each of the Banks, under, in
connection with or relating to the Documents, whether present or
future, direct or indirect, absolute or contingent, secured or
unsecured, material or not, wheresoever and howsoever incurred and
any ultimate unpaid balance thereof, in any currency, and whether
incurred prior to, at the time of or subsequent to the execution
of this Guarantee;
"GAAP" means generally accepted accounting principles applied in a manner
consistent with the application thereof used in the quarterly and annual
financial statements of the Guarantor; and
<PAGE> 24
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"GUARANTOR'S LIABILITIES" means all obligations, indebtedness and
liabilities of the Guarantor under, in connection with or relating to
this Guarantee, including all costs and expenses (including counsel fees
and expenses) incurred by the Agent or any Bank in connection with the
enforcement of this Guarantee.
1.2 INTERPRETATION. This Guarantee shall be interpreted in accordance
with the following:
(1) words denoting the singular include the plural and vice versa and
words denoting any gender include all genders;
(2) headings shall not affect the interpretation of this Guarantee;
(3) references to "this Guarantee" refer to this entire Agreement
(including the indemnities in Article 7); references to "any guarantor" include
the Guarantor;
(4) "hereof", "hereto" and "hereunder" and similar expressions refer to
this Guarantee and not to any particular Article, Section or other subdivision;
and "Article", "Section" or other subdivision of this Guarantee followed by a
number refers to the specified Article, Section or other subdivision of this
Guarantee;
(5) the word "including" shall mean "including without limitation" and
"includes" shall mean "includes without limitation"; and
(6) 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".
1.3 SEVERABILITY. If any provision of this Guarantee is, or becomes,
illegal, invalid or unenforceable, such provision shall be severed from this
Guarantee and be ineffective to the extent of such illegality, invalidity
or unenforceability. The remaining provisions hereof shall be unaffected by
such
<PAGE> 25
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provision and shall continue to be valid and enforceable.
1.4 GOVERNING LAW.
(1) This Guarantee shall be governed by, and interpreted in accordance
with, the laws of the Province of Ontario and the laws of Canada applicable
therein (such laws being collectively referred to herein as the "Applicable
Law"), without giving effect to any conflicts of law rules thereof.
(2) The Guarantor hereby irrevocably attorns and submits to the
non-exclusive jurisdiction of the courts of the Province of Ontario with
respect to any matter arising under or relating to this Guarantee.
ARTICLE 2
GUARANTEE
2.1 GUARANTEE. The Guarantor hereby irrevocably, absolutely and
unconditionally guarantees to the Agent, on its own behalf and as agent for the
Banks, as and by way of a continuing guarantee, the due, prompt and complete
payment, performance and satisfaction of all the Obligations strictly in
accordance with the terms thereof. The Guarantor shall be primarily liable to
the Agent and the Banks for all the Obligations.
2.2 DEALINGS WITH BORROWER AND GUARANTORS. The Guarantor hereby
acknowledges receipt of complete communication of all the terms and conditions
of the Documents and consents to and approves the same. The Agent and each of
the Banks may deal with the Borrower and any other guarantor as the Agent or
such Bank may see fit, whether or not such dealings are in breach (intentional,
negligent or otherwise) of the Agent's or any of the Banks' Agreements (express
or implied) with the Borrower or such other guarantor, without Affecting any of
the Guarantor's Liabilities and without obtaining the consent of or giving
notice to the Guarantor. Without limiting the foregoing, the Agent and any of
the Banks may, without Affecting any of the Guarantor's Liabilities and without
obtaining the consent of or giving notice to the Guarantor: (i) amend,
supplement, waive or delete any terms and conditions of the Documents (except
for the terms and conditions of this Guarantee); (ii) grant time,
<PAGE> 26
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renewals, extensions, indulgences, releases and discharges to, and accept
compositions from, the Borrower and any other guarantor; (iii) renew, extend,
rollover, convert, vary or terminate any Advance; (iv) take Liens and
guarantees from the Borrower or any other Person or abstain from taking,
perfecting, preserving, protecting, valuing, realizing or enforcing any such
Liens or guarantees; (v) renew, exchange, modify, release or discharge any Lien
or guarantee now or hereafter held against or from the Borrower or any other
guarantor, and (vi) prove or refrain from proving a claim in any bankruptcy,
winding-up, dissolution or liquidation of the Borrower or any other guarantor
and receive or refrain from receiving any dividends and other payments in
respect of any such claim.
2.3 GUARANTEE NOT AFFECTED. The Guarantor's Liabilities are absolute and
unconditional and shall not be Affected by:
(1) any assignment or participation of the Obligations or the Documents,
in whole or in part, by the Agent or any of the Banks, or any assignment by the
Borrower or any guarantor of any of their obligations, indebtedness and
liabilities under the Documents:
(2) any cessation or termination of the Obligations from any cause
whatsoever, whether by consent or by operation of law, except for the due,
prompt and complete payment performance and satisfaction of all the
Obligations;
(3) any amalgamation, merger, arrangement, consolidation, reorganization,
winding-up, dissolution, liquidation or termination of the Borrower or any
guarantor or their respective businesses or any change in the name, status,
composition, control or ownership of the Borrower or any guarantor;
(4) any disposition of, Lien on or other dealing with any Property of the
Borrower or any guarantor;
(5) any insolvency or bankruptcy of the Borrower or any voluntary or
involuntary participation by the Borrower or any guarantor in any assignment,
settlement, arrangement, composition or other proceeding for the benefit of its
creditors;
<PAGE> 27
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(6) anything done, omitted, suffered or permitted by the Agent or any of
the Banks in connection with the Borrower, any guarantor, the Obligations or
the Guarantor's Liabilities or any Lien held by the Agent or any of the Banks;
(7) any loss in respect of any Lien held by the Agent or any of the Banks
against or from the Borrower or any guarantor, whether caused by the fault of
the Agent or any Bank or otherwise;
(8) any failure by the Agent or any of the Banks to pursue any recourse
which may otherwise be available, whether by deficiency judgment or otherwise;
(9) any defect, irregularity or informality in, omission from or lack of
validity or enforceability of any provision of any of the Documents, any
limitation, disability or incapacity of the Borrower or any guarantor or any
lack of authority of any director, officer or other Person purporting to be
acting on behalf of the Borrower or any guarantor; or
(10) any other act, omission, thing or circumstance which would or might,
but for this provision, constitute a legal or equitable discharge or defence of
a surety.
2.4 WAIVERS.
(1) The Guarantor hereby (A) waives: (i) demand, presentment, diligence,
protest, notice of dishonour, notice of acceptance and any other notices
whatsoever, and (ii) any duty on the part of the Agent or any of the Banks to
disclose to the Guarantor anything which the Agent or such Bank may now or
hereafter know concerning the Borrower, any guarantor or any other matter
whatsoever, even if the Agent or any of the Banks has reason to believe any
such information materially increases the risk beyond that which the Guarantor
intends to assume hereunder, (iii) any requirement that the Agent or any of the
Banks protect, secure, perfect or insure any Lien granted in respect of the
Obligations or exhaust any right or take any action against the Borrower or any
other Person or in respect of any Collateral, (iv) the filing of any claim with
a court in the event of receivership or bankruptcy of the Borrower, and (v) the
benefit of any statute of limitation; and (B) covenants and agrees that this
Guarantee will not be discharged except by the full and complete payment,
performance and satisfaction of the Obligations and any other
<PAGE> 28
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obligations of the Guarantor contained herein.
(2) If, in the exercise of any of its rights and remedies, the Agent or
any of the Banks shall forfeit any of its rights or remedies, including its
right to enter a deficiency judgment against the Borrower or any other Person,
whether because of any Applicable Law pertaining to "election of remedies" or
the like, the Guarantor hereby consents to such action by the Agent or such
Bank and waives any claim based upon such action. Any election of remedies
which results in the denial or impairment of the right of the Agent or such
Bank to seek a deficiency judgment against the Borrower shall not impair the
obligation of the Guarantor to pay the full amount of the Obligations or any of
the Guarantor's Liabilities.
(3) The Guarantor agrees that notwithstanding the foregoing and without
limiting the generality of the foregoing, if, after the occurrence and during
the continuance of an Event of Default, the Agent and the Banks are prevented
by Applicable Law from exercising their respective rights to accelerate the
maturity of the Obligations, to collect interest on the Obligations, or to
enforce or exercise any other right or remedy with respect to the Obligations,
or the Agent is prevented from taking any action to realize on the Collateral,
the Guarantor agrees to pay to the Agent for the account of the Banks, upon
demand therefor, the amount that would otherwise have been due and payable had
such rights and remedies been permitted to be exercised by the Banks.
(4) The Guarantor consents and agrees that neither the Agent nor the Banks
shall be under any obligation to marshall any assets in favour of the Guarantor
or otherwise in connection with obtaining payment of any or all of the
Obligations from any Person or source.
2.5 SECURITY. The Guarantor has not taken and does not hold and shall not
take or hold, without the prior written consent of the Agent, any Lien from the
Borrower in connection with this Guarantee and any Lien so taken or held shall
be held in trust for the Agent and as security for the Guarantor's Liabilities
in accordance with Section 6.2.
2.6 NO SET-OFF BY GUARANTOR. The Guarantor shall, to the fullest extent
permitted by Applicable Law, make all payments and perform all obligations
hereunder without regard to any right or alleged right of set-off, counterclaim
or appropriation or the application of any Claim that the Borrower or
<PAGE> 29
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the Guarantor may have or may allege to have against the Agent, any of the
Banks or any other Person.
2.7 EVIDENCE OF OBLIGATIONS. The Guarantor agrees that the account records
maintained by the Agent as to the amount of any of the Obligations or the
Guarantor's Liabilities or any judgment determining such amounts obtained by
the Agent and the Banks against the Borrower or the Guarantor, as the case may
be, shall be conclusive evidence against the Guarantor as to the amount of such
Obligations or Guarantor's Liabilities absent manifest error. The failure of
the Agent to correctly record any amount or date shall not Affect the
obligation of the Guarantor to pay amounts due hereunder to the Agent or any of
the Banks in accordance with this Guarantee.
2.8 TERMINATION. This Guarantee shall be additional to any other
guarantee or Lien now or hereafter held by the Agent or any of the Banks from
the Guarantor or any other guarantors and is in addition to any other rights
or remedies that the Agent or any of the Banks might have. This Guarantee
shall not be considered as released or satisfied by any intermediate payment or
satisfaction of the whole or any part of the Obligations but shall be a
continuing security and shall remain in force until all of the Guarantor's
Liabilities shall have been fully paid, performed and satisfied. This
Guarantee shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of any of the Obligations is rescinded or is
otherwise required to be returned by the Agent or any of the Banks upon the
insolvency, bankruptcy or reorganization of the Borrower or otherwise, all as
though such payment had not been made.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES. The Guarantor hereby makes each of the
following representations and warranties in favour of the Agent, on its own
behalf and as agent for the Banks:
(1) STATUS AND POWER. The Guarantor is a corporation duly formed and
organized and validly subsisting under the laws of its jurisdiction of
incorporation, and has full corporate power and capacity to own its Assets and
to carry on its business as now conducted. The Guarantor has obtained all
<PAGE> 30
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necessary authorizations required in respect of its operations, and is not in
default and has received no notice of any claim or default, with respect to any
such necessary authorizations. The Guarantor is duly qualified, licensed or
registered to carry on business in the jurisdictions in which the nature of its
Assets or the business carried on by it make such qualification necessary.
(2) CORPORATE AUTHORIZATION. The Guarantor has full corporate power and
capacity and full legal right to enter into and perform its obligations under
this Guarantee and all other Documents to which it is or will be a party and
will have by closing of the financing contemplated by the Credit Agreement
taken all corporate action necessary to be taken by it to authorize such acts.
(3) ENFORCEABILITY OF GUARANTEE. This Guarantee and any other Documents
to which the Guarantor is a party constitute legal, valid and binding
obligations of the Guarantor enforceable against the Guarantor 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) COMPLIANCE WITH OTHER INSTRUMENTS. The consummation of the
transactions hereby contemplated or contemplated by the other Documents and the
compliance with the terms, conditions and provisions of this Guarantee and any
other Documents to which the Guarantor is a party will not conflict with, or
result in a breach of, or constitute a default under any of the terms,
conditions or provisions of the certificate of incorporation, constating
documents or by-laws of the Guarantor or any material Agreement or instrument
to which the Guarantor is a party or by which it is bound.
(5) RESTRICTIVE DOCUMENTS. The Guarantor is not subject to, or a party
to, any charter or by-law restriction, any notice, any Applicable Law, any
claim, any contract or instrument, any Lien or any other restriction of any
kind or character which would prevent the consummation of the transactions
contemplated by this Guarantee or compliance by the Guarantor with the terms,
conditions and provisions hereof or of any other Documents to which it is a
party .
(6) RECITALS. All of the recitals hereto are in all respects true and
correct.
<PAGE> 31
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3.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All the representations
and warranties of the Guarantor contained in Section 3.1 shall survive the
execution and delivery of this Guarantee and shall continue in full force and
effect until all the Guarantor's Liabilities have been paid, performed and
satisfied in full notwithstanding any investigation made at any time by or on
behalf of the Agent or any of the Banks. Each representation and warranty
contained in Section 3.1 shall be deemed to be repeated by the Guarantor on
each date on which the Borrower delivers a Request for Loan and on the date of
each Advance.
ARTICLE 4
COVENANTS
4.1 COVENANTS. Without derogating from the nature or extent of the
Obligations, so long as any of the Obligations or other Guarantor's Liabilities
are outstanding and so long as the Credit Agreement has not been terminated,
the Guarantor shall:
(1) CORPORATE EXISTENCE. Preserve and maintain its corporate existence,
rights (charter and statutory) and its Agreements, licenses, operations,
contracts, franchises and other arrangements, except to the extent that the
board of directors of the Guarantor shall determine that the preservation of
any Agreement, license, operations, contract, franchise or other arrangement is
no longer desirable in the conduct of its business and that the loss thereof is
not disadvantageous in any material respect to the Agent or the Banks.
(2) COMPLIANCE WITH LAWS. Comply in all material respects with the
requirements of all Applicable Laws.
(3) KEEPING OF BOOKS. Keep proper books, records and accounts, in which
full and correct entries shall be made of all financial transactions of the
Guarantor in accordance with GAAP.
(4) 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
<PAGE> 32
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reasonable opinion of the Agent to carry out more effectually the provisions
and purposes of this Guarantee and any other Documents to which the Guarantor
is a party.
ARTICLE 5
DEFAULT AND ENFORCEMENT
5.1 DEFAULT. In the event that any Event of Default has occurred and is
continuing, the Agent may, at any time, demand from the Guarantor immediate
payment, performance and satisfaction of all the Obligations and other
Guarantor's Liabilities. Forthwith upon such demand, the Guarantor shall
immediately pay, perform and satisfy in full all of the Obligations and other
Guarantor's Liabilities. All payments received by the Agent pursuant to this
Guarantee will be applied in accordance with that certain demand debenture of
even date between the parties hereto.
5.2 [INTENTIONALLY DELETED]
5.3 ENFORCEMENT. If the Guarantor shall fail, forthwith after demand
hereunder, to pay, perform and satisfy in full the Obligations and other
Guarantor's Liabilities, the Agent may, at any time, enforce any or all of its
rights and remedies hereunder, enforce any Lien from or against the Guarantor
or on any of its Property and exercise any right or remedy available under
Applicable Law. Without limiting the foregoing, the Agent may proceed to
enforce such rights, remedies and Liens prior to, contemporaneously with or
after any action taken in respect of any Lien given to the Agent or any of the
Banks by the Borrower or any other guarantor. The Agent shall not be required
to take any action or proceeding against or demand payment from or otherwise
exhaust its recourse against the Borrower or any other Guarantor or pursue any
other right or remedy available to the Agent before being entitled to require
the Guarantor to pay, perform and satisfy the Obligations and other Guarantor's
Liabilities in full.
5.4 WAIVER. No failure on the part of the Agent or any of the Banks to
exercise, and no delay in exercising, any right or remedy under this Guarantee
shall operate as a waiver of such right or remedy; nor shall any single or
partial exercise of any right or remedy under this Guarantee preclude any other
or further exercise thereof or the exercise of any other right or remedy; 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
Guarantee shall be effective unless it is in writing duly executed by the
<PAGE> 33
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waiving party.
5.5 SUBROGATION. This Guarantee shall apply to the ultimate balance
owing by the Borrower to the Agent and the Banks in respect of the Obligations
and until all of the Obligations have been paid, performed and satisfied
in full, the Guarantor shall not be entitled to share in any Lien held or money
received by the Agent or any of the Banks on account of the Obligations, to
stand in the place of the Agent or any of the Banks in respect of any Lien or
money, or to take any step to enforce any right or claim against the Borrower
in respect of any monies paid by the Guarantor to the Agent hereunder or
exercise any rights as surety in competition with the Agent or any of the
Banks. Any moneys paid by or recovered from the Guarantor hereunder shall be
deemed to be paid in discharge of the Guarantor's Liabilities, but not in
discharge of the Obligations. Any right of subrogation acquired by the
Guarantor by reason of payment under this Guarantee shall not be exercised
until the Obligations and all other Guarantor's Liabilities have been paid,
performed and satisfied in full. If any amount shall be paid to the Guarantor
on account of any subrogation rights at any time when any of the Obligations or
other Guarantor's Liabilities have not been paid, performed and satisfied in
full, such amount shall be held in trust for the benefit of the Agent and the
Banks and shall forthwith be paid to the Agent.
5.6 INSOLVENCY OF GUARANTOR. The Guarantor agrees that if it shall: (i)
become insolvent or generally not pay its debts as such debts become due; (ii)
admit in writing its inability to pay its debts generally, or make a general
assignment for the benefit of creditors; (iii) file a notice of intention to
file a proposal under any Applicable Law relating to bankruptcy, insolvency,
reorganization or relief of creditors; (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 Law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
(z) the entry of an order for relief or the appointment of a receiver, trustee
or other similar official for it or for any substantial part of its assets,
and, in the case of any such proceeding instituted against it (but not
instituted by it), such proceeding shall remain undismissed or unstayed for a
period of 30 days or any of the actions sought in such proceeding (including
the entry of an order for relief against it or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part
of its assets) shall occur; or (v) take any action to authorize any of the
foregoing events, and if any of such foregoing events shall occur at a time
when any of the Obligations and other
<PAGE> 34
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Guarantor's Liabilities may not then be due and payable, the Guarantor will
forthwith pay to the Agent, on its own behalf and as agent for the Banks, the
full amount which would be payable hereunder by the Guarantor if all the
Obligations and other Guarantor's Liabilities were then due and payable,
without prejudice to any other right or recourse of the Agent or any of the
Banks under the Documents or at Applicable Law against the Borrower, the
Guarantor or any other Person.
5.7 AGENT AS ATTORNEY. The Guarantor hereby irrevocably appoints the
Agent and any Person designated by the Agent after the occurrence of an Event
of Default to sign, execute or do any deeds, documents, transfers,
demands, assignments, assurances, consents or things that the Guarantor is
required to sign, execute or do hereunder, and to commence, continue or defend
any proceedings authorized to be taken hereunder and generally to use the name
of the Guarantor in the exercise of all or any of the powers hereby conferred
on the Agent.
ARTICLE 6
POSTPONEMENT AND ASSIGNMENT
6.1 SUBORDINATION AND POSTPONEMENT. Upon the occurrence and during the
continuance of an Event of Default, all obligations, indebtedness, liabilities
and claims, present and future, of the Borrower to the Guarantor (the
"Postponed Obligations") and all Liens in favour of the Guarantor from or
against the Borrower or relating to the Postponed Obligations and from or
against any other Person (the "Postponed Liens") are hereby subordinated and
postponed to the Obligations and the Guarantor's Liabilities, and all monies
received by the Guarantor in respect thereof shall be received in trust for the
Agent and the Banks and forthwith upon receipt shall be paid over to the Agent,
without affecting the Guarantor's Liabilities. This Section 6.1 is independent
of the other provisions of this Guarantee and shall remain in full force and
effect until repayment in full of the Obligations and the Guarantor's
Liabilities and the termination of the Credit Agreement, notwithstanding that
the Guarantor's Liabilities may have been discharged or terminated.
6.2 ASSIGNMENT. As further continuing security for the Guarantor's
Liabilities, upon the occurrence and during the continuance of an Event of
Default, the Guarantor hereby unconditionally and
<PAGE> 35
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irrevocably assigns to the Agent, on its own behalf and as agent for the Banks,
all the Postponed Obligations and the Postponed Liens, present and future. The
Guarantor hereby undertakes on demand by the Agent to take all such steps that
may be necessary to enable the Agent to enforce the rights assigned to the
Agent hereby. The Guarantor agrees that upon the occurrence and during the
continuance of an Event of Default, the Agent shall be entitled: (i) at any
time to notify the Borrower of this assignment; (ii) to collect and recover
from the Borrower any amounts covered thereby; and (iii) to compromise any
Postponed Obligations and to release and discharge any Postponed Liens hereby
assigned. The Guarantor hereby irrevocably authorizes the Agent to sign and
execute any and all documents on the Guarantor's behalf which may be necessary
to give effect to or to enforce the rights afforded to the Agent pursuant to
this assignment. If the Agent allows any payment to be made to the Guarantor
and allows the Guarantor to accept and retain such payment, the Agent shall not
consequently lose any of its rights as assignee hereunder to any balance of any
Postponed Obligations or Postponed Liens. No waiver, relaxation or omission on
the part of the Agent in the exercise of any of its rights as assignee in
respect of any Postponed Obligations or Postponed Liens hereunder shall
prejudice or otherwise affect the Guarantor's Liabilities. This Section 6.2 is
independent of the other provisions of this Guarantee and shall remain in full
force and effect until repayment in full of the Obligations and the Guarantor's
Liabilities, notwithstanding that the Guarantor's Liabilities may have been
discharged or terminated.
ARTICLE 7
INDEMNITIES AND TAXATION
7.1 INDEMNITIES. The Guarantor (as a primary obligor and as a separate and
independent obligation and liability from its liabilities and obligations under
Section 2.1 hereby irrevocably, absolutely and unconditionally agrees to
indemnify, exonerate and hold the Agent and each Bank and each of their
respective officers, directors, employees, agents and other representatives
(collectively, the "Indemnified Parties") free and harmless from and against
any claims and losses paid, incurred or suffered by, or asserted against the
Indemnified Parties or any of them, with respect to, or as a direct or indirect
result of the failure of the Borrower to duly, promptly and completely pay,
perform and satisfy all of the Obligations.
7.2 TAXATION ON PAYMENTS. (1) The Guarantor hereby agrees that all
payments to be made
<PAGE> 36
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by the Guarantor under or in connection with this Guarantee shall be made
without deduction or withholding for or on account of any taxes. If any tax is
required to be deducted or withheld from any payment, the Guarantor's
Liabilities shall be increased to the extent necessary to remit to each
affected Bank the amount which would otherwise be payable, if not for the
payment of such tax. From time to time at the request of the Agent on behalf
of each such affected Bank, the Guarantor shall execute and deliver any and all
further instruments necessary or advisable to give full force and effect to
such increase in the amount of the Guarantor's Liabilities resulting from the
payment of such tax. The Guarantor shall also indemnify each such affected
Bank in respect of the delay or failure of the Guarantor to make any such
payment, including penalties relating thereto or interest thereon.
(2) If the Guarantor pays any additional amount under Section 7.2(1) (a
"Tax Payment") and the Agent or any Bank effectively obtains a refund or credit
against tax by reason of the Tax Payment (a "Tax Credit") and the Agent or such
Bank identifies the Tax Credit as being attributable to the Tax Payment, then
the Agent or such Bank after actual receipt of such Tax Credit shall promptly
reimburse the Guarantor for such amount as the Agent or such Bank shall in good
faith determine in its sole discretion to be the proportion of the Tax Credit
that will leave the Agent or such Bank (after that reimbursement) in no better
or worse position than it would have been in if the Tax Payment had not been
required; provided, however, that neither the Agent nor any Bank will be
required to make any reimbursement or part thereof hereunder to the extent it
reasonably believes the making of such reimbursement or part thereof would
cause it to lose the benefit of the Tax Credit. The Agent and each Bank shall
have absolute discretion as to whether to claim any Tax Credit, and if it does
so claim, the extent, order and manner in which it does so and the manner in
which it allocates Tax Credits to its various assets. Neither the Agent nor
any Bank shall be obliged to disclose information regarding its tax affairs or
computations to the Guarantor.
(3) The Agent and the Banks agree to co-operate with the Guarantor in
completing and delivering or filing tax-related forms which would reduce or
eliminate any amount of the nature referred to in Section 7.2(1) required to be
deducted or withheld on account of any payments made by the Guarantor under
this Guarantee; provided, however, that neither the Agent nor any Bank shall be
under any obligation to execute and deliver any such form if, in the opinion of
the Agent or such Bank, completion of any such form could result in an adverse
consequence with respect to the business or tax position of the Agent or such
Bank.
<PAGE> 37
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7.3 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 Document to the Agent or any one or more of the Banks in
any currency (the "Original Currency") into another currency (the "Other
Currency"), the Guarantor agrees, to the fullest extent that it 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 Guarantor in respect of any sum due in the
Original Currency from it to the Agent or any one or more of the Banks
hereunder 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 Banks in the Original Currency, the Guarantor shall, as a
separate obligation and notwithstanding any such judgment, indemnify the Agent
or such Bank 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 Bank in
the Original Currency, the Agent or such Bank shall remit such excess to the
Guarantor.
7.4 COMPUTATIONS OF INTEREST. (1) All computations of interest hereunder
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 and on the basis of a year of 365 or 366 days in the case of a leap
year.
(2) Notwithstanding any provision to the contrary contained in this
Guarantee, 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 Guarantee exceed the maximum
amount of interest on the "credit advanced" (as defined in that section) under
this Guarantee lawfully permitted under that section and, if any payment,
collection or demand pursuant to this Guarantee in respect of "interest" (as
defined in that section) is determined to be contrary to the provisions of that
<PAGE> 38
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section, such payment, collection or demand shall be deemed to have been made
by mutual mistake of the Guarantor and the Agent and the Banks and the amount
of such payment or collection shall be refunded to the Guarantor. For purposes
of this Guarantee, the effective annual rate of interest shall be determined in
accordance with generally accepted actuarial practices and principles 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.
ARTICLE 8
GENERAL PROVISIONS
8.1 RESPONSIBILITY. The Guarantor acknowledges and confirms that neither
the Agent nor any of the Banks has made any representations or warranties to
the Guarantor and that it is relying solely on its own knowledge and has
made all necessary and desirable investigations in connection with the making
of this Guarantee.
8.2 SETTLEMENTS. Any settlement or discharge between the Guarantor and the
Agent shall be conditional upon no Lien taken or held by or payment to the
Agent or any of the Banks being avoided or reduced by virtue of any Applicable
Law and the Agent and the Banks shall be entitled subsequently to recover from
the Guarantor the value or amount by which any such Lien or payment shall have
been avoided or reduced as if such settlement or discharge had not occurred.
8.3 RIGHTS CUMULATIVE. All rights and remedies of the Agent set out in
this Guarantee will be cumulative and no right or remedy contained herein is
intended to be exclusive but each will be in addition to every other right or
remedy contained herein or in the Documents and any other Lien now or hereafter
taken, held or acquired by the Agent or any of the Banks as security for the
Obligations. The taking of a judgment or judgments with respect to any of the
Obligations or other Guarantor's Liabilities will not operate as a merger of
any of the covenants contained in this Guarantee.
8.4 NOTICES. Any demand, notice or communication to be made or given
hereunder shall be in writing and shall be personally delivered to an officer
or other responsible employee of the addressee or
<PAGE> 39
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sent by facsimile, charges prepaid, at or to the applicable addresses or
facsimile numbers, as the case may be, set out below the respective parties'
names as follows:
To the Guarantor: Veltri Metal Products Co.
c/o Talon Automotive Group
900 Wilshire Drive
Suite 270
Troy, Michigan
48084
Attention: David J. Woodward
Telecopy No.: (248) 362-7617
with a copy to:
Timmis & Inman
300 Talon Centre
Detroit, Michigan
48207
Attention: Richard Miettinen
Telecopy No.: (313) 396-4229
Cassels Brock & Blackwell
Scotia Plaza, Suite 2100
40 King Street West
Toronto, Ontario
M5H 3C2
Attention: Gordon Dickson
Telecopy No.: (416) 360-8877
To the Agent: Comerica Bank
500 Woodward Avenue
6th Floor
Detroit, Michigan
U.S.A. 48226
Attention: President
Telecopy No.: (313) 222-5759
<PAGE> 40
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with a copy to:
Miller, Canfield, Paddock and Stone, P.L.C.
150 West Jefferson, Suite 2500
Detroit, Michigan
U.S.A. 48226
Attention: Mr. David K. McLeod
Telecopy No.: (313) 496-8450
Goodman Phillips & Vineberg
Barristers & Solicitors
Suite 2400
250 Yonge Street
Toronto, Ontario
M5B 2M6
Attention: Mr. Stephen Pincus
Telecopy No.: (416) 979-1234
or to such other address or addresses or facsimile number or 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.
8.5 TIME OF THE ESSENCE. Time shall be of the essence of this Guarantee.
8.6 ASSIGNMENT. The Guarantor may not assign or transfer any of its
obligations hereunder. The rights and obligations of the Agent and the Banks
hereunder may be assigned or participated in accordance with the Credit
Agreement.
<PAGE> 41
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8.7 ENUREMENT. This Guarantee shall enure to the benefit of the Agent and
each of the Banks and their respective permitted assigns and participants
and be binding upon the Guarantor and its successors and assigns.
8.8 AMENDMENT. This Guarantee may be amended only by written agreement of
the Guarantor and the Agent.
8.9 RECEIPT OF COPY. The Guarantor acknowledges having received a signed
copy of this Guarantee.
IN WITNESS WHEREOF the Guarantor has executed this Guarantee as of the
date first above written.
VELTRI METAL PRODUCTS CO.
Per: _________________________________
Authorized Signing Officer
<PAGE> 1
EXHIBIT 10.6
DEMAND DEBENTURE
ISSUED TO: COMERICA BANK
500 Woodward Avenue
6th Floor
Detroit, Michigan, U.S.A.
48226
as administrative agent for the Banks (as
defined herein) under the Credit Agreement (as
defined herein)
(the "Holder")
ISSUED BY: VELTRI METAL PRODUCTS CO.
900 Wilshire Drive
Suite 270
Troy, Michigan
48084
(the "Corporation")
U.S.$150,000,000 Date: April , 1998
ARTICLE 1
PROMISE TO PAY
1.1 PROMISE TO PAY
The Corporation, an unlimited liability company formed under the laws
of the Province of Nova Scotia, for value received, hereby acknowledges itself
indebted and promises to pay to or to the order of the Holder, on its own
behalf and as administrative agent for the Banks under the Credit Agreement, at
500 Woodward Avenue, 6th Floor, Detroit, Michigan, 48226, or at such other
place as the Holder may direct at any time and from time to time, ON DEMAND,
the principal amount of U.S.$150,000,000 and all other amounts now or hereafter
payable hereunder or otherwise owing by the Corporation to the Holder and the
Banks, together with interest on the principal amount outstanding
<PAGE> 2
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hereunder from time to time and on all other amounts now or hereafter payable
hereunder or otherwise owing by the Corporation to the Holder and the Banks, in
the case of principal, from the date hereof, and in the case of costs, charges
and expenses, from the date on which they were incurred and in the case of all
other amounts, from the date on which such other amounts are payable, in each
case calculated daily and payable monthly in arrears commencing on the date
hereof at the rate of 30% per annum as well after as before demand, default and
judgment, together with interest on overdue interest at the same rate (the
principal amount, such interest and all other amounts now or hereafter payable
hereunder or otherwise owing by the Corporation to the Holder and the Banks
being referred to herein as the "Obligations Secured").
ARTICLE 2
INTERPRETATION
2.1 DEFINITIONS
"ACCOUNTS" has the meaning set out in Section 3.1(e).
"APPLICABLE LAW" shall mean, in respect of any Person, all provisions of
constitutions, statutes, codes, ordinances, rules, regulations, municipal
by-laws, judicial, arbitral, administrative, ministerial, departmental or
regulatory judgments, orders, decisions, rulings or awards, policies and
guidelines of any Governmental Entity, or any provisions of the foregoing,
including general principles of common and civil law and equity, applicable
to such Person, including, without limiting the foregoing, all orders,
decisions, judgments and decrees of all courts and arbitrators in
proceedings or actions to which the Person in question is a party or by
which it is bound.
"BANKS" shall mean those financial institutions whose names appear as
"Banks" on the signature pages to the Credit Agreement, together with any
assignees thereof pursuant to Section 13.5 of the Credit Agreement, and
shall include the Canadian Swingline lender under the Credit Agreement; and
"BANK" shall mean any one of the foregoing Banks.
"BORROWERS" means, collectively, Talon Automotive Group, Inc.
<PAGE> 3
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"BUSINESS DAY" shall mean a day on which commercial banks are open for
domestic and international business (including dealings in deposits in the
interbank market) in Detroit, Michigan, Toronto, Ontario and London,
England.
"CONTRACTS" has the meaning set out in Section 3.1(f).
"CORPORATION" means Veltri Metal Products Co., its successors and permitted
assigns.
"CREDIT AGREEMENT" means the credit agreement dated as of the date hereof
among the Borrowers, the Holder and the Banks, as amended, supplemented,
restated or replaced from time to time.
"EQUIPMENT" has the meaning set out in Section 3.1(c).
"GAAP" shall mean accounting principles generally accepted in Canada as
recommended in the Handbook of the Canadian Institute of Chartered
Accountants, as in effect on the date hereof.
"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, agency
or instrumentality, 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" shall mean the guarantee dated as of the date hereof between
the Corporation and the Holder, as agent for the Banks, as amended,
supplemented, restated or replaced from time to time.
"INTANGIBLES" has the meaning set out in Section 3.1(h).
<PAGE> 4
- 4 -
"INVENTORY" has the meaning set out in Section 3.1(d).
"LEASEHOLD REAL ESTATE" has the meaning set out in Section 3.1(b).
"LICENSES" has the meaning set out in Section 3.1(i).
"LIEN" means, with respect to any property, any charge, mortgage, pledge,
hypothecation, security interest, lien, conditional sale (or other title
retention agreement or lease in the nature thereof), lease, servitude,
assignment, adverse claim, defect of title, restriction, trust, right of
set-off or other encumbrance of any kind in respect of such property
(including any Lien accounted for as a capitalized lease obligation for
purposes of a balance sheet prepared in accordance with GAAP), whether or
not filed, recorded or otherwise perfected under applicable law.
"MORTGAGED PROPERTY" has the meaning set out in Section 3.1.
"NEGOTIABLE COLLATERAL" has the meaning set out in Section 3.1(g).
"OBLIGATIONS SECURED" has the meaning attributed to such term in Section
1.1.
"PERSON" means an individual, corporation, limited liability company,
association, partnership, joint venture, trust or estate, an unincorporated
organization, a government or any agency or political subdivision thereof,
or any other entity.
"PPSA" means the Personal Property Security Act (Ontario).
"PROCEEDS" has the meaning set out in Section 3.1(l).
"REAL ESTATE" has the meaning set out in Section 3.1(a)(i).
"RECORDS" has the meaning set out in Section 3.1(j).
<PAGE> 5
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"RECEIVER" means any of a receiver, manager, receiver-manager and receiver
and manager.
"SECURITY INTEREST" has the meaning set out in Section 3.1.
"SUBSTITUTE PROPERTY" has the meaning set out in Section 3.1(k).
2.2 INTERPRETATION
This Debenture 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
Debenture;
(c) references to dollars, unless otherwise specifically
indicated, shall be references to lawful money of the United States
of America;
(d) the word "including" shall mean "including without
limitation" and "includes" shall mean "includes without limitation";
(e) the expressions "the aggregate", "the total", "the sum" and
expressions of similar meaning shall mean "the aggregate (or total
or sum) without duplication"; and
(f) 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".
<PAGE> 6
- 6 -
2.3 AMENDMENT
No amendment of any provision of this Debenture shall be effective
unless the same shall be in writing and signed by each of the Corporation and
the Holder, on its own behalf and as administrative agent for the Banks.
2.4 SEVERABILITY
If any provision of this Debenture is or becomes illegal, invalid or
unenforceable, such provision shall be severed from this Debenture and be
ineffective to the extent of such illegality, invalidity or unenforceability.
The remaining provisions hereof shall be unaffected by such provision and shall
continue to be valid and enforceable.
2.5 STATUTES, ETC.
Unless otherwise specified herein all references to statutes or
regulations are to be treated as references to the same as amended,
consolidated, revised or re-enacted from time to time, or to any successor or
replacement statutes or regulations.
2.6 GOVERNING LAW
This Debenture shall be governed by and interpreted in accordance with,
the Applicable Laws of the Province of Ontario and the Applicable Laws of
Canada applicable therein which apply to contracts made and to be performed
entirely in Ontario. The parties hereby irrevocably attorn and submit to the
non-exclusive jurisdiction of the courts of Ontario with respect to any matter
arising under or related to this Debenture.
2.7 SCHEDULES
The following schedules attached hereto shall, for all purposes
hereof, be incorporated in
<PAGE> 7
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and form an integral part of this Debenture:
Schedule A Real Estate
Schedule B Leasehold Real Estate
Schedule C Contracts
Schedule D Places of Business
ARTICLE 3
SECURITY
3.1 CREATION OF SECURITY
As continuing security for the payment of the Obligations Secured and
the performance by the Corporation of all its covenants and obligations
hereunder, but subject to Sections 3.2, 3.3 and 3.4 hereof, the
Corporation hereby grants, assigns, transfers, mortgages, pledges, charges and
hypothecates, as and by way of a fixed and specific mortgage, pledge, charge,
sublease, assignment, security interest and hypothec to and in favour of the
Holder, on its own behalf and as administrative agent for the Banks, all the
right, title, interest and benefit of the Corporation, in, to, under or in
respect of:
(a) (i) all real property now owned or hereafter acquired by the
Corporation, including the real property described in Schedule
"A" hereto, together with all buildings, erections and
improvements thereon and fixtures forming a part thereof
(collectively, the "Real Estate");
(ii) all leases relating to the Real Estate, all income, revenues and
profits derived from any tenancy, use or occupation of the Real
Estate and all rents and other sums payable to the Corporation
pursuant to the terms of any leases relating to the Real Estate
and all benefits, advantages and powers to be derived under such
leases relating to the Real Estate, with full and power and
authority to demand, sue for, recover, receive and give receipts
for all rents and all other monies payable thereunder and
otherwise to enforce the rights of the Corporation
<PAGE> 8
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thereunder;
(iii) all licenses, permits, approvals, certificates and agreements
with or from any Governmental Entity relating directly or
indirectly to the ownership, use, development, operation and
maintenance of the Real Estate or the alteration or renovation or
construction of improvements on the Real Estate, whether
heretofore or hereafter issued or executed;
(iv) all options, contracts, subcontracts, agreements, service
agreements, warranties and purchase orders which have heretofore
been or will be hereafter be executed by or on behalf of the
Corporation or which have been assigned to the Corporation, in
connection with the use, development, operation and maintenance
of the Real Estate or the construction of improvements on the
Real Estate; and
(v) the benefit of all guarantees and indemnities with respect to any
lease of the Real Estate and the performance of any obligations
of any tenant thereunder;
(b) all leasehold property now or hereafter leased by the Corporation,
including the leasehold property described in Schedule "B" hereto,
together with all buildings, erections and improvements thereon and
fixtures forming a part thereof (collectively, the "Leasehold Real
Estate");
(c) all tools, machinery, equipment and supplies (installed or
uninstalled) not included in Inventory below, now owned or hereafter
acquired by the Corporation, including furniture, chattels, motor
vehicles and accessories, and any other equipment used in connection
with the Corporation's business or otherwise owned by the Corporation
(collectively, the "Equipment");
(d) all inventory now owned or hereafter acquired by the Corporation,
including (i) finished goods, work in process, raw materials, goods
in transit, new and unused production, packing and shipping
materials, (ii) all new and unused maintenance items, and (iii) all
<PAGE> 9
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other materials and supplies on hand to be used or
consumed, in connection with the manufacture, packing, shipping,
advertising, selling or furnishing of goods and services
(collectively, the "Inventory");
(e) all right to payment for goods sold or leased or for services
rendered, whether or not earned by performance, and including all
agreements with and sums due from customers and other Persons
(collectively, the "Accounts");
(f) all contracts and leases to which the Corporation is a party,
including construction contracts, management agreements,
rights-of-way, easements, supplier agreements and other agreements,
whether now existing or hereafter arising, and including lease
agreements for personal property and other contracts and contractual
rights, remedies or provisions now existing or hereafter arising in
favour of the Corporation, and further including those contracts and
leases described in Schedule "C" hereto (collectively, the
"Contracts");
(g) all shares, stock, warrants, deeds, debentures, debenture stock and
all other documents, whether now owned or hereafter acquired by the
Corporation, which constitute evidence of a share, participation or
other interest of the Corporation in property or in an enterprise, or
which constitutes evidence of an obligation of the issuer thereof
(collectively, the "Negotiable Collateral");
(h) all general intangibles now owned or hereafter acquired by the
Corporation, including goodwill, choses in action, copyrights, trade
names, trademarks, patents, industrial designs, trade secrets and
other industrial or intellectual property of the Corporation,
together with all related property, both tangible and intangible
(collectively, the "Intangibles");
(i) to the extent permitted by Applicable Law, all franchises, licenses,
authorizations, approvals, permits and operating rights authorizing
or relating to the Corporation's rights to operate its business
(collectively, the "Licenses");
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(j) all books, accounts, invoices, letters, papers, documents, ownership
certificates, manuals, publications, statements of account, bills,
invoices and other documents or records in any form whatsoever
(including computer records) evidencing or relating to the property
described in Sections 3.1(a) to 3.1(i), both inclusive, 3.1(k) and
3.1(l) (collectively, the "Records");
(k) any substitutions and replacements of, and increases, additions and,
where applicable, accessions to the property described in Sections
3.1(a) to 3.1(j), both inclusive (the "Substitute Property"); and
(l) all proceeds in any form now or hereafter derived from the sale,
lease or other disposition of any of the property and assets of the
Corporation subject to, or intended to be subject to, the Security
Interest (as hereinafter defined) (the "Proceeds").
The Real Estate, Leasehold Real Estate, Equipment, Inventory, Accounts,
Contracts, Negotiable Collateral, Intangibles, Licenses, Records, Substitute
Property and Proceeds are herein collectively referred to as the "Mortgaged
Property". The mortgages, charges, pledges, transfers, subleases, assignments
and security interests granted hereby secure payment of the Obligations Secured
and are herein collectively referred to as the "Security Interest".
3.2 EXCEPTION FOR LAST DAY OF LEASES
The last day of the term reserved by any lease or sub-lease, oral or
written, or any agreement therefor now held or hereafter acquired by the
Corporation is hereby excepted out of the Security Interest and does not and
shall not form part of the Mortgaged Property, but the Corporation shall stand
possessed of such last day in trust to assign the same as the Holder shall
direct upon the sale of any leasehold interest on any part thereof in the
course of the enforcement by the Holder of the Security Interest.
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3.3 EXCEPTION FOR CONTRACTUAL RIGHTS
Unless and until the Holder so declares to the contrary by notice in
writing given to the Corporation, the security created hereby does not and
shall not extend to, and Mortgaged Property shall not include, any Contract or
License (the "Contractual Rights") to which the Corporation is a party or of
which the Corporation has the benefit, to the extent that the creation of the
security therein would constitute a breach of the terms of or permit any Person
to terminate the Contractual Rights, but the Corporation shall hold its
interest therein in trust for the Holder and shall assign such Contractual
Rights to the Holder forthwith upon obtaining the consent of the other party
thereto. The Corporation agrees that it shall, upon the request of the Holder,
make all reasonable efforts to obtain any consent required to permit any
Contractual Rights to be subjected to the security created hereby.
3.4 TRANSACTIONS IN ORDINARY COURSE OF BUSINESS
Until the Security Interest shall have become enforceable, the Security
Interest shall in no way hinder or prevent the Corporation from selling,
assigning, transferring, exchanging, leasing or otherwise disposing of or
dealing with the Mortgaged Property in the ordinary course of its business and
for the purpose of carrying on the same, provided such action is not in breach
of the covenants herein contained or of any agreement to which the Holder and
the Corporation are parties.
3.5 ATTACHMENT
(a) The Corporation and the Holder hereby acknowledge that: (i) value has
been given; (ii) the Corporation has rights in the Mortgaged Property
(other than Mortgaged Property acquired after the date hereof); (iii)
they have not agreed to postpone the time for attachment of the
Security Interest;
(b) If the Corporation acquires any Negotiable Collateral after the date
hereof (other than cheques, promissory notes and other bills of
exchange that are acquired in the ordinary course of business of the
Corporation) not otherwise specifically charged to the Holder by
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means satisfactory to the Holder, in its sole discretion, the
Corporation will, forthwith upon receipt by the Corporation, deliver
to the Holder (on its own behalf and as administrative agent for the
Banks) such Negotiable Collateral and shall, at the request of the
Holder: (i) cause the transfer thereof to the Holder, to be
registered wherever, in the opinion of the Holder, such registration
may be required or advisable; (ii) duly endorse the same for transfer
in blank or as the Holder may direct; and (iii) forthwith deliver to
the Holder any and all consents or other instruments or documents
which may be necessary to effect the transfer of the Negotiable
Collateral to the Holder or any third party; and
(c) The Corporation hereby agrees to promptly inform the Holder in
writing of the acquisition by the Corporation of any property which
is intended to constitute Mortgaged Property, whether real or
personal, or which is not adequately described herein, and the
Corporation agrees to execute and deliver at its own cost and expense
from time to time amendments to this Debenture or the schedules
hereto or additional security or schedules as may be required by the
Holder in order that the Security Interest shall be properly recorded
and perfected and attach to such property.
3.6 LICENSES AND CONTRACTS
Neither the Holder nor the Banks will be deemed in any manner to have
assumed any obligation of the Corporation under any of the Licenses or
Contracts nor shall the Holder or the Banks be liable to any Governmental
Entity by reason of any default by any Person under the Licenses or Contracts.
The Corporation agrees to indemnify and hold the Holder and each of the Banks
harmless of and from any and all liability, loss or damage which they may incur
by reason of any claim or demand against any of them based on their alleged
assumption, by virtue of the execution and delivery of this Debenture and the
creation of the Security Interest, of the Corporation's duty and obligation to
perform and discharge the terms, covenants and agreements in the Licenses and
Contracts.
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ARTICLE 4
COVENANTS OF THE CORPORATION
4.1 GENERAL COVENANTS
The Corporation declares, covenants and agrees that it:
(a) As to Title - is the sole beneficial owner of, and has a good and
marketable title to, and will be lawfully possessed of, the Mortgaged
Property free and clear of all Liens except those permitted under the
provisions governing the Obligations Secured, and has full legal
right to grant the Security Interest pursuant to this Debenture. No
Person has any written or oral agreement, option, understanding or
commitment, or any right or privilege capable of becoming any
agreement, option, understanding or commitment, to purchase from the
Corporation any of the Mortgaged Property, except as permitted by the
provisions governing the Obligations Secured;
(b) To Maintain Corporate Existence - shall preserve and maintain its
existence, and its material rights, franchises, licences and
privileges in the jurisdiction of its incorporation and shall advise
the Holder promptly in writing in advance of any proposed change in
its name;
(c) To Maintain Security - except for the filing of renewal statements
and the making of other filings by the Holder as a secured party
hereunder, shall take all action and supply the Holder with all
information necessary to maintain the Security Interest as a valid
and effective security at all times so long as any Obligations
Secured are outstanding hereunder;
(d) To Keep Records - shall maintain a system of accounting established
and administered in accordance with GAAP, shall keep adequate records
and books of account in which complete entries will be made in
accordance with GAAP and reflect all transactions
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required to be reflected by GAAP, and shall keep accurate and
complete records of its properties and assets;
(e) Maintenance of Mortgaged Property - shall maintain or cause to be
maintained in the ordinary course of business in good repair, working
order and condition (reasonable wear and tear accepted) all Mortgaged
Property, other than obsolete Equipment or unused assets, and from
time to time make or cause to be made all needed and appropriate
repairs, renewals, replacements, additions, betterments, and
improvements thereto;
(f) To Furnish Proofs - shall forthwith on the happening of any loss or
damage furnish at its expense all necessary proofs and do all
necessary acts to enable the Holder to obtain payment of the
insurance moneys in accordance with any insurance policies in respect
of the Mortgaged Property;
(g) Not to Remove - subject to Section 3.4, shall not transfer any of the
Mortgaged Property from a jurisdiction in which the Security Interest
is perfected to a jurisdiction in which the Security Interest would
not be perfected, until the Corporation has, at its sole cost and
expense: (i) effected such further registrations and obtained such
consents as are required to perfect, preserve and protect the
Security Interest in the jurisdiction to which the Corporation
proposes to transfer the Mortgaged Property; or (ii) given such other
security as may be required or desirable (in the sole determination
of the Holder) to protect or preserve the Security Interest; and the
Corporation shall promptly notify the Holder in advance of the
intended transfer and the action proposed to be taken;
(h) No Liens - shall not create, assume, incur or permit to exist, or to
be created, assumed or permitted to exist, directly or indirectly,
any Liens upon any part of the Mortgaged Property, other than the
Security Interest and any Liens permitted under the provisions
governing the Obligations Secured, and the Corporation shall at all
times keep such permitted Liens in good standing;
(i) Contracts and Licenses - shall (i) fulfil, perform and observe each
and every material
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condition and covenant contained in any of the Contracts and
Licenses, (ii) give prompt notice to the Holder of any claim of
default under any Contract or License, (iii) at the sole cost and
expense of the Corporation, enforce the performance and observance of
each and every material covenant and condition of the Contracts, and
(iv) appear in and defend any action growing out of or in any manner
connected with any Contract; and
(j) Place of Business - keep its chief executive office, its principal
place of business, its registered office and the location where it
keeps its corporate records, including records respecting the
Accounts, at the address listed in Schedule "D" hereto. Schedule "D"
also contains all other places of business of the Corporation. The
Corporation shall not change its principal place of business, or the
location of the office where it keeps its corporate records, without
the Holder's prior written consent, and the Corporation shall give
the Holder written notice within fifteen (15) days of acquiring any
other places of business.
4.2 VERIFICATION OF MORTGAGED PROPERTY
The Corporation will permit representatives of the Holder and any
of the Banks upon reasonable notice, to (i) visit and inspect the Mortgaged
Property during business hours, (ii) inspect and make extracts from and
copies of the Corporation's books and records, and (iii) discuss with principal
officers of the Corporation the Corporation's business, assets, liabilities,
financial position, results of operations and business prospects. The
Corporation will also permit representatives of the Holder and any of the Banks
to discuss with the Corporation's accountants the Corporation's business,
assets, liabilities, financial position, results of operations and business
prospects.
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4.3 FURTHER ASSURANCES
The Corporation shall, at its own expense do, execute, acknowledge and
deliver or cause to be done, executed, acknowledged and delivered all such
further acts, deeds, mortgages, pledges, charges, assignments, security
agreements, hypothecs, and assurances (including instruments supplemental or
ancillary hereto) and such financing statements as the Holder may from time to
time request to better assure and perfect the Security Interest.
ARTICLE 5
DEFAULT AND ENFORCEMENT
5.1 DEFAULT
The Security Interest shall become enforceable against the
Corporation if and when the Corporation shall fail to pay or perform any of the
Obligations Secured when due and payable or required to be performed, as
the case may be, all as specified in the provisions governing the Obligations
Secured. Whenever the Security Interest has become enforceable, the
Obligations Secured shall immediately become due and payable by the Corporation
to the Holder (on its own behalf and as administrative agent for the Banks)
without the necessity of any further act or formality and, when and after the
Holder exercises any of the remedies available to it under Section 5.2, the
Corporation shall not be entitled to sell, assign, transfer, exchange, lease or
otherwise dispose of or deal with all or any part of the Mortgaged Property.
5.2 REMEDIES
Whenever the Security Interest has become enforceable, the Holder (on
its own behalf and as administrative agent for the Banks) may in its discretion:
(a) take possession of all or any part of the Mortgaged Property with
power to exclude the Corporation and its officers, employees and
agents therefrom;
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(b) take all such steps as the Holder may consider necessary or desirable
for the purposes of preserving, maintaining and completing all or any
part of the Mortgaged Property and making such replacements thereof
and improvements and additions thereto as the Holder may consider
expedient;
(c) carry on all or any part of the business of the Corporation relating
to the Mortgaged Property and use all or any part of the Mortgaged
Property directly in carrying on the Corporation's business or as
security for loans or advances to enable the Holder to carry on the
Corporation's business or otherwise;
(d) receive the rents, incomes and profits of any kind whatsoever from
the Mortgaged Property and pay therefrom: (i) any expenses of
preserving, maintaining and completing the Mortgaged Property, of
making such replacements thereof and improvements and additions
thereto as the Holder may consider expedient and of carrying on all
or any part of the Corporation's business relating to the Mortgaged
Property; and (ii) any charges against the Mortgaged Property ranking
in priority to or pari passu with the Security Interest or the
payment of which may be necessary or desirable to preserve or protect
all or any part of the Mortgaged Property or the interest of the
Holder therein;
(e) lease all or any part of the Mortgaged Property and renew from time
to time all or any of the leases relating to the Real Estate or the
Leasehold Real Estate on such terms and conditions as the Holder may
determine;
(f) with or without taking possession, take any action or proceedings to
enforce the performance of any covenant contained in any of the
leases relating to the Real Estate or the Leasehold Real Estate;
(g) enjoy and exercise all the powers of the Corporation as the
Holder considers necessary or desirable for the exercise of any and
all of the remedies of the Holder provided for herein, including the
powers to make any arrangement or compromise on behalf and in
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the name of the Corporation which the Holder considers expedient, to
purchase on credit and borrow money on behalf and in the name of the
Corporation and to advance their own moneys to the Corporation, all
at such rates of interest as the Holder may consider reasonable, and
to enter into contracts and undertake obligations on behalf of and in
the name of the Corporation for any and all of the foregoing purposes
or which the Holder considers necessary or desirable for the exercise
of any of the rights, powers and remedies of the Holder provided for
herein, all of which borrowings, advances and obligations together
with interest thereon shall, at the discretion of the Holder, be
entitled to the security hereof in priority to the payment of the
Obligations Secured;
(h) sell or otherwise dispose of all or any part of the Mortgaged
Property;
(i) apply to a court for the appointment of a Receiver to take possession
of all or such part of the Mortgaged Property as the Holder shall
designate, with such duties, powers and obligations as the court
making the appointment shall confer;
(j) appoint a Receiver of all or any part of the Mortgaged Property by
instrument in writing executed by the Holder;
(k) institute proceedings in any court of competent jurisdiction for sale
or foreclosure of the Mortgaged Property; and
(l) take any steps or proceedings of any kind permitted by Applicable Law
or in equity or otherwise to enforce payment of the Obligations
Secured or performance of any other covenant or obligation of the
Corporation contained herein, and exercise all rights and remedies of
a secured party under the PPSA.
5.3 REMEDIES CUMULATIVE AND WAIVER
The rights and remedies hereunder of the Holder are cumulative and
are in addition to and not in substitution for any other rights and remedies
provided by law or by equity. Any single or
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partial exercise by the Holder of any right or remedy in respect of a
default or breach of any term, covenant or condition contained herein shall not
be deemed to be a waiver thereof or to alter, affect or prejudice any other
right or remedy hereunder or other rights or remedies to which the Holder may be
lawfully entitled, for such default or breach. The Holder shall at all times
have the right to proceed against all or any portion of the Mortgaged Property
or any other security in such order and in such manner as it shall determine
without waiving any rights, powers or remedies which the Holder may have with
respect to this Debenture or any other security or at law, in equity or
otherwise. No delay or omission by the Holder in exercising any right, power or
remedy hereunder or otherwise shall operate as a waiver thereof or of any other
right, power or remedy. Any waiver by the Holder of the strict observance,
performance or compliance with any term, covenant, condition or agreement herein
contained and any indulgence granted, either expressly or by course of conduct,
by the Holder shall be effective only in the specific instance and for the
purpose for which it was given and shall be deemed not to be a waiver of any
rights and remedies of the Holder hereunder as a result of any other default or
breach hereunder. No consent or waiver by the Holder shall be effective unless
made in writing and signed by an authorized officer of the Holder.
5.4 RECEIVER APPOINTED BY HOLDER
(a) Any Receiver appointed by the Holder shall be vested with the rights
and remedies which could have been exercised by the Holder in respect
of the Corporation or the Mortgaged Property and such other powers
and discretions as are granted in the instrument of appointment and
any instrument or instruments supplemental thereto. The identity of
the Receiver or any replacement thereof and any remuneration thereof
shall be within the sole and unfettered discretion of the Holder.
(b) Any Receiver appointed by the Holder shall act as agent for the
Holder for the purposes of taking possession of the Mortgaged
Property, but otherwise and for all other purposes (except as
provided below) as agent for the Corporation. The Receiver may sell,
lease, or otherwise dispose of the Mortgaged Property as agent for
the Corporation or as agent for the Holder as the Holder may
determine in its discretion. The Receiver shall apply all monies from
time to time received by the Receiver to payment of the Obligations
Secured
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in the order of priority specified in Section 6.1. The
Corporation agrees to indemnify the Receiver in respect of all
actions of the Receiver, acting as agent for the Corporation, except
that the Corporation shall not be liable to indemnify the Receiver
for any claims or losses resulting from the gross negligence or
wilful misconduct of the Receiver.
(c) The Holder, in appointing or refraining from appointing any Receiver,
shall not incur liability to the Receiver, the Corporation or
otherwise and shall not be responsible for any misconduct or
negligence of such Receiver.
5.5 APPOINTMENT OF ATTORNEY
The Corporation hereby irrevocably appoints the Holder (and any officers
thereof) as attorney of the Corporation (with full power of substitution) to
exercise, at any time when and after the Security Interest has become
enforceable , in the name of and on behalf of the Corporation any of the
Corporation's right (including the right of disposal), title and interest in
and to the Mortgaged Property including the execution, endorsement and delivery
of any agreements, documents, instruments, securities, documents of title and
chattel paper and any notices, receipts, assignments or verifications of the
accounts. All acts of any such attorney are hereby ratified and approved, and
such attorney shall not be liable for any act, failure to act or an other
matter or thing in connection therewith, except for its own gross negligence or
wilful misconduct.
5.6 DEALING WITH THE MORTGAGED PROPERTY AND THE SECURITY INTEREST
(a) The Holder shall not be obliged to exhaust its recourse against the
Corporation or any other Person or Persons or against any other
security the Holder may hold in respect of the Obligations Secured
before realizing upon or otherwise dealing with the Mortgaged
Property in such manner as it may consider desirable.
(b) The Holder may grant extensions or other indulgences, take and give
up securities, accept compositions, grant releases and discharges and
otherwise deal with the Corporation and with other parties, sureties
or securities as it sees fit without prejudice to the Obligations
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Secured or the rights of the Holder in respect of the Mortgaged
Property.
(c) Neither the Holder nor the Banks shall be: (i) liable or accountable
for any failure to collect, realize or obtain payment in respect of
the Mortgaged Property; (ii) bound to institute proceedings for the
purpose of collecting, enforcing, realizing or obtaining payment of
the Mortgaged Property or for the purpose of preserving any rights of
the Holder or the Banks, the Corporation or any other Person in
respect thereof; (iii) responsible for any loss occasioned by any
sale or other dealing with the Mortgaged Property or by the retention
of or failure to sell or otherwise deal therewith; and (iv) bound to
protect the Mortgaged Property from depreciating in value or becoming
worthless.
5.7 STANDARDS OF SALE
Subject to Applicable Law, and without prejudice to the ability of
the Holder to dispose of the Mortgaged Property in any manner which is
commercially reasonable, the Corporation acknowledges that a disposition of
Mortgaged Property by the Holder which takes place substantially in accordance
with the following provisions shall be deemed to be commercially reasonable:
(a) Mortgaged Property may be disposed of in whole or in part;
(b) Mortgaged Property may be disposed of by public auction, public
tender or private contract, with or without advertising and without
any other formality;
(c) any purchaser or lessee of such Mortgaged Property may be a customer
of the Holder or any of the Banks;
(d) a disposition of Mortgaged Property may be on such terms and
conditions as to credit or otherwise as the Holder, in its sole
discretion, may deem advantageous; and
(e) the Holder may establish an upset or reserve bid or price in respect
of the Mortgaged
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Property.
5.8 DEALINGS BY THIRD PARTIES
No Person dealing with the Holder or its agent or a Receiver shall be
required:
(a) to determine whether the Security Interest has become enforceable;
(b) to determine whether the powers which the Holder or its agent is
purporting to exercise have been exercisable;
(c) to determine whether any money remains due to the Holder by the
Corporation;
(d) to determine the necessity or expediency of the stipulations and
conditions subject to which any sale or lease shall be made;
(e) to determine the propriety or regularity of any sale or any other
dealing by the Holder with the Mortgaged Property; or
(f) to see to the application of any money paid to the Holder.
The Security Interest hereby constituted is in addition to and not in
substitution for any security now held or hereinafter acquired by the Holder or
the Banks as security for the Obligations Secured.
5.9 CORPORATION LIABLE FOR THE DEFICIENCY
In the case of any judicial or other steps or proceedings to enforce
the Security Interest, and without limiting any right of the Holder to obtain
judgment for any greater amount, the Corporation shall remain liable to the
Holder for any amount which may remain due in respect of the Obligations
Secured after application to the payment thereof of the proceeds of any sale,
lease or other disposition of the Mortgaged Property or any part thereof.
<PAGE> 23
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5.10 NOTICE OF SALE
Unless required by Applicable Law, neither the Holder nor any Receiver
appointed by it shall be required to give the Corporation any notice of any
sale, lease or other disposition of the Mortgaged Property or any part thereof
or the date after which any private disposition of Mortgaged Property or any
part thereof is to be made.
5.11 PAYMENT OF PRIOR CLAIMS
If, when and after the Security Interest has become enforceable, the
Holder is at any time required to make a payment to defeat or honour the
priority or possible priority of any Liens (including Liens permitted under the
provisions governing the Obligations Secured) on or in respect of all or any
part of the Mortgaged Property, any such payment or payments, and the costs,
charges and expenses of the Holder in connection therewith (including legal
fees on a solicitor and client basis) shall be payable by the Corporation on
demand and form part of the Obligations Secured.
ARTICLE 6
APPLICATION OF MONEYS
6.1 APPLICATION OF MONEYS
The moneys arising from the enforcement of the Security Interest as a
result of the possession by the Holder or the Receiver of the Mortgaged
Property or any part thereof or from any sale, lease or other disposition of,
or realization of security on, the Mortgaged Property or any part thereof
(except following foreclosure or other acceptance of the Mortgaged Property or
part thereof in satisfaction of the Obligations Secured) shall be applied by
the Holder or the Receiver in the following order, except to the extent
otherwise required by Applicable Law or by any agreement entered into by the
Holder (on its own behalf and as administrative agent for the Banks), the
Corporation and any other secured creditors of the Corporation with respect to
the application of such moneys:
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(a) first, in payment of the Holder's and the Banks' reasonable costs,
charges and expenses (including legal fees on a solicitor and his own
client basis) incurred in the exercise of all or any of the rights,
powers or remedies granted under this Debenture, and in payment of
the reasonable remuneration of the Receiver, if any, and the
reasonable costs, charges and expenses incurred by the Receiver, if
any, in the exercise of all or any of the rights, powers or remedies
available to the Receiver under this Debenture;
(b) second, in payment of amounts paid by the Holder or the Receiver
pursuant to Section 5.2(d)(ii);
(c) third, in payment of all money borrowed or advanced by the Holder or
the Receiver, if any, whether evidenced by Receiver's certificates or
otherwise, pursuant to the exercise of the rights, powers or remedies
set out in this Debenture and any interest thereon;
(d) fourth, in payment of the remainder of the Obligations Secured in
such order of application as the Holder may determine;
(e) fifth, to any Person entitled thereto by Applicable Law in priority
to the Corporation; and
(f) sixth, to the Corporation.
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6.2 PAYMENT INTO COURT
Where there is a question as to any Person who is entitled to receive
payment under Section 6.1, the Holder or the Receiver may pay the moneys
referred to therein into court.
ARTICLE 7
GENERAL
7.1 RELEASES
The Holder, on its own behalf and as administrative agent for the
Banks, may in its discretion, from time to time, release any part of the
Mortgaged Property or any other security either with or without any sufficient
consideration therefor, without responsibility therefor and without thereby
releasing any other part of the Mortgaged Property or any other security or any
Person from the Security Interest or from any of the covenants herein
contained. Each and every portion into which the Mortgaged Property is or may
hereafter be divided does and shall stay charged with the Obligations Secured.
No Person shall have the right to require the Obligations Secured to be
apportioned and neither the Holder nor the Banks shall be accountable to the
Corporation for any moneys except those actually received by the Holder or the
Banks, as the case may be.
7.2 EXPENSES
The Corporation shall pay to the Holder on demand all of the Holder's
and the Banks' reasonable costs, charges and expenses (including, without
limitation, legal fees on a solicitor and his own client basis and Receiver's
fees) in connection with the preparation, registration or amendment of this
Debenture, the perfection or preservation of the Security Interest, the
enforcement by any means of any provisions hereof or the exercise of any
rights, powers or remedies hereunder, including all such costs, charges and
expenses in connection with taking possession, maintaining, completing,
preserving, protecting, collecting or realizing upon all or any part of the
Mortgaged Property or carrying on all or any part of the business of the
Corporation relating to the Mortgaged Property.
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7.3 DISCHARGE OF DEBENTURE
After the Obligations Secured have been paid in full, the Holder
shall, at the written request and expense of the Corporation, cancel and
discharge this Debenture and execute and deliver to the Corporation such
instruments as shall be necessary to discharge this Debenture and to release or
reconvey to the Corporation any property and assets subject to the Security
Interest.
7.4 NO MERGER OF ESTATES
There shall not be deemed to be any merger of this Debenture, nor of
the rights and interests of the Holder hereunder, with the estate in the Real
Estate or with the reversion or rights and interests of the Corporation or the
Holder under any instrument affecting the Mortgaged Property by reason only of
the fact that the same Person may own or acquire, directly or indirectly, two
or more estates, rights or interests in the Mortgaged Property until all
Persons having any interest under this Debenture, in the estate in the Real
Estate or in the reversion or rights and interests of the Corporation or the
Holder under any instrument affecting the Mortgaged Property, by an appropriate
instrument, so declare and provide.
7.5 NO OBLIGATION TO ADVANCE
Neither the issue nor delivery of this Debenture shall obligate the
Holder or the Banks to advance any funds, or otherwise make or continue to make
any credit available, to the Corporation.
7.6 EXCLUSION OF IMPLIED COVENANTS
The implied covenants deemed to be included in a charge under
subsection 7(1) of the Land Registration Reform Act (Ontario) shall be and are
hereby expressly excluded from the terms of this Debenture.
<PAGE> 27
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7.7 PERFECTION OF SECURITY
The Corporation, at the expense of the Corporation, shall register,
file or record all financing statements and other documents in all offices
where, in the opinion of the Holder's counsel such registration, filing or
recording is necessary or desirable to preserve, perfect or otherwise protect
the Security Interest and the priority thereof. The Holder shall have the
right to require that the form of this Debenture or any part thereof be amended
to reflect any changes in the Applicable Laws, whether arising as a result of
statutory amendments, court decisions or otherwise, in order to confer upon the
Holder the Security Interest.
7.8 ASSIGNMENTS AND PARTICIPATIONS
The Holder may sell, assign, transfer or otherwise dispose of all or
any of the Obligations Secured in accordance with the provisions governing the
Obligations Secured and, in such event, each and every immediate and successive
assignee, transferee or holder of all or any of the Obligations Secured, shall
have, in respect of the rights or obligations sold, assigned, transferred or
otherwise disposed of to it, the full benefit hereof to the same extent as if
it were an original party to the Obligations Secured or the part thereof so
sold, assigned, transferred or otherwise disposed of, without regard to any
set-off, counter-claim or equities between the Corporation and the Holder.
7.9 HOLDER AND BANKS
Each reference herein to any right granted to, benefit conferred upon,
or power exercisable by the Holder shall be a reference to the Holder for the
benefit of all the Banks, and each action taken or right exercised hereunder
shall be deemed to have been so taken or exercised by the Holder for its own
benefit and for the benefit of the Banks. The Corporation acknowledges that in
the event the Holder should cease to act as administrative agent under the
Credit Agreement, a successor administrative agent shall have all the rights of
the Holder provided herein, or in the event that a successor administrative
agent is not appointed, each of the Banks shall have the rights ascribed to the
Holder hereby, in respect of that portion of the Obligations Secured owing by
the Corporation to such Bank.
<PAGE> 28
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7.10 NOTICE
Any demand, notice or communication to be made or given hereunder shall
be in writing and shall be personally delivered to an officer or other
responsible employee of the addressee or sent by facsimile, charges prepaid, at
or to the applicable addresses or facsimile numbers, as the case may be, set
out below the respective parties' names as follows:
To the Corporation: Veltri Metal Products Co.
c/o Talon Automotive Group
900 Wilshire Drive
Suite 270
Troy, Michigan
48084
Attention: David J. Woodward
Telecopy No.: (248) 362-7617
with a copy to:
Timmis & Inman
300 Talon Centre
Detroit, Michigan
48207
Attention: Richard Miettinen
Telecopy No.: (313) 396-4229
Cassels Brock & Blackwell
Scotia Plaza, Suite 2100
40 King Street West
Toronto, Ontario
M5H 3C2
Attention: Gordon Dickson
Telecopy No.: (416) 360-8877
<PAGE> 29
- 29 -
To the Holder: Comerica Bank
500 Woodward Avenue
6th Floor
Detroit, Michigan
U.S.A. 48226
Attention: President
Telecopy No.: (313) 222-5759
with a copy to:
Miller, Canfield, Paddock and Stone, P.L.C.
150 West Jefferson, Suite 2500
Detroit, Michigan
U.S.A. 48226
Attention: Mr. David K. McLeod
Telecopy No.: (313) 496-8450
Goodman Phillips & Vineberg
Barristers & Solicitors
Suite 2400
250 Yonge Street
Toronto, Ontario
M5B 2M6
Attention: Mr. Stephen Pincus
Telecopy No.: (416) 979-1234
or to such other address or addresses or facsimile number or 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.
<PAGE> 30
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7.11 BENEFIT OF THE DEBENTURE
This Debenture shall enure to the benefit of the Holder on its own
behalf and as administrative agent for the Banks and its successors and assigns
and be binding upon the Corporation and its successors and permitted assigns.
7.12 COPY RECEIVED
The Corporation acknowledges receipt of a copy of this Debenture and
copies of the financing statements registered under any applicable provincial
or state statute or statutes in respect of the Security Interest.
7.13 TIME OF ESSENCE. Time shall be of the essence of this Debenture with
respect to the obligations of the Corporation hereunder.
IN WITNESS WHEREOF the Corporation has caused this Debenture to be
executed the day, month and year first written above.
VELTRI METAL PRODUCTS CO.
Per: _________________________________
Authorized Signing Officer
<PAGE> 31
SCHEDULE "A"
REAL ESTATE
1. 2030 North Talbot Road, Windsor, Ontario:
Those lands and premises located in the Township of Sandwich
South, in the County of Essex and Province of Ontario and being
composed of Part of Lot 12, Concession 6, in the said Township and
which said parcel or tract may be more particularly described as
follows:
BEARINGS are assumed astronomic and are referred to a Plan of the King's
Highway No. 401 according to Instrument No. 9790;
COMMENCING at a standard iron bar planted in the northern limit of the
North Talbot Road, distant 945.77 feet measured westerly in that limit
from the western limit of Walker Road, as widened;
THENCE north seventy-one degrees, fifty-five minutes west following the
said northerly limit of the North Talbot Road, 346.17 feet to a standard
iron bar;
THENCE north three degrees, six minutes east and parallel with the
western limit of Walker Road, as widened, 503.03 feet to an iron bar;
THENCE south eighty-seven degrees, fifty-seven minutes east 334.46 feet
to an iron bar;
THENCE south three degrees, six minutes west and parallel with the
western limit of Walker Road, as widened, 598.66 feet more or less to the
place of commencement. Containing by admeasurement the sum of 4.229
acres be the same more or less.
2. 73 Main Street, Glencoe, Ontario:
Part of Lot 24, Range 2, North of the Longwoods Road, formerly in the
Township of Ekfrid, now in the Village of Glencoe in the County of
Middlesex, designated as Parts 1, 2, 3, 4, 8 and 10 on Reference Plan
34R-1667
<PAGE> 32
SCHEDULE "B"
LEASEHOLD REAL ESTATE
1. 2000 North Talbot Road, Windsor:
Leasehold interest in all and Singular that certain parcel or tract of land
and premises situate, lying and being in the Township of Sandwich South, in
the County of Essex and Province of Ontario and being composed of Part of
Lot 12, in the 6th Concession in the said Township, containing by
admeasurement 2.00 acres, and more particularly described as follows:
PREMISING that the northerly limit of North Talbot Road, as referred to in
Instrument No. 493914 is assumed to have an astronomic bearing of North 71
degrees, 55 minutes west, and relating all bearings herein thereto;
COMMENCING at an iron bar planted in the said northerly limit of North
Talbot Road, distant 1480.91 feet, measured westerly therealong from its
intersection with the westerly limit of Walker Road, as widened;
THENCE south 71 degrees, 55 minutes east, along the said northerly limit of
North Talbot Road, a distance of 189.07 feet to a standard iron bar;
THENCE north 3 degrees, 9 minutes east, a distance of 503.03 feet to an
iron bar;
THENCE 87 degrees, 56 minutes west, a distance of 182.71 feet to a standard
iron bar;
THENCE south 3 degrees, 9 minutes west, a distance of 450.86 feet more or
less, to a point of commencement pursuant to a lease made as of August 1,
1994, between Maria L. Veltri as landlord and North American Precision Tool
Ltd. as tenant and amended by First Amendment to Indenture made as of
November 8, 1996. Notice of this lease is registered as Instrument No.
1363306 and notice of the First Amendment to Indenture is registered as
Instrument No. 1367992. North American Precision Tool Ltd. was continued in
the Province of Nova Scotia as North American Precision Tool Limited
pursuant to a Certificate of Continuance registered on December 12, 1996 as
Instrument No. 1367995. North American Precision Tool Limited amalgamated
with Veltri Metal Products Co. pursuant to a Certificate of Amalgamation
registered on December 12, 1996 as Instrument No. 1367997.
2. 309 Ellis Street East, Windsor:
Leasehold interest in Part of Lot 85 (McNiffs Survey), Concession 1, Park
Lot 22 and Part of Park Lots 24 and 20 and Part of Mercer Street (closed by
By-law 2650 Instrument No. 306784), Plan 125; Lots 60 to 74 inclusive on
Plan 649; Lot 20 and Alley on Plan 573; Lots 2, 3, 4, 5 and Part of Lots 1
and 6 on Plan 130, designated as Parts 1 and 2 on Reference Plan received
and deposited as No. 12R-14396, registered in the Land Registry
<PAGE> 33
- 2 -
Office for the Land Registry Division of Essex (No. 12) at Windsor pursuant
to a lease made the 26th day of March, 1996 between Kelsey-Hayes Canada
Limited and Albamor Industrial Estates Inc., carrying on business as a
joint venture known as Metro Industrial Centre, as landlord, and Veltri
Stamping Corporation as tenant. Notice of this lease is registered as
Instrument No. 1362296.
3. 2000 North Talbot Road, Windsor:
Leasehold interest in all and Singular that certain parcel or tract of land
and premises situate, lying and being in the Township of Sandwich South, in
the County of Essex and Province of Ontario and being composed of Part of
Lot 12, in the 6th Concession in the said Township, containing by
admeasurement 2.00 acres, and more particularly described as follows:
PREMISING that the northerly limit of North Talbot Road, as referred to in
Instrument No. 493914 is assumed to have an astronomic bearing of North 71
degrees, 55 minutes west, and relating all bearings herein thereto;
COMMENCING at an iron bar planted in the said northerly limit of North
Talbot Road, distant 1480.91 feet, measured westerly therealong from its
intersection with the westerly limit of Walker Road, as widened;
THENCE south 71 degrees, 55 minutes east, along the said northerly limit of
North Talbot Road, a distance of 189.07 feet to a standard iron bar;
THENCE north 3 degrees, 9 minutes east, a distance of 503.03 feet to an
iron bar;
THENCE 87 degrees, 56 minutes west, a distance of 182.71 feet to a standard
iron bar;
THENCE south 3 degrees, 9 minutes west, a distance of 450.86 feet more or
less, to a point of commencement pursuant to a lease made as of July 1,
1993, between Maria Veltri as landlord and Veltri Stamping Corporation as
tenant and amended by First Amendment to Indenture made as of November 8,
1996. Notice of this lease is registered as Instrument No. 1363307 and
notice of the First Amendment to Indenture is registered as Instrument No.
1367991. Veltri Stamping Corporation was continued in the Province of Nova
Scotia as Veltri Stamping Corporation Limited pursuant to a Certificate of
Continuance registered on December 12, 1996 as Instrument No. 1367994.
Veltri Stamping Corporation Limited amalgamated with Veltri Metal Products
Co. pursuant to a Certificate of Amalgamation registered on December 12,
1996 as Instrument No. 1367997.
<PAGE> 34
SCHEDULE "C"
CONTRACTS
1. Sales Representation Contract between Veltri Stamping Corporation and
Bomber Industries, Inc. dated January 1, 1990.
2. Memorandum of Agreement between Veltri Stamping Corporation and Bomber
Industries, Inc. dated October 10, 1996 which supersedes item #1 above.
3. Settlement Agreement and Payment Contract among Eagle Wings Industries,
Inc., Veltri Stamping Corporation and Veltri Holdings USA, Inc. dated May
9, 1996. Veltri Holdings USA, Inc. guaranteed the payments due from
Veltri Stamping Corporation. Consent from Eagle Wings Industries prior to
assignment is required.
4. Employment Contracts.
5. Palace Royalty Seat Agreement between Veltri Stamping Corporation and
Arena Associates, Inc. dated September 25, 1992 and extended on September
28, 1995. Contract rate is $36,000 per year. Contract expires on
September 30, 1997.
6. Nondisturbance Agreement between Royal Trust Corporation, Veltri Stamping
Corporation and Danarco Limited dated June 10, 1993.
<PAGE> 35
SCHEDULE "D"
PLACES OF BUSINESS
Chief Executive Office: 900 Wilshire Drive, Suite 270, Troy, Michigan,
48084
Principal Place of Business: 900 Wilshire Drive, Suite 270, Troy, Michigan,
48084
Other Places of Business: 2000 North Talbot Road, Windsor
309 Ellis Street East, Windsor
2030 North Talbot Road, Windsor
73 Main Street, Glencoe
Registered Office: c/o Stewart McKelvey Stirling Scales, Purdy's
Wharf Tower 1, 1959 Upper Water Street,
Halifax, Nova Scotia, B3J 2X2
Location of Corporate Records: c/o Stewart McKelvey Stirling Scales, Purdy's
Wharf Tower 1, 1959 Upper Water Street,
Halifax, Nova Scotia, B3J 2X2
<PAGE> 1
EXHIBIT 10.7
DEBENTURE PLEDGE AGREEMENT
THIS AGREEMENT is made the day of April, 1998.
B E T W E E N:
VELTRI METAL PRODUCTS CO., an unlimited liability
company formed under the laws of the Province of
Nova Scotia
(the "Corporation")
OF THE FIRST PART;
- and -
COMERICA BANK, as administrative agent for the
Banks under the Credit Agreement (as hereinafter
defined)
(the "Agent")
OF THE SECOND PART.
WHEREAS pursuant to a credit agreement dated as of the date hereof among
Talon Automotive Group, Inc., the Corporation, the Agent and the Banks (as
amended, supplemented, restated or replaced from time to time, the "Credit
Agreement"), Talon Automotive Group, Inc. and the Corporation (collectively,
the "Borrowers") are, or will become, indebted, liable and obligated to the
Banks (such indebtedness, liabilities and obligations being herein referred to
as the "Credit Agreement Obligations");
AND WHEREAS the Corporation has, under a guarantee of even date herewith
(as amended, supplemented, restated or replaced from time to time, the
"Guarantee"), guaranteed the due, prompt and complete payment, performance and
satisfaction of all the Credit Agreement Obligations (any indebtedness,
liabilities and obligations under the Guarantee being herein referred to as the
"Guarantee Obligations");
<PAGE> 2
- 2 -
AND WHEREAS the Corporation has agreed to execute and deliver a demand
debenture (the "Debenture") in the amount of U.S.$150,000,000, to and in favour
of the Agent, acting on its own behalf and as administrative agent for the
Banks, as security for the due, prompt and complete payment, performance and
satisfaction of all the Credit Agreement Obligations and Guarantee Obligations
(collectively, and together with any expenses, costs and charges incurred by or
on behalf of the Agent and/or the Banks in connection with the Debenture and
the enforcement of the security interest created thereby, the "Obligations");
AND WHEREAS the parties hereto are entering into this agreement for the
purpose of pledging the Debenture to the Agent, as administrative agent for the
Banks;
NOW THEREFORE THIS AGREEMENT WITNESSETH that, in consideration of the
sum of Two Dollars ($2.00) now paid by the Agent to the Corporation and for
other good and valuable consideration (the receipt and sufficiency of which are
hereby acknowledged), the Corporation agrees with the Agent as follows:
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
All capitalized terms used herein shall, unless otherwise indicated,
have the meaning set forth in the Credit Agreement. In this Agreement, "BANKS"
means those financial institutions whose names appear as "Banks" on the
signature pages to the Credit Agreement, together with any assignees thereof
pursuant to Section 13.5 of the Credit Agreement, and shall include the
Canadian Swingline Lender under the Credit Agreement; and "BANK" shall mean any
one of the foregoing Banks.
1.2 INTERPRETATION
This Agreement shall be interpreted in accordance with the following:
<PAGE> 3
- 3 -
(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) references to dollars, unless otherwise specifically
indicated, shall be references to lawful money of the United States
of America;
(d) the word "including" shall mean "including without
limitation" and "includes" shall mean "includes without limitation";
(e) the expressions "the aggregate", "the total", "the sum" and
expressions of similar meaning shall mean "the aggregate (or total
or sum) without duplication"; and
(f) 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".
1.3 SURVIVAL
All covenants, agreements, warranties and representations set forth
herein or in any certificate or other instrument or document delivered by or on
behalf of the Corporation pursuant hereto shall be deemed to have been relied
upon by the Agent notwithstanding investigations heretofore or hereafter made
by the Agent and shall survive the execution of this Agreement and continue in
full force and effect in accordance with the terms of this Agreement until the
due, prompt and complete payment, performance and satisfaction of all of the
Obligations.
1.4 AMENDMENT
No amendment of any provision of this Agreement shall be effective
unless the same shall be in writing and signed by each of the Corporation and
the Agent.
<PAGE> 4
- 4 -
1.5 SEVERABILITY
If any provision of this Agreement is or becomes illegal, invalid or
unenforceable, such provision shall be severed from this Agreement and be
ineffective to the extent of such illegality, invalidity or unenforceability.
The remaining provisions hereof shall be unaffected by such provision and shall
continue to be valid and enforceable.
1.6 STATUTES, ETC.
Unless otherwise specified herein, all references to statutes or
regulations are to be treated as references to the same as amended,
consolidated, revised or re-enacted from time to time, or to any successor or
replacement statutes or regulations.
ARTICLE 2
DEALINGS WITH DEBENTURE
2.1 DEPOSIT OF DEBENTURE
The Corporation hereby delivers the Debenture to the Agent to be held
by it, as administrative agent for the Banks, pursuant to the provisions hereof
as continuing security for the due, prompt and complete payment, performance
and satisfaction of all the Obligations.
<PAGE> 5
- 5 -
2.2 EVENTS OF DEFAULT
Following the occurrence and during the continuance of an Event of
Default, the Agent may at any time demand payment of the Debenture and enforce
all rights and remedies which are accorded to the Agent as holder of the
Debenture, including making demands thereunder as if the Agent were the
absolute owner of the Debenture, realizing upon the Debenture or disposing of
the Debenture by sale, transfer or delivery, and any such remedy may be
exercised separately or in combination and shall be in addition to and not in
substitution for any other rights of the Agent however created under the
Documents; provided that the Agent shall not be bound to exercise any such
right or remedy.
2.3 APPLICATION OF PROCEEDS
All proceeds of the Debenture, including any distributions in respect
thereof, shall be applied by the Agent on account of the Obligations in
accordance with the provisions of the Debenture, without prejudice to any claim
on the Corporation for any deficiency.
2.4 SATISFACTION OF OBLIGATIONS
Payment in full of the Obligations from time to time shall be deemed to
be payment in full of all principal and interest from time to time due under
the Debenture. Notwithstanding anything to the contrary in the Debenture, the
Corporation shall not be obligated to pay any amounts in excess of the
Obligations, nor shall the Corporation be obligated to pay any greater amount
of interest under the Debenture than the highest rate of interest payable by
the Corporation under the Documents (other than the Debenture) in respect of
the Obligations. Upon final satisfaction in full of the Obligations, the Agent
shall, at the request and expense of the Corporation, deliver the Debenture to
the Corporation for cancellation or assign the Debenture (without recourse to
the Agent) to such other Person as the Corporation may direct.
2.5 NO MERGER
<PAGE> 6
- 6 -
The Debenture shall not operate to merge any of the Obligations and no
judgment recovered by the Agent shall operate to merge or in any way affect the
security constituted by the Debenture, which is held in addition to and not in
substitution for any other security now or hereafter held or acquired by the
Agent.
ARTICLE 3
MISCELLANEOUS
3.1 REMEDIES CUMULATIVE AND WAIVER
It is expressly understood and agreed that the respective rights and
remedies of the Agent hereunder are cumulative and are in addition to and not
in substitution for any other rights and remedies provided by law or by equity.
Any single or partial exercise by the Agent of any right or remedy in respect
of a default or breach of any term, covenant or condition contained herein or
in the Debenture shall not be deemed to be a waiver or to alter, affect or
prejudice any other right or remedy hereunder or thereunder or other rights or
remedies to which the Agent may be lawfully entitled, for such default or
breach. Any waiver by the Agent of the strict observance, performance or
compliance with any term, covenant, condition or agreement contained herein or
in the Debenture and any indulgence granted, either expressly or by course of
conduct, by the Agent shall be effective only in the specific instance and for
the purpose for which it was given and shall be deemed not to be a waiver of
any of the rights and remedies of the Agent hereunder or under the Debenture as
a result of any other default or breach.
3.2 OTHER AGREEMENTS
The Debenture and this Debenture Pledge Agreement are given in
accordance with the terms and provisions of the Credit Agreement. If a
conflict or inconsistency exists between a provision of the Debenture or this
Debenture Pledge Agreement and a provision of the Credit Agreement, then the
provisions of the Credit Agreement shall prevail. Notwithstanding the
foregoing, if there is any right or remedy set out in the Debenture or this
Debenture Pledge Agreement or any part thereof which is not set out or provided
for in the Credit Agreement, such additional right or remedy shall not
constitute a conflict
<PAGE> 7
- 7 -
or inconsistency.
3.3 ASSIGNMENTS AND PARTICIPATIONS
The Agent or any of the Banks may sell, assign, transfer or otherwise
dispose of all or any of the Obligations in accordance with the terms of the
Credit Agreement and, in such event, each and every immediate and successive
assignee, transferee or holder of all or any of the Obligations shall have, in
respect of the Obligations sold, assigned, transferred or otherwise disposed of
to it, the whole benefit hereof to the same extent as if it were an original
party to the Obligations or the part thereof so sold, assigned, transferred or
otherwise disposed of, without regard to any set-off, counter-claim or equities
between the Corporation and the Agent.
3.4 NOTICE
Any demand, notice or communication to be made or given hereunder shall
be in writing and shall be personally delivered to an officer or other
responsible employee of the addressee or sent by facsimile, charges prepaid, at
or to the applicable addresses or facsimile numbers, as the case may be, set
out below the respective parties' names as follows:
To the Corporation: Veltri Metal Products Co.
c/o Talon Automotive Group
900 Wilshire Drive
Suite 270
Troy, Michigan
48084
Attention: David J. Woodward
Telecopy No.: (248) 362-7617
with a copy to:
<PAGE> 8
- 8 -
Timmis & Inman
300 Talon Centre
Detroit, Michigan
48207
Attention: Richard Miettinen
Telecopy No.: (313) 396-4229
Cassels Brock & Blackwell
Scotia Plaza, Suite 2100
40 King Street West
Toronto, Ontario
M5H 3C2
Attention: Gordon Dickson
Telecopy No.: (416) 360-8877
To the Holder: Comerica Bank
500 Woodward Avenue
6th Floor
Detroit, Michigan
U.S.A. 48226
Attention: President
Telecopy No.: (313) 222-5759
with a copy to:
Miller, Canfield, Paddock and Stone, P.L.C.
150 West Jefferson, Suite 2500
Detroit, Michigan
U.S.A. 48226
Attention: Mr. David K. McLeod
Telecopy No.: (313) 496-8450
Goodman Phillips & Vineberg
Barristers & Solicitors
Suite 2400
250 Yonge Street
Toronto, Ontario
M5B 2M6
Attention: Mr. Stephen Pincus
Telecopy No.: (416) 979-1234
<PAGE> 9
- 9 -
or to such other address or addresses or facsimile number or 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.
3.5 GOVERNING LAW
(a) This Agreement shall be governed by and interpreted in
accordance with the laws of the Province of Ontario and the laws of
Canada applicable therein which apply to contracts made and to be
performed entirely in Ontario;
(b) The parties hereby irrevocably attorn and submit to the
non-exclusive jurisdiction of the courts of Ontario with respect to
any matter arising under or related to this Agreement.
3.6 BENEFIT OF THE AGREEMENT
This Agreement shall enure to the benefit of the Agent and its
successors and assigns and be binding upon the Corporation and its successors
and permitted assigns.
3.7 COPY RECEIVED
The Corporation acknowledges receipt of a copy of this Agreement.
<PAGE> 10
- 10 -
IN WITNESS WHEREOF the Corporation has caused this Agreement to be
executed the day, month and year first written above.
VELTRI METAL PRODUCTS CO.
Per:
------------------------------------
(Authorized Signing Officer)
COMERICA BANK
Per:
------------------------------------
(Authorized Signing Officer)
Per:
------------------------------------
(Authorized Signing Officer)
<PAGE> 1
EXHIBIT 10.8
AGREEMENT
This Agreement is made this day of April, 1998 by and between
Michael T. J. Veltri, individually and as trustee of the Michael T. J. Veltri
Revocable Living Trust u/a/d December 17, 1992 ("Veltri"), Veltri Metal Products
Co., F/K/A VS Acquisition Co. ("VMP"), VS Holdings, Inc. ("VSH"), Veltri
Holdings USA, Inc. ("VHU") and Talon Automotive Group, Inc. ("TAG").
WHEREAS, Veltri, Maria Veltri, and VMP entered into that certain Stock
Purchase Agreement dated November 8, 1996 (the "Stock Purchase Agreement");
WHEREAS, contemporaneously herewith, TAG is undergoing the following
restructuring (the "Restructuring"): Hawthorne Metal Products Company, J & R
Manufacturing and Talon Automotive Group, L.L.C. will be merging with and into
Production Stamping, Inc., and Production Stamping, Inc., as the\surviving
entity, will change its name to Talon Automotive Group, Inc. ("TAG*); VS
Holdings No. 2, Inc. will merge with and into VS Holdings, Inc.; and VS
Holdings, Inc. (which will then be the sole shareholder of VMP), and Veltri
Holdings USA, Inc. will then each become wholly owned subsidiaries of TAG;
WHEREAS, contemporaneously herewith TAG is completing an offering of up
to $125,000,000 in senior subordinated notes pursuant to Rule 144A promulgated
under the Securities Act of 1933, as amended (the "Offering");
WHEREAS, Comerica Bank, a Michigan banking corporation, as Agent under
a certain credit agreement among TAG, VMP and others, as borrowers, and other
banks, from time to time a party thereto, as lenders, will provide TAG with a
senior credit facility (the "Senior Credit Facility");
WHEREAS, under the Stock Purchase Agreement and its related
documentation (the "SPA Documentation"), VMP is indebted to Veltri for the
following (the "Veltri Indebtedness"), (i) the Earn Out Amounts, as defined in
the Stock Purchase Agreement -dated November 8, 1996, as amended, (ii) the
principal and accrued interest due pursuant to the Amended and Restated
Promissory Note of even date herewith, and (iii) the monetary obligations owed
to Veltri pursuant to the Employment Agreement dated as of November 8, 1996
(excluding any obligations under TAG's Equity Ownership Plan and Veltri's
Deferred Compensation Agreement), which Veltri Indebtedness is secured by, among
other things, the assets of VMP ;
WHEREAS, in connection with the Restructuring, Offering, and the Senior
Credit Facility, the parties have agreed, among other things, to amend certain
agreements relating to the Veltri Indebtedness.
NOW THEREFORE, for good and valuable consideration, including the
premises hereof, and the mutual covenants contained herein, the parties agree as
follows:
1. The parties hereby agree to enter into an Amendment of the Stock
Purchase Agreement in the form attached hereto as Exhibit A.
1
<PAGE> 2
2. The parties agree to amend and restate, in the form attached hereto
as Exhibit B, that certain promissory note of VS Acquisitions Co. in favor of
Veltri, dated November 8, 1996, in the principal amount of $658,325.00 (the
"Promissory Note").
3. As further consideration to Veltri for his agreement to the
amendments and other accommodations hereof:
(i) TAG will pay all of Veltri's legal fees
incurred in connection with the transactions
contemplated by this Agreement provided
however that TAG shall not pay more than an
aggregate of $5,000.00 for such fees and said
fees shall include only those legal fees
associated with the review, negotiation and
documentation requirements reasonably
foreseeable and anticipated by this
Agreement;
(ii) TAG and all of its Applicable Subsidiaries
(as defined herein) shall enter into a
guarantee of the Veltri Indebtedness, in
substantially the form attached hereto as
Exhibit C.; and
(iii) As security for the Veltri Indebtedness,
TAG, VSH AND VHU shall grant to Veltri a
security interest through a security
agreement in substantially the form attached
hereto as Exhibit D in all of their
respective existing and future assets,
subordinated only to Comerica Bank under the
Senior Credit Facility, and, in addition,
all future Applicable Subsidiaries shall
also grant to Veltri a security interest in
their existing and future assets
subordinated only to the Senior Credit
Facility and, in the case of the acquisition
of such subsidiary, subordinated to any
deferred obligations to the sellers.
4. TAG shall fund or cause to be funded VMP, VSH and VHU loans (in
amounts and upon terms substantially comparable to those previously available
plus additional amounts for new platforms and capital expenditures approved by
the Board of Directors) for working capital and other business purposes as
reasonably required by the Veltri Group from time to time as determined by its
Board of Directors.
5. Veltri shall execute an intercreditor agreement in form attached
hereto as Exhibit E together with any other documents reasonably requested by
Comerica Bank in connection therewith or herewith.
6. The parties agree and covenant to take such action and to execute
such documents as may be necessary, from time to time, to give full and complete
effect to this Agreement and to promptly execute and deliver any such reasonably
requested documentation.
7. (a) The Applicable Subsidiaries for purposes of the Veltri
Indebtedness, shall be VMP, VSH and VHU and all other companies wholly-owned by
TAG, together with all other companies controlled by TAG which receive funding
from the Senior Credit Facility or from TAG
2
<PAGE> 3
or any such companies which have their indebtedness guaranteed by TAG or any
other Applicable Subsidiary.
(b) All capitalized terms not herein defined shall have the
meaning assigned to them in the Stock Purchase Agreement.
8. The rights, benefits, and obligations arising under this agreement
shall not arise, vest in or otherwise encumber either party hereto unless and
until the Offering is consummated.
9. All notices, requests, demands and other communication hereunder
shall be in writing, mailed by certified mail, return receipt requested, to the
addresses of the respective parties as they may designate from time to time in a
notice pursuant to this Section, and such notices shall be deemed to have been
duly given on the date of receipt or refusal of receipt.
10. This Agreement shall be governed by and construed in accordance
with the laws of the State of Michigan.
11. This Agreement shall be binding upon and inure to the benefit of
each of the parties hereto and their respective successors and assigns. The
parties shall not have the right to assign their rights and obligations
hereunder without the express written consent of the other parties hereto.
12. This Agreement constitutes the entire agreement and understanding
between the parties with respect to the subject matter hereof. No waiver,
amendment or modification of the terms of this Agreement shall be valid unless
in writing and signed by each of the parties hereto.
13. This Agreement may be executed by facsimile and in one or more
counterparts, each and all of which shall be deemed for all purposes to be one
Agreement enforceable in accordance with its terms.
________________________________________
MICHAEL T.J. VELTRI, Individually and
as Trustee for the Michael T.J. Veltri
Revocable Living Trust u/a/d December 7,
1996
VETRI METAL PRODUCTS CO.
By:___________________________________
Its:__________________________________
3
<PAGE> 4
VS HOLDINGS, INC.
By:_________________________
Its:________________________
VELTRI HOLDINGS USA, INC.
By:_________________________
Its:________________________
TALON AUTOMOTIVE GROUP, INC.
By:_________________________
Its:________________________
4
<PAGE> 5
EXHIBIT A
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
This First Amendment to Stock Purchase Agreement is made this _____
day of April, 1998 by and between Michael T. J. Veltri, individually and as
trustee of the Michael T. J. Veltri Revocable Living Trust u/a/d December 17,
1992 ("Veltri"), Veltri Metal Products Co., F/K/A VS Acquisition Co. ("VMP"), VS
Holdings, Inc. ("VSH"), and Veltri Holdings USA, Inc. ("VHU").
WHEREAS, Veltri, Maria Veltri, VMP, VSH and VHU entered into that
certain Stock Purchase Agreement dated November 8, 1996 (the "Stock Purchase
Agreement");
WHEREAS, contemporaneously herewith, Talon Automotive Group, INc.
("TAG") is undergoing the following restructuring (the "Restructuring"):
Hawthorne Metal Products Company, J & R Manufacturing and Talon Automotive
Group, L.L.C. will be merging with and into Production Stamping, Inc., and
Production Stamping, Inc., as the surviving entity, will change its name to
Talon Automotive Group, Inc. ("TAG"); VS Holdings No. 2, Inc. will merge with
and into VSH; and VSH (which will then be the sole shareholder of VMP), and VHU
will then each become wholly owned subsidiaries of TAG;
WHEREAS, contemporaneously herewith TAG is completing an offering of up
to $125,000,000 in senior subordinated notes (the "Notes") pursuant to Rule 144A
promulgated under the Securities Act of 1933, as amended (the "Offering");
WHEREAS, Comerica Bank, a Michigan banking corporation, as Agent under
a certain credit agreement among TAG, VMP and others, as borrowers, and other
banks from time to time a party thereto, as lenders, will provide TAG with a
senior credit facility (the "Senior Credit Facility"); and
WHEREAS, in connection with the Restructuring, Offering, and the Senior
Credit Facility, the parties have agreed, among other things, to amend the Stock
Purchase Agreement, upon the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the provisions and covenants set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto freely amend
the Stock Purchase Agreement pursuant to ss. 7.3 of the Stock Purchase
Agreement, as follows:
1. Section 1.3(b)(viii) of the Stock Purchase Agreement is hereby
deleted in its entirety and the following shall be substituted
therefor:
"The Earn-Out Amounts shall be paid as follows:
(A) Subject to the foregoing, the Earn-Out Amounts, if
any, payable with
1
<PAGE> 6
respect to the calendar year ending December 31,
1998, (the "1998 Earn-Out"), shall be paid on March
31, 1999 (less any applicable withholding required
pursuant to Section 116, as hereinafter defined),
together with interest on the unpaid balance of such
amount at the Prime Rate (as hereinafter defined)
from and after December 31, 1998 until such amount
is paid in full, which interest shall be payable
(less any applicable withholding) on March 31, 1999;
provided, however, in the event (i) any such
installment of interest or the 1998 Earn-Out is not
paid when due, and such failure shall continue for a
period of ten (10) days following written notice
thereof to Buyer, or (ii) of an unwaived event of
default under the Senior Credit Facility, then in
either such event any of the 1998 Earn Out remaining
unpaid after March 31, 1999 shall thereafter bear
interest at a rate equal to the Prime Rate plus Two
percent (2%) until the same is paid in full; and
(B) Subject to the foregoing, the Earn-Out Amounts,
if any, payable with respect to the calendar year
ending December 31, 1999 (the "1999 Earn-Out") shall
be paid on March 31, 2000 (less any applicable
withholding required pursuant to Section 116)
together with interest on the unpaid balance of such
amount at the Prime Rate from and after December 31,
1999 until such amount is paid in full, which
interest shall be payable (less any applicable
withholding) on March 31, 2000; provided, however,
in the event (i) any such installment of interest or
the 1999 Earn-Out is not paid when due, and such
failure shall continue for a period of ten (10) days
following written notice thereof to Buyer, or (ii)
of an unwaived event of default under the Senior
Credit Facility, then in either such event any of
the 1999 Earn Out remaining unpaid after March 31,
2000 shall thereafter bear interest at a rate equal
to the Prime Rate plus Two percent (2%) until the
same is paid in full."
2. Section 6.1 (a)(ii)(d) of the Stock Purchase Agreement
is hereby deleted in its entirety and the following shall
be substituted therefor:
"(d) Redeem or otherwise acquire any of their respective
stock, securities or other equity interests (other than in
connection with any stock option plans for the benefit of
employees), which, when aggregated with the amounts
permitted pursuant to Section 6. 1(a)(ii)(e) hereof, would
exceed an annual amount equal to One Hundred Thousand Cdn.
Dollars (Cdn. $100,000) per year;"
3. Notwithstanding anything contained in the Stock Purchase
Agreement, or any other agreement to the contrary, Veltri
hereby consents to: (a) the Restructuring; (b) VMP's, VSH's
and VHU's guaranty of all of TAG's obligations under the
Senior Credit Facility and all documents executed in
connection therewith; and (c) VMP's, VSH's and VHU's
guaranty of all of TAG's obligations under the Notes to be
issued
2
<PAGE> 7
in connection with the Offering and all documents executed in
connection therewith.
4. Every other Section and Sub-Section of the Stock Purchase
Agreement as originally executed and delivered shall remain in
full force and effect as so executed and delivered, and are
hereby confirmed and ratified and shall continue in full force
and effect as provided therein.
5. All capitalized terms not otherwise herein defined shall have
the meaning assigned to them in the Stock Purchase Agreement.
The parties hereto have executed this First Amendment to Stock
Purchase Agreement as of the date written above.
Michael T.J. Veltri
------------------------------------
MICHAEL T.J. VELTRI, Individually and
as Trustee for the Michael T.J. Veltri
Revocable Living Trust u/a/d December
17, 1996
VETRI METAL PRODUCTS CO.
By: Michael T.J. Veltri
--------------------------------
Its: President
-------------------------------
VS HOLDINGS, INC.
By:____________________________________
Its:___________________________________
VELTRI HOLDINGS USA, INC.
By:____________________________________
Its:___________________________________
3
<PAGE> 8
EXHIBIT B
AMENDED AND RESTATED
PROMISSORY NOTE
$658,325 (U.S.) TROY, MICHIGAN
NOVEMBER 8, 1996 (ORIGINAL DATE)
APRIL _, 1998 (AMENDED AND RESTATED DATE)
FOR VALUE RECEIVED, which shall include the return of the original
promissory note between the parties hereof which promissory note shall be deemed
canceled with the delivery of this Promissory Note, the undersigned, Veltri
Metal Products Co., F/K/A VS Acquisition Co., a Nova Scotia Company ("Debtor"),
hereby promises to pay to the order of Michael T. J. Veltri, a Michigan
resident, individually and as trustee the Michael T. J. Veltri Revocable Living
Trust u/a/d December 17, 1992 ("Creditor"), the principal sum of Six Hundred
Fifty Eight Thousand Three Hundred Twenty Five Dollars (U.S.) ($658,325.00
U.S.), together with interest on the unpaid principal balance thereof from the
Original Date at a per annum rate equal to the Comerica Bank prime rate of
interest in effect from time to time during the term of this Note ("Note Rate").
The principal sum and any accrued interest shall be paid by Debtor to Creditor
as follows:
The principal balance of this Note and all accrued interest
shall be paid on or before September 17, 1998 (the
"Payment").
The occurrence of any one of the following events shall constitute an
"Event of Default" by Debtor under this Note: (a) Debtor's failure to pay the
Payment when due, whether by maturity, acceleration or otherwise, if such
payment is not made within ten (10) days after receipt of written notice, or any
other breach by Debtor of any term or provision of this Note (other than a
payment failure) if such breach is not cured within thirty (30) days after
receipt of written notice, unless such breach is not capable of cure in such
thirty (30) days of notice and Debtor is diligently and in good faith pursuing
the completion any such cure; (b) an Event of Default shall occur under either
the security agreement entered into by and between Creditor and Veltri Holdings
USA, Inc. on November 8, 1996 or the security agreement among Creditor, Talon
Automotive Group, Inc., VS Holdings, Inc., and Veltri Holdings USA, Inc. in
connection with this Note; and (c) the event of an unwaived event of default
under Debtor's senior credit facility with Comerica Bank as agent for all
participating lenders. From and after any Event of Default, (i) interest shall
accrue on the outstanding principal balance at two percent (2%) above the Note
Rate, until this Note is paid in full, and (ii) Creditor shall have the option,
without notice or demand to Debtor, to declare the entire unpaid principal
balance of this Note, together with all accrued interest, immediately due and
payable.
In the event of Creditor's death, all payments hereunder shall
nevertheless be due and shall be paid to Creditor's personal representative or
to any other person or entity designated by Creditor's personal
representative. This Note may be prepaid in whole or in part on one or more
occasions without penalty. All payments under this Note, whether due by
acceleration or otherwise, shall be
<PAGE> 9
applied first to any accrued interest, and then to principal. This Note shall be
governed and construed in accordance with the laws of the State of Michigan. If
any provision of this Note is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provision shall nevertheless
continue in full force and effect without being impaired or invalid in any way.
Debtor agrees to pay all costs, attorney fees and expenses incurred by
Creditor in connection with the collection of any amount due under this Note or
the enforcement of any rights of Creditor under this Note.
This Note is given by Debtor in connection with the Stock Purchase
Agreement dated November 8, 1996, as amended and Debtor's obligations pursuant
hereto are subject to Debtor's rights contained in Section 5.2(f) of the Stock
Purchase Agreement.
Debtor waives presentment for payment, demand, notice of non-payment,
protest and notice of protest of this Note. Any forbearance by Creditor in
exercising any right or remedy hereunder or otherwise afforded by applicable
law, shall not be a waiver or preclude the exercise of any right or remedy by
Creditor. The acceptance by Creditor of any sum payable hereunder after the due
date of such payment shall not be a waiver of the right of Creditor to require
prompt payment when due of all other sums payable hereunder or to declare a
Default for failure to make prompt payment.
This Note shall be binding upon the successors and assigns of Debtor,
and shall, together with the rights and remedies of Creditor hereunder, inure to
the benefit of Creditor and his heirs or devisees; provided, however, that
neither Debtor nor Creditor may assign any of their respective rights hereunder
without the prior written consent of the other party (which consent shall not be
unreasonably withheld), except that Creditor may assign his rights to a
revocable living trust of which Creditor is the sole trustee during his
lifetime.
This Note is secured by a security agreement among Talon Automotive
Group, Inc., VS Holdings, Inc., and Veltri Holdings USA, Inc. and the parties
hereof, a mortgage on property located in Royal Oak, Michigan owned by Talon
Automotive Group, Inc., and a guaranty given by Talon Automotive Group, Inc., VS
Holdings, Inc., and Veltri Holdings USA, Inc., all of even date herewith.
IN WITNESS WHEREOF, this Promissory Note is made and entered into on
the day and year first above written as the Amended and Restated Date.
DEBTOR:
VELTRI METAL PRODUCTS CO., F/K/A
VS ACQUISITION CO.
By:_____________________________
Its:____________________________
<PAGE> 10
EXHIBIT C
UNCONDITIONAL GUARANTY
KNOW ALL MEN BY THESE PRESENTS that Talon Automotive Group, Inc.
("TAG"), VS Holdings, Inc., and Veltri Holdings USA, Inc. all of which share the
mailing address of 900 Wilshire Drive, Suite 203, Troy, Michigan ("Guarantors"),
for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, hereby unconditionally and absolutely guarantee to Michael
T. J. Veltri, individually and as trustee of the Michael T. J. Veltri Revocable
Living Trust u/a/d December 17, 1992, ("Creditor"), his successors and assigns,
the full and prompt payment by Veltri Metal Products Co. ("VMP"), when and as
due, the Veltri Indebtedness, as that term is defined in the offering of up to
$125,000,000 in senior subordinated notes pursuant to Rule 144A promulgated
under the Securities Act of 1933 as amended, provided, however, that for
purposes of this Guaranty, the Veltri Indebtedness shall not include any
obligations to Creditor under the TAG Equity Ownership Plan, Creditor's Deferred
Compensation Agreement or Creditor's Equity Ownership Agreement.
The obligations of Guarantors hereunder shall be absolute and primary,
and shall be complete and binding immediately upon the complete execution hereof
and shall be subject to no other condition whatsoever precedent or otherwise and
notice of acceptance hereof or action in reliance hereon shall not be required.
The obligations of Guarantors shall be continuing and shall continue,
irrespective of any statute of limitations otherwise applicable or defenses of
laches.
Upon the occurrence of VMP's failure to pay any of the Veltri
Indebtedness, Guarantors agree to pay immediately the same, together with all
other charges accruing with respect to said amount and all costs and expenses of
collection, including reasonable attorneys' fees.
As security for this Guaranty and the obligations of Guarantors
hereunder, Guarantors and Creditor have entered into a certain security
agreement of even date herewith, whereby Guarantors have granted security
interests in all of their assets to Creditor.
Guarantors hereby undertake to cause all of their future wholly-owned
subsidiaries, as well as other subsidiaries which receive funding from any of
them directly or under lending arrangements with Comerica Bank, or whose
indebtedness is guaranteed by TAG, or any of them, to execute guaranties of the
Veltri Indebtedness in the same or substantially the same form hereby given.
Guarantors consent to any and all extensions, renewals, waivers or
modifications that may be granted by Creditor with respect to the Veltri
Indebtedness and waive any defenses in connection with such events. Other than
as required by other agreements by and among the parties hereof, Guarantors
further waive any failure of Creditor to give a notice of default, any failure
of Creditor to pursue any other party or its assets with due diligence, any
failure to resort to any other remedy available to Creditor and any and all
defenses whatsoever arising out of this Guaranty.
1
<PAGE> 11
This Guaranty and the rights and liabilities of the parties hereunder
shall be governed by and construed under the laws of the State of Michigan.
IN WITNESS WHEREOF, the Guarantors have executed this Unconditional
Guaranty on the_____ day of April, 1998.
IN THE PRESENCE OF: TALON AUTOMOTIVE GROUP, INC.,
a Michigan corporation
__________________________ By:__________________________
Its:_________________________
VS HOLDINGS, INC.
By:__________________________
Its:_________________________
VELTRI HOLDINGS USA, INC.
By:__________________________
Its:_________________________
2
<PAGE> 12
EXIHBIT D
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT is made and entered into this day of April,
1998, by and between Talon Automotive Group, Inc., a Michigan corporation
("TAG") and its direct or indirect subsidiaries, VS Holdings, Inc., and Veltri
Holdings USA, Inc., (collectively "Debtor"), and Michael T. J. Veltri,
individually and as trustee of the Michael T. J. Veltri Revocable Living Trust
u/a/d December 17, 1992, a Michigan resident ("Secured Party").
R E C I T A L S :
- - - - - - - -
A. Debtor has entered into that certain Unconditional Guaranty (the
"Guaranty") of even date herewith to guaranty certain obligations of Veltri
Metal Products Co. ("VMP") to Secured Party.
B. In order to secure Debtor's financial obligations to Secured Party
pursuant to the Guaranty ("Veltri Indebtedness"), Debtor wishes to grant Secured
Party a security interest in all of its now owned or hereafter acquired assets
subject to the terms and conditions of this Agreement.
C. Debtor is in the process of completing an offering of up to
$125,000,000 in senior subordinated notes pursuant to Rule 144A promulgated
under the Securities Act of 1933, as amended.
NOW, THEREFORE, in consideration of the above recitals, the mutual
covenants and promises contained herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged and
agreed to, Debtor and Secured Party agree as follows:
1. GRANT OF SECURITY INTEREST. As Security for the prompt and complete
payment when due of the Veltri Indebtedness and the obligations of Debtor
pursuant to the Agreement of even date herewith (the "Agreement"). Debtor hereby
grants to Secured Party a security interest in all assets of Debtor, including
but not limited to all of Debtor's right, title and interest in, to and under
the following, whether now owned or hereafter acquired (collectively, the
"Collateral"):
(i) all accounts as defined in ss. 9-106 of the Uniform
Commercial Code (the "UCC") as from time to time
in effect in Michigan;
(ii) all contracts;
(iii) all equipment as defined in ss. 9-109(2) of the UCC;
(iv) all general intangibles as defined in ss.9-106 of the UCC;
(v) all inventory as defined in ss. 9-109(4) of the UCC
<PAGE> 13
(vi) all books and records, data processing cards, tapes,
tabulating runs, programs and similar material
evidencing, securing or relating to any of the foregoing;
and
(vii) to the extent not otherwise included, all proceeds, as
defined in ss. 9-306 of the UCC, and products of any or
all of the foregoing.
Without limiting the generality of the foregoing, Debtor agrees that the Veltri
Indebtedness shall include: (i) all costs, expenses and attorney fees which are
reasonably paid or incurred by Secured Party in the enforcement, administration
and collection of any Veltri Indebtedness, and in the protection, maintenance
and disposition of any Collateral; and (ii) all amounts payable under this
Security Agreement including, without limitation, Section 3.2 hereof.
2. Representations and Warranties. Debtor hereby represents and
warrants to Secured Party that:
2.1 Good Standing Location and Use of Collateral. Each Debtor is a
company duly organized, validly existing and in good standing under the laws of
the state of their incorporation, and is duly qualified to transact business and
is in good standing in each jurisdiction where such qualification is necessary,
except where the lack of such qualification would not have a material adverse
effect, and each has all the requisite power and authority, corporate or
otherwise, to conduct its business, to own and operate its properties and to
execute, deliver and perform all of its obligations hereunder.
2.2 Authorization; Enforceability. This Security Agreement has been
duly executed and delivered by Debtor and constitutes the legal, valid and
binding obligation of Debtor, enforceable in accordance with its terms. The
execution and delivery of this Security Agreement does not constitute a breach
of any provision contained in Debtor's Article of Incorporation or Bylaws or any
material agreement or instrument to which Debtor is a party or by which Debtor
is bound.
2.3 Threatened or Pending Proceedings. To the best of Debtor's
knowledge, there are no actions or proceedings which are threatened or pending
against Debtor or any of its assets which might result in any material adverse
change in Debtor's financial condition or which might materially adversely
affect the Collateral or Debtor's business.
2.4 Ownership. Debtor owns all right to, title in, and interest in all
of the Collateral free and clear of any liens, pledges or other encumbrances,
except for Permitted liens (as hereinafter defined). As used herein, "Permitted
Liens" shall mean:
(a) the liens, claims, encumbrances and security interests
(collectively, "Liens") on any of the Collateral in favor of Comerica
Bank, as agent for itself and any other institutional lenders which
may participate with Comerica, or their successor lender(s) in
connection with any refinancing thereof (the "Banks"), and any other
person or entity permitted by Secured Party in writing;
(b) In accordance with Section 3.4 below, Liens for taxes,
assessments or governmental charges or claims not yet delinquent, or
Liens for taxes, assessments
2
<PAGE> 14
or governmental charges being contested in good faith and by
appropriate proceedings;
(c) Liens in respect of property or assets of Debtor which
were imposed by law in the ordinary course of business, such as
carriers', warehousemen's and construction liens and other similar
liens arising in the ordinary course of business, which are not
delinquent or which are being contested in good faith by appropriate
proceedings;
(d) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other type of social security, or to secure the
performance of tenders, statutory obligations, surety bonds, bids,
leases, governmental contracts, performance and return-of-money bonds
and other similar obligations incurred in the ordinary course of
business (exclusive of obligations in respect to the payment for
borrowed money or the equivalent);
(e) Liens of any judgment rendered which does not give rise
to an Event of Default (as defined below) and Liens created by
deposits of cash or cash equivalents permitting the Debtor to appeal
court judgments that are being contested in good faith by appropriate
proceedings and do not give rise to an Event of Default;
(f) Assignments, leases or subleases granted to others not
interfering in any material respect with the ordinary conduct of the
Debtor's business and not materially affecting the value of the
Collateral; and
(g) With respect to assets which Debtor may acquire after the
date hereof which become Collateral under this Agreement, purchase
money security interest or other Liens which are a result of seller
financing in the acquisition of all or substantially all of the assets
of a new subsidiary.
2.5 No Competing Filings. No security agreement, financing statement
or equivalent security or lien instrument or continuation statement
covering all or any part of the Collateral is on file or of record in any
public office, except with respect to any Permitted Liens or such as may
have been filed in favor of Secured Party, pursuant to this Security
Agreement.
3. COVENANTS. Debtor hereby covenants and agrees to and with Secured
Party, that until all of the Veltri Indebtedness is fully paid:
3.1 Further Documentation: Pledy-e of Instruments. At any time and
from time to time, upon the reasonable request of Secured Party, and at
the sole expense of Debtor, Debtor will execute and deliver any and all
such further documents including, without limitation, the filing of any
financing or continuation statements under the UCC. Debtor also hereby
authorizes Secured Party to file any mortgage, financing or continuation
statements without the signature of Debtor to the extent permitted by
applicable law. Subject to the prior rights of the Banks, if any amount
payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note or other instrument (other
3
<PAGE> 15
than an instrument which constitutes Chattel Paper), such note or instrument
shall be pledged to Secured Party hereunder and shall be duly endorsed in a
manner reasonably satisfactory to Secured Party and delivered to Secured Party.
3.2 Indemnification. In any suit, proceeding or action properly brought
by Secured Party under this Security Agreement relating to the Collateral,
including, without limitation, any license, account, document, Chattel Paper,
contract or lease, for any sum owing thereunder, or to enforce any provisions of
any license, account, document, Chattel Paper, contract or lease, Debtor will
save, indemnify, defend and keep Secured Party harmless from and against any and
all expense, loss or damage suffered by reason of any and all defense, set-off,
counterclaim, recoupment or reduction of liability whatsoever of the obligor
thereunder arising out of a breach by Debtor of any obligation thereunder or
arising out of any other agreement, indebtedness or liability at any time owing
to or in favor of such obligor or its successors from Debtor, and all such
obligations of Debtor shall be and remain enforceable against and only against
Debtor and shall not be enforceable against Secured Party. Debtor promises to
pay, and to hold Secured Party harmless from: (i) any and all liabilities with
respect to, or resulting from, any delay in paying any and all excise, sales,
transfer or other taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of the transactions
contemplated by this Security Agreement; and (ii) damages (after deduction for
any net tax savings or third party recoveries to the extent either such item
otherwise would result in an excess recovery of Secured Party's damages)
resulting from any default in those transactions contemplated by the Agreement,
except to the extent Debtor is entitled to indemnity from Secured Party under
the Stock Purchase Agreement dated November 8, 1996 among Secured Party, Maria
Veltri and VMP (the "Stock Purchase Agreement").
3.3 Compliance. Debtor will comply, in all material respects, with all
applicable acts, rules, statutes, regulations, orders, judgments, decrees and
directions of any governmental authority applicable to the Collateral or any
part thereof or to the operation of Debtor's business.
3.4 Payment of Taxes. Debtor will pay, prior to the imposition of any
penalties or interest, all taxes, assessments and governmental charges or levies
imposed upon the Collateral or in respect of its income or profits therefrom, as
well as all claims of any kind (including claims for labor, materials and
supplies), except that no such tax, assessment or governmental charge levy or
claim need be paid if the validity thereof is being contested in good faith by
appropriate proceedings, unless such proceedings involve the imminent sale,
seizure, forfeiture or loss or any material portion of the Collateral.
3.5 Limitation on Liens on Collateral. Other than Permitted Liens,
Debtor will not create, permit or suffer to exist, and will defend at its sole
cost and expense the Collateral against and take such other action as is
necessary to remove, any lien, mortgage, pledge, assignment, security interest,
charge or encumbrance of any kind and any agreement to give or refrain from
giving any of the foregoing on the Collateral and, subject to the Permitted
Liens, will defend the right, title and interest of Secured Party in and to any
of the Collateral and in and to the Proceeds and Products thereof against the
claims and demands of any person or entity.
3.6 Maintenance of Insurance. Debtor will maintain insurance policies
insuring
4
<PAGE> 16
(i) the Collateral against loss or damage, however caused, and (ii) Debtor
against liability for personal injury and property damage relating to the
Collateral. Such insurance policies shall be in such form and in such amounts
and coverage as shall be reasonably satisfactory to Secured Party, with losses
payable to Secured Party as its interest may appear under a standard
non-contributory "mortgagee," "lender" or "Secured Party" clause. All such
insurance policies shall (i) contain a clause which provides that Secured
Party's interest under the policy will not be invalidated by any act or
omissions of, or any breach of warranty by, the insured, or by any change in the
title, ownership or possession of the insured property, or by the use of the
property for purposes more hazardous than is permitted in the policy, and (ii)
provide that no cancellation, reduction in amount, change in amount of
deductible, or change in coverage thereof shall be effective until at least
thirty (30) days after receipt by Secured Party of written notice thereof.
Debtor shall provide Secured Party with prompt notice of any claim in excess of
$1,000,000 under any such insurance policy. Debtor shall, if so requested by
Secured Party and as often as Secured Party may reasonably so request, provide
Secured Party with "certificates of insurance" or "insurance binders."
3.7 Limitation on Disposition. Debtor will not sell, transfer, lease or
otherwise dispose of any of the Collateral to the Banks or anyone else (except
inventory sold in the ordinary course of its business, except for the sale of
old and obsolete Collateral in connection with the replacement thereof, and, on
an annual basis, except for Collateral having an aggregate value of less than
$1,000,000), or attempt to offer or contract to do so without the prior written
consent of Secured Party.
3.8 Further Identification of Collateral. Debtor will furnish to
Secured Party from time to time, statements and schedules further identifying
and describing the Collateral and such other reports in connection with the
Collateral as Secured Party may reasonably request, all in detail as Secured
Party may reasonably require.
3.9 Performance by Secured Party of Debtor's Veltri Indebtedness. If
Debtor fails to perform or comply with any term or condition contained herein
and such failure shall continue for a period of thirty (30) days after written
notice thereof to Debtor (except where Debtor disputes such notice in good
faith, in which case Secured Party shall have no right to act on behalf of
Debtor until such dispute is resolved), Secured Party shall have the right to
perform or comply, or otherwise cause performance or compliance, with such term
or condition and the reasonable expenses of Secured Party incurred in connection
with such performance or compliance, together with interest thereon at the rate
of two percent (2%) above prime as reported in the Wall Street Journal, shall be
payable by Debtor to Secured Party on demand and shall constitute part of the
Veltri Indebtedness.
3.10 Right of Inspection. Secured Party shall have access upon
reasonable prior notice during normal business hours to the books and records
relating to the Collateral, and Secured Party or its representatives may
examine the same, take extracts therefrom and make photocopies thereof (at
Secured Party's expense), and Debtor agrees to render to Secured Party such
clerical and other assistance as may be reasonably requested with regard
thereto. Secured Party and its representatives shall also have the right upon
reasonable prior notice to enter into and upon any premises where any of the
Collateral is located for the purpose of inspecting the same, observing its use
or otherwise protecting their interests therein.
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<PAGE> 17
3.11 Maintenance of Equipment and Fixtures. Debtor will keep and
maintain each item of the Collateral in good operating condition and repair,
ordinary wear and tear excepted.
3.12 Conduct of Business, Debtor will not, whether in a single
transaction or a series of transactions, declare or pay dividends (other than
stock dividends or stock splits) on any stock, security or other equity
interests of Debtor, except for the (a) dividends to Debtor's shareholders in
payment of the federal and state income taxes payable by such shareholders as a
result of Debtor's election to be taxed as an S Corporation (assuming that such
shareholders are taxed at the highest applicable rates), (b) a dividend in the
amount of $10,000,000 to be paid contemporaneously with the completion of the
Offering, and (c) dividends in amounts not to exceed the income of Debtor and
its subsidiaries (other than VS Holdings, Inc. and Veltri Holdings USA, Inc.),
but only to the extent that the same is replaced with additional equity and/or
indebtedness subordinated to Secured Party.
3.13 Financial Statement and Information. Debtor will deliver or cause
to be delivered, copies of any and all quarterly and annual financial statements
and other financial statements relating to Debtor, its business, its financial
condition and the Collateral as Debtor may prepare or cause to be prepared. Any
such financial statements and information shall be prepared in accordance with
generally accepted accounting principles, consistently applied.
3.14 Name Change. Debtor shall not change its corporate name without
first giving Security Party ten (10) days prior written notice.
3.15 Repayment of Loan. Debtor shall not repay any existing outstanding
loan to its shareholders, except to the extent that the same are repaid out of
the funds received in connection with the Offering.
3.16 Future Subsidiaries. Debtor hereby undertakes to cause all of its
future whollyowned subsidiaries, as well as other subsidiaries which receive
funding from any of them directly or under lending arrangements with Comerica
Bank, or whose indebtedness is guaranteed by Debtor, or any of them, to grant a
security interest in favor of Secured Party and to execute financing statement
and mortgages, where appropriate, to secure payment of the Veltri Indebtedness
in the same or substantially the same form hereby given.
4. EVENTS OF DEFAULT. Debtor shall be in default under this Security
Agreement upon the occurrence of any of the following events (individually
referred to herein as "Event of Default"):
4.1 A failure of the Debtor to pay, as and when due hereunder,
any of the Veltri Indebtedness. Notwithstanding anything herein
contained to the contrary, no Event of Default shall be deemed to have
occurred pursuant to this Section 4.1 unless such Event of Default
remains uncured ten (10) days after receipt of written notice thereof.
4.2 Debtor's failure to observe or perform any of the terms,
conditions and covenants of this Security Agreement, which failure is
not cured within thirty (30) days after receipt of written notice
thereof, unless such failure is not capable of cure in such thirty (30)
day period, in which case, Debtor shall have commenced such cure within
thirty (30) days of notice and be diligently and in good faith pursuing
the completion of any such cure;
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<PAGE> 18
provided, however, that Debtor shall not be given any such additional
time beyond such original thirty (30) days to cure any breach or
violation of Section 3.12 of this Agreement.
4.3 If a judgment, decree or order for money damages in excess
of $1,000,000 (U.S.) not fully covered by insurance shall have been
entered by a court of competent jurisdiction against Debtor, or any writ
or warrant of execution, attachment, garnishment or any similar process
shall have been filed against any material part of the Collateral, and
such judgment, decree, order, writ or warrant of execution, attachment,
garnishment, or similar process shall have remained unsatisfied,
unvacated, unbonded or unstayed for a period of sixty (60) days.
4.4 If Debtor (i) becomes insolvent or files a bankruptcy
petition, (ii) makes an assignment for the benefit of creditors, (iii)
is unable to pay or meet its obligations as they mature, (iv) applies
for or consents to the appointment of a custodian, trustee or receiver
for all or any portion of its properties, assets or the Collateral, if
any such custodian, trustee or receiver shall not be discharged within
sixty (60) days, or (v) bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation proceedings
commenced against it under any law or statute of the United States or
any State thereof, which proceedings are not dismissed within sixty (60)
days.
4.5 If Comerica, as agent for itself and the Banks, shall
accelerate the indebtedness owed to it, and, after such acceleration,
Comerica shall exercise its remedies, or commence foreclosure
proceedings by public or private sale, with respect to all or any
portion of the Collateral.
4.6 VMP's default under its general security agreement with
Secured Party dated November 2, 1996.
5. RIGHTS UPON DEFAULT. In addition to any other rights given to
Secured Party hereunder and applicable law, if any Event of Default shall occur
and be continuing:
5.1 Subject to the prior interests of the Banks pursuant to
the Intercreditor Agreement (as such term is defined in Section 21
below), all payments received by Debtor which are Proceeds of or which
are in connection with any of the Collateral shall be held by Debtor in
trust for Secured Party, shall be segregated from other funds of Debtor
and shall immediately upon receipt by Debtor be turned over to Secured
Party in the same form as received by Debtor (duly endorsed by Debtor
to Secured Party, if required) including all original checks, drafts,
acceptances, notes and other evidence of payment related thereto; and
5.2 Subject to the prior interests of the Banks pursuant to
the Intercreditor Agreement, any and all such payments so received by
Secured Party (whether from Debtor or otherwise) may, in the sole
discretion of Secured Party, be held by Secured Party as collateral
security for, and/or at any time and from time to time thereafter,
applied in whole or in part by Secured Party against, all or any part
of the Veltri Indebtedness in such order and at such times as Secured
Party shall elect in its reasonable discretion. Any balance of such
payments held by Secured Party and remaining after payment in full of
all of the Veltri Indebtedness shall be paid over to the Debtor or to
whomsoever may be lawftilly entitled to receive the same.
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<PAGE> 19
6. REMEDIES UPON AN EVENT OF DEFAULT. If any Event of Default shall
occur and be continuing, subject to the prior interests and remedies of the
Banks pursuant to the Intercreditor Agreement, Secured Party shall have and may
exercise, in addition to all other rights and remedies granted to it in this
Security Agreement or in any other instrument or agreement securing, evidencing
or relating to the Veltri Indebtedness or available at law or in equity, any one
or more of the following rights and remedies:
6.1 All the rights and remedies upon default, in forfeiture
and otherwise available to secured parties under the UCC and other
applicable law.
6.2 Personally or by agents or attorneys, to take possession
of all or any part of the Collateral and/or render it unusable and
furthermore:
6.2.1 Hold, store, keep idle, lease, operate, remove or
otherwise use or permit the use of the Collateral or any part thereof,
for such time and upon such terms as Secured Party may in its
discretion deem to be in its own best interests, and demand, collect
and retain all earnings and other sums due and to become due in respect
to the same from any party arising from such use and charging against
all receipts from the use of the same or from the sale thereof, all
costs, expenses, judgments, damages and other losses resulting from
such use.
6.2.2 Sell, lease, dispose of or cause to be sold, leased and
disposed of, all or any part of the Collateral at one or more public or
private sales, leasings or other dispositions, in such places and times
and on such terms and conditions as Secured Party in its discretion
determines to be in its own best interest. Debtor's rights, if any, to
all of the following are hereby expressly waived by Debtor to the
fullest extent permitted by law: (i) all notice or advertisement of
sale, lease or other disposition; (ii) any right or equity of
redemption; (iii) any obligation of a perspective purchaser or lessee
to inquire as the power and authority of Secured Party to sell, lease
or otherwise dispose of the Collateral; and (iv) the right to direct
the application of the Proceeds of sale.
Without limiting the generality of the foregoing, Debtor expressly
agrees that if any Event of Default exists, Secured Party,
without demand of performance or other demand, advertisement or notice
of any kind (except the notice, specified below, containing the time
and place of any public or private sale) to or upon Debtor or any other
person (all and each of which demands, advertisements and/or notices
are hereby expressly waived), may forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, lease, assign, give an option or options to
purchase or sell or otherwise dispose of and deliver said Collateral
(or contract to do so), or any part thereof, in one or more units, lots
or parcels, in one or more contracts, at public or private sale or
sales, at any exchange broker's board or at any of Secured Party's
offices or elsewhere at such prices and on such terms as Secured Party
may deem in its reasonable discretion to be in its own best interests,
for cash or on credit or for future delivery without assumption of any
credit risk. Secured Party shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of said
Collateral so sold, free of any right or equity of redemption, which
equity of redemption Debtor hereby releases.
8
<PAGE> 20
Debtor agrees that Secured Party need not give more than twenty (20)
days notice (which notification shall be deemed given when mailed,
postage prepared, addressed to Debtor at its address set forth in this
Security Agreement for the giving of notices) of the time and place of
any public sale or of the time after which a private sale may take
place and that such notice is reasonable notification of such matters.
Debtor agrees to pay all costs of Secured Party, including reasonable
attorneys' fees and expenses, incurred with respect to the enforcement
of any of the Veltri Indebtedness, the enforcement of Secured Party's
rights and remedies upon a violation of Section 3.12 of this Agreement
and the enforcement of any of Secured Party's rights hereunder. Debtor
hereby waives presentment, demand, protest or any notice (to the extent
permitted by applicable law) of any kind in connection with this
Security Agreement or any Collateral. Debtor also expressly waives and
releases all right to direct the order in which any of the Collateral
shall be sold in the event of any sale or sales pursuant hereto and to
have any of the Collateral marshaled upon any foreclosure of any of the
security interests granted in this Security Agreement.
The Proceeds of any sale or other disposition of Collateral shall be
applied by Secured Party first upon all expenses authorized by the UCC
and all reasonable attorneys fees and other expenses incurred by
Secured Party; the balance of the Proceeds of such sale or other
disposition shall be applied to the payment of the Veltri Indebtedness,
first to interest then to principal; then, to any indebtedness of
Debtor secured by a subordinated security interest in the Collateral if
Secured Party is notified thereof in the time and manner provided in
the UCC and the surplus, if any, shall be paid over to Debtor or to
such other person or persons as may be entitled thereto under
applicable law. Debtor shall remain liable for any deficiency if the
Proceeds of any sale or disposition of the Collateral are insufficient
to pay all amounts to which Secured Party is entitled, Debtor shall
also remain liable for the fees and expenses of any attorneys employed
by Secured Party to collect such deficiency.
6.3 To institute legal proceedings to foreclose upon and against
the lien and security interests granted by this Security Agreement and
to recover judgment for all amounts then due and owing, and to collect
the same out of any of the Collateral or from the proceeds of any sale
or disposition thereof.
6.4 To enter upon the premises of Debtor or any other place or
places where the Collateral or any part thereof is found and to take
possession of the Collateral with or without demand and with or without
process of law.
6.5 To be entitled, to the extent provided by law, to have
appointed a custodian, trustee or receiver of the Collateral and to the
rents and profits derived therefrom. The Debtor hereby consents to the
appointment of such a custodian, trustee or receiver. This appointment
shall be in addition to any other rights, relief or remedies afforded
Secured Party. Such custodian, trustee or receiver, in addition to any
other rights to which he shall be entitled, shall be authorized to sell
any and all Collateral for the benefit of Secured Party, pursuant to
provisions of law, and Debtor shall remain liable to Secured Party for
any deficiency resulting from any such sale or disposition; and/or
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<PAGE> 21
6.6 To set off and apply any and all obligations or
indebtedness at any time owing by Secured Party to or for the credit or
the account of Debtor, against any and all of the Veltri Indebtedness.
Notwithstanding anything contained in this Security Agreement
to the contrary, in the exercise of its rights under this Security
Agreement, Secured Party shall use that degree of care required by the
UCC in the handling, storage and disposition and shall take all such
actions as may be reasonably necessary to preserve the value of the
Collateral and mitigate any loss of such value.
7. SECURED PARTY'S APPOINTMENT AS ATTORNEY-IN-FACT.
7.1 Appointment: Powers. Subject to the prior interests and
remedies of the Banks, if an Event of Default shall occur and be
continuing, Debtor irrevocably constitutes and appoints Secured Party,
with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place
and stead of Debtor and in the name of Debtor or in its own name, from
time to time in Secured Party's discretion, for the purpose of carrying
out the terms of this Security Agreement, to take any and all
appropriate action and to execute any and all documents and instruments
which may be necessary or desirable to accomplish the purposes of this
Security Agreement and, without limiting the generality of the
foregoing, hereby gives the Secured Party the power and right, on
behalf of Debtor, without notice to or assent by Debtor to do the
following:
7.1.1 Pay or discharge taxes, liens, security interests or
other encumbrances levied, placed on or threatened against the
Collateral, to effect any repairs or any insurance called for by the
terms of this Security Agreement and to pay all or any part of costs
thereof and the premiums therefor; and
7.1.2 (a) ask, direct and demand any party liable for any
payment under any of the Collateral to make payment of any and all
monies due and to become due thereunder directly to Secured Party or as
Secured Party shall direct; (b) collect and receive payment of and
receipt for any and all monies, claims and other amounts due and to
become due at any time in respect of or arising out of any Collateral;
(c) sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors,
assignments and notices in connection with accounts and other documents
relating to the Collateral; (d) in the name of Debtor, to its own name
or otherwise, take possession of and endorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of
monies due under any Collateral; (e) commence and prosecute any suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction for the purpose of collecting any monies due under any
Collateral or any part thereof or enforcing any other right in respect
of any Collateral; (f) defend any suit, action or proceeding brought
against Debtor with respect to any Collateral; (g) settle, compromise
or adjust any suit, action or proceeding described above and, in
connection therewith, to give such discharges or releases as Secured
Party may deem appropriate; (h) assign any copyright, patent or
trademark owned by Debtor (along with the goodwill of the business to
which such trademark pertains), for such term or terms, on such
conditions and in such manner, as Secured Party shall in its sole
discretion determine;
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<PAGE> 22
(i) direct the appropriate U.S. Postal Service office or offices to
deliver all mail addressed to Debtor with respect to accounts to
Secured Party as such place or places as Secured Party may indicate;
and (j) generally sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral in such manner
as is consistent with the UCC and as fully and completely as though
Secured Party were the absolute owner thereof for all purposes, and do,
at Secured Party's option and Debtor's expense, at any time or from
time to time all acts and things which Secured Party deems reasonably
necessary to protect, preserve or realize upon the Collateral and
Secured Party's security interest therein in order to affect the intent
of this Security Agreement, all as fully and effectively as Debtor
might do.
7.2 LIMITATION ON LIABILITY. The powers conferred on Secured
Party hereunder are solely to protect its interests in the Collateral
and shall not impose any duty upon it to exercise any such powers.
Secured Party shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers and neither it nor
any of its officers, directors, employees or agents shall be
responsible to Debtor for any act or failure to act, except for Secured
Party's own gross negligence or willful misconduct.
7.3 POWERS COUPLED WITH AN INTEREST. All powers, authorizations
and agencies contained in this Security Agreement with respect to the
Collateral are irrevocable and are deemed powers coupled with an
interest. Debtor hereby ratifies all that said attorney shall lawfully
do or cause to be done by virtue hereof.
8. TERMINATION. This Security Agreement, and all security interests of
Secured Party in the Collateral, shall terminate upon the full and final payment
of the Earn Out Amount and the Note Amount, as defined in the Stock Purchase
Agreement. Upon the full and final termination of this Security Agreement,
Secured Party will execute and deliver to Debtor termination statements,
releases and other documents reasonably requested by Debtor to evidence the
termination of this Security Agreement and of Secured Party's security interest
in the Collateral.
9. VENUE: JURISDICTION. Debtor agrees that all actions or proceedings
arising in connection with this Security Agreement shall be filed and tried only
in the courts of Oakland County, Michigan or of the United States for the
Eastern District of Michigan, Southern Division. Debtor hereby irrevocably and
unconditionally consents to, itself and in respect of its property, the
jurisdiction and venue of such courts. Nothing herein shall affect the right of
Secured Party to serve process in any manner permitted by law or to commence
legal proceedings or otherwise proceed against Debtor in any other jurisdiction.
Debtor irrevocably waives any right it may have to assert the doctrine of forum
non conveniens or to object to venue to the extent any proceeding is brought in
accordance with this Section.
10. WAIVERS VOLUNTARY. Ibe waivers contained in this Agreement are
freely, knowingly and voluntarily given by each party, without any duress or
coercion, after each party has consulted with its counsel and has carefully and
completely read all of the terms and provisions of this Agreement, specifically
including the waivers contained in this Section.
11. NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered by hand, or three days after being deposited in the
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<PAGE> 23
mail, postage prepaid, addressed as follows in the case of Debtor and Secured
Party, or to such other address as may be provided in writing:
Debtor: Talon Automotive Group, Inc.
900 Wilshire Drive
Suite 150
Troy, Michigan 48084
Attn: David Woodward,
Secured Party: Michael T.J. Veltri
4530 River Trail
Bloomfield Hills, MI 48301
12. SEVERABILITY. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction.
13. NO WAIVER, CUMULATIVE REMEDIES. Secured Party shall not by any
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder and no waiver shall be valid unless in writing, signed by
Secured Party and then only to the extent therein set forth. A waiver by Secured
Party of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which Secured Party would otherwise
have had on any future occasion. No failure to exercise, nor any delay in
exercising, on the part of Secured Party, any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or future
exercise thereof or the exercise of any other right power or privilege. The
rights and remedies hereunder provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights and remedies
provided by law or in equity. None of the terms or provisions of this Security
Agreement may be waived, altered, modified or amended except by an instrument in
writing, duly executed by Secured Party or Debtor.
14. SUCCESSORS AND ASSIGNS. This Security Agreement and all of the
Veltri Indebtedness shall be binding upon the successors, assigns and
wholly-owned subsidiaries of Debtor, and shall, together with the rights and
remedies of Secured Party hereunder inure to the benefit of Secured Party and
his heirs or devisees; provided, however, that neither Debtor nor Secured Party
may assign any of their respective rights or any of the Veltri Indebtedness
hereunder without the prior written consent of the other party (which consent
shall not be unreasonably withheld), except that Secured Party may assign his
rights and obligations to a revocable living trust of which Secured Party is the
sole trustee during his lifetime.
15. COUNTERPARTS. This Security Agreement may be executed by the
parties hereto in any number of separate counterparts and all of such
counterparts taken together shall be deemed to constitute one and the same
instrument.
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<PAGE> 24
16. CONSTRUCTION. Neither this Security Agreement nor any uncertainty
or ambiguity herein shall be construed or resolved against Secured Party,
whether under any rule of construction or otherwise. On the contrary, this
Security Agreement has been reviewed by each of the parties and their counsel
and shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of all parties
hereto.
17. COMPLETE AGREEMENT. This Security Agreement represents the entire
agreement between Debtor and Secured Party relating to the subject matter
hereof, supersedes all prior agreements, commitments and understandings between
the parties hereto relating to the subject matter hereof, cannot be changed or
terminated orally, and shall be deemed effective as of the date hereof.
18. HEADINGS. Headings used in this Security Agreement are for
convenience of reference only and shall not constitute a part of this Security
Agreement for any other purpose or affect the construction of this Security
Agreement.
19. CHOICE OF LAW. The validity of this Security Agreement, its
construction, interpretation and enforcement and the rights of the parties
hereto shall be determined under, governed by and construed in accordance with
the laws of the State of Michigan, without regard to principles of conflicts of
law.
20. WAIVER OF JURY TRIAL. SECURED PARTY AND DEBTOR ACKNOWLEDGE AND
AGREE THAT THERE MAY BE A CONSTITUTIONAL RIGHT TO A JURY TRIAL IN CONNECTION
WITH ANY CLAIM, DISPUTE OR LAWSUIT ARISING BETWEEN THEM, BUT THAT SUCH RIGHT MAY
BE WAIVED. ACCORDINGLY, THE PARTIES AGREE THAT NOTWITHSTANDING SUCH
CONSTITUTIONAL RIGHT, IN THIS COMMERCIAL MATTER THE PARTIES BELIEVE AND AGREE
THAT IT SHALL BE IN THEIR BEST INTEREST TO WAIVE SUCH RIGHT, AND, ACCORDINGLY,
HEREBY WAIVE SUCH RIGHT TO A JURY TRIAL, AND FURTHER AGREE THAT THE BEST FORUM
FOR HEARING ANY CLAIM, DISPUTE OR LAWSUIT, IF ANY, ARISING IN CONNECTION WITH
THIS AGREEMENT OR THE RELATIONSHIP BETWEEN SECURED PARTY AND DEBTOR, SHALL BE A
COURT OF COMPETENT JURISDICTION SITTING WITHOUT A JURY.
21. ACKNOWLEDGEMENT OF SUBORDINATION. Notwithstanding anything
contained herein to the contrary, Secured Party acknowledges and agrees that its
security interest in the Collateral is subordinate in all respects to the
security interest of the Banks in the Collateral to the extent provided in the
Intercreditor Agreement, dated as of the date hereof (the "Intercreditor
Agreement"), between Secured Party and the Banks and that all rights, remedies
and powers of Secured Party hereunder with respect to the Collateral (including
without limitation those set forth in Sections 5, 6 and 7 hereof) shall be
subject to and limited by the superior rights of the Banks to the extent
provided in the Intercreditor Agreement. In furtherance of the foregoing,
Secured Party agrees to execute and deliver to the Banks a subordination
agreement containing such terms as the Banks may reasonably request with respect
to the foregoing and any other matter to be covered thereby.
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<PAGE> 25
IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered as of the date first set forth above.
DEBTOR:
TALON AUTOMOTIVE GROUP, INC.
By:
-------------------------
Its: --------------------
OTHER PARTIES:
VS HOLDINGS~ INC.
By:
-------------------------
Its:
------------------------
VELTRI HOLDINGS USA, INC.
By:
-------------------------
Its:
------------------------
SECURED PARTY:
----------------------------
Michael T.J. Veltri
14
<PAGE> 1
EXHIBIT 10.9
AMENDED AND RESTATED
PROMISSORY NOTE
$658,325 (U.S.) TROY, MICHIGAN
NOVEMBER 8, 1996 (ORIGINAL DATE)
APRIL , 1998 (AMENDED AND RESTATED DATE)
--
FOR VALUE RECEIVED, which shall include the return of the original
promissory note between the parties hereof which promissory note shall be deemed
canceled with the delivery of this Promissory Note, the undersigned, Veltri
Metal Products Co., F/K/A VS Acquisition Co., a Nova Scotia Company ("Debtor"),
hereby promises to pay to the order of Michael T. J. Veltri, a Michigan
resident, individually and as trustee the Michael T. J. Veltri Revocable Living
Trust u/a/d December 17, 1992 ("Creditor"), the principal sum of Six Hundred
Fifty Eight Thousand Three Hundred Twenty Five Dollars (U.S.) ($658,325.00
U.S.), together with interest on the unpaid principal balance thereof from the
Original Date at a per annum rate equal to the Comerica Bank prime rate of
interest in effect from time to time during the term of this Note ("Note Rate").
The principal sum and any accrued interest shall be paid by Debtor to Creditor
as follows:
The principal balance of this Note and all accrued interest
shall be paid on or before September 17, 1998 (the "Payment").
The occurrence of any one of the following events shall constitute an
"Event of Default" by Debtor under this Note: (a) Debtor's failure to pay the
Payment when due, whether by maturity, acceleration or otherwise, if such
payment is not made within ten (10) days after receipt of written notice, or any
other breach by Debtor of any term or provision of this Note (other than a
payment failure) if such breach is not cured within thirty (30) days after
receipt of written notice, unless such breach is not capable of cure in such
thirty (30) days of notice and Debtor is diligently and in good faith pursuing
the completion any such cure; (b) an Event of Default shall occur under either
the security agreement entered into by and between Creditor and Veltri Holdings
USA, Inc. on November 8, 1996 or the security agreement among Creditor, Talon
Automotive Group, Inc., VS Holdings, Inc., and Veltri Holdings USA, Inc. in
connection with this Note; and (c) the event of an unwaived event of default
under Debtor's senior credit facility with Comerica Bank as agent for all
participating lenders. From and after any Event of Default, (i) interest shall
accrue on the outstanding principal balance at two percent (2%) above the Note
Rate, until this Note is paid in full, and (ii) Creditor shall have the option,
without notice or demand to Debtor, to declare the entire unpaid principal
balance of this Note, together with all accrued interest, immediately due and
payable.
In the event of Creditor's death, all payments hereunder shall nevertheless
be due and shall be paid to Creditor's personal representative or to any other
person or entity designated by Creditor's personal representative. This Note may
be prepaid in whole or in part on one or more occasions without penalty. All
payments under this Note, whether due by acceleration or otherwise, shall be
applied first to any accrued interest, and then to principal. This Note shall be
governed and
<PAGE> 2
construed in accordance with the laws of the State of Michigan. If any provision
of this Note is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provision shall nevertheless continue in full force
and effect without being impaired or invalid in any way.
Debtor agrees to pay all costs, attorney fees and expenses incurred by
Creditor in connection with the collection of any amount due under this Note or
the enforcement of any rights of Creditor under this Note.
This Note is given by Debtor in connection with the Stock Purchase
Agreement dated November 8, 1996, as amended and Debtor's obligations pursuant
hereto are subject to Debtor's rights contained in Section 5.2(f) of the Stock
Purchase Agreement.
Debtor waives presentment for payment, demand, notice of non-payment,
protest and notice of protest of this Note. Any forbearance by Creditor in
exercising any right or remedy hereunder or otherwise afforded by applicable
law, shall not be a waiver or preclude the exercise of any right or remedy by
Creditor. The acceptance by Creditor of any sum payable hereunder after the due
date of such payment shall not be a waiver of the right of Creditor to require
prompt payment when due of all other sums payable hereunder or to declare a
Default for failure to make prompt payment.
This Note shall be binding upon the successors and assigns of Debtor, and
shall, together with the rights and remedies of Creditor hereunder, inure to the
benefit of Creditor and his heirs or devisees; provided, however, that neither
Debtor nor Creditor may assign any of their respective rights hereunder without
the prior written consent of the other party (which consent shall not be
unreasonably withheld), except that Creditor may assign his rights to a
revocable living trust of which Creditor is the sole trustee during his
lifetime.
This Note is secured by a security agreement among Talon Automotive Group,
Inc., VS Holdings, Inc., and Veltri Holdings USA, Inc. and the parties hereof, a
mortgage on property located in Royal Oak, Michigan owned by Talon Automotive
Group, Inc., and a guaranty given by Talon Automotive Group, Inc., VS Holdings,
Inc., and Veltri Holdings USA, Inc., all of even date herewith.
IN WITNESS WHEREOF, this Promissory Note is made and entered into on the
day and year first above written as the Amended and Restated Date.
DEBTOR:
VELTRI METAL PRODUCTS CO., F/K/A
VS ACQUISITION CO.
By: David J. Woodward
-----------------------------------
Its:
----------------------------------
<PAGE> 1
EXHIBIT 10.10
UNCONDITIONAL GUARANTY
KNOW ALL MEN BY THESE PRESENTS that Talon Automotive Group, Inc. ("TAG"),
VS Holdings, Inc., and Veltri Holdings USA, Inc. all of which share the mailing
address of 900 Wilshire Drive, Suite 203, Troy, Michigan ("Guarantors"), for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, hereby unconditionally and absolutely guarantee to Michael T. J.
Veltri, individually and as trustee of the Michael T. J. Veltri Revocable Living
Trust u/a/d December 17, 1992, ("Creditor"), his successors and assigns, the
full and prompt payment by Veltri Metal Products Co. ("VMP"), when and as due,
the Veltri Indebtedness, as that term is defined in the offering of up to
$125,000,000 in senior subordinated notes pursuant to Rule 144A promulgated
under the Securities Act of 1933 as amended, provided, however, that for
purposes of this Guaranty, the Veltri Indebtedness shall not include any
obligations to Creditor under the TAG Equity Ownership Plan, Creditor's Deferred
Compensation Agreement or Creditor's Equity Ownership Agreement.
The obligations of Guarantors hereunder sha11 be absolute and primary, and
shall be complete and binding immediately upon the complete execution hereof and
shall be subject to no other condition whatsoever precedent or otherwise and
notice of acceptance hereof or action in reliance hereon shall not be required.
The obligations of Guarantors shall be continuing and shall continue,
irrespective of any statute of limitations otherwise applicable or defenses of
laches.
Upon the occurrence of VMP's failure to pay any of the Veltri Indebtedness,
Guarantors agree to pay immediately the same, together with all other charges
accruing with respect to said amount and all costs and expenses of collection,
including reasonable attorneys' fees.
As security for this Guaranty and the obligations of Guarantors hereunder,
Guarantors and Creditor have entered into a certain security agreement of even
date herewith, whereby Guarantors have granted security interests in all of
their assets to Creditor.
Guarantors hereby undertake to cause all of their future wholly-owned
subsidiaries, as well as other subsidiaries which receive funding from any of
them directly or under lending arrangements with Comerica Bank, or whose
indebtedness is guaranteed by TAG, or any of them, to execute guaranties of the
Veltri Indebtedness in the same or substantially the same form hereby given.
Guarantors consent to any and all extensions, renewals, waivers or
modifications that may be granted by Creditor with respect to the Veltri
Indebtedness and waive any defenses in connection with such events. Other than
as required by other agreements by and among the parties hereof, Guarantors
further waive any failure of Creditor to give a notice of default, any failure
of Creditor to pursue any other party or its assets with due diligence, any
failure to resort to any other remedy available to Creditor and any and all
defenses whatsoever arising out of this Guaranty.
1
<PAGE> 2
This Guaranty and the rights and liabilities of the parties hereunder shall
be governed by and construed under the laws of the State of Michigan.
IN WITNESS WHEREOF, the Guarantors have executed this Unconditional
Guaranty on the day ____ of April, 1998.
IN THE PRESENCE OF: TALON AUTOMOTIVE GROUP, INC.,
a Michigan corporation
By: David J. Woodward
- ---------------------------------- -------------------------------
Its:
-------------------------------
VS HOLDINGS, INC.
By: David J. Woodward
-------------------------------
Its:
-------------------------------
VELTRI HOLDINGS USA, INC.
By: David J. Woodward
-------------------------------
Its:
-------------------------------
2
<PAGE> 1
EXHIBIT 10.11
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made and entered into this day of April,
1998, by and between Talon Automotive Group, Inc., a Michigan corporation
("TAG") and its direct or indirect subsidiaries, VS Holdings, Inc., and Veltri
Holdings USA, Inc., (collectively "Debtor"), and Michael T. J. Veltri,
individually and as trustee of the Michael T. J. Veltri Revocable Living Trust
u/a/d December 17, 1992, a Michigan resident ("Secured Party").
RECITALS:
A. Debtor has entered into that certain Unconditional Guaranty (the
"Guaranty") of even date herewith to guaranty certain obligations of Veltri
Metal Products Co. ("VMP") to Secured Party.
B. In order to secure Debtor's financial obligations to Secured Party
pursuant to the Guaranty ("Veltri Indebtedness"), Debtor wishes to grant Secured
Party a security interest in all of its now owned or hereafter acquired assets
subject to the terms and conditions of this Agreement.
C. Debtor is in the process of completing an offering of up to $125,000,000
in senior subordinated notes pursuant to Rule 144A promulgated under the
Securities Act of 1933, as amended.
NOW, THEREFORE, in consideration of the above recitals, the mutual
covenants and promises contained herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged and
agreed to, Debtor and Secured Party agree as follows:
1. GRANT OF SECURITY INTEREST. As Security for the prompt and complete
payment when due of the Veltri Indebtedness and the obligations of the Debtor
pursuant to the Agreement of even date herewith (the "Agreement"). Debtor hereby
grants to Secured Party a security interest in all assets of Debtor, including
but not limited to all of Debtor's right, title and interest in, to and under
the following, whether now owned or hereafter acquired (collectively, the
"Collateral"):
(i) all accounts as defined in Section 9-106 of the Uniform
Commercial Code (the "UCC") as from time to time in effect
in Michigan;
(ii) all contracts;
(iii) all equipment as defined in Section 9-109(2) of the UCC;
(iv) all general intangibles as defined in Section 9-106 of the
UCC;
(v) all inventory as defined in Section 9-109(4) of the UCC
<PAGE> 2
(vi) all books and records, data processing cards, tapes,
tabulating runs, programs and similar material evidencing,
securing or relating to any of the foregoing; and
(vii) to the extent not otherwise included, all proceeds, as
defined in Section 9-306 of the UCC, and products of any or
all of the foregoing.
Without limiting the generality of the foregoing, Debtor agrees that the Veltri
Indebtedness shall also include: (i) all costs, expenses and attorney fees which
are reasonably paid or incurred by Secured Party in the enforcement,
administration and collection of any Veltri Indebtedness, and in the protection,
maintenance and disposition of any Collateral; and (ii) all amounts payable
under this Security Agreement including, without limitation, Section 3.2 hereof.
2. REPRESENTATIONS AND WARRANTIES. Debtor hereby represents and warrants
to Secured Party that:
2.1 Good Standing; Location and Use of Collateral. Each Debtor is a
company duly organized, validly existing and in good standing under the
laws of the state of their incorporation, and is duly qualified to transact
business and is in good standing in each jurisdiction where such
qualification is necessary, except where the lack of such qualification
would not have a material adverse effect, and each has all the requisite
power and authority, corporate or otherwise, to conduct its business, to
own and operate its properties and to execute, deliver and perform all of
its obligations hereunder.
2.2 Authorization; Enforceability. This Security Agreement has been
duly executed and delivered by Debtor and constitutes the legal, valid and
binding obligation of Debtor, enforceable in accordance with its terms. The
execution and delivery of this Security Agreement does not constitute a
breach of any provision contained in Debtor's Article of Incorporation or
Bylaws or any material agreement or instrument to which Debtor is a party
or by which Debtor is bound.
2.3 Threatened or Pending Proceedings. To the best of Debtor's
knowledge, there are no actions or proceedings which are threatened or
pending against Debtor or any of its assets which might result in any
material adverse change in Debtor's financial condition or which might
materially adversely affect the Collateral or Debtor's business.
2.4 Ownership. Debtor owns all right to, title in, and interest in
all of the Collateral free and clear of any liens, pledges or other
encumbrances, except for Permitted liens (as hereinafter defined). As used
herein, "Permitted Liens" shall mean:
(a) the liens, claims, encumbrances and security interests
(collectively, "Liens") on any of the Collateral in favor of Comerica
Bank, as agent for itself and any other institutional lenders which
may participate with Comerica, or their successor lender(s) in
connection with any refinancing thereof (the "Banks"), and any other
person or entity permitted by Secured Party in writing;
(b) In accordance with Section 3.4 below, Liens for taxes,
assessments or governmental charges or claims not yet delinquent, or
Liens for taxes, assessments
2
<PAGE> 3
or governmental charges being contested in good faith and by
appropriate proceedings;
(c) Liens in respect of property or assets of Debtor which were
imposed by law in the ordinary course of business, such as carriers',
warehousemen's and construction liens and other similar liens arising
in the ordinary course of business, which are not delinquent or which
are being contested in good faith by appropriate proceedings;
(d) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other type of social security, or to secure the
performance of tenders, statutory obligations, surety bonds, bids,
leases, governmental contracts, performance and return-of-money bonds
and other similar obligations incurred in the ordinary course of
business (exclusive of obligations in respect to the payment for
borrowed money or the equivalent);
(e) Liens of any judgment rendered which does not give rise to an
Event of Default (as defined below) and Liens created by deposits of
cash or cash equivalents permitting the Debtor to appeal court
judgments that are being contested in good faith by appropriate
proceedings and do not give rise to an Event of Default;
(f) Assignments, leases or subleases granted to others not
interfering in any material respect with the ordinary conduct of the
Debtor's business and not materially affecting the value of the
Collateral; and
(g) With respect to assets which Debtor may acquire after the
date hereof which become Collateral under this Agreement, purchase
money security interest or other Liens which are a result of seller
financing in the acquisition of all or substantially all of the assets
of a new subsidiary.
2.5 No Competing Filings. No security agreement, financing statement
or equivalent security or lien instrument or continuation statement
covering all or any part of the Collateral is on file or of record in any
public office, except with respect to any Permitted Liens or such as may
have been filed in favor of Secured Party, pursuant to this Security
Agreement.
3. COVENANTS. Debtor hereby covenants and agrees to and with Secured
Party, that until all of the Veltri Indebtedness is fully paid:
3.1 Further Documentation: Pledge of Instruments. At any time and from
time to time, upon the reasonable request of Secured Party, and at the sole
expense of Debtor, Debtor will execute and deliver any and all such
further documents including, without limitation, the filing of any
financing or continuation statements under the UCC. Debtor also hereby
authorizes Secured Party to file any mortgage, financing or continuation
statements without the signature of Debtor to the extent permitted by
applicable law. Subject to the prior rights of the Banks, if any amount
payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note or other instrument (other
3
<PAGE> 4
than an instrument which constitutes Chattel Paper), such note
or instrument shall be pledged to Secured Party hereunder and shall be
duly endorsed in a manner reasonably satisfactory to Secured Party and
delivered to Secured Party.
3.2 Indemnification. In any suit, proceeding or action properly
brought by Secured Party under this Security Agreement relating to the
Collateral, including, without limitation, any license, account,
document, Chattel Paper, contract or lease, for any sum owing
thereunder, or to enforce any provisions of any license, account,
document, Chattel Paper, contract or lease, Debtor will save,
indemnify, defend and keep Secured Party harmless from and against any
and all expense, loss or damage suffered by reason of any and all
defense, set-off, counterclaim, recoupment or reduction of liability
whatsoever of the obligor thereunder arising out of a breach by Debtor
of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such
obligor or its successors from Debtor, and all such obligations of
Debtor shall be and remain enforceable against and only against Debtor
and shall not be enforceable against Secured Party. Debtor promises to
pay, and to hold Secured Party harmless from: (i) any and all
liabilities with respect to, or resulting from, any delay in paying any
and all excise, sales, transfer or other taxes which may be payable or
determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Security
Agreement; and (ii) damages (after deduction for any net tax savings or
third party recoveries to the extent either such item otherwise would
result in an excess recovery of Secured Party's damages) resulting from
any default in those transactions contemplated by the Agreement, except
to the extent Debtor is entitled to indemnity from Secured Party under
the Stock Purchase Agreement dated November 8, 1996 among Secured
Party, Maria Veltri and VMP (the "Stock Purchase Agreement").
3.3 Compliance. Debtor will comply, in all material respects,
with all applicable acts, rules, statutes, regulations, orders,
judgments, decrees and directions of any governmental authority
applicable to the Collateral or any part thereof or to the operation of
Debtor's business.
3.4 Payment of Taxes. Debtor will pay, prior to the imposition
of any penalties or interest, all taxes, assessments and governmental
charges or levies imposed upon the Collateral or in respect of its
income or profits therefrom, as well as all claims of any kind
(including claims for labor, materials and supplies), except that no
such tax, assessment or governmental charge levy or claim need be paid
if the validity thereof is being contested in good faith by appropriate
proceedings, unless such proceedings involve the imminent sale,
seizure, forfeiture or loss or any material portion of the Collateral.
3.5 Limitation on Liens on Collateral. Other than Permitted
Liens, Debtor will not create, permit or suffer to exist, and will
defend at its sole cost and expense the Collateral against and take
such other action as is necessary to remove, any lien, mortgage,
pledge, assignment, security interest, charge or encumbrance of any
kind and any agreement to give or refrain from giving any of the
foregoing on the Collateral and, subject to the Permitted Liens, will
defend the right, title and interest of Secured Party in and to any of
the Collateral and in and to the Proceeds and Products thereof against
the claims and demands of any person or entity.
3.6 Maintenance of Insurance. Debtor will maintain insurance
policies insuring
4
<PAGE> 5
(i) the Collateral against loss or damage, however caused, and
(ii) Debtor against liability for personal injury and property damage
relating to the Collateral. Such insurance policies shall be in such
form and in such amounts and coverage as shall be reasonably
satisfactory to Secured Party, with losses payable to Secured Party as
its interest may appear under a standard non-contributory "mortgagee,"
"lender" or "Secured Party" clause. All such insurance policies shall
(i) contain a clause which provides that Secured Party's interest under
the policy will not be invalidated by any act or omissions of, or any
breach of warranty by, the insured, or by any change in the title,
ownership or possession of the insured property, or by the use of the
property for purposes more hazardous than is permitted in the policy,
and (H) provide that no cancellation, reduction in amount, change in
amount of deductible, or change in coverage thereof shall be effective
until at least thirty (30) days after receipt by Secured Party of
written notice thereof. Debtor shall provide Secured Party with prompt
notice of any claim in excess of $1,000,000 under any such insurance
policy. Debtor shall, if so requested by Secured Party and as often as
Secured Party may reasonably so request, provide Secured Party with
"certificates of insurance" or "insurance binders."
3.7 Limitation on Disposition. Debtor will not sell, transfer,
lease or otherwise dispose of any of the Collateral to the Banks or
anyone else (except inventory sold in the ordinary course of its
business, except for the sale of old and obsolete Collateral in
connection with the replacement thereof, and, on an annual basis,
except for Collateral having an aggregate value of less than
$1,000,000), or attempt to offer or contract to do so without the prior
written consent of Secured Party.
3.8 Further Identification of Collateral. Debtor will furnish
to Secured Party from time to time, statements and schedules further
identifying and describing the Collateral and such other reports in
connection with the Collateral as Secured Party may reasonably request,
all in detail as Secured Party may reasonably require.
3.9 Performance by Secured Party of Debtor's Veltri
Indebtedness. If Debtor fails to perform or comply with any
term or condition contained herein and such failure shall continue for
a period of thirty (30) days after written notice thereof to Debtor
(except where Debtor disputes such notice in good faith, in which case
Secured Party shall have no right to act on behalf of Debtor until
such dispute is resolved), Secured Party shall have the right to
perform or comply, or otherwise cause performance or compliance, with
such term or condition and the reasonable expenses of Secured Party
incurred in connection with such performance or compliance, together
with interest thereon at the rate of two percent (2%) above prime as
reported in the Wall Street Journal, shall be payable by Debtor to
Secured Party on demand and shall constitute part of the Veltri
Indebtedness.
3.10 Right of Inspection. Secured Party shall have access upon
reasonable prior notice during normal business hours to the books and
records relating to the Collateral, and Secured Party or its
representatives may examine the same, take extracts therefrom and make
photocopies thereof (at Secured Party's expense), and Debtor agrees to
render to Secured Party such clerical and other assistance as may be
reasonably requested with regard thereto. Secured Party and its
representatives shall also have the right upon reasonable prior notice
to enter into and upon any premises where any of the Collateral is
located for the purpose of inspecting the same, observing its use or
otherwise protecting their interests therein.
5
<PAGE> 6
3.11 Maintenance of Equipment and Fixtures. Debtor will keep
and maintain each item of the Collateral in good operating condition
and repair, ordinary wear and tear excepted.
3.12 Conduct of Business. Debtor will not, whether in a single
transaction or a series of transactions, declare or pay dividends
(other than stock dividends or stock splits) on any stock, security or
other equity interests of Debtor, except for the (a) dividends to
Debtor's shareholders in payment of the federal and state income taxes
payable by such shareholders as a result of Debtor's election to be
taxed as an S Corporation (assuming that such shareholders are taxed at
the highest applicable rates), (b) a dividend in the amount of
$10,000,000 to be paid contemporaneously with the completion of the
Offering, and (c) dividends in amounts not to exceed the income of
Debtor and its subsidiaries (other than VS Holdings, Inc. and Veltri
Holdings USA, Inc.), but only to the extent that the same is replaced
with additional equity and/or indebtedness subordinated to Secured
Party.
3.13 Financial Statement and Information. Debtor will deliver
or cause to be delivered, copies of any and all quarterly and annual
financial statements and other financial statements relating to Debtor,
its business, its financial condition and the Collateral as Debtor may
prepare or cause to be prepared. Any such financial statements and
information shall be prepared in accordance with generally accepted
accounting principles, consistently applied.
3.14 Name Change. Debtor shall not change its corporate name
without first giving Security Party ten (10) days prior written notice.
3.15 Repayment of Loan. Debtor shall not repay any existing
outstanding loan to its shareholders, except to the extent that the
same are repaid out of the funds received in connection with the
Offering.
3.16 Future Subsidiaries. Debtor hereby undertakes to cause all
of its future wholly owned subsidiaries, as well as other subsidiaries
which receive funding from any of them directly or under lending
arrangements with Comerica Bank, or whose indebtedness is guaranteed by
Debtor, or any of them, to grant a security interest in favor of
Secured Party and to execute financing statement and mortgages, where
appropriate, to secure payment of the Veltri Indebtedness in the same
or substantially the same form hereby given.
4. EVENTS OF DEFAULT. Debtor shall be in default under this Security
Agreement upon the occurrence of any of the following events (individually
referred to herein as "Event of Default"):
4.1 A failure of the Debtor to pay, as and when due hereunder,
any of the Veltri Indebtedness. Notwithstanding anything herein
contained to the contrary, no Event of Default shall be deemed to have
occurred pursuant to this Section 4.1 unless such Event of Default
remains uncured ten (10) days after receipt of written notice thereof.
4.2 Debtor's failure to observe or perform any of the terms,
conditions and covenants of this Security Agreement, which failure is
not cured within thirty (30) days after receipt of written notice
thereof, unless such failure is not capable of cure in such thirty (30)
day period, in which case, Debtor shall have commenced such cure within
thirty (30) days of notice and be diligently and in good faith pursuing
the completion of any such cure;
6
<PAGE> 7
provided, however, that Debtor shall not be given any such
additional time beyond such original thirty (30) days to cure any
breach or violation of Section 3.12 of this Agreement.
4.3 If a judgment, decree or order for money damages in excess
of $1,000,000 (U.S.) not fully covered by insurance shall have been
entered by a court of competent jurisdiction against Debtor, or any
writ or warrant of execution, attachment, garnishment or any similar
process shall have been filed against any material part of the
Collateral, and such judgment, decree, order, writ or warrant of
execution, attachment, garnishment, or similar process shall have
remained unsatisfied, unvacated, unbonded or unstayed for a period of
sixty (60) days.
4.4 If Debtor (i) becomes insolvent or files a bankruptcy
petition, (ii) makes an assignment for the benefit of creditors, (iii)
is unable to pay or meet its obligations as they mature, (iv) applies
for or consents to the appointment of a custodian, trustee or receiver
for all or any portion of its properties, assets or the Collateral, if
any such custodian, trustee or receiver shall not be discharged within
sixty (60) days, or (v) bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation
proceedings commenced against it under any law or statute of the United
States or any State thereof, which proceedings are not dismissed within
sixty (60) days.
4.5 If Comerica, as agent for itself and the Banks, shall
accelerate the indebtedness owed to it, and, after such acceleration,
Comerica, shall exercise its remedies, or commence foreclosure
proceedings by public or private sale, with respect to all or any
portion of the Collateral.
4.6 VMP's default under its general security agreement with
Secured Party dated November 2, 1996.
5. RIGHTS UPON DEFAULT. In addition to any other rights given to
Secured Party hereunder and applicable law, if any Event of Default shall
occur and be continuing:
5.1 Subject to the prior interests of the Banks pursuant to the
Intercreditor Agreement (as such term is defined in Section 21 below),
all payments received by Debtor which are Proceeds of or which are in
connection with any of the Collateral shall be held by Debtor in trust
for Secured Party, shall be segregated from other funds of Debtor and
shall immediately upon receipt by Debtor be turned over to Secured
Party in the same form as received by Debtor (duly endorsed by Debtor
to Secured Party, if required) including all original checks, drafts,
acceptances, notes and other evidence of payment related thereto; and
5.2 Subject to the prior interests of the Banks pursuant to the
Intercreditor Agreement, any and all such payments so received by
Secured Party (whether from Debtor or otherwise) may, in the sole
discretion of Secured Party, be held by Secured Party as collateral
security for, and/or at any time and from time to time thereafter,
applied in whole or in part by Secured Party against, all or any part
of the Veltri Indebtedness in such order and at such times as Secured
Party shall elect in its reasonable discretion. Any balance of such
payments held by Secured Party and remaining after payment in full of
all of the Veltri Indebtedness shall be paid over to the Debtor or to
whomsoever may be lawfully entitled to receive the same.
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<PAGE> 8
6. REMEDIES UPON AN EVENT OF DEFAULT. If any Event of Default shall
occur and be continuing, subject to the prior interests and remedies of the
Banks pursuant to the Intercreditor Agreement, Secured Party shall have and may
exercise, in addition to all other rights and remedies granted to it in this
Security Agreement or in any other instrument or agreement securing, evidencing
or relating to the Veltri Indebtedness or available at law or in equity, any one
or more of the following rights and remedies:
6.1 All the rights and remedies upon default, in forfeiture and
otherwise available to secured parties under the UCC and other
applicable law.
6.2 Personally or by agents or attorneys, to take possession of
all or any part of the Collateral and/or render it unusable and
furthermore:
6.2. 1 \ Hold, store, keep idle, lease, operate, remove or
otherwise use or permit the use of the Collateral or any part thereof,
for such time and upon such terms as Secured Party may in its
discretion deem to be in its own best interests, and demand, collect
and retain all earnings and other sums due and to become due in respect
to the same from any party arising from such use and charging against
all receipts from the use of the same or from the sale thereof, all
costs, expenses, judgments, damages and other losses resulting from
such use.
6.2.2 Sell, lease, dispose of or cause to be sold, leased and
disposed of, all or any part of the Collateral at one or more public or
private sales, leasings or other dispositions, in such places and times
and on such terms and conditions as Secured Party in its discretion
determines to be in its own best interest. Debtor's rights, if any, to
all of the following are hereby expressly waived by Debtor to the
fullest extent permitted by law: (i) all notice or advertisement of
sale, lease or other disposition; (ii) any right or equity of
redemption; (iii) any obligation of a perspective purchaser or lessee
to inquire as the power and authority of Secured Party to sell, lease
or otherwise dispose of the Collateral; and (iv) the right to direct
the application of the Proceeds of sale.
Without limiting the generality of the foregoing, Debtor
expressly agrees that if any Event of Default exists, Secured Party,
without demand of performance or other demand, advertisement or notice
of any kind (except the notice, specified below, containing the time
and place of any public or private sale) to or upon Debtor or any other
person (all and each of which demands, advertisements and/or notices
are hereby expressly waived), may forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, lease, assign, give an option or options to
purchase or sell or otherwise dispose of and deliver said Collateral
(or contract to do so), or any part thereof, in one or more units, lots
or parcels, in one or more contracts, at public or private sale or
sales, at any exchange broker's board or at any of Secured Party's
offices or elsewhere at such prices and on such terms as Secured Party
may deem in its reasonable discretion to be in its own best interests,
for cash or on credit or for future delivery without assumption of any
credit risk. Secured Party shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of said
Collateral so sold, free of any right or equity of redemption, which
equity of redemption Debtor hereby releases.
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<PAGE> 9
Debtor agrees that Secured Party need not give more than twenty
(20) days notice (which notification shall be deemed given when mailed,
postage prepared, addressed to Debtor at its address set forth in this
Security Agreement for the giving of notices) of the time and place of
any public sale or of the time after which a private sale may take
place and that such notice is reasonable notification of such matters.
Debtor agrees to pay all costs of Secured Party, including
reasonable attorneys' fees and expenses, incurred with respect to the
enforcement of any of the Veltri Indebtedness, the enforcement of
Secured Party's rights and remedies upon a violation of Section 3.12 of
this Agreement and the enforcement of any of Secured Party's rights
hereunder. Debtor hereby waives presentment, demand, protest or any
notice (to the extent permitted by applicable law) of any kind in
connection with this Security Agreement or any Collateral. Debtor also
expressly waives and releases all right to direct the order in which
any of the Collateral shall be sold in the event of any sale or sales
pursuant hereto and to have any of the Collateral marshaled upon any
foreclosure of any of the security interests granted in this Security
Agreement.
The Proceeds of any sale or other disposition of Collateral
shall be applied by Secured Party first upon all expenses authorized by
the UCC and all reasonable attorneys fees and other expenses incurred
by Secured Party; the balance of the Proceeds of such sale or other
disposition shall be applied to the payment of the Veltri Indebtedness,
first to interest then to principal; then, to any indebtedness of
Debtor secured by a subordinated security interest in the Collateral if
Secured Party is notified thereof in the time and manner provided in
the UCC and the surplus, if any, shall be paid over to Debtor or to
such other person or persons as may be entitled thereto under
applicable law. Debtor shall remain liable for any deficiency if the
Proceeds of any sale or disposition of the Collateral are insufficient
to pay all amounts to which Secured Party is entitled, Debtor shall
also remain liable for the fees and expenses of any attorneys employed
by Secured Party to collect such deficiency.
6.3 To institute legal proceedings to foreclose upon and
against the lien and security interests granted by this Security
Agreement and to recover judgment for all amounts then due and owing,
and to collect the same out of any of the Collateral or from the
proceeds of any sale or disposition thereof.
6.4 To enter upon the premises of Debtor or any other place or
places where the Collateral or any part thereof is found and to take
possession of the Collateral with or without demand and with or without
process of law.
6.5 To be entitled, to the extent provided by law, to have
appointed a custodian, trustee or receiver of the Collateral and to the
rents and profits derived therefrom. The Debtor hereby consents to the
appointment of such a custodian, trustee or receiver. This appointment
shall be in addition to any other rights, relief or remedies afforded
Secured Party. Such custodian, trustee or receiver, in addition to any
other rights to which he shall be entitled, shall be authorized to sell
any and all Collateral for the benefit of Secured Party, pursuant to
provisions of law, and Debtor shall remain liable to Secured Party for
any deficiency resulting from any such sale or disposition; and/or
9
<PAGE> 10
6.6 To set off and apply any and all obligations or indebtedness at any
time owing by Secured Party to or for the credit or the account of Debtor,
against any and all of the Veltri Indebtedness.
Notwithstanding anything contained in this Security Agreement to the
contrary, in the exercise of its rights under this Security Agreement, Secured
Party shall use that degree of care required by the UCC in the handling, storage
and disposition and shall take all such actions as may be reasonably necessary
to preserve the value of the Collateral and mitigate any loss of such value.
7. SECURED PARTY'S APPOINTMENT AS ATTORNEY-IN-FACT.
7.1 Appointment; Powers. Subject to the prior interests and remedies of
the Banks, if an Event of Default shall occur and be continuing, Debtor
irrevocably constitutes and appoints Secured Party, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Debtor and in the name of Debtor
or in its own name, from time to time in Secured Party's discretion, for the
purpose of carrying out the terms of this Security Agreement, to take any and
all appropriate action and to execute any and all documents and instruments
which may be necessary or desirable to accomplish the purposes of this Security
Agreement and, without limiting the generality of the foregoing, hereby gives
the Secured Party the power and right, on behalf of Debtor, without notice to or
assent by Debtor to do the following:
7.1.1 Pay or discharge taxes, liens, security interests or
other encumbrances levied, placed on or threatened against the
Collateral, to effect any repairs or any insurance called for by the
terms of this Security Agreement and to pay all or any part of costs
thereof and the premiums therefor; and
7.1.2 (a) ask, direct and demand any party liable for any
payment under any of the Collateral to make payment of any and all
monies due and to become due thereunder directly to Secured Party or as
Secured Party shall direct; (b) collect and receive payment of and
receipt for any and all monies, claims and other amounts due and to
become due at any time in respect of or arising out of any Collateral;
(c) sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors,
assignments and notices in connection with accounts and other documents
relating to the Collateral; (d) in the name of Debtor, to its own name
or otherwise, take possession of and endorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of
monies due under any Collateral; (e) commence and prosecute any suits,
actions or proceedings at law or in equity in any court of competent
jurisdiction for the purpose of collecting any monies due under any
Collateral or any part thereof or enforcing any other right in respect
of any Collateral; (f) defend any suit, action or proceeding brought
against Debtor with respect to any Collateral; (g) settle, compromise
or adjust any suit, action or proceeding described above and, in
connection therewith, to give such discharges or releases as Secured
Party may deem appropriate; (h) assign any copyright, patent or
trademark owned by Debtor (along with the goodwill of the business to
which such trademark pertains), for such term or terms, on such
conditions and in such manner, as Secured Party shall in its sole
discretion determine;
10
<PAGE> 11
(i) direct the appropriate U.S. Postal Service office or
offices to deliver all mail addressed to Debtor with respect
to accounts to Secured Party as such place or places as
Secured Party may indicate; and (j) generally sell, transfer,
pledge, make any agreement with respect to or otherwise deal
with any of the Collateral in such manner as is consistent
with the UCC and as fully and completely as though Secured
Party were the absolute owner thereof for all purposes, and
do, at Secured Party's option and Debtor's expense, at any
time or from time to time all acts and things which Secured
Party deems reasonably necessary to protect, preserve or
realize upon the Collateral and Secured Party's security
interest therein in order to affect the intent of this
Security Agreement, all as fully and effectively as Debtor
might do.
7.2 Limitation on Liabili1y. The powers conferred on Secured
Party hereunder are solely to protect its interests in the Collateral
and shall not impose any duty upon it to exercise any such powers.
Secured Party shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers and neither it nor
any of its officers, directors, employees or agents shall be
responsible to Debtor for any act or failure to act, except for Secured
Party's own gross negligence or willful misconduct.
7.3 Powers Coupled With An Interest. All powers, authorizations
and agencies contained in this Security Agreement with respect to the
Collateral are irrevocable and are deemed powers coupled with an
interest. Debtor hereby ratifies all that said attorney shall lawfully
do or cause to be done by virtue hereof.
8. TERMINATION. This Security Agreement, and all security interests of
Secured Party in the Collateral, shall terminate upon the full and final payment
of the Earn Out Amount and the Note Amount, as defined in the Stock Purchase
Agreement. Upon the full and final termination of this Security Agreement,
Secured Party will execute and deliver to Debtor termination statements,
releases and other documents reasonably requested by Debtor to evidence the
termination of this Security Agreement and of Secured Party's security interest
in the Collateral.
9. VENUE: JURISDICTION. Debtor agrees that all actions or proceedings
arising in connection with this Security Agreement shall be filed and tried only
in the courts of Oakland County, Michigan or of the United States for the
Eastern District of Michigan, Southern Division. Debtor hereby irrevocably and
unconditionally consents to, itself and in respect of its property, the
jurisdiction and venue of such courts. Nothing herein shall affect the right of
Secured Party to serve process in any manner permitted by law or to commence
legal proceedings or otherwise proceed against Debtor in any other jurisdiction.
Debtor irrevocably waives any right it may have to assert the doctrine of forum
non conveniens or to object to venue to the extent any proceeding is brought in
accordance with this Section.
10. WAIVERS VOLUNTARY. The waivers contained in this Agreement are
freely, knowingly and voluntarily given by each party, without any duress or
coercion, after each party has consulted with its counsel and has carefully and
completely read all of the terms and provisions of this Agreement, specifically
including the waivers contained in this Section.
11. Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered by hand, or three days after being deposited in the
11
<PAGE> 12
mail, postage prepaid, addressed as follows in the case of Debtor and Secured
Party, or to such other address as may be provided in writing:
Debtor: Talon Automotive Group, Inc.
900 Wilshire Drive
Suite 150
Troy, Michigan 48084
Attn: David Woodward
Secured Party: Michael T.J. Veltri
4530 River Trail
Bloomfield Hills, MI 48301
12. SEVERABILITY. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction.
13. NO WAIVER, CUMULATIVE REMEDIES. Secured Party shall not by any act,
delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder and no waiver shall be valid unless in writing, signed by
Secured Party and then only to the extent therein set forth. A waiver by Secured
Party of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which Secured Party would otherwise
have had on any future occasion. No failure to exercise, nor any delay in
exercising, on the part of Secured Party, any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or future
exercise thereof or the exercise of any other right power or privilege. The
rights and remedies hereunder provided are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights and remedies
provided by law or in equity. None of the terms or provisions of this Security
Agreement may be waived, altered, modified or amended except by an instrument in
writing, duly executed by Secured Party or Debtor.
14. SUCCESSORS AND ASSIGNS. This Security Agreement and all of the
Veltri Indebtedness shall be binding upon the successors, assigns and
wholly-owned subsidiaries of Debtor, and shall, together with the rights and
remedies of Secured Party hereunder inure to the benefit of Secured Party and
his heirs or devisees; provided, however, that neither Debtor nor Secured Party
may assign any of their respective rights or any of the Veltri Indebtedness
hereunder without the prior written consent of the other party (which consent
shall not be unreasonably withheld), except that Secured Party may assign his
rights and obligations to a revocable living trust of which Secured Party is the
sole trustee during his lifetime.
15. COUNTERPARTS. This Security Agreement may be executed by the
parties hereto in any number of separate counterparts and all of such
counterparts taken together shall be deemed to constitute one and the same
instrument.
12
<PAGE> 13
16. CONSTRUCTION. Neither this Security Agreement nor any uncertainty
or ambiguity herein shall be construed or resolved against Secured Party,
whether under any rule of construction or otherwise. On the contrary, this
Security Agreement has been reviewed by each of the parties and their counsel
and shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of all parties
hereto.
17. COMPLETE AGREEMENT. This Security Agreement represents the entire
agreement between Debtor and Secured Party relating to the subject matter
hereof, supersedes all prior agreements, commitments and understandings between
the parties hereto relating to the subject matter hereof, cannot be changed or
terminated orally, and shall be deemed effective as of the date hereof.
18. HEADINGS. Headings used in this Security Agreement are for
convenience of reference only and shall not constitute a part of this Security
Agreement for any other purpose or affect the construction of this Security
Agreement.
19. CHOICE OF LAW. The validity of this Security Agreement, its
construction, interpretation and enforcement and the rights of the parties
hereto shall be determined under, governed by and construed in accordance with
the laws of the State of Michigan, without regard to principles of conflicts of
law.
20. WAIVER OF JURY TRIAL. SECURED PARTY AND DEBTOR ACKNOWLEDGE AND
AGREE THAT THERE MAY BE A CONSTITUTIONAL RIGHT TO A JURY TRIAL IN CONNECTION
WITH ANY CLAIM, DISPUTE OR LAWSUIT ARISING BETWEEN THEM, BUT THAT SUCH RIGHT MAY
BE WAIVED. ACCORDINGLY, THE PARTIES AGREE THAT NOTWITHSTANDING SUCH
CONSTITUTIONAL RIGHT, IN THIS COMMERCIAL MATTER THE PARTIES BELIEVE AND AGREE
THAT IT SHALL BE IN THEIR BEST INTEREST TO WAIVE SUCH RIGHT, AND, ACCORDINGLY,
HEREBY WAIVE SUCH RIGHT TO A JURY TRIAL, AND FURTHER AGREE THAT THE BEST FORUM
FOR BEARING ANY CLAIM, DISPUTE OR LAWSUIT, IF ANY, ARISING IN CONNECTION WITH
THIS AGREEMENT OR THE RELATIONSHIP BETWEEN SECURED PARTY AND DEBTOR, SHALL BE A
COURT OF COMPETENT JURISDICTION SITTING WITHOUT A JURY.
21. ACKNOWLEDGEMENT OF SUBORDINATION. Notwithstanding anything
contained herein to the contrary, Secured Party acknowledges and agrees that its
security interest in the Collateral is subordinate in all respects to the
security interest of the Banks in the Collateral to the extent provided in the
Intercreditor Agreement, dated as of the date hereof (the "Intercreditor
Agreement"), between Secured Party and the Banks and that all rights, remedies
and powers of Secured Party hereunder with respect to the Collateral (including
without limitation those set forth in Sections 5, 6 and 7 hereof) shall be
subject to and limited by the superior rights of the Banks to the extent
provided in the Intercreditor Agreement. In furtherance of the foregoing,
Secured Party agrees to execute and deliver to the Banks a subordination
agreement containing such terms as the Banks may reasonably request with respect
to the foregoing and any other matter to be covered thereby.
13
<PAGE> 14
IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered as of the date first set forth above.
DEBTOR:
TALON AUTOMOTIVE GROUP, INC.
By: David J. Woodward
-------------------------------
Its:
-----------------------
OTHER PARTIES:
VS HOLDINGS, INC.
By: David J. Woodward
--------------------------------
Its:
-------------------------------
VELTRI HOLDINGS USA, INC.
By: David J. Woodward
--------------------------------
Its:
-------------------------------
SECURED PARTY:
Michael T.J. Veltri
-----------------------------------
Michael T.J. Veltri
14
<PAGE> 1
EXHIBIT 10.12
THIS MORTGAGE, Made April 1998 Between Talon Automotive Group, Inc. hereinafter
referred to as "THE MORTGAGOR," whose address is 900 Wilshire Dr., Ste, 203,
Troy, Michigan and Michael T.J. Veltri hereinafter referred to as "THE
MORTGAGEE," WITNESSETH, That the mortgagor mortgages and warrants to the
mortgagee,_____heirs, successors and assigns, lands situate in the {City of
Royal Oak, Oakland County, Michigan, described as:
See Attached Exhibit A
Including any part of any street or alley adjacent to said premises,
vacated or to be vacated, together with all and singular the buildings,
hereditaments, appurtenances, privileges, rights and water rights, including
(but not excluding any other fixtures which would ordinarily be construed as
part of the realty), any and all storm sash, storm doors, storm vestibules, wire
screens, wire doors, window shades, awnings, mantels and connecting iron or
woodwork, grates, gas and electric fixtures, bathtubs, laundry and bathroom
fixtures, oil burner and equipment, coal stoker, plumbing equipment, linoleum,
furnaces, hot water heaters, incinerators, ventilators and all steam or hot
water radiators and registers and the piping connected therewith, belonging to
or used as a part of the building or said building or buildings or used as a
part thereof at any time during the term of this mortgage, all of which are
hereby deemed to be a part of this realty and secured by this mortgage,
including as well as apparatus and fixtures of every description of watering,
heating, ventilating and screening said premises and the rents, income and
profits thereof thereunto belonging or in anywise appertaining to secure the
performance of the covenants hereinafter contained and the covenants of the
certain Unconditional Guaranty of even date herewith.
And the mortgagor covenants with the mortgagee, while this mortgage
remains in force, as follows:
1. To pay said indebtedness and the interest thereon in the time and in the
manner above provided.
2. To pay all taxes, assessments, water rates and other charges that may be
levied or assessed upon or against said premises, within 30 days after the same
shall become due and payable, and to immediately pay off any lien having or
which may have precedence over this mortgage, except as herein stated, and to
keep all the improvements erected and to be erected on said premises continually
intact and in good order and repair, and to promptly pay for all repairs and
improvements, and to commit or suffer no waste of said premises, and to permit
or suffer no unlawful use thereof.
3. To keep the buildings and equipment on the premises insured against loss or
damage by fire for the benefit of, with loss payable to, and in manner and
amount approved by, and deliver the policies as issued, to the mortgagee with
the premiums therefor paid in full.
4. And it is hereby stipulated and agreed by and between the parties hereto,
that if default shall be made in the payment of taxes, assessments, water rates,
liens, insurance or other charges upon said premises, or any part thereof, the
mortgagee, may, at its option, make payment thereof, and the amounts so paid,
with interest thereon at the same rate as provided for the principal
indebtedness from the date of such payment, shall be impressed as an additional
lien on said premises, and shall be added to and become part of the indebtedness
secured hereby, and shall become immediately due and payable; and that in case
of the payment of taxes, assessments, water rates, liens, insurance or other
charges upon said premises by the mortgagee, as hereinbefore provided, the
receipt or receipts of the proper officer or person for such payment in the
hands of the mortgagee shall be conclusive evidence of the validity and amount
of items so paid by the mortgagee.
5. And it is hereby stipulated and agreed by and between the parties hereto that
if default shall be made in the payment of said principal sum or interest or any
other sum secured hereby, or any part thereof, or in the payment of taxes,
assessments, water rates, liens, insurance or other charges upon said premises,
or any part thereof, at the time and in the manner herein specified for the
payment thereof, or in the performance of any of the covenants and agreements
herein contained, the entire indebtedness secured hereby remaining unpaid shall
at once become due and collectible, if the mortgagee so elects, and without
notice of such election.
6. That, in the event the ownership of the mortgaged premises, or any part
thereof, becomes vested in a person other than the mortgagor, the mortgagee may
deal with such successors in interest with reference to this mortgage, and the
debt hereby secured in the same manner as with the mortgagor, without it any
manner vitiating or discharging the mortgagor's liability hereunder, or upon the
debt hereby secured.
<PAGE> 2
7. That power is hereby granted by the mortgagor to the mortgagee, if
default is made in the payment of said indebtedness, interest, taxes,
assessments, water rates, liens or insurance premiums, or any part thereof at
the time and in the manner herein agreed, to grant, bargain, sell release, and
convey the premises, with the appurtenances at public auction and to execute and
deliver to the purchaser or purchasers, at such sale, deeds of conveyance, good
and sufficient at law, pursuant to the statute in such case made and provided,
and out of the proceeds to retain all sums due hereon, the costs and charges of
such sale and the attorney fees provided by law, returning the surplus money, if
any, to the mortgagor or mortgagor's heirs and assigns, and such sale or a sale
pursuant to a degree in chancery for the foreclosure hereof may, at the option
of the mortgagee, be made en masse.
This Mortgage and Mortgagee's interest hereunder are subordinated to
the interest of Comerica Bank as set forth in Exhibit B attached hereto
and made a part hereof.
The covenants herein shall bind and the benefits and advantages inure to
the respective heirs, assigns and successors of the parties.
Signed by the mortgagor the day and year first above written.
SIGNED IN THE PRESENCE OF: TALON AUTOMOTIVE GROUP, INC.
Richard M. ??? Daryl ???
- ------------------------------ ------------------------------------
Marla Vandenberg
- ------------------------------ ------------------------------------
- ------------------------------ ------------------------------------
STATE OF MICHIGAN
COUNTY OF ss.
The foregoing instrument was acknowledged before me this 28th day of April 1998
by David J. Woodward, the Vice President of Talon Automotive Group, Inc., on
behalf of said corporation.
Kristin A. Hermann
--------------------------------------
Kristin A. Hermann Notary Public
County, Michigan
My Commission expires January 31, 2003
STATE OF MICHIGAN
COUNTY OF WAYNE ss.
The foregoing instrument was acknowledged before me this ___ day of ____________
19 ___ by ______________________________________________________________________
(Individual Name(s) and Office(s) Held)
______________________________________ of ______________________________________
(Corporate Name)
_____________, a ________________________ corporation, on behalf of the
(State of Incorporation)
corporation
_______________________________________
Notary Public
County, Michigan
My Commission expires 19
<PAGE> 3
RIDER A
PARCEL I: Part of the Northwest 1/4 of Section 5, Town 1 North, Range 11 East,
more particularly described as, beginning at a point in the East and West 1/4
line of Section 5, distant North 88 degrees 37 minutes 30 seconds East 180 feet
from the West 1/4 corner of Section 5; thence North 88 degrees 37 minutes 30
seconds East 513.81 feet along the East and West 1/4 line of Section 5; thence
North 1 degrees 28 minutes 40 seconds West 1346.13 feet; thence South 88
degrees 38 minutes 00 seconds West 520.02 feet to a point which is 180 feet
East of the West line of Section 5; thence South 01 degrees 47 minutes 0
seconds East 1346.27 feet parallel to and 180 feet East of the West line of
Section 5 to the point of beginning.
PARCEL III: Land in the City of Royal Oak, Oakland County, Michigan, described
as: Part of the Northwest 1/4 of Section 5, Town 1 North, Range 11 East,
described as: Beginning on the West line of Section 5, South 1 degree 07
minutes East 703.5 feet from the Northwest corner of the section; thence North
88 degrees 38 minutes East 120 feet; thence South 1 degree 07 minutes East
620.78 feet; thence South 88 degrees 38 minutes West 120 feet to the West line
the section; thence North 1 degree 07 minutes West 620.78 feet to the point of
beginning.
PARCEL IV: Part of the Northwest 1/4 of Section 5, beginning on the West line
of section, South 1 degree 07 minutes East 1384.28 feet from the corner of
section; thence North 88 degrees 38 minutes, East 120 feet, South 1 degree 07
minutes East 616 feet, South 88 degrees 38 minutes West 120 feet to West line
of section, North 1 degree 07 minutes West 616 feet to the point of beginning.
<PAGE> 4
EXHIBIT B
Notwithstanding anything contained herein to the contrary, Mortgagee
acknowledges and agrees that its interest in the property (as described in
Exhibit A, the "Property") is subordinate in all respects to the mortgage and
the security interest of Comerica Bank in the Property to the extent provided
in the Intercreditor Agreement, dated as of the date hereof (the "Intercreditor
Agreement"), between Mortgagee and the Agent and that all rights, remedies and
powers of Mortgagee hereunder with respect to the Property shall be subject to
and limited by the superior rights of the Agent to the extent provided in the
Intercreditor Agreement. In furtherance of the foregoing, Secured Party agrees
to execute and deliver to the Agent a subordination agreement containing such
terms as the Agent may reasonably request with respect to the foregoing and any
other matter to be covered thereby.
<PAGE> 1
EXHIBIT 10.13
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
This First Amendment to Stock Purchase Agreement is made this day of
April, 1998 by and between Michael T. J. Veltri, individually and as trustee of
the Michael T. J. Veltri Revocable Living Trust u/a/d December 17, 1992
("Veltri"), Veltri Metal Products Co., F/K/A VS Acquisition Co. ("VMP"), VS
Holdings, Inc. ("VSH"), and Veltri Holdings USA, Inc. ("VHU").
WHEREAS, Veltri, Maria Veltri, VMP, VSH and VHU entered into that certain
Stock Purchase Agreement dated November 8, 1996 (the "Stock Purchase
Agreement");
WHEREAS, contemporaneously herewith, Talon Automotive Group, Inc. ("TAG")
is undergoing the following restructuring (the "Restructuring"): Hawthorne Metal
Products Company, J & R Manufacturing and Talon Automotive Group, L.L.C. will be
merging with and into Production Stamping, Inc., and Production Stamping, Inc.,
as the surviving entity, will change its name to Talon Automotive Group, Inc.
("TAG"); VS Holdings No. 2, Inc. will merge with and into VSH; and VSH (which
will then be the sole shareholder of VMP), and VHU will then each become wholly
owned subsidiaries of TAG;
WHEREAS, contemporaneously herewith TAG is completing an offering of up to
$125,000,000 in senior subordinated notes (the "Notes") pursuant to Rule 144A
promulgated under the Securities Act of 1933, as amended (the "Offering");
WHEREAS, Comerica Bank, a Michigan banking corporation, as Agent under a
certain credit agreement among TAG, VMP and others, as borrowers, and other
banks from time to time a party thereto, as lenders, will provide TAG with a
senior credit facility (the "Senior Credit Facility"); and
WHEREAS, in connection with the Restructuring, Offering, and the Senior
Credit Facility, the parties have agreed, among other things, to amend the Stock
Purchase Agreement, upon the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the provisions and covenants set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto freely amend
the Stock Purchase Agreement pursuant to Section 7.3 of the Stock Purchase
Agreement, as follows:
1. Section 1.3(b)(viii) of the Stock Purchase Agreement is hereby deleted
in its entirety and the following shall be substituted therefor:
"The Earn-Out Amounts shall be paid as follows:
(A) Subject to the foregoing, the Earn-Out Amounts, if any,
payable with respect to the calendar year ending December
31, 1998, (the "1998 Earn-Out"), shall be paid on March 31,
1999 (less any applicable
1
<PAGE> 2
withholding required pursuant to Section 116, as hereinafter
defined), together with interest on the unpaid balance of
such amount at the Prime Rate (as hereinafter defined) from
and after December 31, 1998 until such amount is paid in
full, which interest shall be payable (less any applicable
withholding) on March 31, 1999; provided, however, in the
event (i) any such installment of interest or the 1998
Earn-Out is not paid when due, and such failure shall
continue for a period of ten (10) days following written
notice thereof to Buyer, or (ii) of an unwaived event of
default under the Senior Credit Facility, then in either
such event any of the 1998 Earn Out remaining unpaid after
March 31, 1999 shall thereafter bear interest at a rate
equal to the Prime Rate plus Two percent (2%) until the same
is paid in full; and
(B) Subject to the foregoing, the Earn-Out Amounts, if any,
payable with respect to the calendar year ending December
31, 1999 (the "1999 Earn-Out") shall be paid on March 31,
2000 (less any applicable withholding required pursuant to
Section 116) together with interest on the unpaid balance of
such amount at the Prime Rate from and after December 31,
1999 until such amount is paid in full, which interest shall
be payable (less any applicable withholding) on March 31,
2000; provided, however, in the event (i) any such
installment of interest or the 1999 Earn-Out is not paid
when due, and such failure shall continue for a period of
ten (10) days following written notice thereof to Buyer, or
(ii) of an unwaived event of default under the Senior Credit
Facility, then in either such event any of the 1999 Earn Out
remaining unpaid after March 31, 2000 shall thereafter bear
interest at a rate equal to the Prime Rate plus Two percent
(2%) until the same is paid in full."
2. Section 6.1(a)(ii)(d) of the Stock Purchase Agreement is hereby
deleted in its entirety and the following shall be substituted
therefor:
"(d) Redeem or otherwise acquire any of their respective stock,
securities or other equity interests (other than in connection
with any stock option plans for the benefit of employees), which,
when aggregated with the amounts permitted pursuant to Section
6.1(a)(ii)(e) hereof, would exceed an annual amount equal to One
Hundred Thousand Cdn. Dollars (Cdn. $100,000) per year;"
3. Notwithstanding anything contained in the Stock Purchase Agreement, or
any other agreement to the contrary, Veltri hereby consents to: (a)
the Restructuring; (b) VMP's, VSH's and VHU's guaranty of all of TAG's
obligations under the Senior Credit Facility and all documents
executed in connection therewith; and (c) VMP's, VSH's and VHU's
guaranty of all of TAG's obligations under the Notes to be issued in
connection with the Offering and all documents executed in connection
therewith.
2
<PAGE> 3
4. Every other Section and Sub-Section of the Stock Purchase Agreement as
originally executed and delivered shall remain in full force and
effect as so executed and delivered, and are hereby confirmed and
ratified and shall continue in full force and effect as provided
therein.
5. All capitalized terms not otherwise herein defined shall have the
meaning assigned to them in the Stock Purchase Agreement.
The parties hereto have executed this First Amendment to Stock Purchase
Agreement as of the date written above.
/s/ Michael T.J. Veltri
--------------------------------------
MICHAEL T. J. VELTRI, INDIVIDUALLY AND
AS TRUSTEE FOR THE MICHAEL T. J.
VELTRI REVOCABLE LIVING TRUST U/A/D
DECEMBER 17, 1996
VELTRI METAL PRODUCTS CO.
By: /s/ Michael T.J. Veltri
-------------------------------
Its: PRESIDENT
-------------------------------
VS HOLDINGS, INC.
By: [SIG]
-------------------------------
Its:
-------------------------------
VELTRI HOLDINGS USA, INC.
By: [SIG]
-------------------------------
Its:
-------------------------------
3
<PAGE> 1
EXHIBIT 10.14
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR Agreement is executed and delivered as of the 28th
day of April, 1998 BY MICHAEL VELTRI (individually and as trustee under trust
agreement dated December 17, 1992 called "Veltri") and COMERICA BANK, in its
capacity as Agent ("Agent") under that certain Talon Automotive Group, Inc.
$100,000,000 Credit Agreement of even date herewith (as it may be amended from
time to time, called herein, "Credit Agreement") between Talon Automotive Group,
Inc. ("Talon"), Veltri Metal Products Co. (f/k/a VS Acquisition Co.) ("VMP",
together with Talon, the "Borrowers"), Comerica as Agent and the Banks from time
to time party thereto.
WHEREAS, pursuant to a certain Stock Agreement dated as of November 8,
1996 between VMP and Veltri ("Purchase Agreement"), Veltri sold to VMP the
business and assets described in such Purchase Agreement; and
WHEREAS, as security for the obligation of VMP to pay certain
obligations under or in connection with the Purchase Agreement as and when due
("Veltri Obligations") Borrowers have granted to Veltri security interests in
and liens and mortgages upon certain property of the Borrowers; and
WHEREAS, pursuant to the Credit Agreement, Agent and the Banks have
agreed, and may in the future further agree, to make loans and extensions of
credit to Borrowers for Borrowers' corporate purposes from time to
time, including but not limited to, revolving loans, letters of credit and
swing line loans, in aggregate principal amount from time to time outstanding
of up to One Hundred Million Dollars ($100,000,000) ("Bank Loans"); and
WHEREAS, as security for the indebtedness and obligations of Borrowers
under the Credit Agreement and the Documents (defined therein), including the
Bank Loans ("Bank Obligations", called together with the Veltri Obligations,
"Obligations") Borrowers have granted Agent security interests and liens and
mortgages upon substantially all of their assets and properties (the
"Collateral"); and
WHEREAS, Veltri and Comerica desire to set forth in writing their
agreements with respect to their respective interests in the Collateral;
NOW, THEREFORE, it is agreed:
1. PURPOSE. So long as both the Credit Agreement is in effect, and
thereafter so long as any Bank Obligations remain outstanding, the respective
interests of Comerica and Veltri in and to the Collateral shall at all times be
governed hereby, notwithstanding any contrary priority or right of application
which would otherwise result from the sequence in which the interests of
Comerica and Veltri in the Collateral have been or may be granted, attached
and/or perfected, or that fact that the certain of the Obligations may not be
continuously outstanding during the term of this Agreement.
- 1 -
<PAGE> 2
2. PRIORITIES. To the extent of the Bank Obligations from time to time
outstanding, the interests of Comerica in and to the Collateral shall be senior
to and have priority over the interests of Veltri therein and, in any
liquidation or collection of the Collateral, the proceeds thereof (including
without limit insurance and/or condemnation awards resulting from casualty or
condemnation of the Collateral) shall be applied toward satisfaction in full of
Bank Obligations before Veltri shall be entitled to receive or apply any such
proceeds toward payment or satisfaction of Veltri Obligations.
3. PRE-DEFAULT NOTICE COLLECTIONS. Comerica and Veltri each hereby
covenant and agree to notify one another in writing in the event that, upon the
occurrence of a default in payment or performance of the Obligations, it elects
to accelerate Obligations or exercise other remedies with respect to the
Collateral ("Default Notice"). So long as no Default Notice has been delivered,
or at any time after any Default Notice issued by Comerica or Veltri has been
rescinded or withdrawn by the issuer thereof, each of Comerica and Veltri shall
be entitled to collect and receive payments from Borrower for application
against the Obligations owed to them, and neither of them shall have any
obligation to inquire as to the source of funds from which such payment is made
and/or whether such payment constitutes proceeds of the Collateral in which
Comerica has a superior interest.
4. POST DEFAULT NOTICE COLLECTIONS. Upon and after the issuance a
Default Notice, and until and unless such Default Notice is rescinded in writing
by the issuer thereof, Veltri agrees that: (a) to the extent it collects or
receives proceeds of any Collateral, it shall hold the same in trust on behalf
Comerica and, upon request of Comerica, deliver the same over to Comerica for
application against Bank Obligations; (b) with respect to any Default Notice
issued by Comerica and for a period of three (3) months after the date of such
Default Notice ("Stand Still Period"), (i) Veltri will suspend collection of
Veltri Obligations, and (ii) Comerica shall have the sole right to conduct the
sale and or liquidation of the Collateral and, with respect to any sale or
liquidation commenced before the expiration of the Stand Still Period, shall
have the sole right to complete such sale or liquidation, provided, however,
that (x) Comerica shall not, within any period of less than twelve months, issue
more than one Default Notice and (y) in the event that Veltri initiates a sale
or liquidation of Collateral after the expiration, rescission or termination of
a Stand Still Period, Veltri shall be entitled to continue such sale or
liquidation until completion thereof, notwithstanding the fact that, due to
additional or new Default Notices, Comerica would be entitled to new or
additional Stand Still Periods in the absence of this clause (y).
5. TRANSFERS. Comerica and Veltri covenant and agree that in the event
either of them transfers or assigns any of their respective interests in the
Collateral, such transfer or assignment shall be made expressly subject to the
terms hereof.
6. THIRD PARTY RIGHTS. This Agreement is made solely for the benefit of
Bank and Veltri and their respective successors and assigns, and no other person
or party (including Borrower) shall have any right, remedy, benefit, priority or
other interest hereunder.
7. CHOICE OF LAW. This Agreement is governed by the laws of the State
of Michigan and shall be interpreted and construed in accordance with
such laws, and enforceable in the state
- 2 -
<PAGE> 3
and federal courts which include the State of Michigan within their territorial
jurisdictions and in such other jurisdictions where the Collateral may from time
to time be located.
Executed as of the date first entered above
Michael Veltri
--------------------------------------------
MICHAEL VELTRI, individually and as Trustee
COMERICA BANK, as Agent
By: [SIG]
-----------------------------------------
Its: Assistant Vice President
----------------------------------------
- 3 -
<PAGE> 1
EXHIBIT 10.15
================================================================================
9.625% SENIOR SUBORDINATED NOTES DUE 2008
REGISTRATION RIGHTS AGREEMENT
Dated April 28, 1998
by and among
TALON AUTOMOTIVE GROUP, INC.,
VS HOLDINGS, INC.,
VELTRI HOLDINGS USA, INC.
and
VELTRI METAL PRODUCTS CO.,
and
SALOMON BROTHERS INC
and
CREDIT SUISSE FIRST BOSTON CORPORATION
===============================================================================
<PAGE> 2
This Registration Rights Agreement is made and entered into
this 28th day of April, 1998, by and among Talon Automotive Group, Inc., a
Delaware corporation (the "Company"), VS Holdings, Inc., a Michigan corporation,
Veltri Holdings USA, Inc., a Michigan corporation, and Veltri Metal Products
Co., a Nova Scotia unlimited liability company (the "Guarantors" and, together
with the Company, the "Issuers"), and Salomon Brothers Inc and Credit Suisse
First Boston Corporation (the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement,
dated April 23, 1998, among the Company, the Guarantors and Initial Purchasers
(the "Purchase Agreement"). In order to induce the Initial Purchasers to enter
into the Purchase Agreement, the Issuers have agreed to provide the registration
rights provided for in this Agreement to the Initial Purchasers and their direct
and indirect transferees. The execution and delivery of this Agreement is a
condition to the closing of the transactions contemplated by 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: As defined in Section 4(a) hereof.
Advice: As defined in the last paragraph of Section 5 hereof.
Affiliate: With respect to any specified person, "Affiliate"
shall mean any other person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified person. For the
purposes of this definition, "control," when used with respect to any person,
means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise and the terms "affiliated," controlling" and "controlled" have
meanings correlative to the foregoing.
Agreement: This Registration Rights Agreement, as the same may
be amended, supplemented or modified from time to time in accordance with the
terms hereof.
<PAGE> 3
-2-
Business Day: Any day except a Saturday, a Sunday or a day on
which banking institutions in New York, New York generally are required or
authorized by law or other government action to be closed.
Company: As defined in the preamble hereof.
Consummate or consummate: When used to qualify the term
"Exchange Offer" shall mean validly and lawfully to issue and deliver the
Exchange Notes pursuant to the Exchange Offer for all Notes validly tendered and
not validly withdrawn pursuant thereto in accordance with the terms of this
Agreement.
Consummation Date: The date that is 20 Business Days
immediately following the date that the Exchange Registration Statement shall
have been declared effective by the SEC (or such later date as shall be required
by applicable law).
Effectiveness Period: As defined in Section 3(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC pursuant thereto.
Exchange Date: As defined in Section 2(d) hereof.
Exchange Notes: The 9.625% Senior Subordinated Notes due 2008,
Series B, of the Company, guaranteed on a senior subordinated basis by each of
the Guarantors, that are identical to the Notes in all material respects, except
that the provisions regarding restrictions on transfer shall be modified, as
appropriate, and the issuance thereof pursuant to the Exchange Offer shall have
been registered pursuant to an effective Registration Statement in compliance
with the Securities Act.
Exchange Offer: An offer to issue, in exchange for any and all
of the Notes, a like aggregate principal amount of Exchange Notes, which offer
shall be made by the Company pursuant to Section 2 hereof.
Exchange Registration Statement: As defined in Section 2(a)
hereof.
Guarantors: As defined in the preamble hereof.
Indemnified Person: As defined in Section 7(a) hereof.
<PAGE> 4
-3-
Indenture: The Indenture, dated as of April 28, 1998, among
the Issuers and U.S. Bank Trust National Association, as trustee thereunder,
pursuant to which the Notes are issued and, as amended or supplemented from time
to time in accordance with the terms thereof.
Initial Purchasers: As defined in the preamble hereof.
Issue Date: As defined in Section 2(a).
Issuers: As defined in the preamble hereof.
Notes: The 9.625% Senior Subordinated Notes due 2008, Series
A, of the Company, guaranteed on a senior subordinated basis by each of the
Guarantors, issued pursuant to the Indenture.
Participating Broker-Dealer: As defined in Section 2(e)
hereof.
Private Exchange: As defined in Section 2(c) hereof.
Private Exchange Notes: As defined in Section 2(c) hereof.
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated pursuant to the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Notes, Exchange Notes
or Private Exchange Notes covered by such Registration Statement, and all other
amendments and supplements to any such prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference, if any, in such prospectus.
Registration Default: As defined in Section 4(a) hereof.
Registration Statement: Any registration statement of the
Company and the Guarantors that covers any of the Notes, Exchange Notes or
Private Exchange Notes pursuant to the provisions of this Agreement, including
the Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits
<PAGE> 5
-4-
thereto, and all material incorporated by reference or deemed to be incorporated
by reference, if any, in such registration statement.
Rule 144: Rule 144 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 144A: Rule 144A promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 158: Rule 158 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 174: Rule 174 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 415: Rule 415 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
Rule 424: Rule 424 promulgated by the SEC pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such Rule.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations promulgated by the SEC thereunder.
Shelf Registration: As defined in Section 3 hereof.
<PAGE> 6
-5-
Shelf Registration Statement: As defined in Section 3 hereof.
Special Counsel: Cahill Gordon & Reindel, special counsel to
the holders of Transfer Restricted Securities, or such other counsel as shall be
agreed upon by the Issuers and holders of a majority in aggregate principal
amount of Transfer Restricted Securities, the expenses of which holders of
Transfer Restricted Securities will be reimbursed by the Issuers pursuant to
Section 6.
TIA: The Trust Indenture Act of 1939, as amended.
Transfer Restricted Securities: The Notes, upon original
issuance thereof, and at all times subsequent thereto, each Exchange Note as to
which Section 3(a)(iii) hereof is applicable upon original issuance and at all
times subsequent thereto and each Private Exchange Note upon original issuance
thereof and at all times subsequent thereto, until in the case of any such Note,
Exchange Note or Private Exchange Note, as the case may be, the earliest to
occur of (i) the date on which any such Note has been exchanged by a person
other than a Participating Broker-Dealer for an Exchange Note (other than with
respect to an Exchange Note as to which Section 3(a)(iii) hereof applies)
pursuant to the Exchange Offer, (ii) with respect to Exchange Notes received by
Participating Broker-Dealers in the Exchange Offer, the earlier of (x) the date
on which such Exchange Note has been sold by such Participating Broker-Dealer by
means of the Prospectus contained in the Exchange Registration Statement and (y)
the date on which the Exchange Registration Statement has been effective under
the Securities Act for a period of 6 months after the Consummation Date, (iii) a
Shelf Registration Statement covering such Note, Exchange Note or Private
Exchange Note has been declared effective by the SEC and such Note, Exchange
Note or Private Exchange Note, as the case may be, has been disposed of in
accordance with such effective Shelf Registration Statement, (iv) the date on
which such Note, Exchange Note or Private Exchange Note, as the case may be, is
distributed to the public pursuant to Rule 144 (or any similar provisions then
in effect) or is saleable pursuant to Rule 144(k) promulgated by the SEC
pursuant to the Securities Act or (v) the date on which such Note, Exchange Note
or Private Exchange Note, as the case may be, ceases to be outstanding for
purposes of the Indenture or any other indenture under which such Exchange Note
or Private Exchange Note was issued.
Trustee: The trustee under the Indenture.
<PAGE> 7
-6-
underwritten registration or underwritten offering: A
registration in connection with which securities are sold to an underwriter for
reoffering to the public pursuant to an effective Registration Statement.
2. Exchange Offer
(a) To the extent not prohibited by any applicable law or applicable
interpretation of the staff of the SEC, the Issuers shall (A) prepare and, on or
prior to 60 days after the date of original issuance of the Notes (the "Issue
Date"), file with the SEC a Registration Statement under the Securities Act with
respect to an offer by the Company to the holders of the Notes to issue and
deliver to such holders, in exchange for Notes, a like principal amount of
Exchange Notes, (B) use their best efforts to cause the Registration Statement
relating to the Exchange Offer to be declared effective by the SEC under the
Securities Act on or prior to 150 days after the Issue Date, and (C) commence
the Exchange Offer and use their best efforts to issue, on or prior to the
Consummation Date, the Exchange Notes. The offer and sale of the Exchange Notes
pursuant to the Exchange Offer shall be registered pursuant to the Securities
Act on the appropriate form (the "Exchange Registration Statement") and duly
registered or qualified under all applicable state securities or Blue Sky laws
and will comply with all applicable tender offer rules and regulations under the
Exchange Act and state securities or Blue Sky laws. The Exchange Offer shall not
be subject to any condition, other than that the Exchange Offer does not violate
any applicable law or interpretation of the staff of the SEC. Upon consummation
of the Exchange Offer in accordance with this Section 2, the Issuers shall have
no further registration obligations other than with respect to (i) Private
Exchange Notes, (ii) Exchange Notes held by Participating Broker-Dealers and
(iii) Notes or Exchange Notes as to which Section 3(a)(iii) hereof applies. No
securities shall be included in the Exchange Registration Statement other than
the Exchange Notes.
(b) The Issuers may require each holder of Notes as a condition to its
participation in the Exchange Offer to represent to the Issuers and their
counsel in writing (which may be contained in the applicable letter of
transmittal) that at the time of the consummation of the Exchange Offer (i) any
Exchange Notes received by such holder will be acquired in the ordinary course
of its business, (ii) such holder will have no arrangement or understanding with
any person to participate in the distribution (within the mean-
<PAGE> 8
-7-
ing of the Securities Act) of the Exchange Notes and (iii) such holder is not an
Affiliate of an Issuer, or if it is an Affiliate of an Issuer, it will comply
with the registration and prospectus delivery requirements of the Securities
Act, to the extent applicable.
(c) If, prior to consummation of the Exchange Offer, an Initial
Purchaser holds 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, or any other holder of Notes is not entitled to
participate in the Exchange Offer, the Company upon the request of such Initial
Purchaser or any such holder shall, simultaneously with the delivery of the
Exchange Notes in the Exchange Offer, issue and deliver to such Initial
Purchaser and any such holder, in exchange (the "Private Exchange") for such
Notes held by such Initial Purchaser and any such holder, a like principal
amount of debt securities of the Company, guaranteed by each of the Guarantors
on a senior subordinated basis, that are identical in all material respects to
the Exchange Notes (the "Private Exchange Notes") (and which are issued pursuant
to the same indenture as the Exchange Notes). The Private Exchange Notes shall
bear the same CUSIP number as the Exchange Notes.
(d) Unless the Exchange Offer would not be permitted by any applicable
law or interpretation of the staff of the SEC, the Company shall mail the
Exchange Offer Prospectus and appropriate accompanying documents, including
appropriate letters of transmittal, to each holder of Notes providing, in
addition to such other disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this Agreement and
that all Notes validly tendered will be accepted for exchange;
(ii) the date of acceptance for exchange (the "Exchange Date"), which date
shall in no event be later than the Consummation Date (unless otherwise
required by applicable law);
(iii) that holders of Notes electing to have a Note exchanged pursuant to
the Exchange Offer will be required to surrender such Note, together with
the enclosed letters of transmittal, to the institution and at the address
(located in the Borough of Manhattan, The City of New York) specified in the
<PAGE> 9
-8-
notice prior to the close of business on the Exchange Date; and
(iv) that holders of Notes that do not tender all such securities pursuant
to the Exchange Offer may no longer have any registration rights hereunder
with respect to Notes not tendered.
Promptly after the Exchange Date, the Company shall:
(i) accept for exchange all Notes or portions thereof validly tendered and
not validly withdrawn pursuant to the Exchange Offer or the Private
Exchange; and
(ii) deliver, or cause to be delivered, to the Trustee for cancellation
all Notes or portions thereof so accepted for exchange by the Company, and
issue, cause the Trustee under the Indenture (or the indenture pursuant to
which the Exchange Notes are issued) to authenticate, and mail to each
holder of Notes, Exchange Notes equal in principal amount to the principal
amount of the Notes surrendered by such holder.
(e) The Issuers and the Initial Purchasers acknowledge that the staff
of the SEC has taken the position that any broker-dealer that owns Exchange
Notes that were received by such broker-dealer for its own account in the
Exchange Offer (a "Participating Broker-Dealer") may be deemed to be an
"underwriter" within the meaning of the Securities Act and must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes (other than a resale of an unsold allotment
resulting from the original offering of the Notes).
The Issuers and the Initial Purchasers also acknowledge that it is
the SEC staff's position that if the Prospectus contained in the Exchange
Registration Statement includes a plan of distribution containing a statement to
the above effect and the means by which Participating Broker-Dealers may resell
the Exchange Notes, without naming the Participating Broker-Dealers or
specifying the amount of Exchange Notes owned by them, such Prospectus may be
delivered by Participating Broker-Dealers to satisfy their prospectus delivery
obligations under the Securities Act in connection with resales of Exchange
<PAGE> 10
-9-
Notes for their own accounts, so long as the Prospectus otherwise meets the
requirements of the Securities Act.
In light of the foregoing, if requested by a Participating
Broker-Dealer, the Issuers agree (x) to use their best efforts to keep the
Exchange Registration Statement continuously effective for a period of up to 6
months or such earlier date as each Participating Broker-Dealer shall have
notified the Company in writing that such Participating Broker-Dealer has resold
all Exchange Notes acquired in the Exchange Offer, (y) to comply with the
provisions of Section 5 of this Agreement, as they relate to the Exchange Offer
and the Exchange Registration Statement, and (z) to deliver to such
Participating Broker-Dealer a "cold comfort" letter of the independent public
accountants of the Issuers and a legal opinion as to matters reasonably
requested by such Participating Broker-Dealer relating to the Exchange
Registration Statement and the related Prospectus and any amendments or
supplements thereto.
(f) The Initial Purchasers shall have no liability to any
Participating Broker-Dealer with respect to any request made pursuant to Section
2(e).
(g) Interest on the Exchange Notes and the Private Exchange Notes
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 date of the original issuance of the Notes.
(h) The Exchange Notes and the Private Exchange Notes may be issued
under (i) the Indenture or (ii) an indenture identical in all material respects
to the Indenture, which in either event shall provide that the Exchange Notes
shall not be subject to the transfer restrictions set forth in the Indenture.
The Indenture or such indenture shall provide that the Exchange Notes, the
Private Exchange Notes and the Notes shall vote and consent together on all
matters as one class and that neither the Exchange Notes, the Private Exchange
Notes nor the Notes will have the right to vote or consent as a separate class
on any matter.
3. Shelf Registration
(a) If (i) the Company is not permitted to consummate the Exchange
Offer because the Exchange Offer is not permitted by any applicable law or
applicable interpretation
<PAGE> 11
-10-
of the staff of the SEC or (ii) the Company has not consummated the
Exchange Offer within 180 days of the Issue Date and a holder of Notes so
requests or (iii) any holder of a Note notifies the Company on or prior to the
Exchange Date that (A) due to a change in law or policy it is not entitled to
participate in the Exchange Offer, (B) due to a change in law or policy it may
not resell the Exchange Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the Prospectus contained in the Exchange
Registration Statement is not appropriate or available for such resales by such
holder or (C) it is a broker-dealer that owns Notes (including an Initial
Purchaser that holds Notes as part of an unsold allotment from the original
offering of the Notes) acquired directly from an Issuer or an Affiliate of an
Issuer or (iv) any holder of Private Exchange Notes so requests within 120 days
after the consummation of the Private Exchange (each such event referred to in
clauses (i) through (iv), a "Shelf Filing Event"), the Issuers shall cause to be
filed with the SEC pursuant to Rule 415 a shelf registration statement (the
"Shelf Registration Statement") prior to the later of (x) 60 days after the
Issue Date and (y) 30 days after the occurrence of such Shelf Filing Event,
relating to all Transfer Restricted Securities (the "Shelf Registration") the
holders of which have provided the information required pursuant to Section 3(b)
hereof, and shall use their best efforts to have the Shelf Registration
Statement declared effective by the SEC on or prior to the later of (i) 150 days
after the Issue Date and (ii) 90 days after the occurrence of such Shelf Filing
Event. In such circumstances, the Issuers shall use their best efforts to keep
the Shelf Registration Statement continuously effective under the Securities
Act, until (A) 24 months following the date on which the Shelf Registration
Statement was initially declared effective (subject to extension pursuant to the
last paragraph of Section 5 hereof) or (B) if sooner, the date immediately
following the date that all Transfer Restricted Securities covered by the Shelf
Registration Statement have been sold pursuant thereto (the "Effectiveness
Period"); provided that the Effectiveness Period shall be extended to the extent
required to permit dealers to comply with the applicable prospectus delivery
requirements of Rule 174 and as otherwise provided herein.
(b) No holder of Transfer Restricted Securities may include any of
its Transfer Restricted Securities in any Shelf Registration Statement pursuant
to this Agreement unless and until such holder furnishes to the Company in
writ-
<PAGE> 12
-11-
ing, within 30 days after receipt of a request therefor, such information as
the Company may reasonably request for use in connection with any Shelf
Registration Statement or Prospectus or preliminary prospectus included therein.
No holder of Transfer Restricted Securities shall be entitled to Additional
Interest pursuant to Section 4 hereof unless and until such holder shall have
provided all such reasonably requested information. Each holder of Transfer
Restricted Securities as to which any Shelf Registration Statement is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such holder not materially misleading.
4. Additional Interest
(a) The parties hereto agree that the holders of Transfer Restricted
Securities will suffer damages if the Issuers fail to fulfill their obligations
pursuant to Section 2 or Section 3, as applicable, and that it would not be
feasible to ascertain the extent of such damages. Accordingly, in the event that
(i) the applicable Registration Statement is not filed with the SEC on or prior
to the date specified herein for such filing, (ii) the applicable Registration
Statement has not been declared effective by the SEC on or prior to the date
specified herein for such effectiveness after such obligation arises, (iii) if
the Exchange Offer is required to be Consummated hereunder, the Company has not
exchanged Exchange Notes for all Notes validly tendered and not validly
withdrawn in accordance with the terms of the Exchange Offer by the Consummation
Date or (iv) the applicable Registration Statement is filed and declared
effective but shall thereafter cease to be effective without being succeeded
immediately by any additional Registration Statement covering the Notes, the
Exchange Notes or the Private Exchange Notes, as the case may be, which has been
filed and declared effective (each such event referred to in clauses (i) through
(iv), a "Registration Default"), then the interest rate on Transfer Restricted
Securities will increase ("Additional Interest"), with respect to the first
90-day period immediately following the occurrence of such Registration Default,
by 0.50% per annum and will increase by an additional 0.50% per annum with
respect to each subsequent 90-day period until such Registration Default has
been cured, up to a maximum amount of 1.50% per annum with respect to all
Registration Defaults. Following the cure of a Registration Default, the accrual
of Additional Interest with respect to such Registration Default will cease and
<PAGE> 13
-12-
upon the cure of all Registration Defaults the interest rate will revert to the
original rate.
(b) The Company shall notify the Trustee and paying agent under the
Indenture (or the trustee and paying agent under such other indenture under
which the Transfer Restricted Securities are issued) immediately upon the
happening of each and every Registration Default. The Company shall pay the
Additional Interest due on the Transfer Restricted Securities by depositing with
the paying agent (which shall not be the Company for these purposes) for the
Transfer Restricted Securities, in trust, for the benefit of the holders
thereof, prior to l1:00 A.M. on the next interest payment date specified by the
Indenture (or such other indenture), sums sufficient to pay the Additional
Interest then due. The Additional Interest due shall be payable on each interest
payment date specified by the Indenture (or such other indenture) to the record
holder entitled to receive the interest payment to be made on such date. Each
obligation to pay Additional Interest shall be deemed to accrue from and
including the applicable Registration Default.
(c) The parties hereto agree that the Additional Interest provided
for in this Section 4 constitutes a reasonable estimate of the damages that will
be suffered by holders of Transfer Restricted Securities by reason of the
happening of any Registration Default.
5. Registration Procedures
In connection with the Issuers' registration obligations hereunder,
the Issuers shall effect such registrations on the appropriate form available
for the sale of the Notes, the Exchange Notes or Private Exchange Notes, as
applicable, to (i) in the case of the Exchange Offer, permit the exchange of
Exchange Notes for Notes in the Exchange Offer and, if applicable, resales of
Exchange Notes by Participating Broker-Dealers and (ii) in the case of a Shelf
Registration, permit the sale of the applicable Transfer Restricted Securities
in accordance with the method or methods of disposition thereof specified by the
holders of such Transfer Restricted Securities, and pursuant thereto the Issuers
shall as expeditiously as possible:
(a) In the case of a Shelf Registration, a reasonable period of
time prior to the initial filing of a Shelf Registration Statement or
Prospectus and a reasonable period of time prior to the filing of any
amendment or supplement thereto (including any document
<PAGE> 14
-13-
that would be incorporated or deemed to be incorporated therein by
reference), furnish to the holders of the Transfer Restricted
Securities included in such Shelf Registration Statement, their Special
Counsel and the managing underwriters, if any, copies of all such
documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject
to the review of such holders, their Special Counsel and such
underwriters, if any, and cause the officers and directors of the
Issuers, counsel to the Issuers and independent certified public
accountants to the Issuers to respond to such reasonable inquiries as
shall be necessary, in the opinion of respective counsel to such
holders and such underwriters, to conduct a reasonable investigation
within the meaning of the Securities Act; provided that the Issuers
shall not be deemed to have kept a Shelf Registration Statement
effective during the applicable period if any of them voluntarily takes
or fails to take any reasonable action that results in holders of the
Transfer Restricted Securities covered thereby not being able to sell
such Transfer Restricted Securities pursuant to Federal securities laws
during that period (and the time period during which such Shelf
Registration Statement is required to remain effective hereunder shall
be extended by the number of days during which such holders of Transfer
Restricted Securities are not able to sell such Transfer Restricted
Securities). The Issuers shall not file any such Shelf Registration
Statement or related Prospectus or any amendments or supplements
thereto which the holders of a majority of the Transfer Restricted
Securities included in such Shelf Registration Statement shall
reasonably object on a timely basis;
(b) Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement as may be
necessary to keep such Registration Statement continuously effective
for the applicable time period required hereunder; cause the related
Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424; and comply
with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all securities covered by such
Registration Statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in
such Registration
<PAGE> 15
-14-
Statement as so amended or in such Prospectus as so supplemented;
(c) Notify the holders of Transfer Restricted Securities to be
sold or, in the case of an Exchange Offer, tendered for, their Special
Counsel and the managing underwriters, if any, promptly, and (if
requested by any such person), confirm such notice in writing, (i)(A)
when a Prospectus or any Prospectus supplement or post-effective
amendment is proposed to be filed, and (B) with respect to a
Registration Statement or any post-effective amendment, when the same
has become effective, (ii) of any request by the SEC or any other
Federal or state governmental authority for amendments or supplements
to a Registration Statement or related Prospectus or for additional
information, (iii) of the issuance by the SEC, any state securities
commission, any other governmental agency or any court of any stop
order, order or injunction suspending or enjoining the use of a
Prospectus or the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) of the receipt by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Notes,
Exchange Notes or Private Exchange Notes for sale in any jurisdiction,
or the initiation or threatening of any proceeding for such purpose,
and (v) of the happening of any event or information becoming known
that makes any statement made in a 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 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 a 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 light of the circumstances under which they were made, not
misleading;
(d) Use their best efforts to avoid the issuance of or, if
issued, obtain the withdrawal of any order enjoining or suspending the
use of a Prospectus or the effectiveness of a Registration Statement or
the lift-
<PAGE> 16
-15-
ing of any suspension of the qualification (or exemption from
qualification) of any of the Notes, Exchange Notes or Private Exchange
Notes for sale in any jurisdiction, at the earliest practicable moment;
(e) If a Shelf Registration Statement is filed pursuant to
Section 3 hereof and if requested by the managing underwriters, if any,
or the holders of a majority in aggregate principal amount of the
Transfer Restricted Securities being sold pursuant to such Shelf
Registration Statement, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment such information as the managing
underwriters, if any, and such holders reasonably believe should be
included therein, and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment under the Securities Act as
soon as practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or
post-effective amendment; provided, however, that the Issuers shall not
be required to take any action pursuant to this Section 5(e) that
would, in the opinion of counsel for the Issuers, violate or be
inconsistent with applicable law;
(f) Upon written request to the Company, furnish to each
holder of Notes, Exchange Notes or Private Exchange Notes to be
exchanged or sold pursuant to a Registration Statement, their Special
Counsel and each managing underwriter, if any, without charge, at least
one conformed copy of such Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all
exhibits to the extent requested (including those previously furnished
or incorporated by reference) as soon as practicable after the filing
of such documents with the SEC;
(g) Deliver to each holder of Notes, Exchange Notes or Private
Exchange Notes to be exchanged or sold pursuant to a Registration
Statement, their Special Counsel, and the underwriters, if any, without
charge, as many copies of the Prospectus (including each form of
prospectus) and each amendment or supplement thereto as such persons
reasonably request; and the Issuers hereby consent to the use of such
Prospectus and each amendment or supplement thereto by each of the
selling
<PAGE> 17
-16-
holders of Transfer Restricted Securities and the underwriters, if any,
in connection with the offering and sale of the Transfer Restricted
Securities covered by such Prospectus and any amendment or supplement
thereto;
(h) Prior to any public offering of Notes, Exchange Notes or
Private Exchange Notes, use their best efforts to register or qualify
or cooperate with the holders of Notes, Exchange Notes or Private
Exchange Notes to be sold or tendered for, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of
such Notes, Exchange Notes or Private Exchange Notes for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the
United States as any such holder or underwriter reasonably requests in
writing; keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is
required to be kept effective hereunder and do any and all other acts
or things necessary or advisable to enable the disposition in such
jurisdictions of the Notes, Exchange Notes or Private Exchange Notes
covered by the applicable Registration Statement; provided, however,
that the Issuers shall not be required to (i) qualify generally to do
business in any jurisdiction where they are not then so qualified or
(ii) take any action which would subject them to general service of
process or to taxation in any jurisdiction where they are not so
subject;
(i) In connection with any sale or transfer of Transfer
Restricted Securities that will result in such securities no longer
being Transfer Restricted Securities, cooperate with the holders
thereof and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Transfer
Restricted 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 to enable such Transfer Restricted
Securities to be in such denominations and registered in such names as
the managing underwriters, if any, or such holders may request at least
two Business Days prior to any sale of Transfer Restricted Securities;
<PAGE> 18
-17-
(j) Upon the occurrence of any event contemplated by Section
5(c)(v), as promptly as practicable, prepare a supplement or amendment,
including, if appropriate, a post-effective amendment, to each
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, 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 light of the
circumstances under which they were made, not misleading;
(k) Prior to the effective date of the Exchange Registration
Statement, to provide a CUSIP number for the Exchange Notes (and
Private Exchange Notes if applicable);
(l) If a Shelf Registration Statement is filed pursuant to
Section 3 hereof, enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other reasonable actions in connection
therewith (including those reasonably requested by the managing
underwriters, if any, or the holders of a majority in aggregate
principal amount of the Transfer Restricted Securities being sold) in
order to expedite or facilitate the disposition of such Transfer
Restricted Securities, and, whether or not an underwriting agreement is
entered into and whether or not the registration is an underwritten
registration, (i) make such representations and warranties to the
holders of such Transfer Restricted Securities and the underwriters, if
any, with respect to the business of the Company and its subsidiaries
(including with respect to businesses or assets acquired or to be
acquired by any of them), and the Shelf Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in
underwritten offerings, and confirm the same if and when requested;
(ii) use their best efforts to obtain opinions of counsel to the
Issuers and updates thereof (which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to the managing
underwriters, if any, and Special Counsel to the
<PAGE> 19
-18-
holders of the Transfer Restricted Securities being sold),
addressed to each selling holder of Transfer Restricted Securities and
each of the underwriters, if any, covering the matters customarily
covered in opinions requested in underwritten offerings and such other
matters as may be reasonably requested by such Special Counsel and
underwriters; (iii) use their best efforts to obtain customary "cold
comfort" letters and updates thereof from the independent certified
public accountants of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data is, or is required to be, included in the
Shelf Registration Statement), addressed (where reasonably possible) to
each selling holder of Transfer Restricted Securities and each of the
underwriters, if any, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings; (iv) if an underwriting
agreement is entered into, the same shall contain indemnification
provisions and procedures no less favorable to the selling holders and
the underwriters, if any, than those set forth in Section 7 hereof (or
such other provisions and procedures acceptable to holders of a
majority in aggregate principal amount of Transfer Restricted
Securities covered by such Shelf Registration Statement and the
managing underwriters, if any); and (v) deliver such documents and
certificates as may be reasonably requested by the holders of a
majority in aggregate principal amount of the Transfer Restricted
Securities being sold, their Special Counsel and the managing
underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant to clause (i) above and to
evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Issuers;
(m) In the case of a Shelf Registration, make available for
inspection by a representative of the holders of Transfer Restricted
Securities being sold, any underwriter participating in any such
disposition of Transfer Restricted Securities, and any attorney,
consultant or accountant retained by such selling holders or
underwriter, at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate
documents and prop-
<PAGE> 20
-19-
erties of the Company and its subsidiaries (including with respect to
businesses and assets acquired or to be acquired to the extent that
such information is available to the Company), and cause the officers,
directors, agents and employees of the Company and its subsidiaries
(including with respect to businesses and assets acquired or to be
acquired to the extent that such information is available to the
Company) to supply all information in each case reasonably requested by
any such representative, underwriter, attorney, consultant or
accountant in connection with such Shelf Registration; provided,
however, that such persons shall first agree in writing with the
Company that any information that is reasonably and in good faith
designated by the Company in writing as confidential at the time of
delivery of such information shall be kept confidential by such
persons, unless (i) disclosure of such information is required by court
or administrative order or is necessary to respond to inquiries of
regulatory authorities, (ii) disclosure of such information is required
by law (including any disclosure requirements pursuant to Federal
securities laws in connection with the filing of the Shelf Registration
Statement or the use of any Prospectus), (iii) such information becomes
generally available to the public other than as a result of a
disclosure or failure to safeguard such information by such person or
(iv) such information becomes available to such person from a source
other than the Company and its subsidiaries and such source is not
bound by a confidentiality agreement; and provided, further, that the
foregoing inspection and information gathering shall be coordinated by
one counsel designated by and on behalf of such other persons;
(n) Provide an indenture trustee for the Notes and/or the
Exchange Notes and Private Exchange Notes, as the case may be, and
cause an indenture to be qualified under the TIA not later than the
effective date of the first Registration Statement relating to the
Notes and/or the Exchange Notes and Private Exchange Notes, as the case
may be; and if such indenture shall be the Indenture, in connection
therewith, cooperate with the Trustee and the holders of the Notes
and/or the Exchange Notes and Private Exchange Notes, to effect such
changes to the Indenture as may be required for the Indenture to be so
qualified in accordance with the terms of the TIA; and execute, and use
its reasonable efforts to cause the Trustee to execute, all customary
docu-
<PAGE> 21
-20-
ments as may be required to effect such changes, and all other forms
and documents required to be filed with the SEC to enable the Indenture
to be so qualified in a timely manner;
(o) Comply with all applicable rules and regulations of the
SEC and make generally available to their securityholders earning
statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158, 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 Transfer Restricted Securities are sold to underwriters in a firm
commitment or reasonable efforts underwritten offering and (ii) if not
sold to underwriters in such an offering, commencing on the first day
of the first fiscal quarter after the effective date of a Registration
Statement, which statement shall cover said period, consistent with the
requirements of Rule 158; and
(p) Cooperate with each seller of Transfer Restricted
Securities covered by any Registration Statement and each underwriter,
if any, participating in the disposition of such Transfer Restricted
Securities and their respective counsel in connection with any filings
required to be made with the National Association of Securities
Dealers, Inc.
(q) Use their best efforts to cause the Exchange Notes, if
issued, to be listed on the New York Stock Exchange on or prior to the
consummation of the Exchange Offer.
The Issuers may require a holder of Transfer Restricted
Securities to be included in a Registration Statement to furnish to the Issuers
such information regarding the distribution of such Transfer Restricted
Securities as is required by law to be disclosed in such Registration Statement
and the Issuers may exclude from such Registration Statement the Transfer
Restricted Securities of any holder who unreasonably fails to furnish such
information within a reasonable time after receiving such request.
If any such Registration Statement refers to any holder by
name or otherwise as the holder of any securities of an Issuer, then such holder
shall have the right to require (i)
<PAGE> 22
-21-
the insertion therein of language, in form and substance reasonably satisfactory
to such holder, to the effect that the holding by such holder of such securities
is not to be construed as a recommendation by such holder of the investment
quality of the Issuers' securities covered thereby and that such holding does
not imply that such holder will assist in meeting any future financial
requirements of the Issuers, or (ii) in the event that such reference to such
holder by name or otherwise is not required by the Securities Act, the deletion
of the reference to such holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
In the case of a Shelf Registration pursuant to Section 3
hereof, each holder of Transfer Restricted Securities agrees by acquisition of
such Transfer Restricted Securities that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 5(c)(ii),
5(c)(iii), 5(c)(iv) or 5(c)(v) hereof, such holder will forthwith discontinue
disposition of such Transfer Restricted Securities covered by such Registration
Statement or Prospectus until such holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(j) hereof, or until
it is advised in writing (the "Advice") by the Company that the use of the
applicable Prospectus may be resumed, and, in either case, has received copies
of any additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus. If the Company shall give any such
notice, the Effectiveness Period shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each holder of Transfer Restricted Securities covered by
such Registration Statement shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(j) hereof or (y)
the Advice, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.
6. Registration Expenses
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 any Registration Statement is filed or becomes effective and
whether or not any Notes, Exchange Notes or Private Exchange Notes are issued or
sold pursuant to any Registration Statement. The fees and expenses referred to
in the foregoing sentence shall include, without
<PAGE> 23
-22-
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with the
National Association of Securities Dealers, Inc. and (B) in compliance with
securities or Blue Sky laws), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Notes, Exchange Notes and
Private Exchange Notes in a form eligible for deposit with The Depository Trust
Company and of printing Prospectuses), (iii) reasonable fees and disbursements
of counsel for the Issuers and the Special Counsel, (iv) fees and disbursements
of all independent certified public accountants referred to in Section 2(e) and
Section 5(l)(iii) hereof (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), and (v) fees and expenses of all other persons retained by the
Issuers. In addition, the Issuers shall pay their internal expenses (including,
without limitation, all salaries and expenses of their respective officers and
employees performing legal or accounting duties), the expense of any annual
audit, and the fees and expenses incurred in connection with the listing of the
Notes, Exchange Notes or Private Exchange Notes to be registered on any
securities exchange. Notwithstanding the foregoing or anything in this Agreement
to the contrary, each holder of Transfer Restricted Securities shall pay all
underwriting discounts and commissions of any underwriters with respect to any
Notes, Exchange Notes or Private Exchange Notes sold by it.
7. Indemnification
(a) The Issuers agree, jointly and severally, to indemnify and hold
harmless (i) each Initial Purchaser, each holder of Notes, Exchange Notes and
Private Exchange Notes and each Participating Broker-Dealer, (ii) each person,
if any, who controls (within the meaning of Section 15 of the Act or Section 20
of the Exchange Act) any of the foregoing (any of the persons referred to in
this clause (ii) being hereinafter referred to as a "controlling person"), and
(iii) the respective officers, directors, partners, employees, representatives
and agents of the Initial Purchasers, each holder of Notes, Exchange Notes and
Private Exchange Notes, each Participating Broker-Dealer and any controlling
person (any person referred to in clause (i), (ii) or (iii) may hereinafter be
referred to as an "Indemnified Person"), from and against any and all losses,
claims, damages, liabilities and judgments arising out of or relating to any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or
<PAGE> 24
-23-
preliminary prospectus or in any amendment or supplement thereto, or arising out
of or relating to any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
(in the case of any Prospectus or preliminary prospectus or supplement thereto,
in light of the circumstances under which they were made) not misleading, except
insofar as such losses, claims, damages, liabilities or judgments are caused by
any such untrue statement or omission or alleged untrue statement or omission
based upon information relating to any Indemnified Person furnished in writing
to the Issuers by or on behalf of such Indemnified Person expressly for use
therein; provided that the foregoing indemnity with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Person from whom
the person asserting such losses, claims, damages, liabilities and judgments
purchased securities if such untrue statement or omission or alleged untrue
statement or omission made in such preliminary prospectus is eliminated or
remedied in the Prospectus and a copy of the Prospectus shall not have been
furnished to such person in a timely manner due to the wrongful action or
wrongful inaction of such Indemnified Person.
(b) In case any action shall be brought against any Indemnified Person,
based upon any Registration Statement or any such Prospectus or preliminary
prospectus or any amendment or supplement thereto and with respect to which
indemnity may be sought against the Issuers hereunder, such Indemnified Person
shall promptly notify the Issuers in writing and the Company shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Person and payment of all fees and expenses. Any Indemnified
Person shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person, unless (i) the employment of
such counsel shall have been specifically authorized in writing by the Issuers,
(ii) the Company shall have failed to assume the defense and employ counsel or
pay all such fees and expenses or (iii) the named parties to any such action
(including any impleaded parties) include both such Indemnified Person and an
Issuer and such Indemnified Person shall have been advised by counsel that there
may be one or more legal defenses available to it which are different from or
additional to those available to any such Issuer (in which case the Company
shall not have the right to assume the defense of such action on behalf of
<PAGE> 25
-24-
such Indemnified Person, it being understood, however, that the Issuers shall
not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for all such Indemnified Persons, which firm shall be designated in
writing by such Indemnified Persons, and that all such reasonable fees and
expenses shall be reimbursed as they are incurred). The Issuers shall not be
liable for any settlement of any such action effected without their written
consent but if settled with the written consent of the Issuers, the Issuers
agree, jointly and severally, to indemnify and hold harmless each Indemnified
Person from and against any loss or liability by reason of such settlement. No
Issuer shall, without the prior written consent of each Indemnified Person,
effect any settlement of any pending or threatened proceeding in respect of
which any Indemnified Person is a party and indemnity could have been sought
hereunder by such Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all liability on claims
that are the subject matter of such proceeding.
(c) In connection with any Registration Statement pursuant to which a
holder of Transfer Restricted Securities offers or sells Transfer Restricted
Securities, such holder agrees, severally and not jointly, to indemnify and hold
harmless the Issuers, their respective directors and officers and any person
controlling an 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 Indemnified Person but only with respect to information
relating to such holder furnished in writing by or on behalf of such holder
expressly for use in such Registration Statement. In any such case in which any
action shall be brought against an Issuer, any director or officer of an Issuer
or any person controlling an Issuer based on such Registration Statement and in
respect of which indemnity may be sought against a holder of Transfer Restricted
Securities, such holder shall have the rights and duties given to the Issuers
(except that if an Issuer shall have assumed the defense thereof, such holder
shall not be required to do so, but may employ separate counsel therein and
participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of such holder), and the Issuers, their respective
directors and officers and any person controlling an Issuer shall have the
<PAGE> 26
-25-
rights and duties given to the Indemnified Persons by Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to herein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by each indemnifying party on the one
hand and the indemnified party on the other hand from the offering of the Notes,
the Exchange Notes or the Private Exchange Notes, as the case may be (it being
expressly understood and agreed that the relative benefits received by the
Issuers from the offering of the Notes, Exchange Notes or Private Exchange
Notes, as the case may be, shall be the amount of the net proceeds received by
the Company from the sale of the Notes to the Initial Purchasers), or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of each indemnifying
party on the one hand and the indemnified party on the other hand in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the each indemnifying party on the one
hand the indemnified party on the other hand shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by an indemnifying party or such indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Issuers and the Initial Purchasers agree that it would not be just
and equitable if contribution pursuant to this Section 7(d) were determined by
pro rata allocation (even if the Indemnified Person were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the
<PAGE> 27
-26-
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, no
Indemnified Person shall be required to contribute any amount in excess of the
amount by which the net profits received by it in connection with the sale of
the Notes, Exchange Notes or Private Exchange Notes contemplated by this
Agreement exceeds the amount of any damages which such Indemnified Person 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 Indemnified Person's obligations to contribute
pursuant to this Section 7(d) are several in proportion to the respective amount
of Notes, Exchange Notes or Private Exchange Notes included in any such
Registration Statement by each Indemnified Person and not joint.
8. Rules 144 and 144A
Each of Issuers shall use its best efforts to file the reports
required to be filed by it under the Securities Act and the Exchange Act in a
timely manner and, if at any time it is not required to file such reports but in
the past had been required to or did file such reports, it will, upon the
request of any holder of Transfer Restricted Securities, make available other
information as required by, and so long as necessary to permit, sales of its
Transfer Restricted Securities pursuant to Rule 144A. Notwithstanding the
foregoing, nothing in this Section 8 shall be deemed to require an Issuer to
register any of its securities pursuant to the Exchange Act.
9. Underwritten Registrations
If any of the Transfer Restricted Securities covered by any
Shelf Registration are to be sold in an underwritten offering, the investment
banker or investment bankers and manager or managers that will administer the
offering will be selected by the holders of a majority in aggregate principal
amount of such Transfer Restricted Securities included in such offering, subject
to the consent of the Company (which will not be unreasonably withheld or
delayed).
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such Transfer Restricted
Securities on the basis reasonably provided
<PAGE> 28
-27-
in any underwriting arrangements approved by the persons entitled hereunder to
approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements.
10. Miscellaneous
(a) Remedies. In the event of a breach by an Issuer or by a holder of
Notes, Exchange Notes or Private Exchange Notes of any of its obligations under
this Agreement, each holder of Notes, Exchange Notes or Private Exchange Notes
and each Issuer, in addition to being entitled to exercise all rights granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under this Agreement. Subject to Section 4 hereof, the Issuers and
each holder of Notes, Exchange Notes and Private Exchange Notes agree that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach of any of the provisions of this Agreement and each hereby
further agrees that, in the event 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. The Issuers will not enter into any
agreement with respect to their securities that is inconsistent with the rights
granted to the holders of Notes, Exchange Notes and Private Exchange Notes and
Indemnified Persons in this Agreement or otherwise conflicts with the provisions
hereof. Without the written consent of the holders of a majority in aggregate
principal amount of the outstanding Transfer Restricted Securities, the Issuers
shall not grant to any person any rights which conflict with or are inconsistent
with the provisions of this Agreement.
(c) No Piggyback on Registrations. The Issuers shall not grant to any
of their securityholders (other than the holders of Transfer Restricted
Securities in such capacity) the right to include any of their securities in any
Registration Statement other than Transfer Restricted Securities.
(d) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, 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 the
<PAGE> 29
-28-
holders of not less than a majority of the then outstanding aggregate
principal amount of Transfer Restricted Securities; provided, however, that, for
the purposes of this Agreement, Transfer Restricted Securities that are owned,
directly or indirectly, by the Issuers or any of their Affiliates are not deemed
outstanding. 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 Transfer Restricted Securities whose securities are being
sold pursuant to a Registration Statement and that does not directly or
indirectly affect the rights of other holders of Transfer Restricted Securities
may be given by holders of a majority in aggregate principal amount of the
Transfer Restricted Securities being sold by such holders pursuant to such
Registration Statement; provided, however, that the provisions of this sentence
may not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence. Notwithstanding the foregoing,
no amendment, modification, supplement, waiver or consent with respect to
Section 7 shall be made or given otherwise than with the prior written consent
of each Indemnified Person affected thereby.
(e) Notices. All notices and other communications provided for herein
shall be made in writing by hand-delivery, next-day air courier, certified
first-class mail, return receipt requested, telex or telecopier:
(i) if to the Issuers, as provided in the Purchase Agreement,
(ii) if to the Initial Purchasers, as provided in the Purchase Agreement, or
(iii) if to any other person who is then the registered holder of Notes,
Exchange Notes or Private Exchange Notes, to the address of such holder as it
appears in the register therefor of the Company.
Except as otherwise provided in this Agreement, all such communications
shall be deemed to have been duly given: when delivered by hand, if personally
delivered; one business day after being timely delivered to a next-day air
courier; five business days after being deposited in the mail, postage prepaid,
if mailed; when answered back, if telexed; and when receipt is acknowledged by
the recipient's telecopier machine, if telecopied.
<PAGE> 30
-29-
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each holder of Notes, Exchange Notes
and Private Exchange Notes. The Issuers may not assign any of their rights or
obligations hereunder without the prior written consent of each holder of
Transfer Restricted Securities and each Indemnified Person. Notwithstanding the
foregoing, no successor or assignee of an Issuer shall have any of the rights
granted under this Agreement until such person shall acknowledge its rights and
obligations hereunder by a signed written statement of such person's acceptance
of such rights and obligations.
(g) 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.
(h) Governing Law; Submission to Jurisdiction. 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. THE
ISSUERS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY
AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
(i) Severability. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. 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 reasonable 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
<PAGE> 31
-30-
may be hereafter declared invalid, illegal, void or unenforceable.
(j) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. All
references made in this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly stated otherwise.
<PAGE> 32
-31-
IN WITNESS WHEREOF, the parties have caused this Registration
Rights Agreement to be duly executed as of the date first written above.
TALON AUTOMOTIVE GROUP, INC.
By:______________________________
Name: David J. Woodward
Title: Vice President
VS HOLDINGS, INC.
By:_______________________________
Name: David J. Woodward
Title: Vice President
VETRI HOLDINGS USA, INC.
By:________________________________
Name: David J. Woodward
Title: Vice President
VELTRI METAL PRODUCTS CO.
By:_________________________________
Name: David J. Woodward
Title: Vice President
<PAGE> 33
-32-
SALOMON BROTHERS INC
CREDIT SUISSE FIRST BOSTON CORPORATION
By: SALOMON BROTHERS INC
By: __________________________________
Name: Thomas Spoto
Title: Associate
<PAGE> 1
EXHIBIT 10.16
STOCK PURCHASE AGREEMENT
AMONG
MICHAEL VELTRI,
INDIVIDUALLY AND AS TRUSTEE OF THE MICHAEL T.J. VELTRI REVOCABLE LIVING TRUST,
MARIA VELTRI AND VS ACQUISITION CO.
NOVEMBER 8, 1996
<PAGE> 2
INDEX
-----
ARTICLE 1 -- PURCHASE AND SALE OF SHARES.................................... 2
1.1 Purchase and Sale of Shares....................................... 2
1.2 Purchase Price.................................................... 2
1.3 Payment of the Purchase Price..................................... 3
1.4 Preparation of Closing Net Worth Statement........................18
1.5 Allocation of Purchase Price......................................20
ARTICLE 2 -- CLOSING........................................................20
2.1 Closing...........................................................20
2.2 Closing Date Deliveries...........................................21
ARTICLE 3 -- REPRESENTATIONS AND WARRANTIES OF MICHAEL VELTRI...............24
3.1 Corporate Standing and Authority..................................24
3.2 Stock.............................................................26
3.3 Financial Statements..............................................27
3.4 No Material Changes...............................................30
3.5 Leases and Real Estate............................................32
3.6 Contracts.........................................................34
3.7 Employee Benefit Plans............................................36
3.8 Employees.........................................................37
3.9 Governmental Regulations and Litigation...........................38
3.10 Environmental Compliance..........................................38
3.11 Labor and Employment Relations....................................42
3.12 Title to and Operating Condition of Assets........................42
3.13 Intangible Assets.................................................43
3.14 Insurance.........................................................44
3.15 Customers and Commitments.........................................45
3.16 Finder's or Broker's Fee..........................................46
3.17 Licenses, Permits and Approvals...................................47
3.18 Competitive Interests.............................................47
3.19 Related Party Transactions........................................47
3.20 Sellers Non-Residents.............................................48
3.21 General Warranty..................................................48
3.22 Continuation of Representations and Warranties of Michael Veltri..48
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES OF BUYER........................49
4.1 Corporate Standing and Authority..................................49
4.2 Ownership of Buyer, VS Holdings, Inc. and VS Holdings No. 2, Inc..50
4.3 Finder's or Broker's Fee..........................................51
4.4 Litigation........................................................51
4.8 General Warranty..................................................52
4.9 Continuation of Representations and Warranties of Buyer...........52
ARTICLE 5 -- INDEMNITIES....................................................53
i
<PAGE> 3
5.1 Indemnification by Sellers....................................53
5.2 Limitations on Purchasers Indemnifiable Claims ...............55
5.3 Indemnification by Buyer .....................................59
5.4 Limitations on Sellers Indemnifiable Claims ..................60
5.5 Third Party Claims ...........................................61
5.6 Payment and Interest .........................................62
5.7 Presentment of Claims ........................................63
5.8 Arbitration ..................................................64
ARTICLE 6 - CONVENANTS ...............................................64
6.1 Convenants After Closing .....................................64
6.2 Other Covenants ..............................................67
ARTICLE 7 - MISCELLANEOUS .............................................68
7.1 Additional Documents .........................................68
7.2 Interpretation ...............................................68
7.3 Entire Agreement .............................................68
7.4 Notices ......................................................69
7.5 Governing Law ................................................69
7.6 Waivers ......................................................70
7.7 Expenses .....................................................70
7.8 Partial Invalidity ...........................................70
7.9 Assignment ...................................................71
7.10 No Third Party Beneficiaries ................................71
7.11 Counterparts ................................................71
7.12 Dollars .....................................................71
7.13 Fees and Expenses ...........................................71
7.14 Knowledge ...................................................72
7.15 Press Releases and Public Announcements .....................72
7.16 Schedules ...................................................72
7.17 Affiliate ...................................................72
7.18 Registration ................................................72
ii
<PAGE> 4
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement"), is made as of the ____ day of
November, 1996, by and among MICHAEL VELTRI, individually and as trustee of the
Michael T. J. Veltri Revocable Living Trust under agreement dated December 17,
1992 ("Michael Veltri"), residing in Bloomfield Hills, Michigan, and MARIA
VELTRI ("Maria Veltri"), residing in Bloomfield Hills, Michigan, (Michael
Veltri and Maria Veltri are collectively referred to herein as the "Sellers"),
and VS ACQUISITION CO., a Nova Scotia company, ("Buyer").
WITNESSETH:
WHEREAS, Michael Veltri owns all of the issued and outstanding shares of
capital stock of Veltri Holdings Limited ("Veltri Ltd."), an Ontario
corporation, and, Veltri Holdings USA, Inc. d/b/a Veltri International, an
Indiana corporation ("Veltri Holdings"), and twenty-four (24%) percent of the
issued and outstanding shares of capital stock of North American Precision Tool
Ltd. ("NAPT"), an Ontario corporation (Veltri Ltd., Veltri Holdings and NAPT
are collectively referred to herein as the "Companies");
WHEREAS, Maria Veltri owns seventy-six (76%) percent of the issued and
outstanding shares of capital stock of NAPT;
WHEREAS, Veltri Ltd. owns all of the issued and outstanding shares of
capital stock of Veltri Stamping Corporation (the "Subsidiary"), an Ontario
corporation, which in turn owns the following trade names or divisions: Veltri
Glencoe; Talbot Assembly; MTJ Enterprises; ATF Automotive Group; and Veltri
Modular Assembly (the Companies and the Subsidiary are sometimes collectively
referred to herein as the "Veltri Group" and each individually a "Veltri Group
Member"); and
<PAGE> 5
WHEREAS, the Sellers desire to sell to the Buyer, and the Buyer desires to
purchase from the Sellers, all of the issued and outstanding shares of capital
stock of Veltri Ltd. (the "Veltri Ltd. Shares"), NAPT (the "NAPT Shares") and
Veltri Holdings (the "Veltri Holdings Shares") (the Veltri Ltd. Shares, the
NAPT Shares and the Veltri Holdings Shares are collectively referred to herein
as the "Shares"), for the consideration, upon the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth herein, the parties hereto agree as follows:
ARTICLE 1 - PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Shares. One the Closing Date (as hereinafter
defined), upon the terms and subject to the satisfaction of the conditions
precedent set forth in this Agreement, Sellers shall sell, transfer, assign,
convey and deliver the Shares to Buyer, and Buyer shall purchase and acquire
the Shares from Sellers.
1.2 Purchase Price. The purchase price shall be as follows:
(a) The purchase price for the NAPT Shares (the "NAPT Share Purchase
Price") shall be equal to the sum of One Million Eight Hundred Thousand
(Cdn. $1,800,000) Cdn. Dollars.
(b) The purchase price for the Veltri Ltd. Shares (the "Veltri Ltd.
Share Purchase Price") shall be equal to the sum of:
(i) Ten Million Six Hundred Ten Thousand Four Hundred Sixty
(Cdn. $10,610,460) Cdn. Dollars (the "Initial Amount"), which amount
shall be subject to adjustment as follows:
(A) in the event that the Consolidated Net Worth (as
hereinafter defined) as of the Closing Date is less than
negative Two
2
<PAGE> 6
Million One Hundred Ninety Four Thousand Three Hundred
Twenty Eight (Cdn. -$2,194,328.00) Cdn. Dollars (the "Base
Net Worth"), then the Initial Amount shall be subject to
reduction as provided in Section 1.4 hereof;
(B) in the event that the EBIT (as hereinafter
defined) for the calendar year ending December 31, 1996
shall be less than Seven Million Five Hundred Thousand (Cdn.
$7,500,000) Cdn. Dollars, then the Initial Amount shall be
subject to reduction as provided in Section 1.3(a)(iii)
hereof; or
(C) in the event that the EBIT for the calendar year
ending December 31, 1997 shall be greater than Six Million
Five Hundred Thousand (Cdn. $6,500,000) Cdn. Dollars or less
than Six Million (Cdn. $6,000,000) Cdn. Dollars, then the
Initial Amount shall be subject to adjustment as provided in
Section 1.3(a)(iv) hereof;
(ii) the Earn-Out Amounts (as hereinafter defined); and
(iii) Six Hundred Fifty Eight Thousand Three Hundred Twenty Five
(U.S. $658,325) U.S. Dollars (the "Note Amount").
(c) The aggregate purchase price for the Veltri Holdings Shares (the
"Veltri Holdings Share Purchase Price") shall be equal to the sum of One
Thousand and 00/100 (Cdn. $1,000) Cdn. Dollars.
1.3 Payment of the Purchase Price. The NAPT Share Purchase Price shall be
paid by Buyer to Sellers (in accordance with the NAPT Share Purchase Price
allocation under Section 1.5 hereof) in full at the Closing by certified check
or wire transfer. The Veltri Holdings Share Purchase
3
<PAGE> 7
Price shall be paid by Buyer to Michael Veltri in full at the Closing by
certified check or wire transfer. The Veltri Ltd. Share Purchase Price shall be
paid by Buyer to Michael Veltri as follows:
(a) The Initial Amount shall be paid as follows:
(i) Nine Million One Hundred Ten Thousand Four Hundred Sixty
(Cdn. $9,110,460) Cdn. Dollars (the "Cash Payment") shall be paid
to Michael Veltri at the Closing by certified check or wire
transfer;
(ii) One Million Five Hundred Thousand and 00/100 (Cdn.
$1,500,000.00) Cdn. Dollars (the "Escrowed Amount") shall be
placed into escrow at the Closing with Comerica Bank, who shall
place such funds in an interest bearing demand account, and paid
to Michael Veltri and/or Buyer in accordance with Section 1.4
hereof; and
(iii) in the event that the EBIT for the calendar year
ending December 31, 1996 is less than Seven Million Five Hundred
Thousand (Cdn. $7,500,000) Cdn. Dollars, then Michael Veltri
shall pay to the Buyer on March 31, 1997 an amount equal to the
lesser of (A) Four Hundred Ninety Seven Thousand (Cdn. $497,000)
Cdn. Dollars, or (B) the amount by which EBIT for the calendar
year ending December 31, 1996 is less than Seven Million Five
Hundred Thousand (Cdn. $7,500,000) Cdn. Dollars;
(iv) in the event that the EBIT for the calendar year ending
December 31, 1997 is:
(A) greater than Six Million Five Hundred Thousand
(Cdn. $6,500,000) Cdn. Dollars, then in such event:
(i) Buyer shall pay to Michael Veltri on March 31,
1998 an amount equal to the lesser of (a) One Million
(Cdn.
4
<PAGE> 8
$1,000,000) Cdn. Dollars or (b) fifty (50%)
percent of the amount by which such EBIT
shall be in excess of Six Million Five Hundred
Thousand (Cdn. $6,500,000) Cdn. Dollars, less any
applicable withholding required pursuant to
Section 116 (as hereinafter defined); and
(ii) the EBIT Threshold (as hereinafter
defined) for purposes of the 1998 Earn-Out (as
hereinafter defined) shall be reduced by an
amount equal to the lesser of (a) One Million
(Cdn. $1,000,000) Cdn. Dollars or (b) fifty (50%)
percent of the amount by which such EBIT shall be
in excess of Six Million Five Hundred Thousand
(Cdn. $6,500,000) Cdn. Dollars;
(B) less than Six Million (Cdn. $6,000,000) Cdn.
Dollars, then in such event;
(i) Michael Veltri shall pay to Buyer on
March 31, 1998 an amount equal to the lesser of
(a) One Million (Cdn. $1,000,000) Cdn. Dollars or
(b) fifty (50%) percent of the amount by which
such EBIT shall be less than Six Million (Cdn.
$6,000,000) Cdn. Dollars;
(ii) the EBIT Threshold for purposes of the
1998 Earn-Out shall be increased by an amount
equal to the lesser of (i) One Million (Cdn.
$1,000,000) Cdn. Dollars or (ii) fifty (50%)
percent of the amount by which such EBIT shall be
less than Six Million (Cdn. $6,000,000) Cdn.
Dollars; and
5
<PAGE> 9
(iii) the Conversion Threshold and the
Maximum Earn-Out Amount shall each be increased by
an amount equal to the lesser of (i) One Million
(Cdn. $1,000,000) Cdn. Dollars or (ii) fifty (50%)
percent of the amount by which such EBIT shall be
less than Six Million (Cdn. $6,000,000) Cdn.
Dollars.
(b) An amount (the "Earn-Out Amounts") not to exceed the Maximum
Earn-Out Amount (as hereinafter defined), which shall be paid to Michael
Veltri in accordance with the following:
(i) With respect to each of the calendar years ending
December 31, 1998 and December 31, 1999 (which, together with the
calendar years ending December 31, 1996 and December 31, 1997, are
the referred to herein as the "EBIT Years"), Michael Veltri shall be
paid the Earn-Out Percentage (as hereinafter defined) of the amount
by which the EBIT (as hereinafter defined) shall be in excess of Six
Million Five Hundred Thousand (Cdn. $6,500,000) Cdn. Dollars (the
"EBIT Threshold") (which EBIT Threshold shall be subject to
adjustment as provided in Section 1.3(a)(iv) hereof);
(ii) For each of such calendar years, the Earn-Out Percentage
shall be (A) one hundred (100%) percent up to and until the
cumulative total of the Earn-Out Amounts payable under this
Section 1.3(b) shall total Ten Million (Cdn. $10,000,000) Cdn.
Dollars (the "Conversion Threshold") (which Conversion Threshold
shall be subject to adjustment as provided in Section 1.3(a)(iv)
hereof); and (B) fifty (50%) percent commencing as of that point, if
any, in either of such calendar years in which the cumulative total
of the Earn-Out Amounts payable
6
<PAGE> 10
hereunder shall total the Conversion Threshold; provided, however
that notwithstanding the foregoing, in no event shall the cumulative
total of all Earn-Out Amounts payable hereunder exceed the sum of
Fifteen Million (Cdn. $15,000,000) Cdn. Dollars (the "Maximum
Earn-Out Amount")(which Maximum Earn-Out Amount shall be subject to
adjustment as provided in Section 1.3(a)(iv) hereof).
(iii) "EBIT" means the consolidated sum of the Net Income and
Losses (as hereinafter defined) of the Veltri Group and Buyer
(collectively, the "New Veltri Group", and each individually a
"New Veltri Group Member") for a calendar year consisting of twelve
(12) consecutive months determined in accordance with GAAP (as
hereinafter defined) on a basis consistent with the historic
practices and methodologies used by the Veltri Group for the calendar
years 1994 and 1995, adjusted as follows:
(a) There shall be no deduction for or amortization of any
interest expenses, loan finance costs, loan restructuring costs,
loan refinancing costs, loan administration costs, loan
prepayment costs or other similar material fees or charges by
any lender, or any lessor under any capital leases;
(b) There shall be no deduction for any income taxes (or any
penalties, interest, or fines relating thereto);
(c) EBIT shall not include any deduction for or benefit of
any additional charges for depreciation or amortization, or
incremental changes in depreciation or amortization,
arising out of (i) the transactions contemplated by this
Agreement, including, without limitation, with respect to the
Amalgamation (as hereinafter defined) or any covenant
not-to-compete, intangible assets, goodwill or going concern
value recorded as a result of the
7
<PAGE> 11
transactions contemplated by this Agreement, (ii) any merger,
amalgamation, consolidation, reorganization, restructuring or
initial public offering affecting the New Veltri Group, or (iii)
any changes in depreciation or amortization periods, practices
or methodologies following the Closing Date,
(d) EBIT shall not include any deduction for or benefit of
any loss, gain, income, cost or expense relating to any
issuance or redemption of stock, public or private sale
of stock or any merger, amalgamation, consolidation,
reorganization or restructuring affecting the New Veltri Group;
(e) There shall be no deduction for any management,
administrative, accounting, sales, marketing or other expenses,
charged by Buyer or any Affiliate (as hereinafter defined) of
Buyer without the prior written consent of Michael Veltri (which
consent shall not be unreasonably withheld), except to the
extent such expenses are (i) directly incurred for the New
Veltri Group and not an allocation of the cost of the resources,
overhead, personnel or other indirect costs of the Buyer or any
Affiliate of Buyer, (ii) for services directly rendered by an
employee or outside contractor of the Buyer or any Affiliate of
Buyer, (iii) consistent with historical practices and in
replacement of and not in excess of existing levels of such
expenses, and (iv) not in excess of Two Hundred Thousand (Cdn.
$200,000) Cdn. Dollars per year;
(f) EBIT shall not be increased or decreased as a result of
any changes in accounting principles or methodology (except
to the extent such changes are made to conform to GAAP
where GAAP does not permit the prior practice);
8
<PAGE> 12
(g) Inventory shall calculated on a lower cost of cost or
market, first-in, first-out basis;
(h) Extraordinary items of income, gains or losses (as
determined in accordance with GAAP) shall be excluded;
(i) Any loss or expense recorded during any EBIT Year
which is recovered from insurance carriers, third parties, or
Sellers (whether pursuant to claims for indemnity, set-off or
otherwise) during such EBIT Year shall be excluded and the EBIT
for such year shall not include the recovery as income;
provided, however, in the event any such recovery occurs in a
year other than the EBIT Year in which such loss or expense is
recorded, then in such event the EBIT for the EBIT Year in which
such loss or expense was recorded shall be recomputed taking
into effect such recovery and the EBIT for the EBIT Year in
which such recovery occurred shall not include the recovery as
income;
(j) EBIT shall not be increased or decreased for the
carryover or carryback of operating income or losses generated
in other years;
(k) There shall be no deduction for design or engineering
costs in excess of those amounts set forth on Schedule 1.3(b)(i)
to the extent such excess costs relate to specific
products, services, programs or platforms not listed on Schedule
1.3(b)(ii) (the "Scheduled Items"); provided, however,
notwithstanding the foregoing, such excess design or engineering
costs shall be deducted to the extent that they result in
additional income during an EBIT Year;
9
<PAGE> 13
(l) There shall be no deduction for any additional or
incremental depreciation or amortization charges arising out of
any capital expenditures in excess of those set forth in
Schedule 1.3(b)(iii) to the extent such excess costs relate to
specific products, services, programs or platforms other than
the Scheduled Items; provided, however, notwithstanding the
foregoing, such excess capital expenditure charges shall be
deducted to the extent that they result in additional income
during an EBIT Year;
(m) There shall be no deduction for any accrual or
payments to Michael Veltri pursuant to Sections 4(c) and
4(d) of the Employment Agreement (as hereinafter defined);
(n) There shall be no deduction for any expense, cost or
amortization arising out of the accrual or payment of any
Earn-Out Amounts, or for any costs or expenses incurred in
determining the Earn-Out Amounts (including, without limitation,
any costs incurred with respect to Buyer's Accountants, Veltri's
Accountants and the Independent Accountants) to the extent that
such costs or expenses exceed the aggregate sum of Five Thousand
(Cdn. $5,000) Cdn. Dollars per EBIT Year;
(o) There shall be no deduction for any loss, cost or
expense for any third party claims to the extent that (i) such
claims arise out of the actions of Talon Automotive Group
L.L.C. (or any Affiliate thereof), and (ii) do not relate to the
operations of the New Veltri Group;
(p) EBIT shall not be decreased for any loss, cost or
expense incurred in any EBIT year which applies against the
Indemnity Floor (as hereinafter defined);
10
<PAGE> 14
(q) In the event that any severance payments are payable
to Michael Veltri under Section 7(c) of the Employment
Agreement, there shall be no deduction for any salary,
wages, benefits, bonuses or other compensation expenses incurred
by the New Veltri Group in connection with any person or persons
replacing Michael Veltri or otherwise incurred in obtaining any
services now or hereafter provided by Michael Veltri, and any
severance payments or benefits payable to Michael Veltri shall
be expenses for purposes hereof ratably over the period for
which the same shall be payable pursuant to the Employment
Agreement.
(r) Tooling income shall be accounted for in accordance
with the historic accounting and business practices of the
Veltri Group, notwithstanding any contrary GAAP treatment, as
set forth in Schedule 1.3(b)(iv);
(s) There shall be no change in the historic components or
elements of overhead which are to be allocated to inventory;
(t) All current and deferred foreign exchange gains and
losses shall be excluded;
(u) EBIT shall not include any deduction for or benefit of
any loss, gain, income, cost or expense which Buyer may incur as
a result of any breach by Buyer of the terms of this Agreement,
the Security Agreements (as hereinafter defined), the Debentures
(as hereinafter defined), or the Employment Agreement (except
for severance payments and severance benefits thereunder which
may be deducted as provided in Section 1.3(b)(iii)(q) hereof);
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<PAGE> 15
(v) EBIT shall not include any deduction for or benefit of
any loss, gain, income, cost or expense attributable to any item
listed in Schedule 1.4(b) hereof which has an impact upon
the income of the New Veltri Group or any item which causes the
Consolidated Net Worth as of the Closing Date to be less than
the Base Net Worth to the extent that the Initial Amount is
reduced by the amount of such difference pursuant to Sections
1.2(b)(i)(A) and Section 1.4 hereof;
(w) EBIT shall not include any deduction for or benefit of
any loss, gain, income, cost or expense attributable to
the write-off of any intercompany loans of the Veltri Group;
(x) In the event that any engineering, development or
tooling costs are recouped through an increased piece price or
other revenues ("Recoupment") in a year other than the EBIT
Year that such costs would otherwise constitute a charge against
EBIT, the amount of such costs chargeable to said EBIT year
shall be reversed, reduced or otherwise equitably adjusted to
account for such Recoupment;
(y) EBIT shall not include any deduction for or benefit
of any piece price increases or decreases or other income or
expense adjustments made in an EBIT year which relate to a
non-EBIT Year;
(z) EBIT shall not include any professional fees or other
transactional expenses incurred prior to the date of Closing
with respect to the consummation of the transactions
contemplated hereby;
(aa) There shall be no deduction for any amortization or
other costs arising out of any deviation from the method
currently employed by the Veltri
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<PAGE> 16
Group for the capitalization and amortization of start-up costs
associated with the Modular Assembly operations and
facilities as set forth in Sche- dule 1.3(b)(v);
(bb) EBIT shall not include any benefit from any
adjustments of year-end accruals which represent
adjustments from a non-EBIT Year.
(iv) In the event that the foregoing definition of EBIT does
not adequately address a particular transaction or situation, then
additional adjustments to the foregoing definition of EBIT shall
be made to be consistent with the principles herein contained and the
traditional operations and business practices of the Veltri Group as
are fair and equitable under the circumstances. Prior to any
transfers of business from and to the New Veltri Group and other
Affiliates of Buyer (which transfers may be made with the prior
consent of each of such parties, which consent shall not be
unreasonably withheld), the parties shall agree in writing on
additional adjustments to increase or decrease EBIT, as the case may
be, based upon an agreed upon level of gross profit on such business,
in order to equitably adjust for any such transfers of business. In
the event that the product launch date of any of the Scheduled Items
is delayed for a period of more than three (3) months due to causes
or events beyond the New Veltri Group's reasonable control, then the
parties shall agree to make equitable adjustments in the EBIT
calculations for the EBIT Years which are affected as result thereof.
The parties hereto further agree that, for purposes hereof, the
business of the New Veltri Group shall be operated on an autonomous
basis substantially similar to the historical operations of the
Veltri Group, and the Buyer shall maintain separate books and records
for the determination of the EBIT of the New Veltri Group. Further,
the parties hereto shall act in good faith with respect to
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<PAGE> 17
each other and the business and operations of the New Veltri Group.
Buyer shall not, and shall not permit Buyer's Affiliates to,
directly or indirectly, take any action (or cause any action to be
taken) which would reasonably be expected to decrease the Earn-Out
Amounts in any material respect.
(v) EBIT shall be determined by Buyer's independent certified
public accounting/chartered firm ("Buyer's Accountants") within
seventy-five (75) days following the end of each of the
calendar years ending December 31, 1996, December 31, 1997, December
31, 1998 and December 31, 1999. Upon such determination, Buyer shall
submit such written determination (the "Initial Determination"),
together with all reasonably appropriate worksheets and schedules
relating to such determination, to Michael Veltri for review by
Michael Veltri and/or an independent certified/chartered public
accounting firm selected by Michael Veltri ("Veltri's Accountants"),
who shall either accept or reject such Initial Determination within
forty five (45) days following the receipt thereof (or within forty
five (45) days following the receipt of any materials requested by
Michael Veltri pursuant to the next sentence, if later). Any
documents, records, worksheets or information in Buyer's possession
or under Buyer's control (irrespective of any accountant/client
privilege) which are reasonably requested by Michael Veltri and/or
Veltri's Accountants in this connection shall be promptly furnished
by Buyer to Michael Veltri and/or Veltri's Accountants upon request;
provided, however, that the parties requesting the same shall execute
and deliver to Buyer a reasonable confidentiality agreement upon
terms and conditions mutually satisfactory to the parties. In the
event after reasonable discussions Buyer and Michael Veltri are
unable to agree as to the amount of EBIT for a calendar year, they
shall submit the determinations of
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<PAGE> 18
their respective Accountants (collectively, the "Accountants") to a
third independent certified public accountant/chartered firm (the
"Independent Accountants") to be mutually agreed upon by the
Accountants in writing, who shall review each such determination and
establish EBIT for purposes of this Agreement. The final
determination of EBIT as provided herein shall be referred to herein
as the "Final Determination". In connection with Michael Veltri's
review of the Initial Determination for each of the calendar years
ending December 31, 1998 and December 31, 1999, Buyer hereby agrees
to reimburse Michael Veltri for any out-of-pocket expenses so
incurred by Michael Veltri in an amount up to Five Thousand (Cdn.
$5,000) Cdn. Dollars for each such determination. Except for such
reimbursement, Buyer and Michael Veltri shall each pay their
respective costs and expenses (including all costs of their
respective Accountants) incident to the foregoing and in connection
with such EBIT determinations.
(vi) "GAAP" shall mean generally accepted accounting
principles as adopted and existing in Canada as of the date hereof
(regardless of future pronouncements or modifications to GAAP after
the date hereof).
(vii) "Net Income and Losses" shall mean the sum of all income
and losses from operations (i.e., gross sales minus cost of goods
sold) less all selling, general, administrative and other
operational expenses, determined in accordance with GAAP consistently
applied and in accordance with the historical accounting practices
and methods used by the Veltri Group.
(viii) The Earn-Out Amounts shall be paid as follows:
(A) Subject to the foregoing, the Earn-Out Amounts, if any,
payable with respect to the calendar year ending December 31,
1998, (the
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<PAGE> 19
"1998 Earn-Out"), shall be payable in two (2) equal annual
installments on March 31, 1999 and March 31, 2000 (less any
applicable withholding required pursuant to Section 116, as
hereinafter defined), together with interest on the unpaid
balance of such amount at the Prime Rate (as hereinafter
defined) from and after December 31, 1998 until such amount is
paid in full, which interest shall be payable in quarterly
installments (less any applicable withholding) on the last day
of each calendar quarter and shall commence on March 31, 1999;
provided, however, in the event (i) any such installment of
interest or the 1998 Earn-Out is not paid when due, and such
failure shall continue for a period of ten (10) days following
written notice thereof to Buyer, (ii) or the sale of all or
substantially all of the assets of the New Veltri Group, or
(iii) of the direct or indirect sale, transfer, issuance or
other disposition (in one or a series of transactions) of an
aggregate amount of fifty (50%) percent or more of the
outstanding voting stock of any New Veltri Group Member, VSH or
VSH No. 2 (other than any of the foregoing in connection with an
IPO, as hereinafter defined, or to or among existing
shareholders, their family members or trusts for their benefit,
or to Affiliates, provided such Affiliates remain as Affiliates
after such transfer), then in any of such events the entire 1998
Earn-Out, and all accrued and unpaid interest thereon shall be
immediately due and payable, but in no event sooner than March
31, 1999, and any amounts remaining unpaid shall thereafter bear
interest at a rate equal to the Prime Rate plus Two (2%) percent
until the same is paid in full; and
16
<PAGE> 20
(B) Subject to the foregoing, the Earn-Out Amounts, if
any, payable with respect to the calendar year ending December
31, 1999 (the "1999 Earn-Out") shall be payable in three (3)
installments (less any applicable withholding required pursuant
to Section 116), as follows:
(i) fifty (50%) percent on March 31, 2000;
(ii) twenty five (25%) percent on September 1, 2000;
and
(iii) twenty five (25%) percent on March 31, 2001;
-- together with interest on the unpaid balance of such amount
at the Prime Rate from and after December 31, 1999 until such
amount is paid in full, which interest shall be payable in
quarterly installments (less any applicable withholding) on the
last day of each calendar quarter and shall commence on March
31, 2000; provided, however, in the event (i) any such
installment of interest or the 1999 Earn-Out is not paid when
due, and such failure shall continue for a period of ten (10)
days following written notice thereof to Buyer, (ii) of the sale
of all or substantially all of the assets of the New Veltri
Group, or (iii) of the direct or indirect sale, transfer,
issuance or other disposition (in one or a series of
transactions) of an aggregate amount of fifty (50%) percent or
more of the outstanding voting stock of any New Veltri Group
Member, VSH or VSH No. 2 (other than any of the foregoing in
connection with an IPO or to or among existing shareholders,
their family members or trusts for their benefit, or to
Affiliates, provided such Affiliates remain as Affiliate after
such transfer), then in any such events the entire 1999
Earn-Out, and all accrued and unpaid interest thereon shall be
immediately due and payable, but in no event sooner than March
31, 2000,
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<PAGE> 21
and any amounts remaining unpaid shall thereafter bear interest
at a rate equal to the Prime Rate plus Two (2%) percent
until the same is paid in full.
(c) The Note Amount shall be paid by the Buyer's execution and
delivery at the Closing of a Promissory Note for such amount in the form
attached hereto as Exhibit A (the "Promissory Note").
1.4 Preparation of Closing Net Worth Statement.
(a) Within sixty (60) days following the Closing Date, Buyer shall cause
Buyer's Accountants to prepare an audited statement of the Consolidated Net
Worth of the Veltri Group as of the close of business on the Closing Date (the
"Closing Net Worth Statement"). As used herein, the term "Consolidated Net
Worth" shall mean the total amount of the Veltri Group's assets, on a
consolidated basis, less the total amount of the Veltri Group's liabilities, on
a consolidated basis. Upon the preparation of the Closing Net Worth Statement,
Buyer shall submit such determination (the "Original Determination"), together
with all reasonably appropriate worksheets and schedules relating to such
Original Determination, to Michael Veltri for review by Michael Veltri and/or
Veltri's Accountants, who shall either accept or reject such Original
Determination within forty-five (45) days following receipt thereof (or within
forty five (45) days following the receipt of any materials requested by
Michael Veltri pursuant to the next sentence, if later). Any documents,
records, worksheets or information in Buyer's possession or under Buyer's
control (irrespective of any accountant/client privilege) which are reasonably
requested by Michael Veltri and/or Veltri's Accountants upon request; provided,
however, that the parties requesting the same shall execute and deliver to
Buyer a reasonable confidentiality agreement upon terms and conditions mutually
satisfactory to the parties. In the event after reasonable discussions,
18
<PAGE> 22
Buyer and Michael Veltri are unable to agree as to the Consolidated Net Worth
as of the Closing Date, they shall submit the determinations of their
respective Accountants to the Independent Accountants, who shall review each
such determination and establish the Consolidated Net Worth for purposes of
this Agreement. The final determination of the Consolidated Net Worth as
provided above shall be referred to herein as the "Conclusive Determination."
In the event that the Original Determination of the Consolidated Net Worth
reflects a Consolidated Net Worth less than the Base Net Worth, then Buyer
hereby agrees to reimburse Michael Veltri an amount up to Five Thousand (Cdn.
$5,000) Cdn. Dollars for any out-of-pocket expenses incurred by Michael Veltri
in connection with his review of the Consolidated Net Worth Statement. Except
for such reimbursement, Buyer and Michael Veltri shall each pay their
respective costs and expenses (including all costs of their respective
Accountants) incident to the foregoing and in connection with such
determination.
(b) The Closing Net Worth Statement shall be prepared in accordance with
GAAP on a basis consistent with the historic practices and methodologies used
by the Veltri Group for the calendar years 1994 and 1995, but as adjusted in
accordance with the provisions of Schedule 1.4(b) hereof.
(c) In the event that the Consolidated Net Worth as of the Closing Date
(as set forth in the Closing Net Worth Statement) is greater than the Base Net
Worth, the entire Escrowed Amount, plus interest earned on the Escrowed Amount
while such amount was being held in escrow, shall be paid to Michael Veltri. In
the event that the Consolidated Net Worth as of the Closing Date (as set forth
in the Closing Net Worth Statement) is less than the Base Net Worth, the amount
of such deficiency, plus interest on such deficiency at the prime rate of
interest charged by Comerica Bank as in effect from time to time (the "Prime
Rate") from the Closing Date, shall be paid to Buyer and the remainder of the
Escrowed
19
<PAGE> 23
Amount, plus interest earned on such remainder while such amount was being held
in escrow, shall be paid to Michael Veltri; provided, however, in the event
that the amount of such deficiency is in excess of the Escrowed Amount, the
entire Escrowed Amount, plus all interest earned on the Escrowed Amount while
such amount was being held in escrow, shall be paid to Buyer and Michael
Veltri shall promptly pay to Buyer the amount of such deficiency in excess of
the Escrowed Amount, plus interest at the Prime Rate until paid (which amounts
payable hereunder shall not be subject to the Floor or Ceiling set forth in
Sections 5.2(a) and (b) below). The Escrowed Amount shall be paid to Buyer
and/or Michael Veltri, as the case may be, in accordance within the foregoing,
within ten (10) days of the finalization of the Closing Net Worth Statement.
(d) Buyer hereby represents that, except as otherwise described in
Schedules 1.4(b) or 1.4(d) hereof, Buyer's due diligence investigation
has not revealed any material adjustments to the Veltri Group's financial
statements, net worth or accounting practices which would reasonably be
expected to cause the Consolidated Net Worth as of the Closing to be less than
negative Two Million One Hundred Ninety Four Thousand Three Hundred Twenty
Eight (Cdn. -$2,194,328) Cdn. Dollars.
1.5 Allocation of Purchase Price. The NAPT Share Purchase Price shall
be allocated among the NAPT Shares in the manner set forth in Schedule 1.5
attached hereto.
ARTICLE 2 - CLOSING
2.1 Closing. The consummation of the purchase and sale of the Shares
(the "Closing") shall take place at the offices of Timmis & Inman L.L.P.,
300 Talon Centre, Detroit, Michigan contemporaneously with the execution of
this Agreement. The time and date of the Closing are referred to herein as the
"Closing Date".
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2.2 Closing Date Deliveries. At the Closing:
(a) Sellers shall deliver to Buyer the original stock certificates
representing the Veltri Ltd. shares and the NAPT Shares, together with the
appropriate assignments of stock separate from certificate duly endorsed
for transfer, and Michael Veltri shall deliver to Buyer, or Buyer's
designees listed on Schedule 2.2(a) attached hereto ( the "Designees"), the
original stock certificates representing the Veltri Holdings Shares,
together with the appropriate assignments of stock separate from
certificate duly endorsed for transfer;
(b) Buyer shall pay the NAPT Share Purchase Price to Sellers (in
accordance with the NAPT Share Purchase Price allocation under Section 1.5
hereof), Buyer (or the Designees) shall pay the Veltri Holdings Share
Purchase Price to Michael Veltri, and Buyer shall pay the Cash Payment to
Michael Veltri and the Escrowed Amount into escrow as provided in Section
1.3 hereof;
(c) Buyer and Sellers shall receive from each other executed copies
of the following agreements:
(i) Agreement Not to Compete and Confidentiality Agreement among
the Sellers and Buyer in the form attached hereto as Exhibit B; and
(ii) Employment Agreement among Michael Veltri, Veltri Holdings
and Buyer in the form attached hereto as Exhibit C (the "Employment
Agreement");
(d) Buyer shall receive from Sellers the original minute books and
stock ledgers of each Veltri Group Member.
(e) Buyer shall receive from Sellers an opinion of Kerr, Russell &
Weber, P.L.C., counsel for Sellers and the Veltri Group, with respect to
the matters set forth on Schedule 2.2(e)(i) attached hereto and an opinion
of Bartlet & Richardes, Canadian counsel
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<PAGE> 25
for Sellers and the Veltri Group, with respect to the matters set forth on
Schedule 2.2(e)(ii) attached hereto;
(f) Buyer shall have received the applicable Certificates of
Compliance related to the Disposition of Taxable Canadian Property from
Revenue Canada pursuant to Section 116 of the Canada Income Tax Act
("Section 116"), and the Buyer and Sellers shall have entered into that
certain Memorandum of Agreement in the form attached hereto as Exhibit D
regarding the required withholding under Section 116;
(g) Buyer shall receiver from the Sellers a copy of the following:
(i) All waivers or other consents, if any, required from
Canadian Imperial Bank of Commerce, together with the consent of ABB
Robotics with respect to the Amalgamation, but not including any other
consents to the Amalgamation;
(ii) Certified copies of the Articles of Incorporation and
By-laws of each Veltri Group Member;
(iii) Certificates of Good Standing for each Veltri Group Member
from the jurisdiction in which each Veltri Group Member is qualified
to transact business; and
(iv) Certified copy of the resolutions of the Board of Directors
or shareholders of each Veltri Group Member approving and authorizing
the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby;
(h) Buyer shall receive from Sellers releases from (i) all current
officers and directors of each Veltri Group Member, (ii)
Andrea-Teresa-Frank, Inc. f/k/a ATF Automotive Group, Inc. and
Michael-Tony-Joseph, Inc. f/k/a MTJ Enterprises, Inc., and (iii) Tony
Veltri, Frank Veltri and Maria Veltri.
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<PAGE> 26
(i) Buyer shall receive from Michael Veltri a certified copy of the
relevant portions of the Michael T.J. Veltri Revocable Living Trust
Agreement dated December 17, 1992 confirming the power and authority of
Michael Veltri to execute and deliver this Agreement and to consummate the
transactions contemplated hereby;
(j) Michael Veltri shall execute and deliver to Buyer a Subordination
Agreement (the "Subordination Agreement") in the form attached hereto as
Exhibit E; and
(k) Sellers shall receive an opinion of Buyer's counsel, Timmis &
Inman L.L.P., with respect to the matters set forth on Schedule 2.2(k)(i)
attached hereto, an opinion of Stewart McKelvey Stirling Scales, Nova
Scotia counsel to Buyer, with respect to the matters set forth on Schedule
2.2(k)(ii) attached hereto, and an opinion of Cassels Brock & Blackwell,
Ontario counsel to Buyer, with respect to the matters set forth on Schedule
2.2(k)(iii) attached hereto;
(l) Sellers shall receive from Buyer a copy of the following:
(i) Certified copy of the Memorandum of Association and Articles
of Association of Buyer;
(ii) Certificates of Good Standing from the jurisdiction in which
the Buyer is organized; and
(iii) Certified copy of the resolution of the Buyer's Board of
Directors approving and authorizing the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby;
(m) Buyer shall executive and deliver to Michael Veltri of the
Security Agreements (the "Security Agreements") in the form attached hereto
as Exhibit F;
(n) Buyer shall executed and deliver to Michael Veltri of the
Debentures (the "Debentures") in the form attached hereto as Exhibit G;
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<PAGE> 27
(o) VSH, VSH No. 2 and their shareholders shall execute and deliver to
Michael Veltri a side agreement in the form attached hereto as Exhibit H
(the "Side Agreement");
(p) VSH shall execute and deliver to Michael Veltri a Subordination
Agreement in the form attached hereto as Exhibit I;
(q) Subsidiary shall execute and deliver to Tony Veltri an Employment
Agreement in the form attached hereto as Exhibit J;
(r) Sellers shall execute and deliver terminations, releases and
discharges of all liens and other interests held, directly or indirectly,
by Michael Veltri and Canadian Imperial Bank of Commerce ("CIBC") in the
Veltri Group, and the Buyer shall discharge and refinance the existing
indebtedness of the Veltri Group to CIBC; and
(s) The parties hereto shall execute and deliver to each other such
other reasonable documents, instruments and agreements in order to
effectuate the transactions described herein as reasonably requested by any
other party hereto.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF MICHAEL VELTRI
Michael Veltri represents and warrants to Buyer on the date hereof and
as of the Closing Date that:
3.1 Corporate Standing and Authority.
(a) Each Veltri Group Member is a corporation duly organized and
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation, which jurisdictions of incorporation are as
set forth in Schedule 3.1(a)(i) attached hereto, and each Veltri Group
Member has full corporate power and authority to own their respective
assets and to conduct their respective businesses. No Veltri Group Member
is required to be qualified as a foreign corporation with respect to any
of their respective businesses under the laws of any other jurisdiction,
except where presently qualified as listed on Schedule
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<PAGE> 28
3.1(a)(ii) attached hereto, and except where the lack of such
qualification would not have a material adverse effect on any such
Veltri Group Member. To the best knowledge of Sellers and the Veltri
Group, no Veltri Group Member has any material assets located in any
jurisdiction other than those listed on Schedule 3.1(a)(ii). Except for
the Subsidiary and as set forth on Schedule 3.1(a)(ii). Except for the
Subsidiary and as set forth on Schedule 3.1(a)(iii), none of the Companies
own any equity interest in any other entity.
(b) Sellers have the legal capacity and authority to execute this
Agreement and to perform the transactions contemplated hereby. The
execution, delivery and performance of this Agreement (excluding the
Amalgamation) does not and will not violate or cause a default under any
provision of the respective Articles of Incorporation or By-Laws of each
Veltri Group Member, or result in the breach, termination or acceleration
of any material obligation or constitute a default or permit the
termination of any right under any material mortgage, indenture, lien,
lease, contract, agreement, instrument, order, arbitration award, judgment
or decree to which any of Sellers or any Veltri Group Member is a party or
by which any of their respective properties are bound, except as described
in Schedule 3.1(b)(i). Sellers and each Veltri Group Member have taken all
necessary action required by law, their respective Articles of
Incorporation and By-Laws to authorize the execution, delivery and
performance of this Agreement in accordance with and subject to the terms
and conditions of this Agreement. This Agreement and each document and
instrument executed pursuant to this Agreement by Sellers and any Veltri
Group Member constitutes a valid and binding obligation of Sellers and
such Veltri Group Member, as the case may be, enforceable in accordance
with their respective terms, except as such enforcement may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally. Neither Sellers nor any Veltri Group Member
is required to obtain the consent,
25
<PAGE> 29
approval or waiver of any person not a party of this Agreement to enter
into this Agreement or to consummate the transaction contemplated
hereby, except for (i) the consents of the parties listed in Schedules 3.5
and 3.6 attached hereto, and (ii) those consents which, if not obtained,
would not have a material adverse effect on any Veltri Group Member or
their respective businesses following the Closing.
(c) All material actions of each Veltri Group Member which are
required to be recorded in their respective corporate minute books by law
and/or their respective Articles of Incorporation or By-Laws have
been duly recorded in their respective corporate minute books and duly
authorized and adopted in accordance with the requirements of applicable
law and their respective By-Laws and Articles of Incorporation. Schedule
3.1(c) attached hereto identifies all directors and officers of each
Veltri Group Member.
3.2 Stock.
(a) The authorized capitalization and registered and beneficial
ownership of the issued and outstanding shares of capital stock of each
Veltri Group Member is as set forth on Schedule 3.2(a)(i) attached
hereto. Except as described in such Schedule, no other shares of capital
stock of any Veltri Group Member are issued or outstanding. All of the
shares of capital stock of each Veltri Group member issued and outstanding
are validly issued, fully paid and nonassessable. All of the rights,
preferences and limitations of the capital stock of each Veltri Group
Member are set forth in the respective Articles of Incorporation and
Bylaws of each such Veltri Group member, as attached hereto as Schedule
3.2(a)(ii). No person or entity (other than Buyer) has any rights to
acquire any shares of capital stock of any Veltri Group Member and there
are no options, calls, warrants or other securities or rights outstanding
which are convertible into, exercisable for or relate to any shares of
capital stock of any Companies or the Subsidiary.
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<PAGE> 30
(b) Sellers currently own, and, subject to the terms of this
Agreement, will convey to Buyer on the Closing Date, good title to the
Shares, free and clear of any and all liens, encumbrances, forfeitures,
pledges, penalties, charges, judgments, security interests, buy-sell
agreements, restrictive agreements, transfer restrictions (other than any
restrictions imposed by any securities laws on Buyer's purchase or holding
of the shares), options, rights of first refusal, rights to dividends,
warrants, or claims or rights of others of any nature whatsoever. At the
Closing, the Shares will represent all of the issued and outstanding
shares of capital stock of the Companies. Sellers have the right, power
and capacity to sell and transfer the Shares to Buyer in accordance with
the terms of this Agreement.
3.3 Financial Statements.
(a) Sellers have made available to Buyer (i) the unaudited
consolidating balance sheets and income statements of the Veltri Group as
of and for the six (6), seven (7), eight (8) and nine (9) month periods
ended June 29, 1996, July 27, 1996, August 24, 1996 and September 28, 1996
(the "Interim Financial Statements"), and (ii) the audited consolidating
balance sheet of the Veltri Group as of and for the calendar years ended
December 31, 1995 and December 31, 1994, and the related audited
statements of income and retained earnings and statements of cash flows
for the periods then ended, including the notes hereto and any
supplemental information provided therewith (the "Audited Statement") (the
Audited Statement and the Interim Financial Statements are collectively
referred to herein as the "Financial Statements").
Except as disclosed in Schedule 3.3(a) hereof, the Interim Financial
Statements fairly present the properties, assets, financial position and
results of operations of the business of each Veltri Group Member as of the
respective dates and for the respective periods stated above.
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<PAGE> 31
The Audited Financial Statements:
(i) Fairly present the properties, assets, financial position
and results of operations of the business of each Veltri Group Member
as of the respective dates and for the respective periods
stated above; and
(ii) Have been prepared pursuant to and in accordance with GAAP
consistently applied, except as otherwise disclosed in the Audited
Financial Statements or in the notes thereto.
(b) The Financial Statements reflect (i) all inventories at the
lower of cost or market with cost being valued using the first-in,
first-out method, (ii) an adequate provision for doubtful accounts, and
(iii) accounts receivables and sales net of discounts, returns and
allowances. Except as set forth on Schedule 3.3(b), the Audited
Statements, the August 24, 1996 and the September 28, 1996 Interim
Financial Statements reflect an accrual or liability, or otherwise provide
for all taxes not yet due and payable. To the best knowledge of Sellers
and the Veltri Group, except to the extent reflected in the Audited
Financial Statements and the August 24, 1996 and the September 28, 1996
Interim Financial Statements or in Schedule 3.3(b), no Veltri Group Member
has any material liability or obligations, whether accrued, absolute, or
contingent, arising out of transactions entered into or any condition
existing as of the dates thereof (other than liabilities and obligations
(i) which are not required by GAAP to be reported in the Financial
Statements, (ii) not yet due and payable, (iii) set forth in the Leases,
Contracts, Employee Benefit Plans or other contracts and agreements
entered into in the ordinary course of business, (iv) incurred thereafter
in the ordinary course of business which are consistent with historical
operations, or (v) otherwise disclosed as a liability or obligation in any
Schedule attached hereto). Except as set forth in Schedule 3.3(b) attached
hereto, no material accounts payable under any customer steel resale
program of any Veltri
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Group Member have been written off since January 1, 1992. No provision in
the Financial Statements is necessary (except as otherwise disclosed
therein), under GAAP, for liability on account of product warranties or
with respect to the manufacture or sale of defective products. All
material items of income or expense which are unusual or of a
non-recurring nature are separately disclosed in the Audited Financial
Statements to the extent required by GAAP.
(c) Except with respect to any tax returns described on Schedule
3.3(c)(i), each Veltri Group Member has duly and accurately filed or
caused to be filed all tax returns which are required to be filed through
the date hereof with respect to the operations of the Veltri Group,
including, without limitation, all federal, state, provincial, local and
foreign tax returns relating to all periods ending on or before December
31, 1995, and all tax returns for all federal, state, provincial, local or
foreign income, franchise, real property, personal property, withholding,
employment, sales, ad valorem, goods and services and other taxes payable
or collectible by any Veltri Group Member which are required to be filed
through the date hereof (all of the foregoing are collectively referred to
herein as the "Tax Returns"). Except as set forth on Schedule 3.3(c)(ii),
each Veltri Group Member has paid in full and remitted all taxes and other
amounts required to be paid (including interest, penalties and related
charges and fees in respect thereof) pursuant to the Tax Returns. Sellers
have made available to Buyer true, correct and complete copies of the Tax
Returns. The annual federal and provincial income tax returns of each
Veltri Group Member have been assessed by Revenue Canada and by provincial
revenue authorities through the dates set forth on Schedule 3.3(c)(iii).
Except as set forth on Schedule 3.3(c)(iv), to the best of the knowledge
of the Sellers and the Veltri Group, there are no pending audits of any
Tax Returns of any Veltri Group Member, and neither Sellers nor any Veltri
Group Member has received any written
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notices of any threatened audits or proposed reassessments of any Tax
Returns of any Veltri Group Member. There are not in effect any waivers or
extensions of statutes of limitations by any Veltri Group Member, except as
set forth on Schedule 3.3(c)(v). Except as set forth on Schedule
3.3(c)(vi), each Veltri Group Member has remitted and paid in full, or
accrued, reserved or otherwise provided for in the Financial Statements or
its books and records, all federal, provincial, state, local and foreign
income, franchise, real property, personal property, withholding,
employment, sales, ad valorem, goods and services and other taxes payable
or collectible by any Veltri Group Member, including interest, penalties
and related charges in respect thereof, if any, for all periods covered by
the Tax Returns and continuing through the date hereof, other than current
and deferred taxes of any Veltri Group Member not yet due which arise
solely from income earned after the date of the most recent Financial
Statements and which are consistent in character and amounts with the tax
accruals reflected in the Financial Statements. Except as set forth on
Schedule 3.3(c)(vii), each Veltri Group Member has withheld from each
payment made to any of its officers, directors, former directors, employees
and former employees and third parties (including payments to any other
Veltri Group Member), the amount of all taxes and other deductions
(including without limitation, income taxes, unemployment, disability, and
other required taxes and contributions) required to be withheld and has
paid the same together with the employer's share of same, if any (to the
extent required to be paid so no such amount is past due), to the proper
tax or other receiving officers within the prescribed times and has filed,
incomplete and accurate form, all information and other returns required
pursuant to any applicable legislation within the prescribed times.
3.4 No Material Changes. Except as disclosed on Schedule 3.4(a) (or any
other Schedule to this Agreement) or as reflected in the Financial Statements,
since December 31, 1995, there has
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not been any material adverse change in the business operations or properties
of any Veltri Group Member, and the business operations of each Veltri Group
Member have been conducted in the ordinary course of business as theretofore
conducted. Except as disclosed on Schedule 3.4(b) (or any other Schedule to
this Agreement) or as reflected in the Financial Statements, since August 24,
1996, there has not been any material adverse change in the financial position,
results of operations or net worth of any Veltri Group Member. Except as set
forth in Schedule 3.4(c), since August 24, 1996, no Veltri Group Member has:
(a) sole or transferred any assets, other than in the ordinary
course of business;
(b) entered into any transactions affecting any assets or the
business or operations of any Veltri Group Member, or incurred or
increased any obligation or liability (absolute or contingent), other than
in the ordinary course of business;
(c) paid or otherwise satisfied any obligations other than the
obligations arising in the ordinary course of business;
(d) entered into any transaction other than in the ordinary course of
business;
(e) incurred any obligation for or paid for any capital expenditures
in excess of One Hundred Thousand (Cdn, $100,000) Cdn. Dollars in the
aggregate;
(f) issued any capital stock or declared or paid any dividend
(including capital dividends within the meaning of Section 83(2) of the
Income Tax Act (Canada)) or made any other payment from capital or
surplus or other distribution of any nature, or directly or indirectly,
redeemed, purchased or otherwise acquired or recapitalized or reclassified
any capital stock or liquidated in whole or in part;
(g) created, incurred, or assumed any indebtedness or other
liability, except for accounts payable or other liabilities (other than
for borrowed money) incurred in the ordinary course of business;
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<PAGE> 35
(h) raised salaries or hourly rates or the rate of bonuses or
commissions or other compensation of any employee, other than those made
which were consistent with past practices;
(i) amended or terminated any Leases, Contracts, or Licenses and
Permits, other than in the ordinary course of business;
(j) entered into any agreement or commitment with respect to any of
the foregoing; or
(k) suffered any casualty, loss, damage or destruction to any of its
properties, whether or not covered by or compensated under any insurance
policy, which would have a material adverse effect on any Veltri Group
Member.
All of the transactions referred to in items 1(g), 4 (except as to Tony
Veltri's Employment Agreement), and 7 of Schedule 3.4(b) and items 2, 9 and 11
of Schedule 3.4(c) comply with all applicable laws, and none of such
transactions will result in any net tax or other liabilities to the Veltri
Group following the Closing (other than tax on the profits of item 2 of
Schedule 3.4(c)).
3.5 Leases and Real Estate. Schedule 3.5(a) sets forth a list of every
lease (a) requiring lease payments after the date hereof in excess of Five
Thousand (Cdn. $5,000) Cdn. Dollars per month, or (b) which has a term after
the date hereof longer than six (6) months (other than those which provide for
aggregate lease payments totaling less than Fifty Thousand (Cdn. $50,000) Cdn.
Dollars over the remaining lease term), and, under which any Veltri Group
Member is a lessee of, or holds or operates, any property, real or personal,
owned by any third party and used in the respective businesses of any Veltri
Group Member (the "Lessee").
All other leases under which any Veltri Group Member is a party and which
fail to meet the requirements set forth in Sections 3.5(a) or (b) above have
been entered into in the ordinary course of business. The Leases are in full
force and effect, and are the valid and binding obligations of the
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<PAGE> 36
parties thereto, except as limited by bankruptcy, insolvency and similar laws
affecting creditor's rights generally. Except as set forth in Schedule 3.5(a),
no Veltri Group Member is in breach, violation or default of any of the terms of
the Leases; to the best knowledge of Sellers and the Veltri Group, no other
party to any of the Leases is in breach, violation or default of any of the
terms thereof. Except as set forth on Schedule 3.5(a), the Leases do not contain
any provision prohibiting or requiring the consent of any third-party to the
sale of the Shares to Buyer. Sellers have made available to Buyer true and
complete copies of all Leases.
All real estate owned or leased by any Veltri Group Member, or in which
any of them owns any interest, is listed on Schedule 3.5(b) attached hereto
(collectively, the "Real Estate"). All Real Estate owned by any Veltri Group
Member (the "Owned Real Estate") is identified on Schedule 3.5(b) as owned by
the applicable Veltri Group Member. Except as set forth on Schedule 3.5(b), the
rights of the Veltri Group with respect to the Real Estate are not subordinate
to, or defeasible by, any mortgage, lien or any prior lease thereon. To the
best knowledge of the Sellers and the Veltri Group, and except as otherwise
disclosed in Schedule 3.5(c) attached hereto, (i) the Real Estate and the
improvements thereon are reasonably accessible by public roads, (ii) neither
the Sellers nor the Veltri Group has received any written notice that the
improvements on the Real Estate encroach onto the property of other persons,
and (iii) the use of such Real Estate by the Veltri Group complies with all
applicable zoning laws and ordinances. No governmental authority having
jurisdiction over such Real Estate has given any written notice to any Veltri
Group Member of possible future impositions of assessments affecting the
properties in excess of an aggregate amount of Twenty Five Thousand (Cdn.
$25,000) Cdn. Dollars, or to exercise the power of eminent domain. To the best
knowledge of the Sellers and the Veltri Group, the Real Estate is adequately
serviced by water, sewage, gas, waste disposal, electricity and telephone
utilities.
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Except as described in Schedule 3.5(a), each Veltri Group Member listed on
Schedule 3.5(b) as the owner of the Owned Real Estate is the registered owned
of the Owned Real Estate. Except as listed on Schedule 3.5(a) or Schedule
3.5(c), (i) there are no tenancies, agreements to lease, licenses agreements,
offers to purchase or options to purchase in existence in respect of the Owned
Real Estate, (ii) there are no actions, suits or proceedings pending or
threatened with respect to the Owned Real Estate nor are there any appeals or
other proceedings pending in respect of the municipal taxes and tax assessments
for the Owned Real Estate, (iii) no state, provincial, local, municipal or
other governmental authority has made any order or other provision respecting
the use or occupation of any part of the Owned Real Estate, other than as
contained in the local or municipal by-laws or ordinances of general
application, and neither the Sellers nor the Veltri Group has received any
notice from any such authority directing any alteration, repair, improvement or
other work to be done or performed to or in respect of the Owned Real Estate or
any part thereof, (iv) the buildings and the use thereof on the Owned Real
Estate do not violate any applicable zoning or other by-law, ordinance, or
regulation, and neither the Sellers nor the Veltri Group has received any
notice of any impending or intended rezoning of the Owned Real Estate; (v)
there are no local improvement charges or special levies or assessments against
the Owned Real Estate nor have the Sellers or the Veltri Group received any
proposed local improvement charges or special levies or assessments, (vi) all
state, provincial, local and municipal taxes, rates, levies and assessments
with respect to the Owned Real Estate are paid in full to the extent due, and
(vii) the Owned Real Estate is not the subject of any condemnation or eminent
domain proceedings, presently pending, and neither Sellers nor any Veltri Group
Member has received notice that such premises or properties are or will be
threatened by any such proceedings.
3.6 Contracts. Schedule 3.6(a) contains a list of all of the following
contracts, agreements and other instruments (collectively, the "Contracts"):
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<PAGE> 38
(a) all contracts, agreements and other instruments (i) requiring
payments after the date hereof (or performance valued) in excess of Five
Thousand (Cdn. $5,000) Cdn. Dollars per month, or (ii) which have a term
longer than six (6) months after the date hereof (other than those which
provide for aggregate payments totalling less than Fifty Thousand (Cdn.
$50,000) Cdn. Dollars over the remaining term), and under which any Veltri
Group Member is a party;
(b) All manufacturer's representative, distributor, sales agency and
consulting agreements; and
(c) all guarantees of any obligations of customers or others;
- ---excluding those contracts, agreements and other instruments described in
Sections 3.5 and 3.15 and excluding oral employment agreements terminable by the
Veltri Group at will without penalty under which the only obligation of any
Veltri Group Member is to make current wage payments and provide current fringe
benefits, COBRA benefits, severance or other benefits not exceeding Fifty
Thousand (Cdn. $50,000) Cdn. Dollars in the aggregate per employee). Sellers
have made available to Buyer true and complete copies of all Contracts described
on Schedule 3.6(a).
All other contracts, agreements or instruments which fail to meet the
requirements set forth in Section 3.6(a)(i) or (ii) above have been entered into
in the ordinary course of business. The Contracts are in full force and effect,
and are the valid and binding obligations of the parties thereto, except as
limited by bankruptcy, insolvency and similar laws affecting creditor's rights
generally. No Veltri Group Member is in breach, violation or default of any of
the terms of the Contracts. To the best knowledge of Sellers and the Veltri
Group, no other party to any of the contracts is in breach, violation or default
thereof. There are no outstanding defaults or violations by any of the parties
to the Contracts which would permit the acceleration of any obligation or the
creation of a lien or encumbrance upon the Shares or any of the assets of any
Veltri Group member, except as
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otherwise set forth on Schedule 3.6(b). Except as otherwise provided in
Schedule 3.6(b), the Contracts do not contain any provision prohibiting or
requiring the consent of any third party to the sale of the Shares to Buyer.
3.7 Employee Benefit Plans. Schedule 3.7(a) lists each current employee
welfare benefit plan, employee pension benefit plan, deferred compensation
plan, bonus plan, stock option plan, employee stock purchase plan,
hospitalization plan, employees' insurance plan or other employee or
independent contractor benefit plan maintained or contributed to, directly or
indirectly, by any Veltri Group Member (all of the foregoing are collectively
referred to herein as the "Employee Benefit Plans"), excluding, however, any
policies concerning holidays and vacations or any requirements under the
Ontario Employment Standards Act, or any Employee Benefit Plans disclosed in
any other Schedule to this Agreement. All Employee Benefit Plans have at all
times been administered in compliance with all applicable laws, rules,
regulations, orders, judgments, decrees and other requirements of governmental
authorities (collectively the "Employee Benefit Laws"). With respect to each
Employee benefit Plan: (1) all required reports have been timely filed, (2) all
notices required by the Employee Benefit Laws have been timely filed, (3) all
funding requirements and/or contributions have been timely made, and (4) during
the past five (5) years there have been no actions, lawsuits, grievances or
other litigation or written claims with respect thereto, the assets thereof or
any fiduciary thereof (other than routine claims for benefits in accordance
with the terms thereof). Except as disclosed on Schedule 3.7(a), there are no
Employee Benefit Plans which are subject to qualification under the Employee
Benefit Laws. The value of all accrued benefits are fully funded by the assets
of such Employee Benefit Plans. True and complete copies of all Employee
Benefit Plans have been made available to Buyer, together with copies of the
most recent determination letters, if any, with respect to each such Employee
Benefit Plan, copies of all annual reports with respect thereto, and, to the
extent applicable, copies of the most recent actuarial reports
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and trustee reports with respect to each such Employee Benefit Plan. Except as
disclosed on Schedule 3.7(b), no Veltri Group Member has participated in any
multiemployer plan or has at any time maintained or contributed to, directly or
indirectly, any defined benefit employee plan. The terminations of all employee
benefit plans have been approved, where required, by all appropriate
governmental authorities, and the Veltri Group has no liabilities or
obligations for any employee benefit plans which have at any time been
terminated, except as disclosed in the Financial Statements or on Schedule
3.7(c). No liens under the Employee Benefit Laws exist on any of the assets of
any Veltri Group Member, except to the extent reflected in the Financial
Statements or which have arisen after the date of the most recent Financial
Statements in the ordinary course of business and which are consistent with the
past amounts as reflected in the Financial Statements. Except as set forth on
Schedule 3.7(d), each Veltri Group Member has paid or accrued in the Financial
Statements or otherwise accrued or provided for in its books and records all
amounts due and owing through the date hereof to their respective employees
(including bonuses or any other accrued compensation), under all Employee
Benefit Plans and each Veltri Group Member has withheld all amounts required by
law or any Employee Benefit Plan to be withheld from the wages or salaries of
its employees.
3.8 Employees. Schedule 3.8(a) attached hereto contains a true and
complete list showing the names of all current employees of any Veltri Group
Member whose current annual compensation (including bonuses) in the aggregate
equaled or exceeded Eighty Thousand (Cdn. $80,000) Cdn. Dollars during 1995,
such employees present annual salary and any agreed-upon bonuses for the
calendar year ending December 31, 1996. Schedule 3.8(a) also contains the names
of all employees of any Veltri Group Member who received any compensation
whatsoever (including bonuses) from Sellers or any Affiliate of Sellers (other
than the Veltri Group) and the amount of such compensation received. Schedule
3.8(b) lists all membership fees in any social, country or other similar clubs
or organizations which have been paid for or reimbursed by any Veltri Group
Member during 1996 and
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for which the membership fees exceed the sum of Five Thousand (Cdn. $5,000)
Cdn. Dollars per year. Schedule 3.8(c) lists all officers and employees whose
salary exceeded Eighty Thousand (Cdn. $80,000) Cdn. Dollars per year and whose
employment with any Veltri Group Member has terminated since January 1, 1995.
Except as otherwise disclosed in Schedule 3.8(d), Sellers have not received any
notice (whether oral or written) that any of the employees listed on Schedule
3.8(a) will be terminating such person's employment within the next twelve (12)
months.
3.9 Governmental Regulations and Litigation. Except as set forth in
Schedule 3.9, each Veltri Group Member has complied with all applicable laws,
orders and other requirements of all governmental authorities; provided,
however, the foregoing shall not apply to the Environmental Laws (as
hereinafter defined). Except as set forth in Schedule 3.9, no Veltri Group
Member is subject to any court or administrative order, judgment or decree.
Except as set forth in Schedule 3.9, no investigation, governmental or
administrative proceeding or other litigation of any kind or nature of which
any Veltri Group Member has received written notice of and is a party, is now
pending, or, to the best knowledge of the Sellers and the Veltri Group,
threatened; no written claim which has not ripened into litigation or other
proceeding has been made, or, to the best knowledge of the Sellers and the
Veltri Group, threatened against any Veltri Group Member. No Veltri Group
Member has received any written notice of any claimed violation of any
applicable laws, ordinances or regulations; provided, however, the foregoing
shall not apply to the Environmental Laws (as defined below).
3.10 Environmental Compliance.
(a) Except as described on Schedule 3.10(a) and as reflected in the
documents or reports listed on Schedule 3.10(e):
i. To the best knowledge of the Sellers and the Veltri Group,
the Real Estate, the use of such Real Estate and the conduct of the
respective businesses of the
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Veltri Group thereon is in compliance with all applicable federal,
provincial, state, local and municipal environmental laws, rules,
regulations, ordinances, codes, bylaws, policies and guidelines
governing environmental matters of all governmental authorities
(collectively, the "Environmental Laws");
ii. Neither the Sellers nor any Veltri Group Member has at any
time during the past three (3) years received any written notice of
any claimed violation of any of the Environmental Laws, and, to the
best knowledge of the Sellers and the Veltri Group, neither the
sellers nor any Veltri Group Member has at any time during the past
five (5) years received any written notice of any claimed violation
of any of the Environmental Laws;
iii. To the best knowledge of the Sellers and the Veltri Group,
each Veltri Group member has utilized, stored, disposed of and
transported all hazardous, polluting and toxic substances, including,
without limitation, petroleum products, asbestos, PCB's, and
ureaformldehyde, and all wastes, whether hazardous or not, in
compliance with all Environmental Laws;
iv. To the best knowledge of the Sellers and Veltri Group, the
Real Estate (including, without limitation, the soils, groundwater
and surface waters located on or under such Real Estate) is not
and has not been contaminated, tainted or polluted at a level which
would constitute a violation of any of the Environmental Laws, nor
will such Real Estate become contaminated, tainted or polluted in any
manner whatsoever from the conduct of any activities prior to the
Closing Date or from the migration of contaminants from property
adjacent to such Real Estate;
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v. To the best knowledge of the Sellers and the Veltri Group,
the Real Estate does not appear on any national, federal, provincial
or state listing which identifies sites for remedial clean-up or
investigatory actions;
vi. There are no underground storage tanks on or under the Real
Estate;
vii. There are no outstanding or pending federal, provincial or
state administrative orders which Sellers or the Veltri Group have
received notice of with respect to the Real Estate, the use of
such Real Estate or the conduct of the respective businesses of the
Veltri Group thereon;
viii. To the best knowledge of the Sellers and the Veltri Group,
all clean-up and remediation, including, but not limited to, the
removal of underground storage tanks, that has been undertaken by
the Veltri Group on the Real Estate has been conducted in accordance
with, and to the standards of, all Environmental Laws.
(b) Each Veltri Group Member possess all permits, licenses and
authorizations required under the Environmental Laws to conduct their
respective operations as heretofore conducted, and all such permits,
licenses and authorizations are valid and in full force and effect.
(c) Schedule 3.10(c) lists, to the best knowledge of the Sellers and
the Veltri Group, all waste hauling companies at which wastes generated by
the Sellers have been disposed of (in each case identifying such
wastes). Neither the Sellers nor the Veltri Group has received any notice
during the past three (3) years (i) of any claim or potential
responsibility for the cost of remedial clean-up or investigating any
sites or areas at which such waste hauling companies disposed of any
wastes generated by the Veltri Group, or (ii) that any such waste hauling
companies has violated any applicable Environmental Law. To the best
knowledge of the Sellers and the Veltri Group, neither the Sellers nor the
Veltri
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Group has received any notice during the past five (5) years (i) of any
claim or potential responsibility for the cost of remedial clean-up or
investigating any sites or areas at which such waste hauling
companies disposed of any wastes generated by the Veltri Group, or (ii)
that any such waste hauling companies has violated any applicable
Environmental Law. Schedule 3.10(c) also lists, to the best knowledge of
the Sellers and the Veltri Group, all sites other than the Real Estate at
which wastes owned or generated by each Veltri Group Member have been
stored or disposed. To the best knowledge of the Sellers and the Veltri
Group, none of the sites listed on Schedule 3.10(c) are or have been
contaminated, tainted or polluted at a level that would constitute a
violation of any of the Environmental Laws, nor will such sites become
contaminated, tainted or polluted in any manner whatsoever from the
conduct of any activities of the Veltri Group prior to the Closing. To the
best knowledge of the Sellers and the Veltri Group, there are no
outstanding or pending federal, provincial or state administrative orders
with respect to any of the sites listed on Schedule 3.10(c).
(d) No written claims, actions, protests or complaints have been
made by any of the employees or agents of any Veltri Group Member or any
other persons or entities during the past three (3) years with
respect to the presence, use, storage or disposal of any hazardous or
toxic wastes, materials or other substances by any Veltri Group Member
through the Closing Date. To the best knowledge of the Sellers and the
Veltri Group, no written claims, actions, protests or complaints have been
made by any of the employees or agents of any Veltri Group Member or any
other persons or entities during the past five (5) years with respect to
the presence, use, storage or disposal of any hazardous or toxic wastes,
materials or other substances by any Veltri Group Member through the
Closing Date, and, to the best knowledge of the Sellers and the Veltri
Group, no reasonable basis for any such claims exist.
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(e) Schedule 3.10(e) lists all written environmental reports, audits,
assessments and written notices from any governmental agency in the
possession of Sellers or the Veltri Group which relate in any way to the
environmental condition of the Real Estate and which have been prepared for
or received by the Sellers or the Veltri Group since January 1, 1990,
together with, to the best knowledge of the Sellers and the Veltri Group,
all written environmental reports, audits, assessments and written notices
from any governmental agency in the possession of Sellers or the Veltri
Group which relate in any way to the environmental condition of the Real
Estate and which have at any time been prepared for or received by the
Sellers or the Veltri Group (collectively, the "Environmental Reports").
Sellers have made available to Buyer true and complete copies of all
Environmental Reports.
3.11 Labor and Employment Relations. Except as set forth in Schedule 3.11,
no Veltri Group Member is a party to or bound by any collective bargaining
agreement with any union/association or labor organization. Schedule 3.11 also
contains a true and complete list of all actions before federal, state or
provincial bodies (including arbitration cases), pending or closed, wherein any
Veltri Group Member is a party and has received written notice of the action,
which involve labor or employment matters relating to the businesses of any
Veltri Group Member during the last three (3) years. Except as disclosed on
Schedule 3.11, no Veltri Group Member has been the subject of (or received
written notice of) within the last three (3) years any strike, work stoppage,
union organization drive, demands for representation, primary or secondary
boycott, unfair labor practice claim or employment discrimination charge.
3.12 Title to and Operating Condition of Assets.
(a) Except as disclosed on Schedule 3.12(a), and except for inchoate
liens for taxes not yet due and payable and Liens (as hereinafter defined)
which would not have a material adverse effect on any Veltri Group Member,
each Veltri Group Member owns good
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title to all of its assets (and good and marketable title to any real
estate owned by any Veltri Group Member), free and clear of all liens,
pledges, security interests, leases, claims or encumbrances (the "Liens").
Andrea-Teresa-Frank, Inc. f/k/a/ ATF Automotive Group, Inc. and
Michael-Tony-Joseph, Inc. f/k/a/ MTJ Enterprises, Inc. have no operating
assets or business operations of any kind or nature. Except as described in
Schedule 3.12(b) attached hereto, all material tangible personal property
owned or used by any Veltri Group Member is situated at their respective
business premises. Schedule 3.12(c) lists or describes all material
tangible personal property (other than any personal property covered by the
Leases) owned by or an interest in which is claimed by any other person
(whether a customer, supplier or other person) for which any Veltri Group
Member is responsible (copies of all agreements relating thereto have been
delivered to Buyer), and all such property is in the actual possession of
such Veltri Group Member and is in such condition that upon the return of
such property in its present condition to its owner, such Veltri Group
Member will not be liable in any amount to such owner.
(b) The real property, plants, buildings, machinery, fixtures,
equipment, tools, dies, jigs, and improvements which are owned, used,
leased or held by each Veltri Group Member are in fair operating and usable
condition, subject to normal maintenance and repair, in a manner consistent
with the Veltri Group's past practices.
(c) All bank accounts, certificates of deposit and other deposits or
accounts of any Veltri Group Member are as set forth on Schedule 3.12(d)
atached hereto.
3.13 Intangible Assets. Except for Shelf Software (as hereinafter
defined), Schedule 3.13 contains a listing of all material patents and patent
applications (pending or in the process of preparation), domestic or foreign,
patent rights, trademarks, trade names and licenses of the intellectual
property rights of others, copyrights, trade secrets, secret processes and
other material
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propriety rights (collectively, the "Intellectual Rights") which are owned,
controlled, used or necessary for use by any Veltri Group Member in their
respective business operations as presently conducted or, to the best knowledge
of the Sellers and the Veltri Group, owned or controlled in whole or in part by
any of the officers, directors or key employees of any Veltri Group Member. All
such Intellectual Rights are valid and effective in accordance with their
terms. Except for personal computer software programs licensed or otherwise
used for office purposes in the ordinary course of business and other software
programs generally available to the public for a total cost under Two Thousand
(Cdn. $2,000) Cdn. Dollars ("Shelf Software"), and except as disclosed in
Schedule 3.13, there are no material agreements, contracts, licenses or
obligation under which any Veltri Group Member is obligated with respect to, or
is using, any Intellectual Rights owned or controlled by others.
To the best knowledge of the Sellers and the Veltri Group, the conduct of
the respective businesses of each Veltri Group Member, including the
manufacture and sale of their products, does not infringe upon the Intellectual
Rights of any other party; and no Veltri Group Member has received written
notice of any claim of infringement during the past five (5) years, except as
described in Schedule 3.13 attached hereto. To the best knowledge of the
Sellers and the Veltri Group, neither Seller nor any Veltri Group Member has
outside the ordinary course of business wilfully or negligently disclosed in
any way to any third party any material confidential information or trade
secrets, including, but not by way of limitation, confidential product or
process data, confidential information as to new product developments and
product costs data related to the operations of the Veltri Group, nor entered
into any contract or agreement to disclose any of the above to a third party
outside of the ordinary course of business.
3.14 Insurance. Schedule 3.14 attached hereto contains a listing of all
material insurance policies held by any Veltri Group Member with respect to
their respective businesses, assets, and
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any property of others under the care, custody and/or control of any Veltri
Group Member, including, but not limited to all policies of fire, liability and
other forms of casualty insurance, product liability insurance, and group and
workers' compensation insurance held by any Veltri Group Member with respect to
their respective businesses. All such policies (copies of which have been made
available to Buyer) are maintained in full force and effect by each such Veltri
Group Member and no Veltri Group Member is in default under any of such
policies. To the best knowledge of the Sellers and the Veltri Group, no Veltri
Group Member has been refused any material customary insurance coverage by any
insurance carrier at any time during the past three (3) years.
3.15 Customers and Commitments.
(a) Schedule 3.15(a)(i) lists the ten (10) largest customers of, and
the ten (10) largest steel and component part suppliers to, the Veltri
Group on a consolidated basis during the twelve (12) month period ended
December 31, 1995 (stating for each the dollar volume of the sales or
purchases, as the case may be). All of the existing executory contracts and
commitments and purchase orders of each Veltri Group Member with their
respective customers and trade suppliers have been entered into in the
ordinary course of business, are not in default by any Veltri Group Member,
or the best knowledge of the Sellers and the Veltri Group, by any other
party to the same. The Veltri Group has purchase orders (subject to
releases issued in the ordinary course of business) from those customers
listed on Schedule 3.15(a)(ii) with respect to all parts listed on Schedule
3.15(a)(iii). All outstanding purchase orders from those customers listed
on Schedule 3.15(a)(ii) are substantially the same as the forms of
customers purchase orders attached hereto to Schedule 3.15(a)(iv). Attached
hereto as Schedule 3.15)(a)(v) is a listing of the only production parts
which, as of the fiscal month of October, 1996, were being shipped by the
Veltri Group without customer purchase orders. All outstanding purchase
orders to all suppliers of the Veltri Group are substantially the same
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<PAGE> 49
as the form of vendor purchase order attached hereto as Schedule
3.15(a)(vi). Sellers have provided to Buyer (i) true, correct and complete
copies of all purchase orders issued by any Veltri Group Member in excess
of One Hundred Thousand (Cdn. $100,000) Cdn Dollars to any supplier
regarding the 1998 Chrysler LH program, (ii) a true and complete listing (a
copy of which is attached to Schedule 3.15(a)(vii) with respect to all
purchase commitments in excess of Fifty thousand (Cdn. $50,000) Cdn.
Dollars for the start-up of the Veltri Modular Assembly plant, (iii) a true
and complete listing (a copy of which is attached to Schedule 3.15(a)(vii)
with respect to all purchase commitments in excess of Fifty Thousand
(Cdn.$50,000) Cdn. Dollars for the expansion of the Veltri Glencoe
facility, and (iv) a true and complete listing (a copy of which is attached
to Schedule 3.15(a)(vii) with respect to all other purchase commitments in
excess of Three Hundred Fifty Thousand (Cdn. $350,000) Cdn. Dollars in each
transaction.
(b) Except as disclosed in Schedule 3.15(b) attached hereof, neither
Sellers nor any Veltri Group Member has received any notice (whether oral
or written) during the past twelve (12) months that any customer of any
Veltri Group Member listed on Schedule 3.15(a)(i) intends to cease dealing
with any such Veltri Group Member or intends to substantially decrease the
amount of its vehicle program content with any such Veltri Group Member
from the levels realized during the past twelve (12) months, or that any
material customer of any Veltri Group Member would substantially decrease
the amount of such vehicle program content in the event of the consummation
of the transactions contemplated hereby.
3.16 Finders or Brokers Fee. There are no broker's commissions, finder's
fees or other payments of like nature payable to any person or entity in
connection with the transactions contemplated by this Agreement as a result of
the actions of the Sellers or the Veltri Group, except
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for the fees to be paid to Roney & Co., which shall be the sole obligation of
and paid by Sellers, and in no event will Buyer or the Veltri Group have any
liability for any such fee or commission in connection with the transactions
contemplated hereby.
3.17 Licenses, Permits and Approvals. Schedule 3.17 and the Environmental
Reports contain a list and description of all licenses, permits, authorizations
and approvals required by any federal, provincial, state or local governments'
administrative or judicial authorities or required by any of the material
customers or material suppliers of each Veltri Group Member, which are material
to the operations of the respective businesses of the Veltri Group ( the
"Licenses and Permits"). Except as disclosed on Schedule 3.17, all Licenses and
Permits are valid and in full force and effect and no notice to or approval
under any License and Permit is required for the consummation of the
transactions contemplated by this Agreement (excluding the Amalgamation), or
which would adversely affect or impair the right or ability of the Veltri Group
Members to carry on their respective operations as heretofore conducted.
3.18 Competitive Interests. Except as disclosed on Schedule 3.18, to the
best knowledge of the Sellers and the Veltri Group, none of the officers,
directors, shareholders or key employees of any Veltri Group Member (including
purchasing agents and departmental managers) owns any interest or has any
investment or profit participation in any corporation or other entity which is
a competitor of or which otherwise transacts business with any Veltri Group
Member, except for marketable stock in publicly-trade companies and severance
and retirement benefits.
3.19 Related Party Transactions. Except as set forth on Schedule 3.19(a),
all of the transactions of the Veltri Group during the past three (3) years
have been conducted on an arms-length basis. To the best knowledge of the
Sellers and the Veltri Group, no employee of any Veltri Group Member has,
within the last three (3) years, violated in any material respect the published
business policies of any governmental agency or customer or supplier with
respect to gifts, services
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or corporate business practices. Except as described in Schedule 3.19(b), no
Veltri Group Member has any outstanding loans or other advances directly or
indirectly to or from either Sellers, any officer, director, employee or
Affiliate or relative of Sellers or any entity in which either Sellers or the
Companies have a direct or indirect interest, other than travel and business
advances in the usual and ordinary course of business. Except as disclosed in
Schedule 3.19(c), since December 31, 1995, no Veltri Group Member has forgiven
or canceled, without receiving full consideration, any indebtedness owing to it
by either Sellers, any officer, director or other employee of any Veltri Group
Member or any entity in which either Sellers, has a direct or indirect interest.
3.20 Sellers Non-Residents. The Sellers are "non-residents" of Canada
within the meaning of the Income Tax Act (Canada).
3.21 General Warranty. The representations and warranties of Michael
Veltri contained in this Agreement, all schedule attached hereto and all
certificates furnished to Buyer by Sellers or the Veltri Group at the Closing
pursuant to this Agreement are accurate and complete, and do not and will not
contain any untrue statement of fact, or omit to state a fact necessary to make
the statements herein and therein not misleading.
3.22 Continuation of Representations and Warranties of Michael Veltri.
Except for the representations and warranties contained in Sections 3.2(b),
3.3(c), and 3.10 hereof and in the first sentence of Section 3.12(a), the
representations and warranties contained in this Article 3 shall survive the
Closing Date and continue in full force and effect for a period of two (2)
years following the Closing Date. The representations and warranties contained
in:
(a) Section 3.10 shall survive the Closing Date and continue in full
force and effect for a period of four (4) years following the Closing Date;
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(b) Sections 3.2(b) and the first sentence of Section 3.12(a) shall
survive the Closing Date and continue in full force and effect for a
period of six (6) years following the Closing Date;
(c) Section 3.3(c) hereof with respect to any tax period shall,
subject to compliance with Section 6.1(c) hereof, each survive and
continue in full force and effect until thirty (30) days following the
last day that any taxation authority of competent jurisdiction,
administering any taxation legislation pursuant to which any Veltri Group
Member is subject, has any right to assess, reassess or make additional
assessments pursuant to the taxation legislation of such jurisdiction (the
"Tax Expiration Date").
The applicable expiration dates referred to in this Section are hereinafter
collectively referred to as the "Representation Expiration Dates."
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers on the date hereof and as of the
Closing Date that:
4.1 Corporate Standing and Authority.
(a) Buyer is a company duly organized and validly existing and in
good standing under the laws of the Province of Nova Scotia and has the
power and authority to own its assets and to conduct its business.
(b) Buyer has legal capacity and authority to execute this Agreement
and to perform the transactions contemplated hereby. The execution,
delivery and performance of this Agreement (including, without limitation,
the Amalgamation) does not and will not violate or cause a default under
any provision of Buyer's Memorandum of Association or Articles of
Association. The execution delivery and performance of this Agreement
(excluding the amalgamation) does not and will not result in the breach,
termination or acceleration of any obligation or constitute a default or
permit the termination of any right
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under any mortgage, indenture, lien, lease, contract, agreement,
instrument, order,arbitration award, judgment or decree to which Buyer is
a party or by which either of them or their properties are bound. Buyer
has taken all necessary action required by law, Buyer's Articles of
Incorporation and By-laws or by any contract or agreement to which Buyer
is a party, to authorize the execution, delivery and performance of this
Agreement. This Agreement and each document and instrument executed
pursuant to this Agreement by Buyer constitutes a valid and binding
obligation of Buyer, enforceable in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally. Buyer is not
required to obtain the consent, approval or waiver of any person not a
party to this Agreement to enter into this Agreement or to consummate the
transactions contemplated hereby.
4.2 Ownership of Buyer, VS Holdings, Inc. and VS holdings No. 2, Inc..
(a) The complete ownership of Buyer, VS Holdings, Inc. ("VSH"), and
VS Holdings No., 2, Inc. ("VSH No. 2 ") is set forth on Schedule 4.2
attached hereto.
(b) Neither Buyer, VSH nor VSH No. 2, either individually or in the
aggregate, presently has One Hundred Million (U.S. $100,000,000) U.S.
Dollars or more in assets, neither Buyer, VSH nor VSH No. 2, either
individually or in the aggregate, have ever had One Hundred Million (U.S.
$100,000,000) U.S. Dollars or more in assets.
(c) Neither Buyer, VSH nor VSH No. 2, either individually or in the
aggregate, had annual net sales in excess of One Hundred Million (U.S.
$100,000,000) U.S. Dollars or more, as stated in their last regularly
prepared annual statement of income and expenses.
(d) Buyer, VSH and VSH No. 2 each have outstanding voting securities.
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(e) VSH holds more than fifty (50%) percent or more of the
outstanding voting securities of Buyer, and has the contractual power to
designate fifty (50%) percent or more of the directors of Buyer.
(f) No person (together with their respective spouses and minor
children) holds (beneficially, directly or indirectly through fiduciaries,
agents, controlled entities or other means) fifty (50%) percent or more
of the outstanding voting securities of VSH or VSH No. 2, as the case may
be, or has the contractual power to designate fifty (50%) percent or more
of the directors of VSH or VSH No. 2, as the case may be.
For purposes of this Section 4.2, the terms "person," "control," and
"hold(s)" shall have the meanings prescribed by the Hart-Scot-Rodino Antitrust
Improvements Act of 1976, as amended, 15 U.S.C. Sec. 18a, et seq. and the rules
promulgated by the Federal Trade Commission thereunder.
4.3 Finder's or Broker's Fee. There are no broker's commissions, finder's
fees or other payments of like nature payable to any person or entity in
connection with the transactions contemplated by this Agreement as a result of
the actions of the Buyer, except for the advisory fees to be paid to Ernst &
Young, which shall be the sole obligation of and paid by Buyer, and in no event
will Sellers have any liability for any such fee or commission in connection
with the transaction contemplated hereby.
4.4 Litigation. No investigation, governmental or administrative
proceeding or other litigation of any kind or nature of which Buyer or any
Affiliate of Buyer has received written notice of and is a party, is not
pending, or, to the best knowledge of Buyer, threatened which would, if
adversely determined, materially prevent or delay the transactions contemplated
by this Agreement or have a material adverse effect upon the Buyer or the
operations of the New Veltri Group following the Closing. Buyer is not subject
to any court or administrative order, judgment or decree
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which would, if adversely determined, materially prevent of delay the
transactions contemplated by this Agreement or have a material adverse effect
upon the Buyer or the operations of the New Veltri Group following the Closing.
Buyer has complied in all material respects with all applicable laws,
orders and other requirements of all governmental authorities, and the
Amalgamation complies in all material respects with all applicable laws, orders
and other requirements of all governmental authorities. Buyer is not subject
to any court or administrative order, judgment or decree.
4.5 Hawthorne Metal Products Company Financial Statements. Buyer has
made available to Sellers true and complete copies of the audited balance
sheets of Hawthorne Metal Products Company as of and for the calendar years
ending December 31, 1994 and December 31, 1995, and the related audited
statements of income and retained earnings and statements of cash flows for the
periods then ended, including the notes thereto and any supplemental
information provided therewith.
4.6 Liabilities. Buyer has no material liabilities as of the date
hereof, except for liabilities incurred in connection with the transactions
contemplated by this Agreement and except as otherwise set forth on Schedule
4.6.
4.7 Investment Purpose. Buyer and, as to Veltri holdings, the Designees,
are acquiring the Shares for their own account for investment and not with a
view to immediate distribution, fractionalization or resale to any other person.
4.8 General Warranty. The representations and warranties of Buyer
contained in this Agreement and all certificates furnished to sellers pursuant
to this Agreement are accurate and complete, and do not and will not contain
any untrue statement of fact, or omit to state a fact necessary to make the
statements herein and therein not misleading.
4.9 Continuation of Representations and Warranties of Buyer. The
representations and warranties contained in this Article 4 shall survive the
Closing Date and continue in full force and
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effect for a period of two (2) years following the Closing Date; provided, the
representations and warranties contained in Section 4.2 shall survive the
Closing Date and continue for a period of six (6) years. The applicable
expiration dates referred to in this Section are hereinafter collectively
referred to as the "Representation Termination Dates."
ARTICLE 5 - INDEMNITIES
5.1 Indemnification by Sellers. Sellers, jointly and severally, shall
indemnify, defend and hold Buyer harmless from, against and with respect to any
claim, liability, obligation, tax, loss, damage, assessment, judgment, cost and
expense (including, without limitation, reasonable attorney's fees and costs
and expenses reasonably incurred in connection therewith), after deduction for
any net tax savings, insurance reimbursement or other third party recoveries
received by such party as result thereof, which are incurred by Buyer or its
shareholders, officers, directors and employees (collectively "Purchasers'
Damages") resulting from or attributable to any of the following (collectively
"Purchasers Indemnifiable Claims"):
(a) any breach or failure of any representation or warranty of the
Sellers or any Veltri Group Member contained in this Agreement or in any
of the certificates delivered to Buyer by the Sellers or any Veltri
Group Member pursuant to Section 2.2 of this Agreement;
(b) any failure by the Sellers or any Veltri Group Member to perform
or observe, or to have performed or observed, in full any covenant or
agreement to be performed or observed by Sellers or any Veltri Group
Member under this Agreement (other than Section 6.1 below);
(c) any liability or claim resulting from the conduct of the
businesses of any Veltri Group Member through the Closing (other than
those (i) reflected in the Financial Statements received by Buyer prior
toe Closing Date, (ii) incurred or accruing after the dates of the
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Financial Statements in the ordinary course of business through the
Closing (iii) incurred in the ordinary course of business and resulting
from the Leases, Contracts, Employee Benefit Plans or other instruments
entered into through the Closing in the ordinary course of business on a
basis consistent with historical practices, (iv) those reflected in
Schedule 5.1 (c)(iv) attached hereto, or (vi) those resulting from any
violations of any applicable Environmental Laws, to the extent that such
violation does not constitute a breach of the representations and
warranties set forth in Section 3.1), including, without limitation;
(i) any liability or claim for personal injury or damage to
property based on or resulting from any product sold by any
Veltri Group Member through the Closing;
(ii) any liability or claim for any federal, state, provincial,
local or foreign income, franchise, real property, personal property,
withholding, employment, sales, ad valorem, goods and services and
other taxes payable or collectible by any Veltri Group Member, or any
penalty or interest payable with respect to any of the foregoing,
which relates to any Veltri Group Member for any period through the
Closing;
(iii) any liability or claim for workers' compensation benefits,
health, life or other insurance benefits, or any other employee
benefits or claims for or by any of the employees of any
Veltri Group Member for any period through the Closing (other than
any liability or claim covered by insurance or the workers'
compensation system or any liability for any increase in any
insurance premiums or workers' compensation contributions after
Closing which results from an event prior to the Closing), or any
liability or claim resulting from or relating to any occurrence
during any period through the Closing; or
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(iv) any liability or claim resulting from the termination of any
employee of any Veltri Group member prior to the Closing;
(d) any agreements, contracts, negotiations or other dealings by
Sellers or any Veltri Group Member with any person concerning the sale of
all or substantially all of the stock, assets or businesses of any Veltri
Group Member;
(e) any liability or claim by any third party resulting from the
conduct of the businesses of any Veltri Group Member through the Closing in
violation of any law, rule or regulation of any governmental authority,
excluding any federal, state or local Environmental Laws to the extent such
violation does not constitute a breach of the representations and
warranties set forth in Section 3.10 above;
(f) any liability or claim resulting from any of the matters disclosed
in Schedules 3.3(b), 3.3(c)ii or 3.3(c)(vi) attached hereto (except to the
extent that any unpaid or unaccrued taxes referenced therein are accrued
for in the September 28, 1996 interim financial statements), or from any of
the matters disclosed in Schedules 3.3(c)(i), 3.5(c), 3.6(b), 3.9 (other
than with respect to item 26 on Schedule 3.6(a) and the consideration of
Veltri Ltd. pursuant to item 25 on Schedule 3.6(a)) or items 4, 5 and 6 of
Schedule 3.11 attached hereto.
5.2 Limitations on Purchasers Indemnifiable Claims. Notwithstanding
anything contained in this Agreement to the contrary, Purchasers Indemnifiable
Claims are subject to the following limitations:
(a) Except for any Purchasers Indemnifiable Claims results from a
breach of the representations and warranties set forth in Sections 3.2(b)
and 3.16 hereof and the first sentence of Section 3.12(a) hereof (which
shall not be subject to the limitations set forth in this Section 5.2(a)),
after the Closing, Buyer shall have no right to assert any Purchasers
Indemnifiable Claims until the aggregate amount of all Purchasers
Indemnifiable Claims shall
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exceed the sum of Five Hundred Thousand (Cdn. $500,000) Cdn. Dollars (the
"Floor"), in which event the Buyer shall only be entitled to indemnity
hereunder for the amount of such Purchasers Indemnifiable Claims in excess
of the Floor; provided, however, in the event that the Buyer shall be
entitled to any Purchasers Indemnifiable Claims resulting from a breach of
the representations and warranties set forth in Sections 3.3(c) or
pursuant to Section 5.1(c)(ii), then in such event the Floor shall be
increased by an amount, if any, equal to the lesser of (i) the aggregate
amount of such Purchasers Indemnifiable Claims resulting from a breach of
the representations and warranties set forth in Section 3.3(c) and
pursuant to Section 5.1(c)(ii), or (b) the amount realized by the Veltri
Group from the research and development tax credits described on Schedule
5.2(a) attached hereto resulting from the operations of the Veltri Group
prior to Closing.
(b) Except for any Purchasers Indemnifiable Claims resulting from a
breach of the representations and warranties set forth in Sections 3.2(b)
hereof and the first sentence of Section 3.12(a) hereof (which shall not
be subject to the limitations set forth in this Section 5.2(b)), the
Sellers aggregate liability for any Purchasers Indemnifiable Claims shall
not, under any circumstances, exceed Ten Million (Cdn. $10,000,000) Cdn.
Dollars (the "Ceiling") of which Two Million Five Hundred Thousand (Cdn.
$2,500,000) Cdn Dollars (the "Base Liability Amount") shall be collectable
by Buyer and payable by Sellers irrespective of any Earn-Out Amounts which
may become due to Michael Veltri (including by way of set-off as set forth
in Section 5.2(f) below) and of which Seven Million five Hundred Thousand
(Cdn. $7,500,000) Cdn. Dollars shall be collectable by Buyer and payable
only from the Earn-Out Amounts which may be or have been paid to or become
due to Michael Veltri; provided, however:
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(i) in the event any such Purchasers Indemnifiable Claims have
been asserted hereunder, and in the event that any portion of the
Earn-Out Amounts have been finally determined, then in such event
Buyer shall first set-off and reduce such portion of the Earn-Out
Amounts prior to collecting any portion of the Base Liability Amount
from Michael Veltri); and
(ii) in the event that the Buyer shall be entitled to any
Purchasers Indemnifiable Claims resulting from a breach of the
representations and warranties set forth in Section 3.3(c) or
pursuant to Section 5.1(c)(ii) ("Tax Claim"), and the aggregate
amount of such Tax Claims shall be equal to or exceed Three Hundred
Fifty Thousand (Cdn. $350,000) Cdn. Dollars (without regard to the
limitations set forth in Section 5.2(a) hereof), then in such event
the Base Liability Amount shall be increased by the aggregate amount
of all such Tax Claims which are in excess of such Three Hundred
Fifty Thousand (Cdn. $350,000) Cdn. Dollars, but in no event shall
the Base Liability Amount exceed the sum of Three Million (Cdn.
$3,000,000) Cdn. Dollars.
(c) The Sellers aggregate liability for any Purchasers Indemnifiable
Claims resulting from a breach of the representations and warranties set
forth in Sections 3.2(b) hereof and the first sentence of Section 3.12(a)
hereof, shall not, under any circumstances, exceed the sum of the NAPT
Share Purchase Price, the Veltri Ltd. Share Purchase Price and the Veltri
Holdings Share Purchase Price.
(d) In addition to the other limitations set forth in this Section.
5.2:
(i) Maria Veltri's aggregate liability for any Purchaser's
Indemnifiable Claims shall be limited to the amount of all cash,
assets, property or other consideration of any kind which is
transferred, directly or indirectly, by Michael
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Veltri to Maria on or after the Closing to the extent that the same
totals in excess of One Million (Cdn. $1,000,000) Cdn. Dollars, but
shall not, under any circumstances, exceed the sum of the NAPT Share
Purchase Price, the Veltri Ltd. Share Purchase Price and the Veltri
Holdings share Purchase Price;
(ii) In the event that the Consolidated Net Worth as of the
Closing Date is less than the Base Net Worth, and in the event that
the Initial Amount is reduced by the amount of such difference
pursuant to Sections 1.2(b)(i)(A) and Section 1.4 hereof (the
"Reduction"), then in such event any Purchasers' Damages directly
resulting from those specific items which caused such Consolidated Net
Worth as of the Closing to be less than the Base Net Worth shall be
reduced by the amount of the Reduction; and
(iii) In no event shall any Purchasers Indemnifiable Claims
include any claim, liability, obligation, loss, damage, cost or
expense resulting from the Amalgamation.
(e) As a precondition to Purchasers Indemnifiable Claims, the
following limitations shall apply:
(i) Any claim pursuant to Section 5.1(a) hereof must be Properly
Presented prior to the Representation Expiration Date of the
representation and warranty which is the basis for such claim;
(ii) Any claim pursuant to Sections 5.1(b), 5.1(c) (excluding any
claim within any subparagraph thereof), 5.1(c)(iii), 5.1(c)(iv),
5.1(d), 5.1(e) or 5.1(f) hereof must be Properly Presented (as
hereinafter defined) prior to the expiration of the two (2) year
period following the Closing Date;
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(iii) Any claim pursuant to Section 5.1(c)(i) hereof must be
Properly Presented prior to the expiration of the three (3) year
period following the Closing Date; and
(iv) Any claim pursuant to Section 5.1(c)(ii) hereof must be
Properly Presented prior to the expiration of the Tax Expiration Date;
---provided, however, any claim which is Properly Presented within the
applicable time periods set forth above shall survive thereafter until such
claim is finally resolved; provided, further, however, any claim which is
not Properly Presented within the applicable time periods set forth above
shall be barred.
(f) In the event the Buyer is entitled to indemnification under this
Agreement, in addition to all other rights and remedies available to Buyer
subject to the limits set forth in this Section 5.2, and in the event that
such amounts are not paid within fifteen (15) days after written notice
thereof to the Sellers, then such event Buyer shall in its discretion be
entitled to set-off the amount of such claim against any amounts due to
Sellers hereunder (including the Earn-Out Amounts), under the Promissory
Note or under the Employment Agreement with Michael Veltri, provided, that
Buyer shall place such amounts as may be set-off in escrow in an interest
bearing account with an escrow agent mutually acceptable to the parties,
pending an agreement of the parties or a final order of a court of
competent jurisdiction (or any agreed upon arbitration panel) designating
the party or parties entitled to the same.
5.3 Indemnification by Buyer. The Buyer shall indemnify, defend and hold
Sellers harmless from, against and with respect to any claim, liability,
obligation, tax, loss, damage, assessment, judgment, cost and expense
(including, without limitation, reasonable attorney's fees and costs and
expenses reasonably incurred in connection therewith), after deduction for any
net tax savings, insurance reimbursement or third party recoveries received by
Sellers as result thereof, which are
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incurred by Sellers or its shareholders, officers, directors and employees
(collectively "Sellers' Damages") resulting from or attributable to any of the
following (collectively "Sellers Indemnifiable Claims"):
(a) any breach or failure of any representation or warranty of the
Buyer contained in this Agreement or in any of the certificates delivered
to Sellers by the Buyer pursuant to Section 2.2 of this Agreement;
(b) any failure by the Buyer to perform or observe, or to have
performed or observed, in full any covenant, agreement or condition to be
performed or observed by Buyer under this Agreement;
(c) any activities, operations or conduct of the businesses of any
Veltri Group Member, the Buyer, the New York Veltri Group, VSH and VSH
No. 2 following the Closing (except to the extent that the same is a
result of any actions or omissions of either of the Sellers), including,
without limitation, the Amalgamation, and which results in the incurrence
of Sellers' Damages; or
(d) any liability or claim resulting from the conduct of the
business of Buyer prior to the Closing Date.
5.4 Limitations on Sellers Indemnifiable Claims. Notwithstanding anything
contained in this Agreement to the contrary, Sellers Indemnifiable Claims are
subject to the following limitations:
(a) Except for any Sellers Indemnifiable Claims resulting from a
breach of Sections 1.2, 1.3, 1.4, 4.2, 5.3(c), 5.3(d), 6.1 or 6.2(a)
hereof (which shall not be subject to the limitations set forth in this
Section 5.4(a)) Sellers shall have no right to assert any Sellers
Indemnifiable Claims until the aggregate amount of all Sellers
Indemnifiable Claims shall exceed One Hundred Fifty Thousand (Cdn.
$150,000) Cdn. Dollars, in which event
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Buyer shall only be liable to Sellers hereunder for the amount of such
Sellers Indemnifiable Claims in excess such One Hundred Fifty Thousand
(Cdn. $150,000) Cdn. Dollars.
(b) Except for any Sellers Indemnifiable Claims resulting from a
breach of Sections 1.2, 1.3, 1.4, 4.2 or 6.1 hereof (which shall not be
subject to the limitations set forth in this Section 5.4(b)), the Buyer's
aggregate liability for any Sellers Indemnifiable Claims shall not, under
any circumstances, exceed One Million (Cdn. $1,000,000) Cdn. Dollars.
(c) As a precondition to Sellers Indemnifiable Claims:
(i) any such claim pursuant to Sections 5.3(b), 5.3(c) or 5.3(d)
hereof must be Properly Presented prior to the expiration of the two
(2) year period following the Closing Date, except for (a) any claims
with respect to the covenants set forth in Sections 1.3 and 6.1 hereof
which must be Properly Presented prior to the expiration of the five
(5) year period following the Closing Date, (b) any claim pursuant to
Section 6.2(a) hereof as otherwise provided in Section 5.4(c)(iii),
and (c) any claim pursuant to the Promissory Note; and
(ii) any claim pursuant to Section 5.3(a) hereof must be
Properly Presented prior to the expiration of the applicable
Representation Termination Date;
(iii) any claim pursuant to Section 6.2(a) hereof must be
Properly Presented prior to the expiration of the applicable survival
period set forth therein;
---provided, however, any claim which is Properly Presented within such
time period shall survive thereafter until such claim is finally resolved;
provided, further, however, any claim which is not Properly Presented
within such time period shall be barred.
5.5 Third Party Claims. In the event any party has Properly Presented and
is entitled to a claim for indemnification under this Agreement as a result of
any action, suit, proceeding, claim,
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demand, tax assessment, notice or other assessment brought by a third party (a
"Third Party Claim"), then the party seeking indemnification (the "Indemnitee")
shall Properly Present the same to the indemnifying party (the "Indemnitor"),
and, subject to the terms and conditions set forth in this Article 5, such
Third Party Claim shall be administered as follows:
(a) The Indemnitor shall, at its own cost and expense, contest and
defend such Third Party Claim; provided, however, Indemnitee shall have
the right, at its own cost and expense, to participate in such defense;
and, provided, further, in the event the Indemnitor shall fail to proceed
with reasonable diligence in defending any Third Party Claim, then the
Indemnitee, upon reasonable written notice to the Indemnitor stating its
objections to the conduct of the defense by the Indemnitor and the failure
of the Indemnitor to proceed within twenty (20) days to conduct a
reasonably diligent defense, shall have the right to take over the defense
of the Third Party Claim, with the costs and expenses of such defense to
be borne by the Indemnitor. In no event shall the Indemnitee or Indemnitor
have the right to settle any Third Party Claim without the prior written
consent of the other, which consent shall not be unreasonably withheld or
withheld in bad faith.
(b) Each party shall cooperate with each other in connection with
any Third Party Claim and provide each other with reasonable access to any
books, records or other documents or information which they may possess
relating to such claim.
5.6 Payment and Interest. In the event any party has Properly Presented
and is entitled to indemnification hereunder as a result of any Third Party
Claim, any loss, damage, cost or expense (including, without limitation,
reasonable attorney's fees and costs and expenses reasonably incurred in
connection therewith) incurred by such party shall be paid by the indemnifying
party within sixty (60) days following such indemnifying party's receipt of
notice of the same. In the event such amounts are not paid within such sixty
(60) day period, such unpaid amounts shall bear interest from
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and after the expiration of such sixty (60) day period at the Prime Rate plus
one (1%) percent per annum.
5.7 Presentment of Claims.
(a) For purposes of this Agreement, a claim for indemnification shall
be "Properly Presented" only where it is presented in good faith, where the
party presenting such claim reasonably believes that it may incur damages
as a result thereof, and only where written notice of such claim is
provided to the recipient and such written notice contains, with reasonable
specificity, the nature of the relevant facts pertaining to the claim and
damages, and is accompanied by any relevant documents relating thereto
("Indemnity Notice"). A claim shall not be Properly Presented to the extent
that it is made in bad faith solely for the purpose of avoiding any time
limitations or avoiding the expiration of any right or provision under this
Agreement.
(b) The parties hereto shall have a duty to take all reasonable
actions required by law in order to mitigate any damages with respect to
any matter for which a claim for indemnity is brought.
(c) The parties hereto agree that the indemnification provided by this
Article 5 shall be their sole and exclusive remedy for any actions arising
out of this Agreement or the transactions contemplated hereby, except for
any remedies provided in the Agreement Not to Compete, the Employment
Agreement, the Side Agreement, the Security Agreements, the Debentures, or
the Promissory Note, and except for any claims by Sellers with respect to
the activities, operations or conduct of the businesses of any Veltri Group
Member, the Buyer, the New Veltri Group, VSH and VSH No. 2 following the
Closing (except to the extent that the same is a result of any actions or
omissions of either of the Sellers), including, without limitation, the
Amalgamation; provided, however, the foregoing shall in no way limit any
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statutory or common law tort claims for fraud in the inducement, which
claims (i) must be Properly Presented within three (3) years following the
Closing, and (ii) shall be subject to the limitations and provisions set
forth in Section 5.2(a) and 5.2(c) hereof.
5.8 Arbitration. The parties hereto will endeavor to resolve in good faith
any controversy, disagreement or claim arising between them relating to the
provisions of this Agreement. If they are unable to do so, except as otherwise
provided in Sections 1.3 and 1.4 hereof and except for any claim for specific
performance or injunctive relief pursuant to Section 6.1(d) hereof, any such
controversy, disagreement or claim will be submitted, for final resolution
without appeal, to binding arbitration, by either party giving written notice
to the other of the existence of a dispute which it desires to have arbitrated.
The place of arbitration will be Detroit, Michigan and the arbitration will be
conducted in accordance wit the rules of the AAA. The decision and award (if
any) of the arbitrators shall be final and binding, i.e., not subject to
appeal, and the parties hereby mutually agree that any such determination shall
have the same effect as an arbitration pursuant to Michigan Compiled Laws
Annotated Section 600.5001, and a judgment upon the award may be entered in any
court having jurisdiction thereof, or application may be made to such court for
a judicial acceptance of the award and an order of enforcement, as the case may
be. The expenses of arbitration will be borne in accordance with the
determination of the arbitrators with respect hereto.
ARTICLE 6 - COVENANTS
6.1 Covenants After Closing. Buyer, VSH, VSH No. 2, Veltri Ltd., Veltri
Holdings, NAPT and Subsidiary, jointly and severally, agree that, from and
after the Closing Date until that date that the Earn-Out Amounts and the
Promissory Note are paid in full:
(a) Each New Veltri Group Member, VSH and VSH No. 2 shall not, without
the prior written consent of Michael Veltri (which consent shall not be
unreasonably withheld):
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(i) Amend, revoke, restate or otherwise alter in any material respect
any of their respective Articles of Incorporation or Organization, Bylaws
or Charter, in any manner which would reasonably be expected to have a
material adverse effect on the amount or payment of the Earn-Out Amounts or
would effectuate any of the transactions prohibited by Section 6.1(a)(ii);
provided, however, the foregoing shall not in any way prohibit the
continuance of the Subsidiary, NAPT and Veltri Ltd. into Nova Scotia and
the amalgamation of the Subsidiary, NAPT and Veltri Ltd. into the Buyer
(collectively the "Amalgamation"); and
(ii) Engage in any of the following transactions (whether in a single
transaction or a series of transactions):
(a) merge, amalgamate, consolidate or enter into a share exchange
with any other entity which would reasonably be expected to have a
material adverse effect on the amount or payment of the Earn-Out
Amounts; provided, however, the foregoing shall not in any way
prohibit the Amalgamation;
(b) transfer, sell, assign or otherwise convey any significant
part of their assets (other than inventory in the ordinary course of
business, other property in a manner consistent with historical
practices, or in connection with the Amalgamation);
(c) purchase or otherwise acquire any material amount of the
assets, capital stock, or other ownership interests, of another
entity;
(d) declare or pay any dividends or authorize any other
distributions (other than stock dividends or stock splits) on any
stock, security or other equity interest, whether now or hereafter
issued and outstanding, or redeem or otherwise acquire any of their
respective stock, securities or other equity
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interests (other than in connection with any stock option plans for
the benefit of employees), which, when aggregated with the amounts
permitted pursuant to Section 6.1(a)(ii)(e) hereof, would exceed an
annual amount equal to One Hundred Thousand (Cdn $100,000) Cdn.
Dollars per year;
(e) make any loans or advances to, or become a guarantor,
surety or pledge its credit to become liable for any undertakings of
any person or entity (other than any other member of the New Veltri
Group), which, when aggregated with the amounts permitted pursuant to
Section 6.1(a)(ii)(d) hereof, would exceed an annual amount equal to
One Hundred Thousand (Cdn $100,000) Cdn. Dollars per year; provided,
however, the foregoing shall not apply to advances to employees in
the ordinary course of business or for the endorsement of instruments
payable to their order in the ordinary course of collection;
(f) enter into any transactions with any Affiliate of Buyer,
except that the Buyer may enter into transactions with Talon
Automotive Group L.L.C. ("Talon") pursuant to which Talon may
charge the New Veltri Group management, consulting and administrative
fees in an aggregate amount not to exceed Four Hundred Fifty Thousand
(U.S. $450,000) U.S. Dollars per year, plus any amounts permitted by
Section 1.3(b)(iii)(e)(iv) above; and
(g) permit or be subject to any direct or indirect sale,
issuance, transfer or other disposition (in one or a series of
transactions) of an aggregate amount of fifty (50%) percent or more
of their respective outstanding voting stock which would reasonably
be expected to have a material adverse effect on the amount or
payment of the Earn-Out Amounts;
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provided, however, the foregoing shall not in any way prohibit any of
the foregoing to or among existing shareholders, their family members
or trusts for their benefit, or to Affiliates, provided such
Affiliates remain Affiliates after such transfer;
-- provided, however, that, notwithstanding the foregoing, the New Veltri
Group and VSH No. 2 shall be entitled to enter into any transaction in
preparation for and in connection with an initial public offering
("IPO"), provided that such transaction and such IPO would not reasonably
be expected to have a material adverse effect on the amount or payment of
the Earn-Out Amounts, and provided that the New Veltri Group shall
nevertheless be maintained as a separate division with separate books and
records for the determination of the EBIT of the New Veltri Group.
(b) The business of the New Veltri Group shall be operated on an
autonomous basis substantially similar to the historical operations of the
Veltri Group, and the Buyer shall maintain separate books and records for
the determination of the EBIT of the New Veltri Group.
(c) Each New Veltri Group Member shall not extend or consent to the
extending of the statutes of limitations for any tax without the prior
written consent of Michael Veltri.
(d) In the event of any breach or threatened breach of the
covenants set forth in this Section 6.1, then in such event, in addition
to any other rights or remedies of Michael Veltri, Michael Veltri
shall be entitled to injunctive relief and specific performance of such
covenants in order to prevent and/or remedy any such breach or threatened
breach.
6.2 Other Covenants.
(a) The New Veltri Group shall continue to provide to Frank Veltri
and his wife with (i) medical insurance coverage for the rest of
their lives or until Michael Veltri is no
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longer employed by any member of the New Veltri Group, if sooner, provided
that the cost of such coverage shall not exceed Two Thousand Five Hundred
(Cdn. $2,500) Cdn. Dollars in the aggregate in each year and (ii) medical
reimbursement coverage for the rest of their lives or until Michael Veltri
is not longer employed by any member of the New Veltri Group, if sooner,
provided, that the cost of such coverage shall not exceed Ten Thousand
(U.S. $10,000) U.S. Dollars in the aggregate in each year, provided,
however, in each case, that they continue to qualify for such coverage
under the existing plans or comparable plans which are available to the
Buyer. The parties agree that Michael Veltri shall be permitted to enforce
or recover damages for a breach of this Section 6.2(a) and that such claims
shall survive for the lives of Frank Veltri and his wife.
(b) The name of Buyer, upon the completion of the Amalgamation, will
be changed to "Veltri Metal Products Co."
ARTICLE 7 - MISCELLANEOUS
7.1 Additional Documents. Following the Closing Date, Buyer and Sellers
shall execute and deliver any and all other documents and take such other
actions as may be reasonably requested which are necessary or desirable to
effectuate the terms of this Agreement.
7.2 Interpretation. Article titles, Schedule titles and headings to
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement. The recitals, Schedules and Exhibits referred to herein shall be
deemed an integral part of this Agreement to the same extent as if they were
set forth verbatim herein.
7.3 Entire Agreement. This Agreement, the related agreements referenced
herein and executed in connection herewith and the Schedules and Exhibits
attached hereto, constitute the entire agreement among the parties pertaining
to the agreements, representations, and understandings of
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the parties. All prior negotiations, writings and discussions between the
parties are merged into an superseded by this Agreement. There are no oral or
other representations, warranties, covenants or agreements of the parties which
are not set forth herein and in the Schedules and Exhibits attached hereto. The
parties hereto may amend, modify and supplement this Agreement only by the
written agreement of the parties. Any supplement, modification, or amendment of
this Agreement shall not be binding unless executed in writing.
7.4 Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice
is to be given, or on the date of mailing if mailed to the party to whom notice
is to be given, by first class mail, registered or certified, postage prepaid,
and properly addressed as follows:
(a) To Buyer at: 900 Wilshire Drive
Suite 203
Troy, Michigan 48084
Attention: Mr. David J. Woodward
with a copy to: Timmis & Inman L.L.P.
300 Talon Centre
Detroit, Michigan 48207
Attention: Richard M. Miettinen, Esq.
(b) To Sellers at: 900 Wilshire Drive
Suite 150
Troy, Michigan 48084
Attention: Mr. Michael T.J. Veltri
with a copy to: Kerr, Russell & Weber, P.L.C.
One Detroit Center
500 Woodward Avenue
Suite 2500
Detroit, Michigan 48226
Attention: George Christopoulos, Esq.
Any party may change its address for purposes of this paragraph by giving the
other party written notice of the new address in the manner set forth above.
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7.5 Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the State of Michigan. Any action to enforce the
terms and conditions of this Agreement, or otherwise arising in connection with
this Agreement and the transactions contemplated hereby, shall be resolved in
accordance with the terms of Sections 1.3, 1.4 and 5.8 hereof, and the parties
hereby consent to the personal and subject matter jurisdiction of such panels
and/or persons.
7.6 Waivers. Any term or provision of this Agreement may be waived, or
the time for its performance may be extended, by the party or parties entitled
to the benefit thereof. Any such waiver shall be validly and sufficiently
authorized for the purposes of this Agreement if it is in writing and, as to
the Sellers, if it is authorized by the Sellers, and as to Buyer, if it is
authorized by Randolph J. Agley, Michael T. Timmis or Wayne C. Inman. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
7.7 Expenses. Buyer and Sellers will each pay their respective costs and
expenses incident to their negotiation and preparation of this Agreement and to
their performance and compliance with all agreements and conditions contained
herein on their respective parts to be performed or complied with, including
the fees, expenses and disbursements of their respective counsel and
accountants. In the event any amounts to be paid by Sellers hereunder are paid
by any Veltri Group Member, Sellers shall immediately pay such amounts to
Buyer, and any amounts payable hereunder by Sellers to Buyer shall not be
subject to the limitations set forth in Sections 5.1(c) and (d) above.
7.8 Partial Invalidity. Wherever possible, each provision hereof shall be
interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in
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any respect, such invalidity, illegality or unenforceability shall not
affect any other provisions of this Agreement and this Agreement and this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions has never been contained herein unless the deletion of
such provision or provisions would result in such a material change as to cause
completion of the transactions contemplated hereby to be unreasonable.
7.9 Assignment. The rights and obligations under this Agreement may not
be assigned by any party without the prior written consent of each of the other
parties hereto (which consent shall not be unreasonably withheld), except that
Michael Veltri may assign his rights (but not his obligations hereunder) to a
revocable living trust of which Michael Veltri is sole trustee during this
lifetime, and except that the Buyer may assign its rights (but not its
obligations hereunder) with respect to Veltri Holdings to the Designees (as
defined herein). This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors or permitted assigns.
7.10 Not Third Party Beneficiaries. There are not third party
beneficiaries to this Agreement and nothing in this Agreement, express or
implied, is intended or shall be construed to confer upon any person (other than
the parties hereto and their respective successors or permitted assigns) any
right, remedy or claim under or by reason of this Agreement.
7.11 Counterparts. This Agreement may be executed in one (1) or more
counterparts, each and all of which shall be deemed for all purposes to be one
agreement.
7.12 Dollars. Except as otherwise expressly designated herein, all
references to currency, monetary values and dollars set forth herein shall mean
Canadian (Cdn.) Dollars.
7.13 Fees and Expenses. In connection with any action or proceeding
brought to enforce the terms and conditions of this Agreement, or otherwise
arising in connection with this Agreement
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and the transactions contemplated hereby, the nonprevailing party in such
action or proceeding shall pay the reasonable attorneys' fees, and related
costs and expenses, of the prevailing party.
7.14 Knowledge. For the purposes of Article 3 of this Agreement, any
representation or warranty therein limited to Sellers' or the Veltri Group's
knowledge shall encompass all facts and information which are within the actual
present knowledge of those individuals identified on Schedule 7.14.
7.15 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 prior to the Closing without the prior written approval of the
other parties to this Agreement.
7.16 Schedules. Capitalized terms used in any schedules attached hereto
and not otherwise defined therein shall have the meanings assigned to them in
this Agreement.
7.17 Affiliate. For purposes hereof, "Affiliate" or "Affiliates" of any
specific person or entity shall mean any person or entity (i) listed or
described in Schedule 7.17 hereof with respect to such specified person or
entity (the "Listed Affiliates"), (ii) which is a direct or indirect
shareholder or subsidiary of any specified person or of any of the Listed
Affiliates with respect to such specified person or entity (the "Held
Affiliates"), or (iii) is a relative of or is owned or controlled, in whole or
in part, by any specified person or entity, or any Listed Affiliates or Held
Affiliates with respect to any specified person or entity; provided, however,
that Timmis & Inman L.L.P. shall not be deemed an Affiliate of Buyer or any of
its Affiliates.
7.18 Registration. Buyer acknowledges that: (a) the Shares have never been
registered under the Securities Act of 1933, as amended or under any other
applicable securities laws ("Securities Laws"), (b) the Shares may not be
resold or otherwise disposed of except in compliance with the Securities Laws,
and (c) Buyer has not relied upon any officer, director, employee or agent of
any Veltri Group Member for any explanation of the application of the
Securities Laws.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SELLERS: BUYER:
MICHAEL VELTRI VS ACQUISITION CO.
- --------------------------------
Michael Veltri, individually
MICHAEL VELTRI
- --------------------------------
Michael Veltri, as trustee of the By: Doug Woodward
Michael T.J. Veltri Revocable Living Trust -----------------------------
u/a/d December 17, 1992 Its: Vice President
-----------------------------
MARIA L. VELTRI
- --------------------------------
Maria Veltri, individually
The undersigned hereby execute this Agreement for the sole purpose of
agreeing to be bound by the terms of Sections 4.2, 6.1 and 6.2(a) hereof and no
other purpose whatsoever:
VELTRI HOLDINGS LIMITED NORTH AMERICAN PRECISION TOOL
LIMITED
By: MICHAEL VELTRI By: MICHAEL VELTRI
--------------------------- -----------------------------
Its: President Its: President
--------------------------- -----------------------------
VELTRI STAMPING CORPORATION VS HOLDINGS NO. 2, INC.
By: MICHAEL VELTRI By: DOUG WOODWARD
--------------------------- -----------------------------
Its: President Its: Vice President
--------------------------- -----------------------------
VELTRI HOLDINGS USA, INC. VS HOLDINGS, INC.
By: MICHAEL VELTRI By: DOUG WOODWARD
--------------------------- -----------------------------
Its: President Its: Vice President
--------------------------- -----------------------------
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SCHEDULE 1.4(b)
ADJUSTMENTS TO CLOSING NET WORTH STATEMENT
1. The value of the Consolidated Net Worth shall not be adjusted for any
items which would record or increase a liability or reduce the balance of
any asset if such recording was on account of the transactions contemplated
by this Agreement or if such recording was due to premature or early
payment of any outstanding liability including, but not limited to,
previously incurred expenses due to the CIBC loan, such as professional
fees, loan restructuring fees, etc. which have been previously capitalized
but will be expensed when such loan is replaced by the Purchaser.
2. The amount of all capitalized costs incurred in establishing Veltri
Modular Assembly which are currently an asset on the books and records of
the Veltri Group shall remain an asset for the purpose of the calculation
of Consolidate Net Worth and shall be determined consistent with the
provisions of Section 1.3(b)(iii)(aa) hereof.
3. For the purposes of calculating Consolidated Net Worth, the balance of
the income taxes payable (recoverable) and deferred income taxes payable
(recoverable) shall not include any adjustments that reflect any changes in
calculation, assumptions and estimates relative to the operations of the
Veltri Group prior to December 31, 1995.
4. For purposes of calculating Consolidated Net Worth, the balance of the
income taxes payable (recoverable) and deferred income taxes payable
(recoverable) shall not include any research and development tax credits
relative to the operations of the Veltri Group prior to December 31, 1995.
5. The Consolidated Net Worth calculation shall not include any
adjustments for items which have also been utilized by the Purchasers to
reduce the Purchase Price pursuant to any other provision contained in the
Purchase Agreement.
6. Any liability or claim payable to Tony Veltri shall not be included
for purposes of calculating Consolidated Net Worth.
7. The Consolidated Net Worth shall not include any income or gain
realized by the Veltri Group upon the sale of the facility previously owned
by the Veltri Group located in Indianapolis, Indiana.
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Schedule 1.4(d)
1. Buyer's due diligence identified that the Veltri Group has
historically had difficulty in establishing appropriate cut-off of accounts
receivable and accounts payable. Buyer is not aware of any current cut-off
issues in accounts receivable and accounts payable.
2. Buyer's due diligence identified that the Veltri Group has
historically had difficulties in interim reporting of inventory and cost of
sales which have resulted in material book to physical adjustments. Buyer
is not aware of any current inventory valuation issues.
3. In our review of management letters from KPMG for 1993, 1994 and 1995,
their commentary indicated that the Sellers accounting process and certain
aspects of its operations were not well-disciplined, controlled or
effectively performed. In addition, these reports stated that "The dollar
value and number of unadjusted audit differences is significant, and is
borderline material from a financial perspective". Buyer is not aware of
any material unadjusted audit differences that would impact the New Worth
Statement.
4. Buyer's due diligence identified that the Sellers historical interim
financial statements have not been in compliance with GAAP based on the
number and magnitude of year end adjustments during the annual KPMG audit
process. Buyer is not aware of any issues where Veltri Group is currently
not in non-compliance with GAAP other than potential lack of an accrual for
vacation pay earned but not used.
5. All items which are disclosed on the Schedules to Section 3.3 of the
Agreement.
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SCHEDULE 2.2(a)
BUYER'S DESIGNEES
DESIGNEE SHARES HELD
Randolph J. Agley, as Trustee under that certain 247
Amended and Restated Revocable Living Trust Agreement
dated March 29, 1988, as amended, between Randolph J.
Agley as Grantor and Trustee thereof
Judith A. Agley, as Trustee under that certain Amended 163
Trust Agreement dated March 29, 1988, as amended,
between Judith A. Agley as Grantor and Trustee thereof
James R. Agley 104
Joseph A. Agley 104
Michael T. Timmis, as Trustee under that certain Amended 91
and Restated Trust Agreement dated December 6, 1985, as
amended, between Michael T. Timmis as Grantor and Trustee
thereof
Nancy E. Timmis, as Trustee under that certain Amended 90
Trust Agreement dated March 22, 1995, as amended,
between Nancy E. Timmis as Grantor and Trustee thereof
Nancy E. Timmis, as Trustee of the Michael T. Timmis 181
Irrevocable Trust Agreement dated November 14, 1994,
for the benefit of Michael T O'Reilly Timmis
Wayne C. Inman, as Trustee under that certain Amended 10
and Restated Revocable Living Trust Agreement dated
October 21, 1989, as amended, between Wayne C. Inman
as Grantor and Trustee thereof
Amelia P. Inman, as Trustee under 10
Trust Agreement dated October 30, 1992
TOTAL: 1,000
------
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SCHEDULE 5.1(c)(iv)
The following items:
SCHEDULE 3.3(a)
Items 2-7 of SCHEDULE 3.4(a)
Items 1 (except ot the extent of a breach of the representations and
warranties of Section 3.4), 2, 4 (except provided in Section 5.1(f)),
5 and 7 (except to the extent of a breach of the representations and
warranties of Section 3.4) of SCHEDULE 3.4(b)
Items 1, 3, 5, 7, 8 and 9 (except to the extent of a breach of the
representations and warranties of Section 3.4) of SCHEDULE 3.4(c)
SCHEDULE 3.5(a)
SCHEDULE 3.5(b)
SCHEDULE 3.6(a)
SCHEDULE 3.7(a)
SCHEDULE 3.7(c)
Items 1, 2 (except to the extent provided in Section 5.1(f) and 3 of
SCHEDULE 3.8(a)
Item 2 of SCHEDULE 3.8(c)
SCHEDULE 3.10(a)
SCHEDULE 3.10(c) (except to the extent of a breach of the
represenations and warranties of Section 3.10)
SCHEDULE 3.10(e)
Items 1, 2 and 3 of SCHEDULE 3.11
Items 3-8 of SCHEDULE 3.12(a)
SCHEDULES 3.15(a)(i)-(vii) (except to the extent of a breach of the
representations and warranties of Section 3.15)
SCHEDULE 3.15(b) (except to the extent of a breach of the
representations and warranties of Section 3.15)
SCHEDULES 3.19(a), (b) and (c)
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SCHEDULE 7.14
Michael Veltri
Arden Maybee
Mark Diekman
Nicholas Parker
Thomas Bommarito
Randy Marko
Tony Veltri
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<PAGE> 1
EXHIBIT 10.17
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, entered into as of the 17th day of
October, 1997, is by and between WILLIAM H. JOHN, Trustee of the William H. John
Restated Revocable Trust U/A/D 10/10/95, STORY S. JOHN, Trustee of the Story S.
John Amended and Restated Revocable Trust U/A/D 12/8/95 and MELVYN S. GOLDSTEIN,
Trustee of the John Irrevocable Gift Trust U/A/D 12/29/94 (collectively the
"Seller"), and PRODUCTION ACQUISITION INC., a Michigan corporation (the
"Buyer").
WITNESSETH:
WHEREAS, Seller owns all of the outstanding capital stock of PRODUCTION
STAMPING, INC., a Michigan corporation (the "Company");
WHEREAS, Company is engaged in, among other things, the business of
designing and manufacturing stamped automotive parts and assemblies;
WHEREAS, the Seller desires to sell to the Buyer, and the Buyer desires
to purchase from the Seller, all of the outstanding capital stock of the
Company, upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF THE SHARES
1.1 Purchase and Sale. Subject to the satisfaction of the conditions
precedent set forth in Article 7 hereof, Seller shall sell, transfer, assign,
convey and deliver the Shares (as defined in
<PAGE> 2
Section 4.2(c) hereof) to Buyer, and Buyer shall purchase and acquire the
Shares from Seller, upon the terms and conditions set forth herein.
ARTICLE 2
PURCHASE PRICE AND PAYMENT
2.1 Purchase Price. The purchase price (the "Purchase Price") for the
Shares shall be equal to Forty Six Million ($46,000,000) Dollars, less the
amount of the Financed Debt (as hereinafter defined) as of the Closing, and less
the amount of the Termination Liability (as hereinafter defined), which Purchase
Price shall be increased or decreased, as the case may be to the extent
that the Combined Debt/Equity Amount (as hereinafter defined) as of the Closing
Date (as hereinafter defined) is greater than or less than Fifteen Million Five
Hundred Forty Seven Thousand One Hundred Fifty Four ($15,547,154) Dollars.
2.2 Payment of Purchase Price. The Purchase Price shall be payable as
follows:
An amount equal to that amount which the Seller and Buyer
mutually agree at the Closing to be a good faith estimate of the
Purchase Price less One Million ($1,000,000) Dollars (the "Closing
Payment") shall be paid to Seller at the Closing by cashiers check or
wire transfer; and
(b) The balance of the Purchase Price, if any, together with
interest thereon at the prime rate of interest charged from time to
time by Comerica Bank from and after the Closing Date until the date
of payment, shall be paid to Seller by cashiers check or wire transfer
within thirty (30) days following the finalization of the Closing
Balance Sheet (as
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<PAGE> 3
hereinafter defined) as provided in Section 2.2(c) hereof; provided,
however, in the event that the Purchase Price, as adjusted as provided above, is
less than the Closing Payment, then in such event Seller shall pay to Buyer,
within ten (10) days after Buyer's demand and by cashiers check or wire
transfer, the amount by which such Purchase Price is less than the Closing
Payment.
(c) At the Closing, as security for the payment of the balance of the
Purchase Price, the Buyer shall deposit One Million ($1,000,000) Dollars in
escrow with an escrow agent (the "Escrow Agent") mutually acceptable to the
Buyer and Seller pursuant to an escrow agreement mutually acceptable to the
Buyer and Seller (the "Escrow Agreement"), which amount shall be held by the
Escrow Agent in an interest bearing account in accordance with the Escrow
Agreement, and which amount the Buyer may utilize to assist in the funding of
the payment of the balance of the Purchase Price pursuant to Section 2.2(b)
above.
2.3 Preparation of Closing Balance Sheet.
(a) Simultaneously with the Closing, Buyer and Seller shall jointly
cause a physical inventory (the "Physical Inventory") to be taken of the
Inventory (as hereinafter defined) of the Company as of the close of business on
the Closing Date.
(b) Within ninety (90) days following the Closing Date, Buyer and
Seller shall jointly cause an audited Balance Sheet of the Company to be
prepared as of the close of business on the Closing Date (the "Closing Balance
Sheet"), as follows:
(i) The preparation of the Closing Balance Sheet shall be
prepared and audited in accordance with generally accepted accounting
principles, with the
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<PAGE> 4
Inventory valued as provided in Section 2.3(b) hereof;
(ii) For purposes of the Closing Balance Sheet only, all
revenues, costs and income for any tooling which has not yet been
billed to a customer, but which is intended to be and is in the process
of being built for the Company as of the Closing Date, shall be valued
based upon a percentage of completion basis, which percentage shall be
mutually agreed to between Seller and Buyer. As to any such foregoing
tooling which was also in process as of June 30, 1997, the parties
shall also agree upon the percentage of such revenues, costs and income
which was completed as of June 30, 1997, and such amounts shall be
deducted from the foregoing valuations.
(iii) All auditing and other accounting procedures required to
prepare the Closing Balance Sheet shall be performed by Ernst & Young
L.L.P. ("Accountants"), and reviewed by Linda J. Russell, CPA, the cost
of which shall be shared equally between Buyer and Seller; provided,
however, that the Seller's one-half contribution shall not exceed
$20,000 or the total amount of fees charged by Linda J. Russell, CPA,
whichever is greater.
(c) The Closing Balance Sheet as presented shall be final and
binding on the parties unless either party shall give written notice of its
objection to the same within twenty-one (21) days after its receipt thereof. In
the event either party raises any objection, then the Buyer and Seller shall,
within twenty-one (21) business days thereafter, mutually select an independent
accountant (other than the Accountants), who shall review and finalize the
Closing Balance Sheet, and the determination by said independent accountant of
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<PAGE> 5
the Closing Balance Sheet shall be final and binding on the parties.
Buyer and Seller shall each pay one half of the fees and costs due to
the independent accountant.
2.4 Definitions. For purposes hereof the following terms shall
have the following definitions:
(a) "Financed Debt" shall mean all indebtedness owing by the Company to its
institutional lenders, but excluding those equipment leases listed on
Schedule 2.4(a) attached hereto.
(b) "Inventory" shall include all inventories, including, without
limitation, all inventories in transit, inventories paid for but not
yet delivered, raw materials, supplies, work in progress and finished
goods inventory, but excluding materials owned by customers of Company;
provided, however:
(i) "Inventory" shall include only those items of
Company's inventory which are good and saleable or usable in
the ordinary course of business.; and
(ii) "Inventory" shall be valued at the lower of cost
or market, except for obsolete and excess items (as determined
in accordance with generally accepted accounting principles),
and except that tooling purchased by the Company for sale to a
customer shall be valued in accordance with Section
2.3(b)(ii).
(iii) "Combined Debt/Equity Amount" shall mean the
combined sum of the total shareholders equity and Financed
Debt as reflected on the Closing Balance Sheet, all as
determined in accordance with generally accepted accounting
principles.
(iv) "Termination Liability" shall mean that amount
which the parties mutually agree upon at the Closing to be
equal to the reasonable amount of the
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<PAGE> 6
underfunded liability as a result of the termination of the Company's
defined benefit pension plan, which the Sellers hereby agree to start
terminating on or before the Closing Date.
ARTICLE 3
CLOSING
3.1 Closing. The purchase and sale of the Shares shall be consummated
(the "Closing") within fifteen (15) days following the satisfaction of all of
the conditions precedent set forth in Article 7 hereof, but in any event on or
before December 24, 1997 (the "Closing Date"), at the offices of Timmis & Inman
L.L.P. or at such other place and time as Seller and Buyer shall mutually agree
upon;
3.2 Closing Date Deliveries. At the Closing:
(a) Seller shall deliver to Buyer the original stock certificates
representing the Shares, together with the appropriate assignments of stock
separate from certificate, duly endorsed for transfer,
(b) Buyer shall cause Timmis & Inman L.L.P., counsel for Buyer, to
deliver to Seller an opinion covering the matters set forth in Schedule 3.2(b);
(c) Seller shall cause Berry Moorman P.C., counsel for Seller and the
Company, to deliver to Buyer an opinion covering the matters set forth in
Schedule 3.2(c);
(d) Buyer and Seller shall deliver, or cause to be delivered, executed
copies of the following (collectively the "Related Agreements"):
(i) Agreement Not to Compete and Confidentiality Agreement,
among the Buyer, William H. John, individually, and Seller in the
form attached hereto as
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<PAGE> 7
Exhibit A (the "Agreement Not to Compete"); and
(ii) Escrow Agreement;
(e) Seller shall deliver to Buyer the following:
(i) All consents required for Buyer to obtain the benefits of the
Contracts and Leases described in Schedules 4.5 and 4.6 hereof;
(ii) Certified copies of the Articles or Certificates of Incorporation
and Bylaws of the Company;
(iii) Certificates of Good Standing of the Company from the
jurisdiction in which the Company is incorporated and each jurisdiction in which
the Company is qualified to transact business;
(iv) Resignations from offices and directorships and releases (in a
form satisfactory to the Buyer) from all current officers (other than those
specified by Buyer in writing) and directors of the Company, which resignations
shall not constitute a resignation of employment with the Company (other than as
to William H. John, who shall resign from such employment);
(v) The Company's corporate minute book:
(vi) Certified copies of excerpts of the trust agreements evidencing
the Seller's power and authority to execute this Agreement;
(vii) Release and discharge of the Company's guarantees of all of the
obligations of the Seller,
(viii) Release and termination of that certain Stock Purchase Agreement
dated August 30, 1990 in which Richard Rossetti is granted the right to purchase
7
<PAGE> 8
stock in the Company, without any payment by or obligation to the
Company; and
(ix) Release and termination of that certain Employment
Agreement between the Company and William H. John, without any payment
by or obligation to the Company; and
(x) Release and discharge of the net balance of the amount of
any loans or advances made by Seller to the Company, without any
payment by or obligation to the Company, and payment by the Seller to
the Company of the net balance of any amounts owed by Seller to the
Company, except that such balances may first be netted against each
other.
(xi) Release of all cross default and cross collateralization
provisions of the equipment leases with Michigan National Bank which
are listed on Schedule 2.4(a) attached hereto.
(f) Buyer shall deliver to Seller the following:
(i) Certified copy of the Articles of Incorporation and Bylaws
of the Buyer;
(ii) Certificates of Good Standing from the jurisdiction in
which the Buyer is incorporated and each jurisdiction in which the
Buyer is qualified to transact business; and
(iii) Certified copy of the resolutions of the Buyer's Board of
Directors approving and authorizing the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(g) Seller shall deliver any and all other documents or instruments
reasonably requested by Buyer prior to the Closing Date and necessary to
transfer the Shares to the
8
<PAGE> 9
Buyer and to consummate the transactions contemplated hereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER
For purposes of this Article, the "knowledge of the Seller or the
Company" shall encompass all facts and information which are within the actual
knowledge of those individuals listed on Schedule 4, Key Employees. Seller
hereby represents and warrants to Buyer that:
4.1 Corporate Standing and Authority.
(a) The Company is a corporation duly organized and validly
existing and in good standing under the laws of the State of Michigan,
with full corporate power and authority to own its assets and to
conduct its business. The Company is not required to be qualified as a
foreign corporation with respect to any business under the laws of any
other jurisdiction where the failure to so qualify would have a
material adverse effect upon the Company and the Company does not have
any material assets located in any jurisdiction other than Michigan
and the Company does not own any equity interest in any other entity,
other than as listed in Schedule 4.1-(a).
(b) Seller has the legal capacity and authority to execute
this Agreement and to perform the transactions contemplated hereby. The
execution, delivery and performance of this Agreement do not and will
not violate or cause a default under any provision of Company's
Articles of Incorporation or Bylaws, or result in the breach,
termination or acceleration of any obligation or constitute a default
or permit the termination of any right under any material mortgage
indenture, lien, lease, contract, agreement, instrument, order,
arbitration award, judgment or decree to which the Seller or the
Company is a party or by
9
<PAGE> 10
which either of them or their respective properties are bound, except as listed
on Schedule 4.1-(b). Company and Seller have taken all necessary action required
by law. Company's Articles of Incorporation and Bylaws or otherwise, to
authorize the execution, delivery and performance of this Agreement. This
Agreement and each document and instrument executed pursuant to this Agreement
by Company or Seller constitutes a valid and binding obligation of Company or
Seller, as the case may be, enforceable in accordance with their respective
terms, except as such enforcement may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally. Neither
Company nor Seller are required to obtain the consent, approval or waiver of any
person not a party to this Agreement to enter into this Agreement or to
consummate the transactions contemplated hereby, except for the consents of the
lessors and parties under various of the Leases and Contracts (as defined in
Sections 4.5 and 4.6 hereof), as more fully set forth in Schedules 4.5 and 4.6
attached hereto, which consents are to be obtained on or prior to the Closing
Date in accordance with the provisions of Section 3.2(e)(i) hereof
(c) All material corporate actions of the Company have been duly
recorded in its corporate minute book (a true and complete copy of which has
been previously provided to Buyer) and duly authorized and adopted in accordance
with applicable law and the Company's Bylaws and Articles of Incorporation.
Schedule 4.1(c) attached hereto identifies all directors and officers of the
Company, all of whom shall have resigned such offices and directorships on or
before the Closing Date (except as otherwise specified by the Buyer in writing).
4.2 Title to Assets/Shares.
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<PAGE> 11
(a) Company owns good and marketable title to all of its assets, free
and clear of any liens, pledges, security interests, leases, claims,
encumbrances, restrictive agreements or other adverse interests, charges or
defects of any kind except as otherwise set forth in Schedule 4.2(a) attached
hereto (the "Liens"), all of which Liens shall have been released, discharged or
otherwise removed prior to or concurrently with the Closing hereunder, except as
otherwise listed as an exception under Schedule 4.2-(a). Neither Company nor
Seller knows of any facts or circumstances which are not disclosed or otherwise
revealed in this Agreement which would adversely affect or impair the value of
the Shares or the Company's assets, or which would materially and adversely
affect or impair the right or ability of Buyer to carry on any of Company's
operations substantially as heretofore conducted, except as otherwise disclosed
in Schedule 4.2(a).
(b) Except as described in Schedule 4.2(b)(i), all material tangible
personal property owned or used by the Company is situated at its business
premises and is currently used in its businesses. Schedule 4.2(b)(ii) lists or
describes all material tangible personal property owned by or an interest in
which is claimed by any other person (whether a customer, supplier or other
person) for which the Company is responsible (copies of all agreements relating
thereto have been delivered to Buyer), and all such property is in the Company's
actual possession and is in such condition that upon the return of such property
in its present condition to its owner, the Company will not be liable in any
amount to such owner.
(c) The Company's authorized capitalization consists of Fifty Thousand
(50,000) shares of One ($1.00) Dollar par value, common stock ("Authorized
Common
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<PAGE> 12
Stock"). Thirty Thousand (30,000) shares of the Authorized Common Stock are
currently issued, outstanding and owned by the Seller as set forth on Schedule
4.2(c) hereof (the "Outstanding Common Shares"). (The Outstanding Common
Shares are sometimes referred to herein as the "Shares"). The Shares are owned
by the Seller free and clear of all liens, encumbrances and claims. No other
shares of capital stock of the Company are issued or outstanding. All of the
Shares are validly issued, fully paid and nonassessable. All of the rights,
preferences and limitations of the Shares are set forth on Schedule 4.2(c).
Except as described in Schedule 4.2(c), no person or entity (other than the
Buyer) has any rights to acquire any shares of stock of the Company and there
are no options, calls, warrants or other securities or rights outstanding which
are convertible into, exercisable for or relate to any shares of capital stock
of the Company.
(d) Seller will convey to the Buyer on the Closing Date good and
marketable title to the Shares, free and clear of any and all liens,
encumbrances, forfeitures, pledges, penalties, charges, judgments, security
interests, buy-sell agreements, restrictive agreements, transfer restrictions,
options, rights of first refusal, rights to dividends, equities, or claims or
rights of others of any nature whatsoever. At the Closing, the Shares will
represent all of the issued and outstanding shares of capital stock of the
Company. Seller has the absolute right, power and capacity to sell and transfer
the Shares to the Buyer.
4.3 Financial Statements.
(a) Seller shall make available to Buyer on or before November 3, 1997 the
final balance sheets of Company for the period ending September 30, 1997 and
the related statement of income for the same period (the "September Financial
Statements"). Seller has
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<PAGE> 13
made available to Buyer the audited balance sheets of the Company for each of
the fiscal years ending June 30, 1994 through June 30, 1997 and the related
audited statements of income and retained earnings and changes in financial
position for the periods then ended, including the notes thereto and any
supplemental information provided therewith (all of which, together with the
Closing Balance Sheet and the September Financial Statements, are collectively
referred to herein as the "Financial Statements"). The Financial Statements
(i) Are true, complete and correct in all material respects;
(ii) Fairly present the properties, assets, financial position and
results of operations of its business as of the respective dates and for the
respective periods stated above; and
(iii) Have been prepared pursuant to and in accordance with
generally accepted accounting principles applied on a consistent basis, except
as otherwise set forth on Schedule 4.3(a).
(b) Adequate provision has been made in the Financial Statements
for doubtful accounts receivable, all inventories are valued at the lower of
cost or market with cost being valued using the first-in, first-out method, all
receivables and sales are stated net of discounts, returns and allowances, all
taxes due or paid are reflected and taxes not yet due and payable are fully
accrued or otherwise provided for, and, except to the extent reflected therein,
or as set forth in Schedule 4.3(b), neither the Company nor the Seller have any
knowledge of any liability or obligation, whether accrued, absolute, or
contingent, arising out of transactions entered into or any state of facts
existing as of the dates thereof. No provision in the Financial Statements is
necessary (except as otherwise disclosed therein),
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under generally accepted accounting principles, for liability on account of
product warranties or with respect to the manufacture or sale of defective
products. All extraordinary items of income or expense (as defined under
generally accepted accounting principles) which are unusual or of a
non-recurring nature are separately disclosed in the Financial Statements.
(c) Except to the extent reflected therein or as set forth in Schedule
4.3(c), the Company has paid all known federal, local and foreign income,
franchise, real property, personal property and all other taxes, including, but
not limited to, all withholding, employment, sales, use, ad valorem and other
taxes of the Company, including interest and penalties in respect thereof, if
any, for the fiscal period ended June 30, 1997, all fiscal periods prior
thereto, and except as set forth in Schedule 4.3(c), has paid, remitted or
accrued in the Financial Statements all of the aforesaid known taxes accruing
and becoming due and payable by the Company or will accrue those becoming due as
of the Closing Date. Except with respect to any returns or reports, the filing
of which has been duly extended, the Company has duly and accurately filed all
tax returns and reports which are required to be filed, subject to permissible
extensions, including, without limitation, returns and reports covering all the
aforesaid taxes and has paid all taxes or other amounts reflected thereon.
Seller has made available to Buyer copies of the Company's federal income, state
and other tax returns filed for each of the fiscal years ending June 30, 1994
through June 30, 1997. The Company has filed returns for and paid in full all
known taxes, penalties, interest and related charges and fees to the extent
such filings and payments are required. The Company does not have any
deficiency with respect to any tax period and is not and will not be
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subject to any current or deferred liability with respect to taxes or
penalties or interest thereon, or related charges and fees, whether or
not assessed, which are not timely and adequately provided for in the tax
accruals in the most recent of the Financial Statements, other than current and
deferred taxes of the Company not yet due which arise solely from income earned
after the date of the most recent Financial Statements and which are consistent
in character and amounts with the tax accruals reflected in the Financial
Statements. No consents extending or waiving the time limited for reassessment
of any taxes, duties, governmental charges, penalties, interest or fines, or
any statutes of limitations related thereto have been filed with respect to the
Company for any fiscal year.
The Company has withheld from each payment made to any of its officers,
shareholders, directors, former directors, and employees and former employees
the amount of all taxes and other deductions (including without limitation,
income taxes, unemployment disability, and other required taxes and
contributions) required to be withheld and has paid the same together with the
employer's share of same, if any, to the proper tax or other receiving officers
within the prescribed times and has filed, in complete and accurate form, all
information and other returns required pursuant to any applicable
legislation within the prescribed times.
4.4 No Material Changes. Since June 30, 1997, except as disclosed in
the Financial Statements, or as set forth in Schedule 4.4, there has not been,
to the best of Company's and Seller's knowledge, any material adverse change or
changes, either individually or in the aggregate, in the general affairs,
business, prospects, properties, financial position, results of operations or
net worth of Company, and the business affairs of Company have been conducted in
the usual and ordinary
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course and in the manner as theretofore conducted. Except as set forth on
Schedule 4.4 hereof and the other Schedules to this Agreement, since June 30,
1997, Company has not:
(a) sold or transferred any material asset, other than in the
ordinary course of business;
(b) entered into any transactions affecting the Shares, or the
business or operations of Company, nor acquired additional assets or
entered into any contracts for the acquisition of same or incurred or
increased any obligation or liability (absolute or contingent), other
than in the ordinary course of business;
(c) paid or otherwise satisfied any obligations other than the
obligations arising in the ordinary course of business, except as set
forth in Schedule 4.4;
(d) subjected the Shares or any of the Company's assets to
any Lien;
(e) entered into any transaction other than in the ordinary
course of business;
(f) incurred, created or assumed any obligation for or paid
for any capital expenditures in excess of Two Hundred Fifty Thousand
($250,000) Dollars in the aggregate (other than as described in
Schedule 4.4);
(g) issued any capital stock or, declared or paid any dividend
or made any other payment from capital or surplus or other
distribution of any nature, or directly or indirectly redeemed,
purchased or otherwise acquired or recapitalized or reclassified any
capital stock or liquidated in whole or in part;
(h) created, incurred, or assumed any indebtedness or other
liability, except for accounts payable or other current liabilities
(other than for borrowed money) incurred in the ordinary course of
business;
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<PAGE> 17
(i) raised salaries or hourly rates or the rate of bonuses or
commissions or other compensation of any employee, other than those
made which were consistent with past practices;
(j) materially amended or terminated any contract, agreement,
franchise, permit or license other than in the ordinary course of
business;
(k) entered into any agreement or commitment with respect to
any of the foregoing; or
(l) suffered any material casualty, loss, damage or
destruction to any of its properties, whether or not covered by or
compensated under any insurance policy.
4.5 Leases. Schedule 4.5 sets forth a list of every lease or agreement
under which Company is a lessee of, or primarily or secondarily liable under, or
holds or operates, any property, real or personal, owned by any third party and
used in the Company's businesses (the "Leases"). The Leases have been entered
into in the ordinary course of business, are in full force and effect, are
valid and binding obligations of the parties thereto, and no defaults exist
thereunder. Buyer has been furnished with true and complete copies of all Leases
described on Schedule 4.5.
The Company's rights under all real estate leasehold estates (the
"Leased Real Estate") are not subordinate to, or defeasible by, any lien or any
prior lease thereon. There are no ground subsidences or slides on such Leased
Real Estate. The Leased Real Estate and the improvements thereon are fully
accessible by public roads, are free, to the best of Company's and Seller's
knowledge, from strips, gores and enclaves, and, to the best of Company's and
Seller's knowledge, the improvements thereon do not encroach onto the property
of other persons. No governmental authority having jurisdiction over such Leased
Real Estate has given any notice of a possible future
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imposition of assessments affecting the properties or to exercise the
power of eminent domain. The Leased Real Estate is adequately serviced by
utilities, including but not limited to, water, sewage, gas, waste disposal,
electricity and telephone.
4.6 Contracts. Schedule 4.6 contains a list of all contracts,
agreements and other instruments of any type or kind to which Company is a party
(the "Contracts") (other than oral employment agreements terminable by Company
at will without penalty under which the only obligation of Company is to make
current wage payments and provide current fringe benefits), including, without
limitation, any:
(a) manufacturer's representative, distributor, license,
sales, agency or other contract which is not terminable at will without
penalty;
(b) guarantee of any obligations of customers or others; or
(c) other contracts or commitments, except for any contract
continuing for a period of less than three months or involving payments
of less than One Hundred Thousand ($100,000) Dollars over its remaining
term (including periods covered by any option to renew by either
party).
Buyer has been (or will be before the expiration of the General Investigation
Period) furnished with true and complete copies of all Contracts described on
the foregoing Schedule.
The Contracts have been entered into in the ordinary course of
business, are in full force and effect, and are the valid and binding
obligations of the parties thereto, and no defaults exist thereunder. The
Contracts do not contain any provision, oral or written, expressed or implied,
prohibiting, or requiring the consent of any third party to the transfer of the
Shares to Buyer. Except as set forth in Schedule 4.19 (Related Party
Transactions), all of the existing purchase
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orders, executory contracts and commitments of the Company with its customers
and trade suppliers have been entered into in the ordinary course of business.
4.7 Employee Benefit Plans. Except as set forth on Schedule 4.7, or the
collective bargaining agreements listed in Schedule 4.11(a), Company has not,
directly or indirectly, maintained or contributed to any employee welfare
benefit plan, employee pension benefit plan, deferred compensation plan, bonus
plan, stock option plan, employee stock purchase plan, hospitalization plan,
employees' insurance plan or other employee or independent contractor benefit
plan, agreement, arrangement or commitment (collectively the "Employee Benefit
Plans"), except for normal policies concerning holidays, vacations and leaves of
absence. All Employee Benefit Plans have at all times complied with and been
administered according to the provisions of all applicable laws, rules,
regulations, orders, judgments, decrees and other requirements of governmental
authorities (collectively the "Employee Benefit Laws") except as stated in
Schedule 4.7. With respect to each Employee Benefit Plan: (1) all required
reports have been appropriately filed, (2) all notices required by the Employee
Benefit Laws have been appropriately filed, (3) all funding requirements and/or
contributions have been timely made, and (4) there have been no actions, suits,
grievances or other manner of litigation or claim with respect thereto, the
assets thereof or any fiduciary thereof. Except as specifically set forth in
Schedule 4.7, there are no other Employee Benefit Plans which are subject to
qualification under the Employee Benefit Laws. The Company does not maintain any
welfare benefit plans within the meaning of the Employee Benefit Laws which
provide for any benefits after termination of employment. No reportable events
under the Employee Benefit Laws have occurred with respect to any Employee
Benefit Plan, and there exists no condition or set of circumstances which could
result in a reportable event. Except as
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stated in Schedule 4.7, the value of all accrued benefits are fully
funded by the assets of such Employee Benefit Plans. True and complete copies of
all Employee Benefit Plans have been (or will be before the expiration of the
General Investigation Period) furnished to Buyer, together with copies the most
recent determination letters with respect to each such Employee Benefit Plan,
copies of all annual reports with respect thereto, and copies of the most recent
actuarial reports and trustee reports with respect to each such Employee Benefit
plan. The Company has not participated in any "multiemployer plan" as defined
in the Employee Retirement Income Security Act of 1974, as amended. The Company
has paid or accrued in the Financial Statements all amounts due and owing
through the respective dates thereof to their respective employees (including
bonuses or any other accrued compensation) under all Employee Benefit Plans.
4.8 Compensation. Schedule 4.8 attached hereto contains a true and
complete list showing the names of all employees of Company whose current
annual compensation (including bonuses) in the aggregate equals or exceeds One
Hundred Thousand ($100,000) Dollars, such employees' present annual compensation
including bonus, if any, and the increases, if any, in such annual compensation
for each of the calendar years 1995 through 1997 (year to date). Schedule 4.8
also contains the names of all employees of the Company who receive any
compensation whatsoever (including bonuses) from Seller or any company
affiliated with the Company and/or Seller and the amount of such compensation
received. Schedule 4.8 also lists all membership fees in any social, country or
other similar clubs or organizations which have been paid for or reimbursed by
the Company for each of the calendar years 1995 through 1997 (year to date).
4.9 Governmental Regulations and Litigation. Except as set forth
in Schedule 4.9 or in the Environmental Assessments (as hereinafter defined),
Company has complied with all applicable
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laws, orders and other requirements of governmental authorities, including all
Environmental Laws (as hereinafter defined). Company is not subject to any
court or administrative order, judgment or decree. Except as set forth in
Schedule 4.9 or in the Environmental Assessments, no investigation,
governmental or administrative proceeding or other litigation of any kind or
nature to which Company may be a party is now pending or, to the best of the
Company's and Seller's actual knowledge, threatened; to the Company's and
Seller's actual knowledge, no claim which has not ripened into litigation or
other proceeding has been made or threatened against Company and no facts,
circumstances or conditions exist which might give rise to any such claims,
investigations, proceedings or litigation.
4.10 Environmental Compliance.
(a) Except as set forth in the Environmental Assessments, the
Leased Real Estate, the use by the Company of the Leased Real Estate
and the conduct thereon of the businesses of the Company has not
violated any law, rule, regulation, code or ordinance of any
governmental authority, including but not limited to, any federal,
state, local or common law (including provisions of law or regulations
scheduled for future implementation), any environmental laws rules or
regulations of any governmental authority, or any of the following:
(i) The Resource Conservation and Recovery Act;
(ii) The Comprehensive Environmental Response Compensation
and Liability Act;
(iii) The Federal Occupations Safety and Health Act;
(iv) The Toxic Substances Control Act;
(v) The Environmental Protection Act;
(vi) The Federal Water Pollution Control Act; and
(vii) The Clean Air Act;
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(collectively the "Environmental Laws"), and Company and Seller have not
received notice of any such violation. Except as set forth in the Environmental
Assessments, the Leased Real Estate is not and has not been contaminated,
tainted or polluted in any manner whatsoever from the conduct of any activities
of the Company prior to the Closing Date, nor will the Leased Real Estate become
contaminated, tainted or polluted in any manner whatsoever from the conduct of
any activities of the Company prior to the Closing Date or, to the best
knowledge of the Company and the Seller, from the migration of contaminants
from property adjacent to the Leased Real Estate. The Leased Real Estate does
not appear on the National Priority List or any state listing which identifies
sites for remedial clean-up or investigatory actions and has not been used to
handle, treat, store or dispose of asbestos, PCB's, ureaformaldehyde or any
hazardous or toxic waste or substance, and has not otherwise been contaminated
(including, without limitation, contamination of soils, groundwater and
surface waters located on or under such premises) with pollutants or other
substances which may give rise to a clean-up obligation under any Environmental
Laws.
(b) Except as set forth in the Environmental Assessments, the Company
has utilized, stored, disposed of and transported all hazardous, polluting and
toxic substances (including petroleum products) and all wastes, whether
hazardous or not, in full compliance with all Environmental Laws so as not to
contaminate any property.
(c) Schedule 4.10 lists, to the best knowledge of the Company and the
Seller, all waste hauling companies at which wastes generated by the Company
have been disposed of (in each case identifying such wastes). Neither the
Company nor the Seller has received any notice (i) of any claim or potential
responsibility for the cost of remedial clean-up or
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investigating any sites or areas at which such waste hauling companies disposed
of any wastes generated by the Company, or (ii) that any such waste hauling
companies has violated any applicable Environmental Law. No written claims,
actions, protests or complaints have been filed or made by any of Company's
employees, agents or any other persons with respect to the presence, use,
storage or disposal of any hazardous or toxic wastes, materials or other
substances by the Company through the Closing Date and, to the best of the
Seller's and Company's knowledge, no reasonable basis for any such claims exist.
(d) The Company possesses all permits, licenses and
authorizations required under the Environmental Laws to conduct its
business operations as heretofore conducted, and all such permits,
licenses and authorizations are valid and in full force and effect.
(e) Schedule 4.10(e) lists all written environmental reports,
audits, assessments and written notices from any governmental agency in
the possession of Seller or the Company which relate in any way to the
environmental condition of the Leased Real Estate (collectively, the
"Environmental Reports"). Seller has made available to Buyer true and
complete copies of all Environmental Reports.
4.11 Labor and Employment Relations. Schedule 4.11(a) attached
hereto contains a true and complete list of all collective bargaining agreements
between the Company and any labor organization (true and complete copies of
which have been provided to Buyer), together with the names of all labor
organizations which have been extended recognition by the Company as collective
bargaining representative for one or more bargaining units comprising its
employees, and a description of such units. Except as disclosed on Schedule
4.11(a), Company has not received
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notice of or been the subject of any strike, work stoppage, labor dispute, union
organization drive, demands for representation, primary or secondary boycott,
unfair labor practice or employment discrimination charge. Schedule 4.11(b)
contains a true and complete fist of all actions before federal and state bodies
(including arbitration cases), pending or closed, wherein Company is a party,
which involve the labor and employment relations of Company relating to its
businesses during the last five (5) years.
4.12 Operating Condition of Assets. Except as otherwise noted in
Schedule 4.12:
(a) Each item of the Company's inventory is in good
condition, usable and saleable in the usual and ordinary course of business and
meets all current customer specifications.
(b) To the best of Company's and Seller's knowledge, the
plants, buildings, machinery, fixtures, equipment, tools, dies, jigs, and
improvements which are owned, used, leased or held by Company:
(i) are in good operating and usable condition,
subject to normal maintenance and repair, and free from any material
defects, such that following Closing Buyer can produce, manufacture,
assemble and sell products which meet the applicable specifications
and conform with the quality standards acceptable to the customers
of the Company;
(ii) are, and the use thereof is, in compliance with
all laws, ordinances and regulations of all government authorities
including, but not by way of limitation, all Environmental Laws,
except as set forth in the Environmental Assessments; and
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(iii) are not the subject of, and are not affected
by, any condemnation or eminent domain proceedings, presently
instituted or pending, and neither Company, Seller nor any
officer of Company has any knowledge that such premises or
properties are or will be threatened by any such proceedings.
(c) Neither Company nor Seller have received any notice of any
claimed violation of any such laws, ordinances or regulations referred
to in subparagraph (ii) above.
(d) the Company's assets constitute all the assets used by
Company with respect to or arising out of the operation of the
Company's businesses.
(e) All bank accounts, certificates of deposit and other
deposits or accounts of the Company are as set forth on Schedule
4.12(e) attached hereto.
4.13 Intangible Assets. Schedule 4.13 contains a true and complete list
of all patents and patent applications (pending or in the process of
preparation), domestic or foreign, patent rights, trademarks, trade names and
licenses under the patents of others, trade secrets, secret processes and other
proprietary rights of every kind and nature used or necessary for use by Company
in its businesses as presently conducted, or controlled in whole or in part by
Company or directly or indirectly owned or controlled in whole or in part by
Seller or any of Company's officers, directors or key employees. To the best of
Company's and Seller's knowledge, all such patents, patent applications, patent
rights and licenses are valid and effective in accordance with their terms, and
all such trade names, trade secrets, secret processes and other proprietary
rights are valid and effective. Except as disclosed in Schedule 4.13, there are
no agreements, contracts or obligations under which Company is obligated with
respect to, or is using, any patents, patent applications, patent rights,
trademarks, trade names, licenses under the patents of others, trade secrets,
secret
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processes or other proprietary rights. The manufacturing and engineering
drawings, process sheets, specifications, bills of material, trade secrets,
"know-how" and other like data of Company are solely in the possession of and
owned by Company, and are in such form and of such quality that, Buyer can,
following the Closing, design, produce, manufacture, assemble and sell the
products and provide the services heretofore provided by Company so that such
products and services meet applicable specifications and conform with the
quality standards acceptable to Company's customers.
To the best of Company's and Seller's knowledge, the conduct of
Company's businesses, including the manufacture and sale of its products, does
not infringe upon the patents, trademarks, trade secrets, trade names, or
copyrights or other intellectual property rights, of any other party. Neither
Company nor Seller have received any notice of any claim of infringement except
as described in Schedule 4.13 attached hereto. Company has not disclosed in any
way to any third party, other than to Buyer on a "confidential" basis or to
suppliers or customers of Company on a "confidential" and "need to know" basis
in the ordinary course of business, confidential information or trade secrets
including, but not by way of limitation, confidential product or process data,
information as to new product developments and product costs data, related to
the operations of Company, nor entered into any contract or agreement to
disclose any of the above to a third party.
4.14 Insurance. Schedule 4.14 attached hereto contains a true and
correct list and summary description of all material insurance coverage
(including, the types of coverage, amounts of coverage, name of the insurer,
expiration date and all claims made thereunder during the past three (3) years)
held by Company with respect to its businesses, assets, and any property of
others under Company's care, custody and/or control, including, but not limited
to all policies of fire,
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liability and other forms of casualty insurance, product liability insurance,
and group and worker's compensation insurance held by Company with respect to
its businesses. All such policies (true and complete copies of which have been
delivered to Buyer) are in full force and effect, the Company is not in default
under any of such policies, and the Company has not received any notices of
cancellation, material amendments or material increases in deductibles or
premiums. The Company has not been refused any insurance by any insurance
carrier at any time during the past five (5) years.
4.15 Customers and Commitments. Schedule 4.15 lists the ten (10)
largest customers of, and the ten (10) largest suppliers to, the Company during
the twelve (12) month period ended June 30, 1997 (stating the dollar volume of
the sales or purchases, as the case may be).
Except as stated in Schedule 4.2(a), section c, Neither Company nor
Seller have any knowledge that any supplier or customer of the Company intends
to cease dealing with the Company, or intends to decrease in any material
respect the amount of such person's dealings with the Company from the levels in
effect during the past twelve (12) months, or that any such person would
decrease in any material respect such dealings in the event of the consummation
of the transactions contemplated hereby.
4.16 Finder's or Broker's Fee. There are no broker's commissions,
finder's fees or other payments of like nature payable to any person or entity
in connection with the transactions contemplated by this Agreement as a result
of the actions of the Seller or the Company, except for the fees payable to W.Y.
Campbell & Company or its designee, which shall be the sole responsibility of
the Seller, and in no event will the Buyer have any liability for any such fee
or commission in connection with the transactions contemplated hereby.
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4.17 Licenses, Permits and Approvals. Schedule 4.17 contains a true
and complete list and description of all licenses, permits, authorizations and
approvals required by any federal, state or local governments' administrative or
judicial authorities or any of Company's customers or suppliers in connection
with the operation of Company's businesses. No approval of any of such
organizations is required for the consummation of the transactions contemplated
by this Agreement or which would materially adversely affect or impair the right
or ability of Buyer following the Closing to carry on any of Company's
operations substantially as heretofore conducted.
4.18 Competitive Interests. Except for the ownership of non-controlling
interests in securities of corporations the shares of which are publicly traded
or as otherwise set forth in Schedule 4.18, neither the Seller nor the Company
own, and to the best knowledge of the Seller and the Company, none of the
Company's officers, directors or other key employees (including purchasing
agents and departmental managers) owns, directly or indirectly, any interest or
has any investment or profit participation in any corporation or other entity
which is a competitor or potential competitor of or which otherwise directly or
indirectly transacts business with the Company.
4.19 Related Party Transactions. Except as stated in Schedule 4.19, all
of the transactions of the Company during the past five (5) years have been
conducted on an arms-length basis; to the best knowledge of the Seller and the
Company, no employee of the Company has violated the published business policies
of any governmental agency or customer or supplier with respect to gifts,
services or corporate business practices; to the best knowledge of the Seller
and the Company, the Company has not made any material payments outside the
ordinary course of business to any person or entity in respect of any business
with any customer or supplier of the
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Company. Except as described in Schedule 4.19, the Company does not have
any outstanding loans or other advances directly or indirectly to or from the
Seller, any officer, director, employee, relative or affiliate of the Seller or
any entity in which either of the Seller or the Company have a direct or
indirect interest, other than travel advances in the usual and ordinary course
of business.
4.20 General Warranty. The representations and warranties of Seller
contained in this Agreement and all schedules, exhibits, certificates,
statements and other documents furnished to Buyer by Company or Seller in
connection with the transactions contemplated hereby are accurate and complete,
and do not and will not contain any untrue statement of material fact, or omit
to state a material fact necessary to make the statements herein and therein not
misleading. Company and Seller have made full written disclosure of all facts
necessary to provide Buyer with all material information with respect to the
Company's businesses, assets and liabilities.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that:
5.1 Corporate Standing and Authority.
(a) Buyer is a corporation duly organized and validly
existing and in good standing under the laws of the State of Michigan.
(b) Buyer has legal capacity and authority to execute this
Agreement and to perform the transactions contemplated hereby. The
execution, delivery and performance of this Agreement do not and will
not violate or cause a default under any provision of Buyer's Articles
of Incorporation or Bylaws, or result in the breach, termination or
acceleration of any obligation or constitute a default or permit the
termination of any right under any
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mortgage indenture, lien, lease, contract, agreement, instrument,
order, arbitration award, judgment or decree to which Buyer is a party or by
which it or its properties are bound. Buyer has taken all necessary action
required by law, its Articles of Incorporation and Bylaws or otherwise, to
authorize the execution, delivery and performance of this Agreement. This
Agreement and each document and instrument executed pursuant to this Agreement
by Buyer constitutes a valid and binding obligation of Buyer, enforceable in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally. Buyer is not required to obtain the consent, approval or
waiver of any person not a party to this Agreement to enter into this Agreement
or to consummate the transactions contemplated hereby.
ARTICLE 6
INDEMNITIES
6.1 Indemnification by Seller.
(a) The Seller shall jointly and severally indemnify, defend and hold
Buyer, and its officers, directors and employees harmless, from, against and
with respect to any claim, liability, obligation, loss, damage, assessment,
judgment, cost and expense (including, without limitation, reasonable
attorney's fees and costs and expenses reasonably incurred in investigating,
preparing, defending against or prosecuting any litigation or claim, action,
suit, proceeding or demand), of any kind or character, arising out of or in any
manner incident, relating or attributable to:
(i) any breach or failure of any representation or warranty of the
Seller
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contained in this Agreement or in any certificate,
instrument of transfer or other agreement executed by the
Company, Seller or Company's officers in connection with this
Agreement;
(ii) any failure by the Company or Seller to perform
or observe, or to have performed or observed, in full any
covenant, agreement or condition to be performed or observed
by Company or Seller under this Agreement;
(iii) reliance by Buyer on any books or records of
Company or the Financial Statements furnished to the Buyer,
to the extent any of such information should prove to be
false in any material respect.
(iv) any liability or claim resulting from the
conduct of the Company's businesses through the Closing Date
(other than those reflected in the Financial Statements),
including but not limited to:
(A) any liability or claim for product
warranties, product recalls or personal injury or
damage to property based on or resulting from any
product manufactured or sold by Company through the
Closing Date;
(B) any liability or claim for any income,
capital, transfer, sales, use, goods and services
or other tax, assessment, penalty or interest of
any nature which relates to any period prior to or
including the Closing Date or any liability or
claim for any income, capital, transfer, sales,
use, goods and services or other tax, assessment,
penalty or interest of any nature which relates to
any period prior to or including the Closing Date
other than such accrued taxes as shall be currently
owing as of the Closing Date;
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(C) any liability or claim for workers' compensation
benefits, health life or other insurance benefits, or any other
employee benefits or claims for or by any of the Company's
employees resulting from or relating to any occurrence during any
period prior to or including the Closing Date which is not covered
by insurance or the Company's regular benefits consistent with
past practice; or
(D) any liability or claim resulting from the employment or
termination of any employee of the Company on or prior to the
Closing Date except for those vacations, paid leave and fringe
benefits to which employees are entitled under the Company's
regular programs, and except for any compensation or benefits
payable pursuant to the employment agreements listed in Schedule
4.6 hereof;
(v) any agreements, contracts, negotiations or other dealings by
Company or Seller with any person concerning the sale of the stock,
assets or business of the Company;
(vi) any losses incurred by the Company prior to the Closing Date
which are of a nature customarily insured against by a business similar
to that of the Company, but which are not covered by any insurance
plans maintained by or on behalf of the Company;
(vii) any trade or other accounts receivable (whether billed or
unbilled) of the Company (net of the allowance for bad debts as
reflected in the Closing Balance Sheet) which are not paid in cash
without resort to legal proceedings within One
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Hundred Twenty (120) days following the Closing;
(viii) [intentionally omitted]
(ix) any liability or claim by any third party resulting from the
conduct of the business of the Company through the Closing Date in
violation of any law, rule or regulation of any governmental authority
or agency;
(x) any obligation or liability to, or claim by, the Internal
Revenue Service, the Pension Benefit Guaranty Corporation or any other
party that the underfunding amount, including any excise tax,
assessment, penalty or interest, with respect to or as a result of the
termination of the Company's defined benefit plan shall be greater than
the Termination Liability, and any other claims, obligations or
liabilities relating to or with respect to such defined benefit plan;
or
(xi) any claim, obligation or liability relating to or with
respect to the oil well interests owned by the Company and disclosed on
Schedule 4.1(a) hereof (which interests shall be transferred out of the
Company to one or more of the Sellers on or before Closing, without any
cost or expense to the Company).
(b) The aggregate amount of indemnification to which Buyer shall be
entitled hereunder shall not exceed (i) an amount equal to the Purchase
Price if such claim relates to a breach of a representation or warranty set
forth in Section 4.2 hereof, or (ii) an aggregate amount equal to Ten
Million ($10,000,000) Dollars if such claims relate to any other matter.
(c) Buyer shall notify the Seller in a timely manner of any matters as
to which Buyer or any of its officers, directors or employees are entitled
to receive indemnification
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and/or defense under this Section, and shall set forth in such notice
reasonable detail regarding specific facts and circumstances then known by
Buyer which pertain to such matters.
(d) In the event the Buyer has asserted a claim for indemnification
under this Agreement, in addition to all other rights and remedies available
to Buyer, the Buyer shall be entitled to set-off the amount of such claim
against any amounts due, directly or indirectly, to Seller under any
agreement or arrangement until Buyer's claim has been fully satisfied,
including without limitation, any amount payable pursuant to or in
connection with this Agreement or any of the agreements executed pursuant
hereto.
(e) Except with respect to claims for indemnity pursuant to Sections
and 6.1 (a)(viii) and 6.1(a)(x) hereof (which shall not be subject to
the limitations set forth in this Section 6.1(e)), Buyer shall not be
entitled to demand payment or otherwise enforce any claim for
indemnification or defense, or any right to setoff, under this Section
unless the total amount of Buyer's claims under this Section (exclusive of
any amounts recovered pursuant to Sections 6.1(a)(viii) or 6.1(a)(x)
hereof) exceeds Two Hundred Fifty Thousand ($250,000) Dollars (the "Floor"),
in which event the Seller shall only liable for such claims in excess of the
Floor.
(f) In the event that Buyer shall make any claims against Seller
pursuant to Section 6.1(a)(vii) hereof, and Seller pays such claims in full,
then, upon Seller's request, Buyer shall promptly transfer to Seller, as the
case may be, for collection any such unpaid accounts receivables which have
been paid by Seller pursuant to Section 6.1(a)(vii). In such event, Seller
shall be entitled to take reasonable collection actions with respect to any
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account so transferred so long as such actions do not materially
interfere with the business operations of the Buyer. In this connection, all
payments received from any customer following the Closing Date shall be
deemed to be made first in payment of the account of said customer
outstanding on the Closing Date, unless otherwise designated by said
customer and except for any amounts as to which there is a bona fide
dispute.
(g) Buyer shall have no right to indemnification, defense or setoff
under this Section unless Buyer provides the notice required under Section
6.1(c) within (i) six (6) years following the Closing Date if such claim
relates to a breach of a representation or warranty set forth in Sections
4.1, 4.2, 4.3(c), 4.7 or 4.10 hereof or if such claim is pursuant to
Sections 6.1(a)(x) or 6.1(a)(xi) hereof, or (ii) two (2) years following
the Closing Date if such claim relates to any other matter.
6.2 Indemnification by Buyer.
(a) The Buyer shall indemnify, defend and hold harmless Seller, and its
officers, directors and employees, from, against and with respect to any
claim, liability, obligation, loss damage, assessment, judgment, cost and
expense (including, without limitation, reasonable attorneys' fees and costs
and expenses reasonably incurred in investigation, preparing, defending
against or prosecuting any litigation or claim, action, suit, proceeding or
demand), of any kind or character, arising out of or in any manner incident,
relating or attributable to:
(i) any breach or failure of any representation or warranty of the
Buyer contained in this Agreement or in any certificate, instrument of
transfer or other agreement executed by the Buyer in connection with
this Agreement; or
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(ii) any failure by the Buyer to perform or observe, or to have
performed or observed, in full any covenant, agreement or condition to
be performed or observed by Buyer under this Agreement.
(b) Seller shall notify Buyer in a timely manner of any matters as to
which Seller or any of its officers, directors or employees are entitled to
receive indemnification and/or defense under this Section, and shall set
forth in such notice reasonable detail regarding specific facts and
circumstances then known by Seller which pertain to such matters.
(c) Seller shall have no right to indemnification or defense under this
Section unless Seller provides the notice required under Section 6.2(b)
within two (2) years following the Closing Date.
6.3 Third Party Claims. In the event either party makes a claim for
indemnification under this Agreement as a result of any action, suit,
proceeding, claim, demand or assessment brought by a third party (a "Third Party
Claim"), then the party seeking indemnification (the "Indemnitee") shall advise
the indemnifying party (the "Indemnitor") of the same in the notice pursuant to
Section 6.1(c) or 6.2(b) hereof and include a copy of all relevant materials
with respect to such Third Party Claim received by the Indemintee, and such
Third Party Claim, shall be administered as follows:
(a) The Indemnitor shall, at its own expense, contest and defend such
Third Party Claim, provided, however, Indemnitee shall have the right to
participate in such defense (the costs and expenses of which shall be borne
by the Indemnitee) and, provided, further, in the event the Indemnitor shall
fail to proceed with reasonable diligence in
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defending any Third Party Claim, then the Indemnitee, upon reasonable notice
to the Indemnitor stating its objections to the conduct of the defense by
the Indemnitor, shall have the right to take over the defense of the Third
Party Claim, with the reasonable costs and expenses of such defense to be
borne by the Indemnitor. In no event shall the Indemnitor have the right to
settle any Third Party Claim without the prior written consent of the
Indemnitee, nor shall the Indemnitee have the right to settle any Third
Party Claim without the prior written consent of the Indemnitor. Consent to
the settlement shall not be unreasonably withheld.
(b) Each party shall cooperate with each other in connection with any
such Third Party Claim and provide each other with reasonable access to any
books, records or other documents or information which they may possess
relating to such claim.
6.4 Payment and Interest. In the event any party is entitled to
indemnification hereunder, such amounts shall be paid or the defense of the
claim undertaken, by the indemnifying party within thirty (30) days following
such indemnifying party's receipt of notice of such claim. In the event such
amounts are not paid or such defense is not undertaken within such thirty (30)
day period, any unpaid amounts ultimately determined to be due and owing shall
bear interest from and after the expiration of such thirty (30) day period at
the prime rate of interest charged from time to time by Comerica Bank plus two
(2%) percent, until the date of payment.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Buyer's Conditions. Buyer's obligations under this Agreement are, at
the option of
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Buyer, unless waived in writing, subject to the condition that on the Closing
Date:
(a) The representations and warranties of the Seller contained in this
Agreement shall be true and correct in all material respects on and as of
the Closing Date with the same effect as if such representatives and
warranties had been made on and as of the Closing Date;
(b) Seller shall have performed and complied with all agreement and
covenants contained herein on Seller's part required to be performed or
complied with on or prior to the Closing Date;
(c) Buyer shall have received a certificate executed by Seller dated
the Closing Date, as to the matters set forth in Sections 7.1(a) and (b)
hereof;
(d) During the period between the date hereof and the Closing Date,
there shall have been no material adverse change occurring in the assets,
businesses, operations or financial condition of the Company;
(e) To the extent required, the premerger notifications pursuant to
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall have been
filed and the waiting period and other requirements pursuant thereto shall
have expired or otherwise been complied with and there shall be no action
taken or instituted by the Department of Justice, the Federal Trade
Commission or other governmental body or agency to delay or otherwise enjoin
the transactions contemplated hereby; and
(f) Buyer having completed its purchase investigation (as set forth in
Section 8.1 hereof), and Buyer having not provided a notice of termination
of this Agreement to the Seller pursuant thereto.
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7.2 Seller's Conditions. Seller's obligations under this Agreement are, at
the option of Seller, unless waived in writing, subject to the condition that on
or before Closing Date:
(a) The representations and warranties of the Buyer contained in this
Agreement shall be true and correct in all material respects on and as of
the Closing Date with the same effect as if such representations and
warranties had been made on and as of the Closing Date;
(b) Buyer shall have performed and complied with all agreements and
covenants contained herein on its part required to be performed or complied
with on or prior to the Closing Date;
(c) Seller shall have received a certificate executed by Buyer, dated
the Closing Date, as to the matters set forth in Sections 7.2(a) and (b)
hereof, and
(d) To the extent required, the premerger notifications pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall have been filed
and the waiting period and other requirements pursuant thereto shall have
expired or otherwise been complied with and there shall be no action taken
or instituted by the Department of Justice, the Federal Trade Commission or
other governmental body or agency to delay or otherwise enjoin the
transactions contemplated hereby.
ARTICLE 8
COVENANTS
8.1 Purchase Investigation.
39
<PAGE> 40
(a) Buyer shall have the period from the date hereof until November 7,
1997 (the "General Investigation Period") (which date may be extended until
November 15, 1997 if such extension is required by the Buyer and the Buyer
has theretofore proceeded with reasonable diligence), within which to
complete a general purchase investigation reviewing the financial and
operating aspects of the proposed acquisition to satisfy itself as to the
viability of the same. Buyer shall also have the period from the date hereof
until November 22, 1997 (the "Environmental Investigation Period") (which
date may be extended by Buyer until December 23, 1997 to the extent
reasonably required to complete the Phase II environmental assessments
described below), within which to complete a purchase investigation
reviewing the environmental aspects of the proposed acquisition to satisfy
itself that it will have no liability as to the same. On or before the
expiration of the Environmental Investigation Period, Buyer shall commission
and complete, at Buyer's expense, a standard Phase I environmental
assessment of all premises leased by the Company, conducted by Geraghty &
Miller, together with those Phase II environmental assessments of such
premises as Buyer deems appropriate (the cost of such Phase II environmental
assessments, however, shall be shared equally between the Buyer and the
Seller). Such Phase I and Phase II environmental assessments shall be
collectively referred to herein as the "Environmental Assessments". Buyer
shall provide copies of the Environmental Assessments to Seller as soon as
they are available. The General Investigation Period and the Environmental
Investigation Period are collectively referred to herein as the
"Investigation Periods". During the Investigation Periods, Seller shall
provide Buyer and its representatives full access during normal business
hours to all of the property,
40
<PAGE> 41
books and records of the Company (including, without limitation, all
hazardous, toxic or other waste investigations of all premises owned, leased
or used by the Company) and to permit Buyer and its representatives to
physically inspect all of the Company's assets and facilities, to conduct
the Environmental Assessments, to interview such personnel of the Company as
Buyer shall deem appropriate with prior notice of the same to Seller, and to
interview customers of the Company with Seller's prior consent. At any time
prior to the expiration of the General Investigation Period, Buyer shall
have the absolute right, in its sole discretion and for any reason
whatsoever, to terminate this Agreement by giving written notice thereof to
Seller at the address set forth herein. At any time prior to the expiration
of the Environmental Investigation Period, if Buyer is not satisfied with
the environmental aspects of the proposed acquisition for any reason, Buyer
shall have the absolute right, in its sole discretion, to terminate this
Agreement by giving written notice thereof to Seller at the address set
forth above. In the event of any such termination, this Agreement shall
become null and void and neither party shall have any other or further
liability to the other hereunder. In the event that any of the Environmental
Assessments disclose any material environmental problems (the "Environmental
Problems"), and the Buyer has not agreed in writing to waive making any
claim against the Seller with respect to such Environmental Problems on or
before the expiration of the Environmental Investigation Period, then in
such event the Seller shall also have the right to terminate this Agreement
on or before the expiration of the Environmental Investigation Period by
written notice thereof to Buyer within such period, in which event this
Agreement shall become null and void and neither party shall have any other
or further liability to the other
41
<PAGE> 42
hereunder (other than the sharing of the Phase II environmental assessment
costs as set forth above). In the event that the Buyer has agreed in writing
to waive making such claims against Seller, then in such event Buyer shall
indemnify, defend and hold the Seller, and its successors and assigns,
harmless from and against and with respect to any and all liabilities,
obligations, claims, damages and expenses (including, reasonable attorneys
and consultant fees) which Seller may incur solely in their capacity as
shareholders of the Company as a result of such Environmental Problems. In
the event that the Buyer has not so agreed to waive any such claim against
the Seller and in the event that the Seller does not so elect to terminate
this Agreement and the transactions contemplated by this Agreement are
consummated, then in such event Seller shall, jointly and severally,
indemnify, defend and hold the Buyer and the Company, and their successors
and assigns, harmless from and against and with respect to any and all
liabilities, obligations, claims, damages and expenses (including,
reasonable attorneys and consultant fees) which they may incur as a result
of such Environmental Problems, and Seller shall waive making claim against
the Buyer or the Company, or their successors or assigns, with respect to
such Environmental Problems under any lease or other agreement with the
Buyer or the Company. In the event this transaction is consummated, the
purchase investigation contemplated hereby shall not diminish or replace the
reliance Buyer is placing on obtaining the representations, warranties and
indemnification provisions set forth in this Agreement.
(b) From and after the date hereof until the Closing, neither Company
nor Seller
shall:
i. Enter into any agreement with any other party regarding the
sale of
42
<PAGE> 43
the stock or assets of the Company; or
ii. Disclose the existence of this Agreement, the terms contained
herein or Buyer's interest in acquiring the Shares, without the prior
written consent of the Buyer; provided, however, Company and Seller
may discuss such matters with their officers, agents, lenders,
accountants and lawyers.
(c) Neither party shall issue any press release or make any public
announcement relating to the subject matter of this Agreement prior to the
Closing without the prior written approval of the other party to this
Agreement.
ARTICLE 9
MISCELLANEOUS
9.1 Additional Documents. Following the Closing, Buyer and Seller shall
execute and deliver any and all other documents and take such other actions as
may be reasonably requested by the other which are necessary or desirable to
effectuate the terms of this Agreement. Following the Closing, Buyer shall make
all records and books provided hereunder, including financial and historical
records of Company, available to Seller, or to his representatives, on the
premises of the Buyer upon reasonable notice and for a reasonable purpose, and
shall make available facilities to make any copies which Seller, or his
representatives may reasonably request. Buyer shall be entitled to reimbursement
of its actual costs incurred in providing such copies.
9.2 Survival. All representations, warranties, covenants and agreements of
the parties set forth in this Agreement, shall survive the Closing and continue
in full force and effect in accordance with the terms hereof after the
consummation of the transactions contemplated hereby.
9.3 Interpretation. Article titles, Schedule titles and headings to
Sections herein are
43
<PAGE> 44
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement. The Schedules and
Exhibits referred to herein shall be deemed an integral part of this Agreement
to the same extent as if they were set forth verbatim herein.
9.4 Entire Agreement. This Agreement, the Related Agreements and the
Appendices, Schedules and Exhibits attached hereto, constitute the entire
agreement among the parties pertaining to the contemporaneous agreements,
representations, and understandings of the parties. All prior negotiations,
writings and discussions between the parties (other than that certain
confidentiality agreement between the parties) are merged in this Agreement. The
parties hereto, by mutual agreement, may amend, modify and supplement this
Agreement. Any supplement, modification, or amendment of this Agreement shall
not be binding unless executed in writing.
9.5 Notices. All notices, requests, demands, and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
on the date of service if served personally on the party to whom notice is to be
given, or on the date of mailing if mailed to the party to whom notice is to be
given, by first class mail, registered or certified, postage prepaid, and
properly addressed as follows:
(a) To Buyer at:
c/o Talon Automotive Group LLC
900 Wilshire Dr.
Suite 203
Troy, Michigan 48084
Attention: David J. Woodward
44
<PAGE> 45
with a copy to:
Timmis & Inman L.L.P.
300 Talon Centre
Detroit, Michigan 48207
Attn: Richard M. Miettinen
(b) To Seller at:
c/o William H. John
2295 Lake Angelus Road
Lake Angelus, MI 48326
with a copy to:
Melvyn S. Goldstein
Attorney at Law
Berry Moorman P.C.
255 E. Brown St., Suite 320
Birmingham, MI 48009
Any party may change its address for purposes of this paragraph by giving the
other party written notice of the new address in the manner set forth above.
9.6 Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the State of Michigan.
9.7 Waivers. Any term or provision of this Agreement may be waived, or the
time for its performance may be extended, by the party or parties entitled to
the benefit thereof. Any such waiver shall be validly and sufficiently
authorized for the purposes of this Agreement if it is in writing and, as to
the Seller, if it is executed by him, or, as to Buyer, if it is executed by its
President. The failure of any party hereto to enforce at any time any provision
of this Agreement
45
<PAGE> 46
shall not be construed to be a waiver of such provision, nor in any way to
affect the validity of this Agreement or any part hereof or the right of any
party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
9.8 Expenses. Buyer and Seller shall each pay their respective costs and
expenses incident to their negotiation and preparation of this Agreement and to
their performance and compliance with all agreements and conditions contained
herein on their respective parts to be performed or complied with, including
the fees, expenses and disbursements of their respective counsel and
accountants. Charges to Seller incurred after September 29, 1997 shall be
charged to the Seller and not to the Company. To the extent that the Company
pays such charges for Seller's counsel and accountants for services after
September 29, 1997, such payments shall be treated as a loan by the Company to
Seller to be repaid at Closing.
9.9 Partial Invalidity. Wherever possible, each provision hereof shall be
interpreted in such manner as to be effective and valid under applicable law,
but in case any one or more of the provisions contained herein shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Agreement and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision or provisions had never been contained herein
unless the deletion of such provision or provisions would result in such a
material change as to cause completion of the transactions contemplated hereby
to be unreasonable.
9.10 Assignment. The rights and obligations under this Agreement may not be
assigned, except by the Buyer (without discharge of its obligations hereunder).
This Agreement shall be
46
<PAGE> 47
binding upon and inure to the benefit of the parties hereto and their respective
successors or permitted assigns. Nothing in this Agreement, express or implied,
is intended or shall be construed to confer upon any person (other than the
parties hereto and their respective successors or permitted assigns) any right,
remedy or claim under or by reason of this Agreement.
9.11 Remedies. In the event of any breach of this Agreement by the Seller,
Seller hereby acknowledges and agrees that the Shares are unique and that the
remedy at law would be inadequate, and, in such event, in addition to any other
remedy provided herein or by law or in equity, the Buyer shall be entitled to
specific enforcement of the terms hereof, including, without limitation,
appropriate injunctive relief in any court of competent jurisdiction, and that
no bond or other security shall be required in connection therewith.
9.12 Attorneys Fees. In the event of any litigation arising out of this
Agreement, the prevailing party shall be entitled to recover its reasonable
attorneys fees and costs and expenses of litigation from the non-prevailing
party.
47
<PAGE> 48
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SELLER: BUYER:
PRODUCTION ACQUISITION INC.
William H. John By: David J. Woodward
- ---------------------------------------- ---------------------------------
William H. John, Trustee of the David J. Woodward, Vice President
William H. John Amended and
Restated Revocable Trust U/A/D 10/10/95
Story S. John
- ----------------------------------------
Story S. John, Trustee of the
Story S. John Amended and Restated
Revocable Trust U/A/D 12/8/95
Melvyn S. Goldstein
- ----------------------------------------
Melvyn S. Goldstein, Trustee of the
John Irrevocable Gift Trust
U/A/D 12/29/94
48
<PAGE> 49
GUARANTEE
The undersigned hereby guarantees all those obligations of Production
Acquisition Inc. to Seller under that certain Stock Purchase Agreement dated the
date hereof between such parties (the "Purchase Agreement") to the extent that
such obligations arise from and after the date hereof and continue through the
Closing Date; provided, however, upon the consummation of the transactions
contemplated by the Purchase Agreement, the foregoing guarantee shall be void
and of no force and effect.
Dated: October 17, 1997 TALON AUTOMOTIVE GROUP L.L.C.
By: David J. Woodward
---------------------------------
David J. Woodward, Vice President
49
<PAGE> 50
LIST OF SCHEDULES
2.4 (a) Equipment Leases Excluded From Financed Debt
3.2 (b) Opinion of Buyer's Counsel
3.2 (c) Opinion of Seller's Counsel
4.0 Key Employee
4.1 (a) Ownership of other Equity Interests
4.1 (b) Breach or Acceleration of other Contracts
4.2 (a) Security Interests, Leases and Claims
4.2 (b) (I) Property owned or used by Company not at Company Premises
4.2 (b) (ii) Material Property owned by or in which 3rd Party has Claim
4.2 (c) Outstanding Common Shares (Rights, Preferences and Limitations)
4.3 (b) Possible Liabilities or Obligations
4.3 (c) Taxes
4.4 Material Changes
4.5 Leases and Third Party Property (2 Schedules)
4.6 List of Contracts (2 Schedules)
4.7 Employee Benefit Plans
4.8 Compensation of Highly Compensated Employees
4.9 Exceptions to Governmental Compliance and Pending Proceedings or
Litigation
4.10 Waste Hauling Companies
4.10(e) Environmental Reports
4.11(a) Collective Bargaining Agreements
4.11(b) Labor & Employment Relations Actions
4.12 Condition of Assets
4.13 Patents, Trademarks, Tradenames & Licenses
4.14 Insurance Contracts
4.15 Customers & Suppliers
<PAGE> 51
SCHEDULE 2.4(a)
EQUIPMENT LEASES EXCLUDED FROM FINANCED DEBT
1. The following leases which do not exceed an aggregate of original cost
in excess of $1,810,000:
a. Lease of Minster Presses SN E2-400-29110 (1997) from Michigan
National Bank dated September 3, 1997.
b. Lease of Minster Press SN E2-600-28987 (1997) from Michigan National
Bank dated September 5, 1997.
C. Leases in process with Michigan National Bank for peripheral
equipment pertaining to 400 Ton Minster Press, SN E2-400-29110 (1997) under
lease.
d. Lease in process with Michigan National Bank for peripheral
equipment pertaining to 600 Minster Press, SN E2-600-28987 (1997) under lease.
2. Hi-Lo Leases:
3. Vehicle Leases: (All are treated as operating leases on the books of
the Company).
<PAGE> 52
SCHEDULE 3.2(b)
OPINION OF BUYER'S COUNSEL
<PAGE> 53
SCHEDULE 3.2(b)
1. Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Michigan.
2. Buyer has the full corporate power and authority to enter into the
Purchase Agreement and the Related Agreements to consummate the transactions
contemplated thereby and to comply with the terms, conditions and provisions
thereof. The execution, delivery and performance of the Purchase Agreement and
the Related Agreements have been duly authorized by the Buyer's Board of
Directors and do not require any further authorization or consent of the Buyer.
The Purchase Agreement and the Related Agreements constitute the legal, valid
and binding obligations of Buyer enforceable against Buyer in accordance with
their respective terms, except as such enforceability may be limited by
bankruptcy, moratorium, insolvency, reorganization, or other laws affecting or
limiting the enforcement of creditor's rights generally and except as such
enforceability is subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
3. The execution, delivery and performance of the Purchase Agreement and
the Related Agreements by Buyer and the consummation of the transactions
contemplated thereby do not:
(a) conflict with or result in a breach of the Articles
of Incorporation or Bylaws of Buyer; and
(b) to the best of our knowledge, conflict with or result in a
breach of or default under any unwaived provisions of any indenture or credit
agreement or other material agreement to which the Buyer is a party or by which
it or its properties may be affected or bound.
<PAGE> 54
SCHEDULE 3.2(c)
OPINION OF SELLER'S COUNSEL
<PAGE> 55
SCHEDULE 3.2(c)
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Michigan and the Company is not
required to be qualified as a foreign corporation to do business under the laws
of any other jurisdiction, except where the lack of qualification would not
have a material adverse effect on the Company.
2. Sellers have the full power, capacity and authority pursuant to the
Trusts and otherwise to enter into the Purchase Agreement and the Related
Agreements and to consummate the transactions contemplated thereby and to comply
with the terms, conditions and provisions thereof. The Purchase Agreement and
the Related Agreements have been duly authorized, executed and delivered by the
Sellers, and do not require any further authorization or consent. The Purchase
Agreement and the Related Agreements are the legal, valid and binding obligation
of Sellers enforceable in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, moratorium, insolvency,
reorganization, or other laws affecting or limiting the enforcement of
creditor's rights generally and except as such enforceability is subject to
general principals of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law);
3. The execution, delivery and performance of the Purchase Agreement and
the Related Agreements and the consummation of the transactions contemplated
thereby do not and will not:
(a) conflict with or result in a breach of the Articles of
Incorporation or Bylaws of the Company; or
(b) to the best of our knowledge, conflict with or result in a breach
of or default under any unwaived provision of any indenture, credit agreement,
shareholders agreement, buy-sell agreement or other material agreement to which
either the Sellers or the Company are a party or by which they or their
properties may be affected or bound; except for covenants with the Company's
primary lender, Michigan National Bank.
(c) violate any provision of law or any order of any court or other
agency of government binding upon the Company or the Seller, provided the Hart
Scott Rodino application is approved.
4. The Company's authorized capitalization consists of ________ (50,000)
shares __________ of ($1.00) Dollar par value, common stock (the "Authorized
Common Stock"). Thirty thousand (30,000) shares of the Authorized Common stock
are currently issued and outstanding (the "Outstanding Common Shares"). (The
Outstanding Common Shares are sometimes referred to herein as the "Shares").
Sellers are the sole owners of the Shares and have full right and authority to
sell the Shares to the Buyer. No other shares of capital stock of the Company
are issued or outstanding. All of the rights, preferences, and limitations of
the Shares are set forth on Schedule 4.2(c) to the Purchase Agreement.
5. To the best of our knowledge, except as disclosed in the Purchase
Agreement, no litigation or other proceedings before any court or administrative
agency is pending against the Company or the Sellers.
<PAGE> 56
SCHEDULE 4
KEY EMPLOYEES
<TABLE>
<S> <C>
William H. John Chairman and CEO
Richard A. Rossetti President and COO
Vicki L. Barnett Vice President-Finance
Richard Murray Vice President-Marketing
Jeffrey Brune Vice-President-Manufacturing
Acting Chief Engineer
Richard Burchette Plant Manager-New Baltimore
Brian Berger Director of Operation-Oxford
Melvyn S. Goldstein Outside General Counsel (Mr. Goldstein is Assistant Secretary of
the Company, but is not included on this list in such capacity.)
Nothing contained in this Agreement nor the fact that Mr.
Goldstein is included on this list shall require the disclosure of
information given to Mr. Goldstein within the protection of the
attorney-client privilege nor shall such facts constitute a waiver of
the attorney-client privilege between the Company and Mr.
Goldstein, Wright & Goldstein nor Berry Moorman.
</TABLE>
<PAGE> 57
SCHEDULE 4.1 a
OPERATIONS OUTSIDE OF MICHIGAN AND
OWNERSHIP OF OTHER EQUITY INTERESTS
1. See Schedule 4.9 for status of qualification to do business outside of
Michigan.
2. The Company owns 50% of the common stock of Sportswatch, Inc., a
Michigan corporation. Sportswatch, Inc. is the lessee of a suite at the Palace
of Auburn Hills, Michigan.
3. The Company also owns a number of working interests in dormant oil
wells in Illinois. .
<PAGE> 58
SCHEDULE 4.1(b)
BREACH OR ACCELERATION OF OTHER CONTRACTS:
1. Financing arrangements with the Company's principal lender Michigan
National Bank allow for acceleration of all due dates in the event of a change
in control of the Company. This financing other than press leases, will be paid
at the time of closing.
<PAGE> 59
SCHEDULE 4.2(a)
SECURITY INTEREST, LEASES AND
POSSIBLE CLAIMS ADVERSE CIRCUMSTANCES
A. Liens:
1. Michigan National Bank has been granted security interests in all
assets of the Company to secure its various credit lines to the Company. These
debts will be paid at the time of closing.
B. Leases:
1. Leases of Minster Presses from Michigan National Bank (see Schedule 2.4
(a))
2. Leases of various automobiles, copies of which have been separately
supplied to Buyers.
3. Leases of Hi-Lo equipment, copies of which have been separately
supplied to Buyer. The above leases will continue as part of the Company's
obligations after the closing.
C. Possible Adverse Circumstances:
The following circumstances could have an adverse effect on the ability of
the Company to carry on its operations substantially as previously conducted.
1. The Company needs to expand plant facilities to fully accommodate
probable new jobs. After the development of its projections for future sales,
the Company was approached by TRW to take over approximately $8,000,000 of work
currently being produced by MSI. As a condition of being awarded that work, the
Company was required to agree to the price roll back program of TRW and to
pursue opening a facility near TRW's Cookville, TN location.
2. There is limited availability of skilled labor in areas where the
Company currently has its plants.
3. For at least five (5) years the entire automobile industry has
experienced extreme pressures from OEMs for annual price concessions. While the
Company is confident that it will be able to accommodate these pressures from
its customers in accordance with its past practices, nevertheless this factor
could have a material adverse effect in the future, depending upon the attitudes
and policies adopted by the Company's customers. While the Company has
experienced a reduction in its profits in past years, nevertheless it has
effectively minimized the impact of such price rollback policies through its
program of continuous improvement and by price negotiations. Within ten (10)
days after the date hereof, Seller shall disclose to Buyer in writing all formal
requests for price concessions of which Seller is aware
4. From past experience certain factors could have an adverse effect on
the Company
<PAGE> 60
these include a rapid acceleration of material costs, a substantial downturn in
annual vehicle sales, strikes at customer facilities and similar items beyond
the control of the Company.
5. The Company has entered into the "steel resale program" with General
Motors. Under this program, General Motors negotiates a price with certain steel
suppliers to be the standard in making sales to its suppliers. In order to stay
on the bid list with GM, it is necessary for its stamping suppliers to
participate in the steel resale program. When the available pricing for the
steel in the open market is significantly below that of steel resale program
suppliers, the Company has taken advantage of this disparity by purchasing
certain steel in the open market. Thus far, the balance of such open market
purchases has not caused General Motors to protest this activity, although the
Company has not been required to undergo a steel resale program audit by GM.
Recently, however, GM has requested that the Company work toward full
participation in the steel re-sale program. GM has stated that if the Company
incurs increased steel costs at the resale program matrix costing system, the
Company will be allowed to pass through such increases in costs to GM.
6. It is important that the proposed transaction be disclosed to the
Company's customers. There is a possibility that such customers will object to
the change of control. Such factors should be explored to the Buyers
satisfaction during the due diligence period. Active Manufacturing has placed
approximately $3,000,000 of work with the Company. Upon learning of the Buyer's
possible future involvement with the Company, it expressed concern as it
considers itself a direct competitor of the Buyer's affiliates.
<PAGE> 61
SCHEDULE 4.2(b)(1)
PROPERTY OWNED OR USED BY COMPANY
NOT AT COMPANY PREMISES.
1. The Company owns the following equipment located at its related
supplier Midwest Products and Manufacturing, Inc. which will be returned upon
request of the Company without costs other than rigging and transportation.
1 200 Ton Minster Press with feed
1 150 Ton IOB Press
2 Pneumatic assembly machines
2 Miller MIG welders
1 Tumbler
1 Salt spray cabinet
1 150 KVA welder
2 Computers
Dies and tooling belonging to the Company
Note: 1 press at the Oxford Plant belongs to Midwest
2. The Company has an exhaust system at WRJ Manufacturing, Inc., a related
Company, which will be returned upon request of the Company, without costs other
than rigging and transportation
3. Purchased presses not yet delivered to Company:
1 Bliss 400 ton Press at Universal press (an equipment broker).
4. Vehicles utilized by officers and employees.
5. Inventory, WIP, tools, dies and fixtures as well as material handling
items at various sub-contractors and outside processors.
6. Presses and other equipment not currently in use, but owned by the
Company located at its premises.
7. Obsolete and service inventory at Industrial Packaging, Inc., Detroit,
Michigan totaling $199,000 on the June 30, 1997 financial statement.
<PAGE> 62
SCHEDULE 4.2(b)(ii)
MATERIAL PROPERTY OWNED BY OR IN WHICH
THIRD PARTY HAS CLAIM
1. Sportswatch, Inc. - Suite at Palace
2. 2 Minster Presses 400 Ton and 600 Ton Leased from Michigan National
Bank and peripheral equipment.
3. Tooling belonging to Customers
4. Leased vehicles, Hi-Los and office equipment per Schedule 4.2(a).
<PAGE> 63
SCHEDULE 4.2(c)
OUTSTANDING COMMON SHARES; RIGHTS, PREFERENCES AND LIMITATIONS
1. The issued and outstanding shares of the Company are:
% # of Shares
- -----------
William H. John, Trustee 82.8% 24,830
Story S. John, Trustee 13.5% 4,050
Melvyn S. Goldstein, Trustee 3.7% 1,120
------
Totals 100% 30,000
2. The rights and preferences of the shares of the Company are stated in its
Articles.
3. Rick Rossetti's right to acquire $2,000,000 worth of stock on death of
William H. John according to the agreement dated August 30, 1990, which right
lapses upon the sale of the controlling interest in the Company.
<PAGE> 64
SCHEDULE 4.3(b)
POSSIBLE LIABILITIES OR OBLIGATIONS
1. Suit by McPherson for slip and fall liability for which Company is
insured by Zurich American Insurance Company (see Schedule 4.9).
2. Suit by Wafaa Hannah for alleged civil rights violation (see Schedule
4.9).
3. Various Union grievances as described in Schedule 4.9.
4. Various worker compensation claims covered by workers compensation
insurance. Theses claims are described in a summary of employee circumstances
prepared by the Company, a copy of which has been given to Buyer.
5. Results of payroll audit for year ending June 30, 1997 shows a Company
liability of $75,222 in premium due to Zurich-American Insurance Company for
workers compensation insurance. Since this amount was not known at time that
field work for the audited statement was completed, it was not accrued in that
statement. However, the liability for the previous year end adjustment was
recognized in the year ending June 30, 1997.
<PAGE> 65
SCHEDULE 4.3(c)
Company will accrue or pay as of the Closing Date all of the federal, state and
local taxes not yet due at the time of this Agreement, but which will be owing
as of the Closing Date.
<PAGE> 66
SCHEDULE 4.4
MATERIAL CHANGES
1. On October 3, 1997, the Company entered into an agreement with TRW
agreeing to participate in its rebate program and to review the possibility of
developing a stamping manufacturing facility in Tennessee during calendar year
1998.
2. The Company leased 2 Minster Presses and peripheral equipment and feeds
(see Schedule 2.4(a)).
3. Since May, 1997 the President and Chief Financial Officer, together
with their respective support staff have been intensively involved in the
preparation of materials to support a change in control of the Company. These
activities have been outside of the ordinary course of the business and have
seriously restricted the availability of these officers to attend to their
regular duties.
4. A new tooling line of credit has been established with Michigan
National bank for $3,500,000. Advances are based upon 75% of supplier interim
payment invoices to the Company. This debt is anticipated to be discharged at
closing.
5. Capital expenditures aggregating over $100,000 have been made in
gearing up for new jobs. The two new Minster presses installed that the New
Baltimore location had an aggregate cost of $1,800,000 with peripheral
equipment, all of which will be included in the lease arrangements with Michigan
National Bank. In addition, General Motors has instituted a new returnable
packaging program which has required extra ordinary initial investment by the
Company (prior to June 30, 1997).
6. The Company will pay the dividend accrued as of 6/30/97 in the amount
of $30,000. The Company retained the services of W.Y. Campbell & Company to
evaluate the marketability of the Company and paid it a fee of $50,000 for such
consultation. Additional services were performed by Berry Moorman P.C. in
conjunction with such evaluation. Since June 30,1997 the charge for such served
was approximately $18,380. The Company has also paid those bonuses which were
accrued as of June 30, 1997, which bonuses were consistent with past practices
of the Company.
7. As a result of the change of control contemplated by this Agreement, it
is anticipated that the Company will terminate its business relations with the
related companies: Midwest Products & Manufacturing and WRJ Manufacturing, Inc.
Such termination is likely to result in the inability of those entities to
pay-off the indebtedness owed by them to the Company.
8. It is anticipated that certain obligations of the Company to William H.
John will be offset against sums owing by William H. John to the Company and the
net balance owing to William H. John will be paid to him. The total amount owing
to Mr. John (other than for salary) is less than $100,000 before any setoffs.
<PAGE> 67
9. The Company entered into the letter agreement of October 3, 1997 with
TRW as described in Schedule 4.2(a).
<PAGE> 68
SCHEDULE 4.5
LEASES AND THIRD PARTY PROPERTY
1. The Master Lease with Michigan National Bank covering the two (2) Minster
Presses identified in Schedule 2.4(a) has a cross-default provision with
other financing through that Bank. The parties will seek the consent to the
continuation of the Lease notwithstanding the change of control of the
Company, as well as the deletion of the cross default and cross
collateralization provisions
2. See schedule of Hi-Lo, automobile and office equipment leases attached
hereto
3. Lease dated August 5, 1994 between the Company and John Realty Investments
Inc. regarding property located at 50911 Richard West Blvd., Chesterfield
Twp., Michigan, with Addendum
4. Lease dated June, 1993, between the Company and Marie Schena regarding
property located at 29303 Kehrig Dr., Chesterfield Twp., Michigan, with
Rider
5. Lease dated November 21, 1989 between William H. John, Trustee of the
William H. John Amended and Restated Revocable Trust u/a/d February 5, 1985
as amended, regarding property located at 28175 William Rosso Highway, New
Baltimore
6. Lease dated August 5, 1991 between the Company and James L. and Betty
L. Guy regarding property located at 2300 X-Celsior Drive, Oxford, Michigan
7. Michigan National Bank is the primary mortgagee of the facility at 28175
Win. Rosso Hwy and has a second mortgage on the property as collateral for
the Company's credit facility with that bank. The so called "MIG building"
just east of the main New Baltimore plant is being purchased on Land
Contract by William H. John, Trustee form Wamco Corporation. Seller
believes that the leased facilities in Oxford, the warehouse on Richard
West Boulevard and the TRW building in New Baltimore just to the northeast
of the main plan) are all subject to underlying mortgages which could
result in the ouster of the Company's occupancy if defaulted.
8. Most of the dies and tooling used by the Company belong to customers.
9. Certain employees may have their personal hand tools at the Company
facilities to assist in their jobs.
10. The scrap contractor has various containers belonging to it at the Company
plants to accommodate the removal of scrap.
11. The Company has numerous customer returnable containers at all of its
locations.
<PAGE> 69
SCHEDULE 4.6
LIST OF CONTRACTS
1. Employment Agreement dated August 29, 1986 between the Company and William
H. John
2. Employment Agreement dated August 30, 1990 between the Company and Richard
Rossetti, as amended August 4, 1995
3. Employment Agreement dated February 15, 1994 between the Company and Vicki
L. Barnett
4. Employment Agreement dated April 3, 1990 between the Company and Richard D.
Murray, as amended by two page Amendment of Contract of Employment which
memorializes and confirms past dealings between the parties and relates to
Paragraph 3(a) of the Employment Agreement
5. Employment Agreement dated Nov. 1, 1991 between the Company and Thomas
Davis
6. Stock Purchase Agreement dated August 30, 1990 between William H. John
Revocable Trust u/a/d Feb. 8, 1990 and Richard Rossetti
7. Output Contract dated July 1, 1995 between the Company and Ferrous
Processing & Trading Co.
8. Other oral arrangements for purchase and removal of scrap entered into in
the ordinary course of business which are terminable upon 30 days notice or
less
9. Various service contracts with suppliers for servicing trash removal,
office equipment and computers, tool cleaning, waste oil removal,
landscaping and snow removal and similar services, all of which have been
entered into in the ordinary course of business and have terms less than
one year
10. The Company has a Split Dollar life Insurance Agreement with William H.
John which will be terminated at Closing
11. The Company has an oral agreement with General Motors to participate in its
steel resale program
12. The Company has a letter agreement with TRW dated Oct. 3, 1997 to
participate in its "rebate" program and to open a facility in Tennessee
13. The Company has agreements with General Motors, Active and Delphi to
grant price roll backs each year, which agreements have been or will be
provided to Buyer in writing on or before the expiration of the General
Investigation Period
<PAGE> 70
14. The Company has purchase orders from all of its customers for all of its
current production. All such purchase orders from those customers listed
in Schedule 4.15 are in the forms which will be provided to Buyer within 7
days
15. The Company has current purchase orders outstanding for materials to be
supplied, dies and tools to be built and serviced, sub-contract work to be
performed and shipping contracts, all using form attached hereto
16. The Company has casualty, liability and workers compensation insurance,
hospitalization insurance, life and disability insurance, a defined
benefit plan, employee 401(k) profit sharing plan as set forth in other
schedules attached hereto
17. See collective bargaining agreements set forth in Schedule 4.1l(a)
18. Requirements Contact between the Company and Parkin Welding SPLS dated
July 1, 1996
19. Exclusive Service Agreement between the Company and Usher Oil dated July
1, 1996
20. Service Agreement between the Company and Sterling Sanitation, Inc.
21. Service/Supply Agreement between the Company and Mechanics Uniform Rental
Company effective October 22, 1992
22. Service/Supply Agreement between the Company and Cintas effective January
10, 1997
23. Service Agreement between the Company and J.R. Lawn Service expiring
October 31, 1997
24. Service/Supply Agreement between the Company and Tri-County Coffee Service
dated August 23, 1995
25. See leases described in Schedule 4.5
<PAGE> 71
SCHEDULE 4.7
EMPLOYEE BENEFIT PLANS
1. The Company has the following welfare benefit programs for its
employees, but has not developed a formal plan in compliance with IRC Section.
79 to cover them nor has it provided qualifying summary plan descriptions to its
employees. (The Company has individual group plans with benefit summaries which
have been provided to the employees):
a. Group hospitalization insurance
b. Group life insurance
c. Group short-term disability insurance
2. The Company contributes to the Split Dollar Life Insurance Agreement
for William H. John.
3. The Company has a Salaried Employees' Defined Benefit Plan frozen as of
6/30/97. Summary Plan Descriptions for these plans were not issued on a timely
basis to the participants. Funding for the Defined Benefit Plan has been paid to
a "current" level, but will have an estimated shortfall of approximately
$375,000 if this Plan is terminated. Summary Plan Descriptions for the Defined
Benefit Plan were not issued on a timely basis to the salaried employees.
4. The Company has Salaried Employees' 401(k) Profit Sharing Plan and an
Hourly Employee 401(k) Profit Sharing Plan
<PAGE> 72
SCHEDULE 4.8
COMPENSATION OF HIGHLY COMPENSATED EMPLOYEES
William H. John
Richard A. Rossetti
Richard Murray
Thomas Davis
Vicki Barnett
Jeffrey Brune
See attached detail of wages and memberships.
<PAGE> 73
<TABLE>
<CAPTION>
Bonuses Annual Salary Commissions
- --------------------------------------------------------------------------------------------------
1995 - Calendar Year l/1/95 to 12/31/95
<S> <C> <C> <C>
Vicki Barnett $10,000.00 $81,922.71
Rick Rossetti $50,000.00 $226,442.22
Jeff Brune $20,000.00 $73,845.90
Tom Davis $0.00 $108,173.25
William John $0.00 $221,153.74 $454,770.00
Rick Murray $0.00 $223,865.70
- ---------------------------------------------------------------------------
TOTAL $80,000.00 $935,403.52 $454,770.00
<CAPTION>
1996 - Calendar Year 1/1/96 to 12/31/96
<S> <C> <C> <C>
Vicki Barnett $20,000.00 $100,384.41
Rick Rossetti $118,000.00 $278,173.00
Jeff Brune $0.00 $88,338.08
Tom Davis $0.00 $124,038.66
William John $0.00 $249,999.88 $446,600.00
Rick Murray $0.00 $272,884.54
- ---------------------------------------------------------------------------
TOTAL $138,000.00 $1,113,818.57 $446,600.00
<CAPTION>
1997 - Calendar Year 1/1/97 to 09/21/97
<S> <C> <C> <C>
Vicki Barnett $20,000.00 $77,735.34
Rick Rossetti $57,000.00 $227,403.78
Jeff Brune $10,000.00 $68,406.80
Tom Davis $0.00 $93,750.15 To date
William John $68,000.00 $119,499.91 $300,000.00
Rick Murray $0.00 $206,249.94
- ---------------------------------------------------------------------------
TOTAL $155,000.00 $793,045.92 $300,000.00
</TABLE>
AB 10/16/97
<PAGE> 74
SCHEDULE 4.9
EXCEPTIONS TO GOVERNMENTAL COMPLIANCE AND PENDING
PROCEEDINGS OR LITIGATION
1. State Regulations.
Seller is not aware of any state regulation or filing with which it may be
required to comply outside of the State of Michigan, but there may be some such
requirements of a non-material nature in states into which the Company ships
parts. The Company currently ships or within the past three (3) years has
shipped, parts into the following states:
Pennsylvania
Kentucky
Indiana
Michigan
Texas
California
Maryland
Wisconsin
Missouri
Virginia
Tennessee
Ohio
Louisiana
New Jersey
In 1997, the Company began shipping parts to Dana Corporation in Reading,
PA in February and to is plant in Elizabeth, KY in May, 1997. The number of
parts is escalating monthly to the anticipated level of $2.5 Million to $3.0
Million in each state annually. The terms of shipping are FOB their dock.
Accordingly, the Company should probably qualify to do business in each state in
1997.
2. Foreign Regulation.
Seller is not aware of any foreign regulation or filing with which it may
be required to comply outside of the United States, but there may be some such
requirements of a non-material nature in countries into which the Company ships
parts. The Company currently ships or within the past three (3) years has
shipped, parts into the following countries:
Canada
Mexico
Brazil
<PAGE> 75
Page 2
SCHEDULE 4.9
3. Safe1y Regulation. No open violations.
4. Litigation and Administrative Proceedings
There are workers compensation claims pending against the Company which are
covered by worker's compensation insurance policies covering the periods when
such claims arose. A complete list of such claims has been provided to Buyer.
Richard M. McPherson v Production Stamping, Inc., Macomb County Circuit Court
Case No. 96-6191-NO, is a case by the employee of the Company's waste oil
removal contractor for injuries which he claims he sustained by slipping and
falling into a floor drain while performing his job for the Company. The case is
being defended by counsel designed by Zurich-American Insurance Group, the
Company's insurer at the time of the injury. Upon Circuit Court mediation, the
mediators awarded $140,0000 to the Plaintiff, which award was accepted by the
insurer for the Company. Plaintiff is attempting to obtain a waiver of
subrogation rights by the workers compensation carrier of Plaintiff's employer
which currently has a $125,000 claim. The Company is insured for public
liability coverage for this claim plus costs of defense. Both parties have
accepted the mediation award and are in the final stages of settlement.
5. Ms. Wafaa Hannah is a former employee who threatened to file a civil
rights based claim for discrimination on the basis of nationality. Outside
counsel has reached settlement with Ms. Hannah in the amount of $12,000. The
settlement agreement includes a fall release of liability, covenant not to sue,
a bar to future employment with the Company and a confidentiality requirement as
to the claim and all terms of the settlement.
Gayland Coles. Mr. Coles has filed a complaint with the Michigan Department
of Civil Rights on April 10, 1997. Mr. Coles claims that he has been subjected
to different treatment and a racially hostile atmosphere at work. Mr. Coles is
African-American and files his discrimination action on the basis of race. The
Company responded to the Michigan Department of Civil Rights letter dated April
29, 1997 on May 12, 1997 and has not heard any response as of October 14, 1997.
Dorothy Penzian. Ms. Penzian has retained an attorney and filed for a
mediation hearing under worker comp due to an injury which occurred in May of
1995. She claims that she hurt her hip sweeping floors. Her hearing is scheduled
for January 15, 1998. Zurich American Insurance is handling the claim.
<PAGE> 76
Page 3 SCHEDULE 4.9
6. Union Grievances.
The following grievances are being processed by USWA local Union 4933:
a. In a grievance dated 10/3/97, Mr. Cecil Johnson stated that he had been
told he was too slow in the shipping and receiving department. He requests that
he be allowed to stay in Shipping and Receiving longer to learn the job and
become efficient.
b. In a grievance dated 10/2/97, Mr. Ronald Mazza cited contract language
that "overtime will be distributed based on department classification, seniority
and ability. . ." and stated that an employee with less seniority had worked six
(6) hours overtime and nobody had asked him to work that day. He requests
payment for six (6) hours overtime.
c. In a grievance dated 10/2/97, Mr. Randy Whitmore states an identical
complaint to that by Mr. Mazza and requests that he be paid six (6) hours
overtime.
<PAGE> 77
SCHEDULE 4.10
WASTE HAULING COMPANIES
This list will be provided within 7 days of signing this Agreement.
<PAGE> 78
SCHEDULE 4.10 (e)
ENVIRONMENTAL REPORTS
1. Phase I Environmental Assessment and Limited Suspect
Asbestos-Containing Materials Assessment of Industrial Property for 28225
William Rosso Hwy., Chesterfield Twp., Michigan dated November 27, 1995.
2. Environmental Site Assessment by Swanson Environmental Inc. dated
November 29, 1994 for property located at 2300 X-Celsior Dr., Oxford, Michigan.
<PAGE> 79
SCHEDULE 4.11 (a)
COLLECTIVE BARGAINING AGREEMENTS
1. Agreement between Production Stamping, Inc. and United Steel Workers of
America AFL-CIO-CLC Local Union 4933 effective December 18, 1994 and terminating
December 19, 1997 for the Oxford hourly-rated bargaining unit.
2. Agreement between Production Stamping, Inc. and United Steel Workers of
America AFL-CIO-CLC Local Union 4933 effective February 20, 1996 and terminating
February 19, 1999 for New Baltimore hourly-rated bargaining unit.
<PAGE> 80
SCHEDULE 4.11 (b)
LABOR AND EMPLOYMENT RELATIONS ACTIONS
1. One strike by the USWA about 6 1/2 years ago which lasted about 2
weeks.
2. Unfair labor practice proceedings have not been filed against the
Company. Various claims have been field by individuals alleging discrimination,
violation of the Whistle Blowers Act, or wrongful termination which have been
dismissed or settled for a nominal amount.
3. A wrongful termination grievance filed by James Clark went through
arbitration resulting in an award of re-instatement with full back wages. The
Company paid Mr. Clark full past wages for approximately one (1) year in
exchange for a termination of employment and waiver of claims.
4. Charles Mossner was terminated for work rule violations and filed a
grievance. Before the grievance was resolved he also filed a Whistle Blower suit
in Circuit Court. The Company reinstated him in the grievance and settled the
litigation for a portion of back wages in the amount of $1,500.
5. See Schedule 4.9 for various other claims filed against the Company.
Seller has also provided the Buyer with a report on various employee
circumstances which gives additional information on employee worker's
compensation claims covered by insurance.
6. There have been workers compensation claims covered by the Company's
insurance policy.
<PAGE> 81
SCHEDULE 4.12
CONDITION OF ASSETS
1. As of June 30, 1997 there was $199,000 of service and obsolete
inventory. While there is little demand for the service inventory it is still
active. The obsolete inventory was approximately $43,000 of that amount and is
not likely to be sold.
2. There are items of tooling inventory in process and customer work in
process which will not be saleable until completed.
3. A number of dies and tools for inactive parts as well as incidental
equipment which are stored outside and would not be usable without refurbishing.
4. Several of the Company's presses are not in production and are being
stored. These presses would need to be reworked or re-furbished before they
could be placed in productive use.
5. A 400 ton Komatsu press was recently replaced in production. The press
is not in good working order and will probably be sold or used for applications
consistent with its present condition.
6. There is a Hobart robotic welder which is presently at Midwest Products
and which has been removed from production. It will have to be refurbished
before it is are usable.
<PAGE> 82
SCHEDULE 4.12 (e)
BANK ACCOUNTS, DEPOSITS AND ACCOUNTS
BANK ACCOUNT # ACCOUNT TYPE
Michigan National Bank 6849100117 General
Michigan National Bank 6849100026 Payroll
Michigan National Bank 6816122219 Cash Collateral
<PAGE> 83
SCHEDULE 4.13
PATENTS, TRADEMARKS, TRADENAMES AND LICENSES
1. The Company owns no patents.
2. The Company has explored the possibility of obtaining patent protection
for trailer hitch designs and for its central lubrication system, but decided
not to pursue them further.
3. The Company holds and/or utilizes the following names and identities:
- Production Stamping, Inc.
- PSI
- Production Systems International
4. The Company is duly licensed to utilize the various software products
which it uses by their manufacturers and/or licensors.
<PAGE> 84
SCHEDULE 4.14
INSURANCE CONTRACTS
Blue Cross Group Hospitalization Insurance
Transgeneral Group Life and Short Term Disability
CIGNA - Property, General Liability and Automotive
CIGNA - Worker's Compensation Insurance
Split Dollar Life Insurance - Minnesota Mutual
Key Man insurance policy on Rick Rosetti - Minnesota Mutual
Three year claims deferred
Boiler and Machinery Policy - Hartford Steam Boiler Inspection and
Insurance Company through CIGNA
Umbrella Policy - CIGNA
<PAGE> 85
SCHEDULE 4.15
CUSTOMERS AND SUPPLIERS
The information for this Schedule will be supplied within seven (7) days of
signing the Agreement.
<PAGE> 86
SCHEDULE 4.17
LICENSES, PERMITS AND APPROVALS
The information for this Schedule will be supplied within seven (7)
days of signing the Agreement.
<PAGE> 87
SCHEDULE 4.18
COMPETITIVE INTERESTS
1. William H. John as Trustee of the William H. John Revocable Trust directly or
indirectly leases property to the Company (See Schedule 4.5).
2. William H. John and his family have equity interests in the following
companies which act as subcontractors to the Company: Midwest Products &
Manufacturing, Inc., and WRJ Manufacturing, Inc.
3. The following Company employees have equity interests in the listed firms
which do business with the Company:
- David Pollack, an advanced project engineer, has an interest in D.
Michael Services, a tool and die shop.
- Ted Jones, Plant Manager leased out to Midwest Products, has a
vending company which does business with the Company.
- Dino ______, Warehouse Manager, owns an interest in Tiger Trucking
which acts as a carrier for the Company.
<PAGE> 88
SCHEDULE 4.19
RELATED PARTY TRANSACTIONS
1. The dealings of the Company with Midwest Products and WRJ Manufacturing have
been on terms which are more favorable than those generally available in the
market. The Company has also placed equipment and staff at these companies to
assist in performing work for the Company.
2. The Company has entertained various purchasing agents and other customer
employees at golf outings, dinners and sporting events in the past.
3. The Company has made loans to both Midwest Products and WRJ Manufacturing to
assist their business. Some outstanding balances with those companies may not be
collectable if the Company ceases doing business with them.
4. The Company has made loans to William H. John from time to time and vice
versa. These are currently balances owing from the Company to Mr. John or his
affiliated companies and from Mr. John to the Company. On occasion the Company
has paid for non-material items on behalf of Mr. John which may not have been of
direct benefit to the Company.
<PAGE> 89
AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT TO STOCK PURCHASE AGREEMENT (the "Agreement") is entered
into this 11th day of November, 1997 by and between WILLIAM H. JOHN, Trustee of
the William H. John Restated Revocable Trust U/A/D 10/10/95, STORY S. JOHN,
Trustee of the Story S. John Amended and Restated Revocable Trust U/A/D 12/08/95
and MELVYN S. GOLDSTEIN, Trustee of the John Irrevocable Gift Trust U/A/D
12/29/94 (collectively "Seller") and PRODUCTION ACQUISITION INC. a Michigan
corporation (the "Buyer").
WITNESSETH:
WHEREAS, Seller and Buyer, have entered into that certain Stock
Purchase Agreement dated as of October 17, 1997 (the "Agreement") for the
purchase and sale of all of the outstanding stock of PRODUCTION STAMPING, INC.,
a Michigan corporation (the "Company") (all capitalized terms used herein and
not otherwise defined shall have the meaning given to them in the Agreement);
WHEREAS, at the time the Agreement was executed, the parties agreed
that certain Schedules to the Agreement would be modified and amended; and
WHEREAS, Seller and Buyer desire to amend the Agreement upon the terms
and conditions stated herein;
NOW THEREFORE, for valuable consideration and in consideration of the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
1. Schedules 4.1(a), 4.2(a), 4.2 (b)(i), 4.2(b)(ii), 4.3(b), 4.8,
4.10, 4.12, 4.14, 4.15, 4.17 and 4.19 to the Agreement are hereby deleted in
their entirety and Schedules 4.1(a), 4.2(a), 4.2(b)(i), 4.2(b)(ii), 4.3(b), 4.8,
4.10, 4.12, 4.14, 4.15, 4.17 and 4.18 which are attached hereto are hereby
substituted for and in place of said schedules as if the same were appended to
the Agreement at the time of execution.
2. Schedules 4.1(c) and 4.3(a) attached hereto are hereby added as
part of the Agreement as if originally included therein.
3. The parties hereto hereby acknowledge and agree that Exhibit A
attached hereto is the document referred to in the last sentence of Item C.3 of
Schedule 4.2(a).
4. Item 4 of Schedule 4.5 to the Agreement is hereby amended and
restated in its entirety to read as follows:
"4. Lease dated June 30, 1993 between the Company and Marie Schena
regarding property located at 29303 Kehrig Dr., Chesterfield Twp., Michigan with
Rider, as amended by extension dated May 27, 1997"
<PAGE> 90
5. Item 14 of Schedule 4.6 to the Agreement is hereby amended and
restated in its entirety to read as follows:
"14. The Company has purchase orders from all of its customers for
all of its current production. Representative forms of
purchase orders from those customers listed in Schedule 4.15
are attached as Exhibit B to the Amendment to Stock Purchase
Agreement between the Seller and Buyer dated November _, 1997.
None of the outstanding purchase orders from those customers
listed in Schedule 4.15 are materially different from such
representative forms."
6. The first sentence of Section 4.3(a) of the Agreement is hereby
amended and restated in its entirety to read as follows:
"Seller shall make available to Buyer on or before November 7, 1997
the final balance sheets of Company for the period ending September
30, 1997 and the related statement of income for the same period (the
"September Financial Statements")."
7. The first sentence of the second paragraph of Section 4.5 of the
Agreement is hereby amended and restated in its entirety to read as follows:
"Except as set forth in Schedule 4.5, the Company's rights under all
real estate leasehold estates (the "Leased Real Estate") are not
subordinate to, or defeasible by, any lien or any prior
lease thereon."
8. Section 6.1(e) of the Agreement is hereby amended and restated in
its entirety to read as follows:
"(e) Except with respect to claims for indemnity pursuant to
Section 6.1(a)(x) hereof (which shall not be subject to the
limitations set forth in this Section 6. 1 (e)), Buyer shall not be
entitled to demand payment or otherwise enforce any claim for
indemnification or defense, or any right to setoff, under this Section
unless the total amount of Buyer's claims under this Section
(exclusive of any amounts recovered pursuant to Section 6.1(a)(x)
hereof) exceeds Two Hundred Fifty Thousand ($250,000) Dollars (the
"Floor"), in which event the Seller shall only be liable for such
claims in excess of the Floor."
9. Section 8.1(a) of the Agreement is hereby amended and restated in
its entirety to read as follows:
"(a) Buyer shall have the period from the date hereof until
November 14, 1997 (the "General Investigation Period"), within which
to complete a general purchase investigation reviewing the financial
and operating aspects of the proposed acquisition to satisfy itself as
to the viability of the same.
Buyer shall also have the period from the date hereof until
November 22, 1997 (the "Environmental Investigation Period") (which
date may be extended by Buyer until December 23, 1997 to the extent
reasonably required to complete the Phase II environmental Assessments
described below), within which to complete a purchase investigation
reviewing the environmental aspects of the proposed acquisition to
satisfy itself that it will have no liability as to the same. On or
before the expiration of the Environmental Investigation
<PAGE> 91
Period, Buyer shall commission and complete, at Buyer's expense, a standard
Phase I environmental assessment of all premises leased by the Company,
conducted by Geraghty & Miller, together with those Phase II environmental
assessments of such premises as Buyer deems appropriate (the cost of such Phase
II environmental assessments, however, shall be shared equally between the Buyer
and the Seller). Such Phase I and Phase II environmental assessments shall be
collectively referred to herein as the "Environmental Assessments". Buyer shall
provide copies of the Environmental Assessments to Seller as soon as they are
available.
Buyer shall also have the period from November 14, 1997 until November
19, 1997 (the "Customer Investigation Period"), within which to complete a
purchase investigation reviewing the Company's relationships with its customers
and to satisfy itself as to the same.
The General Investigation Period, the Environmental Investigation
Period and the Customer Investigation Period are collectively referred to herein
as the "Investigation Periods". During the Investigation Periods, Seller shall
provide Buyer and its representatives full access during normal business hours
to all of the property, books and records of the Company (including, without
limitation, all hazardous, toxic or other waste investigations of all premises
owned, leased or used by the Company) and to permit Buyer and its
representatives to physically inspect all of the Company's assets and
facilities, to conduct the Environmental Assessments, to interview such
personnel of the Company as Buyer shall deem appropriate with prior notice of
the same to Seller, and to interview customers of the Company during the
Customer Investigation Period with Seller's prior consent. At any time prior to
the expiration of the General Investigation Period, Buyer shall have the
absolute right, in its sole discretion and for any reason whatsoever, to
terminate this Agreement by giving written notice thereof to Seller at the
address set forth herein. At any time prior to the expiration of the
Environmental Investigation Period, if Buyer is not satisfied with the
environmental aspects of the proposed acquisition for any reason, Buyer shall
have the absolute right, in its sole discretion, to terminate this Agreement by
giving written notice thereof to Seller at the address set forth above. At any
time prior to the expiration of the Customer Investigation Period, if Buyer is
not satisfied with the Company's relationships with its customers for any
reason, Buyer shall have the absolute right, in its sole discretion, to
terminate this Agreement by giving written notice thereof to Seller at the
address set forth above. In the event of any such termination, this Agreement
shall become null and void and neither party shall have any other or further
liability to the other hereunder. In the event that any of the Environmental
Assessments disclose any material environmental problems (the "Environmental
Problems"), and the Buyer has not agreed in writing to waive making any such
claim against the Seller with respect to such Environmental Problems on or
before the expiration of the Environmental Investigation Period, then in such
event the Seller shall also have the right to terminate this Agreement on or
before the expiration of the Environmental Investigation Period by written
notice thereof to Buyer within such period, in which event this Agreement shall
become null and void and neither party shall have any other or further liability
to the other hereunder (other than the sharing of the Phase II environmental
assessment costs as set forth above). In the event that the Buyer has agreed in
writing to waive making such claims against Seller, then in such event Buyer
shall indemnify, defend and hold the Seller, and its successors and assigns,
harmless from and against and with respect to any and all liabilities,
obligations, claims, damages and expenses (including, reasonable attorneys and
consultant fees) which Seller may incur solely in their capacity as shareholders
of the Company as a result of such Environmental Problems. In the event that
<PAGE> 92
the Buyer has not so agreed to waive any such claim against the Seller
and in the event that the Seller does not so elect to terminate this
Agreement and the transactions contemplated by this Agreement are
consummated, then in such event Seller shall, jointly and severally,
indemnify, defend and hold the Buyer and the Company, and their
successors and assigns, harmless from and against and with respect to
any and all liabilities, obligations, claims, damages and expenses
(including, reasonable attorneys and consultant fees) which they may
incur as a result of such Environmental Problems, and Seller shall
waive making claim against the Buyer or the Company, or their
successors or assigns, with respect to such Environmental Problems
under any lease or other agreement with the Buyer or the Company.
In the event this transaction is consummated, the purchase
investigation contemplated hereby shall not diminish or replace the
reliance Buyer is placing on obtaining the representations, warranties
and indemnification provisions set forth in this Agreement."
10. Except as hereby amended, all of the terms and conditions of the
Agreement shall remain in full force and effect.
11. This Agreement may be executed in counterparts which, when taken as
a whole, shall constitute one completely executed agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Agreement as of the 11th day of November, 1997.
SELLER:
/s/William H. John
----------------------------
William H. John, Trustee
/s/Story S. John
----------------------------
Story S. John, Trustee
/s/ Melvyn S. Goldstein
----------------------------
Melvyn S. Goldstein, Trustee
BUYER:
PRODUCTION ACQUISITION INC.
By: /s/ David Woodward
------------------------
David Woodward
Its: Vice President
<PAGE> 93
SCHEDULE 4.1a
OPERATIONS OUTSIDE OF MICHIGAN AND
OWNERSHIP OF OTHER EQUITY INTERESTS
1. See Schedule 4.9 for status of qualification to do business outside of
Michigan.
2. The Company owns 50% of the common stock of Sportswatch, Inc., a
Michigan corporation. Sportswatch, Inc. is the lessee of a suite at the Palace
of Auburn Hills, Michigan.
3. The Company currently has an option to purchase a lease interest in
certain dormant oil wells located in Clay County, Illinois. The Company has
never held legal title to the oil, gas, mineral or surface rights of the real
property upon which these oil wells are located. Any interest the Company
currently has in these oil wells shall be transferred to the Sellers on a quit
claim basis at or before the time of closing.
In addition, the Company's predecessor, Production Oil Company,
previously held title to certain oil leases and working interests in certain
other oil wells in Illinois which were transferred out of that entity to William
H. John, prior to the merger of Production Oil Company into the Company.
<PAGE> 94
SCHEDULE 4.1(c)
Officers
William H. John Chairman and CEO
Richard A. Rossetti President and COO
Vicki L. Barnett Vice President-Finance
Richard Murray Vice President-Marketing
Jeffrey Brune Vice President-Manufacturing
Story S. John Secretary
Melvyn S. Goldstein Assistant Secretary
Sole Director
William H. John
<PAGE> 95
SCHEDULE 4.2(a)
SECURITY INTEREST, LEASES AND
POSSIBLE CLAIMS ADVERSE CIRCUMSTANCES
A. Liens:
1. Michigan National Bank has been granted security interests in all
assets of the Company to secure its various credit lines to the Company. These
debts will be paid at the time of closing.
B. Leases:
1. Leases of Minster Presses from Michigan National Bank (see
Schedule 2.4(a))
2. Leases of various automobiles, copies of which have been
separately supplied to Buyers.
3. Leases of Hi-Lo equipment, copies of which have been separately
supplied to Buyer.
The above leases will continue as part of the Company's obligations
after the closing.
C. Possible Adverse Circumstances:
The following circumstances could have an adverse effect on the
ability of the Company to carry on its operations substantially as previously
conducted.
1. The Company needs to expand plant facilities to fully accommodate
probable new jobs. After the development of its projections for future sales,
the Company was approached by TRW to take over approximately $8,000,000 of work
currently being produced by MSI. As a condition of being awarded that work, the
Company was required to agree to the price roll back program of TRW and to
pursue opening a facility near TRW's Cookville, TN location.
2. There is limited availability of skilled labor in areas where the
Company currently has its plants.
3. For at least five (5) years the entire automobile industry has
experienced extreme pressures from OEMs for annual price concessions. While the
Company is confident that it will be able to accommodate these pressures from
its customers in accordance with its past practices, nevertheless this factor
could have a material adverse effect in the future, depending upon the attitudes
and policies adopted by the Company's customers. While the Company has
experienced a reduction in its profits in past years, nevertheless it has
effectively minimized the impact of such price rollback policies through its
program of continuous improvement and by proper pricing in the initial bidding
process.
<PAGE> 96
4. From past experience certain factors could have an adverse effect
on the Company, such as a rapid acceleration of material costs a substantial
downturn in annual vehicle sales, strikes at customer facilities and similar
items beyond the control of the Company.
5. The Company has entered into the "steel resale prograrn" with
General Motors. Under this program, General Motors negotiates a price with
certain steel suppliers to be the standard in making sales to its suppliers.
In order to stay on the bid list with GM, it is necessary for its stamping
suppliers to participate in the steel resale program. When the available
pricing for the steel in the open market is significantly below that of steel
resale program suppliers, the Company has taken advantage of this disparity by
purchasing certain steel in the open market. Thus far, the balance of such
open market purchases has not caused General Motors to protest this activity,
although the Company has not been required to undergo a steel resale program
audit by GM. Recently, however, GM has requested that the Company work toward
full participation in the steel re-sale program. GM has stated that if the
Company incurs increased steel costs at the resale program matrix costing
system, the Company will be allowed to pass through such increase in costs to
GM.
6. It is important that the proposed transaction be disclosed to the
Company's customers. There is a possibility that such customers will object to
the change of control. Such factors should be explored to the Buyers
satisfaction during the due diligence period. Active Manufacturing has placed
approximately $3,000,000 of work with the Company. Upon learning of the
Buyer's possible future involvement with the Company, it expressed concern as
it considers itself a direct competitor of the Buyer's affiliates.
<PAGE> 97
SCHEDULE 4.3(a)
NONE
<PAGE> 98
SCHEDULE 4.3(b)
POSSIBLE LIABILITIES OR OBLIGATIONS
1. Suit by Mcpherson for slip and fall liability for which Company is
insured by Zurich American Insurance Company (See Schedule 4.9).
2. Suit by Wafaa Hannah for alleged civil rights violation (see
Schedule 4.9).
3. Various Union grievances described in Schedule 4.9.
4. Various worker compensation claims covered by workers compensation
insurance. These claims are described in a summary of employee circumstances
prepared by the Company, a copy of which has been give to Buyer.
5. Results of payroll audit for year ending June 30, 1997 shows a
Company liability of $75,222 in premium due to Zurich-American Insurance Company
for workers compensation insurance. Since this amount was not known at time that
field work for the audited statement was completed, it was not accrued in that
statement. However, the liability for the previous year end adjustment was
recognized in the year ending June 30, 1997.
6. In the event that the Company ceases doing business with WRJ
Manufacturing and/or Midwest Products and Manufacturing after the closing of the
transaction contemplated by this Agreement, these suppliers may be unable to pay
their respective debts owing to the Company.
<PAGE> 99
SCHEDULE 4.2(b)(i)
PROPERTY OWNED OR USED BY COMPANY
NOT AT COMPANY PREMISES.
1. The Company owns the following equipment located at its related
supplier Midwest Products and Manufacturing, Inc. which will be returned upon
request of the Company without costs other than rigging and transportation.
1 200 Ton Minster Press with feed
1 150 Ton IOB Press
2 Pneumatic assembly machines
1 Tumbler
1 Salt spray cabinet
1 150 KVA welder
1 Computer
Dies and tooling belonging to the Company
2. 1 150 ton No. 9 Bliss press, straight side, SN T 33933 at the
Oxford Plant identified as Press S-24 belongs to Midwest.
3. The Company has an exhaust system, a computer and 2 Miller MIG
welders at WRJ Manufacturing, Inc., a related Company, which will be returned
upon request of the Company without costs other than rigging and transportation.
4. Purchased presses not yet delivered to Company:
1 Bliss 400 ton press at Universal Press (an equipment broker).
1 50 ton mechanical clutch press at Universal Press.
5. Vehicles utilized by officers and employees.
6. Inventory, WIP, tools, dies and fixtures as well as material
handling items at various sub-contractors and outside processors.
7. Presses and other equipment not currently in use, but owned by the
Company located at its premises.
8. Obsolete and service inventory at Industrial Packaging, Inc.,
Detroit, Michigan totaling $199,000 on the June 30, 1997 financial statement.
<PAGE> 100
SCHEDULE 4.2 (b) (ii)
MATERIAL PROPERTY OWNED BY OR IN WHICH
THIRD PARTY HAS CLAIM
1. Sportswatch, Inc. -- Suite at Palace
2. 2 Minster Presses 400 Ton and 600 Ton Leased from Michigan
National Bank and peripheral equipment.
3. Tooling belonging to Customers
4. Leased vehicles, Hi-Los and office equipment per Schedule 4.2 (a).
5. Containers and related equipment owned by scrap contractor, but kept
at the Company to accommodate the sale and removal of scrap metal.
<PAGE> 101
SCHEDULE 4.8
COMPENSATION AND MEMBERSHIPS OF HIGHLY
COMPENSATED EMPLOYEES
<TABLE>
<CAPTION>
Memberships: Organization Annual Amt.
- ------------ ------------ -----------
<S> <C> <C>
William H. John Great Oaks Country Club $ 4,800
Muirfield Country Club 3,000
Detroit Athletic Club 3,145
Richard Murray Detroit Gold Club 4,140
Thomas Davis Great Oaks Country Club 2,340
Corporate Chematogan Big Shooters 25,000
Hunters Creek Club 5,564
-------
TOTAL $47,869
</TABLE>
See attached detail of wages for Highly Compensated employees.
<PAGE> 102
<TABLE>
<CAPTION>
Bonuses Annual Salary Commissions
- -----------------------------------------------------------------------------------------------------
1995 - Calendar Year 1/l/95 to 12/31/95
- ----------------------------------------
<S> <C> <C> <C>
Vicki Barnett $10,000.00 $ 81,922.71
Rick Rossetti $50,000.00 $226,442.22
Jeff Brune $20,000.00 $ 73,845.90
Tom Davis $0.00 $108,173.25
William John $0.00 $221,153.74 $454,770.00
Rick Murray $0.00 $223,865.70
- ---------------------------------------------------------------------------
TOTAL $80,000.00 $935,403.52 $454,770.00
1996 - Calendar Year 1/1/96 to 12/31/96
- ----------------------------------------
Vicki Barnett $ 20,000.00 $ 100,384.41
Rick Rossetti $118,000.00 $ 278,173.00
Jeff Brune $0.00 $ 88,338.08
Tom Davis $0.00 $ 124,038.66
William John $O.00 $ 249,999.88 $446,600.00
Rick Murray $0.00 $ 272,884.54
- -----------------------------------------------------------------------------
TOTAL $138,000.00 $ 1,113,88.57 $446,600.00
1997 - Calendar Year 1/1/97 to 09/21/97
- ----------------------------------------
Vicki Barnett $20,000.00 $ 77,735.34
Rick Rossetti $57,000.00 $ 227,403.78
Jeff Brune $10,000.00 $ 68,406.80
Tom Davis $0.00 $ 93,750.15 To date
William John $68,000.00 $ 119,499.91 $ 300,000.00
Rick Murray $0.00 $ 206,249,94
- -----------------------------------------------------------------------------
TOTAL $155,000.00 $ 793,045.92 $300,000.00
</TABLE>
AB 10/16/97
<PAGE> 103
SCHEDULE 4.10
WASTE HAULING COMPANIES
1. Garbage Disposal:
For Oxford, New Baltimore and Chesterfield Township:
Sterling Sanitation
48655 Gratiot Ave.
Chesterfield, MI 48047
(810) 999-1690
2. Waste Water and Waste Oil:
For Oxford and New Baltimore:
Usher Oil
9000 Roselawn Ave.
Detroit MI, 48204
(313) 934-7055
3. Scrap: Aluminum and Steel
For Oxford and New Baltimore:
Ferrous Processing
9100 John Kronk
P.O. Box 10166
Detroit N9 48210
(313) 582-2910
<PAGE> 104
SCHEDULE 4.12
CONDITION OF ASSETS
1. As of June 30, 1997 there was $199,000 of service and obsolete
inventory. While there is little demand for the service inventory it is still
active. The obsolete inventory was approximately $43,000 of that amount and is
not likely to be sold.
2. There are items of tooling inventory in process and customer work
in process which will not be saleable until completed.
3. A number of dies and tools for inactive parts as well as incidental
equipment which are stored outside and would not be usable without refurbishing.
4. Several of the Company's presses are not in production and are being
stored. These presses would need to be reworked or re-furbished before they
could be placed in productive use.
5. A 400 ton Komatsu press was recently replaced in production. The
press is not in good working order and will probably be sold or used for
applications consistent with its present condition.
6. There is a Hobart 2 robotic welder which is presently at Midwest
Products and which has been removed from production. It will have to be
refurbished before it is usable.
7. The Company utilizes various leased items of equipment, vehicles
and hilo's as well as leased real estate to carry on its business as more
particularly identified in Schedule 4.5.
8. The Company utilizes a 150 ton No. 9 Bliss press, straight
side SN T 33933 at its Oxford plant as press S-24, which press belongs to
Midwest Products and Manufacturing.
<PAGE> 105
SCHEDULE 4.15
-------------
CUSTOMERS AND SUPPLIERS
-----------------------
TEN LARGEST CUSTOMERS
---------------------
<TABLE>
(Based upon 6/30/97 volumes)
<S><C>
CUSTOMER VOLUME
- -------- ------
GM $65,739,179
TRW 3,472,969
Dana 952,664
Libralter 714,397
Sota 370,619
Daiken 139,171
CKR 106,579
Cooper 80,025
Volvo 35,712
Trimag 32,074
<CAPTION>
TEN LARGEST SUPPLIERS
---------------------
(Based upon 6/30/97 volumes)
SUPPLIER VOLUME
- ------- ------
Ottawa $8,800,000
Kenwall 8,600,000
Heitman Steel 3,500,000
Lafayette 3,500,000
Cooper 2,700,000
James Steel and Tube 1,500,000
Cable Manufacturing 1,400,000
Decker 900,000
MNP Corporation 700,000
Fabristeel 300,000
</TABLE>
<PAGE> 106
SCHEDULE 4.14
-------------
INSURANCE CONTRACTS
-------------------
Blue Cross Group Hospitalization Insurance
Transgeneral Group Life and Short Term Disability
CIGNA - Property, General Liability and Automotive
CIGNA - Worker's Compensation Insurance
Split Dollar Life Insurance - Minnesota Mutual
Key Man insurance policy on Rick Rossetti - Minnesota Mutual
Three year claims deferred
Boiler and Machinery Policy - Hartford Steam Boiler Inspection and Insurance
Company through CIGNA
Umbrella Policy - CIGNA
The three (3) year history of claims has been or will be supplied to Buyer.
<PAGE> 107
SCHEDULE 4.17
-------------
LICENSES, PERMITS AND APPROVALS
-------------------------------
There are no licenses, permits or approvals required by any federal,
state or local governments in connection with the operation of the Company's
businesses other than occupancy permits for the Company's occupancy of its
various leased facilities, which occupancy permits have been issued in each
instance.
General Motors and TRW have required the Company to meet certain
quality standards for its delivered parts to remain a supplier to those
customers. The Company has met all such standards as currently required and is
in the process of fulfilling QS9000 requirements in a timely manner.
<PAGE> 108
SCHEDULE 4.18
-------------
COMPETITIVE INTERESTS
---------------------
1. William H. John as Trustee of the William H. John Revocable Trust directly or
indirectly leases property to the Company (See Schedule 4.5).
2. William H. John and his family have equity interests in the following
companies which act as subcontractors to the Company: Midwest Products &
Manufacturing, Inc., and WRJ Manufacturing, Inc.
3. The following Company employees have equity interests in the listed firms
which do business with the Company:
- David Pollack, an advanced project engineer, has an interest in D.
Michael Services, a tool and die shop.
- Ted Jones, Plant Manager leased out to Midwest Products, has a
vending company which does business with the Company.
- Dino Fortin, Warehouse Manager, owns an interest in Tiger Trucking
which acts as a carrier for the Company.
<PAGE> 109
SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT is entered into this
24th day of November, 1997, but effective as of November 14, 1997, by and
between WILLIAM H. JOHN, Trustee of the William H. John Restated Revocable Trust
U/A/D 10/10/95, STORY S. JOHN, Trustee of the Story S. John Amended and Restated
Revocable Trust U/A/D 12/08/95 and MELVYN S. GOLDSTEIN, Trustee of the John
Irrevocable Gift Trust U/A/D 12/29/94 (collectively "Seller") and PRODUCTION
ACQUISITION INC. a Michigan corporation (the "Buyer").
WITNESSETH:
WHEREAS, Seller and Buyer, have entered into that certain Stock
Purchase Agreement dated as of October 17, 1997, as amended on November 11,
1997, (the "Agreement") for the purchase and sale of all of the outstanding
stock of PRODUCTION STAMPING, INC., a Michigan corporation (the "Company") (all
capitalized terms used herein and not otherwise defined shall have the meaning
given to them in the Agreement);
WHEREAS, the parties agree that as of the date hereof the General
Investigation Period has expired without notice by Buyer of any termination by
Buyer of the Agreement; and
WHEREAS, Seller and Buyer desire to amend the Agreement upon the
terms and conditions stated herein;
NOW THEREFORE, for valuable consideration and in consideration of the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
1. Section 2.1 of the Agreement is hereby amended and restated
in its entirety to read as follows:
"The purchase price (the "Purchase Price") for the Shares shall be
equal to Forty Four Million Five Hundred Thousand ($44,500,000)
Dollars, less the amount of the Financed Debt (as hereinafter defined)
as of the Closing, and less the amount of the Termination Liability
(as hereinafter defined), which Purchase Price shall be increased or
decreased, as the case may be to the extent that the Combined
Debt/Equity Amount (as hereinafter defined) as of the Closing Date (as
hereinafter defined) is greater than or less than Fifteen Million Five
Hundred Forty Seven Thousand One Hundred Fifty Four ($15,547,154)
Dollars."
2. As of the effective date hereof the General Investigation Period
has expired and Buyer has not given notice to Seller of termination of the Stock
Purchase Agreement.
3. Except as hereby amended, all of the terms and conditions of the
Agreement shall remain in full force and effect.
<PAGE> 110
4. This Amendment may be executed in counterparts which, when taken as
a whole shall constitute one completely executed agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment to Stock Purchase Agreement effective as of the 14th day of November,
1997.
SELLER:
/s/ William H. John
-----------------------------------
William H. John, Trustee
/s/ Story S. John
-----------------------------------
Story S. John, Trustee
/s/ Melvyn S. Goldstein
-----------------------------------
Melvyn S. Goldstein, Trustee
BUYER:
PRODUCTION ACQUISITION INC.
By: David Woodward
-------------------------------
David Woodward
Its: Vice President
<PAGE> 111
THIRD AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS THIRD AMENDMENT TO STOCK PURCHASE AGREEMENT, entered into this
8th day of December, 1997, is by and between WILLIAM H. JOHN, Trustee of the
William H. John Restated Revocable Trust U/A/D 10/10/95, STORY S. JOHN, Trustee
of the Story S. John Amended and Restated Revocable Trust U/A/D 12/08/95 and
MELVYN S. GOLDSTEIN, Trustee of the John Irrevocable Gift Trust U/A/D 12/29/94
(collectively "Seller") and PRODUCTION ACQUISITION INC. a Michigan corporation
(the "Buyer").
WITNESSETH:
WHEREAS, Seller and Buyer have entered into that certain Stock
Purchase Agreement dated as of October 17, 1997, as amended on November 11, 1997
and November 24, 1997 (the "Agreement") for the purchase and sale of all of the
outstanding stock of PRODUCTION STAMPING, INC., a Michigan corporation (the
"Company") (all capitalized terms used herein and not otherwise defined shall
have the meaning given to them in the Agreement);
WHEREAS, Seller and Buyer desire to further amend the Agreement upon
the terms and conditions stated herein;
NOW THEREFORE, FOR valuable consideration and in consideration of the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
1. Section 2.1 of the Agreement is hereby amended and restated in its
entirety to read as follows:
"The purchase price (the "Purchase Price") for the Shares shall be
equal to Forty Four Million Five Hundred Thousand ($44,500,000)
Dollars, less the amount of the Financed Debt (as hereinafter defined)
as of the Closing, and less the amount of the Estimated Termination
Liability (as hereinafter defined), which Purchase Price shall be
increased or decreased, as the case may be, to the extent that the
Combined Debt/Equity Amount (as hereinafter defined) as of the Closing
Date (as hereinafter defined) is greater than or less than Fifteen
Million Five Hundred Forty Seven Thousand One Hundred Fifty Four
($15,547,154) Dollars, and which Purchase Price shall be increased or
decreased, as the case may be, to the extent that the Final
Termination Liability (as hereinafter defined, is less than or greater
than the Estimated Termination Liability."
2. The following section is hereby added as Section 2.3(b)(iv) to the
Agreement:
"(iv) For purposes of the Closing Balance Sheet only, no liability
shall be reflected therein as a result of the termination of the Defined Benefit
Plan (as hereinafter defined), except to the extent such liability was already
reflected in the June 30, 1997 financial statements of the Company."
3. Section 2.4(b)(iv) of the Agreement is hereby deleted in its
entirety.
<PAGE> 112
4. The following section is hereby added as Section 2.5 to the
Agreement:
"2.5 Defined Benefit Plan.
(a) The Sellers hereby agree to start terminating the Company's defined
benefit pension plan (the "Defined Benefit Plan") on or before the Closing Date
(including causing the adoption of board resolutions terminating the Defined
Benefit Plan effective as of March 31, 1998), and, after Closing, Sellers shall,
at their expense, take all actions as may be necessary to terminate the Defined
Benefit Plan effective as of March 31, 1998, to timely obtain all necessary
governmental approvals with respect thereto, to timely provide all notices with
respect thereto, and to timely make all necessary distributions therefrom,
except that the Company shall be responsible at its own expense for providing
termination notice to its employees and proper employee information as may be
required to terminate the Defined Benefit Plan as well as for the amount of any
contributions to the Defined Benefit Plan which may be required to satisfy the
underfunding liability.
(b) Following the termination of the Defined Benefit Plan and
completion of the final distributions thereunder:
(i) in the event that the Final Termination Liability is
greater than the Estimated Termination Liability, then in such event
the Sellers shall promptly pay to the Purchaser the amount by which
such Final Termination Liability is greater than the Estimated
Termination Liability, and, in addition, the Purchaser shall have all
of its rights and remedies under Section 6.1(a)(x) hereof; or
(ii) in the event that the Final Termination Liability is less
than the Estimated Termination Liability, then in such event the
Purchaser shall promptly pay to the Sellers the amount by which such
Final Termination Liability is less than the Estimated Termination
Liability.
(c) For purposes hereof, the following terms shall have the following
meanings:
(i) "Estimated Termination Liability" shall mean Two Hundred Eighty
Four Thousand Five Hundred Twenty Eight and 00/100 ($284,528.00) Dollars, which
represents that amount which the parties mutually agree to be equal to the
estimated reasonable cost to the Company of the underfunded liability as a
result of the termination of the Defined Benefit Plan (including, without
limitation any excise tax, assessment, penalty or interest with respect
thereto), after taking into consideration an estimate of any net tax benefit to
the Company as a result of the payment of such amount as an expense of the
Company.
(ii) "Final Termination Liability" shall mean that amount which the
parties mutually agree to be equal to the final cost to the Company of the
underfunded liability as a result of the termination of the Defined Benefit Plan
(including, without limitation any excise tax, assessment, penalty or interest
with respect thereto), after taking into consideration any net tax benefit to
the Company as a result of the payment of such amount as an expense of the
Company."
<PAGE> 113
5. The following is hereby added as Section 6.I(a)(viii) to the
Agreement:
"(viii) any claim, obligation or liability resulting from the following
lawsuits (the "New Lawsuits"):
(a) Kim Harlan v Production Stamping, Inc. and Orlando
Devell Wright, Macomb County Circuit Court, 97-5725-CZ.
(b) Management Recruiters of Lansing v Production Stamping,
Inc., Oakland County Circuit Court, 97-001286-CK.
(c) Gayland Coles v William Austin as agent for Production
Stamping, Inc. U.S. District Court for the Eastern
District of Michigan, 97-75820.
6. Section 6.1(a)(x) of the Agreement is hereby amended and
restated in its entirety as follows:
"(x) any obligation or liability to, or claim by, the
Internal Revenue Service, the Pension Benefit Guaranty Corporation or
any other party that the Final Termination Liability is greater than
the Estimated Termination Liability, and any other claims, obligations
or liabilities relating to or with respect to the Defined Benefit
Plan; or"
7. The Company's equipment referenced in paragraph 1 of Schedule
4.2(b)(i) of the Agreement, which is currently located at the premises of
Midwest Products and Manufacturing, Inc., shall be delivered to Buyer, at a
location specified by Buyer, within sixty (60) days of the Company's written
request for the same.
8. The Company's exhaust system referenced in paragraph 2 of Schedule
4.2(b)(i) of the Agreement, which is currently located at the premises of WRJ
Manufacturing, Inc., shall be delivered to Buyer, at a location specified by
Buyer, within sixty (60) days of the Company's written request for the same.
9. The Stamping Press belonging to Midwest Products and Manufacturing,
Inc. which is located at the Company's facility in Oxford, Michigan as described
in Schedule 4.2(b)(i) of the Agreement shall be delivered to its owner at a
location specified in the notice within sixty (60) days of the owner's written
request for the same.
10. The costs of delivery for the Company's equipment as described in
Sections 7 and 8 of this Amendment and of the equipment of Midwest Products and
Manufacturing as described in Section 9 of this Agreement shall be borne
entirely by the entities currently in possession of the equipment with the
exception of costs for rigging and transportation of such equipment.
11. The environmental reports described on the list attached hereto as
Exhibit A, are the "Environmental Assessments" for the purposes of Sections 4.10
and 8.1 of the Agreement. The Environmental Assessments, as described in the
list attached hereto, have disclosed no Environmental Problems, as defined in
section 8.1(a) of the Agreement.
<PAGE> 114
12. The Company hereby transfers any right, title or interest which it
may have in and to the memberships currently used by William H. John at the
Detroit Athletic Club, Great Oaks and Muirfield (the "Memberships") to William
H. John, and that, for the purposes of the Closing Balance Sheet, no asset value
or equity shall be reflected on the Company's books and records for the
Memberships. The Company shall nevertheless be responsible for any outstanding
charges owing as of the Closing Date in connection with such memberships and
William H. John has the right to decline such transfer.
13. With respect to the New Lawsuits, the parties hereto hereby agree
that the same may be defended by Berry Moorman P.C., and/or Melvyn S. Goldstein,
P.C. and that all costs, expenses and liabilities of the Company in connection
therewith shall be applied to the Floor, and that the Sellers shall indemnify
the Purchaser in accordance with the provisions of Section 6.1(a)(viii) hereof
to the extent that such costs, expenses and liabilities (together with any other
indemnifiable claims under the Agreement) exceed the Floor.
14. Seller hereby directs the Buyer to withhold the One Million
($1,000,000) Dollar escrow amount from the portion of the Closing Payment due to
William H. John, Trustee of the William H. John Restated Revocable Trust u/a/d
10/10/95, for deposit with the Escrow Agent pursuant to the Escrow Agreement.
Accordingly, the parties hereto hereby agree that any disbursement to the Seller
under the Escrow Agreement shall be made solely to William H. John, Trustee of
the William H. John Restated Revocable Trust u/a/d 10/10/95.
15. Upon Seller's delivery of a written request to Buyer on or before
December 20, 1997, Buyer hereby agrees to cause the Company to assign to Seller
(or its designee) any option which the Company may have to purchase the premises
located at 2300 X-Celsior Drive, Oxford, Michigan pursuant to that certain
Lease, Addendum and Option to Purchase dated August 5, 1991 and Amendment dated
May 10, 1995, subject to obtaining the prior written consent of James and Betty
Guy. In the event of such assignment, and in the event that the Seller (or its
designee) exercises such option to purchase and purchases the premises from
James and Betty Guy, then in such event the Seller (or its designee) shall
agree, and the Buyer shall cause the Company to agree, to amend the Lease for
such premises to provide for the following terms:
a. Continue all the terms and conditions of the Lease for
said premises except as provided in this Section 15.
b. Extend the existing term of the Lease (which currently
expires on March 31, 2000) to March 31, 2005, at the following monthly
rental rates:
4/1/97 to 3/31/98 $30,578.04 per month ($5.95 p.s.f.)
4/1/98 to 3/31/99 $32,119.79 per month ($6.25 p.s.f.)
4/1/99 to 3/31/00 $33,661.54 per month ($6.55 p.s.f.)
4/1/00 to 3/31/01 $34,997.73 per month ($6.81 p.s.f.)
4/1/01 to 3/31/02 $36,076.95 per month ($7.02 p.s.f.)
4/1/02 to 3/31/03 $37,156.18 per month ($7.23 p.s.f.)
4/1/03 to 3/31/04 $38,235.40 per month ($7.44 p.s.f.)
4/1/04 to 3/31/05 $39,417.41 per month ($7.67 p.s.f.)
<PAGE> 115
c. Provide the Company with an option to extend the term of
the Lease for a period of five (5) years commencing April 1, 2005
through March 31, 2010, at the following monthly rental rates:
4/1/05 to 3/31/06 $40,599.42 per month ($7.90 p.s.f.)
4/1/06 to 3/31/07 $41,832.82 per month ($8.14 p.s.f.)
4/1/07 to 3/31/08 $43,066.22 per month ($8.38 p.s.f.)
4/1/08 to 3/31/09 $44,351.01 per month ($8.63 p.s.f.)
4/1/09 to 3/31/10 $45,687.19 per month ($8.89 p.s.f.)
d. The Landlord shall agree to keep in good order and repair
the roof and the four (4) outer walls of the premises, but Tenant shall
be responsible for all other repairs and maintenance to the building
including, but not limited to, the routine maintenance of the roof
(such as leaf, ice and debris removal, re-tarring of the flashing and
seams around any protrusions through the roof and the like) and Tenant
shall be responsible for the maintenance of the doors, door frames, the
window glass, window casing, window frames, windows or any of the
appliances or appurtenances of said doors or window casing, window
frames and windows or any attachment thereto or attachments to said
building or premises used in connection therewith. Tenant shall also be
responsible for repairs and/or replacements required as a result of any
damage caused to the premises by the Tenant, normal wear and tear
excepted.
e. In the event of an assignment by James and Betty Guy to
Seller (or its designee), and in the event that the Seller (or its
designee) exercises the option to purchase and purchases the premises
from James and Betty Guy, then in such event the Seller (or its
designee) shall agree, to enter into the Lessor's Acknowledgment and
Subordination Agreement provided by Comerica Bank in the form attached
hereto as Exhibit B.
f. In the event that the Seller (or its designee) does not
exercise such option to purchase the premises from James and Betty Guy,
then in such event this Section 15 of the Third Amendment to Purchase
Agreement shall become void and of no force or effect.
16. Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in the Agreement.
17. Except as hereby amended, all of the terms and conditions of the
Agreement shall remain in full force and effect.
18. This Amendment may be executed in counterparts which, when taken as
a whole, shall constitute one completely executed agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amendment to Stock Purchase Agreement as of the day first written above.
SELLER:
William H. John
--------------------------------
William H. John, Trustee
<PAGE> 116
Story S. John
------------------------------
Story S. John, Trustee
Melvyn S. Goldstein
------------------------------
Melvyn S. Goldstein, Trustee
BUYER:
PRODUCTION ACQUISITION INC.
By: Daryl Woodward
-------------------------
Its: Vice President
-------------------------
<PAGE> 117
EXHIBIT A
ENVIRONMENTAL ASSESSMENTS
1. Phase I Environmental Site Assessment by Geraghty & Miller dated
December 5, 1997 for property located at 28175 and 28225 William Rosso
Highway and 28335 Kehrig Drive, New Baltimore, Michigan.
2. Phase I Environmental Site Assessment by Geraghty & Miller dated,
December 5, 1997 for the property located at 2300 X-Celsior, Oxford,
Michigan.
3. Phase II completed by Geraghty & Miller dated December 5, 1997 for
property located in New Baltimore, Chesterfield Township, Michigan.
4. Phase II Environmental Evaluation completed by Geraghty & Miller dated
December 5, 1997 for property located at 2300 X-Celsior, Oxford,
Michigan.
5. Environmental Evaluation, by Geraghty & Miller, dated December 3, 1997,
for property located at 50911 Richard W. Boulevard, Chesterfield,
Michigan.
<PAGE> 118
EXHIBIT B
LESSOR'S ACKNOWLEDGMENT AND SUBORDINATION
As of December _, 1997 the undersigned, __________, LESSOR, under the terms of
a Lease, a copy of which is attached hereto ("Lease"), acknowledges that,
Production Stamping, Inc. (formerly known as Production Acquisition Inc.),
LESSEE, has or will receive from Comerica Bank ("Bank") certain credit
accommodations, including the guaranty of a Leasehold Mortgage of the LESSEE'S
interest under the Lease.
NOTICE - LESSOR agrees to notify Bank in writing (at the address specified below
or at any other address given by Bank in writing to Lessor) not less than thirty
(30) days before commencing any proceedings or otherwise taking any action to
terminate the Lease or to enforce its remedies thereunder.
SUBORDINATION - LESSOR agrees that all of Lessee's machinery, equipment,
inventory, fixtures or other property ("Lessee's Property") which may be located
on the 'eased premises shall remain the personal property of the Lessee and
shall not become a fixture or part of the realty notwithstanding anything that
may be implied by law from the mode of attachment, installation or otherwise.
LESSOR hereby consents to the Leasehold Mortgage and further agrees that any
lien or security interest LESSOR may claim against any of Lessee's Property is
subordinated to any lien or security interest now or subsequently held by Bank
in any of such property.
LIMITED RIGHT OF ENTRY - LESSOR acknowledges that, notwithstanding any
noncompliance with or default by LESSEE under the Lease, the Bank shall have the
limited right to enter into and remain in possession of the leased premises for
a reasonable period not to exceed ninety (90) consecutive days for the purpose
of enforcing its liens and security interests in Lessee's Property, including
the sale and/or detachment and/or removal from the leased premises of such
property. Bank shall pay to LESSOR, on a weekly basis in advance (pro rata,
depending on the number of days Bank is in possession), the current monthly rent
accruing under the Lease during the period while Bank is in possession of the
leased premises. Bank shall have no responsibility whatsoever for any back rent
or other obligations which have accrued under the Lease prior to Bank's entry
into possession under this paragraph.
NO ASSUMPTION - LESSOR further agrees that Bank's rights have been given for
security purposes only, and that unless and until Bank agrees expressly and in
writing to do so, Bank shall have no obligations whatsoever under the Lease.
ADDRESS OF LEASED PREMISES: LESSOR:
- -------------------------- --------------------------
By:
- -------------------------- ----------------------
Its:
----------------------
ACKNOWLEDGMENT OF LESSEE: BANK'S ADDRESS
PRODUCTION STAMPING, INC.,
(formerly known as
Production Acquisition Inc.) Comerica Bank
39200 Six Mile Road
By: Livonia, Michigan 48152
----------------------- ATTENTION: Commercial and
Its: Real Estate Loan Documentation,
----------------------- MC7578
<PAGE> 1
EXHIBIT 10.18
PURCHASE AGREEMENT
THIS AGREEMENT, entered into as of the 30th day of September 1996, is
by and among J & R MANUFACTURING, INC., a Michigan corporation (the "Seller"),
and Theodore H. Dezenski and Roger H. Ducoffre (each individually a
"Shareholder" and collectively the "Shareholders"), and JR ACQUISITION INC.
(the "Buyer"), a Michigan corporation.
WITNESSETH:
WHEREAS, Seller is engaged in, among other things, the business of
designing and manufacturing prototypes of stamped automotive parts;
WHEREAS, the Shareholders are shareholders, directors and officers of
Seller; and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, all of the assets and properties of Seller used in connection with
the operation of its businesses, upon the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Purchased Assets. Seller shall sell, transfer, assign, convey
and deliver to Buyer, and Buyer shall purchase and acquire from Seller, all
right, title and interest in and to all of the assets, properties, goodwill and
businesses, as going concerns, of every kind and description (except for the
Excluded Assets as defined in Section 1.2 hereof) owned, held, used or claimed
by Seller (the "Purchased Assets"), including, but not by way of limitation,
the following:
(a) All inventories, including, without limitation, all
inventories in transit, inventories paid for but not yet delivered, raw
materials, supplies, work in progress and
<PAGE> 2
finished goods inventory, and all of Seller's inventory of kirksite,
but excluding materials owned by customers of Seller;
(b) All accounts and notes receivable (whether billed or
unbilled), and all collections thereon from and after the Closing Date
(as hereinafter defined);
(c) All machinery and equipment, and all parts,
accessories, tools, dies and supplies pertaining thereto;
(d) All trucks, automobiles and vehicles titled in the
name of the Seller, and all parts, accessories, tools and supplies
pertaining thereto;
(e) All furniture, fixtures, shelving, office supplies,
computers and equipment, and all parts, accessories, tools and supplies
pertaining thereto;
(f) All prepaid taxes and expenses;
(g) The exclusive world-wide rights to use the name "J & R
Manufacturing, Inc." or any variations thereof;
(h) All patents, inventions, trade secrets, trademarks,
trade names, know-how, service marks, copyrights and applications for
any of the foregoing, including all rights of Seller under any royalty,
license or similar agreements pertaining thereto;
(i) All leaseholds and leasehold improvements and fixtures;
(j) All warranties, guarantees and the like of
manufacturers, contractors, sellers or suppliers which pertain to the
Purchased Assets;
(k) All interest in and to the telephone numbers, facsimile
numbers and telex numbers, if any, and all listings pertaining to the
Seller in all telephone books and directories;
(l) All past and present insurance policies and indemnity
bonds, and all claims or rights thereunder;
<PAGE> 3
(m) All customer orders and inquiries, all commitments and
contracts, chooses in action, claims and rights of recovery or set-off
of every type or character;
(n) All of Seller's interests and rights to possession in
any tools, dies, inventory, fixtures or other property of the customers
or suppliers of Seller which is in Seller's possession; and
(o) All of Seller's businesses as going concerns, including
its goodwill, if any, and all information pertaining thereto, including
all records, books, manuals, customer lists, supplier lists, permits,
franchises, brochures, advertising and sales literature, product
testing records and results, credit information and any and all other
operating data of Seller. After the Closing, Buyer shall make all
records and books provided hereunder, including financial and
historical records of Seller, available to Seller, to the Shareholders,
or to their representatives, on the premises of the Buyer upon
reasonable notice and for a reasonable purpose, and shall make
available facilities to make any copies which Seller, the Shareholders,
or their representatives may reasonably request. Buyer shall be
entitled to reimbursement of its actual costs incurred in providing
such copies.
1.2 Excluded Assets. Notwithstanding the foregoing, the Purchased
Assets shall not include any of those assets listed on Schedule 1.2 attached
hereto (the "Excluded Assets").
1.3 Assumed Liabilities. On the Closing Date (as hereinafter
defined), Buyer shall deliver to Seller an Undertaking and Assumption pursuant
to which Buyer shall assume only the following obligations and liabilities of
Seller (the "Assumed Liabilities"):
(a) Those trade accounts payable (the "Trade Accounts
Payable") included in the Closing Net Asset Statement (as hereinafter
defined); provided, however that Trade
3
<PAGE> 4
Accounts Payable shall not include any professional or other fees
incurred in connection with this Agreement or the transactions
contemplated hereby.
(b) Those accrued expenses (the "Accrued Expenses")
included in the Closing Net Asset Statement;
(c) The obligations of Seller under certain equipment
leases described in Schedule 1.3(c) attached hereto (the "Equipment
Leases"); and
(d) Those obligations specifically listed on Schedule
4.15.
1.4 Excluded Obligations. Except as expressly assumed pursuant to
Section 1.3 hereof, Buyer shall not assume and Seller shall remain liable for
and discharge all liabilities, claims and obligations of Seller of any and
every kind and nature whatsoever (the "Excluded Obligations"), including, but
not by way of limitation, any of the following:
(a) Any obligations incurred or to be incurred for any
claims for product warranties, product recalls or product liability
occurrences with respect to goods produced and shipped prior to the
Closing, or with respect to services provided by Seller prior to the
Closing or otherwise arising out of the pre-Closing business or
operations of Seller;
(b) Any foreign, federal, state, county or local income,
transfer, sales, use or other taxes of Seller incurred in connection
with the sale of the Purchased Assets (other than any sales tax with
respect to any automobiles transferred hereunder, which shall be the
responsibility of the Buyer);
(c) Any liabilities, costs or expenses incurred or to be
incurred with respect to any lawsuits, claims, suits, proceedings or
investigations, including without limitation any governmental or other
fines or penalties of any nature whatsoever, relating to any period
through the Closing Date;
4
<PAGE> 5
(d) Any liability resulting from or in connection with the
Seller's operations or the condition of its premises or assets through
the Closing Date, including but not limited to any failure to comply
with any federal, state or local law, regulation or ordinance,
including, but without limitation, any Environmental Laws (as
hereinafter defined); or
(e) Any other liabilities of Seller of any nature whatsoever
which are not included in the Financial Statements, including, without
limitation, all liabilities and obligations under any federal, state or
local law, any employee benefit plans or otherwise with respect to
current or past-employees of Seller (or its predecessors in interest),
all employee bonus expenses, all workers compensation and other claims
arising from any event, condition or activity which occurred or was in
existence prior to or through the Closing Date.
ARTICLE 2
PURCHASE PRICE AND PAYMENT
2.1 Purchase Price. The purchase price (the "Purchase Price") for
the Assets shall be equal to the sum of the following:
(a) Four Million Seven Hundred Fifty Thousand ($4,750,000)
Dollars (the "Purchase Amount"), which Purchase Amount shall be
increased or decreased, as the case may be, to the extent that the Net
Asset Value (as hereinafter defined) as of the Closing Date (as
hereinafter defined) is greater than or less than Four Million Six
Hundred Twenty Eight Thousand ($4,628,000) Dollars, and which amount
shall be payable as follows:
5
<PAGE> 6
i) Four Million Five Hundred Thousand ($4,500,000)
Dollars of the Purchase Price shall be paid to Seller at the
Closing by certified check or wire transfer; and
ii) Two Hundred Fifty Thousand ($250,000) Dollars
shall be paid by Buyer's execution and delivery at the Closing
of a Promissory Note (the"Promissory Note") in such amount in
the form attached hereto as Exhibit A;
iii) The balance of the Purchase Price, if any,
together with interest thereon at the prime rate of interest
charged from time to time by Comerica Bank from and after the
Closing Date until the date of payment, shall be paid to Seller
by certified check or wire transfer within thirty (30) days
following the finalization of the Closing Net Asset Statement
(as hereinafter defined) as provided in Section 2.2(c) hereof;
--- provided, however, in the event that the Purchase Amount, as
adjusted as provided above, is less than Four Million Seven Hundred
Fifty Thousand ($4,750,000) Dollars, then in such event Seller and
Shareholders, jointly and severally, shall immediately pay to Buyer,
upon demand and by certified check or wire transfer, the amount by
which such Purchase Amount is less Four Million Seven Hundred Fifty
Thousand ($4,750,000) Dollars;
---and
(b) The assumption of the Assumed Liabilities at the
Closing.
2.2 Preparation of Closing Net Asset Statement.
(a) Simultaneously with the Closing, Buyer and Seller shall
jointly cause a physical inventory (the "Physical Inventory") to be
taken of the Inventory (as hereinafter defined) as of the close of
business on the Closing Date.
6
<PAGE> 7
(b) Within forty-five (45) days following the Closing Date,
Buyer and Seller shall jointly cause an audited statement of the Net
Asset Value (as hereinafter defined) to be prepared (the "Closing Net
Asset Statement"), as follows:
(i) The preparation of the Closing Net Asset
Statement shall be prepared and audited in accordance with
generally accepted accounting principles, with the Inventory
valued as provided in Section 2.3(b) hereof; and
(ii) All auditing and other accounting procedures
required hereunder shall be performed by Ernst & Young L.L.P.
("Accountants"), the cost of which shall be paid by Buyer.
(c) The Closing Net Asset Statement as presented shall be
final and binding on the parties unless either party shall give written
notice of its objection to the same within twenty-one (21) days after
its receipt thereof. In the event either party raises any objection,
then the Buyer and Seller shall, within twenty-one (21) business days
thereafter, mutually select an independent accountant (other than the
Accountants), who shall audit the Closing Net Asset Statement, and the
determination by said independent accountant of the Closing Net Asset
Statement shall be final and binding on the parties. Buyer and Seller
shall each pay one half of the fees and costs due to the independent
accountant.
2.3 Definitions. For purposes hereof, the following terms shall
have the following definitions:
(a) "Net Asset Value" shall be equal to the aggregate sum of
Seller's accounts receivable acquired hereunder, Inventory (as
hereinafter defined), prepaid expenses, and Fixed Assets (as
hereinafter defined), less the sum of the Trade Accounts Payable (as
defined in Section 1.3 hereof) and Accrued Expenses (as defined in
Section 1.3 hereof),
7
<PAGE> 8
all as of the Closing Date, provided, however, except as otherwise
defined herein, all of the foregoing shall be determined in accordance
with generally accepted accounting principles, and, provided, further,
that the Net Asset Value shall not include any amounts with respect to
any life insurance policies on the Shareholders.
(b) "Inventory" shall include all inventories, including,
without limitation, all inventories in transit, inventories paid for
but not yet delivered, raw materials, supplies, work in progress and
finished goods inventory, but excluding materials owned by customers of
Seller; provided, however:
(i) "Inventory" shall include only those items of
Seller's inventory which are good and saleable or usable in the
ordinary course of business. "Inventory" shall be valued at the
lower of cost or market, except for obsolete and excess items
(as determined in accordance with generally accepted accounting
principles); and
(ii) Seller's inventory of kirksite (including all
kirksite tools and dies owned by Seller) shall be valued based
on the number of pounds of kirksite in inventory as of the
Closing Date multiplied by the price per pound charged by Arco
Alloys as of the Closing Date; provided, however, in no event
shall the Seller's inventory of kirksite be valued at an amount
in excess of Nine Hundred Fifty Thousand ($950,000) Dollars.
(d) "Fixed Assets" shall mean the Seller's fixed assets,
net of depreciation, and excluding any amounts for any capitalized
leases.
2.4 Purchase Price Allocation, Buyer and Seller shall allocate the
Purchase Price among the Purchased Assets as set forth on Schedule 2.4 hereof.
ARTICLE 3
8
<PAGE> 9
CLOSING
3.1 Closing, The purchase and sale of the Purchased Assets shall be
consummated (the "Closing") contemporaneously with the execution of this
Agreement (the "Closing Date") at the offices of Timmis & Inman L.L.P. or at
such other place as Seller and Buyer shall mutually agree upon;
3.2 Closing Date Deliveries. At the Closing:
(a) Seller shall deliver to Buyer a Bill of Sale and
Assignment of all the Purchased Assets in the form of Exhibit B
attached hereto;
(b) Seller shall receive from Timmis & Inman L.L.P.,
counsel for Buyer, an opinion covering the matters set forth in
Schedule 3.2(b);
(c) Buyer shall receive from Bassey & Selesko, P.C.,
counsel for Seller, an opinion covering the matters set forth in
Schedule 3.2(c);
(d) Buyer and Seller shall deliver, or cause to be
delivered, executed copies of the following (collectively the "Related
Agreements"):
(i) Agreements Not to Compete and Confidentiality
Agreement, between Buyer and Seller and its shareholders, in the
forms attached hereto as Exhibits C-1, C-2 and C-3 (the
"Agreements Not to Compete");
(ii) Employment Agreements between the Buyer and the
Shareholders in the forms attached hereto as Exhibits D-1 and
D-2 (the "Employment Agreements");
(iii) Undertaking and Assumption, between Buyer and
Seller, as required pursuant to Section 1.3 hereof, in the form
attached hereto as Exhibit E;
(iv) Assignment of Lease in the form attached hereto
as Exhibits F (the "Assignments of Leases");
9
<PAGE> 10
(v) Leases in the forms attached hereto as Exhibits
G-1, G-2 and G-3 (the "Affiliate Leases");
(vi) Guaranty by Hawthorne Metal Products Co.
("Hawthorne") in the form of Exhibit H attached hereto (the
"Hawthorne Guaranty"); and
(vii) MESC Form 1027, Business Transferor's Notice to
Transferee of Unemployment Tax Liability and Rate, together
with a statement from the Commissioner of MESC certifying the
status of Seller's contribution liability under Section 15(g)
of the Michigan Employment Security Act, attached hereto as
Exhibit I.
(e) Buyer shall receive from Seller a copy of the following:
(i) All consents required for Buyer to obtain the
benefits of the Contracts and Leases described in Schedules 4.5
and 4.6 hereof;
(ii) Certified copies of the Articles or Certificates
of Incorporation and Bylaws of the Seller;
(iii) Certificates of Good Standing of the Seller from
the jurisdiction in which the Seller is incorporated and each
jurisdiction in which the Seller is qualified to transact
business;
(iv) Certified copies of the resolutions of the
Seller's shareholders and directors approving and authorizing
the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby; and
(v) Certificate of Amendment to Seller's Articles of
Incorporation changing Seller's name to permit Buyer to assume
or adopt the name "J & R Manufacturing".
(f) Seller shall receive from Buyer a copy of the following:
10
<PAGE> 11
(i) Certified copy of the Articles of Incorporation
and Bylaws of the Buyer;
(ii) Certificates of Good Standing from the
jurisdiction in which the Buyer is incorporated and each
jurisdiction in which the Buyer is qualified to transact
business; and
(iii) Certified copy of the resolutions of the Buyer's
Board of Directors approving and authorizing the execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby.
(g) Seller shall deliver any and all other documents or
instruments reasonably requested by Buyer prior to the Closing Date and
necessary to transfer the Purchased Assets to the Buyer.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS
Seller and Shareholders, jointly and severally, represent and warrant to Buyer
that:
4.1 Corporate Standing and Authority.
(a) Seller is a corporation duly organized and validly
existing and in good standing under the laws of the State of Michigan,
with full corporate power and authority to own its assets and to
conduct its business. Seller is not required to be qualified as a
foreign corporation with respect to any business under the laws of any
other jurisdiction.
(b) Seller has the legal capacity and authority to execute
this Agreement and to perform the transactions contemplated hereby. The
execution, delivery and performance of this Agreement do not and will
not violate or cause a default under any provision of Seller's Articles
of Incorporation or Bylaws, or result in the breach, termination or
acceleration of any obligation or constitute a default or permit the
11
<PAGE> 12
termination of any right under any mortgage indenture, lien, lease,
contract, agreement, instrument, order, arbitration award, judgment or
decree to which Seller is a party or by which Seller or its properties
are bound. Seller and Shareholders have taken all necessary action
required by law, Seller's Articles of Incorporation and Bylaws or
otherwise, to authorize the execution, delivery and performance of this
Agreement. This Agreement and each document and instrument executed
pursuant to this Agreement by Seller or Shareholders constitutes a
valid and binding obligation of Seller or Shareholders, as the case may
be, enforceable in accordance with their respective terms, except as
such enforcement may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally. Neither
Seller nor Shareholders are required to obtain the consent, approval or
waiver of any person not a party to this Agreement to enter into this
Agreement or to consummate the transactions contemplated hereby, except
for the consents of the lessors and parties under various of the Leases
and Contracts (as defined in Sections 4.5 and 4.6 hereof), as more
fully set forth in Schedules 4.5 and 4.6 attached hereto, which
consents are to be obtained on or prior to the Closing Date in
accordance with the provisions of Section 3.2(f)(i) hereof.
4.2 Title to Purchased Assets, Seller owns and will convey to Buyer
on the Closing Date good and marketable title to the Purchased Assets, free and
clear of any liens, pledges, security interests, leases, claims, encumbrances,
restrictive agreements or other adverse interests, charges or defects of any
kind except as otherwise set forth in Schedule 4.2(a) attached hereto (the
"Liens"), all of which Liens shall have been released, discharged or otherwise
removed prior to or concurrently with the Closing hereunder. Neither Seller,
Shareholders nor any officer of Seller knows of any facts or circumstances
which are not disclosed or otherwise revealed in this Agreement which would
adversely affect or impair the value of the Purchased
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<PAGE> 13
Assets, or which would adversely affect or impair the right or ability of Buyer
to carry on any of Seller's operations substantially as heretofore conducted.
Except as described in Schedule 4.2(b), all tangible personal property
owned or used by the Seller is situated at its business premises and is
currently used in its businesses. Schedule 4.2(c) lists or describes all
tangible personal property owned by or an interest in which is claimed by any
other person (whether a customer, supplier or other person) for which the
Seller is responsible (copies of all agreements relating thereto have been
delivered to Buyer), and all such property is in the Seller's actual possession
and is in such condition that upon the return of such property in its present
condition to its owner, the Seller will not be liable in any amount to such
owner.
4.3 Financial Statements.
(a) Seller has made available to Buyer the balance sheets of Seller
for the period ending July 31, 1996 and the related statement of income for the
period then ended (the "July Financial Statements"), together with the reviewed
balance sheets of the Seller for each of the fiscal years ending October 31,
1992 through October 31, 1995 and the related reviewed statements of income and
retained earnings and changes in financial position for the periods then ended,
including the notes thereto and any supplemental information provided therewith
(all of which, together with the Closing Net Asset Statement and the July
Financial Statements, are collectively referred to herein as the "Financial
Statements"). The Financial Statements:
(i) Are true, complete and correct in all material
respects;
(ii) Fairly present the properties, assets, financial
position and results of operations of its business as of the respective
dates and for the respective periods stated above, except for capital
leases not recorded as outlined in the accountant's report letter; and
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<PAGE> 14
(iii) Have been prepared pursuant to and in accordance with
generally accepted accounting principles applied on a consistent basis.
(b) Adequate provision has been made in the Financial Statements for
doubtful accounts receivable, and sales are stated net of discounts, returns
and allowances, all taxes due or paid are reflected and taxes not yet due and
payable are fully accrued or otherwise provided for; and, except to the extent
reflected therein, or as set forth in Schedule 4.3(b), neither the Seller nor
the Shareholders have any knowledge of any liability or obligation, whether
accrued, absolute, or contingent, arising out of transactions entered into or
any state of facts existing as of the dates thereof. No provision in the
Financial Statements is necessary (except as otherwise disclosed therein),
under generally accepted accounting principles, for liability on account of
product warranties or with respect to the manufacture or sale of defective
products. All significant items of income or expense which are unusual or of a
non-recurring nature are separately disclosed in the Financial Statements.
(c) Except to the extent reflected therein or as set forth in
Schedule 4.3(c), the Seller has paid all known federal, local and foreign
income, franchise, real property, personal property and all other taxes,
including, but not limited to, all withholding, employment, sales, use, ad
valorem and other taxes of the Seller, including interest and penalties in
respect thereof, if any, for the fiscal period ended October 31, 1995, all
fiscal periods prior thereto, and except as set forth in Schedule 4.3(c), has
paid, remitted or accrued in the Financial Statements all of the aforesaid known
taxes accruing and becoming due and payable by the Seller on or before the
Closing Date. Except with respect to any returns or reports, the filing of which
has been duly extended, the Seller has duly, and to the best of its and the
Shareholders' knowledge, accurately filed all tax returns and reports which are
required to be filed, subject to permissible extensions, including, without
limitation, returns and reports covering all the aforesaid taxes and has paid
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all taxes or other amounts reflected thereon. Seller has made available to
Buyer copies of the Seller's federal income, state and other tax returns filed
for each of the fiscal years ending October 31, 1992 through October 31, 1995.
The Seller has filed returns for and paid in full all known taxes, penalties,
interest and related charges and fees to the extent such filings and payments
are required. The Seller does not have any deficiency with respect to any tax
period and is not and will not be subject to any current or deferred liability
with respect to taxes or penalties or interest thereon, or related charges and
fees, whether or not assessed, which are not timely and adequately provided for
in the tax accruals in the most recent of the Financial Statements, other than
current and deferred taxes of the Seller not yet due which arise solely from
income earned after the date of the most recent Financial Statements and which
are consistent in character and amounts with the tax accruals reflected in the
Financial Statements. No consents extending or waiving the time limited for
reassessment of any taxes, duties, governmental charges, penalties, interest or
fines, or any statutes of limitations related thereto have been filed with
respect to the Seller for any fiscal year.
The Seller has withheld from each payment made to any of its officers,
Shareholders, directors, former directors, and employees and former employees
the amount of all taxes and other deductions (including without limitation,
income taxes, unemployment, disability, and other required taxes and
contributions) required to be withheld and has paid the same together with the
employer's share of same, if any, to the proper tax or other receiving officers
within the prescribed times and has filed, in complete and accurate form, all
information and other returns required pursuant to any applicable legislation
within the prescribed times.
(d) As of the Closing, the Seller shall have made and paid in full
(i) contributions for the current fiscal year to the J & R Manufacturing, Inc.
Profit Sharing Plan (under agreement dated October 30, 1995) in an amount equal
to Zero ($0) Dollars, and (ii)
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employee bonus expenses for the current fiscal year in an amount equal to Fifty
Thousand ($50,000) Dollars.
4.4 No Material Changes. Since October 31, 1995, except as disclosed
in the Financial Statements, or as set forth in Schedule 4.4, there has not
been, to the best of Seller's and Shareholders' knowledge, any material adverse
change or changes, either individually or in the aggregate, in the general
affairs, business, prospects, properties, financial position, results of
operations or net worth of Seller and the business affairs of Seller have been
conducted in the usual and ordinary course and in the manner as theretofore
conducted. Except as set forth on Schedule 4.4 hereof, since October 31, 1995,
Seller has not:
(a) sold or transferred any asset, other than in the
ordinary course of business;
(b) entered into any transactions affecting the Purchased
Assets, or the business or operations of Seller, nor acquired
additional assets or entered into any contracts for the acquisition of
same or incurred or increased any obligation or liability (absolute or
contingent), other than in the ordinary course of business;
(c) paid or otherwise satisfied any obligations other
than the obligations arising in the ordinary course of business, except
as set forth in Schedule 4.4;
(d) subjected any of the Purchased Assets to any Lien;
(e) entered into any transaction other than in the
ordinary course of business;
(f) incurred any obligation for or paid for any capital
expenditures in excess of Twenty-Five Thousand ($25,000) Dollars in the
aggregate (other than as described in Schedule 4.4(f));
(g) issued any capital stock or, declared or paid any
dividend or made any other payment from capital or surplus or other
distribution of any nature, or directly or
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indirectly redeemed, purchased or otherwise acquired or recapitalized
or reclassified any capital stock or liquidated in whole or in part;
(h) created, incurred, or assumed any indebtedness or other
liability, except for accounts payable or other current liabilities
(other than for borrowed money) incurred in the ordinary course of
business;
(i) raised salaries or hourly rates or the rate of bonuses
or commissions or other compensation of any employee, other than those
made which were consistent with past practices and other than those
which have been disclosed in writing to the Buyer in favor of Roger H.
Ducoffre and Theodore H. Dezenski;
(j) materially amended or terminated any contract,
agreement, franchise, permit or license other than in the ordinary
course of business; or
(k) entered into any agreement or commitment with respect to
any of the foregoing.
4.5 Leases. Schedule 4.5 sets forth a list and brief description
(including in each case the names of the lessee and lessor, the monthly rentals
payable, the expiration date thereof, the details of any options to renew and
to purchase thereunder and the property covered thereby, and whether any
action, consent or notice is required as a result of this Agreement) of every
lease or agreement under which Seller is a lessee of, or primarily or
secondarily liable under, or holds or operates, any property, real or personal,
owned by any third party and used in the Seller's businesses (the "Leases").
The Leases are in full force and effect, are valid and binding obligations of
the parties thereto, and no defaults exist thereunder. Buyer has been furnished
with true and complete copies of all Leases described on Schedule 4.5.
The Seller's rights under all real estate leasehold estates (the
"Leased Real Estate") are not subordinate to, or defeasible by, any lien or any
prior lease thereon. There are no ground
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subsidences or slides on such Leased Real Estate. The Leased Real Estate and
the improvements thereon are fully accessible by public roads, are free, to the
best of Seller's and Shareholders' knowledge, from strips, gores and enclaves,
and, to the best of Seller's and Shareholders' knowledge, the improvements
thereon do not encroach onto the property of other persons. No governmental
authority having jurisdiction over such Leased Real Estate has given any notice
of a possible future imposition of assessments affecting the properties or to
exercise the power of eminent domain. The Leased Real Estate is serviced by
utilities, including but not limited to, water, sewage, gas, waste disposal,
electricity and telephone, and the Seller and Shareholders are not aware of any
inadequacies with respect to such utilities.
4.6 Contracts. Schedule 4.6 contains a list and brief description
(including in each case the names of the parties thereto, the terms of any
payments, the execution and termination date thereof, a summary of the
obligations of the parties thereto, and whether any action, consent or notice
is required as a result of this Agreement) of all contracts, agreements and
other instruments of any type or kind to which Seller is a party (the
"Contracts") (other than those described in other Schedules attached hereto and
other than oral employment agreements terminable by Seller at will without
penalty under which the only obligation of Seller is to make current wage
payments and provide current fringe benefits), including, without limitation,
any:
(a) manufacturer's representative, distributor, license,
sales, agency or other contract which is not terminable at will
without penalty;
(b) guarantee of any obligations of customers or others; or
(c) contract for the future purchase of materials, supplies,
merchandise, services or equipment, except for any contract continuing
for a period of less than three months or involving payments of less
than Ten Thousand ($10,000) Dollars over its remaining term (including
periods covered by any option to renew by either party).
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Buyer has been furnished with true and complete copies of all Contracts
described on the foregoing Schedule.
The Contracts have been entered into in the ordinary course of
business, are in full force and effect, and are the valid and binding
obligations of the parties thereto, and no defaults exist thereunder. The
Contracts do not contain any provision, oral or written, expressed or implied,
prohibiting, or requiring the consent of any third party to the transfer of the
Purchased Assets to Buyer.
4.7 Employee Benefit Plans. Except as set forth on Schedule 4.7,
Seller has not, directly or indirectly, maintained or contributed to any
employee welfare benefit plan, employee pension benefit plan, deferred
compensation plan, bonus plan, stock option plan, employee stock purchase plan,
hospitalization plan, employees' insurance plan or other employee or independent
contractor benefit plan, agreement, arrangement or commitment (collectively the
"Employee Benefit Plans"), except for normal policies concerning holidays and
vacations. All Employee Benefit Plans have at all times, to the best of Seller's
and Shareholders' knowledge, complied with and been administered according to
the provisions of all applicable laws, rules, regulations, orders, judgments,
decrees and other requirements of governmental authorities (collectively the
"Employee Benefit Laws"). With respect to each Employee Benefit Plan, to the
best of Seller's and Shareholders' knowledge: (1) all required reports have been
appropriately filed, (2) all notices required by the Employee Benefit Laws have
been appropriately filed, (3) all funding requirements and/or contributions have
been timely made, and (4) there have been no actions, suits, grievances or other
manner of litigation or claim with respect thereto, the assets thereof or any
fiduciary thereof. There are no Employee Benefit Plans which are subject to the
provisions of the Employee Benefit Laws. The Seller does not maintain any
welfare benefit plans within the meaning of the Employee Benefit Laws which
provide for any benefits after
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termination of employment. To the best of Seller's and Shareholders' knowledge,
no reportable events under the Employee Benefit Laws have occurred with respect
to any Employee Benefit Plan, and there exists no condition or set of
circumstances which could result in a reportable event. The value of all
accrued benefits are fully funded by the assets of such Employee Benefit Plans.
True and complete copies of all Employee Benefit Plans have been furnished to
Buyer, together with copies the most recent determination letters with respect
to each such Employee Benefit Plan, copies of all annual reports with respect
thereto, and copies of the most recent actuarial reports and trustee reports
with respect to each such Employee Benefit plan. The Seller has not
participated in any "multiemployer plan" as defined in the Employee Retirement
Income Security Act of 1974, as amended. Buyer will not incur any obligation,
liability or expense whatsoever with respect to any matter directly or
indirectly arising from any Employee Benefit Plan.
4.8 Compensation. Schedule 4.8 attached hereto contains a true and
complete list showing the names of all employees of Seller whose current annual
compensation (including bonuses) in the aggregate equals or exceeds Fifty
Thousand ($50,000) Dollars, such employees present annual compensation
including bonus, if any, and the increases, if any, in such annual compensation
for each of the calendar years 1993 through 1995 and through the Closing.
Schedule 4.8 also contains the names of all employees of the Seller who receive
any compensation whatsoever (including bonuses) from Shareholders or any
company affiliated with Seller and/or Shareholders and the amount of such
compensation received.
4.9 Governmental Regulations and Litigation. To the best of Seller's
and Shareholders' knowledge, and except as set forth in Schedule 4.9, Seller
has complied with all applicable laws, orders and other requirements of
governmental authorities, including all Environmental Laws. Seller is not
subject to any court or administrative order, judgment or
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decree. Except as set forth in Schedule 4.9, no investigation, governmental or
administrative proceeding or other litigation of any kind or nature to which
Seller may be a party is now pending or threatened; no claim which has not
ripened into litigation or other proceeding has been made or threatened against
Seller; and to the best of Seller's and Shareholders' knowledge, no facts,
circumstances or conditions exist which might give rise to any such claims,
investigations, proceedings or litigation.
4.10 Environmental Compliance.
(a) The use by the Seller of Leased Real Estate commonly known as
40739 Irwin Drive (the "Camphous Property") and the conduct thereon of the
businesses of the Seller has not violated,'and based upon present uses of the
Camphous Property is not expected to violate, any law, rule, regulation, code
or ordinance of any governmental authority (collectively the "Environmental
Laws"), including but not limited to, any federal, state, local or common law
(including provisions of law or regulations scheduled for future
implementation), any environmental laws rules or regulations of any
governmental authority, or any of the following:
(a) The Resource Conservation and Recovery Act;
(b) The Comprehensive Environmental Response Compensation
and Liability Act;
(c) The Federal Occupations Safety and Health Act;
(d) The Toxic Substances Control Act;
(e) The Environmental Protection Act;
(f) The Federal Water Pollution Control Act; and
(g) The Clean Air Act;
and Seller and Shareholders have not received notice of any such violation. The
Camphous Property is not and has not been contaminated, tainted or polluted in
any manner whatsoever from the conduct of any activities of the Seller prior to
the Closing Date, nor will the Camphous Property become contaminated, tainted
or polluted in any manner whatsoever from the conduct of any activities of the
Seller prior to the Closing Date or, to the best knowledge of the Seller
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and the Shareholders, from the migration of contaminants from property adjacent
to the Camphous Property. The Camphous, Property does not appear on the
National Priority List or any state listing which identifies sites for remedial
clean-up or investigatory actions and has not been used to handle, treat, store
or dispose of asbestos, PCB's, ureaformaldehyde or any hazardous or toxic waste
or substance, and has not otherwise been contaminated (including, without
limitation, contamination of soils, groundwater and surface waters located on
or under such premises) with pollutants or other substances which may give rise
to a clean-up obligation under any Environmental Laws.
(b) To the best knowledge of the Seller and the Shareholders, the
Leased Real Estate other than the Camphous Property (the "Remaining Property"),
the use of the Remaining Property and the conduct thereon of the businesses of
the Seller has not violated, and based upon present uses of the Remaining
Property are not expected to violate, any of the Environmental Laws and Seller
and Shareholders have not received notice of any such violation. To the best
knowledge of the Seller and the Shareholders, the Remaining Property is not and
has not been contaminated, tainted or polluted in any manner whatsoever, nor
will such Remaining Property become contaminated, tainted or polluted in any
manner whatsoever from the conduct of any activities prior to the Closing Date
or from the migration of contaminants from property adjacent to such Remaining
Property. To the best knowledge of the Seller and the Shareholders, the
Remaining Property does not appear on the National Priority List or any state
listing which identifies sites for remedial clean-up or investigatory actions
and has not been used to handle, treat, store or dispose of asbestos, PCB's,
ureaformaldehyde or any hazardous or toxic waste or substance, and has not
otherwise been contaminated (including, without limitation, contamination of
soils, groundwater and surface waters located on or under such premises) with
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pollutants or other substances which may give rise to a clean-up obligation
under any Environmental Laws.
(c) The Seller has utilized, stored, disposed of and transported all
hazardous, polluting and toxic substances (including petroleum products) and
all wastes, whether hazardous or not, in full compliance with all Environmental
Laws so as not to contaminate any property.
(d) Schedule 4. 10 lists, to the best knowledge of the Seller and
the Shareholders, all waste hauling companies at which wastes generated by the
Seller have been disposed of (in each case identifying such wastes). Neither
the Seller nor the Shareholders has received any notice (i) of any claim or
potential responsibility for the cost of remedial clean-up or investigating any
sites or areas at which such waste hauling companies disposed of any wastes
generated by the Seller, or (ii) that any such waste hauling companies has
violated any applicable federal, state or local law, rule or regulation. No
claims, actions, protests or complaints have been or will be filed or made by
any of Seller's employees, agents or any other persons with respect to the
presence, use, storage or disposal of any hazardous or toxic wastes, materials
or other substances by the Seller through the Closing Date and no basis for any
such claims exist.
4.11 LABOR AND ENVIRONMENT RELATIONS. Seller is not a party to or bound
by any collective bargaining agreement with any labor organization. Schedule
4.11 contains a true and complete list of all actions before federal and state
bodies (including arbitration cases), pending or closed, wherein Seller is a
party, which involve the labor and employment relations of Seller relating to
its businesses during the last five years. Except as disclosed on Schedule 4.11,
Seller has not received notice of or been the subject of any strike, work
stoppage, labor dispute, union organization drive, demands for representation,
primary or secondary boycott, unfair labor practice or employment
discrimination charge.
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4.12 Operating Condition of Assets.
(a) Each item of inventory is in good condition, usable
and saleable in the usual and ordinary course of business and meets all
current customer specifications.
(b) To the best of Seller's and Shareholders' knowledge, the
plants, buildings, machinery, fixtures, equipment, tools, dies, jigs,
and improvements which are owned, used, leased or held by Seller:
(i) are in good operating and usable condition,
subject to normal maintenance and repair, such that following
Closing Buyer can produce, manufacture, assemble and sell
products which meet the applicable specifications and conform
with the quality standards acceptable to the customers of the
Seller;
(ii) are, and the use thereof is, in compliance in
all material respects with all laws, ordinances and regulations
of all government authorities including, but not by way of
limitation, all Environmental Laws; and
(iii) are not the subject of, and are not affected by,
any condemnation or eminent domain proceedings, presently
instituted or pending, and neither Seller, Shareholders nor any
officer of Seller has any knowledge that such premises or
properties are or will be threatened by any such proceedings.
(c) Neither Seller nor Shareholders have received any notice
of any claimed violation of any such laws, ordinances or regulations
referred to in subparagraph (ii) above.
(d) Except for the Excluded Assets, the Purchased Assets
constitute all the assets used by Seller with respect to or arising out
of the operation of the Seller's businesses.
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4.13 INTANGIBLE ASSETS, Schedule 4.13 contains a true and complete
list of all patents and patent applications (pending or in the process of
preparation), domestic or foreign, patent rights, trademarks, trade names and
licenses under the patents of others, trade secrets, secret processes and other
proprietary rights of every kind and nature used or necessary for use by Seller
in its businesses as presently conducted, or controlled in whole or in part by
Seller or directly or indirectly owned or controlled in whole or in part by
Shareholders or any of Seller's officers, directors or key employees. To the
best of Seller's and Shareholders' knowledge, all such patents, patent
applications, patent rights and licenses are valid and effective in accordance
with their terms, and all such trade names, trade secrets, secret processes and
other proprietary rights are valid and effective. Except as disclosed in
Schedule 4.13, there are no agreements, contracts or obligations under which
Seller is obligated with respect to, or is using, any patents, patent
applications, patent rights, trademarks, trade names, licenses under the
patents of others, trade secrets, secret processes or other proprietary rights.
The manufacturing and engineering drawings, process sheets, specifications,
bills of material, trade secrets, "know-how" and other like data of Seller are
solely in the possession of and owned by Seller, and are in such form and of
such quality that, Buyer can, following the Closing, design, produce,
manufacture, assemble and sell the products and provide the services heretofore
provided by Seller so that such products and services meet applicable
specifications and conform with the quality standards acceptable to Seller's
customers.
To the best of Seller's and Shareholders' knowledge, the conduct of
Seller's businesses, including the manufacture and sale of its products, does
not infringe upon the patents, trademarks, trade secrets, trade names, or
copyrights or other intellectual property rights, of any other party. Neither
Seller nor Shareholders have received any notice of any claim of infringement
except as described in Schedule 4.13 attached hereto. Seller has not disclosed
in
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any way to any third party, other than to Buyer on a "confidential" basis or to
suppliers or customers of Seller on a ""confidential" and "need to know" basis
in the ordinary course of business, confidential information or trade secrets
including, but not by way of limitation, confidential product or process data,
information as to new product developments and product costs data, related to
the operations of Seller, nor entered into any contract or agreement to
disclose any of the above to a third party.
4.14 INSURANCE. Schedule 4.14 attached hereto contains a true and
correct list and summary description of the insurance coverage held by Seller
with respect to its businesses, the Purchased Assets, and any property of
others under Seller's care, custody and/or control, including, but not limited
to all policies of fire, liability and other forms of casualty insurance,
product liability insurance, and group and worker's compensation insurance held
by Seller with respect to its businesses. All such policies (copies of which
have been delivered to Buyer) are freely assignable to Buyer and have been
maintained in force and effect by Seller and Seller is not in default under any
of such policies and have not been refused any insurance by any insurance
carrier at any time during the past five (5) years.
4.15 CUSTOMERS AND COMMITMENTS. Schedule 4.15 lists (a) the ten (10)
largest customers of, and the ten (10) largest suppliers to, the Seller during
the twelve (12) month period ended October 31, 1995 and for the six (6) month
period ended April 30, 1996 (stating for each the dollar volume of the sales or
purchases, as the case may be), and (b) as of the date hereof all of the
existing executory contracts and commitments of Seller in excess of Ten
Thousand ($10,000) Dollars of any kind or nature whatsoever (including, without
limiting the generality of the foregoing, all labor agreements, leases, notes
or other evidences of indebtedness, mortgages, sales representation agreements,
and purchase orders and commitments
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and powers of attorney). Seller has delivered to Buyer all copies of the
written instruments, if any, evidencing the items listed on Schedule 4.15.
Neither Seller nor Shareholders have any knowledge that any supplier
or customer of the Seller or any other person intends to cease dealing with the
Seller, or intends to alter in any material respect the amount of such person's
dealings with the Seller or that any such person would alter in any material
respect such dealings in the event of the consummation of the transactions
contemplated hereby.
4.16 Finder's or Broker's Fee, There are no broker's commissions,
finder's fees or other payments of like nature payable to any person or entity
in connection with the transactions contemplated by this Agreement, except for
the fees payable to Plante & Moran, LLP, which shall be the sole responsibility
of the Seller, and in no event will the Buyer have any liability for any fee or
commission in the nature of a finder's, originator's or broker's fee in
connection with the transactions contemplated hereby.
4.17 Licenses, Permits and Approvals. Schedule 4.17 contains a true
and complete list and description of all licenses, permits, authorizations and
approvals required by any federal, state or local governments' administrative
or judicial authorities or any of Seller's customers or suppliers in connection
with the operation of Seller's businesses. No approval of any of such
organizations is required for the consummation of the transactions contemplated
by this Agreement or which would materially adversely affect or impair the
right or ability of Buyer following the Closing to carry on any of Seller's
operations substantially as heretofore conducted.
4.18 General Warranty. The representations and warranties of Seller
contained in this Agreement and all exhibits, certificates, statements and
other documents furnished to Buyer by Seller or Shareholders in connection with
the transactions contemplated hereby are accurate and
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complete, and do not and will not contain any untrue statement of material
fact, or omit to state a material fact necessary to make the statements herein
and therein not misleading. Seller and Shareholders have made full disclosure
of all facts necessary to provide Buyer with all material information with
respect to the Seller's businesses, assets and liabilities.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that:
5.1 Corporate Standing and Authority.
(a) Buyer is a corporation duly organized and validly
existing and in good standing under the laws of the State of Michigan.
(b) Buyer has legal capacity and authority to execute this
Agreement and to perform the transactions contemplated hereby. The
execution, delivery and performance of this Agreement do not and will
not violate or cause a default under any provision of Buyer's Articles
of Incorporation or Bylaws, or result in the breach, termination or
acceleration of any obligation or constitute a default or permit the
termination of any right under any mortgage indenture, lien, lease,
contract, agreement, instrument, order, arbitration award, judgment or
decree to which Buyer is a party or by which it or its properties are
bound. Buyer has taken all necessary action required by law, its
Articles of Incorporation and Bylaws or otherwise, to authorize the
execution, delivery and performance of this Agreement. This
Agreement,and each document and instrument executed pursuant to this
Agreement by Buyer constitutes a valid and binding obligation of Buyer,
enforceable in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally. Buyer is not required to
obtain the consent, approval or waiver of any
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person not a party to this Agreement to enter into this Agreement or to
consummate the transactions contemplated hereby.
ARTICLE 6
INDEMNITIES
6.1 Indemnification by Seller and Shareholders.
(a) The Seller and the Shareholders, jointly and severally,
shall indemnify, defend and hold Buyer, and its officers, directors and
employees harmless, from, against and with respect to any claim,
liability, obligation, loss, damage, assessment, judgment, cost and
expense (including, without limitation, reasonable attorney's fees and
costs and expenses reasonably incurred in investigating, preparing,
defending against or prosecuting any litigation or claim, action, suit,
proceeding or demand), of any kind or character, arising out of or in
any manner incident, relating or attributable to:
(i) any breach or failure of any representation or
warranty of the Seller contained in this Agreement or in any
certificate, instrument of transfer or other document or
agreement (other than the Employment Agreements) executed by the
Seller, Shareholders or Seller's officers in connection with
this Agreement or otherwise made or given by Seller,
Shareholders or Seller's officers in connection with this
Agreement;
(ii) any failure by the Seller or Shareholders to
perform or observe, or to have performed or observed, in full
any covenant, agreement or condition to be performed or
observed by Seller or Shareholders under this Agreement or
under any certificates or other documents or agreements (other
than the Employment Agreements) executed by Seller, or
Shareholders in connection with this Agreement;
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(iii) reliance by Buyer on any books or records of
Seller or the reliance by Buyer on any written information
furnished by Seller, Shareholders or any of Seller's officers,
to Buyer, to the extent any of such information should prove to
be false.
(iv) any liability or claim resulting from the
conduct of the Seller businesses through the Closing Date,
including but not limited to any liability or claim for product
warranties, product recalls or personal injury or damage to
property based on or resulting from any product manufactured or
sold by Seller through the Closing Date, or any liability or
claim for any income, capital, transfer, sales, use, goods and
services or other tax, assessment, penalty or interest of any
nature which relates to any period prior to or including the
Closing Date or any liability or claim for any income, capital,
transfer, sales, use, goods and services or other tax,
assessment, penalty or interest of any nature which relates to
any period prior to or including the Closing Date;
(v) any agreements, contracts, negotiations or other
dealings by Seller or Shareholders with any person concerning
the sale of the stock or business of the Seller;
(vi) any losses incurred by the Seller prior to the
Closing Date which are of a nature customarily insured against
by a business similar to that of the Seller, including any
losses of a nature covered by any insurance plans maintained by
or on behalf of the Seller;
(vii) any liability or claim for workers' compensation
benefits, health, life or other insurance benefits, or any
other employee benefits or claims for or by
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any of the Seller's employees resulting from or relating to any
occurrence during any period prior to or including the Closing
Date;
(viii) any liability or claim resulting from the
employment or termination of any employee of the Seller on or
prior to the Closing Date;
(ix) the Excluded Obligations and any other
liabilities of Seller or Shareholders;
(x) any trade or other accounts receivable (whether
billed or unbilled) purchased hereunder (net of the allowance
for bad debts as reflected in the Net Asset Statement) which are
not paid in cash without resort to legal proceedings within One
Hundred Twenty (120) days following the Closing; or
(xi) any liability or claim resulting from the
matters disclosed on Schedules 4.9 or 4.11 attached hereto.
(b) The aggregate amount of indemnification to which Buyer
shall be entitled hereunder from all parties for all claims for
indemnification shall not exceed a total of Three Million Five Hundred
Thousand ($3,500,000) Dollars.
(c) Buyer shall notify the Seller and Shareholders in a
timely manner of any matters as to which Buyer or any of its officers,
directors or employees are entitled to receive indemnification and/or
defense under this Section, and shall set forth in such notice
reasonable detail regarding specific facts and circumstances then known
by Buyer which pertain to such matters.
(d) In the event the Buyer has asserted a claim for
indemnification under this Agreement, in addition to all other rights
and remedies available to Buyer, the Buyer shall be entitled to set-off
the amount of such claim against any amounts due, directly or
indirectly, to Seller or Shareholders under any agreement or
arrangement until Buyer's
31
<PAGE> 32
claim has been fully satisfied, including without limitation, any
amount payable pursuant to the terms of this Agreement, the Promissory
Note, the Employment Agreements or the Affiliate Leases.
(e) Except with respect to claims for indemnity pursuant to
Sections 6.1(a)(x) and 6.1 (a)(xi) hereof, Buyer shall not demand
payment of otherwise enforce any claim for indemnification or defense,
or any right to setoff, under this Section unless the total amount of
Buyer's claims under this Section exceeds Fifty Thousand ($50,000)
Dollars (exclusive of any amounts recovered pursuant to Sections 6.1
(a)(x) or 6.1 (a)(xi) hereof).
(f) In the event that Buyer shall make any claims against
Seller and/or Shareholders pursuant to Section 6.1(a)(x) hereof, and
Seller and/or Shareholders pay such claims in full, then, upon Seller's
or Shareholders' request, Buyer shall promptly transfer to Seller or
Shareholders, as the case may be, for collection any such unpaid
accounts receivables which have been paid by Seller or Shareholders
pursuant to Section 6.1(a)(x). In such event, Seller and/or
Shareholders shall be entitled to take reasonable collection actions
with respect to any account so transferred so long as such actions do
not materially interfere with the business operations of the Buyer. In
this connection, all payments received from any customer following the
Closing Date shall be deemed to be made first in payment of the account
of said customer outstanding on the Closing Date, unless otherwise
designated by said customer and except for any amounts as to which
there is a bona fide dispute.
(g) Buyer shall have no right to indemnification, defense or
setoff under this Section matter or claim unless Buyer provides the
notice required under Section 6.1(c) as to that matter or claim
within four (4) years following the Closing Date.
6.2 Indemnification by Buyer.
32
<PAGE> 33
(a) The Buyer shall indemnify, defend and hold harmless
Seller, and its officers, directors and employees, from, against and
with respect to any claim, liability, obligation, loss damage,
assessment, judgment, cost and expense (including, without limitation,
reasonable attorneys' fees and costs and expenses reasonably incurred
in investigation, preparing, defending against or prosecuting any
litigation or claim, action, suit, proceeding or demand), of any kind
or character, arising out of or in any manner incident, relating or
attributable to:
(i) any breach or failure of any representation or
warranty of the Buyer contained in this Agreement or in any
certificate, instrument of transfer or other document or
agreement executed by the Buyer in connection with this
Agreement or otherwise made or given by Buyer in connection with
this Agreement; or
(ii) any failure by the Buyer to perform or observe,
or to have performed or observed, in full any covenant,
agreement or condition to be performed or observed by Buyer
under this Agreement or under any certificates or other
documents or agreements executed by Buyer in connection with
this Agreement.
(b) Seller shall notify Buyer in a timely manner of any matters as
to which Seller or any of its officers, directors or employees are
entitled to receive indemnification and/or defense under this Section, and
shall set forth in such notice reasonable detail regarding specific facts and
circumstances then known by Seller which pertain to such matters.
6.3 Third Party Claims. In the event either party makes a claim for
indemnification under this Agreement as a result of any action, suit,
proceeding, claim, demand or assessment brought by a third party (a "Third Party
Claim"), then the party seeking indemnification (the "Indemnitee") shall advise
the indemnifying party (the
33
<PAGE> 34
"Indemnitor") of the same in the notice pursuant to Section 6.1(b) or
6.2(b) hereof and include a copy of all relevant materials with respect
to such Third Party Claim received by the Indemnitee, and such Third
Party Claim, shall be administered as follows:
(a) The Indemnitor shall, at its own expense, contest and
defend such Third Party Claim; provided, however, Indemnitee shall have
the right to participate in such defense (the costs and expenses of
which shall be borne by the Indemnitor) and, provided, further, in the
event the Indemnitor shall fail to proceed with reasonable diligence in
defending any Third Party Claim, then the Indemnitee, upon reasonable
notice to the Indemnitor stating its objections to the conduct of the
defense by the Indemnitor, shall have the right to take over the
defense of the Third Party Claim, with the reasonable costs and
expenses of such defense continued to be borne by the Indemnitor. In no
event shall the Indemnitor have the right to settle any Third Party
Claim without the prior written consent of the Indemnitee, nor shall
the Indemnitee have the right to settle any Third Party Claim without
the prior written consent of the Indemnitor. Consent to the settlement
shall not be unreasonably withheld.
(b) Each party shall cooperate with each other in connection
with any such Third Party Claim and provide each other with reasonable
access to any books, records or other documents or information which
they may possess relating to such claim.
6.4 Payment and Interest. In the event any party makes a
claim for indemnification hereunder, such amounts shall be paid or the
defense of the claim undertaken, by the indemnifying party within
thirty (30) days following such indemnifying party's receipt of notice
of such claim. In the event such amounts are not paid or such defense
is not undertaken within such thirty (30) day period, any unpaid
amounts ultimately found to be due and owing shall bear interest from
and after the
34
<PAGE> 35
expiration of such thirty (30) day period at the prime rate of interest
charged from time to time by Comerica Bank, until the date of payment.
ARTICLE 7
COVENANTS
7.1 Covenants Following Closing. Buyer hereby covenants and agrees
that following the Closing all of the Assumed Liabilities will be paid by the
Buyer as they come due and in the ordinary course of business, and that any
payments to any third party to whom such Assumed Liabilities are owed will be
allocated first to the payment of Assumed Liabilities until such obligations are
paid in full, and only thereafter to post-Closing obligations.
7.2 Employees
(a) On the Closing Date, the Seller shall terminate all of
its employees, and the Buyer shall extend an offer of employment to any
such employees which Buyer, in its discretion, desires to hire
commencing on the next business day immediately following the Closing
Date.
(b) Buyer shall give those former employees of Seller which
are hired by Buyer (the "Former Employees") credit for prior service
with the Seller for qualification for any vacation benefits, 401(k)
and profit sharing plans, and disability and life insurance benefits.
(c) Buyer shall provide to the Former Employees continued
coverage under their current Blue Cross/Blue Shield Master Medical
insurance plan (the "Blue Cross Plan") through December 31, 1996. On
or about such date, Buyer shall, in its discretion, either continue
the Blue Cross Plan coverage for such Former Employees for such period
of time as Buyer may deem appropriate or provide such Former Employees
alternative medical coverage generally comparable to the Blue Cross
Plan.
35
<PAGE> 36
7.3 MESC Rating. Buyer hereby acknowledges that, following Closing,
Buyer may be deemed a successor to Seller's Michigan Employment Security
Commission experience rating and unemployment tax rate.
ARTICLE 8
MISCELLANEOUS
8.1 Additional Documents. Following the Closing Date, Buyer, Seller
and Shareholders shall execute and deliver any and all other documents and take
such other actions as may be reasonably requested by the other which are
necessary or desirable to effectuate the terms of this Agreement.
8.2 Bulk Sales Law. The parties hereto agree to waive compliance
with any applicable bulk sales laws.
8.3 Survival. All representations, warranties, covenants and
agreements of the parties set forth in this Agreement, shall be deemed restated
as of the Closing Date and shall survive the Closing and continue in full force
and effect after the consummation of the transactions contemplated hereby.
8.4 Interpretation. Article titles, Schedule titles and headings to
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement. The Schedules and Exhibits referred to herein shall be deemed an
integral part of this Agreement to the same extent as if they were set forth
verbatim herein.
8.5 Entire Agreement. This Agreement, the Related Agreements and
the Appendices, Schedules and Exhibits attached hereto, constitute the entire
agreement among the parties pertaining to the contemporaneous agreements,
representations, and understandings of the parties. All prior negotiations,
writings and discussions between the parties are merged in this
36
<PAGE> 37
Agreement. The parties hereto, by mutual agreement, may amend, modify and
supplement this Agreement. Any supplement, modification, or amendment of this
Agreement shall not be binding unless executed in writing.
8.6 Notices. All notices, requests, demands, and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on the party to
whom notice is to be given, or on the date of mailing if mailed to the party to
whom notice is to be given, by first class mail, registered or certified,
postage prepaid, and properly addressed as follows:
(a) To Buyer at:
c/o Talon Automotive Group LLC
900 Wilshire Dr.
Suite 203
Troy, Michigan 48084
Attention: David J. Woodward
with a copy to:
Timmis & Inman L.L.P.
300 Talon Centre
Detroit, Michigan 48207
Attn: Richard M. Miettinen
(b) To Seller and Shareholders at:
Roger H. Ducoffre
31325 North River Road
Harrison Township, Michigan 48045
and
Theodore H. Dezenski
4728 Lockwood Drive
Washington, Michigan 48094
with a copy to:
Bassey & Selesko, P.C.
37
<PAGE> 38
27777 Franklin Road
Suite 1400
Southfield, Michigan 48034-2379
Attn: Dennis C. Modzelewski
Any party may change its address for purposes of this paragraph by giving the
other party written notice of the new address in the manner set forth above.
8.7 Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Michigan.
8.8 Waivers. Any term or provision of this Agreement may be waived,
or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if it is in writing
and, as to the Shareholders, if it is executed by them, or, as to Buyer or
Seller, if it is executed by their respective Presidents. The failure of any
party hereto to enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.
8.9 Expenses. Each party hereto (other than the Seller) will pay all
costs and expenses incident to its negotiation and preparation of this
Agreement and to its performance and compliance with all agreements and
conditions contained herein on its part to be performed or complied with,
including the fees, expenses and disbursements of its counsel and accountants,
and in no event shall Seller bear any such costs and expenses of the
Shareholders (except to the extent of time incurred by various employees of
Seller).
8.10 Partial Invalidity. Wherever possible, each provision hereof
shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more
38
<PAGE> 39
of the provisions contained herein shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Agreement and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein unless the deletion of
such provision or provisions would result in such a material change as to cause
completion of the transactions contemplated hereby to be unreasonable.
8.11 Assignment. The rights and obligations under this Agreement may
not be assigned, except by the Buyer (without discharge of its obligations
hereunder). This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors or permitted assigns.
Nothing in this Agreement, express or implied, is intended or shall be
construed to confer upon any person (other than the parties hereto and their
respective successors or permitted assigns) any right, remedy or claim under or
by reason of this Agreement.
8.12 Attorneys Fees. In the event of any litigation arising out of
this Agreement, the prevailing party shall be entitled to recover its
reasonable attorneys fees and costs and expenses of litigation from the
non-prevailing party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
SELLER: BUYER:
J & R MANUFACTURING, INC. JR ACQUISITION INC.
By: Roger H. Ducoffre By: David Woodward, V.P.
----------------------- -----------------------
SHAREHOLDERS:
Roger H. Ducoffre Theodore H. Dezenski
- -------------------------- --------------------------
Roger H. Ducoffre Theodore H. Dezenski
39
<PAGE> 1
EXHIBIT 10.19
EMPLOYMENT AGREEMENT
BY AND BETWEEN
DELMAR O. STANLEY
AND
TALON AUTOMOTIVE GROUP, L.L.C.
Dated November 27, 1995
<PAGE> 2
EMPLOYMENT AGREEMENT
THIS AGREEMENT, entered into as of the 27th day of November, 1995, is by
and between DELMAR O. STANLEY (the "Employee"), an individual residing at 1816
Sudbury Court, Rochester Hills, Michigan 48306, and TALON AUTOMOTIVE GROUP,
L.L.C. (the "Company"), a Michigan corporation with offices located at 900
Wilshire Drive, Suite 203, Troy, Michigan 48084
WITNESSETH:
WHEREAS, the Company desires to retain the services of the Employee upon
the terms and conditions contained herein, and the Employee is willing and
agrees to accept such employment upon such terms and conditions;
NOW THEREFORE, in consideration of the premise and the mutual covenants set
forth herein, the parties hereto agree as follows:
1. Employment. The Company shall employ the Employee, and the Employee
hereby accepts such employment, upon the terms and conditions hereinafter set
forth.
2. Duties During Employment Period.
a. The Employee will be employed by the Company as its President and
Chief Executive Officer, and the Employee will serve the Company in such
capacities and in such other or additional capacities or positions as may
be designated from time to time by the Board of Directors of the Company.
The Employee shall faithfully perform and discharge all of the duties
assigned to him in such capacities and positions from time to time by the
Board of Directors of the Company or by the Chairman of the Board of
Directors of the Company.
<PAGE> 3
b. During the Employment Period (as defined in Paragraph 3
hereof), the Employee shall devote his full time, attention and best
efforts to the performance of his assigned duties with the Company and
shall not during the Employment Period be employed in any other
business activity, whether or not such activity is pursued for gain,
profit or other pecuniary advantage.
3. Term. The term of this Agreement (the "Employment Period") shall
commence as of the date Employee first undertakes the performance of his
assigned duties with the Company (but not later than January 2, 1996), and
shall continue until terminated in accordance with the provisions of Paragraph
10 hereof (the "Employment Period"). A termination of this Agreement shall
not, however, in any way affect the provisions of Paragraphs 6, 7, 8 and 9
hereof which shall survive any such termination and remain in full force and
effect in accordance with the terms thereof.
4. Compensation. Subject to Paragraph 10 hereof, in consideration for the
services rendered by the Employee hereunder, the Company shall pay the Employee
compensation as follows:
a. Salary. During the Employment Period, the Company shall pay the
Employee a salary at an initial annual rate equal to Two Hundred Fifty
Thousand ($250,000) Dollars per year (the "Base Salary"), payable in
accordance with the normal payroll practices of the Company, which Base
Salary shall be subject to increase as determined by the Board of Directors
of the Company from time to time.
2.
<PAGE> 4
b. Incentive Compensation.
i. As forth consideration for the performance by the Employee of his
agreement and covenants contained herein, for each calendar year during the
Employment Period, commencing with the 1996 calendar year, the Company shall pay
the Employee an annual bonus (the "Bonus"), upon the following terms and
conditions:
a) In the event that the Combined Net Income (as hereinafter defined)
of the Talon Automotive Group Companies (as hereinafter defined) shall be
equal to One Hundred (100%) percent of the Projected Combined Net Income
(as hereinafter defined) of the Talon Automotive Group Companies, then the
Bonus for such calendar year shall be equal to Forty Five (45%) percent of
the Employee's Base Salary for such calendar year;
b) In the event that the Combined Net Income of the Talon Automotive
Group Companies shall be equal to or greater than Eighty (80%) percent of
the Projected Combined Net Income of the Talon Automotive Group Companies,
then the Bonus for such calendar year shall be equal to the sum of (i)
Twenty Two and 5/10 (22.5%) percent of the Employee's Base Salary for such
year, plus (ii) an amount equal to One and 125/100 (1.125%) percent of the
Employee's Base Salary for such year for each full percentage by which the
Combined Net Income of the Talon Automotive Group Companies shall be in
excess of Eighty (80%) percent of the Projected Combined Net Income of the
Talon Automotive Group Companies;
3.
<PAGE> 5
c) In the event that the Combined Net Income of the Talon Group
Companies shall be less than Eighty (80%) percent of the Projected Combined
Net Income of the Talon Group Companies, then the Employee shall not be
entitled to any Bonus for such calendar year;
d) Notwithstanding anything contained herein to the contrary, in no
event shall the Bonus for any calendar year exceed the sum of Sixty Seven
and 5/10 (67.5%) percent of the Employee's Base Salary for such calendar
year.
e) Notwithstanding anything contained herein to the contrary, for the
1996 calendar year, the Employee shall be guaranteed a minimum Bonus in the
amount of Seventy Thousand and 00/100 ($70,000) Dollars.
ii. For purposes hereof, the following terms shall have the following
meanings:
a) "Combined Net Income" shall mean the combined sum of the net
income and net losses of all of the Talon Automotive Group Companies for
any calendar year consisting of twelve (12) consecutive months determined
prior to any provision or expense for federal and state income taxes
thereon, all determined in accordance with generally accepted accounting
principles, consistently applied. In addition, all inventory valuations
shall be calculated on a first-in, first-out basis.
4.
<PAGE> 6
b) "Projected Combined Net Income" of the Talon Automotive Group
Companies shall mean those amounts which are reflected in the final
budgets of the Talon Automotive Group Companies and approved by the
Executive Committee of the Company, in its sole and absolute discretion,
on or before January 31 of any calendar year during the Employment Period,
to be the projected Combined Net Income of the Talon Automotive Group
Companies for such calendar year.
c) "Talon Automotive Group Companies" shall mean those entities
listed on Schedule I attached hereto, as such Schedule may be amended from
time to time by the mutual agreement of the Employee and the Company. In
the event that all or substantially all of the assets, stock or membership
interests of any of the Talon Automotive Group Companies is sold or
otherwise disposed of during any calendar year during the Employment
Period, then such entity shall nevertheless be included in the Talon
Automotive Group Companies for the calendar year in which such sale or
disposition occurred; provided, however, the portion of the Combined Net
Income and the Projected Combined Net Income for such entity for such
calendar year shall be determined for the period ending as of the end of
the month immediately preceding the date of the sale. Such entity shall
not be included in the Talon Automotive Group Companies for any calendar
year after the year in which such sale or disposition occurred.
5.
<PAGE> 7
iii. Within ninety (90) days following the end of each calendar
year during the Employment Period, the Company shall determine any
Bonus payable pursuant to the terms hereof and pay such Bonus to the
Employee. Such determination by the Company shall be conclusive and
binding.
iv. In the event that this Agreement is terminated, prior to
the end of a calendar year; then the Bonus for such partial year
shall be determined as set forth above based upon the Combined Net
Income and the Projected Combined Net Income for the Talon Group
Companies for the period ending as of the end of the month
immediately preceding the date of termination, unless the termination
is for Cause (as defined in Paragraph 10(b) hereof), or the
employment is voluntarily terminated by the Employee pursuant to
Paragraph 10(a) which, or in either event, the Employee shall not be
entitled to any Bonus for such partial year.
v. Any Bonus payable pursuant to the terms hereof shall be
subject to all applicable federal, state and local payroll tax
withholding requirements.
c. Deferred Compensation. As further consideration for the
performance by the Employee of his covenants and agreements set forth
herein, the Employee shall be entitled to deferred compensation pursuant
to a deferred compensation program currently being developed by the
Company and contemplated to be in such form as is outlined in the
memorandum dated November 3, 1995 from Wayne C. Inman to the Employee,
attached hereto as Exhibit A.
6
<PAGE> 8
d. Other Benefits. During the Employment Period, the Company shall
provide the Employee the use of a Company automobile, commensurate with his
position, four weeks paid vacation and reimbursement of monthly country
club dues, together with such other fringe benefits as the Company may from
time to time provide its employees, including life insurance, health
insurance, disability insurance, and participation in any pension or profit
sharing plan then in effect. A summary description of other Talon
Automotive Group Companies benefit programs currently in effect is attached
hereto as Exhibit B.
e. Expenses. In addition, the Company shall reimburse the Employee
for any travel and out-of-pocket expenses reasonably incurred by the
Employee for the purpose of performing his services hereunder, such
reimbursement to be made upon presentation to and approval by the Company
of receipts, vouchers and other evidence satisfactory in itemizing such
expenses in reasonable detail in accordance with the Company's regular
practice.
5. Designation of Beneficiary. The Employee shall file with the Secretary
of the Company a written notice designating one or more beneficiaries to whom
payments otherwise due him shall be made in the event of his death while in the
employment of the Company, or after termination thereof at a time when any
amount is still payable to him. The Employee shall have the right to change the
beneficiary or beneficiaries from time to time (without the consent of any prior
beneficiary); provided, however, that any change shall not become effective
unless in writing and upon receipt by the Secretary of the Company. In no such
beneficiary shall have
7.
<PAGE> 9
been designated, or if no designated beneficiary shall survive the Employee,
than all amounts payable hereunder shall be paid to the Employee's estate.
6. Covenant Not to Compete.
a. The Employee hereby acknowledges and recognizes the highly
competitive nature of the businesses of the Company and accordingly agrees for
the consideration stated above that, during the Employment Period and so long
as the Employee is entitled to any payments from the Company hereunder or
pursuant to any other agreement, he will not directly or indirectly (except as
a passive investor in less than one (1%) percent of the outstanding capital
stock of a publicly traded corporation or in his capacity as an employee of the
Company):
i. conduct, engage in, have an interest in, or aid or assist
any person or entity in conducting, engaging or having an interest in
(whether as an owner, principal, lender, stockholder, partner,
employer, employee, consultant, officer, director or otherwise):
a) any business or enterprise (whether or not for profit)
which performs automotive stamping or metal forming services
similar to those being provided by the Company or any Affiliated
Company (as hereinafter defined); or
b) any business or enterprise (whether or not for profit)
which develops, manufactures or sells any automotive products in
any manner directly competitive to those developed, manufactured
or sold by the Company or any Affiliated Company;
8.
<PAGE> 10
-- anywhere within the United States of America, Canada or
Mexico.
ii. Solicit, divert, take away, interfere with or accept any
business from any customers, suppliers, trade or patronage of the
Company or any Affiliated Company, or take any actions which are
adverse to or injurious to the Company or any Affiliated Company or
which adversely affect the business of the Company or any Affiliated
Company or their relationships with their employees, customers or
suppliers; or
iii. Employ, attempt to employ or solicit for employment any
employee of the Company or any Affiliated Company, or induce or
otherwise advise any employee to leave the employ of the Company or
and Affiliated Company or to engage in any of the activities
prohibited hereby.
b. It is expressly understood and agreed that although the Employee
and the Company consider the restrictions contained above reasonable for
the purpose of preserving for the Company and each Affiliated Company,
their businesses and goodwill and other proprietary rights, if any of the
aforesaid restrictive covenants are found by any court having jurisdiction
to be unreasonable for any reason, then the restrictions contained herein
shall nevertheless remain effective, but shall be deemed amended as may be
necessary to be considered to be reasonable by such court, and as so
amended shall be enforced.
7. Disclosure of Information. The Employee acknowledges that the trade
secrets, private or secret processes of the Company and each Affiliated Company
which may exist from time to time and confidential information concerning their
products, development, technical
9.
<PAGE> 11
information, procurement and sales activities and procedures, promotion and
pricing techniques and credit and financial data concerning customers are
valuable, special and unique assets, access to and knowledge of which are
essential to the performance of the Employee's duties hereunder. In view of the
highly competitive nature of the industries in which the business of the
Company and each Affiliated Company is conducted, the Employee further agrees
that all knowledge and information described in the preceding sentence not in
the public domain and heretofore or in the future obtained by the Employee as a
result of his employment by the Company shall be considered confidential
information. In recognition of this fact, Employee agrees that he will not,
during or after the Employment Period, disclose any of such secrets, processes
or information to any person, firm, corporation, association or other entity for
any reason or purpose whatsoever, except as necessary in the performance of his
duties as an employee of the Company and then only upon a written
confidentiality agreement in such form and content as requested by the Company
from time to time, nor shall the Employee make use of any such secrets,
processes or information (other than information in the public domain) for his
own purposes or for the benefit of any person, firm, corporation or other
entity (except the Company) under any circumstances during or after the
Employment Period.
8. Company Right to Inventions. The Employee shall promptly disclose,
grant and assign to the Company for its sole use and benefit any and all
inventions, improvements, technical information and suggestions relating in any
way to the products or services of the Company or any Affiliated Company which
the Employee may conceive, develop or acquire during the Employment Period
(whether or not during usual working hours), together with all patent
applications, patents, letters, copyrights and reissues thereof that may at any
time be
10.
<PAGE> 12
granted for or upon any such invention, improvement or technical information. In
connection therewith, the Employee shall promptly at all times during and after
the Employment Period:
a. Execute and deliver such applications, assignments,
descriptions and other instruments as may be necessary or proper in the
operation of the Company to vest title to such inventions,
improvements, technical information, patent applications and patents or
reissues thereof in the Company and to enable the Company to obtain and
maintain the entire right and title thereto throughout the world.
b. Render to the Company at its expense all such assistance as it
may require in the prosecution of applications for said patents or
reissues thereof, in the prosecution or defense of interferences which
may be declared involving any said application or patents, and in any
litigation in which the Company may be involved relating to any such
patents, inventions, improvements or technical information.
9. Remedies. In the event of a breach or threatened breach by the
Employee of the provisions of Paragraphs 6, 7 or 8 hereof, the Employee
acknowledges that the remedy at law would be inadequate and that the Company
shall be entitled to an injunction restraining him from such breach in addition
to monetary damages and any other remedy provided by law and, if in the opinion
of the Board of Directors of the Company, whose opinion shall be binding and
conclusive, the Employee shall breach any of the provisions set forth in
Paragraphs 6, 7, or 8 hereof and shall fail to cure or correct any such breach
within thirty (30) days after written notice thereof has been provided to the
Employee, any rights of the Employee to any unpaid amounts due hereunder or
under any other agreement (including, without limitation, any severance pay,
unpaid Bonus or deferred compensation amounts) shall thereupon terminate and
11.
<PAGE> 13
be forfeited. Nothing contained herein shall be construed as prohibiting the
Company from pursuing any other remedies available to it for any such breach or
threatened breach.
10. Termination of Employment.
a. The Employee's employment hereunder shall be terminable at
will by the Company or the Employee for any reason whatsoever upon
sixty (60)days prior written notice to the other.
b. The Employee's employment hereunder may also be terminated
at any time during the Employment Period by the Company for Cause (as
hereinafter defined) upon giving the Employee notice of such
termination, which termination may be effective immediately. For
purposes hereof, "Cause" shall mean any of the following events:
i. the Employee's conviction of or a plea of guilty or
nolo contendere to a felony, a crime, directly or indirectly,
injurious to the Company, a crime involving moral turpitude or a
crime providing for a term of imprisonment of one year or more
(which shall not in any event include traffic offenses);
ii. the Employee engages in any fraud, misrepresentation,
theft, embezzlement or misappropriation with respect to the
Company, or any Affiliated Company, or their respective
properties, funds or businesses;
iii. the Employee engages in any actions which are
materially injurious to the Company or which materially and
adversely affect the Company's business or the Company's
relationships with its employees, customers or suppliers;
iv. the violation by the Employee of any covenant or
agreement contained in this Agreement or any other agreement
with the Company and the
12.
<PAGE> 14
Employee shall fail to cure or correct such breach within thirty (30) days
after written notice thereof has been provided to the Employee; or
V. any willful gross misconduct by the Employee not specifically
identified above, or any neglect of duties or inattention to duties which is
not cured within thirty (30) days after written notice thereof by the Company
to the Employee.
c. If the Employee dies, the Employee's employment hereunder shall be
deemed to cease on the date of his death.
d. In the event of the Employee's Total Disability (as hereinafter
defined), the Employee's employment hereunder may be terminated immediately
upon the Company giving notice to such effect to the Employee.
e. Notwithstanding anything contained herein to the contrary, in the
event that:
i. the Employee's employment with the Company is terminated pursuant
to Paragraph 10 (a) hereof, or in the event of the Employee's death, Retirement
(as hereinafter defined) or Total Disability, then the Employee shall forfeit
all rights to any subsequent payments of Base Salary pursuant to Paragraph 4(a)
hereof, and shall only be entitled to a Bonus to the extent provided in
Paragraph 4(b)(iv) hereof; and
ii. the Employee's employment with the Company is terminated by the
Company pursuant to Paragraph 10(a), if such termination occurs during the
first three years of employment, the Company shall pay to the Employee a sum
equal
13
<PAGE> 15
to Two Hundred Fifty Thousand ($250,000) Dollars as severance pay and in full
satisfaction of any and all claims against the Company, except for payments
which may be due pursuant to the Company's deferred compensation program.
The Employee shall not be entitled to any severance pay if (a) the Employee is
terminated after three (3) years of employment by the Company, or (b) the
Employee is terminated for Cause or (c) if the Employee voluntarily terminates
his employment at any time. Any amounts due under this paragraph shall be
contingent upon the execution by the Employee of a satisfactory release of any
and all claims against the Company and shall be payable in twelve (12) equal
consecutive installments following the date of execution of such release, less
all applicable federal, state and local taxes; and
iii. the Employee's employment with the Company is terminated by
the Company for Cause pursuant to Paragraph 10(b) hereof, then the Employee
shall not be entitled to and shall forfeit all rights to any subsequent
payments by the Company of any nature whatsoever from and after the date of
such termination, including without limitation, any right to any subsequent
payments pursuant to Paragraphs 4(a) or 4(b) hereof.
f. For purposes hereof, the following terms shall have the following
meanings:
i. "Affiliated Company" shall mean any entity fifty (50%) percent
or more of which is owned, directly or indirectly, by the shareholders or
members owning, directly or indirectly, fifty (50%) percent or more of the
Company;
14
<PAGE> 16
ii. "Retirement" shall mean a voluntarily termination by the
Employee of his employment with the Company at or after that date upon
which the Employee attains the age of Sixty Two (62) years; and
iii. "Total Disability" means any physical or mental impairment
which in the opinion of the Board of Directors of the Company will
prevent the employee for a period of at least one (1) year from
performing duties as an employee of the Company in a position of
responsibility commensurate with his position at such time.
11. Notices. Any notice required or permitted to be provided under this
Agreement shall be deemed properly furnished if in writing and if mailed by
registered or certified mail, postage prepaid with return receipt requested, to
the Employee at his residence and to the Company at its offices at 900 Wilshire
Drive, Suite 302, Troy, Michigan 48084, to the attention of its Chairman of the
Board (with a copy to Timmis & Inman, 300 Talon Centre, Detroit Michigan 48207).
12. Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach.
13. Assignment. This Agreement shall not be assignable by either party
except by the Company to any Affiliated Company or any successor in interest of
the Company's business, which assumes the obligations of the Company hereunder.
14. Entire Agreement. This instrument contains the entire agreement of
the parties relating to the subject matter hereof and may not be waived,
changed, modified, extended or
15.
<PAGE> 17
discharged orally but only by agreement in writing, consented to in writing by
the Chairman of the Board of the Company, and signed by the party against whom
enforcement of any such waiver, change, modification, extension or discharge is
sought.
15. Applicable Law. This Agreement shall be governed and construed in
accordance with the laws of State of Michigan.
16. Headings. The headings of any of the Paragraphs hereof are for
convenience only and shall not control or affect the meaning or construction
or limit the scope or intent of any of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
TALON AUTOMOTIVE GROUP, L.L.C.
By: Hawthorne Metal Products Company
Its: Member
By /s/ Wayne C. Inman /s/ Delmar O. Stanley
-------------------------------- --------------------------------
Wayne C. Inman DELMAR O. STANLEY
Its: Vice President
<PAGE> 18
EXHIBIT A
TALON AUTOMOTIVE GROUP BENEFITS
MEDICAL
Self-insured with Weyco, PPO networks with SelectCare and Health Choice
Immediate eligibility
Employee monthly pre-tax contribution:
Base Plan: Single $20.00
Family $50.00
Buy Up Plan: Single $38.00
Family $98.00
Prescription coverage:
20% employee copay to annual out-of-pocket maximum $150/individual,
$300/family
Base Plan coverage:
90% in-network, 70% out-of-network
$0 deductible in-network
$400 individual/$800 family deductible out-of-network
$1,000 individual/$2,000 annual out-of-pocket maximum in-network
$2,000 individual/$4,000 annual out-of-pocket maximum out-of-network
$10 office visit copay in-network
$200 preventive coverage
Buy Up Plan coverage
100% in-network, 80% out-of-network
$0 deductible in-network
$400 individual/$800 family deductible out-of-network
Minimal annual out-of-pocket maximum in-network
$1,500 individual/$3,000 annual out-of-pocket maximum out-of-network
$10 office visit copay in-network
$200 preventive coverage
DENTAL
Self-insured with Weyco
$25/individual, 475/family annual deductible - applies only to type B and C
expenses
$1,000 annual maximum for type A, B, and C expenses
$1,000 lifetime maximum for orthodontic benefits
Type A benefits covered at 100%:
Periodic exams (two per calendar year)
Prophylaxis, fluoride applications for children under age 19
Bitewing x-rays
<PAGE> 19
DENTAL CONTINUED
Type B benefits covered at 75% after annual deductible:
Extractions, fillings, periodontics, endodontics, general and local
anesthesia Space maintainers (age 12 and under)
Type C benefits covered at 50% after annual deductible:
inlays, onlays, gold fillings, crowns
initial installation and replacement of fixed bridgework and full or
partial dentures
Type D benefits covered at 50% for dependent children to age 19
orthodontic appliances
SHORT-TERM DISABILITY
Self-insured
90-day eligibility
60% wages up to six months of disability
SALARY CONTINUANCE
Self-insured
Two year eligibility
100% wages up to first 30 days of disability
LONG-TERM DISABILITY
Insured with Reliance Standard Life Insurance Company
After disabled six months, 60% wages up to monthly maximum of $6,000
Payable through age 65 as long as remain disabled
LIFE INSURANCE
Insured with UNUM Life Insurance Company
Coverage if hired before May 1, 1993:
Earnings Coverage
$50,000 or more $500,000
$45,000 to $49,999 $250,000
$25,000 to $34,999 $150,000
$20,000 to $24,999 $ 75,000
less than $20,000 $ 30,000
<PAGE> 20
LIFE INSURANCE CONTINUED
Coverage if hired May 1, 1993 or after:
one times base salary to maximum of $50,000
Accidental death and dismemberment coverage same amount as life coverage
Optional life coverage may be purchased by employee at group rates
one, two, three, or four times base salary is available
Dependent coverage may purchased by employee at group rate
$10,000 or $5,000 per child and/or $50,000, $25,000 or $10,000 for spouse
VISION
No benefits
HEARING
No Benefits
TUITION ASSISTANCE PROGRAM
Self-insured
100% up to $2,000 annual maximum
Includes books, lab fees, tests, etc.
Grade of C or better for undergraduate, B or better for graduate
Job- or degree-related
401(k)
Must be at least age 20 1/2 and have completed 1,000 hours to participate
Employee may contribute the greater of 45,200 or 7 1/2% of salary up to IRS
maximum
No after-tax contributions
Four self-directed investment funds which can be changed quarterly:
Money Market Fund
Balanced Fund
Equity Fund
GIC Fund
Loan provisions of up to one loan; minimum loan is $500
Quarterly allocations of investments
505 employer match, maximum annual match $200
Quarterly participant statements
<PAGE> 21
PROFIT SHARING
Must be at least age 20 1/2 and have completed one year of service to
participate
Must have at least 1,000 hours per year in order to gain vesting for that year
Seven year cliff vesting schedule
Retirement age of 55
Annual discretionary employer contribution
Annual participant statements
No loans allowed
Employer directed investment
No employee contributions
Must be actively employed on the last day of plan year to be eligible for
fofeitures and contributions for that year
VACATION
Two weeks per year after one year of service
Three weeks per year after five years of service
Four weeks per year after fifteen years of service
PERSONAL DAYS
2 days after 90 days of employment
HOLIDAYS
New Year's Day
1/2 Good Friday
Memorial Day
Independence Day
Labor Day
Thanksgiving Day
Day following Thanksgiving Day
Christmas Eve
Christmas Day
<PAGE> 22
EXHIBIT B
TALON GROUP
[TALON LOGO] 400 TALON CENTRE
Detroit, MI 48207
(313) 396-4300
Fax (313) 396-4314
Inter-office Memorandum PERSONAL AND CONFIDENTIAL
- --------------------------------------------------------------------------------
TO: Delmar O. Stanley
FROM: Wayne Inman
DATE: November 3, 1995*
RE: Long Term Deferred Compensation Program
- --------------------------------------------------------------------------------
Following is a description of the long term deferred compensation program that
is being developed for the Talon Automotive Group ("TAG") and in which you
would participate as TAG's CEO. We have not finalized all of the terms of the
plan, but the following sets forth a brief outline of what we plan to implement.
I. General Description of the Plan
A. The plan is a stock appreciation rights plan that provides for
deferred compensation equal to a percentage of the increase in
shareholder value of TAG over a threshold amount. The increase in
shareholder value shall be equal to the amount by which the sum of:
(a) the fair market value of TAG at the end of the employee's
employment period, (b) the amount of all net shareholder
distributions made during the employment period and (c) all Talon
consulting fees paid during the employment period which are in
excess of a mutually agreed upon level, shall exceed the initial
fair market value of TAG at December 31, 1995, increased at the rate
of 5% per annum during the employment period ("Threshold Amount").
B. The Threshold Amount shall be increased by any additional equity
invested by the shareholder in the Company.
C. The amount of the net shareholder distributions shall be equal to the
total shareholder distributions less, in any year where the TAG
companies are subchapter S-corporations, the amount of income taxes
related to such companies.
D. The fair market value of TAG at December 31, 1995 shall be equal to
the appraised value of the company as determined by Roney & Co.,
which has been engaged to prepare annual valuations of the Talon
companies. The value of TAG at the end of the employment period will
be equal to its appraised value or, if the stock is publicly traded,
the market value of such stock.
<PAGE> 23
Mr. Delmar O. Stanley
November 3, 1995
Page two
E. The plan will provide for the conversion of the deferred compensation
value into shares of the company in the event of a public offering.
Such shares would be restricted until fully vested pursuant to the
provisions of the plan.
F. The plan will provide for a three year rolling vesting period with
complete vesting at a mutually agreed upon retirement age or upon
death or disability.
G. The plan will give you the opportunity to withdraw in any year an
amount equal to 50% of your vested account balance, up to a maximum
of $250,000 per annum.
H. The plan balance will be paid out over a five year period following
the end of the employment period.
II. Participation level of Del Stanley
A. Your SAR percentage shall be equal to the following:
<TABLE>
<CAPTION>
Amount of Increase
in Shareholder Value Participation
During Employment Period Percentage
------------------------ ----------
<S> <C>
First $20,000,000 6%
Next $20,000,000 7%
Over $40,000,000 8%
</TABLE>
B. Your account will start out with a balance equal to the value of your
United Technologies stock options which you will lose, which amount
we understand is approximately $145,000.
III. Example:
The following is offered as an example of how your SAR value would be
calculated under the following assumptions:
A. Assumptions:
1. Fair market value of TAG at December 31, 1995 is $25,000,000.
2. Shareholders invested an additional $3,000,000 of equity in year
two and $5,000,000 in year three.
3. Fair market value of TAG increases $5,000,000 in year one,
$15,000,000 in year two, and $20,000,000 in year three.
<PAGE> 24
Mr. Delmar O. Stanley
November 3, 1995
Page three
4. In year four, TAG is doing $250,000,000 in sales with a 5% after
tax income of $12,500,000 and goes public at a 12 x's P/E ratio,
resulting in a total market capitalization of $150,000,000.
(Note: Actual market capitalization would be adjusted to reflect
pro forma financial statements based upon contribution of
proceeds of I.P.O.)
5. Net shareholder distribution plus Talon consulting fees in
excess of minimum amount are as follows:
Year 1 $1,200,000
Year 2 $1,500,000*
Year 3 $1,500,000
Year 4 $2,000,000
B. Computation of SAR values at the end of:
<TABLE>
<CAPTION>
Year 1 Year 2 Year 3 Year 4
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Beginning Threshold Amount $ 25,000,000 $ 26,250,000 $ 30,712,500 $ 37,498,125
Additional Equity Invested - 3,000,000 5,000,000 - (2)
5% Annual Increase in
Threshold Amount 1,250,000 1,462,500 1,785,625 1,874,906
------------ ------------ ------------ ------------
Ending Threshold Amount $ 26,250,000 $ 30,712,500 $ 37,498,125 $ 39,373,031
============ ============ ============ ============
FMV - End of year $ 30,000,000 $ 45,000,000 $ 65,000,000 $150,000,000 (2)
Plus: Cumulative Shareholder
Distribution & Talon Fees 1,200,000 2,700,000 4,200,000 6,200,000
------------ ------------ ------------ ------------
Adjusted FMV $ 31,200,000 $ 47,700,000 $ 69,200,000 $156,200,000
Less: Threshold (26,250,000) (30,712,500) (37,498,125) (39,373,031)
------------ ------------ ------------ ------------
Cumulative Increase $ 4,950,000 $ 16,987,500 $ 31,701,875 $116,826,969
SAR % 6% 6% 6-7%(1) 6-8%(1)
------------ ------------ ------------ ------------
Accumulated Bal. - End of Yr. $ 297,000 $ 1,019,250 $ 2,019,127 $ 8,746,157
Plus: U.T. Balance 145,000 145,000 145,000 145,000
------------ ------------ ------------ ------------
Account Balance - End of Yr. $ 442,000 $ 1,164,250 $ 2,164,127 $ 8,891,157
============ ============ ============ ============
Annual Increase in Acct. Bal. $ 297,000 $ 722,250 $ 999,877 $ 6,727,030
============ ============ ============ ============
-
Amount Vested - - $ 442,000 $ 1,164,250
============ ============
Annual Amount Available
to Withdraw - - $ 250,000 $ 250,000
============ ============
</TABLE>
(1) See above table for relevant percentage.
(2) There would be an adjustment for the additional equity of a public
offering, which would also increase the market capitalization to give
effect to the pro forma interest savings ????????????. We have not tried
to fully adjust for those unknowns.
<PAGE> 25
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
THIS AMENDMENT TO EMPLOYMENT AGREEMENT, entered into as of the 1st day of
January, 1998, is by and between DELMAR O. STANLEY (the "Employee"), an
individual residing at 1816 Sudbury Court, Rochester Hills, Michigan 48306, and
TALON AUTOMOTIVE GROUP L.L.C. (the "Company"), a Michigan limited liability
company with offices located at 900 Wilshire Drive, Suite 203, Troy,
Michigan 48084.
WITNESSETH:
WHEREAS, the Employee of the Company entered into that certain Employment
Agreement dated November 27, 1995 (the "Employment Agreement"); and
WHEREAS, the Employee and the Company desire to amend the Employment
Agreement upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth herein, the parties hereto hereby amend the Employment Agreement as
follows:
1. Paragraph 4(a) of the Employment Agreement is hereby amended and
restated in its entirety to read as follows:
"a. Salary. Effective as of January 1, 1998 and continuing thereafter
during the Employment Period, the Company shall pay the Employee a salary at an
annual rate equal to Four Hundred Thousand ($400,000) Dollars per year (the
"Base Salary"), payable in accordance with the normal payroll practices of the
Company, which Base Salary shall be subject to increase as determined by the
Board of Directors of the Company from time to time."
<PAGE> 26
2. Paragraph 4(b) of the Employment Agreement is hereby amended and
restated in its entirety to read as follows:
"b. Incentive Compensation. As further consideration for the performance
by the Employee of his agreement and covenants contained herein, the Company
shall pay the Employee an annual bonus (the "Bonus"), upon the following terms
and conditions:
i. For calendar years ending December 31, 1996 and December 31,
1997 during the Employment Period:
a) In the event that the Combined Net Income (as hereinafter
defined) of the Talon Automotive Group Companies (as hereinafter
defined) shall be equal to One Hundred (100%) percent of the
Projected Combined Net Income (as hereinafter defined) of the Talon
Automotive Group Companies, then the Bonus for such calendar year
shall be equal to Forty Five (45%) percent of the Employee's Base
Salary for such calendar year;
b) In the event that the Combined Net Income of the Talon
Automotive Group Companies shall be equal to or greater than Eighty
(80%) percent of the Projected Combined Net Income of the Talon
Automotive Group Companies, then the Bonus for such calendar year
shall be equal to the sum of (i) Twenty Two and 5/10 (22.5%) percent
of the Employee's Base Salary for such year, plus (ii) an amount
equal to One and 125/100 (1.125%) percent of the Employee's Base
Salary for such year for each full percentage by which the Combined
Net Income of the Talon Automotive Group Companies shall be in excess
of Eighty (80%) percent of the Projected Combined Net Income of the
Talon Automotive Group Companies;
c) In the event that the Combined Net Income of the Talon
Group Companies shall be less than Eighty (80%) percent of the
Projected Combined Net Income of the Talon Group Companies, then the
Employee shall not be entitled to any Bonus for such calendar year;
d) Notwithstanding anything contained herein to the contrary,
in no event shall the Bonus for any calendar year exceed the sum of
Sixty Seven and 5/10 (67.5%) percent of the Employee's Base Salary
for such calendar year.
e) Notwithstanding anything contained herein to the contrary,
for the 1996 calendar year, the Employee shall be guaranteed a
minimum Bonus in the amount of Seventy Thousand and 00/100 ($70,000)
Dollars.
2
<PAGE> 27
ii. For calendar year ending December 31, 1998, and for each
calendar year thereafter during the Employment Period, the Company shall
pay the Employee a Bonus consisting of the sum of the following two
components:
a) In the event that the Combined Net Income of the Talon
Automotive Group Companies for such calendar year shall be equal to
or greater than Seventy Five (75%) percent of the Projected Combined
Net Income of the Talon Automotive Group Companies for such calendar
year, and in the event that the Talon Automotive Group Companies
shall, during such calendar year, achieve various non-financial
objectives which were established by the mutual agreement of the
Board of Directors of the Company and the Employee at or about the
commencement of each such calendar year, then in such event the
Company shall pay to the Employee a Bonus for such calendar year up
to Thirty (30%) percent of the Employee's Base Salary for such
calendar year; provided, however, in the event that the Talon
Automotive Group Companies shall, during such calendar year,
substantially exceed such mutually agreed non-financial objectives,
then the Company may, in the sole discretion of its Board of
Directors, pay to the Employee a Bonus for such calendar year up to
Forty Five (45%) percent of the Employee's Base Salary for such
calendar year; and
b) In the event that the Combined Net Income of the Talon
Automotive Group Companies for such calendar year shall be equal to
or greater than Seventy Five (75%) percent of the Projected Combined
Net Income of the Talon Automotive Group Companies for such calendar
year, then, in addition to any Bonus payable pursuant to
Section 4(b)(ii)(a) above, in such event the Company shall pay to the
Employee a Bonus for such calendar year, upon the following terms and
conditions:
i) In the event that the Combined Net Income of the Talon
Automotive Group Companies for such calendar year shall be equal
to or greater than Seventy Five (75%) percent, but less than One
Hundred (100%) percent, of the Projected Combined Net Income of
the Talon Automotive Group Companies, then in such event the
Company shall pay to the Employee a Bonus for such calendar year
equal to the sum of (i) Fifteen (15%) percent of the Employee's
Base Salary for such year, plus (ii) an amount equal to 6/10 of
One (.6%) percent of the Employee's Base Salary for such year
for each full percentage by which the Combined Net Income of the
Talon Automotive Group Companies shall be in excess of Seventy
Five (75%) percent of the Projected Combined Net Income of the
Talon Automotive Group Companies;
3
<PAGE> 28
ii) In the event that the Combined Net Income of the Talon
Automotive Group Companies for such calendar year shall be equal to
(but not exceed) One Hundred (100%) percent of the Projected Combined
Net Income of the Talon Automotive Group Companies for such calendar
year, then the Bonus for such calendar year shall be equal to Thirty
(30%) percent of the Employee's Base Salary for such year;
iii) In the event that the Combined Net Income of the Talon
Automotive Group Companies for such calendar year shall be greater
than One Hundred (100%) percent of the Projected Combined Net Income
of the Talon Automotive Group Companies, then in such event the
Company shall pay to the Employee a Bonus for such calendar year
equal to the sum of (i) Thirty (30%) percent of the Employee's Base
Salary for such year, plus (ii) an amount equal to 6/10 of One (.6%)
percent of the Employee's Base Salary for such year for each full
percentage by which the Combined Net Income of the Talon Automotive
Group Companies shall be in excess of One Hundred (100%) percent of
the Projected Combined Net Income of the Talon Automotive Group
Companies; provided, however, notwithstanding anything contained
herein to the contrary, in no event shall the aggregate amount of
Bonus payable pursuant to this Section 4(b)(ii)(b) for any calendar
year exceed Forty Five (45%) percent of the Employee's Base Salary
for such calendar year; and
iv) In the event that the Combined Net Income of the Talon
Group Companies for such calendar year shall be less than Seventy
Five (75%) percent of the Projected Combined Net Income of the Talon
Group Companies for such calendar year, then the Employee shall not
be entitled to any Bonus pursuant to this Section 4(b)(ii)(b) for
such calendar year;
- provided, however, notwithstanding anything contained herein to the
contrary, in no event shall the aggregate amount of Bonus payable pursuant
to this Section 4(b)(ii) for any calendar year exceed Ninety (90%) percent
of the Employee's Base Salary for such calendar year.
iii. For purposes hereof, the following terms shall have the
following meanings:
a) "Combined Net Income" shall mean the combined sum of the
net income and net losses of all of the Talon Automotive Group
Companies for any calendar year consisting of twelve (12) consecutive
months determined prior to any provision or expense for federal and
state income taxes thereon, all determined in accordance with
generally accepted accounting principles, consistently applied. In
addition, all inventory valuations shall be calculated on
4
<PAGE> 29
a first-in, first-out basis.
b) "Projected Combined Net Income" of the Talon Automotive
Group Companies shall mean those amounts which are reflected in the
final budgets of the Talon Automotive Group Companies and approved by
the Executive Committee of the Company, in its sole and absolute
discretion, on or before January 31 of any calendar year during the
Employment Period, to be the projected Combined Net Income of the
Talon Automotive Group Companies for such calendar year.
c) "Talon Automotive Group Companies" shall mean those
entities listed on Schedule I attached hereto, as such Schedule may
be amended from time to time by the mutual agreement of the Employee
and the Company. In the event that all or substantially all of the
assets, stock or membership interests of any of the Talon Automotive
Group Companies is sold or otherwise disposed of during any calendar
year during the Employment Period, then such entity shall
nevertheless be included in the Talon Automotive Group Companies for
the calendar year in which such sale or disposition occurred;
provided, however, the portion of the Combined Net Income and the
Projected Combined Net Income for such entity for such calendar year
shall be determined for the period ending as of the end of the month
immediately preceding the date of the sale. Such entity shall not be
included in the Talon Automotive Group Companies for any calendar
year after the year in which such sale of disposition occurred.
iv. Within ninety (90) days following the end of each calendar year
during the Employment Period, the Company shall determine any Bonus
payable pursuant to the terms hereof and pay such Bonus to the Employee.
Such determination by the Company shall be conclusive and binding.
v. In the event that this Agreement is terminated, prior to the end
of a calendar year, then the Bonus for such partial year shall be
determined as set forth above based upon the Combined Net Income and
Projected Combined Net Income for the Talon Group Companies for the period
ending as of the end of the month immediately preceding the date of
termination, unless the termination is for Cause (as defined in
Paragraph 10(b) hereof), or the employment is voluntarily terminated by
the Employee pursuant to Paragraph 10(a) which, or in either event, the
Employee shall not be entitled to any Bonus for such partial year.
vi. Any Bonus payable pursuant to the terms hereof shall be subject
to all applicable federal, state and local payroll tax withholding
requirements."
5
<PAGE> 30
3. Schedule I attached hereto is hereby substituted for and in place of
the Schedule I which was originally attached to the Agreement.
4. In all other respects, the remaining terms and conditions of the
Employment Agreement are hereby confirmed and ratified and shall continue in
full force and effect as provided therein.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Employment Agreement as of the day and year first written above.
TALON AUTOMOTIVE GROUP L.L.C.
- ---------------------- By
Delmar O. Stanley --------------------------
6
<PAGE> 31
SCHEDULE I
----------
Talon Automotive Group, L.L.C.
Hawthorne Metal Products Company
Veltri Metal Products Company
Production Stamping, Inc.
J & R Manufacturing, Inc.
7
<PAGE> 1
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the 8th day of November, 1996, by and
between MICHAEL T.J. VELTRI (the "Employee"), an individual residing at 4530
River Trail, Bloomfield Hills, Michigan 48301, VELTRI HOLDINGS USA, INC. d/b/a
Veltri International (the "Holdings"), an Indiana corporation with offices
located at 900 Wilshire Drive, Suite 203, Troy, Michigan 48084, and VS
Acquisition Co. ("Buyer"), a Nova Scotia company with offices located at 900
Wilshire Drive, Suite 203, Troy, Michigan 48084 (Holdings and the Buyer are
sometimes collectively and jointly and severally referred to herein as the
"Company").
WITNESSETH:
WHEREAS, prior to the date hereof, Employee was a shareholder of and
employed as the President of Holdings, Veltri Holdings Ltd. ("VH") and North
American Precision Tool Ltd. ("NAPT");
WHEREAS, prior to the date hereof, Employee was also employed as the
President of Veltri Stamping Corporation ("VSC"), a wholly owned subsidiary of
VH (Holdings, Buyer, VSC, VH and NAPT are sometimes each referred to herein as
a "Veltri Group Member", and collectively as the "Veltri Group");
WHEREAS, contemporaneously herewith, Buyer, the Employee and certain other
parties entered in that certain Stock Purchase Agreement dated the date hereof
(the "Purchase Agreement"), pursuant to which Buyer purchased all of the
outstanding shares of capital stock of VH and NAPT, including, without
limitation, all shares owned by the Employee, and
<PAGE> 2
pursuant to which the shareholders of the Buyer purchased all of the outstanding
shares of capital stock of Holdings, including all shares owned by the
Employee;
WHEREAS, as a material inducement for the Buyer and the Employee to enter
into the Stock Purchase Agreement and in agreeing to the provisions thereof,
including, without limitation, the provisions relating to the Earn-Out Amounts
(as defined in the Purchase Agreement) and the provisions relating to the
post-closing covenants which are set forth in Section 6.1 of the Purchase
Agreement, the parties hereto agreed to enter into this Agreement, upon the
terms and conditions set forth herein;
WHEREAS, the Purchase Agreement provides for the amalgamation of the Buyer,
VSC, VH and NAPT;
NOW THEREFORE, in consideration of the premises and the mutual covenants
set forth herein, the parties hereto agree as follows:
1. Employment. The Company shall employ the Employee, and the Employee
hereby accepts such employment, upon the terms and conditions hereinafter set
forth.
2. Term. The initial term of this Agreement (the "Initial Term") shall
commence on the date hereof and shall continue for a period of five (5) years,
unless otherwise terminated in accordance with the provisions of Section 6
hereof. This Agreement shall automatically renew following the Initial Term for
successive terms of one (1) year each (each a "Renewal Term") unless either
party shall give written notice of non-renewal (a "Non-Renewal Notice") to the
other at least sixty (60) days prior to the expiration of the Initial Term or
any Renewal Term, in which case this Agreement shall terminate as of the end of
the then current term, or unless otherwise terminated in accordance with the
provisions of Section 6 hereof. The Initial
2.
<PAGE> 3
Term and any applicable Renewal Term are collectively referred to herein as the
"Employment Period."
3. Position and Duties.
a. During the Employment Period, the Company shall employ the
Employee as the President of each Veltri Group Member, and the
Employee hereby agrees to serve in such positions. In addition, during
the Employment Period, the Employee shall also serve as a member of
the Talon Automotive Group L.L.C. ("TAG") Executive Committee (the
"Executive Committee").
b. As President of each Veltri Group Member, the Employee shall
report (as the highest level officer of each Veltri Group Member) only
to the Board of Directors of Holdings (the principal shareholder of
the Buyer) and the President and Chief Executive Officer of TAG, who
shall have all of the traditional functions, powers and authorities as
are customary for Boards of Directors, including, without limitation,
long term or strategic authority, including, without limitation, such
authority regarding establishing budgets, reviewing operating
performance, establishing financial goals, long range planning,
product lines, market expansion, significant or unbudgeted capital
expenditures, financing matters, and strategic planning matters.
Subject only to the foregoing, the Employee shall have all of the
traditional functions, powers and authorities as are customary for a
President of a group the size of the Veltri Group, including, without
limitation, all of the functions, powers and authorities as are
substantially similar to and consistent with the Employee's prior
services
3.
<PAGE> 4
for the Veltri Group (excluding the Buyer), full authority and
responsibility over the general operations of the Veltri Group,
including, without limitation, human resource, general and
administrative, financial, operational, marketing, customer and
supplier relationship matters (including full check signing authority
subject to controls consistent with customary business practices).
All employees and sales representatives of the Veltri Group shall
report to the Employee or such persons designated by the Employee.
c. During the Employment Period, the Employee shall faithfully
perform and discharge all of his duties and shall devote his full
time, attention and best efforts to the performance of such duties and
shall not during the Employment Period be employed in any other
business activity, whether or not such activity is pursued for gain,
profit or other pecuniary advantage.
d. The Employee's primary duties are to be carried out in the
Company's offices in Troy, Michigan (or, if the operations at such
offices are moved, at such other location(s) within a thirty (30) mile
radius of Bloomfield Hills, Michigan as may be reasonably requested by
the Company in the ordinary course of business); provided, however, in
the performance of the Employee's duties as President of each Veltri
Group Member, Employee hereby acknowledges and agrees that certain of
the Employee's duties may need to be carried out from time to time at
the locations of the other facilities of the Veltri Group. The parties
further agree use their best efforts to minimize the need for
4.
<PAGE> 5
the Employee to travel out of town for periods longer than one
(1) business day at a time during the Employment Period.
4. Compensation. In consideration for the services rendered by the
Employee hereunder, the Company shall provide the Employee with the following
compensation and benefits:
a. Salary. During the Employment Period, the Company shall pay the
Employee a salary at an initial annual rate equal to Three Hundred Eighty
Thousand ($U.S. 380,000) U.S. Dollars per year (the "Base Salary"), payable
in accordance with the normal payroll practices of the Company, which Base
Salary shall be subject to increase as determined by the Board of Directors
of the Company from time to time to maintain a competitive salary based
upon the Employee's performance.
b. Executive Bonus Program. During the Employment Period, the
Employee shall participate in the Company's Executive Bonus Program, a
summary of which is attached hereto as Exhibit A.
c. Stock Option Plan. During the Employment Period, the Employee
shall participate in the Company's Stock Option Plan, a summary of which is
attached hereto as Exhibit B.
d. Deferred Compensation Plan. During the Employment Period, the
Employee shall participate in the Company's Deferred Compensation Plan, a
summary of which is attached hereto as Exhibit C.
e. Other Benefits. In addition to the foregoing, during the
Employment Period, the Company shall provide the Employee the following
benefits:
5.
<PAGE> 6
i. Participation by the Employee (and all of his eligible
family members) in all employee benefit plans which the Company may
from time to time provide its employees, which benefits shall be
comparable to those benefits provided to other executive employees of
the Company, TAG, and each Affiliated Company, and which benefits
shall be generally consistent with the Employee's high level executive
position and status, including, without limitation, the following:
a. medical, dental, optical and disability insurance
(substantially comparable to the Employee's existing insurance),
and life insurance, including, without, limitation, payment
during the Employment Period of the premiums payable with respect
to those specific policies described on Exhibit D attached
hereto;
b. participation in a 401(k) plan and in any pension or
profit sharing plan then in effect, including payment by the
Company of contributions to such 401(k) plan on behalf of the
Employee in a manner consistent with the past; and
c. contributions to the Canadian Pension Plan in a manner
consistent with the past to the extent provided by law;
ii. the use of a Company full size luxury automobile consistent
with the Employees' position and comparable with other executive
employees of the Company and each Affiliated Company, and
reimbursement for all maintenance,
6.
<PAGE> 7
fuel, insurance, cellular phone and other expenses in connection
therewith in accordance with the Company's policies;
iii. six (6) weeks paid vacation each year (one of which shall be
taken between Christmas and New Year's day), provided, however, for
any calendar year during the Employment Period, the Employee shall be
entitled to carry over up to a maximum of two (2) weeks of unused
vacation into the first six (6) months of the following calendar year,
provided, further, that if such two (2) weeks are not used during such
six (6) month period, then such two (2) weeks shall be forfeited;
iv. an office of a size and with furnishings and attendants
(including an exclusive personal secretary) equal to those currently
and traditionally provided to the Employee by the Veltri Group
(excluding Buyer);
v. a personal computer, facsimile, scanning and copying
machines, and such other office equipment and supplies (including
reimbursement for business related telephone lines and expenses) as
the Employee reasonably deems appropriate to maintain an office in his
personal residence;
vi. reimbursement for all monthly membership dues and fees, and
all Company business related expenses, incurred by the Employee in
connection with the Employee's membership at up to two country clubs
selected by Employee, provided, however, that the aggregate monthly
membership dues and fees for such clubs shall not exceed those
currently charged by Indianwood and Pointe West Country Clubs. Upon
termination of this Agreement, and subject to any
7.
<PAGE> 8
requirements of Pointe West Country Club, the Employee may purchase
the membership in Pointe West Country Club from the Company for a
price equal to its then current equity value; and
vii. those additional benefits set forth on Exhibit D attached
hereto.
f. Expenses. In addition, the Company shall reimburse the Employee
for any travel, business entertainment and out-of-pocket expenses
reasonably incurred by the Employee for the purpose of performing his
duties hereunder, such reimbursement to be made promptly following
presentation to and approval by the Company of receipts, vouchers and other
evidence satisfactory in itemizing such expenses in reasonable detail in
accordance with the Company's regular practice.
g. Withholding. Any compensation payable pursuant to the terms of
this Agreement shall be subject to all applicable statutory withholding
requirements.
h. Indemnity. The Company shall indemnify, defend and hold the
Employee harmless to the fullest extent provided by law from and against
all losses, damages, costs and expenses (including, without limitation,
reasonable attorneys fees and litigations expenses) arising out of any
claims by any third party against the Employee by reason of the fact that
the Employee is or was an officer of the Company from and after the date
hereof, provided, however, that such actions (i) were not in violation of
any of the terms of this Agreement, (ii) were taken in good faith and in a
manner the Employee reasonably believed to be in and not opposed to the
best interests of the Company and its shareholders, (iii) did not involve
any intentional misconduct or knowing violation of law, (iv) did not result
in any improper personal benefit to the Employee, and (v) did not
8.
<PAGE> 9
result in any breach of any duty of loyalty, care or otherwise of the
Employee to the Company and its shareholders; provided, further, however,
with respect to any criminal action or proceeding, the Employee had no
reasonable cause to believe that his conduct was unlawful.
5. Designation of Beneficiary. The Employee shall file with the Secretary
of the Company a written notice designating one (1) or more beneficiaries to
whom payments otherwise due him shall be made in the event of his death while in
the employment of the Company, or after termination thereof at a time when any
amount is still payable to him. The Employee shall have the right to change the
beneficiary or beneficiaries from time to time (without the consent of any prior
beneficiary); provided, however, that any change shall not become effective
unless in writing and upon receipt by the Secretary of the Company. If no such
beneficiary shall have been designated, or if no designated beneficiary shall
survive the Employee, then all amounts payable hereunder shall be paid to the
Employee's estate.
6. Termination of Employment. Subject to the provisions of Section 20
hereof, the Employee's employment and this Agreement shall terminate only upon
the occurrence of one or more of the following:
a. This Agreement and the Employee's employment hereunder may be
terminated at any time during the Employment Period by the Company for Just
Cause (as hereinafter defined) immediately upon the Company giving the
Employee written notice of such termination specifying the basis therefor.
For purposes hereof, "Just Cause" shall mean only one or more of the
following events:
9.
<PAGE> 10
i. the Employee's conviction of or plea of guilty or nolo
contendere to a felony crime consisting of intentional conduct which
is, directly or indirectly, materially injurious to the Veltri Group;
ii. Employee's intentional embezzlement or theft from any Veltri
Group Member which is materially injurious to such Veltri Group
Member;
iii. Employee's intentional fraud against any Veltri Group Member
which is materially injurious to such Veltri Group Member;
iv. Employee's breach of the provisions of Sections 9, 10 or 11
hereof, which is not cured within thirty (30) days following written
notice thereof to the Employee;
v. Employee's failure to report to work and perform his duties
hereunder for a period of fifty (50) business days or more during any
six (6) month period during the Employment Period (other than as a
result of any permitted vacation, or any mental or physical illness or
disability documented in writing by the Employee's physician); or
vi. Employee's intentional and malicious engagement in any
severe gross misconduct which is materially injurious to the Veltri
Group, which is not cured within thirty (30) days following written
notice thereof to the Employee;
b. The Employee death, in which event, this Agreement and the
Employee's employment hereunder shall be deemed to cease on the date of his
death.
10.
<PAGE> 11
c. The Employee's Total Disability (as hereinafter defined), in
which event this Agreement and the Employee's employment hereunder may be
terminated immediately upon the Company giving written notice to such
effect to the Employee.
d. The Company's receipt of written notice of termination from the
Employee (for any reason or no reason whatsoever), in which event this
Agreement and the Employee's employment hereunder shall be terminated
effective sixty (60) days following the Company's receipt of such notice.
e. The Company or the Employee provides the other a Non-Renewal
Notice in accordance with the provisions of Section 2 hereof, in which case
this Agreement shall terminate as of the end of the then current term.
f. In the event of a Default Termination (as hereinafter defined)
and the Employee provides written notice of termination to the Company.
7. Obligations Upon Termination.
Notwithstanding anything contained herein to the contrary, in the event
that:
a. the Employee's employment with the Company is terminated by the
Employee pursuant to Section 6(d), Section 6(e) hereof or otherwise
voluntarily terminated by the Employee (excluding a Default Termination),
or in the event the Employee's employment is terminated as a result of the
Employee's death or Total Disability, then:
i. all rights of the Employee to any amounts due hereunder
shall terminate upon the effective date of such termination, including
without limitation, any right to any subsequent payments pursuant to
Sections 4(a), 4(b),
11.
<PAGE> 12
4(c) or 4(d) hereof, except as otherwise specifically provided to the
contrary in the plans referred to under Sections 4(b), 4(c) or 4(d)
hereof, and except for any amounts accrued through the date of
termination, any accrued rights under any of the benefit plans under
Section 4(e)(i) hereof and any rights of indemnity under Section 4(h)
hereof; and
ii. the "Restrictive Period" for purposes hereof shall mean the
Employment Period and the eighteen (18) month period following the
effective date of the Employee's employment termination;
b. the Employee's employment with the Company is terminated by the
Company for Just Cause pursuant to Section 6(a) hereof, then:
i. the Employee shall not be entitled to and shall forfeit all
rights to any subsequent payments by the Company under this Agreement
of any nature whatsoever from and after the date of such termination,
including without limitation, any right to any subsequent payments
pursuant to Sections 4(a), 4(b), 4(c) or 4(d) hereof, except as
otherwise specifically provided to the contrary in the plans referred
to under Sections 4(b), 4(c) or 4(d) hereof, and except for any
amounts accrued through the date of termination, any accrued rights
under any of the benefit plans under Section 4(e)(i) hereof and any
rights of indemnity under Section 4(h) hereof; and
ii. the "Restrictive Period" for purposes hereof shall mean the
Employment Period and the eighteen (18) month period following the
effective date of the Employee's employment termination;
12.
<PAGE> 13
c. the Employee's employment with the Company is terminated by the
Company pursuant to Section 6(e) hereof, then:
i. the Employee shall (a) be entitled to continue to receive
his Base Salary (less all applicable federal, provincial, state and
local taxes) in the same manner as prior to such termination for a
period of twelve (12) months following the effective date of such
employment termination, and (b) be reimbursed by the Company for a
period not to exceed twelve (12) months following such termination for
the premiums for continuation coverage if the Employee elects to
continue his medical, dental and vision insurance under COBRA, all as
severance pay and in full satisfaction of any and all claims against
the Company and the Veltri Group arising out of this Agreement or in
connection with the Employee's employment, except as otherwise
specifically provided to the contrary in the plans referred to under
Sections 4(b), 4(c) or 4(d) hereof, and except for any payments which
may be due pursuant to this Section 7(c)(i), any amounts accrued
through the date of termination, any accrued rights under any of the
benefit plans under Section 4(e)(i) hereof, any rights of indemnity
under Section 4(h) hereof, and any obligations of the Company or any
Affiliated Company to Employee arising under the Purchase Agreement;
provided, however, any amounts due under this Section 7(c)(i) shall be
contingent upon the Employee's compliance with the provisions of
Sections 9, 10 and 11 hereof and the execution by the Employee of a
release reasonably satisfactory to the Company of any and all claims
against the Veltri Group arising out of this Agreement or in
connection with the Employee's
13.
<PAGE> 14
employment, except as otherwise specifically provided to the contrary
in the plans referred to under Sections 4(b), 4(c) or 4(d) hereof, and
except for any payments which may be due pursuant to this Section
7(c)(i), any amounts accrued through the date of termination, any
accrued rights under any of the benefit plans under Section 4(e)(i)
hereof, any rights of indemnity under Section 4(h) hereof, and any
obligations of the Company or any Affiliated Company to Employee
arising under the Purchase Agreement; provided, further, however, any
amounts due to the Employee pursuant to this Section 7(c) shall not be
subject to any duty or obligation on behalf of the Employee to
mitigate any such amounts due to him pursuant to this Section 7(c),
and the Company hereby irrevocably waives any claim, defense or right,
in law or in equity, to require the Employee to mitigate any amounts
due to Employee pursuant to this Section 7(c); and
ii. the "Restrictive Period" for purposes hereof shall mean the
Employment Period and the twelve (12) month period following the
effective date of the Employee's employment termination;
d. the Employee's employment with the Company is terminated by the
Company (other than a termination for Just Cause or a termination pursuant
to Sections 6(b), 6(c) or 6(e) hereof), or in the event that the Employee's
employment is terminated by the Employee pursuant to a Default Termination
(as hereinafter defined), then:
i. the Employee shall (a) be entitled to continue to receive
his Base Salary (less all applicable federal, provincial, state and
local taxes) in the same manner as prior to such termination for the
longer of eighteen (18) months
14.
<PAGE> 15
following the effective date of such employment termination or the
remainder of the Initial Term (on the basis that the Initial Term was
not terminated), and (b) be reimbursed by the Company for a period not
to exceed eighteen (18) months following the effective date of such
employment termination for the premiums for continuation coverage if
the Employee elects to continue his medical, dental and vision
insurance under COBRA, all as severance pay and in full satisfaction
of any and all claims against the Company and the Veltri Group arising
out of this Agreement or in connection with the Employee's
employment, except as otherwise specifically provided to the contrary
in the plans referred to under Sections 4(b), 4(c) or 4(d) hereof, and
except for any payments which may be due pursuant to this Section
7(d)(i), any amounts accrued through the date of termination, any
accrued rights under any of the benefit plans under Section 4(e)(i)
hereof, any rights of indemnity under Section 4(h) hereof, and any
obligations of the Company or any Affiliated Company to Employee
arising under the Purchase Agreement; provided, however, any amounts
due under this Section 7(d)(i) shall be contingent upon the Employee's
compliance with the provisions of Sections 9, 10 and 11 hereof and
the execution by the Employee of a release reasonably satisfactory to
the Company of any and all claims against the Veltri Group arising out
of this Agreement or in connection with the Employee's employment,
except as otherwise specifically provided to the contrary in the plans
referred to under Sections 4(b), 4(c) or 4(d) hereof, and except for
any payments which may be due pursuant to this Section 7(d)(i), any
amounts accrued through
15.
<PAGE> 16
the date of termination, any accrued rights under any of the benefit
plans under Section 4(e)(i) hereof, any rights of indemnity under
Section 4(h) hereof, and any obligations of the Company or any
Affiliated Company to Employee arising under the Purchase Agreement;
provided, further, however, any amounts due to the Employee pursuant
to this Section 7(d) shall not be subject to any duty or obligation on
behalf of the Employee to mitigate any such amounts due to him
pursuant to this Section 7(d), and the Company hereby irrevocably
waives any claim, defense or right, in law or in equity, to require
the Employee to mitigate any amounts due to Employee pursuant to this
Section 7(d); and
ii. the "Restrictive Period" for purposes hereof shall mean the
Employment Period and the longer of (a) the eighteen (18) month period
following the effective date of such employment termination, or (b)
the remainder of the Initial Term (on the basis that the Initial Term
was not terminated).
8. Definitions. For purposes hereof, the following terms shall have the
following meanings:
a. "Affiliated Company" shall mean Hawthorne Metal Products Co.,
G & L Industries, Inc., J & R Manufacturing, Inc., Talon Automotive Group
L.L.C. and any other entity in the automotive industry fifty (50%) percent
or more of which is owned, directly or indirectly, by the Company or the
shareholders owning, directly or indirectly, fifty (50%) percent or more of
the Company.
16.
<PAGE> 17
b. "Default Termination" shall mean a termination of this Agreement
and the Employee's employment with the Company only as a result of one or
more of the following:
i. Any material breach by the Company of any of the terms and
conditions of this Agreement which is not cured within thirty (30)
days following written notice thereof to the Company; or
ii. Any material breach by the Veltri Group of any of the
provisions of Sections 1.3(b)(viii) or 6.1 of the Purchase Agreement
which is not cured within thirty (30) days following written notice
thereof to the Company.
c. "Total Disability" means any physical or mental impairment which
has prevented the Employee for a period of at least six (6) months from
performing duties as an employee of the Company in a position of
responsibility commensurate with his position at such time and, in the
written opinion of a physician mutually appointed by the Employee and the
Board of Directors of the Company, will prevent the Employee for an
additional period of at least six (6) months from performing duties as an
employee of the Company in a position of responsibility commensurate with
his position at such time.
9. Covenant Not to Compete.
a. The Employee hereby acknowledges and recognizes the highly
competitive nature of the businesses of the Company and accordingly agrees
for the consideration stated above that, during the Employment Period and
thereafter for the Restrictive Period (as defined herein), he will not
directly or indirectly (except as a passive investor in less
17.
<PAGE> 18
than three (3%) percent of the outstanding capital stock of a publicly
traded corporation or in his capacity as an employee of the Company):
i. conduct, engage in, have an interest in, or aid or assist
any person or entity in conducting, engaging or having an interest in
(whether as an owner, principal, lender, stockholder, partner,
employer, employee, consultant, officer, director or otherwise)
anywhere within the Territory (as hereinafter defined):
a) any business or enterprise (whether or not for profit)
which offers or performs any automotive stamping or metal forming
services which are the same as or similar to or competitive with
those now or hereafter provided by any Veltri Group Member; or
b) any business or enterprise (whether or not for profit)
which develops, manufactures or sells any automotive parts or
products which are the same as or in any manner similar to or
competitive with those developed, manufactured or sold by any
Veltri Group Member; or
c) any other business or enterprise (whether or not for
profit) which is competitive with the business of any Veltri
Group Member;
ii. Solicit, divert, take away, interfere with or accept any
business competitive with the business of the Company or any
Affiliated Company from any customers, suppliers, trade or patronage
of the Company or any Affiliated Company; or
iii. Engage, employ, attempt to engage or employ or solicit for
engagement or employment any employee or sales representative of any
Veltri
18.
<PAGE> 19
Group Member or any Affiliated Company, or induce or otherwise advise
any employee or sales representative to leave the employ or engagement
of any Veltri Group Member or any Affiliated Company or to engage in
any of the activities prohibited hereby.
b. For purposes hereof, the "Territory" shall mean and include all
of the following:
i. United States of America, Canada and Mexico;
ii. United States of America and Canada;
iii. Canada; and
iv. Province of Ontario.
c. It is expressly understood and agreed that although the Employee
and the Company consider the provisions hereof, including the restrictions
as to Territory set forth in Sections 9(b)(i), (ii), (iii) and (iv), to be
reasonable for the purpose of preserving for the Company and each
Affiliated Company, their businesses and goodwill and other proprietary
rights, the restrictions as to Territory set forth in Sections 9(b)(i),
(ii), (iii) and (iv) are each separate and distinct covenants, severable
one from the other and, if any of such covenants are determined to be
invalid or unenforceable, such invalidity or unenforceability shall attach
only to the covenant or covenants to the extent of such invalidity as
determined and all other covenants shall continue in full force and
effect. The Employee and the Company further agree that a court or other
tribunal having jurisdiction may, if it determines any covenant contained
in Sections 9(b)(i), (ii), (iii) or (iv) hereof to be invalid, modify such
covenant to reduce its scope so that it is effective
19.
<PAGE> 20
to the extent enforceable under the applicable law. Notwithstanding
anything contained herein to the contrary, the obligations of the Company
under Section 7 of this Agreement are contingent upon the Employee's
compliance with all of the terms and conditions of this Section 9, and the
obligations of the Employee under this Section 9 are contingent upon the
Company's compliance with all of the terms and conditions of Section 7 of
this Agreement. In the event that the Company shall fail to make any
required payments due under Section 7 hereof, and such failure shall
continue for a period of ten (10) days following written notice thereof to
the Company, then, notwithstanding anything to the contrary in this
Agreement, in such event the Restrictive Period shall be deemed terminated
immediately and the Employee shall have no further obligations under this
Section 9 from and after such date.
10. Disclosure of Information. The Employee acknowledges that the trade
secrets, private or secret processes of the Company and each Affiliated Company
which may exist from time to time and confidential information concerning their
products, development, technical information, procurement and sales activities
and procedures, promotion and pricing techniques and credit and financial data
concerning customers are valuable, special and unique assets, access to and
knowledge of which are essential to the performance of the Employee's duties
hereunder. In view of the highly competitive nature of the industries in which
the business of the Company and each Affiliated Company is conducted, the
Employee further agrees that all knowledge and information described in the
preceding sentence not in the public domain and heretofore or in the future
obtained by the Employee as a result of his employment by the Company shall be
considered confidential information. In recognition of this fact, Employee
agrees that he will
20.
<PAGE> 21
not, during or after the Employment Period, disclose any of such secrets,
processes or information not in the public domain to any person, firm,
corporation, association or other entity for any reason or purpose whatsoever,
except as necessary in the performance of his duties as an employee of the
Company (and, in such connection, if requested by the Company, the Employee
shall obtain a written confidentiality agreement in such form and content as
reasonably requested by the Company), nor shall the Employee make use of any
such secrets, processes or information (other than information in the public
domain) for his own purposes or for the benefit of any person, firm, corporation
or other entity (except the Company) under any circumstances during or after the
Employment Period. Upon termination of this Agreement for any reason, the
Employee shall promptly return to the Company all records and other property of
the Company in the Employee's possession or under the Employee's control.
Subject to the foregoing sentence, following the Restrictive Period, the
Employee shall be entitled to make use of and disclose any non-proprietary
information in his possession.
11. Company Right to Inventions. The Employee shall promptly disclose,
grant and assign to the Company for its sole use and benefit any and all
inventions, improvements, technical information and suggestions relating in any
way to the products or services sold or under development from time to time by
the Company or any Affiliated Company which the Employee may conceive, develop
or acquire during the Employment Period (whether or not during usual working
hours), together with all patent applications, patents, letters patent,
copyrights and reissues thereof that may at any time be granted for or upon any
such invention, improvement or technical information. In connection therewith,
the Employee shall promptly at all times during and after the Employment Period:
21.
<PAGE> 22
a. Execute and deliver such applications, assignments, descriptions
and other instruments as may be necessary or proper in the operation of the
Company to vest title to such inventions, improvements, technical
information, patent applications and patents or reissues thereof in the
Company and to enable the Company to obtain and maintain the entire right
and title thereto throughout the world.
b. Render to the Company at its expense all such assistance as it
may require in the prosecution of applications for said patents or reissues
thereof, in the prosecution or defense of interferences which may be
declared involving any said application or patents, and in any litigation
in which the Company may be involved relating to any such patents,
inventions, improvements or technical information.
12. Remedies. In the event of a breach or threatened breach by the
Employee of the provisions of Sections 9, 10 or 11 hereof, the Employee
acknowledges that the remedy at law would be inadequate and that the Company
shall be entitled to an injunction restraining him from such breach in addition
to monetary damages and any other remedy provided by law. Nothing contained
herein shall be construed as prohibiting the Company from pursuing any other
remedies available to it for any such breach or threatened breach.
13. Notices. Any notice required or permitted to be provided under this
Agreement shall be deemed properly furnished if in writing and if mailed by
registered or certified mail, postage prepaid with return receipt requested, to
the Employee at his residence (with a copy to George Christopoulos, Esq., Kerr,
Russell and Weber, P.L.C., One Detroit Center, Suite 2500, 500 Woodward Ave.,
Detroit, Michigan 48226) and to the Company at its offices at 900
22.
<PAGE> 23
Wilshire Drive, Suite 203, Troy, Michigan 48084, to the attention of its
Chairman of the Board (with a copy to Timmis & Inman L.L.P., 300 Talon Centre,
Detroit Michigan 48207).
14. Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach.
15. Assignment. This Agreement shall not be assignable by either party
without the prior written consent of the other.
16. Entire Agreement. This instrument contains the entire agreement of the
parties relating to the subject matter hereof and may not be waived, changed,
modified, extended or discharged orally but only by agreement in writing,
consented to in writing by the Chairman of the Board of the Company, and signed
by the party against whom enforcement of any such waiver, change, modification,
extension or discharge is sought.
17. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan.
18. Headings. The headings of any of the Sections hereof are for
convenience only and shall not control or affect the meaning or construction or
limit the scope or intent of any of the provisions of this Agreement.
19. Indemnity. The Company and the Employee hereby agree to indemnify,
defend and hold each other harmless from and against all losses, damages, costs
and expenses (including, without limitation, reasonable attorneys fees and
litigation expenses) arising out of any breach or default by the other of any of
the terms and conditions of this Agreement.
23.
<PAGE> 24
20. Survival. The terms and provisions of Sections 4(h), 7, 9, 10, 11, 12
and 19 hereof shall survive any termination of this Agreement in accordance with
their respective terms.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
VELTRI HOLDINGS USA, INC.
By: [SIG] /s/ Michael Veltri
--------------------------- ------------------------------
Michael Veltri
VS ACQUISITION CO.
By: [SIG]
---------------------------
GUARANTY
The undersigned, jointly and severally, hereby absolutely and
unconditionally guarantee the prompt payment when due of any amounts due to the
Employee pursuant to the above Employment Agreement, and the prompt performance
of all obligations of the Company under this Agreement, which guaranty shall
survive the termination of such Employment Agreement.
VELTRI HOLDINGS, LTD. VELTRI STAMPING CORP.
By: [SIG] By: [SIG]
--------------------------- ---------------------------
NORTH AMERICAN PRECISION
TOOL, LTD.
By: [SIG]
---------------------------
24.
<PAGE> 1
EXHIBIT 10.21
AGREEMENT NOT TO COMPETE
THIS AGREEMENT, entered into as of the 8 day of November, 1996, is by
and between MICHAEL T.J. VELTRI (the "Mr. Veltri"), an individual residing at
4530 River Trail, Bloomfield Hills, Michigan 48301, and VS ACQUISITION CO. (the
"Company"), a Nova Scotia company.
WITNESSETH:
WHEREAS, contemporaneously herewith, the Company and Mr. Veltri entered
into that certain Stock Purchase Agreement (the "Purchase Agreement"), pursuant
to which the Company purchased all of the outstanding shares of capital stock of
Veltri Holdings Ltd. ("VH")(which owns all of the issued and outstanding shares
of capital stock of Veltri Stamping Corporation), and North American Precision
Tool Ltd. ("NAPT") and pursuant to which individual shareholders of the Company
purchased all of the outstanding shares of capital stock of Veltri Holdings USA,
Inc., d/b/a Veltri International ("Holdings") (the Company, Holdings, VH and
NAPT are sometimes each referred to herein as a "Veltri Group Member", and
collectively as the "Veltri Group");
WHEREAS, Mr. Veltri is directly, indirectly or beneficially, a
shareholder, officer and director of each Veltri Group Member being acquired;
and
WHEREAS, as a condition to the Purchase Agreement, the parties hereto
agreed to execute and deliver at Closing (as defined in the Purchase Agreement)
an Agreement Not to Compete, upon the terms and conditions set forth herein;
NOW THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
<PAGE> 2
1. During the Term (as hereinafter defined) of this Agreement, Mr.
Veltri shall not, directly or indirectly (except as a passive investor in less
than three (3%) percent of the outstanding capital stock of a publicly traded
corporation), or in his capacity as an employee of the Veltri Group:
i. anywhere within the Territory (as hereinafter defined),
conduct, engage in, have an interest in, or aid or assist any person or
entity in conducting, engaging or having an interest in (whether as an
owner, principal, lender, stockholder, partner, member, employer,
employee, consultant, officer, director or otherwise):
a) any business or enterprise (whether or not for
profit) which offers or performs any automotive stamping or
metal forming services which are the same as or similar to or
competitive with those now or hereafter being provided by any
Veltri Group Member; or
b) any business or enterprise (whether or not for
profit) which develops, manufactures or sells any automotive
parts or products which are the same as or in any manner
similar to or competitive to those developed, manufactured or
sold by any Veltri Group Member;
c) any other business or enterprise (whether or not
for profit) which is competitive with the business of any
Veltri Group Member.
ii. Solicit, divert, take away, interfere with or accept any
business competitive with any Veltri Group Member from any customers,
suppliers, trade or patronage of any Veltri Group Member; or
iii. Engage, employ, attempt to engage or employ or solicit
for engagement or employment any employee or sales representative of
any Veltri Group Member, or induce or otherwise advise any employee to
leave the employ of any Veltri Group Member or to
2.
<PAGE> 3
engage in any of the activities prohibited hereby.
iv. For purposes hereof:
a) "Territory" shall mean and include all of the following:
i. United States of America, Canada and Mexico;
ii. United States of America and Canada;
iii. Canada; and
iv. Province of Ontario.
b) "Term" shall mean the period commencing on the date hereof
and terminating on the earlier to occur of. (i) five (5) years from
the date hereof, or (ii) the end of the "Restrictive Period," as
such term is defined in the Employment Agreement dated the date
hereof among Mr. Veltri, VS Acquisition Co. and Veltri Holdings USA,
Inc.
2. Mr. Veltri shall, at all times hereafter, hold in confidence and not
disclose or reveal to any person, firm, corporation or other entity, or
otherwise use or permit others to use or disclose, for any reason, any
confidential or proprietary information heretofore or hereafter acquired by him
or disclosed to him relating to the Veltri Group, including all such
confidential or proprietary information relating to machines, practices,
processes, products, inventions, improvements, trade secrets, developments,
customer lists, financial information or other confidential or proprietary
information of any kind pertaining to the Veltri Group, nor shall Mr. Veltri
make use of any such information for his own purpose or for the benefit of any
person, firm, corporation or other entity, except the Veltri Group.
3. Mr. Veltri acknowledges and agrees that the provisions of this
Agreement are reasonable and necessary to protect the interests of the Company
in purchasing the Shares (as defined
3.
<PAGE> 4
in the Stock Purchase Agreement). Mr. Veltri further acknowledges that a breach
of the provisions of this Agreement can result in irreparable damage to the
Company, for which a remedy at law would not be adequate. In the event of any
breach or threatened breach by Mr. Veltri, and in addition to any other remedy
provided herein or by law or in equity, the Company shall be entitled to
specific enforcement thereof, including, without limitation, appropriate
injunctive relief in any court of competent jurisdiction restraining Mr. Veltri
from any such breach or threatened breach, and that no bond or other security
shall be required in connection therewith.
4. It is expressly understood and agreed that, although Mr. Veltri and
the Company consider the provisions hereof, including the restrictions as to
Territory set forth in Section 1(iv)(a) to be reasonable for the purpose of
preserving for the Veltri Group, their business and goodwill and other
proprietary rights, the restrictions as to Territory set forth in Section
l(iv)(a) are each separate and distinct covenants, severable one from the other
and, if any such covenant or covenants are determined to be invalid or
unenforceable, such invalidity or unenforceability shall attach only to the
covenant or covenants to the extent of such invalidity as determined and all
other covenants shall continue in full force and effect. Mr. Veltri and the
Company further agree that a court or other tribunal having jurisdiction may, if
it determines any covenant contained in Sections I(iv)(a) hereof to be invalid,
modify such covenant to reduce its scope so that it is effective to the extent
enforceable under the applicable law.
5. No modification, termination or waiver of the provisions of this
Agreement shall be valid unless consented to in writing by the Chairman of the
Board of the Company, and signed by the party against whom enforcement of any
such waiver, change, modification, extension or discharge is sought.
6. This Agreement shall not be assignable by either party without he
prior written
4.
<PAGE> 5
consent of the other.
7. Mr. Veltri hereby acknowledges and agrees that his obligations under
this Agreement are in consideration for the purchase by the Company of the stock
of the Veltri Group Members being acquired and that such obligations are in
addition to and separate and apart from any of his obligations under that
certain Employment Agreement dated the date hereof with the Company, including
without limiting the generality of foregoing the covenant with respect to
noncompetition contained therein, which obligations shall survive any
termination of this agreement in accordance with the terms of the Employment
Agreement.
8. All notices, requests, demands, and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if served personally on the party to whom notice is given, or on
the date of mailing if mailed to the party to whom notice is to be given, by
first class mail, registered or certified, postage prepaid, and properly
addressed as follows:
(a) To Company at: 900 Wilshire Drive
Suite 203
Troy, Michigan 48084
Attention: Chairman of the Board
--with a copy to: Timmis & Inman L.L.P.
300 Talon Centre
Detroit, Michigan 48207
Attention: Richard M. Miettinen, Esq.
(b) To Mr. Veltri at: 4530 River Trail
Bloomfield Hills, Michigan 48301
--with a copy to: Kerr, Russell and Weber, P.L.C.
One Detroit Center, Suite 2500
500 Woodward Ave.
Detroit, Michigan 48226
Attention: George Christopoulos, Esq.
5.
<PAGE> 6
Any party may change its address for purposes of this paragraph by giving the
other party written notice of the new address in the manner set forth above.
9. This Agreement shall be construed in accordance with and governed
by the laws of the State of Michigan.
10. In the event of any litigation arising out of this Agreement, the
prevailing party in any such litigation shall be entitled to recover its
reasonable attorneys' fees and costs and expenses of litigation from the
non-prevailing party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
Witnesses:
John Giatti Michael T.J. Veltri
- ------------------------------ --------------------------------
JOHN GIATTI MICHAEL T.J. VELTRI
VS ACQUISITION CO.
Erich J. D'Andres By: David J. Woodward
- ------------------------------- -----------------------------
ERICH J. D'ANDRES Its: Vice President
6.
<PAGE> 1
EXHIBIT 10.22
TALON LOGO
TALON
AUTOMOTIVE 900 Wilshire Drive
GROUP LLC Suite 203
Troy, Michigan 48084
(810) 362-7600
CONFIDENTIAL Fax: (810) 362-7617
MEMORANDUM
- --------------------------------------------------------------------------------
TO: DAVID J. WOODWARD
FROM: DEL STANLEY
DATE: FEBRUARY 6, 1996
RE: SEVERANCE AGREEMENT
- --------------------------------------------------------------------------------
This is to advise you that if you were to be terminated without cause, the Talon
Automotive Group ("the Company") will pay you at least one (1) year's base
salary as severance pay. This pay will be in full satisfaction of all claims
against the Company, except for payments which may be due from the Company's
deferred compensation program. Any amounts are contingent upon your executing a
satisfactory release of any and all claims against the Company and is payable in
twelve (12) equal consecutive installments following the date of execution of
the release, less all applicable federal, state and local taxes.
DOS/apt
<PAGE> 1
EXHIBIT 10.23
TALON LOGO
TALON
AUTOMOTIVE 900 Wilshire Drive
GROUP LLC Suire 203
Troy, Miohigan 48084
(870)362-7600
Fax (810)362-7617
CONFIDENTIAL
MEMORANDUM
- --------------------------------------------------------------------------------
TO: KRIS R. PFAEHLER
FROM: DELMAR O. TANLEY
DATE: FEBRUARY 7,1996
RE: SEVERANCE AGREEMENT
- --------------------------------------------------------------------------------
Talon will be developing a company wide severance policy. Until the new policy
is in effect, if you were to be terminated without cause, the Company will pay
you one (1) year's base salary as severance pay. This pay will be in full
satisfaction of all claims against the Company, except for payments which may be
due from the Company's deferred corapensationprogram. Any amounts are contingent
upon your executing a satisfactory release of any and all claims against the
Company and is payable in twelve (12) equal consecutive installments following
the date of execution of the release, less all applicable federal, state and
local taxes.
DOS/apt
<PAGE> 1
EXHIBIT 10.24
TALON AUTOMOTIVE GROUP, INC.
AMENDED AND RESTATED
EQUITY OWNERSHIP PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1 DEFINITIONS 1
1.1 Definitions 1
SECTION 2 GENERAL TERMS 5
2.1 Purpose of the Plan 5
2.2 Stock Subject to the Plan 5
2.3 Administration of the Plan 5
2.4 Eligibility and Limits 5
SECTION 3 TERMS OF AWARDS 6
3.1 Terms and Conditions of All Awards 6
3.2 Terms and Conditions of Options 7
(a) Option Price 7
(b) Option Term 7
(c) Payment 7
(d) Conditions to the Exercise of an Option 7
(e) Termination of Incentive Stock Option 8
(f) Special Provisions for Certain Substitute Options 8
3.3 Terms and Conditions of Stock Appreciation Rights 8
(a) Payment 8
(b) Conditions to Exercise 8
3.4 Terms and Conditions of Stock Awards 9
3.5 Terms and Conditions of Dividend Equivalent Rights 9
(a) Payment 9
(b) Conditions to Payment 9
3.6 Terms and Conditions of Performance Unit Awards 9
(a) Payment 10
(b) Conditions to Payment 10
3.7 Terms and Conditions of Phantom Shares 10
(a) Payment 10
(b) Conditions to Payment 10
3.8 Treatment of Awards Upon Termination of Employment 10
i
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 4 RESTRICTIONS ON STOCK 11
4.1 Escrow of Shares 11
4.2 Forfeiture of Shares 11
4.3 Restrictions on Transfer 11
SECTION 5 GENERAL PROVISIONS 12
5.1 Withholding 12
5.2 Changes in Capitalization; Merger; Liquidation 12
5.3 Cash Awards 13
5.4 Compliance with Code 13
5.5 Right to Terminate Employment 13
5.6 Restrictions on Delivery and Sale of Shares; Legends 13
5.7 Non-alienation of Benefits 14
5.8 Termination and Amendment of the Plan 14
5.9 Stockholder Approval 14
5.10 Choice of Law 14
5.11 Effective Date of Plan 14
</TABLE>
ii
<PAGE> 4
EXHIBIT 10.24
TALON AUTOMOTIVE GROUP, INC.
AMENDED AND RESTATED
EQUITY OWNERSHIP PLAN
WHEREAS, on December 31, 1996, VS Holdings Inc. adopted the VS Holdings
Inc. Equity Ownership Plan; J & R Manufacturing Inc. adopted the J & R
Manufacturing Inc. Equity Ownership Plan; and Hawthorne Metal Products Company
adopted the Hawthorne Metal Products Company Equity Ownership Plan (the
"Predecessor Plans"); and
WHEREAS, on April ___, 1998, VS Holdings Inc., J & R Manufacturing Inc.
and Hawthorne Metal Products Company merged with and into Talon Automotive
Group, Inc. (the "Company").
NOW, THEREFORE, the Company hereby adopts the Amended and Restated
Talon Automotive Group, Inc. Equity Ownership Plan as an amendment, restatement
and continuation of the Predecessor Plans, in order to encourage employees of
the Company to acquire an equity interest in the Company, to make monetary
payments to certain employees based upon the value of the Company's stock, or
based upon achieving certain goals on a basis mutually advantageous to such
employees and the Company, thus providing an incentive for continuation of the
efforts of the employees for the success of the Company, for continuity of
employment and to further the interests of the shareholders.
SECTION 1 DEFINITIONS
1.1 Definitions. Whenever used herein, the masculine pronoun shall be
deemed to include the feminine, the singular to include the plural, unless the
context clearly indicates otherwise, and the following capitalized words and
phrases are used herein with the meaning thereafter ascribed:
(a) "Administrator" means the Board or its designee(s).
(b) "Award" means any Stock Option, Stock Appreciation Right,
Restricted Stock or Performance Award granted under the Plan.
(c) "Beneficiary" means the person or persons designated by a
Participant to exercise an Award in the event of the Participant's death while
employed by the Company, or in the absence of such designation, the executor or
administrator of the Participant's estate.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means conduct by the Participant amounting to
(1) fraud or dishonesty against the Company, (2) willful misconduct, repeated
refusal to follow the reasonable directions of an individual or group authorized
to give such directions, or knowing violation of law
1
<PAGE> 5
in the course of performance of the duties of Participant's employment with the
Company, (3) repeated absences from work without a reasonable excuse, (4)
intoxication with alcohol or drugs while on the Company's premises during
regular business hours, (5) a conviction or plea of guilty or nolo contendere
to a felony or a crime involving dishonesty, or (6) a breach or violation of
the terms of any employment or other agreement to which Participant and the
employer are party, which, in the case of each of (1), (2), (3), (4) and (6)
above, is not cured within thirty (30) days after written notice thereof to the
Participant.
(f) "Change in Control" shall be deemed to have occurred if (i) a
tender offer shall be made and consummated of the ownership of 50% or more of
the outstanding voting securities of the Company, (ii) the Company shall be
merged or consolidated with another corporation and as a result of such merger
or consolidation less than 50% of the outstanding voting securities of the
surviving or resulting corporation shall be owned in the aggregate by the former
shareholders of the Company, other than affiliates (within the meaning of the
Securities Exchange Act of 1934) of any party to such merger or consolidation,
(iii) the Company shall sell substantially all of its assets to another
corporation which corporation is not wholly owned by the Company or an
affiliated entity, or (iv) a person, within the meaning of Section 3(a)(9) or of
Section 13(d)(3) (as in effect on the date hereof) of the securities Exchange
Act of 1934, shall acquire 50% or more of the outstanding voting securities of
the Company (whether directly, indirectly beneficially or of record); provided,
however, notwithstanding the foregoing, a Change in Control shall not be deemed
to have occurred if such person or persons acquire such voting securities in
connection with or subsequent to an Initial Public Offering. For purposes
hereof, ownership of voting securities shall take into account and shall include
ownership as determined by applying the provisions of Rule 13d-3(d)(1)(i) ( as
in effect on the date hereof) pursuant to the Securities Exchange Act of 1934.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Company" means Talon Automotive Group, Inc., a Michigan
corporation.
(i) "Constructive Discharge" means a Termination of Employment by
the Participant on account of (i) any material reduction in the Participant's
Compensation, (ii) any material reduction in the level or scope of job
responsibility or status of the Participant occurring without the consent of the
Participant, or (iii) any relocation to an office of the Company which is more
than fifty (50) miles from the office where the Participant was previously
located to which the Participant has not agreed.
(j) "Disability" has the same meaning as provided in the
long-term disability plan maintained by the Company. In the event of a dispute,
the determination of Disability shall be made by the Administrator. If, at any
time during the period that this Plan is in operation, the Company does not
maintain a long term disability plan, Disability shall mean a physical or mental
condition which, in the judgment off the Administrator, permanently prevents a
Participant from performing his usual duties for the Company or such other
position or job which the Company makes available to him and for which the
Participant is qualified by reason of his education, training and experience.
In making its determination the Administrator may, but is not required to,
2
<PAGE> 6
rely on advice of a physician competent in the area to which such Disability
relates. The Administrator may make the determination in its sole discretion and
any decision of the Administrator will be binding on all parties.
(k) "Disposition" means any conveyance, sale, transfer,
assignment, pledge or hypothecation, whether outright or as security, inter
vivos or testamentary, with or without consideration, voluntary or involuntary.
(l) "Dividend Equivalent Rights" means certain rights to receive
cash payments as described in Plan Section 3.5.
(m) "Equity Ownership Agreement" means an agreement between the
Company and a Participant or other documentation evidencing an Award.
(n) "Expiration Date" means, the last date upon which an Award
can be exercised.
(o) "Fair Market Value" means, for any particular date, (i) for
any period during which the Stock shall be listed for trading on a national
securities exchange or the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), the closing price per share of Stock on such
exchange or the NASDAQ closing bid price as of the close of such trading day, or
(ii) the market price per share of Stock which shall be determined based upon a
fair market valuation of the Company by a qualified valuation expert selected by
the Board in the event (i) above shall not be applicable. If the Fair Market
Value is to be determined as of a day when the securities markets are not open,
the Fair Market Value on that day shall be the Fair Market Value on the next
succeeding day when the markets are open. Additionally, in the event (i) is not
applicable, Fair Market Value shall be determined as of the date of the most
recent previous appraisal referred to in (ii), provided that the most recent
previous appraisal has not occurred more than twelve (12) months prior to the
date of determination.
(p) "Fair Market Value Per Share" means, for any particular date,
the Fair Market Value divided by the total actual number of outstanding shares
of the Company as of such particular date.
(q) "Incentive Stock Option" means an incentive stock option, as
defined in Code Section 422, and described in Plan Section 3.2.
(r) "Initial Public Offering" means the first instance in which
the Company Stock is offered for sale to the public following successful
registration of the Stock with the Securities and Exchange Commission.
(s) "Involuntary Termination" means a Termination of Employment
but does not include a Termination of Employment for Cause or a Voluntary
Resignation.
3
<PAGE> 7
(t) "Non-Qualified Stock Option" means a stock option, other than
an option qualifying as an Incentive Stock Option, described in Plan Section
3.2.
(u) "Option" means a Non-Qualified Stock Option or an Incentive
Stock Option.
(v) "Over 10% Owner" means an individual who at the time an
Incentive Stock Option is granted owns Stock possessing more than 10% of the
total combined voting power of the Company or one of its Parents or
Subsidiaries, determined by applying the attribution rules of Code Section
424(d).
(w) "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, with respect to
Incentive Stock Options, at the time of granting of the Option, each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.
(x) "Participant" means an individual who receives an Award
hereunder.
(y) "Performance Unit Award" refers to a performance unit award
described in Plan Section 3.6.
(z) "Phantom Shares" refers to the rights described in Plan
Section 3.7.
(aa) "Plan" means the Talon Automotive Group, Inc. Equity
Ownership Plan.
(ab) "Retirement" means a Termination of Employment after
attaining age 62 and six (6) years of service.
(ac) "Stock" means the Company's non-voting common stock.
(ad) "Stock Appreciation Right" means a stock appreciation right
described in Plan Section 3.3.
(ae) "Stock Award" means a stock award described in Plan Section
3.4.
(af) "Subsidiary" means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company if, with respect
to Incentive Stock Options, at the time of the granting of the Option, each of
the corporations other than the last corporation in the unbroken chain owns
stock possession 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in the chain.
(ag) "Termination of Employment" means the termination of the
employee-employer relationship between a Participant and the Company and its
affiliates regardless of the fact that severance or similar payments are made to
the Participant, for any reason, including, but
4
<PAGE> 8
not by way of limitation, a Voluntary Resignation, Constructive Discharge,
Involuntary Termination, death, Disability or Retirement. The Administrator
shall, in its absolute discretion, determine the effect of all matters and
questions relating to Termination of Employment, including, but not by way of
limitation, the question of whether a leave of absence constitutes a Termination
of Employment, or whether a Termination of Employment is for Cause or is a
Constructive Discharge.
(ah) "Vested" means that an Award is nonforfeitable and
exercisable with regard to a designated number of shares of Stock.
(ai) "Voluntary Resignation" means a Termination of Employment as
a result of the Participant's resignation but does not include a Constructive
Discharge.
SECTION 2 GENERAL TERMS
2.1 Purpose of the Plan. The Plan is intended to (a) provide incentive
to employees of the Company and its affiliates to stimulate their efforts toward
the continued success of the Company and to operate and manage the business in a
manner that will provide for the long-term growth and profitability of the
Company; (b) encourage stock ownership by employees by providing them with a
means to acquire a proprietary interest in the Company by acquiring shares of
Stock or to receive compensation which is based upon appreciation in the value
of Stock; and (c) provide a means of obtaining and rewarding employees.
2.2 Stock Subject to the Plan. Subject to adjustment in accordance
with Section 5.2, 40,732 shares of Stock (the "Maximum Plan Shares") are hereby
reserved and subject to issuance under the Plan. At no time shall the Company
have outstanding Awards and shares of Stock issued in respect to Awards in
excess of the Maximum Plan Shares. To the extent permitted by law, the shares of
Stock attributable to the nonvested, unpaid, unexercised, unconverted or
otherwise unsettled portion of any Award that is forfeited, canceled, expired or
terminated for any reason without becoming vested, paid, exercised, converted or
otherwise settled in full shall again be available for purposes of the Plan.
2.3 Administration of the Plan. The Plan shall be administered by the
Administrator. The Administrator shall have full authority in its discretion to
determine the employees of the Company or its affiliates to whom Awards shall be
granted and the terms and provisions of Awards, subject to the Plan. Subject to
the provisions of the Plan, the Administrator shall have full and conclusive
authority to interpret the Plan; to prescribe, amend and rescind rules and
regulations relating to the Plan; to determine the terms and provisions of the
respective Equity Ownership Agreements and to make all other determinations
necessary or advisable for the proper administration of the Plan. The
Administrator's determination under the Plan need not be uniform and may be
made by it selectively among persons who receive, or are eligible to receive,
Awards under the Plan (whether or not such persons are similarly situated). The
Administrator's decisions
5
<PAGE> 9
shall be final and binding on all Participants.
2.4 Eligibility and Limits. Participants in the Plan shall be selected
by the Administrator. No Participant may be granted Awards in excess of 40% of
the Maximum Plan Shares. In the case of Incentive Stock Options, the aggregate
Fair Market Value (determined as at the date an Incentive Stock Option is
granted) of Stock with respect to which Stock Options intended to meet the
requirements of Code Section 422 become exercisable for the first time by an
individual during any calendar year under all plans of the Company and its
Parents and Subsidiaries shall not exceed $100,000; provided further, that if
the limitation is exceeded, the Incentive Stock Option(s) which cause the
limitation to be exceeded shall be treated as NonQualified Stock Option(s).
SECTION 3 TERMS OF AWARDS
3.1 Terms and Conditions of All Awards.
(a) The number of shares of Stock as to which an Award shall be
granted shall be determined by the Administrator in its sole discretion, subject
to the provisions of Sections 2.2 and 2.4 as to the total number of shares
available for grants under the Plan.
(b) Each Award shall be evidenced by an Equity Ownership Agreement
in such form as the Administrator may determine is appropriate, subject to the
provisions of the Plan.
(c) The date an Award is granted shall be the date on which the
Administrator has approved the terms and conditions of the Equity Ownership
Agreement and has determined the recipient of the Award and the number of shares
covered by the Award and has taken all such other action necessary to complete
the grant of the Award.
(d) The Administrator may provide in any Equity Ownership
Agreement a vesting schedule. The vesting schedule shall specify when such
Awards shall become Vested and thus exercisable. The Administrator may
accelerate the vesting schedule set forth in the Equity Ownership Agreement if
the Administrator determines that it is in the best interests of the Company and
Participant to do so. Notwithstanding any vesting schedule which may be
specified in an Equity Ownership Agreement, or any determination made by the
Administrator, no award will vest if, to do so, would create a situation in
which the exercisability of any such Award would result in an "excess parachute
payment" within the meaning of Section 280G of the Code.
(e) Awards shall not be transferable or assignable except by will
or by the laws of descent and distribution and shall be exercisable, during the
Participant's lifetime, only by the Participant, or in the event of the
Disability of the Participant, by the legal representative of the Participant.
3.2 Terms and Conditions of Options. At the time any Option is
granted, the
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<PAGE> 10
Administrator shall determine whether the Option is to be an Incentive Stock
Option or a Non-Qualified Stock Option, and the Option shall be clearly
identified as to its status as an Incentive Stock Option or a Non-Qualified
Stock Option. At the time any Incentive Stock Option is exercised, the Company
shall be entitled to place a legend on the certificates representing the shares
of Stock purchased pursuant to the Option to clearly identify them as shares of
Stock purchased upon exercise of an Incentive Stock Option. An Incentive Stock
Option may only be granted within ten (10) years from the date the Plan, as
amended and restated, is adopted or the date such Plan is approved by the
Company's stockholders, whichever is earlier.
(a) Option Price. Subject to adjustment in accordance with Section
5.2 and the other provisions of this Section 3.2, the exercise price (the
"Exercise Price") per share of the Stock purchasable under any Option shall be
as set forth in the applicable Equity Ownership Agreement. With respect to each
grant of an Incentive Stock Option to a Participant who is not an Over 10%
Owner, the Exercise Price per share shall not be less than the Fair Market Value
Per Share on the date the Option is granted. With respect to each grant for an
Incentive Stock Option to a Participant who is an Over 10% Owner, the Exercise
Price shall not be less than 110% of the Fair Market Value Per Share on the date
the Option is granted.
(b) Option Term. The Equity Ownership Agreement shall set forth
the term of each option. Any Incentive Stock Option granted to a Participant who
is not an Over 10% Owner shall not be exercisable after the expiration of ten
(10) years after the date the Option is granted. Any Incentive Stock Option
granted to an Over 10% Owner shall not be exercisable after the expiration of
five (5) years after the date the Option is granted. In either case, the
Administrator may specify a shorter term and state such term in the Equity
Ownership Agreement.
(c) Payment. Payment for all shares of Stock purchased pursuant to
exercise of an Option shall be made in any form or manner authorized by the
Administrator in the Equity Ownership Agreement or by amendment thereto,
including, but not limited to, cash or, if the Equity Ownership Agreement
provides, (i) by delivery of a promissory note with a term of not more than one
year and an interest rate at least equal to a one year U.S. Treasury bill which
may, upon the request of the Administrator, be secured by a pledge of the shares
of stock being purchased; (ii) by delivery to the Company of a number of shares
of Stock which have been owned by the holder for at least six (6) months prior
to the date of exercise having an aggregate Fair Market Value on the date of
exercise equal to the Exercise Price or (iii) by tendering a combination of
cash, promissory note and Stock. Payment shall be made at the time that the
Option or any part thereof is exercised, and no shares shall be issued or
delivered upon exercise of an option until full payment has been made by the
Participant. The holder of an Option, as such, shall have none of the rights of
a stockholder.
(d) Conditions to the Exercise of an Option. Each Option granted
under the Plan shall be exercisable by whom, at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Administrator
shall specify in the Equity Ownership Agreement; provided, however, that
subsequent to the grant of an Option, the Administrator, at any time before
complete termination of such Option, may accelerate the time or times at which
such
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<PAGE> 11
Option may be exercised in whole or in part, including, without limitation,
upon a Change in Control and may permit the Participant or any other designated
person acting for the benefit of the Participant to exercise the Option, or any
portion thereof, for all or part of the remaining Option term notwithstanding
any provision of the Equity Ownership Agreement to the contrary.
(e) Termination of Incentive Stock Option. With respect to an
Incentive Stock Option, in the event of Termination of Employment of a
Participant, the Option or portion thereof held by the Participant which is
unexercised shall expire, terminate, and become unexercisable no later than the
expiration of three (3) months after the date of Termination of Employment;
provided, however, that in the case of a holder whose Termination of Employment
is due to death or Disability, one (1) year shall be substituted for such three
(3) month period. For purposes of this Subsection (e), Termination of Employment
of the Participant shall not be deemed to have occurred if the Participant is
employed by another corporation (or a parent or subsidiary corporation of such
other corporation) which has assumed the Incentive Stock Option of the
Participant in a transaction to which Code Section 424(a) is applicable.
(f) Special Provisions for Certain Substitute Options.
Notwithstanding anything to the contrary in this Section 3.2, any Option issued
in substitution for an option previously issued by another entity, which
substitution occurs in connection with a transaction to which Code Section
424(a) is applicable, may provide for an exercise price computed in accordance
with such Code Section and the regulations thereunder and may contain such other
terms and conditions as the Administrator may prescribe to cause such substitute
Option to contain as nearly as possible the same terms and conditions (including
the applicable vesting and termination provisions) as those contained in the
previously issued option being replaced thereby.
3.3 Terms and Conditions of Stock Appreciation Rights. A Stock
Appreciation Right may be granted in connection with all or any portion of a
previously or contemporaneously granted Award or not in connection with an
Award. A Stock Appreciation Right shall entitle the Participant to receive the
excess of (1) the Fair Market Value of a specified or determinable number of
shares of the Stock at the time of payment or exercise over (2) a specified
price which, in the case of a Stock Appreciation Right granted in connection
with an Option, shall be not less than the Exercise Price for that number of
shares. A Stock Appreciation Right granted in connection with an Award may only
be exercised to the extent that the related Award has not been exercised, paid
or otherwise settled. The exercise of a Stock Appreciation Right granted in
connection with an Award shall result in a pro rata surrender or cancellation of
any related Award to the extent the Stock Appreciation Right has been exercised.
(a) Payment. Upon payment or exercise of a Stock Appreciation
Right, the Company shall pay to the Participant the appreciation in cash or
shares of Stock (valued at the aggregate Fair Market Value on the date of
payment or exercise, as the case may be) as provided in the Equity Ownership
Agreement or, in the absence of such provision, as the Administrator may
determine.
(b) Conditions to Exercise. Each Stock Appreciation Right granted
under the
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<PAGE> 12
Plan shall be exercisable or payable at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Administrator
shall specify in the Equity Ownership Agreement; provided, however, that
subsequent to the grant of a Stock Appreciation Right, the Administrator, at any
time before complete termination of such Stock Appreciation Right, may
accelerate the time or times at which such Stock Appreciation Right may be
exercised or paid in whole or in part.
3.4 Terms and Conditions of Stock Awards. The number of shares of
Stock subject to a Stock Award and restrictions or conditions on such shares, if
any, shall be as the Administrator determines, and the certificate for such
shares shall bear evidence of any restrictions or conditions. Subsequent to the
date of the grant of the Stock Award, the Administrator shall have the power to
permit, in its discretion, an acceleration of the expiration of an applicable
restriction period with respect to any part or all of the shares awarded to a
Participant. The Administrator may require a cash payment from the Participant
in an amount no greater than the aggregate Fair Market Value of the shares of
Stock awarded determined at the date of grant in exchange for the grant of a
Stock Award or may grant a Stock Award without the requirement of a cash
payment.
3.5 Terms and Conditions of Dividend Equivalent Rights. A Dividend
Equivalent Right shall entitle the Participant to receive payments from the
Company in an amount determined by reference to any cash dividends paid on a
specified number of shares of Stock to Company stockholders of record during the
period such rights are effective. The Administrator may impose such restrictions
and conditions on any Dividend Equivalent Right as the Administrator in its
discretion shall determine, including the date any such right shall terminate
and may reserve the right to terminate, amend or suspend any such right at any
time.
(a) Payment. Payment in respect of a Dividend Equivalent Right may
be made by the Company in cash or shares of Stock (valued at Fair Market Value
on the date of payment) as provided in the Equity Ownership Agreement or, in the
absence of such provision, as the Administrator may determine.
(b) Conditions to Payment. Each Dividend Equivalent Right granted
under the Plan shall be payable at such time or times, or upon the occurrence of
such event or events, and in such amounts, as the Administrator shall specify in
the Equity Ownership Agreement; provided, however, that subsequent to the grant
of a Dividend Equivalent Right, the Administrator, at any time before complete
termination of such Dividend Equivalent Right, may accelerate the time or times
at which such Dividend Equivalent Right may be paid in whole or in part.
3.6 Terms and Conditions of Performance Unit Awards. A Performance
Unit Award shall entitle the Participant to receive, at a specified future date,
payment of an amount equal to all or a portion of the value of a specified
number of units (stated in terms of a designated dollar amount per unit) granted
by the Administrator. At the time of the grant, the Administrator must determine
the base value of each unit, the number of units subject to a Performance Unit
Award, the performance factors applicable to the determination of the ultimate
payment value of the Performance Unit Award and the period over which Company
performance shall be measured. The
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Administrator may provide for an alternate base value for each unit under
certain specified conditions.
(a) Payment. Payment in respect of Performance Unit Awards may be
made by the Company in cash or shares of Stock (valued at Fair Market Value on
the date of payment) as provided in the Equity Ownership Agreement or, in the
absence of such provision, as the Administrator may determine.
(b) Conditions to Payment. Each Performance Unit Award granted
under the Plan shall be payable at such time or times, or upon the occurrence of
such event or events, and in such amounts, as the Administrator shall specify in
the Equity Ownership Agreement; provided, however, that subsequent to the grant
of a Performance Unit Award, the Administrator, at any time before complete
termination of such Performance Unit Award, may accelerate the time or times at
which such Performance Unit Award may be paid in whole or in part.
3.7 Terms and Conditions of Phantom Shares. Phantom shares shall
entitle the Participant to receive, at a specified future date, payment of an
amount equal to all or a portion of the Fair Market Value of a specified number
of shares of Stock at the end of a specified period. At the time of the grant,
the Administrator shall determine the factors which will govern the portion of
the rights so payable, including, at the discretion of the Administrator, any
performance criteria that must be satisfied as a condition to payment.
(a) Payment. Payment in respect of Phantom Shares may be made by
the Company in cash or shares of Stock (valued at Fair Market Value on the date
of payment) as provided in the Equity Ownership Agreement or, in the absence of
such provision, as the Administrator may determine.
(b) Conditions to Payment. Each Phantom Share granted under the
Plan shall be payable at such time or times, or upon the occurrence of such
event or events, and in such amounts, as the Administrator shall specify in the
Equity Ownership Agreement; provided, however, that subsequent to the grant of a
Phantom Share, the Administrator, at any time before complete termination of
such Phantom Share, may accelerate the time or times at which such Phantom Share
may be paid in whole or in part.
3.8 Treatment of Awards Upon Termination of Employment. Except as
otherwise provided by Plan Section 3.2(e), any award under this Plan to a
Participant who incurs a Termination of Employment may be canceled, accelerated,
paid or continued, as provided in the Equity Ownership Agreement or, in the
absence of such provision, as the Administrator may determine. The portion of
any award exercisable in the event of continuation or the amount of any payment
due under a continued award may be adjusted by the Administrator to reflect the
Participant's period of service from the date of grant through the date of the
Participant's Termination of Employment or such other factors as the
Administrator determines are relevant to its decision to continue the award.
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SECTION 4 RESTRICTIONS ON STOCK
4.1 Escrow of Shares. Any certificates representing the shares of
Stock issued under the Plan shall be issued in the Participant's name, but, if
the Equity Ownership Agreement so provides, the shares of Stock shall be held by
a custodian designated by the Administrator (the "Custodian"). Each Equity
Ownership Agreement providing for transfer of shares of Stock to the Custodian
shall appoint the Custodian as the attorney-in-fact for the Participant for the
term specified in the Equity Ownership Agreement, with full power and authority
in the Participant's name, place and stead to transfer, assign and convey to the
Company any shares of Stock held by the Custodian for such Participant, if the
Participant forfeits the shares under the terms of the Equity Ownership
Agreement, and to otherwise comply with any other terms and conditions contained
in the Equity Ownership Agreement. During the period that the Custodian holds
the shares subject to this Section, the Participant shall be entitled to all
rights, except as provided in the Equity Ownership Agreement, applicable to
shares of Stock not so held. Any dividends declared on shares of Stock held by
the Custodian shall, as the Administrator may provide in the Equity Ownership
Agreement, be paid directly to the Participant or, in the alternative, be
retained by the Custodian until the expiration of the term specified in the
Equity Ownership Agreement and shall then be delivered, together with any
proceeds, with the shares of Stock to the Participant or the Company, as
applicable.
4.2 Forfeiture of Shares or Payments under Promissory Note.
Notwithstanding any vesting schedule set forth in any Equity Ownership
Agreement, in the event that the Participant violates a non competition
agreement as set forth in the Equity Ownership Agreement, all Awards and shares
of Stock issued to the holder pursuant to the Plan shall be forfeited; provided,
however, that the Company shall return to the holder the lesser of any
consideration paid by the Participant in exchange for Stock issued to the
Participant pursuant to the Plan or the then Fair Market Value of the Stock
forfeited hereunder. In addition, to the extent the Company owes the Participant
any payment under any promissory note issued pursuant to the Equity Ownership
Agreement, 50% of all remaining payments shall also be forfeited in the event of
a violation of a non-competition agreement contained in the Equity Ownership
Agreement. The remedies of the Company set forth in this Section 4.2 shall be
the sole and exclusive remedies of the Company for any violation by the
Participant of the non competition agreement set forth in the Equity Ownership
Agreement.
4.3 Restrictions on Transfer. The Participant shall not have the right
to make or permit to exist any Disposition of the shares of Stock issued
pursuant to the Plan except as provided in the Plan or the Equity Ownership
Agreement. Any Disposition of the shares of Stock issued under the Plan by the
Participant, not made in accordance with the Plan or the Equity Ownership
Agreement, including, but not limited to, any right of repurchase or right of
first refusal, shall be void. The Company shall not recognize, or have the duty
to recognize, any Disposition not made in accordance with the Plan and the
Equity Ownership Agreement, and the shares of Stock so transferred shall
continue to be bound by the Plan and the Equity Ownership Agreement.
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SECTION 5 GENERAL PROVISIONS
5.1 Withholding. The Company shall deduct from all cash distributions
under the Plan any taxes required to be withheld by federal, state or local
government. Whenever the Company proposes or is required to issue or transfer
shares of Stock under the Plan or upon the vesting of any Stock Award, the
Company shall have the right to require the recipient to remit to the Company an
amount sufficient to satisfy any federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for such
shares or the vesting of such Stock Award. A Participant may pay the withholding
tax in cash, or, if the Equity Ownership Agreement provides, a Participant may
also elect to have the number of shares of Stock he is to receive reduced by, or
with respect to a Stock Award, tender back to the Company, the smallest number
of whole shares of Stock which, when multiplied by the Fair Market Value of the
shares determined as of the Tax Date (defined below), is sufficient to satisfy
federal, state and local, if any, withholding taxes arising from exercise or
payment of an Award (a "Withholding Election"). A Participant may make a
Withholding Election only if both of the following conditions are met:
(a) The Withholding Election must be made on or prior to the date
on which the amount of tax required to be withheld is determined (the "Tax
Date") by executing and delivering to the Company a properly completed notice of
Withholding Election as prescribed by the Administrator; and
(b) Any Withholding Election made will be irrevocable; however,
the Administrator may in its sole discretion approve and give no effect to the
Withholding Election.
5.2 Changes in Capitalization; Merger; Liquidation.
(a) The number of shares of Stock reserved for the grant of
Options, Dividend Equivalent Rights, Performance Unit Awards, Phantom Shares,
Stock Appreciation Rights and Stock Awards; the number of shares of Stock
reserved for issuance upon the exercise or payment, as applicable, of each
outstanding Option, Dividend Equivalent Right, Performance Unit Award, Phantom
Share and Stock Appreciation Right and upon vesting or grant, as applicable, of
each Stock Award; the Exercise Price of each outstanding Option and the
specified number of shares of Stock to which each outstanding Dividend
Equivalent Right, Phantom Share and Stock Appreciation Right pertains will be
proportionately and equitably adjusted by the Administrator for any increase or
decrease in the number of issued shares of Stock resulting from a subdivision or
combination of shares or the payment of a stock dividend in shares of Stock to
holders of outstanding shares of Stock or any other increase or decrease in the
number of shares of Stock outstanding effected without receipt of consideration
by the Company.
(b) In the event of a merger, consolidation or other
reorganization of the Company or tender offer for shares of Stock, the
Administrator may make such adjustments with respect to awards and take such
other action as it deems necessary or appropriate to reflect or in anticipation
of such merger, consolidation, reorganization or tender offer, including,
without
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limitation, the substitution of new awards, the termination or adjustment of
outstanding awards, the acceleration of awards or the removal of restrictions on
outstanding awards; provided, however, that such adjustments or such actions
will not adversely affect the rights of a participant under such award without
his consent. Any adjustment pursuant to this Section 5.2 may provide, in the
Administrator's discretion, for the elimination without payment therefor of any
fractional shares that might otherwise become subject to any Award.
(c) The existence of the Plan and the Awards granted pursuant to
the Plan shall not affect in any way the right or power of the Company to make
or authorize any adjustment, reclassification, reorganization or other change in
its capital or business structure, any merger or consolidation of the Company,
any issue of debt or equity securities having preferences or priorities as to
the Stock or the rights thereof, the dissolution or liquidation of the Company,
any sale or transfer of all or any part of its business or assets, or any other
corporate act or proceeding.
5.3 Cash Awards. The Administrator may, at any time and in its
discretion, grant to any holder of an Award the right to receive, at such times
and in such amounts as determined by the Administrator in its discretion, a cash
amount which is intended to reimburse such person for all or a portion of the
federal, state and local income taxes imposed upon such person as a consequence
of the receipt of the Award or the exercise of rights thereunder.
5.4 Compliance with Code. All Incentive Stock Options to be granted
hereunder are intended to comply with Code Section 422, and all provisions of
the Plan and all Incentive Stock Options granted hereunder shall be construed in
such manner as to effectuate that intent.
5.5 Right to Terminate Employment. Nothing in the Plan or in any Award
shall confer upon any Participant the right to continue as an employee or
officer of the Company or any of its affiliates or affect the right of the
Company or any of its affiliates may have to terminate the Participant's
employment at any time.
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5.6 Restrictions on Delivery and Sale of Shares; Legends. Each Award
is subject to the condition that if at any time the Administrator, in its
discretion, shall determine that the listing, registration or qualification of
the shares covered by such Award upon any securities exchange or under any state
or federal law is necessary or desirable as a condition of or in connection with
the granting of such Award or the purchase or delivery of shares thereunder, the
delivery of any or all shares pursuant to such Award may be withheld unless and
until such listing, registration or qualification shall have been effected. If a
registration statement is not in effect under the Securities Act of 1933 or any
applicable state securities laws with respect to the shares of Stock purchasable
or otherwise deliverable under Awards then outstanding, the Administrator may
require, as a condition of exercise of any Option or as a condition to any other
delivery of Stock pursuant to an Award, that the Participant or other recipient
of an Award represent, in writing, that the shares received pursuant to the
Award are being acquired for investment and not with a view to distribution and
agree that shares will not be disposed of except pursuant to an effective
registration statement, unless the Company shall have received an opinion of
counsel that such disposition is exempt from such requirement under the
Securities Act of 1933 and any applicable state securities laws. The Company may
include on certificates representing shares delivered pursuant to an Award such
legends referring to the foregoing representations or restrictions or any other
applicable restrictions on resale as the Company, in its discretion, shall deem
appropriate or as are specifically provided for in the Equity Ownership
Agreement.
5.7 Non-alienation of Benefits. Other than as specifically provided
with regard to the death of a Participant, no benefit under the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge; and any attempt to do so shall be void. No such
benefit shall, prior to receipt by the Participant, be in any manner liable for
or subject to the debts, contracts, liabilities, engagements or torts of the
Participant.
5.8 Termination and Amendment of the Plan. The Board at any time may
amend or terminate the Plan without stockholder approval; provided, however,
that the Board may condition any amendment on the approval of stockholders of
the Company if such approval is necessary or advisable with respect to tax,
securities or other applicable laws. No such termination or amendment without
the consent of the holder of an Award shall adversely affect the rights of the
Participant under such Award.
5.9 Stockholder Approval. The Plan shall be submitted to the
stockholders of the Company for their approval within twelve (12) months before
the adoption of the Plan by the Board. If such approval is not obtained, any
Award granted hereunder shall be void.
5.10 Choice of Law. The laws of the State of Michigan shall govern the
Plan, to the extent not preempted by federal law.
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5.11 Effective Date of Plan. The Predecessor Plans became effective on
December 31, 1996, and the Plan, as amended and restated hereby, shall become
effective on April ____, 1998.
TALON AUTOMOTIVE GROUP, INC.
By:___________________________
Its:___________________
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AMENDED AND RESTATED
EQUITY OWNERSHIP AGREEMENT
THIS AMENDED AND RESTATED EQUITY OWNERSHIP AGREEMENT, entered into as
of the ____ day of April, 1998, is by and between Talon Automotive Group, Inc.
(the "Company" ), a Michigan corporation, and Wayne C. Inman ("Grantee").
WHEREAS, on December 31, 1996, Grantee entered into those certain
equity ownership agreements (the "Predecessor Agreements") with each of VS
Holdings Inc., Hawthorne Metal Products Company and J & R Manufacturing Inc.
(the "Predecessor Companies");
WHEREAS, concurrently herewith, Hawthorne Metal Products Company and J
& R Manufacturing Inc. merged with and into the Company and VS Holdings Inc. has
become a subsidiary of the Company; and
WHEREAS, the Predecessor Plans have been amended, restated and
consolidated into the Talon Automotive Group, Inc. Amended and Restated Equity
Ownership Plan; and
WHEREAS, Grantee is an employee of the Company and has received
Non-Qualified Stock Options under the Predecessor Plans;
NOW, THEREFORE, in consideration of the above premises, the Company and
the Grantee hereby agree to amend, restate and consolidate the Predecessor
Agreements as follows:
I. GRANT OF STOCK OPTIONS
Subject to the terms and conditions set forth herein and in the Plan
which is attached hereto and made a part hereof the Grantee is awarded
Non-Qualified Stock Options to purchase up to an aggregate total of 8,146 shares
of Stock of the Company as hereinafter provided. For purposes of this Agreement,
the Date of Grant of the Options is December 31, 1996.
II. EXERCISE PRICE
The first option grants the Grantee the right to purchase up to 8,146
shares of Stock at a per share Exercise Price equal to One Hundred Eighty Two
and 48/100 ($182.48) Dollars, which represents the sum of the Fair Market Value
Per Share (as defined in the Plan) of Stock of the Predecessor Companies as of
the stated Date of Grant.
III. VESTING
The Grantee may exercise only those Options which are Vested and have not yet
expired. Options granted under this Agreement become Vested in accordance with,
and may not be exercised after the Expiration Date as set forth in, the
following table.
<PAGE> 20
Number of Total Number of
Vesting Date Shares Vested Shares Vested Expiration Date
- ------------ ------------- ------------- ---------------
December 31, 1996 100% of the shares 8,146
of each option January 1, 2018
Notwithstanding the above, and subject to the terms of the Plan, the following
special rules apply with regard to the Options granted under this Agreement.
- - In the event of the Disability of the Grantee while employed by the
Company, the Options granted herein will become 100% Vested.
- - In the event of the death of the Grantee while employed by the Company,
the Options granted herein will become 100% Vested.
- - In the event of the Voluntary Resignation of the Grantee, no further
Options will become Vested after the Termination of Employment.
- - In the event of the Involuntary Termination of the Grantee, no further
Options will become Vested after the Termination of Employment.
- - In the event of Termination of Employment of the Grantee for Cause, no
further Options will become Vested after the Termination of Employment.
- - In the event of a Change of Control, the Options granted herein will
become 100% Vested.
- - In the event of the Grantee's Termination of Employment for any reason
other than those specified above, no further options will become Vested
as of the date of such Termination of Employment.
- - Additionally, the Administrator may accelerate the Vesting of Grantee's
Options if the Administrator determines that it is in the best
interests of the Company and the Grantee.
IV. EXERCISE
Prior to a Termination of Employment, the Grantee may exercise any
Vested Options until the Option's Expiration Date. The Grantee's ability to
exercise any Vested Options following the date the Grantee ceases to be an
employee is a follows:
- In the event the Grantee ceases to be an employee as a result of
Retirement, the Grantee may exercise any Vested Options for a period
of ninety (90) days following the date of the Grantee's Termination
of Employment (or not later than the Expiration Date of the Options,
if shorter).
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- In the event the Grantee ceases to be an employee as a result of a
Disability, the Grantee may exercise any Vested Options for a period
of ninety (90) days following the date of the Grantee's Termination
of Employment (or not later than the Expiration Date of the Options,
if shorter).
- In the event the Grantee dies while an employee of the Company,
the legal representative of such Grantee's estate may exercise
any Vested Options on the Grantee's behalf for a period of
twelve (12) months following death (or not later than the
Expiration Date of the Options, if shorter).
- In the event the Grantee ceases to be an employee as a result of a
Voluntary Resignation, the Grantee shall have no further right to
exercise any Option granted hereunder effective with the Grantee's
Termination of Employment.
- In the event the Grantee ceases to be an employee as a result
of an Involuntary Termination, the Grantee may exercise any
Vested Options for a period of ninety (90) days following the
date of the Grantee's Termination of Employment (or not later
than the Expiration Date of the Options, if shorter).
- In the event that the Grantee ceases to be an employee as a result
of a Termination of Employment for Cause, the Grantee shall have no
further right to exercise any Option granted hereunder effective
with the Grantee's Termination of Employment.
- In the event that the Grantee ceases to be an employee for any other
reason not specified above, the Granter may exercise any Vested
Options for a period of ninety (90) days following the date the
Grantee's Termination of Employment (or not later than the
Expiration Date of the Options, if shorter).
Neither Grantee nor any other person entitled to exercise the Options
under the terms of the Plan shall be, or have any of the rights or privileges
of, a shareholder of the Company in respect of any shares of Stock issuable on
exercise of the Option, unless and until the Exercise Price for such shares has
been paid in full.
V. ESCROW PROVISIONS
The Grantee agrees to place any shares acquired pursuant to the terms
of this Agreement at any time prior to an Initial Public Offering (together with
assignments separate from certificate for all of such shares duly endorsed in
blank for transfer), in escrow with the Company who shall act as the custodian
of such shares. The Grantee hereby appoints such custodian as his
attorney-in-fact for the Grantee with full power and authority in the Grantees'
name, place and stead to transfer, assign and convey to the Company any shares
of Stock which, pursuant to the terms hereof, are to be conveyed to the Company,
and to otherwise deal with such shares in the manner provided herein or in the
Plan.
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VI. DISPOSITIONS OF STOCK
Prior to an Initial Public Offering, the Grantee may not sell,
exchange, transfer, pledge or otherwise dispose of any Stock acquired through
the exercise of any Option granted hereunder until after the expiration of a six
(6) month period following the transfer of such Stock to the Grantee.
In the event of, and after the Initial Public Offering, the Grantee, by
acceptance hereof, agrees not to sell or otherwise dispose of Stock acquired
through the exercise by any option hereunder until after the expiration of the
twelve (12) month period immediately following an Initial Public Offering.
In the event of, and after an Initial Public Offering, the Grantee, by
acceptance hereof, hereby represents, warrants and agrees that, upon exercise of
this Option, unless the shares of Stock are then covered by an effective
registration statement under the Securities Act of 1993, as amended (the "Act"):
(i) the Stock is being acquired for investment and not with a
view towards the public distribution or resale thereof;
(ii) the Grantee will not sell, transfer or assign any Stock
except in compliance with the terms and conditions hereof, the Act and
the rules and regulations thereunder;
(iii) the certificate representing the Stock may bear an
appropriate restrictive legend; and
(iv) the transfer agent of the company may place a stop
transfer notation with respect to the shares in the Stock transfer
books of the Company.
VII. RIGHT OF FIRST REFUSAL AND REPURCHASE
In the event that prior to an Initial Public Offering the Grantee shall
cease to be employed by the Company for any reason including death or
Disability, the Company, following the expiration of the six (6) month holding
period referred to in VI. above, shall have the right to repurchase some or all
of Grantee's Stock acquired through the exercise of an Option granted hereunder
at a purchase price equal to its Fair Market Value at the date of repurchase, as
follows:
(i) The Company may exercise its option to purchase any or all
of such Stock by providing written notice thereof to Grantee; and
(ii) Such purchase shall be consummated within sixty (60) days
following the date of the Company's exercise of the option, and such
purchase price shall be payable as
4
<PAGE> 23
hereinafter provided.
Prior to an Initial Public Offering, the Company, following the
expiration of the six (6) month holding period referred to in VI. above, shall
have the right of first refusal with respect to Grantee's Stock at a purchase
price equal to the higher of Fair Market Value or the price offered by a bona
fide purchaser, as follows:
(i) In the event Grantee proposes to sell, assign, transfer or
otherwise dispose of any Stock pursuant to a bona fide written offer
from an unrelated third party (the "Bona Fide Offer"), then Grantee
shall offer such Stock for sale first to the Company, and the Company
shall have an option to purchase any or all of such Stock upon the same
terms and conditions as set forth in the Bona Fide Offer, except as
follows:
(ii) Such Stock shall be offered to the Company in writing in
and shall state the terms and conditions of the Bona Fide Offer and
attach a copy of the Bona Fide Offer.
(iii) The Company may exercise its option to purchase any or all
of such Stock upon the same terms and conditions as set forth in the
Bona Fide Offer (except as otherwise provided herein), by providing
written notice thereof to Grantee on or before the thirtieth (30th) day
following receipt of such Bona Fide Offer.
(iv) Such purchase by the Company shall then be consummated
within the time frame set forth in the Bona Fide Offer (but in any
event not less than one hundred twenty (120) days following the receipt
of the Bona Fide Offer by the Company) and the purchase price therefor
shall be equal to the higher of Fair Market Value or the purchase price
set forth in the Bona Fide Offer, and shall be payable as hereinafter
provided.
(v) In the event the Company does not elect to purchase all of
such Stock as provided above, with the prior written consent of the
Company, which consent shall not be unreasonably withheld, Grantee may
then sell, assign, transfer or otherwise dispose of such Stock to the
third party pursuant to the Bona Fide Offer, but only upon the precise
terms and conditions as stated in the Bona Fide Offer, provided,
however, that such transaction is consummated within ninety (90) days
following the expiration of the option set forth above. In the event of
any change in the terms and conditions of the Bona Fide Offer or in the
event such transaction is not consummated within such ninety (90) day
period, then such Stock shall not be sold or otherwise transferred to
such third party without again complying with the terms of this Section
and offering the same to the Company in the same manner as set forth
above.
Prior to an Initial Public Offering and while the Grantee is still
employed by the Company, the Grantee, following the expiration of the six (6)
month holding period referred to in VI. above, shall have the right to require
the Company to repurchase, in each calendar year, that number of shares of Stock
then owned by the Grantee which shall have a total Fair Market Value of up to
one hundred thousand ($100,000) dollars greater than the exercise price paid for
such stock, at a
5
<PAGE> 24
purchase price equal to its Fair Market Value at the date of repurchase, which
purchase price shall be paid in cash.
Prior to an Initial Public Offering and in the event Grantee ceases to
be employed by the Company, the Grantee shall have the right, following the
expiration of the six (6) month holding period referred to in VI. above, to
require the Company to repurchase Grantee's Stock acquired through the exercise
of an option granted hereunder at a purchase price equal to its Fair Market
Value at the date of repurchase.
In the event that the Company exercises its right to repurchase, or is
required to repurchase the Grantee's Stock pursuant to the preceding paragraphs
above, it has the right to pay such purchase price either in cash at closing or
in installments over a five (5) year period, with an initial down payment,
payable on the closing of such repurchase, which shall be in an amount equal to
the sum of (a) the Exercise Price paid by the Grantee for the Stock being
repurchased by the Company, and (b) the amount of state and federal income taxes
payable by the Grantee as a result of the exercise of the Options for the Stock
which is being repurchased by the Company, using a maximum combined federal and
state income tax rate equal to forty two (42%) percent (which percentage shall
be subject to adjustment by the Company in its reasonable discretion based upon
future changes in such maximum combined federal and state income tax rate), with
the balance of the purchase price payable in equal semi-annual installments,
with interest, over a period not to exceed five (5) years. For purposes of such
an installment payment, interest shall be calculated and paid not less
frequently than annually, and shall equal the prime rate of interest charged by
the Company's primary bank.
VIII. S CORPORATION PROVISIONS
In the event the Company at any time elects to be treated as an
S Corporation pursuant to Sections 1361-1363 of the Internal Revenue Code of
1986, as amended from time to time (the "IRC"), then Grantee agrees to take any
and all actions necessary for the Company and/or any subsidiary of the Company
to maintain its election to be treated as an S Corporation, and in this regard
agrees to the following:
(i) Grantee shall not take any action which would cause S
Corporation status of the Company or any subsidiary of the Company to
terminate, except with the prior written consent of the Company.
(ii) Grantee shall execute and deliver to the Company and/or
the Internal Revenue Service all consents, documents, instruments and
forms deemed necessary or advisable by counsel to the Company to cause
the Company and/or any subsidiary of the Company to be treated as an S
Corporation and to maintain the S Corporation election of the Company
and/or any subsidiary in full force and effect.
(iii) Grantee, or any permitted transferee, may not transfer
and no person may acquire, the beneficial ownership of any Stock if
such transfer would cause the Corporation
6
<PAGE> 25
status to of the Company or any subsidiary of the Company to terminate,
including a transfer to, or acquisition by:
(a) any person who would cause the Company to have
more than 35 shareholders;
(b) any nonresident alien; or
(c) any person than an individual, an estate or a
trust permitted by Section 1361 of the IRC to be a shareholder
of an S Corporation.
(iv) No transfer to a qualified Subchapter S trust shall be
permitted unless the Company has received reasonable assurance that the
income beneficiary will properly and timely elect under IRC Section
1361(d)(2) to have the provisions of IRC Section 1361(d) apply.
Additionally, no transfer to a qualified Subchapter S trust shall be
permitted unless the trust instrument requires that the income
beneficiary properly and timely elect under IRC Section 1361(d)(2) to
have the provisions of IRC Section 1361(d) apply with respect to the
Company and its subsidiaries and not revoke such election and that any
successive income beneficiary not refuse to consent to such election.
(v) Any transfer or acquisition of Stock in violation of this
Agreement shall be null and void and Grantee and any successor agrees
that any such transfer or acquisition may and should be enjoined.
(vi) Any purported transfer in violation of this Agreement
will not affect the beneficial ownership of the Stock, and Grantee or
person making the purported transfer will retain the right to vote and
the right to receive dividends and liquidation proceeds with respect to
such Stock.
(vii) Notwithstanding any purported transfer in violation of
this Agreement, Grantee or person making the purported transfer shall
continue to report the share of income, gain, loss, deduction or credit
allocated by the Company to such Stock in accordance with IRC Section
1366.
(viii) In the event that all or any portion of the Grantee's
interest in the Company is terminated within the meaning of IRC Section
1377(a)(2) during a taxable year in which the Company is being taxed as
an S Corporation, the following provisions shall apply:
(a) The Company shall elect under IRC Section
1377(a)(2) to have the rules provided in IRC Section
1377(a)(1) applied as if the taxable year consisted of two
taxable years with the first year ending on the date of the
termination of the Grantee's interest in the Company; and
(b) Grantee agrees to execute the necessary
shareholder's consent,
7
<PAGE> 26
notwithstanding that he may have disposed of Stock in the
Company prior to such termination, and will authorize the
filing of such consent and such other instruments as may be
required to give effect to such election, with the appropriate
Internal Revenue Service Center or office.
IX. NOTICE AND PAYMENT
Subject to the limitations set forth in this Agreement, the Grantee may
exercise Options granted under this Agreement by delivering written notice to
the Company, on a form provided by the Company, specifying the number of shares
of Stock to be purchased. The Exercise Price of any Option shall be payable to
the Company in full at the time of exercise of the Option (i) in cash or its
equivalent, (ii) a promissory note having a term of not more than one year and
an interest rate equal to 7% (iii) by tendering shares of previously acquired
Stock which has been held by the Grantee for at least six months having a Fair
Market Value on the date of exercise equal to the total Exercise Price, or (iv)
by a combination of cash, a promissory note and previous acquired stock, all as
determined by the Administrator, in its sole discretion.
X. GENERAL
Administration. Administration of this agreement will be governed by
the terms and conditions set forth in the Plan in effect on the Date of Grant.
That document is incorporated in this Agreement in its entirety.
Notices. Every notice or other communication relating to the Agreement
shall be in writing, and shall be mailed to or delivered to the party for whom
it is intended at such address as may from time to time be designated by such
party. Unless and until some other address is so designated, all notices or
communications by the Grantee to the Company shall be mailed to Talon Automotive
Group, Inc., 400 Talon Centre, Detroit, Michigan 48207, Attention: Wayne C.
Inman.
All notices by the Company to the Grantee may be delivered to the Grantee
personally or may be mailed to the Grantee at the address shown on the records
of the Company.
Withholding: The Company shall deduct from any payment of any kind due
to the Grantee, any federal, state or local taxes of any kind required by law to
be withhold with respect to the exercise of the Stock Options or require the
Grantee to remit an additional amount in cash or its equivalent to pay for such
withholding.
Non-Compete:
a. The Grantee hereby acknowledges and recognizes the highly
competitive nature of the businesses of the Company and accordingly agrees in
consideration for the grant of the options, during the period the Grantee is
employed by the Company and thereafter for the longer of two (2)
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<PAGE> 27
years or that period in which the Grantee is entitled to any payments
pursuant to our Equity Ownership Agreement, for purposes of the Plan he will not
directly or indirectly (except as a passive investor in less than one (1%)
percent of the outstanding capital stock of a publicly traded corporation or in
his capacity as an employee of the Company):
(i) conduct, engage in, have an interest in, or aid or assist any
person or entity in conducting, engaging or having an interest in (whether as an
owner, principal, lender, stockholder, partner, employer, employee, consultant,
officer, director or otherwise) anywhere within the Territory (as hereinafter
defined):
(a) any business or enterprise (whether or not for profit) which
offers or performs any services which are the same as or similar
to or competitive with those now or hereafter provided by the
Company or any of its subsidiaries; or
(b) any business or enterprise (whether or not for profit) which
develops, manufactures or sells any products which are the same
as or in any manner similar to or competitive with those
developed, manufactured or sold the Company or any of its
subsidiaries; or
(c) any other business or enterprise (whether or not for profit)
which is competitive with the business of the Company or any of
its subsidiaries;
(ii) Solicit, divert, take away, interfere with or accept any
business any customers, suppliers, trade or patronage of the Company or
any of its subsidiaries, or take any actions which are materially
adverse to or materially injurious to the Company or any of its
subsidiaries, or which materially and adversely affect the business of
the Company or any of its subsidiaries or their relationships with
their employees, customers or suppliers; or
(iii) Engage, employ, attempt to engage or employ or solicit for
engagement or employment any employee or sales representative of the Company or
any of its subsidiaries, or induce or otherwise advise any employee or sales
representative to leave the employ or engagement of the Company or any of its
subsidiaries or to engage in any of the activities prohibited hereby.
b. For purposes hereof, the "Territory" shall mean and include the
United States of America, Canada and Mexico.
c. It is expressly understood and agreed that the Grantee and the
Company consider the provisions hereof, including the restrictions as to
Territory set forth in Section b. above to be reasonable for the purpose of
preserving for the Company, its business and goodwill and other proprietary
rights.
d. Notwithstanding anything to the contrary, in the event of a
violation of the foregoing non-competition covenants by the Grantee, the Company
shall have all of the remedies set forth in
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<PAGE> 28
Section 4.2 of the Plan; provided, however, the remedies of the Company
set forth in said Section 4.2 of the Plan shall be the sole and exclusive
remedies of the Company for any violation by the Grantee of such non-competition
covenants.
Interpretation: This Agreement is subject in all respects to the terms
of the Plan, and in the event that any provision of the Agreement shall be
inconsistent with the terms of the Plan, then the terms of the Plan shall
govern. Any question of interpretation arising under this Agreement shall be
determined by the Committee and its determinations shall be final and conclusive
upon all parties in interest.
No Right of Employment: Nothing contained in this Agreement shall be
construed to create or otherwise confer upon Grantee any right of employment,
either expressed or implied, or constitute any evidence of any agreement or
understanding, express or implied, that the Company will continue to employ
Grantee for any period of time or at any particular position, and nothing
contained in this Agreement shall affect any right the Company or any of its
subsidiaries may have to terminate the Grantee's employment at any time.
Counterparts: This Agreement may be executed in one or more
counterparts, each counterpart of which will be regarded for all purposes as an
original.
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Equity Ownership Agreement, as amended and restated hereby, as of the
date written above.
TALON AUTOMOTIVE GROUP, INC.
By:
- --------------------------------- ------------------------------
Wayne C. Inman
Approved By:
---------------------------------
Randolph J. Agley, Member of the
Board of Directors
10
<PAGE> 29
AMENDED AND RESTATED
EQUITY OWNERSHIP AGREEMENT
THIS AMENDED AND RESTATED EQUITY OWNERSHIP AGREEMENT, entered into as of
the ____ day of April, 1998, is by and between Talon Automotive Group, Inc. (the
"Company" ), a Michigan corporation, and Kris R. Pfaehler ("Grantee").
WHEREAS, on December 31, 1996, Grantee entered into those certain equity
ownership agreements (the "Predecessor Agreements") with each of VS Holdings
Inc., Hawthorne Metal Products Company and J & R Manufacturing Inc. (the
"Predecessor Companies");
WHEREAS, concurrently herewith, Hawthorne Metal Products Company and J & R
Manufacturing Inc. merged with and into the Company and VS Holdings Inc. has
become a subsidiary of the Company; and
WHEREAS, the Predecessor Plans have been amended, restated and consolidated
into the Talon Automotive Group, Inc. Amended and Restated Equity Ownership
Plan; and
WHEREAS, Grantee is an employee of the Company and has received
Non-Qualified Stock Options under the Predecessor Plans;
NOW, THEREFORE, in consideration of the above premises, the Company and the
Grantee hereby agree to amend, restate and consolidate the Predecessor
Agreements as follows:
I. GRANT OF STOCK OPTIONS
Subject to the terms and conditions set forth herein and in the Plan which
is attached hereto and made a part hereof the Grantee is awarded six (6)
Non-Qualified Stock Options to purchase up to an aggregate total of 3,421 shares
of Stock of the Company as hereinafter provided. For purposes of this Agreement,
the Date of Grant of the Options is December 31, 1996.
II. EXERCISE PRICE
The first option grants the Grantee the right to purchase up to 391 shares
of Stock at a per share Exercise Price equal to One Hundred Eighty Two and
48/100 ($182.48) Dollars, which represents the sum of the Fair Market Value Per
Share (as defined in the Plan) of Stock of the Predecessor Companies as of the
stated Date of Grant;
The second option grants the Grantee the right to purchase up to 391 shares
of Stock at a per share Exercise Price equal to Two Hundred and 73/100 ($200.73)
Dollars, which represents 110% of the Fair Market Value Per Share of Stock of
the Predecessor Companies as of the stated Date of Grant;
<PAGE> 30
The third option grants the Grantee the right to purchase up to 391 shares
of Stock at a per share Exercise Price equal to Two Hundred Eighteen and 98/100
($218.98) Dollars, which represents 120% of the Fair Market Value Per Share of
Stock of the Predecessor Companies as of the stated Date of Grant;
The fourth option grants the Grantee the right to purchase up to 391 shares
of Stock at a per share Exercise Price equal to Two Hundred Thirty Seven and
22/100 ($237.22) Dollars, which represents 130% of the Fair Market Value Per
Share of Stock of the Predecessor Companies as of the stated Date of Grant;
The fifth option grants the Grantee the right to purchase up to 391 shares
of Stock at a per share Exercise Price equal to Two Hundred Fifty Five and
47/100 ($255.47) Dollars, which represents 140% of the Fair Market Value Per
Share of Stock of the Companies as of the stated Date of Grant;
The sixth option grants the Grantee the right to purchase up to 1,466
shares of Stock at a per share Exercise Price equal to Three Hundred Twenty Nine
and 46/100 ($329.46) Dollars, which represents the sum of (i) 120% of the Fair
Market Value Per Share of Stock of the Predecessor Companies as of the stated
Date of Grant and (ii) One Hundred Ten and 48/100 ($110.48) Dollars.
III. VESTING
The Grantee may exercise only those Options which are Vested and have not yet
expired. Options granted under this Agreement become Vested in accordance with,
and may not be exercised after the Expiration Date as set forth in, the
following table.
<TABLE>
<CAPTION>
Number of Total Number of
Vesting Date Shares Vested Shares Vested Expiration Date
- ------------ ------------- --------------- ---------------
<S> <C> <C> <C>
January 1, 1999 20% of the shares 683
of each option January 1, 2018
January 1, 2000 20% of the shares 1,366
of each option January 1, 2018
January 1, 2001 20% of the shares 2,049
of each option January 1, 2018
January 1, 2002 20% of the shares 2,732
of each option January 1, 2018
January 2, 2003 20% of the shares 3,421
of each option January 1, 2018
</TABLE>
2
<PAGE> 31
Notwithstanding the above, and subject to the terms of the Plan, the following
special rules apply with regard to the Options granted under this Agreement.
- - In the event of the Disability of the Grantee while employed by the
Company, the Options granted herein will become 100% Vested.
- - In the event of the death of the Grantee while employed by the Company, the
Options granted herein will become 100% Vested.
- - In the event of the Voluntary Resignation of the Grantee, no further
Options will become Vested after the Termination of Employment.
- - In the event of the Involuntary Termination of the Grantee, no further
Options will become Vested after the Termination of Employment.
- - In the event of Termination of Employment of the Grantee for Cause, no
further Options will become Vested after the Termination of Employment.
- - In the event of a Change of Control, the Options granted herein will become
100% Vested.
- - In the event of the Grantee's Termination of Employment for any reason
other than those specified above, no further options will become Vested as
of the date of such Termination of Employment.
- - Additionally, the Administrator may accelerate the Vesting of Grantee's
Options if the Administrator determines that it is in the best interests of
the Company and the Grantee.
IV. EXERCISE
Prior to a Termination of Employment, the Grantee may exercise any Vested
Options until the Option's Expiration Date. The Grantee's ability to exercise
any Vested Options following the date the Grantee ceases to be an employee is a
follows:
- - In the event the Grantee ceases to be an employee as a result of
Retirement, the Grantee may exercise any Vested Options for a period of
ninety (90) days following the date of the Grantee's Termination of
Employment (or not later than the Expiration Date of the Options, if
shorter).
- - In the event the Grantee ceases to be an employee as a result of a
Disability, the Grantee may exercise any Vested Options for a period of
ninety (90) days following the date of the Grantee's Termination of
Employment (or not later than the Expiration Date of the Options, if
shorter).
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<PAGE> 32
- - In the event the Grantee dies while an employee of the Company, the legal
representative of such Grantee's estate may exercise any Vested
Options on the Grantee's behalf for a period of twelve
(12) months following death (or not later than the Expiration
Date of the Options, if shorter).
- - In the event the Grantee ceases to be an employee as a result of a
Voluntary Resignation, the Grantee shall have no further right to
exercise any Option granted hereunder effective with the Grantee's
Termination of Employment.
- - In the event the Grantee ceases to be an employee as a result of an
Involuntary Termination, the Grantee may exercise any Vested
Options for a period of ninety (90) days following the date
of the Grantee's Termination of Employment (or not later than the
Expiration Date of the Options, if shorter).
- - In the event that the Grantee ceases to be an employee as a result of a
Termination of Employment for Cause, the Grantee shall have no further
right to exercise any Option granted hereunder effective with the
Grantee's Termination of Employment.
- - In the event that the Grantee ceases to be an employee for any other reason
not specified above, the Granter may exercise any Vested Options for
a period of ninety (90) days following the date the Grantee's
Termination of Employment (or not later than the Expiration Date of
the Options, if shorter).
Neither Grantee nor any other person entitled to exercise the Options under
the terms of the Plan shall be, or have any of the rights or privileges of, a
shareholder of the Company in respect of any shares of Stock issuable on
exercise of the Option, unless and until the Exercise Price for such shares has
been paid in full.
V. ESCROW PROVISIONS
The Grantee agrees to place any shares acquired pursuant to the terms of
this Agreement at any time prior to an Initial Public Offering (together with
assignments separate from certificate for all of such shares duly endorsed in
blank for transfer), in escrow with the Company who shall act as the custodian
of such shares. The Grantee hereby appoints such custodian as his
attorney-in-fact for the Grantee with full power and authority in the Grantees'
name, place and stead to transfer, assign and convey to the Company any shares
of Stock which, pursuant to the terms hereof, are to be conveyed to the Company,
and to otherwise deal with such shares in the manner provided herein or in the
Plan.
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<PAGE> 33
VI. DISPOSITIONS OF STOCK
Prior to an Initial Public Offering, the Grantee may not sell, exchange,
transfer, pledge or otherwise dispose of any Stock acquired through the exercise
of any Option granted hereunder until after the expiration of a six (6) month
period following the transfer of such Stock to the Grantee.
In the event of, and after the Initial Public Offering, the Grantee, by
acceptance hereof, agrees not to sell or otherwise dispose of Stock acquired
through the exercise by any option hereunder until after the expiration of the
twelve (12) month period immediately following an Initial Public Offering.
In the event of, and after an Initial Public Offering, the Grantee, by
acceptance hereof, hereby represents, warrants and agrees that, upon exercise of
this Option, unless the shares of Stock are then covered by an effective
registration statement under the Securities Act of 1993, as amended (the "Act"):
(i) the Stock is being acquired for investment and not with a view
towards the public distribution or resale thereof;
(ii) the Grantee will not sell, transfer or assign any Stock except
in compliance with the terms and conditions hereof, the Act and the rules
and regulations thereunder;
(iii) the certificate representing the Stock may bear an appropriate
restrictive legend; and
(iv) the transfer agent of the company may place a stop transfer
notation with respect to the shares in the Stock transfer books of the
Company.
VII. RIGHT OF FIRST REFUSAL AND REPURCHASE
In the event that prior to an Initial Public Offering the Grantee shall
cease to be employed by the Company for any reason including death or
Disability, the Company, following the expiration of the six (6) month holding
period referred to in VI. above, shall have the right to repurchase some or all
of Grantee's Stock acquired through the exercise of an Option granted hereunder
at a purchase price equal to its Fair Market Value at the date of repurchase, as
follows:
(i) The Company may exercise its option to purchase any or all of
such Stock by providing written notice thereof to Grantee; and
(ii) Such purchase shall be consummated within sixty (60) days
following the date of the Company's exercise of the option, and such
purchase price shall be payable as hereinafter provided.
Prior to an Initial Public Offering, the Company, following the
expiration of the six (6)
5
<PAGE> 34
month holding period referred to in VI. above, shall have the right of first
refusal with respect to Grantee's Stock at a purchase price equal to the higher
of Fair Market Value or the price offered by a bona fide purchaser, as follows:
(i) In the event Grantee proposes to sell, assign, transfer or
otherwise dispose of any Stock pursuant to a bona fide written offer from
an unrelated third party (the "Bona Fide Offer"), then Grantee shall offer
such Stock for sale first to the Company, and the Company shall have an
option to purchase any or all of such Stock upon the same terms and
conditions as set forth in the Bona Fide Offer, except as follows:
(ii) Such Stock shall be offered to the Company in writing in and
shall state the terms and conditions of the Bona Fide Offer and attach a
copy of the Bona Fide Offer.
(iii) The Company may exercise its option to purchase any or all of
such Stock upon the same terms and conditions as set forth in the Bona Fide
Offer (except as otherwise provided herein), by providing written notice
thereof to Grantee on or before the thirtieth (30th) day following receipt
of such Bona Fide Offer.
(iv) Such purchase by the Company shall then be consummated within
the time frame set forth in the Bona Fide Offer (but in any event not less
than one hundred twenty (120) days following the receipt of the Bona Fide
Offer by the Company) and the purchase price therefor shall be equal to the
higher of Fair Market Value or the purchase price set forth in the Bona
Fide Offer, and shall be payable as hereinafter provided.
(v) In the event the Company does not elect to purchase all of such
Stock as provided above, with the prior written consent of the Company,
which consent shall not be unreasonably withheld, Grantee may then sell,
assign, transfer or otherwise dispose of such Stock to the third party
pursuant to the Bona Fide Offer, but only upon the precise terms and
conditions as stated in the Bona Fide Offer, provided, however, that such
transaction is consummated within ninety (90) days following the expiration
of the option set forth above. In the event of any change in the terms and
conditions of the Bona Fide Offer or in the event such transaction is not
consummated within such ninety (90) day period, then such Stock shall not
be sold or otherwise transferred to such third party without again
complying with the terms of this Section and offering the same to the
Company in the same manner as set forth above.
Prior to an Initial Public Offering and while the Grantee is still employed
by the Company, the Grantee, following the expiration of the six (6) month
holding period referred to in VI. above, shall have the right to require the
Company to repurchase, in each calendar year, that number of shares of Stock
then owned by the Grantee which shall have a total Fair Market Value of up to
one hundred thousand ($100,000) dollars greater than the exercise price paid for
such stock, at a purchase price equal to its Fair Market Value at the date of
repurchase, which purchase price shall be paid in cash.
6
<PAGE> 35
Prior to an Initial Public Offering and in the event Grantee ceases to be
employed by the Company, the Grantee shall have the right, following the
expiration of the six (6) month holding period referred to in VI. above, to
require the Company to repurchase Grantee's Stock acquired through the exercise
of an option granted hereunder at a purchase price equal to its Fair Market
Value at the date of repurchase.
In the event that the Company exercises its right to repurchase, or is
required to repurchase the Grantee's Stock pursuant to the preceding paragraphs
above, it has the right to pay such purchase price either in cash at closing or
in installments over a five (5) year period, with an initial down payment,
payable on the closing of such repurchase, which shall be in an amount equal to
the sum of (a) the Exercise Price paid by the Grantee for the Stock being
repurchased by the Company, and (b) the amount of state and federal income taxes
payable by the Grantee as a result of the exercise of the Options for the Stock
which is being repurchased by the Company, using a maximum combined federal and
state income tax rate equal to forty two (42%) percent (which percentage shall
be subject to adjustment by the Company in its reasonable discretion based upon
future changes in such maximum combined federal and state income tax rate), with
the balance of the purchase price payable in equal semi-annual installments,
with interest, over a period not to exceed five (5) years. For purposes of such
an installment payment, interest shall be calculated and paid not less
frequently than annually, and shall equal the prime rate of interest charged by
the Company's primary bank.
VIII. S CORPORATION PROVISIONS
In the event the Company at any time elects to be treated as an S
Corporation pursuant to Sections 1361-1363 of the Internal Revenue Code of 1986,
as amended from time to time (the "IRC"), then Grantee agrees to take any and
all actions necessary for the Company and/or any subsidiary of the Company to
maintain its election to be treated as an S Corporation, and in this regard
agrees to the following:
(i) Grantee shall not take any action which would cause S
Corporation status of the Company or any subsidiary of the Company to
terminate, except with the prior written consent of the Company.
(ii) Grantee shall execute and deliver to the Company and/or the
Internal Revenue Service all consents, documents, instruments and forms
deemed necessary or advisable by counsel to the Company to cause the
Company and/or any subsidiary of the Company to be treated as an S
Corporation and to maintain the S Corporation election of the Company
and/or any subsidiary in full force and effect.
(iii) Grantee, or any permitted transferee, may not transfer and no
person may acquire, the beneficial ownership of any Stock if such transfer
would cause the Corporation status to of the Company or any subsidiary of
the Company to terminate, including a transfer to, or acquisition by:
7
<PAGE> 36
(a) any person who would cause the Company to have more than 35
shareholders;
(b) any nonresident alien; or
(c) any person than an individual, an estate or a trust
permitted by Section 1361 of the IRC to be a shareholder of an S
Corporation.
(iv) No transfer to a qualified Subchapter S trust shall be
permitted unless the Company has received reasonable assurance that the
income beneficiary will properly and timely elect under IRC Section
1361(d)(2) to have the provisions of IRC Section 1361(d) apply.
Additionally, no transfer to a qualified Subchapter S trust shall be
permitted unless the trust instrument requires that the income beneficiary
properly and timely elect under IRC Section 1361(d)(2) to have the
provisions of IRC Section 1361(d) apply with respect to the Company and its
subsidiaries and not revoke such election and that any successive income
beneficiary not refuse to consent to such election.
(v) Any transfer or acquisition of Stock in violation of this
Agreement shall be null and void and Grantee and any successor agrees that
any such transfer or acquisition may and should be enjoined.
(vi) Any purported transfer in violation of this Agreement will not
affect the beneficial ownership of the Stock, and Grantee or person making
the purported transfer will retain the right to vote and the right to
receive dividends and liquidation proceeds with respect to such Stock.
(vii) Notwithstanding any purported transfer in violation of this
Agreement, Grantee or person making the purported transfer shall continue
to report the share of income, gain, loss, deduction or credit allocated by
the Company to such Stock in accordance with IRC Section 1366.
(viii) In the event that all or any portion of the Grantee's interest
in the Company is terminated within the meaning of IRC Section 1377(a)(2)
during a taxable year in which the Company is being taxed as an S
Corporation, the following provisions shall apply:
(a) The Company shall elect under IRC Section 1377(a)(2) to
have the rules provided in IRC Section 1377(a)(1) applied as if the
taxable year consisted of two taxable years with the first year ending
on the date of the termination of the Grantee's interest in the
Company; and
(b) Grantee agrees to execute the necessary shareholder's
consent, notwithstanding that he may have disposed of Stock in the
Company prior to such termination, and will authorize the filing of
such consent and such other instruments as may be required to give
effect to such election, with the appropriate Internal
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<PAGE> 37
Revenue Service Center or office.
IX. NOTICE AND PAYMENT
Subject to the limitations set forth in this Agreement, the Grantee may
exercise Options granted under this Agreement by delivering written notice to
the Company, on a form provided by the Company, specifying the number of shares
of Stock to be purchased. The Exercise Price of any Option shall be payable to
the Company in full at the time of exercise of the Option (i) in cash or its
equivalent, (ii) a promissory note having a term of not more than one year and
an interest rate equal to 7% (iii) by tendering shares of previously acquired
Stock which has been held by the Grantee for at least six months having a Fair
Market Value on the date of exercise equal to the total Exercise Price, or (iv)
by a combination of cash, a promissory note and previous acquired stock, all as
determined by the Administrator, in its sole discretion.
X. GENERAL
Administration. Administration of this agreement will be governed by the
terms and conditions set forth in the Plan in effect on the Date of Grant. That
document is incorporated in this Agreement in its entirety.
Notices. Every notice or other communication relating to the Agreement
shall be in writing, and shall be mailed to or delivered to the party for whom
it is intended at such address as may from time to time be designated by such
party. Unless and until some other address is so designated, all notices or
communications by the Grantee to the Company shall be mailed to Talon Automotive
Group, Inc., 400 Talon Centre, Detroit, Michigan 48207, Attention: Wayne C.
Inman.
All notices by the Company to the Grantee may be delivered to the Grantee
personally or may be mailed to the Grantee at the address shown on the records
of the Company.
Withholding: The Company shall deduct from any payment of any kind due to
the Grantee, any federal, state or local taxes of any kind required by law to be
withhold with respect to the exercise of the Stock Options or require the
Grantee to remit an additional amount in cash or its equivalent to pay for such
withholding.
Non-Compete:
a. The Grantee hereby acknowledges and recognizes the highly competitive
nature of the businesses of the Company and accordingly agrees in consideration
for the grant of the options, during the period the Grantee is employed by the
Company and thereafter for the longer of two (2) years or that period in which
the Grantee is entitled to any payments pursuant to our Equity Ownership
Agreement, for purposes of the Plan he will not directly or indirectly (except
as a passive investor in less than one (1%) percent of the outstanding capital
stock of a publicly traded
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<PAGE> 38
corporation or in his capacity as an employee of the Company):
(i) conduct, engage in, have an interest in, or aid or assist any
person or entity in conducting, engaging or having an interest in (whether
as an owner, principal, lender, stockholder, partner, employer, employee,
consultant, officer, director or otherwise) anywhere within the Territory
(as hereinafter defined):
(a) any business or enterprise (whether or not for profit) which
offers or performs any services which are the same as or similar
to or competitive with those now or hereafter provided by the
Company or any of its subsidiaries; or
(b) any business or enterprise (whether or not for profit) which
develops, manufactures or sells any products which are the same
as or in any manner similar to or competitive with those
developed, manufactured or sold the Company or any of its
subsidiaries; or
(c) any other business or enterprise (whether or not for profit)
which is competitive with the business of the Company or any of
its subsidiaries;
(ii) Solicit, divert, take away, interfere with or accept any
business any customers, suppliers, trade or patronage of the Company or any
of its subsidiaries, or take any actions which are materially adverse to or
materially injurious to the Company or any of its subsidiaries, or which
materially and adversely affect the business of the Company or any of its
subsidiaries or their relationships with their employees, customers or
suppliers; or
(iii) Engage, employ, attempt to engage or employ or solicit for
engagement or employment any employee or sales representative of the
Company or any of its subsidiaries, or induce or otherwise advise any
employee or sales representative to leave the employ or engagement of the
Company or any of its subsidiaries or to engage in any of the activities
prohibited hereby.
b. For purposes hereof, the "Territory" shall mean and include the United
States of America, Canada and Mexico.
c. It is expressly understood and agreed that the Grantee and the Company
consider the provisions hereof, including the restrictions as to Territory set
forth in Section b. above to be reasonable for the purpose of preserving for the
Company, its business and goodwill and other proprietary rights.
d. Notwithstanding anything to the contrary, in the event of a violation
of the foregoing non-competition covenants by the Grantee, the Company shall
have all of the remedies set forth in Section 4.2 of the Plan; provided,
however, the remedies of the Company set forth in said Section 4.2 of the Plan
shall be the sole and exclusive remedies of the Company for any violation by the
Grantee of such non-competition covenants.
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<PAGE> 39
Interpretation: This Agreement is subject in all respects to the terms of
the Plan, and in the event that any provision of the Agreement shall be
inconsistent with the terms of the Plan, then the terms of the Plan shall
govern. Any question of interpretation arising under this Agreement shall be
determined by the Committee and its determinations shall be final and conclusive
upon all parties in interest.
No Right of Employment: Nothing contained in this Agreement shall be
construed to create or otherwise confer upon Grantee any right of employment,
either expressed or implied, or constitute any evidence of any agreement or
understanding, express or implied, that the Company will continue to employ
Grantee for any period of time or at any particular position, and nothing
contained in this Agreement shall affect any right the Company or any of its
subsidiaries may have to terminate the Grantee's employment at any time.
Counterparts: This Agreement may be executed in one or more counterparts,
each counterpart of which will be regarded for all purposes as an original.
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Equity Ownership Agreement, as amended and restated hereby, as of the
date written above.
TALON AUTOMOTIVE GROUP, INC.
By:
- ----------------------------- ----------------------------------
Kris R. Pfaehler
11
<PAGE> 40
AMENDED AND RESTATED
EQUITY OWNERSHIP AGREEMENT
THIS AMENDED AND RESTATED EQUITY OWNERSHIP AGREEMENT, entered into as of
the ____ day of April, 1998, is by and between Talon Automotive Group, Inc. (the
"Company" ), a Michigan corporation, and David J. Woodward ("Grantee").
WHEREAS, on December 31, 1996, Grantee entered into those certain equity
ownership agreements (the "Predecessor Agreements") with each of VS Holdings
Inc., Hawthorne Metal Products Company and J & R Manufacturing Inc. (the
"Predecessor Companies");
WHEREAS, concurrently herewith, Hawthorne Metal Products Company and J & R
Manufacturing Inc. merged with and into the Company and VS Holdings Inc. has
become a subsidiary of the Company; and
WHEREAS, the Predecessor Plans have been amended, restated and consolidated
into the Talon Automotive Group, Inc. Amended and Restated Equity Ownership
Plan; and
WHEREAS, Grantee is an employee of the Company and has received
Non-Qualified Stock Options under the Predecessor Plans;
NOW, THEREFORE, in consideration of the above premises, the Company and the
Grantee hereby agree to amend, restate and consolidate the Predecessor
Agreements as follows:
I. GRANT OF STOCK OPTIONS
Subject to the terms and conditions set forth herein and in the Plan which
is attached hereto and made a part hereof the Grantee is awarded six (6)
Non-Qualified Stock Options to purchase up to an aggregate total of 4,073 shares
of Stock of the Company as hereinafter provided. For purposes of this Agreement,
the Date of Grant of the Options is December 31, 1996.
II. EXERCISE PRICE
The first option grants the Grantee the right to purchase up to 456 shares
of Stock at a per share Exercise Price equal to One Hundred Eighty Two and
48/100 ($182.48) Dollars, which represents the sum of the Fair Market Value Per
Share (as defined in the Plan) of Stock of the Predecessor Companies as of the
stated Date of Grant;
The second option grants the Grantee the right to purchase up to 456 shares
of Stock at a per share Exercise Price equal to Two Hundred and 73/100 ($200.73)
Dollars, which represents 110% of the Fair Market Value Per Share of Stock of
the Predecessor Companies as of the stated Date of Grant;
<PAGE> 41
The third option grants the Grantee the right to purchase up to 456 shares
of Stock at a per share Exercise Price equal to Two Hundred Eighteen and 98/100
($218.98) Dollars, which represents 120% of the Fair Market Value Per Share of
Stock of the Predecessor Companies as of the stated Date of Grant;
The fourth option grants the Grantee the right to purchase up to 456 shares
of Stock at a per share Exercise Price equal to Two Hundred Thirty Seven and
22/100 ($237.22) Dollars, which represents 130% of the Fair Market Value Per
Share of Stock of the Predecessor Companies as of the stated Date of Grant;
The fifth option grants the Grantee the right to purchase up to 456 shares
of Stock at a per share Exercise Price equal to Two Hundred Fifty Five and
47/100 ($255.47) Dollars, which represents 140% of the Fair Market Value Per
Share of Stock of the Companies as of the stated Date of Grant;
The sixth option grants the Grantee the right to purchase up to 1,793
shares of Stock at a per share Exercise Price equal to Three Hundred Twenty Nine
and 46/100 ($329.46) Dollars, which represents the sum of (i) 120% of the Fair
Market Value Per Share of Stock of the Predecessor Companies as of the stated
Date of Grant and (ii) One Hundred Ten and 48/100 ($110.48) Dollars.
III. VESTING
The Grantee may exercise only those Options which are Vested and have not yet
expired. Options granted under this Agreement become Vested in accordance with,
and may not be exercised after the Expiration Date as set forth in, the
following table.
<TABLE>
<CAPTION>
Number of Total Number of
Vesting Date Shares Vested Shares Vested Expiration Date
- ------------ ------------- --------------- ---------------
<S> <C> <C> <C>
January 1, 1999 20% of the shares 814
of each option January 1, 2018
January 1, 2000 20% of the shares 1,628
of each option January 1, 2018
January 1, 2001 20% of the shares 2,442
of each option January 1, 2018
January 1, 2002 20% of the shares 3,256
of each option January 1, 2018
January 2, 2003 20% of the shares 4,073
of each option January 1, 2018
</TABLE>
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<PAGE> 42
Notwithstanding the above, and subject to the terms of the Plan, the following
special rules apply with regard to the Options granted under this Agreement.
- - In the event of the Disability of the Grantee while employed by the
Company, the Options granted herein will become 100% Vested.
- - In the event of the death of the Grantee while employed by the Company, the
Options granted herein will become 100% Vested.
- - In the event of the Voluntary Resignation of the Grantee, no further
Options will become Vested after the Termination of Employment.
- - In the event of the Involuntary Termination of the Grantee, no further
Options will become Vested after the Termination of Employment.
- - In the event of Termination of Employment of the Grantee for Cause, no
further Options will become Vested after the Termination of Employment.
- - In the event of a Change of Control, the Options granted herein will become
100% Vested.
- - In the event of the Grantee's Termination of Employment for any reason
other than those specified above, no further options will become Vested as
of the date of such Termination of Employment.
- - Additionally, the Administrator may accelerate the Vesting of Grantee's
Options if the Administrator determines that it is in the best interests of
the Company and the Grantee.
IV. EXERCISE
Prior to a Termination of Employment, the Grantee may exercise any
Vested Options until the Option's Expiration Date. The Grantee's ability to
exercise any Vested Options following the date the Grantee ceases to be an
employee is a follows:
- - In the event the Grantee ceases to be an employee as a result of
Retirement, the Grantee may exercise any Vested Options for a period of
ninety (90) days following the date of the Grantee's Termination of
Employment (or not later than the Expiration Date of the Options, if
shorter).
- - In the event the Grantee ceases to be an employee as a result of a
Disability, the Grantee may exercise any Vested Options for a period of
ninety (90) days following the date of the Grantee's Termination of
Employment (or not later than the Expiration Date of the Options, if
shorter).
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<PAGE> 43
- - In the event the Grantee dies while an employee of the Company, the legal
representative of such Grantee's estate may exercise any Vested
Options on the Grantee's behalf for a period of twelve (12)
months following death (or not later than the Expiration
Date of the Options, if shorter).
- - In the event the Grantee ceases to be an employee as a result of a
Voluntary Resignation, the Grantee shall have no further right to
exercise any Option granted hereunder effective with the
Grantee's Termination of Employment.
- - In the event the Grantee ceases to be an employee as a result of an
Involuntary Termination, the Grantee may exercise any Vested
Options for a period of ninety (90) days following the date of
the Grantee's Termination of Employment (or not later than the
Expiration Date of the Options, if shorter).
- - In the event that the Grantee ceases to be an employee as a result of a
Termination of Employment for Cause, the Grantee shall have no further
right to exercise any Option granted hereunder effective with the
Grantee's Termination of Employment.
- - In the event that the Grantee ceases to be an employee for any other reason
not specified above, the Granter may exercise any Vested Options for a
period of ninety (90) days following the date the Grantee's
Termination of Employment (or not later than the Expiration Date of
the Options, if shorter).
Neither Grantee nor any other person entitled to exercise the Options
under the terms of the Plan shall be, or have any of the rights or privileges
of, a shareholder of the Company in respect of any shares of Stock issuable on
exercise of the Option, unless and until the Exercise Price for such shares has
been paid in full.
V. ESCROW PROVISIONS
The Grantee agrees to place any shares acquired pursuant to the terms of
this Agreement at any time prior to an Initial Public Offering (together with
assignments separate from certificate for all of such shares duly endorsed in
blank for transfer), in escrow with the Company who shall act as the custodian
of such shares. The Grantee hereby appoints such custodian as his
attorney-in-fact for the Grantee with full power and authority in the Grantees'
name, place and stead to transfer, assign and convey to the Company any shares
of Stock which, pursuant to the terms hereof, are to be conveyed to the Company,
and to otherwise deal with such shares in the manner provided herein or in the
Plan.
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<PAGE> 44
VI. DISPOSITIONS OF STOCK
Prior to an Initial Public Offering, the Grantee may not sell, exchange,
transfer, pledge or otherwise dispose of any Stock acquired through the exercise
of any Option granted hereunder until after the expiration of a six (6) month
period following the transfer of such Stock to the Grantee.
In the event of, and after the Initial Public Offering, the Grantee, by
acceptance hereof, agrees not to sell or otherwise dispose of Stock acquired
through the exercise by any option hereunder until after the expiration of the
twelve (12) month period immediately following an Initial Public Offering.
In the event of, and after an Initial Public Offering, the Grantee, by
acceptance hereof, hereby represents, warrants and agrees that, upon exercise of
this Option, unless the shares of Stock are then covered by an effective
registration statement under the Securities Act of 1993, as amended (the "Act"):
(i) the Stock is being acquired for investment and not with a view
towards the public distribution or resale thereof;
(ii) the Grantee will not sell, transfer or assign any Stock except
in compliance with the terms and conditions hereof, the Act and the rules
and regulations thereunder;
(iii) the certificate representing the Stock may bear an appropriate
restrictive legend; and
(iv) the transfer agent of the company may place a stop transfer
notation with respect to the shares in the Stock transfer books of the
Company.
VII. RIGHT OF FIRST REFUSAL AND REPURCHASE
In the event that prior to an Initial Public Offering the Grantee shall
cease to be employed by the Company for any reason including death or
Disability, the Company, following the expiration of the six (6) month holding
period referred to in VI. above, shall have the right to repurchase some or all
of Grantee's Stock acquired through the exercise of an Option granted hereunder
at a purchase price equal to its Fair Market Value at the date of repurchase, as
follows:
(i) The Company may exercise its option to purchase any or all of
such Stock by providing written notice thereof to Grantee; and
(ii) Such purchase shall be consummated within sixty (60) days
following the date of the Company's exercise of the option, and such
purchase price shall be payable as hereinafter provided.
Prior to an Initial Public Offering, the Company, following the expiration
of the six (6)
5
<PAGE> 45
month holding period referred to in VI. above, shall have the right of first
refusal with respect to Grantee's Stock at a purchase price equal to the higher
of Fair Market Value or the price offered by a bona fide purchaser, as follows:
(i) In the event Grantee proposes to sell, assign, transfer or
otherwise dispose of any Stock pursuant to a bona fide written offer from
an unrelated third party (the "Bona Fide Offer"), then Grantee shall offer
such Stock for sale first to the Company, and the Company shall have an
option to purchase any or all of such Stock upon the same terms and
conditions as set forth in the Bona Fide Offer, except as follows:
(ii) Such Stock shall be offered to the Company in writing in and
shall state the terms and conditions of the Bona Fide Offer and attach a
copy of the Bona Fide Offer.
(iii) The Company may exercise its option to purchase any or all of
such Stock upon the same terms and conditions as set forth in the Bona Fide
Offer (except as otherwise provided herein), by providing written notice
thereof to Grantee on or before the thirtieth (30th) day following receipt
of such Bona Fide Offer.
(iv) Such purchase by the Company shall then be consummated within
the time frame set forth in the Bona Fide Offer (but in any event not less
than one hundred twenty (120) days following the receipt of the Bona Fide
Offer by the Company) and the purchase price therefor shall be equal to the
higher of Fair Market Value or the purchase price set forth in the Bona
Fide Offer, and shall be payable as hereinafter provided.
(v) In the event the Company does not elect to purchase all of such
Stock as provided above, with the prior written consent of the Company,
which consent shall not be unreasonably withheld, Grantee may then sell,
assign, transfer or otherwise dispose of such Stock to the third party
pursuant to the Bona Fide Offer, but only upon the precise terms and
conditions as stated in the Bona Fide Offer, provided, however, that such
transaction is consummated within ninety (90) days following the expiration
of the option set forth above. In the event of any change in the terms and
conditions of the Bona Fide Offer or in the event such transaction is not
consummated within such ninety (90) day period, then such Stock shall not
be sold or otherwise transferred to such third party without again
complying with the terms of this Section and offering the same to the
Company in the same manner as set forth above.
Prior to an Initial Public Offering and while the Grantee is still employed
by the Company, the Grantee, following the expiration of the six (6) month
holding period referred to in VI. above, shall have the right to require the
Company to repurchase, in each calendar year, that number of shares of Stock
then owned by the Grantee which shall have a total Fair Market Value of up to
one hundred thousand ($100,000) dollars greater than the exercise price paid for
such stock, at a purchase price equal to its Fair Market Value at the date of
repurchase, which purchase price shall be paid in cash.
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<PAGE> 46
Prior to an Initial Public Offering and in the event Grantee ceases to be
employed by the Company, the Grantee shall have the right, following the
expiration of the six (6) month holding period referred to in VI. above, to
require the Company to repurchase Grantee's Stock acquired through the exercise
of an option granted hereunder at a purchase price equal to its Fair Market
Value at the date of repurchase.
In the event that the Company exercises its right to repurchase, or is
required to repurchase the Grantee's Stock pursuant to the preceding paragraphs
above, it has the right to pay such purchase price either in cash at closing or
in installments over a five (5) year period, with an initial down payment,
payable on the closing of such repurchase, which shall be in an amount equal to
the sum of (a) the Exercise Price paid by the Grantee for the Stock being
repurchased by the Company, and (b) the amount of state and federal income taxes
payable by the Grantee as a result of the exercise of the Options for the Stock
which is being repurchased by the Company, using a maximum combined federal and
state income tax rate equal to forty two (42%) percent (which percentage shall
be subject to adjustment by the Company in its reasonable discretion based upon
future changes in such maximum combined federal and state income tax rate), with
the balance of the purchase price payable in equal semi-annual installments,
with interest, over a period not to exceed five (5) years. For purposes of such
an installment payment, interest shall be calculated and paid not less
frequently than annually, and shall equal the prime rate of interest charged by
the Company's primary bank.
VIII. S CORPORATION PROVISIONS
In the event the Company at any time elects to be treated as an S
Corporation pursuant to Sections 1361-1363 of the Internal Revenue Code of 1986,
as amended from time to time (the "IRC"), then Grantee agrees to take any and
all actions necessary for the Company and/or any subsidiary of the Company to
maintain its election to be treated as an S Corporation, and in this regard
agrees to the following:
(i) Grantee shall not take any action which would cause S
Corporation status of the Company or any subsidiary of the Company to
terminate, except with the prior written consent of the Company.
(ii) Grantee shall execute and deliver to the Company and/or the
Internal Revenue Service all consents, documents, instruments and forms
deemed necessary or advisable by counsel to the Company to cause the
Company and/or any subsidiary of the Company to be treated as an S
Corporation and to maintain the S Corporation election of the Company
and/or any subsidiary in full force and effect.
(iii) Grantee, or any permitted transferee, may not transfer and no
person may acquire, the beneficial ownership of any Stock if such transfer
would cause the Corporation status to of the Company or any subsidiary of
the Company to terminate, including a transfer to, or acquisition by:
7
<PAGE> 47
(a) any person who would cause the Company to have more than
35 shareholders;
(b) any nonresident alien; or
(c) any person than an individual, an estate or a trust
permitted by Section 1361 of the IRC to be a shareholder of an S
Corporation.
(iv) No transfer to a qualified Subchapter S trust shall be
permitted unless the Company has received reasonable assurance that the
income beneficiary will properly and timely elect under IRC Section
1361(d)(2) to have the provisions of IRC Section 1361(d) apply.
Additionally, no transfer to a qualified Subchapter S trust shall be
permitted unless the trust instrument requires that the income beneficiary
properly and timely elect under IRC Section 1361(d)(2) to have the
provisions of IRC Section 1361(d) apply with respect to the Company and its
subsidiaries and not revoke such election and that any successive income
beneficiary not refuse to consent to such election.
(v) Any transfer or acquisition of Stock in violation of this
Agreement shall be null and void and Grantee and any successor agrees that
any such transfer or acquisition may and should be enjoined.
(vi) Any purported transfer in violation of this Agreement will not
affect the beneficial ownership of the Stock, and Grantee or person making
the purported transfer will retain the right to vote and the right to
receive dividends and liquidation proceeds with respect to such Stock.
(vii) Notwithstanding any purported transfer in violation of this
Agreement, Grantee or person making the purported transfer shall continue
to report the share of income, gain, loss, deduction or credit allocated by
the Company to such Stock in accordance with IRC Section 1366.
(viii) In the event that all or any portion of the Grantee's interest
in the Company is terminated within the meaning of IRC Section 1377(a)(2)
during a taxable year in which the Company is being taxed as an S
Corporation, the following provisions shall apply:
(a) The Company shall elect under IRC Section 1377(a)(2) to
have the rules provided in IRC Section 1377(a)(1) applied as if the
taxable year consisted of two taxable years with the first year ending
on the date of the termination of the Grantee's interest in the
Company; and
(b) Grantee agrees to execute the necessary shareholder's
consent, notwithstanding that he may have disposed of Stock in the
Company prior to such termination, and will authorize the filing of
such consent and such other instruments as may be required to give
effect to such election, with the appropriate Internal
8
<PAGE> 48
Revenue Service Center or office.
IX. NOTICE AND PAYMENT
Subject to the limitations set forth in this Agreement, the Grantee may
exercise Options granted under this Agreement by delivering written notice to
the Company, on a form provided by the Company, specifying the number of shares
of Stock to be purchased. The Exercise Price of any Option shall be payable to
the Company in full at the time of exercise of the Option (i) in cash or its
equivalent, (ii) a promissory note having a term of not more than one year and
an interest rate equal to 7% (iii) by tendering shares of previously acquired
Stock which has been held by the Grantee for at least six months having a Fair
Market Value on the date of exercise equal to the total Exercise Price, or (iv)
by a combination of cash, a promissory note and previous acquired stock, all as
determined by the Administrator, in its sole discretion.
X. GENERAL
Administration. Administration of this agreement will be governed by the
terms and conditions set forth in the Plan in effect on the Date of Grant. That
document is incorporated in this Agreement in its entirety.
Notices. Every notice or other communication relating to the Agreement
shall be in writing, and shall be mailed to or delivered to the party for whom
it is intended at such address as may from time to time be designated by such
party. Unless and until some other address is so designated, all notices or
communications by the Grantee to the Company shall be mailed to Talon Automotive
Group, Inc., 400 Talon Centre, Detroit, Michigan 48207, Attention: Wayne C.
Inman.
All notices by the Company to the Grantee may be delivered to the Grantee
personally or may be mailed to the Grantee at the address shown on the records
of the Company.
Withholding: The Company shall deduct from any payment of any kind due to
the Grantee, any federal, state or local taxes of any kind required by law to be
withhold with respect to the exercise of the Stock Options or require the
Grantee to remit an additional amount in cash or its equivalent to pay for such
withholding.
Non-Compete:
a. The Grantee hereby acknowledges and recognizes the highly competitive
nature of the businesses of the Company and accordingly agrees in consideration
for the grant of the options, during the period the Grantee is employed by the
Company and thereafter for the longer of two (2) years or that period in which
the Grantee is entitled to any payments pursuant to our Equity Ownership
Agreement, for purposes of the Plan he will not directly or indirectly (except
as a passive investor in less than one (1%) percent of the outstanding capital
stock of a publicly traded
9
<PAGE> 49
corporation or in his capacity as an employee of the Company):
(i) conduct, engage in, have an interest in, or aid or assist any
person or entity in conducting, engaging or having an interest in (whether
as an owner, principal, lender, stockholder, partner, employer, employee,
consultant, officer, director or otherwise) anywhere within the Territory
(as hereinafter defined):
(a) any business or enterprise (whether or not for profit) which
offers or performs any services which are the same as or
similar to or competitive with those now or hereafter provided
by the Company or any of its subsidiaries; or
(b) any business or enterprise (whether or not for profit) which
develops, manufactures or sells any products which are the same
as or in any manner similar to or competitive with those
developed, manufactured or sold the Company or any of its
subsidiaries; or
(c) any other business or enterprise (whether or not for profit)
which is competitive with the business of the Company or any of
its subsidiaries;
(ii) Solicit, divert, take away, interfere with or accept any
business any customers, suppliers, trade or patronage of the Company or any
of its subsidiaries, or take any actions which are materially adverse to or
materially injurious to the Company or any of its subsidiaries, or which
materially and adversely affect the business of the Company or any of its
subsidiaries or their relationships with their employees, customers or
suppliers; or
(iii) Engage, employ, attempt to engage or employ or solicit for
engagement or employment any employee or sales representative of the
Company or any of its subsidiaries, or induce or otherwise advise any
employee or sales representative to leave the employ or engagement of the
Company or any of its subsidiaries or to engage in any of the activities
prohibited hereby.
b. For purposes hereof, the "Territory" shall mean and include the United
States of America, Canada and Mexico.
c. It is expressly understood and agreed that the Grantee and the Company
consider the provisions hereof, including the restrictions as to Territory set
forth in Section b. above to be reasonable for the purpose of preserving for the
Company, its business and goodwill and other proprietary rights.
d. Notwithstanding anything to the contrary, in the event of a violation
of the foregoing non-competition covenants by the Grantee, the Company shall
have all of the remedies set forth in Section 4.2 of the Plan; provided,
however, the remedies of the Company set forth in said Section 4.2 of the Plan
shall be the sole and exclusive remedies of the Company for any violation by the
Grantee of such non-competition covenants.
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<PAGE> 50
Interpretation: This Agreement is subject in all respects to the terms of
the Plan, and in the event that any provision of the Agreement shall be
inconsistent with the terms of the Plan, then the terms of the Plan shall
govern. Any question of interpretation arising under this Agreement shall be
determined by the Committee and its determinations shall be final and conclusive
upon all parties in interest.
No Right of Employment: Nothing contained in this Agreement shall be
construed to create or otherwise confer upon Grantee any right of employment,
either expressed or implied, or constitute any evidence of any agreement or
understanding, express or implied, that the Company will continue to employ
Grantee for any period of time or at any particular position, and nothing
contained in this Agreement shall affect any right the Company or any of its
subsidiaries may have to terminate the Grantee's employment at any time.
Counterparts: This Agreement may be executed in one or more counterparts,
each counterpart of which will be regarded for all purposes as an original.
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Equity Ownership Agreement, as amended and restated hereby, as of the
date written above.
TALON AUTOMOTIVE GROUP, INC.
By:
- ----------------------------- -------------------------------
David J. Woodward
11
<PAGE> 51
EXHIBIT 10.24
AMENDED AND RESTATED
EQUITY OWNERSHIP AGREEMENT
THIS AMENDED AND RESTATED EQUITY OWNERSHIP AGREEMENT, entered into as of
the ____ day of April, 1998, is by and between Talon Automotive Group, Inc. (the
"Company" ), a Michigan corporation, and Delmar O. Stanley ("Grantee").
WHEREAS, on December 31, 1996, Grantee entered into those certain equity
ownership agreements (the "Predecessor Agreements") with each of VS Holdings
Inc., Hawthorne Metal Products Company and J & R Manufacturing Inc. (the
"Predecessor Companies");
WHEREAS, concurrently herewith, Hawthorne Metal Products Company and J & R
Manufacturing Inc. merged with and into the Company and VS Holdings Inc. has
become a subsidiary of the Company; and
WHEREAS, the Predecessor Plans have been amended, restated and consolidated
into the Talon Automotive Group, Inc. Amended and Restated Equity Ownership
Plan; and
WHEREAS, Grantee is an employee of the Company and has received
Non-Qualified Stock Options under the Predecessor Plans;
NOW, THEREFORE, in consideration of the above premises, the Company and the
Grantee hereby agree to amend, restate and consolidate the Predecessor
Agreements as follows:
I. GRANT OF STOCK OPTIONS
Subject to the terms and conditions set forth herein and in the Plan which
is attached hereto and made a part hereof the Grantee is awarded six (6)
Non-Qualified Stock Options to purchase up to an aggregate total of 13,034
shares of Stock of the Company as hereinafter provided. For purposes of this
Agreement, the Date of Grant of the Options is December 31, 1996.
II. EXERCISE PRICE
The first option grants the Grantee the right to purchase up to 1,792
shares of Stock at a per share Exercise Price equal to One Hundred Eighty Two
and 48/100 ($182.48) Dollars, which represents the sum of the Fair Market Value
Per Share (as defined in the Plan) of Stock of the Predecessor Companies as of
the stated Date of Grant;
The second option grants the Grantee the right to purchase up to 1,792
shares of Stock at a per share Exercise Price equal to Two Hundred and 73/100
($200.73) Dollars, which represents 110% of the Fair Market Value Per Share of
Stock of the Predecessor Companies as of the stated Date of Grant;
<PAGE> 52
The third option grants the Grantee the right to purchase up to 1,792
shares of Stock at a per share Exercise Price equal to Two Hundred Eighteen and
98/100 ($218.98) Dollars, which represents 120% of the Fair Market Value Per
Share of Stock of the Predecessor Companies as of the stated Date of Grant;
The fourth option grants the Grantee the right to purchase up to 1,792
shares of Stock at a per share Exercise Price equal to Two Hundred Thirty Seven
and 22/100 ($237.22) Dollars, which represents 130% of the Fair Market Value Per
Share of Stock of the Predecessor Companies as of the stated Date of Grant;
The fifth option grants the Grantee the right to purchase up to 1,792
shares of Stock at a per share Exercise Price equal to Two Hundred Fifty Five
and 47/100 ($255.47) Dollars, which represents 140% of the Fair Market Value Per
Share of Stock of the Companies as of the stated Date of Grant;
The sixth option grants the Grantee the right to purchase up to 4,074
shares of Stock at a per share Exercise Price equal to Four Hundred Thirty Nine
and 94/100 ($439.94) Dollars, which represents the sum of (i) 120% of the Fair
Market Value Per Share of Stock of the Predecessor Companies as of the stated
Date of Grant and (ii) Two Hundred Twenty and 96/100 ($220.96) Dollars.
III. VESTING
The Grantee may exercise only those Options which are Vested and have not yet
expired. Options granted under this Agreement become Vested in accordance with,
and may not be exercised after the Expiration Date as set forth in, the
following table.
<TABLE>
<CAPTION>
Number of Total Number of
Vesting Date Shares Vested Shares Vested Expiration Date
- ------------ ------------- --------------- ---------------
<S> <C> <C> <C>
January 1, 1999 20% of the shares 2,605
of each option January 1, 2018
January 1, 2000 20% of the shares 5,210
of each option January 1, 2018
January 1, 2001 20% of the shares 7,815
of each option January 1, 2018
January 1, 2002 20% of the shares 10,420
of each option January 1, 2018
January 2, 2003 20% of the shares 13,034
of each option January 1, 2018
</TABLE>
2
<PAGE> 53
Notwithstanding the above, and subject to the terms of the Plan, the following
special rules apply with regard to the Options granted under this Agreement.
- - In the event of the Disability of the Grantee while employed by the
Company, the Options granted herein will become 100% Vested.
- - In the event of the death of the Grantee while employed by the Company,
the Options granted herein will become 100% Vested.
- - In the event of the Voluntary Resignation of the Grantee, no further
Options will become Vested after the Termination of Employment.
- - In the event of the Involuntary Termination of the Grantee, no further
Options will become Vested after the Termination of Employment.
- - In the event of Termination of Employment of the Grantee for Cause, no
further Options will become Vested after the Termination of Employment.
- - In the event of a Change of Control, the Options granted herein will
become 100% Vested.
- - In the event of the Grantee's Termination of Employment for any reason
other than those specified above, no further options will become Vested
as of the date of such Termination of Employment.
- - Additionally, the Administrator may accelerate the Vesting of Grantee's
Options if the Administrator determines that it is in the best
interests of the Company and the Grantee.
IV. EXERCISE
Prior to a Termination of Employment, the Grantee may exercise any
Vested Options until the Option's Expiration Date. The Grantee's ability to
exercise any Vested Options following the date the Grantee ceases to be an
employee is a follows:
- In the event the Grantee ceases to be an employee as a result of
Retirement, the Grantee may exercise any Vested Options for a period
of ninety (90) days following the date of the Grantee's Termination of
Employment (or not later than the Expiration Date of the Options, if
shorter).
- In the event the Grantee ceases to be an employee as a result of a
Disability, the Grantee may exercise any Vested Options for a period
of ninety (90) days following the date of the Grantee's Termination of
Employment (or not later than the Expiration Date of the
3
<PAGE> 54
Options, if shorter).
- In the event the Grantee dies while an employee of the Company, the
legal representative of such Grantee's estate may
exercise any Vested Options on the Grantee's behalf
for a period of twelve (12) months following death (or
not later than the Expiration Date of the Options, if
shorter).
- In the event the Grantee ceases to be an employee as a result of a
Voluntary Resignation, the Grantee shall have no further right to
exercise any Option granted hereunder effective with the Grantee's
Termination of Employment.
- In the event the Grantee ceases to be an employee as a result of an
Involuntary Termination, the Grantee may exercise any
Vested Options for a period of ninety (90) days following
the date of the Grantee's Termination of Employment (or
not later than the Expiration Date of the Options, if
shorter).
- In the event that the Grantee ceases to be an employee as a result of a
Termination of Employment for Cause, the Grantee shall have no
further right to exercise any Option granted hereunder
effective with the Grantee's Termination of Employment.
- In the event that the Grantee ceases to be an employee for any other
reason not specified above, the Granter may exercise any Vested
Options for a period of ninety (90) days following the date the
Grantee's Termination of Employment (or not later than the Expiration
Date of the Options, if shorter).
Neither Grantee nor any other person entitled to exercise the Options
under the terms of the Plan shall be, or have any of the rights or privileges
of, a shareholder of the Company in respect of any shares of Stock issuable on
exercise of the Option, unless and until the Exercise Price for such shares has
been paid in full.
V. ESCROW PROVISIONS
The Grantee agrees to place any shares acquired pursuant to the terms
of this Agreement at any time prior to an Initial Public Offering (together with
assignments separate from certificate for all of such shares duly endorsed in
blank for transfer), in escrow with the Company who shall act as the custodian
of such shares. The Grantee hereby appoints such custodian as his
attorney-in-fact for the Grantee with full power and authority in the Grantees'
name, place and stead to transfer, assign and convey to the Company any shares
of Stock which, pursuant to the terms hereof, are to be conveyed to the Company,
and to otherwise deal with such shares in the manner provided herein or in the
Plan.
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<PAGE> 55
VI. DISPOSITIONS OF STOCK
Prior to an Initial Public Offering, the Grantee may not sell, exchange,
transfer, pledge or otherwise dispose of any Stock acquired through the exercise
of any Option granted hereunder until after the expiration of a six (6) month
period following the transfer of such Stock to the Grantee.
In the event of, and after the Initial Public Offering, the Grantee, by
acceptance hereof, agrees not to sell or otherwise dispose of Stock acquired
through the exercise by any option hereunder until after the expiration of the
twelve (12) month period immediately following an Initial Public Offering.
In the event of, and after an Initial Public Offering, the Grantee, by
acceptance hereof, hereby represents, warrants and agrees that, upon exercise of
this Option, unless the shares of Stock are then covered by an effective
registration statement under the Securities Act of 1993, as amended (the "Act"):
(i) the Stock is being acquired for investment and not with a view
towards the public distribution or resale thereof;
(ii) the Grantee will not sell, transfer or assign any Stock except in
compliance with the terms and conditions hereof, the Act and the rules and
regulations thereunder;
(iii) the certificate representing the Stock may bear an appropriate
restrictive legend; and
(iv) the transfer agent of the company may place a stop transfer
notation with respect to the shares in the Stock transfer books of the
Company.
VII. RIGHT OF FIRST REFUSAL AND REPURCHASE
In the event that prior to an Initial Public Offering the Grantee shall
cease to be employed by the Company for any reason including death or
Disability, the Company, following the expiration of the six (6) month holding
period referred to in VI. above, shall have the right to repurchase some or all
of Grantee's Stock acquired through the exercise of an Option granted hereunder
at a purchase price equal to its Fair Market Value at the date of repurchase, as
follows:
(i) The Company may exercise its option to purchase any or all of such
Stock by providing written notice thereof to Grantee; and
(ii) Such purchase shall be consummated within sixty (60) days
following the date of the Company's exercise of the option, and such
purchase price shall be payable as hereinafter provided.
5
<PAGE> 56
Prior to an Initial Public Offering, the Company, following the expiration
of the six (6) month holding period referred to in VI. above, shall have the
right of first refusal with respect to Grantee's Stock at a purchase price equal
to the higher of Fair Market Value or the price offered by a bona fide
purchaser, as follows:
(i) In the event Grantee proposes to sell, assign, transfer or
otherwise dispose of any Stock pursuant to a bona fide written offer from
an unrelated third party (the "Bona Fide Offer"), then Grantee shall offer
such Stock for sale first to the Company, and the Company shall have an
option to purchase any or all of such Stock upon the same terms and
conditions as set forth in the Bona Fide Offer, except as follows:
(ii) Such Stock shall be offered to the Company in writing in and
shall state the terms and conditions of the Bona Fide Offer and attach a
copy of the Bona Fide Offer.
(iii) The Company may exercise its option to purchase any or all of
such Stock upon the same terms and conditions as set forth in the Bona Fide
Offer (except as otherwise provided herein), by providing written notice
thereof to Grantee on or before the thirtieth (30th) day following receipt
of such Bona Fide Offer.
(iv) Such purchase by the Company shall then be consummated within the
time frame set forth in the Bona Fide Offer (but in any event not less than
one hundred twenty (120) days following the receipt of the Bona Fide Offer
by the Company) and the purchase price therefor shall be equal to the
higher of Fair Market Value or the purchase price set forth in the Bona
Fide Offer, and shall be payable as hereinafter provided.
(v) In the event the Company does not elect to purchase all of such
Stock as provided above, with the prior written consent of the Company,
which consent shall not be unreasonably withheld, Grantee may then sell,
assign, transfer or otherwise dispose of such Stock to the third party
pursuant to the Bona Fide Offer, but only upon the precise terms and
conditions as stated in the Bona Fide Offer, provided, however, that such
transaction is consummated within ninety (90) days following the expiration
of the option set forth above. In the event of any change in the terms and
conditions of the Bona Fide Offer or in the event such transaction is not
consummated within such ninety (90) day period, then such Stock shall not
be sold or otherwise transferred to such third party without again
complying with the terms of this Section and offering the same to the
Company in the same manner as set forth above.
Prior to an Initial Public Offering and while the Grantee is still employed
by the Company, the Grantee, following the expiration of the six (6) month
holding period referred to in VI. above, shall have the right to require the
Company to repurchase, in each calendar year, that number of shares of Stock
then owned by the Grantee which shall have a total Fair Market Value of up to
one hundred thousand ($100,000) dollars greater than the exercise price paid for
such stock, at a purchase price equal to its Fair Market Value at the date of
repurchase, which purchase price shall
6
<PAGE> 57
be paid in cash.
Prior to an Initial Public Offering and in the event Grantee ceases to be
employed by the Company, the Grantee shall have the right, following the
expiration of the six (6) month holding period referred to in VI. above, to
require the Company to repurchase Grantee's Stock acquired through the exercise
of an option granted hereunder at a purchase price equal to its Fair Market
Value at the date of repurchase.
In the event that the Company exercises its right to repurchase, or is
required to repurchase the Grantee's Stock pursuant to the preceding paragraphs
above, it has the right to pay such purchase price either in cash at closing or
in installments over a five (5) year period, with an initial down payment,
payable on the closing of such repurchase, which shall be in an amount equal to
the sum of (a) the Exercise Price paid by the Grantee for the Stock being
repurchased by the Company, and (b) the amount of state and federal income taxes
payable by the Grantee as a result of the exercise of the Options for the Stock
which is being repurchased by the Company, using a maximum combined federal and
state income tax rate equal to forty two (42%) percent (which percentage shall
be subject to adjustment by the Company in its reasonable discretion based upon
future changes in such maximum combined federal and state income tax rate), with
the balance of the purchase price payable in equal semi-annual installments,
with interest, over a period not to exceed five (5) years. For purposes of such
an installment payment, interest shall be calculated and paid not less
frequently than annually, and shall equal the prime rate of interest charged by
the Company's primary bank.
VIII. S CORPORATION PROVISIONS
In the event the Company at any time elects to be treated as an S
Corporation pursuant to Sections 1361-1363 of the Internal Revenue Code of 1986,
as amended from time to time (the "IRC"), then Grantee agrees to take any and
all actions necessary for the Company and/or any subsidiary of the Company to
maintain its election to be treated as an S Corporation, and in this regard
agrees to the following:
(i) Grantee shall not take any action which would cause S Corporation
status of the Company or any subsidiary of the Company to terminate, except
with the prior written consent of the Company.
(ii) Grantee shall execute and deliver to the Company and/or the
Internal Revenue Service all consents, documents, instruments and forms
deemed necessary or advisable by counsel to the Company to cause the
Company and/or any subsidiary of the Company to be treated as an S
Corporation and to maintain the S Corporation election of the Company
and/or any subsidiary in full force and effect.
(iii) Grantee, or any permitted transferee, may not transfer and no
person may acquire, the beneficial ownership of any Stock if such transfer
would cause the Corporation status to of the Company or any subsidiary of
the Company to terminate, including a
7
<PAGE> 58
transfer to, or acquisition by:
(a) any person who would cause the Company to have more than 35
shareholders;
(b) any nonresident alien; or
(c) any person than an individual, an estate or a trust permitted
by Section 1361 of the IRC to be a shareholder of an S Corporation.
(iv) No transfer to a qualified Subchapter S trust shall be permitted
unless the Company has received reasonable assurance that the income
beneficiary will properly and timely elect under IRC Section 1361(d)(2) to
have the provisions of IRC Section 1361(d) apply. Additionally, no transfer
to a qualified Subchapter S trust shall be permitted unless the trust
instrument requires that the income beneficiary properly and timely elect
under IRC Section 1361(d)(2) to have the provisions of IRC Section 1361(d)
apply with respect to the Company and its subsidiaries and not revoke such
election and that any successive income beneficiary not refuse to consent
to such election.
(v) Any transfer or acquisition of Stock in violation of this
Agreement shall be null and void and Grantee and any successor agrees that
any such transfer or acquisition may and should be enjoined.
(vi) Any purported transfer in violation of this Agreement will not
affect the beneficial ownership of the Stock, and Grantee or person making
the purported transfer will retain the right to vote and the right to
receive dividends and liquidation proceeds with respect to such Stock.
(vii) Notwithstanding any purported transfer in violation of this
Agreement, Grantee or person making the purported transfer shall continue
to report the share of income, gain, loss, deduction or credit allocated by
the Company to such Stock in accordance with IRC Section 1366.
(viii) In the event that all or any portion of the Grantee's interest
in the Company is terminated within the meaning of IRC Section 1377(a)(2)
during a taxable year in which the Company is being taxed as an S
Corporation, the following provisions shall apply:
(a) The Company shall elect under IRC Section 1377(a)(2) to have
the rules provided in IRC Section 1377(a)(1) applied as if the taxable
year consisted of two taxable years with the first year ending on the
date of the termination of the Grantee's interest in the Company; and
(b) Grantee agrees to execute the necessary shareholder's
consent, notwithstanding that he may have disposed of Stock in the
Company prior to such
8
<PAGE> 59
termination, and will authorize the filing of such consent and
such other instruments as may be required to give effect to such
election, with the appropriate Internal Revenue Service Center or
office.
IX. NOTICE AND PAYMENT
Subject to the limitations set forth in this Agreement, the Grantee may
exercise Options granted under this Agreement by delivering written notice to
the Company, on a form provided by the Company, specifying the number of shares
of Stock to be purchased. The Exercise Price of any Option shall be payable to
the Company in full at the time of exercise of the Option (i) in cash or its
equivalent, (ii) a promissory note having a term of not more than one year and
an interest rate equal to 7% (iii) by tendering shares of previously acquired
Stock which has been held by the Grantee for at least six months having a Fair
Market Value on the date of exercise equal to the total Exercise Price, or (iv)
by a combination of cash, a promissory note and previous acquired stock, all as
determined by the Administrator, in its sole discretion.
X. GENERAL
Administration. Administration of this agreement will be governed by the
terms and conditions set forth in the Plan in effect on the Date of Grant. That
document is incorporated in this Agreement in its entirety.
Notices. Every notice or other communication relating to the Agreement
shall be in writing, and shall be mailed to or delivered to the party for whom
it is intended at such address as may from time to time be designated by such
party. Unless and until some other address is so designated, all notices or
communications by the Grantee to the Company shall be mailed to Talon Automotive
Group, Inc., 400 Talon Centre, Detroit, Michigan 48207, Attention: Wayne C.
Inman.
All notices by the Company to the Grantee may be delivered to the Grantee
personally or may be mailed to the Grantee at the address shown on the records
of the Company.
Withholding: The Company shall deduct from any payment of any kind due to
the Grantee, any federal, state or local taxes of any kind required by law to be
withhold with respect to the exercise of the Stock Options or require the
Grantee to remit an additional amount in cash or its equivalent to pay for such
withholding.
Non-Compete:
a. The Grantee hereby acknowledges and recognizes the highly competitive
nature of the businesses of the Company and accordingly agrees in consideration
for the grant of the options, during the period the Grantee is employed by the
Company and thereafter for the longer of two (2) years or that period in which
the Grantee is entitled to any payments pursuant to our Equity
9
<PAGE> 60
Ownership Agreement, for purposes of the Plan he will not directly or
indirectly (except as a passive investor in less than one (1%) percent of the
outstanding capital stock of a publicly traded corporation or in his capacity as
an employee of the Company):
(i) conduct, engage in, have an interest in, or aid or assist any
person or entity in conducting, engaging or having an interest in (whether as
an owner, principal, lender, stockholder, partner, employer, employee,
consultant, officer, director or otherwise) anywhere within the Territory (as
hereinafter defined):
(a) any business or enterprise (whether or not for
profit) which offers or performs any services which are the
same as or similar to or competitive with those now or
hereafter provided by the Company or any of its subsidiaries;
or
(b) any business or enterprise (whether or not for
profit) which develops, manufactures or sells any products
which are the same as or in any manner similar to or
competitive with those developed, manufactured or sold the
Company or any of its subsidiaries; or
(c) any other business or enterprise (whether or not
for profit) which is competitive with the business of the
Company or any of its subsidiaries;
(ii) Solicit, divert, take away, interfere with or accept any
business any customers, suppliers, trade or patronage of the Company or
any of its subsidiaries, or take any actions which are materially
adverse to or materially injurious to the Company or any of its
subsidiaries, or which materially and adversely affect the business of
the Company or any of its subsidiaries or their relationships with
their employees, customers or suppliers; or
(iii) Engage, employ, attempt to engage or employ or solicit for
engagement or employment any employee or sales representative of the Company or
any of its subsidiaries, or induce or otherwise advise any employee or sales
representative to leave the employ or engagement of the Company or any of its
subsidiaries or to engage in any of the activities prohibited hereby.
b. For purposes hereof, the "Territory" shall mean and include the United
States of America, Canada and Mexico.
c. It is expressly understood and agreed that the Grantee and the Company
consider the provisions hereof, including the restrictions as to Territory set
forth in Section b. above to be reasonable for the purpose of preserving for the
Company, its business and goodwill and other proprietary rights.
d. Notwithstanding anything to the contrary, in the event of a violation
of the foregoing non-competition covenants by the Grantee, the Company shall
have all of the remedies set forth in Section 4.2 of the Plan; provided,
however, the remedies of the Company set forth in said Section
10
<PAGE> 61
4.2 of the Plan shall be the sole and exclusive remedies of the Company for
any violation by the Grantee of such non-competition covenants.
Interpretation: This Agreement is subject in all respects to the terms of
the Plan, and in the event that any provision of the Agreement shall be
inconsistent with the terms of the Plan, then the terms of the Plan shall
govern. Any question of interpretation arising under this Agreement shall be
determined by the Committee and its determinations shall be final and conclusive
upon all parties in interest.
No Right of Employment: Nothing contained in this Agreement shall be
construed to create or otherwise confer upon Grantee any right of employment,
either expressed or implied, or constitute any evidence of any agreement or
understanding, express or implied, that the Company will continue to employ
Grantee for any period of time or at any particular position, and nothing
contained in this Agreement shall affect any right the Company or any of its
subsidiaries may have to terminate the Grantee's employment at any time.
Counterparts: This Agreement may be executed in one or more counterparts,
each counterpart of which will be regarded for all purposes as an original.
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Equity Ownership Agreement, as amended and restated hereby, as of the
date written above.
TALON AUTOMOTIVE GROUP, INC.
_________________________________ By:______________________________
Delmar O. Stanley
11
<PAGE> 1
EXHIBIT 10.25
AMENDED AND RESTATED DEFERRED COMPENSATION AGREEMENT
THIS AMENDED AND RESTATED DEFERRED COMPENSATION AGREEMENT,
entered into as of the 31st day of December 1997, is by and between Talon
Automotive Group L.L.C. (the "Company"), a Michigan limited liability company
with offices located at 900 Wilshire Drive, Suite 203, Troy, Michigan 48084, and
the undersigned (the "Employee"), an individual.
WITNESSETH:
WHEREAS, the Employee and Company entered into that certain Deferred
Compensation Agreement dated January 1, 1997 (the "Agreement") in order to
enable the Company to provide additional incentives to the Employee to exert his
best efforts on behalf of the Company and to advance the Company's best
interests; and
WHEREAS, the Company and Employee desire to amend and restate the
Agreement, upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the Agreement is hereby amended and restated as
follows:
1. Deferred Compensation Benefits. Subject to the terms and conditions
set forth herein, the Employee shall be entitled to receive a deferred
compensation benefit from the Company equal to the Vested Portion (as
hereinafter defined) of the Allocated Amounts (as hereinafter defined), as
deferred compensation benefits, payable as set forth in Section 4 hereof.
2. Deferred Compensation Account. Subject to the terms and conditions
set forth herein, the Company shall establish a deferred compensation account
(the "Account") for the benefit of the Employee, and allocate certain amounts
(the "Allocated Amounts") to the Account determined as follows:
a. Effective as of January 1, 1997, the Company shall
allocate to the Account an amount as determined on Exhibit A attached
hereto;
b. Commencing with the calendar year ending as of December 31,
1997 (provided that the Employee shall be employed by the Company or a
member of the Talon Automotive Group on such date), and continuing for
each calendar year thereafter until the earlier of an Initial Public
Offering (as hereinafter defined), a Change of Control (as hereinafter
defined), a Bond Offering (as hereinafter defined), or a Termination
Event (as hereinafter defined), the Company shall allocate to the
Account an amount equal to Designated Percentage (as hereinafter
defined) of the Total Distributions (as hereinafter defined) for such
calendar year; provided, however, notwithstanding the foregoing:
i. For purposes of the calculation of the amounts to
be allocated to the Account pursuant to this Section 2(b),
effective as of January 1, 1998, there shall be excluded from
the amount of Total Distributions the first One Million
($1,000,000) Dollars of Total Distributions following January
1, 1998;
<PAGE> 2
ii. For the calendar year in which the earlier of
such Initial Public Offering, Change of Control, Bond Offering
or Termination Event shall occur, there shall only be
allocated to the Account an amount equal to the Designated
Percentage of the Total Distributions through the date of such
event (after taking into account any adjustment required
pursuant to Section 2(b)(i) above); and
iii. Upon the occurrence of the earlier of an Initial
Public Offering, Change of Control, Bond Offering or
Termination Event, no amounts shall be allocated to the
Account pursuant to Section 2(b) hereof following the date of
such event.
c. The outstanding balance of any Vested Portion of any
Allocated Amounts shall be increased on an annual basis from and after
the end of the calendar year in which such amounts became vested, until
the end of the calendar year immediately preceding the Termination
Event, at the rate of Six (6%) percent per annum;
d. Upon the occurrence of a Termination Event, the outstanding
balance of any Vested Portion of any Allocated Amounts shall be reduced
by an amount equal to the Designated Percentage of any Shortfall Amount
(as hereinafter defined); and
e. Upon the occurrence of a Termination Event, in the event
that the Value Increase (as defined in Exhibit A attached hereto) as of
the end of the calendar year immediately preceding the Termination
Event should be less than Thirty Six Million ($36,000,000) Dollars,
then in such event the Vested Portion of all Allocated Amounts
allocated to the account pursuant to Section 2(b) hereof shall be
reduced by an amount equal to Two and 5/10 (2.5%) percent of the
aggregate amount of all Total Distributions upon which the amounts
allocated to the account pursuant to Section 2(b) hereof were based.
3. Definitions. For purposes hereof, the following terms shall have the
following meanings:
a. "Bond Offering" shall mean any private or public offering
by the Company (or its successors in interest) of senior subordinated
notes;
b. "Designated Management Fees" shall mean the aggregate
amount of all management and consulting fees paid by the Talon
Automotive Group to Talon L.L.C. in excess of Seven Hundred Thousand
($700,000) Dollars for a particular calendar year, which amount may be
amended from time to time by the Company in its reasonable discretion.
c. "Designated Percentage" shall mean (i) for the period from
January 1, 1997 through December 31, 1997, Five and 5/10 (5.5%)
percent, and (ii) for the period after December 31, 1997, Eight (8%)
percent.
d. "Initial Public Offering" shall mean the first instance in
which the stock of the Company shall be offered for sale to the public
following a successful registration of such stock
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<PAGE> 3
with the United States Securities and Exchange Commission;
e. "Fair Market Value of the Talon Automotive Group" as of the
end of any particular calendar year shall mean the combined fair market
value of all members of the Talon Automotive Group as of such date as
determined by an appraisal thereof by Roney & Co. (or such other
company as designated by the Company from time to time), or in the
event that the stock (or equity interests) of any member of the Talon
Automotive Group shall be publicly traded at such date, then the
applicable fair market value of such entity shall be equal to the
closing price quotation of such stock (or equity interests) as of such
date multiplied by the total number of outstanding shares of stock (or
equity interests) of such entity as of such date;
f. "Net Shareholder Distributions" for any particular calendar
year (or other period) shall be equal to the aggregate sum of all
shareholder and equityholder dividends and distributions made in cash
by the Talon Automotive Group to their shareholders during such period;
provided, however, in the event that any member of the Talon Automotive
Group shall have elected to be treated as an S Corporation pursuant to
Sections 1361-1363 of the Internal Revenue Code of 1986 (as amended or
superseded from time to time) for such calendar year (or other period),
then Net Shareholder Distributions shall not include an aggregate
amount equal to the maximum amount of all federal and state income
taxes payable by such shareholders for such calendar year (or other
period) as a result of such S Corporation status, using a maximum
combined federal and state income tax rate equal to forty two (42%)
percent, which percentage shall be subject to adjustment by the Company
in its reasonable discretion based upon future changes in such maximum
combined federal and state income tax rate.
g. "Talon Automotive Group" shall mean and include the
Company, Hawthorne Metal Products Co., J & R Manufacturing, Inc., VS
Holdings Inc. and, effective December 8, 1997, Production Stamping,
Inc.; provided, however (i) in the event of any merger or consolidation
of any of such companies, then Talon Automotive Group shall include all
of such companies as so merged or consolidated, together with all of
their wholly-owned subsidiaries, and (ii) in the event any such entity
shall at any time cease to be under the direct or indirect control of
Randolph J. Agley and/or Michael T. Timmis and/or their respective
immediate families (or trusts for their benefit), then such entity
shall no longer be considered a member of the Talon Automotive Group.
h. "Shortfall Amount" shall mean that amount, if any, by which
the Threshold Amount (as hereinafter defined) as of the end of the
calendar year immediately preceding the Termination Event shall be in
excess of the Fair Market Value of the Talon Automotive Group as of the
end of the calendar year immediately preceding the Termination Event.
i. "Termination Event" shall mean the termination of the
Employee's employment with the Company and any member of the Talon
Automotive Group for any reason.
j. "Threshold Amount" shall be an amount computed on an annual
basis as of December 31 of each year commencing as of December 31,
1996, and shall be equal to the product of:
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<PAGE> 4
i. One and 5/100 (1.05); multiplied by
ii. the sum of the following:
a. The Threshold Amount as of December 31
of the immediately preceding year; and
b. the aggregate amount of all additional
equity invested in the members of the Talon
Automotive Group by their shareholders or
equityholders during the immediately preceding
calendar year (excluding, however, any equity
invested in Production Stamping, Inc. during calendar
year 1998);
---provided, however, the Threshold Amount as of December 31, 1995
shall be equal to Eighteen Million Five Hundred Forty Four Thousand
($18,544,000) Dollars, which represents the Fair Market Value of the
Talon Automotive Group (as defined herein) as of December 31, 1995.
k. "Total Distributions" for any calendar year shall mean the
sum of the Net Shareholder Distributions (as defined herein) for such
calendar year and the Designated Management Fees (as defined herein)
for such calendar year.
l. "Vested Portion" as of any particular date occurring on or
prior to the Termination Event shall mean all Allocated Amounts which
have been allocated to the Account as of that date which is three (3)
years immediately preceding such date; provided, however,
notwithstanding the foregoing:
i. In the event that the Termination Event is
as a result of the any of the following events:
a) the Employee's Disability;
b) the Employee's death;
c) a Change of Control;
d) the Involuntary Termination of the Employee
within twenty four (24) months following a Change of Control;
or
e) a voluntary termination by the Employee of
his employment on or after that date upon which the Employee
attains the age of sixty two (62) years;
---then in any of such events, the Vested Portion as of the
date of the Termination Event shall mean all Allocated Amounts
which have been allocated to the Account as of the
4
<PAGE> 5
end of the immediately preceding calendar year.
ii. The Vested Portion of all Allocated Amounts
which have been allocated to the Account as of December 31,
1997 shall mean all Allocated Amounts which have been
allocated to the Account as of December 31, 1997.
iii. In the event of a Bond Offering, then the Vested
Portion as of the date of such Bond Offering shall mean all
Allocated Amounts which have been allocated to the Account
through the date of such Bond Offering.
For purposes hereof, the terms "Disability", "Change of Control" and
"Involuntary Termination" shall have the same meanings set forth in the
Company's Equity Ownership Plan.
4. Payment of Deferred Compensation Benefits. In the event of a
Termination Event, the Vested Portion of the Allocated Amounts shall be paid to
the Employee as follows:
a. The Vested Portion of the Allocated Amounts shall be paid
to the Employee in twenty (20) equal consecutive quarterly installments
commencing on the last day of the first calendar quarter which is at
least ninety (90) days following the Termination Event, and continuing
on the last day of each of the next succeeding nineteen (19) calendar
quarters thereafter;
b. The unpaid balance of the Vested Portion of the Allocated
Amounts shall bear interest from and after the Termination Event at a
per annum rate equal to the prime rate of interest charged from time to
time by the Company's primary bank, which interest shall be payable
quarterly with the foregoing installments until such amount is paid in
full;
c. Notwithstanding anything contained herein to the contrary:
i. The Company shall have the right in its sole
discretion to pay the balance of the Vested Portion of the
Allocated Amounts over a shorter period than provided herein
or in a lump sum payment as it may deem appropriate;
ii. The Company shall have the right to deduct any
federal, state, local or employment or withholding taxes which
the Company deems are required by law to be withheld from any
amounts payable to a Employee hereunder or otherwise; and
iii. In the event that the Employee shall voluntarily
terminate his employment or in the event that the Employee
should be terminated for Cause (as defined in the Company's
Equity Ownership Plan), in each case on or before December 31,
1998, then in either such event the Employee shall only be
entitled to receive Thirty Three (33%) percent of the Vested
Portion of the Allocated Amounts payable as set forth above,
and all rights to receive any other amounts or payments
hereunder (including, without limitation, all rights to the
balance of the Vested Portion of the Allocated Amounts) shall
be forfeited;
5
<PAGE> 6
iv. In the event that the Employee shall voluntarily
terminate his employment or in the event that the Employee
should be terminated for Cause (as defined in the Company's
Equity Ownership Plan), in each case during calendar year
1999, then in either such event the Employee shall only be
entitled to receive Sixty-Seven (67%) percent of the Vested
Portion of the Allocated Amounts payable as set forth above,
and all rights to receive any other amounts or payments
hereunder (including, without limitation, all rights to the
balance of the Vested Portion of the Allocated Amounts) shall
be forfeited;
v. In the event that the Employee shall at any time
fail to comply with the terms and conditions of Sections 5 or
6 of this Agreement, then the Employee shall only be entitled
to receive Fifty (50%) percent of the Vested Portion of the
Allocated Amounts, payable as set forth above, and all rights
to receive any other amounts or payments hereunder (including,
without limitation, the balance of the Vested Portion of the
Allocated Amounts) shall be forfeited; and
vi. In the event of a Change of Control and the
Employee is requested by the Company, its successor or the
purchaser to continue to be employed by the Company, its
successor or such purchaser for a salary and upon such other
financial terms and conditions comparable to those received by
the Employee from the Company at such time, for a minimum
period not to exceed one (1) year following such Change of
Control, the Employee shall so continue such employment, and,
in the event the Employee refuses such continued employment or
does not continue such employment for such minimum period,
then in such event the Employee shall only be entitled to
receive Fifty (50%) percent of the Vested Portion of the
Allocated Amounts, and all rights to the balance of the Vested
Portion of the Allocated Amounts and the Account shall be
forfeited.
d. In the event of a Change of Control on or before the
Termination Date, and provided the Employee has complied with the terms
of Section 4(c)(vi) hereof, then, notwithstanding anything herein to
the contrary: (i) if the Employee is requested to continue to be
employed as provided in Section 4(c)(vi) hereof, then the Vested
Portion of the Allocated Amounts shall be paid to the Employee in
twelve (12) equal consecutive quarterly installments with the first
installment commencing on the last day of the first calendar quarter
which is at least ninety (90) days following the Change of Control, or
(ii) if the Employee is not requested to continue to be employed as
provided in Section 4(c)(vi) hereof, then the Vested Portion of the
Allocated Amounts shall be paid to the Employee in eight (8) equal
consecutive quarterly installments with the first installment
commencing on the last day of the first calendar quarter which is at
least ninety (90) days following the Change of Control. The Employee
shall have the right, upon written notice thereof to the Company, to
cause the Company to place the installments payable under this Section
4(d) in escrow with an independent escrow agent appointed by the
Company in its discretion, in order to secure the payment of such
installments to the Employee, and upon terms and conditions reasonably
acceptable to the Company and the Employee.
6
<PAGE> 7
5. Non-Compete.
a. The Employee hereby acknowledges and recognizes the highly
competitive nature of the businesses of the Talon Automotive Group and
accordingly agrees in consideration hereof, during the period the
Employee is employed by the Company or any member of the Talon
Automotive Group and thereafter for the longer of two (2) years or that
period in which the Employee is entitled to any payments pursuant to
the terms hereof, for purposes of this Agreement, he will not directly
or indirectly (except as a passive investor in less than one (1%)
percent of the outstanding capital stock of a publicly traded
corporation or in his capacity as an employee of the Company):
i. conduct, engage in, have an interest in, or aid or
assist any person or entity in conducting, engaging or having
an interest in (whether as an owner, principal, lender,
stockholder, partner, employer, employee, consultant, officer,
director or otherwise) anywhere within the Territory (as
hereinafter defined):
(a) any business or enterprise (whether or
not for profit) which offers or performs any services
which are the same as or similar to or competitive
with those now or hereafter provided by the Company
or any member of the Talon Automotive Group; or
(b) any business or enterprise (whether or
not for profit) which develops, manufactures or sells
any products which are the same as or in any manner
similar to or competitive with those developed,
manufactured or sold the Company or any member of the
Talon Automotive Group; or
(c) any other business or enterprise
(whether or not for profit) which is competitive with
the business of the Company or any member of the
Talon Automotive Group;
ii. Solicit, divert, take away, interfere with or
accept any business from any customers, suppliers, trade or
patronage of the Company or any member of the Talon Automotive
Group, or take any actions which are materially adverse to or
materially injurious to the Company or any member of the Talon
Automotive Group or which materially and adversely affect the
business of the Company or any member of the Talon Automotive
Group or their relationships with their employees, customers
or suppliers; or
iii. Engage, employ, attempt to engage or employ or
solicit for engagement or employment any employee or sales
representative of the Company or any member of the Talon
Automotive Group, or induce or otherwise advise any employee
or sales representative to leave the employ or engagement of
the Company or any member of the Talon Automotive Group or to
engage in any of the activities prohibited hereby.
7
<PAGE> 8
b. For purposes hereof, the "Territory" shall mean and include
the United States of America, Canada and Mexico.
c. It is expressly understood and agreed that although the
Employee and the Company consider the provisions hereof, including the
restrictions as to Territory set forth in this Section above to be
reasonable for the purpose of preserving for the Company and each
Affiliated Group, their businesses and goodwill and other proprietary
rights.
d. Notwithstanding anything to the contrary in this Agreement,
in the event of a violation of any of the covenants set forth in this
Section 5 by the Employee, the Company shall have all of the remedies
set forth in Section 4(c)(iii) hereof; provided, however, the remedies
set forth in said Section 4(c)(iii) shall be the sole and exclusive
remedies of the Company for any violation by the Employee of such
covenants.
6. Confidentiality. The Employee shall, while employed by the Company
and thereafter, preserve in confidence all proprietary information heretofore or
hereafter acquired by him or disclosed to him relating to machines, processes,
practices, products, inventions, improvement, or developments of the Talon
Automotive Group or in which the Talon Automotive Group is interested and all
other confidential or proprietary information of any kind or nature pertaining
to the business of the Talon Automotive Group, and the Employee will not
disclose any such information to any other person without the express
authorization of the Company or make use of such information for the Employee's
personal benefit or for the benefit of any person other than the Talon
Automotive Group or assist others in using such information.
7. Employment. Nothing contained in this Agreement or in any
modifications to this Agreement shall give the Employee any right to employment
by the Company, either expressed or implied, or constitute any evidence of any
agreement or understanding, expressed or implied, that the Company will continue
to employ the Employee for any period of time or at any particular position.
8. Miscellaneous.
a. The Employee shall have the right, from time to time, in
writing on a form designated by the Company, to name the beneficiary or
beneficiaries who may be named successively or contingently, and who
may be natural persons or otherwise, to receive any benefits payable to
the Employee hereunder if the Employee shall die before receiving all
benefits. If the Employee shall decline or fail to designate a
beneficiary, the Employee's estate shall be deemed to be the Employee's
beneficiary. The Employee shall have the right to change the
beneficiary or beneficiaries from time to time (without the consent of
any prior beneficiary); provided, however, that any change shall not
become effective unless in writing and upon receipt by the Company.
b. The Company shall not in any manner be liable for or
subject to the debts of the Employee or any beneficiary. Except as
provided by the laws of descent and distribution, no benefit under this
Agreement shall at any time be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, or encumbrance of any
kind, nor shall any such
8
<PAGE> 9
benefit be subject to attachment or other legal process of whatever
nature, and any attempted anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment or other such legal process
shall be void and of no force or effect whatsoever. Upon any such
attempted anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or if by reason of Employee's bankruptcy,
divorce or other event there is a possibility that such benefits may be
received by someone other than the Employee or that such benefits may
not be enjoyed by such Employee, then in any such event the benefits
shall automatically terminate and be of no force or effect. The Company
may, in its discretion, apply to a court of competent jurisdiction for
a determination as to the rights of any person in any plan benefits,
such determination shall be final and binding upon the Company and the
Employee (including all beneficiaries or other persons claiming an
interest).
c. The obligations of the Company under this Agreement
constitute an unsecured promise to pay from the Company's general
assets as provided herein. The Company shall have no obligation to fund
or reserve any amounts for any payments hereunder and neither the
Employee nor any beneficiary shall have any security interest or claim
upon any account set aside for the payments hereunder or any other
property of the Company. The obligations of the Company under this
Agreement may be transferred or assigned to an Affiliated Company or a
successor entity, which agrees to be bound by the terms hereof,
provided, however, no such transfer or assignment shall operate as a
release of the Company from its obligations hereunder without the
written consent of the Employee, which consent shall not be
unreasonably withheld.
d. It is the desire and intent of the parties hereto that
provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each
jurisdiction in which enforcement may be sought. Accordingly, to the
extent any provision hereof is deemed unenforceable by limitation
thereon, the parties agree that the same shall, nevertheless, be
enforceable to the fullest extent permissible under the laws and public
policies applied in such jurisdiction in which enforcement is sought.
Furthermore, if any particular portion of this Agreement be adjudicated
as invalid or unenforceable, such portion shall be deleted and such
deletion shall apply only with respect to the operation of such portion
in the particular jurisdiction in which such adjudication is made.
e. This Agreement constitutes the entire agreement between the
parties with regard to the subject matter hereof and shall supersede
any and all prior oral or written understandings or agreements relating
to the subject hereof. This Agreement may only be amended by written
instrument signed by each of the parties hereto.
f. Any notice required or permitted to be provided under this
Agreement shall be deemed properly furnished if in writing and if
mailed by registered or certified mail, postage prepaid with return
receipt requested, to the Employee at the address set forth below and
to the Company at its offices at 900 Wilshire Drive, Suite 203, Troy,
Michigan 48084, to the attention of its Chairman of the Board (with a
copy to Timmis & Inman L.L.P., 300 Talon Centre, Detroit Michigan
48207).
9
<PAGE> 10
g. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Michigan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
Witnesses:
COMPANY:
TALON AUTOMOTIVE GROUP
L.L.C.
By
- ---------------------------------- -----------------------------
EMPLOYEE:
- ---------------------------------- -------------------------------
Delmar O. Stanley
Address:
1816 Sudbury Court
Rochester Hills, Michigan 48306
10
<PAGE> 11
EXHIBIT A
AMOUNT ALLOCATED TO THE ACCOUNT AS OF JANUARY 1, 1997
Effective as of January 1, 1997, there shall be allocated to the Account
an amount equal to Five and 5/10 percent of the Value Increase (as hereinafter
defined) as of December 31, 1996.
For purposes hereof, the "Value Increase" as of the end of any
particular calendar year shall be equal to that amount, if any, by which the
aggregate sum of (A) the cumulative amount of the Total Distributions for
calendar years 1996 through the end of the calendar year for which the Value
Increase is being determined, and (B) the Fair Market Value of the Talon
Automotive Group as of the end of the calendar year for which the Value Increase
is being determined, shall exceed the Threshold Amount as of the end of the
calendar year for which the Value Increase is being determined. The parties
hereto hereby acknowledge that the Value Increase as of December 31, 1996 and
the amount allocated to the Account as of January 1, 1997 has been determined as
set forth on Schedule I attached hereto.
Upon the occurrence of a Termination Event, in the event that the Value Increase
as of the end of the calendar year immediately preceding the Termination Event
should exceed Thirty Six Million ($36,000,000) Dollars, then in such event there
shall be allocated to the Account effective as of December 31, 1997 an
additional amount equal to Two and 5/10 (2.5%) percent of the Value Increase as
of December 31, 1996 (which is set forth on Schedule I attached hereto).
Upon the occurrence of a Termination Event and in the event of the existence of
any Shortfall Amount, then the amount of the reduction of the outstanding
balance of any Vested Portion of any Allocated Amounts for purposes of Section
2(d) of the Agreement shall be:
(1) First determined to be equal to Eight (8.0%) percent of the
Vested Portion of any Allocated Amounts to the Account to the
extent that any Vested Portion of such Allocated Amounts have
been determined pursuant to the above formula or the Agreement
using such Eight (8.0) percentage; and
(2) Thereafter determined to be equal to Five and 5/10 (5.5%)
percent of the Vested Portion of any Allocated Amounts to the
Account to the extent that any Vested Portion of such
Allocated Amounts have been determined pursuant to the above
formula using such Five and 5/10 (5.5) percentage.
<PAGE> 12
SCHEDULE I
<PAGE> 13
AMENDED AND RESTATED DEFERRED COMPENSATION AGREEMENT
THIS AMENDED AND RESTATED DEFERRED COMPENSATION AGREEMENT,
entered into as of the 31st day of December 1997, is by and between Talon
Automotive Group L.L.C. (the "Company"), a Michigan limited liability company
with offices located at 900 Wilshire Drive, Suite 203, Troy, Michigan 48084, and
the undersigned (the "Employee"), an individual.
WITNESSETH:
WHEREAS, the Employee and Company entered into that certain Deferred
Compensation Agreement dated January 1, 1997 (the "Agreement") in order to
enable the Company to provide additional incentives to the Employee to exert his
best efforts on behalf of the Company and to advance the Company's best
interests; and
WHEREAS, the Company and Employee desire to amend and restate the
Agreement, upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the Agreement is hereby amended and restated as
follows:
1. Deferred Compensation Benefits. Subject to the terms and conditions
set forth herein, the Employee shall be entitled to receive a deferred
compensation benefit from the Company equal to the Vested Portion (as
hereinafter defined) of the Allocated Amounts (as hereinafter defined), as
deferred compensation benefits, payable as set forth in Section 4 hereof.
2. Deferred Compensation Account. Subject to the terms and conditions
set forth herein, the Company shall establish a deferred compensation account
(the "Account") for the benefit of the Employee, and allocate certain amounts
(the "Allocated Amounts") to the Account determined as follows:
a. Effective as of January 1, 1997, the Company shall allocate to
the Account an amount as determined on Exhibit A attached hereto;
b. Commencing with the calendar year ending as of December 31, 1997
(provided that the Employee shall be employed by the Company or a
member of the Talon Automotive Group on such date), and continuing for
each calendar year thereafter until the earlier of an Initial Public
Offering (as hereinafter defined), a Change of Control (as hereinafter
defined), a Bond Offering (as hereinafter defined), or a Termination
Event (as hereinafter defined), the Company shall allocate to the
Account an amount equal to Designated Percentage (as hereinafter
defined) of the Total Distributions (as hereinafter defined) for such
calendar year; provided, however, notwithstanding the foregoing:
i. For purposes of the calculation of the amounts to be allocated
to the Account pursuant to this Section 2(b), effective as of
January 1, 1998, there shall be excluded from the amount of Total
Distributions the first One Million ($1,000,000) Dollars of Total
Distributions following January 1, 1998;
<PAGE> 14
ii. For the calendar year in which the earlier of such Initial
Public Offering, Change of Control, Bond Offering or Termination
Event shall occur, there shall only be allocated to the Account an
amount equal to the Designated Percentage of the Total Distributions
through the date of such event (after taking into account any
adjustment required pursuant to Section 2(b)(i) above); and
iii. Upon the occurrence of the earlier of an Initial Public
Offering, Change of Control, Bond Offering or Termination Event, no
amounts shall be allocated to the Account pursuant to Section 2(b)
hereof following the date of such event.
c. The outstanding balance of any Vested Portion of any
Allocated Amounts shall be increased on an annual basis from and after
the end of the calendar year in which such amounts became vested, until
the end of the calendar year immediately preceding the Termination
Event, at the rate of Six (6%) percent per annum; and
d. Upon the occurrence of a Termination Event, the outstanding
balance of any Vested Portion of any Allocated Amounts shall be reduced
by an amount equal to the Designated Percentage of any Shortfall Amount
(as hereinafter defined).
3. Definitions. For purposes hereof, the following terms shall
have the following meanings:
a. "Bond Offering" shall mean any private or public offering
by the Company (or its successors in interest) of senior subordinated
notes;
b. "Designated Management Fees" shall mean the aggregate
amount of all management and consulting fees paid by the Talon
Automotive Group to Talon L.L.C. in excess of Seven Hundred Thousand
($700,000) Dollars for a particular calendar year, which amount may be
amended from time to time by the Company in its reasonable discretion.
c. "Designated Percentage" shall mean Two and 1/10 (2.1%)
percent.
d. "Initial Public Offering" shall mean the first instance in
which the stock of the Company shall be offered for sale to the public
following a successful registration of such stock with the United
States Securities and Exchange Commission;
e. "Fair Market Value of the Talon Automotive Group" as of the
end of any particular calendar year shall mean the combined fair market
value of all members of the Talon Automotive Group as of such date as
determined by an appraisal thereof by Roney & Co. (or such other
company as designated by the Company from time to time), or in the
event that the stock (or equity interests) of any member of the Talon
Automotive Group shall be publicly traded at such date, then the
applicable fair market value of such entity shall be equal to the
closing price quotation of such stock (or equity interests) as of such
date multiplied by the total number of outstanding shares of stock (or
equity interests) of such entity as of such date;
2
<PAGE> 15
f. "Net Shareholder Distributions" for any particular calendar
year (or other period) shall be equal to the aggregate sum of all
shareholder and equityholder dividends and distributions made in cash
by the Talon Automotive Group to their shareholders during such period;
provided, however, in the event that any member of the Talon Automotive
Group shall have elected to be treated as an S Corporation pursuant to
Sections 1361-1363 of the Internal Revenue Code of 1986 (as amended or
superseded from time to time) for such calendar year (or other period),
then Net Shareholder Distributions shall not include an aggregate
amount equal to the maximum amount of all federal and state income
taxes payable by such shareholders for such calendar year (or other
period) as a result of such S Corporation status, using a maximum
combined federal and state income tax rate equal to forty two (42%)
percent, which percentage shall be subject to adjustment by the Company
in its reasonable discretion based upon future changes in such maximum
combined federal and state income tax rate.
g. "Talon Automotive Group" shall mean and include the
Company, Hawthorne Metal Products Co., J & R Manufacturing, Inc., VS
Holdings Inc. and, effective December 8, 1997, Production Stamping,
Inc.; provided, however (i) in the event of any merger or consolidation
of any of such companies, then Talon Automotive Group shall include all
of such companies as so merged or consolidated, together with all of
their wholly-owned subsidiaries, and (ii) in the event any such entity
shall at any time cease to be under the direct or indirect control of
Randolph J. Agley and/or Michael T. Timmis and/or their respective
immediate families (or trusts for their benefit), then such entity
shall no longer be considered a member of the Talon Automotive Group.
h. "Shortfall Amount" shall mean that amount, if any, by which
the Threshold Amount (as hereinafter defined) as of the end of the
calendar year immediately preceding the Termination Event shall be in
excess of the Fair Market Value of the Talon Automotive Group as of the
end of the calendar year immediately preceding the Termination Event.
i. "Termination Event" shall mean the termination of the
Employee's employment with the Company and any member of the Talon
Automotive Group for any reason.
j. "Threshold Amount" shall be an amount computed on an annual
basis as of December 31 of each year commencing as of December 31,
1996, and shall be equal to the product of:
i. One and 5/100 (1.05); multiplied by
ii. the sum of the following:
a. The Threshold Amount as of December 31 of the
immediately preceding year; and
b. the aggregate amount of all additional equity
invested in the members of the Talon Automotive Group by
their shareholders or
3
<PAGE> 16
equityholders during the immediately preceding calendar
year (excluding, however, any equity invested in Production
Stamping, Inc. during calendar year 1998);
---provided, however, the Threshold Amount as of December 31, 1995
shall be equal to Eighteen Million Five Hundred Forty Four Thousand
($18,544,000) Dollars, which represents the Fair Market Value of the
Talon Automotive Group (as defined herein) as of
December 31, 1995.
k. "Total Distributions" for any calendar year shall mean the
sum of the Net Shareholder Distributions (as defined herein) for such
calendar year and the Designated Management Fees (as defined herein)
for such calendar year.
l. "Vested Portion" as of any particular date occurring on or
prior to the Termination Event shall mean all Allocated Amounts which
have been allocated to the Account as of that date which is three (3)
years immediately preceding such date; provided, however,
notwithstanding the foregoing:
i. In the event that the Termination Event is as a result
of the any of the following events:
a) the Employee's Disability;
b) the Employee's death;
c) a Change of Control;
d) the Involuntary Termination of the Employee within
twenty four (24) months following a Change of Control; or
e) a voluntary termination by the Employee of his
employment on or after that date upon which the Employee
attains the age of sixty two (62) years;
---then in any of such events, the Vested Portion as of the
date of the Termination Event shall mean all Allocated Amounts
which have been allocated to the Account as of the end of the
immediately preceding calendar year.
ii. The Vested Portion of all Allocated Amounts which have
been allocated to the Account as of December 31, 1997 shall
mean all Allocated Amounts which have been allocated to the
Account as of December 31, 1997.
iii. In the event of a Bond Offering, then the Vested
Portion as of the date of such Bond Offering shall mean all
Allocated Amounts which have been allocated to the Account
through the date of such Bond Offering.
4
<PAGE> 17
For purposes hereof, the terms "Disability", "Change of Control" and
"Involuntary Termination" shall have the same meanings set forth in the
Company's Equity Ownership Plan.
4. Payment of Deferred Compensation Benefits. In the event of a
Termination Event, the Vested Portion of the Allocated Amounts shall be paid to
the Employee as follows:
a. The Vested Portion of the Allocated Amounts shall be paid
to the Employee in twenty (20) equal consecutive quarterly installments
commencing on the last day of the first calendar quarter which is at
least ninety (90) days following the Termination Event, and continuing
on the last day of each of the next succeeding nineteen (19) calendar
quarters thereafter;
b. The unpaid balance of the Vested Portion of the Allocated
Amounts shall bear interest from and after the Termination Event at a
per annum rate equal to the prime rate of interest charged from time to
time by the Company's primary bank, which interest shall be payable
quarterly with the foregoing installments until such amount is paid in
full;
c. Notwithstanding anything contained herein to the
contrary:
i. The Company shall have the right in its sole
discretion to pay the balance of the Vested Portion of the
Allocated Amounts over a shorter period than provided herein
or in a lump sum payment as it may deem appropriate;
ii. The Company shall have the right to deduct any
federal, state, local or employment or withholding taxes
which the Company deems are required by law to be withheld
from any amounts payable to a Employee hereunder or
otherwise; and
iii. In the event that the Employee shall voluntarily
terminate his employment or in the event that the Employee
should be terminated for Cause (as defined in the Company's
Equity Ownership Plan), in each case on or before December
31, 1998, then in either such event the Employee shall only
be entitled to receive Thirty Three (33%) percent of the
Vested Portion of the Allocated Amounts payable as set forth
above, and all rights to receive any other amounts or
payments hereunder (including, without limitation, all
rights to the balance of the Vested Portion of the Allocated
Amounts) shall be forfeited;
iv. In the event that the Employee shall voluntarily
terminate his employment or in the event that the Employee
should be terminated for Cause (as defined in the Company's
Equity Ownership Plan), in each case during calendar year
1999, then in either such event the Employee shall only be
entitled to receive Sixty-Seven (67%) percent of the Vested
Portion of the Allocated Amounts payable as set forth above,
and all rights to receive any other amounts or payments
hereunder (including, without limitation, all rights to the
balance of the Vested Portion of the Allocated Amounts)
shall be forfeited;
5
<PAGE> 18
v. In the event that the Employee shall at any time fail
to comply with the terms and conditions of Sections 5 or 6
of this Agreement, then the Employee shall only be entitled
to receive Fifty (50%) percent of the Vested Portion of the
Allocated Amounts, payable as set forth above, and all
rights to receive any other amounts or payments hereunder
(including, without limitation, the balance of the Vested
Portion of the Allocated Amounts) shall be forfeited; and
vi. In the event of a Change of Control and the Employee
is requested by the Company, its successor or the purchaser
to continue to be employed by the Company, its successor or
such purchaser for a salary and upon such other financial
terms and conditions comparable to those received by the
Employee from the Company at such time, for a minimum period
not to exceed one (1) year following such Change of Control,
the Employee shall so continue such employment, and, in the
event the Employee refuses such continued employment or does
not continue such employment for such minimum period, then
in such event the Employee shall only be entitled to receive
Fifty (50%) percent of the Vested Portion of the Allocated
Amounts, and all rights to the balance of the Vested Portion
of the Allocated Amounts and the Account shall be forfeited.
d. In the event of a Change of Control on or before the
Termination Date, and provided the Employee has complied with the terms
of Section 4(c)(vi) hereof, then, notwithstanding anything herein to
the contrary: (i) if the Employee is requested to continue to be
employed as provided in Section 4(c)(vi) hereof, then the Vested
Portion of the Allocated Amounts shall be paid to the Employee in
twelve (12) equal consecutive quarterly installments with the first
installment commencing on the last day of the first calendar quarter
which is at least ninety (90) days following the Change of Control, or
(ii) if the Employee is not requested to continue to be employed as
provided in Section 4(c)(vi) hereof, then the Vested Portion of the
Allocated Amounts shall be paid to the Employee in eight (8) equal
consecutive quarterly installments with the first installment
commencing on the last day of the first calendar quarter which is at
least ninety (90) days following the Change of Control. The Employee
shall have the right, upon written notice thereof to the Company, to
cause the Company to place the installments payable under this
Section 4(d) in escrow with an independent escrow agent appointed by
the Company in its discretion, in order to secure the payment of such
installments to the Employee, and upon terms and conditions reasonably
acceptable to the Company and the Employee.
5. Non-Compete.
a. The Employee hereby acknowledges and recognizes the
highly competitive nature of the businesses of the Talon Automotive
Group and accordingly agrees in consideration hereof, during the period
the Employee is employed by the Company or any member of the Talon
Automotive Group and thereafter for the longer of two (2) years or that
period in which the Employee is entitled to any payments pursuant to
the terms hereof, for purposes of this Agreement, he will not directly
or indirectly (except as a passive investor in less than one (1%)
percent of the outstanding capital stock of a publicly traded
corporation or in
6
<PAGE> 19
his capacity as an employee of the Company):
i. conduct, engage in, have an interest in, or aid or
assist any person or entity in conducting, engaging or having
an interest in (whether as an owner, principal, lender,
stockholder, partner, employer, employee, consultant, officer,
director or otherwise) anywhere within the Territory (as
hereinafter defined):
(a) any business or enterprise (whether or
not for profit) which offers or performs any services
which are the same as or similar to or competitive
with those now or hereafter provided by the Company
or any member of the Talon Automotive Group; or
(b) any business or enterprise (whether or
not for profit) which develops, manufactures or sells
any products which are the same as or in any manner
similar to or competitive with those developed,
manufactured or sold the Company or any member of the
Talon Automotive Group; or
(c) any other business or enterprise
(whether or not for profit) which is competitive with
the business of the Company or any member of the
Talon Automotive Group;
ii. Solicit, divert, take away, interfere with or
accept any business from any customers, suppliers, trade or
patronage of the Company or any member of the Talon Automotive
Group, or take any actions which are materially adverse to or
materially injurious to the Company or any member of the Talon
Automotive Group or which materially and adversely affect the
business of the Company or any member of the Talon Automotive
Group or their relationships with their employees, customers
or suppliers; or
iii. Engage, employ, attempt to engage or employ or
solicit for engagement or employment any employee or sales
representative of the Company or any member of the Talon
Automotive Group, or induce or otherwise advise any employee
or sales representative to leave the employ or engagement of
the Company or any member of the Talon Automotive Group or to
engage in any of the activities prohibited hereby.
b. For purposes hereof, the "Territory" shall mean and include
the United States of America, Canada and Mexico.
c. It is expressly understood and agreed that although the
Employee and the Company consider the provisions hereof, including the
restrictions as to Territory set forth in this Section above to be
reasonable for the purpose of preserving for the Company and each
Affiliated Group, their businesses and goodwill and other proprietary
rights.
d. Notwithstanding anything to the contrary in this Agreement,
in the event of a violation of any of the covenants set forth in this
Section 5 by the Employee, the Company shall
7
<PAGE> 20
have all of the remedies set forth in Section 4(c)(iii) hereof;
provided, however, the remedies set forth in said Section 4(c)(iii)
shall be the sole and exclusive remedies of the Company for any
violation by the Employee of such covenants.
6. Confidentiality. The Employee shall, while employed by the Company
and thereafter, preserve in confidence all proprietary information heretofore or
hereafter acquired by him or disclosed to him relating to machines, processes,
practices, products, inventions, improvement, or developments of the Talon
Automotive Group or in which the Talon Automotive Group is interested and all
other confidential or proprietary information of any kind or nature pertaining
to the business of the Talon Automotive Group, and the Employee will not
disclose any such information to any other person without the express
authorization of the Company or make use of such information for the Employee's
personal benefit or for the benefit of any person other than the Talon
Automotive Group or assist others in using such information.
7. Employment. Nothing contained in this Agreement or in any
modifications to this Agreement shall give the Employee any right to employment
by the Company, either expressed or implied, or constitute any evidence of any
agreement or understanding, expressed or implied, that the Company will continue
to employ the Employee for any period of time or at any particular position.
8. Miscellaneous.
a. The Employee shall have the right, from time to time, in
writing on a form designated by the Company, to name the beneficiary or
beneficiaries who may be named successively or contingently, and who
may be natural persons or otherwise, to receive any benefits payable to
the Employee hereunder if the Employee shall die before receiving all
benefits. If the Employee shall decline or fail to designate a
beneficiary, the Employee's estate shall be deemed to be the Employee's
beneficiary. The Employee shall have the right to change the
beneficiary or beneficiaries from time to time (without the consent of
any prior beneficiary); provided, however, that any change shall not
become effective unless in writing and upon receipt by the Company.
b. The Company shall not in any manner be liable for or
subject to the debts of the Employee or any beneficiary. Except as
provided by the laws of descent and distribution, no benefit under this
Agreement shall at any time be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, or encumbrance of any
kind, nor shall any such benefit be subject to attachment or other
legal process of whatever nature, and any attempted anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment
or other such legal process shall be void and of no force or effect
whatsoever. Upon any such attempted anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or if by reason
of Employee's bankruptcy, divorce or other event there is a possibility
that such benefits may be received by someone other than the Employee
or that such benefits may not be enjoyed by such Employee, then in any
such event the benefits shall automatically terminate and be of no
force or effect. The Company may, in its discretion, apply to a court
of competent jurisdiction for a determination as to the rights of any
person in any plan benefits, such determination shall be final and
binding upon the Company and the Employee (including all
8
<PAGE> 21
beneficiaries or other persons claiming an interest).
c. The obligations of the Company under this Agreement
constitute an unsecured promise to pay from the Company's general
assets as provided herein. The Company shall have no obligation to fund
or reserve any amounts for any payments hereunder and neither the
Employee nor any beneficiary shall have any security interest or claim
upon any account set aside for the payments hereunder or any other
property of the Company. The obligations of the Company under this
Agreement may be transferred or assigned to an Affiliated Company or a
successor entity, which agrees to be bound by the terms hereof,
provided, however, no such transfer or assignment shall operate as a
release of the Company from its obligations hereunder without the
written consent of the Employee, which consent shall not be
unreasonably withheld.
d. It is the desire and intent of the parties hereto that
provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each
jurisdiction in which enforcement may be sought. Accordingly, to the
extent any provision hereof is deemed unenforceable by limitation
thereon, the parties agree that the same shall, nevertheless, be
enforceable to the fullest extent permissible under the laws and public
policies applied in such jurisdiction in which enforcement is sought.
Furthermore, if any particular portion of this Agreement be adjudicated
as invalid or unenforceable, such portion shall be deleted and such
deletion shall apply only with respect to the operation of such portion
in the particular jurisdiction in which such adjudication is made.
e. This Agreement constitutes the entire agreement between the
parties with regard to the subject matter hereof and shall supersede
any and all prior oral or written understandings or agreements relating
to the subject hereof. This Agreement may only be amended by written
instrument signed by each of the parties hereto.
f. Any notice required or permitted to be provided under this
Agreement shall be deemed properly furnished if in writing and if
mailed by registered or certified mail, postage prepaid with return
receipt requested, to the Employee at the address set forth below and
to the Company at its offices at 900 Wilshire Drive, Suite 203, Troy,
Michigan 48084, to the attention of its Chairman of the Board (with a
copy to Timmis & Inman L.L.P., 300 Talon Centre, Detroit Michigan
48207).
g. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Michigan.
9
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
Witnesses:
COMPANY:
TALON AUTOMOTIVE GROUP L.L.C.
By
- ---------------------------------- --------------------------------
EMPLOYEE:
- ---------------------------------- -------------------------------
Kris R. Pfaehler
Address:
776 Trombley
Grosse Pointe, Michigan 48230
10
<PAGE> 23
EXHIBIT A
AMOUNT ALLOCATED TO THE ACCOUNT AS OF JANUARY 1, 1997
Effective as of January 1, 1997, there shall be allocated to the Account
an amount equal to One and 2/10 (1.2%) percent of the Value Increase (as
hereinafter defined) as of December 31, 1996.
For purposes hereof, the "Value Increase" as of the end of any
particular calendar year shall be equal to that amount, if any, by which the
aggregate sum of (A) the cumulative amount of the Total Distributions for
calendar years 1996 through the end of the calendar year for which the Value
Increase is being determined, and (B) the Fair Market Value of the Talon
Automotive Group as of the end of the calendar year for which the Value Increase
is being determined, shall exceed the Threshold Amount as of the end of the
calendar year for which the Value Increase is being determined. The parties
hereto hereby acknowledge that the Value Increase as of December 31, 1996 and
the amount allocated to the Account as of January 1, 1997 has been determined as
set forth on Schedule I attached hereto.
Upon the occurrence of a Termination Event, in the event that the Value Increase
as of the end of the calendar year immediately preceding the Termination Event
should exceed Eighteen Million ($18,000,000) Dollars, then in such event there
shall be allocated to the Account effective as of December 31, 1997 an
additional amount equal to 9/10 of One (.9%) percent of the Value Increase as of
December 31, 1996 (which is set forth on Schedule I attached hereto).
Upon the occurrence of a Termination Event and in the event of the existence of
any Shortfall Amount, then the amount of the reduction of the outstanding
balance of any Vested Portion of any Allocated Amounts for purposes of Section
2(d) of the Agreement shall be:
(1) First determined to be equal to Two and 1/10 (2.1%) percent of
the Vested Portion of any Allocated Amounts to the Account to
the extent that any Vested Portion of such Allocated Amounts
have been determined pursuant to the above formula or the
Agreement using such Two and 1/10 (2.1) percentage; and
(2) Thereafter determined to be equal to One and 2/10 (1.2%)
percent of the Vested Portion of any Allocated Amounts to the
Account to the extent that any Vested Portion of such
Allocated Amounts have been determined pursuant to the above
formula using such One and 2/10 (1.2) percentage.
<PAGE> 24
SCHEDULE I
<PAGE> 25
AMENDED AND RESTATED DEFERRED COMPENSATION AGREEMENT
THIS AMENDED AND RESTATED DEFERRED COMPENSATION AGREEMENT, entered into as
of the 31st day of December 1997, is by and between Talon Automotive Group
L.L.C. (the "Company"), a Michigan limited liability company with offices
located at 900 Wilshire Drive, Suite 203, Troy, Michigan 48084, and the
undersigned (the "Employee"), an individual.
WITNESSETH:
WHEREAS, the Employee and Company entered into that certain Deferred
Compensation Agreement dated January 1, 1997 (the "Agreement") in order to
enable the Company to provide additional incentives to the Employee to exert his
best efforts on behalf of the Company and to advance the Company's best
interests; and
WHEREAS, the Company and Employee desire to amend and restate the
Agreement, upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth herein, the Agreement is hereby amended and restated as follows:
1. Deferred Compensation Benefits. Subject to the terms and conditions set
forth herein, the Employee shall be entitled to receive a deferred compensation
benefit from the Company equal to the Vested Portion (as hereinafter defined) of
the Allocated Amounts (as hereinafter defined), as deferred compensation
benefits, payable as set forth in Section 4 hereof.
2. Deferred Compensation Account. Subject to the terms and conditions set
forth herein, the Company shall establish a deferred compensation account (the
"Account") for the benefit of the Employee, and allocate certain amounts (the
"Allocated Amounts") to the Account determined as follows:
a. Effective as of January 1, 1997, the Company shall allocate to the
Account an amount as determined on Exhibit A attached hereto;
b. Commencing with the calendar year ending as of December 31, 1997
(provided that the Employee shall be employed by the Company or a member of
the Talon Automotive Group on such date), and continuing for each calendar
year thereafter until the earlier of an Initial Public Offering (as
hereinafter defined), a Change of Control (as hereinafter defined), a Bond
Offering (as hereinafter defined), or a Termination Event (as hereinafter
defined), the Company shall allocate to the Account an amount equal to
Designated Percentage (as hereinafter defined) of the Total Distributions
(as hereinafter defined) for such calendar year; provided, however,
notwithstanding the foregoing:
i. For purposes of the calculation of the amounts to
be allocated to the Account pursuant to this Section 2(b),
effective as of January 1, 1998, there shall be excluded
from the amount of Total Distributions the first One Million
($1,000,000) Dollars of Total Distributions following
January 1, 1998;
<PAGE> 26
ii. For the calendar year in which the earlier of
such Initial Public Offering, Change of Control, Bond Offering
or Termination Event shall occur, there shall only be
allocated to the Account an amount equal to the Designated
Percentage of the Total Distributions through the date of such
event (after taking into account any adjustment required
pursuant to Section 2(b)(i) above); and
iii. Upon the occurrence of the earlier of an Initial
Public Offering, Change of Control, Bond Offering or
Termination Event, no amounts shall be allocated to the
Account pursuant to Section 2(b) hereof following the date of
such event.
c. The outstanding balance of any Vested Portion of any
Allocated Amounts shall be increased on an annual basis from and after
the end of the calendar year in which such amounts became vested, until
the end of the calendar year immediately preceding the Termination
Event, at the rate of Six (6%) percent per annum; and
d. Upon the occurrence of a Termination Event, the outstanding
balance of any Vested Portion of any Allocated Amounts shall be reduced
by an amount equal to the Designated Percentage of any Shortfall Amount
(as hereinafter defined).
3. Definitions. For purposes hereof, the following terms shall have the
following meanings:
a. "Bond Offering" shall mean any private or public offering
by the Company (or its successors in interest) of senior subordinated
notes;
b. "Designated Management Fees" shall mean the aggregate
amount of all management and consulting fees paid by the Talon
Automotive Group to Talon L.L.C. in excess of Seven Hundred Thousand
($700,000) Dollars for a particular calendar year, which amount may be
amended from time to time by the Company in its reasonable discretion.
c. "Designated Percentage" shall mean Two and 5/10 (2.5%)
percent.
d. "Initial Public Offering" shall mean the first instance in
which the stock of the Company shall be offered for sale to the public
following a successful registration of such stock with the United
States Securities and Exchange Commission;
e. "Fair Market Value of the Talon Automotive Group" as of the
end of any particular calendar year shall mean the combined fair market
value of all members of the Talon Automotive Group as of such date as
determined by an appraisal thereof by Roney & Co. (or such other
company as designated by the Company from time to time), or in the
event that the stock (or equity interests) of any member of the Talon
Automotive Group shall be publicly traded at such date, then the
applicable fair market value of such entity shall be equal to the
closing price quotation of such stock (or equity interests) as of such
date multiplied by the total number of outstanding shares of stock (or
equity interests) of such entity as of such date;
2
<PAGE> 27
f. "Net Shareholder Distributions" for any particular calendar
year (or other period) shall be equal to the aggregate sum of all
shareholder and equityholder dividends and distributions made in cash
by the Talon Automotive Group to their shareholders during such period;
provided, however, in the event that any member of the Talon Automotive
Group shall have elected to be treated as an S Corporation pursuant to
Sections 1361-1363 of the Internal Revenue Code of 1986 (as amended or
superseded from time to time) for such calendar year (or other period),
then Net Shareholder Distributions shall not include an aggregate
amount equal to the maximum amount of all federal and state income
taxes payable by such shareholders for such calendar year (or other
period) as a result of such S Corporation status, using a maximum
combined federal and state income tax rate equal to forty two (42%)
percent, which percentage shall be subject to adjustment by the Company
in its reasonable discretion based upon future changes in such maximum
combined federal and state income tax rate.
g. "Talon Automotive Group" shall mean and include the
Company, Hawthorne Metal Products Co., J & R Manufacturing, Inc., VS
Holdings Inc. and, effective December 8, 1997, Production Stamping,
Inc.; provided, however (i) in the event of any merger or consolidation
of any of such companies, then Talon Automotive Group shall include all
of such companies as so merged or consolidated, together with all of
their wholly-owned subsidiaries, and (ii) in the event any such entity
shall at any time cease to be under the direct or indirect control of
Randolph J. Agley and/or Michael T. Timmis and/or their respective
immediate families (or trusts for their benefit), then such entity
shall no longer be considered a member of the Talon Automotive Group.
h. "Shortfall Amount" shall mean that amount, if any, by which
the Threshold Amount (as hereinafter defined) as of the end of the
calendar year immediately preceding the Termination Event shall be in
excess of the Fair Market Value of the Talon Automotive Group as of the
end of the calendar year immediately preceding the Termination Event.
i. "Termination Event" shall mean the termination of the
Employee's employment with the Company and any member of the Talon
Automotive Group for any reason.
j. "Threshold Amount" shall be an amount computed on an annual
basis as of December 31 of each year commencing as of December 31,
1995, and shall be equal to the product of:
i. One and 5/100 (1.05); multiplied by
ii. the sum of the following:
a. The Threshold Amount as of December 31
of the immediately preceding year; and
b. the aggregate amount of all additional
equity invested in the members of the Talon
Automotive Group by their shareholders or
3
<PAGE> 28
equityholders during the immediately preceding
calendar year (excluding, however, any equity
invested in Production Stamping, Inc. during calendar
year 1998);
---provided, however, the Threshold Amount as of December 31, 1994
shall be equal to Sixteen Million Three Hundred Fifteen Thousand
($16,315,000) Dollars, which represents the Fair Market Value of the
Talon Automotive Group (as defined herein) as of December
31, 1994.
k. "Total Distributions" for any calendar year shall mean the
sum of the Net Shareholder Distributions (as defined herein) for such
calendar year and the Designated Management Fees (as defined herein)
for such calendar year.
l. "Vested Portion" as of any particular date occurring on or
prior to the Termination Event shall mean all Allocated Amounts which
have been allocated to the Account as of that date which is three (3)
years immediately preceding such date; provided, however,
notwithstanding the foregoing:
i. In the event that the Termination Event is as a
result of the any of the following events:
a) the Employee's Disability;
b) the Employee's death;
c) a Change of Control;
d) the Involuntary Termination of the Employee
within twenty four (24) months following a Change of Control;
or
e) a voluntary termination by the Employee of his
employment on or after that date upon which the Employee
attains the age of sixty two (62) years;
---then in any of such events, the Vested Portion as of the
date of the Termination Event shall mean all Allocated Amounts
which have been allocated to the Account as of the end of the
immediately preceding calendar year.
ii. The Vested Portion of all Allocated Amounts which
have been allocated to the Account as of December 31, 1997
shall mean all Allocated Amounts which have been allocated to
the Account as of December 31, 1997.
iii. In the event of a Bond Offering, then the Vested
Portion as of the date of such Bond Offering shall mean all
Allocated Amounts which have been allocated to the Account
through the date of such Bond Offering.
For purposes hereof, the terms "Disability", "Change of Control" and
"Involuntary
4
<PAGE> 29
Termination" shall have the same meanings set forth in the Company's
Equity Ownership Plan.
4. Payment of Deferred Compensation Benefits. In the event of a Termination
Event, the Vested Portion of the Allocated Amounts shall be paid to the Employee
as follows:
a. The Vested Portion of the Allocated Amounts shall be paid
to the Employee in twenty (20) equal consecutive quarterly installments
commencing on the last day of the first calendar quarter which is at
least ninety (90) days following the Termination Event, and continuing
on the last day of each of the next succeeding nineteen (19) calendar
quarters thereafter;
b. The unpaid balance of the Vested Portion of the Allocated
Amounts shall bear interest from and after the Termination Event at a
per annum rate equal to the prime rate of interest charged from time to
time by the Company's primary bank, which interest shall be payable
quarterly with the foregoing installments until such amount is paid in
full;
c. Notwithstanding anything contained herein to the contrary:
i. The Company shall have the right in its sole
discretion to pay the balance of the Vested Portion of the
Allocated Amounts over a shorter period than provided herein
or in a lump sum payment as it may deem appropriate;
ii. The Company shall have the right to deduct any
federal, state, local or employment or withholding taxes which
the Company deems are required by law to be withheld from any
amounts payable to a Employee hereunder or otherwise; and
iii. In the event that the Employee shall voluntarily
terminate his employment or in the event that the Employee
should be terminated for Cause (as defined in the Company's
Equity Ownership Plan), in each case on or before December 31,
1998, then in either such event the Employee shall only be
entitled to receive Thirty Three (33%) percent of the Vested
Portion of the Allocated Amounts payable as set forth above,
and all rights to receive any other amounts or payments
hereunder (including, without limitation, all rights to the
balance of the Vested Portion of the Allocated Amounts) shall
be forfeited;
iv. In the event that the Employee shall voluntarily
terminate his employment or in the event that the Employee
should be terminated for Cause (as defined in the Company's
Equity Ownership Plan), in each case during calendar year
1999, then in either such event the Employee shall only be
entitled to receive Sixty-Seven (67%) percent of the Vested
Portion of the Allocated Amounts payable as set forth above,
and all rights to receive any other amounts or payments
hereunder (including, without limitation, all rights to the
balance of the Vested Portion of the Allocated Amounts) shall
be forfeited;
v. In the event that the Employee shall at any time
fail to comply with the
5
<PAGE> 30
terms and conditions of Sections 5 or 6 of this Agreement,
then the Employee shall only be entitled to receive Fifty
(50%) percent of the Vested Portion of the Allocated
Amounts, payable as set forth above, and all rights
to receive any other amounts or payments hereunder
(including, without limitation, the balance of the Vested
Portion of the Allocated Amounts) shall be forfeited; and
vi. In the event of a Change of Control and the
Employee is requested by the Company, its successor or the
purchaser to continue to be employed by the Company, its
successor or such purchaser for a salary and upon such other
financial terms and conditions comparable to those received by
the Employee from the Company at such time, for a minimum
period not to exceed one (1) year following such Change of
Control, the Employee shall so continue such employment, and,
in the event the Employee refuses such continued employment or
does not continue such employment for such minimum period,
then in such event the Employee shall only be entitled to
receive Fifty (50%) percent of the Vested Portion of the
Allocated Amounts, and all rights to the balance of the Vested
Portion of the Allocated Amounts and the Account shall be
forfeited.
d. In the event of a Change of Control on or before the
Termination Date, and provided the Employee has complied with the terms
of Section 4(c)(vi) hereof, then, notwithstanding anything herein to
the contrary: (i) if the Employee is requested to continue to be
employed as provided in Section 4(c)(vi) hereof, then the Vested
Portion of the Allocated Amounts shall be paid to the Employee in
twelve (12) equal consecutive quarterly installments with the first
installment commencing on the last day of the first calendar quarter
which is at least ninety (90) days following the Change of Control, or
(ii) if the Employee is not requested to continue to be employed as
provided in Section 4(c)(vi) hereof, then the Vested Portion of the
Allocated Amounts shall be paid to the Employee in eight (8) equal
consecutive quarterly installments with the first installment
commencing on the last day of the first calendar quarter which is at
least ninety (90) days following the Change of Control. The Employee
shall have the right, upon written notice thereof to the Company, to
cause the Company to place the installments payable under this Section
4(d) in escrow with an independent escrow agent appointed by the
Company in its discretion, in order to secure the payment of such
installments to the Employee, and upon terms and conditions reasonably
acceptable to the Company and the Employee.
5. Non-Compete.
a. The Employee hereby acknowledges and recognizes the highly
competitive nature of the businesses of the Talon Automotive Group and
accordingly agrees in consideration hereof, during the period the
Employee is employed by the Company or any member of the Talon
Automotive Group and thereafter for the longer of two (2) years or that
period in which the Employee is entitled to any payments pursuant to
the terms hereof, for purposes of this Agreement, he will not directly
or indirectly (except as a passive investor in less than one (1%)
percent of the outstanding capital stock of a publicly traded
corporation or in his capacity as an employee of the Company):
6
<PAGE> 31
i. conduct, engage in, have an interest in, or aid or
assist any person or entity in conducting, engaging or having
an interest in (whether as an owner, principal, lender,
stockholder, partner, employer, employee, consultant, officer,
director or otherwise) anywhere within the Territory (as
hereinafter defined):
(a) any business or enterprise (whether or
not for profit) which offers or performs any services
which are the same as or similar to or competitive
with those now or hereafter provided by the Company
or any member of the Talon Automotive Group; or
(b) any business or enterprise (whether or
not for profit) which develops, manufactures or sells
any products which are the same as or in any manner
similar to or competitive with those developed,
manufactured or sold the Company or any member of the
Talon Automotive Group; or
(c) any other business or enterprise
(whether or not for profit) which is competitive with
the business of the Company or any member of the
Talon Automotive Group;
ii. Solicit, divert, take away, interfere with or
accept any business from any customers, suppliers, trade or
patronage of the Company or any member of the Talon Automotive
Group, or take any actions which are materially adverse to or
materially injurious to the Company or any member of the Talon
Automotive Group or which materially and adversely affect the
business of the Company or any member of the Talon Automotive
Group or their relationships with their employees, customers
or suppliers; or
iii. Engage, employ, attempt to engage or employ or
solicit for engagement or employment any employee or sales
representative of the Company or any member of the Talon
Automotive Group, or induce or otherwise advise any employee
or sales representative to leave the employ or engagement of
the Company or any member of the Talon Automotive Group or
to engage in any of the activities prohibited hereby.
b. For purposes hereof, the "Territory" shall mean and include
the United States of America, Canada and Mexico.
c. It is expressly understood and agreed that although the
Employee and the Company consider the provisions hereof, including the
restrictions as to Territory set forth in this Section above to be
reasonable for the purpose of preserving for the Company and each
Affiliated Group, their businesses and goodwill and other proprietary
rights.
d. Notwithstanding anything to the contrary in this Agreement,
in the event of a violation of any of the covenants set forth in this
Section 5 by the Employee, the Company shall have all of the remedies
set forth in Section 4(c)(iii) hereof; provided, however, the remedies
7
<PAGE> 32
set forth in said Section 4(c)(iii) shall be the sole and exclusive
remedies of the Company for any violation by the Employee of such
covenants.
6. Confidentiality. The Employee shall, while employed by the Company
and thereafter, preserve in confidence all proprietary information heretofore or
hereafter acquired by him or disclosed to him relating to machines, processes,
practices, products, inventions, improvement, or developments of the Talon
Automotive Group or in which the Talon Automotive Group is interested and all
other confidential or proprietary information of any kind or nature pertaining
to the business of the Talon Automotive Group, and the Employee will not
disclose any such information to any other person without the express
authorization of the Company or make use of such information for the Employee's
personal benefit or for the benefit of any person other than the Talon
Automotive Group or assist others in using such information.
7. Employment. Nothing contained in this Agreement or in any
modifications to this Agreement shall give the Employee any right to employment
by the Company, either expressed or implied, or constitute any evidence of any
agreement or understanding, expressed or implied, that the Company will continue
to employ the Employee for any period of time or at any particular position.
8. Miscellaneous.
a. The Employee shall have the right, from time to time, in
writing on a form designated by the Company, to name the beneficiary or
beneficiaries who may be named successively or contingently, and who
may be natural persons or otherwise, to receive any benefits payable to
the Employee hereunder if the Employee shall die before receiving all
benefits. If the Employee shall decline or fail to designate a
beneficiary, the Employee's estate shall be deemed to be the Employee's
beneficiary. The Employee shall have the right to change the
beneficiary or beneficiaries from time to time (without the consent of
any prior beneficiary); provided, however, that any change shall not
become effective unless in writing and upon receipt by the Company.
b. The Company shall not in any manner be liable for or
subject to the debts of the Employee or any beneficiary. Except as
provided by the laws of descent and distribution, no benefit under this
Agreement shall at any time be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, or encumbrance of any
kind, nor shall any such benefit be subject to attachment or other
legal process of whatever nature, and any attempted anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment
or other such legal process shall be void and of no force or effect
whatsoever. Upon any such attempted anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or if by reason
of Employee's bankruptcy, divorce or other event there is a possibility
that such benefits may be received by someone other than the Employee
or that such benefits may not be enjoyed by such Employee, then in any
such event the benefits shall automatically terminate and be of no
force or effect. The Company may, in its discretion, apply to a court
of competent jurisdiction for a determination as to the rights of any
person in any plan benefits, such determination shall be final and
binding upon the Company and the Employee (including all beneficiaries
or other persons claiming an interest).
8
<PAGE> 33
c. The obligations of the Company under this Agreement
constitute an unsecured promise to pay from the Company's general
assets as provided herein. The Company shall have no obligation to fund
or reserve any amounts for any payments hereunder and neither the
Employee nor any beneficiary shall have any security interest or claim
upon any account set aside for the payments hereunder or any other
property of the Company. The obligations of the Company under this
Agreement may be transferred or assigned to an Affiliated Company or a
successor entity, which agrees to be bound by the terms hereof,
provided, however, no such transfer or assignment shall operate as a
release of the Company from its obligations hereunder without the
written consent of the Employee, which consent shall not be
unreasonably withheld.
d. It is the desire and intent of the parties hereto that
provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each
jurisdiction in which enforcement may be sought. Accordingly, to the
extent any provision hereof is deemed unenforceable by limitation
thereon, the parties agree that the same shall, nevertheless, be
enforceable to the fullest extent permissible under the laws and public
policies applied in such jurisdiction in which enforcement is sought.
Furthermore, if any particular portion of this Agreement be adjudicated
as invalid or unenforceable, such portion shall be deleted and such
deletion shall apply only with respect to the operation of such portion
in the particular jurisdiction in which such adjudication is made.
e. This Agreement constitutes the entire agreement between the
parties with regard to the subject matter hereof and shall supersede
any and all prior oral or written understandings or agreements relating
to the subject hereof. This Agreement may only be amended by written
instrument signed by each of the parties hereto.
f. Any notice required or permitted to be provided under this
Agreement shall be deemed properly furnished if in writing and if
mailed by registered or certified mail, postage prepaid with return
receipt requested, to the Employee at the address set forth below and
to the Company at its offices at 900 Wilshire Drive, Suite 203, Troy,
Michigan 48084, to the attention of its Chairman of the Board (with a
copy to Timmis & Inman L.L.P., 300 Talon Centre, Detroit Michigan
48207).
g. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Michigan.
9
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
Witnesses:
COMPANY:
L.L.C. TALON AUTOMOTIVE GROUP
- --------------------------------- By
------------------------------
EMPLOYEE:
- --------------------------------- --------------------------------
David J. Woodward
Address:
3 Rathbone Place
Grosse Pointe, Michigan 48230
10
<PAGE> 35
EXHIBIT A
AMOUNT ALLOCATED TO THE ACCOUNT AS OF JANUARY 1, 1997
Effective as of January 1, 1997, there shall be allocated to the Account
an amount equal to One and 4/10 (1.4%) of the Value Increase (as hereinafter
defined) as of December 31, 1996.
For purposes hereof, the "Value Increase" as of the end of any
particular calendar year shall be equal to that amount, if any, by which the
aggregate sum of (A) the cumulative amount of the Total Distributions for
calendar years 1995 through the end of the calendar year for which the Value
Increase is being determined, and (B) the Fair Market Value of the Talon
Automotive Group as of the end of the calendar year for which the Value Increase
is being determined, shall exceed the Threshold Amount as of the end of the
calendar year for which the Value Increase is being determined. The parties
hereto hereby acknowledge that the Value Increase as of December 31, 1996 and
the amount allocated to the Account as of January 1, 1997 has been determined as
set forth on Schedule I attached hereto.
Upon the occurrence of a Termination Event, in the event that the Value Increase
as of the end of the calendar year immediately preceding the Termination Event
should exceed Eighteen Million ($18,000,000) Dollars, then in such event there
shall be allocated to the Account effective as of December 31, 1997 an
additional amount equal to One and 1/10 (1.1%) percent of the Value Increase as
of December 31, 1996 (which is set forth on Schedule I attached hereto).
Upon the occurrence of a Termination Event and in the event of the existence of
any Shortfall Amount, then the amount of the reduction of the outstanding
balance of any Vested Portion of any Allocated Amounts for purposes of Section
2(d) of the Agreement shall be:
(1) First determined to be equal to Two and 5/10 (2.5%) percent of
the Vested Portion of any Allocated Amounts to the Account to
the extent that any Vested Portion of such Allocated Amounts
have been determined pursuant to the above formula or the
Agreement using such Two and 5/10 (2.5) percentage; and
(2) Thereafter determined to be equal to One and 4/10 (1.4%)
percent of the Vested Portion of any Allocated Amounts to the
Account to the extent that any Vested Portion of such
Allocated Amounts have been determined pursuant to the above
formula using such One and 4/10 (1.4) percentage.
<PAGE> 36
SCHEDULE I
<PAGE> 1
EXHIBIT 10.26
FIRST AMENDMENT
TO
THE TALON INC.
401(k) PLAN AND TRUST
(FORMERLY KNOWN AS THE G & L INDUSTRIES, INC. 401(k) PLAN AND TRUST)
This First Amendment is made as of the 1st day of October, 1992, by G &
L Industries, Inc. Allen-Stevens Corp., Hawthorne Metal Products Company, Talon
Inc., Talon Development Group, Inc. and Pres-Tock, Inc., all Michigan
corporations (the "Employers").
WITNESSETH:
WHEREAS, effective August 1, 1985, G & L Industries, Inc. adopted the G
& L Industries, Inc. 401(k) Plan and Trust (the "Plan"); and
WHEREAS, Allen-Stevens Corp., Hawthorne Metal Products Company and
Pres-Tock, Inc., subsequently adopted the Plan as participating employers; and
WHEREAS, Talon Inc. and Talon Development Group, Inc. hereby
acknowledge their adoption of the Plan as participating employers, effective as
of October 1, 1992, by their signature to this Amendment; and
WHEREAS, under the provisions of the Plan, the Employers reserved for
themselves the right to amend the Plan; and
WHEREAS, it is the Employers' desire to make several amendments to the
Plan, including, but not limited to, changing the name of the Plan to the Talon
Inc. 401(k) Plan and Trust.
NOW, THEREFORE, the Plan is hereby amended effective October 1, 1992 as
follows:
1. ARTICLE I, "DEFINITIONS," SECTION 1.15 SHALL BE DELETED IN ITS
ENTIRETY AND THE FOLLOWING SECTION 1.15 SHALL BE SUBSTITUTED IN ITS PLACE:
1.15 "Employer" means G & L Industries, Inc. and any Participating
Employer (as defined in Section 10.1) which shall adopt this Plan, Allen-Stevens
Corp. (effective November 1, 1989), Hawthorne Metal Products Company (effective
January 1, 1990), Pres-Tock, Inc. (Effective January 1, 1991), Talon Inc.
(effective October 1, 1992) and Talon Development Group, Inc. (effective October
1, 1992).
2. ARTICLE I, "DEFINITIONS," SECTION 1.38 SHALL BE DELETED IN ITS
ENTIRETY AND THE FOLLOWING SECTION 1.38 SHALL BE SUBSTITUTED IN ITS PLACE:
1.38 "Normal Retirement Date" means the first day of the month
coinciding with or next following the Participant's Normal Retirement Age (55th
birthday). A Participant shall become fully Vested in his Account upon attaining
his Normal Retirement Age.
- 1 -
<PAGE> 2
3. ARTICLE I, "DEFINITIONS," SECTION 1.44 SHALL BE DELETED IN ITS
ENTIRETY AND THE FOLLOWING SECTION 1.44 SHALL BE SUBSTITUTED IN ITS PLACE:
1.44 "Plan" means this instrument; the name of the Plan shall be the
Talon Inc. 401(k) Plan and Trust.
4. ARTICLE I, "DEFINITIONS," SHALL BE AMENDED BY THE ADDITION OF A NEW
SECTION 1.62, TO READ AS FOLLOWS:
1.62 "Pre-Retirement Survivor Annuity" is an immediate annuity for the
life of the Participant's spouse, the payments under which must be equal to the
amount of benefit which can be purchased with the accounts of a Participant used
to provide the death benefit under the Plan.
5. ARTICLE II, "TOP HEAVY AND ADMINISTRATION," SECTION 2.6 SHALL BE
DELETED IN ITS ENTIRETY AND THE FOLLOWING SECTION 2.6 SHALL BE SUBSTITUTED IN
ITS PLACE:
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to administer the
Plan for the exclusive benefit of the Participants and their Beneficiaries,
subject to the specific terms of the Plan. The Administrator shall administer
the Plan in accordance with its terms and shall have the power and discretion to
construe the terms of the Plan and to determine all questions arising in
connection with the administration, interpretation, and application of the Plan.
Any such determination by the Administrator shall be conclusive and binding upon
all persons. The Administrator may establish procedures, correct any defect,
supply any information, or reconcile any inconsistency in such manner and to
such extent as shall be deemed necessary or advisable to carry out the purpose
of the Plan; provided, however, that any procedure, discretionary act,
interpretation or construction shall be done in a nondiscriminatory manner based
upon uniform principles consistently applied and shall be consistent with the
intent that the Plan shall continue to be deemed a qualified plan under the
terms of Code Section 401(a), and shall comply with the terms of the Act and all
regulations issued pursuant thereto. The Administrator shall have all powers
necessary or appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:
(a) the discretion to determine all questions relating to the
eligibility of Employees to participate or remain a Participant hereunder and to
receive benefits under the Plan;
(b) to compute, certify, and direct the Trustee with respect
to the amount and the kind of benefits to which any Participant shall be
entitled hereunder;
(c) to authorize and direct the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the Trust;
- 2 -
<PAGE> 3
(d) to maintain all necessary records for the
administration of the Plan;
(e) to interpret the provisions of the Plan and to make and
publish such rules for regulation of the Plan as are consistent with the terms
hereof;
(f) to determine the size and type of Contract to be purchased
from any insurer, and to designate the insurer from which such Contract shall be
purchased;
(g) to compute and certify to the Employer and to the Trustee
from time to time the sums of money necessary or desirable to be contributed to
the Plan;
(h) to consult with the Employer and the Trustee regarding the
short and long-term liquidity needs of the Plan in order that the Trustee can
exercise any investment discretion in a manner designed to accomplish specific
objectives;
(i) to prepare and distribute to Employees a procedure for
notifying Participants and Beneficiaries of their rights to elect joint and
survivor annuities and Pre-Retirement Survivor Annuities as required by the Act
and Regulations thereunder.
(j) to prepare and implement a procedure to notify Eligible
Employees that they may elect to have a portion of their Compensation deferred
or paid to them in cash;
(k) to assist any Participant regarding his rights, benefits
or elections available under the Plan.
6. ARTICLE III, "ELIGIBILITY", SECTION 3.1 IS DELETED IN ITS
ENTIRETY AND THE FOLLOWING SECTION 3.1 SHALL BE SUBSTITUTED IN ITS PLACE:
3.1 CONDITIONS OF ELIGIBILITY
(a) Prior to January 1, 1990, any Eligible Employee who has
attained age twenty and has completed at least one (1) Hour of Service in each
of six (6) calendar months for the Employer or for any member of a group defined
in Internal Revenue Code Sections 414(b), (c) or (m) of which the Employer is a
part, shall be eligible to participate hereunder; and
(b) On and after January 1, 1990, any Eligible Employee who
has completed one Year of Service and has attained age twenty and one-half shall
be eligible to participate hereunder as of the date he has satisfied such
requirements. However, any Employee who was a Participant in the Plan prior to
August 1, 1989 shall continue to participate in the Plan; and
(c) On or after October 1, 1992, any Eligible Employee who
either, (i) makes a rollover contribution pursuant to Section 4.9 or (ii)
presents to the Administrator satisfactory evidence that he or she will make a
rollover contribution with funds from a distribution which will be made to the
Employee in the future, before becoming a Participant pursuant to subsection (b)
of this Section 3.1,
- 3 -
<PAGE> 4
shall become a Participant, as provided in subsection (c) of Section 3.3.
(d) The Employer shall give each prospective Eligible Employee
written notice of his eligibility to participate in the Plan prior to the close
of the Plan Year in which he first becomes an Eligible Employee.
7. ARTICLE III, "ELIGIBILITY," SECTION 3.3 SHALL BE DELETED IN
ITS ENTIRETY AND THE FOLLOWING SECTION 3.3 SHALL BE SUBSTITUTED IN ITS PLACE:
3.3 EFFECTIVE DATE OF PARTICIPATION
(a) Prior to January 1, 1990, an Eligible Employee shall
become a Participant effective as of the first day of the Plan Year following
his or her satisfaction of the eligibility requirements of Section 3.1(a),
provided he or she has not separated from service prior to that date; and
(b) On and after January 1, 1990, an employee who becomes an
Eligible Employee pursuant to Section 3.1(b) shall become a Participant
effective as of the last day of the calendar quarter coinciding with or next
following the date on which such Employee met the eligibility requirements of
Section 3.1(b), provided said Employee was still employed as of such date (or if
not employed on such date, as of the date of rehire if a 1-Year Break in Service
has not occurred); and
(c) On and after October 1, 1992, an employee who becomes an
Eligible Employee pursuant to Section 3.1(c) shall become a Participant on the
first day of the month coinciding with or next following the date on which such
Employee met the requirements of subsection (c) of Section 3.1.
(d) Notwithstanding the foregoing:
(1) a Participant in the Allen Stevens Corp. Profit
Sharing Retirement Benefit Plan on October 31, 1989
shall become a Participant in this Plan effective
November 1, 1989;
(2) An Employee of Allen-Stevens Corp. who on October
31, 1989: was not represented in collective
bargaining by a union, was at least age 21, and has
completed 1,000 Hours of Service during the
12-consecutive month period measured from his
employment commencement date or during the Plan Year
in which the first anniversary of his employment
commencement date fell or any subsequent Plan Year,
shall participate in the Plan effective November 1,
1989, provided he is employed by the Employer on that
date;
(3) A Participant in the Hawthorne Metal Products
Company Profit Sharing Plan on December 31, 1989
shall become a Participant in this Plan effective
January 1, 1990; and
(4) Any employee of Talon Inc. or Talon Development
Group, Inc. who was a Participant in the F & M
Distributors, Inc. 401(k) Investment Savings
- 4 -
<PAGE> 5
Plan on September 30, 1992 shall become a participant
in this Plan as of October 1, 1992.
8. EFFECTIVE AS OF JANUARY 1, 1993, ARTICLE IV, "CONTRIBUTION AND
ALLOCATION," SECTION 4.2, "PARTICIPANT'S SALARY REDUCTION ELECTION," SUBSECTION
(a) SHALL BE AMENDED IN ITS ENTIRETY AND THE FOLLOWING SECTION 4.2(a) SHALL BE
SUBSTITUTED IN ITS PLACE:
(a) Each Participant may, beginning January 1, 1993, elect to
defer his Compensation which would have been received in the Plan Year, but for
the deferral election, by up to the greater of 7.5% or $5,200. A deferral
election (or modification of an earlier election) may not be made with respect
to Compensation which is currently available on or before the date the
Participant executed such election.
The amount by which Compensation is reduced shall be that
Participant's Deferred Compensation and be treated as an Employer Elective
Contribution and allocated to that Participant's Elective Account.
9. ARTICLE VI, "DETERMINATION AND DISTRIBUTION OF BENEFITS,"
SHALL BE DELETED IN ITS ENTIRETY AND THE FOLLOWING ARTICLE VI SHALL BE
SUBSTITUTED IN ITS PLACE:
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer and
retire for the purposes hereof on his Normal Retirement Date. Upon such Normal
Retirement Date, all amounts credited to such Participant's Combined Account
shall become distributable. However, a Participant may postpone the termination
of his employment with the Employer to a later date, in which event the
participation of such Participant in the Plan, including the right to receive
allocations pursuant to Section 4.4, shall continue until his Late Retirement
Date. Upon a Participant's Retirement Date, or as soon thereafter as is
practicable, the Trustee shall distribute all amounts credited to such
Participant's Combined Account in accordance with Section 6.5.
6.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Retirement Date
or other termination of his employment, all amounts credited to such
Participant's Combined Account shall become fully vested. The Administrator
shall direct the Trustee, in accordance with the provisions of Sections 6.6 and
6.7, to distribute the value of the deceased Participant's accounts to the
Participant's Beneficiary.
(b) Upon the death of a Former Participant, the Administrator
shall direct the Trustee, in accordance with the provisions of Sections 6.6 and
6.7, to distribute any remaining vested amounts credited to the accounts of a
deceased Former Participant to such Former Participant's Beneficiary.
- 5 -
<PAGE> 6
(c) Any security interest held by the Plan by reason of an
outstanding loan to the Participant or Former Participant shall be taken into
account in determining the amount of the Pre- Retirement Survivor Annuity.
(d) The Administrator may require such proper proof of death
and such evidence of the right of any person to receive payment of the value of
the account of a deceased Participant or Former Participant as the Administrator
may deem desirable. The Administrator's determination of death and of the right
of any person to receive payment shall be conclusive.
(e) Unless otherwise elected in the manner prescribed in
Section 6.6, the Beneficiary of the death benefit shall be the Participant's
spouse, who shall receive such benefit in the form of a Pre-Retirement Survivor
Annuity pursuant to Section 6.6. Except, however, the Participant may designate
a Beneficiary other than his spouse if:
(1) the Participant and his spouse have validly
waived the Pre-Retirement Survivor Annuity in the
manner prescribed in Section 6.6, and the spouse has
waived his or her right to be the Participant's
Beneficiary, or
(2) the Participant is legally separated or has been
abandoned (within the meaning of local law) and the
Participant has a court order to such effect (and
there is no "qualified domestic relations order" as
defined in Code Section 414(p) which provides
otherwise), or
(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a Beneficiary shall
be made on a form satisfactory to the Administrator. A Participant may at any
time revoke his designation of a Beneficiary or change his Beneficiary by filing
written notice of such revocation or change with the Administrator. However, the
Participant's spouse must again consent in writing to any change in Beneficiary
unless the original consent acknowledged that the spouse had the right to limit
consent only to a specific Beneficiary and that the spouse voluntarily elected
to relinquish such right. In the event no valid designation of Beneficiary
exists at the time of the Participant's death, the death benefit shall be
payable to his estate.
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability prior to
his Retirement Date or other termination of his employment, all amounts credited
to such Participant's Combined Account shall become fully Vested. In the event
of a Participant's Total and Permanent Disability, the Trustee, in accordance
with the provisions of Sections 6.5 and 6.7, shall distribute to such
Participant all amounts credited to such Participant's Combined Account as
though he had retired.
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<PAGE> 7
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date coinciding with or
subsequent to the termination of a Participant's employment for any reason other
than death, Total and Permanent Disability or retirement, the Administrator may
direct the Trustee to segregate the amount of the Vested portion of such
Terminated Participant's Combined Account and invest the aggregate amount
thereof in a separate, federally insured savings account, certificate of
deposit, common or collective trust fund of a bank or a deferred annuity. In the
event the Vested portion of a Participant's Combined Account is not segregated,
the amount shall remain in a separate account for the Terminated Participant and
share in allocations pursuant to Section 4.4 until such time as a distribution
is made to the Terminated Participant.
Distribution of the funds due to a Terminated Participant
shall be made on the occurrence of an event which would result in the
distribution had the Terminated Participant remained in the employ of the
Employer (upon the Participant's death, Total and Permanent Disability or Normal
Retirement). However, at the election of the Participant, the Administrator
shall direct the Trustee to cause the entire Vested portion of the Terminated
Participant's Combined Account to be payable to such Terminated Participant. Any
distribution under this paragraph shall be made in a manner which is consistent
with and satisfies the provisions of Section 6.5, including, but not limited to,
all notice and consent requirements of Code Sections 417 and 411(a)(11) and the
Regulations thereunder.
If the value of a Terminated Participant's Vested benefit
derived from Employer and Employee contributions does not exceed $3,500 and has
never exceeded $3,500 at the time of any prior distribution, the Administrator
shall direct the Trustee to cause the entire Vested benefit to be paid to such
Participant in a single lump sum.
For purposes of this Section 6.4, if the value of a Terminated
Participant's Vested benefit is zero, the Terminated Participant shall be deemed
to have received a distribution of such Vested benefit.
(b) The Vested portion of any Participant's Account shall be a
percentage of the total amount credited to his Participant's Account determined
on the basis of the Participant's number of Years of Service according to the
following schedule:
Vesting Schedule
Years of Service Percentage
3 20%
4 40%
5 60%
6 80%
7 100%
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<PAGE> 8
(c) Notwithstanding the vesting provided for in
paragraph (b) above, for any Top Heavy Plan Year, the Vested portion of the
Participant's Account of any Participant who has an Hour of Service after the
Plan becomes top heavy shall be a percentage of the total amount credited to his
Participant's Account determined on the basis of the Participant's number of
Years of Service according to the following schedule:
Vesting Schedule
Years of Service Percentage
2 20%
3 40%
4 60%
5 80%
6 100%
If in any subsequent Plan Year, the Plan ceases to be a Top
Heavy Plan, the Administrator shall revert to the vesting schedule in effect
before this Plan became a Top Heavy Plan. Any such reversion shall be treated as
a Plan amendment pursuant to the terms of the Plan.
(d) Notwithstanding the vesting schedule above, the Vested
percentage of a Participant's Account shall not be less than the Vested
percentage attained as of the later of the effective date or adoption date of
this amendment and restatement.
(e) Notwithstanding the vesting schedule above, upon the
complete discontinuance of the Employers contributions to the Plan or upon any
full or partial termination of the Plan, all amounts credited to the account of
any affected Participant shall become 100% Vested and shall not thereafter be
subject to Forfeiture.
(f) The computation of a Participant's nonforfeitable
percentage of his interest in the Plan shall not be reduced as the result of any
direct or indirect amendment to this Plan. For this purpose, the Plan shall be
treated as having been amended if the Plan provides for an automatic change in
vesting due to a change in top heavy status. In the event that the Plan is
amended to change or modify any vesting schedule, a Participant with at least
three (3) Years of Service as of the expiration date of the election period may
elect to have his nonforfeitable percentage computed under the Plan without
regard to such amendment. If a Participant fails to make such election, then
such Participant shall be subject to the new vesting schedule. The Participant's
election period shall commence on the adoption date of the amendment and shall
end 60 days after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice
of the amendment from the Employer or Administrator.
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<PAGE> 9
(g) (1) If any Former Participant shall be reemployed by
the Employer before a 1-Year Break in Service occurs,
he shall continue to participate in the Plan in the
same manner as if such termination had not occurred.
(2) If any Former Participant shall be reemployed by
the Employer before five (5) consecutive 1-Year
Breaks in Service, and such Former Participant had
received, or was deemed to have received, a
distribution of his entire Vested interest prior to
his reemployment, his forfeited account shall be
reinstated only if he repays the full amount
distributed to him before the earlier of five (5)
years after the first date on which the Participant
is subsequently reemployed by the Employer or the
close of the first period of five (5) consecutive
1-Year Breaks in Service commencing after the
distribution, or in the event of a deemed
distribution, upon the reemployment of such Former
Participant. If a distribution occurs for any reason
other than a separation from service, the time for
repayment may not end earlier than five (5) years
after the date of distribution. In the event the
Former Participant does repay the full amount
distributed to him, or in the event of a deemed
distribution, the undistributed portion of the
Participant's Account must be restored in full,
unadjusted by any gains or losses occurring
subsequent to the Anniversary Date or other valuation
date coinciding with or preceding his termination.
The source for such reinstatement shall first be any
Forfeitures occurring during the year. If such source
is insufficient, then the Employer shall contribute
an amount which is sufficient to restore any such
forfeited Accounts provided, however, that if a
discretionary contribution is made for such year
pursuant to Section 4.1(c), such contribution shall
first be applied to restore any such Accounts and the
remainder shall be allocated in accordance with
Section 4.4.
(3) If any Former Participant is reemployed after a
1-Year Break in Service has occurred, Years of
Service shall include Years of Service prior to his
1-Year Break in Service subject to the following
rules:
(i) If a Former Participant has a 1-Year
Break in Service, his pre-break and
post-break service shall be used for
computing Years of Service for eligibility
and for vesting purposes only after he has
been employed for one (1) Year of Service
following the date of his reemployment with
the Employer;
(ii) Any Former Participant who under the
Plan does not have a nonforfeitable right to
any interest in the Plan resulting from
Employer contributions shall lose credits
otherwise allowable under (i) above if his
consecutive 1-Year Breaks in Service equal
or exceed the greater of (A) five (5) or (B)
the aggregate number of his pre- break Years
of Service;
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<PAGE> 10
(iii) After five (5) consecutive 1-Year
Breaks in Service, a Former Participant's
Vested Account balance attributable to
pre-break service shall not be increased as
a result of post-break service;
(iv) If a Former Participant who has not
had his Years of Service before a 1-Year
Break in Service disregarded pursuant to
(ii) above completes one (1) Year of Service
for eligibility purposes following his
reemployment with the Employer, he shall
participate in the Plan retroactively from
his date of reemployment;
(v) If a Former Participant who has not
had his Years of Service before a 1-Year
Break in Service disregarded pursuant to
(ii) above completes a Year of Service (a
1-Year Break in Service previously occurred,
but employment had not terminated), he shall
participate in the Plan retroactively from
the first day of the Plan Year during which
he completes one (1) Year of Service.
6.5 DISTRIBUTION OF BENEFITS
(a) (1) Unless otherwise elected as provided below,
a Participant who is married on the "annuity starting
date; and who does not die before the "annuity
starting date" shall receive the value of all of his
benefits in the form of a joint and survivor annuity.
The joint and survivor annuity is an annuity that
commences immediately and shall be equal in value to
a single life annuity. Such joint and survivor
benefits following the Participant's death shall
continue to the spouse during the spouse's lifetime
at a rate equal to 50% of the rate at which such
benefits were payable to the Participant. This joint
and 50% survivor annuity shall be considered the
designated qualified joint and survivor annuity and
automatic form of payment for the purposes of this
Plan. However, the Participant may elect to receive a
smaller annuity benefit with continuation of payments
to the spouse at a rate of seventy-five percent (75%)
or one hundred percent (100%) of the rate payable to
a Participant during his lifetime, which alternative
joint and survivor annuity shall be equal in value to
the automatic joint and 50% survivor annuity. An
unmarried Participant shall receive the value of his
benefit in the form of a life annuity. Such unmarried
Participant, however, may elect in writing to waive
the life annuity. The election must comply with the
provisions of this Section as if it were an election
to waive the joint and survivor annuity by a married
Participant, but without the spousal consent
requirement. The Participant may elect to have any
annuity provided for in this Section distributed upon
the attainment of the "earliest retirement age" under
the Plan. The "earliest retirement age" is the
earliest date on which, under the Plan, the
Participant could elect to receive retirement
benefits.
(2) Any election to waive the joint and survivor
annuity must be made by
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<PAGE> 11
the Participant in writing during the election period
and be consented to by the Participant's spouse. If
the spouse is legally incompetent to give consent,
the spouse's legal guardian, even if such guardian is
the Participant, may give consent. Such election
shall designate a Beneficiary (or a form of benefits)
that may not be changed without spousal consent
(unless the consent of the spouse expressly permits
designations by the Participant with the requirement
of further consent by the spouse). Such spouse's
consent shall be irrevocable and must acknowledge the
effect of such election and be witnessed by a Plan
representative or a notary public. Such consent shall
not be required if it is established to the
satisfaction of the Administrator that the required
consent cannot be obtained because there is no
spouse, the spouse cannot be located, or other
circumstances that may be prescribed by Regulations.
The election made by the Participant and consented to
by his spouse may be revoked by the Participant in
writing without the consent of the spouse at any time
during the election period. The number of revocations
shall not be limited. Any new election must comply
with the requirements of this paragraph. A former
spouse's waiver shall not be binding on a new spouse.
(3) The election period to waive the joint and
survivor annuity shall be the 90 day period ending on
the "annuity starting date."
(4) For purposes of this Section, the "annuity
starting date" means the first day of the first
period for which an amount is paid as an annuity, or,
in the case of a benefit not payable in the form of
an annuity, the first day on which all events have
occurred which entitle the Participant to such
benefit.
(5) With regard to the election, the Administrator
shall provide to the Participant no less than 30 days
and no more than 90 days before the "annuity starting
date" a written explanation of:
(i) the terms and conditions of the
joint and survivor annuity, and
(ii) the Participant's right to make, and
the effect of, an election to waive
the joint and survivor annuity, and
(iii) the right of the Participant's
spouse to consent to any election to
waive the joint and survivor
annuity, and
(iv) the right of the Participant to
revoke such election, and the effect
of such revocation.
(b) In the event a married Participant duly elects
pursuant to paragraph (a)(2) above not to receive his benefit in the form of a
joint and survivor annuity, or if such Participant is not married, in the form
of a life annuity, the Administrator, pursuant to the election of the
Participant, shall direct the Trustee to distribute to a Participant or his
Beneficiary any amount to which he is entitled
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<PAGE> 12
under the Plan in one or more of the following methods:
(1) One lump-sum payment in cash,
(2) Payments over a period certain in monthly,
quarterly, semiannual, or annual cash installments.
In order to provide such installment payments, the
Administrator may (A) segregate the aggregate amount
thereof in a separate, federally insured savings
account, certificate of deposit in a bank or savings
and loan association, money market certificate or
other liquid short-term security or (B) purchase a
nontransferable annuity contract for a term certain
(with no life contingencies) providing for such
payment. The period over which such payment is to be
made shall not exceed one hundred twenty (120)
months.
(c) The present value of a Participant's joint and survivor
annuity derived from Employer and Employee contributions, may not be paid
without his written consent if the value exceeds, or has ever exceeded, $3,500
at the time of any prior distribution. Further, the spouse of a Participant must
consent in writing to any immediate distribution. If the value of the
Participant's benefit derived from Employer and Employee contributions, does not
exceed $3,500 and has never exceeded $3,500 at the time of any prior
distribution, the Administrator may immediately distribute such benefit without
such Participant's consent. No distribution may be made under the preceding
sentence after the "annuity starting date" unless the Participant and his spouse
consent in writing to such distribution. Any written consent required under this
paragraph must be obtained not more than 90 days before commencement of the
distribution and shall be made in a manner consistent with Section 6.5(a)2.
(d) Any distribution to a Participant who has a benefit which
exceeds, or has ever exceeded, $3,500 at the time of any prior distribution
shall require such Participant's consent if such distribution commences prior to
the later of his Normal Retirement Age or age 62. With regard to this required
consent:
(1) No consent shall be valid unless the Participant
has received a general description of the material
features and an explanation of the relative values of
the optional forms of benefit available under the
Plan that would satisfy the notice requirements of
Code Section 417.
(2) The Participant must be informed of his right to
defer receipt of the distribution. If a Participant
fails to consent, it shall be deemed an election to
defer the commencement of payment. However, any
election to defer the receipt of benefits shall not
apply with respect to distributions which are
required under Section 6.5(e).
(3) Notice of the rights specified under this
paragraph shall be provided no less than 30 days and
no more than 90 days before the "annuity starting
date".
(4) Written consent of the Participant to the
distribution must not be made
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<PAGE> 13
before the Participant receives the notice and must
not be made more than 90 days before the "annuity
starting date".
(5) No consent shall be valid if a significant
detriment is imposed under the Plan on any
Participant who does not consent to the distribution.
(e) Notwithstanding any provision in the Plan to the contrary,
the distribution of a Participant's benefits made on or after January 1, 1985,
whether under the Plan or through the purchase of an annuity contract, shall be
made in accordance with the following requirements and shall otherwise comply
with Code Section 401(a)(9) and the Regulations thereunder (including Regulation
1.401(a)(9)-2), the provisions of which are incorporated herein by reference:
(1) A Participant's benefits shall be distributed to
him not later than April 1st of the calendar year
following the later of (i) the calendar year in which
the Participant attains age 70 1/2 or (ii) the
calendar year in which the Participant retires,
provided, however, that this clause (ii) shall not
apply in the case of a Participant who is a "five (5)
percent owner" at any time during the five (5) Plan
Year period ending in the calendar year in which he
attains age 70 1/2, or, in the case of the
Participant who becomes a "five (5) percent owner"
during any subsequent Plan Year, clause (ii) shall no
longer apply and the required beginning date shall be
the April 1st of the calendar year following the
calendar year in which such subsequent Plan Year
ends. Alternatively, if the distribution is to be in
the form of a joint and survivor annuity or single
life annuity as provided in paragraph (a)(1) above,
then distributions must begin no later than the
applicable April 1st as determined under the
preceding sentence and must be made over the life of
the Participant (or the lives of the Participant and
the Participant's designated Beneficiary) in
accordance with Regulations. Notwithstanding the
foregoing, clause (ii) above shall not apply to any
Participant unless the Participant had attained age
70 1/2 before January 1, 1988 and was not a "five (5)
percent owner" at any time during the Plan Year
ending with or within the calendar year in which the
Participant attained age 66 1/2 or any subsequent
Plan Year.
(2) Distributions to a Participant and his
Beneficiaries shall only be made in accordance with
the incidental death benefit requirements of Code
Section 401(a)(9)(G) and the Regulations thereunder.
Additionally, for calendar years beginning before
1989, distributions may also be made under an
alternative method which provides that the then
present value of the payments to be made over the
period of the Participant's life expectancy exceeds
fifty percent (50%) of the then present value of the
total payments to be made to the Participant and his
beneficiaries.
(f) For purposes of this Section, the life expectancy of a
Participant and a Participant's spouse, other than in the case of a life
annuity, shall not be redetermined in accordance
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<PAGE> 14
with Code Section 401(a)(9)(D). Life expectancy and joint and last survivor
expectancy shall be computed using the return multiples in Tables V and VI of
Regulation 1.72-9.
(g) Subject to the spouse's right of consent afforded under
the Plan, the restrictions imposed by this Section shall not apply if a
Participant has, prior to January 1, 1984, made a written designation to have
his retirement benefit paid in an alternative method acceptable under Code
Section 401(a) as in effect prior to the enactment of the Tax Equity and Fiscal
Responsibility Act of 1982.
(h) All annuity Contracts under this Plan shall be
non-transferable when distributed. Furthermore, the terms of any annuity
Contract purchased and distributed to a Participant or spouse shall comply with
all of the requirements of the Plan.
(i) If a distribution is made at a time when a Participant is
not fully Vested in his Participant's Account and the Participant may increase
the Vested percentage in such account:
(1) a separate account shall be established for
the Participant's interest in the Plan as of the
time of the distribution; and
(2) at any relevant time, the Participant's Vested
portion of the separate account shall be equal to an
amount ("X") determined by the formula:
X equals P(AB plus (R x D)) - (R x D)
For purposes of applying the formula: P is the Vested
percentage at the relevant time. AB is the account
balance at the relevant time, D is the amount of
distribution, and R is the ratio of the account
balance at the relevant time to the account balance
after distribution.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
(a) Unless otherwise elected as provided below, a Vested
Participant who dies before the annuity starting date and who has a surviving
spouse shall have his death benefit paid to his surviving spouse in the form of
a Pre-Retirement Survivor Annuity. The Participant's spouse may direct that
payment of the Pre-Retirement Survivor Annuity commence within a reasonable
period after the Participant's death. If the spouse does not so direct, payment
of such benefit will commence at the time the Participant would have attained
the later of his Normal Retirement Age or age 62. However, the spouse may elect
a later commencement date. Any distribution to the Participant's spouse shall be
subject to the rules specified in Section 6.6(g).
(b) Any election to waive the Pre-Retirement Survivor Annuity
before the Participant's death must be made by the Participant in writing during
the election period and shall require that spouse's irrevocable consent in the
same manner provided for in Section 6.5(a)(2). Further, the spouse's consent
must acknowledge the specific nonspouse Beneficiary. Notwithstanding
the foregoing, the nonspouse Beneficiary need not be acknowledged, provided the
consent of the spouse acknowledges that the spouse has the right to limit
consent only to a specific Beneficiary and that the
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<PAGE> 15
spouse voluntarily elects to relinquish such right.
(c) The election period to waive the Pre-Retirement Survivor
Annuity shall begin on the first day of the Plan Year in which the Participant
attains age 35 and end on the date of the Participant's death. An earlier waiver
(with spousal consent) may be made provided a written explanation of the
Pre-Retirement Survivor Annuity is given to the Participant and such waiver
becomes invalid at the beginning of the Plan Year in which the Participant turns
age 35. In the event a Vested Participant separates from service prior to the
beginning of the election period, the election period shall begin on the date of
such separation from service.
(d) With regard to the election, the Administrator shall
provide each Participant within the applicable period, with respect to such
Participant (and consistent with Regulations), a written explanation of the
Pre-Retirement Survivor Annuity containing comparable information to that
required pursuant to Section 6.5(a)(5). For the purposes of this paragraph, the
term "applicable period" means, with respect to a Participant, whichever of the
following periods ends last:
(1) The period beginning with the first day of the
Plan Year in which the Participant attains age 32 and
ending with the close of the Plan Year preceding the
Plan Year in which the Participant attains age 35;
(2) A reasonable period after the individual becomes
a Participant;
(3) A reasonable period ending after the Plan no
longer fully subsidizes the cost of the
Pre-Retirement Survivor Annuity with respect to the
Participant;
(4) A reasonable period ending after Code Section
401(a)(11) applies to the Participant; or
(5) A reasonable period after separation from service
in the case of a Participant who separates before
attaining age 35. For this purpose, the Administrator
must provide the explanation beginning one year
before the separation from service and ending one
year after such separation. If such a Participant
thereafter returns to employment with the Employer,
the applicable period for such Participant shall be
redetermined.
For purposes of applying this Section 6.6(d), a reasonable
period ending after the enumerated events described in paragraphs (2), (3) and
(4) is the end of the two year period beginning one year prior to the date the
applicable event occurs, and ending one year after that date.
(e) If the present value of the Pre-Retirement Survivor
Annuity derived from Employer and Employee contributions does not exceed $3,500
and has never exceeded $3,500 at the time of any prior distribution, the
Administrator shall direct the immediate distribution of such amount to the
Participant's spouse. No distribution may be made under the preceding sentence
after the annuity starting date unless the spouse consents in writing. If the
value exceeds, or has ever exceeded, $3,500 at the time of any prior
distribution, an immediate distribution of the entire amount may be made to the
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<PAGE> 16
surviving spouse, provided such surviving spouse consents in writing to such
distribution. Any written consent required under this paragraph must be obtained
not more than 90 days before commencement of the distribution and shall be made
in a manner consistent with Section 6.5(a)(2).
(f) (1) In the event the death benefit is not paid in the
form of a Pre-Retirement Survivor Annuity, it shall
be paid to the Participant's Beneficiary by either of
the following methods, as elected by the Participant
(or if no election has been made prior to the
Participant's death, by his Beneficiary), subject to
the rules specified in Section 6.6(g):
(i) One lump-sum payment in cash.
(ii) Payment in monthly, quarterly,
semi-annual, or annual cash installments
over a period to be determined by the
Participant or his Beneficiary. After
periodic installments commence, the
Beneficiary shall have right to direct the
Trustee to reduce the period over which such
periodic installments shall be made, and the
Trustee shall adjust the cash amount of such
periodic installments accordingly.
(2) In the event the death benefit payable pursuant
to Section 6.2 is payable in installments, then, upon
the death of the Participant, the Administrator may
direct the Trustee to segregate the death benefit
into a separate account, and the Trustee shall invest
such segregated account separately, and the funds
accumulated in such account shall be used for the
payment of the installments.
(g) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a Participant made on or after January 1, 1985,
shall be made in accordance with the following requirements and shall otherwise
comply with Code Section 401(a)(9) and the Regulations thereunder. If the death
benefit is paid in the form of a Pre-Retirement Survivor Annuity, then
distributions to the Participant's spouse must commence on or before the later
of (1) December 31st of the calendar year immediately following the calendar
year in which the Participant died; or (2) December 31st of the calendar year in
which the Participant would have attained aged 70-1/2. If it is determined
pursuant to Regulations that the distribution of a Participant's interest has
begun and the Participant dies before his entire interest has been distributed
to him, the remaining portion of such interest shall be distributed at least as
rapidly as under the method of distribution selected pursuant to Section 6.5 as
of his date of death. If a Participant dies before he has begun to receive any
distributions of his interest under the Plan or before distributions are deemed
to have begun pursuant to Regulations and distributions are not to be made in
the form of a Pre-Retirement Survivor Annuity, then his death benefit shall be
distributed to his Beneficiaries by December 31st of the calendar year in which
the fifth anniversary of his date of death occurs.
(h) For purposes of this Section, the life expectancy of a
Participant and a Participant's spouse may, at the election of the Participant
or the Participant's spouse, be redetermined in accordance with Regulations. The
election, once made, shall be irrevocable. If no election is made by the time
distributions must commence, then the life expectancy of the Participant and the
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<PAGE> 17
Participant's spouse shall not be subject to recalculation. Life expectancy and
joint and last survivor expectancy shall be computed using the return multiples
in Tables V and VI of Regulation 1.72-9.
(i) Subject to the spouse's right of consent afforded under
the Plan, the restrictions imposed by this Section shall not apply if a
Participant has, prior to January 1, 1984, made a written designation to have
his death benefits paid in an alternative method acceptable under Code Section
401(a) as in effect prior to the enactment of the Tax Equity and Fiscal
Responsibility Act of 1982.
6.7 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever the Trustee is to
make a distribution or to commence a series of payments on or as of an
Anniversary Date, the distribution may be made or begun on such date or as soon
thereafter as is practicable, but in no event later than 180 days after the
Anniversary Date. However, unless a Former Participant elects in writing to
defer the receipt of benefits (such election may not result in a death benefit
that is more than incidental), the payment of benefits shall begin not later
than the 60th day after the close of the Plan Year in which the latest of the
following events occurs: (a) the date on which the Participant attains the
earlier of age 65 or the Normal Retirement Age specified herein; (b) the 10th
anniversary of the year in which the Participant commenced participation in the
Plan; or (c) the date the Participant terminates his service with the Employer.
6.8 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by laws of the state in which said Beneficiary resides. Such a payment to the
legal guardian, custodian or parent or a minor Beneficiary shall fully discharge
the Trustee, Employer, and Plan from further liability on account thereof.
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, at the later of the
Participant's attainment of age 62 or his Normal Retirement Age, remain unpaid
solely by reason of the inability of the Administrator, after sending a
registered letter, return receipt requested, to the last known address, and
after further diligent effort, to ascertain the whereabouts of such Participant
or his Beneficiary, the amount so distributable shall be treated as a Forfeiture
pursuant to the Plan. In the event a Participant or Beneficiary is located
subsequent to his benefit being reallocated, such benefit shall be restored.
6.10 PRE-RETIREMENT DISTRIBUTION
At such time as a Participant shall have attained the age of 55 years,
the Administrator, at the
- 17 -
<PAGE> 18
election of the Participant, shall direct the Trustee to distribute all or a
portion of the Vested amount then credited to the accounts maintained on behalf
of the Participant. (However, no distribution from the Participant's Account
shall occur prior to 100% vesting.) In the event that the Administrator makes
such a distribution, the Participant shall continue to be eligible to
participate in the Plan on the same basis as any other Employee. Any
distribution made pursuant to this Section shall be made in a manner consistent
with Section 6.5, including, but not limited to, all notice and consent
requirements of Code Sections 417 and 411(a)(11) and the Regulation thereunder.
Notwithstanding the above, pre-retirement distributions from a
Participant's Elective Account shall not be permitted prior to the Participant
attaining age 59 1/2 except as otherwise permitted under the terms of the Plan.
6.11 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided to a Participant
in this Plan shall be subject to the rights afforded to any "alternate payee"
under a "qualified domestic relations order." Furthermore, a distribution to an
"alternate payee" shall be permitted if such distribution is authorized by a
"qualified domestic relations order," even if the affected Participant has not
separated from service and has not reached the "earliest retirement age" under
the Plan. For the purposes of this Section, "alternate payee," "qualified
domestic relations order" and "earliest retirement age' shall have the meaning
set forth under Code Section 414(p).
10. ARTICLE VII, "TRUSTEE," SECTION 7.4(a) SHALL BE DELETED IN ITS
ENTIRETY AND THE FOLLOWING SECTION 7.4(a) SHALL BE SUBSTITUTED IN ITS PLACE:
(a) The Trustee may, in the Trustee's discretion, make loans
to Participants and Beneficiaries under the following circumstances: (1) loans
shall be made available to all Participants from their Participant's Elective
Accounts and from their Participant's Rollover Accounts, as defined in Section
4.9 hereof, and to their beneficiaries on a reasonably equivalent basis; (2)
loans shall not be made available to Highly Compensated Employees in an amount
greater than the amount made available to other Participants from their
Participant's Elective Accounts and Participant's Rollover Accounts and to their
Beneficiaries; (3) loans shall bear a reasonable rate of interest; (4) loans
shall be adequately secured; and (5) loans shall provide for repayment over a
reasonable period of time.
11. ARTICLE X, "PARTICIPATING EMPLOYERS," SHALL BE AMENDED BY THE
ADDITION OF A NEW SECTION 10.11, "PLAN NAME," TO READ AS FOLLOWS:
10.11 SUBSTITUTION OF PLAN NAME
When referring to this Plan, Participating Employers may substitute the
name of the Participating Employer for the words, "Talon Inc."
- 18 -
<PAGE> 19
12. EXCEPT AS HEREBY AMENDED, THE PLAN, AS IN EFFECT PRIOR TO THIS
AMENDMENT, REMAINS IN FULL FORCE AND EFFECT.
- 19 -
<PAGE> 20
IN WITNESS WHEREOF, the Employers have caused this amendment to be
executed as of the date first written above.
G & L INDUSTRIES, INC.
By: __________________________
Its:__________________________
ALLEN-STEVENS CORP.
By: __________________________
Its:__________________________
HAWTHORNE METAL PRODUCTS COMPANY
By: ___________________________
Its:___________________________
TALON INC.
By: ___________________________
Its:___________________________
TALON DEVELOPMENT GROUP, INC.
By: ___________________________
Its:___________________________
PRES-TOCK, INC.
By: ___________________________
Its:___________________________
- 20 -
<PAGE> 21
THIRD AMENDMENT
TO
THE TALON INC.
401(k) PLAN AND TRUST
This Third Amendment is made as of the 20th day of July, 1993, by G & L
Industries, Inc. Allen-Stevens Corp., Hawthorne Metal Products Company, Talon
Inc. and Talon Development Group, Inc., all Michigan corporations, and
Pres-Tock, Inc., a Washington corporation (the "Employers").
WITNESSETH:
WHEREAS, effective August 1, 1985, G & L Industries, Inc. adopted the G & L
Industries, Inc. 401(k) Plan and Trust (the "Plan"); and
WHEREAS, Talon Inc., Talon Development Group, Allen-Stevens Corp.,
Hawthorne Metal Products Company and Pres-Tock, Inc., subsequently adopted the
Plan as participating employers; and
WHEREAS, under the provisions of the Plan, the Employers reserved for
themselves the right to amend the Plan; and
WHEREAS, it is the Employers' desire to amend the Plan.
NOW, THEREFORE, the Plan is hereby amended effective January 1, 1993 as
follows:
FIRST, a new Section 6.12, " Distributions on or after January 1,
1993 (Model Language of Rev. Proc. 93-12.)" shall be added to Article
VI, "Determination and Distribution of Benefits," read as follows:
6.12 Distributions on or after January 1, 1993 (model language
of Rev. Proc. 93-12.)
This Article applies to distributions made on or after
January 1, 1993. Notwithstanding any provisions of the plan to
the contrary that would otherwise limit a distributee's election
under this Article, a distributee may elect, at the time and in
the manner prescribed by the Plan Administrator, to
<PAGE> 22
have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan specified by the
distributee in a direct rollover.
(a) Eligible rollover distribution: An eligible
rollover distribution is any distribution of all or any
portion of the balance to the credit of the distributee,
except that an eligible rollover distribution does not
include any distribution that is one of a series of
substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's designated
beneficiary, or for a specified period of ten years or more;
any distribution to the extent such distribution is required
under section 401(a)(9) of the Code, and the portion of any
distribution that is not includible in gross income
(determined without regard to the exclusion for net
unrealized appreciation with respect to employer
securities).
(b) Eligible retirement plan: An eligible retirement
plan is an individual retirement account described in
section 408(a) of the Code, an individual retirement annuity
described in section 403(a) of the Code, or a qualified
trust described in section 401(a) of the Code, that accepts
the distributee's eligible rollover distribution. However,
in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an annuity.
(c) Distributee: A distributee includes an employee or
former employee. In addition, the employee's or former
employee's surviving spouse and the employee's or former
employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined
in Section 414(p) of the Code, are distributees with regard
to the interest of the spouse or former spouse.
(d) Direct rollover: A direct rollover is a payment by
the Plan to the eligible retirement plan specified by the
distributee.
<PAGE> 23
IN WITNESS WHEREOF, the Employers have caused this amendment to be executed
as of the date first written above.
G & L INDUSTRIES, INC.
By: _______________________
Its:_______________________
ALLEN-STEVENS CORP.
By: _______________________
Its:_______________________
HAWTHORNE METAL PRODUCTS COMPANY
By: ___________________________
Its:___________________________
TALON INC.
By: ___________________________
Its:___________________________
TALON DEVELOPMENT GROUP, INC.
By: ___________________________
Its:___________________________
PRES-TOCK, INC.
By: ___________________________
Its:___________________________
<PAGE> 24
FOURTH AMENDMENT
TO
THE TALON INC.
401(k) PLAN AND TRUST
This Fourth Amendment is made as of the 10th day of November, 1994, by G &
L Industries, Inc. Allen-Stevens Corp., Hawthorne Metal Products Company, Talon
Inc. and Talon Development Group, Inc. and Pres-Tock, Inc., all Michigan
corporations (the "Employers").
WITNESSETH:
WHEREAS, the Employers sponsor the Plan and, under the provisions of the
Plan, reserve for themselves the right to amend the Plan; and
WHEREAS, it is the Employers' desire to amend the Plan.
NOW, THEREFORE, the Plan is hereby amended effective January 1, 1994 as
follows:
FIRST, Section 1.8, "Compensation" shall be amended by the addition of
three paragraphs (model language of Rev Proc 94-13) to read as follows:
"In addition to other applicable limitations set forth in the
Plan, and notwithstanding any other provision of the Plan to the
contrary, for Plan Years beginning on or after January 1, 1994, the
annual compensation of each employee taken into account under the Plan
shall not exceed the OBRA '93 annual compensation limit. The OBRA '93
annual compensation limit is $150,000, as adjusted by the Commissioner
for increases in the cost of living in accordance with section
401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not
exceeding 12 months, over which compensation is determined
(determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the determination
period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any
reference in this Plan to the Limitation under section 401(a)(17) of
the Code shall mean the OBRA '93 annual compensation limit set forth
in this provision.
If compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current
Plan Year, the compensation for that prior determination period is
subject to the OBRA '93 annual compensation limit in effect for that
prior determination period. For this purpose,
<PAGE> 25
for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA
'93 annual compensation limit is $150,000."
SECOND, Article I, "Definitions," shall be amended by the addition of a
new Section 1.63, to read as follows:
"1.63 "Contributing Employer" means G & L Industries, Inc.
and any Participating Employer, as defined in Section 10.1."
THIRD, Subsection 4.1(c) shall be deleted in its entirety and the
following subsection 4.1(c) shall be substituted in its place and
stead:
"A discretionary amount, which amount shall be deemed an
Employer's Non-Elective Contribution. Each Contributing Employer
may contribute to the Plan a separate discretionary amount for
their respective employees who are Participants in the Plan,
provided that such contributions or benefits do not cause the
Plan to discriminate in favor of Highly Compensated Employees,
within the meaning of Code Section 401(a)(4) and the regulations
thereunder."
FOURTH, Subsection 4.4(b)(3) shall be deleted in its entirety and the
following subsection 4.4(b)(3) shall be substituted in its place and
stead:
"With respect to the Employer's Non-Elective Contribution
made pursuant to Section 4.1(c), in the following manner:
(i) A dollar amount equal to 5.7% of the sum
of each Participant's total Compensation
plus Excess Compensation shall be allocated
to each Participant's Account. If any
Contributing Employer does not contribute
such amount for all of its respective
Participants, such Participants will be
allocated a share of the Contributing
Employer's contribution in the same
proportion that each such Participant's
total Compensation plus his total Excess
Compensation for the Plan Year bears to the
total Compensation plus the total Excess
Compensation of all Participants employed by
such Contributing Employer for that year.
(ii) The balance of each Contributing
Employer's Non-Elective Contribution, over
the amount allocated above, if any, shall be
allocated to the Participant Account of
those Participants who are Employees of such
Contributing Employer in the same proportion
that each such Participant's total
Compensation for the Plan Year bears to the
total Compensation of all Participants
employed by such Contributing Employer for
that year."
<PAGE> 26
FIFTH, Section 8.1 "Amendment" shall be amended by the
addition of the following subsection 8.1(d):
"(d) Amendments to the Plan may be effected by a
written resolution in accordance with the established
procedure of the Employer's Board of Directors. Any such
amendment shall be effective as of such date as the Board of
Directors shall determine. The Plan Administrator shall notify
all covered Participants of any amendment modifying the
substantive terms of the Plan. Such notification shall be in
the form of a Summary of Material Modification unless
incorporated in an updated Summary Plan Description."
IN WITNESS WHEREOF, the Employers have caused this amendment to be
executed as of the date first written above.
TALON INC.
By: _______________________
Its:_______________________
G & L INDUSTRIES, INC.
By: _______________________
Its:_______________________
ALLEN-STEVENS CORP.
By: _______________________
Its:_______________________
<PAGE> 27
HAWTHORNE METAL PRODUCTS COMPANY
By: ___________________________
Its:___________________________
TALON DEVELOPMENT GROUP, INC.
By: ___________________________
Its:___________________________
PRES-TOCK, INC.
By: ___________________________
Its:___________________________
<PAGE> 28
FIFTH AMENDMENT
TO
THE TALON INC.
401(k) PLAN AND TRUST
This Fifth Amendment is made as of the 15th day of March, 1995, by G & L
Industries, Inc. Allen-Stevens Corp., Talon Inc. and Talon Development Group,
Inc., Hawthorne Metal Products Company, Pres-Tock, Inc., Reflectolite Products
Co., Inc., North American Die Casting Corp., North American Manufacturing Corp.
and Talon Automotive Group L.L.C. (the "Employers").
WITNESSETH:
WHEREAS, the Employers sponsor the Plan and, under the provisions of the
Plan, reserve for themselves the right to amend the Plan; and
WHEREAS, it is the Employers' desire to amend the Plan.
NOW, THEREFORE, effective March 15, 1995, except as provided herein, the
Plan is hereby amended as follows:
FIRST: Article II, "Top Heavy and Administration," Section 2.3(b) is hereby
deleted in its entirety and the following Section 2.3(b) is substituted in its
place and stead:
(b) The Employer shall establish a "funding policy and
method," i.e., it shall determine whether the Plan has a short
run need for liquidity (e.g., to pay benefits) or whether
liquidity is a long run goal and investment growth (and stability
of same) is a more current need, or shall appoint a qualified
person to do so. Such "funding policy and method" shall be
consistent with the objectives of this Plan and with the
requirements of Title I of the Act. The Employer shall also
provide investment directions ("Investment Directions"), insofar
as such Investment Directions are not contrary to the Act, to the
Trustee of any trust holding Assets of the Plan if such trust
requires Investment Directions for other than Directed Investment
Accounts. The Employer or its delegate shall communicate such
needs, goals and, if applicable, Investment Directions to the
Trustee, who shall coordinate such Plan needs with its investment
policy.
SECOND: Upon the approval of a final accounting to be rendered by the
Trustees under the Plan, Article VII, "Trustee," Sections 7.1, 7.2, 7.3, 7.5,
7.6, 7.7, 7.8 and 7.9 are deleted in their entirety;
<PAGE> 29
THIRD: Article VII, "Trustee," Section 7.4(a) is hereby deleted in its
entirety and the following Section 7.4(a) is substituted in its place and stead:
(a) The Administrator may, in the Administrator's discretion, direct
the Trustee of any trust holding Assets of the Plan, to make loans to
Participants and Beneficiaries under the following circumstances: (1) loans
shall be made available to all Participants from their Participants' Elective
Accounts and to their Beneficiaries on a reasonably equivalent basis; (2) loans
shall not be made available to Highly Compensated Employees in an amount
greater than the amount made available to other Participants from their
Participants' Elective Accounts and to their Beneficiaries; (3) loans shall
bear a reasonable rate of interest; (4) loans shall be adequately secured; and
(5) shall provide for repayment over a reasonable period of time.
FOURTH: Article IX, "Miscellaneous," Section 9.12 is hereby deleted in its
entirety and the following Section 9.12 is substituted in its place and stead:
9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY.
The "named Fiduciaries" of this Plan are (1) the Employer (2) the
Administrator, and (3) the Trustee. The named Fiduciaries shall have only
those specific powers, duties, responsibilities, and obligations as are
specifically given them under the Plan. In general, the Employer shall have
the sole responsibility for making the contributions provided for under
Section 4.1; and shall have the sole authority to appoint and remove the
Trustee of any trust and the Administrator; to formulate the Plan's
"funding policy and method"; to provide Investment Directions to the
Trustee of any trust if Investment Directions are required under such
trust, insofar as such Investment Directions are not contrary to the Act;
and to amend or terminate, in whole or in part, the Plan. The Administrator
shall have the sole responsibility for the administration of the Plan,
which responsibility is specifically described in the Plan. The Trustee of
each trust holding assets of the Plan shall have the sole responsibility of
management of the assets held under such Trust, subject to the direction of
the Employer, if applicable, as to the assets not held in Directed
Investment Accounts and subject to the direction of the Participants as to
those assets which are held in Directed Investment Accounts, except those
assets, the management of which are assigned to an Investment Manager, all
as specifically provided in the Plan. Each named Fiduciary warrants that
any directions given, information furnished, or action taken by it shall be
in accordance with the provisions of the Plan, authorizing or providing for
such direction, information or action. Furthermore, each named Fiduciary
may rely upon any such direction, information or action of another named
Fiduciary as being proper under the Plan, and is not required under the
Plan to inquire into the propriety of any such direction, information or
action. It is intended under the Plan that each named Fiduciary shall be
responsible for the proper exercise of its own powers, duties,
responsibilities and obligations under the Plan. No named Fiduciary shall
guarantee the Trust Fund in any manner against investment loss or
depreciation in asset value. Any person or group may serve in more than one
Fiduciary capacity. In the furtherance of their responsibilities hereunder,
the "named Fiduciaries" shall be empowered to interpret the Plan and Trust
and to resolve
<PAGE> 30
ambiguities, inconsistencies and omissions, which findings shall be
binding, final and conclusive.
IN WITNESS WHEREOF, the Employers have caused this amendment to be executed
as of the date first written above.
TALON INC.
By: ___________________________
Its:___________________________
G & L INDUSTRIES, INC.
By: __________________________
Its:__________________________
ALLEN-STEVENS CORP.
By: __________________________
Its:__________________________
HAWTHORNE METAL PRODUCTS COMPANY
By: ___________________________
Its:___________________________
TALON DEVELOPMENT GROUP, INC.
By: ___________________________
Its:___________________________
PRES-TOCK, INC.
By: ___________________________
Its:___________________________
<PAGE> 31
REFLECTOLITE PRODUCTS CO., INC.
By: __________________________
Its:__________________________
NORTH AMERICAN DIE CASTING CORP.
By: ___________________________
Its:___________________________
NORTH AMERICAN MANUFACTURING CORP.
By: ___________________________
Its:___________________________
TALON AUTOMOTIVE GROUP L.L.C.
By: ___________________________
Its:___________________________
<PAGE> 32
SIXTH AMENDMENT
TO
THE TALON INC.
401(k) PLAN AND TRUST
This Sixth Amendment is made as of the 3rd day of April, 1995, by G & L
Industries, Inc. Allen-Stevens Corp., Talon LLC, Talon Development Group, Inc.,
Hawthorne Metal Products Company, Pres-Tock, Inc., Reflectolite Products Co.,
Inc., North American Die Casting Corp., North American Manufacturing Corp. and
Talon Automotive Group L.L.C. (the "Employers").
WITNESSETH:
WHEREAS, the Employers sponsor the Talon Inc. 401(k) Plan and Trust (the
"Plan") and, under the provisions of the Plan, reserve for themselves the right
to amend the Plan; and
WHEREAS, it is the Employers' desire to amend the Plan.
NOW, THEREFORE, effective April 3, 1995, except as provided herein, the
Plan is hereby amended as follows:
1. ARTICLE II, "DEFINITIONS," SECTION 1.8, "COMPENSATION" SHALL BE AMENDED
BY THE ADDITION OF THE FOLLOWING SENTENCE:
Compensation for any Self-Employed Individual shall be equal to his Earned
Income.
2. ARTICLE II, "DEFINITIONS," SHALL BE AMENDED BY THE ADDITION OF THE
FOLLOWING SECTIONS:
Section 1.64 "Earned Income" means with respect to a
Self-Employed Individual, the net earnings from self-employment in the trade or
business with respect to which the Plan is adopted, for which the personal
services of the individual are a material income-producing factor. Net earnings
will be determined without regard to items not included in gross income and the
deductions allocable to such items. Net earnings are reduced by contributions by
the Self-Employed Individual to a qualified Plan to the extent deductible under
Code Section 404. Additionally, net earnings shall be determined with regard to
the deduction allowed to the Self-Employed Individual by Code Section 164(f).
Section 1.65 "Owner Employee" means a partner or member who
owns more than 10% of either the capital interest or the profits interest in the
Employer and who receives income for personal services from the Employer.
Section 1.66 "Self-Employed Individual" means an individual
who has Earned Income for the taxable year from the trade or business for which
the Plan is adopted, and also, an
<PAGE> 33
individual who would have had Earned Income but for the fact that the trade or
business had no net profits for the taxable year. A Self-Employed Individual
shall be treated as an Employee.
3. ARTICLE VII, "TRUSTEE," SECTION 7.4(b) SHALL BE DELETED AND THE
FOLLOWING SECTION 7.4(b) SHALL BE SUBSTITUTED IN ITS PLACE:
(b) Loans shall not be made to any Shareholder-Employee or
Owner-Employee unless an exemption for such loan is obtained pursuant to Act
Section 408 and further provided that such loan would not be subject to tax
pursuant to Code Section 4975.
IN WITNESS WHEREOF, the Employers have caused this amendment to be executed
as of the date first written above.
Talon LLC
By: ___________________________
Its:___________________________
G & L INDUSTRIES, INC.
By: __________________________
Its:__________________________
ALLEN-STEVENS CORP.
By: __________________________
Its:__________________________
HAWTHORNE METAL PRODUCTS COMPANY
By: ___________________________
Its:___________________________
<PAGE> 34
TALON DEVELOPMENT GROUP, INC.
By: ___________________________
Its:___________________________
PRES-TOCK, INC.
By: ___________________________
Its:___________________________
REFLECTOLITE PRODUCTS CO., INC.
By: __________________________
Its:__________________________
NORTH AMERICAN DIE CASTING CORP.
By: ___________________________
Its:___________________________
NORTH AMERICAN MANUFACTURING CORP.
By: ___________________________
Its:___________________________
TALON AUTOMOTIVE GROUP L.L.C.
By: ___________________________
Its:___________________________
<PAGE> 35
SEVENTH AMENDMENT
TO
THE TALON INC.
401(k) PLAN AND TRUST
This Seventh Amendment is made as of the 11th day of June, 1996, by G &
L Industries, Inc., Allen-Stevens Corp., Talon LLC, Talon Development Group,
Inc., Hawthorne Metal Products Company, Pres-Tock, Inc., Reflectolite Products
Co., Inc., North American Die Casting Corp., North American Manufacturing Corp.
and Talon Automotive Group L.L.C. (the "Employers").
WITNESSETH:
WHEREAS, the Employers sponsor the Talon Inc. 401(k) Plan and Trust
(the "Plan") and, under the provisions of the Plan, reserve for themselves the
right to amend the Plan; and
WHEREAS, it is the Employers' desire to amend the Plan.
NOW, THEREFORE, effective June 11, 1996, except as provided herein, the
Plan is hereby amended as follows:
1. ARTICLE I, "DEFINITIONS," SECTION 1.44 SHALL BE DELETED IN
ITS ENTIRETY AND THE FOLLOWING SECTION 1.44 SHALL BE SUBSTITUTED IN ITS PLACE:
1.44 "Plan" means this instrument and any amendments thereto; the name
of the Plan shall be the Talon LLC 401(k) Plan and Trust.
2. ARTICLE III, "ELIGIBILITY", SECTION 3.1 IS DELETED IN ITS
ENTIRETY AND THE FOLLOWING SECTION 3.1 SHALL BE SUBSTITUTED IN ITS PLACE:
3.1 CONDITIONS OF ELIGIBILITY
(a) Prior to January 1, 1990, any Eligible Employee who has
attained age twenty and has completed at least one (1) Hour of Service in each
of six (6) calendar months for the Employer or for any member of a group defined
in Internal Revenue Code Sections 414(b), (c) or (m) of which the Employer is a
part, shall be eligible to participate hereunder; and
(b) On and after January 1, 1990, any Eligible Employee who
has completed one Year of Service and has attained age twenty and one-half shall
be eligible to participate hereunder as of the date he has satisfied such
requirements. However, any Employee who was a Participant in the Plan prior to
August 1, 1989 shall continue to participate in the Plan; and
(c) Effective October 1, 1992, any Eligible Employee who
either, (i) makes a rollover contribution pursuant to Section 4.9 or (ii)
presents to the Administrator satisfactory evidence that he or
<PAGE> 36
she will make a rollover contribution with funds from a distribution which will
be made to the Employee in the future, before becoming a Participant pursuant to
subsection (b) of this Section 3.1, shall become a Participant, as provided in
subsection (c) of Section 3.3. Effective June 11, 1996, this provision shall be
of no further effect with respect to Eligible Employees hired on or after such
date.
(d) Effective June 11, 1996, any Eligible Employee hired on or
after June 11, 1996 who makes a rollover contribution before becoming a
Participant pursuant to subsection (b) of this Section 3.1, shall become a
Participant, as provided in subsection (d) of Section 3.3.
(e) The Employer shall give each prospective Eligible Employee
written notice of his eligibility to participate in the Plan prior to the close
of the Plan Year in which he first becomes an Eligible Employee.
3. ARTICLE III, "ELIGIBILITY," SECTION 3.3 SHALL BE DELETED IN
ITS ENTIRETY AND THE FOLLOWING SECTION 3.3 SHALL BE SUBSTITUTED IN ITS PLACE:
3.3 EFFECTIVE DATE OF PARTICIPATION
(a) Prior to January 1, 1990, an Eligible Employee shall
become a Participant effective as of the first day of the Plan Year following
his or her satisfaction of the eligibility requirements of Section 3.1(a),
provided he or she has not separated from service prior to that date; and
(b) On and after January 1, 1990, an employee who becomes an
Eligible Employee pursuant to Section 3.1(b) shall become a Participant
effective as of the last day of the calendar quarter coinciding with or next
following the date on which such Employee met the eligibility requirements of
Section 3.1(b), provided said Employee was still employed as of such date (or if
not employed on such date, as of the date of rehire if a 1-Year Break in Service
has not occurred); and
(c) Effective October 1, 1992, an employee who becomes an
Eligible Employee pursuant to Section 3.1(c) shall become a Participant on the
first day of the month coinciding with or next following the date on which such
Employee met the requirements of subsection (c) of Section 3.1. Effective June
11, 1996, this provision shall be of no further effect with respect to Eligible
Employees hired on or after such date.
(d) Effective June 11, 1996, an Eligible Employee shall become
a Participant on the first day of the month coinciding with or next following
the date on which such Employee met the requirements of subsection (d) of
Section 3.1, but only with respect to their rollover contribution.
(e) Notwithstanding the foregoing:
(1) a Participant in the Allen Stevens Corp. Profit
Sharing Retirement Benefit Plan on October 31, 1989
shall become a Participant in this Plan effective
November 1, 1989;
(2) An Employee of Allen-Stevens Corp. who on October
31, 1989: was not represented in collective
bargaining by a union, was at least age 21, and has
<PAGE> 37
completed 1,000 Hours of Service during the
12-consecutive month period measured from his
employment commencement date or during the Plan Year
in which the first anniversary of his employment
commencement date fell or any subsequent Plan Year,
shall participate in the Plan effective November 1,
1989, provided he is employed by the Employer on that
date;
(3) A Participant in the Hawthorne Metal Products
Company Profit Sharing Plan on December 31, 1989
shall become a Participant in this Plan effective
January 1, 1990; and
(4) Any employee of Talon Inc. or Talon Development
Group, Inc. who was a Participant in the F & M
Distributors, Inc. 401(k) Investment Savings Plan on
September 30, 1992 shall become a participant in
this Plan as of October 1, 1992.
4. ARTICLE X, "PARTICIPATING EMPLOYERS," SECTION 10.11, "SUBSTITUTION
OF PLAN NAME," IS DELETED IN ITS ENTIRETY AND THE FOLLOWING SECTION 10.11 SHALL
BE SUBSTITUTED IN ITS PLACE:
10.11 SUBSTITUTION OF PLAN NAME
When referring to this Plan, Participating Employers may substitute the
name of the Participating Employer for the words, "Talon LLC."
IN WITNESS WHEREOF, the Employers have caused this amendment to be
executed as of the date first written above.
TALON LLC
By: ___________________________
Its:___________________________
G & L INDUSTRIES, INC.
By: __________________________
Its:__________________________
<PAGE> 38
ALLEN-STEVENS CORP.
By: __________________________
Its:__________________________
HAWTHORNE METAL PRODUCTS COMPANY
By: ___________________________
Its:___________________________
TALON DEVELOPMENT GROUP, INC.
By: ___________________________
Its:___________________________
PRES-TOCK, INC.
By: ___________________________
Its:___________________________
REFLECTOLITE PRODUCTS CO., INC.
By: __________________________
Its:__________________________
NORTH AMERICAN DIE CASTING CORP.
By: ___________________________
Its:___________________________
<PAGE> 39
NORTH AMERICAN MANUFACTURING CORP.
By: ___________________________
Its:___________________________
TALON AUTOMOTIVE GROUP L.L.C.
By: ___________________________
Its:___________________________
<PAGE> 40
EIGHTH AMENDMENT
TO
THE TALON LLC
401(k) PLAN AND TRUST
This Eighth Amendment is made as of the 3rd day of July, 1996, by G & L
Industries, Inc., Allen-Stevens Corp., Talon LLC, Talon Development Group, Inc.,
Hawthorne Metal Products Company, Pres-Tock, Inc., Reflectolite Products Co.,
Inc., North American Die Casting Corp., North American Manufacturing Corp. and
Talon Automotive Group L.L.C. (the
"Employers").
WITNESSETH:
WHEREAS, the Employers sponsor the Talon LLC 401(k) Plan and Trust (the
"Plan") and, under the provisions of the Plan, reserve for themselves the right
to amend the Plan; and
WHEREAS, it is the Employers' desire to amend the Plan.
NOW, THEREFORE, the Plan is hereby amended effective July 3, 1996 as
follows:
1. ARTICLE I, "DEFINITIONS," SECTION 1.29, "HOUR OF SERVICE," SHALL BE
AMENDED BY THE ADDITION OF THE FOLLOWING SENTENCE:
Hours of Service credited by ASC Incorporated to employees of
ASC Incorporated who were hired by G & L Industries, Inc. on July 3,
1996 shall be recognized for purposes of eligibility and vesting.
2. ARTICLE I, "DEFINITIONS," SECTION 1.51, "YEAR OF SERVICE," SHALL BE
AMENDED BY THE ADDITION OF THE FOLLOWING SENTENCE:
Years of Service credited by ASC Incorporated to employees of
ASC Incorporated who were hired by G & L Industries, Inc. on July 3,
1996 shall be recognized for purposes of eligibility and vesting.
IN WITNESS WHEREOF, the Employers have caused this amendment to be
executed as of the date first written above.
<PAGE> 41
TALON LLC
By: ___________________________
Its:___________________________
G & L INDUSTRIES, INC.
By: __________________________
Its:__________________________
ALLEN-STEVENS CORP.
By: __________________________
Its:__________________________
HAWTHORNE METAL PRODUCTS COMPANY
By: ___________________________
Its:___________________________
TALON DEVELOPMENT GROUP, INC.
By: ___________________________
Its:___________________________
PRES-TOCK, INC.
By: ___________________________
Its:___________________________
REFLECTOLITE PRODUCTS CO., INC.
By: __________________________
<PAGE> 42
Its:__________________________
NORTH AMERICAN DIE CASTING CORP.
By: ___________________________
Its:___________________________
NORTH AMERICAN MANUFACTURING CORP.
By: ___________________________
Its:___________________________
TALON AUTOMOTIVE GROUP L.L.C.
By: ___________________________
Its:___________________________
<PAGE> 43
NINTH AMENDMENT
TO
THE TALON LLC
401(k) PLAN AND TRUST
This Ninth Amendment is made as of the 30th day of September, 1996, by
G & L Industries, Inc., Allen-Stevens Corp., Talon LLC, Talon Development Group,
Inc., Hawthorne Metal Products Company, Pres-Tock, Inc., Reflectolite Products
Co., Inc., North American Die Casting Corp., NADC Leasing, Inc. and Talon
Automotive Group L.L.C. (the "Employers").
WITNESSETH:
WHEREAS, the Employers sponsor the Talon LLC 401(k) Plan and Trust (the
"Plan") and, under the provisions of the Plan, reserve for themselves the right
to amend the Plan; and
WHEREAS, it is the Employers' desire to amend the Plan.
NOW, THEREFORE, the Plan is hereby amended effective September 30, 1996
as follows:
1. ARTICLE I, "DEFINITIONS," SECTION 1.29, "HOUR OF SERVICE," SHALL BE
AMENDED BY THE ADDITION OF THE FOLLOWING SENTENCE:
Hours of Service credited by J & R Manufacturing, Inc. to
employees of J & R Manufacturing, Inc. who were hired by JR Acquisition
Inc. (now known as J & R Manufacturing Inc.) on September 30, 1996
shall be recognized for purposes of eligibility and vesting.
2. ARTICLE I, "DEFINITIONS," SECTION 1.51, "YEAR OF SERVICE," SHALL BE
AMENDED BY THE ADDITION OF THE FOLLOWING SENTENCE:
Years of Service credited by J & R Manufacturing, Inc. to
employees of J & R Manufacturing, Inc. who were hired by JR Acquisition
Inc. (now known as J & R Manufacturing Inc.) on September 30, 1996
shall be recognized for purposes of eligibility and vesting.
IN WITNESS WHEREOF, the Employers have caused this amendment to be
executed as of the date first written above.
<PAGE> 44
TALON LLC
By: ___________________________
Its:___________________________
G & L INDUSTRIES, INC.
By: __________________________
Its:__________________________
ALLEN-STEVENS CORP.
By: __________________________
Its:__________________________
HAWTHORNE METAL PRODUCTS COMPANY
By: ___________________________
Its:___________________________
TALON DEVELOPMENT GROUP, INC.
By: ___________________________
Its:___________________________
PRES-TOCK, INC.
By: ___________________________
Its:___________________________
<PAGE> 45
REFLECTOLITE PRODUCTS CO., INC.
By: __________________________
Its:__________________________
NORTH AMERICAN DIE CASTING CORP.
By: ___________________________
Its:___________________________
NADC LEASING INC.
By: ___________________________
Its:___________________________
TALON AUTOMOTIVE GROUP L.L.C.
By: ___________________________
Its:___________________________
<PAGE> 1
EXHIBIT 10.27
PLAN #001
STANDARDIZED
ADOPTION AGREEMENT
PROTOTYPE CASH OR DEFERRED PROFIT-SHARING
PLAN AND TRUST/CUSTODIAL ACCOUNT
Sponsored by
NBD BANK, N.A.
The Employer named below hereby establishes a Cash or Deferred
Profit-Sharing Plan for eligible Employees as provided in this Adoption
Agreement and the accompanying Basic Prototype Plan and Trust/Custodial Account
Basic Plan Document #04.
1. EMPLOYER INFORMATION
NOTE: If multiple Employers are adopting the Plan, complete
this section based on the lead Employer. Additional
Employers may adopt this Plan by attaching executed
signature pages to the back of the Employer's Adoption
Agreement.
(a) NAME AND ADDRESS:
VELTRI HOLDINGS USA, INC. - ATF AUTOMOTIVE GROUP
SUITE 150
900 WILSHIRE DRIVE
TROY, Ml 48084
(b) TELEPHONE NUMBER: (810) 244-9463
(c) TAX ID NUMBER: 35-1849474
(d) FORM OF BUSINESS:
[ ] (i) Sole Proprietor
[ ] (ii) Partnership
[ ] (iii) Corporation
[X] (iv) "S" Corporation (formerly known as Subchapter S)
[ ] (v) Other:
1
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PROTOTYPE CASH OR
DEFERRED PROFIT
SHARING PLAN #001
(e) NAME OF INDIVIDUAL AUTHORIZED TO ISSUE
INSTRUCTIONS TO THE TRUSTEE/CUSTODIAN:
JERE WIEGAND AND CRISTIE BIEBUYCK
(f) NAME OF PLAN: VELTRI HOLDINGS USA, INC. 401-K PLAN
(g) THREE DIGIT PLAN NUMBER
FOR ANNUAL RETURN/REPORT: 001
2. EFFECTIVE DATE
(a) This is a new Plan having an effective date of _________________.
(b) This is an amended Plan.
The effective date of the original Plan was JANUARY 1, 1993.
The effective date of the amended Plan is JULY 1, 1994.
(c) If different from above, the Effective Date for the Plan's Elective
Deferral provisions shall be ________________.
3. DEFINITIONS
(a) "Collective or Commingled Funds" (Applicable to Institutional Trustees
only.) Investment in collective or commingled funds as permitted at
paragraph 13.3(b) of the Basic Plan Document #04 shall only be made to
the following specifically named fund(s):
ALL NBD SPONSORED INVESTMENT FUNDS
Funds made available after the execution of this Adoption Agreement
will be listed on schedules attached to the end of this Adoption
Agreement.
(b) "Compensation" Compensation shall be determined on the basis of the:
[ ] (i) Plan Year.
[ ] (ii) Employer's Taxable Year.
2
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PROTOTYPE CASH OR
DEFERRED PROFIT
SHARING PLAN #001
[X] (iii) Calendar Year.
Compensation shall be determined on the basis of the following
safe-harbor definition of Compensation in IRS Regulation Section
1.414(s)-(c):
[ ] (iv) Code Section 6041 and 6051 Compensation,
[ ] (v) Code Section 3401(a) Compensation, or
[X] (vi) Code Section 415 Compensation.
Compensation [X] shall [ ] shall not include Employer contributions
made pursuant to a Salary Savings Agreement which are not includable in
the gross income of the Employee for the reasons indicated in the
definition of Compensation at 1.12 of the Basic Plan Document #04.
For purposes of the Plan, Compensation shall be limited to $______, the
maximum amount which will be considered for Plan purposes. [If an
amount is specified, it will limit the amount of contributions allowed
on behalf of higher compensated Employees. Completion of this section
is not intended to coordinate with the $200,000 of Code Section 415(d),
thus the amount should be less than $200,000 as adjusted for
cost-of-living increases.]
(c) "Entry Date"
[ ] (i) The first day of the Plan Year nearest the date on which an
Employee meets the eligibility requirements.
[X] (ii) The earlier of the first day of the Plan Year or the first
day of the seventh month of the Plan Year coinciding with or
following the date on which an Employee meets the
eligibility requirements.
[ ] (iii) The first day of the Plan Year following the date on which
the Employee meets the eligibility requirements. If this
election is made, the Service requirement at 4(a)(ii) may
not exceed 1/2 year and the age requirement at 4(b)(ii) may
not exceed 20-1/2.
[ ] (iv) The first day of the month coinciding with or following the
date on which an Employee meets the eligibility
requirements.
[ ] (v) The first day of the Plan Year, or the first day of the
fourth month, or the first day of the seventh month or the
first day of the tenth month,
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PROTOTYPE CASH OR
DEFERRED PROFIT
SHARING PLAN #001
of the Plan Year coinciding with or following the date on
which an Employee meets the eligibility requirements.
(d) "Hours of Service" Shall be determined on the basis of the method
selected below. Only one method may be selected. The method selected
shall be applied to all Employees covered under the Plan as follows:
[X] (i) On the basis of actual hours for which an Employee is
paid or entitled to payment.
[ ] (ii) On the basis of days worked.
An Employee shall be credited with ten (10) Hours of
Service if under paragraph 1.42 of the Basic Plan
Document #04 such Employee would be credited with at
least one (1) Hour of Service during the day.
[ ] (iii) On the basis of weeks worked.
An Employee shall be credited with forty-five (45)
Hours of Service if under paragraph 1.42 of the Basic
Plan Document #04 such Employee would be credited
with at least one (1) Hour of Service during the
week.
[ ] (iv) On the basis of semi-monthly payroll periods.
An Employee shall be credited with ninety-five (95)
Hours of Service if under paragraph 1.42 of the Basic
Plan Document #04 such Employee would be credited
with at least one (1) Hour of Service during the
semi-monthly payroll period.
[ ] (v) On the basis of months worked.
An Employee shall be credited with one-hundred-ninety
(190) Hours of Service if under paragraph 1.42 of the
Basic Plan Document #04 such Employee would be
credited with at least one (1) Hour of Service during
the month.
(e) "Limitation Year" The 12-consecutive month period commencing on
JANUARY 1, and ending on DECEMBER 31.
If applicable, the Limitation Year will be a short Limitation Year
commencing on _____ and ending on ______. Thereafter, the Limitation
Year shall end on the date last specified above.
(f) "Net Profit"
[X] (i) Not applicable (profits will not be required for any
contributions to the Plan).
4
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PROTOTYPE CASH OR
DEFERRED PROFIT
SHARING PLAN #001
[ ] (ii) As defined in paragraph 1.49 of the Basic Plan
Document #04.
[ ] (iii) Shall be defined as:
_____________________________________________
(Only use if definition in paragraph 1.49 of the
Basic Plan Document #04 is to be superseded.)
(g) "Plan Year" The 12-consecutive month period commencing on JANUARY 1 and
ending on DECEMBER 31.
If applicable, the Plan Year will be a short Plan Year commencing on
and ending on. Thereafter, the Plan Year shall end on the date last
specified above.
(h) "Qualified Early Retirement Age" For purposes of making distributions
under the provisions of a Qualified Domestic Relations Order, the
Plan's Qualified Early Retirement Age with regard to the Participant
against whom the order is entered [X] shall [ ] shall not be the date
the order is determined to be qualified. If "shall" is elected, this
will only allow payout to the alternate payee(s).
(i) "Qualified Joint and Survivor Annuity" The safe-harbor provisions of
paragraph 8.7 of the Basic Plan Document #04 [X] are [ ] are not
applicable. If not applicable, the survivor annuity shall be % (50%,
66-2/3%, 75% or 100%) of the annuity payable during the lives of the
Participant and Spouse. If no answer is specified, 50% will be used.
(j) "Taxable Wage Base" [paragraph 1.79]
[X] (i) Not Applicable - Plan is not integrated with Social
Security.
[ ] (ii) The maximum earnings considered wages for such Plan
Year under Code Section 3121 (a).
[ ] (iii) ___% (not more than 100%) of the amount considered
wages for such Plan Year under Code Section 3121(a).
[ ] (iv) $___, provided that such amount is not in excess of
the amount determined under paragraph 3(j)(ii) above.
[ ] (v) For the 1989 Plan Year $10,000. For all subsequent
Plan Years, 20% of the maximum earnings considered
wages for such Plan Year under Code Section 3121(a).
5
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PROTOTYPE CASH OR
DEFERRED PROFIT-
SHARING PLAN #001
NOTE: Using less than the maximum at (ii) may result in a
change in the allocation formula in Section 7.
(k) "Valuation Date(s)" Allocations to Participant Accounts will be done in
accordance with Article V of the Basic Plan Document #04:
(i) Daily (v) Quarterly
(ii) Weekly (vi) Semi-Annually
(iii) Monthly (vii) Annually
(iv) Bi-Monthly
Indicate Valuation Date(s) to be used by specifying option from list
above:
Type of Contribution(s) Valuation Date(s)
----------------------- -----------------
After-Tax Voluntary Contributions [Section 6] V
---
Elective Deferrals [Section 7(b)] V
---
Matching Contributions [Section 7(c)] V
---
Qualified Non-Elective Contributions [Section 7(d)] V
---
Non-Elective Contributions [Section 7(e), (f) and (g)] V
---
Minimum Top-Heavy Contributions [Section 7(i)] V
---
(1) "Year of Service"
(i) For Eligibility Purposes: The 12-consecutive month period
during which an Employee is credited with 1000 (not more than
1,000) Hours of Service.
(ii) For Allocation Accrual Purposes: The 12-consecutive month
period during which an Employee is credited with 501 (not more
than 1,000) Hours of Service. (For Plan Years beginning in 1990
and thereafter, if a number greater than 501 is specified,
it will be deemed to be 501.)
(iii) For Vesting Purposes: The 12-consecutive month period during
which an Employee is credited with 1000 (not more than 1,000)
Hours of Service.
6
<PAGE> 7
PROTOTYPE CASH OR
DEFERRED PROFIT-
SHARING PLAN #001
4. ELIGIBILITY REQUIREMENTS
(a) Service:
[ ] (i) The Plan shall have no service requirement.
[X] (ii) The Plan shall cover only Employees having completed at
least 1/2 YR [not more than three (3)] Years of Service.
If more than one (1) is specified, for Plan Years beginning
in 1989 and later, the answer will be deemed to be one (1).
NOTE: If the eligibility period selected is less than one year,
an Employee will not be required to complete any
specified number of Hours of Service to receive credit for
such period.
(b) Age:
[ ] (i) The Plan shall have no minimum age requirement.
[X] (ii) The Plan shall cover only Employees having attained age 21
(not more than age 21).
(c) Classification:
The Plan shall cover all Employees who have met the age and service
requirements with the following exceptions:
[ ] (i) No exceptions.
[X] (ii) The Plan shall exclude Employees included in a unit
of Employees covered by a collective bargaining
agreement between the Employer and Employee
Representatives, if retirement benefits were the
subject of good faith bargaining. For this purpose,
the term "Employee Representative" does not include
any organization more than half of whose members are
Employees who are owners, officers, or executives of
the Employer.
[X] (iii) The Plan shall exclude Employees who are nonresident aliens
and who receive no earned income from the Employer which
constitutes income from sources within the United States.
7
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PROTOTYPE CASH OR
DEFERRED PROFIT-
SHARING PLAN #001
(d) Employees on Effective Date:
[ ] (i) Not Applicable. All Employees will be required to
satisfy both the age and Service requirements
specified above.
[X] (ii) Employees employed on the Plan's Effective
Date do not have to satisfy the Service requirements
specified above.
[ ] (iii) Employees employed on the Plan's Effective Date
do not have to satisfy the age requirements
specified above.
5. RETIREMENT AGES
(a) Normal Retirement Age:
If the Employer imposes a requirement that Employees retire upon
reaching a specified age, the Normal Retirement Age selected below may
not exceed the Employer imposed mandatory retirement age.
[X] (i) Normal Retirement Age shall be 65 (not to exceed age 65).
[ ] (ii) Normal Retirement Age shall be the later of attaining
age ____ (not to exceed age 65) or the ____ (not to exceed
the 5th) anniversary of the first day of the first Plan Year
in which the Participant commenced participation in the
Plan.
(b) Early Retirement Age:
[X] (i) Not Applicable.
[ ] (ii) The Plan shall have an Early Retirement Age of ____ (not
less than 55) and completion of ____ Years of Service.
6. EMPLOYEE CONTRIBUTIONS
[X] (a) Participants shall be permitted to make Elective Deferrals in any
amount from 1% up to 15% of their Compensation.
If (a) is applicable, Participants shall be permitted to amend
their Salary Savings Agreements to change the contribution
percentage as provided below:
[ ] (i) On the Anniversary Date of the Plan,
8
<PAGE> 9
PROTOTYPE CASH OR
DEFERRED PROFIT-
SHARING PLAN #001
[ ] (ii) On the Anniversary Date of the Plan and on the
first day of the seventh month of the Plan Year,
[X] (iii) On the Anniversary Date of the Plan and on the
first day following any Valuation Date, or
[ ] (iv) Upon 30 days notice to the Employer.
[ ] (b) Participants shall be permitted to make after tax Voluntary
Contributions.
[ ] (c) Participants shall be required to make after tax Voluntary
Contributions as follows (Thrift Savings Plan):
[ ] (i) ___% of Compensation.
[ ] (ii) A percentage determined by the Employee on his
or her enrollment form.
[ ] (d) If necessary to pass the Average Deferral Percentage Test,
Participants [ ] may [ ] may not have Elective Deferrals
recharacterized as Voluntary Contributions.
NOTE: The Average Deferral Percentage Test will apply to
contributions under (a) above. The Average Contribution
Percentage Test will apply to contributions under (b) and
(c) above, and may apply to (a).
7. EMPLOYER CONTRIBUTIONS AND ALLOCATION THEREOF
NOTE: The Employer shall make contributions to the Plan in accordance
with the formula or formulas selected below. The Employer's
contribution shall be subject to the limitations contained in
Articles III and X. For this purpose, a contribution for a Plan
Year shall be limited for the Limitation Year which ends with or
within such Plan Year. Also, the integrated allocation formulas
below are for Plan Years beginning in 1989 and later. The
Employer's allocation for earlier years shall be as specified in
its Plan prior to amendment for the Tax Reform Act of 1986.
(a) Profits Requirement:
(i) Current or Accumulated Net Profits are required for:
[ ] (A) Matching Contributions.
[ ] (B) Qualified Non-Elective Contributions.
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<PAGE> 10
PROTOTYPE CASH OR
DEFERRED PROFIT-
SHARING PLAN #001
[ ] (C) discretionary contributions.
(ii) No Net Profits are required for:
[X] (A) Matching Contributions.
[X] (B) Qualified Non-Elective Contributions.
[X] (C) discretionary contributions.
NOTE: Elective Deferrals can always be contributed regardless of
profits.
[ ] (b) Salary Savings Agreement:
The Employer shall contribute and allocate to each Participant's
account an amount equal to the amount withheld from the Compensation of
such Participant pursuant to his or her Salary Savings Agreement. If
applicable, the maximum percentage is specified in Section 6 above.
An Employee who has terminated his or her election under the Salary
Savings Agreement other than for hardship reasons may not make another
Elective Deferral:
[ ] (i) until the first day of the next Plan Year.
[ ] (ii) until the first day of the next valuation period.
[X] (iii) for a period of 12 month(s) (not to exceed 12 months).
[ ] (c) Matching Employer Contribution [See paragraphs (h) and (i)]:
[ ] (i) PERCENTAGE MATCH: The Employer shall contribute and allocate
to each eligible Participant's account an amount equal to
____% of the amount contributed and allocated in accordance
with paragraph 7(b) above and (if checked) ____% of [ ] the
amount of Voluntary Contributions made in accordance with
paragraph 4.1 of the Basic Plan Document #04. The Employer
shall not match Participant Elective Deferrals as provided
above in excess of $____ or in excess of ____% of the
Participant's Compensation or if applicable, Voluntary
Contributions in excess of $____ or in excess of ____% of
the Participant's Compensation. In no event will the match
on both Elective Deferrals and Voluntary Contributions
exceed a combined amount of $____ or ____%.
10
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PROTOTYPE CASH OR
DEFERRED PROFIT-
SHARING PLAN #001
[X] (ii) DISCRETIONARY MATCH: The Employer shall contribute and
allocate to each eligible Participant's account a percentage
of the Participant's Elective Deferral contributed and
allocated in accordance with paragraph 7(b) above. The
Employer shall set such percentage prior to the end of the
Plan Year. The Employer shall not match Participant Elective
Deferrals in excess of $____ or in excess of 15 % of the
Participant's Compensation.
[ ] (iii) TIERED MATCH: The Employer shall contribute and allocate to
each Participant's account an amount equal to ____% of the
first ____% of the Participant's Compensation, to the
extent deferred.
____% of the next ____% of the Participant's Compensation,
to the extent deferred.
____% of the next ____% of the Participant's Compensation,
to the extent deferred.
NOTE: Percentages specified in (iii) above may not increase as the
percentage of Participant's contribution increases.
[ ] (iv) FLAT DOLLAR MATCH: The Employer shall contribute and
allocate to each Participant's account $__ if the
Participant defers at least 1% of Compensation.
[ ] (v) PERCENTAGE OF COMPENSATION MATCH: The Employer shall
contribute and allocate to each Participant's account % of
Compensation if the Participant defers at least 1% of
Compensation.
[ ] (vi) PROPORTIONATE COMPENSATION MATCH: The Employer shall
contribute and allocate to each Participant who defers at
least 1% of Compensation, an amount determined by
multiplying such Employer Matching Contribution by a
fraction the numerator of which is the Participant's
Compensation and the denominator of which is the
Compensation of all Participants eligible to receive such an
allocation. The Employer shall set such discretionary
contribution prior to the end of the Plan Year.
[ ] (vii) QUALIFIED MATCH: Employer Matching Contributions will
be treated as Qualified Matching Contributions to the extent
specified below:
[ ] (A) All Matching Contributions.
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PROTOTYPE CASH OR
DEFERRED PROFIT-
SHARING PLAN #001
[ ] (B) None.
[ ] (C) ____% of the Employer's Matching Contribution.
[ ] (D) up to ____% of each Participant's Compensation.
[ ] (E) The amount necessary to meet the [ ] Average
Deferral Percentage (ADP) test, [ ] Average
Contribution Percentage (ACP) test, [ ] Both
the ADP and ACP tests.
(viii) MATCHING CONTRIBUTION COMPUTATION PERIOD: The time
period upon which matching contributions will be
based shall be
[ ] (A) weekly
[ ] (B) bi-weekly
[ ] (C) semi-monthly
[ ] (D) monthly
[ ] (E) quarterly
[ ] (F) semi-annually
[ ] (G) annually
(ix) ELIGIBILITY FOR MATCH: Employer Matching Contributions,
whether or not Qualified, will only be made on Employee
Contributions not withdrawn prior to the end of the
[ ] valuation period [X] Plan Year.
[X] (d) Qualified Non-Elective Employer Contribution - [See paragraphs (h)
and (i)] These contributions are fully vested when contributed.
The Employer shall have the right to make an additional discretionary
contribution which shall be allocated to each eligible Employee in
proportion to his or her Compensation as a percentage of the
Compensation of all eligible Employees. This part of the Employer's
contribution and the allocation thereof shall be unrelated to any
12
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PROTOTYPE CASH OR
DEFERRED PROFIT-
SHARING PLAN #001
Employee contributions made hereunder. The amount of Qualified
non-Elective Contributions taken into account for purposes of
meeting THE ADP or ACP test requirements is:
[ ] (i) All such Qualified non-Elective Contributions.
[X] (ii) The amount necessary to meet [ ] the ADP-test, [ ] the
ACP test, [X] Both the ADP and ACP tests.
Qualified non-Elective Contributions will be made to:
[ ] (iii) All Employees eligible to participate.
[X] (iv) Only non-Highly Compensated Employees eligible to
participate.
[X] (e) Additional Employer Contribution Other Than Qualified Non-Elective
Contributions - Non-Integrated [See paragraphs (h) and (i)]
The Employer shall have the right to make an additional
discretionary contribution which shall be allocated to each
eligible Employee in proportion to his or her Compensation as a
percentage of the Compensation of all eligible Employees. This
part of the Employer's contribution and the allocation thereof
shall be unrelated to any Employee contributions made hereunder.
[ ] (f) Additional Employer Contribution - Integrated Allocation Formula
[See paragraphs (h) and (i)]
The Employer shall have the right to make an additional
discretionary contribution. The Employer's contribution for the
Plan Year plus any forfeitures shall be allocated to the accounts
of eligible Participants as follows:
(i) First, to the extent contributions and forfeitures are
sufficient, all Participants will receive an allocation
equal to 3% of their Compensation.
(ii) Next, any remaining Employer Contributions and
forfeitures will be allocated to Participants who have
Compensation in excess of the Taxable Wage Base (excess
Compensation). Each such Participant will receive an
allocation in the ratio that his or her excess
compensation bears to the excess Compensation of all
Participants. Participants may only receive an
allocation of 3% of excess Compensation.
(iii) Next, any remaining Employer contributions and
forfeitures will be allocated to all Participants in
the ratio that their Compensation plus excess
Compensation bears to the total Compensation plus excess
Compensation of all
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Participants. Participants may only receive an allocation of
up to 2.7% of their Compensation plus excess Compensation,
under this allocation method. If the Taxable Wage Base defined
at Section 3(j) is less than or equal to the greater of $10,000
or 20% of the maximum, the 2.7% need not be reduced. If the
amount specified is greater than the greater of $10,000 or 20%
of the maximum Taxable Wage Base, but not more than 80%, 2.7%
must be reduced to 1.3%. If the amount specified is greater
than 80% but less than 100% of the maximum Taxable Wage Base,
the 2.7% must be reduced to 2.4%.
NOTE: If the Plan is not Top-Heavy or if the Top-Heavy
minimum contribution or benefit is provided under
another Plan [see Section 11(c)(ii)] covering the
same Employees, sub-paragraphs (i) and (ii) above may
be disregarded and 5.7%, 4.3% or 5.4% may be
substituted for 2.7%, 1.3% or 2.4% where it appears
in (iii) above.
(iv) Next, any remaining Employer contributions and forfeitures
will be allocated to all Participants (whether or not they
received an allocation under the preceding paragraphs) in the
ratio that each Participant's Compensation bears to all
Participants' Compensation.
[ ] (g) Additional Employer Contribution-Alternative Integrated Allocation
Formula [See paragraph (h) and (i)]
The Employer shall have the right to make an additional discretionary
contribution. To the extent that such contributions are sufficient,
they shall be allocated as follows:
____% of each eligible Participant's Compensation plus ____% of
Compensation in excess of the Taxable Wage Base defined at Section 3(j)
hereof. The percentage on excess compensation may not exceed the lesser
of (i) the amount first specified in this paragraph or (ii) the greater
of 5.7% or the percentage rate of tax under Code Section 3111(a) as in
effect on the first day of the Plan Year attributable to the Old Age
(OA) portion of the OASDI provisions of the Social Security Act. If the
Employer specifies a Taxable Wage Base in Section 3(j) which is lower
than the Taxable Wage Base for. Social Security purposes (SSTWB) in
effect as of the first day of the Plan Year, the percentage contributed
with respect to excess Compensation must be adjusted. If the Plan's
Taxable Wage Base is greater than the larger of $10,000 or 20% of the
SSTWB but not more than 80% of the SSTWB, the excess percentage is
4.3%. If the Plan's Taxable Wage Base is greater than 80% of the SSTWB
but less than 100% of the SSTWB, the excess percentage is 5.4%.
NOTE: Only one plan maintained by the Employer may be integrated
with Social Security.
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(h) Allocation of Excess Amounts (Annual Additions)
In the event that the allocation formula above results in an Excess
Amount, such excess shall be:
[ ] (i) placed in a suspense account accruing no gains or losses
for the benefit of the Participant.
[ ] (ii) reallocated as additional Employer contributions to all
other Participants to the extent that they do not have any
Excess Amount.
(i) Minimum Employer Contribution Under Top-Heavy Plans:
For any Plan Year during which the Plan is Top-Heavy, the sum of
the contributions and forfeitures as allocated to eligible
Employees under paragraphs 7(d), 7(e), 7(f), 7(g) and 9 of this
Adoption Agreement shall not be less than the amount required
under paragraph 14.2 of the Basic Plan Document #04. Top-Heavy
minimums will be allocated to:
[ ] (i) all eligible Participants.
[X] (ii) only eligible non-Key Employees who are Participants.
(j) Return of Excess Contributions and/or Excess Aggregate Contributions:
In the event that one or more Highly Compensated Employees is
subject to both the ADP AND ACP TESTS and the sum of such tests
exceeds the Aggregate Limit, the limit will be satisfied by
reducing the:
[ ] (i) the ADP of the affected Highly Compensated Employees.
[ ] (ii) the ACP of the affected Highly Compensated Employees.
[X] (iii) a combination of the ADP and ACP of the affected Highly
Compensated Employees.
8. ALLOCATIONS TO TERMINATED EMPLOYEES
(a) For Plan Years beginning prior to 1990:
[ ] (i) For Plan Years beginning prior to 1990, the Employer will
not allocate Employer related contributions to any
Participant who terminates employment during the Plan Year.
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[X] (ii) The Employer will allocate Employer related contributions to
Employees who terminate during the Plan Year as a result of:
[X] (1) Retirement.
[X] (2) Disability.
[X] (3) Death.
[ ] (4) Other termination provided that the Participant
has completed a Year of Service.
[ ] (5) Other termination.
(b) For Plan Years beginning in 1990 and thereafter, the Employer will
allocate Employer related contributions to any Participant who is
credited with more than 500 Hours of Service or is employed on the last
day of the Plan Year without regard to the number of Hours of Service.
The Employer will also allocate Employer related contributions to any
Participant who terminates during the Plan Year without accruing the
necessary Hours of Service if they terminate as a result of:
[X] (i) Retirement.
[X] (ii) Disability.
[X] (iii) Death.
9. ALLOCATION OF FORFEITURES
NOTE: Subsections (a), (b) and (e) below apply to forfeitures of amounts
other than Excess Aggregate Contributions.
(a) Allocation Alternatives:
[ ] (i) Not Applicable. All contributions, are always fully vested.
[X] (ii) Forfeitures shall be allocated to Participants in the same
manner as the Employer's contribution.
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If allocation to other Participants is selected, the
allocation shall be as follows:
[1] Amount attributable to Employer discretionary
contributions and Top-Heavy minimums will be allocated
to:
[ ] all eligible Participants under the Plan.
[ ] only those Participants eligible for an allocation
of matching contributions in the current year.
[2] Amounts attributable to Employer Matching contributions
will be allocated to:
[ ] all eligible Participants.
[X] only those Participants eligible for allocations
of matching, contributions in the current year.
[ ] (iii) Forfeitures shall be applied to reduce the Employer's
contribution for such Plan Year.
[ ] (iv) Forfeitures shall be applied to offset administrative
expenses of the Plan. If forfeitures exceed these expenses,
(iii) above shall apply.
(b) Date for Reallocation:
NOTE: If no distribution has been made to a former Participant,
sub-section (i) below will apply to such Participant even if
the Employer elects (ii), (iii) or (iv) below as its normal
administrative policy.
[ ] (i) Forfeitures shall be reallocated at the end of the Plan Year
during which the former Participant incurs his or her fifth
consecutive one year Break In Service.
[ ] (ii) Forfeitures will be reallocated immediately (as of the next
Valuation Date).
[X] (iii) Forfeitures shall be reallocated at the end of the Plan Year
during which the former Employee incurs his or her 1 (1st,
2nd, 3rd, or 4th) consecutive one year Break In Service.
[ ] (iv) Forfeitures will be reallocated immediately (as of the Plan
Year end).
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(c) Restoration of Forfeitures:
If amounts are forfeited prior to five consecutive 1-year Breaks
in Service, the Funds for restoration of account balances will be
obtained from the following resources in the order indicated (fill
in the appropriate number):
[1] (i) Current year's forfeitures.
[3] (ii) Additional Employer contribution.
[2] (iii) Income or gain to the Plan.
(d) Forfeitures of Excess Aggregate Contributions shall be:
[ ] (i) Applied to reduce Employer contributions.
[ ] (ii) Allocated, after all other forfeitures under the Plan, to
the Matching Contribution account of each non-Highly
Compensated Participant who made Elective Deferrals or
Voluntary Contributions in the ratio which each such
Participant's Compensation for the Plan Year bears to the
total Compensation of all Participants for such Plan Year.
Such forfeitures cannot be allocated to the account of any
Highly Compensated Employee.
Forfeitures of Excess Aggregate Contributions will be so applied at the
end of the Plan Year in which they occur.
10. CASH OPTION
[X] (a) The Employer may permit a Participant to elect to defer to the
Plan, an amount not to exceed 15 % of any Employer paid cash
bonus made for such Participant for any year. A Participant must
file an election to defer such contribution at least fifteen (15)
days prior to the end of the Plan Year. If the Employee fails to
make such an election, the entire Employer paid cash bonus to
which the Participant would be entitled shall be paid as cash and
not to the Plan. Amounts deferred under this section shall be
treated for all purposes as Elective Deferrals. Notwithstanding
the above, the election to defer must be made before the bonus is
made available to the Participants.
[ ] (b) Not Applicable.
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11. LIMITATIONS ON ALLOCATIONS
[X] This is the only Plan the Employer maintains or ever maintained;
therefore, this section is not applicable.
[ ] The Employer does maintain or has maintained another Plan (including a
Welfare Benefit Fund or an individual medical account [as defined in
Code Section 415(l)(2)], under which amounts are treated as Annual
Additions) and has completed the proper sections below.
Complete (a), (b) and (c) only if the Employer maintains or ever
maintained another qualified plan, including a Welfare Benefit Fund or
an individual medical account [as defined in Code Section 415(l)(2)],
in which any Participant in this Plan is (or was) a participant or
could possibly become a participant.
(a) If the Participant is covered under another qualified Defined
Contribution Plan maintained by the Employer, other than a Master or
Prototype Plan:
[ ] (i) the provisions of Article X of the Basic Plan Document #04
will apply, as if the other plan were a Master or Prototype
Plan.
[ ] (ii) Attach provisions stating the method under which the plans
will limit total Annual Additions to the Maximum Permissible
Amount, and will properly reduce any Excess Amounts, in a
manner that precludes Employer discretion.
(b) If a Participant is or ever has been a participant in a Defined Benefit
Plan maintained by the Employer:
Attach provisions which will satisfy the 1.0 limitation of Code
Section 415(e). Such language must preclude Employer discretion. The
Employer must also specify the interest and mortality assumptions used
in determining Present Value in the Defined Benefit Plan.
(c) The minimum contribution or benefit required under Code Section 416
relating to Top-Heavy Plans shall be satisfied by:
[ ] (i) this Plan.
[ ] (ii) _____________________________________________________
(Name of other qualified plan of the Employer).
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[ ] (iii) Attach provisions stating the method under which the
contribution and benefit provisions of Code Section 416
will be mortality satisfied. If a Defined Benefit Plan is
or was maintained, an attachment must be provided showing
interest and assumptions used in the Top-Heavy Ratio.
12. VESTING
Employees shall have a fully vested and nonforfeitable interest in any
Employer contribution and the investment earnings thereon made in accordance
with paragraphs (select one or more options) [ ] 7(c), [ ] 7(e), [ ] 7(f),
[ ] 7(g) and [ ] 7(i) hereof. Contributions under paragraph 7(b), 7(c)(vii)
and 7(d) are always fully vested. If one or more of the foregoing options
are not selected, such Employer contributions shall be subject to the
vesting table selected by the Employer.
Each Participant shall acquire a vested and nonforfeitable percentage in his
or her account balance attributable to Employer contributions and the
earnings thereon under the procedures selected below except with respect to
any Plan Year during which the Plan is Top-Heavy, in which case the
Two-twenty vesting schedule [Option (b)(iv)] shall automatically apply
unless the Employer has already elected a faster vesting schedule. If the
Plan is switched to option (b)(iv), because of its Top-Heavy status, that
vesting schedule will remain in effect even if the Plan later becomes
non-Top-Heavy until the Employer executes an amendment of this Adoption
Agreement indicating otherwise.
(a) Computation Period:
The computation period for purposes of determining Years of Service and
Breaks in Service for purposes of computing a Participant's
nonforfeitable right to his or her account balance derived from
Employer contributions:
[ ] (i) shall not be applicable since Participants are always fully
vested,
[ ] (ii) shall commence on the date on which an Employee first
performs an Hour of Service for the Employer and each
subsequent 12-consecutive month period shall commence on the
anniversary thereof, or
[X] (iii) shall commence on the first day of the Plan Year during
which an Employee first performs an Hour of Service for the
Employer and each subsequent 12-consecutive month period
shall commence on the anniversary thereof.
A Participant shall receive credit for a Year of Service if he or she
completes at least 1,000 Hours of Service [or if lesser, the number of
hours specified at 3(l)(iii) of this
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Adoption Agreement] at any time during the 12-consecutive month
computation period. Consequently, a Year of Service may be earned prior
to the end of the 12-consecutive month computation period and the
Participant need not be employed at the end of the 12-consecutive month
computation period to receive credit for a Year of Service.
(b) Vesting Schedules:
NOTE: The vesting schedules below only apply to a Participant who
has at least one Hour of Service during or after the, 1989
Plan Year. If applicable, Participants who separated from
Service prior to the 1989 Plan Year will remain under the
vesting schedule as in effect in the Plan prior to amendment
for the Tax Reform Act of 1986.
(i) Full and immediate vesting,
<TABLE>
<CAPTION>
Years of Service
----------------
1 2 3 4 5 6 7
-- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
(ii) ___% 100%
(iii) ___% ___% 100%
(iv) ___% 20% 40% 60% 80% 100%
(v) ___% ___% 20% 40% 60% 80% 100%
(vi) 10% 20% 30% 40% 60% 80% 100%
(vii) 20% 40% 60% 80% 100%
(viii) ___% ___% ___% ___% ___% ___% 100%
</TABLE>
NOTE: The percentages selected for schedule (viii) may not be less for any
year than the percentages shown at schedule (v).
[X] All contributions other than those which are fully vested when
contributed will vest under schedule VII above.
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[X] Contributions other than those which are fully vested when
contributed will vest as provided below:
<TABLE>
<CAPTION>
Vesting
Option Selected Type Of Employer Contribution
--------------- -----------------------------
<S> <C>
VII 7(c) Employer Match on Salary Savings
___ 7(c) Employer Match on
Employee Voluntary
VII 7(e) Employer Discretionary
___ 7(f) & (g) Employer
Discretionary - Integrated
</TABLE>
(c) Service disregarded for Vesting:
[ ] (i) Not Applicable. All Service shall be considered.
(ii) Service prior to the Effective Date of this Plan or a
predecessor plan shall be disregarded when computing a
Participant's vested and nonforfeitable interest.
(iii) Service prior to a Participant having attained age 18
shall be disregarded when computing a Participant's vested
and nonforfeitable interest.
13. SERVICE WITH PREDECESSOR ORGANIZATION
For purposes of satisfying the Service requirements for eligibility, Hours
of Service shall include Service with the following predecessor
organization(s):
(These hours will also be used for vesting purposes.)
VELTRI HOLDINGS LIMITED; ATF AUTOMOTIVE GROUP, INC.; VELTRI STAMPING CORP;
VELTRI GLENCOE LTD.; VELTRI USA; N.A. PRECISION LTD; TALBOT ASSEMBLY LTD
14. ROLLOVER/TRANSFER CONTRIBUTIONS
(a) Rollover Contributions, as described at paragraph 4.3 of the
Basic Plan Document #04, [X] shall [ ] shall not be permitted. If
permitted, Employees [X] may [ ] may not
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make Rollover Contributions prior to meeting the eligibility
requirements for participation in the Plan.
(b) Transfer Contributions, as described at paragraph 4.4 of the Basic
Plan Document #04 [X] shall [ ] shall not be permitted. If permitted,
Employees [X] may [ ] may not Transfer Contributions prior to meeting
the eligibility requirements for participation in the Plan.
NOTE: Even if available, the Employer may refuse to accept such
contributions if its Plan meets the safe-harbor rules of paragraph
8.7 of the Basic Plan Document #04.
15. HARDSHIP WITHDRAWALS
Hardship withdrawals, as provided for in paragraph 6.9 of the Basic Plan
Document #04, [X] are [ ] are not permitted.
16. PARTICIPANT LOANS
Participant loans, as provided for in paragraph 13.5 of the Basic Plan
Document #04, [ ] are [X] are not permitted. If permitted, repayments of
principal and interest shall be repaid to [ ] the Participant's segregated
account or [ ] the general Fund.
17. INSURANCE POLICIES
The insurance provisions of paragraph 13.6 of the Basic Plan Document #04
[ ] shall [X] shall not be applicable.
18. EMPLOYER INVESTMENT DIRECTION
The Employer investment direction provisions, as set forth in paragraph 13.7
of the Basic Plan Document #04, [ ] shall [X] shall not be applicable.
19. EMPLOYEE INVESTMENT DIRECTION
(a) The Employee investment direction provisions, as set forth in paragraph
13.8 of the Basic Plan Document #04, [X] shall [ ] shall not be
applicable.
If applicable, Participants may direct their investments:
[X] (i) among funds offered by the Trustee.
[ ] (ii) among any allowable investments.
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(b) Participants may direct the following kinds of contributions and
the earnings thereon (check all applicable):
[X] (i) All Contributions.
[ ] (ii) Elective Deferrals.
[ ] (iii) Employee Voluntary Contributions (after-tax).
[ ] (iv) Employee Mandatory Contributions (after-tax).
[ ] (v) Employer Qualified Matching Contributions.
[ ] (vi) Other Employer Matching Contributions.
[ ] (vii) Employer Qualified Non-Elective Contributions.
[ ] (viii) Employer Discretionary Contributions.
[ ] (ix) Rollover Contributions.
[ ] (x) Transfer Contributions.
[ ] (xi) All of above which are checked, but only to the extent that
the Participant is vested in those contributions.
NOTE: To the extent Employee investment direction was previously
allowed, it shall continue to be allowed on those amounts and the
earnings thereon.
20. EARLY PAYMENT OPTION
(a) A Participant who separates from Service prior to retirement, death or
Disability [X] may [ ] may not make application to the Employer
requesting an early payment of his or her vested account balance.
(b) A Participant who has attained age 59-1/2 and who has not separated
from Service [X] may [ ] may not obtain a distribution of his or her
vested Employer contributions. Distribution can only be made if the
Participant is 100% vested.
(c) A Participant who has attained the Plan's Normal Retirement Age and who
has not separated from Service [X] may [ ] may not receive a
distribution of his or her vested account balance.
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NOTE: If the Participant has had the right to withdraw his or her
account balance in the past, this right may not be taken away.
Notwithstanding the above, to the contrary, required minimum
distributions will be paid. For timing of distributions, see item
21(a) below.
21. DISTRIBUTION OPTIONS
(a) Timing of Distributions:
In cases of termination for other than death, Disability or retirement,
benefits shall be paid:
[ ] (i) As soon as administratively feasible, following the close
of the valuation period during which a distribution is
requested or is otherwise payable.
[ ] (ii) As soon as administratively feasible following the close of
the Plan Year during which a distribution is requested or
is otherwise payable.
[ ] (iii) As soon as administratively feasible, following the date
on which a distribution is requested or is otherwise
payable.
[ ] (iv) As soon as administratively feasible, after the close of
the Plan Year during which the Participant incurs
consecutive one-year Breaks in Service.
[ ] (v) Only after the Participant has achieved the Plan's Normal
Retirement Age, or Early Retirement Age, if applicable.
In cases of death, Disability or retirement, benefits shall be paid:
[ ] (vi) As soon as administratively feasible, following the close
of the valuation period during which a distribution is
requested or is otherwise payable.
[ ] (vii) As soon as administratively feasible following the close
of the Plan Year during which a distribution is requested
or is otherwise payable.
[X] (viii) As soon as administratively feasible, following the
date on which a distribution is requested or is otherwise
payable.
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(b) Optional Forms of Payment:
[X] (i) Lump Sum.
[ ] (ii) Installment Payments.
[ ] (iii) Life Annuity*.
[ ] (iv) Life Annuity Term Certain*.
Life Annuity with payments guaranteed for _______ years
(not to exceed 20 years, specify all applicable).
[ ] (v) Joint and [ ] 50%, [ ] 66-2/3%, [ ] 75% or [ ] 100% survivor
annuity* (specify all applicable).
[ ] (vi) Other form(s) specified:
*Not available in Plan meeting provisions of paragraph 8.7 of Basic
Plan Document #04.
(c) Recalculation of Life Expectancy:
In determining required distributions under the Plan, Participants
and/or their Spouse (Surviving Spouse) [ ] shall [ ] shall not have the
right to have their life expectancy recalculated annually.
If "shall",
[ ] only the Participant shall be recalculated.
[ ] both the Participant and Spouse shall be recalculated.
[ ] who is recalculated shall be determined by the Participant.
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22. SPONSOR CONTACT
Employers should direct questions concerning the language contained in and
qualification of the Prototype to:
OTTO GUTOWSKY
(Job Title) 2ND VICE PRESIDENT
(Phone Number) 810-816-0282
In the event that the Sponsor amends, discontinues or abandons this
Prototype Plan, notification will be provided to the Employer's address
provided on the first page of this Agreement.
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23. SIGNATURES
DUE TO THE SIGNIFICANT TAX RAMIFICATIONS, THE SPONSOR RECOMMENDS THAT BEFORE
YOU EXECUTE THIS ADOPTION AGREEMENT, YOU CONTACT YOUR ATTORNEY OR TAX
ADVISOR, IF ANY.
(a) EMPLOYER:
Name and address of Employer if different than specified in Section I
above.
This agreement and the corresponding provisions of the Plan and
Trust/Custodial Account Basic Plan Document #04 were adopted by the
Employer the 30 day of Dec, 1994.
Signed for the Employer by:
Title: Plan Administrator
Signature: Cristie Biebuyck
------------------------------------
THE EMPLOYER UNDERSTANDS THAT ITS FAILURE TO PROPERLY COMPLETE THE
ADOPTION AGREEMENT MAY RESULT IN DISQUALIFICATION OF ITS PLAN.
Employer's Reliance: An Employer who maintains or has ever maintained
or who later adopts any Plan [including, after December 31, 1985, a
Welfare Benefit Fund, as defined in Section 419(e) of the Code, which
provides post-retirement medical benefits allocated to separate
accounts for Key Employees, as defined in Section 419A(d)(3)] or an
individual medical account, as defined in Code Section 415(l)(2) in
addition to this Plan may not rely on the opinion letter issued by the
National Office of the Internal Revenue Service as evidence that this
Plan is qualified under Section 401 of the Code. If the Employer who
adopts or maintains multiple Plans wishes to obtain reliance that such
Plan(s) are qualified, application for a determination letter should be
made to the appropriate Key District Director of Internal Revenue. The
Employer understands that its failure to properly complete the Adoption
Agreement may result in disqualification of its plan.
This Adoption Agreement may only be used in conjunction with Basic Plan
Document #04.
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[X] (b) TRUSTEE:
Name of Trustee:
NBD BANK
The assets of the Fund shall be invested in accordance with paragraph
13.3 of the Basic Plan Document #04 as a Trust. As such, the Employer's
Plan as contained herein was accepted by the Trustee the 20 day of
December, 1994.
Signed for the Trustee by: OTTO L. GUTOWSKY
Title: SECOND VP
Signature: Otto L. Gutowsky
-------------------------------------
[X] (c) CUSTODIAN:
Name of Custodian:
NBD BANK, N.A.
The assets of the Fund shall be invested in accordance with paragraph
13.4 of the Basic Plan Document #04 as a Custodial Account. As such,
the Employer's Plan as contained herein was accepted by the Custodian
the 20 day of December, 1994.
Signed for the Custodian by: OTTO L. GUTOWSKY
Title: SECOND VP
Signature: Otto L. Gutowsky
-------------------------------------
(d) SPONSOR:
The Employer's Agreement and the corresponding provisions of the Plan
and Trust/Custodial Account Basic Plan Document #04 were accepted by
the Sponsor the 20 day of December, 1994.
Signed for the Sponsor by: OTTO L. GUTOWSKY
Title: SECOND VP
Signature: Otto L. Gutowsky
-------------------------------------
29
<PAGE> 1
EXHIBIT 10.28
TALON
AUTOMOTIVE 900 Wilshire Drive
GROUP LLC Suite 203
Troy, Michigan 48084
(810) 362-7600
FAX (810) 362-7617
October 25, 1996
Mr. Michael Veltri
President & CEO
Veltri International
900 Wilshire Plaza
Suite 150
Troy, MI. 49084
Dear Mike:
While we have discussed Talon Automotive Group's bonus program verbally several
times, per your request, I am putting in writing the Talon Automotive Group's
executive bonus program that you would be eligible to participate in:
* Executives can earn up to 50% of their base pay by obtaining certain
agreed upon performance levels. Over the last several years,
performance metrics have primarily focused on pre-tax net income
performance versus budget, however, prospectively, other measures may
be utilized such as ROA, EVA, etc.
* On an annual basis, each business unit prepares a business plan
including a financial budget for the upcoming year. These budgets
include income statements, balance sheets and cash flows. All business
plans are approved by T.A.G.'s executive committee then ultimately by
the owners in mid December.
* Bonuses are earned as long as actual performance meets or exceeds 75%
of the annual budget. Under 75% bonuses are not awarded. Over 75%
bonuses are earned ratably through the range of 0% - 5O%.
* The following indicates how bonuses are earned and provides and
example:
<TABLE>
<CAPTION>
Performance Relative to
Budgeted Earnings Bonus as Percentage of Base
<S> <C>
* 75% - 100% of budgeted earnings * 0 - 35%
* 100% - 125% * 35% - 50%
</TABLE>
<PAGE> 2
Mr. Michael Veltri
Veltri International
October 25, 1996
Page 2
Example:
Assume: Budgeted Pre-Tax Net Income - $4.0 million
Base Pay = $375,000 (Estimate)
<TABLE>
<CAPTION>
Percentage of Percentage
Actual Performance Budget Bonus of Base Bonus
------------------ ------ ------------- -----
<S> <C> <C> <C>
Net income $5.0 million 125% 50% $187,500
Net income $4.0 million 100% 35% $131,250
Net income $3.5 million 88% 8.2% $ 68,250
Net income $2.8 million 70% 0 0
</TABLE>
* Payment of the bonus is made after completion of the year-end audit by
Ernst & Young, usually in mid-March after year-end.
* Finally, any rights that you may have to any unpaid bonuses would be
forfeited if you are not employed by the company on December 31 of any
year, you terminate your employment with the company at any time, or
if you are terminated by the company for cause, as defined in your
employment agreement.
Hopefully, this clears up this issue. Please call if you have any questions.
Sincerely,
/s/ David J. Woodward
David J. Woodward
Vice President/CFO
DJW/apt
<PAGE> 1
EXHIBIT 10.29
THIS INDENTURE made as of the lst day of August, 1994.
IN PURSUANCE OF THE SHORT FORKS OF LEASES ACT;
MARIA L. VELTRI,
of the City of Bloomfield Hills,
in the County of Oakland, in the
State of Michigan, one of the
United States of America,
(hereinafter called the "LANDLORD"),
OF THE FIRST PART,
-and-
NORTH AMERIAN PRECISION TOOL LTD.,
a corporation incorporated under
the laws of the Province of Ontario,
(hereinafter called the "TENANT"),
OF THE SECOND PART,
WITNESSETH that in consideration of the rents, covenants and
agreements hereinafter reserved and contained on the part of the Tenant to be
paid, observed and performed, the Landlord has demised and leased, and by these
presents does demise and lease unto the Tenant that portion of the lands and
premises in the City of Windsor, in the County of Essex and Province of Ontario
described in Schedule "All annexed hereto as are outliiied in red on the plan of
survey annexed as Schedule "B", known municipally as 2000 North Talbot Road,
together with all buildings, structures, improvements and all fixtures
permanently affixed to the realty, all hereinafter called the demised
premises".
TO HAVE AND TO HOLD the demised premises for and during the term of
five (5) years to be computed from the lst day of August, 1994, and from
thenceforth next ensuing and fully to be completed and ended on the 31st day of
July, 1999.
YIELDING AND PAYING THEREFOR during the said term the sum of
Seventy-Five Thousand Seven Hundred Seventy-two Dollars ($75,772.00) per annum,
without deduction, payable in equal monthly instalments of Six Thousand Three
Hundred Fourteen Dollars and Thirty-four Cents ($6,314.34) each in advance on
the lst day of each month during the said term, the first payment of which is to
be paid on the lst day of August, 1994 and the last payment of which is to be
paid on the lst day of July, 1999.
<PAGE> 2
-2-
This Indenture of Lease is entered into upon the following terms,
covenants and conditions and the Landlord and the Tenant hereby agree to perform
and observe the covenants and conditions, herein contained on their respective
parts to be performed and observed:
1. The Tenant covenants to pay Kent, and in addition, to pay interest at
the rate of FIFTEEN PER CENT (15%) per annum on all arrears of rent.
2. The Tenant shall pay all realty taxes and local improvement rates and charges
which may be levied against the demised premises, including all buildings,
structures, machinery, equipment and fixtures therein and thereon, during the
term of this lease, and shall pay all water rates, sewer charges and charges for
electrical power, gas, telephone, waste removal (if any) and any other utility
service provided to the demised premises, and doth hereby indemnify the Landlord
against all such payments in, respect of the demised premises to secure to the
Landlord a net rent in the amount set out above free and clear from all
deductions throughout the term of this lease.
3. The Tenant shall at all times during the term of this lease and any renewal
thereof, at its expense, repair, maintain and keep in good and tenantable repair
the demised premises and the buildings, structures and other improvements from
time to time on the demised premises (including, without limiting the
generality of the foregoing, the roof and the plumbing, electrical, heating and
air-conditioning systems and apparatus contained therein) and to promptly make
all needed repairs and replacements, save and except where: (a) the want of
repair is the result of reasonable wear and tear; and (b) repairs for
structural defects to the walls, foundations and cracks to the floor not caused
by the Tenant's acts, omission or neglect. If the Tenant shall fail to keep the
demised premises and the buildings, structures and other improvements repaired
and maintained as aforesaid, the Landlord shall be entitled but shall not be
obliged to repair the same, and the cost of such repairs shall be repayable by
the Tenant forthwith on demand as an addition to the rent payable hereunder.
<PAGE> 3
-3-
4. The Tenant shall promptly comply with all laws, ordinances and lawful orders
and regulations at any time in force during the term which affect the safety,
condition, maintenance, use or occupation of the demised premises, and with
every applicable regulation, order and requirement of the Canadian Fire
Underwriters Association or any body having similar functions or of any
liability or fire insurance company by which the Landlord may be insured at any
time during the term; provided that if the Tenant defaults under the provisions
of this clause the Landlord may itself comply with the requirements of this
clause and the Tenant shall forthwith pay all costs and expenses incurred by the
Landlord in so doing.
5. The Tenant shall at all times during the term of this lease, at its expense,
insure and keep insured in the name of the Landlord the buildings and structures
from time to time on the demised premises to the lesser of their full insurable
value or their replacement cost, exclusive of the cost of foundations, against
all risk of loss or damage caused by or resulting from fire, lightning or
tempest or any peril defined in a standard fire insurance additional perils
supplemental contract and any other insurable peril reasonably required by the
Landlord. If the Tenant shall fail to keep the said buildings and structures
insured as aforesaid, the Landlord shall be entitled but shall not be obliged to
insure the said buildings and structures, and may pay for the said insurance and
the amount so paid shall be repayable by the Tenant forthwith on demand as an
addition to the rental payable hereunder.
6. The Landlord may enter and view the state of repair of the demised premises
during normal business hours, and upon reasonable notice.
7. The Tenant may assign or sublet the premises in whole or in part with the
prior written consent of the Landlord (which consent shall not be unreasonably
withheld) but no such assigning or sub-letting shall relieve the Tenant of its
liability for the due observance of its covenants hereunder.
<PAGE> 4
-4-
8. The Tenant shall heat the demised premises during the term to such
temperature as may be necessary to prevent damage thereto.
9. The Tenant will, at the expiration or sooner termination of the term of this
lease, peaceably surrender and yield up to the Landlord the demised premises,
together with all the buildings and structures thereon In repair and condition
equivalent to the repair and condition in which the Tenant was required to
maintain the same, and the Tenant may remove its fixtures, machinery and
equipment, but shall make good any damage done to the demised premises by such
removal.
10. PROVIDED and it is expressly agreed that if and whenever during the term
hereby demised. the demised premises shall be destroyed or damaged by any
casualty, then the following provisions shall apply:
(a) If the damage or destruction is such that the
premises are rendered wholly unfit for occupancy or it is impossible or unsafe
to use and occupy them and if in either event the damage, in the opinion of the
Landlord, to be given to the Tenant within thirty (30) days of the happening of
such damage or destruction, cannot be repaired with reasonable diligence within
one hundred and twenty (120) days from the date the Landlord has given its
opinion, then either the Landlord or the Tenant may within five (5) days next
succeeding the giving of the Landlord's opinion as aforesaid, terminate this
lease by giving to the other notice in writing of such termination, in which
event this lease and the term hereby demised shall cease and be at an end as of
the date of such destruction or damage and the rent and all other payments for
which the Tenant is liable under the terms of this lease shall be apportioned
and paid in full to the date of such destruction or damage; in the event that
neither the Landlord nor the Tenant so terminate this lease, then the Landlord
shall repair the said building with all reasonable speed and the rent hereby
reserved shall abate from the date of the happening of the damage until the
damage shall be made good
<PAGE> 5
-5-
to the extent of enabling the Tenant to use and occupy the demised premises.
(b) If the damage be such that the demised premises are wholly unfit
for occupancy, or if it is impossible or unsafe to use or occupy them, but if
in either event the damage, in the opinion of the Landlord, to be given to the
Tenant within thirty (30) days from the happening of such damage, can be
repaired with reasonable diligence within one hundred and twenty (120) days from
the date the Landlord has given its opinion, then the rent hereby reserved shall
abate from the date of the happening of such damage until the damage shall be
made good to the extent of enabling the Tenant to use and occupy the demised
premises, and the Landlord shall repair the damage with all reasonable speed.
(c) If the damage is such that the demised premises are only
partially damaged or destroyed, and in the opinion of the Landlord, to be given
to the Tenant within thirty (30) days from the happening of such damage, can be
repaired with reasonable diligence within one hundred and twenty (120) days
from the date the Landlord has given its opinion, then the rent hereby reserved
shall abate in the proportion that the part of the demised premises so damaged
bears to the whole of the demised premises, and the Landlord shall repair the
damage with all reasonable speed.
11. The Tenant shall maintain and pay all premiums for public liability
insurance for death, injury and property damage occurring on the demised
premises in such amounts as may be reasonably satisfactory to the Landlord with
the Landlord named as the insured. Notwithstanding the foregoing, the Tenant
shall indemnify and save harmless the Landlord from any and all liabilities,
damages, costs, claims, suits or actions growing out of:
(a) any breach, violation or non-performance of any
covenant, condition or agreement in this lease set
forth and contained on the part of the Tenant, to
be fulfilled, kept, observed and performed;
<PAGE> 6
-6 -
(b) any damage to property occasioned by the Tenant's
use and occupation of the demised premises;
(c) any injury to person or persons, including death
resulting at any time therefrom, occuring in or about
the demised premises, and/or on the sidewalks adjacent
to same.
12. The Landlord covenants with the Tenant for quiet enjoyment.
13. The Tenant shall not, without the prior written consent of the Landlord,
which consent will not be unreasonably withheld, make any alterations or
additions, structural or otherwise, to the demised premises (both inside and
outside).
14. This lease and the term and estate hereby granted are subject to the
limitation that:
(i) whenever the Tenant shall make default in the payment
of any instalment of rent, or the payment of any other
sum payable hereunder, and such default shall continue
for fifteen (15) days whether formally demanded or
not;
(ii) if the Tenant shall be adjudicated bankrupt or
judged to be insolvent, or if a receiver or trustee
of the Tenant"s property be appointed or if the
Tenant shall file a petition in bankruptcy or
insolvency, or if an execution or attachment shall
be issued against the Tenant or any of the Tenant's
property whereby the said demised premises or any
part thereof may be taken or occupied by someone
other than the Tenant; and
(iii) if the Tenant shall breach any of its covenants
herein;
then and in every case and so often as the same shall happen the full amount of
the current month's rent and the next three months' rent shall immediately
become due and payable, and it shall be lawful for the Landlord to enter into
and upon the demised premises or any part thereof in the name of the whole, and
this lease and the term thereof created herein, shall at the
<PAGE> 7
- 7 -
option of the Landlord and with or without entry, terminate, and all rights of
the Tenant and any person, firm or corporation claiming through or under the
Tenant,, with respect to the demised premises shall be absolutely forfeited and
shall lapse.
15. In the event that the Tenant remains in possession of the demised premises
after the expiration of this lease or any renewal thereof, and without the
execution and delivery of a new lease, it shall be deemed to be occupying the
demised premises as a tenant from month to month at the same monthly rental in
effect at the expiration of the lease or any renewal and subject to the terms of
this lease insofar as the same are applicable to a month to month tenancy.
16. All notices, demands and requests which may be or are required to be given
by either party to the other shall be in writing,, and may be delivered
personally or sent by registered mail addressed in the case of the Landlord to:
Mrs. Maria L. Veltri
c/o 2030 North Talbot Road
Windsor, Ontario
N9A 6J3
and in the case of the Tenant to
North American Precision Tool Ltd.
2000 North Talbot Road
Windsor, Ontario
N9A 6J3
or at such other place as either party may from time to time designate by
written notice to the other. Notices, demands and requests which shall be given
to the parties in the manner aforesaid shall be deemed sufficiently served, or
given for all purposes hereof in the case of those served personally, on the day
of such services, and in the case of those given by registered mail, on the next
business day following the date of the mailing thereof.
17. The Tenant shall use and occupy the demised premises for the business of a
manufacturer and such business or businesses as are incidental thereto, and for
no other purpose without the prior written consent of the Landlord, which
consent shall not be unreasonably withheld. The Tenant shall not carry on any
<PAGE> 8
-8-
activity or business upon the demised premises which shall be deemed a nuisance.
18. During the last three (3) months of the term the Landlord shall be entitled
to affix and maintain upon the demised premises notices statIng that the same
are for rent or for sale, which notices shall not be disturbed by the Tenant,
and to enter the demised premises during normal business hours with any
prospective tenants or purchasers in order to inspect the same.
19. Any condoning, excusing or overlooking by either party hereto of any
default, breach or non-observance by the other party at any time or times in
respect of any covenant, proviso or condition herein contained shall not operate
as a waiver of any rights hereunder in respect of any subsequent default, breach
or non-observance.
20. The Tenant waives and renounces the benefit of any present or future Act of
the Legislature of Ontario taking away or limiting the Landlord's right of
distress and, notwithstanding any such Act, the Landlord may seize and sell all
the Tenant's goods and chattels for payment of rent and costs as might have been
done if such Act had not been passed. The Tenant further agrees that if it
leaves the demised premises owing unpaid rent, the Landlord, in addition to any
remedy otherwise provided by law, may seize and sell the goods and chattels of
the Tenant at any place to which the Tenant or any other person may have removed
them, in the same manner as if such goods and chattels had remained and been
distrained upon the demised premises.
21. Notwithstanding anything herein contained, it is the intention of this lease
and of the parties hereto that all expenses, payments and outgoings incurred in
respect of the demised premises for any matter, cause or reason whatsoever shall
be borne by the Tenant and all rent to be paid shall be net to the Landlord and
clear of all such outgoings. Any outgoings of any kind which may become payable
out of the demised premises shall not entitle the Tenant to reduce the amount of
its payments of rent to the Landlord, and the Landlord shall be entitled to
<PAGE> 9
-9-
recover from the Tenant as if it were rent in arrears any amount which the
Landlord may pay, whether voluntarily or involuntarily, on account of any such
outgoing payable by the Tenant.
22. The Tenant shall keep the demised premises in a clean and tidy condition,
shall not bring thereon any machinery, equipment or article that might damage
the demised premises, and shall not overload the floor and shall not permit
waste paper, garbade, waste or objectionable material to accumulate on or near
the demised premises.
23. This lease is subject and subordinate to all mortgages and all renewals,
modifications, replacements and extensions thereof which may now or at any time
hereafter affect the demised premises. Tenant shall at any time on notice from
Landlord attorn to and become a tenant of a mortgagee under any such mortgage
upon the same terms and conditions as set forth in this lease and shall execute
promptly upon request by Landlord any certificates, instruments of postponement
or attornment or other instruments as from time to time may be requested to give
full effect to this requirement.
24. Provided that if the Tenant duly and regularly pays the rent hereby reserved
together with all additional rent and other charges herein secured and duly
keeps, observes and performs the covenants, agreements and conditions herein on
Tenant's part to be kept, observed and performed, the Landlord at the expiration
of the term hereby granted shall upon the written request of the Tenant, given
at least six (6) months before the expiration of the term hereby demised, grant
to the Tenant a renewal lease of the premises for a further term of five (5)
years and such renewal lease shall contain, so far as they apply, all the
covenants, agreements, conditions and provisos contained in this lease, except
this covenant for renewal and except for the rent payable during such renewal
term. The rent payable during the renewal term shall be such rent as is agreed
upon between the parties not later than three (3) months prior to the expiry of
the initial term hereof, and failing agreement by such date will
<PAGE> 10
-10-
be set by arbitration; provided that any leasing pursuant to this paragraph
shall be on the term and condition that the rent payable by the Tenant shall in
no event be less than the rent paid during the final year of the initial term.
Any arbitration called for by this lease shall be conducted in the City of
Windsor by the Senior County Court Judge of the. County of Essex or by someone
designated by him, whose decision shall be final and binding upon the parties
and who shall in all such cases be acting as persona designata and not as an
arbitrator.
25. Subject to the provisions hereof, this Indenture of Lease shall extend to
and be binding upon and enure to the benef it of the parties hereto, their
heirs, executors, administrators, successors and assigns.
IN WITNESS WHEREOF the parties hereto have hereunto caused to be
affixed their corporate seals under the hands of their proper officers duly
authorized in that behalf respectively.
SIGNED, SEALED AND DELIVERED )
in the presence of )
)
) Maria L. Veltri
-----------------------
Maria L. Veltri
NORTH AMERICAN PRECISION
TOOL LTD.
by Maria L. Veltri
---------------------
<PAGE> 11
SCHEDULE A
ALL AND SINGULAR that certain parcel or tract of land and premises situate,
lying and being in the Township of Sandwich South, in the County of Essex and
Province of Ontario-and being composed of Part of Lot 12, in Concession 6 in the
said Township, containing by admeasurement 2.00 acres, and more particularly
described as follows:
PREMISING that the northerly limit of North Talbot Road, as referred to in
Instrument Number 493914 is assumed to have an astronomic bearing of
North 71 degrees 55' West, and relating all bearings herein thereto;
COMMENCING at an iron bar planted in the said northerly limit of North Talbot
Road, distant 1480.91 feet, measured westerly therealong from its intersection
with the westerly limit of Walker Road, as widened;
THENCE South 71 degrees 55' East, along the said northerly limit of North
Talbot Road, a distance of 189.07 feet to a standard iron bar;
THENCE North 3 degrees 09' East, a distance of 503.03 feet to an iron bar;
THENCE 87 degrees 56' West, a distance of 182.71 feet to a standard iron bar;
THENCE South 3 degrees 09' West, a distance of 450.86 feet more or less,
to the point of commencement.
<PAGE> 12
SCHEDULE B
PLAN OF SURVEY OF
PART of LOT 12
CONCESSION 6
IN THE
TOWNSHIP of SANDWICH SOUTH
COUNTY of ESSEX - ONTARIO
SCALE 1 - 60'
(c)VERMAEGEN - STUBBERFIELD - HARLEY - BREWER - BEZAIRE INC. - 1989
BEARING REFERNCE
BEARINGS ARE ASTRONOMIC AND ARE REFERRED TO THE NORTHERN LIMIT OF NORTH TALBOT
ROAD AS SHOWN ON PLAN 12R-384Z, HAVING A BEARING OF H 71' 55' W.
[LEGEND]
[SURVEYOR'S INFORMATION]
[MAP]
<PAGE> 13
FIRST AMENDMENT TO INDENTURE
THIS FIRST AMENDMENT to Indenture, made and entered into this 8th day
of November, 1996, by and between Maria L. Veltri, of the City of Bloomfield
Hills, Michigan, as Landlord, and North American Precision Tool Ltd., a
corporation incorporated under the laws of the Province of Ontario, as Tenant.
WHEREAS, on August 1, 1994, Landlord and Tenant made and entered into
a certain Indenture in pursuance of the Short Forms of Leases Act (the "Lease
Agreement"), covering certain real property as more fully described in the Lease
Agreement; and
WHEREAS, the Lease Agreement provided for an initial term equal to
five years commencing on August 1, 1994 and ending on July 31, 1999 ("Initial
Term"); and
WHEREAS, Landlord and Tenant are desirous of amending the Lease
Agreement to reflect an increase in the term of the Lease Agreement upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto hereby agree as follows:
1. That second paragraph of the Lease Agreement is hereby amended to
read as follows:
TO HAVE AND TO HOLD the demised premises for and during the
term of seven years and eleven months to be computed from the lst day of August,
1994 and from thenceforth next ensuing and fully to be completed and ended on
the 30th day of June, 2002. The term commencing on August 1, 1999 until June 30,
2002 shall be referred to as the "Extension Term."
2. That third paragraph of the Lease Agreement is hereby amended to
read as follows:
YIELDING AND PAYING THEREFORE during the Initial Term the sum of
Seventy Five Thousand Seven Hundred Seventy Two and No/100 ($75,772.00) Dollars
per annum, without deduction, payable in equal monthly installments of Six
Thousand Three Hundred Fourteen and 34/100 ($6,314.34) Dollars each in advance
on the lst day of each month during the Initial Term; and YIELDING AND PAYING
during the Extension Term, commencing on August 1, 1999, an amount equal to the
fair market rental value (taking into account the terms and conditions of the
Lease Agreement as amended herein). The rental amount for the Extension Term
("Extension Term Rental Amount") shall be payable on the same terms and
conditions as provided under the Lease Agreement. In the event that the parties
can not mutually agree upon the Extension Term Rental Amount within sixty (60)
days preceding the end of the Initial Term, then the parties shall appoint a
mutually agreeable appraiser who shall determine the Extension Term Rental
Amount and such determination shall be final and binding on the parties. The
costs of such appraiser shall be bome equally by the parties.
<PAGE> 14
Notwithstanding anything contained in this agreement to the contrary, the
Extension Term Rental Amount shall not be less than the annual rental rate for
the final year of the Initial Term.
3. That Paragraph 3 of the Lease Agreement is hereby amended to read as
follows:
During the Initial Term, the Tenant shall at all times during the term
of this lease and any renewal thereof, at its expense, repair, maintain
and keep in good and tenantable repair the demised premises and the
buildings, structures and other iTprovements from time to time on the
demised premises (including, without limiting the generality of the
foregoing, the structural defects to the walls, foundations, floor,
roof and plumbing, electrical, heating and air-conditioning systems and
apparatus contained therein) and shall promptly make all needed repairs
and replacements, save and except where: (a) the want of repair is the
result of reasonable wear and tear; and (b) repairs for structural
defects to the walls, foundations and cracks to the floor not caused by
the Tenant's acts, omission or neglect. During the Extension Term,
including any renewal thereof, the Tenant shall at all times, at its
expense, repair, maintain and keep in good and tenantable repair the
demised premises and the buildings, structures and other improvements
from time to time on the demised premises (including, without limiting
the generality of the foregoing, the structural defects to the walls,
foundations, floor, roof and plumbing, electrical, heating and
air-conditioning systems and apparatus contained therein) and shall
promptly make all needed repairs and replacements. If the Tenant shall
fail to keep the demised premises and the buildings, structures and
other improvements repaired and maintained as aforesaid, the Landlord
shall be entitled but shall not be obliged to repair the same, and the
cost of such repairs shall be repayable by the Tenant forthwith on
demand as an addition to the rent payable hereunder.
4. Except as expressly amended herein all of the terms and conditions
of said Lease Agreement shall remain in full force in effect and are hereby
ratified and confirmed by the parties hereto.
5. The Amendment shall be binding upon the parties hereto, the
respective successors and assigns.
2
<PAGE> 15
IN WITNESS WHEREOF the parties hereto have hereunto caused to be
affixed their corporate seals under the hands of their proper officers duly
authorized in that behalf respectively.
SIGNED, SEALED AND DELIVERED )
in the presence of ) Maria L. Veltri
) ------------------------
) Maria L. Veltri
NORTH AMERICAN PRECISION
TOOL LTD.
By: Dary Woodward
-------------------
3
<PAGE> 1
EXHIBIT 10.30
THIS INDENTURE MADE AS OF THE 1ST DAY OF JULY, 1993.
IN PURSUANCE OF THE SHORT FORMS OF LEASES ACT:
MARIA VELTRI,
(hereinafter called the "LANDLORD"),
OF THE FIRST PART,
- and
VELTRI STAMPING CORPORATION, a corporation
incorporated under the laws of the Province of Ontario,
(HEREINAFTER called the "TENANT"),
OF THE SECOND PART.
WITNESSETH that in consideration of the rents, covenants and
agreements hereinafter reserved and contained on the part of the Tenant to be
paid, observed and performed, the Landlord has demised and leased, and by these
presents does demise and lease unto the Tenant the vacant land used as a parking
area consisting of that portion of the lands and premises in the City of
Windsor, in the County of Essex and Province of Ontario described in Schedule
"All annexed hereto as are outlined in red on the plan of survey annexed as
Schedule "B", (hereinafter called the "demised premises").
TO HAVE AND TO HOLD the demised premises for and during the term of
four (4) years to be computed from the lst day of July, 1993, and from
thenceforth next ensuing and fully to be completed and ended on the 30th day of
June, 1997.
YIELDING AND PAYING THEREFOR during the first two years of the said
term from July 1, 1993 to June 30, 1995 the sum of Thirty-One Thousand Four
Hundred Sixty Dollars ($31,460) per annum, without deduction, payable in equal
monthly instalments of Two Thousand Six Hundred Twenty-one Dollars and
Sixty-seven Cents ($2,621.67) each in advance on the lst day of each month
during such period; and YIELDING AND PAYING during the final two years of the
said term from July 1, 1995 to June 30, 1997 the sum of
<PAGE> 2
-2-
Thirty-four Thousand Six Hundred Dollars ($34,600) per annum, without deduction,
payable in equal monthly instalments of Two Thousand Eight Hundred Eighty-three
Dollars and Thirty-four Cents ($2,883.34) each in advance on the ist day of each
month during such period.
This Indenture of Lease is entered into upon the following terms,
covenants and conditions and the Landlord and the Tenant hereby agree to perform
and observe the covenants and conditions herein contained on their respective
parts to be performed and observed:
1. The Tenant covenants to pay rent, and in addition, to pay interest at the
rate of FIFTEEN PER CENT (15%) per annum on all arrears of rent.
2. The Tenant shall pay all realty taxes and local improvement rates and charges
which may be levied against the demised premises, during the term of this lease,
and doth hereby indemnify the Landlord against all such payments in respect of
the demised premises to secure to the Landlord a net rent in the amount set out
above free and clear from all deductions throughout the term of this lease.
3. The Tenant shall at all times during the term of this lease and any renewal
thereof, at its expense, maintain and keep in good repair the demised premises.
If the Tenant shall fail to keep the demised premises repaired and maintained as
aforesaid, the Landlord shall be entitled but shall not be obliged to repair the
same, and the cost of such repairs shall be repayable by the Tenant forthwith on
demand as an addition to the rent payable hereunder.
4. The Tenant shall promptly comply with all laws, ordinances and lawful orders
and regulations at any time in force during the term which affect the safety,
condition, maintenance, use or occupation of the demised premises; provided that
if the Tenant ,defaults under the provisions of this clause the Landlord may
<PAGE> 3
-3-
itself comply with the requirements of this clause and the Tenant SHALL
forthwith pay all costs and expenses incurred by the Landlord in so doing.
5. The Landlord may enter and view the state of repair of the demised premises
during normal business hours, and upon reasonable notice.
6. The Tenant may assign or sublet the premises in whole or in part with the
prior written consent of the Landlord (which consent shall not be unreasonably
withheld) but no.such assigning or sub-letting shall relieve the Tenant of its
liability for the due observance of its covenants hereunder.
7. The Tenant will, at the expiration or sooner termination of the term of this
lease, peaceably surrender and yield up to the Landlord the demised premises, in
repair and condition equivalent to the repair and condition of the demised
premises at the commencement of this lease.
8. The Tenant shall maintain and pay all premiums for public liability
insurance for death, injury and property damage occurring on the demised
premises in such amounts as may be reasonably satisfactory to the Landlord with
the Landlord named as the insured. Notwithstanding the foregoing, the Tenant
shall indemnify and save harmless the Landlord from any and all liabilities,
damages, costs, claims, suits or actions growing out of:
(a) any breach, violation or non-performance of any
covenant, condition or agreement in this lease set
forth and contained on the part of the Tenant, to
be fulfilled, kept, observed and performed;
(b) any damage to property occasioned by the Tenant's
use and occupation of the demised premises;
(c) any injury to person or persons, including death
resulting at any time therefrom, occurring in or
about the demised premises, and/or on the sidewalks
adjacent to same.
<PAGE> 4
- 4 -
9. The Landlord covenants with the Tenant for quiet enjoyment.
10. The Tenant shall not, without the prior written consent of the Landlord,
which consent will not be unreasonably withheld, CONSTRUCT any buildings or
other structures or make any alterations or additions, structural or otherwise,
to the demised premises.
11. This lease and the term and estate hereby granted are subject to the
limitation that:
(i) whenever the Tenant shall make default in the
payment of any instalment of rent, or the payment
of any other sum payable hereunder, and such
default shall continue for fifteen (15) days
whether formally demanded or not;
(ii) if the Tenant shall be adjudicated bankrupt or
judged to be insolvent, or if a receiver or trustee
of the Tenant's property be appointed or if the
Tenant shall file a petition in bankruptcy or
insolvency, or if an execution or attachment shall
be issued against the Tenant or any of the Tenant's
property whereby the said demised premises or any
part thereof may be taken or occupied by someone
other than the Tenant; and
(iii) if the Tenant shall breach any of its covenants
herein;
then and in every case and so often as the same shall happen the full amount
of the current month's rent and the next three months' rent shall immediately
become due and payable, and it shall be lawful for the Landlord to enter into
and upon the demised premises or any part thereof in the name of the whole,
and this lease and the term thereof created herein, shall at the option of the
Landlord and with or without entry, terminate, and all rights of the Tenant
and any person, firm or corporation claiming,through or under the Tenant, with
respect to the demised premises shall be absolutely forfeited and shall lapse,
<PAGE> 5
- 5 -
12. In the event that the Tenant remains in possession of the demised premises
after the expiration of this lease or any renewal thereof, and without the
execution and delivery of a new lease, it shall be deemed to be occupying the
demised premises as a tenant from month to month at the same monthly rental in
effect at the expiration of the lease or any renewal and subject to the terms of
this lease insofar as the same are applicable to a month to month tenancy.
13. All notices, demands, and requests which may be or are required to be given
by either party to the other shall be in writing, and may be delivered
personally or sent by registered mail addressed in the case of the Landlord to:
Mrs. Maria Veltri
c/o Suite 150
900 Wilshire Plaza
Troy, Michigan, 48084
and in the case of the Tenant to:
Veltri Stamping Corporation
2030 North Talbot Road
Windsor, Ontario
N9A 6J3
or at such other place as either party may from time to time designate by
written notice to the other. Notices, demands and requests which shall be given
to the parties in the manner aforesaid shall be deemed sufficiently served, or
given for all purposes hereof in the case of those served personally, on the day
of such services, and in the case of those given by registered mail, on the next
business day following the date of the mailing thereof.
14. The Tenant shall use and occupy the demised premises as a parking area for
motor vehicles in connection with the business of the Tenant carried on the
property adjacent to the demised premises, and for no other purpose without the
prior written consent of the Landlord, which consent shall not be unreasonably
withheld. The Tenant shall not carry on any activity or business upon the
demised premises which shall be deemed a nuisance.
<PAGE> 6
- 6 -
15. During the last three (3) months of the term the Landlord shall be entitled
to affix and maintain upon the demised premises notices stating that the same
are for rent or for sale, which notices shall not be disturbed by the Tenant,
and to enter the demised premises during normal business hours with any
prospective tenants or purchasers in order to inspect the same.
16. Any condoning, excusing or overlooking by either party hereto of any
default, breach or non-observance by the other party at any time or times in
respect of any covenant, proviso or condition herein contained shall not operate
as a waiver of any rights hereunder in respect of any subsequent default, breach
or non-observance.
17. The Tenant waives and renounces the benefit of any present or future Act of
the Legislature of Ontario taking away or limiting the Landlord's right of
distress and, notwithstanding any such Act, the Landlord may seize and sell all
the Tenant's goods and chattels for payment of rent and costs as might have been
done if such Act had not been passed. The Tenant further agrees that if it
leaves the demised premises owing unpaid rent, the Landlord, in addition to any
remedy otherwise provided by law, may seize and sell the goods and chattels of
the Tenant at any place to which the Tenant or any other person may have removed
them, in the same manner as if such goods and chattels had remained and been
distrained upon the demised premises.
18. Notwithstanding anything herein contained, it is the intention of this lease
and of the parties hereto that all expenses, payments and outgoings incurred in
respect of the demised premises for any matter, cause or reason whatsoever shall
be borne by the Tenant and all rent to be paid shall be net to the Landlord and
clear of all such outgoings. Any outgoings of any kind which may become payable
out of the demised premises shall not entitle the Tenant to reduce the amount of
its payments of rent to the Landlord, and the Landlord shall be entitled to
<PAGE> 7
- 7 -
recover from the Tenant as if it were rent in arrears any amount which the
Landlord may pay, whether voluntarily or involuntarily, on account of any such
outgoing payable by the Tenant.
19. This lease is subject and subordinate to all mortgages and all renewals,
modifications, replacements and extensions thereof which may now or at any time
hereafter affect the demised premises. Tenant shall at any time on notice from
Landlord attorn to and become a tenant of a mortgagee under any such mortgage
upon the same terms and conditions as set forth in this lease and shall execute
promptly upon request by Landlord any certificates, instruments of postponement
or attornment or other instruments as from time to time may be requested to
give full effect to this requirement.
20. Provided that if the Tenant duly and regularly pays the rent hereby reserved
together with all additional rent and other charges herein secured and duly
keeps, observes and performs the covenants, agreements and conditions herein on
Tenant's part to be kept, observed and performed, the Landlord at the expiration
of the term hereby granted shall upon the written request of the Tenant, given
at least six (6) months before the expiration of the term hereby demised, grant
to the Tenant a renewal lease of the premises for a further term of two (2)
years and such renewal lease shall contain, so far as they apply, all the
covenants, agreements, conditions and provisos contained in this lease, except
this covenant for renewal and except for the rent payable during such renewal
term. The rent payable during the renewal term shall be such rent as is agreed
upon between the parties not later than three (3) months prior to the expiry of
the initial term hereof, and failing agreement by such date will be set by
arbitration; provided that any leasing pursuant to this paragraph shall be on
the term and condition that the rent payable by the Tenant shall in no event be
less than the rent paid during the final year of the initial term. Any
arbitration
<PAGE> 8
- 8 -
called for by this lease shall be conducted in the City of Windsor by the Senior
County Court Judge of the County of Essex or by someone designated by him, whose
decision shall be final and binding upon the parties and who shall in all such
cases be acting as persona designata and not as an arbitrator.
21. Subject to the provisions hereof, this Indenture of Lease shall extend to
and be binding upon and enure to the benef it of the parties hereto, their
heirs, executors, administrators, successors and assigns.
IN WITNESS WHEREOF the parties hereto have hereunto caused to be
affixed their corporate seals under the hands of their proper officers duly
authorized in that behalf respectively.
SIGNED, SEALED AND DELIVERED )
in the presence of )
) Maria L. Veltri
) ---------------------------
) Maria L. Veltri
)
)
) VELTRI STAMPING CORPORATION
)
) by [SIG]
-----------------------------
<PAGE> 9
SCHEDULE A
ALL AND SINGULAR that certain parcel or tract of land and premises situate,
lying and being in the Township of Sandwich South, in the County of Essex and
Province of Ontario and being composed of Part of Lot 12, in Concession 6 in
Elie said Township, containing by admeasurement 2.00 acres, and. more
particularly described as follows:
PREMISING that the northerly limit of North Talbot Road, as referted to in
Instrument Number 493914 is assumed to have an astronomic bearing of North 71
degrees 55' West, and relating all bearings herein thereto;
COMMENCING at an iron bar planted in Elie said northerly limit of North Talbot
Road, distance 1480.91 feet, measured westerly therealong from its intersection
with the westerly limit of Walker Road, as widened;
THENCE South 71 degrees 55' East, along Elie said northerly limit of North
Talbot Road, a distance of 189.07 feet to a standard iron bar;
THENCE North 3 degrees 09' East, a distance of 503.03 feet to an iron bar;
THENCE 87 degrees 56' West, a distance of 182.71 feet to a standard iron bar;
THENCE South 3 degrees 09' West, a distance of 450.86 feet more or less, to the
point of commencement
<PAGE> 10
SCHEDULE B
PLAN OF SURVEY OF
PART of LOT 12
CONCESSION 6
IN THE
TOWNSHIP of SANDWICH SOUTH
COUNTY of ESSEX - ONTARIO
SCALE 1 - 60'
(c)VERMAEGEN - STUBBERFIELD - HARLEY - BREWER - BEZAIRE INC. - 1989
BEARING REFERNCE
BEARINGS ARE ASTRONOMIC AND ARE REFERRED TO THE NORTHERN LIMIT OF NORTH TALBOT
ROAD AS SHOWN ON PLAN 12R-384Z, HAVING A BEARING OF H 71' 55' W.
[LEGEND]
[SURVEYOR'S INFORMATION]
[MAP]
<PAGE> 11
FIRST AMENDMENT TO INDENTURE
THIS FIRST AMENDMENT to Indenture, made and entered into this 8th day
of November, 1996, by and between Maria L. Veltri, of the City of Windsor and
the County of Essex and Province of Ontario, as Landlord, and Veltri Stamping
Corporation, a corporation incorporated under the laws of the Province of
Ontario, as Tenant.
WHEREAS, on July 1, 1993, Landlord and Tenant made and entexed into a
certain Indenture in pursuance of the Short Forms of Leases Act (the "Lease
Agreement"), covering certain vacant land used as a parking area as more fully
described in the Lease Agreement; and
WHEREAS, the Lease Agreement provided for an initial term equal to
four (4) years commencing on July 1, 1993 ("Initial Term"); and
WHEREAS, Landlord and Tenant are desirous of amending the Lease
Agreement to reflect an increase in the term of the Lease Agreement and to
reflect an increase in the rents payable by Tenant upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises herein.
contained, the parties hereto hereby agrees as follows:
1. The second paragraph of the Lease Agreement is hereby amended to
read as follows:
TO HAVE AND TO HOLD the demised premises for and during the
term of nine (9) years to be computed from the 1st day of July, 1993 and from
thenceforth next ensuing and fully to be completed and ended on the 30th day of
June, 2002. The term commencing on August 1, 1997 and ending on June 30, 2002
shall be referred to as the "Extension Term."
2. That third paragraph of the Lease Agreement is hereby amended to
read as follows:
YIELDING AND PAYING THEREFORE during the first two years of the
Initial Term from July 1, 1993 to June 30, 1995 the sum of Thirty One Thousand
Four Hundred Sixty Dollars ($31,460.00) per annum, without deduction, payable in
equal monthly installments of Two Thousand Six Hundred Twenty One and 67/100
($2,621.67) Dollars each in advance on the first day of each month during such
period; and YIELDING AND PAYING during the next two years of the Initial Term
from July 1, 1995 to June 30, 1997 the sum of Thirty Four Thousand Six Hundred
($34,600) Dollars per annum, without deduction, payable in equal monthly
installments of Two Thousand Eight Hundred Eighty Three and 34/100 ($2,883.34)
Dollars each in advance on the first day of each month during such period; and
YIELDING AND PAYING during the Extension Term an amount equal to the fair market
rental value (taking into account the terms and conditions of the Lease
Agreement as amended herein). The rental amount for the Extension Term
("Extension Term Rental Amount") shall be payable on the same terms and
condtions as provided under the Lease Agreement. In the event that the parties
can not mutually agree upon the Extension Term Rental Amount within sixty (60)
days
<PAGE> 12
preceding the end of the Initial Term, then the parties shall appoint a mutually
agreeable appraiser who shall determine the Extension Term Rental Amount and
such determination shall be final and binding on the parties. The costs of such
appraiser shall be borne equally by the parties. Notwithstanding anything
contained in this agreement to the contrary, the Extension Term Rental Rate
during any year during the Extension Term shall not be less than the annual
rental rate for the final year of the Initial Term.
3. That paragraph 20 of the Lease Agreement is hereby amended to read
as follows:
Provided that if the Tenant duly and regularly pays the rent hereby
reserved together with all additional rent and other charges herein secured and
duly keeps, observes and performs the covenants, agreeemtns and conditions
herein on Tenant's part to be kept, observed and performed, the Landlord at the
expiration of the term hereby granted shall upon the written request of the
Tenant, given at least six (6) months before expiration of the term hereby
demised, grant to the Tenant a renewal lease of the premises for a further term
of five (5) years and such renewal lease shall contain, so far as they apply,
all the covenants, agreements, conditions and provisos contained in this lease,
as amended, except for this covenant for renewal and except for the rent payable
during such renewal term. The rent payable during the renewal term shall be such
rent as is agreed upon between the parties ot later than three (3) months prior
to the expiry of the Initial Term and Extension Term hereof, and failing
agreement by such date will be set by arbitration; provided that any leasing
pursuant to this paragraph shall be on the term and condition that the rent
payable by the Tenant shall in no event be less than the rent paid during the
final year of the Extension Term. Any arbitration called for by this lease shall
be conducted in the City of Windsor by the Senior County Judge of the County of
Essex or by someon designated by him, whose decision shall be final and binding
upon the parties and who shall in all such cases be acting as persona designata
and not as an arbitrator.
4. Except as expressly amended herein all of the terms and conditions
of said Lease Agreement shall remain in full force in effect and are hereby
ratified and confirmed by the parties hereto.
5. The Amendment shall be binding upon the parties hereto, the
respective successors and assigns.
2
<PAGE> 13
IN WITNESS WHEREOF the parties hereto have hereunto caused to be
affixed their corporate seals under the hands of their proper officers duly
authorized in that behalf respectively.
SIGNED, SEALED AND DELIVERED )
in the presence of ) Maria L. Veltri
) ----------------------------------
) Maria L. Veltri
VELTRI STAMPING CORPORATION
By: David J. Woodward
-------------------------------
3
<PAGE> 1
EXHIBIT 10.31
AMENDED AND RESTATED AGREEMIENT
THIS AMENDED AND RESTATED AGREEMENT (the "Agreement"), entered into as
of the _ day of April, 1998, is by and between Talon Automotive Group L.L.C., a
Michigan limited liability company ("TAG") and Talon L.L.C., a Michigan limited
liability company ("Talon").
WHEREAS, TAG and Talon entered into that certain Agreement dated July
1, 1997 (the "Agreement"), pursuant to which Talon agreed to provide certain
services to the TAG Group (as hereinafter defined), as provided therein;
WHEREAS, the parties hereto desire to amend and restate the Agreement
upon the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the premise and the covenants set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby amend and
restate the Agreement in its entirety as follows:
1. Engagement. TAG hereby engages Talon, and Talon agrees to provide
to the TAG Group, the following services (the "Services"), upon the terms and
conditions set forth herein:
a. Insurance/Employee Benefit Administration Assistance. Talon
shall assist the TAG Group, as requested from time to time, in
connection with the development and implementation of
property/casualty, employee benefits, insurance portfolio submissions
and applications.
b . Accounting/Financial Assistance Services. Talon shall assist
the TAG Group, as requested from time to time, in connection with the
administration of various accounting/financial matters, including the
annual financial audits with their independent auditors and
institutional financing matters.
C. Tax Assistance Services. Talon shall prepare drafts of federal
and state income and franchise tax returns for TAG's review and
approval, and, if requested, represent the TAG Group before Internal
Revenue service and state taxing authorities regarding disputes as to
tax liability. Talon shall also assist the TAG Group, as requested
from time to time, in connection with review of depreciation systems,
payroll tax matters, and tax considerations of proposed transactions,
and advise the TAG Group as requested from time to time as to the
effect of various tax provisions of federal and state law.
d . Acquisition Assistance. Talon shall assist the TAG Group as
requested from time to time in connection with various acquisition
matters, including providing assistance with respect to the
structuring, negotiation and financing thereof.
<PAGE> 2
Notwithstanding anything contained herein to the contrary, in no event
shall Talon provide or be responsible for providing (i) any management services
for the TAG Group of any kind, or (ii) any services with respect to the
planning, supervision or overseeing of the management or operations (including
safety or regulatory compliance matters) of the TAG Group of any kind. In
addition, nothing contained herein shall require Talon to provide any services
which would be in contravention of law or which would disrupt Talon's provision
of services for its own business, and, in no event shall Talon be required to
retain any additional employees in order to accommodate TAG's request for any
services hereunder.
2. Term. Unless terminated earlier pursuant to Section 4 hereof, the
initial term of this Agreement shall commence as of the date hereof and continue
for a period of one (1) year following July 1, 1997; provided, however, this
Agreement shall be automatically renewed for successive one (1) year periods
thereafter, unless either party provides written notice of nonrenewal to the
other within ninety (90) days prior to the expiration of the initial term or any
such renewal term or unless otherwise terminated pursuant to Section 4 hereof.
3. Compensation. As compensation for the services to be rendered by
Talon pursuant to this Agreement, TAG shall pay to Talon an annual fee in an
amount equal to Five Hundred Thousand ($500,000) Dollars, which annual fee shall
be subject to adjustment by the mutual agreement of TAG and Talon, and which
annual fee shall be paid in twelve (12) equal monthly installments commencing as
of the date hereof and continuing on the first day of each month thereafter
during the term of this Agreement. If the term of this Agreement commences or
terminates during any calendar month, then the monthly installment for such
calendar month shall be pro rated based upon the number of days during such
month in which this Agreement was in effect in relation to the total number days
of such month.
4. Default and Termination. If either party hereto defaults in the
performance of any of its obligations hereunder, and such default continues for
a period of thirty (30) days after written notice thereof to the other party,
such other party shall have the right to terminate this Agreement immediately
upon notice thereof to the defaulting party.
5. Confidentiality.
a. In connection with the services provided hereunder, TAG or Talon
may provide or disclose to the other certain confidential and
proprietary information concerning their respective businesses,
including, without limitation, certain confidential and proprietary
information regarding the machines, processes, practices, products,
inventions, developments, customers, employees, contracts,
relationships, financial condition, and other information, data and
documents relating thereto (the "Confidential Information").
Accordingly, TAG and Talon hereby agree that, during the term of this
Agreement, and for a period of two (2) years thereafter, to:
i. hold in confidence all Confidential Information relating to
the other and not disclose any such Confidential Information to any
third party without the
2.
<PAGE> 3
prior written consent of the party providing or disclosing such
Confidential Information; and
ii. use all Confidential Information relating to the other
solely for purposes of this Agreement and for no other purpose
whatsoever.
b. The obligations of the parties set forth in this Section 5 shall
not apply to any information which:
i. is in the public domain at the time of disclosure or becomes
part of the public domain through no violation of this Agreement or
any other agreement between the parties; or
ii. either party is require to disclose by law.
6. Definition. For purposes hereof, "TAG Group" shall mean and include
TAG, Hawthorne Metal Products Co., J & R Manufacturing, Inc., VS Holdings Inc.,
Production Stamping, Inc., Veltri Holdings USA, Inc., and Veltri Metal Products
Company, together with their successors in interest and those additional
entities mutually agreed in writing by TAG and Talon after the date hereof to be
included in the TAG Group.
7. No Warranties. TALON MAKES NO WARRANTIES WHATSOEVER WITH RESPECT TO
THE SERVICES PROVIDED HEREUNDER, AND ALL WARRANTIES, EXPRESSED OR IMPLIED, ARE
HEREBY DISCLAIMED AND EXCLUDED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. TALON'S SOLE LIABILITY
HEREUNDER SHALL BE LIMITED TO THE AMOUNTS PAID TO IT PURSUANT TO SECTION 2
HEREOF, AND IN NO EVENT SHALL TALON BE LIABLE FOR ANY FEES, COSTS, LOST PROFITS,
INDIRECT, SPECIAL, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES ARISING OUT OF
THIS AGREEMENT OR OTHERWISE.
8. Notices. All notices and demands of any kind which either party
hereto may be required to or desires to serve upon the other party under the
terms of this Agreement shall be in writing and shall be served by personal
service upon such other party or by mailing a copy thereof by certified mail,
postage prepaid, with return receipt requested, addressed as follows:
If to TAG: Talon Automotive Group L.L.C.
900 Wilshire Drive, Suite 203
Troy, Michigan 48084
Attn: President
3.
<PAGE> 4
If to Talon: Talon L.L.C.
400 Talon Centre
Detroit, Michigan 48207
Attn: President
In the case of service by mail, it shall be deemed complete on the day
of actual delivery as shown by the addressee's registered or certified mail
receipt or at the expiration of the third business day after the date of
mailing, whichever first occurs. The addresses to which notices and demands
shall be delivered or sent may be changed from time to time by notice served as
provided herein by either party upon the other party.
9. Amendments. Any and all amendments to this Agreement shall be in
writing signed by each of the parties hereto.
10. Assignment. Neither party may assign this Agreement or any
interest herein without the prior written consent of the other party. This
Agreement shall be binding upon and shall inure to the benefit of the heirs,
executors, administrators, successors and assigns of the parties hereto.
11. Headings. The headings of the various sections of this Agreement
are inserted solely for convenience of reference, and are not a part of and are
not intended to govern, limit or aid in the construction of any term or
provision hereof.
12. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Michigan.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
and year first above written.
TALON AUTOMOTIVE GROUP L.L.C. TALON L.L.C.
By: By:
--------------------------- ----------------------------
4.
<PAGE> 1
EXHIBIT 10.32
EDC LOAN NO. 880-CAN-RD04
DATED AS OF
VELTRI METAL PRODUCTS CO.
AND
EXPORT DEVELOPMENT CORPORATION
LOAN AGREEMENT
<PAGE> 2
EDC LOAN NO. 880-CAN-RD04
DATED AS OF
VELTRI METAL PRODUCTS CO.
AND
EXPORT DEVELOPMENT CORPORATION
LOAN AGREEMENT
<PAGE> 3
TABLE OF CONTENTS
Page
PARTIES ................................................ 1
RECITALS ............................................... 1
ARTICLE I .............................................. 1
DEFINITIONS ............................................ 1
Section 1.01 -Definitions ........................... 1
Section 1.02 - Rules of Interpretation .............. 4
ARTICLE II ............................................. 5
REPRESENTATIONS AND WARRANTIES ......................... 5
Section 2.01 - Representations and Warranties ....... 5
ARTICLE III ............................................ 8
LOAN ................................................... 8
Section 3.01 - Loan ................................. 8
Section 3.02 - Currency and Manner of Advances ...... 8
Section 3.03 - Disclaimer ........................... 9
ARTICLE IV ............................................. 9
REPAYMENT OF PRINCIPAL, PAYMENT OF INTEREST ............ 9
AND OTHER CHARGES ...................................... 9
Section 4.01 - Principal and Interest ............... 9
Section 4.02 - Additional Cost and Illegality ....... 11
Section 4.03 - Place and Manner of Payment .......... 12
Section 4.04 - Costs and Expenses ................... 12
Section 4.05 - Application of Payments .............. 12
Section 4.06 - Indemnities .......................... 13
Section 4.07 - Voluntary Prepayment ................. 13
ARTICLE V .............................................. 14
LOAN ACCOUNTS .......................................... 14
Section 5.01 - Loan Accounts ........................ 14
ARTICLE VI ............................................. 14
SECURITY ............................................... 14
Section 6.01 - Security Agreement ................... 14
Section 6.02 - Security Effective ................... 14
ARTICLE VII ............................................ 15
PREDISBURSEMENT CONDITIONS ............................. 15
Section 7.01 - Advances ............................. 15
Section 7.02 - Further Conditions Precedent ......... 16
Section 7.03 - Waiver of Predisbursement Conditions.. 16
ARTICLE VIII ........................................... 16
COVENANTS OF BORROWER .................................. 16
Section 8.01 - Covenants of Borrower ................ 16
<PAGE> 4
ARTICLE IX ..................................................... 19
DEFAULT ........................................................ 19
Section 9.01 - Events of Default ............................ 19
Section 9.02 - Suspension of Advances ....................... 21
Section 9.03 - Termination of Installments and Acceleration.. 21
Section 9.04 - Remedies Cumulative .......................... 22
ARTICLE X ...................................................... 22
CANADIAN BENEFIT ............................................... 22
Section 10.01 - Canadian Benefit ............................ 22
ARTICLE XI ..................................................... 22
NOTICE ......................................................... 22
Section 11.01 - Notice ...................................... 22
ARTICLE)GI ..................................................... 23
PROPER LAW ..................................................... 23
Section 12.01 - Proper Law .................................. 23
ARTICLE XIII ................................................... 24
SEVERABILITY OF PROVISIONS ..................................... 24
Section 13.01 - Severability of Provisions .................. 24
ARTICLE XIV .................................................... 24
SUCCESSORS AND ASSIGNS ......................................... 24
Section 14.01 - Successors and Assigns ...................... 24
ARTICLE XV ..................................................... 24
COUNTERPARTS ................................................... 24
Section 15.01 - Counterparts ................................ 24
ARTICLE XVI .................................................... 24
FURTHER ASSURANCES ............................................. 24
Section 16.01 - Further Assurances .......................... 24
ARTICLE XVII ................................................... 25
ENTIRE AGREEMENT ............................................... 25
Section 17.01 - Entire Agreement ............................ 25
SCHEDULE "A" FORM OF SECURITY AGREEMENT
SCHEDULE "B" DESCRIPTION OF TOOLS
SCHEDULE "C" DRAWDOWN REQUEST
SCHEDULE "D-1" FORM OF SUBORDINATION AGREEMENT
SCHEDULE "D-2" FORM OF SUBORDINATION AGREEMENT
SCHEDULE "E" SECURITY INTERESTS ON COLLATERAL
SCHEDULE "F" LOCATION OF COLLATERAL
SCHEDULE "G" FORM OF OPINION OF BORROWER'S COUNSEL
<PAGE> 5
EDC LOAN NO. 880-CAN-RD04
THIS LOAN AGREEMENT dated as of is made
BETWEEN
VELTRI METAL PRODUCTS CO.,
a corporation incorporated pursuant to the laws
of Nova Scotia and having its chief executive office
at 900 Wilshire Drive, Suite 270
Troy, Michigan
(the "BORROWER")
AND
EXPORT DEVELOPMENT CORPORATION,
a corporation established by an Act of the
Parliament of Canada, having its head office
at Ottawa, Ontario, Canada
("EDC")
WHEREAS EDC, at the request of the BORROWER, is prepared to establish this loan
facility, on the terms and subject to the conditions of this Agreement in order
to finance the purchase price and EDC approved manufacturing costs of the HONDA
MINIVAN TOOLS;
AND WHEREAS pursuant to the terms of the HONDA TOOL QUOTE the BORROWER will sell
the HONDA MINIVAN TOOLS and HONDA MINIVAN PARTS to the BUYER;
NOW THEREFORE EDC and the BORROWER agree that:
ARTICLE I
DEFINITIONS
SECTION 1.01 - DEFINITIONS
In this Agreement, unless the context otherwise requires:
"ADVANCE" means an amount loaned to the BORROWER by EDC under Article III
hereof;
"BANK" means the Bank of Montreal, having its head office at Montreal, Canada;
"BUSINESS DAY" means any day on which banks are open for business in Toronto,
Canada and any place where a payment is required to be made under this
Agreement;
<PAGE> 6
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"BUYER" means Honda of Canada Manufacturin- Inc., a corporation incorporated
under the laws of Ontario and having its head office at Alliston, Ontario;
"BUYER CONFIRMATION" means the approvals by the BUYER, in a form satisfactory to
EDC, of each of the HONDA MINIVAN TOOLS to which an ADVANCE relates;
"CANADIAN DOLLARS" and "CAD" each means the currency of Canada;
"COLLATERAL" has the meaning ascribed to it in the SECURITY AGREEMENT;
"DRAWDOWN REQUEST" means the request from the BORROWER to EDC for an ADVANCE in
the form of Schedule "C";
"ENVIRONMENTAL LAWS" means any and all requirements under or prescribed by any
applicable federal, provincial, or municipal laws, rules, regulations,
ordinances, guidelines, judgments, orders, decrees, permits, concessions,
grants, franchises, licenses, agreements or other government restrictions
relating in any way to the environment or the release of any substance into the
environment;
"EVENT OF DEFAULT" means any of the events or circumstances described in Section
9.01;
"FIRST REPAYMENT DATE" means the earlier of: (a) 1st day of the first month
after the month in which the first ADVANCE occurs; or (b) the 30th day after
the HONDA LAUNCH DATE; or, if any such date is not a BUSINESS DAY, the next
BUSINESS DAY;
"GAAP" means generally accepted accounting principles in Canada, as recommended
in the Handbook of the Canadian Institute of Chartered Accountants, or any
successor provision;
"HONDA LAUNCH DATE" means July 31, 1998, or such other date that the parties may
agree upon in writing;
"HONDA MINIVAN PARTS" means the automotive parts manufactured from the HONDA
MINIVAN TOOLS by the BORROWER for the BUYER pursuant to the HONDA TOOL QUOTE in
connection with the 1999 Honda Minivan Program and the 1999, 2000 and 2001 model
year Honda Minivans;
"HONDA MINIVAN TOOLS" means the tools listed in Schedule "B" to be supplied by
the BORROWER to the BUYER pursuant to a HONDA TOOL QUOTE for the manufacture of
HONDA MINIVAN PARTS in connection with the 1999 Honda Minivan Program and the
1999, 2000 and 2001 model year Honda Minivans. Schedule "B" will be amended from
time to time to reflect the tools to be built by tooler subcontractors whose
Applications For Initial Financing EDC has approved as contemplated under the
Credit Facility Agreement between the BORROWER and EDC (EDC Loan No. CAN-TF00)
and any tools which the BORROWER will be manufacturing, the costs of which EDC
has agreed to reimburse the BORROWER according to the terms hereof);
<PAGE> 7
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"HONDA TOOL QUOTE" means each and every Honda Tool Quote issued by the BUYER to
the BORROWER detailing the monthly tooling payment (to include the start month,
frequency of payment and principal and interest associated with the HONDA
MINIVAN TOOLS), and the terms of purchase by the BUYER of the HONDA MINIVAN
TOOLS and HONDA MINIVAN PARTS;
"INTEREST PAYMENT DATE" means the 1st day of each month in each year or, if any
such date is not a BUSINESS DAY, the next BUSINESS DAY;
"INTEREST PERIOD" means:
(a) (i) for each ADVANCE the period commencing on and including
the date on which that ADVANCE is made and ending on and
including the date preceding the next INTEREST PAYMENT DATE; and
(ii) for any amount in default hereunder, the period commencing on
and including the date of default and ending, on and
including the date preceding the next INTEREST PAYMENT; and
(b) thereafter the period commencing on and including an INTEREST PAYMENT
DATE and ending on and including the date preceding the next INTEREST
PAYMENT DATE;
"LIENS" means any mortgage, leasehold mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement, encumbrance, privilege, preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
securing the obligation of any person (including, without limitation, any title
retention agreement, execution, seizure, attachment, garnishment or other
similar encumbrance, any financing lease having substantially the same economic
effect as any of the foregoing, the filing of, or agreement to give, any
financing statement perfecting a security interest under applicable law of
any jurisdiction and any designation of loss payees or beneficiaries other than
the owner of the insured property or any similar arrangement under any insurance
policy);
"POTENTIAL DEFAULT" means any event or circumstance that, with notice or lapse
of time or both, would constitute an EVENT OF DEFAULT;
"RECEIVABLES" has the meaning ascribed to it in the SECURITY AGREEMENT;
"SECURITY AGREEMENT" means the security agreement whereby the BORROVYTER. grants
a security interest to EDC over the COLLATERAL in the form of Schedule "A";
"SHAREHOLDER'S EQUITY" means, at any time, for the BORROWER the difference
between (a) total assets; and (b) total liabilities determined in accordance
with generally accepted accounting principles including the amount owed under
this Agreement less the amount of all loans subordinated at that time
according to a Shareholder's Postponement Agreement dated
<PAGE> 8
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"SUBORDINATION AGREEMENTS" means the subordination agreements in the form of
Schedule "D-1" or Schedule "D-2", as the case may be;
"TAXES" means all present or future taxes including, without limitation, income
taxes, sales or value-added taxes, levies, stamp duties, duties, fees,
royalties, deductions and withholdings imposed, levied, collected, withheld or
assessed as of the date hereof or at any time in the future by a government or
governmental body of or within Canada or any other jurisdiction whatsoever
having power to tax together with any fines, penalties and interest thereon;
"TELERATE PAGE 3105" means the display designated as Telerate page 3105 on the
service provided by Dow Jones Telerate (or such other display as may replace it
on that service for the purpose of displaying Government of Canada 3 year
Benchmark Bonds); and
"TOOLING AGREEMENT" means the Tooling Agreement between the BUYER and the
BORROWER governing the amortization of the HONDA MINIVAN TOOLS.
SECTION 1.02 - RULES OF INTERPRETATION
In this Agreement unless the context requires otherwise:
(a) the singular will include the plural and vice versa;
(b) references to a "person" will be construed as references to any
individual, firm, company, corporation, unincorporated body of persons
or any state or political subdivision thereof or any government or any
agency thereof;
(c) whenever any person is referred to, such reference will be deemed to
include the permitted assignees and successors of such person, whether
by operation of law, consolidation, merger, sale, amalgamation or
otherwise as applicable;
(d) references to a specified Article, Section or Schedule will be
construed as references to that specified Article or Section of, or
Schedule to, this Agreement;
(e) references to any agreement or other instrument will be deemed to
include such agreement or other instrument as it may from time to time
be modified, amended, supplemented or restated in accordance with its
terms and, where required hereunder, with the consent of EDC;
(f) the terms "hereof", "herein" and "hereunder" will be deemed to refer to
this Agreement; and
(g) the headings of the Articles and Sections are inserted for convenience
only and will not affect the construction or interpretation of this
Agreement.
<PAGE> 9
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to EDC as of the date of this Agreement
and, except as otherwise permitted or required hereunder, will be deemed to
represent and warrant as of the date of each ADVANCE (and it shall be a
condition of EDC's obligation to make each ADVANCE and the making of any
ADVANCE shall not constitute a waiver thereof), that:
(a) the BORROWER is a corporation duly incorporated and organized and
validly existing under the laws of the Province of Nova Scotia and duly
qualified in any other jurisdiction where it carries on a material portion
of its business;
(b) the BORROWER has the necessary corporate power and authority to own its
property and assets and to carry on business as it is being carried on;
(c) the Entering into and the performance of the terms of this Agreement and the
SECURITY AGREEMENT and of each document to be delivered by the BORROWER with
respect to:
(i) are within its corporate powers and have been duly authorized by all
necessary corporate action;
(ii) are not in violation of any law, statute or regulation of the
Province of Ontario or of Canada applicable therein; and
(iii) save for the creation of a security interest under the SECURITY
AGREEMENT and those subordinated under the SUBORDINATION
AGREEMENTS, will not result in or require the creation or imposition of
a LIEN upon the COLLATERAL whether created or imposed at law or
pursuant to the terms of any document, agreement or instrument to which
the BORROWER is subject or by which it or any of its properties or
assets are bound;
(d) this Agreement and the SECURITY AGREEMENT have been duly executed and
delivered and each constitutes the direct, legal, valid and binding obligation
of the BORROWER enforceable against the BORROWER in accordance with their
respective terms except as such enforcement may be limited by bankruptcy,
insolvency and other laws of general application affecting creditors' rights
and by rules of equity governing the availability of equitable remedies,
(e) all Registrations, consents, licenses and approvals of any administrative
or governmental agency required in connection with the execution and delivery
by the BORROWER of this Agreement, the SECURITY AGREEMENT and each document
to be delivered by the BORROWER with respect hereto or thereto and for the
performance of the terms hereof
<PAGE> 10
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or thereof and for the validity and enforceability and admissibility in
evidence hereof and thereof, have been effected or obtained and are in
full force and effect;
(f) subject to the rights of the BUYER, the BORROWER is, or with respect to
the COLLATERAL acquired after the date hereof will be, the sole
beneficial owner of the COLLATERAL, free and clear of any LIENS except
for the security interests granted to EDC pursuant to the SECURITY
AGREEMENT and the security interests set out in Schedule "E" which will
be subordinated prior to the date of the first ADVANCE according to the
terms of the SUBORDINATION AGREEMENT set out in Schedule "D-l";
(g) the BORROWER has, or with respect to the COLLATERAL acquired after the
date hereof will have, the right to grant a security interest in the
COLLATERAL in favor of EDC on the terms of the SECURITY AGREEMENT;
(h) the RECEIVABLES which constitute part of the COLLATERAL are enforceable
against the BUYER; and the amount represented by the BORROWER to EDC as
owing, from time to time, by the BUYER will be the correct amount
actually owing by the BUYER; and the BUYER has no defense, set-off,
claim or counterclaim against the BORROWER which can be asserted
against EDC, whether in any proceeding to enforce the SECURITY
AGREEMENT or otherwise;
(i) the location specified in Schedule "F" hereto as to the business
operations and records of the BORROWER is accurate and complete and the
COLLATERAL will be kept at such location or at such other location as
the BORROWER will specify in writing to EDC and, subject to the
provisions of the SECURITY AGREEMENT, none of the COLLATERAL will be
moved therefrom without the prior written consent of EDC;
(j) the BORROWER's full name and chief executive address is as set out on
the first page of this Agreement;
(k) none of the COLLATERAL consists of consumer goods;
(l) the BORROWER is in material compliance with all ENVIRONMENTAL LAWS and
no charge, order or notice has been made or issued under any
ENVIRONMENTAL LAWS against the BORROWER or with respect to any of its
assets which the BORROWER expects will result in a material
environmental claim against the BORROWER; and no material environment
investigations or inquiries are currently being conducted against the
BORROWER; and the BORROWER holds all necessary licenses and permits
required by all ENVIRONMENTAL LAWS for the proper conduct of its
business; and the BORROWER has filed all material reports required
under the ENVIRONMENTAL LAWS; and any contaminant, pollutant, hazardous
waste or dangerous good as defined under ENVIRONMENTAL LAWS stored or
located at any real property on which the business of the BORROWER is
conducted, is stored or located in material compliance with all
ENVIRONMENTAL LAWS;
<PAGE> 11
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(m) the BORROWER has (i) filed or caused to be filed all necessary tax
returns and reports required to be filed to the appropriate government
or governmental body; (ii) paid and discharged all TAXES due and
payable by it; (iii) withheld and collected all TAXES required to be
withheld and collected by it and remitted such TAXES to the
appropriate government or governmental body, and no assessment, appeal
or claim is, as far as the BORROWER is aware, being assessed or
processed with respect to such claims or TAXES except to the extent
that the failure to do any of the foregoing would not be material to
the BORROWER;
(n) the BORROWER has provided to EDC all material information relating to
the financial condition, business and prospects of the BORROWER and,
as at the date thereof, all such information was true, accurate and
complete in all material respects and omitted no material fact
necessary to make such information not misleading;
(o) the audited financial statements of the BORROWER dated as of
December 31, 1996, copies of which have been delivered to EDC,
fairly present in all material respects the financial condition of the
BORROWER and the results of its operations for the period covered; and
such financial statements have been prepared in accordance with GAAP
applied on a consistent basis and between the date of those financial
statements and the date of this Agreement there has been no material
adverse change in the financial condition or in the business or assets
of the BORROWER;
(p) there are no legal proceedings pending or, so far as is known to the
BORROWER, threatened before any court, arbitral tribunal,
administrative or governmental agency or other body having authority
over it which would materially adversely affect the financial
condition or the operations of the BORROWER or its ability to perform
its obligations hereunder, under the SECURITY AGREEMENT or under the
HONDA TOOL QUOTE;
(q) the BORROWER is not in violation of any term of its incorporating
instrument and by-laws or of any agreement, instrument evidencing
indebtedness, mortgage, franchise, license, judgment, decree, order,
statute, rule, law, ordinance or regulation to which it or its
business or assets are subject, except for immaterial violations; the
entering into, performance and compliance with this Agreement, the
SECURITY AGREEMENT and each document to be delivered by the
BORROWER with respect thereto will not result in any such violation
or constitute a default under or be in conflict in any material
respects with any such term; and there is no such term which
materially adversely affects or in the future may (so far as the
BORROWER can now foresee) materially adversely affect the financial
condition or the business or assets of the BORROWER or its ability to
perform its obligations hereunder, under the SECURITY AGREEMENT or
under the HONDA TOOL QUOTE;
(r) there are no disputes between the BORROWER and the BUYER which would
reasonably be expected to adversely affect performance of the
respective obligations of the parties under the HONDA TOOL QUOTE;
<PAGE> 12
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(s) the HONDA TOOL QUOTE, the TOOLING AGREEMENT, the BUYER Authorization
for the Mass Production Tooling for the HONDA TOOLS ("Authorization
for the Mass Production Tooling"), the Tooling Investigation Sheet
(A) for the HONDA TOOLS detailing the cost of each HONDA TOOL
("Tooling Investigation Sheet") and the BUYER Minivan Parts Supply
Contract, copies of which are to be delivered to EDC, will be in full
force and effect and will not have been materially amended without
EDC's knowledge; and
(t) the HONDA MINIVAN TOOLS when title is obtained by the BORROWER will
be properly insured according to the HONDA TOOL QUOTE and the loss
under the insurance policies is payable to EDC in accordance with
EDC's interest in the HONDA MINIVAN TOOLS.
ARTICLE III
LOAN
SECTION 3.01 - LOAN
Subject to the terms and conditions of this Agreement and in reliance on the
foregoing representations and warranties, EDC agrees to lend the BORROWER up to
CAD5,000,000.00 to finance up to 100% of payments on account of the purchase
price and EDC approved manufacturing costs of the HONDA MINIVAN TOOLS less (a)
any amounts received by the BORROWER from the BUYER in respect of such purchase
price; and (b) any financing costs payable by the BUYER as documented in the
HONDA TOOL QUOTE.
SECTION 3.02 - CURRENCY AND MANNER OF ADVANCES
Subject to the terms and conditions of this Agreement, EDC will make to the
BORROWER ADVANCES in the aggregate of no more than CAD5,000,000.00 relating to
HONDA MINIVAN TOOLS under Section 3.01 upon receipt of a DRAWDOWN REQUEST. The
amount of each ADVANCE will be up to the amount of the BORROWER's purchase order
("Purchase Order") relating to the related HONDA MINIVAN TOOL being purchased
from a tooler subcontractor. Such ADVANCES shall be disbursed firstly, directly
to EDC in application of outstanding amounts owed to EDC by such tooler
subcontractor under its loan agreement made with EDC pursuant to the Facility
Agreement between the BORROWER and EDC, (EDC Loan No. CAN-TF00) at the time of
the DRAWDOWN REQUEST. Once the amount owing to EDC by such tooler subcontractor
under its respective loan made pursuant to the Facility Agreement and relating
to the HONDA MINIVAN TOOLS is fully paid, EDC will disburse the remainder to
the tooler subcontractor to the extent owing to it under its invoice relating to
the related Purchase Order. Such application of ADVANCES will represent payment
of amounts owing by the BORROWER to such tooler subcontractor in respect of
tools manufactured by such tooler subcontractor which form part of the HONDA
MINIVAN TOOLS. The balance of the ADVANCE, if any, will be paid to the BORROWER.
<PAGE> 13
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Once the amounts owing to EDC by all tooler subcontractors under the loans made
pursuant to the Facility Agreement and relating to the HONDA MINIVAN TOOLS are
fully paid and EDC disbursing to the tooler subcontractors and VELTRI as set
out above, EDC will consider making any remaining available ADVANCES to the
BORROWER to reimburse the BORROWER for any EDC approved manufacturing costs
which the BORROWER has incurred in respect of the HONDA MINIVAN TOOLS provided
EDC has approved such DRAWDOWN REQUESTS.
SECTION 3.03 - DISCLAIMER
Notwithstanding that ADVANCES under this Agreement are to be used to finance the
HONDA MINIVAN TOOLS, the BORROWER agrees that EDC is under no obligation to
determine the validity, legality or enforceability of the HONDA TOOL QUOTE. If
part or all of the HONDA TOOL QUOTE or any related document is repudiated or
proves to be void, invalid, illegal or unenforceable, or if there is any dispute
between the BORROWER and the BUYER relating to the HONDA MINIVAN TOOLS or HONDA
MINIVAN PARTS, or between the BORROWER and the BUYER relating to the HONDA TOOL
QUOTE, such event will not in any way affect or impair the rights of EDC against
the BORROWER under this Agreement and the SECURITY AGREEMENT or any related
document executed or issued by the BORROWER, or change in any way the
obligations of the BORROWER to EDC hereunder or under the SECURITY AGREEMENT.
ARTICLE IV
REPAYMENT OF PRINCIPAL, PAYMENT OF INTEREST
AND OTHER CHARGES
SECTION 4.01 - PRINCIPAL AND INTEREST
Subject to the provisions of Section 4.02, the BORROWER will repay to EDC or its
order, the aggregate of all ADVANCES outstanding from time to time and will pay
to EDC interest thereon as follows:
(a) PAYMENT OF PRINCIPAL AND INTEREST
The BORROWER will pay to EDC interest on the amount of the ADVANCES
outstanding from time to time at a fixed rate of the interest equal to
6.397% per annum calculated and payable in each instance in arrears
on each INTEREST PAYMENT DATE commencing on the FIRST REPAYMENT DATE.
Subject to the provisions of this Agreement, the BORROWER will repay
to EDC the aggregate of all ADVANCES in 36 installments on successive
INTEREST PAYMENT DATES commencing on the FIRST REPAYMENT DATE. Each
installment will be equal to the amount of RECEIVABLES the BORROWER is
scheduled to receive under the HONDA TOOL QUOTE and/or under the
TOOLING AGREEMENT. EDC will firstly apply the monthly installment in
payment of outstanding interest due and payable under
<PAGE> 14
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this Section 4.01(a) and secondly to the repayment of the ADVANCES
outstanding from time to time.
Where the amount of the monthly RECEIVABLE scheduled to be received by
the BORROWER is less than the interest due and payable monthly under
this Section 4.01(a), the BORROWER will pay to EDC on the relevant
INTEREST PAYMENT DATE, the amount by which the monthly RECEIVABLE is
less than the interest due and payable monthly under this
Section 4.01(a).
Notwithstanding anything contained herein to the contrary, the
BORROWER shall on the INTEREST PAYMENT DATE on which the last
installment is to be made, pay to EDC an amount necessary to repay in
full the outstanding amount of the ADVANCES and all outstanding
accrued interest.
(b) ADJUSTING PAYMENT OR INSTALLMENT
Notwithstanding anything contained herein to the contrary, in
relation to the ADVANCES, and at any time or times after six months
from the date the first ADVANCE was made, if EDC determines, acting
reasonably, that the aggregate of all anticipated RECEIVABLES payable
under the HONDA TOOL QUOTE will be insufficient to repay the balance
of the amount of the ADVANCES outstanding from time to time and to pay
the anticipated interest to be charged thereon over the balance of the
period ending on 36 months after the FIRST REPAYMENT DATE then EDC
shall have the option either to (i) request from the BORROWER a lump
sum amount equal to the anticipated deficiency which the BORROWER
shall make within ten (10) BUSINESS DAYS of EDC's request specifying
the amount of such deficiency; or (ii) request that on each subsequent
INTEREST PAYMENT DATE the BORROWER make installments of principal in
such an amount as EDC determines in its sole discretion necessary to
repay the outstanding amount of the ADVANCES over the balance of the
period on 36 months after the FIRST REPAYMENT DATE. EDC's
determination of whether the anticipated RECEIVABLES will be
insufficient to pay the anticipated interest and the amount of the
ADVANCES will be based solely on whether the interest rate charged
hereunder will be greater than the interest rate accruing under the
HONDA TOOL QUOTE.
(c) In the event of a payment default under this Agreement, the BORROWER
shall pay on demand default interest on any amount of principal or
interest payable hereunder and on any other amount due and payable
hereunder at the rate determined under Section 4.01(a) increased in
each case by 2.0% from the date of the payment default so long as such
default shall continue, compounded on each INTEREST PAYMENT DATE,
before and after demand and judgment.
(d) Each determination of a rate of interest by EDC will be conclusive
evidence, in the absence of demonstrable error, of such rate of
interest and will promptly be notified to the BORROWER. In each case
interest will be calculated on the basis of the actual number of days
elapsed divided by 365. The actual yearly rates of interest equivalent
to each of the
<PAGE> 15
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rates determined as above and calculated in such manner is such rate
multiplied by the actual number of days in the year divided by 365.
The ADVANCES shall bear interest at the applicable rates during the
relevant INTEREST PERIOD. Interest shall accrue from day to day for
the actual number of days in the relevant INTEREST PERIOD.
(e) Unless EDC otherwise agrees, the DRAWDOWN REQUEST must be received by
EDC at least three (3) BUSINESS DAYS before the date any ADVANCE is
to be made.
SECTION 4.02 - ADDITIONAL COST AND ILLEGALITY
(a) In the event that a law or regulation is enacted or changed or the
interpretation or administration thereof is changed by the
administering governmental authority, or in the event that a judgment
is rendered which:
(1) subjects EDC to any tax with respect to payments to be made by
the BORROWER to EDC hereunder (except for taxes on the overall
net income of EDC);
(ii) imposes or modifies any reserve or similar requirements
against assets held by, or deposits in or for the account of,
or loans by, an office of EDC; or
(iii) imposes on EDC any other condition with respect to this
Agreement;
with the result that the cost to EDC of making or maintaining ADVANCES
is increased or the income receivable by EDC in respect of the
principal indebtedness of the BORROWER to EDC hereunder is reduced,
the BORROWER will pay to EDC on demand that amount which will
compensate EDC for such additional cost or reduction in income. Upon
EDC having determined, promptly whenever possible, that it is entitled
to additional compensation in accordance with the provisions of this
Section 4.02(a), EDC will promptly notify the BORROWER thereof. A
certificate of EDC setting forth the amount of such additional
compensation and the basis therefor will be submitted by EDC to the
BORROWER and will be conclusive evidence of such amount absent
demonstrable error. EDC will have no obligation to make any further
ADVANCE after such event until EDC has received the additional
compensation.
In the event EDC gives the notice provided for in this Section
4.02(a), THE BORROWER will have the right, upon written notice to
that effect (which will be irrevocable and will constitute the
BORROWER's undertaking to prepay accordingly) delivered to EDC at
least thirty (30) days prior to the next INTEREST PAYMENT DATE, to
prepay in full on such INTEREST PAYMENT DATE, the said principal
indebtedness of the BORROWER under Section 4.01 together with accrued
interest thereon, all other sums due hereunder with respect to such
indebtedness and the additional compensation to the date of such
prepayment.
In the event of such prepayment, the obligation of EDC to make any
further ADVANCES hereunder will, at the option of EDC, thereupon
terminate. The obligations of the
<PAGE> 16
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BORROWER under this Section 4,02(a) will survive the repayment to EDC
of the principal of and interest on the indebtedness of the BORROWER
to EDC hereunder.
(b) If it becomes unlawful in any relevant jurisdiction for EDC to
continue to make or to maintain ADVANCES or for EDC to make or receive
any payment or to perform, exercise or to give effect to any
obligation, right or benefit under this Agreement, the
SECURITY AGREEMENT or any related document, the BORROWER will prepay
to EDC upon request by EDC, forthwith or at the end of such period as
EDC will have permitted, the principal indebtedness of the BORROWER
pursuant to Section 4.01 together with interest accrued thereon up to
the date of actual prepayment and, where applicable, all other sums
due hereunder with respect to such indebtedness. In the event of any
such illegality or prepayment, the obligation of EDC to make any
further ADVANCES hereunder will, at the option of EDC, thereupon
terminate.
SECTION 4.03 - PLACE AND MANNER OF PAYMENT
Amounts payable by the BORROWER to EDC pursuant hereto will be paid in CANADIAN
DOLLARS without set-off or counterclaim not later than 11:00 a.m. (Ottawa
time) on the day such payment is due and in funds for same-day settlement
required to be made hereunder at Bank of Montreal, First Bank Tower, First
Canadian Place, Toronto, Ontario M5X 1A1 for the credit of EDC, account number
0000-876, or at such other account or financial institution as EDC may, from
time to time, notify the BORROWER.
SECTION 4.04 - COSTS AND EXPENSES
(a) In respect of the preparation, negotiation and execution of this
Agreement and the SECURITY AGREEMENT, the BORROWER will pay to EDC
thirty (30) days from the date of this Agreement, a documentation
cost of CAD3,000.00.
(b) The BORROWER will pay within thirty (30) days of EDC's billing,
therefor, all reasonable out-of-pocket costs and expenses incurred by
EDC (other than the costs referred to in Section 4.04(a)) in
connection with the preparation, negotiation, execution, amendment of,
operation of, preservation of rights under or enforcement of this
Agreement and the SECURITY AGREEMENT including, without limitation,
the costs and expenses of EDC's independent legal counsel and travel
expenses, if any. All documents or information to be furnished to EDC
by the BORROWER will be supplied at the BORROWER's expense.
SECTION 4.05 - APPLICATION OF PAYMENTS
All payments (other than a prepayment pursuant to Section 4.02) made by or for
the account of the BORROWER under this Agreement will be applied first to all
amounts then due and payable other than principal and interest in such order as
EDC may elect, then to interest due and payable, then to principal.
<PAGE> 17
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SECTION 4.06 - INDEMNITIES
The BORROWER will indemnify and hold harmless EDC against any loss (excluding
loss of profit) costs, damage, liability or expense which EDC will certify as
sustained or incurred by EDC as a consequence of:
(a) any default in repayment of principal or payment of interest or any
other amount due hereunder;
(b) any payment or prepayment of principal being made on other than an
INTEREST PAYMENT DATE; or
(c) the occurrence of an EVENT OF DEFAULT;
including, in any such case, but not limited to, any loss, costs, damage,
liability or expenses sustained or incurred by EDC in liquidating or
re-employing deposits or funds from third parties acquired or to be acquired to
make ADVANCES or maintain or continue any amount already advanced or any part
thereof. The obligations of the BORROWER under this Section 4.06 will survive
the repayment to EDC of the principal of and interest on the indebtedness of the
BORROWER to EDC hereunder.
SECTION 4.07 - VOLUNTARY PREPAYMENT
(a) The BORROWER may, when not in default hereunder, prepay the principal
indebtedness of the BORROWER hereunder, in whole or from time to time
in part, provided that:
(i) each partial prepayment will be in an amount not less than the
amount of one installment of principal payable pursuant to
Section 4.01 or a whole multiple thereof;
(ii) any such prepayment will be made only on the FIRST REPAYMENT
DATE and any INTEREST PAYMENT DATE thereafter;
(iii) the BORROWER gives notice to EDC of its intention to make
any such prepayment not less than sixty (60) days prior to
such prepayment, which notice will be irrevocable and will
constitute the BORROWER's undertaking to prepay accordingly;
(iv) the BORROWER pays interest accrued on such principal amount
being prepaid to the date of prepayment as well as all other
amounts due and payable on the date of prepayment in respect
of such principal amount being prepaid;
(v) the BORROWER pays to EDC the amount set out in Section
4.07(b); and
<PAGE> 18
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(vi) amounts prepaid will be applied to installments payable in
inverse order of maturity and will not be re-ADVANCED.
(b) The BORROWER will also pay an amount equal to the present value of the
difference between the remaining scheduled interest payments and a
schedule of reinvestment interest revenues calculated at a rate equal
to the Government of Canada 3 year Benchmark Bonds as quoted on
TELERATE PAGE 3105 seven (7) BUSINESS DAYS before the date of
repayment ("Discount Rate"). In the event that the Discount Rate would
be greater than the face rate of interest hereunder, prepayment would
be permitted on similar notice against receipt of the outstanding
principal plus any accrued interest to the date of prepayment.
ARTICLE V
LOAN ACCOUNTS
SECTION 5.01 - LOAN ACCOUNTS
EDC will maintain loan accounts in the name of the BORROWER in accordance with
normal business practices. The loan accounts of EDC will be conclusive evidence
(in the absence of demonstrable error) of the indebtedness of the BORROWER to
EDC and of the amounts due from time to time by the BORROWER to EDC under this
Agreement.
ARTICLE VI
SECURITY
SECTION 6.01 - SECURITY AGREEMENT
The BORROWER will deliver to EDC an executed copy of the SECURITY AGREEMENT and
the SUBORDINATION AGREEMENTS.
Section 6.02 - Security Effective
The security interests constituted under the SECURITY AGREEMENT will be
effective and the undertakings thereunder in respect thereto will be continuing,
whether the ADVANCES hereby or thereby secured or any part thereof will be
advanced before or after or at the same time as the creation of any such
security interest or before or after or upon the date of execution of this
Agreement.
<PAGE> 19
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ARTICLE VII
PREDISBURSEMENT CONDITIONS
SECTION 7.01 - ADVANCES
EDC will have no obligation to make the first ADVANCE unless each of the
following conditions precedent have been satisfied at the time the ADVANCE is to
be made:
(a) EDC has received an executed copy of the SECURITY AGREEMENT;
(b) EDC has received an executed copy of the SUBORDINATION AGREEMENTS from
each secured creditor who has a security interest in the COLLATERAL, in
form and substance satisfactory to EDC;
(c) EDC has received evidence satisfactory to EDC that the security
interests created by the SECURITY AGREEMENT have been perfected in the
Province of Ontario and represent a first charge on the COLLATERAL;
(d) EDC has received the opinion of counsel for the BORROWER;
(e) EDC has received a certificate of incumbency of the BORROWER
satisfactory to EDC setting out the names and titles of those officers
of the BORROWER authorized to sign any documents required to be
delivered pursuant to this Agreement or the SECURITY AGREEMENT with
specimen signatures of such persons. The BORROWER agrees that EDC may
rely on the authority of any such person until notified in writing to
the contrary (effective only upon actual receipt by EDC), and any
documents related to this Agreement signed by any such person will be
binding upon the BORROWER. For these purposes, a telex or telefax is
deemed signed by a person whose name is typed on it as a signatory of
that telex or telefax;
(f) EDC has received any sums due (to the extent then payable) to EDC
hereunder or under the SECURITY AGREEMENT;
(g) EDC has received evidence of insurance coverage relating to each HONDA
MINIVAN TOOLS with coverage amounts satisfactory to EDC and evidence
satisfactory to EDC that it is a first loss payee; and
(h) EDC has received the Canadian Benefits Form, executed copies of the
HONDA TOOL QUOTE, the TOOLING AGREEMENT, the Authorization for the Mass
Production Tooling, the Tooling Investigation Sheet and the BUYER
Minivan Parts Supply Contract, and all such documents must be in form
and substance satisfactory to EDC.
<PAGE> 20
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Section 7.02 - FURTHER CONDITIONS PRECEDENT
EDC will have no obligation to make ADVANCES unless each of the following
additional conditions precedent have been satisfied at the time any ADVANCE is
to be made:
(a) EDC will have received the DRAWDOWN REQUEST properly completed;
(b) except as permitted or required hereunder, each of the representations
and warranties set forth in Section 2.01 hereof will be true and
correct in all material respects as if made and repeated on the date
of the ADVANCE with reference to the facts then existing;
(c) there will have been no material adverse change in the financial
condition or in the business or assets of the BORROWER since the date
of the most recent financial statements provided to EDC by the
BORROWER;
(d) no EVENT OF DEFAULT or POTENTIAL DEFAULT shall have occurred and be
continuing;
(e) in respect of any ADVANCES which are to reimburse the BORROWER for its
manufacturing costs in respect of the HONDA MINIVAN TOOLS as
contemplated under Section 3.02, EDC will have received satisfactory
evidence to EDC of such costs incurred; and
(f) EDC will have received BUYER CONFIRMATION relating to those HONDA
MINIVAN TOOLS to which the ADVANCE relates.
SECTION 7.03 - WAIVER OF PREDISBURSEMENT CONDITIONS
The conditions in Sections 7.01 and 7.02 are for the benefit of EDC only and
may be waived by EDC in whole or in part, and with or without conditions for
any ADVANCE without affecting such conditions for any other ADVANCE.
ARTICLE VIII
COVENANTS OF BORROWER
SECTION 8.01 - COVENANTS OF BORROWER
The BORROWER covenants and agrees with EDC that, unless compliance has been
waived by EDC, it will so long as its obligations hereunder and under the
SECURITY AGREEMENT remain outstanding:
(a) punctually pay to EDC all principal, interest and any other amounts
owing by it under this Agreement and under the SECURITY AGREEMENT and
on the dates, at the place, in the currency and in the manner
specified herein and therein;
<PAGE> 21
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(b) maintain its corporate existence in good standing and not merge,
amalgamate or effect any reorganization with any person other than an
affiliate of the BORROWER which does not materially adversely affect
the ability of the BORROWER to perform its obligations hereunder and
provided any successor company executes, prior to or contemporaneously
with the consummation of such transaction, such instruments as are
reasonably satisfactory to EDC evidencing the agreement of such
successor company to observe and perform all the covenants and
obligations of the BORROWER hereunder without the prior consent of EDC;
(c) carry on its business in a proper and businesslike manner and maintain
all properties, rights and contracts necessary in the conduct of its
business;
(d) within one hundred and twenty (120) days after the end of each
financial year, deliver to EDC a copy of the BORROWER's audited
financial statements (including a balance sheet and statement of profit
and loss), with a certificate of its independent auditors, who will be
acceptable to EDC, stating that in their opinion, without any material
qualification, the statements fairly present in all material respects
the financial position of the BORROWER and the results of its
operations for the financial year reported on, in accordance with GAAP
consistently applied;
(e) upon EDC's request, deliver a declaration, in form and substance
satisfactory to EDC, from an authorized officer of the BORROWER as to
the amounts paid by the BUYER to the BORROWER, pursuant to the HONDA
TOOL QUOTE and attaching thereto documentary evidence of such amounts
paid;
(f) from time to time deliver to EDC such other financial and operating
reports, statements and other information as EDC may reasonably
request, including, without limitation, information regarding the
amounts owing to the BORROWER by the BUYER relating to the HONDA TOOL
QUOTE or the TOOLING AGREEMENT from time to time and quarterly
financial statements (including a balance sheet and statement of profit
and loss);
(g) promptly notify EDC of any material dispute under the HONDA TOOL QUOTE
or the TOOLING AGREEMENT or of any event which could entitle the BUYER
to set-off or withhold any amounts due under the HONDA TOOL QUOTE or
the TOOLING AGREEMENT;
(h) promptly notify EDC of the occurrence of any event which has or is
likely to materially adversely affect the financial condition or the
business and/or assets of the BORROWER or its ability to perform its
obligations hereunder, the SECURITY AGREEMENT and the HONDA TOOL
QUOTE, as well as of the steps being taken to remedy the same;
(i) notify EDC of the commencement of any legal proceedings, arbitration or
investigation which if adversely determined would likely have a
material adverse effect on the financial condition or the operations of
the BORROWER or its ability to perform its obligations hereunder, under
the SECURITY AGREEMENT or under the HONDA TOOL QUOTE;
<PAGE> 22
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(j) promptly notify EDC of any material loss of or damage to the HONDA
MINIVAN TOOLS;
(k) promptly notify EDC of any change in the name of the BORROWER or the
location of its chief executive office;
(l) keep the HONDA MINIVAN TOOLS insured according to the HONDA TOOL QUOTE
with the loss under the insurance policies payable to EDC in accordance
with EDC's interest in the HONDA MINIVAN TOOLS and to provide EDC on
EDC's request with satisfactory evidence of insurance described in
Section 7.01(g) and promptly notify EDC of any material insurance
claims arising in relation to the HONDA MINIVAN TOOLS, and if required,
direct the insurer to pay all insurance proceeds under such claim to
EDC to be applied to the outstanding, indebtedness of the BORROWER
under this Agreement;
(m) not sell, lease, assign or otherwise dispose of the COLLATERAL other
than as contemplated in the HONDA TOOL QUOTE and the TOOLING AGREEMENT;
(n) promptly notify EDC of the occurrence of any EVENT OF DEFAULT and any
POTENTIAL DEFAULT and of any other event which has or is likely to
materially adversely affect the financial condition or the business
and/or assets of the BORROWER or its ability to perform its obligations
hereunder and the SECURITY AGREEMENT, as well as of the steps being
taken to remedy the same;
(o) comply with the requirements of all laws (including ENVIRONMENTAL
LAWS), statutes, regulations, authorizations, approvals, licenses or
registrations required to own its property and assets, including the
HONDA MINIVAN TOOLS, except to the extent that non-compliance would not
reasonably be expected to have a material adverse effect on the
BORROWER and to carry on its business as presently carried on by it
and to perform its obligations hereunder and under the SECURITY
AGREEMENT;
(p) (i) file or cause to be filed all necessary tax returns and
reports required to be filed with the appropriate government
or governmental body;
(ii) pay and discharge all lawful claims for labor, materials and
supplies, the non-payment of which can result in a lawful LIEN
in the COLLATERAL; and
(iii) pay and discharge all TAXES payable by it, withhold and
collect all TAXES required to be withheld and collected by it
and remit such TAXES to the appropriate government or
governmental body;
all within the required time frames before any penalty attaches-,
(q) maintain and preserve all of the HONDA MINIVAN TOOLS in good repair,
working order and condition, normal wear and tear excepted, and from
time to time, make all needful and proper repairs, renewals,
replacements, additions and improvements thereto,
<PAGE> 23
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and carry on its business in a proper and efficient manner so as to
preserve and protect the HONDA MINIVAN TOOLS and the earning, incomes,
issues and profits thereof,
(r) at any reasonable time and from time to time upon reasonable prior
notice, the BORROWER shall permit EDC or any representatives thereof
(i) to examine and make copies of and abstracts from the records and
books of the BORROWER relating to HONDA MINIVAN TOOLS; and (ii)
verify the existence and state of the HONDA MINIVAN TOOLS in any
manner EDC may consider appropriate, and the BORROWER agrees to
furnish all assistance and information and to perform all such acts
as EDC may reasonably request in connection therewith and for such
purpose to grant to EDC or its agents access to all places where HONDA
MINIVAN TOOLS may be located and to all premises occupied by the
BORROWER to examine and inspect the HONDA MINIVAN TOOLS;
(s) not locate or permit its records and the COLLATERAL to be located at,
any location other than the location set out in Schedule "F";
(t) effective January 1, 1998, maintain at all times SHAREHOLDER'S EQUITY
of not less than CAD5,000,000.00;
(u) keep the COLLATERAL free and clear of all TAXES and LIENS, assessments
and claims except for the creation of the security interest under the
SECURITY AGREEMENT and the security interests subordinated under the
SUBORDINATION AGREEMENTS; and
(v) take all steps and all actions necessary to ensure that it complies at
all times with all its obligations under the HONDA TOOL QUOTE and the
TOOLING AGREEMENT and not cancel or terminate or permit the
cancellation or termination of the HONDA TOOL QUOTE or the TOOLING
AGREEMENT or make or permit the making of any amendments which relate
to the price of, the terms and manner of payment for, the time and
manner of delivery of the HONDA MINIVAN TOOLS or HONDA MINIVAN PARTS.
ARTICLE IX
DEFAULT
SECTION 9.01 - EVENTS OF DEFAULT
The occurrence of any of the following shall be an EVENT OF DEFAULT by the
BORROWER under this Agreement:
(a) the non-payment when due of any sum payable hereunder or under the
SECURITY AGREEMENT, whether at maturity, by acceleration or otherwise
within five (5) days of the relevant due date;
<PAGE> 24
- 20 -
(b) if proceedings are started by any person to dissolve, liquidate or
wind-up the BORROWER or to suspend its operations which remain
undischarged for a period of thirty (30) days after commencement of
such proceedings;
(c) if the BORROWER (i) makes an assignment for the benefit of its
creditors; or (ii) petitions or applies to any tribunal for the
appointment of a receiver or trustee for itself or any substantial
part of its assets; or (iii) starts any proceeding relating to itself
under any present or future reorganization, arrangement, adjustment of
debt, dissolution or liquidation law of any jurisdiction; or (iv) in
any way consents to, approves or acquiesces in any bankruptcy,
reorganization or insolvency proceeding started by any other person,
or any proceeding by any other person for the appointment of a
receiver or trustee for the BORROWER or any substantial part of its
assets; or (v) allows any receivership or trusteeship of the BORROWER
to remain undischarged for a period of thiry (30) days; or (vi)
becomes or is declared by any competent authority to be bankrupt or
insolvent;
(d) the BORROWER sells or otherwise disposes of all or a substantial
part of its assets by one or more transactions (other than
in connection with a merger, amalgamation or other reorganization
which would not materially adversely affect the financial condition of
the BORROWER or its successor or the ability of the BORROWER or its
successor to perform its obligations hereunder) without the prior
consent of EDC;
(e) if the BORROWER (i) fails to pay any amount due, under any loan,
guarantee or security agreement relating to indebtedness of at least
CAD500,000.00, on the due date or within any applicable grace period;
or (ii) if the BORROWER defaults under any other term of any loan,
guarantee or security agreement relating to indebtedness of at least
CAD500,000.00 to which it is a party, and the result of any such
payment default or covenant default has been the acceleration of such
obligation;
(f) if any court makes any judgment or order, or any law, ordinance, decree
or regulation is enacted, the effect of which is to make this Agreement
or the SECURITY AGREEMENT or any document required to be delivered
thereunder or any material provision hereof or thereof, invalid or
unenforceable, and the BORROWER fails to provide acceptable replacement
documents to EDC evidencing and, where applicable, securing its
indebtedness under this Agreement within five (5) days of such event;
(g) if any representation or warranty made by the BORROWER herein or in any
related document or opinion shall have been incorrect in any material
respect when made or deemed to be made and not remedied, if curable,
within fifteen (15) days of notification by EDC that such
representation and warranty is incorrect;
(h) if any other event or circumstance occurs which, would materially and
adversely affects the ability of the BORROWER to perform its financial
obligations under this Agreement or the SECURITY AGREEMENT;
<PAGE> 25
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(i) if the BORROWER defaults, in the due performance or observance of any
terms of this Agreement or the SECURITY AGREEMENT other than those
specifically dealt with in this Section 9.01, which is not remedied
within fifteen (15) days after notice by EDC to do so;
(j) this Agreement or the SECURITY AGREEMENT is disaffirmed or repudiated
by or on behalf of the BORROWER in whole or in part; or
(k) the failure by the BORROWER to perform any of its material obligations
under the HONDA TOOL QUOTE or the TOOLING AGREEMENT following any
notice or cure period.
SECTION 9.02 - SUSPENSION OF ADVANCES
If at any time, (a) an EVENT OF DEFAULT or POTENTIAL DEFAULT occurs and is
continuing; (b) there is an unresolved commercial dispute under any agreement
between the BORROWER and the BUYER, or (c) in the reasonable judgment of EDC,
there is a material adverse change in the financial or operational status of the
BORROWER where such change would impair the BORROWER's ability to fulfill its
obligations under this Agreement, the SECURITY AGREEMENT or the HONDA TOOL QUOTE
on a timely basis, EDC may, without prejudice to the BORROWER's obligations
hereunder, by notice to the BORROWER, suspend EDC's obligation to make ADVANCES
pursuant to this Agreement, which suspension will continue until EDC notifies
the BORROWER that the suspension is removed.
SECTION 9.03 - TERMINATION OF INSTALLMENTS AND ACCELERATION
If an EVENT OF DEFAULT occurs and is continuing, EDC may by one or more notices
to the BORROWER do one or more of the following:
(a) declare that EDC is under no further obligation to make ADVANCES
pursuant hereto, whereupon such obligation shall cease;
(b) declare that all or part of the indebtedness hereunder be payable on
demand whereupon the same shall immediately become payable on demand;
(c) declare all or part of the indebtedness of the BORROWER under this
Agreement to be immediately due and payable, whereupon the same shall
become immediately due and payable, together with all accrued interest
and any other amounts payable under this Agreement without any further
demand or notice of any kind; and
(d) exercise all other rights or remedies available to it under the
SECURITY AGREEMENT
<PAGE> 26
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SECTION 9.04 - REMEDIES CUMULATIVE
The rights and remedies of EDC under this Agreement are cumulative and are in
addition to, and not in substitution for, any rights or remedies provided by law
or by the SECURITY AGREEMENT. Any single or partial exercise by EDC of any right
under this Agreement and the SECURITY AGREEMENT, or any failure to exercise or
delay in exercising any such rights will not be or be deemed to be a waiver of,
or to prejudice any rights or remedies to which EDC may be entitled for any
EVENT OF DEFAULT or POTENTIAL DEFAULT. Any waiver by EDC of the strict
compliance with any term of this Agreement or the SECURITY AGREEMENT or any
related document will not be deemed to be a waiver of any subsequent default.
SECTION 9.05 - PERFORMANCE OF BORROWER'S COVENANTS
If an EVENT OF DEFAULT has occurred or if the BORROWER is in default under the
SECURITY AGREEMENT, then EDC may, without waiving or releasing the BORROWER from
any of its obligations and without prejudice to any right or remedy of EDC,
observe and perform any covenant in respect of which the BORROWER is in default
and in that connection pay such monies as may be required. Any such monies paid
out by EDC shall be repayable to EDC on demand, with interest at the rate
specified and calculated in the manner described in Section 4.01(c), from the
date of payment by EDC.
ARTICLE X
CANADIAN BENEFIT
SECTION 10.01 - CANADIAN BENEFIT
The BORROWER acknowledges that EDC has entered into this Agreement to finance
goods and services of Canadian manufacture and origin, and that the HONDA
MINIVAN TOOLS shall have the maximum practicable Canadian content which shall
not be less than 75%. It is the responsibility of the BORROWER to satisfy EDC
that EDC's Canadian benefit requirements are being met.
ARTICLE XI
NOTICE
SECTION 11.01 - NOTICE
Every notice, demand, request, consent, waiver or agreement under this
Agreement will be in writing. All such documents will be hand-delivered or sent
by prepaid courier, air mail, telex or telefax to the following addresses:
<PAGE> 27
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for the BORROWER,
VELTRI METAL PRODUCTS CO.
900 Wilshire Drive
Suite 203
Troy, Michigan 48084
Attention: Chief Financial Officer
Telefax: (248) 362-7612
for EDC,
EXPORT DEVELOPMENT CORPORATION
151 O'Connor Street
Ottawa, Canada K1A 1K3
Attention: Loans Operations
Telex: 053-4136 EXCREDCORP OTT
Telefax: (613) 598-2514
or such other address or numbers as to which either party may from time to time
notify the other. Documents sent by mail will be deemed to be received the fifth
Business Day after mailing, those transmitted by telex or telefax the second
Business Day after transmission and those by courier at the time of delivery. In
this Agreement, "in writing" includes printing, typewriting, or any electronic
transmission that can be reproduced as printed text, on paper, at the point of
reception. In this Section 11.01 "Business Day" means a day in the recipient's
jurisdiction when banks are generally open for public business.
ARTICLE XII
PROPER LAW
SECTION 12.01 - PROPER LAW
This Agreement is made under and will be governed by and construed in accordance
with the laws of the Province of Ontario and the laws of Canada applicable
therein.
<PAGE> 28
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ARTICLE XIII
SEVERABILITY OF PROVISIONS
SECTION 13.01 - SEVERABILITY OF PROVISIONS
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction will, as to that jurisdiction, be ineffective to the extent of that
prohibition or unenforceability without invalidating the remaining provisions
hereof or affecting the validity or enforceability of that provision in any
other jurisdiction.
ARTICLE XIV
SUCCESSORS AND ASSIGNS
SECTION 14.01 - SUCCESSORS AND ASSIGNS
This Agreement will be binding upon and enure to the benefit of the parties and
their respective successors and permitted assigns. The BORROWER may not assign
or transfer all or any part of its rights or obligations hereunder without the
prior written consent of EDC. The BORROWER acknowledges that EDC may or may be
required to assign its interest in this Agreement and the SECURITY AGREEMENT to
the BUYER at any time.
ARTICLE XV
COUNTERPARTS
SECTION 15.01 - COUNTERPARTS
This Agreement may be executed in any number of counterparts, and all the
counterparts taken together will be deemed to constitute one and the same
instrument and the parties further agree that receipt by telefax of an executed
copy of this Agreement will be deemed to be receipt of an original.
ARTICLE XVI
FURTHER ASSURANCES
SECTION 16.01 - FURTHER ASSURANCES
The BORROWER and EDC hereby agree to do such further acts and things, and to
execute and deliver to the other party such additional consents and instruments,
as may be reasonably required or deemed advisable to carry into effect the
purposes of this Agreement.
<PAGE> 29
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ARTICLE XVII
ENTIRE AGREEMENT
SECTION 17.01 - ENTIRE AGREEMENT
Except as expressly contemplated or provided herein, this Agreement, including
without limitation all Schedules, constitutes the whole and entire agreement
between the parties and cancels and supersedes any prior agreements,
undertakings, declarations, representations, written or verbal, relating to the
subject matter hereof. None of the terms hereof will be modified except by
instrument in writing, duly signed by each of the parties.
IN WITNESS WHEREOF the parties hereto have signed and delivered this Agreement.
VELTRI METAL PRODUCTS CO.
Signature: [SIG]
(Print Name):
EXPORT DEVELOPMENT CORPORATION
Signature:
(Print Name):
Signature:
(Print Name):
<PAGE> 30
EDC LOAN NO. 880-CAN-TF00
DATED AS OF
VELTRI METAL PRODUCTS CO.
AND
EXPORT DEVELOPMENT CORPORATION
FACILITY AGREEMENT
<PAGE> 31
EDC LOAN NO. 880-CAN-TF00
DATED AS OF
VELTRI METAL PRODUCTS CO.
AND
EXPORT DEVELOPMENT CORPORATION
FACILITY AGREEMENT
<PAGE> 32
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
PARTIES ..........................................................................................................1
RECITALS .........................................................................................................1
ARTICLE I ........................................................................................................2
DEFINITIONS ......................................................................................................2
Section 1.01 - General .......................................................................................2
Section 1.02 - Rules of Interpretation .......................................................................5
Section 1.03 - Invalidity of Provisions ......................................................................6
Section 1.04 - Currency of Account and Currency of Payment ...................................................6
ARTICLE II .......................................................................................................7
REPRESENTATIONS AND WARRANTIES ...................................................................................7
Section 2.01 - Representations and Warranties ................................................................7
ARTICLE III .....................................................................................................10
FINANCING SUPPORT ...............................................................................................10
Section 3.01 - Maximum Amount of Financing, Support .........................................................10
Section 3.02 - Request for Financing Support ................................................................11
Section 3.03 - Increase in Financing Support ................................................................12
ARTICLE IV ......................................................................................................13
CREDIT ENHANCEMENT ..............................................................................................13
Section 4.01 -Indemnity .....................................................................................13
Section 4.02 - Waiver .......................................................................................13
Section 4.03 - No Benefit ...................................................................................14
Section 4.04 - Assignment ...................................................................................14
Section 4.05 - Security .....................................................................................14
ARTICLE V .......................................................................................................15
CANADIAN BENEFIT ................................................................................................15
Section 5.01 - Canadian Benefit .............................................................................15
ARTICLE VI ......................................................................................................15
COVENANTS OF VELTRI .................' ..........................................................................15
Section 6.01 - Covenants of Veltri ..........................................................................15
ARTICLE VII .....................................................................................................18
CONDITIONS PRECEDENT ............................................................................................18
Section 7.01 - Conditions Precedent to First Loan Agreement .................................................18
ARTICLE VIII ....................................................................................................19
EVENTS OF DEFAULT ...............................................................................................19
Section 8.01 - Events of Default ............................................................................19
Section 8.02 - Remedies .....................................................................................21
Section 8.03 - Remedies Cumulative ..........................................................................21
ARTICLE IX ......................................................................................................21
PAYMENTS ........................................................................................................21
Section 9.01 - Place and Manner of Payment ..................................................................21
</TABLE>
<PAGE> 33
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<TABLE>
<S> <C>
ARTICLE X .....................................................................................................22
COSTS AND EXPENSES ............................................................................................22
Section 10.01 - Costs and Expenses .......................................................................22
ARTICLE XI ....................................................................................................23
NOTICE ........................................................................................................23
Section 11.0 1 -Notice ...................................................................................23
ARTICLE XII ...................................................................................................23
PROPER LAW AND JURISDICTION ...................................................................................23
Section 12.01 - Proper Law ...............................................................................23
ARTICLE XIII ..................................................................................................24
SUCCESSORS AND ASSIGNS ........................................................................................24
Section 13.01 - Successors and Assigns ...................................................................24
ARTICLE XIV ...................................................................................................24
MISCELLANEOUS .................................................................................................24
Section 14.01 - Miscellaneous ............................................................................24
Section 14.02 - Counterparts .............................................................................25
SCHEDULE "A" APPLICATION FOR INITIAL FINANCING
SCHEDULE "B" APPLICATION FOR ADDITIONAL FINANCING FOR NEW AND/OR
EXISTING VELTRI PURCHASE ORDERS
SCHEDULE "C" DRAWDOWN REQUEST
SCHEDULE "D" OPINION OF VELTRI'S COUNSEL
SCHEDULE "E" SHAREHOLDER'S POSTPONEMENT AGREEMENT
SCHEDULE "F" LOAN AGREEMENT
SCHEDULE "G" VELTRI SECURITY AGREEMENT
</TABLE>
<PAGE> 34
EDC LOAN NO. 880-CAN-TF00
THIS FACILITY AGREEMENT dated as of is made
BETWEEN
VELTRI METAL PRODUCTS CO., a corporation incorporated
pursuant to the laws of the Province of Nova Scotia, having
its chief executive office at 900 Wilshire Drive, Suite 270,
Troy, Michigan
(hereinafter called "VELTRI")
AND
EXPORT DEVELOPMENT CORPORATION, a corporation established by
an Act of the Parliament of Canada, having its head office at
Ottawa, Canada (hereinafter called "EDC")
WHEREAS VELTRI carries on as part of its business the business of designing,
building and selling tools, molds and dies used in the production of parts for
automobiles;
AND WHEREAS the design and building of certain of such tools, molds and dies
are subcontracted to various companies and such subcontractors often require
working capital assistance in the form of progress payments or loans from
VELTRI;
AND WHEREAS EDC has offered to provide financing support to VELTRI and certain
of its subcontractors in the form of loans by EDC to such subcontractors;
AND WHEREAS in consideration of EDC providing the aforementioned financing
support and becoming the lender to such subcontractors, VELTRI has agreed to
provide credit enhancement in respect of such loans to EDC as set forth
herein;
AND WHEREAS VELTRI and EDC wish to set forth herein the terms and conditions
pursuant to which EDC may provide such financing support.
NOW, THEREFORE, the parties agree as follows:
<PAGE> 35
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ARTICLE I
DEFINITIONS
SECTION 1.01 - GENERAL
In this AGREEMENT and the recitals, unless the context otherwise requires:
"ACQUIRED ENTITIES" shall mean Veltri Holdings Ltd., Veltri Stamping Corp. and
North American Precision Tool Ltd., each an Ontario corporation;
"AFFILIATE" shall mean, when used with respect to any person, any other person
which, directly or indirectly, controls or is controlled by or is under common
control with such person. For purposes of this definition, "control" (including
the correlative meanings of the terms "controlled by" and "under common control
with"), with respect to any person, shall mean possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such person, whether through the ownership of voting securities or
by contract or otherwise;
"AFFILIATE LOAN" shall mean an unsecured loan made by VS Holdings Inc., the
majority shareholder of the BORROWER, to the BORROWER not to exceed Seven
Million Five Hundred Thousand US DOLLARS (USD$7,500,000);
"AGREEMENT" means this Facility Agreement together with all Appendices hereto
and all Schedules at any time made hereto, all as amended, supplemented or
restated from time to time hereafter;
"ANNUAL DEBT SERVICE" shall mean, as of the last day of each fiscal quarter, all
amounts required for the four quarters immediately preceding the calculation
thereof for mandatory repayment of principal of and premium on INDEBTEDNESS
(whether by operation of sinking fund or otherwise) and actual cash payments on
the Earn-Out Amounts payable to Michael T. J. Veltri made during such period,
for VELTRI, all determined in accordance with GAAP, provided, however, that for
any calculation thereof occurring on or before December 31, 1997, the amounts
of BORROWER's repayments of principal for the relevant period of calculation
shall be deemed to be CAD1,577,488.00;
"APPLICATION FOR ADDITIONAL FINANCING FOR NEW AND/OR EXISTING VELTRI PURCHASE
ORDERS" means each request from VELTRI requesting EDC to approve for financing
under an existing LOAN AGREEMENT (a) a subsequent VELTRI PURCHASE ORDER in
respect of the relevant BORROWER; or (b) an amended VELTRI PURCHASE ORDER
previously approved for financing by EDC (whether pursuant to an APPLICATION FOR
ADDITIONAL FINANCING FOR NEW AND/OR EXISTING VELTRI PURCHASE ORDERS or an
APPLICATION FOR INITIAL FINANCING), which request must be approved by the
relevant BORROWER, substantially in the form of Schedule "B" hereto;
"APPLICATION FOR INITIAL FINANCING" means the request from VELTRI requesting
EDC to consider (a) entering into a LOAN AGREEMENT to lend monies to a BORROWER
to
<PAGE> 36
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finance thereunder the design and build by the BORROWER of the BORROWER GOODS to
be supplied to VELTRI by the BORROWER under VELTRI PURCHASE ORDERS; and (b)
approving the first VELTRI PURCHASE ORDER, substantially in the form of Schedule
"A" hereto;
"BORROWER" means each person which is a borrower who has entered or will enter
into a LOAN AGREEMENT and "BORROWERS" means collectively each and every
BORROWER;
"BORROWER GOODS" means the tools, molds, fixtures and dies to be supplied by a
BORROWER to VELTRI pursuant to a VELTRI PURCHASE ORDER;
"BORROWER OBLIGATIONS" means all indebtedness of each BORROWER to EDC
outstanding from time to time under the LOAN AGREEMENTS to which each such
BORROWER is a party, including, without limitation, principal, interest,
expenses and any additional amounts payable in respect thereof;
"BORROWER SECURITY AGREEMENT" means each security agreement between EDC and a
BORROWER delivered in connection with a LOAN AGREEMENT;
"BUDGETED CAPITALIZED INTEREST" means, in respect of any VELTRI PURCHASE ORDER
and the financing related thereto under a LOAN AGREEMENT, the amount of interest
incorporated in the price associated with such VELTRI PURCHASE ORDER which
amount is set forth in item (c) of either Annex I to the related APPLICATION FOR
INITIAL FINANCING or Annex I to the related APPLICATION FOR ADDITIONAL FINANCING
FOR NEW AND/OR EXISTING VELTRI PURCHASE ORDER;
"BUSINESS DAY" means any day except Saturday, Sunday and any other day on which
banks are closed for business in Toronto, Canada;
"BUYER" means Honda of Canada Manufacturing Inc. and any other automotive
original equipment manufacturer or automotive parts manufacturer approved by
EDC;
"BUYER PURCHASE ORDER" means a purchase order or other document satisfactory to
EDC for the purchase of VELTRI GOODS by a BUYER from VELTRI, which corresponds
to a VELTRI PURCHASE ORDER for which a request for financing has been approved
by EDC hereunder, as such BUYER PURCHASE ORDER may be amended from time to time
and "BUYER PURCHASE ORDERS" means collectively each and every BUYER PURCHASE
ORDER;
"CANADIAN DOLLARS" or "CAD" means the lawful currency of Canada;
"DEBT SERVICE CHARGE COVERAGE RATIO" shall mean, as of the date of any
determination thereof, the ratio of VELTRI's EARNINGS AVAILABLE FOR DEBT SERVICE
to its ANNUAL DEBT SERVICE;
<PAGE> 37
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"DRAWDOWN REQUEST" means each request from a BORROWER requesting an advance
under the relevant LOAN AGREEMENT in respect of a specific VELTRI PURCHASE
ORDER, which request must be approved by VELTRI, substantially in the form of
Schedule "C" hereto;
"EARNINGS AVAILABLE FOR DEBT SERVICE" shall mean, as of the last day of each
fiscal quarter, for the four fiscal quarters preceding any calculation thereof,
EBITDA minus the tax expenses and interest expense on INDEBTEDNESS of VELTRI
for such period;
"EBITDA" shall mean, as of the last day of any fiscal quarter, for the four
fiscal quarters immediately preceding any calculation thereof, net income
(before extraordinary items) plus the aggregate amounts deducted in determining
net income for such period in respect of taxes based on income, interest expense
and depreciation and amortization, all determined in accordance with GAAP;
"EVENT OF DEFAULT" has the meaning ascribed to it in Section 8.01 hereof;
"GAAP" shall mean, at any time, accounting principles generally accepted in
Canada, as recommended in the Handbook of the Canadian Institute of Chartered
Accountants, or any successor provision;
"INDEBTEDNESS" shall mean, with respect to any person, without duplication, (a)
all indebtedness of such person for borrowed money; (b) the deferred purchase
price of assets or services which in accordance with GAAP would be shown on the
liability side of the balance sheet of such person; (c) the face amount of all
letters of credit issued for the account of such person and, without
duplication, all drafts drawn thereunder; (d) all obligations of any other
person secured by any LIEN on any property owned by such first person, whether
or not such obligations have been assumed by such first person; and (e) all
capitalized lease obligations of such person; (f) all obligations of such person
under interest rate agreements; provided, however, that in the case of VELTRI
the term INDEBTEDNESS shall not include the AFFILIATE LOAN;
"LEVERAGE RATIO" shall mean, as of any date, the ratio of the VELTRI's
INDEBTEDNESS to EBITDA;
"LIENS" means any mortgage, leasehold mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement, encumbrance, privilege, preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
securing the obligation of any person (including, without limitation, any title
retention agreement, execution, seizure, attachment, garnishment or other
similar encumbrance, any financing lease having substantially the same economic
effect as any of the foregoing, the filing of, or agreement to give, any
financing statement perfecting a security interest under applicable law of
any jurisdiction and any designation of loss payees or beneficiaries other than
the owner of the insured property or any similar arrangement under any insurance
policy);
"LOAN AGREEMENT" means a loan agreement between EDC and A BORROWER, and "LOAN
AGREEMENTS" means collectively each and every LOAN AGREEMENT;
<PAGE> 38
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"SUBORDINATION AGREEMENT(S)" means the subordination agreements from Michael T.
J. Veltri and Comerica Bank in favour of EDC whereby each of them agrees to
subordinate its security interest in the VELTRI COLLATERAL to EDC's security
interest therein pursuant to the VELTRI SECURITY AGREEMENT, in form and
substance satisfactory to EDC;
"TAXES" means all present or future taxes (including stamp taxes) of whatever
nature, including but not limited to, levies, imposts, duties, fees, royalties,
deductions and withholdings, together with any fines, penalties or interest
thereon, imposed, levied or assessed by any competent country, jurisdiction,
taxing authority or governmental sub-division thereof or therein; and
"US DOLLARS" or "USD" means the lawful currency of the United States of America;
"VELTRI COLLATERAL" means the collateral described in the VELTRI SECURITY
AGREEMENT;
"VELTRI GOODS" means the tools, molds, fixtures and dies to be supplied by
VELTRI to a BUYER pursuant to a BUYER PURCHASE ORDER;
"VELTRI PURCHASE ORDER" means a purchase order or other document satisfactory to
EDC for the purchase of BORROWER GOODS by VELTRI from a BORROWER, as such VELTRI
PURCHASE ORDER may be amended from time to time, in respect of which EDC has
approved a request for financing hereunder and "VELTRI PURCHASE ORDERS" means
collectively each and every VELTRI PURCHASE ORDER;
"VELTRI SECURITY AGREEMENT" means the security agreement between EDC and VELTRI
securing payment and performance by VELTRI of its obligations pursuant to the
indemnity referred to in Article IV hereof, in the form of Schedule "G".
SECTION 1.02 - RULES OF INTERPRETATION
In this AGREEMENT:
(a) unless the context otherwise requires, the singular shall include the
plural and vice versa;
(b) references to a "person" shall be construed as references to any
individual, firm, company, corporation, unincorporated body of
persons or any state or political subdivision thereof or any
government or any agency thereof;
(c) whenever any person is referred to, such reference shall be deemed to
include the permitted assignees and successors of such person, whether
by operation of law, consolidation, merger, sale, amalgamation or
otherwise;
(d) references to a specified Article or Section shall be construed as
references to that specified article or section of this AGREEMENT;
<PAGE> 39
-6-
(e) references to any agreement or other instrument shall be deemed to
include such agreement or other instrument as it may from time to time
be modified, amended, supplemented or restated in accordance with
its terms and, where required hereunder, with the consent of EDC;
(f) the terms "hereof", "herein" and "hereunder" shall be deemed to refer
to this AGREEMENT;
(g) the headings of the Articles and Sections are inserted for convenience
only and shall not affect the construction or interpretation of this
AGREEMENT;
(h) "in writing" or "written" includes printing, typewriting, or any
electronic means of communication capable of being permanently
reproduced in alphanumeric characters at the point of reception and
(i) unless otherwise specified herein, all accounting terms used shall be
interpreted, all accounting determinations required to be made shall be
made, and all financial statements required to be delivered shall be
prepared in accordance with accounting principles generally accepted in
Canada as in effect from time to time.
SECTION 1.03 - INVALIDITY OF PROVISIONS
Each of the provisions contained in this AGREEMENT is distinct and severable and
a declaration of invalidity or unenforceability of any such provision or part
thereof by a court of competent jurisdiction shall not affect the validity or
enforceability of any other provision hereof or the validity or enforceability
of such provision or part in any other competent jurisdiction.
SECTION 1.04 - CURRENCY OF ACCOUNT AND CURRENCY OF PAYMENT
(a) Payments required to be made by VELTRI pursuant to this AGREEMENT
shall be made in CANADIAN DOLLARS. The obligation of VELTRI to make
payments in CANADIAN DOLLARS shall not be discharged or satisfied by
any payment or recovery, whether pursuant to judgment or otherwise,
expressed in or converted into any other currency except to the extent
of CANADIAN DOLLARS that is actually received by EDC as a result of
such payment.
(b) The obligation as regards currency of payment described in subsection
(a) above shall be enforceable as an alternative or additional cause of
action for the purpose of recovery in such currency of the amount by
which the amount received by EDC falls short of the full amount of
CANADIAN DOLLARS, as the case may be, and such obligation of VELTRI
shall not be affected by being obtained for any other sums.
<PAGE> 40
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01 - REPRESENTATIONS AND WARRANTIES
VELTRI hereby represents and warrants to EDC as of the date hereof and shall be
deemed to represent and warrant on and as of the date of each advance under a
LOAN AGREEMENT, that:
(a) VELTRI is a corporation duly incorporated and organized and validly
existing under the laws of the Province of Nova Scotia;
(b) VELTRI has full corporate power and authority to own its property and
assets and to carry on its business as currently conducted;
(c) the entering into and the performance of the terms of this AGREEMENT
and the VELTRI SECURITY AGREEMENT by VELTRI:
(i) are within its corporate powers and have been duly authorized by
all necessary corporate action;
(ii) require no action by or in respect of, or filing with; any
governmental body; and
(iii) except for the security interest created pursuant to the VELTRI
SECURITY AGREEMENT and the security interests subordinated under
the SUBORDINATION AGREEMENTS, will not result in or require the
creation or imposition of a LIEN upon the VELTRI COLLATERAL
whether created or imposed at law or pursuant to the terms of
any instrument to which VELTRI is subject or by which it or any
of its properties or assets are bound;
(d) this AGREEMENT and the VELTRI SECURITY AGREEMENT have been duly
executed and delivered by VELTRI and constitute the legal, valid and
binding obligation of VELTRI, enforceable against VELTRI in accordance
with their respective terms, subject as to enforcement of remedies to
applicable bankruptcy, insolvency, reorganization and similar laws
affecting generally the enforcement of the rights of creditors and
subject to a court's discretionary authority with regard to the
granting of a decree ordering specific performance or other equitable
remedies and further subject to the Currency Act (Canada) precluding a
court in Canada from awarding a judgment for an amount expressed in
currency other than CANADIAN DOLLARS;
(e) VELTRI is, or with respect to the VELTRI COLLATERAL acquired after the
date hereof will be, the sole beneficial owner of the VELTRI COLLATERAL
free and clear of any LIENS except for the security interests
subordinated under the SUBORDINATION AGREEMENTS;
<PAGE> 41
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(f) VELTRI has, or with respect to the VELTRI COLLATERAL acquired after the
date hereof will have, the right to grant a security interest in the
VELTRI COLLATERAL in favour of EDC on the terms of the VELTRI
SECURITY AGREEMENT;
(g) the business operations and records of VELTRI are located at 73 Main
Street, Glencoe, Ontario and the VELTRI COLLATERAL will be kept at such
location or at such other location as VELTRI will specify in writing to
EDC and, subject to the provisions of the VELTRI SECURITY AGREEMENT,
none of the VELTRI COLLATERAL will be moved therefrom without the prior
written consent of EDC;
(h) VELTRI's full name and chief executive office are as set out on the
first page of this AGREEMENT;
(i) none of the VELTRI COLLATERAL consists of consumer goods;
(j) there are no disputes between a BORROWER and VELTRI which would
adversely affect performance of the respective obligations of the
parties under the relevant VELTRI PURCHASE ORDER and there are no
disputes between a BUYER and VELTRI which could adversely affect
performance of the respective obligations of the parties under the
relevant BUYER PURCHASE ORDER;
(k) the obligations of VELTRI under this AGREEMENT, to the extent they are
not secured, rank and will rank at least pari passu with all other
unsecured indebtedness, including unsecured guarantees, of VELTRI,
save as may be preferred by mandatory provisions of applicable law;
(l) the audited financial statements of VELTRI as of December 31, 1996 and
the interim financial statements as of June 28, 1997, copies of which
have been delivered to EDC, present fairly, in all material respects,
the financial position of VELTRI and the results of its operations for
the period covered thereby and such financial statements have been
prepared in accordance with accounting principles generally accepted
in Canada, applied on a consistent basis, and between the date of such
interim financial statements and the date of this AGREEMENT there has
been no material adverse change in the financial condition or in the
business or assets of VELTRI;
(m) there are no legal proceedings pending or, so far as is known to
VELTRI, threatened before any court, arbitral tribunal, administrative
agency or governmental or other body having authority over it which
would materially adversely affect the financial condition or the
business or assets of VELTRI or its ability to perform its obligations
hereunder, under the VELTRI SECURITY AGREEMENT or under any BUYER
PURCHASE ORDER other than those disclosed in the most recent audited
financial statements of VELTRI;
(n) VELTRI is not currently in violation of, and the execution of this
AGREEMENT and the VELTRI SECURITY AGREEMENT will not place it in
violation of (i) any agreement, instrument, mortgage, franchise or
license to which it is subject; (ii) any judgment, order
<PAGE> 42
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or decree of any court or other governmental authority applicable to
it; or (iii) any statute or regulation applicable to it, so as
materially to imperil the ability of VELTRI to fulfill its obligations
hereunder or under the VELTRI SECURITY AGREEMENT;
(o) it has received an originally executed copy of the LOAN AGREEMENT and
the BORROWER SECURITY AGREEMENT related thereto and is familiar with
all the terms and provisions thereof;
(p) each APPLICATION FOR INITIAL FINANCING and each APPLICATION FOR
ADDITIONAL FINANCING FOR NEW AND/OR EXISTING VELTRI PURCHASE ORDERS (as
the case may be) and the DRAWDOWN REQUEST associated with such advance
has been duly executed and delivered by VELTRI and constitutes a legal,
valid and binding obligation of VELTRI, enforceable against VELTRI in
accordance with its respective terms, subject as to enforcement of
remedies to applicable bankruptcy, insolvency, reorganization and
similar laws affecting generally the enforcement of the rights of
creditors and subject to a court's discretionary authority with regard
to the granting of a decree ordering specific performance or other
equitable remedies and further subject to the Currency Act (Canada)
precluding a court in Canada from awarding a judgment for an amount
expressed in currency other than CANADIAN DOLLARS;
(q) so far as VELTRI is aware (having made reasonable inquiries) there
exists no event of default under the VELTRI PURCHASE ORDER or the BUYER
PURCHASE ORDER associated with such advance nor has any event occurred
nor does any circumstance exist which, with the giving of notice, lapse
of time or fulfillment of any other condition, would be an event of
default under the VELTRI PURCHASE ORDER or the BUYER PURCHASE ORDER;
(r) the VELTRI PURCHASE ORDER and the BUYER PURCHASE ORDER associated with
such advance are in full force and effect and have not been amended,
supplemented, extended or replaced in any material respect or canceled
other than as noted in the APPLICATION FOR ADDITIONAL FINANCING FOR NEW
AND/OR EXISTING VELTRI PURCHASE ORDERS related to such VELTRI PURCHASE
ORDER and BUYER PURCHASE ORDER;
(s) all covenants and obligations of any kind whatsoever on VELTRI's part
to be performed under the VELTRI PURCHASE ORDER and BUYER PURCHASE
ORDER associated with such advance are not in default; and
(t) there has been no pre-payment of any amount or of any kind under the
VELTRI PURCHASE ORDER except as previously disclosed in writing to EDC
or the BUYER PURCHASE ORDER associated with such advance.
<PAGE> 43
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ARTICLE III
FINANCING SUPPORT
SECTION 3.01 - MAXIMUM AMOUNT OF FINANCING SUPPORT
(a) Upon and subject to the terms and conditions set forth in this
AGREEMENT, EDC agrees to provide financing support to VELTRI and
certain of its subcontractors in respect of VELTRI PURCHASE ORDERS,
in CANADIAN DOLLARS, provided however, that the maximum aggregate
amount of such financing support, whether advanced or committed,
(including INTEREST ADVANCES as defined in each LOAN AGREEMENT) shall
not exceed CAD5,000,000, on a revolving basis.
(b) In respect of each VELTRI PURCHASE ORDER, EDC will not finance:
(i) a VELTRI PURCHASE ORDER which is in a currency other than
CANADIAN DOLLARS;
(ii) a VELTRI PURCHASE ORDER in an amount less than CAD100,000;
(iii) a VELTRI PURCHASE ORDER which does not relate to BORROWER GOODS
ultimately to be sold to a BUYER;
(iv) more than the aggregate of (I) 85% of (a) such VELTRI PURCHASE
ORDER less (b) the BUDGETED CAPITALIZED INTEREST relating to such
VELTRI PURCHASE ORDER; and (II) the aggregate of all Interest
Advances (as defined in each LOAN AGREEMENT) made under the
relevant LOAN AGREEMENT which Interest Advances will equal the
BUDGETED CAPITALIZED INTEREST.
(c) EDC will not provide financing support to any BORROWER under a LOAN
AGREEMENT in excess of CAD1,000,000 at any one time (whether advanced
or committed, (including INTEREST ADVANCES as defined in each LOAN
AGREEMENT), unless EDC in its sole discretion otherwise agrees in
writing and except for financial support to Superior Tool and Machine
of up to CAD1,500,000.00.
(d) Notwithstanding the provisions of this Section 3.01 or any other
provision of this AGREEMENT, VELTRI acknowledges and agrees that, (i)
EDC is not obligated in any manner whatsoever to approve any particular
APPLICATION FOR INITIAL FINANCING or APPLICATION FOR ADDITIONAL
FINANCING FOR NEW AND/OR EXISTING VELTRI PURCHASE ORDERS or to provide
any financing support contemplated by such documents; and (ii) it is in
EDC's sole discretion whether or not to approve any particular
APPLICATION FOR INITIAL FINANCING or APPLICATION FOR ADDITIONAL
FINANCING FOR NEW AND/OR EXISTING VELTRI PURCHASE ORDERS or provide any
financing support contemplated thereby.
<PAGE> 44
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(e) The parties acknowledge that it is a condition precedent to the LOAN
AGREEMENT (and related security) that this AGREEMENT and the VELTRI
SECURITY AGREEMENT be valid and binding on all parties and that this
AGREEMENT and the VELTRI SECURITY AGREEMENT apply to the indebtedness
which will be owing to EDC pursuant to such LOAN AGREEMENT.
(f) This AGREEMENT shall terminate on December 31, 1998, EDC will have no
obligation to consider any APPLICATION FOR INITIAL FINANCING or
APPLICATION FOR ADDITIONAL FINANCING FOR NEW AND/OR EXISTING VELTRI
PURCHASE ORDERS after such date unless otherwise agreed to by EDC. It
is understood that disbursements under VELTRI PURCHASE ORDERS approved
by EDC prior to such date will, subject to satisfaction or waiver of
the relevant conditions precedent in the relevant LOAN AGREEMENT,
continue to be made after such date and this AGREEMENT (including
without limitation the indemnity referred to in Article IV hereof)
shall apply in connection thereto.
SECTION 3.02 - REQUEST FOR FINANCING SUPPORT
In consideration of the credit enhancement provided herein by VELTRI and for
other good and valuable consideration, and upon and subject to the terms and
conditions set forth herein, VELTRI may, from time to time, with the relevant
BORROWER's written consent, provide EDC with a request that EDC consider (a)
entering into a LOAN AGREEMENT to lend monies to a BORROWER to finance the
design and build by the BORROWER of the BORROWER GOODS to be supplied to VELTRI
by the BORROWER under VELTRI PURCHASE ORDERS; and (b) approving a specific
corresponding VELTRI PURCHASE ORDER. VELTRI's request shall be in the form of an
APPLICATION FOR INITIAL FINANCING, shall include any documents required to be
delivered to EDC pursuant to such APPLICATION FOR INITIAL FINANCING and shall be
consented to in writing by the BORROWER. Thereafter, EDC shall, subject to the
terms and conditions of this AGREEMENT, return to VELTRI the relevant
APPLICATION FOR INITIAL FINANCING indicating thereon whether or not EDC is
prepared to (i) enter into a LOAN AGREEMENT to lend monies to the BORROWER; and
(ii) approve a specific VELTRI PURCHASE ORDER and, if such is the case, the
amount of financing EDC is prepared to offer such BORROWER for the specific
VELTRI PURCHASE ORDER. EDC shall also advise the BORROWER whether or not EDC is
prepared to (i) enter into a LOAN AGREEMENT to lend monies to the BORROWER; and
(ii) approve a specific VELTRI PURCHASE ORDER and, if such is the case, the
amount of financing EDC is prepared to offer such BORROWER for the specific
VELTRI PURCHASE ORDER.
In the event EDC indicates its willingness to provide financing to the relevant
BORROWER, EDC shall forward to such BORROWER a LOAN AGREEMENT and the related
BORROWER SECURITY AGREEMENT. EDC shall then arrange for the relevant BORROWER to
(a) sign the LOAN AGREEMENT and BORROWER SECURITY AGREEMENT; and (b) forward to
EDC and VELTRI a fully executed copy of the LOAN AGREEMENT and BORROWER SECURITY
AGREEMENT as well as an opinion from the BORROWER's counsel addressed to EDC and
VELTRI in form and substance satisfactory to EDC and VELTRI which opinion shall
<PAGE> 45
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include without limitation an opinion that the BORROWER has the authority to
borrow the maximum amount of available financing set out in the LOAN AGREEMENT,
as amended by future APPLICATION FOR ADDITIONAL FINANCING FOR NEW AND/OR
EXISTING VELTRI PURCHASE ORDERS and that the LOAN AGREEMENT has been duly
executed. The LOAN AGREEMENT and BORROWER SECURITY AGREEMENT and opinion of the
BORROWER's counsel shall be in the form of Schedule "F hereof.
SECTION 3.03 - INCREASE IN FINANCING SUPPORT
In consideration of the credit enhancement provided herein by VELTRI and for
other good and valuable consideration, and upon and subject to the terms
and conditions set forth herein, VELTRI may, from time to time, with the
relevant BORROWER's written consent, provide EDC with a request that EDC
consider increasing the maximum amount of financing available under an existing
LOAN AGREEMENT to (a) cover amendments to VELTRI PURCHASE ORDERS which already
are the subject of financing under the LOAN AGREEMENT; or (b) subsequent VELTRI
PURCHASER ORDERS to the relevant BORROWER. VELTRI's request shall be in the form
of an APPLICATION FOR ADDITIONAL FINANCING FOR NEW AND/OR EXISTING VELTRI
PURCHASE ORDERS, shall include any documents reasonably required to be delivered
to EDC pursuant to such APPLICATION FOR ADDITIONAL FINANCING FOR NEW AND/OR
EXISTING VELTRI PURCHASE ORDERS and shall be consented to in writing by the
BORROWER. Thereafter, EDC shall, subject to the terms and conditions of this
AGREEMENT, return to VELTRI the APPLICATION FOR ADDITIONAL FINANCING FOR NEW
AND/OR EXISTING VELTRI PURCHASE ORDERS indicating thereon whether or not EDC is
prepared to permit the maximum amount of financing under the relevant LOAN
AGREEMENT to be increased to cover (i) amendments to VELTRI PURCHASE ORDERS
which already are the subject of financing under the LOAN AGREEMENT; or (ii)
additional VELTRI PURCHASER ORDERS to the relevant BORROWER and, if such is the
case, the additional amount of financing EDC is prepared to offer. EDC shall
also advise the BORROWER whether or not EDC is prepared to permit the maximum
amount of financing under the relevant LOAN AGREEMENT to be increased and, if
such is the case, the additional amount of financing EDC is prepared to offer.
In the event EDC indicates its willingness to increase the maximum dollar
amount of financing available under the relevant LOAN AGREEMENT, EDC
shall forward to the BORROWER any documents EDC considers necessary to ensure
that the LOAN AGREEMENT reflects the increase in financing and to ensure that
the security related to the LOAN AGREEMENT covers the subsequent VELTRI
PURCHASE ORDERS or the amended VELTRI PURCHASE ORDERS and BORROWER GOODS
supplied thereunder including without limitation a certificate of an officer of
the BORROWER certifying that the resolution authorizing the BORROWER to
borrow the maximum amount of available financing set out in the LOAN AGREEMENT,
as amended by APPLICATION FOR ADDITIONAL FINANCING FOR NEW AND/OR EXISTING
VELTRI PURCHASE ORDERS, has not been amended or repealed. EDC shall then arrange
for the relevant BORROWER to (a) sign the said documents; and (b) forward to EDC
and VELTRI a fully executed copy of those documents.
<PAGE> 46
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ARTICLE IV
CREDIT ENHANCEMENT
SECTION 4.01 - INDEMNITY
(a) VELTRI hereby unconditionally and irrevocably agrees, as primary
obligor, to indemnify on demand EDC against any monetary loss suffered
by it as a result of any BORROWER OBLIGATIONS, whether at maturity, on
acceleration or otherwise, not being paid on time, on the date and
otherwise in the manner specified in the LOAN AGREEMENTS or as a result
of any BORROWER OBLIGATION being or becoming void, voidable or
unenforceable for any reason (whether or not now existing and whether
or not now known or becoming known to the BORROWERS or EDC), the amount
of that loss being the amount expressed to be payable by the BORROWERS
in the LOAN AGREEMENTS and unpaid. VELTRI agrees that its obligations
under this Section 4.01(a) shall not be discharged, released or
otherwise terminated except by payment in full to EDC of the amount of
the said loss. Notwithstanding anything contained herein to the
contrary, EDC may, in its discretion, make multiple demands under this
AGREEMENT and such demands may be for all or any part of the BORROWER
OBLIGATIONS then due and unpaid.
(b) VELTRI further agrees to pay interest on the BORROWER OBLIGATIONS (to
the extent that such interest is not paid by the relevant BORROWER)
from the date upon which EDC has demanded payment of the BORROWER
OBLIGATIONS pursuant to Section 4.01(a) hereof (or from the date the
BORROWER ceases to be legally liable to pay interest under the relevant
LOAN AGREEMENT by reason of provisions or enactments relating to
bankruptcy, insolvency, liquidation or otherwise, if applicable) until
the unpaid BORROWER OBLIGATIONS have been paid in full, such interest
to be payable before and after judgment at such rate equal to the rate
of interest payable under the relevant LOAN AGREEMENT in respect of
such BORROWER OBLIGATIONS.
SECTION 4.02 - WAIVER
(a) VELTRI hereby waives any requirement that EDC, in the event of default
by any of the BORROWERS under the relevant LOAN AGREEMENTS, make demand
upon or seek to enforce remedies against any such BORROWER before
demanding payment under, or seeking to enforce the provisions of this
indemnity, and EDC shall not be bound to exhaust its recourse against
any such BORROWER or any other person or the securities it may hold in
respect of the BORROWER OBLIGATIONS or to value such securities before
demanding or being entitled to payment from VELTRI.
(b) Except for its rights under Section 4.04, VELTRI hereby expressly
waives the benefit of all privileges and defences which now or may
hereafter be available to sureties including the benefits of discussion
and division, and hereby waives diligence, presentment, demand, protest
and notice of every kind.
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SECTION 4.03 - NO BENEFIT
(a) Until all sums owing to EDC by a BORROWER under the relevant LOAN
AGREEMENTS have been paid in full, VELTRI shall not with respect to
any payment made by VELTRI hereunder:
(i) be entitled and shall not claim to rank as a creditor in the
bankruptcy or liquidation of the relevant BORROWER in competition
with EDC;
(ii) receive, claim or have the benefit of any payment or distribution
from or on account of the relevant BORROWER or claim the benefit
of any security or monies held by or for the account of EDC
except for the benefit of EDC and EDC shall be entitled to apply
such security and monies as it sees fit.
(b) Any settlement or discharge between EDC and VELTRI shall be conditional
upon no security or payment to EDC by the relevant BORROWER or any
other person on behalf of the BORROWER being avoided or set aside or
ordered to be refunded or reduced by virtue of any provision or
enactment relating to bankruptcy, insolvency or liquidation for the
time being in force and EDC shall be entitled to recover from VELTRI
the value which EDC has placed upon such security or the amount of any
such payment as if such settlement or discharge had not occurred
limited to the amount owing to EDC by the BORROWER.
SECTION 4.04 - ASSIGNMENT
Upon payment in full by VELTRI to EDC of the indemnity referred to in this
Article IV with respect to a BORROWER, EDC shall assign to VELTRI, or as it
may direct, all of EDC's rights, title and interests in and to any or all
related LOAN AGREEMENTS and related security in respect of which an indemnity
payment is fully made to EDC pursuant to this Article IV. EDC covenants to,
perfect all security interests granted by a BORROWER to EDC under a BORROWER's
security agreement in EDC's favour and not release or subordinate or permit the
expiry of any such security interest (unless in the case of an expired
registration, such registration may be renewed or reperfected so as to maintain
EDC's priority position that existed prior to the expiry of such registration).
Nevertheless EDC is not required to ensure that any security interest which it
perfects confers on EDC any priority over any other security interest.
SECTION 4.05 - SECURITY
As security for the payment and performance of its obligations under the
indemnity referred to in this Article IV, VELTRI agrees to deliver to EDC the
VELTRI SECURITY AGREEMENT in accordance with the terms hereof.
<PAGE> 48
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ARTICLE V
CANADIAN BENEFIT
SECTION 5.01 - CANADIAN BENEFIT
The parties acknowledge that EDC has entered into this AGREEMENT to finance
goods and services of Canadian manufacture and origin and that no less than
75% of work related to the manufacture of the BORROWER GOODS supplied under all
approved VELTRI PURCHASE ORDERS shall give rise to an aggregate Canadian
benefit. In any case where the aggregate amount of proposed financing in
respect of a VELTRI PURCHASE ORDER exceeds CAD5,000,000, EDC's internal
Industrial Advisory Service shall confirm whether or not such VELTRI PURCHASE
ORDER meets the Canadian benefit test. EDC may conduct a review, not less than
annually, of the aggregate Canadian benefit under approved VELTRI PURCHASE
ORDERS. In the event that the Canadian benefit is found by EDC to be less than
75%, EDC shall so notify VELTRI and VELTRI shall not, after such notice, submit
VELTRI PURCHASE ORDERS for approval with a Canadian benefit less than 75% and
if the aggregate Canadian benefit remains less than 75% ninety (90) days
following such notice, EDC shall not be obligated to approve any further VELTRI
PURCHASE ORDERS. Notwithstanding the foregoing, EDC may not suspend or
terminate advances related to VELTRI PURCHASE ORDERS previously approved under
the associated APPLICATION FOR INITIAL FINANCING.
ARTICLE VI
COVENANTS OF VELTRI
SECTION 6.01 - COVENANTS OF VELTRI
VELTRI covenants and agrees with EDC that, unless compliance has been waived by
EDC, it will:
(a) perform and observe all the provisions of this AGREEMENT and the
VELTRI SECURITY AGREEMENT;
(b) maintain its corporate existence in good standing subject to the right
to merge, amalgamate or effect any reorganization which does not
result in any deterioration of the position of or detriment to any of
its creditors, and provided that any successor company executes, prior
to or contemporaneously with the consummation of such transaction, such
instruments as are satisfactory to EDC evidencing the agreement of
such successor company to observe and perform all the covenants and
obligations of VELTRI hereunder and under the VELTRI SECURITY
AGREEMENT;
(c) carry on its business in a proper, efficient and businesslike manner
and maintain all rights, contracts, powers, privileges, leases, lands
and franchises, permits and authorizations necessary in the conduct
of its business or operations;
<PAGE> 49
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(d) within one hundred and twenty (120) days after the end of each
financial year:(i) cause to be prepared as at the end of such financial
year a balance sheet, statement of profit and loss and such other
statements as VELTRI is required by law to prepare and will forthwith
deliver to EDC a signed copy of each of such statements, together with
a certificate of its independent auditors, setting forth that in their
opinion without any material qualification the statements present
fairly in all material respects the financial position of VELTRI and
the results of its operations for the financial year reported on, in
accordance with accounting principles generally accepted in Canada
applied on a basis consistent with that of the preceding year; (ii)
prepare and deliver to EDC a report setting out the calculation of
each of the ratios referred to in Sections 6.01(k), (l), (m) and (o);
and (iii) prepare and deliver to EDC a certificate of an officer of
VELTRI certifying that VELTRI is not in default under any loans,
guarantees or security agreements to which it is a party or if in
default specifying the nature of such default;
(e) within forty-five (45) days after the end of each of the first three
quarters of each financial year deliver to EDC: (i) its quarterly
financial reports for such fiscal quarter; (ii) the income statement of
VELTRI; (iii) a report setting out the calculation of each of the
ratios referred to in Sections 6.01(k), (l), (m) and (o); and (iv) a
certificate of an officer of VELTRI certifying that VELTRI is not in
default under any loans, guarantees or security agreements to which it
is a party or if in default specifying the nature of such default;
(f) from time to time deliver to EDC such other financial and operating
reports and statements as EDC may reasonably request;
(g) keep its assets and business insured in the manner and to the extent
customary for companies engaged in businesses of a similar character;
(h) ensure that at all times its obligations hereunder to the extent they
are unsecured rank at least pari passu with all of its other unsecured
indebtedness, including unsecured guarantees, save as may be preferred
by mandatory provisions of applicable law;
(i) not take or suffer to be taken any unreasonable action whereby the
interests of EDC hereunder or under any of the LOAN AGREEMENTS,
BORROWER SECURITY AGREEMENTS, or the VELTRI SECURITY AGREEMENT may be
jeopardized;
(j) promptly notify EDC upon becoming aware of the occurrence of any event
of default or of any event or circumstance which, after notice or lapse
of time or both, would constitute an event of default under any of the
VELTRI PURCHASE ORDERS or the BUYER PURCHASE ORDERS, and of any other
matter which might materially adversely affect the financial condition
or the business or assets of any of the BORROWERS or of VELTRI, or the
ability of any of the BORROWERS or VELTRI to perform their respective
obligations under the LOAN AGREEMENTS, the BORROWER SECURITY
AGREEMENTS, the VELTRI PURCHASE ORDERS, the BUYER PURCHASE ORDERS, the
VELTRI SECURITY AGREEMENT or hereunder, as the case may be, as well as
of the steps being taken to remedy the same;
<PAGE> 50
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(k) maintain at all times a current assets: current liabilities ratio of
not less than 1.00:1.00, which ratio is as at the date hereof not less
that 1.00:1.00; for the purposes of this covenant "current liabilities"
means current liabilities including the current portion of all
revolving bank lines of credit less all amounts subordinated at the
relevant time pursuant to the shareholder's postponement agreement
dated ;
(l) maintain at all times a DEBT SERVICE COVERAGE RATIO of not less than
1.25 to 1.0;
(m) maintain at all times a LEVERAGE RATIO of not more than 4.25 to 1.0;
(n) maintain from May 15, 1998, and at all times thereafter a shareholders'
equity of no less than CAD5,000,000; for the purposes of this covenant
"shareholders' equity" means common stock plus retained earnings as
noted on the most recent financial statements;
(o) no VELTRI PURCHASE ORDER shall be canceled or terminated, or any
material amendments made to the terms and manner of payment or to the
time and manner of delivery of the goods thereunder, or any amendments
made which might effect an unreasonable decrease in the purchase
price of the BORROWER GOODS, in each case without the prior written
consent of EDC. In addition, no change shall be made to any of the
VELTRI PURCHASE ORDERS which materially relates to or affects EDC's
Canadian benefit requirements without the prior written consent of EDC;
(p) promptly notify EDC of any dispute under any VELTRI PURCHASE ORDER or
BUYER PURCHASE ORDER or of any event which could entitle VELTRI to
set-off or withhold any amounts due under any VELTRI PURCHASE ORDER or
the BUYER to set-off or withhold any amounts due under any BUYER
PURCHASE ORDER;
(q) promptly notify EDC of any change in the name of VELTRI or the location
of its chief executive office;
(r) in respect of the VELTRI COLLATERAL:
(i) carry on it's business in a proper and efficient manner so as to
preserve and protect the VELTRI COLLATERAL and the earnings,
incomes, issues and profits thereof;
(ii) at any reasonable time and from time to time, upon reasonable
prior notice, permit EDC or any representative thereof to verify
the existence and state of the VELTRI COLLATERAL in any manner
EDC may consider appropriate; and VELTRI agrees to furnish all
assistance and information and to perform all such acts as EDC
may reasonably request in connection therewith and for such
purpose to grant to EDC or its representative access to all
places where the VELTRI COLLATERAL may be located and to all
premises occupied by VELTRI to examine and inspect the VELTRI
COLLATERAL;
<PAGE> 51
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(iii) not locate or permit its records and the VELTRI COLLATERAL to be
located at any location other than 73 Main Street, Glencoe,
Ontario;
(iv) not sell, lease, assign or otherwise dispose of the VELTRI
COLLATERAL other than as contemplated in the relevant BUYER
PURCHASE ORDER;
(v) keep the VELTRI COLLATERAL free and clear of all LIENS other than
the security interests subordinated under the SUBORDINATION
AGREEMENTS;
(vi) promptly notify EDC of any material loss of or material damage to
the VELTRI COLLATERAL; and
(vii) take all steps and all actions as may be reasonably required or
deemed advisable by EDC to perfect or more fully evidence EDC's
rights and interest in the VELTRI COLLATERAL over which a
security interest has been granted by VELTRI to EDC under the
VELTRI SECURITY AGREEMENT.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01 - CONDITIONS PRECEDENT TO FIRST LOAN AGREEMENT
EDC shall have no obligation to enter into any LOAN AGREEMENT hereunder until
EDC has received:
(a) an executed copy of the VELTRI SECURITY AGREEMENT;
(b) evidence satisfactory to EDC that EDC's first priority security
interests in the VELTRI COLLATERAL granted pursuant to the VELTRI
SECURITY AGREEMENT has been duly perfected and/or registered in such
filing offices as EDC may deem necessary or appropriate;
(c) an executed copy of both SUBORDINATION AGREEMENTS;
(d) the following corporate documents of VELTRI relating to the matters
contemplated hereby: Articles of Incorporation, resolutions, specimen
signatures and certificates of authorization, as requested by EDC;
(e) the opinion of counsel for VELTRI in the form of Schedule "D";
(f) payment of all fees required pursuant hereto;
(g) an executed copy of the shareholder's postponement agreement in the
form of Schedule "E";
<PAGE> 52
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(h) such other information or documentation as EDC may reasonably require.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.01 - EVENTS OF DEFAULT
The occurrence of any of the following events shall be a default by VELTRI
under this AGREEMENT (each an "EVENT OF DEFAULT"):
(a) VELTRI shall fail to pay or remit within three (3) BUSINESS DAYS of the
due date thereof any amount owing to EDC hereunder;
(b) any representation or warranty made or deemed to have been made by
VELTRI hereunder or in connection with this AGREEMENT or any other
information or report supplied by VELTRI to EDC hereunder or in
connection herewith shall prove to have been false, incorrect or
misleading in any material respect when made or deemed made;
(c) VELTRI fails to observe or perform any other term, covenant or
agreement herein on its part to be observed or performed and, if such
failure is capable of being remedied, any such failure shall remain
unremedied for thirty (30) days after written notice thereof shall have
been given by EDC to VELTRI;
(d) an encumbrancer takes possession of, or a receiver or similar officer
is appointed over the whole or a substantial part of the assets, rights
or revenues of VELTRI or a distress, execution, sequestration or other
process is levied or enforced upon or sued out against a substantial
part of the assets, rights or revenues of VELTRI and is not
discharged, dismissed or stayed within thirty (30) days;
(e) a court or other authority of competent jurisdiction issues any
judgment or order, or similar instrument, for bankruptcy,
liquidation, winding-up or dissolution or for the appointment of a
receiver, trustee, liquidator, or like official of all or a substantial
portion of VELTRI's assets, and such order remains in effect for a
period of forty-five (45) days without being vacated, discharged,
stayed or dismissed;
(f) proceedings are started by any person to dissolve, liquidate or wind-up
VELTRI or to suspend its operations and which remain undischarged
thirty (30) days after commencement;
(g) VELTRI (i) makes an assignment for the benefit of its creditors; or
(ii) petitions or applies to any tribunal for the appointment of a
receiver or trustee for itself or any substantial part of its assets;
or (iii) starts any proceeding relating to itself under any present or
future reorganization, arrangement, adjustment of debt, dissolution or
liquidation law of any jurisdiction; or (iv) in any way consents to,
approves or acquiesces in any bankruptcy,
<PAGE> 53
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reorganization or insolvency proceeding started by any other
person, or any proceeding by any other person for the appointment of
a receiver or trustee for VELTRI or any substantial part of its
assets; or (v) allows any receivership or trusteeship to remain
undischarged for a period of thirty (30) days; or (vi) becomes or is
declared by any competent authority to be bankrupt or insolvent;
(h) VELTRI (i) fails to pay any amount due in excess of CAD500,000 under
any one or more loans, guarantees or security agreements to which it is
a party on the due date or within any originally applicable grace
period whether on maturity, by acceleration or otherwise; or (ii)
defaults under any other term of any loan, guarantee or security
agreement to which it is a party (for which the debt associated
therewith is in excess of CAD500,000) which has caused the holder or
holders of such loan, guarantee or security to declare the
indebtedness thereunder to be due and payable; or
(i) VELTRI disposes of all or a substantial portion of its assets, whether
by one or a series of transactions, related or not, other than:
(i) for the purposes of and followed by a reconstruction, merger or
amalgamation whilst able to pay its debts as they fall due in
which the obligations of VELTRI to EDC are assumed by the
successor entity in such merger, reconstruction or amalgamation;
(ii) for fair market value on arm's length terms; or
(iii) in the ordinary course of business;
without the prior written consent of EDC;
(j) if any event or circumstance occurs which would materially and
adversely affect VELTRI's ability to perform all or any of its
obligations hereunder or under the VELTRI SECURITY AGREEMENT;
(k) if VELTRI defaults in the due performance or observance of any term of
any BUYER PURCHASE ORDER or VELTRI PURCHASE ORDER after lapse of any
applicable grace period;
(l) if title to the VELTRI GOODS granted as security pursuant to the term
of the VELTRI SECURITY AGREEMENT is transferred to the BUYER or any
other person prior to all amounts owing by VELTRI hereunder having
been fully repaid;
(m) if VELTRI creates or permits to exist or continue any LIENS over the
VELTRI COLLATERAL as security for the obligations of VELTRI or any
other person except for the security interests subordinated under the
SUBORDINATION AGREEMENTS; or
<PAGE> 54
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(n) if VELTRI fails within a reasonable time after notice to take all steps
and all actions as may be reasonably required or deemed advisable by
EDC to perfect or more fully evidence EDC's rights and interest in the
VELTRI COLLATERAL over which a security interest has been granted by
VELTRI to EDC under the VELTRI SECURITY AGREEMENT.
SECTION 8.02 - REMEDIES
If an EVENT OF DEFAULT occurs and is continuing, EDC may, in addition to any
other rights or remedies available to it under this AGREEMENT, any document
contemplated hereby or at law, do one or more of the following: (a) exercise all
other rights and remedies available to it under the VELTRI SECURITY AGREEMENT
or at law; (b) by way of one or more notices to VELTRI declare that EDC will not
approve any APPLICATION FOR INITIAL FINANCING or APPLICATION FOR ADDITIONAL
FINANCING FOR NEW AND/OR EXISTING VELTRI PURCHASE ORDERS; or (c) assign to
VELTRI all of EDC's rights, title and interests in any or all LOAN AGREEMENTS
and related security and VELTRI agrees, in consideration for such assignment
immediately to pay to EDC an amount equal to the aggregate of all indebtedness
of the BORROWERS outstanding to EDC under such LOAN AGREEMENTS (including,
without limitation, all principal, interest and other amounts) as of the date of
such assignment, it being understood that such assignment shall only occur on
payment in full by VELTRI.
SECTION 8.03 - REMEDIES CUMULATIVE
It is expressly agreed by VELTRI that the rights and remedies of EDC under this
AGREEMENT are cumulative and are in addition to, and not in substitution for,
any rights or remedies provided by law; and any single or partial exercise by
EDC of any right or remedy for default or breach of any term of this AGREEMENT
shall not, and any failure to exercise or delay in exercising any such rights or
remedies shall not, be or be deemed to be a waiver of or to alter, affect or
prejudice any other right or remedy or other rights or remedies to which EDC
may be lawfully entitled for the same default or breach; and any waiver by EDC
of the strict observance or performance of or compliance with any term of this
AGREEMENT shall not be deemed to be a waiver of any subsequent default or
breach.
ARTICLE IX
PAYMENTS
SECTION 9.01 - PLACE AND MANNER OF PAYMENT
VELTRI agrees to make any payment required of it hereunder forthwith without
set-off or counterclaim at Bank of Montreal, First Bank Tower, First Canadian
Place, Toronto, Ontario, M5X lAl, for the credit of EDC, account number 000-876
or at such other account or place as EDC may, from time to time, notify VELTRI
in writing. VELTRI agrees to instruct its bank to provide a copy of its payment
instructions (including its transfer reference number), showing how funds are
being transferred, by telex to EDC at number 053-4136 or by telefax at number
(613) 598-2514.
<PAGE> 55
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ARTICLE X
COSTS AND EXPENSES
SECTION 10.01 - COSTS AND EXPENSES
(a) VELTRI will pay, on the earlier of (i) thirty (30) days of EDC's
billing therefor; and (ii) the date of the first LOAN AGREEMENT
hereunder, a documentation fee of CAD5,000.
(b) All documents or information to be furnished to EDC by VELTRI shall be
supplied at VELTRI's expense. VELTRI hereby agrees to pay, on demand,
all costs and expenses incurred by EDC subsequent to the execution of
this AGREEMENT in connection with the transaction contemplated hereby
including, without limitation, in connection with the amendment or
operation of, or preservation of rights under or enforcement of this
AGREEMENT and the other documents contemplated hereby.
(c) As a stand-by fee, VELTRI will pay, in CANADIAN DOLLARS to EDC 1/8 of
1% of the remainder (the "REMAINDER") of the amount then available for
financing hereunder pursuant to Section 3.01(a) less (i) the
aggregate amount advanced and remaining unpaid pursuant to
APPLICATIONS FOR INITIAL FINANCING and APPLICATION FOR ADDITIONAL
FINANCING FOR NEW AND/OR EXISTING VELTRI PURCHASE ORDERS and (ii) the
aggregate amount committed for financing pursuant to outstanding
APPLICATIONS FOR INITIAL FINANCING and APPLICATION FOR ADDITIONAL
FINANCING FOR NEW AND/OR EXISTING VELTRI PURCHASE ORDERS and not yet
advanced, computed from and including the date of this AGREEMENT, up to
and including the date this AGREEMENT is terminated and all financing
approved (prior to such termination) under APPLICATIONS FOR INITIAL
FINANCING and APPLICATION FOR ADDITIONAL FINANCING FOR NEW AND/OR
EXISTING VELTRI PURCHASE ORDERS has been fully advanced. The stand-by
fee is due and payable and calculated quarterly in arrears on June 1,
September 1, December 1 and March 1 of each year during the existence
of this AGREEMENT and until this AGREEMENT has been terminated on
December 31, 1998, unless otherwise extended by EDC. The stand-by
fee is calculated on the basis of the actual number of days elapsed
divided by 365. Notwithstanding the foregoing, for administrative
efficiency, VELTRI will pay the stand-by fee based on the REMAINDER as
at thirty (30) days prior to the relevant June 1, September 1, December
1 or March 1 and adjustments for any underpayment or overpayment, as
the case may be, will be made on the next following June 1, September
1, December 1, or March 1.
(d) EDC acknowledges receipt of a set up fee of CAD5,000.
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ARTICLE XI
NOTICE
SECTION 11.01 - NOTICE
Every notice, demand, request, consent, approval, waiver or agreement to be
given or made hereunder shall, save as otherwise herein specifically provided,
be in writing and shall be delivered by hand or sent by prepaid air mail or
telefax, and shall be deemed to have been given and received, if delivered by
hand, upon delivery, if sent by mail, the fifth day (excluding Saturdays and
Sundays) following the date of mailing, and, if sent by telefax, the second day
(excluding Saturdays and Sundays) following the date of transmission. The
mailing address and telefax numbers of VELTRI and EDC for such purposes shall
respectively be:
for VELTRI,
VELTRI METAL PRODUCTS CO.
900 Wilshire Drive, Suite 203
Troy, Michigan 48084
Attention: Chief Financial Officer
Telefax: (248) 362-7612
for EDC,
EXPORT DEVELOPMENT CORPORATION
151 O'Connor Street
Ottawa, Canada K1A 1K3
Attention: Loans Operations
Telefax: (613) 598-2514
or such other mailing or telefax number as to which VELTRI or EDC may, for
itself, from time to time notify the other as aforesaid.
ARTICLE XII
PROPER LAW AND JURISDICTION
SECTION 12.01 - PROPER LAW
This AGREEMENT shall be deemed to be made under and shall be governed by and
construed in accordance with the laws of the Province of Ontario and the federal
laws of Canada applicable in such Province.
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ARTICLE XIII
SUCCESSORS AND ASSIGNS
SECTION 13.01 - SUCCESSORS AND ASSIGNS
This AGREEMENT shall be binding upon VELTRI and its successors and assigns, and
the benefit hereof shall extend to EDC and its successors and assigns. VELTRI
may not assign or transfer all or any part of its rights or obligations
hereunder. EDC may assign or transfer all or part of its rights and obligations
hereunder. EDC may also obtain at any time the participation of a person to
guarantee the obligations of VELTRI hereunder or to lend all or part of the loan
facility amount set out in Section 3.01(a) hereof.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01 - MISCELLANEOUS
(a) VELTRI shall give further assurances and do, execute and perform all
such acts, deeds, documents and things as may be required to give EDC
the full benefit and effect of, or intended by, this AGREEMENT.
(b) No term, condition or provision hereof or any right hereunder, or in
respect thereof, shall be deemed to have been waived by the benefited
party, except by express written waiver signed by such party, all such
waivers to extend only to the particular circumstances therein
specified. No agreement or undertaking purporting to amend or modify
this AGREEMENT or any of its terms, conditions or provisions or any
rights or liabilities hereunder shall be effective or binding unless
in writing and signed by EDC and VELTRI.
(e) No action or omission on the part of EDC in exercising or failing to
exercise its rights hereunder or in connection with or arising from the
BORROWER OBLIGATIONS or any part thereof shall make EDC liable to
VELTRI for any loss thereby occasioned to VELTRI other than by virtue
of EDC's breach of covenant under Section 4.04.
<PAGE> 58
-25-
SECTION 14.02 - COUNTERPARTS
This AGREEMENT may be executed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
IN WITNESS WHEREOF the parties hereto have signed and delivered this AGREEMENT,
this day of , 1997.
VELTRI METAL PRODUCTS CO.
Signature: David J. Woodward, V.P.
(Print Name:) David J. Woodward
EXPORT DEVELOPMENT CORPORATION
Signature:
(Print Name:)
Signature:
(Print Name:)
<PAGE> 1
EXHIBIT 12.1
TALON AUTOMOTIVE GROUP
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
(In thousands except for ratios)
<TABLE>
<CAPTION>
Three months Three months
ended ended Year ended December 31,
April 4, April 4, --------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ------------ ---- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense $ 2,390 $ 1,050 $ 4,599 $ 1,754 $ 1,192 $ 714 $ 806
Estimated interest portion of rents 131 131 522 291 206 - -
------- ------- ------- ------- ------- ------- -------
Total fixed charges $ 2,521 $ 1,181 $ 5,121 $ 2,045 $ 1,398 $ 714 $ 806
Earnings:
Earnings before fixed charges $ 2,055 $ 2,153 $ 2,121 $ 2,363 $ 2,702 $ 610 $ 2,023
Fixed charges 2,521 1,181 5,121 2,045 1,398 714 806
------- ------- ------- ------- ------- ------- -------
Adjusted earnings $ 4,576 $ 3,334 $ 7,242 $ 4,408 $ 4,100 $ 1,324 $ 2,829
Ratio of Earnings to Fixed Charges 1.815 2,823 1.414 2.156 2.933 1.854 3.510
======= ======= ======= ======= ======= ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 12.2
TALON AUTOMOTIVE GROUP
PRO FORMA COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
(IN THOUSANDS EXCEPT FOR RATIOS)
<TABLE>
<CAPTION>
Three months Year
ended ended
April 4, December 31,
1998 1997
------------- -------------
<S> <C> <C>
Fixed Charges:
Interest expense $ 3,302 $ 12,569
Estimated interest portion of rents $ 131 $ 522
--------- ---------
Total fixed charges $ 3,433 $ 13,091
Earnings:
Earnings before fixed charges (1) $ 4,608 $ 11,520
Estimated interest portion of rents $ 131 $ 522
--------- ---------
Adjusted earnings $ 4,739 $ 12,042
Ratio of Earnings to Fixed Charges 1.380 0.920
========= =========
</TABLE>
(1) Includes gain on sale of assets and foreign currency exchange loss.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES AND AFFILIATES
<TABLE>
<CAPTION>
OWNED BY AND JURISDICTION OF
NAME PERCENTAGE OWNED INCORPORATION
- ---- ---------------- -------------
<S> <C> <C>
SUBSIDIARIES
VS Holdings, Inc. Talon Automotive Group, Inc. (100%) Michigan corporation
Veltri Holdings USA, Inc. Talon Automotive Group, Inc. (100%) Indiana corporation
Veltri Metal Products Co. VS Holdings, Inc. (100%) Nova Scotia unlimited liability
company
AFFILIATES
None
</TABLE>
<PAGE> 1
EXHIBIT 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated March 20, 1998 on the combined financial statements of
Talon Automotive Group, and Production Stamping, Inc, and of our report dated
March 17, 1998 on the financial statements of Veltri Group, in the Registration
Statement (Form S-4) and related Prospectus of Talon Automotive Group, Inc.
dated June 9, 1998 for the registration of $120,000,000 principal amount of
9-5/8% Senior Subordinated Notes due 2008, Series B.
/s/ Ernst & Young LLP
Detroit, Michigan
June 9, 1998
<PAGE> 1
EXHIBIT 23.3
Independent Accountants' Consent
Board of Directors and Shareholders
Talon Automotive Group:
We consent to the use of our report on the combined financial statements of
Veltri International as of and for the year ended December 31, 1995, included
herein, and to the reference to our firm under the heading "Experts" in the
prospectus.
Detroit, Michigan
June 8, 1998
/s/ KPMG PEAT MARWICK LLP
<PAGE> 1
EXHIBIT-25
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER
THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of
a Trustee Pursuant to Section 305(b)(2)___
-------------------------------------------------------
U.S. BANK TRUST NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
<TABLE>
<S> <C> <C>
111 E. WACKER DRIVE, SUITE 3000
CHICAGO, ILLINOIS 60601 36-4046888
(Address of principal executive offices) (Zip Code) I.R.S. Employer Identification No.
</TABLE>
James D. Khami
535 Griswold, Suite 740
Detroit, Michigan 48226
Telephone (313) 234-4713
(Name, address and telephone number of agent for service)
TALON AUTOMOTIVE GROUP, INC.
(Exact name of obligor as specified in its charter)
MICHIGAN 38-3382174
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
<TABLE>
<S> <C> <C>
MICHIGAN VS HOLDINGS, INC. 38-3382174
INDIANA VELTRI HOLDINGS USA, INC. 35-1849474
NOVA SCOTIA VELTRI METAL PRODUCTS CO. 38-3354143
(Exact name of each guarantor as specified in its charter)
</TABLE>
900 WILSHIRE DRIVE, SUITE 203
TROY, MICHIGAN 48084
(Address of Principal Executive Offices) (Zip Code)
9 5/8% SENIOR EXCHANGE NOTES DUE 2008, SERIES B
(Title of the Indenture Securities)
==============================================================================
<PAGE> 2
FORM T-1
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.
Comptroller of the Currency
Washington, D.C.
b) Whether it is authorized to exercise corporate trust powers.
Yes
ITEM 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the
Trustee, describe each such affiliation.
None
ITEM 3-15.
Not applicable because, to the best of Trustee's knowledge, the
Trustee is not a trustee under any other indenture under which any
other securities or certificates of interest or participation in any
other securities of the obligor are outstanding and there is not, nor
has there been, a default with respect to securities issued under this
indenture.
ITEM 16. LIST OF EXHIBITS: List below all exhibits filed as a part of this
statement of eligibility and qualification.
1. A copy of the Articles of Association of the Trustee, as now in
effect, incorporated herein by reference to Exhibit 1 to Item 16
of Form T-1, Registration No. 333-51415.*
2. A copy of the certificate of authority of the Trustee to commence
business, incorporated herein by reference to Exhibit 2 to Item
16 of Form T-1, Registration No. 33-64175.*
3. A copy of the certificate of authority of the Trustee to exercise
corporate trust powers, incorporated herein by reference to
Exhibit 3 to Item 16 of Form T-1, Registration No. 33-64175.*
4. A copy of the existing bylaws of the Trustee, as now in effect,
incorporated herein by reference to Exhibit 4 to Item 16 of Form
T-1, Registration No. 333-51415.*
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the
Trust Indenture Act of 1939, incorporated herein by reference to
Exhibit 6 of Form T-1, Registration No. 33-64175.*
7. A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or
examining authority, filed herewith.
8. Not applicable.
9. Not applicable.
2
<PAGE> 3
* Exhibits thus designated are incorporated herein by reference to
Exhibits bearing identical numbers in Item 16 of the Form T-1 filed by
the Trustee with the Securities and Exchange Commission with the specific
references noted.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, U.S. BANK TRUST NATIONAL ASSOCIATION, a national
banking 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 Detroit, State of Michigan on the
9th day of June, 1998.
U.S. BANK TRUST NATIONAL ASSOCIATION
By: James D. Khami
--------------------------------
James D. Khami
Vice President
3
<PAGE> 4
<TABLE>
<CAPTION>
<S><C>
U.S. BANK TRUST NATIONAL ASSOCIATION CALL DATE: 05/31/98 ST-BK: 17-1638 FFIEC 033
400 North Michigan Avenue PAGE RC- 1
Chicago, IL 60611 Vendor ID: D CERT: 34094 9
Transit Number: 09600069
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1998
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
C200
Dollar Amounts in Thousands
- ------------------------------------------------------------------------------------------------------------
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A): RCON
----
a. Noninterest-bearing balances and currency and coin (1)____________________0081 56,244 1.a
b. Interest-bearing balances (2)_____________________________________________0071 0 1.b
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A)________________1754 0 2.a
b. Available-for-sale securities (from Schedule RC-B, column D)______________1773 3,219 2.b
3. Federal funds sold and securities purchased under agreements to resell_______1350 0 3.
4. Loans and Lease financing receivables: RCON
a. Loans and leases, not of unearned income ----
(from Schedule RC-C)______________________________________________________2122 0 4.a
b. LESS: Allowance for loan and lease losses_________________________________3123 0 4.b
c. LESS: Allocated transfer risk reserve_____________________________________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 0 4.d
5. Trading assets_______________________________________________________________3545 0 5.
6. Premises and fixed assets (including capitalized leases)_____________________2145 125 6.
7. Other real estate owned (from Schedule RC-M)_________________________________2150 0 7.
8. Investments in unconsolidated subsidiaries and associated companies (from
Schedule RC-M)_______________________________________________________________2130 0 8.
9. Customers' liability to this bank on acceptances outstanding_________________2155 0 9.
10. Intangible assets (from Schedule RC-M)_______________________________________2143 47,202 10.
11 Other assets (from Schedule RC-F)____________________________________________2160 2,713 11.
12. Total assets (sum of items 1 through 11)_____________________________________2170 109,503 12.
</TABLE>
- ---------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE> 5
<TABLE>
<CAPTION>
<S><C>
U.S. BANK TRUST NATIONAL ASSOCIATION CALL DATE: 05/31/98 ST-BK: 17-1638 FFIEC 033
400 North Michigan Avenue PAGE RC- 2
Chicago, IL 60611 Vendor ID: D CERT: 34094 10
Transit Number: 09600069
Schedule RC - Continued
Dollar Amounts in Thousands
- -----------------------------------------------------------------------------------------------------
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of RCON
----
columns A and C from Schedule RC-E)_______________________________________2200 0 13.a
R-CON
-----
(1) Noninterest-bearing (1)_______________________________________________6631 0 13.a.1
(2) Interest-bearing______________________________________________________6636 0 13.a.2
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs_____________
(1) Noninterest-bearing___________________________________________________
(2) Interest-bearing______________________________________________________
14. Federal funds purchased and securities sold under agreements to repurchase___2800 0 14.
15. a. Demand notes issued to the U.S. Treasury__________________________________2840 0 15.a
b. Trading liabilities_______________________________________________________3548 0 15.b
16. Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases):
a. With a remaining maturity of one year or less_____________________________2332 0 16.a
b. With a remaining maturity of more than one year through three years_______A547 0 16.b
c. With a remaining maturity of more than three years________________________A548 0 16.c
17. Not applicable
18. Bank's liability on acceptances executed and outstanding_____________________2920 0 18.
19. Subordinated notes and debentures (2)________________________________________3200 0 19.
20. Other liabilities (from Schedule RC-G)_______________________________________2930 2,454 20.
21. Total liabilities (sum of items 13 through 20)_______________________________2948 2,454 21.
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus________________________________3838 0 23.
24. Common stock_________________________________________________________________3230 1,000 24.
25. Surplus (exclude all surplus related to preferred stock)_____________________3839 106,712 25.
26. a. Undivided profits and capital reserves____________________________________3632 (663) 26.a
b. Net unrealized holding gains (losses) on available-for-sale securities____8434 0 26.b
27. Cumulative foreign currency translation adjustments__________________________
28. Total equity capital (sum of items 23 through 27)____________________________3210 107,049 28.
29. Total liabilities and equity capital (sum of items 21 and 28)________________3300 109,503 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 auditors as of any date during 1997_________6724 2 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
deposits.
(2) Includes limited life preferred stock and related surplus.
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR
TENDER OF 9 5/8% SENIOR SUBORDINATED NOTES DUE 2008, SERIES A
IN EXCHANGE FOR
9 5/8% SENIOR SUBORDINATED NOTES DUE 2008, SERIES B
TALON AUTOMOTIVE GROUP, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
DELIVER TO THE EXCHANGE AGENT:
U.S. BANK TRUST NATIONAL ASSOCIATION
<TABLE>
<S> <C> <C>
By Registered/Certified
By First Class Mail: or Overnight Delivery: Hand Delivery:
U.S. Bank Trust N.A. U.S. Bank Trust N.A. U.S. Bank Trust N.A.
P.O. Box 64485 Attn: Specialized Finance 4th Floor Bond Drop Window
St. Paul, Minnesota 55164-9549 SPFT0414 180 East Fifth Street
180 East Fifth Street St. Paul, Minnesota 55101
St. Paul, Minnesota 55101
Telephone Number: Facsimile Number
612-244-8161 612-244-1537
</TABLE>
------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS 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 hereby acknowledges receipt and review of the Prospectus
dated , 1998 (the "Prospectus") of Talon Automotive Group, Inc. (the
"Company") and this Letter of Transmittal (the "Letter of Transmittal"), which
together describe the Company's offer (the "Exchange Offer") to exchange its
9 5/8% Senior Subordinated Notes due May 1, 2008, Series B (the "New Notes"),
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which the Prospectus
is a part, for a like principal amount of its issued and outstanding 9 5/8%
Senior Subordinated Notes due May 1, 2008, Series A (the "Old Notes").
Capitalized terms used but not defined herein have the respective meaning given
to them in the Prospectus.
The Company reserves the right, at any time or from time to time, to extend
the Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest time and date in which the Exchange Offer is extended. The
Company shall notify the holders of the Old Notes of any extension by oral or
written notice prior to 9:00 A.M., New York City time, on the next business day
after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by a Holder of Old Notes either if
original Old Notes are to be forwarded herewith or if delivery of Old Notes, if
available, is to be made by book-entry transfer to the account maintained by the
Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in the Prospectus under the
caption "The Exchange Offer-Book-Entry Transfer." Holders of Old Notes whose Old
Notes are not immediately available, or who are unable to deliver
<PAGE> 2
their Old Notes and all other documents required by this Letter of Transmittal
to the Exchange Agent on or prior to the Expiration Date, or who are unable to
complete the procedure for book-entry transfer on a timely basis, must 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 1. Delivery of documents to the Book-Entry Transfer
Facility does not constitute delivery to the Exchange Agent.
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 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.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If
the space below is inadequate, list the registered numbers and principal amounts
on a separate signed schedule and affix the list to this Letter of Transmittal.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED
- ---------------------------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S), AMOUNT PRINCIPAL
EXACTLY AS NAMES(S) APPEAR(S) ON OLD NOTES REGISTERED REPRESENTED AMOUNT
(PLEASE FILL IN, IF BLANK) NUMBER(S)* BY NOTE(S) TENDERED**
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
----------------
----------------
----------------
----------------
----------------
TOTAL
- ---------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry Holders.
** Unless otherwise indicated, any tendering Holder of Old Notes will be deemed to have tendered the entire
aggregate principal amount represented by such Old Notes. All tenders must be in integral multiples of
$1,000.
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
[ ] CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE
INSTITUTIONS ONLY):
Name of Tendering Institution:
--------------------------------------------------
Account Number:
-----------------------------------------------------------------
Transaction Code Number:
---------------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING (FOR
USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Holder(s) of Old Notes:
-----------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-----------------------------
Window Ticket Number (if available):
--------------------------------------------
Name of Eligible Institution that Guaranteed Delivery:
--------------------------
Account Number (if delivered by book-entry transfer):
---------------------------
[ ] 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.
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of New
Notes. If the undersigned is a broker-dealer that will receive New Notes for its
own account in exchange for Old Notes, it acknowledges that the Old Notes were
acquired as a result of market-making activities or other trading activities and
that it will deliver a prospectus in connection with any resale of such New
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company for exchange 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 hereby exchanges, assigns and transfers to the
Company all right, title and interest in and to the Old Notes tendered for
exchange hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent, the agent and attorney-in-fact of the undersigned (with full
knowledge that the Exchange Agent also acts as the agent of the Company in
connection with the Exchange Offer) with respect to the tendered Old Notes with
full power of substitution to (i) deliver such Old Notes, or transfer ownership
of such Old Notes on the account books maintained by the Book-Entry Transfer
Facility, to the Company and deliver all accompanying evidences of transfer and
authenticity, and (ii) present such Old Notes for transfer on the books of the
Company and receive all benefits and otherwise exercise all rights of beneficial
ownership of such Old Notes, 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.
<PAGE> 4
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and to acquire the New Notes issuable upon the exchange of such
tendered Old Notes, and that the Company 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 accepted
for exchange by the Company.
The undersigned acknowledge(s) that this Exchange Offer is being made in
reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the
"Commission") that the New Notes issued in exchange for the Old Notes pursuant
to the Exchange Offer may be offered for resale, resold and otherwise
transferred by Holders thereof (other than any such Holder that is an
"affiliate" of the Company within the meaning of Rule 405 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 Holders' business and such Holders are not engaging
in and do not intend to engage in a distribution of the New Notes and have no
arrangement or understanding with any person to participate in a distribution of
such New Notes. The undersigned hereby further represent(s) to the Company that
(i) any New Notes acquired in exchange for Old Notes tendered hereby are being
acquired in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the undersigned, (ii) neither the
undersigned nor any such other person is engaging in or intends to engage in a
distribution of the New Notes, (iii) neither the undersigned nor any such other
person has an arrangement or understanding with any person to participate in the
distribution of such New Notes, and (iv) neither the Holder nor any such other
person is an "affiliate," as defined in Rule 405 under the Securities Act, of
the Company or, if it is an affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
If the undersigned or the person receiving the New Notes is a broker-dealer
that is receiving New Notes for its own account in exchange for Old Notes that
were acquired as a result of market-making activities or other trading
activities, the undersigned acknowledges that it or such other person will
deliver a prospectus in connection with any resale of such New Notes; however,
by so acknowledging and by delivering a prospectus, the undersigned will not be
deemed to admit that the undersigned or such other person is an "underwriter"
within the meaning of the Securities Act. The undersigned acknowledges that if
the undersigned is participating in the Exchange Offer for the purpose of
distributing the New Notes (i) the undersigned cannot rely on the position of
the staff of the Commission in certain no-action letters and, in the absence of
an exemption therefrom, must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction of the New Notes, in which case the registration statement
must contain the selling security holder information required by Item 507 or
Item 508, as applicable, of Regulation S-K of the Commission, and (ii) failure
to comply with such requirements in such instance could result in the
undersigned incurring liability under the Securities Act for which the
undersigned is not indemnified by the Company.
If the undersigned or the person receiving the New Notes is an "affiliate"
(as defined in Rule 405 under the Securities Act), the undersigned represents to
the Company that the undersigned understands and acknowledges that the New Notes
may not be offered for resale, resold or otherwise transferred by the
undersigned or such other person without registration under the Securities Act
or an exemption therefrom.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Old Notes
tendered hereby, including the transfer of such Old Notes on the account books
maintained by the Book-Entry Transfer Facility.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange validly tendered Old Notes when, as and if the Company
gives oral or written notice thereof to the Exchange Agent. Any tendered Old
Notes that are not accepted for exchange pursuant to the Exchange Offer for any
reason 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.
<PAGE> 5
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 acknowledge(s) that the Company's acceptance of properly
tendered 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 Company upon the terms and subject to the conditions of the Exchange
Offer.
Unless otherwise indicated under "Special Issuance Instructions," please
issue the New Notes issued in exchange for the Old Notes accepted for exchange
and return any Old Notes not tendered or not exchanged, in the name(s) of the
undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail or deliver the New Notes issued in exchange for the
Old Notes accepted for exchange and any 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
Issuance Instructions" and "Special Delivery Instructions" are completed, please
issue the New Notes issued in exchange for the Old Notes accepted for exchange
in the name(s) of, and return any Old Notes not tendered or not exchanged to,
the person(s) so indicated. The undersigned recognize(s) that the Company has no
obligation pursuant to the "Special Issuance Instructions" and "Special Delivery
Instructions" to transfer any Old Notes from the name of the registered holer(s)
thereof if the Company does not accept for exchange any of the Old Notes so
tendered for exchange.
<PAGE> 6
==========================================================
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY (i) if 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, or (ii) if Old Notes
tendered by book-entry transfer which
are not exchanged are to be returned
by credit to an account maintained by
the Book-Entry Transfer Facility.
Issue New Notes and/or Old Notes to:
Name(s):
-----------------------------
-------------------------------------
(Please Type or Print)
Address:
-----------------------------
-------------------------------------
(Include Zip Code)
-------------------------------------
(Tax Identification or Social
Security No.)
(Complete Substitute Form W-9)
[ ] Credit unexchanged Old Notes
delivered by book-entry transfer
to the Book-Entry Transfer
Facility set forth below:
-------------------------------------
(Book-Entry Transfer Facility Account
Number, if applicable)
==========================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if Old Notes in
a principal amount not tendered, or
New Notes issued in exchange for Old
Notes accepted for exchange, are to
be mailed or delivered to someone
other than the undersigned, or to the
undersigned at an address other than
that shown below the undersigned's
signature(s).
Mail or deliver New Notes and/or Old
Notes to:
-------------------------------------
Name:
--------------------------------
-------------------------------------
(Please Type or Print)
Address:
-----------------------------
-------------------------------------
(Include Zip Code)
-------------------------------------
(Tax Identification or Social
Security No.)
- --------------------------------------------------------------------------------
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(Complete Accompanying Substitute Form W-9 on Reverse Side)
<TABLE>
<S> <C> <C>
X ------------------------------------------------------------ ------------------------
Date
X
------------------------------------------------------------ ------------------------
Date
</TABLE>
Area Code and Telephone Number:
------------------------------------------------
The above lines must be signed by the registered Holder(s) of Old Notes
as name(s) appear(s) on the Old Notes or on a security position listing, 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 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 signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
then such person must (i) set forth his or her full title below and (ii)
unless waived by the Company, submit evidence satisfactory to the Company of
such person's authority so to act. See Instruction 5 regarding the completion
of this Letter of Transmittal, printed below.
Name(s):
----------------------------------------------------------------------
------------------------------------------------------------------------------
(Please Type or Print)
Capacity:
---------------------------------------------------------------------
Address:
----------------------------------------------------------------------
------------------------------------------------------------------------------
(Include Zip Code)
MEDALLION SIGNATURE GUARANTEE
(If Required by Instruction 5)
Certain signatures must be Guaranteed by an Eligible Institution.
Signature(s) Guaranteed by an Eligible Institution:
---------------------------
(Authorized Signature)
------------------------------------------------------------------------------
(Title)
------------------------------------------------------------------------------
(Name of Firm)
------------------------------------------------------------------------------
(Address, Include Zip Code)
------------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated: , 1997
----------------------------------------------------------------
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Old Notes or Book-Entry
Confirmations. All physically delivered Old Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the Book-Entry Transfer
Facility of Old Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, 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. The method of delivery of the tendered Old Notes, this Letter
of Transmittal and all 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 or confirmed by the
Exchange Agent. Instead of delivery by mail, it is recommended that the Holder
use an overnight or hand delivery service. 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.
2. Guaranteed Delivery Procedures. Holders who wish to tender their Old
Notes and (a) whose Old Notes are not immediately available, or (b) who cannot
deliver their Old Notes, this Letter of Transmittal or any other documents
required hereby to the Exchange Agent prior to the Expiration Date or (c) who
are unable to complete the procedure for book-entry transfer on a timely basis,
must tender their Old Notes according to the guaranteed delivery procedures set
forth in the Prospectus. Pursuant to such procedures: (i) such tender must be
made by or through a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers Inc. or a
commercial bank or a trust company having an office or correspondent in the
United States (an "Eligible Institution"); (ii) 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) setting forth the name and address of the
Holder of the Old Notes, the registration 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 three (3) New York Stock Exchange, Inc.
("NYSE") trading days after the Expiration Date, this Letter of Transmittal (or
facsimile hereof) together with the Old Notes (or a Book-Entry Confirmation) in
proper form for transfer, will be received by the Exchange Agent within three
(3) NYSE trading days after the Expiration Date; and (iii) the certificates for
all physically tendered Old Notes, in proper form for transfer, or Book-Entry
Confirmation, as the case may be, and all other documents required by this
Letter of Transmittal are received by the Exchange Agent within three (3) NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.
Any Holder of Old Notes who wishes to tender 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 of 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.
See "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus.
3. Tender by Holder. Only a Holder of Old Notes may tender such Old Notes
in the Exchange Offer. Any beneficial Holder of Old Notes who is not the
registered Holder and who wishes to tender should arrange with the registered
Holder to execute and deliver this Letter of Transmittal on his behalf or must,
prior to completing and executing this Letter of Transmittal and delivering his
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in such Holder's name or obtain a properly completed bond power from the
registered Holder.
4. 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 third column of the box entitled "Description of Old Notes" above. The
entire principal amount of Old Notes delivered to the Exchange Agent will be
deemed to have been tendered unless
<PAGE> 8
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
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.
5. Signatures on this Letter of Transmittal; Bond Powers and Endorsements;
Medallion Guarantee of Signatures. If this Letter of Transmittal (or facsimile
hereof) is signed by the record 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 is signed by a participant in the Book-Entry Transfer Facility,
the signature must correspond with the name as it appears on the security
position listing as the Holder of the Old Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Old Notes listed and tendered hereby and the New
Notes issued in exchange therefor are to be issued (or any untendered principal
amount of Old Notes is to be reissued) to the registered Holder, the said Holder
need not and should not endorse any tendered Old Notes, nor provide a separate
bond power. In any other case, such Holder 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) is signed by a person
other than the registered Holder or Holders of any Old Notes listed, such Old
Notes must be endorsed or accompanied by appropriate bond powers, in each case
signed as the name of the registered Holder or Holders appears on the Old Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, evidence satisfactory to the Company of their
authority so to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Letter of Transmittal is
signed by the registered holder(s) of the Old Notes tendered herewith (or by a
participant in the Book-Entry Transfer Facility whose name appears on a security
position listing as the owner of the tendered Old Notes) and the issuance of New
Notes (and any Old Notes not tendered or not accepted) are to be issued directly
to such registered holder(s) (or, if signed by a participant in the Book-Entry
Transfer Facility, any New Notes or Old Notes not tendered or not accepted are
to be deposited to such participant's account at such Book-Entry Transfer
Facility) and neither the box entitled "Special Delivery Instructions" nor the
box entitled "Special Issuance Instructions" has been completed, or (ii) such
Old Notes are tendered for the account of an Eligible Institution. In all other
cases, all signatures on this Letter of Transmittal must be guaranteed by an
Eligible Institution.
6. Special Issuance and Delivery Instructions. Tendering holders should
indicate, in the applicable box or boxes, the name and address (or account at
the Book-Entry Transfer Facility) 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 signing 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.
7. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, New Notes or Old Notes for principal amounts not tendered or accepted
for exchange are to be delivered to, or are to be registered or 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 any other persons) will be
<PAGE> 9
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 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES LISTED IN THIS LETTER OF
TRANSMITTAL.
8. Tax Identification Number. Federal income tax law requires that a holder
of any Old Notes which are accepted for exchange must provide the Exchange Agent
(as payor) with its correct taxpayer identification number ("TIN"), which, in
the case of a holder who is an individual is his or her social security number.
If the Company is not provided with the correct TIN, the Holder may be subject
to a $50 penalty imposed by the Internal Revenue Service. (If withholding
results in an over-payment of taxes, a refund may be obtained.) Certain holders
(including, among others, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the Old Notes are registered in more than one name or are not in the name of
the actual owner, see the enclosed "Guidelines for Certification of Taxpayer
Identification Number of Substitute Form W-9" for information on which TIN to
report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligation regarding backup
withholding.
9. Validity of Tenders. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of tendered Old Notes will be
determined by the Company, in its sole discretion, which determination will be
final and binding. The Company reserves the right to reject any and all Old
Notes not validly tendered or any Old Notes, the Company's acceptance of which
would, in the opinion of the Company or its counsel, be unlawful. The Company
also reserves the right to waive any conditions of the Exchange Offer or defects
or irregularities in tenders of Old Notes as to any ineligibility of any holder
who seeks to tender Old Notes in the Exchange Offer. The interpretation of the
terms and conditions of the Exchange Offer (which includes this Letter of
Transmittal and the instructions hereto) by the Company 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
Company shall determine. The Company will use reasonable efforts to give
notification of defects or irregularities with respect to tenders of Old Notes,
but shall not incur any liability for failure to give such notification.
10. Waiver of Conditions. The Company reserves the absolute right to waive,
in whole or part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
11. No Conditional Tender. No alternative, conditional, irregular or
contingent tender of Old Notes on transmittal of this Letter of Transmittal will
be accepted.
12. Mutilated, Lost, Stolen or Destroyed Old Notes. Any Holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
13. Requests for Assistance or Additional Copies. Requests for assistance
or for additional copies of the Prospectus or this Letter of Transmittal may be
directed to the Exchange Agent at the address or telephone number set forth on
the cover page of this Letter of Transmittal. Holders may also contact their
broker, dealer, commercial bank, trust company or other nominee for assistance
concerning the Exchange Offer.
14. Acceptance of Tendered Old Notes and Issuance of New Notes; Return of
Old Notes. Subject to the terms and conditions of the Exchange Offer, the
Company will accept for exchange all validly tendered Old
<PAGE> 10
Notes as soon as practicable after the Expiration Date and will issue New Notes
therefor as soon as practicable thereafter. For purposes of the Exchange Offer,
the Company shall be deemed to have accepted tendered Old Notes when, as and if
the Company has given written and oral notice thereof to the Exchange Agent. If
any tendered Old Notes are not exchanged pursuant to the Exchange Offer for any
reason, such unexchanged Old Notes will be returned, without expense, to the
undersigned at the address shown above (or credited to the undersigned's account
at the Book-Entry Transfer Facility designated above) or at a different address
as may be indicated under the box entitled "Special Delivery Instructions."
15. Withdrawal. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer -- Withdrawal of Tenders."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH THE OLD NOTES) WHICH MUST BE DELIVERED BY BOOK-ENTRY TRANSFER OR
IN ORIGINAL HARD COPY FROM) OR THE NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
<PAGE> 11
(TO BE COMPLETED BY ALL TENDERING HOLDERS (SEE INSTRUCTION 8))
PAYOR'S NAME: U.S. BANK TRUST NATIONAL ASSOCIATION, AS EXCHANGE AGENT
<TABLE>
<C> <S> <C>
- -----------------------------------------------------------------------------------------------------
SUBSTITUTE PART I--Taxpayer Identification
FORM W-9 No.--For all accounts, enter
DEPARTMENT OF THE TREASURY your taxpayer identification ----------------------------
INTERNAL REVENUE SERVICE number in the appropriate box. Social Security Number
For most individuals and sole
proprietors, this is your OR
social security number. For --------------------------
other entities, it is your Employer
Employer Identification Number. Identification Number
If you do not have a number,
see How to Obtain a TIN in the
enclosed Guidelines. Note: If
the account is in more than one
name, see the chart on page 2
of the enclosed Guidelines to
determine what number to enter.
- -----------------------------------------------------------------------------------------------------
Payor's Request for Taxpayer PART II--For Payees Exempt From Backup Withholding (see enclosed
Identification Number Guidelines)
- -----------------------------------------------------------------------------------------------------
</TABLE>
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 to me), and
(2) I am not subject to backup withholding either because (a) I am exempt from
backup withholding, or (b) 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 (c) the IRS
has notified me that I am no longer subject to backup withholding; and
(3) Any other information provided on this form is true, correct and complete.
- --------------------------------------------------------------------------------
SIGNATURE DATE , 1998
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU WITH RESPECT TO THE NEW NOTES. PLEASE
REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS.
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
for
Tender of 9 5/8% Senior Subordinated Notes due 2008, Series A
in Exchange for
9 5/8% Senior Subordinated Notes due 2008, Series B
TALON AUTOMOTIVE GROUP, INC.
This form or one substantially equivalent hereto must be used by a Holder
to accept the Exchange Offer of Talon Automotive Group, Inc., a Michigan
corporation (the "Company"), who wishes to tender 9 5/8% Senior Subordinated
Notes due 2008, Series A (the "Old Notes") to the Exchange Agent pursuant to the
guaranteed delivery procedures described in "The Exchange Offer -- Guaranteed
Delivery Procedures" of the Company's Prospectus, dated , 1998 (the
"Prospectus") and in Instruction 2 to the related Letter of Transmittal. Any
Holder who wishes to tender Old Notes pursuant to such guaranteed delivery
procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to the Expiration Date (as defined below) of the
Exchange Offer. Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). OLD NOTES TENDERED IN
THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
The Exchange Agent for the Exchange Offer is:
U.S. BANK TRUST NATIONAL ASSOCIATION
<TABLE>
<S> <C> <C>
By Registered/Certified
By First Class Mail: or Overnight Delivery: Hand Delivery:
U.S. Bank Trust N.A. U.S. Bank Trust N.A. U.S. Bank Trust N.A.
P.O. Box 64485 Attn: Specialized Finance 4th Floor Bond Drop Window
St. Paul, Minnesota 55164-9549 SPFT0414 180 East Fifth Street
180 East Fifth Street St. Paul, Minnesota 55101
St. Paul, Minnesota 55101
Telephone Number: Facsimile Number
612-244-8161 612-244-1537
</TABLE>
------------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET
FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE BOX ON THE LETTER OF
TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
1
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), 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 and
in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
<TABLE>
<CAPTION>
CERTIFICATE NUMBER(S) (IF KNOWN) OF OLD NOTES OR AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
- ------------------------------------------------ ------------------- -------------------
<S> <C> <C>
- ------------------------------------------------ ------------------- -------------------
- ------------------------------------------------ ------------------- -------------------
- ------------------------------------------------ ------------------- -------------------
</TABLE>
PLEASE SIGN AND COMPLETE
<TABLE>
<S> <C>
Signatures of Registered Holder(s) or Date:
-----------------------------------------------
Authorized Signatory:
-------------------------------
Address:
- ----------------------------------------------------- --------------------------------------------
- ----------------------------------------------------- -----------------------------------------------------
Name(s) of Registered Holder(s): Area Code and Telephone No.
-------------------- -------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Old Notes or on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Names(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity:
- --------------------------------------------------------------------------------
Address(es):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
<PAGE> 3
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Old Notes tendered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Old Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility) as described
in the Prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures", and any other documents required by the Letter of Transmittal, all
by 5:00 p.m., New York City time, within three New York Stock Exchange trading
days following the Expiration Date.
<TABLE>
<S> <C>
Name of Firm:
-------------------------------------- ----------------------------------------------------
(AUTHORIZED SIGNATURE)
Address: Name:
------------------------------------------- ----------------------------------------------
(INCLUDE ZIP CODE)
Title:
---------------------------------------------
Area Code and Tel. Number: (PLEASE TYPE OR PRINT)
Date: , 1997
- ---------------------------------------------------- ----------------------------------------
</TABLE>
DO NOT SEND OLD NOTES WITH THIS FORM. ACTUAL SURRENDER OF OLD NOTES MUST BE MADE
PURSUANT TO, AND BE ACCOMPANIED BY A PROPERLY COMPLETED AND DULY EXECUTED LETTER
OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
3
<PAGE> 4
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other documents
required by this Notice of Guaranteed Delivery must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. The method
of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holders may wish to consider using an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedures, see Instruction 2 of the
Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Old Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Old Notes, the signature must correspond with the
name shown on the security position listing as the owner of the Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than
the registered holder(s) of any Old Notes listed or a participant of the
Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the
registered holder(s) appears on the Old Notes or signed as the name of the
participant shown on the Book-Entry Transfer Facility's security position
listing.
If this Notice of Guaranteed Delivery is 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 should so indicate when signing and submit with the
Letter of Transmittal evidence satisfactory to the Company of such person's
authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address specified in the Prospectus. Holders may
also contact their broker, dealer, commercial bank, trust company, or other
nominee for assistance concerning the Exchange Offer.
4
