<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 1998
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICAN AXLE & MANUFACTURING
HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 3714 52-2100832
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION) CLASSIFICATION CODE NUMBER)
------------------------
1840 HOLBROOK AVENUE
DETROIT, MICHIGAN 48212
(313) 974-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
PATRICK S. LANCASTER
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
1840 HOLBROOK AVENUE
DETROIT, MICHIGAN 48212
(313) 974-2333
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
Copies of all correspondence to:
WILSON S. NEELY MICHAEL A. CAMPBELL
SIMPSON THACHER & BARTLETT MAYER, BROWN & PLATT
425 LEXINGTON AVENUE 190 SOUTH LASALLE STREET
NEW YORK, NEW YORK 10017 CHICAGO, ILLINOIS 60603-3441
(212) 455-2000 (312) 782-0600
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
PROPOSED
MAXIMUM AGGREGATE
TITLE OF CLASS OF SECURITIES OFFERING AMOUNT OF
TO BE REGISTERED PRICE(1)(2) REGISTRATION FEE
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Common Stock, $.01 par value.... $115,000,000 $33,925
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(1) Includes shares of Common Stock that the Underwriters have options to
purchase to cover over-allotments, if any.
(2) Estimated pursuant to Rule 457(o) under the Securities Act of 1933 solely
for the purpose of calculating the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
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
PRELIMINARY PROSPECTUS DATED MAY 22, 1998
PROSPECTUS
SHARES
[LOGO]
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
COMMON STOCK
------------------------
All of the shares of common stock, par value $.01 per share (the
'Common Stock'), of American Axle & Manufacturing Holdings, Inc., a Delaware
corporation (the 'Company'), offered hereby are being issued and sold by the
Company.
Of the shares of Common Stock offered hereby, shares
are being offered initially in the United States and Canada by the U.S.
Underwriters (the 'U.S. Offering') and shares are being offered
initially outside the United States and Canada by the International Managers
(the 'International Offering'). The initial public offering price and the
underwriting discount per share are identical for the U.S. Offering and the
International Offering (collectively, the 'Offerings'). See 'Underwriting.'
Prior to the Offerings, there has been no public market for the Common
Stock. It is currently anticipated that the initial public offering price will
be between $ and $ per share. See 'Underwriting' for a discussion of
the factors to be considered in determining the initial public offering price.
The Company intends to apply to list the Common Stock on the New York Stock
Exchange under the proposed symbol 'AXL.'
------------------------
SEE 'RISK FACTORS' BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------
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.
[CAPTION]
<TABLE>
PRICE TO PROCEEDS TO
PUBLIC UNDERWRITING DISCOUNT(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share... $ $ $
Total(3).... $ $ $
</TABLE>
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(1) The Company has agreed to indemnify the U.S. Underwriters and International
Managers (collectively, the 'Underwriters') against certain liabilities,
including certain liabilities under the Securities Act of 1933, as amended.
See 'Underwriting.'
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted the U.S. Underwriters and the International Managers
options exercisable within 30 days of the date hereof to purchase up to an
additional and shares of Common Stock, respectively, solely to
cover over-allotments, if any. If such options are exercised in full, the
total Price to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See 'Underwriting.'
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to the
approval of certain legal matters by counsel for the Underwriters and to certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made in New York, New York on or
about , 1998.
------------------------
MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
------------------------
The date of this Prospectus is , 1998.
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two prospectuses, one to be used in
connection with an offering in the United States and Canada (the 'U.S.
Prospectus') and one to be used in a concurrent international offering outside
the United States and Canada (the 'International Prospectus'). The complete U.S.
Prospectus follows immediately. Following the U.S. Prospectus are certain pages
of the International Prospectus, which include an alternate front cover page, an
alternate underwriting section and an alternate back cover page. All other pages
of the U.S. Prospectus and the International Prospectus are identical.
<PAGE>
[INSIDE FRONT COVER]
[GATEFOLD AND PICTURES]
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF COMMON STOCK TO COVER
SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE 'UNDERWRITING.'
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements
(including the notes thereto) appearing elsewhere in this Prospectus. Unless
otherwise indicated, the information in this Prospectus (i) assumes that the
Underwriters' over-allotment options are not exercised, (ii) gives effect to the
contemplated merger of American Axle & Manufacturing of Michigan, Inc., a
Michigan corporation ('Michigan'), into American Axle & Manufacturing Holdings,
Inc., a newly formed Delaware corporation ('Holdings') established for the
purpose of reincorporating in the State of Delaware, and (iii) reflects what is
essentially a -for-1 stock split of Michigan Common Stock into Holdings
Common Stock that will occur prior to the closing of the Offerings. Statements
concerning the automotive industry contained in this Prospectus are based on
information compiled by the Company or derived from public sources which the
Company believes to be reliable, including J.D. Power & Associates, Inc. ('J.D.
Power') and Autofacts Automotive Outlook. Unless the context requires otherwise,
all references herein to the 'Company' mean Michigan (prior to the migratory
merger referred to above) and Holdings (after such merger), their wholly and
majority owned subsidiaries and their respective predecessors, collectively.
THE COMPANY
The Company is a Tier I supplier to the automotive industry and a world
leader in the design, engineering, and manufacturing of driveline systems for
light trucks and sport-utility vehicles ('SUVs'). The driveline system includes
all of the components that transfer power from the transmission and deliver it
to the drive wheels. Driveline products produced by the Company include axles,
propeller shafts, chassis components and forged products. With an estimated 33%
market share in North America (which represents a 15% market share worldwide),
the Company is the leading independent supplier of driveline components for
light trucks and SUVs, the fastest growing segment of the light vehicle market.
The Company also manufactures axles, propeller shafts and other products for
rear-wheel drive ('RWD') passenger cars. Additionally, the Company has the
second largest automotive (by sales) forging operation in North America.
The Company is General Motors Corporation's ('GM') principal supplier of
driveline components for light trucks, SUVs and RWD passenger cars, supplying
substantially all of GM's rear axle and front four-wheel drive ('4WD') axle
requirements, and over 75% of its propeller shaft requirements for these vehicle
platforms in 1997. Approximately 96% of the Company's 1997 sales were to various
divisions and subsidiaries of GM. The Company's second largest customer is the
Ford Motor Company ('Ford'), for which the Company produces axle shafts and
double cardan joints for light trucks and SUVs manufactured by Ford in North
America.
THE 1994 ACQUISITION
The Company is the successor to the former Final Drive and Forge Business
Unit of the Saginaw Division of GM (the 'Business Unit') and has produced
driveline components and forged products for over 75 years. In March 1994, a
private investor group led by Richard E. Dauch formed the Company and purchased
the Business Unit from GM (the '1994 Acquisition'). In connection with the 1994
Acquisition, GM and the Company entered into a Component Supply Agreement (the
'CSA') under which the Company became the sole-source supplier to GM of all the
products and components previously supplied to GM by the Business Unit. In
September 1997, the Company and GM signed an additional binding agreement, the
Amended and Restated Memorandum of Understanding ('MOU'), which became operative
after the Company's recapitalization described below. Under the MOU, the Company
and GM have agreed to transition the CSA into a number of separate Lifetime
Program Contracts ('LPCs'), under which the Company will supply products and
components for the life of each GM vehicle program covered by an LPC. These LPCs
will ultimately replace the CSA. See 'Business--Contractual Arrangements with
GM.'
The Company's management team, which was formed in connection with the 1994
Acquisition, is led by Mr. Dauch as Chairman of the Board, Chief Executive
Officer and President and was carefully selected on the basis of its management
expertise in the automotive industry. Mr. Dauch has over 34 years of experience
in the industry and was an Executive Vice President for Chrysler Corporation
('Chrysler') from 1980 to 1991, and was instrumental in Chrysler's manufacturing
and financial turnaround. As an executive of GM, he also managed
3
<PAGE>
the Business Unit's largest manufacturing plant (Detroit Gear & Axle) from 1974
to 1976. The Company's senior management team is comprised of 12 executives with
an average of 27 years' experience in the automotive industry, including both
automotive original equipment manufacturer ('OEM') and supplier operations.
POST-ACQUISITION IMPROVEMENTS
Since the 1994 Acquisition, the Company has dramatically improved product
quality and manufacturing efficiency through a combination of management
leadership, significant investments in new equipment and technology, workforce
training, and process improvements resulting in increased capacity utilization.
From March 1994 through March 1998, the Company has invested approximately $700
million in capital expenditures and 1.2 million labor hours for training and
education of its associates and has received and maintained ISO/QS 9000
certification for each of its facilities. As a result, (i) the average number of
axles produced per production day increased from approximately 10,000 in March
1994 to approximately 14,000 in March 1998, (ii) discrepant parts shipped to GM,
as measured by GM, have been reduced from approximately 13,400 PPM during the
six months ended December 31, 1994 to approximately 180 PPM during the six
months ended March 31, 1998 and (iii) returned parts decreased from 5,136 PPM
during the ten months ended December 31, 1994 to 664 PPM during the twelve
months ended December 31, 1997. Net sales and operating income increased to
$2.15 billion and $116.1 million, respectively, for the year ended December 31,
1997 from $2.02 billion and $93.5 million, respectively, for the year ended
December 31, 1996.
In February 1996, the Company was chosen as the design, development and
production supplier for the GMT-800 Program, which represents the next
generation of GM's full-size pickup trucks and SUVs, including such models as
the GMC and Chevrolet full-size pickup trucks, as well as the Suburban, Tahoe
and Yukon SUVs. GM currently plans to phase in production of GMT-800 vehicles
beginning in June 1998. In June 1997, the Company was chosen as the supplier for
the next generation of GM's mid-size SUVs, including such models as the Blazer,
Bravada and Jimmy (the 'New M-SUV Program'). The current generation of these
platforms represented approximately 70% of the Company's 1997 sales. For the
GMT-800 Program, the Company has designed and engineered significant
improvements in the quality and reliability of its driveline products, which
will improve the ride and handling of these light trucks and SUVs. Additionally,
as a result of these design and engineering enhancements for these platforms,
the Company's sales-dollar content per vehicle will increase beginning in late
1998.
THE RECAPITALIZATION
On September 17, 1997, AAM Acquisition, Inc., an entity organized by
Blackstone Capital Partners II Merchant Banking Fund L.P. and certain other
affiliated investors (collectively, 'Blackstone'), Jupiter Capital Corporation
('Jupiter'), Richard E. Dauch, Morton E. Harris, the Company and American Axle &
Manufacturing, Inc. ('AAM, Inc.'), then the parent of the Company, entered into
an agreement (the 'Recapitalization Agreement'), pursuant to which Blackstone
acquired control of the Company on October 29, 1997 (the 'Recapitalization').
Prior to the Recapitalization, the Company was a wholly-owned subsidiary of AAM,
Inc. Pursuant to the Recapitalization, the Company acquired a 100% ownership
interest in AAM, Inc. by exchanging shares of its own stock, on a one-for-one
basis, with the shareholders of AAM, Inc. Following the exchange of shares, on
October 29, 1997, pursuant to the Recapitalization Agreement, Blackstone
acquired shares of the Company's Common Stock from Jupiter and Mr. Dauch. The
Company used approximately $474 million of aggregate proceeds from certain
financings described herein to (i) repay certain indebtedness of AAM, Inc., (ii)
repurchase all of the issued and outstanding shares of Class A Preferred Stock
of AAM, Inc., (iii) repurchase certain shares of the Company's Common Stock held
by Jupiter and Mr. Harris, (iv) pay costs and expenses incurred in connection
with the Recapitalization, including fees, expenses and payments relating to
certain of the Company's then existing stock options and (v) fund the working
capital requirements of the Company. Immediately after the closing of the
Recapitalization, on a fully diluted basis Blackstone owned approximately 64.3%
of the Common Stock, members of the Company's senior management owned
approximately 30.3% of the Common Stock and Jupiter and Mr. Harris owned
approximately 5.5% of the Common Stock. See 'Ownership of Common Stock' and
Notes 2 and 8 to the Consolidated Financial Statements.
4
<PAGE>
INDUSTRY
The automotive industry has been and continues to be significantly
influenced by several industry trends which the Company believes will enhance
its strategic position and growth prospects. First, consumer demand for light
trucks and SUVs continues to grow both in North America and worldwide. The
Company benefits directly from this trend due to its leading North American
market share position as an independent supplier of driveline components for the
light truck and SUV segment. Second, sales penetration of 4WD in the U.S. light
vehicle market has increased from 7% in 1990 to over 15% in 1997 and, according
to J.D. Power, is expected to continue to rise. The Company benefits from this
trend since its sales-dollar content per vehicle is approximately 40% higher on
a 4WD vehicle than on a comparable two-wheel drive vehicle. Third, automotive
OEMs continue to outsource component manufacturing as a result of competitive
pressures to improve quality and reduce capital expenditures, production costs
and inventory levels. A significant portion of driveline components are
currently manufactured by OEMs, representing a substantial outsourcing
opportunity for the Company. Fourth, in connection with this outsourcing trend,
OEMs are placing greater reliance on large Tier I full-service suppliers that
are capable of supplying integrated systems. It is anticipated that as this
trend continues, the number of suppliers will substantially decrease. As the
16th largest (by sales) North American automotive OEM supplier, the Company
believes it is well positioned to compete successfully as a systems integrator
in the consolidating supplier market. Fifth, OEMs are expanding manufacturing
operations into global markets, thereby providing Tier I suppliers the
opportunity to follow OEMs into those markets. The Company has participated in
this trend by being awarded contracts to supply components to GM's operations in
South America, Indonesia and Mexico.
BUSINESS STRATEGY
The Company plans to leverage its competitive advantages and actively
pursue the following strategies to increase revenue and profitability:
Improve product quality and manufacturing efficiency. Since the 1994
Acquisition, the Company has dramatically improved product quality and
efficiency. The Company is committed to continue reducing operating costs by
developing new manufacturing processes and by investing in new equipment,
technologies and improvements in product designs. The Company believes that the
significant modernization of its manufacturing equipment and facilities which
has been completed over the last four years, as well as initiatives to be
undertaken in connection with the GMT-800 and the New M-SUV Programs, will
generate enhanced productivity and operating efficiency. From March 1, 1994
through March 31, 1998, the Company has invested approximately $700 million on
the modernization of its equipment and facilities and anticipates spending
approximately $225 million to $325 million in additional capital expenditures
during the last three quarters of 1998.
Diversify, strengthen and globalize OEM customer base. The Company
currently provides axle shafts to Ford and has begun to pursue strategic
initiatives to further diversify its customer base by providing products for
vehicles manufactured by Isuzu, Nissan, CAMI (a joint venture between GM and
Suzuki), and Mercedes-Benz. The Company's sales to customers other than GM have
increased from $38.3 million for the ten months ended December 31, 1994 to
approximately $88.5 million in 1997. The Company will continue to seek new
business from existing customers, as well as develop relationships with new
customers worldwide. Substantially all of the Company's products are presently
sold in North America. The Company currently has a regional sales office in
Tokyo and is in the process of opening another office in Europe; this presence
is intended to help the Company access new markets for its products.
Additionally, the Company is establishing a regional sales office and
constructing a manufacturing facility in Guanajuato, Mexico, which is currently
scheduled to begin production in the fall of 2000.
Expand systems integrator capability. OEMs continue to consolidate their
supplier base and shift the design, engineering and manufacturing functions of
complete systems to their remaining Tier I suppliers. The Company currently
supplies axles, propeller shafts, chassis components and forged products for
light trucks and SUVs. The Company intends to provide additional driveline
components through a combination of developing new technologies and other
capabilities, managing Tier II and Tier III suppliers and acquiring other
suppliers, in order to offer its customers more fully-integrated driveline
systems.
Develop new products. The Company intends to diversify its product
portfolio by designing and developing new products and systems. As part of its
commitment to product development, the Company opened its
5
<PAGE>
Technical Center in 1995 which provides resources to the Company's engineers to
improve the design of the Company's existing products and to design new
products. The Company invested $23.4 million and $27.8 million in research and
development expenses in 1996 and 1997, respectively. To date, these initiatives
have resulted in several new products such as the new 11.5' axle (initially
being used in the GMT-800 Program), multi-link rear axles, an integral oil pan
front axle, precision steering system joints (which utilize lash free/low lash
idlers and radiax pivot sockets) and improved propeller shaft 'U-Joints.' The
Company is also in the process of developing other new products such as
independent rear drive system modules, traction-enhancing advance differentials,
banjo style axles, aluminum rear axle carriers, axle cooler covers, spherical
differential cases and near net/net shaped forgings.
Pursue selected acquisition opportunities. The Company intends to pursue an
acquisition strategy designed to accelerate the implementation of its strategic
initiatives. The acquisition candidates the Company will evaluate will include:
(i) suppliers of driveline components which complement the Company's current
products offerings, (ii) companies in the forging industry, a segment which is
highly fragmented, which will allow the Company to capitalize upon the trend
toward OEM supplier consolidation, and (iii) other automotive parts suppliers,
enhancing the Company's efforts to diversify its customer base, expand its
product development capability, selectively globalize its operations and/or
leverage its design, engineering and validation expertise.
The Company is incorporated in Delaware. The address of the Company's
principal place of business is 1840 Holbrook Avenue, Detroit, Michigan 48212,
and its telephone number is (313) 974-2000.
6
<PAGE>
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered...................................................... shares(1)
Common Stock to be outstanding after the Offerings........................ shares(1)(2)
Use of Proceeds........................................................... To reduce the Company's indebtedness
and for general corporate purposes,
including capital expenditures, as
described in 'Use of Proceeds.'
Proposed New York Stock Exchange symbol................................... AXL
</TABLE>
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(1) Assumes no exercise of the over-allotment options granted by the Company to
the Underwriters.
(2) Does not include shares of Common Stock reserved for issuance upon
exercise of outstanding options and shares of Common Stock available
for future issuance under the Company's stock option plans. See
'Management--Stock Options.'
7
<PAGE>
SUMMARY FINANCIAL DATA
The following summary consolidated financial data at and for the ten months
ended December 31, 1994 and at and for the three years ended December 31, 1997
were derived from audited consolidated financial statements of the Company,
which have been audited by Ernst & Young, LLP, independent auditors. The
financial data at and for the three-month periods ended March 31, 1997 and 1998
were derived from unaudited consolidated financial statements of the Company. In
the opinion of management, the unaudited data have been prepared on the same
basis as the audited consolidated financial statements and include all
adjustments, consisting of normal recurring adjustments, which the Company
considers necessary for a fair presentation of the financial position and the
results of operations for these periods. Results for interim periods are not
indicative of results for a full year. The pro-forma earnings per common share
has been computed based on the stock split to be effected prior to the
consummation of the Offerings. The table should be read in conjunction with
'Management's Discussion and Analysis of Financial Condition and Results of
Operations,' the consolidated financial statements of the Company and the
related notes, the 'Unaudited Pro Forma Condensed Consolidated Financial
Statements' and the other financial information included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
TEN MONTHS YEAR ENDED THREE MONTHS ENDED
ENDED DECEMBER 31, MARCH 31,
DECEMBER 31, -------------------------------------- --------------------
1994(a) 1995 1996 1997 1997 1998
------------ ---------- ---------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales..................... $1,548,655 $1,968,076 $2,022,272 $2,147,451 $546,859 $583,285
Gross profit.................. 141,997 179,488 176,550 220,087 59,031 61,006
Operating income.............. 73,880 108,885 93,478 116,133 36,369 36,307
Net interest expense
(income)................... (3,941) (9,086) (9,412) 1,846 (2,255) 9,749
Net income.................... 36,446 70,571 61,724 55,264 24,790 16,923
Net income per share (pro-
forma).....................
BALANCE SHEET DATA:
Total assets.................. $ 534,108 $ 736,997 $ 771,222 $1,017,653 $854,722 $999,541
Total debt.................... 1,000 1,000 2,368 507,043 2,287 482,962
Preferred stock............... 200,000 200,000 200,000 -- 200,000 --
Stockholders' equity.......... 88,101 168,572 250,168 37,231 282,833 54,457
OPERATING DATA:
EBITDA(b)..................... $ 96,038 $ 144,779 $ 134,740 $ 159,708 $ 50,978 $ 51,369
Depreciation and
amortization............... 16,846 25,242 36,076 50,177 12,223 14,497
Net cash provided by operating
activities................. 196,990 196,886 65,687 200,830 73,642 76,140
Capital expenditures.......... 25,168 147,077 162,317 282,625 59,344 66,301
</TABLE>
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(a) Results are for the ten-month period beginning on the closing date of the
1994 Acquisition and ending on December 31, 1994. Prior period financial
data is not considered relevant as the Business Unit was part of the
integrated operations of GM.
(b) EBITDA represents income from continuing operations before interest expense,
income taxes, depreciation and amortization. EBITDA should not be construed
as a substitute for income from operations, net income or cash flow from
operating activities as determined by generally accepted accounting
principles.
8
<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the 'Securities Act').
Such forward-looking statements are based on the beliefs of the Company's
management as well as on assumptions made by and information currently available
to the Company at the time such statements were made. When used in this
Prospectus, the words 'anticipate,' 'believe,' 'estimate,' 'expect,' 'intends'
and similar expressions as they relate to the Company are intended to identify
forward-looking statements which include the Company's ability to continue to
implement its operating and growth strategy. Actual results could differ
materially from those projected in the forward-looking statements as a result of
economic and business factors and the factors described below, as well as other
factors, some of which may be beyond the control of the Company. The Company
cautions the reader, however, that this list of factors may not be exhaustive,
particularly with respect to future business conditions. In analyzing an
investment in the Common Stock offered hereby, prospective investors should
carefully consider, along with the other matters referred to herein, the risk
factors described below.
AUTOMOTIVE INDUSTRY CYCLICALITY AND CONDITIONS
The Company's operations are cyclical because they are directly related to
domestic automotive production, which is itself cyclical and dependent on
general economic conditions and other factors. Sales of products for light
trucks and SUVs constitute approximately 90% of the Company's revenues in 1997.
There can be no assurance that positive trends in sales of these vehicles, or
that the increasing penetration of 4WDs as a percentage of these vehicles, will
continue. A decrease in consumer demand for the models that generate the most
sales for the Company, the failure of the Company to obtain sales orders for new
or redesigned models or pricing pressure from its customers or competitors could
have a material adverse effect on the Company. Government regulations, including
those relating to Corporate Average Fuel Economy regulations, could impact
vehicle mix and volume which could adversely affect the demand for the Company's
existing products.
In addition, the Company may be unable to pass on raw material price
increases to its customers due to pricing pressure to remain competitive. There
is substantial and continuing pressure from the major automotive companies to
reduce the number of outside suppliers and reduce costs. Management believes
that the Company's ability to control its own costs and to develop new products
will be essential to remain competitive. There can be no assurance that the
Company will be able to improve or maintain its profitability on product sales.
RELIANCE ON GM
Sales to GM constituted approximately 96% of the Company's sales in 1997
and 1996. See 'Business-- Contractual Arrangements with GM.' In connection with
the Company's purchase of the Business Unit, GM agreed pursuant to the CSA to
continue to purchase all of the components that were supplied to GM by the
Business Unit at the time of the 1994 Acquisition. In 1997, the Company and GM
entered into a binding MOU which provides for transitioning the CSA into a
number of separate LPCs, applicable for the life of each GM vehicle program
covered by an LPC. Although pricing has been established for the LPCs, the
Company must remain competitive with respect to technology, design and quality.
There can be no assurance that the Company will remain competitive with respect
to technology, design and quality to GM's reasonable satisfaction. In addition,
pricing negotiated for future programs may be more or less favorable than
currently applicable terms. If the Company loses any significant portion of its
sales to GM, or if GM significantly reduces its production of light trucks or
SUVs, it would have a material adverse effect on the results of operations and
financial condition of the Company. Additionally, a prolonged labor disruption
involving GM and its workers could have a negative impact on the Company.
The Company currently purchases through GM's purchasing network certain
materials for use in the manufacture of products sold under the CSA and to be
sold under the LPCs. While the Company pays current market prices for such
materials, increases or decreases in such prices from levels established under
the CSA currently result in corresponding increases or decreases in the
aggregate amount paid by GM to the Company for its products, thereby protecting
the Company from increases in the costs of such materials while such purchasing
arrangement is in effect. The Company and GM have agreed to develop a mutually
satisfactory plan to terminate this purchasing arrangement no later than
December 2002, although the Company will continue to be eligible to participate
in GM's then current steel resale program and pricing adjustment policy for
non-ferrous metals.
While the prices at which the Company sells its products under the CSA and
will sell its products under the LPCs have been established, under the LPCs,
upon termination of the purchasing arrangement described above, the Company will
have no contractual right to pass on any cost increases subsequent to such
termination. There can be no assurance that the Company will be able to pass on
any increased labor, materials or other costs to GM
9
<PAGE>
in the future as it has from time to time in the past pursuant to the
above-described terms of the CSA or by certain additional payments agreed to as
part of the commercial arrangements between GM and the Company (subject to
certain temporary reductions described in 'Management's Discussion and Analysis
of Financial Condition and Results of Operations--Company Overview').
Under the CSA, the Company is not liable for warranty costs for its
products after the relevant vehicle has been sold to a retail purchaser unless
it is determined that the frequency or total cost of warranty claims for a given
period significantly exceeds the historical frequency of such claims for a
comparable model. Under the LPCs, the Company's products will be subject to the
warranty provisions of GM's standard purchase order, including warranties as to
the absence of defects and as to fitness and sufficiency for the particular
purposes for which such products are to be used by GM.
In addition, pursuant to various agreements executed by the Company and GM
or one of GM's subsidiaries, in connection with the 1994 Acquisition, GM
provides several key services to the Company. See 'Business-- Contractual
Arrangements with GM.' These services consist primarily of the use of
purchasing, manufacturing and cost accounting systems support. Although the
Company is currently in the process of developing and installing its own
computer systems to allow transition from these GM systems, there can be no
assurance that the Company will convert these operations in a timely or
cost-effective manner.
LEVERAGE
The Company incurred indebtedness in connection with the Recapitalization
and this indebtedness is substantial in relation to its stockholders'
investment. As of March 31, 1998, the Company had approximately $483.0 million
of outstanding debt and approximately $54.5 million of stockholders' equity. The
degree to which the Company is leveraged could have important consequences,
including the following: (i) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures, research and
development, acquisitions or general corporate purposes may be impaired; (ii) a
substantial portion of the Company's cash flow from operations must be dedicated
to the payment of interest on its existing indebtedness, thereby reducing the
funds available to the Company for other purposes; (iii) the Company's
operations are restricted by the agreements governing the Company's long-term
indebtedness which contain certain financial and operating covenants; (iv)
indebtedness under the Company's Credit Facilities (as defined below) is at
variable rates of interest, and therefore the Company is vulnerable to increases
in interest rates; (v) all of the indebtedness outstanding under the Credit
Facilities is secured by substantially all of the assets of the Company; and
(vi) the Company's substantial degree of leverage could make it more vulnerable
in the event of a downturn in general economic conditions or in its business.
See 'Description of Certain Indebtedness.'
The Company's ability to satisfy its debt obligations will depend on its
future operating performance, which will be affected by prevailing economic
conditions and financial, business and other factors, certain of which are
beyond the Company's control. The Company believes, based on current
circumstances, that the Company's cash flow, together with available borrowings
under the Credit Facilities, will be sufficient to permit the Company to meet
its operating expenses and to service its debt requirements. Significant
assumptions underlie this belief, including, among other things, that the
Company will succeed in implementing its business and growth strategies and
there will be no material adverse developments in the business, liquidity or
capital requirements of the Company. It is anticipated that the Company will
increase its leverage to meet its working capital and capital expenditure
requirements in the future. In addition, the consummation of future acquisitions
could increase the Company's leverage. See 'Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources.'
DEBT COVENANTS
The agreements governing the Company's Credit Facilities include certain
covenants that, among other matters, restrict the Company's ability to: (i) pay
dividends; (ii) incur additional indebtedness; (iii) grant liens, other than
liens created pursuant to such agreements and certain permitted liens; and (iv)
sell material assets. The Credit Facilities also require the Company to comply
with financial covenants relating to interest coverage, leverage, retained
earnings and capital expenditures. There can be no assurance that these
requirements will be met in the future. If they are not, the holders of the
indebtedness under such agreements would be entitled to declare such
indebtedness immediately due and payable. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources.'
The Company is currently in compliance with the covenants and restrictions
contained in the Credit Facilities. However, its ability to continue to comply
may be affected by events beyond its control, including prevailing economic,
financial and industry conditions. The breach of any of such covenants or
restrictions could result in a default under the Credit Facilities, which would
permit the lenders to declare all amounts borrowed
10
<PAGE>
thereunder to be due and payable, together with accrued and unpaid interest, and
the commitments of the lenders to make further extensions of credit under the
Credit Facilities could be terminated. If the Company were unable to repay its
indebtedness to its lenders, such lenders could proceed against the collateral
securing such indebtedness.
Amounts outstanding under the Credit Facilities are unconditionally and
irrevocably guaranteed by the Company and certain of its subsidiaries. In
addition, the Credit Facilities are secured by first priority security interests
in substantially all of the tangible and intangible assets of the Company and
its subsidiaries (excluding receivables related to the Receivables Facility
(defined below)), including all the capital stock of, or other equity interests
in, the Company's existing or subsequently acquired or organized direct or
indirect domestic subsidiaries and 65% of the capital stock of, or other equity
interests in, each direct foreign subsidiary of the Company. See 'Description of
Certain Indebtedness--Senior Secured Credit Facilities.'
LABOR RELATIONS
The Company's current national collective bargaining agreements with the
United Automobile, Aerospace and Agricultural Implement Workers of America (the
'UAW') and the International Association of Machinists ('IAM') run through
February 25, 2000 and May 5, 2000, respectively. Since the 1994 Acquisition, the
Company has not experienced any work stoppages. Although the Company believes
its relations with its unions are positive, there can be no assurance that
issues with its labor unions will be resolved favorably to the Company or that
the Company will not experience a work stoppage. Additionally, unfavorably
resolved issues regarding labor relations or work stoppages at GM or any future
significant customer of the Company could adversely affect the Company's
business.
PRODUCT PROGRAM IMPLEMENTATION
GM has announced that it will launch a new light truck product program in
June 1998, known as the GMT-800 Program. Although the Company has installed and
certified the equipment needed to produce products for the GMT-800 Program in
time for the start of production, there can be no assurance that GM will execute
the launch of the GMT-800 Program on schedule. There can be no assurance that
the transitioning of manufacturing facilities and resources to full production
under the GMT-800 Program, or any other future product programs, will not impact
production rates or other operational efficiency measures at the Company's
facilities. GM has also announced that it plans to launch a new truck product
program, referred to herein as the New M-SUV Program. Engineering changes to the
axles, propeller shafts, steering linkages and stabilizer bars necessitated by
the New M-SUV Program will require the Company to make a capital investment
currently estimated to be approximately $120 million. There can be no assurance
that the Company will be able to install and certify the equipment needed to
produce products for the New M-SUV Program in time for the start of production.
Moreover, there can be no assurance that GM will execute the New M-SUV Program,
or that GM or any future significant customer of the Company will execute any
other additional future program for which the Company may supply components, on
schedule.
COMPETITION
The automotive OEM supply industry is highly competitive with a number of
other manufacturers that produce competitive products. Quality, service and
price, as well as technological innovation, are the primary elements of
competition. There can be no assurance that the Company's products will compete
successfully with those of its competitors. These competitors include driveline
component manufacturing facilities of existing OEMs, as well as independent
domestic and international suppliers. Certain competitors are more diversified
and have greater access to financial resources. There can be no assurance that
the Company's business will not be adversely affected by increased competition,
or that the Company will be able to maintain its profitability, if the
competitive environment changes.
DEPENDENCE ON KEY PERSONNEL
The Company's success will depend, in part, on the efforts of its executive
officers and other key associates, including Richard E. Dauch, Chairman of the
Board, Chief Executive Officer and President. In addition, the future success of
the Company will depend on, among other factors, the Company's ability to
continue to attract and retain qualified personnel. The Company does not have
employment agreements with, or 'key man' life insurance on, any of its
associates other than Mr. Dauch. The loss of the services of any of its key
associates or the failure to attract or retain associates could have a material
adverse effect on the financial condition and results of operations of the
Company. See 'Management.'
11
<PAGE>
ENVIRONMENTAL REGULATION AND PROCEEDINGS
The Company's operations are subject to federal, state, local and foreign
laws and regulations governing, among other things, emissions to air, discharge
to waters and the generation, handling, storage, transportation, treatment and
disposal of waste and other materials. The Company believes that its business,
operations and facilities have been and are being operated in compliance in all
material respects with applicable environmental and health and safety laws and
regulations, many of which provide for substantial fines and criminal sanctions
for violations. The operation of automotive parts manufacturing plants entails
risks in these areas, however, and there can be no assurance that the Company
will not incur material costs or liabilities. In addition, potentially
significant expenditures could be required in order to comply with evolving
environmental and health and safety laws, regulations or requirements that may
be adopted or imposed in the future.
The Company believes that the overall impact of compliance with regulations
and legislation protecting the environment will not have a material effect on
its future financial position or results of operations, although no assurance
can be given in this regard. Capital expenditures and expenses in 1997
attributable to compliance with such regulations and legislation were not
material. See 'Business--Environmental Matters.'
INVENTORY MANAGEMENT; RELIANCE ON SINGLE SOURCE SUPPLIERS
The Company has initiated a policy of strengthening its supplier
relationships by concentrating its productive material purchases with a limited
number of suppliers. The Company believes that this policy contributes to
quality and cost controls and increases the suppliers' commitments to the
Company. The Company relies upon, and expects to continue to rely upon, single
source suppliers for certain critical components that are not readily available
in sufficient volume from other sources. There can be no assurance that the
suppliers of these productive materials will be able to meet the Company's
future needs on a timely basis, or be willing to continue to be suppliers to the
Company, or that a disruption in a supplier's business would not disrupt the
supply of productive materials that could not easily be replaced.
The Company has an agreement with General Motors of Canada Limited
('GMCL'), an affiliate of GM, whereby GMCL has agreed to provide axles to the
Company for resale to GM. This agreement, as amended, expires in September 1999.
An interruption in production of the axles supplied by GMCL could have a
material adverse effect on the Company.
YEAR 2000 COMPLIANCE
While the Company believes it is addressing its computer systems and
software to be 'Year 2000' compliant, it is dependent on third-party software
and computer technology, used internally, which if not Year 2000 compliant, may
materially impact the Company. Further, the Company's operations may be at risk
if its suppliers, customers and other third-parties fail to adequately address
the problem or if software conversions result in system incompatibilities with
these third parties. See 'Management's Discussion and Analysis of Financial
Conditions and Operations--Year 2000 Compliance.'
CONTROL BY PRINCIPAL STOCKHOLDER
Blackstone owns approximately 64.3% of the Company's voting Common Stock
and, upon completion of the Offerings, Blackstone is expected to own
approximately % of the outstanding Common Stock (or approximately
%, if the Underwriters' over-allotment options are exercised in full), in
each case on a fully diluted basis. See 'Ownership of Common Stock.' In
addition, Blackstone, Jupiter, Richard E. Dauch, Morton E. Harris and the
Company are parties to a stockholders' agreement (the 'Stockholders' Agreement')
executed in connection with the Recapitalization. Generally, pursuant to the
Stockholders' Agreement, so long as Blackstone owns at least one-third of the
Common Stock held by it at the closing of the Recapitalization, (i) if
Blackstone receives and accepts an offer from a person to purchase all, or
substantially all, of the Common Stock held by Blackstone, Jupiter and Messrs.
Dauch and Harris, then Jupiter and Messrs. Dauch and Harris are required to
offer their shares of Common Stock in any such sale and (ii) if Blackstone
proposes to transfer all or a portion of its shares of Common Stock, other than
to its affiliates or in connection with a public offering registered under the
Securities Act, Jupiter and Messrs. Dauch and Harris have the right to require
the transferee to purchase a proportional share of their respective shares.
Moreover, upon completion of the Offerings, Blackstone's ownership of
approximately % of the outstanding Common Stock will enable it to
influence significantly the election of the Company's Board of Directors and
votes on all matters submitted to the Company's stockholders for approval. See
'Certain Transactions--Stockholders' Agreement.'
12
<PAGE>
ANTITAKEOVER PROVISIONS
Certain provisions of the Company's Certificate of Incorporation (the
'Certificate of Incorporation') and Bylaws (the 'Bylaws') and Delaware law may
make the acquisition of control of the Company in a transaction not approved by
the Company's Board of Directors more difficult or expensive. See 'Description
of Capital Stock.'
NO PRIOR PUBLIC MARKET; POTENTIAL VOLATILITY OF STOCK PRICE
Prior to the Offerings, there has been no public market for the Common
Stock and there can be no assurance that an active trading market will develop
or be sustained in the future. The initial public offering price of the Common
Stock will be determined solely by negotiations among the Company and the
representatives of the U.S. Underwriters and the International Managers and may
not be indicative of the market price of the Common Stock after completion of
the Offerings or the price at which Common Stock may be sold in the public
market after the Offerings. See 'Underwriting' for information relating to the
method of determining the initial public offering price of Common Stock.
The Company believes that various factors, such as general economic
conditions and changes or volatility in the financial markets, announcements or
significant developments with respect to the automotive industry, actual or
anticipated variations in the Company's quarterly or annual financial results,
the introduction of new products or technologies by the Company or its
competitors, changes in other conditions or trends in the Company's industry or
in the markets of any of the Company's significant customers, changes in
governmental regulation or changes in securities analysts' estimates of the
Company's future performance or that of its competitors or its industry, could
cause the market price of the Common Stock to fluctuate substantially.
SHARES ELIGIBLE FOR FUTURE SALE
No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock or the availability of such shares for future sale will
have on the market price of Common Stock prevailing from time to time. In
addition, pursuant to, and in accordance with the terms and conditions of, the
Stockholders' Agreement, Blackstone, Jupiter and Messrs. Dauch and Harris can
require the Company to effect a registration of their shares of Common Stock.
Generally, Blackstone has the right to request five such demand registrations,
and (i) Mr. Dauch and his affiliates and (ii) Jupiter, Mr. Harris and their
affiliates, can request one demand registration each, so long as the requesting
stockholder(s) own(s) at least 40% of the Company's Common Stock held by it at
the time of the Closing of the Recapitalization, and all of such parties have
certain 'piggyback' registration rights. Sales of substantial amounts of Common
Stock in the public market, whether such shares are presently outstanding or
subsequently issued, or the perception that such sales could occur, could
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital in the future through an offering of its
equity securities or to consummate acquisitions using its equity securities as
consideration. The Company cannot predict when or how many of such additional
shares of Common Stock may be offered for sale or sold to the public in the
future. See 'Shares Eligible for Future Sale' and 'Certain
Transactions--Shareholders' Agreement.'
The Company and its executive officers and directors and substantially all
of its existing stockholders have agreed not to offer, sell, contract to sell or
otherwise dispose of any shares of Common Stock, or any securities convertible
into or exercisable or exchangeable for Common Stock, for a period of 180 days
after the date of this Prospectus without the prior written consent of Merrill
Lynch, Pierce, Fenner & Smith Incorporated ('Merrill Lynch'), except, in the
case of the Company, for shares of Common Stock offered in the Offerings and
shares issued and options granted pursuant to the Company's stock option plans.
See 'Management--Stock Options,' 'Shares Eligible for Future Sale' and
'Underwriting.'
DILUTION
The initial public offering price is substantially higher than the book
value per share of the Common Stock. Accordingly, purchasers of the Common Stock
offered hereby would experience immediate and substantial dilution of $ in
tangible book value per share of the Common Stock. See 'Dilution.'
13
<PAGE>
THE RECAPITALIZATION
On September 17, 1997, AAM Acquisition, Inc., an entity organized by
Blackstone, Jupiter, Mr. Dauch, Mr. Harris, the Company and American Axle &
Manufacturing, Inc. ('AAM, Inc.'), then the parent of the Company, entered into
an agreement (the 'Recapitalization Agreement'), pursuant to which Blackstone
acquired control of the Company on October 29, 1997 (the 'Recapitalization').
Prior to the Recapitalization, the Company was a wholly-owned subsidiary of AAM,
Inc. Pursuant to the Recapitalization, the Company acquired a 100% ownership
interest in AAM, Inc. by exchanging shares of its own stock, on a one-for-one
basis, with the shareholders of AAM, Inc. The exchange of shares has been
accounted for in a manner similar to a pooling of interest since both the
Company and AAM, Inc. were under common control. Following the exchange of
shares, on October 29, 1997, pursuant to the Recapitalization Agreement,
Blackstone acquired shares of the Company's Common Stock. The Company used
approximately $474 million of aggregate proceeds from certain financings
described below (the 'Financings'), to (i) repay certain indebtedness of AAM,
Inc., (ii) redeem all of the issued and outstanding shares of Class A Preferred
Stock of AAM, Inc., (iii) repurchase certain shares of the Company's Common
Stock held by Jupiter and Harris, (iv) pay costs and expenses incurred in
connection with the Recapitalization, including fees, expenses and payments
relating to certain of the Company's then existing stock options and (v) fund
the working capital requirements of the Company. Immediately after the closing
of the Recapitalization, on a fully diluted basis Blackstone owned approximately
64.3% of the Common Stock, members of senior Company management owned
approximately 30.3% of the Common Stock and Jupiter and Harris owned
approximately 5.5% of the Common Stock. See 'Dividend Policy', 'Ownership of
Common Stock' and Notes 2 and 8 to the Consolidated Financial Statements.
The Financings included (i) (a) a senior secured term loan facility (the
'Tranche A Term Loan Facility') providing for delayed draw term loans in an
aggregate principal amount of $125 million, (b) a senior secured term loan
facility (the 'Tranche B Term Loan Facility' and, together with the Tranche A
Term Loan Facility, the 'Term Loan Facility') providing for term loans in an
aggregate principal amount of $375 million and (c) a $250 million senior secured
revolving credit facility (the 'Revolving Credit Facility' and, together with
the Term Loan Facility, the 'Credit Facilities'), of which $474 million was
drawn at the Recapitalization Closing and (ii) a $125 million receivables
purchase facility (the 'Receivables Facility') of which $75 million was drawn at
the closing of the Recapitalization. See 'Description of Certain Indebtedness.'
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby (at an assumed public offering price of $ per share and after
deducting the underwriting discounts and commissions and estimated expenses from
the Offerings payable by the Company) are estimated to be $92.5 million ($106.6
million if the Underwriters' over-allotment options are exercised in full).
The Company intends to use approximately $46.0 million of the net proceeds
of the Offerings to reduce the outstanding borrowings under the Revolving Credit
Facility and the balance of the net proceeds for general corporate purposes,
including capital expenditures. Pending such uses, the Company intends to invest
the net proceeds of the Offerings in short-term investment grade, interest
bearing securities or money market instruments.
As of March 31, 1998, the Company had an aggregate of $421.0 million of
indebtedness outstanding under the Credit Facilities, including $46.0 million
outstanding under the Revolving Credit Facility. See 'Description of Certain
Indebtedness--Senior Secured Credit Facilities.' The Credit Facilities were
incurred in connection with the Recapitalization. Borrowings under the Tranche A
Term Loan Facility due October 2004, the Tranche B Term Loan Facility due April
2006 and the Revolving Credit Facility which terminates on October 30, 2005 each
bear interest, at the Company's option, at rates based on LIBOR or the Base Rate
(each as defined in the Credit Facilities) plus, in each case, an applicable
margin. The weighted average interest rate under the Revolving Credit Facility
at March 31, 1998 was 9.5%.
DIVIDEND POLICY
In 1997, the Company paid dividends of $29.9 million to GM, the holder of
its Class A Preferred Stock and $4.6 million to the holders of its Common Stock.
In 1996, the Company paid dividends of $13.6 million to GM, the holder of its
Class A Preferred Stock and $3.8 million to the holders of its Common Stock.
Contemporaneous with the Recapitalization, the Company repurchased all of its
outstanding Class A Preferred Stock. The Company has not paid any dividends
since the Recapitalization and it is the current policy of the Company's Board
of Directors to retain earnings to repay debt and finance operations of the
Company and not to pay any cash dividends on the Common Stock. In addition, the
Credit Facilities restrict the Company's payment of cash dividends on the Common
Stock. See 'Description of Certain Indebtedness--Senior Secured Credit
Facilities' and Note 8 to the Consolidated Financial Statements.
The Company is a holding company that derives all of its cash flow from its
operating subsidiaries, the common stock of which constitutes a material asset
of the Company. Consequently, the Company's ability to pay dividends is
dependent upon the earnings of its operating subsidiaries and its other
subsidiaries and the distribution of those earnings to the Company.
15
<PAGE>
DILUTION
The net tangible book value of the Company as of March 31, 1998 was
approximately $ million, or $ per outstanding share of Common Stock,
based on an assumed shares of Common Stock outstanding. The net tangible
book value per share of Common Stock is equal to the Company's total tangible
assets (total assets less intangible assets, consisting primarily of licenses
and goodwill) less its total liabilities, divided by the number of shares of
Common Stock outstanding. After giving effect to the sale of shares of
Common Stock being offered by the Company in the Offerings at an assumed initial
public offering price of $ per share, the midpoint of the estimated range
of the initial public offering price, and the application by the Company of the
estimated net proceeds therefrom as described in 'Use of Proceeds,' the pro
forma net tangible book value of the Company at March 31, 1998 would have been
$ million, or $ per share of Common Stock. This represents an
immediate increase in net tangible book value of $ per share of Common
Stock to existing stockholders and an immediate dilution in net tangible book
value of $ per share of Common Stock to purchasers of Common Stock in the
Offerings.
If the Underwriters' over-allotment options are exercised in full, net
tangible book value upon completion of the Offerings would be $ per share
(assuming an initial public offering price of $ per share).
The following table illustrates the per share dilution that would have
occurred if the Offerings had been consummated on March 31, 1998
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share....................................... $
-------
Net tangible book value per share
at March 31, 1998................................................................... $
-------
Increase in net tangible book value per share
attributable to price paid by purchasers
of Common Stock in the Offering..................................................... $
-------
-------
Pro forma net tangible book value per share after
the Offering........................................................................ $
-------
Dilution in net tangible book value per share
to purchasers of Common Stock in the Offerings...................................... $
-------
-------
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1998,
the differences between existing shareholders and the new investors with respect
to the number of shares of Common Stock purchased from the Company, the total
consideration paid (assuming an initial public offering price of $ per
share) and the average price per share paid:
<TABLE>
<CAPTION>
SHARES TOTAL
PURCHASED(1) CONSIDERATION AVERAGE
----------------- ----------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders........................................... % $ % $
New investors...................................................
------ ------- ------ -------
Total........................................................... 100% $ 100%
------ ------- ------ -------
------ ------- ------ -------
</TABLE>
- ------------------
(1) These computations assume no exercise of any outstanding stock options after
March 31, 1998 or of the Underwriters' over-allotment options. See
'Underwriting' for information concerning the Underwriters' over-allotment
options. As of March 31, 1998, options to purchase shares of Common
Stock were outstanding. See 'Management--Stock Options.' To the extent these
stock options are exercised, there will be further dilution to new
investors.
16
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1998, and as adjusted to give effect to (i) the sale of shares of Common
Stock by the Company in the Offerings at an assumed initial public offering
price of $ per share, after deduction of underwriting discounts and
estimated expenses of the Offerings and (ii) the application of the estimated
net proceeds therefrom as described under 'Use of Proceeds.' This table should
be read in conjunction with the historical consolidated financial statements of
the Company and the notes thereto which are included elsewhere in the
Prospectus.
<TABLE>
<CAPTION>
AT MARCH 31, 1998
---------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents......................................................... $ 3,346 $ 49,846
---------- -----------
---------- -----------
Long-term debt:
Term Loan Facility.............................................................. $ 375,000 $ 375,000
Revolving Credit Facility....................................................... 46,000 --
Receivables Facility............................................................ 60,000 60,000
Other........................................................................... 1,962 1,962
---------- -----------
Total long-term debt....................................................... 482,962 436,962
---------- -----------
Stockholders' equity:
Preferred Stock, shares authorized, no shares
issued and outstanding....................................................... -- --
Common Stock, par value $.01 per share, shares authorized,
shares issued and outstanding, historical; shares issued and
outstanding as adjusted...................................................... 1 1
Paid-in capital................................................................. 92,528 185,028
Retained (deficit) earnings..................................................... (38,072) (38,072)
---------- -----------
Total stockholders' equity................................................. 54,457 146,957
---------- -----------
Total capitalization....................................................... $ 537,419 $ 583,919
---------- -----------
---------- -----------
</TABLE>
17
<PAGE>
SELECTED FINANCIAL AND OTHER OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected consolidated historical financial
and other operating data of the Company at and for the ten months ended December
31, 1994, at and for the three years ended December 31, 1997 and at and for the
three-month periods ended March 31, 1997 and 1998. The statement of operations
data for the ten months ended December 31, 1994 and the three years ended
December 31, 1997 and the balance sheet data as of December 31, 1994, 1995, 1996
and 1997 were derived from audited consolidated financial statements of the
Company, which have been audited by Ernst & Young, LLP, independent auditors.
The financial data for the three-month periods ended March 31, 1997 and 1998
were derived from unaudited consolidated financial statements of the Company. In
the opinion of management, the unaudited financial data have been prepared on
the same basis as the audited consolidated financial statements and include all
adjustments, consisting of normal recurring adjustments, which the Company
considers necessary for a fair presentation of the financial position and the
results of operations for these periods. Results for interim periods are not
indicative of results for a full year. The pro-forma earnings per common share
has been computed based on the stock split that would be in effect upon
consummation of the Offerings. The table should be read in conjunction with
'Management's Discussion and Analysis of Financial Condition and Results of
Operations,' the consolidated financial statements of the Company and the
related notes, the 'Unaudited Pro Forma Condensed Consolidated Financial
Statements' and the other financial information included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
TEN THREE
MONTHS ENDED YEAR ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31, MARCH 31,
------------ -------------------------------------- ---------------------
1994(A) 1995 1996 1997 1997 1998
------------ ---------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................... $1,548,655 $1,968,076 $2,022,272 $2,147,451 $546,859 $ 583,285
Cost of goods sold........... 1,406,658 1,788,588 1,845,722 1,927,364 487,828 522,279
------------ ---------- ---------- ---------- -------- ---------
Gross profit................. 141,997 179,488 176,550 220,087 59,031 61,006
Selling, general and
administrative expenses.... 68,117 70,603 83,072 103,954 22,662 24,699
------------ ---------- ---------- ---------- -------- ---------
Operating income............. 73,880 108,885 93,478 116,133 36,369 36,307
Net interest expense
(income)................... (3,941) (9,086) (9,412) 1,846 (2,255) 9,749
Recapitalization expense..... -- -- -- 15,929 -- --
Other expense (income)....... -- -- 4,566 4,161 (111) (333)
------------ ---------- ---------- ---------- -------- ---------
Income before income taxes... 77,821 117,971 98,324 94,197 38,735 26,891
Income taxes................. 41,375 47,400 36,600 38,933 13,945 9,968
------------ ---------- ---------- ---------- -------- ---------
Net income................... $ 36,446 $ 70,571 $ 61,724 $ 55,264 $ 24,790 $ 16,923
------------ ---------- ---------- ---------- -------- ---------
------------ ---------- ---------- ---------- -------- ---------
Net income per share (pro-
forma).....................
BALANCE SHEET DATA:
Working capital (deficit).... $ 97,143 $ 80,894 $ 103,271 $ (96,826) $ 71,093 $(141,019)
Total assets................. 534,108 736,997 771,222 1,017,653 854,722 999,541
Total debt................... 1,000 1,000 2,368 507,043 2,287 482,962
Preferred stock.............. 200,000 200,000 200,000 -- 200,000 --
Stockholders' equity......... 88,101 168,572 250,168 37,231 282,833 54,457
OPERATING AND OTHER DATA:
EBITDA(b).................... $ 96,038 $ 144,779 $ 134,740 $ 159,708 $ 50,978 $ 51,369
Depreciation and
amortization............... 16,846 25,242 36,076 50,177 12,223 14,497
Pension and OPEB
expenses(c)................ 36,761 36,319 48,050 34,620 8,655 9,413
Net cash provided by
operating activities....... 196,990 196,886 65,687 200,830 73,642 76,140
Capital expenditures......... 25,168 147,077 162,317 282,625 59,344 66,301
Hourly associates at year-
end........................ 7,242 7,631 7,542 7,323 N/A N/A
Net sales per year-end hourly
associate.................. $ 214 $ 258 $ 268 $ 293 N/A N/A
</TABLE>
(Footnotes on next page)
18
<PAGE>
(Footnotes from previous page)
- ------------------
(a) Results are for the ten-month period beginning on the closing date of the
1994 Acquisition and ending on December 31, 1994. Prior period financial
data is not considered relevant as the Business Unit was part of the
integrated operations of GM.
(b) EBITDA represents income from continuing operations before interest expense,
income taxes, depreciation and amortization. EBITDA should not be construed
as a substitute for income from operations, net income or cash flow from
operating activities as determined by generally accepted accounting
principles.
(c) Total expenses related to pension and other post-retirement benefits other
than pension ('OPEB'), the non-cash portion was $18.0 million for the ten
months ended December 31, 1994; $20.8 million, $22.1 million and $30.7
million for the years ended December 31, 1995, 1996 and 1997, respectively;
and $8.6 million and $7.7 million for the three months ended March 31, 1997
and 1998, respectively.
19
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
The following Unaudited Pro Forma Condensed Consolidated Statement of
Income is based on the consolidated financial statements included elsewhere in
this Prospectus, adjusted to give effect to (i) the Recapitalization and (ii)
the Offerings and the application of the net proceeds therefrom (the
'Transactions'), as if they had occurred on January 1, 1997.
The pro forma adjustments are based upon available information and upon
certain assumptions that management believes are reasonable under the
circumstances. The Unaudited Pro Forma Condensed Consolidated Statement of
Income and accompanying notes should be read in conjunction with the historical
consolidated financial statements of the Company, including the notes thereto,
and other financial information pertaining to the Company included elsewhere in
this Prospectus. The Unaudited Pro Forma Condensed Consolidated Statement of
Income does not purport to represent what the Company's actual results of
operations would have been if the Recapitalization and the Offerings in fact had
occurred on such date or to project the Company's results of operations for any
future period. The Unaudited Pro Forma Condensed Consolidated Statement of
Income does not give effect to any transactions other than the Recapitalization,
the Offerings and the transactions related thereto discussed in the notes to the
Unaudited Pro Forma Condensed Consolidated Statement of Income set forth below.
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------------------
ACTUAL RECAPITALIZATION THE OFFERINGS PRO FORMA
---------- ---------------- ------------- ----------
<S> <C> <C> <C> <C>
Net sales........................................ $2,147,451 -- -- $2,147,451
Cost of goods sold............................... 1,927,364 -- -- 1,927,364
---------- ----------
Gross profit..................................... 220,087 -- -- 220,087
Selling and administrative expenses.............. 103,954 -- -- 103,954
---------- ----------
Operating income................................. 116,133 -- -- 116,133
Recapitalization expenses........................ (15,929) 15,929(a) -- --
Net interest (expense) income.................... (1,846) (34,193)(b) 4,370(d) (31,669)
Other (expense) income........................... (4,161) -- -- (4,161)
---------- ---------------- ------------- ----------
Income before income taxes....................... 94,197 (18,264) 4,370 80,303
Income taxes..................................... 38,933 (10,838)(c) 1,617(e) 29,712
---------- ---------------- ------------- ----------
Net income....................................... $ 55,264 $ (7,426) $ 2,753 $ 50,591
---------- ---------------- ------------- ----------
---------- ---------------- ------------- ----------
</TABLE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(a) Adjustment to eliminate non-recurring expenses incurred pursuant to the
Recapitalization.
(b) Adjustment to reflect additional interest expense related to borrowings
initiated in the Recapitalization inclusive of additional amortization of
debt issuance costs of $2,593.
(c) Adjustment to income tax expense related to notes (a) and (b) above.
(d) Adjustment to reflect use of proceeds. Assumes pay-down of Revolving Credit
Facility of $46 million bearing interest at 9.5% per annum.
(e) Adjustment to income tax expense related to Note (d) above.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis presents the factors that had a material
effect on the Company's results of operations and cash flows during the three
months ended March 31, 1998 and March 31, 1997 and the three years ended
December 31, 1997, and the Company's financial position at March 31, 1998 and
December 31, 1997. This discussion and analysis should be read in conjunction
with the 'Selected Financial Data' and the Consolidated Financial Statements and
notes thereto appearing elsewhere in this Prospectus.
COMPANY OVERVIEW
The Company is a Tier I supplier to the automotive industry and a world
leader in the design, engineering and manufacturing of driveline systems for
light trucks and SUVs. The driveline system includes all of the components that
transfer power from the transmission and deliver it to the drive wheels. The
driveline products produced by the Company include axles, propeller shafts,
chassis components and forged products. The Company is GM's principal supplier
of driveline components for light trucks, SUVs and RWD passenger cars. Sales to
GM were approximately 96% of the Company's 1997 and 1996 sales.
In March 1994, the Company purchased the assets of the Final Drive and
Forge Business Unit of the Saginaw Division of GM. In connection with the
Company's acquisition of the Business Unit, GM and the Company entered into the
CSA under which the Company became the sole-source supplier to GM of all the
products and components previously supplied to GM by the Business Unit. In
October 1997, the Company entered into a Recapitalization Agreement, pursuant to
which Blackstone acquired control of the Company. In connection with the
Recapitalization, the Company and GM entered into an additional binding
agreement, the MOU. Under the MOU, the Company and GM have agreed to commit to
transition the CSA into a number of separate LPCs, applicable for the life of
each GM vehicle program for which the Company supplies products. These LPCs will
ultimately replace the CSA.
In order to induce GM to enter into the MOU and commit to enter into LPCs,
in 1997, the Company agreed to temporary reductions of certain payments
previously agreed to be made by GM to the Company as part of the commercial
arrangements between them, including certain payments pursuant to the CSA. Such
reductions amounted to approximately $11.4 million in 1997 and approximately
$12.7 million in the first quarter of 1998. Such reductions are currently
estimated by the Company to amount to approximately $51.1 million for the full
year ending December 31, 1998, at which time such reductions are expected to
terminate.
The Company sells most of its products under long-term contracts at fixed
prices, some of which are subject to annual price reductions in subsequent
years, and all of which are subject to negotiated price increases for
engineering changes. With respect to GM, pricing has been established for
products sold under the CSA and to be sold under the LPCs; however, the Company
must remain competitive with respect to technology, design and quality. Under
the CSA, the Company pays current market prices for certain materials used in
the manufacture of products sold to GM, but increases or decreases in such
prices from levels established under the CSA currently result in corresponding
increases or decreases in the aggregate amount paid by GM to the Company for its
products, thereby protecting the Company from increases in the costs of such
materials while such purchasing arrangement is in effect. The Company and GM
have agreed to develop a mutually satisfactory plan to terminate this purchasing
arrangement no later than December 2002. Thus, while the prices at which the
Company sells its products under the CSA and will sell its products under the
LPCs have been established, under the LPCs, upon termination of the purchasing
arrangement described above, the Company will have no contractual right to pass
on any direct materials cost increases subsequent to such termination, and there
can be no assurance that the Company will be able to pass on any increased
labor, materials or other costs to GM in the future as it has from time to time
in the past pursuant to the above-described terms of the CSA or by certain
additional payments agreed to as part of the commercial arrangements between GM
and the Company. See 'Risk Factors--Reliance on GM' and 'Business--Contractual
Arrangements with GM.'
21
<PAGE>
INDUSTRY AND COMPETITION
The Company's operations are cyclical because they are directly related to
domestic automotive production, which is itself cyclical and dependent on
general economic conditions and other factors. The axle and related driveline
systems segment of the automotive industry is highly competitive. The current
trend in the automotive industry is for OEMs to shift research and development
('R&D'), design and testing responsibility to suppliers to take advantage of
certain efficiencies. The OEMs have also been reducing the number of their
suppliers, preferring stronger relationships with fewer suppliers. As a result,
the Tier I supplier market has been undergoing consolidation over the past three
to four years. This trend is expected to continue, leaving the industry with
only a small number of dominant, worldwide suppliers.
The following table sets forth certain statement of operations data
expressed as a percentage of net sales:
<TABLE>
<CAPTION>
FOR THE THREE
FOR THE YEAR ENDED MONTHS
DECEMBER 31, ENDED MARCH 31,
------------------------- ---------------
1995 1996 1997 1997 1998
----- ----- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Statement of income data:
Net sales........................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.................................. 90.9% 91.3% 89.8% 89.2% 89.5%
----- ----- ----- ----- -----
Gross profit........................................ 9.1% 8.7% 10.2% 10.8% 10.5%
Selling, general and administrative expenses........ 3.6% 4.1% 4.8% 4.1% 4.3%
----- ----- ----- ----- -----
Operating income.................................... 5.5% 4.6% 5.4% 6.7% 6.2%
Other expense (income).............................. (.5%) (.3%) 1.0% (.4%) 1.6%
----- ----- ----- ----- -----
Income before income taxes.......................... 6.0% 4.9% 4.4% 7.1% 4.6%
Income tax expense.................................. 2.4% 1.8% 1.8% 2.6% 1.7%
----- ----- ----- ----- -----
Net income.......................................... 3.6% 3.1% 2.6% 4.5% 2.9%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
RESULTS OF OPERATIONS--THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO
THE THREE MONTHS ENDED MARCH 31, 1997
Net Sales. Net sales increased approximately 7% to $583.3 million for the
three months ended March 31, 1998 compared with $546.9 million for the three
months ended March 31, 1997. This increase was primarily a result of volume
increases in 1998 related to customer demand for the Company's products.
Sales to customers other than GM increased 22% to approximately $25.9
million in the first quarter of 1998 versus $21.3 million in the similar period
of 1997. Additionally, the Company had export sales of $89.2 million in the
first quarter of 1998 versus $77.9 million in the first quarter of 1997. The
increases in these sales were a result of new business that the Company has
gained.
Gross Profit. Gross profit increased 3% to $61.0 million for the three
months ended March 31, 1998 compared with $59.0 million for the three months
ended March 31, 1997. Gross margin decreased to 10.5% in the first quarter of
1998 compared to 10.8% for the same period of 1997. The decrease in gross margin
in the first quarter of 1998 was due to the temporary payment reductions
discussed under '--Company Overview' above, partially offset by increased
productivity as a result of the prior capital expenditures made to improve
manufacturing initiatives, reduce labor intensive operations and achieve other
cost efficiencies.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (including R&D) increased 9% to $24.7 million for the
three months ended March 31, 1998 compared with $22.7 million for the three
months ended March 31, 1997. Selling, general and administrative expenses as a
percentage of sales increased to 4.3% for the three months ended March 31, 1998
compared to 4.1% for the similar period of 1997. These increases were
principally due to the Company's increase in personnel to support the Company's
growth and continued investments for information systems as the Company
continues to transition from GM systems. R&D expenses were $6.4 million for the
three months ended March 31, 1998 compared to $6.8 million for the three months
ended March 31, 1997.
22
<PAGE>
Operating Income. Operating income was $36.3 million for the three months
ended March 31, 1998 compared to $36.4 million for the three months ended March
31, 1997. Operating margin decreased to 6.2% for the three months ended March
31, 1998 compared to 6.7% for the similar period of 1997. The decrease in
operating margin was primarily due to the decline in gross margin and increased
selling, general and administrative expenses, partially offset by increased
sales volumes.
Net Interest. Net interest expense was $9.7 million for the three months
ended March 31, 1998 compared to net interest income of $2.3 million for the
similar period of 1997. The increase was due to the borrowings incurred in
connection with the Recapitalization.
Income Tax Expenses. Income tax expense decreased 29% to $10.0 million for
the three months ended March 31, 1998 compared to $13.9 million for the three
months ended March 31, 1997. The Company's effective income tax rate was 37.1%
for the three months ended March 31, 1998 versus 36.0% for the three months
ended March 31, 1997.
Net Income. Net income decreased 32% to $16.9 million for the three months
ended March 31, 1998 compared to $24.8 million for the three months ended March
31, 1997 primarily due to the operating results discussed previously and the
impact of additional interest expense in 1998.
RESULTS OF OPERATIONS--YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED
DECEMBER 31, 1996
Net Sales. Net sales increased 6% to $2.15 billion for 1997 compared to
$2.02 billion for 1996. This increase was primarily a result of volume increases
related to customer demand for the Company's products.
Sales to GM were approximately 96% of the Company's total sales in both
1997 and 1996. Sales to customers other than GM increased approximately 12% to
approximately $88.5 million in 1997 compared to $78.8 million in 1996. The
Company had export sales of $328.0 million in 1997 compared to $265.7 million in
1996. These increases were a result of new business initiatives that the Company
implemented.
Gross Profit. Gross profit increased approximately 25% to $220.1 million
for 1997 compared to $176.6 million for 1996. Gross margin increased to 10.2%
for 1997 compared to 8.7% for 1996. These increases were primarily due to
increased sales volume and increased productivity primarily as a result of the
capital expenditures to support manufacturing initiatives, reduce labor
intensive operations and achieve cost productivity initiatives, as well as a
benefit of approximately $20 million related to a change in assumptions in 1997
related to pensions and other postretirement benefits other than pensions, and a
decrease in depreciation resulting from a change in estimated lives.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (including R&D) increased approximately 25% to $104.0
million for 1997 compared to $83.1 million for 1996. Selling, general and
administrative expenses as a percentage of sales increased to 4.8% for 1997
compared to 4.1% for 1996. These increases were principally due to the Company's
increase in personnel to support the Company's growth, investments made for
information systems as the Company transitions from GM systems, certain stock
compensation expenses totaling $9.2 million and increases in R&D expenses. R&D
expenses increased approximately 19% to $27.8 million for 1997 compared to $23.4
million for 1996. The increases in R&D spending were primarily related to the
Company's initiative to expand its customer and product base through the
development of advanced driveline systems including the support of the New M-SUV
Program.
Operating Income. Operating income increased approximately 24% to $116.1
million for 1997 compared to $93.5 million for 1996. Operating margins increased
to 5.4% for 1997 compared to 4.6% for 1996. These increases were primarily due
to increased volumes and increased productivity, the impact of the change in
assumptions and depreciable lives partially offset by the impact of increased
selling, general and administrative expenses discussed above.
Net Interest. Net interest expense was $1.8 million for 1997 compared to
net interest income of $9.4 million for 1996. The increase was due to the
additional borrowings incurred in connection with the Recapitalization. For most
of 1996 and 1997, the Company had excess cash invested in short-term investments
and limited outstanding debt.
23
<PAGE>
Recapitalization Expenses. The Company incurred $15.9 million of expenses
in 1997 related to the Recapitalization. These expenses were seller-related
expenses which included professional advisory fees.
Income Tax Expense. Income tax expense increased 6% to $38.9 million for
1997 compared to $36.6 million in 1996. The Company's effective income tax rate
was 41.3% for 1997 compared to 37.2% for 1996. The increase in the effective tax
rate for 1997 was primarily due to non-deductible permanent items related to
stock compensation.
Net Income. Net income decreased 10% to $55.3 million for 1997 compared to
$61.7 million for 1996 primarily due to the factors described above.
RESULTS OF OPERATIONS--YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED
DECEMBER 31, 1995
Net Sales. Net sales increased approximately 3% to $2.02 billion for 1996
compared to $1.97 billion for 1995. This increase was primarily a result of
volume increases related to customer demand for the Company's products offset by
labor-related work stoppages at GM which adversely impacted sales.
Sales to GM were approximately 96% and 97% of the Company's total sales in
1996 and 1995, respectively. Sales to customers other than GM increased 29% to
approximately $78.8 million in 1996 compared to $61.3 million in 1995. The
Company had export sales of $265.7 million in 1996 compared to $255.8 million in
1995. These increases were a result of new business that the Company has gained.
Gross Profit. Gross profit decreased approximately 2% to $176.6 million
for 1996 compared to $179.6 million for 1995. Gross margin decreased to 8.7% for
1996 compared to 9.1% for 1995. These decreases were a result of (i) increased
benefit expenses associated with the higher number of workers moving into full
benefit status, (ii) additional training costs to train associates to replace
workers who elected to transfer back to GM, (iii) the adverse impact of the work
stoppages at GM, and (iv) charges relating to maintenance and expenses for
cleaning, painting and general repairs of the Company's facilities.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (including R&D) increased approximately 18% to $83.1
million for 1996 compared to $70.6 million for 1995. Selling, general and
administrative expenses as a percentage of sales increased to 4.1% for 1996
compared to 3.6% for 1995. These increases were principally due to the Company's
increase in personnel to support the Company's growth and investments made for
the Company to perform certain functions that were previously performed by GM;
these increases were partially offset by decreased R&D expenses. R&D expenses
decreased approximately 19% to $23.4 million for 1996 compared to $29.0 million
for 1995. The decreases in R&D spending were primarily related to the Company's
initiative to support the early designs related to the GMT-800 Program that were
incurred in 1995.
Operating Income. Operating income decreased approximately 14% to $93.5
million for 1996 compared to $108.9 million for 1995. Operating margin decreased
to 4.6% for 1996 compared to 5.5% for 1995. These decreases were primarily due
to the GM work stoppages discussed previously.
Net Interest. Net interest income was $9.4 million and $9.l million for
1996 and 1995, respectively. For most of 1996 and 1995, the Company had excess
cash invested in short-term investments.
Income Tax Expense. Income tax expense decreased 23% to $36.6 million for
1996 compared to $47.4 million in 1995. The Company's effective income tax rate
was 37.2% for 1996 compared to 40.2% for 1995. The decrease in the tax expense
was related to the decrease in the Company's operating income discussed
previously. The decrease in the effective tax rate for 1996 was primarily due to
the use of federal tax credits and various state and local tax incentives.
Net Income. Net income decreased approximately 13% to $61.7 million for
1996 compared to $70.6 million for 1995 primarily due to the factors described
above.
24
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The 1997 Recapitalization involved the incurrence of substantial new
indebtedness and the repurchase of a substantial amount of equity. See 'The
Recapitalization' and Note 2 to the Consolidated Financial Statements.
Management assesses the Company's liquidity in terms of its overall ability
to mobilize cash to support business needs and to fund its growth. The Company
relies primarily upon cash flow from operations and borrowings under the
Company's Credit Facilities and Receivables Facility to finance operations and
capital expenditures.
At March 31, 1998, the Company had a working capital deficit of $141.0
million versus a deficit of $96.8 million at December 31, 1997. This increase
was a result of a decrease in receivables (discussed below) and the increase in
liabilities related to the capital expenditure program in connection with the
launch of the GMT-800 Program, which will be funded primarily through long-term
debt.
The decrease in accounts receivable at March 31, 1998 from December 31,
1997 was due to the receipt of payments from a customer for rebillable tooling
charges, premium charges for additional manufacturing capacity and volume and
raw material rebates.
The Company had a working capital deficit of $96.8 million at December 31,
1997 compared to a working capital surplus of $103.2 million at December 31,
1996. This decrease in working capital was a result of the Recapitalization, the
liabilities related to the capital expenditure program in connection with the
launch of the GMT-800 Program (which will be primarily funded through long-term
debt) and payments to be made in connection with certain benefit programs.
The increase in accounts receivable at December 31, 1997 was due to amounts
due from GM for rebillable tooling (in connection with the GMT-800 manufacturing
process), amounts due for premium charges for additional manufacturing capacity
and volume, and raw material rebates.
As part of the arrangements with GM, payment terms for products shipped to
GM will steadily lengthen during the three-year period beginning March 1, 1999,
resulting in an expected increase in accounts receivable balances and
anticipated increased interest expense related to the Company's funding of
working capital. The Company anticipates that this working capital increase will
be funded from available sources including cash flow from operations and its
Credit Facilities.
The Company intends to lend approximately $15.0 million in the third
quarter of 1998 to its Chairman to enable him to pay taxes related to the
recognition of income associated with certain stock options.
The increase in other assets as of December 31, 1997 was due to fees paid
in connection with the establishment of the Credit Facilities and the
Receivables Facility. The increase in non-current deferred income taxes asset is
primarily due to the Recapitalization.
The Company has various sources of funds including the Credit Facilities
and the Receivables Facility. Refer to Note 3, 'Long-Term Debt and Credit
Facilities' contained in the Consolidated Financial Statements.
At March 31, 1998, $375 million of borrowings were outstanding and $125
million was available for future borrowings under the Term Loan Facility and $46
million was outstanding and $204 million was available for future borrowings
under the Revolving Credit Facility. Additionally at March 31, 1998,
approximately $75 million was available under the variable funding certificates
of the Receivables Facility, of which $60 million was utilized and borrowed.
These facilities were established in connection with the Recapitalization.
The weighted average interest rate of the Company's long-term debt
outstanding as of March 31, 1998 was approximately 7.9% and was approximately
8.1% at December 31, 1997.
Capital expenditures were $66.3 million for the three months ended March
31, 1998. These investments in machinery and equipment were primarily made to
support the launch of the GMT-800 Program and to generate additional capacity.
The Company estimates that it will invest between $300 million and $400 million
in capital expenditures in 1998.
Capital expenditures were $282.6 million, $162.3 million and $147.1 million
in 1997, 1996 and 1995, respectively. These investments in machinery and
equipment were primarily made to support the launch of the GMT-800 program, to
reduce labor-intensive operations, to support additional capacity and for cost
reduction programs including upgrades in machinery technology and quality
standards.
25
<PAGE>
The Company intends to fund its capital expenditures by borrowing under the
Credit Facilities or the Receivables Facility. The Company believes it has lines
of credit adequate to support ongoing operational requirements. Beyond that, the
Company believes it has sufficient financial flexibility to attract long-term
funding on acceptable terms as may be needed to support its growth objectives.
The Company has initiated discussions with Chase to amend its Credit Facilities
which, if completed, would result in lower interest rates and otherwise more
favorable terms and conditions. Such amendment is expected to become effective
concurrent with the Offerings.
SEASONALITY
The Company's business is moderately seasonal as its major OEM customers
historically have a two week shutdown of operations in July and approximately a
one week shutdown in December. In addition, traditionally in the third quarter
OEM customers have incurred lower production rates as model changes enter
production. Accordingly, third and fourth quarter results may reflect these
trends.
EFFECTS OF INFLATION
Inflation generally affects the Company by increasing the cost of labor,
equipment and raw materials. The Company believes that the relatively moderate
rate of inflation over the past few years has not had a significant impact on
the Company's operations as the Company offset the increases by realizing
improvements in operating efficiency or by passing through certain increases in
the cost of raw materials to GM under the terms of the CSA and the LPCs.
FINANCIAL INSTRUMENTS MARKET RISK
The Company's business and financial results are affected by fluctuations
in world financial markets, including interest rates and currency exchange
rates. The Company's hedging policy attempts to manage these risks to an
acceptable level based on management's judgment of the appropriate trade-off
between risk, opportunity and costs. The Company hedges its interest rate risks
by utilizing swaps and collars. The Company does not currently have significant
exposures relating to currency risks and does not have any financial instruments
to reduce currency risks at March 31, 1998 or at December 31, 1997. The Company
does not hold financial instruments for trading or speculative purposes.
The Credit Facilities required the Company to enter into interest rate
hedging arrangements with a notional value of $112.5 million. The arrangements
entered into by the Company, which terminate in December 2000, require the
Company to pay a floating rate of interest based on three-month LIBOR with a cap
rate of 6.5% and a floor rate of 5.5%.
Interest Rate Risk. As part of its risk-management program, the Company
performs sensitivity analyses to assess potential gains and losses in earnings
and changes in fair value relating to hypothetical movements in interest rates.
An 80 basis-point increase in interest rates (approximately 10% of the Company's
weighted average interest rate) affecting the Company's debt obligations,
related interest rate swaps and collars (existing at December 31, 1997), would
impact the Company's 1998 pretax earnings by approximately $3.0 million.
Additional, for detail of financial instruments in place at December 31, 1997,
please see Note 5, 'Risk Management' in the Consolidated Financial Statements.
Currency Risk. The Company does not currently have material exposures to
currency exchange-rate risk as most of its business is denominated in U.S.
Dollars. Future business operations and opportunities, including the
construction of its new manufacturing facility in Guanajuato, Mexico, may expose
the Company to the risk that the eventual net dollar cash inflows resulting from
these activities may be adversely affected by changes in currency exchange
rates. The Company will manage these risks by utilizing various types of foreign
exchange contracts, where appropriate.
YEAR 2000 COMPLIANCE
The Company is in the process of implementing appropriate action to ensure
that its computer information systems will be able to interpret the calendar
year term '2000'. (Systems that process transactions based on storing two digits
for the year rather than the full four digits may encounter significant process
inaccuracies and even inoperability in attempting to process year 2000
transactions.) The costs of software replacing existing non-compliant year 2000
systems will be capitalized and amortized over the software's estimated useful
life and
26
<PAGE>
software modifications will be expensed as incurred in accordance with the
Company's software capitalization policy. The amounts expensed to date have been
immaterial and the Company does not expect the amounts required to be expensed
in the future to have a material effect on its financial position or results of
operations. Management presently believes that, with planned modifications to
existing software and conversion to new software, year 2000 compliance will not
pose significant operational problems. However, if such modifications and
conversions are not completed on a timely basis, or if the Company's partners
have significant unresolved systems problems, there is a risk that year 2000
compliance could have a material impact on the operations of the Company.
LITIGATION AND ENVIRONMENTAL REGULATIONS
The Company is party to various legal actions and is subject to various
claims arising in the ordinary course of business. The Company believes that the
disposition of these matters will not have a material adverse effect on the
financial position, results of operations or cash flows of the Company.
GM has agreed to indemnify and hold the Company harmless from certain
environmental issues identified as potential areas of environmental concern at
the time of transaction. GM has also agreed to indemnify the Company, under
certain circumstances, for up to ten years from the date of closing with respect
to certain pre-closing environmental conditions.
Approximately one-acre of a parking lot at the Company's Buffalo facility
has been designated by the New York Department of Environmental Conservation
('NYDEC') as a Class 3 Inactive Hazardous Waste Disposal Site due to the
presence of polychlorinated byphenyl in subsurface soil and groundwater below
existing pavement, and an elevated level of lead in the soil. A Class 3
designation is given to a site which does not present a significant threat to
the public health or environment and at which action may be deferred. The
contamination took place prior to the Company acquiring the property and is the
responsibility of GM. The area is the subject of an Order of Consent between GM
and NYDEC effective February 2, 1995. Remediation required thereunder is being
performed by GM in the ordinary course of business.
Based on the Company's assessment of costs associated with its
environmental responsibilities, including recurring administrative costs,
capital expenditures and other compliance costs, such costs have not had, and in
management's opinion, will not have in the foreseeable future, a material effect
on the Company's financial position, results of operations, cash flows or
competitive position.
EFFECT OF NEW ACCOUNTING STANDARDS
The Company adopted SFAS No. 128 'Earnings Per Share' in 1997. This
accounting standard specifies new computation, presentation and disclosure
requirements for earnings per share to be applied retroactively. SFAS No. 128
requires, among other things, presentation of basic and diluted earnings per
share, replacing the former primary and fully diluted earnings per share, on the
face of the income statement.
In 1998, the Company adopted SFAS No. 130, 'Reporting Comprehensive Income'
and SFAS No. 131, 'Disclosures about Segments of an Enterprise and Related
Information.' SFAS No. 130 requires that the components and total amount of
comprehensive income be displayed in the financial statements for interim and
annual periods in 1998. SFAS No. 131 requires, among other things, the reporting
of detailed operating segment information and related disclosures about products
and services, geographic areas and major customers for annual periods beginning
in 1998 and for interim periods beginning in 1999. Management is currently
evaluating it alternatives under the new Statement and anticipates disclosures
in one segment under the new rules.
Statement of Position ('SOP') 98-1, 'Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use,' was issued in March 1998. SOP
98-1, among other things, requires that certain costs of internal use software,
whether purchased or developed internally, be capitalized and amortized over the
estimated useful life of the software. Adoption of SOP 98-1 is required as of
January 1, 1999, but earlier adoption is allowed. The Company has historically
followed the guidelines specified in SOP 98-1.
27
<PAGE>
BUSINESS
GENERAL
The Company is a Tier I supplier to the automotive industry and a world
leader in the design, engineering and manufacturing of driveline systems for
light trucks and SUVs. The driveline system includes all of the components that
transfer power from the transmission and deliver it to the drive wheels.
Driveline products produced by the Company include axles, propeller shafts,
chassis components and forged products. With an estimated 34% market share in
North America (which represents an 18% share of the estimated worldwide market),
the Company is the leading independent supplier of driveline components for
light trucks and SUVs, the fastest growing segments of the light vehicle market.
The Company also manufactures axles, propeller shafts and other products for RWD
passenger cars. Additionally, the Company has the second largest automotive (by
sales) forging operation in North America.
The Company is GM's principal supplier of driveline components for light
trucks, SUVs and RWD passenger cars, supplying substantially all of GM's rear
axle and front 4WD axle requirements, and over 75% of its propeller shaft
requirements for these vehicle platforms in 1997. Approximately 96% of the
Company's 1997 sales were to various divisions and subsidiaries of GM. The
Company's second largest customer is Ford, for which the Company produces axle
shafts and double cardan joints for light trucks and SUVs manufactured by Ford
in North America.
THE 1994 ACQUISITION
The Company is the successor to the former Final Drive and Forge Business
Unit of the Saginaw Division of GM and has produced driveline components and
forged products for over 75 years. In March 1994, a private investor group led
by Richard E. Dauch formed the Company and consummated the 1994 Acquisition. In
connection with the 1994 Acquisition, GM and the Company entered into the CSA
under which the Company became the sole-source supplier to GM of all the
products and components previously supplied to GM by the Business Unit. In
September 1997, the Company and GM signed an additional binding agreement, the
MOU, which became operative after the Company's recapitalization described
below. Under the MOU, the Company and GM have agreed to transition the CSA into
a number of separate LPCs, under which the Company will supply products and
components for the life of each GM vehicle program covered by an LPC. These LPCs
will ultimately replace the CSA. See '--Contractual Arrangements with GM.'
The Company's management team, which was formed in connection with the 1994
Acquisition, is led by Mr. Dauch as Chairman of the Board, Chief Executive
Officer and President and was carefully selected on the basis of its management
expertise in the automotive industry. Mr. Dauch has over 34 years of experience
in the industry and was an Executive Vice President for Chrysler from 1980 to
1991 and was instrumental in Chrysler's manufacturing and financial turnaround.
As an executive of GM, he also managed the Business Unit's largest manufacturing
plant (Detroit Gear & Axle) from 1974 to 1976. The Company's senior management
team is comprised of 12 executives with an average of 27 years' experience in
the automotive industry and experience in both automotive original equipment
manufacturer ('OEM') and supplier operations.
POST-ACQUISITION IMPROVEMENTS
Since the 1994 Acquisition, the Company has dramatically improved product
quality and manufacturing efficiency through a combination of management
leadership, significant investments in new equipment and technology, workforce
training, and process improvements resulting in increased capacity utilization.
From March 1994 through March 1998, the Company has invested in excess of $700
million in capital expenditures and 1.2 million labor hours for training and
education of its associates and has received and maintained ISO/QS 9000
certification for each of its facilities. As a result, (i) the average number of
axles produced per production day increased from approximately 10,000 in March
1994 to approximately 14,000 in March 1998, (ii) discrepant parts shipped to GM
(as measured by GM) decreased from approximately 13,400 PPM during the six
months ended December 31, 1994 to approximately 180 PPM during the twelve months
ended December 31, 1997 and (iii) returned parts decreased from 5,136 PPM during
the ten months ended December 31, 1994 to 664 PPM during the twelve months ended
December 31, 1997. See 'Risk Factors--Product Program Implementation.' Net sales
and operating income increased to $2.15 billion and $116.1 million,
respectively, for the year ended December 31, 1997 from $2.02 billion and $93.5
million, respectively, for the year ended December 31, 1996.
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<PAGE>
INDUSTRY OVERVIEW
The automotive industry has been and continues to be significantly
influenced by several trends which the Company believes will enhance its
strategic position and growth prospects.
Demand for Light Trucks and SUVs. From 1990 to 1997, domestic unit sales
of light trucks and SUVs increased as a percentage of total U.S. light vehicle
unit sales from 33% to 45%. While GM's sales of light trucks and SUVs during the
same period followed a similar trend, increasing to 43.0% in 1997, it still
trailed Chrysler and Ford which had penetrations of 68% and 58%, respectively.
Increased consumer demand for light trucks and SUVs increases the demand for the
Company's products.
4WD Penetration. Between 1990 and 1997, 4WD sales penetration of the U.S.
light vehicle market doubled, from 7% to over 15% and, according to J.D. Power,
is expected to continue to rise. The increasing penetration of 4WD vehicles is
also evident in the sales of GM light trucks and SUVs. For example, in 1990, 4WD
penetration of GM light truck and SUV sales was 31%. By 1997, this penetration
rate had risen to nearly 42%. The Company benefits from this trend to increased
4WD penetration since its sales-dollar content per vehicle is approximately 40%
higher on a 4WD vehicle than on a comparable two-wheel drive vehicle.
Outsourcing. In recent years, OEMs have been shifting research and
development, design, testing and validation responsibilities to suppliers to
take advantage of suppliers' lower cost structures, allocate engineering
resources more efficiently, and realize the synergistic benefits of a systems
approach. The trend has also been driven by the competitive pressures on OEMs to
improve product quality and to reduce capital expenditures, production costs and
inventory levels. A significant portion of driveline components are currently
manufactured by OEMs, representing a substantial outsourcing opportunity for the
Company.
Supplier Consolidation and Systems Integration. The OEMs have been
reducing the number of their suppliers, establishing stronger relationships with
large Tier I full-service suppliers. In conjunction with this trend, OEMs are
transitioning from purchasing components to shifting complete responsibility for
design, engineering and manufacturing full component systems to their remaining
Tier I suppliers. In response to this trend, suppliers have combined with other
suppliers to gain the critical mass to support research and development and
realize economies of scale. Furthermore, these combinations have been pursued to
add capabilities to manufacture complementary components and achieve more
complete systems supplier capabilities. The Company believes that this trend
toward multi-component system integrators will compel further consolidation,
leaving the industry with only a small number of dominant, worldwide suppliers.
Globalization. Tier I suppliers are increasingly following their OEM
customers as they expand manufacturing into global markets. Shipping costs,
import duties and local content laws make it advantageous for OEMs to purchase
from Tier I suppliers with a local presence. The Company is positioning itself
to follow the industry as it expands globally. The Company is in the process of
constructing a manufacturing facility in Guanajuato, Mexico; this facility is
currently scheduled to begin production in the fall of 2000.
The Company believes that as a result of its leading North American market
position as an independent supplier of driveline systems for the light truck and
SUV segment, management expertise, strong OEM and labor relationships, full
service engineering capabilities, high quality products, critical mass and
access to capital that it is well positioned to take advantage of trends in the
industry and to compete successfully as both a sub-assembly supplier and as a
manufacturing process specialist in the consolidating OEM supplier market.
BUSINESS STRATEGY
The Company plans to leverage its competitive advantages and actively
pursue the following strategies to increase revenue and profitability:
Improve product quality and manufacturing efficiency. Since the 1994
Acquisition, the Company has dramatically improved product quality and
efficiency. The Company is committed to continue reducing operating costs by
developing new manufacturing processes and by investing in new equipment,
technologies and improvements in product designs. The Company believes that the
significant modernization of its manufacturing equipment and facilities which
has been completed over the last four years, as well as initiatives to be
undertaken in connection with the GMT-800 and the New M-SUV Programs, will
generate enhanced productivity and operating efficiency. From March 1, 1994
through March 31, 1998, the Company has invested approximately $700 million on
the modernization of its equipment and facilities and anticipates spending $225
million to $325 million in additional capital expenditures during the last three
quarters of 1998.
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<PAGE>
Diversify, strengthen and globalize OEM customer base. The Company
currently provides axle shafts to Ford and has begun to pursue strategic
initiatives to further diversify its customer base by providing products for
vehicles manufactured by Isuzu, Nissan, CAMI (a joint venture between GM and
Suzuki), and Mercedes-Benz. The Company's sales to customers other than GM have
increased from $38.3 million for the ten months ended December 31, 1994 to
approximately $88.5 million in 1997. The Company will continue to seek new
business from existing customers, as well as develop relationships with new
customers worldwide. Substantially all of the Company's products are presently
sold in North America. The Company currently has a regional sales office in
Tokyo, Japan and is in the process of opening another office in Europe; this
presence is intended to help the Company access new markets for its products.
Additionally, the Company is establishing a regional sales office and
constructing a manufacturing facility in Guanajuato, Mexico; this facility is
currently scheduled to begin production in the fall of 2000.
Expand systems integrator capability. OEMs continue to consolidate their
supplier base and shift the design, engineering and manufacturing functions of
complete systems to their remaining Tier I suppliers. The Company currently
supplies axles, propeller shafts, chassis components and forged products for
light trucks and SUVs. The Company intends to provide additional driveline
components through a combination of developing new technologies and other
capabilities and managing Tier II and Tier III suppliers and acquiring other
suppliers, in order to offer its customers a more fully-integrated driveline
systems.
Develop new products. The Company intends to diversify its product
portfolio by designing and developing new products and systems. As part of its
commitment to product development, the Company opened its Technical Center in
1995 which provides resources to the Company's engineers to improve the design
of the Company's existing products and to design new products. The Company
invested $23.4 million and $27.8 million in research and development expenses in
1996 and 1997, respectively. To date, these initiatives have resulted in several
new products such as the new '11.5' axle (initially being used in the GMT-800
Program), multi-link rear axles, an integral oil pan front axle, precision
steering system joints (which utilize lash free/low lash idlers and radiax pivot
sockets) and improved propeller shaft 'U-Joints.' The Company is also in the
process of developing other new products such as independent rear drive system
modules, traction-enhancing advance differentials, banjo style axles, aluminum
rear axle carriers, axle cooler covers, spherical differential cases and near
net/net shaped forgings.
Pursue selected acquisition opportunities. The Company intends to pursue an
acquisition strategy designed to accelerate the implementation of its strategic
initiatives. The acquisition candidates the Company will evaluate will include:
(i) suppliers of driveline components which complement the Company's current
products offerings, (ii) companies in the forging industry, a segment which is
highly fragmented, which will allow the Company to capitalize upon the trend
toward OEM supplier consolidation, and (iii) other automotive parts suppliers,
enhancing the Company's efforts to diversify its customer base, expand its
product development capability, selectively globalize its operations and/or
leverage its design, engineering and validation expertise.
PRODUCTS
The Company designs, engineers and manufactures components for driveline
systems. The driveline system includes all the components that transfer power
from the transmission and deliver it to the drive wheels. Driveline products
produced by the Company include axles, propeller shafts, chassis components and
forged products. The following chart sets forth the percentage of total revenues
attributable to the Company's products for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Rear Axles........................................................... 55.0% 53.9% 53.0%
Front Axles.......................................................... 14.1 15.2 16.5
Propeller shafts..................................................... 8.4 8.7 8.8
Chassis components................................................... 11.9 10.5 9.8
Forged products...................................................... 8.8 8.9 9.2
Other................................................................ 1.8 2.8 2.7
----- ----- -----
100.0% 100.0% 100.0%
----- ----- -----
----- ----- -----
</TABLE>
30
<PAGE>
Rear Axles. Rear axles are rigid, integral drive axle modules for use on
light trucks, SUVs and RWD passenger cars. The Company offers a range of axle
sizes, gear ratios, differentials, brakes and anti-corrosion coatings. Each unit
is assembled, tested and shipped as an integrated system to minimize noise and
vibration. The products are available in semi-floating models for economy or
full-floating models for higher shaft torque and load capacity.
Front Axles. Independent front axles are chassis-mounted drive axles for
all-wheel and 4WD vehicles with independent front suspensions. Typical vehicle
applications include light trucks and SUVs. The Company produces a
'shift-on-the-fly' disconnect system that allows shifting into and out of 4WD
while the vehicle is moving. This innovation reduces system wear and extends
service life by making it easy to disconnect the front-drive system when not
needed. Components are matched and balanced to reduce noise and vibration.
Propeller Shafts. Propeller shafts, also referred to as driveshafts,
transmit power from the transmission to the axle. The Company produces one- and
two-piece propeller shafts for RWD vehicles and front-auxiliary shafts for 4WD
and all-wheel drive systems. Propeller shafts can be designed and manufactured
to meet customer requirements for torque, packaging, speed, size, joint type,
and special configuration. Each propeller shaft can be system balanced with its
corresponding axle or marked for future match-mounting considerations. For
applications requiring faster rotation speed, lighter weight or longer
distances, metal composites and all aluminum designs are also manufactured.
Chassis Components. Chassis components consist of steering linkage
assemblies, stabilizer bars and other components. Steering linkage assemblies
convert the circular motion of the steering wheel into the linear motion which
is used to turn the front wheels and control the direction of the vehicle.
Stabilizer bars are used for anti-roll systems. The Company's chassis components
also include brake drums, front suspensions, rods, ball studs and stabilizer bar
links.
Forged Products. The Company's forge division designs and manufactures a
wide variety of forged light truck, SUV and passenger car products for sale to
external customers and for internal use in the Company's driveline products. The
Company has the second largest automotive forging operation (by sales) in North
America and has invested significant capital in equipment and tooling which
enables it to produce large volumes of its products. The Company's forged
products include: net shaped differential gears, axle shafts, output shafts,
hypoid driving gears, pinions, weld yokes, tie rod sockets, relay rods, wheel
spindles, hubs, struts, connecting rods and caps, toe links, torsion bars and
trunnions. The Company's forging operations are designed to optimize material
usage and provide a low cost, high volume source for all forming needs.
Computerized tool design, metal flow simulation and computerized video gauging
are all used to design products quickly and efficiently, eliminating the costly
trial and error process used by other methods. The Company has developed
advanced net-shape forging capabilities that allow parts to be forged close to
finish size greatly reducing machining requirements after the forging process
and reducing materials waste.
Other. The Company's other sales revenue is comprised of service parts and
aftermarket sales.
CUSTOMERS
The Company is GM's principal supplier of driveline components for light
trucks, SUVs and RWD passenger cars, supplying substantially all of GM's rear
axle and front 4WD axle requirements, and over 75% of its propeller shaft
requirements for these vehicle platforms in 1997. Approximately 96% of the
Company's 1997 sales were to various divisions and subsidiaries of GM. The
Company's second largest customer is Ford, for which the Company produces axle
shafts and double cardan joints for its light trucks and SUVs manufactured in
North America.
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GM programs currently supplied and to be supplied by the Company include:
<TABLE>
<CAPTION>
VEHICLE PLATFORM VEHICLE DESCRIPTION VEHICLE NAMEPLATE
- ------------------------------ ------------------------ ---------------------
<S> <C> <C>
C/K (GMT-400/GMT-800) Full-size Pick-up/SUV Silverado, Sierra,
Suburban, Tahoe and
Yukon
S/T (GMT-325-330/New M-SUV Mid-size Pick-up/SUV Blazer, Jimmy,
Program) Bravada, S-10 Pick-up
and Sonoma
M/L Mid-size Van Astro and Safari
G-VAN (GMT-600) Full-size Van Savanna and Chevy
Express
F-CAR RWD Passenger Car Camaro and Firebird
P-TRUCK Medium-Duty Commercial Commercial trucks and
Truck motorhomes
</TABLE>
The Company has been chosen as the design, development and production
partner/supplier for the GMT-800 and New M-SUV Programs. The GMT-800 Program
represents the next generation of GM's full-size pickup trucks, as well as the
Suburban, Tahoe and Yukon SUVs. GM currently plans to phase in production of
GMT-800 vehicles beginning in June 1998. The New M-SUV Program represents the
next generation of GM's compact SUVs, including such models as the Blazer,
Bravada and Jimmy. GM currently plans to phase in production of New M-SUV
vehicles post-2000. See 'Risk Factors--Product Program Implementation.'
While the Company is working to continue expanding its business with GM, it
is also pursuing strategic initiatives to diversify its customer base. In
addition to its business with Ford, the Company also currently supplies products
for vehicles manufactured by Isuzu, Nissan, CAMI (a joint venture between Suzuki
and GM), and Mercedes-Benz. The Company's sales to customers other than GM have
increased from $38.3 million for the ten month period ended December 31, 1994 to
$88.5 million in 1997. The Company will continue to seek new business from
existing customers, as well as develop relationships with new customers
worldwide. The Company currently has a regional sales office in Tokyo and is
opening two additional regional sales offices in Europe and in Guanajuato,
Mexico.
CONTRACTUAL ARRANGEMENTS WITH GM
In connection with the Company's acquisition of the Business Unit in 1994,
it entered into the CSA with GM pursuant to which the Company became the
sole-source supplier to GM of all products and components that were supplied to
GM by the Business Unit at such time. Substantially all of the Company's 1997
sales to GM were under the CSA. In connection with the Recapitalization in 1997,
the Company and GM entered into the MOU. Under the MOU, which is a binding
agreement, the Company and GM have agreed to replace the CSA with separate
sole-source lifetime program contracts ('LPCs') for each of the GM vehicle
programs covered by the CSA, including the GMT-800 and New M-SUV Programs
described above. The following is a summary of certain terms and conditions of
the CSA and the MOU as well as of the standard form LPCs to be entered into
pursuant to the MOU.
The CSA has an initial term of seven years, expiring March 2001, and is
automatically extended for successive one-year periods unless otherwise
terminated. During the term of the CSA, GM has agreed to purchase all of its
requirements for the products and components subject to the CSA so long as GM
continues regular production of the applicable vehicle models or requires the
products or components for service parts. LPCs will have terms equal to the life
of the relevant vehicle program, typically 6 to 12 years.
Prices for products sold under the CSA were established at the time the
parties entered into the agreement and are subject to adjustment for engineering
changes that result from changes in GM's component specifications. Prices for
products sold under the LPCs have been agreed to for existing programs and for
the GMT-800 and New M-SUV Programs. Prices for future programs will be
negotiated at the time the contracts for such programs are awarded.
The Company currently purchases through GM's purchasing network certain
materials for use in the manufacture of products sold under the CSA and to be
sold under the LPCs. While the Company pays current market prices for such
materials, increases or decreases in such prices from levels established under
the CSA currently result in corresponding increases or decreases in the
aggregate amount paid by GM to the Company for
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<PAGE>
its products, thereby protecting the Company from increases in the costs of such
materials while such purchasing arrangement is in effect. The Company and GM
have agreed to develop a mutually satisfactory plan to terminate this purchasing
arrangement no later than December 2002, although the Company will continue to
be eligible to participate in GM's then current steel resale program and pricing
adjustment policy for non-ferrous metals.
While the prices at which the Company sells its products under the CSA and
will sell its products under the LPCs have been established, under the LPCs,
upon termination of the purchasing arrangement described above, the Company will
have no contractual right to pass on any cost increases subsequent to such
termination. There can be no assurance that the Company will be able to pass on
any increased labor, materials or other costs to GM in the future as it has from
time to time in the past pursuant to the above-described terms of the CSA or by
certain additional payments agreed to as part of the commercial arrangements
between GM and the Company (subject to certain temporary reductions described in
'Management's Discussion and Analysis of Financial Condition and Results of
Operations--Company Overview').
Under the CSA, the Company and GM have agreed to share certain savings in
costs resulting from their mutual efforts or from labor contract negotiations.
To date, such shared cost savings have been minimal. Other cost savings
resulting from the Company's management expertise and knowledge or contributions
by Company associates, without input from GM, are not included in any such cost
savings computations and are not shared with GM. Sharing of cost savings under
the LPCs is expected to be substantially similar as under the CSA, but will not
include savings resulting from labor contract negotiations.
Under the CSA, the Company is not liable for warranty costs for its
products after the relevant vehicle has been sold to a retail purchaser unless
it is determined that the frequency or total cost of warranty claims for a given
period significantly exceeds the historical frequency of such claims for a
comparable model. Under the LPCs, the Company's products will be subject to the
warranty provisions of GM's standard purchase order, including warranties as to
the absence of defects and as to fitness and sufficiency for the particular
purposes for which such products are to be used by GM.
Under the terms of the CSA, if GM determines that a family of products (as
defined in the CSA) produced by the Company under the CSA is no longer
competitive in terms of quality, service or price and, following notice from GM,
the Company fails to remedy the noncompetitive condition within a specified
period, then GM may elect to discontinue purchasing such family of products from
the Company beginning March 2001. GM also may terminate the CSA in the event the
Company becomes insolvent or enters into bankruptcy or similar proceedings or if
a significant portion of the Company's assets become subject to attachment,
embargo or expropriation. Pursuant to the MOU, the CSA will terminate when the
materials purchasing arrangements described above have been terminated and all
products currently supplied under the CSA are included in LPCs, but in any event
no earlier than March 2001.
Under the terms of the standard form LPC, if GM determines that products
produced by the Company under an LPC are no longer competitive in terms of
technology, design or quality and, following notice from GM, the Company fails
to remedy the noncompetitive condition within a specified period, then GM may
elect to terminate such LPC. Termination with respect to such products becomes
effective one year after GM gives the Company notice of termination. Under the
LPCs, the Company will agree not to sue GM or its other suppliers in the event
GM terminates the LPC and obtains similar products from other sources.
The Company at the time of the 1994 Acquisition also entered into a supply
agreement (the 'GMCL Agreement') with General Motors of Canada, Limited
('GMCL'), an affiliate of GM, whereby axles produced at GMCL's St. Catharines,
Ontario facility are purchased by the Company for resale to GM. The GMCL
Agreement, as amended, expires in September 1999. The axles produced at St.
Catharines accounted for approximately 10% of the Company's revenues in 1997. In
addition, the Company has an irrevocable option to purchase for a nominal amount
the equipment used by GMCL at this facility to produce axles.
SALES AND BUSINESS DEVELOPMENT
The Company's sales and business development organization is structured
into two groups. The first group manages the commercial sales to GM's North
American operations, while the second group supports all other customers
worldwide, including GM's international divisions. Sales and business
development associates work closely with customers and Company engineers to
identify product needs and anticipate customer program initiatives and timing in
order to position the Company to support new programs, beginning with the design
and the development and continuing through product launch.
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<PAGE>
As GM and other OEMs expand globally, the Company intends to support its
customers through regional sales offices. The Company currently has a regional
sales office in Tokyo to support its customers and pursue business development
opportunities in Asia. In addition, the Company also plans to have a regional
sales office opened in Europe in the summer of 1998 and will consider offices in
other regions of the world in order to support OEM programs worldwide and
provide access to new markets for the Company's products. The Company has also
begun construction of a manufacturing facility, which will include a regional
sales office, in Guanajuato, Mexico. Production in this facility currently is
scheduled to begin in the fall of 2000.
RESEARCH AND DEVELOPMENT
The Company's research and development efforts are intended to facilitate
its ability to respond to the technological demands of the market and to support
its customers. In July 1995, the Company completed construction of its Technical
Center in Rochester Hills, Michigan, employing approximately 150 engineers,
designers and technicians, specializing in design, development and process
engineering. The Technical Center is located near GM's Truck Group Headquarters,
as well as the technical centers of other major OEMs, which facilitates
communications between the Company and its customers. The Technical Center
includes a materials laboratory and complete product testing and development
equipment, including four-wheel drive chassis and driveline dynamometers in
semi-anechoic noise chambers to analyze complete driveline systems for sources
of noise and vibration. The Company engages in a multi-phase program of
management processes and product launch review to ensure product readiness. The
Company believes that this rigorous program of research and development, testing
and validation provides its customers with full-service design services and high
quality engineering and manufacturing.
Approximately $23.4 million and $27.8 million was expended in research and
development, product enhancement and new designs during the years ended December
31, 1996 and 1997, respectively, in order for the Company to maintain and expand
its technological expertise in both product and process. Engineering design at
the Company involves the use of highly sophisticated analytical tools,
computer-aided design techniques and a simultaneous engineering processes based
on close communications and teamwork among design engineers, manufacturing
engineers and the customer. The Company promotes a cross-functional product team
approach with respect to product and process development that utilizes
engineering tools such as: computer-aided design, manufacturing and engineering,
computer-integrated manufacturing, engineering analysis, design validation plans
and reports and a fully integrated LAN/WAN computer network.
MANUFACTURING
The Company continues to expand and implement a flexible manufacturing
strategy that improves quality, delivery integrity and cost reduction ability.
All of the Company's manufacturing plants, its Technical Center and its
corporate headquarters have received ISO/QS 9000 certifications, which are
international and industry quality standards.
The Company utilizes the latest technology such as computer-aided design
and manufacturing to reduce lead time and to assure dimensional accuracy and
quality of its final products. For example, computer integrated manufacturing
allows the Company to validate tooling before release to actual production.
Reductions in cost are expected to result from newer flexible equipment, the
Company's ability to perform several manufacturing processes at the same
facility, less inventory, reduction in defects and fewer returned sales. Since
the 1994 Acquisition, the Company has invested approximately $700 million to
upgrade its equipment and facilities.
The Company is committed to reducing operating costs by developing new
manufacturing processes, improving product design and investing in new equipment
and technology. Management continues to identify and implement new cost
reduction initiatives and believes that additional improvements can be achieved
through improved manufacturing methods, many of which involve minimal capital
expenditures. These initiatives have been focused on key capacity and efficiency
issues such as reducing equipment downtime, improving product and material
workflow, eliminating bottleneck operations and upgrading personnel through
training and hiring.
Another important element of the Company's manufacturing strategy and a key
to its future success is the strategic investment of capital for new technology.
Any new machinery and equipment purchased by the Company is analyzed for its
flexibility, speed and reliability and must be capable of achieving maximum
throughput at world-class quality levels.
The Company produces on average 14,000 axles, 11,500 propeller shafts,
10,500 steering linkages, 20,000 stabilizer bars and 220,000 forgings each
production day. The Company has successfully increased production of axles per
production day from approximately 10,000 in March 1994 to approximately 14,000
in March 1998 while
34
<PAGE>
reducing manufacturing space requirements and improving quality. The Company has
reduced discrepant parts shipped to GM, as measured by GM, from approximately
13,400 PPM during the six months ended December 31, 1994 to approximately 180
PPM during the twelve months ended December 31, 1997 and returned parts
decreased from 5,136 PPM during the ten months ended December 31, 1994 to 664
PPM during the twelve months ended December 31, 1997. See Risk Factors, 'Product
Program Implementation.' The Company's manufacturing facilities have adequate
production capacity for its current needs, and management believes its present
facilities, enhanced by currently budgeted capital expenditures for equipment
additions and improvements, will be adequate to meet currently anticipated
customer requirements.
ASSOCIATES
The Company believes that one of its most important assets is its
workforce. Since the 1994 Acquisition, the Company has focused on making
significant improvements in its labor relations through improving working
conditions, incentive programs and town hall meetings with its hourly
associates. The Company has also implemented a program of continuous training
whereby the Company associates are taught the skill sets important to producing
products of precision quality. In each of the past three years, the Company has
invested approximately 300,000 labor hours annually in various training and
educational programs.
The Company also recognizes that a key element of its long-term
competitiveness is developing a constructive working relationship with its
unions. In 1997, the Company's management negotiated, and the Company's workers
ratified, the Company's first non-GM agreements with the UAW and the IAM.
Significantly, the unions have committed to assist the Company in achieving both
quality and productivity gains over the life of the contract.
As of March 31, 1998, the Company employed approximately 8,500 associates.
Approximately 7,000 of the Company's hourly associates are represented by the
UAW under a collective bargaining agreement which runs through February 25,
2000. The Company's approximately 300 remaining hourly associates are
represented by the IAM under a collective bargaining agreement which runs
through May 5, 2000. The Company believes its relationships with its associates
and their unions are good.
As part of the 1994 Acquisition, the Company's hourly associates were given
the option to transition back to GM as jobs at GM became available. Of the 6,500
hourly associates that were employed on March 1, 1994, approximately 2,900 have
returned to GM and as of March 31, 1998, approximately 1,600 associates are
eligible to return to GM. Such associates may transition back to GM once a
requested position becomes available on a schedule to be determined by the
Company. Such associates may also elect to remain at the Company. Many of those
who returned to GM were high seniority workers who were at or near retirement
age. As a result of this turnover, the average age of hourly associates has
decreased and the level of education of hourly associates in the workforce has
increased.
COMPETITION
The primary competitors to the Company in the North American light truck
and SUV driveline systems market are (i) the internal 'captive' operations of
Ford and Chrysler and (ii) independent, publicly-traded Dana Corporation. The
Ford and Chrysler operations are strictly internal and do not manufacture
products for outside customers at this time. Several foreign firms have niche
driveline businesses which primarily supply foreign transplant auto
manufacturers.
The automotive industry is highly competitive. The Company competes based
on technology, quality, price, durability, reliability and overall customer
service. The Company's competitors include driveline component manufacturing
facilities of existing OEMs, as well as a small number of independent suppliers
of driveline systems and several independent suppliers of forged products.
Certain of these OEMs are also customers of the Company. The Company's principal
competitors are large and have substantial resources, including those
competitors that are owned by OEMs. There can be no assurance that competitors
will not be able to take actions, including developing new technology or
products, or offering prolonged reduced pricing, which could adversely affect
the Company.
The Company believes that the trend in the industry is for OEMs to reduce
the number of their suppliers and develop close ties and long term,
partnership-style relationships with those suppliers similar to the relationship
developed between the Company and GM.
35
<PAGE>
PRODUCTIVE MATERIALS
The Company believes it has adequate sources for the supply of productive
materials and components for its manufacturing needs. The Company's suppliers
are located primarily in North America. The Company has initiated a policy of
strengthening its supplier relationships by concentrating its purchases for
particular parts over a limited number of suppliers. The Company believes that
this policy contributes to quality and cost control and increases a supplier's
commitment to the Company. The Company relies upon, and expects to continue to
rely upon, single source suppliers for certain critical components. See 'Risk
Factors--Reliance on GM' and '--Inventory Management; Reliance on Single Source
Suppliers.'
PATENTS AND TRADEMARKS
The Company maintains and has pending various U.S. and foreign patents and
other rights to intellectual property relating to its business, which it
believes are appropriate to protect the Company's interest in existing products,
new inventions, manufacturing process and product developments. The Company does
not believe any single patent is material to its business nor would the
expiration or invalidity of any patent have a material adverse effect on its
business or its ability to compete. The Company is not currently engaged in any
material infringement litigation, nor are there any material claims pending by
or against the Company.
PROPERTIES
Since the 1994 Acquisition, the Company has dedicated substantial resources
to improving the functionality and physical appearance of its facilities, making
renovations including painting, lighting, roofing, insulation, ventilation, fire
protection, fencing, parking lot, railroad and dock upgrades, and office
improvements. The Company has also purchased numerous buildings surrounding its
facilities and subsequently demolished these buildings and landscaped the areas.
Working with state and local governments, the Company has been successful in
securing infrastructure improvements surrounding the Detroit and Buffalo
facilities, including road, sewer, and utility upgrades.
The following is a summary of the Company's facilities:
<TABLE>
<CAPTION>
APPROX. TYPE OF
NAME SQ. FEET INTEREST FUNCTION
- ----------------------------------------- ---------------- ------- -----------------------------------------
<S> <C> <C> <C>
Detroit Gear & Axle ..................... 1,660,000 Owned Rear and front axles, front suspensions,
Detroit, MI brake assemblies, and rear brake drums
Buffalo Gear & Axle ..................... 1,165,000 Owned Rear axles and steering linkages
Buffalo, NY
Detroit Forge ........................... 710,000 Owned Forged products
Detroit, MI
Three Rivers Plant ...................... 750,000 Owned Rear propeller shafts, front auxiliary
Three Rivers, MI propeller shafts, and universal joints
Tonawanda Forge ......................... 470,000 Owned Forged products
Tonawanda, NY
Guanajuato Gear & Axle .................. 335,000 Owned Rear axles
Guanajuato, Mexico (in construction
phase)
Corporate Headquarters .................. 31,000 Owned Located at the Detroit Gear & Axle
Detroit, MI facility
Technical Center ........................ 66,000 Leased Research and development, design
Rochester Hills, MI engineering, metallurgy, testing,
validation, materials purchasing and
sales
</TABLE>
The Detroit Gear & Axle, Detroit Forge, Three Rivers Plant and Corporate
Headquarters facilities are each subject to a mortgage executed in favor of the
several lenders party to the Credit Facilities. Such mortgages expire upon
satisfaction of all borrowings under the Credit Facilities.
SEASONALITY
The Company's business is moderately seasonal as it typically shuts down
its operations for two weeks each July and approximately one week at the end of
December consistent with the work schedule of its principal customers. The
Company's third and fourth quarter results reflect the effects of these
shutdowns. In addition, the
36
<PAGE>
Company's principal customers have incurred lower production rates in the third
quarter as model changes enter production.
ENVIRONMENTAL MATTERS
In connection with the 1994 Acquisition, GM has agreed to indemnify and
hold the Company harmless from certain environmental issues identified as
potential areas of environmental concern at the time of the acquisition. GM has
also agreed to indemnify the Company, under certain circumstances, for up to ten
years from the date of closing with respect to certain preclosing environmental
conditions.
Approximately one acre of a parking lot at the Company's Buffalo facility
has been designated by the New York Department of Environmental Conservation
('NYDEC') as a Class 3 Inactive Hazardous Waste Disposal Site due to the
presence of polychlorinated biphenyl in subsurface soil and groundwater below
existing pavement, and an elevated level of lead in the soil. A Class 3
designation is given to a site which does not present a significant threat to
the public health or the environment and at which action may be deferred. The
contamination took place prior to the Company acquiring the property and is the
responsibility of GM. The area is the subject of an Order of Consent between GM
and NYDEC effective February 2, 1995. Remediation required thereunder is being
performed by GM in the ordinary course of business.
LITIGATION
The Company has no material litigation and management is not aware of any
pending matters of potential litigation or administrative processes which it
believes will have a material adverse impact upon the Company.
37
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company possesses a management team with proven leadership and
extensive automotive industry experience. The management team has been a
critical factor in the turnaround of the Company's operations since the 1994
Acquisition. The Directors and Executive Officers of the Company and its
principal operating subsidiary, American Axle & Manufacturing, Inc. ('AAM,
Inc.'), are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ ---- -----------------------------------------------------
<S> <C> <C>
Richard E. Dauch.......................... 55 Chairman of the Board of Directors; Chief Executive
Officer and President*
B.G. Mathis............................... 65 Executive Vice President and Chief Administrative
Officer*; Director
Michael D. Alexander...................... 50 Vice President--Management Information Systems and
Internal Audit, and Chief Information Officer**
Marion A. Cumo, Sr........................ 55 Vice President--Materials Management**
George J. Dellas.......................... 55 Vice President--Quality Assurance and Customer
Satisfaction**
David J. Demos............................ 48 Vice President--Sales and Business Development**
Patrick S. Lancaster...................... 50 Vice President, General Counsel and Secretary*
Allan R. Monich........................... 44 Vice President--Personnel**
Joel D. Robinson.......................... 55 Vice President--Manufacturing**
Daniel V. Sagady, P.E..................... 49 Vice President--Product Development and Engineering**
Michael D. Straney........................ 55 Vice President--Procurement**
Gary J. Witosky........................... 41 Vice President--Finance and Chief Financial Officer*
Robert A. Krause.......................... 42 Treasurer*
Glenn H. Hutchins......................... 42 Director
Bret D. Pearlman.......................... 31 Director
David A. Stockman......................... 51 Director
</TABLE>
- ------------------
* Executive Officer of both the Company and its principal operating subsidiary,
AAM, Inc.
** Executive Officer of AAM, Inc.
Richard E. Dauch has been Chief Executive Officer, President and a member
of the Board of Directors of the Company since the 1994 Acquisition. In October
1997, he was named Chairman of the Board of Directors. Prior to March 1994, he
spent 12 years at Chrysler. He left Chrysler in 1991 as Executive Vice President
of Worldwide Manufacturing. Mr. Dauch also served as group vice president of
Volkswagen of America, where he established the manufacturing facilities for the
first automotive transplant in the United States. Mr. Dauch has over 34 years of
experience in the automotive industry. In 1996, Mr. Dauch was recognized as the
Worldwide Automotive Executive of the Year by the Automotive Hall of Fame and
was recently named the 1997 Manufacturer of the Year by the Michigan
Manufacturer's Association. He has lectured extensively on the subject of
manufacturing and authored the book, Passion for Manufacturing, which is
distributed in 80 countries in several languages.
38
<PAGE>
B. G. Mathis has been Executive Vice President and Chief Administrative
Officer since November 1997 and previously was Vice President--Administration
and Chief Administrative Officer of the Company since it was purchased in the
1994 Acquisition. Mr. Mathis spent 28 years at Chrysler and held increasingly
responsible executive administrative positions, including Manager of Personnel
for all Chrysler Manufacturing Operations. He retired from Chrysler in 1988.
Michael D. Alexander has been Vice President--Management Information
Systems and Internal Audit, and Chief Information Officer since November 1997
and previously was Vice President--Personnel and Management Information Systems
since March 1997. From March 1994 to March 1997, Mr. Alexander was Vice
President--Finance and Chief Financial Officer of the Company. Before coming to
the Company, Mr. Alexander worked at Chrysler Corporation for 21 years. He held
both technical and managerial positions in the financial operational disciplines
with Chrysler Corporation. His experience spans all facets of manufacturing
including corporate, assembly, stamping, and power train operations in domestic
and international organizations and held the following positions: Finance
Manager, Latin America; Plant Controller; Senior Financial Specialist;
Divisional Manufacturing Financial Executive; and Director Hardware Planning,
Finance and Administration.
Marion A. Cumo, Sr. has been Vice President--Materials Management since May
1996 and was Vice President--Quality Assurance and Customer Satisfaction from
March 1994 to May 1996. Prior to joining the Company, Mr. Cumo spent 11 years
from 1980 to 1991 working as a manufacturing executive at Chrysler. His most
recent title at Chrysler was General Plants Manager of Assembly Operations.
After leaving Chrysler in 1991, Mr. Cumo became President of Tri-County Chrysler
Products in Peebles/West Union, Ohio, and also worked as an automotive
manufacturing consultant.
George J. Dellas has been Vice President--Quality Assurance and Customer
Satisfaction since May 1996 and prior thereto was Vice President--Procurement
and Material Management since the 1994 Acquisition. Prior to joining the
Company, Mr. Dellas spent 11 years in executive positions of increasing
responsibility at Chrysler. Before leaving Chrysler in 1991, he served as the
Director of Advanced Planning for the Assembly Division. Mr. Dellas has over 30
years experience in the automotive industry.
David J. Demos has been Vice President--Sales and Business Development
since November 1997 and previously was Vice President--Sales since May 1996.
Prior to joining the Company, Mr. Demos worked for GM for 21 years in various
engineering, quality and sales positions in the United States and overseas. In
his most recent position with GM he was chief engineer for the European business
unit of GM's Saginaw Division and chief engineer of GM final drive systems.
Since joining the Company he has held the positions of Executive Director, Sales
and Marketing, and Director, Sales, Marketing and Planning.
Patrick S. Lancaster has been Vice President, General Counsel and Secretary
since November 1997, and previously was General Counsel and Secretary since the
1994 Acquisition. Prior to joining the Company, Mr. Lancaster worked at Fruehauf
Trailer Corporation and its predecessor company from 1981 to 1994 where he last
served as General Counsel and Assistant Secretary.
Allan R. Monich has been Vice President--Personnel since November 1997. Mr.
Monich served as plant manager for the Buffalo Gear & Axle plant since the
formation of the Company in March 1994. Prior to joining the Company in March
1994, Mr. Monich worked for GM for 21 years in the areas of manufacturing,
quality, sales and engineering, including four years as a GM plant manager.
Joel D. Robinson has been Vice President--Manufacturing since April 1997.
Mr. Robinson joined the Company in March 1994 and has held various positions,
including, most recently, Executive Director of the GMT-800 Program. Mr.
Robinson began his career in the automotive industry at Ford in 1963, where he
held a series of technical and manufacturing management positions. Mr. Robinson
also worked for American Motors Corporation, serving as Director of Vehicle
Assembly, and later, at Chrysler, where he was responsible for all car body
programs.
Daniel V. Sagady, P.E. has been Vice President--Product Development and
Engineering since November 1997 and previously was Executive Director of Product
Engineering since May 1996. Prior to his promotion, Mr. Sagady served as the
Company's Director of Product Engineering from March 1994. He began is career at
GM in 1967 and has spent over 30 years in the automotive industry with both Ford
and GM where he has held
39
<PAGE>
various positions in manufacturing, quality, testing, and developmental
engineering. Mr. Sagady is a licensed Professional Engineer.
Michael D. Straney has been Vice President--Procurement since November 1997
and previously was Executive Director of Procurement since May 1996. Prior to
his current position, Mr. Straney served as Executive Director of Strategic
Planning from August 1995 and Director of Capacity, Planning, Modernization and
Investment since joining the Company in March 1994. Mr. Straney began his career
in 1960 with GM and has served in various capacities, including Plant Manager at
the Buffalo facilities of the Company while it was owned by GM, and as the
Operations Manager of all driveline facilities.
Gary J. Witosky has been Vice President--Finance and Chief Financial
Officer of the Company since March 1997. He also has been Treasurer of the
Company from March 1994 until January 1998 and Vice President since July 1996.
Prior to joining the Company, Mr. Witosky worked for Park Corporation from 1986
to 1994 in Cleveland, Ohio where he served in various positions including
Corporate Controller, Assistant Treasurer and Treasurer. In addition, Mr.
Witosky spent several years in public accounting and is a Certified Public
Accountant.
Robert A. Krause has been Treasurer of the Company since January 1998.
Prior to joining the Company, Mr. Krause worked for Baxter International Inc.
from 1985 to 1997 where he served in various positions in treasury and corporate
controller functions. In addition, Mr. Krause spent several years in public
accounting and is a Certified Public Accountant.
Glenn H. Hutchins was elected director of the Company in connection with
the Recapitalization. He is a member of the limited liability company which acts
as the general partner of the Blackstone Entities. He is a Senior Managing
Director of the Blackstone Group L.P. and has been with Blackstone since 1994.
Mr. Hutchins was a Managing Director of Thomas H. Lee Co. ('THL') from 1987
until 1994 and, while on leave from THL during parts of 1993 and 1994, was a
Special Advisor in the White House. Mr. Hutchins is a member of the boards of
directors of Clark Refining & Marketing, Inc., Clark USA, Inc., Corp Banca
(Argentina) S.A., Corp Group C.V., and Haynes International, Inc. In 1994, Mr.
Hutchins was also appointed Chairman of the board of directors of the Western
N.I.S. Enterprise Fund by President Clinton.
Bret D. Pearlman was elected director of the Company in May 1998. Mr.
Pearlman became a Managing Director of The Blackstone Group L.P. in 1998, and
has been involved in the firm's principal activities since 1989.
David A. Stockman was elected director of the Company in connection with
the Recapitalization. He is a member of the limited liability company which acts
as the general partner of the Blackstone Entities. He is a Senior Managing
Director of The Blackstone Group L.P. and has been with Blackstone since 1988.
Mr. Stockman is also a Co-Chairman of the board of directors of Collins & Aikman
Corporation and a member of the boards of directors of Bar Technologies Inc.,
Clark Refining & Marketing, Inc., Clark USA, Inc., and Haynes International,
Inc.
In connection with the Offerings, the Board intends to elect at least two
independent directors. The identity of the independent directors has not yet
been determined and may not be determined until after the completion of the
Offerings. The Company does not have a nominating committee.
COMMITTEES
Audit Committee. The Company has established an Audit Committee currently
consisting of Messrs. Mathis and Pearlman. The Audit Committee shall consider
and recommend to the Board of Directors the engagement of independent auditors
to audit annually the books and records of the Company and the terms of such
engagement; to review the reports of such independent auditors; the
appropriateness of the accounting principles followed in preparation of the
financial statements of the Company; to review the performance of the Company's
program of internal control to ensure compliance of the Company with legal
requirements; and to perform such other duties related to the foregoing as may
be directed by the Board of Directors. It is intended that the Company's new
independent directors will replace Messrs. Mathis and Pearlman on this
committee.
Executive Committee. The Company has established an Executive Committee
consisting of Messrs. Dauch (Committee Chairman), Stockman and Hutchins. The
Executive Committee shall have the powers set forth in
40
<PAGE>
Section 1 of Article III of the Bylaws of the Company to serve as the Board
between Board Meetings in regard to projects, expenditures and appropriations of
the Company and to review the Company's financial arrangements with third
parties.
Compensation Committee. The Company has established a Compensation
Committee consisting of Messrs. Hutchins and Stockman in order to attract and
retain qualified executives. The duties of the Compensation Committee are
generally to review employment, development, reassignment and compensation
matters involving corporate officers and such other executive level associates
as may be appropriate, including, without limitation, issues relative to salary,
bonus, stock options and other incentive arrangements. The Compensation
Committee shall also perform the function of the Employee Benefit Plan Fiduciary
Committee relative to the management and investment of assets held by or under
the Company's pension and employee benefit plan. The Employee Benefit Plan
Fiduciary Committee shall be discontinued.
DIRECTOR COMPENSATION
The Company expects to pay its non-employee and non-affiliated directors an
annual fee of $ , plus $ for each regularly scheduled meeting
attended and an additional $ for attendance at each Board committee
meeting.
EXECUTIVE COMPENSATION
The following tables set forth the compensation awarded or paid to, or
earned by, the Company's Chief Executive Officer and each of the Company's other
four most highly compensated executive officers during 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
SECURITIES ALL
---------------------- UNDERLYING OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(1)
- -------------------------------------------------------------- --------- ---------- ------------ ------------------
<S> <C> <C> <C> <C>
Richard E. Dauch ............................................. $625,000 $1,000,000 $ 11,029,000
Chairman of the Board, President and CEO
B. G. Mathis ................................................. 220,833 325,000 980,999
Executive Vice President and Chief Administrative Officer
Michael D. Alexander ......................................... 204,167 225,000 3,155,056
Vice President--Management Information Systems and Internal
Audit, and Chief Information Officer
George J. Dellas ............................................. 200,000 200,000 1,861,334
Vice President--Quality Assurance and Customer Satisfaction
Marion A. Cumo, Sr. .......................................... 183,333 200,000 1,865,484
Vice President--Materials Management
</TABLE>
- ------------------
(1) Amounts shown represent the Company matching contributions in the Company's
qualified section 401(k) profit sharing plan, the dollar value of
split-dollar life insurance benefits, special bonus payments and payments
made in connection with an incentive compensation plan due to a change in
control. These four amounts for 1997, expressed in the same order as
identified above, for the named executive officers are as follows: Mr.
Dauch--$14,250, $14,750, $11,000,000 and $0; Mr. Mathis--$5,125, $0, $0 and
$975,874; Mr. Alexander--$4,625, $0, $0 and $3,150,431; Mr. Dellas--$0, $0,
$0 and $1,861,334 and Mr. Cumo, Sr.--$4,150, $0, $0 and $1,861,334.
41
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS POTENTIAL REALIZABLE VALUE AT
UNDERLYING GRANTED TO EXERCISE ASSUMED ANNUAL RATES OF STOCK PRICE
OPTIONS/ EMPLOYEES OR BASE APPRECIATED FOR OPTION TERM
SARS IN FISCAL PRICE EXPIRATION ---------------------------------------
NAME GRANTED(#) YEAR ($/SH) DATE 0%($) 5%($)(1) 10%($)(1)
- ------------------------- ---------- ---------- ---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard E. Dauch......... 13.1% $16,811.78 11/10 $ 6,997,989 $19,376,711
48.7 1.00 11/07 $29,368,433 47,839,181 76,176,935
B. G. Mathis............. 7.1 16,811.78 11/10 3,767,003 10,430,442
Michael D. Alexander..... 0.9 16,811.78 11/10 506,238 1,401,720
Marion A. Cumo........... 3.3 16,811.78 11/10 1,742,053 4,823,564
George J. Dellas......... 3.3 16,811.78 11/10 1,742,053 4,823,564
</TABLE>
- ------------------
(1) The dollar amounts are based on assumed rates of annually compounded stock
price appreciation of 5% and 10% over the term of the option pursuant to the
rules of the Securities and Exchange Commission and are not intended to
forecast possible future appreciation, if any, in the price of the Common
Stock.
42
<PAGE>
STOCK OPTIONS
Management Stock Option Plan
The Company has adopted The Amended and Restated American Axle &
Manufacturing of Michigan, Inc. Management Stock Option Plan (the 'Option Plan')
under which the Company is authorized to grant options to purchase up to
shares of Common Stock.
The Option Plan provides for the issuance of shares of authorized but
unissued or reacquired shares of Common Stock, subject to adjustment to reflect
certain events such as stock dividends, stock splits, mergers or reorganizations
of or by the Company. The Option Plan is intended to assist the Company in
attracting and retaining employees of outstanding ability and to promote the
identification of their interests with those of the stockholders of the Company.
The Option Plan permits the grant of non-qualified stock options to purchase
shares of common stock. Unless sooner terminated by the Company's Board of
Directors, the Option Plan will terminate on December 31, 2004. Such termination
will not affect the validity of any outstanding grants on the date of the
termination.
The Compensation Committee of the Board of Directors will administer the
Option Plan. The Board of Directors may from time to time amend the terms of any
grant of options, but, except for adjustments made upon a change in the Common
Stock by reason of a stock split, spin-off, stock dividend, recapitalization,
reorganization or similar event, such action will not adversely affect the
rights of any participant under the Option Plan without such participant's
consent. The Board of Directors will retain the right to amend, suspend or
terminate the Option Plan.
In October 1997, the Company granted certain options (the 'Options') to key
employees to purchase an aggregate of approximately shares (the 'Option
Shares') of its common stock. Each Option gives the optionee the right to
purchase 1 share at a purchase price of $ . The Company may call a
participant's Option or Option Shares, under certain circumstances, after a
participant's termination of employment, however, no Options or Option Shares
may be called after the consummation of an initial Public Offering, as defined
in the Option Plan. One-third of the Options vest and become exercisable ratably
over 5 years; provided, however, that such Options will become immediately
vested and exercisable upon the earlier of a Change of Control, for certain
participants, or a participant's termination of employment without Cause or
voluntary termination of employment for Good Reason, as those terms are defined
in the Option Plan. The remaining two-thirds of the Options vest and become
exercisable on the seventh anniversary of the grant date; provided, however,
that such options may become exercisable sooner upon the achievement of certain
performance targets.
Replacement Plan
The Company has also adopted the 1997 American Axle & Manufacturing of
Michigan, Inc. Replacement Plan (the 'Replacement Plan') under which the Company
is authorized to grant options to purchase up to shares of Common Stock.
The purpose of the Replacement Plan is to provide the award of Replacement
Stock Options (as defined in the Replacement Plan) to certain current or former
executive officers or directors ('Eligible Holders') of the Company whose awards
under the American Axle & Manufacturing, Inc. Phantom Stock Plan dated March 1,
1994 (the 'PSP Plan') were voluntarily canceled in connection with the
Recapitalization. It is the intention of the Company that the terms of the
Replacement Stock Options preserve the economic value of the cancelled awards.
The Company expects that it will benefit from the added interest which such
Eligible Holders will have in the welfare of the Company as a result of their
proprietary interest in the Company's success. The Replacement Plan provides for
the issuance of shares equal to the aggregate number of shares subject to
Replacement Stock Options; provided, however, that such shares may be adjusted
to reflect certain events such as stock dividends, stock splits, mergers or
reorganizations of or by the Company.
The Compensation Committee of the Board of Directors will administer the
Replacement Plan. The Board of Directors may from time to time amend the terms
of any grant of options, but, except for adjustments made upon a change in the
Common Stock by reason of a stock split, spin-off, stock dividend,
recapitalization, reorganization, or similar event, such action will not
adversely affect the rights of any participant under the
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Replacement Plan, without such participants, consent. The Board of Directors
will retain the right to amend, suspend or terminate the Replacement Plan.
The only grant of options under the Replacement Plan was to Eligible
Holders, to the extent they elected to rollover to this plan, in whole or in
part, the awards held under the PSP Plan immediately prior to the consummation
of the Recapitalization. The Replacement Stock Options are non-qualified options
and are fully vested and exercisable.
Nonqualified Stock Option Agreement
AAM, Inc. and Richard E. Dauch are parties to a nonqualified stock option
agreement dated February 27, 1994 and amended as of December 21, 1994 (the
'Nonqualified Option Agreement'). Pursuant to the Nonqualified Option Agreement,
AAM, Inc. granted Dauch an option to purchase 1,747 shares of common stock of
AAM, Inc. (the 'AAM, Inc. Option'), with such number of shares to be adjusted to
reflect certain events such as stock dividends, stock splits, mergers or
reorganizations. In connection with the Recapitalization, the Company agreed to
provide Dauch with an option to purchase shares of Company Common Stock (the
'Exchange Option') in exchange for the AAM, Inc. Option; however, such Exchange
Option is to be governed by the terms of a nonqualified option agreement dated
as of October 30, 1997 between American Axle & Manufacturing of Michigan, Inc.
and Richard E. Dauch. The Exchange Option expires 10 years after the date such
Exchange Option was granted, and is fully vested and exercisable.
RETIREMENT PROGRAM
The retirement program for the Company executives consists of the American
Axle & Manufacturing, Inc. Retirement Program for Salaried Employees, which is a
tax-qualified plan and subject to ERISA, as well as one non-qualified plan
(collectively the American Axle & Manufacturing Supplemental Executive
Retirement Program). The contributory portion of the tax-qualified plan provides
defined benefits under a formula based on eligible years of credited service,
and upon the average monthly remuneration received in the highest sixty months
out of the final ten years of service, subject to certain Internal Revenue Code
limitations which change from time to time. In addition, employees receive an
annual retirement benefit which is equal to the sum of 100% of their
contributions upon retirement at or after age 65. If employees do not elect to
contribute to the tax-qualified plan, they are entitled to receive only basic
retirement benefits equal to flat dollar amount per year of credited service,
essentially equivalent to the American Axle & Manufacturing Hourly-Rate
Employees Pension Plan. All participants in the plan are entitled to this flat
dollar benefit. In accordance with its terms, benefits under the tax-qualified
plan fully vest after five years of credited service and are payable at the
normal retirement age of 65, or earlier at the election of the participant,
either in the form of a single life annuity or in a reduced amount, in joint and
survivor form. Supplemental early retirement benefits are available for certain
employees hired before 1998.
If executives made the required contributions to the tax-qualified plan,
they may also be eligible to receive the regular form of a supplemental
executive benefit (herein referred to as 'Regular Supplemental Executive
Retirement Program'). The regular form of the supplemental executive retirement
benefit will provide the executive with total monthly retirement benefits equal
to 2% of the average monthly base salary received in the highest sixty months
out of the final ten years of service, times the years of credited service
calculated for purposes of the contributory portion of the qualified plan, less
the sum of all benefits payable under this plan before reduction for any
survivor option plus 2% times the years of credited service times the maximum
monthly Social Security benefit payable to a person retiring at age 65. Table I
shows the regular form of the estimated total annual retirement benefit related
to final average base salary as of December 31, 1997, that would be payable in
12 equal monthly installments per annum as a single life annuity to executives
retiring in 1998 at age 65 (the benefits shown are based upon maximum annual
Social Security benefits of $ payable to persons retiring in 1998). If the
executive elects to receive benefits in the form of 60% joint and survivor
annuity, the amounts shown would generally be reduced by 5%, subject to certain
adjustments depending on the age differential between spouses.
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<PAGE>
TABLE I
PROJECTED TOTAL ANNUAL SUPPLEMENTAL EXECUTIVE RETIREMENT BENEFITS
ASSUMING EXECUTIVE QUALIFIES FOR REGULAR RETIREMENT PROGRAM BENEFITS
<TABLE>
<CAPTION>
YEARS OF ELIGIBLE CONTRIBUTORY CREDITED SERVICE
- ---------------------------------------------------------------------
HIGHEST FIVE-YEAR
ANNUAL SALARY 15 YEARS 25 YEARS 35 YEARS 45 YEARS
- ----------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 150,000 $ 44,540 $ 74,240 $103,940 $133,610
200,000 55,169 91,948 128,727 165,506
300,000 85,169 141,948 198,727 255,506
400,000 115,169 191,948 268,727 345,506
500,000 145,169 241,948 338,727 435,506
600,000 175,169 291,948 408,727 525,506
</TABLE>
The annual base salaries for the most recent year(s) considered in the
calculations of the averages reported here in the Summary Compensation Table in
the column labeled 'Salary.'
An executive may be eligible to receive the alternative form of the
supplemental executive retirement benefit (herein referred to as Alternative
Retirement Program) in lieu of the regular form of the supplemental executive
retirement benefit. The executive will receive the greater of the regular form
or alternative form of the supplemental executive retirement benefit. The sum of
the qualified plan benefits and the alternative supplemental retirement benefit
will provide the executive with total annual retirement benefits that are equal
to 1.5% times eligible years of credited service times the average monthly
compensation of the executive's highest five years of total direct compensation
(i.e., the average of the 60 highest months of base salary plus the average
monthly compensation of the five highest years of bonus and/or restricted stock
units awarded) out of the last ten years, less 100% of the maximum monthly
Social Security benefit payable to a person in the year of retirement. Table II
shows the alternative form of the estimated total supplemental executive annual
retirement benefit related to final average total direct compensation as of
December 31, 1997, that would be payable in 12 equal monthly installments per
annum as a single annuity to executives retiring in 1998 at age 65 (the benefits
shown are based upon the maximum Social Security benefits of the $16,104 payable
retiring in 1998). Again, the amounts shown would be reduced in the same way if
the executive were to elect joint and survivor benefits.
TABLE II
PROJECTED TOTAL ANNUAL ALTERNATIVE RETIREMENT BENEFITS
ASSUMING EXECUTIVE QUALIFIES FOR ALTERNATIVE SUPPLEMENTAL
EXECUTIVE RETIREMENT PROGRAM BENEFITS (A)
<TABLE>
<CAPTION>
YEARS OF ELIGIBLE CONTRIBUTORY CREDITED SERVICE
- --------------------------------------------------------------------------
HIGHEST FIVE-YEAR
AVERAGE ANNUAL TOTAL
DIRECT COMPENSATION 15 YEARS 25 YEARS 35 YEARS 45 YEARS
- -------------------- -------- -------- -------- ----------
<S> <C> <C> <C> <C>
$ 400,000 $ 76,916 $139,166 $201,416 $ 263,666
500,000 96,396 171,396 246,396 321,396
1,000,000 208,896 358,896 508,896 658,896
1,200,000 253,896 433,896 613,896 793,896
1,500,000 321,396 546,396 771,396 996,396
1,800,000 388,896 658,896 928,896 1,198,896
</TABLE>
The annual total direct compensation for the most recent year considered in
the calculation of the sum of the averages of salary and of bonus income, which
is reported here as average annual total direct compensation, will be found in
the Summary Compensation Table in the column labeled 'Salary' and in the column
labeled 'Bonus.'
The regular or alternative form of the supplemental executive retirement
benefit is provided under a program which is non-qualified for tax purposes and
not pre-funded. Supplemental executive retirement benefits under the
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<PAGE>
regular and alternative formula can be reduced or eliminated for both retirees
and active employees by the Compensation Committee and the Board of Directors.
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
For a discussion of certain business relationships between Mr. Dauch and
the Company, see 'Certain Transactions--Transactions with Management.' The
Company has established a Compensation Committee of which no member of which is
an insider of the Company.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by the Delaware General Corporation Law ('Delaware Law'), the
Company's Certificate Articles of Incorporation, as anticipated to be in effect
upon consummation of the Offerings, will eliminate the personal liability of a
director of the Company for monetary damages for breach of fiduciary duty of
care as a director, except for (i) any breach of the director's duty of loyalty
to the Company or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
unlawful payment of dividends or stock purchases or redemptions pursuant to
Section 174 of the Delaware Law and (iv) any transaction from which the director
derived an improper personal benefit. In addition, the Company's Bylaws provide
for indemnification, to the full extent specifically authorized under the
Delaware Law, of directors and officers of the Company and persons who serve at
the request of the Company as a director, officer, employee, agent or trustee of
another corporation, partnership, joint venture, trust or other enterprise.
EMPLOYMENT AGREEMENTS
The Company has a seven-year employment agreement with Mr. Dauch, which
expires on December 31, 2004 and provides for an annual base salary of $750,000.
Pursuant to the agreement, Mr. Dauch will be a voting member of the Board of
Directors for the term of his employment and will also, during such term, have
the right to fill a number of seats on the Board of Directors in proportion to
his percentage ownership of voting equity in the Company. Mr. Dauch's employment
agreement also provides, among other things, (i) for an annual bonus payable on
or before the March 15th following the year in which such bonus was earned and
(ii) participation in the Company Stock Option Plan. Under the terms of his
employment agreement, Mr. Dauch is bound by confidentiality and non-competition
covenants for a period of two years following the expiration of the employment
agreement. The Company may terminate Mr. Dauch's employment agreement for Cause
(as defined therein).
The Company has purchased a five million dollar life insurance policy for
Mr. Dauch, which the Company will maintain during employment and for two years
after termination other than for cause.
In connection with the commencement of his employment with the Company, Mr.
Dauch received an option to purchase 1,747 shares of AAM, Inc. at an exercise
price of $1.00 per share. In connection with the Recapitalization, the Company
agreed to provide Dauch with an option to purchase shares of Company
Common Stock (the 'Exchange Option') in exchange for the AAM, Inc. Option;
however, such Exchange Option is to be governed by the terms of a nonqualified
option agreement dated as of October 30, 1997 between American Axle &
Manufacturing of Michigan, Inc. and Richard E. Dauch. The Exchange Option
expires 10 years after the date such Exchange Option was granted, and is fully
vested and exercisable.
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OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 31, 1998 by (i) each person known by
the Company to be the beneficial owner of 5% or more of the outstanding Common
Stock, (ii) each director of the Company, (iii) each of the named executive
officers of the Company and (iv) all of the Company's directors and executive
officers as a group. Unless otherwise indicated, the Company believes that the
beneficial owner has sole voting and investment power over such shares. The
table does not reflect the potential sale of additional shares if the
Underwriters' over-allotment options are exercised.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF BENEFICIAL PERCENT OF
OWNERSHIP CLASS
-------------------- ----------------------
NAME AND ADDRESS OF BEFORE AFTER
BENEFICIAL OWNER OFFERINGS OFFERINGS
- ------------------------------------------------------------------------ --------- ---------
<S> <C> <C> <C>
Blackstone Entities(1)
345 Park Avenue, 31st Floor
New York, NY 10154.................................................... 64.3%
Richard E. Dauch(2)..................................................... 25.3%
Jupiter Capital Corporation(3).......................................... 5.1%
Park Corporation(3)..................................................... 5.1%
Raymond P. Park(3)...................................................... 5.1%
Dan K. Park(3).......................................................... 5.1%
Patrick M. Park(3)...................................................... 5.1%
Kelly C. Park(3)........................................................ 5.1%
Piper Park-Strasshofer(3)............................................... 5.1%
Glenn H. Hutchins(4).................................................... 64.3%
Bret D. Pearlman(4)..................................................... 64.3%
David A. Stockman(4).................................................... 64.3%
B. G. Mathis(2)......................................................... 1.3%
Michael D. Alexander(2)................................................. *
Marion A. Cumo, Sr.(2).................................................. *
George J. Dellas(2)..................................................... *
All directors and executive officers of the Company as a group
(16) persons(5)....................................................... 94.9%
</TABLE>
- ------------------
* Represents holdings of less than one percent.
(1) shares, or 64.3% (before the Offerings), of the outstanding
shares are held collectively by Blackstone Capital Partners II Merchant
Banking Fund L.P., Blackstone Offshore Capital Partners II L.P. and
Blackstone Family Investment Partnership II L.P. Blackstone Management
Associates II L.L.C. ('BMA') is the general partner of each of such
entities. Messrs. Peter G. Peterson and Stephen A. Schwarzman are the
founding members of BMA and as such may be deemed to share beneficial
ownership of the shares owned by the Blackstone Entities.
(2) Each of such person's business address is 1840 Holbrook Avenue, Detroit,
Michigan 48212.
(3) Such person's business address is 6200 Riverside Drive, Cleveland, Ohio
44135. Jupiter is a wholly-owned subsidiary of Park Corporation, a company
that is privately owned by Raymond P. Park, Dan K. Park, Patrick M. Park,
Kelly C. Park and Piper Park-Strasshofer, with each holding equal shares of
Park Corporation.
(4) Each such person's address is 345 Park Avenue, 31st Floor, New York, New
York 10154. Messrs. Hutchins and Stockman are members of the general partner
of the Blackstone Entities that has investment and voting control over the
shares held or controlled by the Blackstone Entities. Beneficial ownership
of shares by three such individuals include the shares beneficially owned by
the Blackstone Entities. Each of such persons disclaims beneficial ownership
of such shares.
(Footnotes continued on next page)
47
<PAGE>
(Footnotes continued from previous page)
(5) Includes options for shares of Common Stock subject to time options
and shares of Common Stock subject to certain performance options
which will vest and become exercisable upon the closing of the Offerings.
See 'Management--Stock Options.' Includes shares of Common Stock
beneficially owned by the Blackstone Entities, as described in note (1)
above.
CERTAIN TRANSACTIONS
TRANSACTIONS WITH BLACKSTONE AFFILIATES
In connection with the Recapitalization, the Company and Blackstone
Management Partners II L.L.C. ('Blackstone Management'), an affiliate of
Blackstone, entered into a monitoring agreement dated as of October 29, 1997
(the 'Monitoring Agreement'), pursuant to which Blackstone Management will
provide certain advisory and consulting services to the Company in connection
with the ongoing strategic and operational affairs of the Company. The term of
the Monitoring Agreement expires when Blackstone ceases to own at least one-half
of the Common Stock held by it at the closing of the Recapitalization. Under the
Monitoring Agreement, the Company paid Blackstone $838,356 during the year ended
December 31, 1997. On each March 31 and September 30 thereafter, the Company
will pay Blackstone Management $1.0 million. In addition, on each March 31,
commencing in 1999, the Company will pay Blackstone an amount equal to 1.0% of
EBITDA (as defined in the Monitoring Agreement) for the most recently completed
fiscal year less $2.0 million (if such amount is positive). In addition, in 1997
the Company paid Blackstone Management a $9.3 million transaction fee for
services provided in connection with the Recapitalization.
STOCKHOLDERS' AGREEMENT AND RECAPITALIZATION
In connection with the Recapitalization, the Company, Blackstone, Jupiter
and Messrs. Dauch and Harris entered into the Stockholders' Agreement which
provides for, among other things, the matters described below:
Tag-Along Rights. So long as Blackstone owns not less that one-third of
the Common Stock held by it at the closing of the Recapitalization, the
Stockholders' Agreement grants each of Jupiter and Messrs. Dauch and Harris the
right, subject to certain exceptions, in connection with a proposed transfer of
Common Stock by Blackstone, to require the proposed transferee to purchase a
certain percentage of the Common Stock owned by them at the same price and upon
the same terms and conditions.
Drag-Along Rights. So long as Blackstone owns not less than one-third of
the Common Stock held by it at the closing of the Recapitalization, the
Stockholders' Agreement grants Blackstone the right, in connection with an offer
by a third party to purchase all of the Common Stock held by Blackstone, Jupiter
and Messrs. Dauch and Harris, to require Jupiter and Messrs. Dauch and Harris to
transfer all of the Common Stock owned by them to such third party on the terms
of the offer so accepted by Blackstone, subject to certain restrictions.
Registration Rights. The Stockholders' Agreement grants 'piggy-back'
registration rights to Blackstone, Jupiter and Messrs. Dauch and Harris, subject
to certain limitations, each time the Company files a registration statement in
connection with the sale of Common Stock by the Company. The Stockholders'
Agreement also grants 'demand' registration rights to Blackstone, Jupiter and
Messrs. Dauch and Harris, subject to certain limitations. See 'Shares Eligible
for Future Sale.'
Participation Rights. The Stockholders' Agreement grants to Jupiter and
Messrs. Dauch and Harris the right, upon any issuance by the Company of
additional Common Stock to Blackstone (other than pursuant to a public offering
or a pro rata issuance to all holders of Common Stock), to subscribe for
additional Common Stock at the same price and upon the same conditions so that,
after giving effect to the issuance and the exercise of such rights, the Common
Stock owned by each represents the same percentage of the total outstanding
Common Stock on a fully diluted basis as was owned by each immediately prior
thereto.
Approval of Affiliate Transactions. The Stockholders' Agreement generally
provides that, subject to certain conditions, the Company will not, and will
cause its subsidiaries not to, enter into any transaction with Blackstone that
would require consent of the banks under the Credit Facilities among the Company
and the lenders thereto unless such transaction (i) is approved by the Board of
Directors of the Company, (ii) is
48
<PAGE>
contemplated by the Recapitalization Agreement or (iii) is the payment of
customary investment banking fees to Blackstone.
Termination. The Stockholders' Agreement will terminate on the earliest
date on which Blackstone and its affiliates do not collectively own one-fifth or
more of the Common Stock on a fully diluted basis. See 'Ownership of Common
Stock.'
In connection with the Recapitalization, (i) the Company repurchased shares
of Common Stock held by Jupiter and Morton E. Harris for an aggregate purchase
price of $110.0 million and $10.0 million, respectively, (ii) the Company made a
$74.2 million payment to Jupiter related to certain tax payments, and (iii) AAM,
Inc. paid to James W. McLernon, the former chairman of the board of directors of
AAM, Inc., a bonus of approximately $7.2 million pursuant to a letter agreement
dated July 29, 1997.
TRANSACTIONS WITH PARK CORPORATION
Immediately after the closing of the Recapitalization, Jupiter, a wholly
owned subsidiary of Park Corporation, owned 5.1% of the Common Stock. Prior to
the Recapitalization, Park Corporation provided AAM, Inc. cash management
services whereby available cash balances of AAM, Inc. were invested on its
behalf. Park Corporation received $12,536,288 from AAM, Inc. in consideration
for services it provided to AAM, Inc. from March 1994 to September 1997. In
addition, prior to the Recapitalization, AAM, Inc. purchased certain
manufacturing equipment from Motch Corporation, an affiliate of Park
Corporation. During 1997, payments to Motch Corporation from AAM, Inc. for such
equipment totalled approximately $9.6 million.
OTHER TRANSACTIONS
The Company intends to lend approximately $15.0 million in the third
quarter of 1998 to Mr. Dauch to enable him to pay taxes related to the
recognition of income associated with certain stock options.
DESCRIPTION OF CAPITAL STOCK
The following summary describes elements of the Company's Certificate of
Incorporation and Bylaws as anticipated to be in effect prior to consummation of
the Offerings.
The Company's authorized capital stock consists of (i) shares of
common stock, par value $.01 per share, of which shares are issued and
outstanding, and (ii) shares of Preferred Stock, par value $.01 per
share ('Preferred Stock') of which no shares are issued and outstanding.
Immediately following completion of the Offering, there are expected to be
shares of Common Stock ( shares of Common Stock if the
Underwriters' over-allotment options are exercised in full) and no shares of
preferred stock outstanding. The following description of the Company's capital
stock and related matters is qualified in its entirety by reference to the
Certificate of Incorporation and the Company's Bylaws, copies of which are being
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters
to be voted upon by the stockholders. The holders of Common Stock do not have
cumulative voting rights in the election of directors. Holders of Common Stock
are entitled to receive dividends if, as and when dividends are declared from
time to time by the Company's Board of Directors out of funds legally available
therefor, after payment of dividends required to be paid on outstanding
preferred stock (as described below), if any. In the event of liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets remaining after payment of liabilities
and accrued but unpaid dividends and liquidation preferences on any outstanding
preferred stock of the Company. The Common Stock has no preemptive or conversion
rights and is not subject to further calls or assessment by the Company. There
are no redemption or sinking fund provisions applicable to the Common Stock. The
Common Stock being sold by the Company in the Offering, when sold to the
Underwriters in the manner described in this Prospectus will be, and all
currently outstanding Common Stock of the Company is, duly authorized, validly
issued, fully paid and non-assessable.
49
<PAGE>
PREFERRED STOCK
The Certificate of Incorporation authorizes the Board of Directors to
establish one or more series of Preferred Stock and to determine, with respect
to any series of Preferred Stock, the terms and rights of such series, including
(i) the designation of the series, (ii) the number of shares of the series,
which number the Board may thereafter (except where otherwise provided in the
Preferred Stock designation) increase or decrease (but not below the number of
shares thereof then outstanding), (iii) whether dividends, if any, will be
cumulative or non-cumulative and the dividend rate of the series, (iv) the dates
at which dividends, if any, will be payable, (v) the redemption rights and price
or prices, if any, for shares of the series, (vi) the terms and amounts of any
sinking fund provided for the purchase or redemption of shares of the series,
(vii) the amounts payable on shares of the series in the event of any voluntary
or involuntary liquidation, dissolution or winding-up of the affairs of the
Company, (viii) whether the shares of the series will be convertible into shares
of any other class or series, or any other security, of the Company or any other
corporation, and, if so, the specification of such other class or series or such
other security, the conversion price or prices or rate or rates, any adjustments
thereof, the date or dates as of which such shares shall be convertible and all
other terms and conditions upon which such conversion may be made, (ix)
restrictions on the issuance of shares of the same series or of any other class
or series, and (x) the voting rights, if any, of the holders of such series. The
authorized shares of Preferred Stock, as well as shares of Common Stock, will be
available for issuance without further action by the Company's stockholders,
unless such action is required by applicable law or the rules of any stock
exchange or automated quotation system on which the Company's securities may be
listed or traded.
Although the Board has no intention at the present time of doing so, it
could issue a series of Preferred Stock that could, depending on the terms of
such series, impede the completion of a merger, tender offer or other takeover
attempt. The Board will make any determination to issue such shares based on its
judgment as to the best interests of the Company and its stockholders. The
Board, in so acting, could issue Preferred Stock having terms that could
discourage an acquisition attempt or other transaction that some, or a majority,
of the Company's stockholders might believe to be in their best interests or in
which stockholders might receive a premium for their stock over the then-current
market price of such stock.
THE DELAWARE GENERAL CORPORATION LAW
The Company is a Delaware corporation subject to Section 203 of the
Delaware General Corporation Law (the 'DGCL'). Section 203 provides that,
subject to certain exceptions specified therein, a Delaware corporation shall
not engage in certain 'business combinations' with any 'interested stockholder'
for a three-year period following the time that such stockholder became an
interested stockholder unless (i) the corporation has elected in its certificate
of incorporation not to be governed by Section 203 (the Company has not made
such an election), (ii) prior to such time, the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (iii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding certain shares), or (iv) at or subsequent to such time, the
business combination is approved by the board of directors of the corporation
and by the affirmative vote of at least 66 2/3% of the outstanding voting stock
which is not owned by the interested stockholder. The three-year prohibition
also does not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors. The term 'business combination' is defined generally to include
mergers or consolidations between a Delaware corporation and an 'interested
stockholder,' transactions with an 'interested stockholder' involving the assets
or stock of the corporation or its majority-owned subsidiaries and transactions
which increase an interested stockholder's percentage ownership of stock. Except
as specified in Section 203 of the DGCL, an interested stockholder is defined to
include (x) any person that is the owner of 15% or more of the outstanding
voting stock of the corporation, or is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting stock of
the corporation, at any time within three years immediately prior to the
relevant date and (y) the affiliates and associates of any such person. Under
certain circumstances, Section 203 of the DGCL makes it more difficult for an
'interested stockholder' to effect various business combinations with a
corporation for a three-year period, although the stockholders may elect to
exclude
50
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a corporation from the restrictions imposed thereunder. The Articles of
Incorporation does not exclude the Company from the restrictions imposed under
Section 203 of the DGCL.
CERTIFICATE OF INCORPORATION; BYLAWS
The Certificate of Incorporation and the Bylaws contain certain provisions
that could make more difficult the acquisition of the Company by means of a
tender offer, a proxy contest or otherwise.
Classified Board. The Certificate of Incorporation provides that the
Company's Board of Directors will be divided into three classes of directors,
with the classes to be as nearly equal in number as possible. As a result,
approximately one-third of the Board of Directors will be elected each year. The
classification of directors will have the effect of making it more difficult for
stockholders to change the composition of the Company's Board. The Certificate
of Incorporation provides that, subject to any rights of holders of Preferred
Stock to elect additional directors under specified circumstances, the number of
directors will be fixed in the manner provided in the Bylaws. The Bylaws provide
that, subject to any rights of holders of Preferred Stock to elect directors
under specified circumstances, the number of directors will be fixed from time
to time exclusively pursuant to a resolution adopted by directors constituting a
majority of the total number of directors that the Company would have if there
were no vacancies on the Board, but must consist of not more than nor
fewer than
directors. In addition, the Certificate of Incorporation provides that, subject
to any rights of holders of Preferred Stock, and unless the Board otherwise
determines, any vacancies will be filled only by the affirmative vote of a
majority of the remaining directors, though less than a quorum.
Removal of Directors. Under the DGCL, unless otherwise provided in the
Certificate of Incorporation, directors serving on a classified board may be
removed by the stockholders only for cause. In addition, the Certificate of
Incorporation and the Bylaws provide that directors may be removed only for
cause and only upon the affirmative vote of holders of at least 75% of the
voting power of all the then outstanding shares of stock entitled to vote
generally in the election of directors ('Voting Stock'), voting together as a
single class.
Stockholders Action. The Certificate of Incorporation and the Bylaws
provide that, subject to the rights of any holders of Preferred Stock to elect
additional directors under specified circumstances, stockholder action can be
taken only at an annual or special meeting of stockholders and may not be taken
by written consent in lieu of a meeting. The Bylaws provide that, subject to the
rights of holders of any series of Preferred Stock to elect additional directors
under specified circumstances, special meetings of stockholders can be called
only by the Board pursuant to a resolution adopted by a majority of the total
number of directors. Stockholders are not permitted to call a special meeting or
to require that the Board call a special meeting of stockholders. Moreover, the
business permitted to be conducted at any special meeting of stockholders is
limited to the business brought before the meeting pursuant to the notice of
meeting given by the Company.
Advance Notice Procedures. The Bylaws establish an advance notice
procedure for stockholders to make nominations of candidates for election as
directors, or bring other business before an annual meeting of stockholders of
the Company (the 'Stockholders Notice Procedure'). The Stockholders Notice
Procedure provides that only persons who are nominated by, or at the direction
of, the Board, or by a stockholder who has given timely written notice to the
Secretary of the Company prior to the meeting at which directors are to be
elected, will be eligible for election as directors of the Company. The
Stockholders Notice Procedure also provides that at an annual meeting only such
business may be conducted as has been brought before the meeting by, or at the
direction of, the Chairman of the Board or by a stockholder who has given timely
written notice to the Secretary of the Company of such stockholder's intention
to bring such business before such meeting. Under the Stockholders Notice
Procedure, for notice of stockholder nominations to be made at an annual meeting
to be timely, such notice must be received by the Company not less than 60 days
nor more than 90 days prior to the first anniversary of the previous year's
annual meeting (or, if the date of the annual meeting is advanced by more than
30 days or delayed by more than 60 days from such anniversary date, not earlier
than the 90th day prior to such meeting and not later than the later of (x) the
60th day prior to such meeting and (y) the 10th day after public announcement of
the date of such meeting is first made). Notwithstanding the foregoing, in the
event that the number of directors to be elected is increased and there is no
public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Company at least 70 days
prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice will be timely, but only with respect to nominees for any
new positions created by such increase, if it is received by the
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Company not later than the 10th day after such public announcement is first made
by the Company. Under the Stockholders Notice Procedure, for notice of a
stockholder nomination to be made at a special meeting at which directors are to
be elected to be timely, such notice must be received by the Company not earlier
than the 90th day before such meeting and not later than the later of (x) the
60th day prior to such meeting and (y) the 10th day after the public
announcement of the date of such meeting is first made. In addition, under the
Stockholders Notice Procedure, a stockholder's notice to the Company proposing
to nominate a person for election as a director or relating to the conduct of
business other than the nomination of directors must contain certain specified
information. If the Chairman of the Board or other officer presiding at a
meeting determines that a person was not nominated, or other business was not
brought before the meeting, in accordance with the Stockholders Notice
Procedure, such person will not be eligible for election as a director, or such
business will not be conducted at such meeting, as the case may be.
Liability of Directors; Indemnification. The Certificate of Incorporation
provides that a director will not be personally liable for monetary damages to
the Company or its stockholders for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
paying a dividend or approving a stock repurchase or redemption in violation of
Section 174 of the DGCL, or (iv) for any transaction from which the director
derived an improper personal benefit. The Certificate of Incorporation also
provides that each current or former director, officer, employee or agent of the
Company, or each such person who is or was serving or who had agreed to serve at
the request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise (including
the heirs, executors, administrators or estate of such person), will be
indemnified by the Company to the full extent permitted by the DGCL, as the same
exists or may in the future be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment). The Certificate of Incorporation also specifically authorizes
the Company to enter into agreements with any person providing for
indemnification greater or different than that provided by the Certificate of
Incorporation.
Amendment. The Certificate of Incorporation provides that the affirmative
vote of the holders of at least 75% of the voting power of the outstanding
shares of Voting Stock, voting together as a single class, is required to amend
provisions of the Certificate of Incorporation relating to the prohibition of
stockholder action without a meeting; the number, election and term of the
Company's directors; and the removal of directors. The Certificate of
Incorporation further provides that the Bylaws may be amended by the Board or by
the affirmative vote of the holders of at least 75% of the outstanding shares of
Voting Stock, voting together as a single class.
The description set forth above is intended as a summary only and is
qualified in its entirety by reference to the forms of the Certificate of
Incorporation and the Bylaws, copies of which are being filed as exhibits to the
Registration Statement of which this Prospectus is a part. See 'Available
Information.'
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the Common Stock is First Chicago
Trust Company of New York.
LISTING
The Company intends to apply to list the Common Stock on the New York Stock
Exchange under the proposed symbol 'AXL.'
DESCRIPTION OF CERTAIN INDEBTEDNESS
SENIOR SECURED CREDIT FACILITIES
In connection with the Recapitalization, The Chase Manhattan Bank ('Chase')
and a group of other lenders provided the Company with Credit Facilities, in an
aggregate principal amount not to exceed $750 million of which (i) $399 million
was drawn at the closing of the Recapitalization and (ii) $125 million is
available under the Tranche A Term Loan Facility (as defined below) to finance
Capital Expenditures as defined in the Credit Facilities and refinance the
Revolving Credit Facility and $195 million is available under the Revolving
Credit Facility (as defined below) for general corporate purposes, each subject
to customary borrowing conditions.
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The Credit Facilities consist of (i) a Senior Secured Term Loan Facility
(the 'Tranche A Term Loan Facility') providing for delayed draw term loans in an
aggregate principal amount of $125 million, (ii) a Senior Secured Term Loan
Facility (the 'Tranche B Term Loan Facility' and, together with the Tranche A
Term Loan Facility, the 'Term Loan Facility')) providing for term loans in an
aggregate principal amount of $375 million and (iii) a Senior Secured Revolving
Credit Facility (the 'Revolving Credit Facility') providing for revolving loans
and the issuance of letters of credit in an aggregate principal and stated
amount not to exceed $250 million (of which not more than $30 million may be
represented by letters of credit).
Except as set forth below, the full amount of the Tranche B Term Loan
Facility was drawn in a single drawing at the closing of the Recapitalization
and amounts repaid and prepaid under any Term Loan Facility may not be
reborrowed. Loans under the Tranche A Term Loan Facility are available at any
time prior to October 1999. Loans and letters of credit under the Revolving
Credit Facility are available at any time prior to October 30, 2004. In
connection with the Revolving Credit Facility, the Company may make short-term
borrowings of up to $20 million of swing-line loans. Any such swing-line loans
will reduce the amount available under the Revolving Credit Facility on a
dollar-for-dollar basis.
Loans made under the Tranche A Term Loan Facility will amortize
semi-annually and mature on October 30, 2004. The Tranche B Term Loan Facility
amortizes semi-annually and matures on April 30, 2006. The Company is required
to make mandatory prepayments of term loans, and commitments will be mandatorily
reduced, in amounts, at specified times and subject to certain exceptions, (a)
in respect of 75% of consolidated excess cash flow of the Company and its
subsidiaries (after giving effect to debt service on the Credit Facilities), (b)
in respect of 100% of the net proceeds of (i) certain dispositions by the
Company or any of its subsidiaries of assets or the stock of subsidiaries (other
than asset sales effected pursuant to certain lease financings and the
Receivables Facility) or (ii) the incurrence of certain indebtedness by the
Company or its subsidiaries and (c) in respect of 50% of the net proceeds of
certain sales of the Company's equity securities.
Amounts outstanding under the Credit Facilities are unconditionally and
irrevocably guaranteed by the Company and certain of its subsidiaries. In
addition, the Credit Facilities are secured by first priority security interests
in substantially all of the tangible and intangible assets of the Company and
its subsidiaries (excluding receivables related to the Receivables Facility),
including all the capital stock of, or other equity interests in, the Company's
domestic subsidiaries and its existing or subsequently acquired or organized
direct or indirect domestic subsidiaries and 65% of the capital stock of, or
other equity interests in, each foreign subsidiary of the Company.
At the Company's option, the interests rates applicable to the Credit
Facilities are either based on Chase's alternate base rate plus a margin ranging
from zero to 1.50% or the eurodollar rate plus a margin ranging from 0.75% to
2.25%. The alternate base rate is the higher of Chase's Prime Rate and the
federal funds effective rate plus 0.50%.
The Company pays a per annum fee equal to the applicable margin with
respect to the eurodollar rate then in effect under the Revolving Credit
Facility multiplied by the aggregate face amount of outstanding letters of
credit under the Revolving Credit Facility and a per annum fee ranging from
0.25% to 0.50% multiplied by the undrawn portion of the commitments under the
Tranche A Term Loan Facility and the Revolving Credit Facility.
The Credit Facilities contain various operating covenants which, among
other things, impose certain limitations on the Company's ability to redeem or
repurchase capital stock, incur liens, incur indebtedness, or merge, make
acquisitions or sell assets. The Credit Facilities also restrict the payment of
dividends on, or other distributions with respect to, the capital stock of the
Company, other than (i) dividends or distributions payable solely in Common
Stock and (ii) subject to certain dollar limitations, payable to employee
benefit plans or to officers and employees in connection with stock option and
similar employee benefit plans. In addition, the Credit Facilities require the
Company to comply with specified financial ratios and tests, including covenants
relating to interest coverage, leverage, retained earnings and capital
expenditures.
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RECEIVABLES FACILITY
The following is a summary of the material terms of the Receivables
Facility and is qualified in its entirety by reference to the Receivables Sale
Agreement and the Pooling Agreement (each as defined below).
The Receivables Facility
The Company established AAM Receivables as a wholly-owned, special purpose,
bankruptcy-remote subsidiary that purchases all receivables (the 'Receivables')
generated by AAM, Inc. (the 'Seller') pursuant to a receivables sale agreement
(the 'Receivables Sale Agreement'). The Receivables Sale Agreement contains
customary terms for similar transactions, including representations and
warranties of the Seller as to the Receivables and certain corporate matters,
affirmative and negative covenants and purchase termination events, and is
limited recourse to the Seller for breach of representations, warranties and
covenants.
AAM Receivables also entered into a pooling agreement (the 'Pooling
Agreement') with Chase as trustee (the 'Trustee') pursuant to which AAM
Receivables transferred to a trust (the 'Trust') all the Receivables, and Chase,
as a purchaser (in such capacity, the 'Purchaser') provided financing to AAM
Receivables (which in turn used such financing to pay a portion of the purchase
price of the Receivables purchased from the Seller) through the purchase of an
undivided percentage ownership interest in the Trust ('Transferred Interests').
The Receivables Facility is supported by a commitment of the Purchaser, subject
to the terms and conditions of the Pooling Agreement, to purchase Transferred
Interests through the Trust on a revolving basis in an amount not to exceed $125
million. The availability of the Receivables Facility is subject to the Trust
holding Receivables meeting certain eligibility requirements equal to the amount
of the outstanding Transferred Interests and required reserves. At December 31,
1997, approximately $99 million was available under the Receivables Facility, of
which $75 million was utilized. The sale of Receivables to AAM Receivables, the
transfer of Receivables to the Trust and the sale of Transferred Interests are
without recourse to AAM, Inc., except for claims arising from a breach of
representations and warranties or covenants.
The Trust, on behalf of the Purchaser, has a first priority perfected
security interest in the Receivables, the rights of AAM Receivables under the
Receivables Sales Agreement and cash collections and other proceeds received in
respect of the Receivables.
The Receivables are not available to the Company's general creditors.
However, the primary customer of the Seller is also a vendor to the Seller and,
in certain circumstances, may be able to offset amounts payable by the Seller
against the Seller's trade receivables from the vendor. Accordingly, the
Receivables Facility has been accounted for as a secured borrowing and is
consolidated.
Pursuant to a servicing agreement entered into by AAM, Inc., AAM
Receivables and the Trust, AAM, Inc. agreed to service the Receivables for the
Trust; provided, that, upon the occurrence of certain events, the servicing
agreement may be terminated by the Trustee.
Interest
The Receivables Facility bears interest determined, at the Company's
option, at rates based on Chase's alternate base rate or LIBOR, plus, in each
case, an applicable margin which is subject to specified increases on or about
July 31, 1998.
Fees
AAM Receivables pays certain fees with respect to the Receivables Facility,
including a commitment fee (the 'Commitment Fee') to the Purchaser in an amount
equal to the excess of the average aggregate purchase commitment for any monthly
period over the average aggregate Transferred Interests for such period and a
monthly program fee. The Commitment Fee is subject to specified increases on or
about July 31, 1998.
Facility Reductions
The Receivables Facility is supported by a commitment of the Purchaser,
subject to the terms and conditions of the Pooling Agreement, providing for the
purchase of Receivables through October 2003 to purchase Transferred Interests
on a revolving basis. After such time, all collections in respect of Receivables
purchased by AAM Receivables from the Seller will be used to reduce the
Transferred Interests of the Purchaser in the
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Receivables. Additionally, at any time, AAM Receivables at its option may reduce
the purchase commitment upon notice to the Purchaser or terminate the purchases
of Transferred Interests by the Purchaser.
Early Termination Events
The Pooling Agreement contains certain early amortization events which
would cause the termination of, or permit the Purchaser to terminate, the
revolving period and effectively reduce the amount of financing available under
the Receivables Facility to zero. Early amortization events include nonpayment
of amounts when due, violation of covenants, inaccuracy of representations and
warranties in any material respect, failure to comply with specified Receivables
performance tests, purchase termination events under the Receivables Sale
Agreement, bankruptcy, material judgments, imposition of PBGC liens or material
tax liens, and actual or asserted invalidity of the Purchaser's ownership
interest in the Receivables. Purchase termination events under the Receivables
Sales Agreement relating to the Seller include nonpayment of amounts when due,
violation of covenants, inaccuracy of representations and warranties in any
material respect, bankruptcy, ERISA events, imposition of PBGC liens or material
environmental or tax liens, and certain cross-defaults to the Credit Facilities.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of the Offerings, the Company will have outstanding
shares of Common Stock ( shares if the Underwriters' over-allotment
options are exercised in full). In addition, the Company will have reserved an
additional shares of Common Stock for issuance pursuant to the Option
Plan and the Replacement Plan. Of such outstanding shares, the shares sold in
connection with the Offerings will be freely tradeable in the United States
without restriction under the Securities Act, except that shares purchased by an
'affiliate' of the Company, within the meaning of the rules and regulations
adopted under the Securities Act, may be subject to resale restrictions. The
remaining outstanding shares and any of the shares issued pursuant to the Option
Plan and the Replacement Plan are 'restricted securities,' as that term is
defined under such rules and regulations, and may not be sold unless they are
registered under the Securities Act or they are sold in accordance with Rule 144
under the Securities Act or some other exemption from such registration
requirement. In addition, certain of those remaining outstanding shares are
subject to restrictions on transfer under various agreements. As those
restrictions under the Securities Act and those agreements lapse, such shares
may be sold to the public pursuant to Rule 144. The Company intends to register
under the Securities Act the shares issued or issuable under the Option Plan and
the Replacement Plan. In addition, pursuant to, and in accordance with the terms
and conditions of, the Stockholders' Agreement, Blackstone, Jupiter and Messrs.
Dauch and Harris can require the Company to effect a registration of their
shares of Common Stock. Generally, Blackstone has the right to request five such
demand registrations, and (i) Mr. Dauch and his affiliates and (ii) Jupiter, Mr.
Harris and their affiliates, can request one demand registration each, so long
as the requesting stockholder(s) own(s) at least 40% of the Company's Common
Stock held by it at the time of the closing of the Recapitalization, and all of
such parties have certain 'piggyback' registration rights. See 'Management' and
'Certain Transactions--Stockholders' Agreement.'
In general, under Rule 144, beginning 90 days after the date of this
Prospectus, subject to certain conditions with respect to the manner of sale,
the availability of current public information concerning the Company and other
matters, each of the existing stockholders who has beneficially owned shares of
Common Stock for at least one year will be entitled to sell within any three
month period that number of such shares which does not exceed the greater of 1%
of the total number of the then outstanding shares of Common Stock or the
average weekly trading volume of shares of Common Stock during the four calendar
weeks preceding the date on which notice of the proposed sale is sent to the
Commission and the New York Stock Exchange. Moreover, each of the existing
stockholders who is not deemed to be an affiliate of the Company at the time of
the proposed sale, who is not deemed to be such an affiliate during the three
months preceding the time of the proposed sale and who has beneficially owned
his shares of Common Stock for at least two years will be entitled to sell such
shares under Rule 144 without regard to such volume limitations or notice
requirements.
The Company and certain of its executive officers and directors and
substantially all of its existing stockholders have agreed that, for a period of
180 days after the date of this Prospectus, they will not dispose of any shares
of Common Stock or securities convertible or exchangeable into or exercisable
for any shares of
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Common Stock without the prior written consent of Merrill Lynch, Pierce, Fenner
& Smith Incorporated, subject to certain limited exceptions.
Prior to the Offerings, there has been no public market for the Common
Stock, and no assurance can be given that such a market will develop or, if it
develops, will be sustained after the Offerings or that the purchasers of the
Common Stock will be able to resell such Common Stock at a price higher than or
equal to the initial public offering price or otherwise. If such a market
develops, no prediction can be made as to the effect, if any, that future sales
of shares of Common Stock, or the availability of shares of Common Stock for
future sale, to the public will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of Common Stock in
the public market, whether such shares are presently outstanding or subsequently
issued, or the perception that such sales could occur, could adversely affect
prevailing market prices for the Common Stock and could impair the Company's
ability to raise capital in the future through an offering of its equity
securities or to consummate acquisitions using its equity securities as
consideration. The Company cannot predict when or how many of such additional
shares of Common Stock may be offered for sale or sold to the public in the
future.
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
TO NON-U.S. HOLDERS OF COMMON STOCK
The following is a general discussion of certain United States federal
income and estate tax consequences of the purchase, ownership and disposition of
Common Stock by a Non-U.S. Holder. As used herein the term 'Non-U.S. Holder'
means any person or entity that is not a United States Holder ('U.S. Holder'). A
U.S. Holder is any beneficial owner of Common Stock that is (i) a citizen or
resident of the United States, (ii) a corporation or partnership created or
organized in or under the laws of the United States or any political subdivision
thereof, (iii) an estate the income of which is subject to U.S. federal income
taxation regardless of its source and (iv) a trust which is subject to the
supervision of a court within the United States and the control of a United
Stated person as described in section 7701(a)(30) of the Internal Revenue Code
of 1986, as amended (the 'Code'). This discussion does not address all aspects
of United States federal income and estate taxes and does not deal with foreign,
state and local consequences that may be relevant to such Non-U.S. Holders in
light of their personal circumstances. Furthermore, this discussion is based on
provisions of the Code, existing and proposed regulations promulgated thereunder
and administrative and judicial interpretations thereof, as of the date hereof,
all of which are subject to change. EACH PROSPECTIVE PURCHASER OF COMMON STOCK
IS ADVISED TO CONSULT A TAX ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE
TAX CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF COMMON STOCK AS WELL AS
ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY U.S. STATE,
MUNICIPALITY OR OTHER TAXING JURISDICTION.
DIVIDENDS
Dividends paid to a Non-U.S. Holder of Common Stock generally will be
subject to withholding of United States federal income tax at a 30% rate or such
lower rate as may be specified by an applicable income tax treaty. However,
dividends that are effectively connected with the conduct of a trade or business
by the Non-U.S. Holder within the United States and, where a tax treaty applies,
are attributable to a United States permanent establishment of the Non-U.S.
Holder, are not subject to the withholding tax, but instead are subject to
United States federal income tax on a net income basis at applicable graduated
individual or corporate rates. Certain certification and disclosure requirements
must be complied with in order to be exempt from withholding under such
effectively connected income exemption. Any such effectively connected dividends
received by a foreign corporation may, under certain circumstances, be subject
to an additional 'branch profits tax' at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.
Under current law, dividends paid to an address outside the United States
are presumed to be paid to a resident of such country (unless the payer has
knowledge to the contrary) for purposes of the withholding tax discussed above
and, under the current interpretation of United States Treasury regulations, for
purposes of determining the applicability of a tax treaty rate. Under recently
finalized United States Treasury regulations (the 'Final Regulations'), a
Non-U.S. Holder of Common Stock who wishes to claim the benefit of an applicable
treaty rate (and avoid back-up withholding as discussed below) for dividends
paid after December 31, 1999, will be required to satisfy applicable
certification and other requirements.
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A Non-U.S. Holder of Common Stock eligible for a reduced rate of United
States withholding tax pursuant to an income tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
Internal Revenue Service (the 'IRS').
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to United States federal
income tax with respect to gain recognized on a sale or other disposition of
Common Stock unless (i) the gain is effectively connected with a trade or
business of the Non-U.S. Holder in the United States, and, where a tax treaty
applies, is attributable to a United States permanent establishment of the
Non-U.S. Holder (ii) in the case of a Non-U.S. Holder who is an individual and
holds the Common Stock as a capital asset, such holder is present in the United
States for 183 or more days in the taxable year of the sale or other disposition
and certain other conditions are met, or (iii) the Company is or has been a
'U.S. real property holding corporation' for United States federal income tax
purposes.
An individual Non-U.S. Holder described in clause (i) above will be subject
to tax on the net gain derived from the sale under regular graduated United
States federal income tax rates. An individual Non-U.S. Holder described in
clause (ii) above will be subject to a flat 30% tax on the gain derived from the
sale, which may be offset by United States source capital losses (even though
the individual is not considered a resident of the United States). If a Non-U.S.
Holder that is a foreign corporation falls under clause (i) above, it will be
subject to tax on its gain under regular graduated United States federal income
tax rates and, in addition, may be subject to the branch profits tax equal to
30% of its effectively connected earnings and profits within the meaning of the
Code for the taxable year, as adjusted for certain items, unless it qualifies
for a lower rate under an applicable income tax treaty.
The Company is not and does not anticipate becoming a 'U.S. real property
holding corporation' for United States federal income tax purposes.
Special Rules may apply to certain Non-U.S. Holders, such as 'controlled
foreign corporations', 'passive foreign investment companies' and 'foreign
personal holding companies', that are subject to special treatment under the
Code. Such entities should consult their own tax advisors to determine the U.S.
federal, state, local and other tax consequences that may be relevant to them.
FEDERAL ESTATE TAX
Common Stock held by an individual Non-U.S. Holder at the time of death
will be included in such holder's gross estate for United States federal estate
tax purposes, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company must report annually to the IRS and to each Non-U.S. Holder the
amount of dividends paid to such holder and the tax withheld with respect to
such dividends, regardless of whether withholding was required. Copies of the
information returns reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the Non-U.S. Holder
resides under the provisions of an applicable income tax treaty.
Under current law, backup withholding at the rate of 31% generally will not
apply to dividends paid to a Non-U.S. Holder at an address outside the United
States (unless the payer has knowledge that the payee is a U.S. person). Under
the Final Regulations, however, a Non-U.S. Holder will be subject to back-up
withholding unless applicable certification requirements are met.
Payment of the proceeds of a sale of Common Stock within the United States
or conducted through certain U.S. related financial intermediaries is subject to
both backup withholding and information reporting unless the beneficial owner
certifies under penalties of perjury that it is a Non-U.S. Holder (and the payor
does not have actual knowledge that the beneficial owner is a United States
person) or the holder otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules may be allowed as a
refund or a credit against such holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
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UNDERWRITING
Merrill Lynch, Pierce Fenner & Smith Incorporated ('Merrill Lynch'), Credit
Suisse First Boston Corporation, Donaldson, Lufkin & Jenrette Securities
Corporation, Morgan Stanley & Co. Incorporated and PaineWebber Incorporated are
acting as representatives (the 'U.S. Representatives') of each of the
Underwriters named below (the 'U.S. Underwriters'). Subject to the terms and
conditions set forth in a purchase agreement (the 'U.S. Purchase Agreement')
among the Company and the U.S. Underwriters, and concurrently with the sale of
shares of Common Stock to the International Managers (as defined
below), the Company has agreed to sell to the U.S. Underwriters, and each of the
U.S. Underwriters has severally agreed to purchase from the Company, the number
of shares of Common Stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER
U.S. UNDERWRITER OF SHARES
- ------------------------------------------------------------------------------------------ ----------
<S> <C>
Merrill Lynch, Pierce Fenner & Smith
Incorporated.................................................................
Credit Suisse First Boston Corporation....................................................
Donaldson, Lufkin & Jenrette Securities Corporation.......................................
Morgan Stanley & Co. Incorporated.........................................................
PaineWebber Incorporated..................................................................
Total........................................................................
----------
----------
----------
</TABLE>
The Company has also entered into an international purchase agreement (the
'International Purchase Agreement') with certain underwriters outside the United
States and Canada (collectively, the 'International Managers' and, together with
the U.S. Underwriters, the 'Underwriters') for whom Merrill Lynch International
Limited, Credit Suisse First Boston Corporation, Donaldson, Lufkin & Jenrette
Securities Corporation, Morgan Stanley & Co. International Limited and
PaineWebber Incorporated are acting as lead managers (the 'Lead Managers').
Subject to the terms and conditions set forth in the International Purchase
Agreement, and concurrently with the sale of shares of Common Stock
to the U.S. Underwriters pursuant to the U.S. Purchase Agreement, the Company
has agreed to sell to the International Managers, and the International Managers
severally have agreed to purchase from the Company, an aggregate of
shares of Common Stock. The initial public offering price per share of Common
Stock and the underwriting discount per share of Common Stock will be identical
under the U.S. Purchase Agreement and the International Purchase Agreement.
In the U.S. Purchase Agreement and the International Purchase Agreement,
the several U.S. Underwriters and the several International Managers,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant to
such agreement are purchased. The closings with respect to the sale of shares of
Common Stock to be purchased by the U.S. Underwriters and the International
Managers are conditioned upon one another.
The U.S. Representatives have advised the Company that the U.S.
Underwriters propose initially to offer the shares of Common Stock to the public
at the initial public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of $ per share of Common Stock. The U.S. Underwriters may allow, and such
dealers may reallow, a discount not in excess of $ per share of Common Stock
on sales to certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed.
The Company has granted an option to the U.S. Underwriters, exercisable for
30 days after the date of this Prospectus, to purchase up to an aggregate of
additional shares of Common Stock at the initial public offering
price set forth on the cover page of this Prospectus, less the underwriting
discount. The U.S. Underwriters may exercise this option solely to cover
over-allotments, if any, made on the sale of the Common Stock offered hereby. To
the extent that the U.S. Underwriters exercise such option, each of the U.S.
Underwriters will be obligated, subject to certain conditions, to purchase a
number of additional shares of Common Stock proportionate to such U.S.
Underwriter's initial amount reflected in the foregoing table. The Company has
also granted an option to the International Managers, exercisable for 30 days
after the date of this
58
<PAGE>
Prospectus, to purchase up to an aggregate of shares of Common Stock to
cover over-allotments, if any, on terms similar to those granted to the U.S.
Underwriters.
The Company, its executive officers and directors and substantially all of
its existing stockholders have agreed, subject to certain exceptions, not to
directly or indirectly (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant for the sale of or otherwise dispose of or transfer
any shares of Common Stock or securities convertible into or exchangeable or
exercisable for Common Stock, whether now owned or thereafter acquired by the
person executing the agreement or with respect to which the person executing the
agreement thereafter acquires the power of disposition, or file a registration
statement under the Securities Act with respect to the foregoing except for the
registration under the Securities Act of the shares issuable under the
that may be registered on Form S-8 or any such successor form or (ii)
enter into any swap or other agreement that transfers, in whole or in part, the
economic consequence of ownership of the Common Stock whether any such swap or
transaction is to be settled by delivery of Common Stock or other securities, in
cash or otherwise, without the prior written consent of Merrill Lynch on behalf
of the Underwriters for a period of 180 days after the date of this Prospectus.
See 'Shares Eligible for Future Sale.'
The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the 'Intersyndicate Agreement') that provides for the
coordination of their activities. Pursuant to the Intersyndicate Agreement, the
U.S. Underwriters and the International Managers are permitted to sell shares of
Common Stock to each other for purposes of resale at the initial public offering
price, less an amount not greater than the selling concession. Pursuant to the
Intersyndicate Agreement, the U.S. Underwriters and the International Managers
are permitted to sell shares of Common Stock to each other for purposes of
resale at the initial public offering price, less an amount not greater than the
selling concession. Under the terms of the Intersyndicate Agreement, the U.S.
Underwriters and any dealer to whom they sell shares of Common Stock will not
offer to sell or sell shares of Common Stock to persons who are non-U.S. or
non-Canadian persons or to persons they believe intend to resell to persons who
are non-U.S. or non-Canadian persons, and the International Managers and any
dealer to whom they sell shares of Common Stock will not offer to sell or sell
shares of Common Stock to U.S. persons or to Canadian persons or to persons they
believe intend to resell to U.S. persons or to Canadian persons, except in the
case of transactions pursuant to the Intersyndicate Agreement.
Prior to the Offerings, there has been no public market for the Common
Stock of the Company. The initial public offering price will be determined
through negotiations between the Company and the U.S. Representatives and the
Lead Managers. The factors to be considered in determining the initial public
offering price, in addition to prevailing market conditions, will be
price-earning ratios of publicly-traded companies that the U.S. Representatives
believe to be comparable to the Company, certain financial information of the
Company, the history of, and the prospects for, the Company and the industry in
which it competes, an assessment of the Company's management, its past and
present operations, the prospects for, and the timing of, future revenues of the
Company, the present state of the Company's development, and the above factors
in relation to market values and various valuation measures of other companies
engaged in activities similar to the Company. There can be no assurance that an
active trading market will develop for the Common Stock or that the Common Stock
will trade in the public market subsequent to the Offerings at or above the
initial public offering price.
The Underwriters do not intend to confirm sales of Common Stock offered
hereby to any accounts over which they exercise discretionary authority.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments the Underwriters may be required to make in respect
thereof.
Until the distribution of the Common Stock is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the Common Stock. As an exception to these
rules, the U.S. Representatives are permitted to engage in certain transactions
that stabilize the price of the Common Stock. Such transactions consist of bids
or purchases for the purpose of pegging, fixing or maintaining the price of the
Common Stock.
59
<PAGE>
If the Underwriters create a short position in the Common Stock in
connection with the Offerings, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the U.S.
Representatives may reduce that short position by purchasing Common Stock in the
open market. The U.S. Representatives may also elect to reduce any short
position by exercising all or part of the over-allotment opinion described
above.
The U.S. Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the U.S.
Representatives purchase shares of Common Stock in the open market to reduce the
Underwriters' short position or to stabilize the price of the Common Stock, they
may reclaim the amount of the selling concession from the Underwriters and
selling group members who sold those shares as part of the Offerings.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the U.S.
Representatives will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
At the request of the Company, the Underwriters have reserved for sale, at
the initial public offering price, up to shares of Common Stock that
will be offered by this Prospectus for certain employees, customers and
suppliers of the Company and certain other persons with whom the Company has
existing relationships who have expressed an interest in purchasing such shares.
The number of shares of Common Stock available for sale to the general public
will be reduced to the extent such persons purchase such reserved shares. Any
reserved shares that are not so purchased will be offered by the Underwriters to
the general public on the same basis as the other shares offered hereby.
Merrill Lynch acted as a financial advisor to the Company in connection
with the Recapitalization for which it received customary fees. In addition,
Credit Suisse First Boston and certain affiliates of Merrill Lynch are lenders
under the Credit Facilities. Credit Suisse First Boston, as a lender under the
Revolving Credit Facility, is expected to receive a portion of the proceeds from
the Offerings, which is expected to be less than 10% of the aggregate net
proceeds of the Offerings. See 'Use of Proceeds.'
LEGAL OPINIONS
The validity of the issuance of the Common Stock offered hereby will be
passed on for the Company by Simpson Thacher & Bartlett, New York, New York.
Certain legal matters will be passed upon for the Underwriters by Mayer, Brown &
Platt, Chicago, Illinois.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1997 and 1996 and for each of the three years in the period ended December
31, 1997, included in this Prospectus have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report with respect thereto, and are included herein and in the Registration
Statement in reliance upon such report of such firm given upon their authority
as of such firm experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
'Commission') a Registration Statement on Form S-1 (herein, together with all
amendments and exhibits thereto, referred to as the 'Registration Statement')
under the Securities Act with respect to the registration of the shares of
Common
60
<PAGE>
Stock offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, omits certain information contained in the Registration
Statement as permitted by the rules and regulations of the Commission.
Statements contained herein concerning the provisions of any contract, agreement
or other document are not necessarily complete, and, in each instance, reference
is made to the copy of such document filed as an exhibit to the Registration
Statement for a more complete description of the matter involved, and each such
statement is qualified in its entirety by such reference. The Registration
Statement, including the exhibits and schedules filed therewith, may be
inspected at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission located at 7 World Trade Center, Suite 1300, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such materials may be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Commission maintains a Web site at http://www.sec.gov
containing reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the 'Exchange Act'). As a
result of the Offering, the Company will become subject to the informational
requirements of the Exchange Act. The Company will fulfill its obligations with
respect to such requirements by filing periodic reports with the Commission. In
addition, the Company will furnish its shareholders with annual reports
containing audited financial statements certified by its independent accountants
and quarterly reports for the first three quarters of each fiscal year
containing unaudited summary financial information.
61
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Consolidated Financial Statements:
<S> <C>
Report of Independent Auditors........................................................................... F-2
Consolidated Balance Sheets at December 31, 1997 and 1996................................................ F-3
Consolidated Statements of Income for the years ended December 31, 1997, 1996 and 1995................... F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995............... F-5
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1997, 1996
and 1995.............................................................................................. F-6
Notes to Consolidated Financial Statements............................................................... F-7
Unaudited Interim Financial Statements:
Condensed Consolidated Balance Sheets at March 31, 1998 and December 31, 1997............................ F-22
Condensed Consolidated Statements of Income for the three months ended March 31, 1998
and 1997.............................................................................................. F-23
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1998
and 1997.............................................................................................. F-24
Notes to Condensed Consolidated Financial Statements..................................................... F-25
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
American Axle & Manufacturing of Michigan, Inc.
We have audited the accompanying consolidated balance sheets of American Axle &
Manufacturing of Michigan, Inc. and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
1997. Our audit also included the financial statement schedule listed in Item
16. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
American Axle & Manufacturing of Michigan, Inc. and subsidiaries at December 31,
1997 and 1996, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects, the information set forth therein.
/s/ ERNST & YOUNG LLP
Detroit, Michigan
May 15, 1998
F-2
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
---------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................. $ 17,285 $126,034
Accounts receivable................................................................... 166,459 91,137
Inventories........................................................................... 96,636 107,439
Prepaid expenses and other............................................................ 3,184 3,819
Deferred income taxes................................................................. 5,608 12,309
---------- --------
Total current assets.................................................................... 289,172 340,738
Property, plant and equipment........................................................... 768,883 491,875
Less accumulated depreciation........................................................... 119,103 72,479
---------- --------
Property, plant and equipment, net...................................................... 649,780 419,396
Deferred income taxes................................................................... 53,959 7,301
Other assets and deferred charges....................................................... 24,742 3,787
---------- --------
Total assets............................................................................ $1,017,653 $771,222
---------- --------
---------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................................................... $ 227,826 $127,968
Accrued compensation and benefits..................................................... 135,513 99,315
Other accrued expenses................................................................ 22,659 10,184
---------- --------
Total current liabilities............................................................... 385,998 237,467
Long-term debt.......................................................................... 507,043 2,368
Long-term liabilities................................................................... 87,381 81,219
---------- --------
Total liabilities....................................................................... 980,422 321,054
Preferred stock, par value $.01 a share, shares authorized and
issued--13,334 in 1996................................................................ -- 200,000
Shareholders' equity:
Common stock, par value $.01 a share; shares
authorized--100,000 in 1997 and 36,134 in 1996;
shares issued--8,209 in 1997 and 21,053 in 1996.................................... 1 1
Paid-in capital....................................................................... 92,225 90,205
Retained (deficit) earnings........................................................... (54,995) 159,962
---------- --------
Total shareholders' equity.............................................................. 37,231 250,168
---------- --------
Total liabilities and shareholders' equity.............................................. $1,017,653 $771,222
---------- --------
---------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1996 1995
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net sales............................................................... $2,147,451 $2,022,272 $1,968,076
Cost of goods sold...................................................... 1,927,364 1,845,722 1,788,588
---------- ---------- ----------
Gross profit............................................................ 220,087 176,550 179,488
Selling, general and administrative expenses............................ 103,954 83,072 70,603
---------- ---------- ----------
Operating income........................................................ 116,133 93,478 108,885
Recapitalization expenses............................................... (15,929) -- --
Net interest (expense) income........................................... (1,846) 9,412 9,086
Other (expense) income.................................................. (4,161) (4,566) --
---------- ---------- ----------
Income before income taxes.............................................. 94,197 98,324 117,971
Income taxes............................................................ 38,933 36,600 47,400
---------- ---------- ----------
Net income.............................................................. $ 55,264 $ 61,724 $ 70,571
---------- ---------- ----------
---------- ---------- ----------
Basic earnings per share................................................ $ 2,917 $ 2,284 $ 3,352
---------- ---------- ----------
---------- ---------- ----------
Diluted earnings per share.............................................. $ 1,724 $ 1,708 $ 1,953
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating activities
Net income............................................................... $ 55,264 $ 61,724 $ 70,571
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization....................................... 50,177 36,076 25,242
Deferred income taxes............................................... (9,651) (7,549) (6,557)
Stock option compensation expense................................... 6,870 -- --
Pensions and other postretirement benefits.......................... 30,701 22,050 20,751
Loss on disposal of equipment....................................... 4,161 4,566 --
Changes in operating assets and liabilities:
Accounts receivable.............................................. (75,322) 2,529 (21,863)
Inventories...................................................... 10,803 2,255 (5,070)
Accounts payable and accrued expenses............................ 141,521 (68,963) 106,800
Long-term liabilities............................................ (9,916) 6,049 17,367
Income taxes payable............................................. -- -- (10,344)
Other assets and deferred charges................................ (3,778) 6,950 (11)
--------- --------- ---------
Net cash provided by operating activities.................................. 200,830 65,687 196,886
Investing activities
Purchases of property and equipment, net................................. (282,625) (162,317) (147,077)
Proceeds from sale-leaseback of equipment................................ -- 31,085 --
--------- --------- ---------
Net cash used in investing activities...................................... (282,625) (131,232) (147,077)
Financing activities
Borrowings under Revolving Credit and Receivables facilities, net........ 130,000 -- --
Proceeds from issuance of long-term debt................................. 375,000 2,420 --
Payments on long-term debt............................................... (325) (1,052) (10,192)
Debt issuance costs...................................................... (18,567) -- --
Payment of dividends..................................................... (34,538) (17,434) --
Recapitalization payments................................................ (478,928) -- --
Proceeds from issuance of common stock................................... 404 -- --
Payments from shareholder of preferred stock............................. -- 37,306 10,400
Redemption of Class B preferred shares................................... -- -- (500)
--------- --------- ---------
Net cash (used in) provided by financing activities........................ (26,954) 21,240 (292)
--------- --------- ---------
Net (decrease) increase in cash and cash equivalents....................... (108,749) (44,305) 49,517
Cash and cash equivalents at beginning of year............................. 126,034 170,339 120,822
--------- --------- ---------
Cash and cash equivalents at end of year................................... $ 17,285 $ 126,034 $ 170,339
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
RECEIVABLE
FROM
ADDITIONAL RETAINED SHAREHOLDER
COMMON PAID-IN EARNINGS OF PREFERRED
STOCK CAPITAL (DEFICIT) STOCK
------ ---------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at January 1, 1995....................................... $1 $ 94,999 $ 45,101 $(52,000)
Net income....................................................... 70,571
Payment received from shareholder of preferred stock............. 10,400
Redemption of 50 Class B preferred shares........................ (500)
------ ---------- -------- ------------
Balance at December 31, 1995..................................... 1 94,499 115,672 (41,600)
Net income....................................................... 61,724
Cash dividends:
Preferred stock--$1,023 per share.............................. (13,642)
Common stock--$180 per share................................... (3,792)
Payment received from shareholder of preferred stock............. 37,306
Discount for prepayment of receivable from shareholder of
preferred stock................................................ (4,294) 4,294
------ ---------- -------- ------------
Balance at December 31, 1996..................................... 1 90,205 159,962 0
Net income....................................................... 55,264
Cash dividends:
Preferred stock--$2,243 per share.............................. (29,915)
Common stock--$220 per share................................... (4,623)
Recapitalization of common stock................................. (12,867) (203,450)
Recapitalization of preferred stock.............................. 29,814
Recapitalization Tax payment..................................... (74,200)
Recapitalization costs........................................... (18,225)
Recapitalization Deferred taxes.................................. 30,378
Issuance of common stock......................................... 404
Stock option grants.............................................. 14,483
------ ---------- -------- ------------
Balance at December 31, 1997..................................... $1 $ 92,225 $(54,995) $ 0
------ ---------- -------- ------------
------ ---------- -------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
American Axle & Manufacturing of Michigan, Inc. ('AAMM') and its
subsidiaries (the 'Company'), is a Tier I supplier to the automotive industry
and a world leader in the design, engineering and manufacturing of driveline
systems for light trucks, sport utility vehicles, pickups and vans. The
driveline system includes all the components that transfer power from the
transmission and deliver it to the drive wheels. AAM's driveline systems include
axles, propeller shafts, chassis components and forged products. The Company's
manufacturing facilities consist of gear and axle plants located in Detroit,
Michigan and Buffalo, New York; forge plants located in Detroit, Michigan and
Tonawanda, New York; a propeller shaft plant located in Three Rivers, Michigan;
and a technical center in Rochester Hills, Michigan.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company.
All intercompany transactions, balances and profits are eliminated upon
consolidation.
Cash and Cash Equivalents
Cash and cash equivalents include all cash balances and highly liquid
investments with a maturity of ninety days or less at time of purchase. At
December 31, 1996, cash and cash equivalents included cash balances held in
repurchase agreements collateralized by U.S. Government securities with a
maturity of thirty days or less when purchased.
Revenue Recognition
The Company recognizes revenue when goods are shipped to the customer.
Research and Development Costs
The Company expenses research and development costs as incurred. Research
and development costs were $27.8 million, $23.4 million and $29.0 million for
1997, 1996 and 1995, respectively.
Inventories
The components of inventory are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1996
------- --------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and work-in-process...................................... $68,323 $ 80,829
Finished goods......................................................... 25,587 22,305
------- --------
Gross inventories at average cost...................................... 93,910 103,134
Excess of average cost over LIFO cost.................................. 7,650 6,200
------- --------
Net inventories at LIFO................................................ 86,260 96,934
Supplies and repair parts.............................................. 10,376 10,505
------- --------
$96,636 $107,439
------- --------
------- --------
</TABLE>
Inventories are carried at lower of cost or market determined on the
last-in, first-out (LIFO) method. Supplies and repair parts inventory consists
of materials consumed in the manufacturing process but not incorporated into the
finished products and repair parts used to service machinery and equipment.
F-7
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Property, Plant and Equipment
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land and land improvements............................................ $ 15,757 $ 11,899
Buildings and building improvements................................... 40,426 32,506
Machinery and equipment............................................... 506,927 358,551
Construction in progress.............................................. 205,773 88,919
-------- --------
$768,883 $491,875
-------- --------
-------- --------
</TABLE>
Property, plant and equipment are stated at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of the related
assets. Depreciation expense totaled $48 million, $35 million and $22 million in
1997, 1996 and 1995, respectively.
Effective January 1, 1997, the Company extended the estimated useful lives
of certain machinery and equipment to better allocate the cost of the assets
over their estimated useful lives. This change in estimated useful lives
increased operating income by approximately $6.4 million in 1997.
Construction in progress includes costs incurred for machinery and
equipment and building improvements in process.
Other Assets and Deferred Charges
Intangible assets consisting of patents, other identified rights, and
deferred charges are amortized on a straight-line basis over their estimated
useful lives, ranging from 1 to 8 1/2 years.
Valuation of Long Lived Assets
The Company periodically evaluates the carrying value of long-lived assets
to be held and used, including intangible assets, when events and circumstances
warrant such a review. Based upon management's assessment of the future
undiscounted operating cash flows related to these assets, the carrying values
have not been impaired at December 31, 1997.
Effect of Accounting Pronouncements
In 1997, the Financial Accounting Standards Board issued Statement No. 130,
Reporting Comprehensive Income. This Statement is effective for fiscal years
beginning after December 15, 1997 and establishes standards for the reporting
and display of comprehensive income and its components in a full set of general
purpose financial statements. Beginning in 1998, the Company will provide the
information relating to comprehensive income to conform to the requirements. For
the year ended December 31, 1997, comprehensive income would have been equal to
net income.
In 1997, the Financial Accounting Standards Board issued Statement No. 131,
Disclosures about Segments of an Enterprise and Related Information. This
Statement is effective for fiscal years beginning after December 15, 1997 and
significantly changes the basis on which public business enterprises report
information about operating segments. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
Beginning in 1998, the Company will provide the information relating to
F-8
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Statement No. 131 to conform to the requirements. As of December 31, 1997,
segment information was presented in accordance with Financial Accounting
Standards Board Statement No. 14.
Accounting for Stock Based Compensation
The Company has elected to follow Accounting Principles Board Opinion
Number 25 (APB No. 25), Accounting for Stock Issued to Employees and related
interpretations in accounting for its employee stock options. Accordingly,
compensation cost is measured on the excess, if any, of the market price of the
company's stock at the date of grant over the amount an employee must pay to
acquire the stock. The Company has adopted the disclosure-only provisions for
Statement of Financial Accounting Standards Number 123 (SFAS No. 123),
Accounting for Stock-Based Compensation, which requires the company to record
compensation for stock-based compensation at fair value.
Derivatives
Gains and losses on hedges of assets and liabilities are included in the
carrying amounts of those assets or liabilities and ultimately are recognized in
income. The interest rate differential relating to interest rate swaps and
collars used to hedge debt obligations is reflected as an adjustment to interest
expense over the lives of the swaps. Cash flows from derivatives are classified
in the same category as the cash flows from the related activity. In
circumstances where the underlying assets or liabilities are sold or no longer
exist, any remaining carrying value adjustments are recognized in other income
or expense. See Note 5.
Earnings Per Share
In 1997, the Company adopted the Financial Accounting Standards Board
issued Statement No. 128, Earnings Per Share, which is effective for periods
ending after December 15, 1997. The statement replaced the calculation of
primary and fully diluted earnings per share computed in accordance with Opinion
No. 15 with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effects of options,
warrants and convertible securities. Diluted earnings per share is similar to
the previously reported fully diluted earnings per share. See Note 15.
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 and the disclosures in the
financial statements. Actual results could differ from those estimates.
Reclassifications
Certain 1995 and 1996 amounts have been reclassified to conform with 1997
presentation.
2. RECAPITALIZATION
On October 29, 1997, the Company completed a comprehensive recapitalization
(the 'Recapitalization'). Prior to the Recapitalization, AAMM was a wholly-owned
subsidiary of American Axle & Manufacturing, Inc. ('AAM'). Pursuant to the
Recapitalization, AAMM acquired a 100% ownership interest in AAM by exchanging
shares of its own stock, on a one-for-one basis, with the shareholders of AAM.
The exchange of shares has been accounted for in a manner similar to a pooling
of interests since both AAMM and AAM were under common control. Following the
exchange of shares, AAMM repurchased 12,867.15 shares or 61% of its common stock
outstanding for $216.3 million. Following the Recapitalization, the original
shareholders of AAM
F-9
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
2. RECAPITALIZATION--(CONTINUED)
owned 17.8% of outstanding common stock. As part of the Recapitalization, AAMM
repurchased all outstanding Preferred Stock for $170.2 million. As part of the
Recapitalization, AAMM made a $74.2 million payment to Jupiter Capital
Corporation (AAM's parent prior to the Recapitalization) related to certain tax
payments.
Recapitalization expenses of $15.9 million consisted primarily of fees for
professional services. In addition, other Recapitalization costs of $18.2
million were paid either to shareholders or to third parties on the
shareholders' behalf and have been charged directly to retained earnings.
At December 31, 1997, the Company had a $7.2 million receivable from a
shareholder arising from a tax-related post-closing adjustment associated with
the Recapitalization. This was repaid in 1998.
3. LONG-TERM DEBT AND CREDIT FACILITIES
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
-------- ------
(IN THOUSANDS)
<S> <C> <C>
Credit Facilities:
Revolver.............................................................. $ 55,000 $ 0
Tranche A Term Loan................................................... 0 0
Tranche B Term Loan................................................... 375,000 0
-------- ------
Total Credit Facilities............................................ 430,000 0
Receivables Facility.................................................... 75,000 0
Other................................................................... 2,043 2,368
-------- ------
$507,043 $2,368
-------- ------
-------- ------
</TABLE>
At December 31, 1997, the Revolver and Receivables Facility are supported
by long-term Credit Facilities.
Credit Facilities
The Company's Senior Secured Bank Credit Facilities ('Credit Facilities')
consist of a (i) $250 million Revolving Credit Facility, due October 2004
('Revolver'), (ii) $125 million delayed draw Term Loan Facility ('Tranche A Term
Loan') due in semi-annual installments of varying amounts through October 2004
and (iii) $375 million Term Loan Facility ('Tranche B Term Loan') due in
semi-annual installments of varying amounts through April 2006. The Tranche A
Term Loan can be drawn until October 1999.
Amounts outstanding under the Credit Facilities are secured by the capital
stock of the Company's significant subsidiaries and all the assets except for
those securing the Receivables Facility and permitted equipment and lease
financings. Borrowings under the Credit Facilities bear interest at rates based
on The Chase Manhattan Bank ('Chase') alternate base rate or LIBOR, plus, in
each case, an applicable margin. At December 31, 1997, $375 million of
borrowings were outstanding and $125 million was available under the Term Loan
Facility and $55 million was outstanding and $195 million was available for
future borrowings under the Revolver.
The Credit Facilities contain various operating covenants which, among
other things, impose certain limitations on the Company's ability to declare or
pay dividends or distributions on capital stock, redeem or repurchase capital
stock, incur liens, incur indebtedness, or merge, make acquisitions or sell
assets. Under the Credit Facilities, the company is required to comply with
financial covenants relating to interest coverage, leverage, retained earnings
and capital expenditures. Borrowings under the Credit Facilities may be prepaid
by
F-10
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
3. LONG-TERM DEBT AND CREDIT FACILITIES--(CONTINUED)
the Company at any time at the option of the Company, without penalty, other
than breakage costs. Loans made under the Credit Facilities are subject to
mandatory prepayments under certain conditions. Additionally, the Credit
Facilities required the Company to enter into interest rate hedging arrangements
with a notional value of $112.5 million.
At December 31, 1997, the weighted average rate of interest on the balances
outstanding under the Credit Facilities was 8.2%.
Receivables Facility
In connection with the Recapitalization, AAM (the 'Seller') established a
receivables financing facility (the 'Receivables Facility') through AAM
Receivables Corp. ('AAM Receivables'), a wholly-owned, bankruptcy-remote
subsidiary of the Company. Pursuant to the Receivables Facility, the Seller
agreed to sell certain customer trade receivables created from time to time to
AAM Receivables which, in turn, transferred all of such receivables to a trust,
which issued a variable funding certificate (the 'VFC') representing an
undivided interest in the receivables pool to Chase. Under the VFC, Chase
provided a revolving financing commitment, subject to the terms and conditions
of the Receivables Facility, of up to $125 million through October 2003. These
receivables are not available to the Company's general creditors. However, the
primary customer of the Seller is also a supplier to the Seller and, in certain
circumstances, may be able to offset amounts payable by the Seller against the
Seller's trade receivables from the supplier. Accordingly, the Receivables
Facility has been accounted for as a secured borrowing.
Availability of financing under the VFC depends on the amount of
receivables generated by the Seller from its sales, the rate of collection on
those receivables and certain other characteristics of those receivables that
affect their eligibility. At December 31, 1997, approximately $99 million was
available under the VFC, of which $75 million was utilized.
The Receivables Facility bears interest, at the Company's option, at rates
based on Chase's alternate base rate or LIBOR plus, in each case, an applicable
margin. The margins for borrowings under the Receivables Facility increase in
July 1998 to be the same as the margins for the Revolver and the Tranche A Term
Loan. The weighted average rate of interest on the balances outstanding under
the Receivables Facility at December 31, 1997 was 7.3%.
General
The Company made cash payments of interest of $1,723,000, $14,000 and
$1,566,000 in 1997, 1996 and 1995, respectively.
Aggregate Debt Maturities
Aggregate debt maturities at December 31, 1997, are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1998....................................................... $ 0
1999....................................................... 368
2000....................................................... 1,380
2001....................................................... 1,380
2002....................................................... 1,380
Thereafter................................................. 502,773
--------------
Total obligations.......................................... 507,281
Amounts representing interest.............................. (238)
--------------
Present value of long-term debt............................ $507,043
--------------
--------------
</TABLE>
F-11
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
4. LEASE OBLIGATIONS
The Company leases certain facilities, machinery and equipment under
operating leases expiring at various dates. All of the leases contain renewal
and/or purchase options. Total expense for all operating leases was $9,679,000,
$4,440,000 and $180,000 for the years ended December 31, 1997, 1996 and 1995
respectively.
Future minimum lease payments under noncancelable operating leases at
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1998....................................................... $ 14,484
1999....................................................... 14,366
2000....................................................... 14,368
2001....................................................... 14,346
2002....................................................... 38,250
Thereafter................................................. 2,406
--------------
$ 98,220
--------------
--------------
</TABLE>
5. RISK MANAGEMENT
Financial Instruments
The Company uses interest-rate swaps and collars of up to 3 years in
duration to manage its exposure to adverse movements in interest rates. The
Company entered into a rate collar transaction in connection with $112.5 million
of the Tranche B Term Loan to pay a fixed rate of interest based on 3-month
LIBOR with a cap rate of 6.5% and a floor rate of 5.5% which terminates in
December 2000. Additionally, the Company entered into an interest rate swap
agreement with a notional amount of $77.4 million that converts the variable
rate of a lease to a fixed rate of approximately 8%. The carrying value of these
instruments approximates fair value at December 31, 1997 and 1996.
Fair Values
The carrying value of cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities approximates fair value due to the
short-term maturities of these assets and liabilities. The fair values of
long-term debt is approximately the same as the carrying values due to the
frequent resetting of the interest rate.
Concentrations of Credit Risk
In the normal course of business, the Company provides credit to customers
in the automotive industry, performs credit evaluations of these customers and
maintains reserves for potential credit losses which, when realized, have been
within the range of management's allowance for doubtful accounts. The allowance
for doubtful accounts was $3.1 million and $2.1 million at December 31, 1997 and
1996, respectively. See Note 12.
The Company invests the majority of its excess cash in money market
accounts (or previously in repurchase agreements collaterized by U.S. Government
securities) and, where appropriate, diversifies the concentration of cash among
different financial institutions. With respect to financial instruments, where
appropriate, the Company has diversified its selection of counter-parties.
F-12
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
6. EMPLOYEE BENEFIT PLANS
The Company sponsors qualified and non-qualified defined benefit pension
plans covering substantially all employees. The plan covering salaried employees
provides benefits that are based upon years of service and final average
compensation. Benefits for hourly employees, which are all substantially covered
by collective bargaining agreements, are based on stated amounts for each year
of service. The Company's funding policy is to contribute amounts to provide the
plans with sufficient assets to meet future benefit payment requirements
consistent with the funding requirements of federal laws and regulations. The
assets of the plan are primarily invested in fixed income and equity securities.
The components of pension expense are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost--benefits earned during the period........................ $15,324 $22,586 $19,516
Interest cost on projected benefit obligation.......................... 5,807 5,046 2,730
Actual return on assets................................................ (10,965) (4,815) (2,783)
Net amortization and deferral.......................................... 4,242 1,883 654
------- ------- -------
Total pension expense.................................................. $14,408 $24,700 $20,117
------- ------- -------
------- ------- -------
</TABLE>
Changes in assumptions for 1997 had an impact which reduced pension expense
by approximately $10.9 million.
The funded status for the Company's defined benefit pension plans at
September 30, 1997 and 1996 reconciled to the net pension liability at December
31, 1997 and 1996, respectively, is shown below:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of accumulated pension benefit obligation
Vested.......................................................................... $40,459 $29,697
Nonvested....................................................................... 35,552 26,448
------- -------
76,011 56,145
Value of future salary and benefit projections.................................. 2,350 15,277
------- -------
Total projected pension benefit obligation........................................ 78,361 71,422
Less plan assets at fair value.................................................... (81,296) (57,344)
------- -------
Plan assets (in excess of)/less than projected benefit obligation................. (2,935) 14,078
Unrecognized prior service cost................................................... (5,612) (824)
Unrecognized net gain/(loss)...................................................... 22,825 (3,304)
------- -------
Net pension liability at September 30............................................. 14,278 9,950
Fourth quarter contribution....................................................... (2,000) (8,285)
------- -------
Net pension liability at December 31.............................................. $12,278 $ 1,665
------- -------
------- -------
</TABLE>
F-13
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
6. EMPLOYEE BENEFIT PLANS--(CONTINUED)
Assumptions used in determining the funded status of these plans as of
September 30, 1997, 1996 and 1995 were:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Discount rate applied to benefit obligations.................................... 7.5% 7.0% 7.0%
Annual rate of increase in compensation levels.................................. 4.0% 4.0% 4.0%
Return on assets................................................................ 9.0% 8.0% 8.0%
</TABLE>
The Company sponsors voluntary savings plans for eligible salaried and
hourly employees. Participants may contribute up to 18% and 15% (limited to
$9,500 per individual in 1997) of their annual compensation to the hourly and
salaried plans, respectively, pursuant to section 401(k) of the Internal Revenue
Code. The Company matches 25% of the first 6% of salaried employee
contributions. Effective July 1, 1997 the Company matching contribution was
increased to 50% of the first 6% of salaried contributions. Company matching
contributions totaling $910,000, $547,000 and $472,000 were made for the years
ended December 31, 1997, 1996 and 1995 respectively.
In addition to pension plans, the Company maintains hourly and salaried
benefit plans that provide postretirement medical, dental, vision and life
insurance to domestic retirees and eligible dependents. The benefits are payable
for life, although the Company retains the right to modify or terminate the
plans providing these benefits. The salaried plan is contributory, with
additional cost sharing features such as deductibles and co-payments. Pursuant
to the Asset Purchase Agreement (see Note 12) the Company and General Motors
agreed to share proportionally the cost of postretirement medical benefits based
upon the length of service an employee had with each company. It is the
Company's policy to fund these benefits as claims are incurred.
Expense for postretirement benefits other than pensions is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost--benefits earned during the period........................ $17,218 $19,764 $14,460
Interest cost.......................................................... 4,103 3,559 1,982
Net amortization and deferral.......................................... (1,109) 27 (240)
------- ------- -------
Total postretirement benefits other than pension expense............... $20,212 $23,350 $16,202
------- ------- -------
------- ------- -------
</TABLE>
Changes in assumptions for 1997 had an impact which reduced the expense for
postretirement benefits other than pensions by approximately $6.3 million.
F-14
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
6. EMPLOYEE BENEFIT PLANS--(CONTINUED)
The funded status of the postretirement benefit plans at September 30, 1997
and 1996, reconciled to the net postretirement benefit liability at December 31,
1997 and 1996, respectively, is shown below:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of accumulated postretirement benefit obligation:
Retirees........................................................................ $ 331 $ 0
Active employees fully eligible for benefits.................................... 12,288 12,714
Other active employees.......................................................... 40,046 36,912
------- -------
52,665 49,626
Unamortized amounts not yet recognized:
Prior service cost.............................................................. (146) (173)
Net gain........................................................................ 18,060 986
------- -------
Accrued postretirement benefit liability at September 30.......................... 70,579 50,439
Fourth quarter benefit payments................................................. (52) 0
------- -------
Accrued postretirement benefit liability at December 31........................... $70,527 $50,439
------- -------
------- -------
</TABLE>
Assumptions used in determining the accrued postretirement benefit
liability at September 30, 1997, 1996 and 1995 were:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- -----
<S> <C> <C> <C>
Discount rate................................................................... 7.5% 7.0% 7.0%
Annual rate of increase in the
Per capita cost............................................................... 7.75 8.2 8.6
Rate to decrease to........................................................... 5.0 5.5 5.5
By the year ended............................................................. 2002 2002 2002
</TABLE>
An increase of 1% in assumed health care cost trend rates would increase
the accrued postretirement benefit liability as of December 31, 1997 and 1996 by
$8,177,000 and $9,303,000, respectively. Components of the net periodic cost
would have increased by $5,369,000, $4,882,000 and $3,465,000 during the years
ended December 31, 1997, 1996 and 1995, respectively.
The Company sponsors profit sharing plans covering substantially all of its
employees. Distributions are determined based upon established formulas and are
made annually. Profit sharing expense for the years ended December 31, 1997,
1996 and 1995 was $23,275,000, $16,900,000 and $20,100,000, respectively.
7. SHAREHOLDERS' EQUITY AND PREFERRED STOCK
The authorized capital stock of the Company consists of Common and
Preferred Stock. Authorized shares of Stock at December 31, 1997 were 100,000
shares of Common Stock and 100,000 shares of Preferred Stock. At December 31,
1996, AAM had authorized 36,134 shares of common stock and 13,334 shares of
Class A Preferred Stock.
In 1994, General Motors agreed to contribute an additional $52 million to
fund capital improvements to increase the Company's productive capacity. The
contribution was payable in sixty monthly installments of $867,000 beginning
January, 1995. General Motors paid 14 installments of $867,000 and in March 1996
paid a final amount of $35.6 million, which represented the remaining balance
discounted at 6%. The Company is not required to repay this contribution.
F-15
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
8. REDEEMABLE PREFERRED STOCK
On March 1, 1994, AAM issued 13,334 shares of preferred stock to General
Motors (see Note 12). General Motors was entitled to receive dividends annually
based on a cash flow formula, as defined, up to a maximum amount not to exceed
$16 million. In addition to dividends based upon the cash flow formula, the
Preferred Stock shareholder could receive an additional dividend based upon net
income. In 1997, 1996 and 1995, $12 million, $17.9 million and $13.6 million,
respectively, of dividends were earned. Both the 1997 and 1996 dividends were
declared and paid in 1997, and the 1995 dividends were declared and paid in
1996.
The Class A Preferred Stock was redeemable at any time and was subject to
mandatory redemption requirements beginning March 31, 2001 and on March 31 of
each year thereafter, based on AAM's cash flow of the preceding year, as
defined. The Class A Preferred Stock was not convertible into Common Stock
unless AAM tendered cash to redeem the Preferred Stock or notified the preferred
shareholder of its intent to engage in a public offering. AAM had reserved
13,334 shares of Common Stock to be issued only for the conversion of the Class
A Preferred Stock. As part of the Recapitalization, AAM redeemed and retired all
outstanding shares of Class A Preferred Stock.
9. STOCK OPTIONS
In 1994, the Company granted an officer of the Company options to purchase
1,747 shares of the Company's common stock. In 1997, the Company canceled and
replaced these options at substantially identical terms, except for a
modification of the exercisability period. The options may be exercised at any
time within a 10 year term at a price of $1 per share. At December 31, 1997,
none of the options were exercised. The Company recognized compensation expense
of $6.8 million resulting from the modification of the exercisability period.
On October 29, 1997, the Company granted several officers of the Company
options to purchase 471 shares of the Company's common stock as replacement for
an incentive compensation plan established in 1994. The options were immediately
vested and exercisable at a weighted average exercise price of $648. At December
31, 1997, none of the options were exercised. Under APB No. 25, compensation
expense resulting from stock options is measured and recorded when earned.
Compensation expense relating to the incentive compensation plan established in
1994 was $2,293,000, $6,050,000 and $4,300,000 in 1997, 1996 and 1995,
respectively.
In addition, on October 29, 1997, and as amended on November 15, 1997, the
Company's shareholders established a stock option plan (the 'Plan') for certain
employees. There are 1,425 options authorized for grant under the Plan. The Plan
allows participants to vest in options to purchase shares of the Company's
common stock based upon duration of employment and/or operating performance. The
exercise price of the options equals the underlying value of the common stock at
time of grant and the options vest and become exercisable over a seven-year
period. In 1997, 1,366 options were granted under the Plan at an exercise price
of $16,812. No options were exercised as of December 31, 1997. Under APB No. 25,
no compensation cost has been recognized for the options granted under the Plan.
Had the Company determined compensation cost based upon the fair value of
the options at the grant date consistent with the method of SFAS No. 123, and
using the Minimum Value method at an assumed interest rate
F-16
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
9. STOCK OPTIONS--(CONTINUED)
of 6.13%, the Company's net income and earnings per share would have been
adjusted to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS, EXCEPT FOR PER
SHARE DATA)
<S> <C> <C> <C>
Net income as reported................................. $55,264 $61,724 $70,571
------- ------- -------
------- ------- -------
Pro forma.............................................. $54,543 $61,724 $70,571
------- ------- -------
------- ------- -------
Basic earnings per share as reported................... $ 2,917 $ 2,284 $ 3,352
------- ------- -------
------- ------- -------
Pro forma.............................................. $ 2,910 $ 2,284 $ 3,352
------- ------- -------
------- ------- -------
Diluted earnings per share as reported................. $ 1,724 $ 1,708 $ 1,953
------- ------- -------
------- ------- -------
Pro forma.............................................. $ 1,723 $ 1,708 $ 1,953
------- ------- -------
------- ------- -------
</TABLE>
Since the above pro forma disclosure of results is only required to
consider grants awarded in 1995 and thereafter, the pro forma effects described
above may not be representative of the effects on the reported results for
future years.
The following table summarizes the activity relating to the Company's stock
options:
<TABLE>
<CAPTION>
WEIGHTED-
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Outstanding at January 1, 1995..................................... 1,747 $ 1
Options granted.................................................. -- --
Options exercised................................................ -- --
Options lapsed or canceled....................................... -- --
--------- --------------
Outstanding at December 31, 1995................................... 1,747 $ 1
Options granted.................................................. -- --
Options exercised................................................ -- --
Options lapsed or canceled....................................... -- --
--------- --------------
Outstanding at December 31, 1996................................... 1,747 $ 1
Options granted.................................................. 3,584 6,494
Options exercised................................................ -- --
Options lapsed or canceled....................................... (1,747) $ 1
--------- --------------
Outstanding at December 31, 1997................................... 3,584 6,494
--------- --------------
--------- --------------
Options exercisable at December 31, 1995........................... 1,747 $ 1
--------- --------------
--------- --------------
Options exercisable at December 31, 1996........................... 1,747 $ 1
--------- --------------
--------- --------------
Options exercisable at December 31, 1997........................... 2,218 $ 138
--------- --------------
--------- --------------
</TABLE>
F-17
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
10. NET INTEREST (EXPENSE) INCOME
Net interest (expense) income consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest income......................................................... $ 7,110 $ 9,752 $10,652
Interest expense........................................................ (8,956) (340) (1,566)
------- ------- -------
$(1,846) $ 9,412 $ 9,086
------- ------- -------
------- ------- -------
</TABLE>
11. INCOME TAXES
The following is a summary of the components of the provision for income
taxes:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal.............................................................. $43,439 $37,773 $46,985
Michigan single business tax......................................... 4,051 5,638 5,935
Other state and local................................................ 1,094 738 1,037
------- ------- -------
48,584 44,149 53,957
Deferred:
Federal.............................................................. (8,108) (8,247) (2,340)
Michigan single business tax......................................... (1,132) 221 (3,243)
Other state and local................................................ (411) 477 (974)
------- ------- -------
(9,651) (7,549) (6,557)
------- ------- -------
$38,933 $36,600 $47,400
------- ------- -------
------- ------- -------
</TABLE>
A reconciliation of income taxes at the United States federal statutory
rate to the effective income tax rate follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Federal statutory.................................................. 35.0% 35.0% 35.0%
State and local.................................................... 2.9 4.1 3.8
Other.............................................................. 3.4 (1.9) 1.4
---- ---- ----
Effective income tax rate.......................................... 41.3% 37.2% 40.2%
---- ---- ----
---- ---- ----
</TABLE>
F-18
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
11. INCOME TAXES--(CONTINUED)
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities:
<TABLE>
<CAPTION>
DEFERRED TAX
DEFERRED TAX ASSETS LIABILITIES
-------------------- ----------------------
CURRENT LONG-TERM CURRENT LONG-TERM
------- --------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
December 31, 1997:
Employee benefits...................................... $ 1,958 $24,312
Inventory.............................................. 3,460
Depreciation and amortization.......................... 13,241
Net operating loss carryforwards....................... 13,539
Other.................................................. 190 2,867
------- --------- --- ----------
$ 5,608 $53,959 $ 0 $ 0
------- --------- --- ----------
------- --------- --- ----------
December 31, 1996:
Employee benefits...................................... $ 8,266 $41,507
Inventory.............................................. 1,173
State and local taxes.................................. 1,715
Depreciation and amortization.......................... $ 28,765
Other.................................................. 1,155 2,434
------- --------- --- ----------
$12,309 $43,941 $ 0 $ 28,765
------- --------- --- ----------
------- --------- --- ----------
</TABLE>
As part of the Recapitalization, an election was made to treat the
transaction as a sale of assets for tax purposes under Internal Revenue Code
Section 338(h)(10). As a result of this election, certain differences between
book and tax bases of the Company's assets and liabilities were created which
generated a deferred tax asset of $30,378,000. This amount was charged directly
to retained earnings.
Through October 29, 1997, AAM filed a consolidated federal income tax
return with Jupiter Capital Corporation (AAM's parent prior to
Recapitalization). Under the terms of a tax-sharing agreement, federal income
taxes reflect the tax expense and the related liability which would have been
applicable if a separate federal income tax return had been filed by the
Company. Subsequent to the Recapitalization, the Company will file stand-alone
consolidated tax returns. The Company's income tax expense would not have
differed materially from that reported had the Company filed tax returns on a
stand-alone basis.
Income tax payments, including federal and state income taxes for the years
ended December 31, 1997, 1996 and 1995 were $43,738,000, $44,099,000 and
$53,161,000, respectively.
The Company has net operating loss carryovers for federal tax purposes of
approximately $32 million and approximately $92 million, for various state and
local tax purposes all of which expire at various times during 2007-2017. In
addition, the Company has a federal research and development tax credit
carryover of $600,000 which expires in 2012. The tax effect of these carryovers
and credits is reflected as a deferred tax asset totaling $13,539,000 at
December 31, 1997.
12. TRANSACTIONS WITH GENERAL MOTORS
On March 1, 1994, AAM finalized an Asset Purchase Agreement with General
Motors Corporation ('General Motors') to acquire substantially all of General
Motors' Saginaw Division's Final Drive and Forge Business Unit inventory,
property, plant and equipment, and various other assets. In addition, the
Company entered into long-term component supply agreements with General Motors
and General Motors of Canada, Ltd.
F-19
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
12. TRANSACTIONS WITH GENERAL MOTORS--(CONTINUED)
('GMCL'), which made the Company the sole-source supplier to General Motors for
all components manufactured by the Company at the date of acquisition. In 1997,
the Company and General Motors entered into a binding memorandum of
understanding (MOU) which provides the framework for the continuance of this
business relationship on a long term basis. The GMCL supply agreement, which
expires in September 1999, sets forth the terms whereby GMCL supplies axles
produced at the General Motors St. Catharines, Ontario facility to the Company
which resells them to General Motors. The Company has an irrevocable option to
purchase, for a nominal amount, and relocate the equipment used in axle
production by GMCL at this facility.
Sales to General Motors accounted for approximately 96% of the Company's
sales for 1997 and 1996, and 97% for 1995. The Company also purchased materials
and services from General Motors in the amount of $331 million, $328 million and
$402 million in 1997, 1996 and 1995, respectively. At December 31, 1997 and 1996
accounts receivable from General Motors were $144 million and $77 million,
respectively, and accounts payable to General Motors were $23 million and $26
million, respectively.
13. COMMITMENTS
The Company plans to continue to make significant capital expenditures for
new product and capacity programs and to upgrade its machinery, equipment and
facilities. In 1998, the Company expects to invest between $300 million to $400
million for capital expenditures, of which obligated purchase commitments were
approximately $150 million as of December 31, 1997.
14. SEGMENT INFORMATION
The Company is engaged in one business segment: the manufacturing of
driveline systems, including forged products for the automotive industry.
United States export sales were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Canada............................................................. $200,572 $158,536 $204,659
Mexico and Latin America........................................... 126,035 105,574 50,260
Other.............................................................. 1,439 1,572 928
-------- -------- --------
$328,046 $265,682 $255,847
-------- -------- --------
-------- -------- --------
</TABLE>
F-20
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
15. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Numerator:
Net Income..................................................................... $55,264 $61,724 $70,571
Preferred dividends declared................................................... (29,915) (13,642) --
Excess of the carrying amount over the fair value of the consideration
transferred to the holders of Class A Preferred Stock....................... 29,814 -- --
------- ------- -------
Numerator for basic earnings per share--income available to common
stockholders................................................................ $55,163 $48,082 $70,571
Effect of dilutive securities:
Preferred dividends declared................................................ 29,915 13,642 --
Excess of the carrying amount over the fair value of the consideration
transferred to the holders of class A Preferred Stock....................... (29,814) -- --
------- ------- -------
Numerator for diluted earnings per share--income available to common
stockholders after assumed conversions...................................... $55,264 $61,724 $70,571
Denominator:
Denominator for basic earnings per share--weighted-average shares.............. 18,912 21,053 21,053
Effect of dilutive securities:
Dilutive stock options outstanding.......................................... 2,034 1,747 1,747
Conversion of Class A Preferred Stock....................................... 11,112 13,334 13,334
------- ------- -------
Dilutive potential common shares............................................... 13,146 15,081 15,081
Denominator for dilutive earnings per share--adjusted weighted-average shares
and assumed conversion...................................................... 32,058 36,134 36,134
------- ------- -------
Basic earnings per share......................................................... $ 2,917 $ 2,284 $ 3,352
------- ------- -------
------- ------- -------
Diluted earnings per share....................................................... $ 1,724 $ 1,708 $ 1,953
------- ------- -------
------- ------- -------
</TABLE>
F-21
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1998 1997
-------- --------
(IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
Net Sales................................................................................. $583,285 $546,859
Cost of goods sold........................................................................ 522,279 487,828
-------- --------
Gross profit.............................................................................. 61,006 59,031
Selling, general and administrative expenses.............................................. 24,699 22,662
-------- --------
Operating income.......................................................................... 36,307 36,369
Net interest (expense) income............................................................. (9,749) 2,255
Other income.............................................................................. 333 111
-------- --------
Income before income taxes................................................................ 26,891 38,735
Income taxes.............................................................................. 9,968 13,945
-------- --------
Net income................................................................................ $ 16,923 $ 24,790
-------- --------
-------- --------
Basic earnings per share.................................................................. $ 2,061 $ 1,178
-------- --------
-------- --------
Diluted earnings per share................................................................ $ 1,652 $ 686
-------- --------
-------- --------
</TABLE>
See notes to condensed consolidated financial statements.
F-23
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------
1998 1997
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Net cash provided by operating activities................................................ $ 76,140 $ 73,642
Purchases of property and equipment, net and net cash (used in)
investing activities................................................................... (66,301) (59,344)
Financing activities
Proceeds from issuance of long-term debt............................................... (9,000) --
Payments on long-term debt............................................................. (81) (81)
Payments of accounts receivable facility............................................... (15,000) --
Proceeds from issuance of common stock................................................. 303 --
-------- ---------
Net cash (used in) financing activities.................................................. (23,778) (81)
-------- ---------
Net (decrease) increase in cash and cash equivalents..................................... (13,939) 14,217
Cash and cash equivalents at beginning of quarter........................................ 17,285 126,034
-------- ---------
Cash and cash equivalents at end of quarter.............................................. $ 3,346 $ 140,251
-------- ---------
-------- ---------
</TABLE>
See notes to condensed consolidated financial statements.
F-24
<PAGE>
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited interim condensed consolidated financial
statements contain all adjustments, consisting of normal recurring adjustments,
which are, in the opinion of the management of American Axle & Manufacturing of
Michigan, Inc. (the 'Company'), necessary to present fairly the condensed
consolidated financial position of the Company as of March 31, 1998 and December
31, 1997, and the condensed consolidated results of operations and cash flows of
the Company for the three months ended March 31, 1998 and 1997, respectively.
Results of operations for the periods presented are not necessarily indicative
of the results for the full fiscal year. The balance sheet at December 31, 1997
has been derived from the audited consolidated financial statements at that date
but does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. These 1997
financial statements should be read in conjunction with the audited consolidated
financial statements and notes thereto for the year ended December 31, 1997.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and work-in-progress.................................. $68,979 $ 68,323
Finished goods...................................................... 25,513 25,587
--------- ------------
Gross inventories at average cost................................... 94,492 93,910
Excess of average cost over LIFO cost............................... 7,790 7,650
--------- ------------
Net inventories at LIFO............................................. 86,702 86,260
Supplies and repair parts........................................... 10,505 10,376
--------- ------------
$97,207 $ 96,636
--------- ------------
--------- ------------
</TABLE>
3. COMPREHENSIVE INCOME
In 1998, the Company adopted SFAS No. 130, 'Reporting Comprehensive
Income'. SFAS No. 130 requires that the components and total amount of
comprehensive income be reported in the financial statements for interim and
annual periods in 1998. For the quarters ended March 31, 1998 and March 31,
1997, comprehensive income is equal to net income.
4. EARNINGS PER SHARE
The weighted average number of common shares outstanding for purposes of
the earnings per share computations are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
1998 1997
--------- ------------
<S> <C> <C>
Basic............................................................... 8,211 21,053
--------- ------------
--------- ------------
Diluted............................................................. 10,245 36,134
--------- ------------
--------- ------------
</TABLE>
On October 29, 1997 the Company completed a comprehensive recapitalization
(the 'Recapitalization'). The weighted average number of common shares
outstanding for purposes of the earnings per share calculation for the three
months ended March 31, 1998 reflects the effects of such Recapitalization.
F-25
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary.......................................... 3
Risk Factors................................................ 9
The Recapitalization........................................ 14
Use of Proceeds............................................. 15
Dividend Policy............................................. 15
Dilution.................................................... 15
Capitalization.............................................. 17
Selected Financial and Other Operating Data................. 18
Unaudited Pro Forma Condensed Consolidated Financial Data... 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 23
Business.................................................... 31
Management.................................................. 41
Ownership of Common Stock................................... 50
Certain Transactions........................................ 51
Description of Capital Stock................................ 52
Description of Certain Indebtedness......................... 56
Shares Eligible for Future Sale............................. 58
Certain United States Federal Tax Consequences to Non-U.S.
Holders of Common Stock................................... 59
Underwriting................................................ 62
Legal Opinions.............................................. 64
Experts..................................................... 64
Additional Information...................................... 64
Index to Financial Statements............................... F-1
------------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING
TRANSACTIONS IN THE COMMON STOCK, 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
[LOGO]
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
COMMON STOCK
---------------------------
P R O S P E C T U S
---------------------------
MERRILL LYNCH & CO.
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
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
PRELIMINARY PROSPECTUS DATED , 1998
PROSPECTUS
SHARES
[LOGO]
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
COMMON STOCK
------------------------
All of the shares of common stock, par value $.01 per share (the
'Common Stock'), of American Axle & Manufacturing Holdings, Inc., a Delaware
corporation (the 'Company'), offered hereby are being issued and sold by the
Company.
Of the shares of Common Stock offered initially hereby,
shares are being offered initially outside the United States and
Canada by the International Managers (the 'International Offering') and
shares are being offered initially in the United States and Canada by
the U.S. Underwriters (the 'U.S. Offering'). The initial public offering price
and the underwriting discount per share are identical for the International
Offering and the U.S. Offering (collectively, the 'Offering'). See
'Underwriting.'
Prior to the Offering, there has been no public market for the Common
Stock. It is currently anticipated that the initial public offering price will
be between $ and $ per share. See 'Underwriting' for a discussion of
the factors to be considered in determining the initial public offering price.
The Company intends to apply to list the Common Stock on the New York Stock
Exchange under the proposed symbol 'AXL'.
------------------------
SEE 'RISK FACTORS' BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------
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.
[CAPTION]
<TABLE>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
-------- ------------ -----------
<S> <C> <C> <C>
Per Share... $ $ $
Total(3).... $ $ $
</TABLE>
- ------------
(1) Company has agreed to indemnify the International Managers and U.S.
Underwriters (collectively, the 'Underwriters') against certain liabilities,
including certain liabilities under the Securities Act of 1933, as amended.
See 'Underwriting.'
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted the International Managers and the U.S. Underwriters
options exercisable within 30 days of the date hereof to purchase up to an
additional and shares of Common Stock, respectively, solely to
cover over-allotments, if any. If such options are exercised in full, the
total Price to Public, Underwriting Discount and Proceeds to Company will be
$ , $ , and $ respectively. See 'Underwriting.'
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to the
approval of certain legal matters by counsel for the Underwriters and to certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made in New York, New York on or
about , 1998.
------------------------
MERRILL LYNCH INTERNATIONAL
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
INTERNATIONAL
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INTERNATIONAL
------------------------
The date of this Prospectus is , 1998
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING
Merrill Lynch International ('Merrill Lynch'), Credit Suisse First Boston
Corporation, Donaldson, Lufkin & Jenrette International, Morgan Stanley & Co.
International Limited and PaineWebber International (U.K.) Ltd. are acting as
International Managers. Subject to the terms and conditions set forth in the
purchase agreement (the 'International Purchase Agreement') among the Company
and the International Managers, and concurrently with the sale of
shares of Common Stock to the U.S. Underwriters (as defined
below), the Company has agreed to sell to the International Managers, and each
of the International Managers has severally agreed to purchase from the Company,
the number of shares of Common Stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER
INTERNATIONAL MANAGER OF SHARES
- ------------------------------------------------------------------------------------------- ---------
<S> <C>
Merrill Lynch International................................................................
Credit Suisse First Boston Corporation.....................................................
Donaldson, Lufkin & Jenrette International.................................................
Morgan Stanley & Co. International Limited.................................................
PaineWebber International (U.K.) Ltd.......................................................
---------
Total.........................................................................
---------
---------
</TABLE>
The Company has also entered into a purchase agreement (the 'U.S. Purchase
Agreement') with certain underwriters in the United States and Canada
(collectively, the 'U.S. Underwriters' and, together with the International
Underwriters, the 'Underwriters'), for whom Merrill Lynch, Pierce Fenner & Smith
Incorporated, Credit Suisse First Boston Corporation, Donaldson, Lufkin &
Jenrette Securities Corporation, Morgan Stanley & Co. Incorporated and
PaineWebber Incorporated are acting as representatives (the 'U.S.
Representatives'). Subject to the terms and conditions set forth in the U.S.
Purchase Agreement, and concurrently with the sale of shares of
Common Stock to the International Managers pursuant to the International
Purchase Agreement, the Company has agreed to sell to the U.S. Underwriters, and
the U.S. Underwriters severally have agreed to purchase from the Company, an
aggregate of shares of Common Stock. The initial public offering
price per share of Common Stock and the underwriting discount per share of
Common Stock will be identical under the International Purchase Agreement and
the U.S. Purchase Agreement.
In the International Purchase Agreement and the U.S. Purchase Agreement,
the several International Managers and the several U.S. Underwriters,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such agreement if any of the shares of Common Stock being sold pursuant to
such agreement are purchased. The closings with respect to the sale of shares of
Common Stock to be purchased by the International Managers and the U.S.
Underwriters are conditioned upon one another.
The International Managers have advised the Company that the International
Managers propose initially to offer the shares of Common Stock to the public at
the initial public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of $ per share of Common Stock. The International Managers may allow,
and such dealers may reallow, a discount not in excess of $ per share
of Common Stock on sales to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
The Company has granted an option to the International Managers,
exercisable for 30 days after the date of this Prospectus, to purchase up to an
aggregate of shares of Common Stock at the initial public
offering price set forth on the cover page of this Prospectus, less the
underwriting discount. The International Managers may exercise this option
solely to cover over-allotments, if any, made on the sale of the Common Stock
offered hereby. To the extent that the International Managers exercise such
options, each of the International Managers will be obligated, subject to
certain conditions, to purchase a number of additional shares of Common Stock
proportionate to such International Manager's initial amount reflected in the
foregoing table. The Company has also granted an option to the U.S.
Underwriters, exercisable for 30 days after the date of this Prospectus, to
purchases up to an aggregate of shares of Common Stock to cover
over-allotments, if any, on terms similar to those granted to the International
Managers.
62
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
The Company, its executive officers and directors and substantially all of
its existing stockholders have agreed, subject to certain exceptions, not to
directly or indirectly (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant for the sale of or otherwise dispose of or transfer
any shares of Common Stock or securities convertible into or exchangeable or
exercisable for Common Stock, whether now owned or thereafter acquired by the
person executing the agreement or with respect to which the person executing the
agreement thereafter acquires the power of disposition, or file a registration
statement under the Securities Act with respect to the foregoing except for the
registration under the Securities Act of the shares issuable under the
that may be registered on Form S-8 or any such successor form
or (ii) enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of the Common Stock whether any such
swap or transaction is to be settled by delivery of Common Stock or other
securities, in cash or otherwise, without the prior written consent of Merrill
Lynch on behalf of the Underwriters for a period of 180 days after the date of
this Prospectus. See 'Shares Eligible for Future Sale.'
The International Managers and the U.S. Underwriters have entered into an
intersyndicate agreement (the 'Intersyndicate Agreement') that provides for the
coordination of their activities. Pursuant to the Intersyndicate Agreement, the
International Managers and the U.S. Underwriters are permitted to sell shares of
Common Stock to each other for purposes of resale at the initial public offering
price, less an amount not greater than the selling concession. Pursuant to the
Intersyndicate Agreement, the International Managers and the U.S. Underwriters
are permitted to sell shares of Common Stock to each other for purposes of
resale at the initial public offering price, less an amount not greater than the
selling concession. Under the terms of the Intersyndicate Agreement, the U.S.
Underwriters and any dealer to whom they sell shares of Common Stock will not
offer to sell or sell shares of Common Stock to persons who are non-U.S. or
non-Canadian persons or to persons they believe intend to resell to persons who
are non-U.S. or non-Canadian persons, and the International Managers and any
dealer to whom they sell shares of Common Stock will not offer to sell or sell
shares of Common Stock to U.S. persons or to Canadian persons or to persons they
believe intend to resell to U.S. persons or to Canadian persons, except in the
case of transactions pursuant to the Intersyndicate Agreement.
Prior to the Offerings, there has been no public market for the Common
Stock of the Company. The initial public offering price will be determined
through negotiations between the Company and the International Managers and the
U.S. Representatives. The factors to be considered in determining the initial
public offering price, in addition to prevailing market conditions, will be
price-earnings ratios of publicly traded companies that the International
Managers believe to be comparable to the Company, certain financial information
of the Company, the history of, and the prospects for, the Company and the
industry in which it competes, an assessment of the Company's management, its
past and present operations, the prospects for, and the timing of, future
revenues of the Company, the present state of the Company's development, and the
above factors in relation to market values and various valuation measures of
other companies engaged in activities similar to the Company. There can be no
assurance that an active trading market will develop for the Common Stock or
that the Common Stock will trade in the public market subsequent to the
Offerings at or above the initial public offering price.
Each International Manager has agreed that (i) it has not offered or sold,
and it will not offer or sell, directly or indirectly, any shares of Common
Stock offered hereby to persons in the United Kingdom prior to the expiration of
the period of six months from the closing date except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public within the meaning of the Public Offers of Securities
Regulations 1995, (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 with respect to anything done by
it in relation to the Common Stock in, from, or otherwise involving the United
Kingdom, and (iii) it has only issued or passed on and will only issue or pass
on to any person in the United Kingdom any document received by it in connection
with the issuance of Common Stock if that person is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995 or is a person to whom the document may otherwise
lawfully be issued or passed on.
The Underwriters do not intend to confirm sales of Common Stock offered
hereby to any accounts over which they exercise discretionary authority.
63
<PAGE>
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments the Underwriters may be required to make in respect
thereof.
Until the distribution of the Common Stock is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the Common Stock. As an exception to these
rules, the International Managers are permitted to engage in certain
transactions that stabilize the price of the Common Stock. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Common Stock.
If the Underwriters create a short position in the Common Stock in
connection with the Offerings, i.e., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus, the International
Managers may reduce that short position by purchasing Common Stock in the open
market. The International Managers may also elect to reduce any short position
by exercising all or part of the over-allotment opinion described above.
The International Managers may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the International
Managers purchase shares of Common Stock in the option market to reduce the
Underwriters' short position or to stabilize the price of the Common Stock, they
may reclaim the amount of the selling concession from the Underwriters and
selling group members who sold those shares as part of the Offerings.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the
International Managers will engage in such transactions, or that such
transactions, once commenced, will not be discontinued without notice.
Purchasers of the shares offered hereby may be required to pay stamp taxes
and other charges in accordance with the laws and practices of the country of
purchase, in addition to the offering price set forth on the cover page hereof.
Merrill Lynch acted as a financial advisor to the Company in connection
with the Recapitalization for which it received customary fees. In addition,
Credit Suisse First Boston and certain affiliates of Merrill Lynch are lenders
under the Credit Facilities. Credit Suisse First Boston, as a lender under the
Revolving Facility, is expected to receive a portion of the proceeds from the
Offerings, which is expected to be less than 10% of the aggregate net proceeds
of the Offerings. See 'Use of Proceeds.'
64
<PAGE>
[ALTERNATE BACK COVER]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PAGE
-------
Prospectus Summary.......................................... 3
Risk Factors................................................ 9
The Recapitalization........................................ 14
Use of Proceeds............................................. 15
Dividend Policy............................................. 15
Dilution.................................................... 15
Capitalization.............................................. 17
Selected Financial and Other Operating Data................. 18
Unaudited Pro Forma Condensed Consolidated Financial Data... 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 23
Business.................................................... 31
Management.................................................. 41
Ownership of Common Stock................................... 50
Certain Transactions........................................ 51
Description of Capital Stock................................ 52
Description of Certain Indebtedness......................... 56
Shares Eligible for Future Sale............................. 58
Certain United States Federal Tax Consequences to Non-U.S.
Holders of Common Stock................................... 59
Underwriting................................................ 62
Index to Financial Statements............................... F-1
------------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING
TRANSACTIONS IN THE COMMON STOCK, 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
[LOGO]
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
COMMON STOCK
---------------------------
P R O S P E C T U S
---------------------------
MERRILL LYNCH INTERNATIONAL
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
INTERNATIONAL
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INTERNATIONAL
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder. Except
for the SEC registration fee and the NASD filing fee, all amounts are estimates.
SEC registration fee.......................................... $ 33,925
NASD filing fee............................................... 12,000
NYSE filing fee............................................... 150,000
Accounting fees and expenses.................................. 400,000
Legal fees and expenses....................................... 500,000
Blue Sky fees and expenses (including counsel fees)........... 5,000
Printing and engraving expenses...............................
Transfer agent's and registrar's fees and expenses............
Miscellaneous Expenses........................................
--------
Total.................................................... $
--------
--------
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware (the
'Delaware Law') authorizes the Registrant to indemnify the officers and
directors of the Company, under certain circumstances and subject to certain
conditions and limitations as stated therein, against all expenses and
liabilities incurred by or imposed upon them as a result of actions, suits and
proceedings, civil or criminal, brought against them as such officers and
directors if they acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the Registrant and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
their conduct was unlawful.
Reference is hereby made to Article VI of the Registrant's By-laws, a copy
of which is filed as Exhibit 3.02, which provides for indemnification of
officers and directors of the Registrant to the full extent authorized by
Section 145 of the Delaware Law. Section 7 of Article VI of the Bylaws
authorizes the Registrant to purchase and maintain insurance on behalf of any
officer, director, employee, trustee or agent of the Registrant or its
subsidiaries against any liability asserted against or incurred by them in such
capacity or arising out of their status as such, whether or not the Registrant
would have the power to indemnify such officer, director, employee, trustee or
agent against such liability under the provisions of such Article or Delaware
law.
The Registrant maintains a directors' and officers' insurance policy which
insures the officers and directors of the Registrant from any claim arising out
of an alleged wrongful act by such persons in their respective capacities as
officers and directors of the Registrant.
Section 102(b)(7) of the Delaware Law permits corporations to eliminate or
limit the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of a fiduciary duty of care as a
director. Reference is made to Article __ of the Registrant's Articles of
Incorporation, a copy of which is filed as Exhibit 3.01, which limits a
director's liability in accordance with such Section.
Reference is made to Section 6 of the U.S. Purchase Agreement and the
International Purchase Agreement, copies of which are filed as Exhibit 1.01 and
1.02, respectively, for information concerning indemnification arrangements
among the Registrant and the Underwriters.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In connection with the Recapitalization, the Company issued 18,261, 1,488
and 1,304 shares of Common Stock to Jupiter, Richard E. Dauch and Morton E.
Harris, respectively, in a one-for-one exchange for AAM, Inc. common stock held
by each of the above pursuant to a private placement. In addition, the Company
privately
II-1
<PAGE>
issued 24 and 18 shares of Common Stock to Michael D. Alexander and Gary J.
Witosky, respectively, pursuant to Management Common Stock Subscription
Agreements. Mr. Alexander purchased his shares in October 1997 for approximately
$400,000 and Mr. Witosky purchased his shares in March 1998 for approximately
$300,000.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
<S> <C>
*1.01 -- Proposed form of U.S. Purchase Agreement
*1.02 -- Proposed form of International Purchase Agreement
*3.01 -- Articles of Incorporation of the Company, as Amended
*3.02 -- Bylaws of the Company
*4.01 -- Specimen Stock Certificate
*5.01 -- Opinion of Simpson Thacher & Bartlett as to the legality of the Common Stock being registered
10.01 -- Asset Purchase Agreement, dated February 18, 1994, between the American Axle & Manufacturing, Inc.
('AAM, Inc.') and General Motors Corporation ('GM'), and all amendments thereto
*10.02 -- Component Supply Agreement, dated February 28, 1994, between AAM, Inc. and GM
*10.02(a) -- Amendment No. 1 to Component Supply Agreement, dated February 28, 1994, between AAM, Inc. and GM
*10.02(b) -- Amendment No. 2 to Component Supply Agreement, dated February 7, 1996, between AAM, Inc. and GM
*10.02(c) -- Letter Agreement dated February 20, 1996, between AAM, Inc. and GM
*10.02(d) -- Letter of Confirmation dated February 21, 1996, between GM and AAM, Inc.
*10.02(e) -- Letter of Intent dated February 21, 1996, by G.M.T.G., GMT-800 PGM Worldwide Purchasing ('G.M.T.G')
(re: Front & Rear axles)
*10.02(f) -- Letter of Intent dated February 21, 1996, by G.M.T.G.
*10.02(g) -- Letter Agreement dated June 25, 1997, between AAM, Inc. and GM
*10.02(h) -- Amended and Restated Memorandum of Understanding, dated September 2, 1997, between AAM, Inc. and GM
*10.02(i) -- MOU Extension Agreement, dated September 22, 1997, between AAM, Inc. and GM
*10.03 -- GMCL Purchase Order Agreement dated February 17, 1994 by and between AAM, Inc. and General Motors
of Canada Limited ('GMCL')
*10.04 -- AAM/GMCL Supply Agreement dated February 17, 1994 ('AAM/GMCL Supply Agreement') by and between AAM,
Inc. and GMCL
*10.04(a) -- Amending Agreement dated as of September 5, 1996, between AAM, Inc. and GMCL
*10.04(b) -- Amending Agreement dated as of October 7, 1996, between AAM, Inc. and GMCL
*10.04(c) -- Amendment No. 1 to AAM/GMCL Supply Agreement dated February 17, 1994, between AAM, Inc. and GMCL
*10.05 -- Agreement dated February 17, 1997, between AAM, Inc. and GM
*10.06 -- Lease dated September 30, 1994, by and between AAM, Inc., as lessee, and First Industrial, L.P., as
lessor (Technical Center)
10.07 -- 1997 American Axle & Manufacturing of Michigan, Inc. Replacement Plan
10.08 -- The Amended and Restated American Axle & Manufacturing of Michigan, Inc. Management Stock Option
Plan
*10.09 -- Nonqualified Stock Option Agreement, dated October 30, 1997, between the Company and Dauch
*10.10 -- Indemnification Agreement, dated February 28, 1994, between AAM, Inc. and GM
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
<S> <C>
10.11 -- Employment Agreement, dated October 27, 1997, by and between the Company and Dauch
10.12. -- Recapitalization Agreement, dated as of September 19, 1997, among AAM, Inc., the Company, Jupiter
Capital Corporation ('Jupiter'), Richard E. Dauch ('Dauch'), Morton E. Harris ('Harris') and AAM
Acquisition, Inc.
10.13 -- Stockholders' Agreement, dated as October 29, 1997, among Blackstone Capital Partners II Merchant
Banking Fund L.P., Blackstone Offshore Capital Partners II L.P., Blackstone Family Investment
Partnership II L.P., Jupiter, Dauch, Harris and AAM, Inc.
10.14 -- Monitoring Agreement, dated as of October 29, 1997, between the Company and Blackstone Management
Partners L.P.
10.15 -- Credit Agreement, dated as of October 27, 1997, among the Company, AAM, Inc., the lenders named
therein, The Chase Manhattan Bank, as administrative agent and collateral agent, and Chase
Manhattan Bank Delaware, as fronting bank
*10.16 -- AAM Master Trust Pooling Agreement, dated as of October 29, 1997, among AAM Receivables Corp.('AAM
Receivables'), the Company, as Servicer, and The Chase Manhattan Bank, as Trustee
*10.16(a) -- AAM Master Trust Series 1997-A Supplement to Pooling Agreement, dated as of October 29, 1997, among
AAM Receivables, the Company, as Servicer, and The Chase Manhattan Bank, as Trustee
*10.17 -- Receivables Sale Agreement, dated as of October 29, 1997, between AAM Receivables, as purchaser,
and the Company, as Seller and Servicer
*10.18 -- Servicing Agreement, dated as of October 29, 1997, among AAM Receivables, the Company, as Servicer,
and The Chase Manhattan Bank, as Trustee
*10.19 -- Agreement for Information Technology Services, dated March 1, 1998, between AAM, Inc. and
Electronic Data Systems Corporation
21 -- Subsidiaries of the Registrant
*23.01 -- Consent of Simpson Thacher & Bartlett (contained in Exhibit 5.01)
*23.02 -- Consent of Ernst & Young LLP
*24.01 -- Power of Attorney
*27 -- Financial Data Schedules (For SEC use only)
</TABLE>
- ------------------
* To be filed by amendment.
(b) Financial Statement Schedules:
Not applicable
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
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 foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the Offerings of such securities at that time shall be deemed to be the
initial bona fide International Manager thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 Detroit,
State Holdings, on the 22nd day of May, 1998.
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
BY /S/ PATRICK S. LANCASTER
TITLE SECRETARY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Richard E. Dauch and Patrick S. Lancaster,
or any one of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign any and all amendments to the
Registration Statement, including post-effective amendments, and registration
statements filed pursuant to Rule 462 under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, and does hereby grant
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities on the 22nd day of May, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------------- -------------------------------------------- -----------------
<C> <S> <C>
/s/ Richard E. Dauch Chairman of the Board of Directors; May 22, 1998
Richard E. Dauch President and Chief Executive Officer
/s/ Gary J. Witosky Vice President--Finance and Chief Financial May 22, 1998
Gary J. Witosky Officer
/s/ Robert A. Krause Treasurer May 22, 1998
Robert A. Krause
/s/ B. G. Mathis Director; Executive Vice President and Chief May 22, 1998
B. G. Mathis Administration Officer
/s/ Glenn H. Hutchins Director May 22, 1998
Glenn H. Hutchins
/s/ Bret D. Pearlman Director May 22, 1998
Bret D. Pearlman
/s/ David A. Stockman Director May 22, 1998
David A. Stockman
</TABLE>
II-5
<PAGE>
SCHEDULE II
AMERICAN AXLE MANUFACTURING OF MICHIGAN, INC.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND DEDUCTIONS-- BALANCE AT
PERIOD PERIOD EXPENSES DESCRIBE END OF PERIOD
- ---------------------------------------------------------- ------------ ---------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Year Ended December 31, 1995.............................. $ 100 $ 950 $ 50(1) $ 1,000
Year Ended December 31, 1996.............................. $1,000 $1,600 $ 0 $ 2,600
Year Ended December 31, 1997.............................. $2,600 $1,000 $ 353(1) $ 3,247
</TABLE>
(1) Uncollectible accounts charged off net of recoveries.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ---------- --------------------------------------------------------------------------------------------- ----------
<S> <C>
*1.01 -- Proposed form of U.S. Purchase Agreement
*1.02 -- Proposed form of International Purchase Agreement
*3.01 -- Articles of Incorporation of the Company, as Amended
*3.02 -- Bylaws of the Company
*4.01 -- Specimen Stock Certificate
*5.01 -- Opinion of Simpson Thacher & Bartlett as to the legality of the Common Stock being
registered
10.01 -- Asset Purchase Agreement, dated February 18, 1994, between the American Axle &
Manufacturing, Inc. ('AAM, Inc.') and General Motors Corporation ('GM'), and all
amendments thereto
*10.02 -- Component Supply Agreement, dated February 28, 1994, between AAM, Inc. and GM
*10.02(a) -- Amendment No. 1 to Component Supply Agreement, dated February 28, 1994, between AAM,
Inc. and GM
*10.02(b) -- Amendment No. 2 to Component Supply Agreement, dated February 7, 1996, between AAM,
Inc. and GM
*10.02(c) -- Letter Agreement dated February 20, 1996, between AAM, Inc. and GM
*10.02(d) -- Letter of Confirmation dated February 21, 1996, between GM and AAM, Inc.
*10.02(e) -- Letter of Intent dated February 21, 1996, by G.M.T.G., GMT-800 PGM Worldwide Purchasing
('G.M.T.G') (re: Front & Rear axles)
*10.02(f) -- Letter of Intent dated February 21, 1996, by G.M.T.G.
*10.02(g) -- Letter Agreement dated June 25, 1997, between AAM, Inc. and GM
*10.02(h) -- Amended and Restated Memorandum of Understanding, dated September 2, 1997, between AAM,
Inc. and GM
*10.02(i) -- MOU Extension Agreement, dated September 22, 1997, between AAM, Inc. and GM
*10.03 -- GMCL Purchase Order Agreement dated February 17, 1994 by and between AAM, Inc. and
General Motors of Canada Limited ('GMCL')
*10.04 -- AAM/GMCL Supply Agreement dated February 17, 1994 ('AAM/GMCL Supply Agreement') by and
between AAM, Inc. and GMCL
*10.04(a) -- Amending Agreement dated as of September 5, 1996, between AAM, Inc. and GMCL
*10.04(b) -- Amending Agreement dated as of October 7, 1996, between AAM, Inc. and GMCL
*10.04(c) -- Amendment No. 1 to AAM/GMCL Supply Agreement dated February 17, 1994, between AAM, Inc.
and GMCL
*10.05 -- Agreement dated February 17, 1997, between AAM, Inc. and GM
*10.06 -- Lease dated September 30, 1994, by and between AAM, Inc., as lessee, and First
Industrial, L.P., as lessor (Technical Center)
10.07 -- 1997 American Axle & Manufacturing of Michigan, Inc. Replacement Plan
10.08 -- The Amended and Restated American Axle & Manufacturing of Michigan, Inc. Management
Stock Option Plan
*10.09 -- Nonqualified Stock Option Agreement, dated October 30, 1997, between the Company and
Dauch
*10.10 -- Indemnification Agreement, dated February 28, 1994, between AAM, Inc. and GM
10.11 -- Employment Agreement, dated October 27, 1997, by and between the Company and Dauch
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ---------- --------------------------------------------------------------------------------------------- ----------
<S> <C>
10.12. -- Recapitalization Agreement, dated as of September 19, 1997, among AAM, Inc., the
Company, Jupiter Capital Corporation ('Jupiter'), Richard E. Dauch ('Dauch'), Morton E.
Harris ('Harris') and AAM Acquisition, Inc
10.13 -- Stockholders' Agreement, dated as October 29, 1997, among Blackstone Capital Partners
II Merchant Banking Fund L.P., Blackstone Offshore Capital Partners II L.P., Blackstone
Family Investment Partnership II L.P., Jupiter, Dauch, Harris and AAM, Inc.
10.14 -- Monitoring Agreement, dated as of October 29, 1997, between the Company and Blackstone
Management Partners L.P.
10.15 -- Credit Agreement, dated as of October 27, 1997, among the Company, AAM, Inc., the
lenders named therein, The Chase Manhattan Bank, as administrative agent and collateral
agent, and Chase Manhattan Bank Delaware, as fronting bank
*10.16 -- AAM Master Trust Pooling Agreement, dated as of October 29, 1997, among AAM Receivables
Corp.('AAM Receivables'), the Company, as Servicer, and The Chase Manhattan Bank, as
Trustee
*10.16(a) -- AAM Master Trust Series 1997-A Supplement to Pooling Agreement, dated as of October 29,
1997, among AAM Receivables, the Company, as Servicer, and The Chase Manhattan Bank, as
Trustee
*10.17 -- Receivables Sale Agreement, dated as of October 29, 1997, between AAM Receivables, as
purchaser, and the Company, as Seller and Servicer
*10.18 -- Servicing Agreement, dated as of October 29, 1997, among AAM Receivables, the Company,
as Servicer, and The Chase Manhattan Bank, as Trustee
*10.19 -- Agreement for Information Technology Services, dated March 1, 1998, between AAM, Inc.
and Electronic Data Systems Corporation
21 -- Subsidiaries of the Registrant
*23.01 -- Consent of Simpson Thacher & Bartlett (contained in Exhibit 5.01)
*23.02 -- Consent of Ernst & Young LLP
*24.01 -- Power of Attorney
*27 -- Financial Data Schedules (For SEC use only)
</TABLE>
- ------------------
* To be filed by amendment.
(b) Financial Statement Schedules:
Not Applicable.
Schedule II--American Axle & Manufacturing of Michigan, Inc.--Allowance for
Doubtful Accounts
<PAGE>
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
AMERICAN AXLE & MANUFACTURING, INC.
AND
GENERAL MOTORS CORPORATION
February 18, 1994
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is dated as of February 18,
1994, by and between AMERICAN AXLE & MANUFACTURING, INC., a Delaware corporation
("AAM"), and GENERAL MOTORS CORPORATION, a Delaware corporation ("GM").
The purpose of this Agreement is to set forth the terms and conditions
applicable to the sale to AAM of the Assets of the Final Drive and Forge
Business Unit heretofore conducted by GM through its Saginaw Division and the
establishment by AAM and GM of a Strategic Partnership for the production of
products formerly manufactured by the Final Drive and Forge Business Unit.
Now, therefore, in consideration of that purpose and for good and valuable
consideration had and received and the mutual covenants and agreements
hereinafter set forth, AAM and GM agree as follows:
Definitions
The following terms, as used herein, shall have the following meanings
whether used in the singular or plural (other terms are defined in Sections to
which they pertain):
"AAM" means American Axle & Manufacturing, Inc., a Delaware corporation.
"Affiliate" means a company, partnership or other entity in which a Party
owns, directly or indirectly, more than fifty (50) percent of the outstanding
capital stock or other equity interests.
"Agreement" means this Agreement including its Exhibits which are
incorporated by reference herein.
<PAGE>
2
"Ancillary Agreements" means, collectively, the Ancillary Agreements
described in Section 8.1.4.
"Assets" see Section 1.1.
"Assumed Obligations" see Section 3.1.
"Authorized Signatory" means a person with the legal
authority to act for, and whose signature shall be binding upon,
a Party.
"Book Value" means the record amount of the Assets as shown on GM's books
with inventories valued at the lower of actual cost (including actual burden
rates) or market on a first-in, first-out basis and otherwise determined in
accordance win generally accepted accounting principles. Certain finished goods
inventory will be valued at the selling price.
"Business" means the operations of the Final Drive and Forge Business Unit
conducted heretofore and through the Closing by GM from manufacturing facilities
located in Detroit, Michigan and Hamtramck, Michigan; Three Rivers, Michigan;
Buffalo, New York; and Tonawanda, New York; and the leased office facility
located in Saginaw, Michigan.
"Class A Preferred Stock" means AAM's Class A Variable Rate Non-Voting
Convertible Preferred Stock, which shall have the terms set forth in AAM's
Amended and Restated Certificate of Incorporation attached hereto as Exhibit
8.2.5.
"Class B Preferred Stock" means AAM's Class B 8% Non-Voting Preferred
Stock, which shall have the terms set forth in AAM's Amended and Restated
Certificate of Incorporation attached hereto as Exhibit 8.2.5.
<PAGE>
3
"Closing" see Section 9.1.
"Contract" see Section 4.1.12.
"EDS" means Electronic Data Systems Corporation, a GM Affiliate.
"Employee Benefit Plan" means any Employee Pension Benefit Plan, Employee
Welfare Benefit Plan or any other material vacation, severance, bonus or other
benefit plan or program, whether or not subject to ERISA.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(1).
"Environmental Laws" see Section 6.17.A.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Estimated Closing Date Statement" see Section 2.1.1.
"Excess Inventory" means Inventory (excluding Non-Productive Inventory) of
which the on-hand quantity exceeds Requirements.
"Excluded Assets" see Section 1.2.
"Final Closing Date Statement" see Section 2.1.1.
"GM" means General Motors Corporation, a Delaware corporation, including
its unincorporated division known as the Saginaw Division.
"GMCL" means General Motors of Canada Limited.
"GMCL Facility" means GMCL's facility in St. Catharine's, Ontario, Canada.
<PAGE>
4
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended.
"IAM" means the International Association of Machinists.
"including" means including without limitation unless otherwise
specifically indicated.
"Inventory" see Section 1.1.2.D.
"knowledge" or "best knowledge" as it relates to the knowledge of GM or any
of the Affiliates of GM means the knowledge of the Saginaw Finance Director, the
Final Drive and Forge Business Unit Director, and the plant managers at each
facility of the Business, after all reasonable inquiry with appropriate
personnel of GM with respect to the subject matter involved.
"Non-Productive Inventory" means (i) Inventory of materials consumed in the
manufacturing process but not incorporated into the finished products, and (ii)
replacement parts used to service machines, both of which are recorded on the
balance sheet of GM as an asset.
"Obsolete Inventory" means inventory for which no Requirements exist.
"Party" or "Parties" means AAM or GM or both.
"Permitted Encumbrances" see Section 4.1.4.C.
"Preferred Stock" means, collectively, the Class A Preferred Stock and the
Class B Preferred Stock.
"Purchase Price" see Section 2.1.
"Real Property" see Section 1.1.1.
<PAGE>
5
"Requirements" means the quantity of Inventory, excluding Non-Productive
Inventory, necessary to meet all GM's requirements, including the GM parts and
service organization, over the 6 months following the date of the Closing.
"Saginaw Sublease" see Section 8.1.9.
"Strategic Partnership" has the meaning set forth in the letter attached
hereto as Exhibit 1.1; provided, however, that such term does not mean and shall
not be deemed to imply that any partnership (as such term is understood under
applicable partnership law) exists between GM or any of its Affiliates and AAM
with respect to the imposition of liability to third parties including, with
respect to tax matters; and neither AAM nor GM or any its Affiliates shall have
the authority to legally bind or create any obligation on behalf of the other.
"Taxes" means any federal, state, local or foreign tax or assessment
(including any interest or penalties).
"Tax Return" means any return, declaration, report, claim for refund or
information return or statement, or any other similar filings, related to Taxes,
including any schedule or attachment thereto.
"Technical Documentation" see Section 1.1.3.C.
"Transfer Documents" see Section 8.1.3.
"UAW" means the International Union, United Automobile, Aerospace, and
Agricultural Implement Workers of America.
<PAGE>
6
I. CONVEYANCE OF THE ASSETS
1.1. Assets. Upon the terms and subject to the conditions of this
Agreement, at Closing GM shall sell, transfer, assign, convey and deliver to
AAM, and AAM shall purchase, accept and acquire from GM, all of GM's right,
title and interest in and to all of the assets, properties and rights
(contractual or otherwise), exclusively used in or relating to the Business of
every kind, nature and description, real, personal and mixed, tangible and
intangible, known or unknown, wherever located (collectively, the "Assets"),
except for the Excluded Assets described in Section 1.2, including the
following:
1.1.1. Real Property. Fee simple title to all real property owned by GM and
utilized in the Business, consisting of all interests of GM in the real property
described or shown on Exhibit 1.1.1 attached hereto and made a part hereof, or,
in the case of the Tonawanda, New York facility, the real property to be
transferred to AAM as set forth in Exhibit 7.4, together with all appurtenant
rights, buildings, fixtures and improvements situated thereon, thereunder or
therein (collectively, the "Real Property"). Specifically, the Real Property
shall include (i) good, valid and marketable indefeasible fee simple absolute
title to each of the Detroit and Three Rivers, Michigan, and Buffalo, New York,
properties described or shown on Exhibit 1.1.1., as well as the Tonawanda, New
York property, as described on Exhibit 7.4, in each case free and clear of all
mortgages, pledges, liens, security interests, encumbrances and restrictions of
any nature other than Permitted Encumbrances (as defined in Section
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7
4.1.4.), and (ii) all of GM's right, title, estate and interests in and to the
real property leases listed in Exhibit 1.1.2.C. A current land survey showing
improvements and easements on the owned Real Property will be provided prior to
date of the Closing as more fully set forth in Section 7.3.A. The parties
acknowledge that due to lack of timely availability of definitive surveys for
each property, the descriptions and drawings constituting Exhibit 1.1.1 may be
imprecise. Accordingly, the parties agree that prior to Closing, with each party
acting reasonably and in good faith, definitive legal descriptions for each
property shall be prepared in the case of the Tonawanda property and finalized
as to the Detroit, Three Rivers and Buffalo properties based on the final
accepted surveys described in Section 7.3. The parties further agree that the
Assets shall include a subleasehold estate in favor of AAM for up to three full
floors of the so-called Towers Building in Saginaw, Michigan presently prime
leased by GM from an independent third party prime landlord. An acceptable
Saginaw Sublease shall be finalized as a condition to Closing as set forth in
Section 8.1.9.
1.1.2. Personal Property.
A. All machinery and equipment, including material handling equipment,
business machines, furniture, fixtures, tooling, testing equipment,
in-factory vehicles, trucks, expense materials, model shop equipment,
in-process containers, laboratory test equipment and fixtures (including
those located at the Trilon test facility in Saginaw, Michigan),
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8
supplies, stores, hardware, office equipment, and other tangible personal
property (including replacement, spare and maintenance parts designed for use
with the Assets of the Business) owned by GM at the date of the Closing, and
used exclusively in the current manufacture of products at or for the Business
or otherwise used exclusively in the Business, whether located on or near the
Real Property or at the place of business of a vendor, including those items
listed in Exhibit 1.1.2. A.
B. All records located at the Real Property or related exclusively to the
Business as of the Closing, but excluding any records which are subject to any
privilege of the nature described on Exhibit 1.1.2.B. which would be lost if
such records were transferred to AAM, a list of which will be delivered to AAM
prior to Closing and excluding all GM internal environmental audit reports other
than those referred to in Article VI hereof, all environmental bulletins
prepared by GM and provided to the Business prior to the Closing, EMIS software
and documents and Purdue University course materials.
C. Subject to Article III, all claims and rights under contracts,
agreements, contract rights, real and personal property leases, license
agreements, franchise rights and agreements, policies, purchase and sales
orders, quotations and executory commitments, instruments, guaranties,
indemnifications, arrangements, and understandings of GM or any of its
Affiliates (except EDS), whether oral or written, to which GM or any of its
Affiliates (except EDS) is a party and relating exclusively to
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9
the Business, including the Contracts listed on Exhibit 1.1.2.C., but excluding
the contracts listed on Exhibit 3.1.
D. All inventory, including raw materials, component parts,
work-in-process, Non-Productive Inventory and finished products owned by GM as
of the date of Closing relating exclusively to the Business and whether or not
reflected as assets on the books of the Business, wherever such inventories may
be located, other than Excess Inventory and Obsolete Inventory (collectively
"Inventory").
1.1.3. Patents and Technical Information.
A. The patents listed in Exhibit 1.1.3, subject, however, to the
reservation to GM or any of its Affiliates of a non-exclusive, non-transferable,
royalty-free and irrevocable license for all purposes other than to make, have
made, use or sell items which GM is obligated to purchase exclusively from AAM
pursuant to the Component Supply Agreement, substantially the form of which is
attached hereto as Exhibit 8.1.4.D. (the "Component Supply Agreement"), and for
all purposes without limitation whatsoever upon expiration of the term or
termination of the Component Supply Agreement relative to any Family or Families
(as defined in the Component Supply Agreement) of products.
B. A non-exclusive, royalty-free and irrevocable license under all patents
owned by GM and its Affiliates (other than EDS) which pertain, but not
primarily, to the design or manufacture of the products of the Business
(including
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10
components, parts and accessories designed or manufactured by Affiliates,
subsidiaries, divisions or units of GM other than the Business heretofore
conducted by GM through its Saginaw Division) to make, have made, use and sell
the products of the Business and any other products developed or otherwise
acquired by AAM. Unless otherwise agreed to by GM in writing, the license
granted by this clause shall be sublicensable to third parties only to make,
have made, use, and/or sell to or on behalf of AAM.
C. All documented technical information ("Technical Documentation")
currently in the files of the Business and owned by GM and its Affiliates (other
than EDS) which pertains to the design or manufacture of the products of the
Business (exclusive of components, parts and accessories designed or
manufactured by Affiliates, subsidiaries, divisions or units of GM other than
the Business as heretofore conducted by GM through its Saginaw Division);
provided, however, that GM and its Affiliates may retain copies of such
Technical Documentation and a nonexclusive, non-transferable, royalty-free and
irrevocable license for all purposes other than to make, have made, use and sell
items which GM is obligated to purchase exclusively from AAM pursuant to the
Component Supply Agreement and for all purposes without limitation whatsoever
upon expiration of the term or termination of the Component Supply Agreement
relative to any Family or Families (as defined in the Component Supply
Agreement) of products.
D. A non-exclusive, royalty-free and irrevocable license under all
Technical Documentation currently in the files
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11
of or available to the Business and owned by GM and its Affiliates (other than
EDS) which relates, but not primarily, to the design or manufacture of the
products of the Business (including components, parts and accessories designed
or manufactured by Affiliates, subsidiaries, divisions or units of GM other than
the Business heretofore conducted by GM through its Saginaw Division) to use
such Technical Documentation to make, have made, use and sell the products of
the Business and any other products developed or otherwise acquired by AAM.
Unless otherwise agreed to by GM in writing, the license granted by this clause
shall be sublicensable to third parties only to make, have made, use, and/or
sell to or on behalf of AAM.
1.1.4. Government Licenses, Permits and Approvals. All franchises,
licenses, permits, consents, authorizations, approvals and certificates of any
regulatory, administrative or other government agency or body issued to GM and
that are currently used or will be used at the time of the Closing for the
purpose of carrying on the Business or that relate to the Assets, including
those listed in Exhibit 1.1.4 (the "Permits"), to the extent that GM or any of
its Affiliates has the power, authority or right to transfer or assign such
licenses, permits or approvals.
1.1.5. Administrative Assets. All of the books and records of GM relating
exclusively to the Business or the Assets (exclusive of any such item subject to
a privilege, the nature of which is identified on Exhibit 1.1.2.B. and a list of
which will be delivered to AAM prior to the date of Closing), including
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12
advertising and promotional materials, catalogues, price lists, correspondence,
mailing lists, customer lists, vendor lists, photographs, production data, sales
materials and records (regardless of the media on which they are stored),
purchasing materials and records, personnel records of employees (subject to
Section 1.2.1), labor relations records, manufacturing and quality control
records and procedures, research and development files extant at the Real
Property or located outside the Real Property if such files relate exclusively
to the patents listed in Exhibit 1.1.3 or products manufactured by the Business,
records, data and laboratory books, billing records, accounting records, sale
order files, tool routings, labor routings, inspection processes and equipment
lists, picture process sheets, process procedures, equipment prints and
specifications, facility blueprints, service blueprints and plant layouts and
environmental records and reports (excluding all GM internal environmental audit
reports other than those referred to in Article VI hereof, all environmental
bulletins prepared by GM and provided to the Business prior to the Closing, EMIS
software and documents and Purdue University course materials). GM shall make
such information available to AAM in machine readable form to the extent it is
in GM's files in such form.
1.1.6. Legal Claims. All actions, causes of action, judgments and claims or
demands exclusively in favor of the Business of whatever kind or description,
but excluding any such actions, causes of action, judgments, claims or demands
which are
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13
the subject of litigation commenced by or against GM or a GM Affiliate prior to
the date of Closing.
1.1.7. Emission Credits. All emission offsets and emission reduction
credits which have accrued as a result of changes in operations or the shutdown
of equipment or processes of the Business, to the extent such credits can be
transferred by GM.
1.2. Excluded Assets. Notwithstanding anything to the contrary in Section
1.1 of this Agreement, the following rights, properties and assets ("Excluded
Assets") shall not be included in the sale of Assets:
1.2.1. Personnel and Medical Records. All personnel and medical records of
employees and retired former employees of GM who worked at any time for any
reason at the Business for whom a record exists on the date of the Closing;
provided, however, AAM will be provided the originals of all personnel and
medical records of former GM employees who have accepted employment with AAM.
Upon written request of GM, AAM shall promptly provide copies of any and all of
these records to GM, at GM's sole expense. AAM hereby agrees to provide all GM
employees who have accepted employment with AAM with written notice that AAM has
requested GM to deliver such employees' personnel and medical records to AAM.
If, within fourteen (14) days after receiving such notice, an employee notifies
GM of his objection to having his medical records delivered to AAM, such
employee's medical records may be retained by GM.
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14
1.2.2. Dispositions. All of the inventories, products, rights, properties
and assets of the Business which shall have been transferred or disposed of by
GM prior to Closing in the ordinary course of business; provided that (i) none
of the Real Property shall be transferred or encumbered without the prior
written consent of AAM, and (ii) the Saginaw Prime Lease shall not be terminated
or extended or amended in a manner which adversely affects the Saginaw Sublease
without the prior written consent of AAM.
1.2.3. Trademarks. All GM trademarks, trade names and service marks,
provided, however, AAM may sell or dispose of any existing Inventory of products
bearing any GM trademark or related corporate name or trade name.
1.2.4. Third Party and GM Assets. All assets located at the Real Property
owned by third parties, including EDS, listed in Exhibit 1.2.4, and that
property of GM located at the Real Property and listed on Exhibit 1.2.4. Data
processing hardware, software and know-how owned by EDS will be transferred, or
the use thereof licensed, to AAM under the Agreement for Information Technology,
attached hereto as Exhibit 8.1.4.I. Any property of GM listed on Exhibit 1.2.4.
shall be provided by GM to AAM at no charge and GM agrees to keep such property
in good working condition and to maintain such property at such levels as are
reasonably necessary for AAM to provide to GM the services contemplated by the
Component Supply Agreement.
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15
1.2.5. Cash, Cash Equivalents and Accounts Receivable. All cash, bank
accounts, cash equivalents and accounts receivable of the Business as of
Closing.
1.2.6. Vehicles. All GM company vehicles, other than those listed on
Exhibit 1.1.2.A.
1.2.7. Tax Refunds. Any refund of Taxes, or claim for refund of Taxes, of
any kind relating to any period on or prior to the date of the Closing, and any
deferred Tax assets of GM.
1.2.8. Litigation Matters. All actions, causes of action, judgments, claims
or demands which are the subject of litigation commenced by or against GM or a
GM Affiliate on or prior to the date of Closing.
1.2.9. EMIS. GM's environmental management information systems, computer
software and related documentation.
1.2.10. Excluded Contracts. The contracts listed on Exhibit 3.1.
1.3. Exhibits. While the various Exhibits to this Agreement are intended to
be complete, to the extent that any Assets are intended to be transferred to AAM
pursuant to Section 1.1., or not retained by GM pursuant to Section 1.2., but do
not appear on the applicable Exhibits, such Assets shall be the property of AAM.
On and after the Closing, GM shall prepare, execute and deliver, at GM's
expense, such further instruments of conveyance, sale, assignment or transfer,
and shall take or cause to be taken such other or further action, as AAM shall
reasonably request at any time or from time to time in order to perfect, confirm
or evidence in AAM title to all or any part of the Assets
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16
or to consummate, in any other manner, the terms and conditions of this
Agreement. Should it be determined after the date of the Closing that property,
books, records or other materials that were not intended to be transferred to
AAM were transferred, AAM shall promptly return them at no cost to GM.
1.4. Nonassignable Permits, Licenses, Leases and Contracts.
1.4.1. Nonassignability. Except as otherwise provided in Section 1.4.3., to
the extent that any contract or other agreement listed on Exhibit 1.1.2.C. or
any license, permit or approval or any other contract, agreement or commitment
included in the Assets is not capable of being assigned, transferred or
subleased by the Closing without the consent or waiver of the issuer thereof or
the other party thereto or any third party (including a governmental entity), or
if such assignment, transfer or sublease or attempted assignment, transfer or
sublease would constitute a breach thereof, or a violation of any law, decree,
order, regulation or other governmental edict, this Agreement shall not
constitute an assignment, transfer or sublease thereof, or an attempted
assignment, transfer or sublease thereof, unless any such consent or waiver is
obtained.
1.4.2. GM to Use All Reasonable Efforts. GM shall, at its sole expense, use
all reasonable efforts, and AAM shall cooperate with GM, to obtain the consents
and waivers and to resolve the impediments to assignment referred to in Section
1.4.1, and to obtain any other consents and waivers necessary to convey to AAM
any other of the Assets; provided, however, that
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17
neither GM nor AAM shall be obligated to pay any consideration therefor to the
party from whom the consent or waiver is requested.
1.4.3. Consents Required of GM or Its Affiliates. Without limiting the
generality of Section 1.4.2, GM shall, at its sole expense, obtain the consents
and waivers and resolve the impediments to any assignment referred to in Section
1.4.1 with respect to which GM or any Affiliate (other than EDS) of GM is the
party from whom consent is required.
1.4.4. If Waivers or Consents Cannot be Obtained. To the extent that the
consents and waivers referred to in Section 1.4.1 are not obtained by GM, or
until the impediments to transfer referred to therein are resolved, GM shall,
during the two (2) year period commencing with the Closing, use all reasonable
efforts, at its expense, to (i) provide to AAM the benefits of any permit or
approval and of any contract, license or other agreement, all as referred to in
Section 1.4.1, to the extent involving the Business, (ii) cooperate in any
reasonable and lawful arrangement designed to provide such benefits to AAM,
without incurring any financial obligation to AAM other than to provide such
benefits, and (iii) enforce for the account of AAM any rights of GM arising from
the licenses, permits and approvals and the contracts or other agreements
referred to in Section 1.4.1 against such issuer thereof or other party or
parties thereto (including the right to elect to terminate in accordance with
the terms thereof on the advice of AAM). At the end of such two (2) year period,
GM shall have no further obligations
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18
hereunder with respect to such licenses, permits and approvals and such
contracts and other agreements and the failure to obtain any necessary consent
or waiver with respect thereto shall not be a breach of this Agreement.
1.4.5. Obligation of AAM to Perform. To the extent that AAM is provided the
benefits pursuant to Section 1.4.3 of any license, permit or approval or any
contract or other agreement, AAM shall perform, on behalf of GM, for the benefit
of the issuer thereof or the other party or parties thereto the obligations of
GM thereunder or in connection therewith, but only to the extent that (i) such
action by AAM would not result in any material default thereunder or in
connection therewith, and (ii) such obligation would have been an obligation
assumed by AAM pursuant to Article III but for the nonassignability or
nontransferability thereof, and if AAM shall fail to perform to the extent
required herein, GM, without waiving any rights or remedies that it may have
under this Agreement, may suspend its performance under Section 1.4.3 in respect
of the instrument which is the subject of such failure to perform unless and
until such situation is remedied.
1.5. St. Catharine's Equipment. Title to and delivery of the St.
Catharine's equipment shall occur on the date and in the manner set forth in the
Option to Purchase Equipment Agreement to be executed by GM, the form of which
is attached hereto as Exhibit 8.1.4.E. (the "St. Catherine's Option Agreement").
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19
II. PURCHASE PRICE.
2.1. Purchase Price. The purchase price (the "Purchase Price") for the
Assets shall be equal to the sum of:
(i) one hundred percent (100%) of the Book Value of the Inventory,
(excluding Excess Inventory and Obsolete Inventory) less Seven Million
Dollars ($7,000,000) (the "Inventory Purchase Price"), plus
(ii) interest, at the rate of 6% per annum, for a period of twenty-five
(25) days on the aggregate amount of the accounts receivable of Ford,
Isuzu and New Venture Gear outstanding on the date of the Closing,
plus
(iii) Two Hundred Million Dollars ($200,000,000) by the delivery by AAM of
Class A Preferred Stock, plus
(iv) Five Hundred Thousand Dollars ($500,000) by the delivery by AAM of
Class B Preferred Stock.
The Inventory Purchase Price shall be subject to revaluation as provided in
Section 2.1.1 and shall be payable as provided in Section 2.2. The amounts set
forth in subsections (ii), (iii), and (iv) above shall be payable as provided in
Section 2.2. The Purchase Price shall be allocated among the Assets as provided
in Section 2.3.
2.1.1. Determining Inventory Purchase Price.
A. GM shall deliver to AAM, on the date of the Closing, an estimated
statement of the Book Value of the Inventory (excluding Excess Inventory and
Obsolete Inventory) to be transferred as of the close of business on the date of
the Closing (the "Estimated Closing Date Statement"), which statement shall be
based on the physical audit of the Inventory described herein. During the week
of December 27, 1993, GM, at its sole
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20
expense, conducted a physical audit of the Inventory in accordance with
procedures agreed upon by the parties. AAM had representatives present to
observe the physical audit. By May 2, 1994, GM shall prepare and deliver to AAM
a statement of Inventory as of the date of closing (excluding Excess Inventory
and Obsolete Inventory) (the "Closing Date Statement"), which statement shall be
prepared in accordance with generally accepted accounting principles applied on
a consistent basis, and shall be accompanied by an audit report of the firm of
Deloitte & Touche stating that (i) examination of the Closing Date Statement has
been made in accordance with generally accepted auditing standards, and (ii) in
their opinion, the Closing Date Statement has been prepared in accordance with
generally accepted accounting principles applied on a consistent basis. GM shall
pay the expenses of Deloitte & Touche in connection with such audit report.
B. During the period between the date of the Closing and May 2, 1994, AAM
and its accountants shall be permitted to review with GM and its accountants the
proposed Closing Date Statement, and AAM and its accountants shall on and after
the date of the Closing have full access upon reasonable notice and at all
reasonable times during normal business hours to the work papers and supporting
records of GM and its accountants so as to pc.mit AAM and its accountants to
make copies of such work papers and supporting records and to allow AAM to
become informed concerning all matters relating to the preparation of the
Closing Date Statement and the accounting
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21
procedures, methods, tests and approaches being utilized in connection
therewith. If AAM does not notify GM that in AAM's judgment modifications to the
Closing Date Statement are required within thirty (30) days after its receipt,
AAM shall be deemed to have accepted the Closing Date Statement and such
Statement shall be deemed to be the Final Closing Date Statement (as defined
below); provided, however, that such deemed acceptance of AAM shall not modify
or alter the representations and warranties of GM contained in this Agreement.
If within thirty (30) days after the Closing Date Statement is delivered to AAM
by GM, AAM notifies GM that in AAM's judgment modifications are required to be
made in order for the Closing Date Statement to present fairly the Book Value of
the Inventory (excluding Excess Inventory and Obsolete Inventory), the Closing
Date Statement shall be so modified unless within fifteen (15) days after
receipt of notice from AAM that modifications should be made, GM notifies AAM of
GM's disagreement with respect to any of the modifications. GM and AAM shall
have fifteen (15) days to resolve the items of disagreement. If the items of
disagreement cannot be resolved in such fifteen (15) day period, the
modifications subject to such disagreement shall be determined by Arthur
Andersen & Co. (the "Independent Public Accountant") in accordance with the
terms of this Agreement, on the basis of such procedures as the Independent
Public Accountant, in its sole judgment, deems applicable and appropriate,
taking into account the nature of the issues, the amount(s) in dispute and the
respective positions asserted by the parties. The Independent Public Accountant
shall
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22
review only the matters in dispute and as promptly as practicable deliver to GM
and AAM a statement in writing setting forth its determination as to the proper
treatment of the modifications as to which there was disagreement, and such
determination shall be final and binding upon the parties hereto without any
further right of appeal. All charges of the Independent Public Accountant
incurred in making such determination shall be borne equally by GM and AAM. The
Closing Date Statement as accepted by AAM, with such changes, if any, as have
been agreed to by GM or determined by the Independent Public Accountant, or
both, shall be hereinafter referred to as the Final Closing Date Statement.
2.1.2. Pre-Closing Expenses.
A. AAM shall be reimbursed by GM for costs, liabilities and expenses with
respect to the Business relating to periods prior to the Closing paid or to be
paid by AAM, excluding, however, any costs or expenses incurred by AAM on or
prior to the date of Closing relating to the acquisition of the Business. All
such costs, liabilities and expenses shall be prorated as of the Closing and
paid by GM on demand when and as the same become due and payable. Prorations
with respect to real estate taxes are provided for in Section 7.5.
2.2. Payment of Purchase Price.
A. On the date of the Closing, AAM shall (i) deliver to GM a promissory
note (the "Estimated Note") in an amount equal to the estimated Inventory
Purchase Price (based on the Estimated Closing Date Statement), (ii) pay by wire
transfer an amount equal to the interest payable under subsection 2.1 (ii)
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23
to the account of GM's Asset Sale Account at Citibank, New York City, Account
No. 4063-7874, (iii) issue to GM 13,334 shares of the Class A Preferred Stock,
and (iv) issue to GM 50 shares of the Class B Preferred Stock.
B. Within ten (10) days after the acceptance and approval by AAM of the
Final Closing Date Statement or the final resolution by the Independent Public
Accountant of any disagreement of the Parties with respect to the Final Closing
Date Statement in accordance with Section 2.1.1.B., GM shall return to AAM the
Estimated Note and AAM shall deliver to GM a replacement promissory note (the
"Replacement Note") having a principal amount equal to the amount of the Book
Value of the Inventory set forth in the Final Closing Date Statement as approved
by AAM or determined by the Public Accountant less Seven Million Dollars
($7,000,000).
2.3. Allocation of Purchase Price. The parties hereby agree to allocate the
portion of the Purchase Price allocable to the Buffalo, New York, property and
the Tonawanda, New York, property in accordance with the amounts specified on
the Valuation Agreement attached as Exhibit 7.6.C. The Parties shall endeavor to
agree on an allocation of the remainder of the Purchase Price and the Assumed
Obligations among the Assets within one hundred eighty (180) days following the
Closing. In the event the Parties cannot agree upon the allocation of the
remainder of the Purchase Price and the Assumed Obligations among the Assets,
each Party shall use its own allocation of the Purchase Price and the Assumed
Obligations for all purposes, and
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24
neither Party shall be bound to utilize the allocation determined by the other
Party except as otherwise provided in the first sentence of this Section 2.3.
III. ASSUMPTION OF OBLIGATIONS: NON-ASSUMPTION OF LIABILITIES.
3.1. Assumption of Certain Obligations. At and as of the Closing, except as
set forth on Exhibit 3.1, AAM shall assume and agree to perform all of the
obligations of GM under all contracts, leases, and other commitments listed on
Exhibit 1.1.2.C., all other contracts, leases, and other commitments of GM with
respect to the Business, no one of which will involve the expenditure after the
date hereof by any party thereto of $100,000 or more in the aggregate, and
licenses and permits listed on Exhibit 1.1.4. after the date of the Closing to
the extent the same arise and are first required to be performed after the date
of the Closing (the "Assumed Obligations").
3.2. Non-Assumption of Liabilities. With the exception of the Assumed
Obligations, AAM shall not by the execution and performance of this Agreement,
or otherwise, assume or otherwise be responsible for any liability or obligation
of any nature of GM or any of its Affiliates, or claims of such liability or
obligation, matured or unmatured, liquidated or unliquidated, fixed or
contingent, or known or unknown, whether arising out of occurrences prior to, on
or after the date hereof, including those arising from: (i) any occurrence or
circumstance (whether known or unknown) which occurs or exists prior to, on or
after the date hereof and which constitutes, or which by the lapse of time or
delivery of notice (or both) would constitute, a
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25
breach or default under any lease, contract, instrument or agreement of GM or
any of its Affiliates (whether written or oral); (ii) any injury to or death of
any person or damage to or destruction of any property, arising out of the
occurrence of any event on or prior to the date of the Closing, regardless of
whether such injury, death, damage or destruction occurs prior to, on or after
the date of the Closing and whether based on GM's or any of its Affiliates'
negligence, breach of warranty, breach of contract, products liability, strict
liability or any other theory; (iii) any violation of the requirements of any
governmental authority or of the rights of any third person; (iv) subject to
Section 11.14, any liabilities, obligations or commitments for Taxes of GM or
any of its Affiliates or predecessors, or any other liabilities, obligations or
commitments for Taxes arising with respect to the conduct of the Business or the
ownership of the Assets on or prior to the date of Closing; or (v) any employee
benefit plan or any other fringe benefit program maintained by GM or any of its
Affiliates or to which GM or any of its Affiliates contributes or any
contributions, benefits or liabilities therefor or any liability for GM's or any
of its Affiliates' withdrawal or partial withdrawal from, or termination of, any
such plan or program or any liability of GM or any of its Affiliates for
severance pay, vacation pay or any other type of compensatory arrangement with
employees or former employees. This Section 3.2 shall not relieve the parties of
their obligations under Articles V or VI.
IV. REPRESENTATIONS AND WARRANTIES.
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26
4.1. Representations and Warranties of GM. GM represents and warrants to
AAM as follows:
4.1.1. Corporate Data. GM is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has full
corporate power to own, hold or lease the Assets and to carry on the Business as
presently conducted.
4.1.2. Authority; Binding Effect. GM has the corporate power and authority
to execute and deliver this Agreement and the Ancillary Agreements, and to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated herein and therein. The execution, performance and
consummation of this Agreement and the Ancillary Agreements have been duly
authorized by all necessary action on the part of GM and its Affiliates. This
Agreement is, and the Ancillary Agreements will be when executed and delivered,
valid and legally binding obligations of GM and its Affiliates, enforceable
against GM and its Affiliates in accordance with their respective terms.
4.1.3. Qualification. GM or an appropriate GM Affiliate is duly qualified
or licensed and in good standing as a corporation, duly authorized to do
business in all jurisdictions, including the states of Michigan and New York,
where it owns or leases real property or maintains stocks of business
inventories relating to the Business, or where the failure so to qualify or to
be so licensed would have a material adverse effect on the
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27
condition, assets, revenues, business, operations or affairs (financial and
otherwise) of the Business.
4.1.4. Title to Assets, etc.
A. Title. GM has good and marketable title to the Assets (excluding the
Real Property, the title to which is addressed in Section 4.1.4.C. below), free
and clear of any mortgage, pledge, lien, security interest or encumbrance. The
Assets referred to in Section 1.1, and all assets referred to in Section 1.2 and
defined as Excluded Assets constitute all of the properties and assets that GM
uses or holds exclusively in connection with the Business, and, except for
additions and dispositions in the ordinary course of business, such Assets and
Excluded Assets include all properties and assets the use of which are necessary
for the continued conduct of the Business after the Closing as it is now being
conducted.
B. Nonconforming Use. GM has no knowledge and no reason to believe that the
current use of property, plant or equipment included in the Assets is dependent
on any nonconforming use or other permit.
C. Title and Condition of Real Property. Except as set forth in Exhibit
4.1.4. (the "Permitted Encumbrances") and as to real property leased pursuant to
real property leases listed on Exhibit 1.1.2.C., GM has good, valid, marketable
and insurable indefeasible fee simple title to the Real Property. The Real
Property constitutes all of the real estate now used in and necessary for the
conduct of the business of GM as presently conducted at the Detroit and Three
Rivers, Michigan, and Buffalo,
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28
New York, sites and at the Forge Facility at Tonawanda, New York, respectively.
Except as set forth in Exhibit 4.1.4, the Real Property is held free and clear
of all mortgages, pledges, liens, security interests, encumbrances and
restrictions of any nature whatsoever, including (i) rights or claims of parties
in possession; (ii) easements or claims of easements not shown by public records
or the Surveys; (iii) encroachments, overlaps, boundary line or water drainage
disputes except as set forth on the Surveys; (iv) any lien or right to a lien
for services, labor or material furnished; (v) special tax or other assessments;
(vi) options to purchase, leases, tenancies, or land contracts; (vii) contracts,
covenants, or restrictions which restrict the use of the Real Property in a
manner inconsistent with the present use; and (viii) to GM's knowledge,
violations of zoning, fire, safety, building, and other laws, ordinances and
regulations applicable to the Real Property, excluding pollution and
environmental control laws, ordinances and regulations. Exhibit 1.1.1 contains
or shows by description or drawing each parcel of real property owned or used by
GM in the conduct of its business at Detroit and Three Rivers, Michigan, and
Buffalo, New York, and Exhibit 7.4 contains a description of real property owned
or used by GM in the conduct of its business at Tonawanda, New York,
respectively. To GM's knowledge, except as set forth on Exhibit 4.1.4.C., there
are no hidden material structural defects in the exterior walls or the interior
bearing walls, the foundation or the roof of any plant, building, garage or
other such structure located on the Real Property and the electrical, plumbing
and heating systems,
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29
and the air conditioning system, if any, of any such plant, building, garage or
structure are in reasonable operating condition in light of their age and prior
use. Except as may be disclosed on Exhibit 4.1.4., the Company owns all oil, gas
and other minerals in, on or under the Real Property and all rights with respect
thereto and no other person or entity has any right or interest with respect
thereto. To GM's knowledge, the utilities servicing the Real Property are
adequate to permit the continued operation of the Business and there are no
pending or threatened zoning, condemnation or eminent domain proceedings,
building, utility or other moratoria, or injunctions or court orders which would
materially affect such continued operation. GM has used all reasonable efforts
to furnish or make available to AAM copies of all unrecorded easements, books,
records, plans, specifications, blue prints, reports and other writings and
drawings in its control or possession which relate exclusively to the Real
Property (excluding all GM internal environmental audit reports other than those
referred to in Article VI hereof, all environmental bulletins prepared by GM and
provided to the Business prior to the Closing, EMIS software and documents and
Purdue University course materials).
4.1.5. Condition of Assets, Inventories, etc.
A. EXCEPT FOR SUCH WARRANTIES AND REPRESENTATIONS SET FORTH IN ANY SECTION
OR PROVISION OF THIS AGREEMENT OR IN ANY OF THE TRANSFER DOCUMENTS PURSUANT TO
WHICH THE ASSETS WILL BE TRANSFERRED TO AAM, THE ASSETS ARE SOLD AND FURNISHED
"AS IS, WHERE IS" AND WITH ALL FAULTS AND WITHOUT ANY REPRESENTATION OR
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30
WARRANTY OF ANY NATURE WHATSOEVER, EXPRESS OR IMPLIED, ORAL OR WRITTEN, AND IN
PARTICULAR WITHOUT ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE; and except as otherwise expressly provided for in this
Agreement and/or the Transfer Documents, GM disclaims and AAM hereby waives any
obligation, liability, right, claim or demand in contract, tort (including
negligence and patent infringement), strict liability or otherwise with respect
to the condition of the Assets. Without limiting the generality of the
foregoing, AAM acknowledges and agrees that except for such warranties and
representations expressly set forth in any Section or provision of this
Agreement: (i) GM neither represents nor warrants that the Assets or any part
thereof sold under this Agreement will operate satisfactorily, (ii) GM shall
have no liability or responsibility for the condition and/or operation of the
Assets after transfer to AAM, and (iii) AAM is purchasing the Assets based
solely upon its own inspection, evaluation, review and analysis and AAM assumes
the entire risk associated with such inspection, evaluation, review and analysis
being incomplete or inaccurate.
B. All of the Inventory, other than Excess Inventory and Obsolete
Inventory, (i) consists of a quality and quantity usable and saleable in the
ordinary and usual course of business; and (ii) has been valued on a first-in,
first-out basis at the lower of actual cost (including actual burden rates) or
market price with certain finished goods inventory valued at the selling price.
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31
4.1.6. Litigation, Investigation or Inquiries. Exhibit 4.1.6 describes all
pending litigation relating to the Business and to which GM or any of its
Affiliates is named as a party. Except as identified in Exhibit 4.1.6, neither
GM nor any Affiliate of GM is subject to any outstanding judgment, order,
decree, arbitral award, stipulation or injunction which restrains, prohibits or
declares illegal or questions the validity, or imposes or would impose
substantial damages in connection with this Agreement, any of the Ancillary
Agreements or any of the transactions contemplated hereby or thereby. Except as
set forth on Exhibit 4.1.6, there is no claim, suit, action, litigation or
proceeding, of any nature, civil, criminal, regulatory or otherwise, in law or
in equity, and there are no proceedings or governmental investigations before
any commission, court, arbitrator or governmental or other administrative
agency, instrumentality or authority, filed, pending, or, to GM's knowledge,
threatened against or affecting GM or its Affiliates, in each case which could
have an adverse effect on the ability of GM to perform its obligations under
this Agreement or any of the Ancillary Agreements or on the consummation of the
transactions contemplated by this Agreement or on the ability of AAM to conduct
the Business as it is presently being conducted. Further, except as set forth in
Exhibit 4.1.6, there are no pending citations, notices of violation, fines or
penalties heretofore asserted against GM, nor, to GM's knowledge, does there
exist any notice of any threats of citations, fines or penalties, which affect
the Business or the Assets under any
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32
federal, state or local law relating to occupational health or safety, which
remain unpaid or which otherwise encumber the Assets. GM has cured, or is in the
process of resolving or curing, any defect or problem which resulted in the
issuance of any such citation, fine or penalty. Further, AAM acknowledges that
it is receiving the assets "as is", however, GM agrees to pay any Federal
Occupational Safety and Health Administration (or State equivalent) losses,
expenses or penalties resulting from or relating to any defects or problems
cited on or before the 30th day following the date of Closing which become a
Final Order. This agreement to pay by GM does not include fines which are the
result of AAM's failure to enforce existing safety rules or OSHA or state
equivalent standards, rules, regulations and orders, which shall be the sole
responsibility of AAM or costs of abatement less than $1,200 per illustration of
alleged violation. With respect to products manufactured by the Business, GM has
made available to AAM copies of its non-privileged files containing all
information with respect to (i) litigation, administrative proceedings and other
pending customer claims relating to product performance or resulting from the
manufacture, use or sale of the products, and (ii) other notifications
concerning products.
4.1.7. Patents, etc. Exhibit 1.1.3 is a complete list of patents, patent
applications, and invention-disclosures awaiting patent application filing
decision, owned by GM and its Affiliates (other than EDS) pertaining exclusively
to the design or manufacture of the products of the Business (exclusive of
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33
components, parts and accessories designed or manufactured by affiliates,
subsidiaries, divisions or units of GM other than the Business heretofore
conducted by GM through its Saginaw Division). GM has made available to AAM
copies of all of the materials set forth on Exhibit 1.1.3. GM has the right to
transfer the Patents and Technical Documentation included in the Assets. None of
the Patents or Technical Documentation has been knowingly misappropriated from
any third person. Except as set forth on Exhibit 4.1.7, GM has received no claim
or notice that the use of the Patents or the Technical Documentation infringes
or results in a product that infringes upon the rights of any other person or
entity, and GM has no knowledge of any such infringement. Except as listed in
Exhibit 4.1.7, GM has no knowledge of any infringement or improper use by any
third party of the Patents or the Technical Documentation, and there is no
action or proceeding instituted by or on behalf of GM in which an act
constituting an infringement of any of the rights to the Patent and Technical
Documentation was alleged to have been committed by a third party. GM has not
knowingly taken or omitted to take any action which would have the effect of
waiving any rights to the Patents and Technical Documentation, the waiver of
which would adversely affect the conduct of the Business as it is presently
being conducted or the use of the Assets or allow any third party to compete
more effectively with the Business than it now does.
4.1.8. Compliance with Other Instruments and Laws. Except as set forth in
Exhibit 4.1.8 and excluding any
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34
Environmental Laws, National Labor Relations Act claims and claims under any
federal, state, or local law related to occupational health or safety incurred
in the ordinary course of business, the Business and the Assets are in
compliance in all material respects with all applicable statutes, laws,
ordinances, rules, governmental regulations promulgated, or judgments, decisions
or orders entered, by any federal, state, local, or foreign court or
governmental authority (the "Applicable Laws"). To GM's knowledge, except as set
forth on Exhibit 4.1.8, GM is not under investigation with respect to, or been
charged with or been given notice of any violation of any of the Applicable Laws
as they relate to the Business. Exhibit 1.1.4. constitutes complete and accurate
disclosure of all permits, concessions, grants, franchises, licenses and other
governmental authorizations and approvals necessary for the conduct of the
Business and the ownership and operation of the Assets, all of which have been
duly obtained and, except as indicated on Exhibit 1.1.4, are in full force and
effect, and there are no proceedings pending or, to the best of GM's knowledge,
threatened, which may result in the revocation, cancellation or suspension, or
any materially adverse modification, of any such permit, concession, grant,
franchise, license or other governmental authorization or approval. To GM's
knowledge, it is not in violation of any of the Permits, and there is no pending
or, to the best of GM's knowledge, threatened proceeding which could result in
the revocation, cancellation or inability of GM or AAM after the Closing to
renew any Permit. The execution, delivery and
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35
performance of, and compliance with, this Agreement and the Ancillary Agreements
will not result in any such violation or be in conflict with or constitute a
default under any of the foregoing.
4.1.9. Brokers, Finders. The transactions contemplated herein were not
submitted to GM by any broker or other person entitled to a commission or
finder's fee thereon, and were not with the consent of GM submitted to AAM by
any such broker or other person. Neither GM nor any of its officers, directors
or employees, has engaged any broker or finder or incurred or taken any action
which may give rise to any liability against itself or the Assets for any
brokerage fees, commissions, finders' fees or similar fees or expenses, no
broker or finder has acted directly or indirectly for GM in connection with this
Agreement or the transactions contemplated hereby and no investment banking,
financial advisory or similar fees have been incurred or are or will be payable
by GM in connection with this Agreement or the transactions contemplated hereby.
GM shall indemnify and hold AAM harmless from and against any such fees
described in this Section 4.1.9.
4.1.10. Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental or judicial authority
or any other third party is required in connection with the valid execution,
delivery and performance of this Agreement and the Ancillary Agreements by GM or
the consummation by GM of the transactions contemplated hereby and thereby,
except (i) for the matters set forth in Exhibit
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36
4.1.10, (ii) in connection with contracts, leases, and other commitments, no one
of which will involve the expenditure after the date hereof by any party thereto
of $100,000 or more in the aggregate, and (iii) any approval required under the
HSR Act.
4.1.11. Absence of Certain Changes. Except as set forth in Exhibit 4.1.11,
since December 31, 1993, GM has not, and from the date of this Agreement to the
date of the Closing will not have, with respect to the Business or Assets (i)
incurred any material obligations or liabilities, whether absolute, accrued,
contingent or otherwise (including liabilities as guarantor or otherwise with
respect to obligations of others), or incurred any obligations or liabilities
other than in the ordinary course of business, (ii) mortgaged, pledged or
subjected any of the Assets to any lien, lease, security interest or other
charge or encumbrance, (iii) acquired or disposed of material assets or
properties, or entered into any agreement or other arrangement for any such
acquisition or disposition, or acquired or disposed of, or entered into any
agreement to acquire or dispose of, any material assets or properties, other
than in the ordinary course of business, (iv) increased the wages, salaries,
compensation, pension or other benefits payable to any salaried employee other
than in the ordinary course of business, (v) forgiven or canceled any debts or
claims or waived any rights of a material value in the aggregate other than in
the normal operation of its credit policies, (vi) entered into any transaction
other than in the ordinary course of business, (vii) granted any rights or
licenses under any of its patents used in the Business or entered into any
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37
licensing or distributorship arrangements, (viii) suffered any change other than
changes in the ordinary course of its business, none of which has had, in any
case or in aggregate, a material adverse effect on the Assets or the Business,
(ix) suffered any damage, destruction or loss, in any case or in the aggregate
(whether or not covered by insurance), having a material adverse effect on the
Assets or the Business, (x) suffered any labor trouble having a material adverse
effect on the Assets or the Business, (xi) suffered any loss of customers having
a material adverse effect on the Assets or the Business, or (xii) suffered any
other event or condition of any character which materially and adversely affects
or may reasonably be expected to materially and adversely affect the business
operations (as now conducted or as currently proposed to be conducted), Assets,
properties or prospects or condition (financial or otherwise) of the Business.
4.1.12. Contracts.
A. Exhibit 1.1.2.C is a list of all contracts, agreements, contract rights,
leases, license arrangements, franchise rights and agreements, policies,
purchase and sales orders, and executory commitments, instruments, guaranties,
indemnification arrangements and understandings to which GM is a party (whether
or not legally bound) or by which it or any of its properties is bound that
relate exclusively to the Assets or the Business (including employment and
consulting agreements, labor agreements, non-patent license and distribution
agreements and arrangements among GM, its Affiliates and intradivisional
facilities other than accounts receivable of GM arising from the
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38
sale of products in the ordinary course of business) and other than agreements,
contracts and commitments for the purchase or sale of goods or services or lease
of personal property in the ordinary course of business, no one of which (or no
related set or number of which) will involve the expenditure after the date
hereof by any party thereto of more than $100,000 in aggregate. The agreements,
contracts and commitments listed on Exhibit 1.1.2.C, which are collectively
referred to herein as the "Contracts," constitute all agreements, contracts and
commitments necessary for the conduct of the Business as it is currently being
conducted, other than accounts receivable of GM arising from the sale of
products in the ordinary course of business and other agreements, contracts and
commitments for the purchase or sale of goods or services or lease of personal
property in the ordinary course of business, no one of which (or no related set
or number of which) will involve the expenditure after the date hereof by any
party thereto of more than $100,000 in aggregate. GM has furnished to AAM access
to copies of the Contracts, and afforded AAM the opportunity to inspect them.
B. Each of the Contracts is valid and in full force and effect. There is no
default thereunder or claim of default and there has not occurred any event
which, with the passage of time or the giving of notice (or both), would
constitute a default thereunder, whether on the part of GM or, to the best of
GM's knowledge, on the part of any other party thereto. There are no unresolved
disputes under any of the
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39
Contracts other than as disclosed in Exhibits 1.1.2.C, 4.1.6, or 4.1.8.
C. Exhibit 1.1.2.C lists all collective bargaining agreements with any
labor union or other representative of employees connected with the Business
(including local agreements, amendments, supplements, letters and memoranda of
understanding of any kind). GM is in compliance in all respects with each
collective bargaining agreement listed on Exhibit 1.1.2.C.
4.1.13. Regulatory Matters. With the exception of the matters listed on
Exhibit 4.1.13, GM is not required to file or otherwise provide reports, or
data, other information or applications with respect to the products
manufactured by the Business with any federal, state or local governmental
authorities with jurisdiction over the manufacture, use or sale of such
products, and no regulatory approvals are required with respect to such
products.
4.1.14. Tax Matters.
A. GM has duly and timely filed with the appropriate federal, state, local
and foreign authorities or governmental agencies, all Tax Returns and the tax
reports required to be filed with respect to the Business for the periods ending
on or prior to the date of Closing, and has paid all Taxes, assessments, fees
and other governmental charges arising thereunder except where the failure to
file or pay such Taxes would not have an adverse effect on the financial
condition of the Business. All such returns and reports are true and correct
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40
and are the most recent returns filed by GM with any such governmental entity.
B. GM has withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee.
C. GM is not a party to any Tax allocation or sharing agreement, except as
provided in this Agreement, under which AAM or the Assets could be subject to
Taxes or other liability after the Closing.
4.1.15. Restrictive Documents or Laws. With the exception of the Permitted
Encumbrances and the matters listed in Exhibit 4.1.15, GM is not a party to or
bound under any and, to the best knowledge of GM, there is no pending or
proposed, regulation, certificate, mortgage, lien, lease, agreement, contract,
instrument, law, vote, order, judgment or decree, or any similar restriction not
of general application which materially adversely affects, or reasonably could
be expected to materially and adversely affect (i) the condition, financial or
otherwise, of the Business or the Assets; (ii) the continued operation by AAM of
the Business after the Closing on substantially the same basis as the Business
was theretofore operated; or (iii) the consummation of the transactions
contemplated in this Agreement.
4.1.16. No Conflict or Default. Neither the execution and delivery of this
Agreement, nor compliance with the terms and provisions hereof, including the
consummation of the transactions contemplated hereby, will violate in any
material fashion any
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41
statute, regulation or ordinance of any governmental authority, or conflict with
or result in the breach of any term, condition or provision of the certificate
of incorporation or bylaws of GM or of any agreement, deed, contract, mortgage,
indenture, writ, order, decree, legal obligation or instrument of the Business
to which GM is a party or by which the Business or the Assets are or may be
bound, or constitute a material default (or an event which, with the lapse of
time or the giving of notice, or both, would constitute a material default)
thereunder, or result in the creation or imposition of any lien, charge or
encumbrance, or restriction of any nature whatsoever with respect to any aspect
of the Business.
4.1.17. Labor Relations.
A. GM has complied in all material respects with all applicable federal,
state and local laws, rules, regulations and Executive Orders relating to
employment of employees of the Business, including, as applicable, the National
Labor Relations Act, as amended; Title VII of the Civil Rights Act of 1964, as
amended; the Reconstruction Civil Rights Acts, as amended the Equal Pay Act of
1963, as amended; the Age Discrimination in Employment Act of 1967, as amended;
the Rehabilitation Act of 1973, as amended; the Selective Service Act of 1948,
as amended; the Veterans' Re-employment Rights Acts, as amended; the Vietnam Era
Veterans Readjustment Act of 1974, as amended; the Fair Labor Standards Act, as
amended; ERISA; the Consolidated Omnibus Budget Reconciliation Act of 1988;
Workers Adjustment Retraining Notification Act; the Immigration Reform and
Control Act of 1986;
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42
the Americans with Disabilities Act of 1990; the Family Medical Leave Act of
1993; and, as applicable, any and all rules and regulations promulgated
thereunder or with respect to any such Acts or statutes; and all applicable
laws, rules and regulations governing payment of minimum wages and overtime
rates, the withholding and payment of taxes from compensation of employees and
the payment of premiums and/or benefits under applicable worker compensation
laws.
B. Except as set forth in Exhibit 4.1.17.B, there is no material unfair
labor practice charge or complaint relating to the Business against GM pending
before the National Labor Relations Board. Except as set forth on Exhibit
4.1.17.B, to the best knowledge of GM, there is no material labor strike,
slowdown or stoppage, or any union organizing campaign, or petition for
certification actually pending or in the process of being circulated with
respect to, against or involving the Business. Except as set forth on Exhibit
4.1.17.B., no collective bargaining or other labor agreement is currently being
negotiated by GM. Except as set forth in Exhibit 4.1.17.B., GM has delivered to
AAM true, correct and complete copies (or, in the case of oral agreements, true,
correct and complete summaries of such agreements) of all collective bargaining
agreements or other agreements between GM and any of its employees with respect
to the Business, including any such agreements with local bargaining units.
C. For purposes of this Section 4.1.17, Section 4.1.19 and Section V, any
representation or commitment relating
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43
to materiality shall not be deemed to have been breached unless it results in a
party expending more than $50,000 for an individual breach or $250,000 in
aggregate.
4.1.18. Books of Account; Records. The general ledgers, books of account
and other records of the Business are in all material respects complete and
correct, have been maintained in accordance with good business practices and the
matters contained therein are appropriately and accurately reflected in the
Financial Statements (as that term is defined in Section 4.1.20).
4.1.19. Employee Benefit Plans. Exhibit 4.1.19 lists all Employee Pension
Benefit Plans and Employee Welfare Benefit Plans relating to the Business which
are sponsored by or contributed to by GM (the "Benefit Plans"). GM has complied
in all material respects with the terms of all Benefit Plans and the relevant
provisions of all collective bargaining agreements applicable thereto.
4.1.20. Financial Statements. The Financial Statements of the Business, as
defined below in this Section 4.1.20, which have been furnished to AAM by GM and
initialed for identification by the Finance Director of GM's Saginaw Division
are true, correct and complete in all material respects, have been prepared from
and are in accordance with the books and records of the Business, and have been
prepared in conformity with GM's internal accounting practices for a GM division
applied on a consistent basis using an accrual basis method of accounting and
fairly present in all material respects the financial
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44
condition of the Business as of the dates stated and the results of operations
of the Business for the periods then ended in accordance with such practices:
the unaudited balance sheets, statements of operations and retained earnings and
statement of cash flow of the Business as at June 30, 1993, December 31, 1993,
December 31, 1992, and December 31, 1991 (collectively, the "Financial
Statements"). GM shall provide AAM prior to Closing with a list of the material
differences between generally accepted accounting principles and GM's internal
accounting practices for a GM division.
4.1.21. Propeller Shaft Assets. Except for (i) new equipment on order
between the date of this Agreement and the date of the Closing, (ii) equipment
owned by GM and in the possession of any third party, whether on consignment,
being re-built or for any other reason, or (iii) still located at GM's Parma,
Ohio, facility, all of the Assets needed to manufacture the full mix of
propeller shaft products for the Business have been installed at GM's Three
Rivers, Michigan facility.
4.1.22. Undisclosed Liabilities, etc. Except as specifically set forth in
this Section 4.1 and the related Exhibits, GM has no liabilities or obligations
of any nature (whether liquidated, unliquidated, accrued, absolute, contingent
or otherwise and whether due or to become due) affecting, directly or
indirectly, the Assets or the Business. The representations and warranties
contained in this Agreement and the information contained in the Exhibits and
other written documents delivered by or on behalf of GM in connection with the
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45
purchase and sale of the Assets are true and correct in all material respects.
There is no fact known to GM which materially adversely affects, or in the
future may (so far as GM can now reasonably foresee) materially adversely
affect, the condition (financial or other) of the Assets, business, operations
or prospects of the Business which has not been identified herein or in the
Exhibits.
4.1.23. Termination of Representations and Warranties of GM. The
representations and warranties of GM relating to the Business made in this
Agreement shall be unaffected by any investigation made by any Party at any time
and shall terminate two (2) years after the date of Closing, and thereafter
shall be without force or effect; provided, however, that (i) the
representations and warranties set forth in Section 4.1.14 (relating to Taxes)
and Section 4.1.17.A (relating to labor relations), shall survive until the end
of the period of any applicable statutes of limitations and (ii) the
representations and warranties with respect to title to the Real Property, as
set forth in the deeds thereto to be delivered by GM to AAM pursuant to this
Agreement, and with respect to title to the other Assets, as set forth in
Section 4.1.4, shall survive indefinitely. Except as otherwise defined herein,
the term "material" or "materially" as used in this Article IV shall be
construed by referring, inter alia, to the Assets and the condition, revenues,
business, operations and affairs of the Business.
4.2. Representations and Warranties of AAM. AAM warrants and represents to
GM as follows:
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4.2.1. Corporate Data; Preferred Stock. AAM is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has full corporate power and authority to own, hold or lease the
Assets and to carry on the Business as it is presently conducted. As of the date
of Closing, AAM will be duly qualified or licensed and in good standing as a
corporation, duly authorized to do business in the states of Michigan and New
York. As of the Closing Date, the authorized, issued and outstanding capital
stock of AAM will be as specified in AAM's Restated Certificate of Incorporation
attached as Exhibit 8.2.5. There are no outstanding obligations, options, calls,
warrants, agreements or similar rights (preemptive or otherwise) relating to the
issuance, sale, transfer or purchase of any capital stock of AAM, other than an
option to Richard Dauch for 2,800 shares of common stock (the "Dauch Option").
When issued and delivered pursuant to Section 2.2, the Preferred Stock shall be
duly authorized, validly issued, fully paid and nonassessable and free and clear
of any lien, call, option or preemptive or other right or claim, other than the
Dauch Option. The requisite number of shares of common stock will be, as of the
Closing Date, reserved for issuance upon conversion of the Class A Preferred
Stock in accordance with its terms.
4.2.2. Corporate Power; Due Authorization. AAM has the corporate power and
authority to execute and deliver this Agreement and the Ancillary Agreements,
and to perform its obligations hereunder and thereunder and to consummate the
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47
transactions contemplated herein and therein, including the authorization,
issuance and delivery of the Preferred Stock. The execution, performance and
consummation of this Agreement and the Ancillary Agreements have been duly
authorized by all necessary corporate action on the part of AAM. This Agreement
is, and the Ancillary Agreements will be when executed and delivered, valid and
legally binding obligations of AAM, enforceable against AAM in accordance with
their respective terms.
4.2.3. Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental or judicial authority
or any other third party is required in connection with the valid execution,
delivery and performance of this Agreement and the Ancillary Agreements by AAM
or the consummation by AAM of the transactions contemplated hereby and thereby,
except for any approval required under the HER Act.
4.2.4. Litigation. Neither AAM nor any Affiliate of AAM is subject to any
outstanding judgment, order, decree, arbitral award, stipulation or injunction
which restrains, prohibits or declares illegal or questions the validity, or
imposes or would impose substantial damages in connection with, this Agreement,
any of the Ancillary Agreements or any of the transactions contemplated hereby
or thereby. There is no claim, suit, action, litigation or proceeding, of any
nature, civil, criminal, regulatory or otherwise, in law or in equity, and there
are no proceedings or governmental investigations before any commission, court,
arbitrator or governmental or other
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48
administrative agency, instrumentality or authority, pending, or, to AAM's
knowledge, threatened against or affecting AAM or its Affiliates that seeks to
restrain, prohibit or declare illegal or questions the validity of, or that
seeks substantial damages in connection with, the Agreement, any of the
Ancillary Agreements or any of the transactions contemplated hereby or thereby.
4.3. Finder's Fee. The transactions contemplated herein were not submitted
to AAM by any broker or other person entitled to a commission or finder's fee
thereon, and were not with the consent of AAM submitted to GM by any such broker
or other person. Neither AAM nor any of its officers, directors or employees,
has engaged any broker or finder or incurred or taken any action which may give
rise to any liability against itself or the Assets for any brokerage fees,
commissions, finders' fees or similar fees or expenses, no broker or finder has
acted directly or indirectly for AAM in connection with this Agreement or the
transactions contemplated hereby and no investment banking, financial advisory
or similar fees have been incurred or are or will be payable by AAM in
connection with this Agreement or the transactions contemplated hereby. AAM
shall indemnify and hold GM harmless from and against any such fees described in
this Section 4.3.
4.4. Termination of Representations and Warranties of AAM. The
representations and warranties of AAM made in this Agreement shall be unaffected
by any investigation made by any Party at any time and shall terminate two (2)
years after the
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49
date of the Closing, and thereafter shall be without force or effect.
V. PERSONNEL MATTERS.
5.1. Responsibility for Employees.
5.1.1. Exhibit 5.1.1 identifies all employees (the "Employees") of GM or
its Affiliates who were employed by (or otherwise accorded employment rights
with respect to) the Business, or utilized primarily in the operation of the
Business as of February 6, 1994 (with respect to hourly Employees), and February
10, 1994 (with respect to salaried employees), by name, location, function and,
as to hourly and regular salaried employees, status (e.g., active, laid-off or
leave of absence) as of such date. Effective as of the date of the Closing, AAM
will offer employment to the individuals identified on Exhibit 5.1.1, and to any
individuals hired by the Business in the ordinary course of business after the
date of such Exhibit and prior to the date of the Closing (excluding those
employed by EDS or by GM's Regional Personnel Administration and also excluding,
at the discretion of AAM, up to twelve (12) salaried employees heretofore
identified by AAM).
Employees who are laid off, on leave of absence, or not actively employed
for any other reason, shall not become employees of AAM until they would have
been returned to work at GM pursuant to GM's then existing practices and such
employees who have been given the opportunity do in fact return to work.
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50
Employees identified in Exhibit 5.1.1 who are offered and accept employment
with AAM pursuant to this Section are referred to herein as "Transitioned
Employees".
5.1.2. AAM agrees that it will not hire, on a regular, contract or other
basis, any Employee who was employed on a salaried basis and who broke credited
service with GM on an incentive basis within twenty-four (24) months prior to
the date of the Closing; provided, however, that if circumstances make it
necessary for AAM to hire such individuals, AAM may hire up to twenty-four (24)
such individuals.
5.1.3. AAM will provide written notice to GM whenever an hourly or salaried
Transitioned Employee retires or otherwise breaks seniority or length of service
with AAM.
5.2. Special Provisions Relating to Hourly Employees.
5.2.1. Prior to the date of the Closing, GM will notify the UAW and IAM of
the pertinent terms of this Agreement and will provide AAM with a copy of such
notice at least three (3) business days prior to delivery thereof to the UAW and
IAM. Effective as of the date of the Closing, except as otherwise specifically
provided in this Article V, AAM will assume the terms of the 1993 GM-UAW
National Agreement and the 1993 GM-IAM National Agreement (the "UAW Agreement"
and "IAM Agreement," respectively), in accordance with Document 91 (in the case
of the UAW Agreement) and Document 16 (in the case of the IAM Agreement) thereto
(both such Documents being hereinafter referred to as "Document 91"), and
existing UAW and IAM agreements negotiated locally at the Business. Such
agreements thereafter shall
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51
constitute the "1993 AAM-UAW Agreement" or "1993 AAM-IAM Agreement,"
respectively. To the extent that GM benefit plans or programs cannot reasonably
be duplicated according to the terms of such plans or programs (because of
matters such as changes in plan sponsor, fiduciary structure, etc., but not
matters such as level of benefits), or to the extent that terms or conditions
required under the UAW Agreement, IAM Agreement or any local GM-UAW or GM-IAM
agreements cannot reasonably be assumed according to their terms (because of
matters such as changes in employer entity, corporate structure, etc., but not
matters such as level of wages), AAM will enter into negotiations in good faith
with the UAW or IAM to resolve the matter in a manner consistent with Document
91. AAM shall reimburse GM for any liability incurred by GM to hourly
Transitioned Employees resulting from any failure by AAM to abide by the terms
of this Section 5.2.1.
5.2.2. AAM will recognize the GM seniority status of all hourly
Transitioned Employees for purposes of determining seniority under the 1993
AAM-UAW Agreement and the 1993 AAM-IAM Agreement.
5.3. Special Provisions Relating to Salaried Employees.
5.3.1. Effective as of the date of the Closing, AAM will provide each
salaried Transitioned Employee with (i) a base monthly salary that is no less
than the base monthly salary paid by GM to such Transitioned Employee prior to
Closing, (ii) vacation entitlement no less than that provided under the GM
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52
vacation policy in effect in 1993, and (iii) employee benefit plans and programs
(excluding plans and programs limiting coverage only to executives) which are
substantially similar in the aggregate to those provided by GM immediately prior
to the date of the Closing. AAM will continue to provide such wages, vacation
entitlement and employee benefit plans and programs for at least one (1) year
after the date of the Closing. AAM shall reimburse GM for any liability incurred
by GM to salaried Transitioned Employees resulting from any failure by AAM to
abide by the terms of this Section 5.3.1.
5.3.2. GM shall pay to AAM on or before March 15, 1994, Eight Hundred
Dollars ($800) for each eligible salaried Transitioned Employee who was hired
prior to July 1, 1993, and actively employed on December 31, 1993. AAM agrees to
offer to each such eligible Transitioned Employee the $1,600 flexible
compensation payment (including additional paid days off taken in lieu of part
of such payment) payable with the March 15, 1994, paycheck.
5.4. Retirement Program and Pension Plan.
5.4.1. Salaried Employees. AAM will establish, effective as of the date of
the Closing, a new defined benefit retirement program (the "Replacement
Retirement Program") which substantially duplicates the terms and benefits
provided for under the GM Retirement Program for Salaried Employees (the
"Retirement Program"). Effective as of the date they become AAM employees, all
salaried Transitioned Employees (the "Salaried Participants") who were
participants in the Retirement Program at
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53
Closing shall become participants in the Replacement Retirement Program. Under
the Replacement Retirement Program, Salaried Participants' prior periods of
credited service as of the date of the Closing under the Retirement Program are
not taken into account for any purpose except as otherwise expressly provided in
this Section 5.4. The Replacement Retirement Program shall provide substantially
for the following plan terms effective as of the date of the Closing:
a. Recognition by the Replacement Retirement Program for vesting but not
for accrual purposes of all credited service accrued by Salaried
Participants under the Retirement Program as of the date the
Participant becomes an AAM employee. The Replacement Retirement
Program will also recognize for accrual purposes credited service
accrued under the Retirement Program for any Salaried Participant who
is not vested in the Retirement Program as of the date the Participant
becomes an AAM employee.
b. All Salaried Participants who are vested under the Retirement Program
as of the date the Participant becomes an AAM employee and retire from
AAM on a normal, early voluntary or total and permanent disability
basis shall be entitled to payment from the Replacement Retirement
Program, upon retirement from AAM, of an amount equal to e pro rata
share of the total Part A benefits payable
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54
under the Replacement Retirement Program at the time of retirement
from AAM and, for those Salaried Participants who were participants in
Part B of the Retirement Program as of the date the Participant
retires from AAM, (i) a Part B Primary Benefit based on the
contributions of the individual Salaried Participant remaining in the
Replacement Retirement Program as of date of retirement from AAM and
the Part B Primary Benefit rates in effect at such time, and (ii) a
Part B Supplementary Benefit calculated based on the formula under the
Replacement Retirement Program in effect at the date of retirement
from AAM. Such Part B benefit under the Replacement Retirement Program
shall be determined by taking into account solely for eligibility for
retirement (but not for the determination of the amount of payment)
credited service actually accrued under the Retirement Program for
service with GM prior to retirement. The Replacement Retirement
Program payment will include a Part A Basic Benefit and a Part B
Supplementary Benefit (both reduced for age where appropriate) for
each year of applicable credited service accrued under the Replacement
Retirement Program, and any Part B Primary Benefit and any applicable
supplement in an amount equal to the difference between the sum of the
Part A
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55
Basic Benefit and Part B Supplementary Benefit and the pro rata share
of the total Part A Benefit. All other Replacement Retirement Program
terms shall apply, including, but not limited to, the discontinuation
of benefit payments, when applicable, upon death, an award of Social
Security Disability Insurance benefits, cessation of retirement
benefits for other reason, reemployment by AAM or attainment of age 62
and 1 (one) month. Prior to payment of a pro rata share of a total and
permanent disability pension benefit from the Replacement Retirement
Program, approval of the AAM doctor is required.
c. In the case of any Salaried Participant who has at least thirty (30)
years of credited service under the Retirement Program at the time he
becomes an AAM employee, there shall be no reduction in any supplement
payable under the Replacement Retirement Program as of the date of the
Closing.
d. All benefit payments to any Salaried Participant under the Replacement
Retirement Program shall be discontinued upon reemployment with AAM or
GM on a regular, contract or other basis.
GM shall amend the Retirement Program to provide Salaried Participants the
following as of the Closing:
i. All Salaried Participants who are vested under the Retirement Program
as of the date the Participant
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56
becomes an AAM employee and retire from AAM on a normal, early
voluntary or total and permanent disability basis shall be entitled to
payment from the Retirement Program, upon retirement from AAM, of an
amount equal to a pro rata share of the total Part A benefits payable
under the Retirement Program at the time of retirement from AAM and,
for those Salaried Participants who were participants in Part B of the
Retirement Program as of the date the Participant becomes an AAM
employee, (a) a Part B Primary Benefit based on the contributions of
the individual Salaried Participant remaining in the Retirement
Program as of date of retirement from AAM and the Part B Primary
Benefit rates in effect at such time, and (b) a Part B Supplementary
Benefit calculated based on the formula under the Retirement Program
in effect on the date of retirement from AAM. Such Part B benefit
under the Retirement Program shall be determined as if the Salaried
Participant were then retiring from GM on a normal or early voluntary
basis or, if applicable, a total and permanent disability basis, and
by taking into account solely for eligibility for retirement (but not
for the determination of the amount of payment) the additional
credited service actually accrued under the Replacement Retirement
Program
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57
for service with AAM after the Closing. The Retirement Program payment
will include a Part A Basic Benefit and a Part B Supplementary Benefit
(both reduced for age where appropriate) for each year of applicable
credited service accrued under the Retirement Program, and any Part B
Primary Benefit and any applicable supplement in an amount equal to
the difference between the sum of the Part A Basic Benefit and Part B
Supplementary Benefit and the pro rata share of the total Part A
benefit. All other Retirement Program terms shall apply, including,
but not limited to, the discontinuation of benefit payments, when
applicable, upon death, an award of Social Security Disability
Insurance benefits, cessation of retirement benefits for other reason,
reemployment by GM or attainment of age 62 and 1 (one) month. Prior to
payment of a pro rata share of a total and permanent disability
pension benefit from the Retirement Program, approval of the GM doctor
is required.
ii. If a Salaried Participant, who is vested under the Retirement Program
as of the date the Participant becomes an AAM employee, subsequently
retires from AAM and is not otherwise eligible to retire on a normal
or early voluntary or total and permanent disability basis under the
Retirement Program as
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58
of the date of retirement from AAM, then the Salaried Participant
shall be eligible under the Retirement Program only for unreduced
benefits at age 62 and one (1) month at the benefit levels in effect
under the Retirement Program as of the date of retirement from AAM,
increased as appropriate until age 62 and one (1) month under
subsection (vii) below as if the Retirement Program benefits had
commenced as of the date the Salaried Participant retired from AAM.
iii. The surviving spouse of any Salaried Participant who was vested under
the Retirement Program as of the date the Participant becomes an AAM
employee and died while employed by AAM shall be eligible for payment
from the Retirement Program of the Retirement Program survivor monthly
benefit or a REA preretirement monthly survivor benefit, whichever is
applicable, based on the Salaried Participant's credited service
accrued under the Retirement Program as of the date of Closing and the
benefit levels in effect under the Retirement Program at the time of
death. All other Retirement Program terms shall apply, including, but
not limited to, those regarding eligibility and duration of surviving
spouse benefits.
iv. With regard to retirement under subsection (i), (ii), and (iii) above,
for Salaried Participants
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59
who do not withdraw their Part B contributions prior to separation
from service with AAM, the average monthly base salary for calculation
of the Part B Supplementary Benefit under the Retirement Program shall
be the Salaried Participant's average monthly base salary under the
Retirement Program determined as of the date the Participant becomes
an AAM employee increased 3% per year for each full year of salaried
employment with AAM after the date the Participant becomes an AAM
employee until the earlier of age 60, death or retirement from AAM,
but only if such Salaried Participant had continuous salaried
employment with AAM from the date the Participant becomes an AAM
employee through such event.
v. Any other break in service under the Replacement Retirement Program
shall also break the Salaried Participant's credited service under the
Retirement Program with entitlement only to a deferred vested benefit
at the benefit levels in effect under the Retirement Program as of the
break in service from AAM and the Salaried Participant's average
monthly base salary as of Closing increased by 3% per year as
described in subsection (iv) above.
vi. All benefit payments to any Salaried Participant under the Retirement
Program shall be discontinued
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60
upon employment with AAM or GM on a regular, contract or other basis.
vii. Any benefits payable from the Retirement Program under subsections
(i), (ii) and (iii) shall be based on provisions applicable to other
GM salaried retirees, including any increase in benefit rates based on
the Salaried Participant's years of credited service under the
Retirement Program.
5.4.2. Hourly Employees. AAM will establish, effective as of the date of
the Closing, new defined benefit pension plans (the "Replacement Pension Plan")
covering the hourly Transitioned Employees (the "Hourly Participants")
consistent with any obligation AAM has to assume the UAW Agreement or the IAM
Agreement. Under the Replacement Pension Plan, Hourly Participants' prior
periods of credited service (as such term is used in the UAW Agreement and IAM
Agreement) as of the date of the Closing under the GM Hourly-Rate Employees
Pension Plan (the "Pension Plan") will not be taken into account for any purpose
except as otherwise expressly provided in this Section 5.4.
GM shall have the option to require AAM and the Replacement Pension Plan to
take into account for determining each Hourly Participant's eligibility to
receive benefits (but not for determination of benefit amounts) under the
Replacement Pension Plan all such prior periods of credited service accrued by
Hourly Participants under the Pension Plan as of the date the
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61
Participant becomes an AAM employee, and to recognize under the Replacement
Pension Plan for accrual purposes all credited service under the Pension Plan
for any Hourly Participant not vested in the Pension Plan as of the date the
Participant becomes an AAM employee. GM may exercise this option for UAW and/or
IAM represented employees upon:
(1) Execution of an agreement between GM and the UAW (in the case of UAW
represented employees) and GM and the IAM (in the case of IAM represented
employees) that addresses the status and rights with regard to GM of all hourly
Transitioned Employees as specified in Exhibit 5.1.1 and amends the Pension Plan
to substantially provide for the following effective as of the date of the
Closing:
i. The Pension Plan shall recognize, for both accrual and eligibility
purposes, credited service accumulated under the Replacement Pension
Plan for any Hourly Participants who are eligible under the Pension
Plan and retire from AAM on a normal, early voluntary or total and
permanent disability basis on or before September 14, 1996. No
Replacement Pension Plan credited service shall be recognized for
accruals under the Pension Plan unless the Hourly Participant retires
from GM and leaves employment with AAM on or before September 14,
1996. Further, the Pension Plan shall only recognize Replacement
Pension Plan credited service in an amount equal to the credited
service
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62
actually accrued under the Replacement Pension Plan on or before
September 14, 1996, and no additional credited service shall be
recognized for any period for which the Pension Plan has already
provided credited service.
ii. All Hourly Participants, who are vested under the Pension Plan as of
the date they become AAM employees and who retire from AAM on a
normal, early voluntary or total and permanent disability basis after
September 14, 1996, shall be entitled to payment from the Pension
Plan, upon retirement from AAM, of an amount equal to a pro rata share
of the total benefit that would be payable under the Pension Plan,
determined as if the Hourly Participant were then retiring from GM on
a normal, early voluntary or total and permanent disability basis and
by taking into account solely for eligibility for payment (but not for
the determination of the amount of payment) the additional credited
service actually accrued under the Replacement Pension Plan for
service with AAM after the date the Participant becomes an AAM
employee. The payment will include a basic benefit (reduced for age
where appropriate) for each year of credited service accrued under the
Pension Plan and, if applicable, a supplemental amount equal to the
difference between the basic
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63
benefit and the pro rata share of the total benefit. All other Pension
Plan terms shall apply, including but not limited to appropriate
substantiation of total and permanent disability, if applicable, and
discontinuation of benefit payments, when applicable, upon death, an
award of Social Security Disability Insurance benefits, cessation of
pension benefits for other reasons, re-employment by GM or attainment
of age 62 and 1 (one) month.
iii. No early retirement under mutually satisfactory conditions ("Mutual
Retirement") will be recognized under the Pension Plan after the date
of the Closing for Hourly Participants. However, if an Hourly
Participant, who is vested under the Pension Plan as of the date he
becomes an AAM employee, subsequently retires from AAM under a Mutual
Retirement, and such Hourly Participant is otherwise eligible to
retire on a normal or early voluntary basis under the Pension Plan
when considering solely for eligibility (but not for determination of
the amount of benefits) the age of the employee and combined GM and
AAM credited service at the time of the retirement from AAM, then the
Pension Plan shall pay a pro rata share of any normal or early
voluntary retirement benefits the employee is eligible to receive. The
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64
pro rata share shall be determined as described in subsection (ii)
above and all other Pension Plan provisions shall apply. If the Hourly
Participant is not otherwise eligible to retire on a normal or early
voluntary basis under the Pension Plan as of the date of Mutual
Retirement from AAM, then the Hourly Participant shall be eligible
under the Pension Plan only for unreduced benefits at age 62 and one
(1) month at the benefit levels in effect under the Pension Plan as of
the date of retirement from AAM, increased as appropriate until age 62
and one (1) month under subsection (vii) below as if the Pension Plan
benefits had commenced as of the date the Hourly Participant retired
from AAM.
iv. The surviving spouse of an Hourly Participant, who is vested under the
Pension Plan as of the date he becomes an AAM employee and who dies
while employed by AAM, shall be eligible for payment from the Pension
Plan of a pro rata preretirement monthly survivor benefit based on the
Hourly Participant's credited service accrued under the Pension Plan
as of the date he became an AAM employee and the benefit levels in
effect under the Pension Plan at the time of death. All other Pension
Plan terms shall apply, including but not
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65
limited to those regarding eligibility and duration of surviving
spouse benefits.
v. Any other break in service under the Replacement Pension Plan also
shall break the Hourly Participant's credited service under the
Pension Plan with entitlement only to a deferred vested retirement at
the benefit levels in effect under the Pension Plan as of the break in
service from AAM.
vi. All benefit payments to any Hourly Participant under the Pension Plan
shall be discontinued upon reemployment with AAM or GM on a regular,
contract or other basis.
vii. Any benefits payable from the Pension Plan under subsections (i),
(ii), (iii) and (iv) above shall be based on the provisions applicable
to other GM-UAW or GM-IAM retirees, including any increase in benefit
rates, based on the Hourly Participant's years of credited service
under the Pension Plan; or
(2) Obtaining the mutual consent of AAM.
GM's option shall be contingent further upon the UAW (in the case of UAW
represented employees) and IAM (in the case of IAM represented employees)
agreeing to allow AAM to amend the Replacement Pension Plan to provide
substantially for the following plan terms effective as of the date of the
Closing:
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66
a. Recognition by the Replacement Pension Plan for vesting but not for
accrual purposes of all credited service accrued by Hourly
Participants under the Pension Plan as of the date they become AAM
employees, except for Hourly Participants who retire on or before
September 14, 1996 under clause (1)(i) above, whose credited service
shall be recognized only under the Pension Plan. The Replacement
Pension Plan also will recognize for accrual purposes credited service
previously accrued under the Pension Plan for any Hourly Participant
who is not vested under the Pension Plan as of the date he becomes an
AAM employee.
b. All Hourly Participants, who are vested under the Pension Plan as of
the date they become AAM employees and who retire from AAM on a
normal, early voluntary or total and permanent disability basis after
September 14, 1996, shall be entitled to payment from the Replacement
Pension Plan of an amount equal to a pro rata share of the total
benefit that would be payable under the Replacement Pension Plan,
determined by taking into account solely for eligibility for payment
(but not for the determination of the amount of payment) the credited
service accrued under the Pension Plan as of the date the Participant
becomes an AAM employee. The payment from the
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Replacement Pension Plan will include a basic benefit (reduced for age
where appropriate) for each year of credited service accrued under the
Replacement Pension Plan and, if applicable, a supplemental amount
equal to the difference between the basic benefit and the pro rata
share of the total benefit.
c. In the case of any Hourly Participant who has at least thirty (30)
years of credited service under the Pension Plan at the time he
becomes an AAM employee, there shall be no reduction in the amount of
any supplement payable under the Replacement Pension Plan as of the
date of the Closing.
d. In the case of any Hourly Participant who is vested in the Pension
Plan on the date he becomes an AAM employee and who retires under the
Replacement Pension Plan on a Mutual Retirement without being eligible
to retire on a normal, early voluntary or total and permanent
disability basis under the Pension Plan, he shall be entitled to a
supplemental payment from the Replacement Pension Plan until age 62
and 1 (one) month based on his combined credited service under the
Pension Plan and the Replacement Pension Plan. After age 62 and 1
(one) month, the Replacement Pension Plan
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68
shall pay a monthly benefit based on a pro rata share of the total
benefit.
e. All benefit payments to any Hourly Participant under the Replacement
Pension Plan shall be discontinued upon reemployment with GM or AAM on
a regular, contract or other basis.
f. Any Hourly Participant, who is vested in the Pension Plan as of the
date of the Closing and is reemployed by GM thereafter, shall be
entitled to payment from the Replacement Pension Plan, upon retirement
from GM, of an amount equal to a pro rata share of the total benefits
that would be payable under the Replacement Pension Plan, determined
as if the Hourly Participant were then retiring from AAM on a normal,
early voluntary or total and permanent disability basis and by taking
into account solely for eligibility for payment (but not for
determination of the amount of payment) the credited service accrued
under the Pension Plan as of the date he becomes an AAM employee and
any additional credited service accrued under the Pension Plan
thereafter as a result of reemployment by GM. The payment will include
a basic benefit (reduced for age where appropriate) for each year of
credited service accrued under the Replacement Pension Plan and, if
applicable, a supplemental amount equal to the
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69
difference between the basic benefit and the pro rata share of the
total benefit.
In the event GM does not exercise the option described in the second
paragraph of this Section 5.4.2, and a court order or settlement of litigation
requires GM to pay pension benefits to any Hourly Participant, either directly
from the Pension Plan or in lieu thereof from GM's operating cash, in an amount
greater than the Pension Plan would pay based upon such Hourly Participant's
credited service accrued under the Pension Plan as of the date he becomes an AAM
employee and any additional credited service accrued under the Pension Plan
thereafter as a result of reemployment by GM, AAM will reimburse GM for such
greater amount. Such reimbursement, however, will be limited so that the total
obligation of AAM and the Replacement Pension Plan for pension benefits with
respect to any such Hourly Participant shall not exceed the amount of the
Replacement Pension Plan's obligation described in subsections (a) through (f)
of this Section 5.4.2.
In the event GM does not exercise the option described in the second
paragraph of this Section 5.4.2, and a court order or settlement of litigation
requires AAM to pay pension benefits to any Hourly Participant, either directly
from the Replacement Pension Plan or in lieu thereof from AAM's operating cash,
in an amount greater than the Replacement Pension Plan would pay based upon such
Hourly Participant's credited service accrued under the Replacement Pension Plan
after he becomes an AAM employee, GM will reimburse AAM for such greater amount.
Such reimbursement,
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70
however, will be limited so that the total obligation of GM and the Pension Plan
for pension benefits with respect to any such Hourly Participant shall not
exceed the amount of the Pension Plan's obligation described in subsections (i)
through (vii) of this Section 5.4.2.
5.4.3. AAM and GM acknowledge that neither they nor their respective
pension plans or retirement programs shall be required to recognize any grants
of additional age or additional credited service given to Salaried Participants
or Hourly Participants by the other Party and/or their respective pension plans
or retirement programs as an inducement for Salaried Participants or Hourly
Participants to retire early. Moreover, nothing herein shall be construed to
limit GM's or AAM's right to amend the Pension Plan, Retirement Program,
Replacement Retirement Program or Replacement Pension Plan in compliance with
Section 411(d)(6) of the Internal Revenue Code of 1986, as amended, to eliminate
all or a portion of any supplement or subsidy otherwise payable under their
respective plans, except that supplements or subsidies for Transitioned
Employees never can be eliminated or reduced by AAM in violation of Sections
5.4.1.d. or 5.4.2.c. or by GM unless such action is fully applicable to all GM
employees participating in the Pension Plan or Retirement Program. Nothing in
this Article V shall be interpreted to require the Pension Plan, Retirement
Program, Replacement Pension Plan or Replacement Retirement Program to pay more
than its pro rata share of any "30 and out" retirement benefit.
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71
5.4.4. For purposes of Article V, including, without limitation, Sections
5.4.1 and 5.4.2 above, pro rata share shall mean, with respect to each Salaried
Participant or Hourly Participant, the amount which is equal to the quotient,
expressed as a percentage, of (i) the number of years of credited service taken
into account under the Retirement Program or Pension Plan as of the date the
Participant becomes an AAM employee (or under the Replacement Pension Plan or
Replacement Retirement Program after the date the Participant becomes an AAM
employee, if referring to the pro rata share to be paid by the Replacement
Pension Plan or Replacement Retirement Program) for each Salaried Participant or
Hourly Participant, respectively, divided by (ii) the total number of years of
credited service taken into account under the Retirement Program and Replacement
Retirement Program, or Pension Plan and Replacement Pension Plan, respectively,
with regard to such Salaried Participant or Hourly Participant as of the date of
his retirement from AAM or GM.
5.4.5. In the event the Replacement Retirement Program or Replacement
Pension Plan is terminated, provides for or is amended to provide for a cap on
credited service or other restriction on the further accumulation of credited
service by Salaried Participants or Hourly Participants, respectively, the
credited service recognized for, where applicable, accrual, eligibility or
calculation of pro rata payment under the Retirement Program or Pension Plan,
respectively, shall include the total number of years of credited service taken
into account under the Replacement Retirement Program or Replacement Pension
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Plan, as applicable, plus any additional service with AAM that would have been
accumulated under the Replacement Retirement Program or Replacement Pension Plan
under the terms of the Retirement Program and Pension Plan in effect as of the
date of the Closing had the Replacement Retirement Program or Replacement
Pension Plan not been amended to provide for a cap or been so terminated or
amended.
5.4.6. In the case of each hourly Transitioned Employee who retires under
the provisions of Section 5.4.2(1)(i), the parties shall determine the pro rata
share of the total benefit that would be payable by the Replacement Pension Plan
if such Transitioned Employee had been covered by Section 5.4.2(1)(ii),
determined without regard to the requirement that retirement must occur after
September 14, 1996. AAM then shall pay to GM an amount equal to the present
value of the pro rata share so determined to be allocable to the Replacement
Pension Plan, less an offset for the reasonable administrative expense to AAM
regarding the post-retirement optional and dependent life insurance coverage
provided for in Section 5.5.3. Such present value shall be computed based upon
the actuarial assumptions (excluding any assumption for future retiree benefit
increases) being used by GM for funding the Pension Plan at the time of a
particular hourly or salaried Transitioned Employee's retirement, and the amount
due shall be paid within one hundred twenty (120) days after being confirmed by
the respective actuaries for GM and AAM.
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5.4.7. With respect to all hourly and salaried Transitioned Employees who
are not vested under the Pension Plan or Retirement Program on the date they
become AAM employees, GM shall pay to AAM an amount equal to the present value
of the projected benefits which may become payable in the future under the
Replacement Pension Plan or the Replacement Retirement Program, as the case may
be, attributable to the recognition under such AAM plans of the credited service
that such Transitioned Employees had accumulated on the date they become AAM
employees under GM's Pension Plan or Retirement Program. Such present value
shall be computed based upon the actuarial assumptions (excluding any
assumptions for future retiree benefit increases, but including assumptions
regarding employee withdrawal rates) being used by AAM for funding the
Replacement Pension Plan or Replacement Retirement Program, as the case may be,
at the time each person herein described becomes an AAM employee, and the amount
due shall be paid within one hundred twenty (120) days after being confirmed by
the respective actuaries for AAM and GM.
5.5. Health Care and Life and Disability Benefits Programs.
5.5.1. AAM health care and life and disability benefits programs will be
established by AAM, consistent with Sections 5.2.1 and 5.3.1, to provide
coverages for all Transitioned Employees for claims incurred after the date of
the Closing.
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5.5.2. Upon retirement from AAM, GM shall provide post-retirement health
care and basic life insurance coverage to the following Transitioned Employees:
i. Each hourly and salaried Transitioned Employee who is eligible to
retire from GM, as of the date he becomes an AAM employee, on a
voluntary basis with GM subsidized post-retirement health care and
basic life insurance coverage.
ii. Each hourly Transitioned Employee who retires under the Pension Plan
on or before September 14, 1996, on a normal, early voluntary or total
and permanent disability basis under the provisions set forth in
Section 5.4.2(1)(i) and who otherwise is eligible for post-retirement
health care and basic life insurance coverage.
The provision of post-retirement health care and basic life insurance coverage
by GM is subject to all applicable benefit plan terms, including but not limited
to the right to amend, modify, suspend or terminate the plans, except that such
coverages for the aforesaid Transitioned Employees shall not be eliminated or
reduced by GM unless such action is fully applicable to all GM employees
participating in GM's health care and life and disability benefits programs.
5.5.3. Provision of post-retirement health care and life insurance coverage
for all other eligible hourly and salaried Transitioned Employees shall be
provided, consistent with Sections 5.2.1 and 5.3.1, under a program(s) to be
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established and administered by AAM. Under such program(s), combined GM and AAM
service shall be taken into account for eligibility, and GM shall share in the
costs by reimbursing AAM as described in Section 5.5.4. In addition, AAM shall
provide post-retirement optional and dependent life insurance coverage to all
hourly and salaried Transitioned Employees, who are eligible for post-retirement
life insurance from GM under the provisions of Section 5.5.2(i) and (ii) above,
in an amount equal to that provided by GM to comparably situated employees as of
the date of retirement from AAM.
5.5.4. With regard to post-retirement health care and life insurance
coverage provided to Transitioned Employees pursuant to Section 5.5.2, AAM will
reimburse GM annually for a portion of the cost of such programs allocated on a
pro rata basis based on years of service at AAM over years of service at both
AAM and GM. With regard to post-retirement health care and life insurance
coverage provided to Transitioned Employees pursuant to Section 5.5.3, GM will
reimburse AAM annually for a portion of the cost of such programs allocated on a
pro rata basis based on years of service at GM over years of service at both GM
and AAM, provided that, in the case of hourly Transitioned Employees who retire
on a Mutual Retirement or salaried Transitioned Employees who retire on an
Incentive Retirement, GMs pro rata reimbursement shall not begin until such
employees otherwise would have been eligible to retire with post-retirement
health care and life insurance coverage.
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5.6. Personal Savings Plan.
In the case of hourly represented Transitioned Employees, AAM's Personal
Saving Plan will allow rollovers from the GM Personal Savings Plan to the extent
permissible by law.
5.7. Legal Services.
5.7.1. In the case of UAW represented Transitioned Employees, the GM legal
services plan shall provide coverage with respect to all files opened prior to
the date of the Closing and the AAM legal services plan shall provide coverage
with respect to subsequently opened files, except that the GM legal services
plan will provide coverage for Transitioned Employees who retire from AAM on a
normal, early voluntary or total and permanent disability basis on or before
September 14, 1996, pursuant to Section 5.4.2(1)(i).
5.7.2. For the period from the date of the Closing through September 14,
1996, AAM will provide legal services through the UAW-GM Legal Services Plan,
including funding as set forth in the 1993 GM-UAW Agreement.
5.8. Training and Tuition Reimbursement Expenses.
5.8.1. GM shall be responsible for payment of all training expenses
incurred for Transitioned Employees as of the date of the Closing. Subject to
Section 5.16.1, AAM shall be responsible for all training expenses incurred for
Transitioned Employees after the date of the Closing.
5.8.2. GM shall be responsible for payment of all tuition reimbursement
expenses for Transitioned Employees for classes commenced prior to the date of
Closing. All other
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tuition reimbursement expenses, if any, for Transitioned Employees shall be the
responsibility of AAM.
5.9. SUB/GIS and JOBS Program.
5.9.1. In the event that GM retains liability for SUB, GIS and JOBS Bank
(or successor program) costs with respect to hourly represented Transitioned
Employees who become employees of AAM, AAM will indemnify GM for such costs
incurred by GM with respect to such employees if (but only to the extent that)
layoffs for any one (1) year period (beginning on the date of Closing) exceed,
on a percentage basis, any percentage decline in GM's orders to AAM that year
from GM's level of orders to AAM for the preceding year. However, no
indemnification shall be required for layoffs due to acts of God or in any
situation where indemnification payments would duplicate payments made by AAM's
layoff and job security programs. AAM's layoff and job security programs are
primary over GM's programs.
5.10. Workers' Compensation.
5.10.1. GM shall be responsible for workers' compensation claims of
Transitioned Employees based on injuries or illnesses which arose out of and in
the course of employment with GM prior to Closing.
5.10.2. AAM will be responsible for workers' compensation claims of
Transitioned Employees based on injuries and illnesses which arise out of and in
the course of employment with AAM after the date of the Closing. With regard to
claims for which GM retains responsibility and which involve the payment of
lost-time workers' compensation benefits, at the time any
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claimant becomes able to work, AAM will make prompt, reasonable efforts,
including reasonable accommodations where necessary, to place such employees in
suitable employment.
5.11. Future Changes to Benefit Plans.
Except as otherwise provided in this Article V, nothing herein shall
prejudice the right of AAM or GM to amend or terminate any of its plans,
programs, policies or arrangements applicable to any Transitioned Employee
following the date of the Closing.
5.12. Employee Information; Cooperation in Establishing AAM Benefit Plans.
5.12.1. GM and AAM will each provide the other any relevant information
with respect to any Transitioned Employee's employment with, and compensation
from, GM or AAM, or rights or benefits under any employee benefit plan which
either Party may reasonably request.
5.12.2. AAM will use its best efforts to establish Employee Welfare Benefit
Plans for the Transitioned Employees and other AAM employees on a timely basis
so that such plans will be in effect as of the date of the Closing. If AAM is
unable to arrange for the necessary insurance or other coverage required by such
plans, GM shall permit Transitioned Employees and other AAM employees to receive
the AAM provided coverages under an arrangement that will be administered by GM
pursuant to the appropriate GM welfare benefit plans for at least twelve (12)
months following the date of the Closing (plus any mutually agreed upon
extensions), subject to AAM's reimbursing GM for the
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full costs as reasonably determined by GM. Payment for such costs shall be due
not later than the fifteenth day of each month following the month (or part
thereof) in which AAM receives the billing for such costs. AAM employees will
not be participants in the GM plans, but rather the AAM benefits will be
administered by GM pursuant to the appropriate GM welfare benefit plans. AAM
will have its own benefit plans, make appropriate governmental filings for such
plans, and form a committee or designate an individual as the final step for the
ERISA appeal process.
5.12.3. In the event AAM is unable to arrange for the necessary employee
welfare benefit plan coverages and/or administration as of the date of the
Closing as described in Section 5.12.2, GM will also make available to AAM for a
period of at least twelve (12) months following the date of the Closing (plus
any mutually agreed upon extensions), the following services as they relate to
the employee welfare benefit plans made available during such period pursuant to
Section 5.12.2, provided that such plans remain at all times substantially the
same as those provided by GM prior to the date of the Closing: (i) personnel
administration and employee benefits administration, (ii) management information
systems and central data processing support, and (iii) accounting and treasury
services. Such services shall be performed for a fee which shall equal the cost
to GM of providing such services as reasonably determined by GM, and which shall
include fully allocated administrative charges. Payment of such fee shall be due
not later than the fifteenth day of each month following the month
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(or part thereof) in which AAM receives the billing for such services. The terms
of such services will be described in greater detail in a separate transition
service agreement, to the extent such services are necessary.
5.12.4. AAM shall cause the waiver of any applicable waiting periods,
vesting requirements, medical examinations or other restrictions (whether
imposed by AAM or its insurers) which might otherwise delay or prevent the
initial participation of Transitioned Employees in such employee benefit
programs as of the date of the Closing. Such waiver with respect to the AAM
Optional Group Life Insurance Plan and Dependent Group Life Insurance Plans
shall be limited to hourly and salaried Transitioned Employees currently
participating in GM's applicable benefit program(s) in an amount of insurance or
coverage currently in force in respect to such Transitioned Employees.
5.13. Wrongful Acts.
Notwithstanding anything to the contrary in this Agreement, GM shall not be
liable for any adverse consequences arising from a wrongful act by AAM with
respect to any Transitioned Employee. Notwithstanding anything to the contrary
in this Agreement, AAM shall not be liable for any adverse consequences arising
from a wrongful act by GM with respect to any Transitioned Employee.
5.14. Grievances.
GM has disclosed to AAM all pending and threatened labor grievances and
arbitration proceedings which may have a material adverse effect on the conduct
of the Business. The
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parties will address grievances open as of the date of the Closing ("the
Grievances") as set forth below. AAM and GM will cooperate in the defense of the
Grievances. AAM will not settle any of the Grievances without GM's consent if
such settlement will result in liability for GM. Such consent will not be
unreasonably withheld. GM will not settle any of the Grievances without AAM's
consent if such settlement will result in liability for AAM. Such consent will
not be unreasonably withheld. If the seniority of a grievant is reinstated as a
result of the disposition of a Grievance or a court or administrative order, AAM
will reinstate the grievant as if the grievant had been a Transitioned Employee
as of the date of the Closing. In general, for Transitioned Employees who have
been continuously employed, back pay liability for pre-closing dates will be
allocated to GM and for post-closing dates will be allocated to AAM. In general,
for Transitioned Employees who become AAM employees because they are reinstated
through the grievance procedure, back pay liability will be allocated to GM. The
parties will discuss treatment of Grievances involving unusual circumstances.
5.15. Dual Coverages. If a Transitioned Employee is eligible for coverage
under employee welfare benefit plans maintained by both GM and AAM, he first
shall be paid any benefits to which he may be entitled from the AAM plan before
being entitled to receive any benefits from the GM plan. Except as otherwise
specifically provided in this Article V, AAM will not intentionally fashion its
employee welfare benefit plans in such a manner as to provide benefits only for
those AAM employees
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who are ineligible for coverage under plans maintained by GM. Neither GM nor AAM
will design or negotiate their pension plans or employee welfare benefit plans
in a manner which is designed to circumvent their intended responsibilities for
the Transitioned Employees as set forth in Article V.
5.16. Miscellaneous.
5.16.1. Training.
A. AAM will continue to participate in joint activities through the UAW-GM
Human Resource Center in the same manner as provided prior to the date of the
Closing through September 14, 1996. This includes funding levels, the funding
approval process, and full participation in jointly developed and negotiated
programs. Upon the expiration of the 1993 GM-UAW Agreement, AAM's funding
obligations will be met by a payment to the UAW-GM Human Resource Center in an
amount equal to the accumulated funding obligation incurred by AAM during the
life of the 1993 GM-UAW Agreement. AAM's funding rate for overtime hours will be
based on the applicable GM corporate average overtime rate for U.S. markets. In
the event and to the extent that AAM is required to pay any amounts determined
by a rate in excess of GM's corporate average overtime rate for U.S. markets for
such overtime hours, GM will promptly reimburse AAM for all such excess
payments.
B. AAM's Joint Program Representatives will be appointed by the Director of
the UAW-General Motors Department for the duration of the 1993 GM-UAW Agreement.
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C. Individuals who are performing activities for the UAW-GM HRC will
continue to do so for the duration of the 1993 GM-UAW Agreement unless notified
to the contrary by the Director of the UAW-GM Department.
VI. ENVIRONMENTAL MATTERS
6.1. GM's Environmental Reports/Post-Closing Matters.
6.1.1. Environmental Confidentiality Agreement. GM and AAM have entered
into an Environmental Confidentiality Agreement regarding environmental matters
which is dated September 15, 1993, and is attached hereto as Exhibit 6.1.1. (the
"ECA"). GM and AAM agree that the terms and conditions of the ECA are hereby
amended so as to apply through the longest indemnity period set forth in this
Article VI. and shall take precedence over any provisions of this Article VI.
inconsistent with the ECA.
6.1.2. Environmental Reports and Implementation of Remedial Plans.
A. Environmental Reports. Before or after the date of Closing, GM will
cause Haley & Aldrich or another independent environmental consultant selected
by GM to conduct an environmental assessment, which may be performed in phases
both prior to and after the date of Closing, to determine the Pre-Closing
Environmental Condition of the Real Property, the nature and scope of which
assessment will be determined by GM in its sole discretion. GM will provide
copies of the final reports of such assessment or phases thereof (the
"Environmental Reports"), as they become available, to AAM under the terms of
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the ECA. The following Environmental Reports have been delivered to AAM by GM
prior to the date of Closing:
PHASE I ENVIRONMENTAL SITE ASSESSMENTS
1. Phase I Environmental Site by: Haley & Aldrich, Inc.
Assessment Rochester, New York
Saginaw Division - Buffalo File No. 70451-40
Plant ("Buffalo Plant") December 14, 1993
Buffalo, New York
2. Phase I Environmental Site by: Haley & Aldrich, Inc.
Assessment Rochester, New York
Saginaw Division - Tonawanda File No. 70452-40
Forge Plant December 10, 1993
Tonawanda, New York
("Tonawanda Plant")
3. Phase I Environmental Site by: Haley & Aldrich, Inc.
Assessment Cleveland, Ohio
Saginaw Prop Shaft Facility File No. 79010-40
Three Rivers, Michigan December 10, 1993
4. Phase I Environmental Site by: Haley & Aldrich, Inc.
Assessment Cleveland, Ohio
Saginaw Division - General File No. 79012-40
Motors Corporation December 15, 1993
Detroit Gear & Axle Plant
Hamtramck/Detroit, Michigan
5. Phase I Environmental Site by: Haley & Aldrich, Inc.
Assessment Cleveland, Ohio
Saginaw Division - Detroit File No. 79013-40
Forge Facility December 10, 1993
Detroit, Michigan
The Environmental Reports will include action plans for any subsequent
investigation, cleanup, remediation, and/or other actions which GM determines,
in accordance with Section 6.1.2.B., should be or must be conducted under
specifically applicable Environmental Laws, as existing and in effect as of the
date of
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Closing, to address Pre-Closing Environmental Conditions (the "Remedial
Plan(s)"); provided, however, that the Remedial Plan(s) will provide for an
action plan relating to the area at the Buffalo Plant described in the Phase I
Environmental Site Assessment for the Buffalo Plant as the "Inactive Hazardous
Waste Site" (also referred to as "Parking Lot #4") taking into consideration the
factors set forth in Section 6.1.2.B(ii) or, if GM enters into a consent order
with the State of New York to address such area, as required under such order.
Such actions may include reporting/discussing environmental issues related to
the Real Property with appropriate governmental agencies. GM will, in its sole
discretion, determine whether such reports/discussions should or must be
initiated with such governmental agencies. Subject to Section 6.12.5, AAM
retains the right to make reports to governmental agencies if and to the extent
required by Environmental Laws.
B. Implementation of Remedial Plans. AAM acknowledges and agrees that in
determining whether an action should be conducted or is required to be conducted
under any specifically applicable Environmental Laws, as existing and in effect
as of the date of Closing, under Section 6.1.2.A. or 6.1.3. to address
Pre-Closing Environmental Conditions: (i) the decision as to whether any
Pre-Closing Environmental Condition should be addressed or is required to be
addressed under any specifically applicable Environmental Law will be in GM's
sole discretion; and (ii) GM will, to the extent not prohibited by law, utilize
the following factors in developing the particular
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action to be undertaken or in determining that no action will be undertaken: (a)
specific requirements, if any, under applicable Environmental Laws, as existing
and in effect as of the date of Closing; (b) technical feasibility of the
action(s); (c) economic reasonableness of the action(s); (d) continued
industrial use of the Real Property, as defined in Section 1.1.1, substantially
similar to its use by GM before the date of Closing; and (e) human health and
environmental risk-based factors, including, but not limited to: (1) likely
exposure pathways consistent with continued industrial use of the Real Property,
as defined in Section 1.1.1, substantially similar to its use by GM before the
date of Closing; (2) typical simulated exposure distributions consistent with
such exposures; (3) fate and transport characteristics; (4) local geology and
hydrogeology; and (5) toxicity of the material(s) in question. Unless or to the
extent required by law or agency directive, GM will not propose any action which
would significantly and materially impair the ability of AAM to produce products
in the ordinary course of business as conducted by GM before the date of Closing
without the prior consent of AAM, which consent will not be unreasonably
withheld. Subject to events of Force Majeure, GM will use reasonable efforts to
commence implementation of the Remedial Plans as expeditiously as practicable.
AAM agrees that GM will have access to the Assets, including, but not limited
to, the Real Property, as defined in Section 1.1.1, after the date of Closing
consistent with Section 6.3 to undertake any activities under the Remedial
Plans.
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C. Agency Contact. Unless specifically requested by GM or, subject to
Section 6.12.5, required by Environmental Laws, AAM acknowledges and agrees that
AAM will have no right to participate in any of GM's discussions/negotiations
with any governmental agencies and will not independently engage in any
discussions/negotiations with any governmental agencies regarding GM's
activities hereunder, including, but not limited to, activities under any
Remedial Plan or Compliance Plan, as hereafter defined, or any other issues
related to the environmental condition of the Real Property, including, but not
limited to, any Pre-Closing Environmental Conditions or Non-Compliance Matters,
without the prior written consent of GM.
D. Notification of GM. AAM agrees that it will, as soon as practical,
notify GM of any contact, whether written, verbal, or in person, by or with any
governmental agency, agency representative, or any other party regarding GM's
activities at or any other issues related to the environmental condition or
compliance status of the Real Property, as defined in Section 1.1.1, the Assets
or the Business including, but not limited to, Pre-Closing Environmental
Conditions, Non-Compliance Matters or activities under a Remedial Plan or as
defined hereafter, a Compliance Plan. This provision will be effective through
the end of the tenth year after the date of Closing, except that it will remain
in effect thereafter as to any Remedial Plan or Compliance Plan which is still
being implemented by GM at the end of such tenth year until the implementation
of such plan has been completed.
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E. Scope of GM's Obligations. Notwithstanding the foregoing, AAM
acknowledges and agrees that, except as specifically provided in Sections
6.1.2., 6.1.3., 6.2.1., 6.8., 6.9., 6.12.2. or 6.12.4., GM will have no
obligation to undertake or conduct any cleanup, remediation, and/or other
actions with respect to any environmental condition(s) or a non-compliance
matter at the Real Property, as defined in Section 1.1.1, or concerning the
Assets or Business, including, but not limited to, Pre-Closing Environmental
Conditions or Non-Compliance Matters, or be liable to AAM or any third party for
any such matters, and AAM will indemnify and defend GM therefrom in accordance
with the provisions of Section 6.12.3.
F. AAM's Review of Remedial Plans. GM will provide AAM with a copy of the
proposed Remedial Plan(s), as may be amended from time to time, subject to the
terms of the ECA for undertaking and completing investigation, cleanup,
remediation, and/or other actions to address Pre-Closing Environmental
Conditions under Section 6.1.2.A. or 6.1.3. AAM will have the right to review
and comment on such Remedial Plan(s) prior to implementation by GM. GM will
cooperate reasonably with AAM in facilitating AAM's review of the Remedial
Plan(s). GM will consider AAM's comments on the Remedial Plans and, if requested
by AAM, discuss AAM's comments on the Remedial Plans with AAM. AAM will complete
its review promptly, but in no event will AAM's review period exceed thirty (30)
calendar days after AAM's receipt of any Remedial Plan unless additional time is
reasonably required. Any requests for additional time must be made in
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writing within the review period; provided, however, that in the event that a
shorter time for review is made necessary as a result of the need to obtain the
approval of a governmental agency or as a result of a requirement of a
governmental agency, then AAM's review time will be shortened to a period which
is reasonable under the circumstances as specified by GM. If AAM does not object
to the Remedial Plan(s) within the review period, GM will implement the Remedial
Plan(s) as proposed or modified to address comments or objections from AAM
consistent with this Section 6.1.2.F and as the Remedial Plan(s) may be amended
from time to time. Notwithstanding any comments by AAM on the Remedial Plan(s),
any objection to the Remedial Plan(s) by AAM must be timely and must be based
solely upon a showing by AAM that an action(s) set forth in the Remedial Plan(s)
will significantly and materially impair the ability of AAM to produce products
in the ordinary course of business as conducted by GM before the date of
Closing. If AAM makes such a showing, GM will modify its Remedial Plan(s) so as
to not significantly and materially impair the ability of AAM to produce
products in the ordinary course of business as conducted by GM before the date
of Closing. Notwithstanding and without limiting the foregoing, AAM may not
object to any Remedial Plan: (i) because a different action(s) might take a
shorter period of time, require less of a presence of GM or its representatives
at the Real Property, as defined in Section 1.1.1., or be preferable to AAM;
(ii) to require action(s) more stringent or materially different from that
required under Environmental Laws, as existing and in effect
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as of the date of Closing; (iii) to require changes to an action(s) which was
commenced or was substantially in place and/or negotiated prior to the date of
Closing; or (iv) to require any modification or replacement of any personal
property, building or fixture, or any process or material respecification where
an alternative exists to address a Pre-Closing Environmental Condition. GM will
have access to the Real Property, as defined in Section 1.1.1, after the date of
Closing consistent with Section 6.3. to undertake any activities under the
Remedial Plans. AAM will cooperate with GM in performing such post-closing
activities.
G. AAM's Environmental Reports. AAM agrees to provide to GM, promptly upon
request and during the longest indemnity period under this Article VI., copies
of any environmental reports, data or assessments prepared or collected by or on
behalf of AAM except those which are protected by the attorney-client privilege
or the attorney-work product doctrine; provided, however, that no data relating
to the quality, quantity or concentration of any emission, discharge or
environmental medium or any constituent or contamination thereof at the Real
Property, as defined in Section 1.1.1., or relating to the Assets will be
subject to any such privilege or doctrine.
6.1.3. Post-Closing Matters. If, during the first five (5) years after the
date of Closing, AAM discovers a potential Pre-Closing Environmental Condition
which was not a condition or matter identified, assessed or investigated in the
Environmental Reports, GM will, with respect to such condition,
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take actions which GM determines should be conducted or must be conducted under
specifically applicable Environmental Laws, as existing and in effect as of the
date of Closing, so long as AAM establishes that such condition: (i) is
significant and material; (ii) was in existence as of the date of Closing; and
(iii) was not caused or significantly contributed to, significantly aggravated
by, or significantly exacerbated by AAM. If AAM makes such a showing, such
condition will be deemed a Pre-Closing Environmental Condition and GM will
address such condition under the provisions of Section 6.1.2. For purposes of
Sections 6.1.3., 6.12.2. and 6.12.3, the condition will be deemed to be
"significant and material" if the cost to remediate such condition, as
reasonably determined or estimated using best engineering judgment, exceeds
$45,000, exclusive of costs of investigation, evaluation, assessment, oversight,
operation and maintenance, and any fines or penalties associated therewith. With
respect to any significant and material Pre-Closing Environmental Condition
subject to this Section 6.1.3. which becomes subject to a Remedial Plan under
Section 6.1.2.B., GM will be responsible only for costs reasonably incurred by
AAM with respect to investigation, evaluation and assessment with respect to
such significant and material Pre-Closing Environmental Condition in excess of
$50,000, and GM will reimburse AAM for any of its costs for investigation,
evaluation and assessment in excess of $50,000; provided, however, that before
AAM incurs costs in excess of $50,000 with respect to such investigation,
evaluation and assessment, AAM will submit to GM
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for review and approval a work plan setting forth the nature of the
investigative, evaluation and assessment work to be performed, an estimate using
best engineering judgment of the cost thereof and the basis for undertaking such
work. GM will expeditiously review and comment upon any such work plan and AAM
will consider and, if reasonable, adopt GM's comments on the work plan. If, as
modified, the work plan and the activities thereunder are reasonable in purpose,
scope, cost, duration and extent, GM will not unreasonably withhold its approval
of such work plan. With respect to GM's indemnification obligations under
Section 6.12.2, GM will also be responsible only for costs with respect to each
such significant and material Pre-Closing Environmental Condition in excess of
$50,000 and AAM will be responsible for all such costs less than $50,000. The
term "best engineering judgment" will mean the application of generally accepted
engineering principles and cost estimation techniques to determine the cost of
investigation, assessment, evaluation and performance of remediation of a
Pre-Closing Environmental Condition based upon credible and verifiable facts,
and confirmation and use of the factors set forth in Section 6.1.2.B.
6.2. GM's Environmental Compliance Audit(s); Environmental Permits.
6.2.1. Compliance Review.
A. Compliance Plans and Implementation. GM has retained Haley & Aldrich to
conduct a review(s) of the compliance status of the operations of the Business
with Environmental Laws, as existing and in effect as of the date of Closing. GM
has
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provided AAM with a copy of the final report(s) of this compliance review(s)
subject to the terms of the ECA (the "Environmental Compliance Audits") as
described below:
ENVIRONMENTAL COMPLIANCE AUDITS
1. Environmental Compliance by: Haley & Aldrich, Inc.
Audit Cleveland, Ohio
Saginaw Buffalo Plant File No. 70451-41
Buffalo, New York December 9, 1993
2. Environmental Compliance by: Haley & Aldrich, Inc.
Audit Cleveland, Ohio
Saginaw Division - Tonawanda File No. 70452-41
Forge Plant December 9, 1993
Tonawanda, New York
3. Environmental Compliance by: Haley & Aldrich, Inc.
Audit Cleveland, Ohio
Saginaw Division - Prop File No. 79010-41
Shaft Facility, December 10, 1993
Three Rivers, Michigan
4. Environmental Compliance by: Haley & Aldrich, Inc.
Audit Cleveland, Ohio
Saginaw Division - Gear & File No. 79012-41
Axle Facility December 8, 1993
Detroit, Michigan
5. Environmental Compliance by: Haley & Aldrich, Inc.
Audit Cleveland, Ohio
Saginaw Division - Detroit File No. 79013-41
Forge Facility December 10, 1993
Detroit, Michigan
GM will develop compliance plan(s) to address the matters to be set forth on
Exhibit 6.2.1.A. before the date of Closing (which matters will be set forth
based on the information contained in
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the Environmental Compliance Audits) or which may be added after the date of the
Closing as set forth below under Environmental Laws, as existing and in effect
as of the date of Closing (the "Compliance Plans") to the extent such matters
constitute Non-Compliance Matters or will address one or more of such
Non-Compliance Matters in the manner set forth on Exhibit 6.2.1.A. AAM and GM
agree that the matters to be set forth on Exhibit 6.2.1.A. based on the
Environmental Compliance Audits will be determined prior to the date of the
Closing, and they each agree that it will be a condition precedent to each of
their respective obligations to consummate the transactions set forth in this
Agreement that such determinations are mutually satisfactory to AAM and GM. As
soon as practicable, but in no event later than ninety (90) calendar days after
the date of Closing, AAM may propose that additional matters be added to Exhibit
6.2.1.A. If GM reasonably determines that such matters were in existence as of
the date of Closing and constituted a Non-Compliance Matter, such matters will
be added to Exhibit 6.2.1.A. and will be addressed by GM in the Compliance Plans
or in the manner set forth on Exhibit 6.2.1.A. GM will be responsible only for
addressing the Non-Compliance Matters set forth in the Compliance Plans in the
manner described in the Compliance Plans or in Exhibit 6.2.1.A. No
Non-Compliance Matter will constitute a Pre-Closing Environmental Condition for
purposes of this Agreement or otherwise.
B. AAM's Review of Compliance Plans. GM will provide AAM with a copy of the
proposed Compliance Plan(s), as
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may be amended from time to time, subject to the terms of the ECA. AAM will have
the right to review and comment on such Compliance Plan(s) prior to
implementation by GM. GM will cooperate reasonably with AAM in facilitating
AAM's review of the Compliance Plan(s). GM will consider AAM's comments on the
Compliance Plan(s) and, if requested by AAM, discuss AAM's comments on the
Compliance Plan(s) with AAM. AAM will complete its review promptly, but in no
event will AAM's review period exceed thirty (30) calendar days after AAM's
receipt of any Compliance Plan unless additional time is reasonably required.
Any requests for additional time must be made in writing within the review
period; provided, however, that in the event that a shorter time for review is
made necessary as a result of the need to obtain the approval of a governmental
agency or as a result of a requirement of a governmental agency, then AAM's
review time will be shortened to a period which is reasonable under the
circumstances as specified by GM. If AAM does not object to the Compliance
Plan(s) within the review period, GM will implement the Compliance Plan(s) as
proposed or modified to address comments or objections from AAM consistent with
this Section 6.2.1.B. and as the Compliance Plan(s) may be amended from time to
time. Notwithstanding any comments by AAM on the Compliance Plan(s), any
objection to the Compliance Plan(s) by AAM must be timely and must be based
solely upon a showing by AAM that an action(s) set forth in the Compliance
Plan(s) will significantly and materially impair the ability of AAM to produce
products in the ordinary course of business as conducted by GM before the
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date of Closing. If AAM makes such a showing, GM will modify its Compliance
Plan(s) so as to not significantly and materially impair the ability of AAM to
produce products in the ordinary course of business as conducted by GM before
the date of Closing. Notwithstanding and without limiting the foregoing, AAM may
not object to any Compliance Plan: (i) because a different action might take a
shorter period of time, require less of a presence of GM or its representatives
at the Real Property, as defined in Section 1.1.1., or be preferable to AAM;
(ii) to require action(s) more stringent or materially different from that
required under Environmental Laws, as existing and in effect as of the date of
Closing; (iii) to require changes to an action(s) which was commenced or was
substantially in place and/or negotiated prior to the date of Closing; or (iv)
to require any modification or replacement of any personal property, building or
fixture, or any process or material respecification where an alternative exists
to address a Non-Compliance Matter. GM will have access to the Real Property, as
defined in Section 1.1.1., after the date of Closing consistent with Section
6.3. to undertake any activities under the Compliance Plans. AAM will cooperate
with GM in performing such post-closing activities. Subject to events of Force
Majeure, GM will use reasonable efforts to commence implementation of the
Compliance Plans as expeditiously as practicable.
C. Except as set forth in Section 6.8. or 6.9., AAM will be solely
responsible and liable for correcting and/or resolving any Non-Compliance Matter
not set forth on Exhibit
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6.2.1.A. and AAM will indemnify and defend GM in connection with any such matter
in accordance with Section 6.12.3. GM will reasonably cooperate with AAM in
AAM's efforts in addressing such matters.
6.2.2. Environmental Permits; Transfer. Set forth on Exhibit 6.2.2. are all
of the environmental permits, licenses and authorizations identified by GM and
issued with respect to the operations at the Real Property, as defined in
Section 1.1.1. ("Environmental Permits"). Prior to the date of Closing, GM will
take all actions reasonably required to effect the transfer to AAM of the
Environmental Permits which can be transferred solely by notification to the
applicable permitting authority. GM will use its best efforts to transfer to AAM
all other Environmental Permits which require consent, review, approval or
additional actions other than mere notification, and which may be lawfully
transferred to AAM. AAM will be solely responsible for (i) obtaining or
effecting the transfer of all Environmental Permits which are not transferable
prior to the date of Closing under the two preceding sentences; and (ii) all
other permits, licenses, authorizations and approvals required with respect to
the Assets, the Real Property, as defined in Section 1.1.1, and the Business
under Environmental Laws, as existing and in effect as of the date of Closing
and thereafter, which have not been issued as of the date of Closing. GM and AAM
agree to reasonably cooperate with one another in obtaining any consents,
reviews or approvals necessary to transfer or obtain the Environmental Permits
and in identifying, applying for and obtaining any permits, licenses,
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authorizations or approvals referred to in the preceding clause (ii) under
Environmental Laws as existing and in effect as of the date of Closing. Any
Environmental Permit transferred under this Section 6.2.2. will be considered to
be an Asset of the Business transferred to AAM under this Agreement.
6.3. Post-Closing Access to Real Property; Documentation of Actions.
A. AAM acknowledges and agrees that, at any time after the date of Closing
and, except where emergency conditions require otherwise, upon reasonable prior
notice, GM and its representatives may come upon the Real Property, as defined
in Section 1.1.1., to: (i) undertake any actions with respect to any Remedial
Plan under Section 6.1.2. or 6.1.3.; (ii) undertake any actions with respect to
any Compliance Plan under Section 6.2.1.; or (iii) undertake any actions under
Sections 6.8., 6.9., 6.12.2. or 6.12.4. GM will keep AAM apprised of scheduled
activities at the Real Property. AAM agrees to: (i) cooperate with GM and its
representatives in obtaining any requisite governmental approvals, consents,
authorizations, waivers, or permits which may be required in connection with
Remedial Plans or Compliance Plans, and which will be obtained at GM's sole
expense, to conduct such activities; (ii) not interfere with any actions
instituted by GM before the date of Closing or under this Agreement or any
Remedial Plan or Compliance Plan; (iii) do all things reasonably necessary and
appropriate to allow GM to implement actions under this Agreement or any
Remedial Plan or Compliance Plan; and (iv) exercise due care so as not to
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adversely affect the installation, operation, integrity or maintenance of any
action or remedy existing or taken at or about the Real Property, as defined in
Section 1.1.1., before the date of Closing or thereafter under this Agreement or
any Remedial Plan or Compliance Plan. Regarding activities undertaken pursuant
to Sections 6.1.2., 6.1.3., 6.2.1., 6.8., 6.9., 6.12.2. or 6.12.4.B. and C., GM
agrees to provide AAM with documentation detailing the actions taken by GM. AAM
will cooperate with GM in performing such post-closing activities. GM will
indemnify, defend and hold AAM harmless from any personal injury or property
damage to a third party (including any AAM employee) or to AAM's property which
occurs solely and directly as a result of GM's access to the Real Property
pursuant to this Section 6.3. and which is due solely to GM's negligent act or
omission; provided, however, no action taken or condition created as a result of
GM's implementation of a Remedial Plan or a Compliance Plan will be subject to
the foregoing indemnification. GM's indemnification obligation under the
preceding sentence will not include any liability for consequential damages,
special damages or incidental damages such as, by way of example and not
limitation, loss of profits, loss of business opportunity, or any attorney's or
consultant's fees or other expenses as to any matter as to which GM has accepted
its defense and indemnity obligation, and the procedures specified in Section
6.12.2.A. through H. will apply to any such claim for indemnification.
B. In connection with GM's access to the Real Property, as defined in
Section 1.1.1., for any purpose under
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this Article VI., both GM and AAM will exercise best efforts to avoid
unreasonably interfering with the actions, business and operations of the other
party on and associated with the Assets, the Real Property, as defined in
Section 1.1.1., and the Business and the access of each party thereto. GM will
abide by all applicable health and safety requirements of AAM while conducting
actions on the Real Property, as defined in Section 1.1.1. GM or its agents may
need access to services, including potable water, electric and telephone
utilities, security and possibly wastewater treatment facilities, in connection
with its activities on the Real Property, as defined in Section 1.1.1.,
subsequent to the date of Closing. AAM will provide GM or its agents with access
to such utilities and facilities, on GM's reasonable request, for all purposes
authorized or required under this Article VI. Such access will be utilized by GM
or its agents in a reasonable manner which will minimize interference with AAM's
operation of the Business. GM will reimburse AAM for GM's share of the
reasonable cost of providing such services upon receipt from AAM of reasonably
satisfactory evidence of the cost for such services based on a proportional
share mutually agreed to by the parties.
C. In the event that GM requires access to the Real Property, as defined in
Section 1.1.1., relating to the Tonawanda Forge Plant to investigate any
environmental condition or to undertake any remedial action with respect to or
relating to the adjacent GM Powertrain Division Engine Plant, AAM will
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grant GM such access as is reasonably necessary and which is consistent with the
access provided under Sections 6.3.A. and B.
6.4. Generator-Only Status. AAM acknowledges, warrants and agrees that it
will not treat, store, or dispose of any hazardous substances, hazardous wastes,
or toxic substances as those terms are defined under Environmental Laws, as may
be amended from time to time, on, at or below the Real Property, as defined in
Section 1.1.1., and will maintain generator-only status; provided, however, that
AAM may: (i) temporarily or for a limited time period accumulate such substances
or wastes as allowed under Environmental Laws without the necessity of a license
or permit therefor; and (ii) use for lawful purposes and in a safe and
environmentally appropriate and lawful manner commercial products which may
contain such substances so long as and to the extent that AAM does not adversely
affect or impact any property or operation of GM which may occur in the vicinity
of the Real Property. AAM will use its best efforts to obtain new identification
numbers which are required under Environmental Laws for hazardous waste
management activities with respect to hazardous waste generated by the Business
at the Real Property after the date of Closing. GM represents and warrants that
no permit has been issued prior to the date of Closing with respect to the
Business for operation of a hazardous waste treatment, storage or disposal
facility under RCRA or any state law equivalent.
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6.5. Restrictions on Use and Transfer.
A. AAM acknowledges, warrants and agrees that any contract, deed, transfer
document or other instrument for transfer of any interest in, possession of, or
right to use the whole or any part of the Real Property, as defined in Section
1.1.1., through sale, lease, license, easement or otherwise, including, but not
limited to, any contract, deed, transfer document or other instrument for
transfer of any such interest by and between GM and AAM in connection with or
pursuant to this Agreement, will incorporate the obligations of AAM and any
subsequent user, occupant or transferee of the Real Property, as defined in
Section 1.1.1., set forth in Sections 6.3., 6.4. and 6.5.B., and will restrict
use of the Real Property, as defined in Section 1.1.1., from and after the date
of Closing and, except as provided in the succeeding sentence, in perpetuity
thereafter to industrial use and without access by members of the general
public. Such restriction will allow for customary office and other uses
ancillary to the principal use of the Real Property for industrial use, will
provide that the restriction may be eliminated as an encumbrance upon the Real
Property, as defined in Section 1.1.1., only with the written consent of GM, and
will provide that it is directly enforceable by GM against AAM and any
subsequent user, occupant or transferee of the Real Property, as defined in
Section 1.1.1.
B. In the event AAM wishes to transfer all or any part of or any interest
in the Real Property, as defined in Section 1.1.1., to a third party, it will
require as a condition of any
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such transfer that the transferee covenant not to sue and release GM from all
liability for any environmental matter or condition involving the Real Property,
as defined in Section 1.1.1., and be bound by the provisions of this Article
VI., other than AAM's indemnification obligations under Section 6.12.3 and
assume the obligations of AAM under this Article VI., other than AAM's
indemnification obligations under 6.12.3.; provided, however, that no such
assumption will relieve AAM of its obligations under this Agreement. In the case
of any transfer to an Affiliate, the Affiliate will be required as a condition
thereof to be bound by all of the provisions of this Article VI. including AAM's
indemnification obligations under this Article VI. and assume all of AAM's
obligations under the Article VI. including AAM's indemnification obligations
under this Article VI.; provided, however, that no transfer to an Affiliate will
relieve AAM of its obligations under this Agreement. AAM will indemnify and
defend GM against any claims asserted by such transferee against GM which are
contrary to the provisions of this Article VI.
6.6. Maintenance of the Real Property. Except as set forth in any Remedial
Plan or Compliance Plan, AAM acknowledges, warrants and agrees that, after the
date of Closing, AAM will be solely responsible for maintenance of the Real
Property, as defined in Section 1.1.1., and the Assets, including, but not
limited to, any and all current or future structures, facilities, parking lots,
and storage areas, under contracts (including this Agreement), Environmental
Laws, other laws and the common law.
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6.7. Compliance With Environmental Laws. AAM acknowledges, warrants and
agrees that: (i) after the date of Closing, AAM and any of AAM's successors,
tenants, agents, employees, or contractors will comply in all material respects
with all Environmental Laws applicable to the use of, operations at or occupancy
of the Assets (including, but not limited to, the Real Property, as defined in
Section 1.1.1., and any facilities, structures, parking lots, and storage areas
thereon); and (ii) except as specifically otherwise provided in this Article
VI., sole legal and financial responsibility for compliance with all
Environmental Laws including hazardous waste management requirements, applicable
to the use of, operations at or occupancy of the Assets, including, but not
limited to, the Real Property, as defined in Section 1.1.1., will be that of
AAM.
6.8. Responsibility for Transformers and Capacitors.
A. GM has informed AAM that the Assets, including, but not limited to, the
Real Property, as defined in Section 1.1.1., may include, among other things,
transformers and capacitors that may contain mono or polychlorinated biphenyl
("PCBs") dielectric or other materials. Prior to the date of Closing, GM will,
at its cost, inspect identified PCB-containing transformers and provide to AAM a
copy of the results of its inspection. GM will investigate and, if necessary,
remediate any containment structure associated with a PCB-containing transformer
determined during the course of such inspection to be leaking. Such remediation
will be consistent with the provisions of the PCB Spill Cleanup Policy set forth
at 40 CFR Part 761,
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Subpart G (1992). Either before or after the date of Closing, as the
circumstances may require, GM will take such actions as may be required under
TSCA so that GM can lawfully transfer such transformers to AAM as of or after
the date of Closing.
B. After the date of Closing, and without limitation of the other
obligations of AAM under this Agreement, AAM agrees to use, store, mark, handle,
transport, distribute in commerce, and/or dispose of properly the PCB
transformers and capacitors, including, but not limited to, the PCB materials
contained therein, in compliance with Environmental Laws and other laws.
C. Other than as provided in Sections 6.8.A. and 6.8.D., AAM agrees that GM
will have no further obligation or liability with regard to such PCB and PCB
containing equipment or material, including, but not limited to, transformers
and capacitors, and the PCB materials contained therein or any release thereof,
after the date of Closing, and that AAM will be and remain solely liable and
responsible for the proper handling, marking, transportation, distribution in
commerce, storage, use, maintenance, repair, or disposal of such transformers
and capacitors, including the PCB fluids contained therein or any release
thereof, under contract (including this Agreement), Environmental Laws, other
laws, and the common law, and AAM will indemnify and defend GM therefrom in
accordance with Section 6.12.3.
D. AAM acknowledges that an exterior building siding or cladding material
known as "Galbestos" may be in use at
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the Tonawanda Plant and that such use may not presently be subject to a use
authorization under 40 CFR Part 761 (1992). With respect to such material, GM
agrees that, if at any time within the first five (5) years after the date of
Closing it is expressly determined by a regulation or final order of a
governmental agency with jurisdiction in the matter duly promulgated or issued
under TSCA and taking effect within such time period that such material may not
lawfully remain in use, then GM will reimburse AAM for its reasonable and actual
costs and expenses incurred in the removal and disposal of such material in the
manner then required by TSCA, and in accordance with the plan and cost estimate
approved by GM, and AAM will be solely responsible for all costs and expenses
associated with the replacement of such material. If any such final order is
issued, AAM will, if requested by GM, prosecute and perfect an appeal of such
order or any affirmance thereof in the manner prescribed by GM and with counsel
of GM's choice, and GM will in such event pay the cost and expense incurred by
AAM to appeal any such order or affirmance thereof; provided, however, that if
GM has requested that AAM appeal such order and the appeal thereof is ongoing at
the end of the five (5) year period set forth above, GM's obligations under this
subsection will continue until the appeal has been finally determined. Prior to
any such removal and disposal, AAM will submit to GM for its approval, a plan
and cost estimate for effecting such removal and disposal. Any removal, disposal
or replacement costs incurred by AAM with respect to such material in the
ordinary course of business or not mandated
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by the regulation or order of a governmental agency promulgated or issued under
TSCA after the date of Closing will be the sole responsibility of AAM and AAM
will indemnify and defend GM therefrom in accordance with Section 6.12.3.
6.9. Responsibility for Asbestos.
A. GM has informed AAM that the Assets, including, but not limited to, the
Real Property, as defined in Section 1.1.1., may include, among other things,
asbestos insulation and other asbestos-containing material ("ACM"). Either
before or after the date of Closing, GM will, at its sole cost, engage an
independent consulting firm to conduct a survey of all reasonably accessible ACM
at the Real Property, as defined in Section 1.1.1., and to prepare a written
report of its findings. Such survey will take into account the location,
condition, friability, accessibility, and frequency and manner of use of and
exposure to such ACM. Upon completion of the survey, GM will provide a copy
thereof to AAM and agrees to remove or, at its option, repair only friable ACM
identified in the survey which is excessively damaged and accessible and which
poses an immediate threat of release to the general worker population.
B. Except as provided in Section 6.9.A. and 6.9.C., after the date of
Closing, and without limitation of the other obligations of AAM under this
Agreement, AAM agrees that GM will have no further obligation or liability with
regard to the presence, maintenance, handling, repair, use, removal, release,
storage, or disposal of any ACM, and that AAM will be and remain solely liable
and responsible for such activities under contract
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(including this Agreement), Environmental Laws, other laws, and the common law,
and AAM will indemnify and defend GM therefrom in accordance with Section
6.12.3.
C. Liability for Employee Asbestos-Related Claims will be borne by the
parties as follows. AAM's portion of such liability will be equal to an amount
determined by multiplying the aggregate liability for such claim by a fraction,
the numerator of which fraction will be the period of employment of the claimant
with AAM at the facility in question on and after the date of Closing, and the
denominator of such fraction will be the total period of employment of such
claimant with GM at the facility in question before the date of Closing and with
AAM at the facility in question on and after the date of Closing. That portion
of the aggregate liability for such claim not allocated to AAM as provided in
the preceding sentence will be GM's responsibility. For purposes of this Section
6.9.C., the term "Employee Asbestos-Related Claim" will mean lawsuits and claims
brought or made by or on behalf of employees or former employees of the Business
for personal injuries arising, or alleged to have arisen, from exposure to
asbestos fibers, either before or after the Closing, on the Real Property, as
defined in Section 1.1.1., including all claims for compensation pursuant to
applicable worker's compensation or related or similar legislation.
6.10. No Arrangement for Disposal. GM and AAM acknowledge that the
transactions contemplated by this Agreement constitute a sale and transfer of
assets in the ordinary course of business and are not intended in any way, nor
will they be
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deemed to be, an arrangement for treatment, storage or disposal of any of the
Assets or any substances or materials contained therein. AAM agrees that GM will
not have any liability under any Environmental Law by virtue of such transfer
alone.
6.11. GM's Inspection Rights. AAM acknowledges and agrees that GM has the
right, at any time and at least semi-annually, and, except where emergency
conditions require otherwise, upon reasonable notice, during the period of GM's
indemnity obligations set forth in this Article VI., to inspect or audit the
Assets, including, but not limited to, the Real Property, as defined in Section
1.1.1., from time to time, to observe AAM's or its tenant's, agents, employee's,
or contractor's compliance with Environmental Laws and the provisions of this
Agreement. During such inspection or audit, AAM agrees to provide all documents
and information reasonably requested by GM and provide to GM the opportunity to
interview AAM's employees relating to environmental matters, except such
documents and information as are protected by the attorney-client privilege or
attorney-work product doctrine; provided, however, that no data relating to the
quality, quantity or concentration of any emission, discharge or environmental
medium or any constituent or contamination thereof at the Real Property, as
defined in Section 1.1.1., or relating to the Assets will be subject to any such
privilege or doctrine. Any such inspection or audit, including employee
interviews and assistance, will be coordinated with management personnel
responsible for environmental compliance and will not unreasonably interfere
with
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AAM's continued operation of the Business. This right of inspection does not
constitute a duty on GM's part to so inspect and in no event relieves AAM of any
obligations under this Agreement or under the law.
6.12. Condition of Assets; Indemnification Obligations.
6.12.1. Condition of Assets.
A. AAM acknowledges, warrants and agrees that, prior to the date of
Closing, it has had the opportunity to and has examined and investigated the
nature, environmental condition and compliance status of the Assets, including,
but not limited to, the Real Property, as defined in Section 1.1.1., and the
Business. Except as set forth in Section 6.4., neither GM, nor any agent,
attorney, employee, or representative of GM, has made any representation
whatsoever regarding the nature, environmental condition or compliance status of
the Assets, the Real Property, as defined in Section 1.1.1., or the Business by
GM to AAM or any part thereof and that AAM in executing, delivering, and/or
performing this Agreement has not relied upon any statement and/or information
(including, but not limited to, any Environmental Report or Environmental
Compliance Audit), to whomsoever made or given directly, orally or in writing,
by any individual, firm, or corporation. The parties assume that the
Environmental Reports and the Environmental Compliance audits do and will in the
future accurately describe the condition of the soil, ground water and surface
water at the Real Property and the environmental compliance status of the Assets
and the Business.
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Neither GM nor AAM represents or warrants the accuracy or completeness of the
Environmental Reports or the Environmental Compliance Audits, and AAM has
entered into this Agreement based solely upon its own inspection, evaluation,
review and analysis of such reports and audits and its rights under Sections
6.1.3. and 6.2.1.A.
B. AAM acknowledges and agrees that, except as otherwise provided in this
Article VI., it is purchasing the Assets, the Real Property, as defined in
Section 1.1.1., and the Business in an "as is, where is" condition as of the
date of Closing and without any right of action with respect to environmental
matters or conditions against GM under contract (including this Agreement),
Environmental Laws, other laws, the common law or in equity. Except for actions
arising under Sections 6.8., 6.9., 6.12.2., 6.12.3.B.2. or 6.12.4., AAM hereby
expressly releases and covenants not to sue GM with respect to environmental
matters or conditions regarding the Assets, the Real Property, as defined in
Section 1.1.1, or the Business, whether existing before or after the date of
Closing, including, but not limited to, environmental matters arising from or
related to the presence of PCBs, asbestos, wood floor blocks, ceiling and floor
tiles, buildings, refractory brick and any substances, materials or structures
at or about the Real Property, as defined in Section 1.1.1., or in or about the
Assets.
6.12.2. GM's Indemnification. GM agrees that for a period of five (5) years
after the date of Closing and in accordance with the following terms and
conditions, GM will
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indemnify, defend, and hold AAM harmless from and against any liabilities,
damages, penalties, or fines, including, without limitation, reasonable
attorney's fees, (but in no event will GM's agreement to indemnify AAM include
consequential, special or incidental damages such as, by way of example and not
limitation, loss of profits or loss of business opportunity, or any attorney's
or consultant's fees or other expenses as to any matter as to which GM has
accepted its defense and indemnity obligations) to which AAM may be subjected as
a result of an action, suit, complaint, formal notice of probable claim, or
proceeding brought by a governmental agency or other third party (hereinafter
"Claim"), but only to the extent such Claim is based upon a Pre-Closing
Environmental Condition described in any Environmental Report or a significant
and material Pre-Closing Environmental Condition which: (i) constitutes a
violation of a specifically applicable Environmental Law, as existing and in
effect as of the date of Closing, or (ii) results in an investigation or
remediation obligation or liability being imposed under Environmental Laws, as
existing and in effect as of the date of Closing. GM agrees that for the period
commencing with the sixth year after the date of Closing and continuing through
the tenth year after the date of Closing, and in accordance with the following
terms and conditions, GM will indemnify, defend and hold AAM harmless from and
against any liabilities, damages, penalties, or fines, including, without
limitation, reasonable attorney's fees, (but in no event will GM's agreement to
indemnify AAM include consequential damages,
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special damages or incidental damages such as, by way of example and not
limitation, loss of profits or loss of business opportunity, or any attorney's
or consultant's fees or other expenses as to any matter as to which GM has
accepted its defense and indemnity obligations) to which AAM may be subjected as
a result of any Claim, but only if and to the extent such Claim is based upon a
Pre-Closing Environmental Condition which is disclosed in any Environmental
Report or is a significant and material Pre-Closing Environmental Condition
which arises under Section 6.1.3., and AAM establishes that: (i) AAM did not
cause or significantly contribute to, significantly aggravate or significantly
exacerbate such Pre-Closing Environmental Condition; (ii) AAM has substantially
complied with and met in all material respects all of its obligations under this
Article VI.; and (iii) GM's determination regarding if and to what extent
actions taken or not taken with respect to any such Pre-Closing Environmental
Condition was, and resulted in a condition that was, inconsistent with
Environmental Laws, as existing and in effect as of the date of Closing. The
foregoing indemnities will be effective as follows:
A. AAM agrees that it will promptly, but in no event later than thirty (30)
calendar days from the date of its discovery of facts which are reasonably
likely to give rise to a demand by it for indemnification under this Article VI.
or relating to any such Claim, notify GM in writing of such facts and potential
Claim. AAM's written notice will specify in detail the particular facts and
Environmental Law involved.
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B. AAM and GM will use best efforts to resolve promptly any disputes
regarding any Claim hereunder.
C. GM's indemnification obligations hereunder will be apportioned to the
extent that a Claim results from, or GM's expenses are materially increased by,
AAM's failure to provide timely notice as required under Section 6.12.2.A. No
indemnification obligation exists if, without the prior written approval of GM,
AAM has negotiated and/or agreed with a third party to conduct investigation,
remediation, or other actions with respect to a Claim or to settle a Claim.
D. After notification is given under Section 6.12.2.A., GM will be
entitled, but not obligated, to assume the defense or settlement of any Claim or
to participate in any negotiations or proceedings to settle or otherwise
eliminate any Claim. If GM fails to elect in writing within thirty (30) calendar
days after the notification referred to above to assume the defense or
settlement, AAM may engage counsel to defend, settle or otherwise dispose of
such Claim.
E. In cases where GM has assumed the defense, settlement or disposition of
a Claim, GM will be entitled to assume the defense or settlement thereof with
counsel of its own choosing, and will be entitled to settle, compromise, decline
to appeal, or otherwise dispose of the Claim without the consent or agreement of
AAM; provided, however, that in such event GM shall obtain from the claimant a
release in favor of AAM from all liability with respect to such Claim.
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F. In any case in which GM assumes the defense or settlement of a Claim and
GM, in its sole discretion, so consents, AAM will be entitled to continue to
participate at its own cost in any such action or proceeding or in any
negotiations or proceedings to settle or otherwise eliminate any Claim for which
indemnification is being sought and will have the right to employ its own
counsel in any such case, but the fees and expenses of such counsel will be at
the expense of AAM; otherwise, AAM will have no such right to participate in any
such action or proceeding. In no event will GM be liable to any indemnified
party for the cost of employing or using in-house legal counsel regardless of
whether GM has, or has not, assumed the defense or settlement of such Claim.
G. In the event indemnification is requested, GM and its representatives
and agents will have access to the premises, books and records of the
indemnified party or parties seeking such indemnification to the extent
reasonably necessary to assist it in defending or settling any Claim; provided,
however, that such access will be conducted in such manner so as not to
interfere unreasonably with the operation of the Business.
H. Until the expiration of the indemnification period under Section
6.12.2.I., AAM agrees to retain all documents with respect to all matters as to
which indemnity may be sought under this Article VI. Before disposing of or
otherwise destroying any such documents, AAM will give reasonable notice to such
effect and deliver to GM, at GM's expense and upon its request, a copy of any
such documents. In addition, each
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party to this Agreement agrees to use its reasonable efforts to cause its
employees to cooperate with and assist GM in connection with any Claim for which
indemnity is sought by AAM hereunder.
I. Upon expiration of the ten (10) year period after the date of Closing,
the indemnification requirements of this Section 6.12.2. will terminate and AAM
will have no right of action against GM for environmental matters or conditions
relating to the Real Property, as defined in Section 1.1.1., the Assets or the
Business under contract (including this Agreement), Environmental Laws, other
laws, or the common law or in equity; provided, however, that: (i) in the event
a Claim is asserted before the end of such ten (10) year period, the obligation
of GM to indemnify and defend AAM will continue, but only as to such Claim; and
(ii) in the event GM has not completed a Remedial Plan before the end of such
ten (10) year period, GM will nevertheless complete the actions required under
such Remedial Plan.
J. If GM, in addressing a Pre-Closing Environmental Condition under Section
6.1.2 or 6.1.3 or in defending or resolving any Claim as to which it has
indemnification responsibility under this Article VI., remediates or incurs
costs or damages with respect to a matter for which a third party may be
responsible or liable, AAM agrees to cooperate with GM in pursuing any claim
against such third party and will use its best efforts to assist GM and to
enable GM to legally assert such claim against such third party and to recover
GM's costs and damages against such third party including, but not limited to,
acting as the real party in interest and assigning
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AAM's rights or cause of action against any such third party relating to such
claim or the proceeds thereof to GM. With respect to any such action, GM agrees
to defend, indemnify and hold AAM harmless from and against any cost or
liability to which AAM may be subjected as a result of providing such
assistance.
6.12.3. AAM's Indemnification.
A. AAM will indemnify, defend and hold GM harmless from and against any
Claims, including, without limitation, reasonable attorney's fees, (but in no
event will AAM's agreement to indemnify GM include consequential, special or
incidental damages such as, by way of example and not limitation, loss of
profits or loss of business opportunity, or any attorney's or consultant's fees
or other expenses as to any matters as to which AAM has accepted its defense and
indemnity obligations) asserted against or to which GM may be subjected and
which are caused by, relate to or arise in connection with: (i) any breach by
AAM of any warranty or agreement by AAM under this Article VI.; (ii) any
violation by AAM of any Environmental Law with respect to the Assets, the Real
Property, as defined in Section 1.1.1., or the Business; (iii) any matter with
respect to which AAM is obligated to indemnify GM under Section 6.1.2.E.,
6.2.1.C., 6.5.B., 6.8.C., 6.8.D., 6.9.B., 6.9.C. or 6.16.4.A.; and (iv) except
as provided in Section 6.12.3.B., any matter as to which GM is not obligated to
indemnify AAM under Section 6.12.2. or 6.12.4., whether due to the passage of
time beyond the applicable indemnity period, the fact that such matter is not
within the scope of GM's indemnification obligations, or
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otherwise, including, but not limited to, Claims based on GM's actions,
omissions or status, whether negligent or otherwise; Claims relating to a
Pre-Closing Environmental Condition arising during the second five (5) year
period after the date of Closing which was significantly contributed to or
significantly aggravated or significantly exacerbated by AAM; or Claims which
were not discovered by AAM within five (5) years after the date of Closing.
AAM's indemnification obligations will exist in perpetuity and will not be
affected in any way by, or be merged into, the transactions contemplated under
this Agreement, and all representations and warranties of AAM in this Article
VI. will also survive the Closing.
B. 1. With respect to any condition or matter which was not identified,
assessed or investigated in the Environmental Reports and any condition or
matter which is not a significant and material Pre-Closing Environmental
Condition subject to Section 6.1.3, AAM's obligation to indemnify and defend GM
under Section 6.12.3.A(iv) will be unconditional and absolute.
2. With respect to any Pre-Closing Environmental Condition identified,
assessed or investigated in the Environmental Reports and any condition or
matter which constitutes a significant and material Pre-Closing Environmental
Condition subject to Section 6.1.3, AAM will defend and indemnify GM against any
Claim relating thereto and asserted against GM when and if it is determined by a
final, non-appealable determination of a court or agency with jurisdiction over
the
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matter that GM addressed such condition or matter in such a manner that the
result was consistent with Environmental Laws, as existing and in effect as of
the date of Closing, and will thereupon reimburse GM for all of GM's costs,
including costs of defense, incurred with respect to such Claim prior to such
determination. The parties agree that, solely with respect to Claims arising
under this Section 6.12.3.B.2., either of them will have the right to seek a
declaratory judgment at any time (subject to any applicable statute of
limitations) following the assertion of such Claims for the purpose of
determining whether GM addressed the Pre-Closing Environmental Condition which
is the subject of the Claim in such a manner that the result was consistent with
Environmental laws as existing and in effect as of the date of Closing.
3. Notwithstanding anything to the contrary elsewhere in this Section
6.12.3., AAM will be solely responsible for any cost, expense, liability, charge
or assessment arising from or in connection with: (i) the enactment or taking
effect of any Environmental Law after the date of Closing; or (ii) the amendment
or modification of or change in any Environmental Law, as existing and in effect
as of the date of Closing.
C. The foregoing indemnities will be effective as follows:
1. GM agrees that it will promptly, but in no event later than thirty (30)
calendar days from the date of its discovery of facts which are reasonably
likely to give rise to a demand by it for indemnification under this Article VI.
or
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relating to any such Claim, notify AAM in writing of such facts and potential
Claim. GM's written notice will specify in detail the particular facts and
Environmental Law involved.
2. GM and AAM will use best efforts to resolve promptly any disputes
regarding any Claim hereunder.
3. AAM's indemnification obligations hereunder will be apportioned to the
extent that a Claim results from, or AAM's expenses are materially increased by,
GM's failure to provide timely notice as required under Section 6.12.3.C.1. No
indemnification obligation exists if, without the prior written approval of AAM,
GM has negotiated and/or agreed with a third party to conduct investigation,
remediation, or other actions with respect to a Claim or to settle a Claim.
4. After notification is given under Section 6.12.3.C.1., AAM will be
entitled, but not obligated, to assume the defense or settlement of any Claim or
to participate in any negotiations or proceedings to settle or otherwise
eliminate any Claim. If AAM fails to elect in writing within thirty (30)
calendar days after the notification referred to above to assume the defense or
settlement, GM may engage counsel to defend, settle or otherwise dispose of such
Claim.
5. In cases where AAM has assumed the defense, settlement or disposition of
a Claim, AAM will be entitled to assume the defense or settlement thereof with
counsel of its own choosing, and will be entitled to settle, compromise, decline
to appeal, or otherwise dispose of the Claim without the consent or agreement of
GM; provided, however, that in such event
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AAM shall obtain from the claimant a release in favor of GM from all liability
with respect to such Claim.
6. In any case in which AAM assumes the defense or settlement of a Claim
and AAM, in its sole discretion, so consents, GM will be entitled to continue to
participate at its own cost in any such action or proceeding or in any
negotiations or proceedings to settle or otherwise eliminate any Claim for which
indemnification is being sought and will have the right to employ its own
counsel in any such case, but the fees and expenses of such counsel will be at
the expense of GM; otherwise, GM will have no such right to participate in any
such action or proceeding. In no event will AAM be liable to any indemnified
party the cost of employing or using in-house legal counsel regardless of
whether AAM has, or has not, assumed the defense or settlement of such Claim.
7. In the event indemnification is requested, AAM and its representatives
and agents will have access to the premises, books and records of the
indemnified party or parties seeking such indemnification to the extent
reasonably necessary to assist it in defending or settling any Claim; provided,
however, that such access will be conducted in such manner so as not to
interfere unreasonably with GM's operations. In addition, GM will use its
reasonable efforts to cause its employees to cooperate with and assist AAM in
connection with any Claim for which indemnity is sought by GM hereunder.
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8. If a Claim relates to a matter as to which both parties have indemnity
obligations under this Article VI., then each party will be responsible for its
proportionate share of the Claim unless otherwise specifically provided herein.
The proportionate shares of the parties will be determined by the parties as
soon as reasonably practicable based upon a determination of each party's
relative contribution to the condition considering the respective chemical
quantities and qualities of the contamination contributed or remaining after
remediation and the time periods involved. If the party against the Claim is
asserted determines that the other party's potential liability with respect to
such Claim is de minimis, no claim will be asserted against the other party with
respect to such Claim. If the parties are jointly responsible for the Claim, the
parties will jointly manage and respond to such Claim (unless otherwise agreed)
and will agree upon a mutually acceptable resolution of such Claim, including
any cleanup, remediation and/or other actions required in response to such
Claim. The parties will use best efforts, good faith and sound and accepted
engineering judgment in making the foregoing determinations. Where GM is solely
responsible for a Claim or where the parties are jointly responsible for
resolution of a Claim, any remediation, cleanup and/or other actions proposed by
the parties to resolve such Claim must be consistent with the factors set forth
in Section 6.1.2.B.
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6.12.4. GM's Additional Indemnities.
A. GM agrees to indemnify, defend and hold AAM harmless from and against
any Claims, including, without limitation, reasonable attorney's fees, (but in
no event will GM's agreement to indemnify AAM include consequential, special or
incidental damages such as, by way of example and not limitation, loss of
profits or loss of business opportunity, or any attorney's or consultant's fees
or other expenses as to any matter as to which GM has accepted its defense and
indemnity obligations) to which AAM may be subjected as a result of any off-site
treatment, off-site storage, off-site transportation, or off-site disposal of
hazardous wastes, hazardous substances, or toxic substances, as those terms are
defined under Environmental Laws, as existing and in effect as of the date of
Closing, to or at a facility intended by GM to be used for such purposes and
such wastes or substances were generated by GM at the Real Property or in
connection with the operation of the Business on or prior to the date of Closing
or after the date of Closing in connection with the implementation by GM of any
Remedial Plan. This indemnity will remain in effect in perpetuity. With respect
to any written communication from a governmental agency relating to any off-site
treatment, off-site storage, off-site transportation or off-site disposal of
hazardous wastes, hazardous substances or toxic substances by GM relating to
operation of the Business prior to the date of Closing, AAM will promptly
forward any such communication to GM.
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B. GM agrees that, for a period of one (1) year after the date of Closing,
GM will indemnify, defend and hold AAM harmless from and against any Claims,
including, without limitation, reasonable attorney's fees, (but in no event will
GM's agreement to indemnify AAM include consequential, special or incidental
damages such as, by way of example and not limitation, loss of profits or loss
of business opportunity, or any attorney's or consultant's fees or other
expenses as to any matter as to which GM has accepted its defense and indemnity
obligations) relating to alleged violations of Environmental Laws, as existing
and in effect as of the date of Closing, to the extent such Claims are based
solely upon compliance monitoring reports, data, or other such submissions or
disclosures made to a federal, state, or local agency prior to the date of
Closing. AAM agrees to cooperate reasonably with GM in any actions which are
reasonably required to resolve any such Claim. GM will have a right of access to
the Real Property, as defined in Section 1.1.1., consistent with the provisions
of Section 6.3. and will provide AAM with documentation describing the actions
taken to resolve any such Claim.
C. GM agrees that it will indemnify, defend, and hold AAM harmless from and
against any Claim, including without limitation, reasonable attorney's fees,
(but in no event will GM's agreement to indemnify AAM include consequential,
special or incidental damages such as, by way of example and not limitation,
loss of profits or loss of business opportunity, or any attorney's or
consultant's fees or other expenses as to any
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matter as to which GM has accepted its defense and indemnity obligations)
relating to any Non-Compliance Matter set forth on Exhibit 6.2.1.A. (as compiled
in accordance with Section 6.2.1.A.), but only to the extent such Claim seeks
compliance with an Environmental Law, as existing and in effect as of the date
of Closing, and/or recovery of fines, penalties or other statutory sanctions or
impositions for any alleged non-compliance therewith and, with respect to each
such Non-Compliance Matter, such Claim is asserted after the date of Closing and
within one (1) year after the date such Non-Compliance Matter was remedied or
eliminated in the manner set forth in a Compliance Plan or Exhibit 6.1.2.A., as
verified by an independent environmental consultant retained by GM. GM will give
AAM notice of any final report by such consultant setting forth its verification
that such Non-Compliance Matter has been remedied or eliminated in the matter
set forth in a Compliance Plan or Exhibit 6.1.2.A.
D. The procedures set forth in Sections 6.1 2.2.A. through H. will apply to
any Claim for which indemnification is sought under Section 6.12.4.A., B., or C.
If a Claim is asserted which is covered by Section 6.12.4.B. or C. within the
indemnification period provided therein for such Claim, then GM's defense and
indemnity obligations will continue, beyond expiration of the indemnification
period but only with respect to such Claim.
6.12.5. No Third Party Claims Initiation.
A. Except if and to the extent required by Environmental Laws and subject
to Section 6.12.5.B., AAM
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acknowledges, warrants and agrees that it will not initiate any action with any
third party, including any governmental agency, which could reasonably be
expected to lead to a Claim.
B. If AAM believes that a disclosure, communication, or report is required
to be made under any Environmental Law relating to any Pre-Closing Environmental
Condition, Non-Compliance Matter, Remedial Plan or Compliance Plan, it will give
GM prior written notice of the basis for that belief, including a reference to
the specific Environmental Law which AAM believes requires such disclosure,
communication or report, and the nature and content of the proposed disclosure,
communication or report AAM believes is required to be made. In all cases, AAM
will use its best efforts to avoid disclosure of matters related to GM's
activities under this Agreement. AAM will afford GM a reasonable opportunity to
evaluate whether it concurs with AAM's belief. Subject to Section 6.12.5.C., AAM
will not make such disclosure, communication or report unless GM has consented
thereto, which consent will not be unreasonably withheld.
C. Nothing herein will constrain AAM's ability to: (i) comply with any
specific requirements under Environmental Laws which would require disclosure of
information about the environmental condition of the Business, the Real
Property, as defined in Section 1.1.1., or the Assets; (ii) disclose information
necessary to operate the Business in the ordinary course of business; or (iii)
comply with any specific requirements under any other applicable laws,
regulations,
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ordinances, rules, orders, codes or permits which would require disclosure of
such information in connection with the operation of the Business.
D. Until the expiration of the indemnification period under Section
6.12.2.I., AAM will notify GM of any portions of significant submittal(s) or
disclosure(s) to the extent they relate to the environmental condition of the
Business, the Real Property, as defined in Section 1.1.1., or the Assets to any
governmental agency or other third party it intends to make under Section
6.12.5.C. GM will have a reasonable time period in which to conduct its review
of such submittal(s) or disclosure(s). AAM will, if reasonably and timely
requested by GM, incorporate GM's requests to modify such disclosure. AAM will
use its best efforts to avoid unnecessarily disclosing information about the
environmental condition of the Business, the Real Property, as defined under
Section 1.1.1, or the Assets. AAM will have the right, however, to make such
disclosures AAM reasonably deems necessary to fulfill its obligations under
Environmental Laws, other applicable laws, or to operate the Business in the
ordinary course of business as provided in Section 6.12.5.C., taking into
account GM's reasonable requests regarding such disclosures.
6.13. Dispute Resolution. The parties will use good faith, best efforts,
and sound and accepted engineering judgment in making all determinations under
this Article VI. In the event of a dispute or disagreement under this Article
VI., the parties will consult in good faith with each other and will use best
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efforts to resolve the matter. It is the express intent of the parties that any
such disputes or disagreements will be resolved through negotiation between the
parties or, if mutually agreeable in each party's sole discretion, through a
form of alternative dispute resolution; it being understood and agreed, however,
that alternative dispute resolution and litigation hereunder will be viewed as
the last resort.
6.14. Exclusive Remedies. The rights and obligations provided in this
Article VI. will be the exclusive remedies of the parties with respect to
environmental matters and will be in lieu of, and not in addition to, all other
remedies which may exist in law, equity or under any other contract.
6.15. Non-assignability of Indemnities. The parties' respective
indemnification rights in this Article VI. are personal to each of them and may
not be assigned to any successor, assignee, or any other third party without the
prior written consent of the other party; provided, however, that AAM may assign
such indemnities to any lender in the event such lender becomes a successor
through foreclosure (or a deed in lieu thereof) to AAM's interests under this
Agreement if GM consents to such assignment, which consent will not be
unreasonably withheld.
6.16. Miscellaneous.
6.16.1. Exclusivity. Notwithstanding any provisions of this Agreement to
the contrary and except as provided in the ECA, this Article VI. will
exclusively govern with respect to all matters related to Environmental Laws and
the environmental
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conditions of the Assets, Real Property and the Business. All of the
representations, warranties, covenants, agreements and indemnities set forth in
this Agreement, the Indemnity Agreement or any other agreement between the
parties with respect to the transactions contemplated by this Agreement, other
than those specifically set forth in this Article VI. and in the ECA, will be
deemed to exclude all matters relating to the environmental condition of the
Assets and the Real Property or compliance of the Assets, the Real Property and
the Business with Environmental Laws. For purposes of this Section 6.16.1., Real
Property will have the meaning set forth in Section 1.1.1 of this Agreement.
6.16.2. Reporting. All reporting to governmental agencies or other
reporting necessary or desirable in connection with Remedial Plans or Compliance
Plans will be made by GM to the extent permitted by Environmental Laws. AAM will
cooperate reasonably with GM in connection with or to effectuate such reporting.
If Environmental Laws, as existing and in effect on the date of Closing, require
reporting to be made solely with respect to or in connection with operations
conducted by the Business prior to the date of Closing, whether such reporting
is required to be made prior to or after the date of Closing, GM will prepare
and submit such reports. AAM will otherwise be responsible for all reporting
with respect to or in connection with operation of the Business after the date
of Closing. Where Environmental Laws require reports to be submitted which cover
a specific period of time and that period includes some time both before and
after the date of Closing, and Environmental Laws will
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not permit separate reporting for pre and post-closing periods by GM and AAM,
respectively, the parties hereto will cooperate reasonably to prepare and submit
a joint report.
6.16.3. Wastewater and Stormwater Services. AAM and GM agree that they
desire to enter into an agreement under which GM will provide certain industrial
process wastewater, millwater, sanitary wastewater and stormwater conveyance and
discharge services from the Tonawanda Plant to and through GM's nearby
facilities after the date of Closing on mutually agreeable terms and conditions
satisfactory to GM and AAM, but which will include environmental matters within
its scope and related solely to the provision and use of such services (the
"Services Agreement"). AAM and GM each agree that their entry into the Services
Agreement will be a condition precedent to each of their respective obligations
to consummate the transactions set forth in this Agreement.
6.16.4. Changes in Environmental Laws.
A. Any cost, expense or additional activity rendered necessary by any
modification or amendment of any Environmental Law, as existing and in effect as
of the date of Closing, will, except as otherwise provided in this Article VI.,
be the sole responsibility of AAM and AAM will indemnify and defend GM therefrom
in accordance with Section 6.12.3.
B. Notwithstanding anything in this Agreement to the contrary, in the event
any Environmental Law, as existing and in effect as of the date of Closing, is
modified or amended to reduce the extent of remediation or compliance otherwise
required
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before such amendment or modification, then GM will be entitled to avail itself
of any such amendment or modification in performing its obligations under this
Article VI.
6.16.5. Disclosure and Non-Recordation. AAM acknowledges, warrants and
agrees that the materials, records, reports and documents provided by GM to AAM
as of the date of the Closing adequately, lawfully and sufficiently disclose to
AAM all environmental matters relevant to the Business, the Assets and Real
Property, as defined in Section 1.1.1., such as to comply in form and substance
with Section 10c of the Michigan Environmental Response Act ("MERA") (MCLA
299.610c). Without limiting any other provision of this Agreement, AAM hereby
agrees that, to the extent permissible under law, AAM waives any right of AAM to
receive, and waives and releases GM from any obligation to provide, any notice,
disclosure document or other information or statement required by Section 10c of
MERA to be provided by GM to AAM and which is related to or concerns releases of
materials or environmental conditions of, at or about, or environmental
information concerning, the Real Property, as defined in Section 1.1.1., the
Business or the Assets. AAM further waives and releases any claims it may or
could at any time now or after the date of Closing have against GM in connection
with or arising out of any such right or obligation including, but not limited
to, any claim that any notice, disclosure document or other environmental
information or statement provided by GM to AAM was inadequate, insufficient or
incorrect in any way or was not, or was not properly, recorded or presented,
sent or provided to AAM
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as required by Section 10c of MERA. The parties also agree that to the extent
any obligation exists to record any such information or a notice thereof under
Section 10c of MERA, such obligation will be AAM's; provided, however, that AAM
will not record any such information or notice without GM's prior consent to and
approval thereof, which consent and approval will not be unreasonably withheld.
6.17. Definitions. For purposes of this Article VI., the following
definitions will apply:
A. "Environmental Laws" will mean all laws, ordinances, regulations, final
orders and judgments concerning the subject of the introduction, emission,
discharge or release of pollutants or contaminants into the air, soil or surface
or ground water; the transportation, storage, treatment or disposal of waste
materials; or the remediation or investigation of contamination of air, soil, or
surface or ground water by pollutants, contaminants or waste materials
including, but not limited to, CERCLA, RCRA, CWA, SWDA, CAA, TSCA, and EPCRA,
and similar state and local laws, but will not include laws, ordinances, final
orders, final judgments or regulations concerning primarily worker health or
safety, including, but not limited to, OSHA, MCL ss.408.1001 et seq., NY Lab.
Law ss. 1 et seq. (Consol.), or NY Pub. Health Law ss. 1 et seq. (Consol.). The
foregoing terms have the following meanings:
"CAA" means the Clean Air Act, 42 U.S.C. ss.ss. 7401, et seq., as amended.
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"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. ss.ss. 9601, et seq., as amended by, among
other things, the Superfund Amendments and Reauthorization Act of 1986.
"CWA" means the Federal Water Pollution Control Act, 33 U.S.C. ss.ss. 1251,
et seq., as amended.
"SWDA" means the Solid Waste Disposal Act, 42 U.S.C. ss.ss. 6901, et seq.,
as amended.
"EPCRA" means the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. ss.ss. 11001 , et seq., as amended.
"RCRA" means the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
ss.ss. 6901, et seq., as amended.
"TSCA" means the Toxic Substances Control Act, 15 U.S.C. ss.ss. 52601, et
seq., as amended.
B. "Pre-Closing Environmental Condition" will mean the presence on the date
of Closing of any hazardous substance, hazardous waste or toxic substance, as
defined under Environmental Laws, as existing and in effect as of the date of
Closing, in the soil's, surface water or ground water in, on or under the Real
Property in excess of the least stringent remediation standard acceptable under
such Environmental Laws. In no event will the term include any contamination in
or on any building, structure, improvement, fixture, appurtenance or equipment.
C. "Force Majeure" will mean an occurrence or nonoccurrence arising from
causes beyond the reasonable control
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of a party and which hinders or delays performance or compliance and includes,
but is not limited to, failure of a governmental agency to review or to approve
or disapprove a permit, license or plan.
D. "Real Property" will mean for purposes of this Article VI. unless
otherwise specifically provided only the land upon which the Business has been
conducted and which is to be transferred by GM to AAM under this Agreement and
will not include any buildings, structures, improvements, fixtures,
appurtenances, or equipment located thereon.
E. "Non-Compliance Matter" will mean a violation of a specifically
applicable Environmental Law, as existing and in effect as of the date of
Closing, relating to the operation of the Business as of the date of Closing and
in no case will it include the release or presence of any hazardous substance,
hazardous waste or toxic substance, as defined under Environmental Laws,
pollutant or contaminant into or in the soils, surface water, ground water or
any other environmental medium in, on, or under the Real Property or in or on
any building, structure, improvement, fixture, appurtenance, or equipment
located thereon.
VII. REAL PROPERTY MATTERS.
7.1. Conveyance. Conveyance by GM to AAM of the Real Property shall be by
GM's covenant deeds (for the Detroit and Three Rivers properties) and by bargain
and sale deeds with lien covenants (for the Buffalo and Tonawanda properties) in
recordable form mutually satisfactory to the Parties, conveying
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to AAM or its nominee the Real Property, together with all rights, privileges,
easements and appurtenances thereto, subject only to Permitted Encumbrances, as
set forth on Exhibit 4.1.4., and those adjustments referred to in Section 1.1.1
mutually agreed by the Parties to be Permitted Encumbrances. Included among the
Contracts listed in Exhibit 1.1.2.C are certain recorded and unrecorded
agreements, easements, restrictions and other encumbrances relating to the Real
Property. AAM acknowledges receipt of such listed documents and agrees that the
same are Permitted Encumbrances.
7.2. Title.
A. For the Real Property at each of the Detroit, Three Rivers, Buffalo and
Tonawanda sites, GM shall, as assurance that, upon Closing, marketable fee
simple title shall have been conveyed to AAM, provide to AAM as a condition upon
Closing an Owner's Fee Policy of Title Insurance, on Form B-1970, with respect
to the Real Property located at Detroit and Three Rivers (the "Michigan Title
Policies"), and on Form 1990, with respect to the Real Property located at
Buffalo and Tonawanda (the "New York Title Policies"), (i) in the respective
amounts shown in Exhibit 7.2.A attached hereto and made a part hereof (which
amounts, however, shall not be binding for purposes of allocating the Purchase
Price described in Section 2.3), (ii) issued by Commonwealth Land Title
Insurance Company, as underwriter, with Land Title Agency, Inc. of Cleveland,
Ohio as agent (the "Title Company"), (iii) showing in Schedule A thereof the
approved survey description of such Real Property and each easement
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appurtenant thereto, (iv) with the standard printed exceptions deleted, and
otherwise showing in Schedule B thereof only the Permitted Exceptions identified
in Exhibit 4.1.4 attached hereto and made a part hereof (subject to the
affirmative insurance and cure requirements of Section 7.2.B hereof) and (v)
containing such endorsements as may reasonably be requested by AAM, at AAM's
sole cost and expense. Except for the cost of any endorsements referred to in
Section 7.2.A(v), GM shall pay the entire cost of providing the Michigan Title
Policies in the form described above and GM and AAM shall each pay one-half of
the cost of providing the New York Title Policies in the form described above.
B. If a defect in title (i.e., an exception not shown as a Permitted
Encumbrance herein and not dischargeable by payments to be made at Closing)
exists including any Survey Defects (as hereinafter defined), GM shall use
reasonable efforts for and during a period of fifteen (15) days after obtaining
notice of such defect(s) to affect a cure thereof or to obtain, with respect
thereto, affirmative title insurance, reasonably satisfactory in form and
substance to AAM. If GM fails to cure such title defect(s) or to obtain such
insurance, within such period, AAM may, at its sole option (i) waive the
defect(s) and accept title subject thereto, or (ii) extend the date of the
Closing for a period not to exceed thirty (30) days to provide GM with
additional time within which to affect such cure or obtain such insurance, or
(iii) terminate this Agreement with respect to such Real Property or completely,
in which event neither Party shall thereafter have any liability to the other in
total or as
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to such property, as the case may be, and all funds previously paid or deposited
by AAM relating to such Real Property, including all accrued interest, shall be
returned to AAM. GM's obligation to use its reasonable efforts hereunder shall
not require it to expend in excess of One Hundred Thousand Dollars ($100,000) in
the aggregate to affect a cure or to obtain such affirmative insurance.
7.3. Land Survey.
A. Except for the survey of the Tonawanda, New York, property (which will
be delivered by GM to AAM prior to the Closing), GM has delivered to AAM a
survey of each parcel of Real Property (each a "Survey") made on the ground by a
surveyor registered in the state such parcel of Real Property is located, in
accordance with the 1992 minimum standard detail requirements for ALTA/ACSM
Surveys, Urban, Suburban, Rural or Mountain and Marshland, as the case may be,
including the following optional items from Table A: 1, 2, 3, 9, 10, 11 and 12,
and dated as of a date after December 1, 1993, showing the Real Property, all
known easements and rights granted by license thereon which can be depicted on
the Survey, all improvements (including fences and driveways), and access to and
from a dedicated and accepted public right-of-way. Each such survey shall (i) be
certified to AAM and its assigns, its mortgage lender, if any, in form
reasonably satisfactory to AAM and to the Title Company, and (ii) comply with
any requirements reasonably imposed by the Title Company as a condition to the
removal of any exceptions from Schedule B to the respective Title Policies.
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B. In the event a Survey shows (i) lack of access to and from a dedicated
and accepted public right-of-way, or (ii) a matter which, in the judgment of AAM
reasonably exercised, materially interferes with the use of the Real Property
for the Business (collectively "Survey Defects"), GM shall, at its expense,
either (i) remove or correct such Survey Defects, (ii) cause such Survey Defects
to be insured over by the Title Company, or (iii) otherwise reasonably address
such Survey Defects within the period provided for the cure of Title Defects and
otherwise subject to the provisions of Section 7.2.B. GM's obligation under this
Section 7.3.B. shall not require it to expend in excess of One Hundred Thousand
Dollars ($100,000) in aggregate to cure any Survey Defects.
7.4. Special Provisions Relating to Tonawanda Real Property.
The Real Property located in Tonawanda, New York, which constitutes a
portion of the Assets, is integrated with other GM facilities not included
within the Assets. Exhibit 7.4 sets forth the actions required to be taken by GM
and AAM in order to separate the Real Property at Tonawanda included within the
Assets from the balance of the GM facilities currently integrated with such Real
Property, all of which must be completed prior to Closing.
7.5. Real Estate Prorations.
All real estate and taxes shall be prorated and allocated in accordance
with Section 11.14.D. and all utility charges shall be prorated in accordance
with Section 11.14.E.
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7.6. Special Provisions Relating to New York State Real Property Gains and
New York State and Erie County Transfer Taxes.
A. GM and AAM shall cause all necessary documents to be submitted to the
New York State Department of Taxation and Finance for a determination of the
amount of tax, if any, which will be imposed under the New York Tax on Gains
Derived from Certain Real Property Transfers (NY Tax Law Article 31-B) due as a
result of this transaction. GM shall cause Form TP-580 (Transferor
Questionnaire) and AAM shall cause Form TP-581 (Transferee Questionnaire) to be
executed. Further, at Closing, GM shall deliver Form TP-584 (Real Estate
Transfer Tax Return).
B. GM shall be responsible for the payment of any Real Property Transfer
Gains Tax, New York Real Estate Transfer Tax (NY Tax Law Article 31) and the
Erie County Transportation Assistance Tax (Erie County Local Law No. 4-1990) due
as a result of the transactions contemplated by this Agreement, and shall
indemnify and save AAM harmless from and against any cost, liability and expense
in connection therewith.
C. The Parties agree that the Questionnaires and Real Estate Transfer Tax
Return shall list the Consideration to be paid for the acquisition by AAM of the
Interests in Real Property as a result of the transactions contemplated by this
Agreement to be the amounts set forth on the Valuation Agreement attached as
Exhibit 7.6.C. The Parties further agree that these amounts represent the fair
market values of the Real Property interests in New York State involved with
this transaction and
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the amount of the Purchase Price apportioned to those Interests. The capitalized
terms in this Section 7.6.C. shall have the meanings set forth in NY Tax Law
Articles 31 and 31-B and Erie County Local Law No. 4-1990.
VIII. CONDITIONS TO CLOSING.
8.1. Conditions to Obligations of AAM. The obligation of AAM to consummate
the transactions contemplated by this Agreement shall be subject to the
fulfillment at or prior to the date of the Closing of the following conditions
(any one or more of which may be waived in whole or in part by AAM):
8.1.1. Legal Opinion. AAM shall have received from counsel to GM an opinion
dated the date of Closing and in form and substance satisfactory to AAM
substantially to the effect of Sections 4.1.1, 4.1.2 (without being subject to
the approval of the GM Board of Directors) and 4.1.3.
8.1.2. Accuracy of Representations and Warranties, Performance of
Covenants. The representations and warranties of GM set forth in this Agreement
or in any certificate or document called for in this Agreement shall be true and
correct in all material respects as made, both on the day of signing this
Agreement and at and as of the date of the Closing (as though such
representations and warranties were made anew), except with respect to the
effect of transactions permitted by the provisions of this Agreement, and all
agreements and transactions contemplated hereby and to be performed by GM on or
before the Closing shall have been duly performed.
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8.1.3. Conveyancing Documents. There shall have been delivered to AAM by GM
such bills of sale, assignments, and other good and sufficient instruments of
transfer (the "Transfer Documents"), including covenant deeds, for the Detroit
and Three Rivers, Michigan properties and bargain and sale deeds with lien
covenants for the Buffalo and Tonawanda, New York properties, in the forms
attached hereto as Exhibit 7.1, conveying and transferring to AAM title to the
Assets as provided in this Agreement and as AAM may reasonably request.
8.1.4. Execution of Ancillary Agreements. Each of the following agreements
(the "Ancillary Agreements") shall have been executed by GM or an Affiliate of
GM, as the case may be, and delivered to AAM:
A. The Strategic Partnership letter in substantially the form of Exhibit
1.1. hereto.
B. The Registration Rights Agreement in substantially the form of Exhibit
8.1.4.B. hereto.
C. The Indemnification Agreement substantially in the form of Exhibit
8.1.4.C. hereto.
D. The Component Supply Agreement substantially in the form of Exhibit
8.1.4.D. hereto.
E. The Option to Purchase Equipment Agreement substantially in the form of
Exhibit 8.1.4.E. hereto.
F. The Access and Security Agreement substantially in the form of Exhibit
8.1.4.F. hereto.
G. The Transition Services Agreement substantially in the form of Exhibit
8.1.4.G. hereto.
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H. The AAM/GMCL Purchase Order Agreement and the GMCL Supply Agreement in
the forms of Exhibits 8.1.4.H.(i) and 8.1.4.H.(ii) hereto, respectively.
I. The Agreement for Information Technology Services in a form mutually
satisfactory to the parties thereto.
J. An agreement relating to the supply of steam to the Detroit, Michigan
facility in a form mutually satisfactory to the Parties and incorporating the
substance of the terms set forth on Exhibit 8.1.4.J hereto.
K. A Tonawanda Separation Services Agreement in a form mutually
satisfactory to the Parties and incorporating the substance of the terms set
forth on Exhibit 7.4.
L. A Service Agreement As To Waste Water, Mill Water, and Storm Water in
accordance with Section 6.16.3.
M. All of the agreements necessary or appropriate to consummate the matters
set forth on Exhibit 7.4.
8.1.5. Officer's Certificate. There shall have been delivered to AAM
appropriate certificates dated the date of Closing and signed by an authorized
officer of GM which evidence the authorization of the execution and delivery of
this Agreement and the Ancillary Agreements, and fulfillment of the conditions
specified in Section 8.1.2.
8.1.6. No Suits or Pending or Threatened Labor Disturbance. No suit, action
or other proceeding or investigation shall be threatened or pending before any
court or governmental agency in which it is sought to restrain or prohibit or to
obtain material damages or other material relief in
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connection with this Agreement or the consummation of the transactions
contemplated hereby, or which is likely to affect materially the value or
utility of the Assets or the Business. No strike, walkout or work stoppage shall
be pending at any of the facilities where the Business is conducted and GM shall
not have received a 5 day letter from the local or national union that such
event may occur.
8.1.7. HSR Act. All filings, if any, required under the HSR Act to be made
in connection with the transactions contemplated by this Agreement shall have
been made, the waiting period under such Act shall have expired, and no
conditions to the transactions contemplated by this Agreement shall have been
imposed by any federal governmental agency.
8.1.8. Certified Corporate Resolutions. AAM shall have received from GM,
resolutions of GM's Board of Directors, certified by GM's Secretary, authorizing
the sale of the Business and the execution of this Agreement and all Ancillary
Agreements to which GM is a party.
8.1.9. Saginaw Towers Building Sublease. A mutually acceptable sublease
(the "Saginaw Sublease") for the space presently occupied or reserved for the
Business in the so called Towers Building in Saginaw, Michigan shall have been
executed by GM and delivered by the Parties.
8.1.10. GM Financing Consummated. AAM and GM shall have consummated the
financing pursuant to which GM will loan to AAM the amounts referred to in
Article II.
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8.1.11. Compliance Schedule. The Parties shall have made the determinations
set forth in Section 6.2.1. which are necessary to be completed prior to the
date of Closing.
8.2. Conditions to Obligations of GM. The obligation of GM to consummate
the transactions contemplated by this Agreement shall be subject to the
fulfillment at or prior to the Closing of the following conditions (any one or
more of which may be waived in whole or in part by GM):
8.2.1. Legal Opinion. GM shall have received from counsel to AAM, an
opinion dated the date of Closing and in form and substance satisfactory to GM
substantially to the effect of Sections 4.2.1., 4.2.2. and 4.2.3.
8.2.2. Accuracy of Representations and Warranties; Performance of
Covenants. The representations and warranties of AAM contained in this Agreement
or in any certificate or document called for in this Agreement shall be true and
correct in all material respects as made, both on the day of signing this
Agreement and at and as of the Closing (as though such representations were made
anew), except with respect to the effect of transactions permitted by the
provisions of this Agreement, and all agreements and transactions contemplated
hereby and to be performed by AAM on or before the date of the Closing shall
have been duly performed.
8.2.3. Officer's Certificate. There shall have been delivered to GM
appropriate certificates dated the date of the Closing and signed by authorized
officers of AAM which evidence the authorization of the execution and delivery
of this Agreement
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and the Ancillary Agreements, and fulfillment of the conditions specified in
Section 8.2.2.
8.2.4. Execution of Ancillary Agreements. Each of the Ancillary Agreements
shall have been executed by AAM and delivered to GM or an Affiliate of GM, as
the case may be.
8.2.5. Amended and Restated Certificate of Incorporation. AAM shall have
filed with the Delaware Secretary of State its Amended and Restated Certificate
of Incorporation in substantially the form of Exhibit 8.2.5 hereto.
8.2.6. Bylaws. AAM shall have amended and restated its Bylaws in
substantially the form of Exhibit 8.2.6. hereto.
8.2.7. Certified Resolutions. GM shall have received a copy of the
resolution of the Board of Directors of AAM approving this Agreement and the
consummation of the transactions contemplated hereby, including the
authorization, issuance and delivery of the Preferred Stock.
8.2.8. Dauch Employment Agreement. AAM shall have entered into an agreement
with Richard Dauch pursuant to which Mr. Dauch will become an employee of AAM
for a term of not less than 10 years.
8.2.9. Saginaw Towers Building Sublease. A mutually acceptable sublease
(the "Saginaw Sublease") for the space presently occupied or reserved for the
Business in the so called Towers Building in Saginaw, Michigan shall have been
executed by AAM and delivered by the Parties.
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8.2.10. Compliance Schedule. The Parties shall have made the determinations
set forth in Section 6.2.1. which are necessary to be completed prior to the
date of Closing.
8.2.11. No Suits. No suit, action or other proceeding or investigation
shall be threatened or pending before any court or governmental agency in which
it is sought to restrain or prohibit or to obtain material damages or other
material relief in connection with this Agreement or the consummation of the
transactions contemplated hereby, or which is likely to affect materially the
value or utility of the Assets or the Business.
8.2.12. HSR Act. All filings, if any, required under the HSR Act to be made
in connection with the transactions contemplated by this Agreement shall have
been made, the waiting period under such Act shall have expired, and no
conditions to the transactions contemplated by this Agreement shall have been
imposed by any federal governmental agency.
IX. CLOSING; TERMINATION; MATERIALITY.
9.1. The Closing. The closing (the "Closing") of the transactions
contemplated hereby shall take place at Honigman, Miller, Schwartz and Cohn,
2290 First National Building, Detroit, Michigan at 10:00 a.m. on February 28,
1994, or on such other date or at such other time as the Parties may agree; the
Closing to be effective as of 12:01 a.m. in Detroit, Michigan on March 1, 1994.
9.2. Termination. This Agreement may be terminated unilaterally by either
Party, without any further cause, if the Closing does not occur on or prior to
March 15, 1994 (or such
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later date as AAM and GM shall agree), for any reason other than such Party's
own failure to meet conditions or obligations imposed on it herein, or, at any
time prior to the Closing:
(i) By mutual agreement of GM and AAM;
(ii) By AAM if there has been a material violation or breach by GM of any
of the agreements, representations or warranties contained in this
Agreement which has not been waived in writing, or if there has been a
material failure of satisfaction of a condition to the obligations of
AAM which has not been waived in writing; and
(iii) By GM, if there has been a material violation or breach by AAM of any
of the agreements, representations or warranties contained in this
Agreement which has not been waived in writing, or if there has been a
material failure of satisfaction of a condition to the obligations of
GM hereunder which has not been waived in writing.
In the event of termination of this Agreement by either GM or AAM as
provided above, this Agreement shall forthwith become void. Notwithstanding the
foregoing, termination of this Agreement pursuant to this Section 9.2 shall not
in any way limit or restrict the rights and remedies of any Party against any
other Party hereto which has violated or breached any of the
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representations, warranties, agreements or other provisions of this Agreement
prior to such termination.
9.3. GM's Obligations. At the Closing, GM shall deliver to AAM the
following, in proper form for recording where appropriate:
9.3.1. Transfer Documents. All appropriate Transfer Documents necessary to
transfer to AAM such title to the Assets as is warranted by GM herein.
9.3.2. Receipts. Appropriate receipts.
9.3.3. Executed Ancillary Agreements. The Ancillary Agreements as required
by Section 8.1.4.
9.3.4. Other. All other documents and papers required by Article VIII
hereof as conditions to Closing.
9.4. AAM's Obligations. At the Closing, AAM shall deliver to GM, at the
expense of AAM:
9.4.1. Executed Ancillary Agreements. The executed Ancillary Agreements as
required by Section 8.2.4.
9.4.2. Closing Payment. Payment of the Purchase Price in accordance with
Section 2.2.A.
9.4.3. Preferred Stock. The Preferred Stock required by Section 2.2.
9.4.4. Certificate of Incorporation and Bylaws. Certified copy of AAM's
Amended and Restated Certificate of Incorporation and Bylaws required by
Sections 8.2.5 and 8.2.6.
9.4.5. Other. All other documents and papers required by Article VIII
hereof as conditions to Closing.
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9.5. Material Violation. For purposes of Articles VIII and IX, in assessing
the materiality of any violation, error, breach, or failure of satisfaction of a
condition with respect to determining whether conditions to Closing have been
satisfied under this Agreement, the Parties agree that, absent an intent to
defraud, an individual instance involving less than $750,000 and aggregated
individual instances totaling less than $5,000,000 are not material.
GM and AAM hereby further acknowledge and agree that the Ancillary
Agreements shall not have any force or effect until the Closing. If the Closing
shall not occur for any reason whatsoever, the Ancillary Agreements shall be
null and void and of no force or effect.
X. CERTAIN ADDITIONAL COVENANTS: POST CLOSING COOPERATION.
10.1. Rights of Inspection. GM has and shall until the Closing afford to
officers, attorneys, accountants or other authorized representatives of AAM
reasonable access to all of the Assets and books and records of GM relating
exclusively to the Assets and the Business, including those items listed in
Exhibit 1.1.2.A, in order to afford AAM full opportunity to make such review,
examination and investigation of the operations as AAM shall desire to make, and
AAM may, subject to reasonable restrictions of GM be permitted to take extracts
from, or to make copies of such books and records as may be reasonably necessary
at AAM's cost; and GM shall furnish or cause to be furnished to AAM such
financial and operating data and other information relating to the Assets and
the Business as AAM may reasonably
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request. AAM shall keep confidential all proprietary information to which it is
given access pursuant to this Section 10.1, as provided in Section 10.2.
10.2. Confidentiality of Information. The provisions of this Agreement and
all proprietary information disclosed heretofore or hereafter by GM to AAM in
connection with this Agreement, including all such information in the possession
of AAM relating to GM products other than those manufactured or assembled by the
Business, shall be kept confidential by AAM, and shall not be used by AAM other
than in connection with this Agreement and operating the Business after the date
of the Closing except (i) to the extent it was known when received or as it is
or as it becomes lawfully obtainable from other sources, or (ii) to the extent
such duty as to confidentiality and non-use is waived, or (iii) as may be
required by court order or any governmental agency. Such obligation as to
confidentiality and non-use shall cease one year following the date of the
Closing. In the event the Parties fail to close, AAM shall return to GM all
documents (and reproductions thereof), received from GM (and, in the case of
reproductions, all such reproductions made by AAM).
10.3. Operation of the Business. Except as otherwise provided herein, until
the date of the Closing GM will carry on the Business in substantially the same
manner as heretofore; cause the Assets to be maintained and kept in normal
condition, repair and working order as on the date of this Agreement (normal
wear and tear excepted); perform all of its obligations under all
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Contracts and not amend, alter or modify any provision of any such Contract;
keep in full force and effect insurance on the Business comparable in amount and
scope to coverage maintained by it on the date of this Agreement; use its best
efforts to maintain and preserve its Business organization intact; maintain the
goodwill of the Business; promptly advise AAM of any change in the business
condition (financial or other), Assets or prospects of the Business; not take
any action that would render any of GM's representations and warranties
hereunder inaccurate as of the date hereof or the date of the Closing; and
without the consent of AAM, not enter into any contract, commitment or
transaction relating to the Assets or the Business outside the ordinary course
of business.
10.4. Further Assurances. At the Closing and from time to time after the
Closing, for no further consideration, the Parties shall perform all such other
action and shall execute, acknowledge and deliver all such assignments,
transfers, consents and other documents as the other Party or its counsel may
reasonably request to carry out the intent of this Agreement. In furtherance of
the foregoing, GM hereby agrees to provide written instructions at Closing to
its Argonaut Division to deliver to AAM all deeds, easements, books, records,
plans, specifications, blue prints, reports and other writings and drawings in
its control or possession which relate exclusively to the Real Property but
excluding all GM internal environmental audit reports other than those referred
to in Article VI hereof, any environmental bulletins prepared by GM and provided
to the
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Business prior to the Closing, EMIS software and documents and Purdue University
course materials. In addition, from time to time after the Closing, GM shall
afford to officers, attorneys, accountants or other authorized representatives
of AAM reasonable access to all of the books and records of GM which were not
sold, transferred or conveyed to AAM at the Closing and which relate exclusively
to the Business and AAM may, subject to reasonable restrictions of GM and at
AAM's sole cost and expense be permitted to take extracts from, or to make
copies of such books and records as may be reasonably necessary for AAM to
conduct the Business; provided, however, that this sentence shall not apply to
books and records which are subject to any attorney-client, work product, or
other applicable privilege to which GM is the beneficiary.
10.5. Technical and Other Assistance.
A. Pursuant to the Transition Services Agreement, GM and AAM shall render
transitional assistance to each other in order to smoothly transition the
ownership of the Business from GM to AAM.
B. Representatives of GM and AAM shall meet periodically to determine in
good faith the appropriate method of and cost for any ongoing technical
assistance necessary for AAM to conduct the Business on an ongoing basis.
C. AAM shall from time to time at the reasonable request of GM, cooperate
with GM in providing GM, to the extent possible through AAM employees formerly
employed by GM, with technical assistance and information in respect to any
claims
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brought against GM involving products manufactured or assembled by the Business,
including consultation and/or the appearance(s) of such persons on a reasonable
basis as expert or fact witnesses in trials or administrative proceedings. GM
shall reimburse AAM for its cost in providing such services.
10.6. Post Closing Cooperation.
A. After the date of the Closing, AAM shall from time to time, at GM's
request and without further cost or expense to GM, prepare, execute and deliver
to GM such other instruments of assumption and take such other action as GM may
find reasonably necessary.
B. After the date of the Closing, GM shall from time to time, at AAM's
request and without further cost or expense to AAM, prepare, execute and deliver
to AAM such documents and take such other action to effect the transfer of the
Assets and the Business as contemplated by this Agreement as AAM may find
reasonably necessary.
C. AAM shall preserve and keep all books and records delivered to AAM by GM
pursuant to the provisions of this Agreement for a period of seven (7) years
from the date of the Closing, or for any longer period specified in writing by
GM as may be required by any government agency, ongoing litigation, law,
regulation, audit or appeal of Taxes or Tax examination at AAM's sole cost and
expense. During such period, AAM shall make such books and records available to
GM as may be reasonably required by GM in connection with any legal proceedings
against or governmental investigations of GM or in connection with any
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Tax examination, audit or appeal of Taxes of GM, the Business or the Assets. AAM
shall indemnify GM for any taxes, interest, penalties or other such charges
which are imposed on GM by any taxing authority resulting from AAM's failure to
preserve and keep records pursuant to this Section 10.6.C. GM shall reimburse
AAM for the reasonable out-of-pocket expenses incurred in connection with any
request by GM to make available records pursuant to the foregoing sentence. In
the event AAM wishes to destroy or dispose of such books and records, it shall
first give ninety (90) days' prior written notice to the Chief Tax Officer of
the GM Tax Staff at 3044 Grand Boulevard, Detroit, Michigan 48202, and GM shall
have the right at its option, upon prior written notice given to AAM within
sixty (60) days of receipt of AAM's notice, to take possession of said records
within one hundred eighty (180) days after the date of AAM's notice to GM
hereunder.
D. For a period of five (5) years commencing at the date of the Closing,
AAM shall maintain all Technical Documentation it acquires from GM in connection
with the purchase of the Assets under Section 1.1 at a location at which they
shall be reasonably accessible to GM upon request. During such five (5) year
period, AAM shall not destroy or give up possession of its final copy of such
documentation without offering GM the opportunity, at GM's expense but without
any payment to AAM, to obtain a copy of such documentation.
E. After the Closing and for so long as the Component Supply Agreement is
in effect, AAM shall provide GM
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with AAM's monthly financial statements certified by its chief financial officer
and AAM's annual audited financial statement. In furtherance of and in the
spirit of maintaining a Strategic Partnership, should a trend develop that
indicates AAM's financial performance is deteriorating, including but not
limited to the breach by AAM of any or all covenants contained in any agreement
for the advance of funds to AAM by any lender, GM and AAM shall work together in
good faith to arrive at an action plan acceptable to both Parties for AAM to
implement to reverse AAM's deteriorating financial performance.
F. GM shall take such action as may be reasonably necessary to segregate
payments made or collections received on behalf of AAM after the date of the
Closing, and AAM shall take such action as may be reasonably necessary to
segregate payments made or collections received on behalf of GM after the date
of the Closing, in order to ensure that the cost of the related liability or the
benefits of the related assets accrue to the appropriate Party in accordance
with the terms of this Agreement. To the extent that any such collections are
received after the date of the Closing in the form of checks or other negotiable
instruments payable to the other Party to this Agreement, GM or AAM, as
appropriate, shall promptly take all necessary action to endorse such checks or
instruments to permit the appropriate Party to collect the proceeds of such
checks and instruments.
G. If any Party to this Agreement is requested by the other Party, or on
behalf of the other Party undertakes, to make payments or advance funds on
behalf of such other Party to
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156
facilitate the orderly consummation of the transition contemplated by this
Section 10.6.G., the Party on whose behalf such payments are made shall promptly
reimburse the Party making such payments following receipt of appropriate
documentation with respect to the payments.
10.7. Three Rivers Bond Issues. GM covenants and agrees that it shall pay
in full all debt service payments, including principal, interest, penalties, and
premiums, if any, in connection with or related to currently outstanding water
facilities bond, waste water bond, and sewer bond issues with respect to the
Three Rivers, Michigan facility. GM agrees that it shall indemnify AAM against
any loss, liability, damage, or expense as a result of the foregoing without the
same being subject to any minimum, deductible, threshold, or similar amount.
10.8. Patent infringement Claims and Suits. GM covenants and agrees that it
shall defend diligently and in good faith the validity of all patents and
related rights that are the subject of the lawsuits described on Exhibit 4.1.7,
and it shall defend diligently and in good faith against any claims, lawsuits,
or other actions which may arise out of the claims of infringement described on
Exhibit 4.1.7. GM agrees that it shall indemnify AAM against any loss,
liability, damage, or expense as a result of the foregoing without the same
being subject to any minimum, deductible, threshold, or similar amount.
10.9. Propeller Shaft Assets. GM, at its sole expense, shall complete
delivery to and installation at GM's facility at Three Rivers, Michigan, all the
equipment and other
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personal property needed to manufacture propeller shafts in accordance with the
transition plan. GM agrees that it shall indemnify AAM against any loss,
liability, damage, or expense as a result of the foregoing without the same
being subject to any minimum, deductible, threshold, or similar amount.
XI. MISCELLANEOUS.
11.1. Waiver Of Compliance With Bulk Sales Laws and Hold Harmless
Agreement. AAM hereby waives compliance by GM with the provisions of the Bulk
Sales Law of any state or foreign jurisdiction, and GM agrees to indemnify AAM
against and hold AAM harmless from any and all claims, demands, liabilities, and
obligations arising out of the failure or alleged failure of GM to comply with
any such law in respect of the sale of the Assets to AAM.
11.2. Notices. Except as otherwise provided in Section 10.6.C. relating to
certain notices that are to be sent to the Chief Tax Officer of the GM Tax
Staff, all notices, requests, consents or other communications permitted or
required under this Agreement shall be in writing and shall be deemed to have
been given when personally delivered or when sent via fax and first class mail,
to the following:
If to GM: General Motors Corporation
767 Fifth Avenue
New York, New York 10153
Attn: Treasurer
Fax No: (212) 418-3695
With a copy to: North American Truck Platform
Finance Director
31 E. Judson Street
Pontiac, Michigan 48342
Fax No: (810) 456-5979
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158
and
Office of General Counsel
New Center One Building
3031 West Grand Boulevard
P. O. Box 33122
Detroit, Michigan 48232
If to AAM: American Axle & Manufacturing, Inc.
1840 Holbrook Avenue
Detroit, Michigan 48212
Attn: Richard E. Dauch, President
Fax No: (313) 974-2070
With a copy to: Baker & Hostetler
3200 National City Center
1900 East Ninth Sweet
Cleveland, Ohio 44114
Attn: R. Steven Kestner
Fax No: (216) 696-0740
provided, however, if either Party shall have designated a different addressee
by notice, then to the last addressee so designated.
11.3. Assignment. This Agreement shall be binding and inure to the benefit
of the successors and assigns of each of the Parties hereto, but no rights,
obligations, duties or liabilities of either Party may be assigned without the
prior written consent of the other, which shall not be unreasonably withheld.
11.4. Entire Agreement. This Agreement represents the entire agreement and
understandings between the Parties with respect to the transactions contemplated
herein. This Agreement supersedes all prior agreements, understandings,
arrangements, covenants, representations or warranties, written or oral, by any
officer, employee or representative of either Party dealing with the subject
matter hereof.
11.5. Waiver. Waiver by GM or AAM of any breach or of a failure to comply
with any provision of this Agreement shall
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159
not constitute, or be construed as, a continuing waiver of such provision, or a
waiver of any other breach of, or failure to comply with, any provision of this
Agreement.
11.6. Amendment. This Agreement may only be terminated or amended in
writing by duly authorized representatives or officers of the Parties.
11.7. Expenses. Each Party shall be responsible for its own expenses
incurred in connection with the preparation of this Agreement, the performance
of its obligations hereunder and with the consummation of the transactions
contemplated hereby, except as otherwise expressly provided in this Agreement.
11.8. Third Parties. Nothing contained in this Agreement is intended to or
shall be construed to confer upon or give to any person, firm, corporation,
association, labor union, trust, or governmental entity other than the Parties
hereto and their respective permitted successors and assigns, any claims,
rights, or remedies under or by reason of this Agreement.
11.9. Headings. The headings of the Articles and Sections of this Agreement
are inserted for convenience only and shall not be deemed to constitute a part
hereof.
11.10. Counterparts. This Agreement has be executed by the Patties in two
counterparts. Each fully executed counterpart shall be deemed an original.
11.11. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Michigan.
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160
11.12. Public Announcements. GM and AAM will consult with each other before
issuing any press releases or otherwise making any public statements with
respect to this Agreement or the transactions contemplated hereby, and shall not
issue any press release or make any public statement without mutual consent,
except as may be required by law and then only with such prior consultation.
11.13. Sales or Transfer Taxes. All costs relating to the Closing of the
transactions contemplated hereby, including all sales taxes, documentary and
stamp taxes, use taxes, gross receipt taxes in connection with the transfer of
the Assets, as well as any permit, transfer and filing fees required in order to
obtain governmental approvals and consents relating to the transactions
contemplated by this Agreement and any related agreements, including the fees
associated with AAM's filings under HSR, shall be paid by AAM; except that real
estate transfer taxes and all charges incurred in filing and recording real
property documents shall be paid by GM.
11.14. Tax Matters.
A. GM will be responsible for the preparation and filing of all applicable
Tax Returns for the Business for all periods on or prior to the Closing as well
as with respect to periods for which the consolidated, unitary and combined Tax
Returns of GM will include the operations of the Business. GM will make all
payments required with respect to any such Tax Return.
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161
B. AAM will be responsible for the preparation and filing of all applicable
Tax Returns for the Business for all periods after the Closing (other than for
Taxes with respect to periods for which the consolidated, unitary, and combined
Tax Returns of GM will include the operations of the Business). AAM will make
all payments required with respect to any such Tax Return.
C. GM and AAM will cooperate in connection with (i) the preparation of
filing of any Tax Return, tax election, Tax consent or certification, or any
claim for a Tax refund, (ii) any determination of liability for Taxes, and (iii)
any audit, examination or other proceeding in respect of Taxes related to the
Business or the Assets. Such cooperation includes direct access to engineering
and contracting personnel.
D. All real estate taxes and general assessments and personal property
taxes shall be allocated and prorated between the Parties as of the date of
Closing in accordance with local practice. With respect to the Real Property at
Tonawanda, if such Real Property is not separately assessed for real estate tax
purposes, such real estate taxes shall be further pro rated based upon the
portion of the property covered by the tax bills which is included within the
Assets and that portion which is not included within the Assets as set forth on
Exhibit 7.4.
E. GM shall cause all utility meters to be read as of the date of the
Closing. GM shall pay all utility charges through the date of the Closing and
AAM shall be responsible for all utility charges relating to subsequent periods.
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162
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized signatories at Detroit, Michigan.
GENERAL MOTORS CORPORATION AMERICAN AXLE & MANUFACTURING, INC.
By:/s/ J.H. Mark, Jr. By:/s/ R.E. Dauch
---------------------------- --------------------------------
Print Name:John H. Mark, Jr. Print Name:R.E. Dauch
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163
INDEX OF EXHIBITS
1.1 Strategic partnership letter
1.1.1 List of real estate sold.
1.1.2.A. List of machinery and equipment sold.
1.1.2.B. List of privileges.
1.1.2.C. Listing of all purchase orders, sale agreements,
etc., and agreements entered into in the ordinary
course of business.
1.1 .3. Patents transferred.
1.1.4. Licenses, Permits and Approvals transferred.
1 .2.4. Excluded Assets.
3.1. Contracts, Licenses and Permits Not Assumed
4.1.4. Permitted Encumbrances and Records
4.1.4.C. Title and Condition of Real Property
4.1.6. Pending litigation, investigations, inquiries.
4.1.7. Patent and Technical Documentation Infringement
4.1.8. List of Exceptions to Applicable Laws
4.1.10. Consents
4.1.13 Regulatory Matters
4.1.15. Restrictive Documents or Laws
4.1.17.B. List of Unfair Labor Charges
4.1.19. Certain Employee Benefit Plans
5.1.1. Employees of the Business
6.1.1. Environmental Confidentiality Agreement
6.2.1.A. Environmental Compliance
6.2.2. Environmental Permits
7.2.A. Title Insurance Amounts
7.4. Tonawanda Separation Plan
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164
7.6.C. Valuation Agreement
8.1.4.B. Registration Rights Agreement
8.1.4.C. Indemnification Agreement
8.1.4.D. Component Supply Agreement
8.1.4.E. Option to Purchase Equipment Agreement
8.1.4.F. Access and Security Agreement
8.1.4.G. Transition Services Agreement
8.1.4.H.(i) GMCL Purchase Order Agreement
8.1.4.H.(ii) GMCL Supply Agreement
8.2.5. Restated Certificate of Incorporation of AAM
8.2.6. Bylaws of AAM
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NET LEASE
THIS LEASE is made as of September 30, 1994, by and between FIRST
INDUSTRIAL, L.P., 150 North Wacker, Suite 150, Chicago, Illinois 60606
("Landlord"), and AMERICAN AXLE & MANUFACTURING, INC., a Delaware Corporation,
1040 Holbrook Avenue, Detroit, Michigan 40212-3400 ("Tenant"), who agree as
follows:
SECTION 1
THE PREMISES
1.01 Landlord hereby leases to Tenant the real property located in the City
of Rochester Hills, County of Oakland, and State of Michigan, more particularly
described in Exhibit "A" attached to, and made an integral part of, this Lease
(the "Land"), together with the building and other improvements to be
constructed on the Land under Section 2 (the "Improvements") (the Land and the
Improvements collectively will constitute and be referred to in this Lease as
the "Premises").
SECTION 2
CONSTRUCTION OF IMPROVEMENTS
2.01 Landlord agrees to construct ("Landlord's Work") the Improvements on
the Land, prior to the Commencement Date (defined in Section 3.01, in accordance
with the plans and specifications listed in Exhibit "B" attached to and made an
integral part of this Lease (the "Plans" or "Plans and Specifications").
2.02 The Improvements will be completed on or before the dates described in
Exhibit E. If in good faith Landlord is delayed in construction by any labor
dispute, strike, lockout, fire, unavailability of material, weather or other
casualty, beyond its reasonable control, then the period of delay necessarily
caused by such occurrence will be added to the indicated completion date.
SECTION 3
THE TERM
3.01 Deleted
3.02 The date shown in Section 2.02 represents Landlord's estimate of the
date the Premises will be ready for occupancy. Landlord agrees to use its best
efforts to complete all work, and to tender possession to Tenant, on or before
the date shown in Section 2.02, or the extended date, if any, provided for
thereIN. If Landlord is unable, for any reason beyond Landlord's control, to
tender possession on that date, Tenant may not terminate this Lease, and
Landlord will have no liability for damages.
3.03 Landlord will require its contractor to cooperate with Tenant's
installers of equipment, trade fixtures, furnishings and decorations attached to
the Improvements to the maximum extent possible, but Tenant agrees that delay of
or interference with construction caused by such installers will not postpone
the Commencement Date or the obligation to
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begin paying rent. By occupying the Premises or any portion thereof, Tenant will
be deemed to have accepted the Premises or such portion thereof and acknowledged
that they are in the condition called for in this Lease, subject only to punch
list items.
3.04 Landlord shall permit Tenant to enter into possession of the Premises
in order to install Tenant's equipment, trade fixtures, furnishings or
decorations prior to the Commencement Date, Tenant agrees that such occupancy
will be deemed to be under all the provisions of this Lease, except as to the
rental established herein.
3.05 Upon request by Landlord, Tenant will execute a written instrument
confirming the Commencement Date and the expiration date of the Term.
SECTION 4
THE BASE RENT
4.01 Tenant agrees to pay to Landlord, as a minimum net rental for the
original Term of this Lease, the total amount of Three Million Either Hundred
Seventy-Seven Thousand, Four Hundred Sixty-Seven and 90/100 Dollars
($3,877,467.90), in monthly installments of Twenty-Nine Thousand Three Hundred
Twenty Four and 46/100 ($29,324.46) Dollars for months 1-48; Thirty-Two
Thousand, Nine Hundred Twenty and 85/100 ($32,920.85) Dollars for months 49-96;
and Thirty-Seven Thousand Seventy and 54/100 ($37,070.54) Dollars for months
97-120.
4.02 Each monthly installment of minimum net rental will be paid in
advance, without any setoffs or deductions, on the first day of each and every
month (the "Rent Date") during the Term, at the office of the Landlord (P.O. Box
75460, Chicago, Illinois 60675- 5460) or at such other place as Landlord from
time to time may designate in writing. Landlord acknowledges receipt of
Twenty-Nine Thousand Three Hundred Twenty-Four and 46/100 Dollars ($29,324.46),
representing the first month's rent. In the event the Commencement Date is other
than the first day of a calendar month, the rental for the partial first
calendar month of the Term will be prorated accordingly.
4.03 Except as otherwise provided herein, Landlord and Tenant acknowledge
and agree that this is a net lease, and that it must yield, net, to Landlord
during the original Term, not less than the minimum net rent shown in Section
4.01. All costs, expenses and charges of every nature relating to the Premises
which may be attributable to, or become due during, the Term will be paid by
Tenant, and Tenant will indemnify and hold harmless Landlord from and against
such costs, expenses and charges.
SECTION 5
LATE CHARGES AND INTEREST
5.01 Any rent or other sums, if any, payable by Tenant to Landlord under
this Lease which are not paid within seven days after they are due, and any rent
or other sums received and accepted by Landlord more than seven days after they
are due, will be subject to a late
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charge of two percent (2%) of the amount due. Such late charges will be due and
payable as additional rent on or before the next Rent Day.
5.02 Any rent, late charges or other sums payable by Tenant to Landlord
under this Lease not paid within thirty (30) days after the same are due will
bear interest at a per annum rate equal to two percentage points above the
effective prime interest rate per annum charged by Comerica Bank to its best
commercial customers on the date when the rent, late charges or other sums
became due, but not in excess of the maximum interest rate permitted by law.
Such interest will be due and payable as additional rent on or before the next
Rent Day, and will accrue from the date that such rent, late charges or other
sums are payable under the provisions of this Lease until actually paid by
Tenant.
5.03 Any default in the payment of rent, late charges or other sums will
not be considered cured unless and until the late charges and interest due
hereunder are paid by Tenant to Landlord. If Tenant defaults in paying such late
charges and/or interest, Landlord will have the same remedies as on default in
the payment of rent. The obligation hereunder to pay late charges and interest
will exist in addition to, and not in place of, the other default provisions of
this Lease.
SECTION 6
TAXES, ASSESSMENTS AND UTILITIES
6.01 Tenant agrees to pay as additional rent for the Premises all taxes and
assessments, general and special, all water rates and all other governmental
impositions which may be levied on the Premises or any part thereof, or on any
building or improvements at any time situated thereon, during or pertaining to
the Term and any extensions thereof. All such taxes, assessments, water rate and
other impositions will be paid by Tenant before they become delinquent. The
property taxes and assessments for the first and last years of the Term or any
extensions thereof, will be prorated between Landlord and Tenant so that Tenant
will be responsible for any such tax or assessment attributable to the period
during which Tenant has possession of the Premises.
The so-called "due-date" method of proration will be used, it being
presumed that taxes and assessments are payable in advance. In the event that
during the Term or any extension thereof (i) the real property taxes levied or
assessed against the Premises are reduced or eliminated, whether the cause is a
judicial determination of unconstitutionality, a change in the nature of the
taxes imposed or otherwise, and (ii) there is levied, assessed or otherwise
imposed on the Landlord, in substitution for all or part of the tax thus reduced
or eliminated, a tax (the "Substitute Tax") which imposes a burden upon Landlord
by reason of its ownership of the Premises, then to the extent of such burden
the Substitute Tax will be deemed a real estate tax for purposes of this
paragraph.
6.02 From and after the Commencement Date Tenant agrees to pay all charges
made against the Premises for gas, heat, electricity and all other utilities as
and when due during the continuance of this Lease.
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6.03 DELETED
6.04 Tenant also agrees to pay as additional rent for the Premises all dues
and assessments levied against or in regard to the Premises by Rochester Hills
Executive Park Owners Association until the termination of the Term and of any
extended term of this Lease. Tenant will pay all such dues and assessments
before they become delinquent. Such dues and assessments which relate to
specific periods of time which periods include the Commencement Date and/or the
termination date of this Lease or any extension thereof, will be prorated
between Landlord and Tenant so that Tenant will be responsible for any such dues
and assessments attributable to the period during which Tenant has possession of
the Premises.
6.05 See Addendum
6.06 See Addendum
SECTION 7
USE OF PREMISES
7.01 The Premises during the continuance of this Lease will be used and
occupied for general office, warehousing, assembly and testing and engineering
and any other lawful use consistent with other uses in the Rochester Hills
Executive Park only and for no other purpose without the prior written consent
of Landlord. Tenant agrees that it will not use or permit any person to use the
Premises or any part thereof for any use or purposes in violation of the laws of
the United States, the laws, ordinances or other regulations of the State and
municipality in which the Premises are located, or of any other lawful
authorities, or the Declaration of Covenants and Restrictions, dated December
22, 1992 recorded January 8, 1993 in Liber 13241, pages 270-382, inclusive,
Oakland County Records (a copy of which is attached hereto as Exhibit "C", to
which Declaration this Lease is hereby expressly made subject). During the Term
or any extended term, Tenant will keep the Premises and every part thereof and
all buildings at any time situation thereon in a clean and wholesome condition
and generally will comply with all lawful health and policy regulations. All
signs and advertising displayed in and about the Premises will be such only as
to advertise the business carried on upon the Premises and Landlord will control
the location, character and size thereof. No signs will be displayed, except as
approved in writing by Landlord, and no awning will be installed or used on the
exterior of the building unless approved in writing by Landlord.
ALTERNATE
SECTION 8
INSURANCE
(Tenant TO OBTAIN)
8.01 Tenant, at its sole expense, will obtain and maintain at all times
until termination of this Lease and surrender of the Premises to Landlord, a
primary policy of
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insurance covering the Premises and providing the insurance protection described
in this Section 8.
8.02 The liability coverage under the primary policy will name Landlord and
Landlord's mortgagee as additional insured parties, and will provide
comprehensive general public liability insurance including blanket contractual
coverage against claims for or arising out of bodily injury, death or property
damage, occurring in, on or about the Premises or property in, on or about the
streets, sidewalks or properties adjacent to the Premises. The limits of
coverage will be, initially, if dual limits are provided, not less than Two
Million Dollars ($2,000,000.00) with respect to injury or death of a single
person, not less than Two Million Dollars ($2,000,000.00) with respect to any
one occurrence and not less than One Million Dollars ($1,000,000.00) with
respect to any one occurrence of property damage, or, in the alternative, a
single limit policy in the amount of Two Million Dollars ($2,000,000.00), and
thereafter in such reasonably appropriate increased amounts as may be determined
by Landlord or Landlord's mortgagee; provided, however, that the amount of
coverage will not be increased more frequently than at five (5) year intervals.
The policy will contain cross-liability endorsements.
8.03 The primary policy will insure the Improvements, as defined in Section
1.01 hereof (but not any personal property, fixtures or equipment of Tenant) for
full replacement cost against loss by fire, with standard extended risk
coverage, vandalism, malicious mischief, sprinkler leakage and all other risk
perils. The name insured will be Landlord, Tenant and Landlord's mortgagee,
only. The initial amount of this insurance will be _________________ Dollars
($____________), but such amounts shall be increased upon notice to Tenant on
the recommendation or requirement of Landlord or Landlord's mortgagee, in order
to reflect increases in the replacement cost of the Improvements.
8.04 The primary policy also will provide loss of tents coverage
sufficient, as reasonably determined by Landlord, to cover the net rental and
all other charges which are the obligation of Tenant under this Lease for a
12-month period from the date of any loss or casualty.
8.05 The insurance policy or policies to be provided by Tenant hereunder
shall be issued by an insurance company or companies having an A.M. Best Company
rating of not less than "A". Each policy procured by Tenant under this Section 8
must provide for at least thirty (30) days' written notice to Landlord of any
cancellation. Certificates of Insurance will be delivered by Tenant to Landlord
prior to the effective date thereof, together with receipts evidencing payment
of the premiums therefor. Tenant will deliver certificates of renewal for such
policies to Landlord at least thirty (30) days prior to the expiration dates
thereof. The insurance provided by Tenant under this Section 8 may be in the
form of a blanket insurance policy covering other properties as well as the
Premises; provided, however, that any such policy or policies of blanket
insurance (i) must specify therein or Tenant must furnish Landlord with a
written statement from the insurers under such policy or policies specifying,
the amount of the total insurance allocated to the Premises, which amounts will
not be less than the amounts required by Subsections 8.02, 8.03 and 8.04 hereof,
and (ii) such amounts so specified must be sufficient to prevent Landlord or
Landlord's mortgagee from becoming a
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co-insurer within the terms of the applicable policy or policies, and provided
further, however, that any such policy or policies of blanket insurance must, as
to the Premises, otherwise comply as to endorsements and coverage with the other
provisions of this Section 8.
8.06 Except with respect to the insurance required by Subsection 8.02,
neither Landlord nor Tenant may take out separate insurance concurrent in form
or contributing in the event of loss with that required under this Section 8
unless Landlord and Tenant are included therein as the insured payable as
provided in this Lease. Each party will notify the other immediately of the
placing of any such separate insurance.
8.07 If Tenant fails to provide all or any of the insurance required by
this Section 8, or subsequently fails to maintain such insurance in accordance
with the requirements of this Section, Landlord may but will not be required to)
procure or renew such insurance, and any amounts paid by Landlord for such
insurance will be additional rental due and payable on or before the next Rent
Day, together with late charges and interest as provided in Section 5.
SECTION 9
DAMAGE BY FIRE OR OTHER CASUALTY
9.01 See Addendum.
9.02 See Addendum.
9.03 Tenant will have the option, exercisable by written notice to Landlord
upon restoration of the Premises, to extend the original Term of this Lease (or
the extension of the Term during which the damage or destruction occurred, as
the case may be) for a period equal to the period, if any, during which Tenant
was deprived of the use of all or a significant portion of the Premises by
reason of such damage or destruction. Tenant's option must be exercised within
twenty (20) days following completion of the work of restoration and repair.
SECTION 10
REPAIRS
10.01 Except as otherwise provided herein, Tenant agrees at its own expense
to keep the Improvements, including all structural, electrical, mechanical and
plumbing systems at all times in good appearance and repair except for
reasonable and normal wear and tear. Tenant will also pay all other expenses in
connection with the maintenance of the Premises including repair and upkeep of
grounds, sidewalks, driveways and parking areas in a first-class condition.
10.02 Notwithstanding any other provision of this Lease, from and after the
date Tenant takes occupancy of the Premises any repairs, additions or
alterations to the Improvements or any of its systems (e.g., plumbing,
electrical, mechanical) structural or non-structural, which are required by any
law, statute, ordinance, rule, regulation or governmental authority which are
enacted after the Commencement Date or insurance carrier, including,
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without limitation, OSHA, will be the obligation of Tenant. Landlord will assign
to Tenant the benefit of all guarantees and warranties covering the Improvements
and the systems thereof.
SECTION 11
PAYMENT FOR SERVICES RENDERED BY Landlord
11.01 Except for the construction under Section 2 hereof, if Landlord at
any time: (i) does any work or performs any service in connection with the
Premises, or (ii) supplies any materials to the Premises, and the cost of the
services, work or materials is Tenant's responsibility under the provisions of
this Lease, Landlord will invoice Tenant for the cost, payable within five (5)
days after delivery of the invoice. This Section will apply to any such work,
services or materials, whether furnished at Tenant's request or on its behalf
and whether furnished or caused to be furnished by Landlord or its agents,
employees or contractors. All amounts payable under this Section will be
additional rental, and failure by Tenant to pay them when due will be a default
under this Lease and further will result in the assessment of late charges and
interest under Section 5.
SECTION 12
ALTERATIONS
12.01 The parties agree that Tenant will not make any structural or
mechanical alterations, additions, or improvements to the Premises without the
written consent of Landlord and, if required by the terms of any mortgage on the
Premises, the written consent of the mortgagee which consent shall not be
unreasonably withheld or delayed. All alterations, additions or improvements
made by either of the parties hereto on the Premises will be the property of
Landlord except for Tenant's equipment, trade fixtures, furnishings,
decorations, or machinery and will remain on and be surrendered with the
Premises at the termination of this Lease, except that alterations, additions or
improvements made by Tenant must be removed and the Premises restored by Tenant
if so indicated by Landlord, at the time or approval, or if no approval is
requested by Tenant, if requested by Landlord. In any event, Tenant will supply
Landlord with as built plans for any such work.
SECTION 13
LIENS
13.01 After the Commencement Date, Tenant will keep the premises free of
liens of any sort and will hold Landlord harmless from any liens which may be
placed on the Premises except those attributable to the acts of Landlord.
SECTION 14
EMINENT DOMAIN
14.01 If seventy-five (75%) percent or more of the building's net rentable
area is condemned or taken in any manner (including without limitation any
conveyance in lieu thereof) for any public or quasi-public use, the Term of this
Lease shall cease and terminate
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as of the date title is vested in the condemning authority. If fifth (50%)
percent or less of the building's net lease area is so condemned or taken, the
Tenant may terminate this Lease if it determines, in the reasonable exercise of
its business judgment, that continued operation of the Premises under this Lease
would be uneconomic. If more than fifty (50%) but less than seventy-five (75%)
percent of the building's net rentable area is so condemned or taken, with the
result that Tenant's business is significantly and adversely affected thereby,
or if such a portion of the parking area is so condemned or taken that the
number of parking spaces remaining are less than the number required by
applicable zoning or other code for the building, then either Landlord or Tenant
may terminate this Lease as of the date title is vested in the condemning
authority by written notice to the other.
14.02 If this Lease is not terminated following such condemnation or
taking, Landlord, as soon as reasonably practicable after such condemnation or
taking and the determination and payment of Landlord's award on account thereof,
shall expend as much as may be necessary of the net amount which is awarded to
Landlord and released by Landlord's mortgagee, if any, in restoring, to the
extent originally constructed by Landlord (consistent, however, with zoning laws
and building codes then in existence), so much of the building as was originally
constructed by Landlord to an architectural unit as nearly like its condition
prior to such taking as shall be practicable. Should the net amount so awarded
to Landlord be insufficient to cover the cost of restoring the building, in the
reasonable estimate of Landlord, Landlord may, but shall have no obligation to,
supply the amount of such insufficiency and restore the building to such an
architectural unit, with all reasonable diligence, or Landlord may terminate
this Lease by giving notice to Tenant not later than a reasonable time after
Landlord has determined the estimated net amount which may be awarded to
Landlord and the estimated cost of such restoration, unless Tenant elects, at
its sole option, to promptly provide the amount of any insufficiency.
14.03 If this Lease is not terminated pursuant to Section 14.01, the
minimum net rental payable by Tenant shall be reduced in proportion to the
reduction in net rentable area of the building by reason of the condemnation or
taking. If this Lease is terminated pursuant to Section 14.01, the minimum net
rental and other charges which are the obligation of Tenant hereunder shall be
apportioned and prorated accordingly as of the date of termination.
14.04 The whole of any award or compensation for any portion of the
Premises taken, condemned or conveyed in lieu of taking or condemnation shall be
solely the property of and payable to Landlord. Nothing herein contained shall
be deemed to preclude Tenant from seeking, at its own cost and expense, an award
from the condemning authority for loss of its business, the value of any trade
fixtures or other personal property of Tenant in the Premises or moving expenses
SECTION 15
ASSIGNMENT OR SUBLETTING
15.01 Tenant agrees not to assign or in any manner transfer this Lease or
any interest in this Lease without the previous written consent of Landlord, and
not to sublet the Premises or any part of the Premises or allow anyone to use or
to come in with, through or under it
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without like consent, which consent will not be withheld unreasonably. In no
event may Tenant assign or otherwise transfer this Lease or any interest in this
Lease at any time while in default thereunder. One such consent will not be
deemed a consent to any subsequent assignment, subletting, occupation, or use by
any other person. Tenant amy, however, assign this Lease to a corporation with
which it may merge or consolidate, to any parent or subsidiary of Tenant or
subsidiary of Tenant's parent, or to a purchaser of substantially all of
Tenant's assets if the assignee executes an agreement required by Landlord
assuming Tenant's obligations. The acceptance of rent from an assignee,
subTenant or occupant will not constitute a release of Tenant from the further
performance of the obligations of Tenant contained in this Lease. In the event
of any assignment or sublease of all or any portion of the Premises where the
rental or other consideration reserved in the sublease or by the assignment
exceeds the rental or prorata portion of the rental, as the case may be for such
space reserved in this Lease, Tenant agrees to pay Landlord monthly as
additional rent, on the Rent Day fifty percent (50%) of the excess of the rental
or other consideration reserved in the sublease or assignment over the rental
reserved in this Lease applicable to the subleased/assigned space. Tenant
acknowledges that Landlord selected Tenant in part on the basis of Tenant's
proposed use and occupation of the premises, and agrees that Landlord may
withhold consent to any proposed sublease or assignment if the subTenant's or
assignee's business or proposed use of the Premises would be physically
injurious to the Building or would detract from the reputation of the industrial
park, if any, within which the Premises are located. Neither the transfer of
stock of Tenant nor the public offering of stock of the Tenant shall constitute
an assignment, subletting or transfer hereunder.
SECTION 16
INSPECTION OF PREMISES
16.01 After prior notice (except in an emergency) Tenant agrees to permit
Landlord and the authorized representatives of Landlord to enter the Premises at
all reasonable times during business hours for the purpose of inspecting the
same. A representative of Tenant shall be entitled to be present during an
inspection. Confidential areas shall be subject to special inspection
procedures.
SECTION 17
FIXTURES AND EQUIPMENT
17.01 All fixtures and equipment paid for by Landlord and all fixtures and
equipment which may be paid for and placed on the Premises by Tenant from time
to time but which are so incorporated and affixed to Improvements that their
removal would involve damage or structural change to Improvements will be and
remain the property of Landlord, except for Tenant's machinery, equipment,
furnishings, decorations or trade fixtures which Tenant may remove.
17.02 All furnishings, equipment and fixtures other than those specified in
Section 17.01, which are paid for an placed on the Premises by Tenant from time
to time (other than those which are replacements for fixtures originally paid
for by Landlord) will remain the property of Tenant.
9
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SECTION 18
SECURITY
Deleted
SECTION 19
NOTICE OR DEMANDS
19.01 All bills, notices, statements, communications to or demands
(collectively, "notices or demands") upon Landlord or Tenant desired or required
to be given under any of the provisions hereof must be in writing. Any such
notices or demands from Landlord to Tenant will be deemed to have been duly and
sufficiently given if a copy thereof has been mailed by United States mail in an
envelope properly stamped and addressed to Tenant at the address of the Premises
or Tenant's registered office in the State in which the Premises are located at
such time, or at such other address as Tenant may have last furnished in writing
to the Landlord for such purpose, and any such notices or demands from Tenant to
Landlord will be deemed to have been duly and sufficiently given if personally
delivered to Landlord or mailed by United States mail in an envelope properly
stamped and addressed to Landlord at the address last furnished by written
notice from Landlord to Tenant. The effective date of such notice or demand will
be deemed to be the time when personally delivered or mailed as herein provided.
A copy of all notices or demands to Tenant shall be sent to A. Jeffrey Bean at
such address as he provides to Landlord in writing.
SECTION 20
BREACH; INSOLVENCY; RE-ENTRY
20.01 If any rental payable by Tenant to Landlord remains unpaid for more
than seven (7) days after written notice to Tenant of non-payment, or if Tenant
violates or defaults in the performance of any of its obligations in this Lease
and the violation or default continues for a period of thirty (30) days after
written notice, then Landlord may (but will not be required to) declare this
Lease forfeited and the Term ended, or re-enter the Premises, or may exercise
all other remedies available under Michigan law. In the event such non-monetary
violation or default cannot be cured within thirty (30) days, so long as Tenant
shall have commenced the cure and is proceeding diligently to complete such
cure, Tenant shall have such additional time as necessary to complete such cure.
Landlord will not be liable for damages to person or property by reason of any
law, re-entry or forfeiture, and Landlord will be aided and assisted by Tenant,
its agents, representatives and employees. Tenant, by the execution of this
Lease, waives notice of re-entry by Landlord. In the event of re-entry by
Landlord without declaration of forfeiture, the liability of Tenant for the rent
provided herein will not be relinquished or extinguished for the balance of the
Term, and any rentals prepaid may be retained by Landlord and applied against
the costs of re=entry, or as liquidated damages, or both. Tenant will pay, in
addition to the rental sand other sums agreed to be paid hereunder, reasonable
attorneys' fees, costs and expenses in any suit or action instituted by or
involving Landlord to enforce the provisions of, or the collection of the
rentals due Landlord under this Lease, including any proceeding under the
Federal Bankruptcy Code.
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If Tenant is adjudged bankrupt or insolvent, files or consents to the
filing of a petition in bankruptcy under Federal or State law, applies for or
consents to the appointment of a receiver for all or substantially all of its
assets, makes a general assignment for the benefit of its creditors, fails
generally to pay its debts as they become due, or does anything which, under the
applicable provisions of the Federal Bankruptcy Code would permit a petition to
be filed by or against Tenant, then tenant shall be in default under this Lease
and, to the extent from time to time permitted by applicable law, including but
not limited to the Federal Bankruptcy Code, Landlord shall be entitled to
exercise all remedies set forth in the preceding paragraph of this Section 20.
In a reorganization under Chapter 11 of the Federal Bankruptcy Code, the debtor
or trustee must assume this Lease or assign it within sixty (60) days from the
filing of the proceeding, or he shall be deemed to have rejected and terminated
this Lease. Tenant acknowledges that its selection to be the tenant hereunder
was premised in material part on Landlord's determination of Tenant's
creditworthiness and ability to perform the economic terms of the Lease, and
Landlord's further determination that Tenant and the character of its occupancy
and use of the Premises would be compatible with the nature of the Premises and
other adjacent properties of Landlord. Therefore, if Tenant, as debtor, or its
trustee elects to assume or assign this Lease, in addition to complying with all
other requirements for assumption or assignment under the Federal Bankruptcy
Code, then Tenant, as debtor, or its trustee or assignee, as the case may be,
must also provide adequate assurance of future performance, including but not
limited to a deposit, the amount of which shall be reasonably determined based
on the duration of time remaining in the Term, the physical condition of the
premises at the time the proceeding as filed, and such damages as may be
reasonably anticipated after reinstatement of the Lease, taking into account
rental market conditions at the time of the reinstatement. In the event of an
assignment, the Landlord must be reasonably assured that the financial condition
of the assignee is sound, and that its use of the Premises will be compatible
with the nature of the Premises and other adjacent properties of Landlord.
In the event of declaration of forfeiture at or after the time or re-entry,
Landlord may re-lease the Premises or any portion(s) of the Premises for a term
or terms and at a rent which may be less than or exceed the balance of the Term
of and the rent reserved under this Lease. In such event Tenant will pay to
Landlord as liquidated damages for Tenant's default any deficiency between the
total rent reserved and the net amount, if any, of the rents collected on
account of the lease or leases or the Premises which otherwise would have
constituted the balance of the term of this Lease. In computing such liquidated
damages, there will be added to the deficiency any expenses which Landlord may
incur in connection with re-leasing, such as legal expenses, attorneys' fees,
brokerage fees and expenses, advertising and for keeping the Premises in good
order or for preparing the Premises for releasing. Any such liquidated damages
will be paid in monthly installments by Tenant on the Rent Day and any suit
brought to collect the deficiency for any month will not prejudice Landlord's
right to collect the deficiency for any subsequent month by a similar
proceeding. In lieu of the foregoing computation of liquidated damages, Landlord
may elect, at its sole option, to receive liquidated damages in one payment
equal to any deficiency between the total rent reserved hereunder and the fair
and reasonable rental of the Premises, both discounted at ten (10%) percent per
annum to present value at the time of declaration of
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<PAGE>
forfeiture. Landlord shall use reasonable business efforts to re-lease the
Premises and to mitigate its damages.
Whether or not forfeiture has been declared, Landlord will not be obliged
or be responsible in any way for failure to re-lease the Premises or, in the
event that the Premises are re-leased, for failure to collect the rent under
such re-leasing. The failure of Landlord to re-lease all or any part of the
Premises will not release or affect Tenant's liability for rent or damages.
SECTION 21
SURRENDER OF PREMISES ON TERMINATION
21.01 At the expiration (or earlier termination) of the Term, Tenant will
surrender the Premises broom clean and in as good condition and repair as they
were at the time Tenant took possession, reasonable wear and tear and
obligations of Landlord hereunder excepted, and promptly upon surrender will
deliver all keys and building security cards for the Premises to Landlord at the
place then fixed for payment of rent. All costs and expenses incurred by
Landlord in connection with repairing or restoring the Premises to the condition
called for herein, together with the costs, if any, of removing from the
Premises any property of Tenant left therein, together with liquidated damages
in an amount equal to the amount of minimum net rental plus all other charges
which would have been payable by Tenant under this Lease if the term of this
Lease had been extended for the period of time reasonably required for Landlord
to repair or restore the Premises to the condition called for herein up to
fifteen (15) days shall be invoiced to Tenant and shall be payable as additional
rental within five (5) days after receipt of invoice.
SECTION 22
PERFORMANCE BY LANDLORD OF THE COVENANTS OF TENANT
22.01 If Tenant fails to pay any sum of money other than rental, required
to be paid hereunder or fails to perform any act on its part to be performed
hereunder, including without limitation the performance of all covenants
pertaining to the condition and repair of the Premises pursuant to Section 10,
above, and such failure shall continue for a period thirty (30) days (or a
reasonable period of less than thirty days when life, person or property is in
jeopardy) after notice thereof by Landlord, Landlord may (but shall not be
required to), and without waiving or releasing Tenant from any of Tenant's
obligations, make any such payment or perform any such other act. All sums so
paid by Landlord and all necessary incidental costs, including without
limitation the cost of repair, maintenance or restoration of the Premises if so
performed by Landlord hereunder, shall be deemed additional rental and, together
with interest thereon at the rate set forth in Section 5.02, from the date of
payment by Landlord until the date of repayment by Tenant to Landlord, shall be
payable to Landlord within five (5) days after receipt of invoice by Tenant. On
default in such payment, Landlord shall have the same remedies as on default in
payment of rent. The rights and remedies granted to Landlord under this Section
22 shall be in addition to, and not in lieu of all other remedies, if any,
available to Landlord under this Lease or otherwise, and nothing herein
12
<PAGE>
contained shall be construed to limit such other remedies of Landlord with
respect to any matters covered herein.
22.02 See Addendum.
SECTION 23
SUBORDINATION; ESTOPPEL CERTIFICATES
23.01 Tenant agrees that Landlord may choose to make this lease subordinate
or paramount to any construction loans, mortgages, trust deeds and ground or
underlying leases now or hereafter affecting the Premises and to any and all
advances to be made thereunder, and to the interest and charges thereon, and all
renewals, replacements, and extensions thereon, provided the mortgagee, lessor
or trustee named in any such mortgages, trust deeds or leases agrees to
recognize the lease of Tenant and not to disturb Tenant's quiet possession of
the Premises in the event of foreclosure if Tenant is not in default. Tenant
will execute promptly any instrument or certificate that Landlord may request to
confirm such subordination, and hereby irrevocably appoints Landlord as Tenant's
attorney-in-fact to execute such instrument or certificate on its behalf.
23.02 Tenant, within ten (10) days after request (not to exceed once per
year) by Landlord will execute and deliver to Landlord, an estoppel certificate
identifying the Commencement Date and expiration date of the Term and stating
that this Lease is unmodified and in full force and effect, or is in full force
and effect as modified, stating the modifications, and stating that Tenant does
not claim that Landlord is in default in any way, or listing any such claimed
defaults. The certificate also will confirm the amount of monthly Base Rent and
additional rent as of the date of the certificate, the date to which the rent
has been paid in advance, and the amount of any security deposit or prepaid
rent. If Tenant fails to deliver the executed certificate to Landlord within the
ten (10) day period, the accuracy of the proposed certificate will be deemed
conclusively confirmed.
SECTION 24
QUIET ENJOYMENT
24.01 Landlord agrees that at all times when Tenant is not in default under
the provisions and during the Term of this Lease, Tenant's quiet and peaceable
enjoyment of the Premises will not be disturbed or interfered with by Landlord
or any person claiming by, through, or under Landlord.
SECTION 25
HOLDING OVER
25.01 Unless the parties are actively negotiating a new Lease, if Tenant
remains in possession of the Premises after the expiration of this Lease without
executing a new lease, it will be deemed to be occupying the Premises as a
tenant from month to month, subject to all the provisions of this Lease to the
extent that they can be applicable to a month-to-month tenancy, except that the
minimum net rental for each month will be one hundred twenty five
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(125%) percent of the regular monthly installments of minimum net rental set
forth in Section 4.01, above.
SECTION 26
REMEDIES NOT EXCLUSIVE; WAIVER
26.01 Each and every of the rights, remedies and benefits provided by this
Lease are cumulative, and are not exclusive of any other of said rights,
remedies and benefits, or of any other rights, remedies and benefits allowed by
law.
26.02 One or more waivers of any covenant or condition by Landlord will not
be construed as a waiver of a further or subsequent breach of the same covenant
or condition, and the consent or approval by Landlord to or of any act by Tenant
requiring Landlord's consent or approval will not be deemed to waive nor render
unnecessary Landlord's consent or approval to or of any subsequent similar act
by Tenant.
SECTION 27
WAIVER OF SUBROGATION
27.01 Landlord and Tenant hereby waive any and all right of recovery
against each other for any loss or damage caused by fire or any of the risks
covered by standard fire and extended coverage, vandalism and malicious mischief
insurance policies.
SECTION 28
RIGHT TO SHOW PREMISES
28.01 For a period commencing one hundred and seventy nine (179) days prior
to the termination of this Lease or any extension thereof, Landlord may show the
Premises and may display about the Premises signs advertising the availability
of the Premises.
SECTION 29
Deleted
SECTION 30
INDEMNIFICATION
30.01 Tenant at its expense will defend, indemnify and save Landlord, its
licensees, servants, agents, employees and contractors, harmless from any loss,
damage, claim of damage, liability or expense to or for any person or property,
whether based on contract, tort, negligence or otherwise, arising directly or
indirectly out of or in connection with the condition of the Premises, the use
or misuse thereof by Tenant or any other person, the acts or omissions of
Tenant, its licensees, servants, agents, employees or contractors, the failure
of Tenant to comply with any provision of this Lease, or any event on the
Premises, whatever the cause; provided, however, that nothing herein shall be
construed to require Tenant to indemnify Landlord against Landlord's own acts,
omissions or neglect.
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30.02 See Addendum.
SECTION 31
PREVENTING REMOTE VESTING
31.01 Notwithstanding any other provisions of this Lease, if the Term of
this Lease does not commence within three (3) years from the date hereof, this
Lease will be deemed terminated three (3) years from the date herof without
necessity of any notice or act by Landlord or Tenant. It is the intention of
this Section to prevent this Lease from becoming unenforceable by reason of any
claim that it might violate the rule against perpetuities.
SECTION 32
DEFINITION OF LANDLORD; LANDLORD'S LIABILITY
32.01 The term "Landlord" as used in this Lease so far as covenants,
agreements, stipulations or obligations on the part of the Landlord are
concerned is limited to mean and include only the owner or owners of fee title
(or of a ground leasehold interest) to the Premises at the time in question, and
in the event of any transfer or transfers of the title to such fee the Landlord
herein named (and in case of any subsequent transfers or conveyances the then
grantor) will automatically be freed and relieved from and after the date of
such transfer or conveyance of all personal liability for the performance of any
covenants or obligations on the part of the Landlord contained in this Lease
thereafter performed so long as the assignee or transferee, in the event of a
voluntary transfer, assumes Landlords*.
If Landlord fails to perform any provision of this Lease upon Landlord's
part to the performed, and if as a consequence of such default Tenant recovers a
money judgement against Landlord, such judgment may be satisfied only out of the
proceeds of sale received upon execution of such judgement and levied thereon
against the right, title and interest of Landlord in the Premises and out of
rents or other income from such property receivable by Landlord and Landlord
shall not be personally liable for any deficiency.
*obligation hereunder.
SECTION 33
ENTIRE AGREEMENT
33.01 This lease and the Exhibits attached hereto and forming a part
hereof, set forth all of the covenants, agreements, stipulations, promises,
conditions and understandings between Landlord and Tenant concerning the
Premises and there are no covenants, agreements, stipulations, promises,
conditions or understanding, either oral or written, between them other than
herein set forth.
SECTION 34
GENERAL
15
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34.01 Many references in this Leaser to persons, entities and items have
been generalized for ease of reading. Therefore, references in a single person,
entity or item will also mean more than one person, entity or thing whenever
such usage is appropriate (for example, "Tenant" may include, if appropriate, a
group of persons acting as a single entity, or as tenants-in-common). Similarly,
pronouns of any gender should be considered interchangeable with pronouns of
other genders.
34.02 All agreements and obligations of Tenant under this Lease are joint
and several in nature. Any waiver or waivers by Landlord of any of the
provisions of this Lease will not constitute a waiver of any later breach of
that provision, and any consent or approval given by Landlord with respect to
any act, neglect or default by Tenant will not waive or make unnecessary
Landlord's consent or approval with respect to any later similar act, neglect or
default by Tenant.
34.03 Topical headings appearing in this Lease are for convenience only.
They do not define, limit or construe the contents of any paragraphs or clauses.
34.04 This Lease can be modified or amended only by a written agreement
signed by Landlord and Tenant.
34.05 All provisions of this Lease are and will be binding on the heirs,
executors, administrators, personal representatives, successors and assigns of
Landlord and Tenant.
34.06 The laws of the State of Michigan will control in the construction
and enforcement of this Lease.
34.07 See Addendum attached hereto and made a part hereof.
16
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In WITNESS WHEREOF the Landlord and Tenant have executed this Lease of the date
set forth at the outset hereof.
WITNESS:
Landlord: FIRST INDUSTRIAL, L.P.,
a Delaware limited partnership
By: First Industrial Realty Trust Inc.
its general partner
By:/s/ Michael G. Damone
- ------------------------------- --------------------------------------------
Its: Senior Regional Director
- ------------------------------- --------------------------------------------
Tenant: AMERICAN AXLE & MANUFACTURING, INC., a
Delaware Corporation
By:/s/ Richard E. Dauch
- ------------------------------- ----------------------------------------------
Its: President and CEO
- ------------------------------- ----------------------------------------------
17
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ROCHESTER HILLS EXECUTIVE PARK
AMERICAN AXLE CORPORATION
PRELIMINARY OUTLINE CONSTRUCTION SPECIFICATIONS
- --------------------------------------------------------------------------------
Landlord shall construct the Improvements set forth in the Plans and
Specifications described in Exhibit "B" to the Lease.
These Outline Construction Specifications are intended to describe the general
scope of work and services to be performed by and to be paid for by First
Industrial, L.P. (Landlord). The cost and expenses to be paid for by Landlord in
connection with the construction of such Improvements shall be based on the
design and construction of a one story industrial building which will be
substantially similar to the existing industrial building occupied by SI Systems
located at 2791 Research Drive, Rochester Hills, Michigan (Base Building) which
are described below.
The following plans relate to the construction of the Base Building:
1. Construction Site Plan, Building #9, prepared by Nowak & Fraus, dated
8/18/86, last revised 2/11/87, Job #86-6367.
2. Building Shell Drawings prepared by Smith/Schurman Associates, Sheet
A-1 through A-7; S-1 and S-2, dated 7/29/86, last revised 8118186,
Plan #85-37881.
3. Tenant improvement Drawings, Smith/Schurman Associates, Plan #TP-1
through TP-3, dated 7/12/91, last revised 8/20/91, Plan #90-4985A.
These specifications will also define the quality levels and approximate
quantities of work to be provided by Landlord for the design and construction of
the new American Axle Corporation (Tenant) facility in Rochester Hills,
Michigan.
Tenant shall be responsible for the payment of all costs and expenses which are
the result of design and/or construction changes to the Base Building and these
Outline Specifications required by the Tenant including additional costs arising
from changes in the law and building codes that have occurred since November 21,
1986. Tenant agrees to make progress payments to Landlord, or to its contractor
or subcontractors, for those costs and expenses properly chargeable to Tenant,
upon delivery of appropriate documentation of such costs and expenses and upon
completion of such work.
The proposed American Axle facility will contain the following approximate areas
<PAGE>
2
Office Area 20,450 SF
Shop Area 45,945 SF
---------
TOTAL 66,395 SF
The facility to be located on Lot #36 and the South 27 feet of Lot 35 of
Rochester Hills Executive Park containing approximately 4.92 acres of land.
Work to be performed for this new facility is further described as follows:
<PAGE>
3
GENERAL PROJECT INFORMATION
Project Description
The building to be constructed is a one story industrial facility to be built in
the City of Rochester Hills, Michigan. It will have a minimum clear height of
twenty four (24) feet under the joists in the shop area and a finished ceiling
height of Nine feet (9'-0") in the main office area.
The exterior shop area wall system will consist of an 8'-0" high masonry sill
wall with insulated metal siding to the building's eaves. The exterior Office
area wall system will consist of a face brick sill wall, tinted insulated glass
ribbon windows and a Dryvit or similar material fascia treatment above the
windows.
Drawings and Specifications
The cost for all architectural/engineering services necessary to prepare
"Working Drawings and Specifications" for construction of the proposed facility
is included. Also the cost to secure approvals including site plan approval and
permits including building permits is included. Architects and Engineers (A&E)
will be registered in accordance with applicable laws in the State of Michigan.
Smith/Schurman Associates will be retained as the architect for the project, and
Nowak & Fraus will be retained as the civil (site) engineers. Architect and
Engineering fees for tenant work as well as those A&E fees and municipal fees
required to expedite municipal approvals are not included. Allowance: $36,000
Permits
We are providing an allowance of $82,400 to secure all municipal and building
permits including water and sewer tap fees. Additional fees for changes or
additions relative to tenant work is not included. Allowance: $82,000.
Winter Conditions
The cost of winter conditions is not included. American Axle shall have option
to approve and pay for methods of construction necessary to accommodate winter
conditions on an as needed basis.
<PAGE>
4
DIVISION 2 - SITEWORK
EARTHWORK: The site is assumed clear, level and at proper grade with a
soil bearing capacity of 3,000 pounds per square foot 3'-6"
below finished grade. The subsoil is considered to be free
from organic material, excessive groundwater, rock,
underground obstructions, or other latent soil conditions
that could result in unusual construction requirements.
Site areas which are to be occupied by the new building or
pavement will be stripped of all vegetation, brush and
topsoil to a depth of 6". Topsoil will be stockpiled on
undeveloped portions of the site for future placement in all
landscaped areas to a depth of 4" to 6" and for use in terms
where appropriate. Excess topsoil to be removed from the
site.
All cutting, filling and rough grading is to be completed to
proper subgrade elevations for finish floor, pavement and
landscaped areas.
Site areas occupied by building and paved areas will be
rough and fine graded as necessary by moving on-site
materials, which are assumed to be suitable, to meet
engineered elevations and grades and to provide proper
surface drainage.
Site areas occupied by the new building or pavement will be
proof rolled to compact the existing sub-base to 95% maximum
density as determined by the Modified Proctor Method (AASHT
T-180).
On-site fill material will be compacted to 95% maximum
density as determined by the Modified Proctor Method (AASHT
T-180).
SAND: Provide a minimum of 4" of compacted sand full under all
concrete floor slabs and concrete pavement areas.
LANDSCAPING: Provide an allowance of $45,250 for landscaping design and
the installation
<PAGE>
5
of sod, shrubs, trees and an underground lawn sprinkler
system.
ASPHALT PAVEMENT: Asphalt paving shall be provided for driveways and parking
areas as shown on the site plan.
Compacted aggregate base shall be crushed concrete slag or
gravel equivalent to MDOT Specification 22A.
The asphalt pavement will consist of the following
approximate areas:
o 30,000 square feet of heavy duty pavement consisting of
a 8" thick aggregate base, a 2-1/2" thick asphalt
leveling course and a 1-1/2" thick wearing course.
o 32,900 square feet of regular pavement consisting of a
8" thick aggregate base, a 1-1/2" thick asphalt
leveling course and a 1-1/2" thick wearing course for
automobile parking and drives.
Parking area striping is included.
SITE CONCRETE: Concrete approaches and pads shall be provided as shown on
the site plan. Concrete strength shall be 3500 PSI (28 day
test).
All exterior concrete slabs will be steel troweled and then
broom finished for anti-skid characteristics.
Provide approximately 2060 square feet of sidewalk
consisting of 4" thick concrete on a 4" compacted sand base.
Provide one 10'x 20'x 6" wire mesh reinforced concrete
dumpster pad with a trench foundation.
SITE UTILITIES: Site utility work will consist of the following:
Storm Drainage Storm Water from the Shop/Office Area roofs will be
collected by roof sumps which will then carry runoff through
<PAGE>
6
interior roof conductors to an underground storm drainage
system.
Paved and landscaped areas will be contoured and sloped to
permit positive surface drainage into a system of
underground storm sewers which will be connected into an
existing storm drain in Technology Drive.
Storm Drain piping inside the building will be PVC. Storm
Drain piping outside the building will be RCP (Reinforced
Concrete Pipe).
Underdrains will be provided at each catch basin for
positive sub grade drainage.
The Storm Drain system will consist of the following
approximate quantities.
o 8" DI - 100 LF
o 8" PVC - 72 LF
o 18" RCP - 180 LF
o 15" RCP - 155 LF
o 12" RCP - 440 LF
o 10" RCP - 150 LF
o Two (2) Manholes
o Five (5) Catch Basins
o One (1) Inlet
Water Main The Watermain system shall consist of ductile iron pipe
connecting to an existing water main in Technology Drive.
The watermain will serve the requirements of the fire
protection and domestic water system.
The Watermain system will contain the following approximate
quantities:
o 600 LF of 8" DI Watermain
o One (1) 8" Gate Valve & Well o One (1) Fire Hydrant
including appurtenances
o Twenty Five LF of one and one-half (1-1/2") inch line
for domestic water service including water meter
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7
Sanitary Sewer Sanitary sewer work is to consist of:
o Approximately 130 LF of 6" (PVC) underground sanitary
sewer line extended from an existing lead in Technology
Drive into the building.
Natural Gas
Service Incoming natural gas services (piping and meter) is to be
provided by the utility company.
SITE SPECIALTIES: Provide One (1) 10'x10'x30' wood dumpster enclosure
including concrete pad and double-swing gate.
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8
DIVISION 3 - CONCRETE
FOUNDATIONS: Foundations are to be 3,000 PSI strength (28 day test)
concrete.
All Concrete work shall be completed in accordance with
current recommended practices of the American Concrete
Institute (ACI).
Foundations and footings will be designed for a soil-bearing
pressure of 3000 psf at 3'-6" below finish grade.
All foundations will be designed in accordance with
applicable code requirements and will accommodate all
calculated building live and dead loads.
Concrete foundations have been designed to incorporate
earthformed trenched continuous footings, designed to meet
assumed soil conditions. All foundation piers will be sized
to carry the imposed building loads to a depth below the
frost line (3'-6").
Interior column footings shall be spread type.
Foundations and truckwell retaining walls to be poured
concrete, formed above the grade where exposed.
Not Included: Foundations to support Tenant's equipment or
machinery or construction of pits.
INTERIOR FLATWORK: Interior flatwork includes all concrete floor slabs on grade
and mezzanine floors where indicated.
Finish floor is to be a minimum of 6" above finish grade.
Floor slabs are to be 3,000 PSI (28 day test) concrete.
All interior concrete slabs on grade will be placed on a 4"
compacted sand base.
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9
INTERIOR
FLATWORK CONT:
Finish is to be steel-troweled and cured with a liquid
curing compound similar or equal to Kur-N-Seal.
Control joints and expansion joints will be provided as
recommended by ACI.
Provide 2" x 24" insulation board laid flat below floor
slabs at exterior walls
Plant/Storage Area floor slab will be 6" thick concrete,
reinforced with 6 x 6 wire mesh.
Office Area floor slab will be 4" thick concrete, reinforced
with 6 x 6 wire mesh and placed on a visqueen vapor barrier.
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10
DIVISION 4 - MASONRY
MASONRY: Wall System
The shop area wall system will consist of an 8 foot high
masonry wainscot and a prefinished insulated metal panel
system up to the roof.
The office area wall system will consist of masonry block
and brick. Brick allowance is $325.00 per thousand.
Each third course of masonry work will be horizontally
reinforced with Dur-O-Wall or similar type masonry
reinforcement.
All masonry walls will be laid in standard running bond with
tooled joints in accordance with all Masonry Institute
Standard Practices.
All masonry shall meet or exceed A.S.T.M. standard
specifications for masonry construction.
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11
DIVISION 5 - METALS
STRUCTURAL SYSTEM The structural framing for the Office and Shop Area will
consist of suitably sized beams, columns and bar joists for
the support of a 1-1/2" deep 20 gauge corrugated metal roof
deck as set forth on the plans for the building at 2791
Research Drive. The bar joist will bear on steel beams or
truss joists and columns.
Steel beams, columns, and lintels will be designed in
accordance with the current edition of the American
Institute of Steel Construction Manual.
The bar joist roof framing will be designed in accordance
with the requirements of the Steel Joist Institute.
Design live loads are as follows:
Roof: 30 pounds per square foot Mezzanine: 125 pounds per
square foot
MISCELLANEOUS: Miscellaneous iron will consist of the following items:
METAL o 4'-0" high x 6" diameter concrete-filled steel pipe
guard posts set in concrete will be provided at
exterior and interior overhead grade level and
truckwell doors.
o Roof or wall opening framing for HVAC equipment.
o Overhead door jambs and frames.
o Access ladder to roof
o 1-1/2" diameter pipe safety rail on one side of
truckwell and 4" toeboard at truckwell.
o Miscellaneous framing, lintels, truckwell guard rail,
ladder, and edge angles will be provided as required.
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12
DIVISION 6 - CARPENTRY
CARPENTRY: Rough carpentry including labor and materials for the shell
will include:
o Wood Nailers and blocking.
o Framing and bracing for the office fascia system
subframe.
Rough and finish carpentry including labor and materials for
the interior will include (lineal feet measurements are
approximate):
o Furr, insulate and drywall exterior masonry walls in
office area.
o Provide 337 LF feet of 24' high demising wall between
Shop and Office areas.
o Provide 860 lineal feet of 9' high partition walls.
o Provide 29 3'-0" wide x 8'-6" high x 1-3/4" solid core,
pre-finished wood doors with a rotary cut premium birch
veneer finish that will be similar or equal to those as
manufactured by Mohawk Flush Doors. Each door will be
set in a pre-finished light gage metal frame.
o Hang hollow metal doors.
o Provide 260 lineal feet of formica sills at office
windows.
o Provide plastic laminate countertops (with backsplash)
in restrooms and lunch room areas.
o Provide window opening in Computer Room
o Provide 490 LF of furring and drywall on exterior
Office Walls.
o Box 13 Columns
DRYWALL: Office Area drywall partitions will be constructed of a 5/8"
thick, gypsum board installed on each side of 3-1/2" metal
studs spaced 24" on center or as a single layer attached to
masonry with metal furring.
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13
Shop area drywall partitions will be constructed of double
5/8" thick, gypsum board fastened to metal studs.
Provide drywall enclosures around steel columns in office
area
All drywall to be taped and sanded.
All drywall materials will be similar or equal to the
products as manufactured by U.S. Gypsum.
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14
DIVISION 7 - THERMAL & MOISTURE PROTECTION
INSULATION:
Insulation systems will consist of the following:
2" thick x 24" wide rigid board insulation will be
provided at all perimeter, foundation walls.
1" thick, rigid insulation will be provided at
perimeter masonry walls receiving furred drywall.
The metal siding system will be insulated as
noted.
The roofing system will be insulated as noted.
METAL SIDING The exterior wall of the shop area above the masonry
wainscoat will consist of Mor-Wall concealed fastener panel
with a Kynar color finish. Color to be chosen from
manufacturers standard.
o Provide 1-1/2" fiberglass insulation in
panels.
o Interior liner shall be a 24 gauge panel
factory painted with a white prime coat.
ROOF SYSTEM:
The roof system will be a single-ply membrane-type roof on
rigid insulation, consisting of:
o Mechanically fastened 45 mil EPDM roof as
manufactured by Firestone or approved equal.
o Ten (10) year manufacturer's standard
guarantee.
o 1 layer of isocyanurate insulation (2.7"
thick) to provide R-20 insulating factor.
o Coping, cant pieces, and trims as required.
o Flashings as required including flashings
around roof drains, skylights, smoke vents,
roof hatches and mechanical equipment.
o Provide one (1) roof hatch for accessibility
to Shop roof.
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15
Not included: Flashings for Tenant's mechanical
equipment
CAULKING/SEALANTS: High quality caulking or other appropriate sealant will seal
joints between dissimilar materials and at control joints in
masonry.
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16
DIVISION 8 - DOORS & WINDOWS
GLASS & ALUMINUM: An aluminum framed glazing system is to be provided similar
or equal to systems as manufactured by Kawneer or Howmet.
Aluminum framing for Office windows will be a nominal 2"x4"
bronze anodized system which will include thermal breaks.
Exterior glazing for Office windows will be bronze tinted 1"
thick, nominal, dual-glazed, insulated units.
Exterior entrance doors will be 3'x 7' medium stile doors
including surface mounted hardware, closers, lockset and
weatherstripping.
The exterior sidelight and entry door will be glazed with
single pane, tempered glass.
Interior vestibule sidelight and door will be glazed with
single pane, tempered glass.
HOLLOW METAL
DOORS: Industrial grade, 3070, hollow metal doors and frames will
be provided as required; each including preparation for
locksets, butts, panic hardware (where appropriate). Doors
located as shown in the drawings.
Exterior doors to be insulated with thresholds and
weatherstripping.
Frames will be 16 gage with welded corners. Doors will be 18
gage. Doors and frames will receive a factory primer in
preparation for field painting.
OVERHEAD DOORS: Overhead sectional doors with electric door openers as
follows:
o Two (2) 12'-0" x 14'-0" vertical lift doors.
The overhead doors will have the following specifications:
o Exterior panels of 24 gage steel.
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17
o Insulated with liner panel.
o Full weatherstripping at jambs, sill head.
o Exterior surface to be a factory provided
baked enamel finish.
o Doors to have one vision lite.
HARDWARE: A hardware allowance of $10,800 is included for hollow metal
and wood door hardware sets.
The hardware sets for each door type are as follows:
o Hollow metal: Butts, locksets, closer,
threshold, as appropriate, panic hardware.
o Wood: Butts and passage or lockset, as
appropriate.
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18
DIVISION 9 - FINISHES
ACOUSTICAL
CEILING: Approximately 20,450 square feet of 2' x 4' suspended lay-in
acoustical ceiling system consisting of grid, hangers, and
acoustical panels will be provided for the Office and
designated portions of the Shop area. "T" bar grid to be
white.
Materials to be similar or equal to that as manufactured by
Celotex or Armstrong.
FLOOR COVERING: Floor coverings to be provided as follows:
Shop Area
o Approximately 45,945 square feet of exposed
concrete Shop floor to be sealed with a
concrete floor sealer. Allowance: $16,100.
Office Area
o Provide approximately 2,386 SY of carpeting
in the Office Area. Allowance: $28,650
o Provide approximately 2,000 square feet of
1/8" Vinyl tile. Allowance: $2,500
VINYL BASE: All office areas to receive 4" cove type vinyl base.
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19
PAINTING: All field finished drywall work will be taped, sanded, and
primed in preparation for receiving two (2) finish coats of
flat latex paint, wall covering or ceramic tile.
All exterior masonry surfaces will receive one (1)
application of masonry stain and sealer or one (1) coat of
block filler and one (1) finish coat of masonry paint.
Exposed block which occurs in the Shop Area will be filled
with one (1) coat of masonry filler and finished with two
(2) coats of alkyd enamel paint.
Overhead doors, exposed miscellaneous steel and hollow metal
doors shall receive one coat of semi-gloss alkyd enamel
paint over shop applied primer.
Interior doors will be finished with one coat of stain and
two finish applications of stain finish polyurethane.
All colors to be approved by owner.
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20
DIVISION 10 - SPECIALTIES
TOILET PARTITIONS
AND ACCESSORIES: Nine (9) sets of floor mounted toilet partitions with a
baked enamel finish similar or equal to those manufactured
by Sanymetal or Weis/Robart.
Furnish and install the following restroom accessories:
o Four (4) 18" x 24" mirrors in restrooms
o Four (4) grab bar sets for the handicap
toilet areas.
o Eight (8) soap dispensers.
o Eight (8) toilet paper dispensers.
o Four (4) recessed combination paper
towel/waste receptacles.
o Two (2) sanitary napkin dispensers for ladies
restroom.
All accessory items to be similar or equal to those
manufactured by Bobrick.
COMPUTER FLOOR Provide approximately 945 square feet of raised computer
floor. Allowance: $16,500
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21
DIVISION 11- EQUIPMENT
DOCK LEVELERS: Furnish and install one (1) 20,000 pound mechanically
operated dock levelers in truckwell as manufactured by Rite
Height or approved equal.
DOCK BUMPERS: Furnish and install two (2) rubber dock bumpers in the
truckwell area.
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22
DIVISION 12,13 AND 14 ARE OMITTED
<PAGE>
23
DIVISION 15 - MECHANICAL
HEATING, VENTILATING
AND AIR
CONDITIONING: The HVAC system will be designed in accordance with the
current recommended practices of the following codes.
BOCA
ASHRAE
SMACNA
Applicable Building Codes
ENGINEERING
CRITERIA: The following criteria were used to design the HVAC system.
Heating Design: o Indoor temperature: 75(degree)F
o No humidification
o Outdoor temperature: -10(degree)F
Cooling Design: o Indoor temperature: 75(degree)F: 50%RH
o Outdoor temperature: 91(degree)F DB, 73(degree)F WB
SCOPE OF WORK:
Office Area
o Provide a total of 55 tons of cooling via seven (7)
constant volume rooftop units, (with a temperature
control zone per unit), with full economizer cycle
and gas heat as follows:
o Two (2) - 12.5 ton units
o Two (2) - 7.5 ton units
o Three (3) - 5 ton units
o Provide air distribution duct work including tenant
finish distribution.
o Provide toilet exhaust system.
o Provide a 10 ton Liebert unit for the computer room.
<PAGE>
24
SCOPE OF WORK CONT.
Shop Area
o Provide two (2) 900,000 BTU direct gas fired RTU's to
heat shop area as manufactured by Cambridge Model C900
or approved equal.
o Toilet Room exhaust
General
o Automatic temperature controls
o Insulation as required
o Air balancing
o Hoisting
o Roof curbs
o Fire dampers
o Gas piping to RTU's
PLUMBING: Furnish and install a complete plumbing system including the
following:
o Excavation and back fill
o Sanitary and storm to be PVC pipe
o Gas service to building by Consumers Power
o Water to begin five feet out and extend to all fixtures
o Plumbing fixtures to be Kohler as
follows:
- Nine (9) flush valve floor mounted units
- Eight (8) countertop lavatories
- Two (2) EWC drinking fountains
- Three (3) wall hung urinals
- Two (2) 40 gallon electric water heaters
- One (1) stainless steel, bar-type sink in
lunchroom
FIRE PROTECTION: A complete wet overhead automatic fire sprinkler protection
system will be provided and will consist of:
o Sprinkler heads, distribution piping and
single fire riser.
o Interior and exterior electric water a flow
alarm bells.
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25
o All necessary check valves, Fire Department
connections, flow switches, controls, etc.
The system will be hydraulically designed for the following
densities:
o Office Area 0.1 per 3000
o Plant 0.3 per 40000
All pipe fittings, workmanship, and methods to be in
accordance with N.F.P.A. No. 13 criteria.
Municipal water volume and pressure is assumed to be
adequate for the above design.
Not Included: Allowance for fire extinguishers
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26
DIVISION 16 - ELECTRICAL
ELECTRICAL: Scope of Work identifies those components required to
provide an operable electrical power system. These include:
o Site Lighting and Power
o Incoming power and telephone conduits
o Panels, fixtures, receptacles, switches etc.
o Connection of all building HVAC equipment
Not Included: Connection of Tenants
Equipment
Service
Provide a 3-Phase 1000 amp 480 volt overhead service
connecting to a Detroit Edison line. The service will
include:
Electrical Panels & Transformers
o Three (3) 3-phase 480/208 volt, 200 amp
power panels
o Two (2) 208 volt, 150 amp lighting panels
o Three (3) 75 KVA transformers o Four Hundred
Fifty Feet (450) of 200 amp feeder
Site Lighting
o Six 400 watt High Pressure Sodium floodlights
mounted on building wail.
o Time clock and relays for lighting controls.
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27
ELECTRICAL - CONT.
Office Area
o Two Hundred Ninety Six (296) 2'x 4', 4-lamp
fluorescent fixtures with prismatic lenses
o Ninety-seven (97) 110 volt duplex receptacles
o Two (2) dedicated 20 amp 120 volt circuits
o Fifteen (15) power pole circuits
o Thirty (30) circuits at columns
o Two (2) circuits for lunch room
o Wire lunch room Fan
o Provide 480 volt 150 amp power to computer
room
o Thirty Five (35) single pole switches
o Eight (8) 3 pole switches
o Fifty-Four (54) telephone outlets
o Six (6) exit lights
o Five (5) emergency lights
o Ten (10) Night light circuits
Shop Area
o One Hundred Ten (110) 400 watt metal halide
fixtures
o Four (4) exit lights
o Nine (9) emergency lights
<PAGE>
9/12/94
ADDENDUM attached to and made a part of a Lease dated September 30, 1994,
between FIRST INDUSTRIAL, L.P., as Landlord, and AMERICAN AXLE & MANUFACTURING,
INC., a Delaware Corporation, as Tenant, for premises located at Technology
Drive, City of Rochester Hills, County of Oakland, State of Michigan.
- --------------------------------------------------------------------------------
ADDITIONAL CONDITIONS:
SECTION 2
CONSTRUCTION OF IMPROVEMENTS
2.03 Modifications in the plans and specifications will be done through
written change order approved by both parties. Landlord's Work shall be fully
completed in a good and workmanlike manner in full compliance with all
applicable building, health, environmental, safety and other ordinances, codes
and regulations.
2.04 Landlord shall (a) pay before delinquency all costs and expenses of
work done or caused to be done by Landlord to the Building; (b) keep the title
to the Building and every part thereof free and clear of any lien or encumbrance
in respect of such work; and (c) indemnify and hold harmless Tenant against any
claim, loss, cost, demand (including reasonable legal fees), whether in respect
of liens or otherwise, arising out of the supply of material, services or labor
for such Landlord's work. Landlord shall immediately notify Tenant of any lien,
claim of lien or other action of which Landlord has or reasonably should have
knowledge and which affects the title to the Building or any part thereof, and
shall cause the same to be removed within sixty (60) days after receipt of
notice (or such additional time as Tenant may consent to in writing), either by
paying and discharging such lien or by posting a bond or such other security as
may be reasonably satisfactory to Tenant. If Landlord shall fail to remove same
within said time period, Tenant may take such action as Tenant deems necessary
to remove the same and the entire cost thereof shall be immediately due and
payable by Landlord to Tenant.
2.05 Landlord shall warrant its work for a period of one (1) year after
date of completion. In addition, unless the need for repairs or replacement is
caused by an insurable loss or by Tenant, its agents, employees, invitees,
licensees or contractors;
(a) Landlord, at its expense, shall be responsible for structural
repairs and replacements due to patent or latent defects in the footings,
<PAGE>
2
foundations (except those installed by tenant) and the four outer walls.
(b) In the event the roof has to be replaced during the initial Lease
term, Landlord shall pay any cost not covered by the roof warranty. In the
event the roof has to be replaced during any extended term, the parties
shall share the cost based upon the expected life of the roof compared to
the remaining term of the Lease.
(c) In the event that the parking lot or driveways on the Property
must be totally replaced during the Lease Term, Tenant shall share the cost
bases upon the expected life of such payment compared to the remaining term
of the Lease.
2.06 Tenant shall fill in any machinery or equipment pits prior to vacating
the Premises.
2.07 Landlord shall cause weekly construction meetings to be held (so long
a representative of Tenant attends at least every other meeting). Each party
shall name a representative in writing which representative shall have authority
to bind the party to construction items up to a cost or value of $50,000. After
delivery of possession of the Premises the parties will conduct an inspection
and create a punch list which Landlord will have the contractor correct in a
timely manner.
SECTION 3
THE TERM
3.01 (a) Except as provided in Section 3.04 hereof, the Term will commence
(the "Commencement Date") on the earlier of:
(i) The date Tenant takes possession of the entire Premises; or
(ii) The date Landlord delivers possession of the entire Premises to
Tenant, ready for occupancy.
The term will be ten (10) years, from and after the Commencement Date. If
the Commencement Date is other than the first day of a calendar month, the Term
will be extended to terminate at the end of the calendar month in which it would
otherwise terminate under the preceding sentence.
In the event Tenant takes possession of portions of the Premises other than
for fixturing as provided in Section 3.04 hereof, such possession will be under
all of the provisions of this Lease including, but not limited to, the base
rental and
<PAGE>
3
additional rental established hereunder which rental shall be prorated for the
actual square footage occupied by Tenant as compared to the total square footage
of the building.
3.01 (b) Possession of the Premises shall be deemed delivered to Tenant on
the date when all of the following shall have occurred:
(1) Landlord's Work is substantially complete. "Substantially complete" as
used in this Lease shall mean the delivery by the Landlord to Tenant of a
certification by Landlord's architect that the architect has inspected the Work
and that the Work has been substantially completed in accordance with the
appropriate plans and/or specifications and can be occupied for the use intended
under this Lease. Work shall not be considered incomplete if only minor or
insubstantial details of construction, decoration or mechanical adjustments
remain to be done within the building, or if only landscaping, exterior trim or
completion of the parking lot remains to be done outside the building or if the
delay in the availability of the Premises for Tenant's occupation is caused in
whole or in part by Tenant. However, the parking lot must be useable even if not
hard surfaced;
(2) The Premises are free and clear from all tenancies, occupancies, claims
or rights to possession of persons other than the rights of Landlord and Tenant
under this lease, and free from all orders, notices, violations, and
construction liens, and from complaints or reports of violations, noticed or
existing in or filed with any federal, state, county or local authority; and
(3) Landlord has obtained a temporary certificate of occupancy (or
equivalent form of governmental approval) from the appropriate municipality or
governmental agency which will permit the Premises to be occupied for the use
intended under this Lease. Landlord shall do such Work and provide such items
(including bonds) as may be necessary to obtain a permanent certificate of
occupancy as promptly as reasonably possible.
SECTION 6
TAXES, ASSESSMENTS AND UTILITIES
6.05 Right to Contest Taxes.
(a) Landlord shall promptly notify Tenant of any increase in assessed value
of or increases in Taxes attributable to the Premises of which Landlord receives
notice or otherwise becomes aware.
(b) If Taxes are not contested by Landlord, Tenant shall have the right to
contest such Taxes, at Tenant's
<PAGE>
4
sole cost and expense, by the appropriate proceedings diligently contested in
good faith. Notwithstanding such proceedings, the contested Taxes shall be
promptly paid and discharged, unless such proceedings (and where necessary the
posting of an appropriate bond or other security) shall operate to prevent or
stay the collection of the Taxes and secure any accruing penalties or interest
and to cure Landlord's default in the payment of Taxes required under any
mortgage upon the Premises. Landlord shall join Tenant in such proceedings, if
necessary, provided that Tenant pays all costs and expenses incurred by
Landlord.
6.06 Any special assessment that must be paid in a single lump sum shall be
paid by Landlord. Tenant shall repay Landlord for its prorate share of such
assessment based on the useful life of the improvement provided by such
assessment attributable to the remaining term of the Lease, as extended.
SECTION 9
DAMAGE BY FIRE OR OTHER CASUALTY
9.01 Repairs to Premises. In the event the Premises are damaged or
destroyed in whole or in part by fire or other casualty during the Term of this
Lease, then Tenant shall, after the adjustment of the insurance loss and the
release of such proceeds to the Tenant, immediately commence and diligently
pursue the restoration of the Premises to good and tenantable condition. Tenant
shall restore the Premises to substantially the same condition as before the
occurrence of such casualty.
If and to the extent covered by loss of rents insurance proceeds, the rent
required under this Lease shall abate in proportion to the area of the Building
which is untenantable, provided, however, that if Tenant uses any part of such
untenantable portion for storage during the period of repair, Landlord may
assess a reasonable charge therefor against Tenant.
If the insurance proceeds available for rebuilding are insufficient to
cover the cost of repairs and restoration of the Premises as required hereunder,
Tenant shall nevertheless complete such repairs and restoration and shall pay
any and all amounts by which the cost to complete such work exceeds the
available insurance proceeds.
If the available insurance proceeds exceed the cost of such repairs and
restoration, the excess shall be the property of Tenant, and Landlord shall have
no right or interest therein. The insurance proceeds will be held in an interest
bearing account for the benefit of Tenant by Metropolitan Title Company (or
other mutually agreeable title company) and disbursed in accordance with
customary construction loan disbursement procedures.
<PAGE>
5
9.02 Tenant has right to terminate the Lease in the event of fire or
casualty if more than 50% of Building is destroyed as determined by the building
inspector of the City of Rochester Hills (or in the alternative an architect
acceptable to both parties) and all insurance proceeds are paid to Landlord and
are sufficient to enable Landlord to rebuild the Building. Tenant will remit to
Landlord any shortfall in insurance proceeds. Any excess in insurance proceeds
shall be paid to the Tenant.
SECTION 22
22.02 Tenant's Right to Cure Landlord's Default. If Landlord defaults in
the performance of any provision of this Lease, Tenant shall have the right (but
not the obligation) in addition to any and all other rights and remedies
available to Tenant at law or in equity, to cure such default on behalf of
Landlord, upon ten (10) days' prior written notice to Landlord unless such cure
cannot be made within such period in which event Landlord shall have such
additional time as may be required to complete such cure so long as Landlord
commences and is diligently pursuing such cure, except that in an emergency,
Tenant may cure such default without prior notice to Landlord. Upon receipt from
Tenant of notice of such cure and demand for payment, Landlord shall repay any
payment or expenditure made by Tenant, on or before the date the next monthly
installments of rent is due.
Tenant's failure to exercise its right to cure such default(s) shall not be
deemed a breach of this Lease nor a waiver or release of any of Landlord's
obligations under this Lease.
SECTION 30
INDEMNIFICATION
30.02 As limited by Section 32 of the Lease, Landlord at its expense will
defend, indemnify and save Tenant, its licensees, servants, agents, employees
and contractors, harmless form any loss, damage, claim of damage, liability or
expense to or for any person or property, whether based on contract, tort
negligence or otherwise, arising directly or indirectly out of or in connection
with the acts or omissions of Landlord, its licensees, servants, agents,
employees or contractors, the failure of Landlord to comply with any provision
of this Lease; provided, however, that nothing herein shall be construed to
require Landlord to indemnify Tenant against Tenant's own acts, omission or
neglect.
<PAGE>
6
SECTION 35
ADDENDUM TO GOVERN
35.01 The terms and provisions of this Addendum shall govern and control
the terms and provisions of the preprinted lease form to which this Addendum is
attached if or whenever any term or provision of the preprinted lease form is
inconsistent or in conflict with the terms and provisions of this Addendum.
SECTION 36
OPTION TO RENEW
36.01 Grant of Option. Tenant shall have the right and option to extend the
Term of this Lease for five (5) additional periods of two (2) years each in
duration, (hereinafter called the extension periods), such extension periods to
commence upon the expiration of the original Term of this Lease, or the
extension period, as the case may be, provided, that Tenant is not then in
default under any of the terms, covenants and conditions of this Lease, and/or
if during the year immediately preceding the date for exercise of the option in
question Tenant has not been in default under the Lease for any consecutive
period of three (3) months, or any nonconsecutive period totalling six (6)
months. Each said extension period shall be on like terms and conditions as set
forth in the Lease attached hereto, except that the minimum net rental for each
extension period shall be established as set forth below:
First two (2) year Renewal Period: Thirty-Eight Thousand Seven Hundred
Thirty and 42/100 ($38,730.42) Dollars per month or Seven and 00/100
($7.00) Dollars per square foot per year.
Second two (2) year Renewal Period: Thirty-Nine Thousand Eight Hundred
Ninety-Two and 33/100 ($39,892.33) Dollars per month or Seven and 21/100
($7.21) Dollars per square foot per year.
Third through fifth two (2) year Renewal Periods: Rental rate will be the
greater of Fair Market Value or the rental rate for the previous Renewal
Period.
Adjusted Minimum Net Rental for Option Periods three (3) through five
(5). Tenant's possession of the Premises during each of the extension
periods, if any, shall be under and subject to all the terms,
covenants and conditions set forth in this Lease, with the exception
that the minimum net rental under Section 4 for the extension period
shall be adjusted to the fair market rental value of the Premises at
the time of
<PAGE>
7
commencement of the extension period in question. Within thirty (30)
days following Tenant's notice to Landlord of exercise of its option
to extend the Term for the extension period in question, Landlord
shall notify Tenant of Landlord's determination of the fair market
rental value for such extension period. Tenant shall have fifteen (15)
days following receipt of Landlord's determination in which to accept
or reject such determination. If Tenant does not notify Landlord of
its rejection of the determination within said fifteen (15) day
period, Tenant shall be deemed conclusively to have accepted the
rental set forth therein. If Tenant rejects Landlord's determination
and if Landlord and Tenant in good faith cannot agree upon the fair
market rental value within fifteen (15) days following Tenant's
rejection of Landlord's determination, Tenant may by notice to
Landlord within ten (10) days after expiration of the immediately
preceding fifteen (15) day period, elect by written notice to
Landlord, to withdraw its exercise of this option, in which event
Tenant shall have no further obligation or liability hereunder, or
proceed as hereinafter provided. In the event Tenant does not so
notify Landlord within such ten (10) day period of Tenant's election,
Tenant shall conclusively be deemed to have exercised this option in
which event the Landlord and Tenant shall each select, at its own
expense, an MAI appraiser specializing in the appraisal of industrial
properties within ten (10) days after Tenant's notice of its election
to proceed or the expiration of the ten (10) day notice period,
whichever occurs first. The two appraisers so selected shall have
thirty (30) days in which to determine the fair market rental value of
the Premises. If they cannot agree upon the fair market rental value
within said thirty (30) day period, the two appraisers promptly shall
jointly select a third MAI appraiser specializing in the appraisal of
industrial properties, whose determination shall be made within thirty
(30) days. The average of fair market rental value of the two closest
appraisals shall be determined as the fair market rental value of the
Premises and shall be binding on the Landlord and the Tenant. The cost
of the third appraiser shall be borne equally by Landlord and Tenant.
In the event there shall be any delay in the determination of the rent
for either extension period, the rent payable during the original Term
of the Lease, or the extension period, as the case may be, shall
continue until such determination, at which time any deficiency shall
be paid promptly to the Landlord.
36.02 Exercise of Option. Tenant shall give to Landlord written notice of
its intention to extend the original Term of this Lease and any subsequent
extension not less than six
<PAGE>
8
(6) months, prior to the expiration of the original term or any subsequent
extension of this lease.
36.03 Option Personal to Tenant. The option to extend the Term of this
Lease set forth herein is personal to Tenant and shall not be assigned or
transferred to any other party in any manner whatsoever (except to a party
described in the fourth sentence of Section 15.01 hereof).
SECTION 38
TOXIC WASTE PROVISION
38.01 Tenant shall be fully responsible, at its own expense, for the
control and appropriate handling of any toxic chemicals or other substances used
or stored on the Premises in connection with Tenant's business conducted
therein. Tenant shall not spill, introduce, discharge or bury any toxic
chemical, substance or contaminant of any kind in, on, or under the Premises or
any portion thereof, or permit the discharge thereof into the sanitary or storm
sewer or water system serving the Premises and/or the industrial park in which
the Premises are located, or into any municipal or other governmental water
system or storm and/or sanitary sewer system, without first obtaining the
written license, permit or other approval of all governmental agencies having
jurisdiction thereover, and in any event Tenant shall employ all appropriate
safeguards and procedures necessary or appropriate to protect such systems from
contamination. Tenant shall undertake, at its expense, any necessary and/or
appropriate cleanup process in connection with any breach of the foregoing
covenant, and without limiting Tenant's other indemnity or insurance obligations
under this Lease, Tenant shall indemnify and hold harmless Landlord from and
against all liability, whether direct or indirect, arising from any incident or
occurrence on or about the Premises or the industrial park in which the Premises
are located pertaining to toxics caused by tenant, its agents, employees,
invitees and contractors.
38.02 Exhibit "D" attached to and made a part of this Lease has been
completed by Tenant.
38.03 Landlord, at its sole cost and expense, shall deliver to the Tenant a
written environmental Phase I assessment of the Premises within 30 days of the
execution of this Lease by the Landlord and Tenant. Such report shall be
prepared by Quantum Environmental, Inc., of Ann Arbor, Michigan, a company
qualified to identify the presence of hazardous or toxic materials or waster and
to assess the environmental condition of sites. If the Phase I Assessment
reveals the existence of hazardous or toxic materials or waste, the Landlord
may, at its sole cost and expense, promptly remediate the same or either party
may elect to terminate this Lease by giving written notice to the other in which
event any monies paid by Tenant to Landlord
<PAGE>
9
in advance shall be refunded to tenant and neither party shall have any further
liability to the other hereunder unless Tenant promptly elects to proceed with
the Lease, in which event Landlord shall have no obligation hereunder with
regard to such hazardous or toxic materials or waste and Tenant shall indemnify
and hold Landlord harmless as provided in Section 39.01 as if such materials or
waste had been caused solely by Tenant. The Tenant shall conduct an
environmental Phase I audit by a company acceptable to Landlord, at its sole
cost and expense, and furnish a written report to the Landlord ten (10) days
prior to the Lease termination date. In the event such report of Tenant shows
the presence of hazardous or toxic materials or waste, unless Tenant can
establish that such hazardous or toxic materials or waste were not caused by
Tenant's use of the Premises, Tenant shall undertake, at its sole cost and
expense, any necessary and/or appropriate cleanup process.
SECTION 39
PURCHASE PROVISION
39.01 In the event Landlord decides to sell the Property as a single
property to third parties, it will first offer the Property to Tenant. Tenant
shall have fifteen (15) days following receipt of Landlord's notice in which to
advise Landlord of its desire to purchase the Property. If Tenant does not
notify Landlord of its election within said fifteen (15) day period, Tenant
shall be deemed conclusively to have waived any right to purchase the Property.
If Tenant elects to purchase the Property within such 15 day period the parties
shall attempt to reach agreement on the fair market value within fifteen (15)
days following Tenant's notice to Landlord. In the event the parties can not
agree on the fair market value the Landlord and Tenant shall each select, at its
own expense, an MAI appraiser specializing in the appraisal of industrial
properties within ten (10) days thereafter. The two appraisers so selected shall
have thirty (30) days in which to determine the fair market rental value of the
Premises. If they cannot agree upon the fair market rental value within said
thirty (30) day period, the two appraisers promptly shall jointly select a third
MAI appraiser specializing in the appraisal of industrial properties, whose
determination shall be made within thirty (30) days. The average of fair market
value of the two closest appraisals shall be determined as the fair market value
of the Premises and shall be binding on the Landlord and the Tenant. The cost of
the third appraiser shall be borne equally by Landlord and Tenant.
39.02 The option to purchase is personal to Tenant and shall not be
assigned or transferred to any other party in any manner whatsoever (except to a
party described in the fourth sentence of Section 15.01 hereof).
<PAGE>
10
SECTION 40
LANDLORD REPRESENTATIONS
40.01 Landlord represents and warrants that:
(a) It owns the land in fee simple, subject only to items 7 through 13
inclusive of First American Title Insurance Company commitment for title
insurance No. O-166763 dated August 18, 1994;
(b) It has adequate financial ability to construct the building and
improvements described on Exhibit B hereto; and
(c) As to the Property and the Improvements constructed by Landlord
thereon, there will be no violation of the Declaration of Covenants and
Restrictions.
40.02 Landlord shall not convey, transfer or assign its interest in the
Property or in this Lease prior to the Commencement Date.
SECTION 41
OWNER'S ASSOCIATION
41.01 Landlord shall use its best efforts to send Tenant copies of all
information that it receives in writing as a property owner member of the
Rochester Hills Executive Park Property Owners Association (the "Owner's
Association"). To the extent relevant to Tenant's tenancy or obligations under
the Lease with regard to the Owner's Association, Landlord will allow Tenant to
participate in the activities of the Owner's Association as if it were the owner
of the Premises.
41.02 To the extent permitted under the Owner's Association liability
insurance policy, Landlord shall use its best efforts (so long as there is no
increase in premium, or if there is Tenant remits it in advance) to have Tenant
included as a named insured.
<PAGE>
11
Witnesses Landlord: FIRST INDUSTRIAL,
L.P., a Delaware limited
- ----------------------- partnership
By: First Industrial Realty
- ----------------------- Trust, Inc.,
its general partner
By:/s/ Michael G. Damone
Its: Senior Regional Director
Tenant: AMERICAN AXLE &
MANUFACTURING, INC., a
Delaware Corporation
- ----------------------- By:/s/ Richard E. Dauch
- ----------------------- Its: President and CEO
<PAGE>
12
EXHIBIT "A"
Legal Description:
Land in the City of Rochester Hills, County of Oakland, State of Michigan more
particularly described as follow:
Lot 36 and the South 27.00 feet of Lot 35, "Rochester Hills Executive Park", a
part of the S.W. 1/4 of Section 29 and a part of the S.E. 1/4 of Section 30,
T.3N., R.11E., City of Rochester Hills, Oakland County, Michigan according to
the plat thereof as recorded in Liber 199, Pages 26-30, Oakland County Records.
<PAGE>
13
MAP
<PAGE>
14
EXHIBIT "B"
o Site Plan and related drawings prepared by Nowak & Fraus, Job Number
9081, Sheets 1 through 9, dated 9/19/94.
o Landscape Site Plan prepared by James C. Scott and Associates, Inc.,
Sheet S-401, dated 9/8/94.
o Architectural Drawings prepared by Smith/Schurman Associates, Inc.,
Job #945642, dated 9/19/94, Sheets A201, A202, A301, A302, A401, A402,
A501, A601, A602, M401, M402, S1 through S4.
The foregoing are collectively referred to as the "Plans and Specifications".
<PAGE>
9/20/94
ADDENDUM attached to and made a part of a Lease dated September 30, 1994,
between FIRST INDUSTRIAL, L.P., as Landlord, and AMERICAN AXLE & MANUFACTURING,
INC., a Delaware Corporation, as Tenant, for premises located at Technology
Drive, City of Rochester Hills, County of Oakland, State of Michigan.
ADDITIONAL CONDITIONS:
SECTION 6
TAXES, ASSESSMENTS AND UTILITIES
6.05 Right to Contest Taxes
(a) Landlord shall promptly notify Tenant of any increase in assessed value
of or increases in Taxes attributable to the Premises of which Landlord receives
notice or otherwise becomes aware.
(b) If Taxes are not contested by Landlord, Tenant shall have the right to
contest such Taxes, at Tenant's sole cost and expense, by the appropriate
proceedings diligently contested in good faith. Notwithstanding such
proceedings, the contested Taxes shall be promptly paid and discharged, unless
such proceedings (and where necessary the posting of an appropriate bond or
other security) shall operate to prevent or stay the collection of the Taxes and
secure any accruing penalties or interest and to cure Landlord's default in the
payment of Taxes required under any mortgage upon the Premises. Landlord shall
join Tenant in such proceedings, if necessary, provided that Tenant pays all
costs and expenses incurred by Landlord.
6.06 Any special assessment that must be paid in a single lump sum shall be
paid by Landlord. Tenant shall repay Landlord for its pro rata share of such
assessment based on the useful life of the improvement provided by such
assessment attributable to the remaining term of the Lease, as extended.
SECTION 22
22.02 Tenant's Right to Cure Landlord's Default. If Landlord defaults in
the performance of any provision of this Lease, Tenant shall have the right (but
not the obligation) in addition to any and all others rights and remedies
available to Tenant at law or in equity, to cure such default on behalf of
Landlord, upon ten (10) days' prior written notice to Landlord unless such cure
cannot be made within such period in which event Landlord shall have such
additional time as may be required to complete such cure so long as Landlord
commences and is diligently pursuing such cure, except that in an emergency,
Tenant may cure such default without prior notice to Landlord. Upon receipt from
Tenant of notice of
1
<PAGE>
such cure and demand for payment, Landlord shall repay any payment or
expenditure made by Tenant, on or before the date the next monthly installments
of rent is due.
Tenant's failure to exercise its right to cure such default(s) shall not be
deemed a breach of this Lease nor a waiver or release of any of Landlord's
obligations under this Lease.
SECTION 30
INDEMNIFICATION
30.02 As limited by Section 32 of the Lease, Landlord at its expense will
defend, indemnify and save Tenant, its licensees, servants, agents, employees
and contractors, harmless from any loss, damage, claim of damage, liability or
expense to or for any person or property, whether based on contract, tort
negligence or otherwise, arising directly or indirectly out of or in connection
with the acts or omissions of Landlord, its licensees, servants, agents,
employees or contractors, the failure of Landlord to comply with any provision
of this Lease; provided, however, that nothing herein shall be construed to
require Landlord to indemnify Tenant against Tenant's own acts, omission or
neglect.
SECTION 35
ADDENDUM TO GOVERN
35.01 The terms and provisions of this Addendum shall govern and control
the terms and provisions of the preprinted lease form to which this Addendum is
attached if or whenever any term or provision of the pre-printed lease form is
inconsistent or in conflict with the terms and provisions of this Addendum.
SECTION 36
OPTION TO RENEW
36.01 Grant of Option. Only in the event Tenant exercises its option to
renew its Lease of the adjacent property, Tenant shall have the right and option
to extend the Term of this Lease for five (5) additional periods of two (2)
years each in duration, (hereinafter called the extension periods), such
extension periods to commence upon the expiration of the original Term of this
Lease, or the extension period, as the case may be, provided, that Tenant is not
then in default under any of the terms, covenants and conditions of this Lease,
and/or if during the year immediately preceding the date for exercise of the
option in question Tenant has not been in default under the Lease for any
consecutive period of three (3) months, or any nonconsecutive period totalling
six (6) months. Each said extension period shall be on like terms and conditions
as set forth in the Lease attached hereto, except that the minimum net rental
for each extension period shall be established as set forth below:
2
<PAGE>
First two (2) year Renewal Period: Three Thousand Four Hundred Forty Three and
58/100 (%3,443.58) Dollars per month.
Second two (2) year Renewal Period: Three Thousand Five Hundred Forty Six and
89/100 ($3,546.89) Dollars per month.
Third through fifth two (2) year Renewal Periods: Rental rate will be the
greater of Fair Market Value or the rental rate for the previous Renewal Period.
Adjusted Minimum Net Rental for Option Periods three (3) through five (5).
Tenant's possession of the Premises during each of the extension periods,
if any, shall be under and subject to all the terms, covenants, and
conditions set forth in this Lease, with the exception that the minimum net
rental under Section 4 for the extension period shall be adjusted to the
fair market rental value of the Premises at the time of commencement of the
extension period in question. Within thirty (30) days following Tenant's
notice to Landlord of exercise of its option to extend the Term for the
extension period in question, Landlord shall notify Tenant of Landlord's
determination of the fair market rental value for such extension period.
Tenant shall have fifteen (15) days following receipt of Landlord's
determination in which to accept or reject such determination. If Tenant
does not notify Landlord of its rejection of the determination within said
fifteen (15) day period, Tenant shall be deemed conclusively to have
accepted the rental set forth therein. If Tenant rejects Landlord's
determination and if Landlord and Tenant in good faith cannot agree upon
the fair market rental value within fifteen (15) days following Tenant's
rejection of Landlord's determination, Tenant may by notice to Landlord
within ten (10) days after expiration of the immediately preceding fifteen
(15) day period, elect by written notice to Landlord, to withdraw its
exercise of this option, in which event Tenant shall have no further
obligation or liability hereunder, or proceed as hereinafter provided. In
the event Tenant does not so notify Landlord within such ten (10) day
period of Tenant's election, Tenant shall conclusively be deemed to have
exercised this option in which event the Landlord and Tenant shall each
select, at its own expense, an MAI appraiser specializing in the appraisal
of industrial properties within ten (10) days after Tenant's notice of its
election to proceed or the expiration of the ten (10) day notice period,
whichever occurs first. The two appraisers so selected shall have thirty
(30) days in which to determine the fair market rental value of the
Premises. If they cannot agree upon the fair market rental value within
said thirty (30) day period, the two appraisers promptly shall jointly
select a third MAI appraiser specializing in the appraisal of industrial
properties, whose determination shall be made within thirty (30) days. The
average of fair market rental value of the two closest appraisals shall be
determined as the fair market rental value of the Premises and shall e
binding on the Landlord and the Tenant. The cost of the third appraiser
shall be borne equally by Landlord and Tenant. In the event there shall be
any delay in the determination of he rent for either extension period, the
rent payable during the
3
<PAGE>
original Term of the Lease, or the extension period, as the case may be,
shall continue until such determination, at which time any deficiency shall
be paid promptly to the Landlord.
36.02 Exercise of Option. Tenant shall give to Landlord written notice of
its intention to extend the original Term of this Lease and any subsequent
extension not less than six (6) months, prior to the expiration of the original
term or any subsequent extension of this lease.
36.03 Option Personal to Tenant. The option to extend the Term of this
Lease set forth herein is personal to Tenant and shall not be assigned or
transferred to any other party in any manner whatsoever (except to a party
described in the fourth sentence of Section 15.01 hereof), and may only be
exercised if Tenant exercises its option to extend contained in the Lease of the
adjacent property and not otherwise.
SECTION 38
TOXIC WASTE PROVISION
38.01 Tenant shall be fully responsible, at its own expense, for the
control and appropriate handling of any toxic chemicals or other substances used
or stored on the Premises in connection with Tenant's business conducted
therein. Tenant shall not spill, introduce, discharge or bury any toxic
chemical, substance or contaminant of any kind in, on, or under the Premises or
any portion thereof, or permit the discharge thereof into the sanitary or storm
sewer or water system serving the Premises and/or the industrial park in which
the Premises are located, or into any municipal or other governmental water
system or storm and/or sanitary sewer system, without first obtaining the
written license, permit or other approval of all governmental agencies having
jurisdiction thereover, and in any event Tenant shall employ all appropriate
safeguards and procedures necessary or appropriate to protect such systems from
contamination. Tenant shall undertake, at its expense, any necessary and/or
appropriate cleanup process in connection with any breach of the foregoing
covenant, and without limiting Tenant's other indemnity or insurance obligations
under this Lease, tenant shall indemnify and hold harmless Landlord from and
against all liability, whether direct or indirect, arising from any incident or
occurrence on or about the Premises or the industrial park in which the Premises
are located pertaining to toxics caused by tenant, its agents, employees,
invitees and contractors.
38.02 Exhibit "D" attached to and made a part of this Lease has been
completed by Tenant.
38.03 Landlord, at its sole cost and expense, shall deliver to the Tenant a
written environmental Phase I assessment of the Premises within 30 days of the
execution of this Lease by the Landlord and Tenant. Such report shall be
prepared by Quantum Environmental, Inc., of Ann Arbor, Michigan, a company
qualified to identify the presence of hazardous or toxic materials or waster and
to assess the environmental condition of sites. If the Phase I Assessment
reveals the existence of hazardous or toxic materials or waste, the
4
<PAGE>
Landlord may, at its sole cost and expense, promptly remediate the same or
either party may elect to terminate this Lease by giving written notice to the
other in which event any monies paid by Tenant to Landlord in advance shall be
refunded to tenant and neither party shall have any further liability to the
other hereunder unless Tenant promptly elects to proceed with the Lease, in
which event Landlord shall have no obligation hereunder with regard to such
hazardous or toxic materials or waste and Tenant shall indemnify and hold
Landlord harmless as provided in Section 39.01 as if such materials or waste had
been caused solely by Tenant. The Tenant shall conduct an environmental Phase I
audit by a company acceptable to landlord, at its sole cost and expense, and
furnish a written report to the Landlord ten (10) days prior to the Lease
termination date. In the event such report of Tenant shows the presence of
hazardous or toxic materials or waste were not caused by Tenant's use of the
Premises, Tenant shall undertake, at its sole cost and expense, any necessary
and/or appropriate cleanup process,.
SECTION 39
PURCHASE PROVISION
39.01 Only in the event Tenant has and exercises its right to purchase the
adjacent property it may purchase the Land on the same terms and conditions as
contained in the Lease of the adjacent property.
39.02 The option to purchase is person to Tenant and shall not be assigned
or transferred to any other party in any manner whatsoever (except to a party
described in the fourth sentence of Section 15.01 hereof).
SECTION 40
LANDLORD REPRESENTATIONS
40.01 Landlord represents and warrants that it owns the land in fee simple,
subject only to items 7 through 13 inclusive of First American Title Insurance
Company commitment for title insurance No. 0-1667663 dated August 18, 1994.
40.02 Landlord shall not convey, transfer or assign its interest in the
Property or in this Lease prior to the Commencement Date.
SECTION 41
CONSTRUCTION
41.01 In the event Tenant elects to expand the building on the adjacent
parcel, either (i) Landlord shall construct such addition and the rent hereunder
shall be agreed to by the parties prior to commencement of the work, or (ii)
Tenant may construct such addition at its sole cost and expense pursuant to
plans and specifications that are subject to the prior approval of Landlord and
which addition shall become he property of the Landlord
5
<PAGE>
at the end of the Lease Term. The construction by tenant shall be generally
consistent with design and quality of the original construction.
SECTION 42
RIGHT OF TERMINATION
42.01 At any time during the initial ten (10) year term of this Lease, so
long as Tenant is not in default hereunder and no addition or other structure
has been constructed on the Premises, Tenant may terminate this Lease and all of
its obligations hereunder following one years prior written notice to Landlord.
SECTION 43
CROSS-DEFAULT
43.01 A default by Tenant under the terms and conditions of the lease of
the adjacent property shall be considered a default hereunder.
Witnesses Landlord: FIRST INDUSTRIAL, L.P.,
a Delaware limited partnership
By: First Industrial Realty
Trust, Inc.
its general partner
By: /s/ Michael G. Damone
- ------------------------ ------------------------------
Its: Senior Regional Director
- ------------------------
Tenant: AMERICAN AXLE &
MANUFACTURING, INC., a Delaware
Corporation
By: /s/ Richard E. Dauch
- ------------------------ ------------------------------
Its: /s/ President & CEO
- ------------------------ ------------------------------
6
<PAGE>
EXHIBIT "A"
Legal Description
Land in the City of Rochester Hills, County of Oakland, State of Michigan more
particularly described as follow:
The southerly 207 feet of Lot 35 except the southerly 27 feet thereof,
"Rochester Hills Executive Park" according to the plat thereof recorded in Liber
199 of Plats, pages 26, 27, 28, 29 and 30, Oakland County Records.
<PAGE>
EXHIBIT "A"
PAGE 2
MAP
<PAGE>
EXHIBIT "C"
PAGE 1 OF 13
ROCHESTER HILLS EXECUTIVE PARK
DECLARATION OF COVENANTS AND RESTRICTIONS
This Declaration of Covenants and Restrictions is made this 22nd day of
December, 1992 by Rochester Hills Executive Park, a Michigan joint venture
having an office at 850 Stephenson Highway, Suite 600, Troy, Michigan 48083.
WHEREAS, Rochester Hills Executive Park, a Michigan joint venture, is the
owner of the real property described in attached Exhibit A (the "Land") and,
WHEREAS, it is the intention of Rochester Hills Executive Park to develop
the Land as an industrial park known as Rochester Hills Executive Park (the
"Park"), containing industrial facilities of harmonious structural and
architectural design and suitable landscaping, and to adopt a general plan of
improvement for the benefit of all of the Land and the future owners thereof as
hereinafter set forth.
NOW, THEREFORE, it is hereby declared (subject to the provisions of Section
F below) that the Land is held and shall be held, conveyed, encumbered, leased,
rented, used, occupied and improved subject to the following conditions,
restrictions and covenants in furtherance of a plan for the division,
improvement and sale of the Land, which are established for the purpose of
enhancing the value, desirability and attractiveness of the Land. The
conditions, restrictions and covenants herein contained are hereby expressly
made an essential part of this instrument and shall be and remain in full force
and effect in respect to the said premises and the parties herein designated,
their and each of their successors, heirs and assigns until the expiration
thereof as hereinafter stated.
All of the conditions, covenants and restrictions shall run with the Land
and shall be binding on all parties having or acquiring any right, title or
interest in the Land, or any party hereof. They shall be for the benefit of each
owner of any portion of the Land or any interest therein and shall inure to the
benefit of and be binding upon each successor in interest of the owners thereof.
A. Definitions
1. The "Developer" shall mean:
(a) Rochester Hills Executive Park, a Michigan joint venture, its
successors and assigns;
(b) any partnership, joint venture, corporation, association or trust
controlled by Rochester Hills Executive Park, a Michigan joint
venture, or by which Rochester Hills Executive Park has been
acquired, provided it has been granted
<PAGE>
EXHIBIT "C"
PAGE 2 OF 13
of record by Rochester Hills Executive Park the exclusive right
to act hereunder;
(c) Any association, organized by a majority of owners of record of
the and for the purpose of maintaining and enforcing the
restrictions as set forth in Section B herein and provided
Rochester Hills Executive Park or its successor has granted to
said association the exclusive right to act hereunder;
2. "Site" means an area of the Land in the same ownership or subject to
the same leasehold interest;
3. "Site Area" shall be the square footage of the Land in the same
ownership which shall include easements, rights of way and property
thereafter taken for streets or railroads whether by condemnation or
dedication.
B. Restrictions.
1. All structures and improvements constructed or erected on a Site shall
comply with applicable ordinances, rules, regulations and codes.
Moreover, no structure or any portion thereof shall be constructed on
any Site within fifth (50) feet of any street in existence at the time
of construction, or within fifteen (15) feet of its side lot lines and
twenty (20) feet of its rear lot lines, nor shall more than fifth
(50%) of any Site be covered by structures. No parking surfaces shall
be constructed within the front set back area.
2. Exterior walls of buildings shall be constructed of durable permanent
materials, tastefully handled (face brick, treated concrete or other
architectural exterior surfaces or approved equal material). All
exposed masonry surfaces except brick and stone must be painted.
3. No building having barrel-type or arch-type roof construction shall be
built on any Site.
4. All set back areas from streets other than paved driveways and paved
walks, must be in lawns and landscaping and be irrigated via
underground sprinkler systems. All landscaped areas must be maintained
in a park-like manner. All landscaping and irrigation plans must be
approved by the Developer and implemented within one (1) year after
approval.
5. Overhead electric power lines are located on rear property lines.
Overhead electric service entrances shall be located at the rear of
the structure. If electric service entrances are forward of the rear
building wall, electric service entrances shall be underground. All
other overhead utility services shall comply with the electric service
entrance standards.
<PAGE>
EXHIBIT "C"
PAGE 3 OF 13
6. All vertical roof projections over eighteen (18) inches in height must
be set back a minimum of twenty (20) feet from the face of the
exterior walls; in no event may such projections, for equipment or
otherwise, exceed five (5) feet in height on any office roof.
7. All parking and truck maneuvering areas shall be surfaced with
bituminous concrete, asphalt or approved comparable all-weather
dustless material.
8. Outside storage shall comply with applicable ordinances, rules,
regulations and codes and, in any event, shall be permitted on the
rear lot areas only, and all such storage shall be properly fenced and
screened with approved material to a minimum height of six (6) feet
and a maximum height of ten (10) feet. Under no circumstances may
material or equipment in excess of ten (10) feet in height be stored
outdoors.
9. Signs must be for identification only, must be located on the exterior
building walls and cannot project above the roofline. They may not
exceed a height of four (4) feet and a total area of forty (40) square
feet. All lettering is to be open and of metallic material. Only
individual (i.e., unconnected) letters may be used on signs. Flashing
signs and ground signs are not permitted. All exterior signs must be
approved by the Developer.
10. The exterior of all structures and all walks, driveways, lawns and
landscaping on each Site shall be maintained in good order, repair and
condition and all exterior painted surfaces shall be maintained in
first-class condition and shall be repainted at least once in every
four (4) years.
11. All provisions of the zoning codes and ordinances in effect at the
time of conveyance shall be maintained and owners of Sites shall not
petition for variation or other relief with respect to such zoning
codes and ordinances without prior written approval of the Developer.
12. No open loading dock or truck loading doors shall be erected on the
sides of buildings fronting on any street.
13. Used for Sites shall be restricted to manufacturing, assembly,
processing, storage, wholesale, office, laboratory, professional
research and development activities; there shall be no junk or salvage
yard or rendering plant, or such other use which will be offensive to
the neighborhood by reason of odor, fumes, dust, smoke, noise, or
pollution, or such use as would be hazardous by reason of danger of
fire, explosion or contamination. Uses for retail purposes shall be
limited to sales of goods and services reasonably required for the
convenience of occupants of the Land, such as restaurants, drug
stores, barber and beauty shops, shoe repair shops, cleaners, post
offices, banks, department and hardware stores; no retail or wholesale
use shall be undertaken unless and until same shall have been approved
in the manner hereinafter provided (See Section C below).
<PAGE>
EXHIBIT "C"
PAGE 4 OF 13
14. No buildings, structures or exterior signs shall be erected, altered,
or added to or improved in any fashion on any Site on the Land until
the building plans and specifications, landscaping plan, and site plan
showing the location of such building or addition or improvement or
alteration have been approved by the Developer in writing as to
architectural design and to conformity and harmony of external design
to existing structures, and as to location of the building with
respect to topography and finished ground elevation, and in
conformance with all other restrictions of record, as aforesaid. All
blueprints, specifications, and plans submitted under this provision
shall be retained by the Developer.
15. There exists within the Land a certain storm drainage retention basis
(the "Basin"), which Basin is more particularly described in attached
Exhibit B. The Basin shall be used for the sole purpose of the
retention of surface water until such time as the City of Rochester
Hills (the "City") may determine and signify by written notice to the
Developer and its successors and assigns, if any, that it is no longer
necessary to utilize the Basin for the retention of surface water. In
no event shall the Basin be utilized for any purpose other than the
retention of surface water without the prior written agreement of the
Developer and the City. Notwithstanding the foregoing, the Developer
may use water from the Basin for purposes of irrigation. The discharge
of sewage or industrial waste of any kind into the Basin is
prohibited.
16. Accumulated of snow and ice on parking lots and drives must be removed
by shovel, plow or alt. Only the minimum amount of salt necessary for
the removal of snow and ice may be used.
17. Trees bordering the Basin shall not be removed so long as such trees
do not materially interfere with the intended use of a Site.
18. No owner(s) of a Site shall spill, leak, introduce, discharge or
release any hazardous substance as defined int he Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. 9601 et seq. ("CERCLA"), or any pollutant or contaminant of any
kind in, on or under the Land or any portion thereof, or to the air or
permit the discharge thereof into the sanitary or storm sewer or water
systems serving the Land and/or a Site or into any municipal or other
governmental water system or storm and/or sanitary sewer system
without complying with all applicable federal, state and locals laws
and regulations, and without first obtaining any necessary license,
permit or other approval of all governmental agencies having
jurisdiction thereover. No owner(s) of a Site shall store or treat any
hazardous waste, oil or polluting materials on or under the Land or a
Wit without complying with all federal, state and local laws and
ordinances, and without first obtaining all necessary licenses and
permits.
All safeguards and procedures necessary or appropriate to protect such
systems from contamination shall be employed by the owner()s) of each
Site A copy of any violation, permit, approval or license issued by
any federal, state or local government pursuant to any storage,
discharge or treatment of any such pollutant or contaminant or
<PAGE>
EXHIBIT "C"
PAGE 5 OF 13
violation of any such law or regulation shall be provided by the
owner(s) of each Site to the Developer promptly upon receipt thereof.
Notwithstanding anything contained herein to the contrary, it shall be
the sole responsibility of the owner(s) of any particular Site to
obtain (and thereafter achieve and maintain compliance therewith) all
necessary permits, licenses and authorizations as may be required by
applicable laws, regulations, rules and ordinances; nothing contained
herein shall be deemed to impose such obligations upon the Developer.
The owner(s) of any particular Site shall be solely responsible, at
its/their cost and expense, for the control and proper handling of any
toxic chemicals or other substances used or stored on such Site and
each such owner shall undertake, at its sole cost and expense, any
necessary and/or appropriate clean-up process in connection with the
foregoing covenant, and shall indemnify and hold the Developer
harmless from and against all liability, whether direct, indirect,
consequential or other wise, arising from any incident or occurrence
on or about the Site or the Land, attributable in whole or in part to
such owner, whether such owner has obtained any approval, license or
permit issued by any governmental authority having jurisdiction
thereof and pertaining to any hazardous substance as defined in CERCLA
or any relevant state or local rule, regulation or ordinance. The
obligation of a Site owner under the Paragraph 18, including without
limitation the foregoing indemnity, shall survive the expiration or
earlier termination of this Declaration of Covenants and Restrictions,
anything to the contrary contained herein notwithstanding.
C. Approvals, Variances and Waivers.
1. The Developer shall have the exclusive right to grant approvals
required by these restrictions and to waive or vary restrictions in
particular respects whenever in its opinion and sole discretion such
waiver or variance will not be detrimental to the Land.
2. All persons having an interest in any Site may rely upon the approval
signed by the Developer purporting to grant any approval or to waive
or vary restrictions in particular respects.
3. If building plans, specifications and plot plan have been submitted to
the Developer for approval, and written notice of disapproval has been
given by the Developer within sixty (60) days thereafter, all
construction other than exterior signs, driveways, parking areas,
grading, landscaping, fences and screens completed for more than three
(3) months shall be deemed approval unless prior to the expiration of
such period a suit for enforcement of the restrictions contained
herein has been commenced and notice thereof duly recorded.
D. Owner's Association.
1. In accordance with the terms of a certain Agreement for Maintenance of
Retention Basin dated August 10, 1984 and recorded in Liber 8845, Page
460 in the Office of the Oakland County Register of Deeds, the
Developer intends (and hereby reserves the right) to (i) establish a
Drainage District which shall utilize the Basin (the size and
<PAGE>
EXHIBIT "C"
PAGE 6 OF 13
location of such Drainage District being subject to the approval of
the City) and (ii) incorporate a Michigan nonprofit membership
corporation to serve as the Owner's Association (the "Association")
for the purpose of (i) maintaining the Basin in accordance with the
terms of the Agreement and this Declaration of Covenants and
Restrictions and (ii) maintaining, repairing and replacing the
landscaping within the Park (the "Landscaping") and the entranceways
to the Park (the "Entranceways").
2. The members of the Association shall consist of the owners of Sites
within the Park. The Association shall be subject to such provisions
as may be established by the Bylaws or Articles of Incorporation of
the Association, which the Developer reserves the right to prepare and
to amend or modify.
3. The Association shall have the right to make reasonable rules and
regulations relating to the maintenance of the Basin and the
maintenance, repair and replacement of the Landscaping and the
Entranceways. All persons and/or entities having an ownership or
leasehold interest in a Site shall abide by and observe such rules and
regulations.
E. Enforcement.
1. All of the provisions herein contained shall run with the Land and
shall be specifically enforceable.
2. So long as there is a Developer, as defined above, it shall have the
exclusive right to enforce the provisions hereof without liability for
failure to do so, except that each owner of record of any portion of
the Land shall have the right to enforce the provisions hereof then
applicable to any Site if the Developer shall fail to do so within
thirty (30) days after written request from any such owner and
providing said the Developer has not waived such provisions complained
of prior thereto.
3. If there ceases to be a Developer, or if there is for any reason no
"Developer" as defined herein, each owner of record of any portion of
the Land shall have the right to enforce the restrictions then
applicable to any site without liability providing said restrictions
have not been waived prior thereto.
4. A person having an interest in any Site who violates the restrictions
set forth in Section B above shall indemnify and hold harmless the
Developer, of the persons having an interest in a Site and their
respective successors and assigns from any claims, costs, causes of
action, damages, judgments, obligations or expenses, including
reasonable property or harm to any person incurred in connection with
or as a result of such person's negligence or any act or omission
arising from the exercise of the restrictions set forth above. The
terms and provisions of this paragraph shall survive the termination
of this Declaration of Covenants and Restrictions.
<PAGE>
EXHIBIT "C"
PAGE 7 OF 13
F. Limitations
The provisions of this Declaration of Covenants and Restrictions shall
run with the and bind the Land until December 31, 2020, whereupon they
shall be extended automatically for successive period of ten (10)
years.
<PAGE>
EXHIBIT "C"
PAGE 8 OF 13
IN WITNESS WHEREOF, the undersigned have executed this Declaration of
Covenants and Restrictions as of the date first written above.
WITNESSES: ROCHESTER HILLS EXECUTIVE PARK,
a Michigan joint venture
BY: RHEP LIMITED PARTNERSHIP, a
Michigan limited partnership
Its: Joint Venturer
By: Damone/Andrew
Investment Co., Inc.
Its: General Partner
/s/James E. White By: /s/ Michael G. Damone
- --------------------- ------------------------
Michael G. Damone
Its: President
/s/Sherril Szep
- ---------------------
And
By: /s/Daniel R. Andrew
------------------------
/s/James E. White Daniel R. Andrew
- -=------------------- Its: General Partner
/s/Sherri S. Szep
And
By: /s/Michael G. Damone
------------------------
/s/James E. White Michael G. Damone
- --------------------- Its: General Partner
/s/Sherri E. Szep
- ---------------------
STATE OF MICHIGAN )
) ss.
COUNTY OF OAKLAND )
The foregoing instrument was acknowledged before me this 22nd day of
December, 1992 by Michael G. Damone, the President of Damone/Andrew Investment
Co., Inc., a general partner of RHEP Limited Partnership, a Michigan limited
partnership, one of the joint venturers of Rochester Hills Executive Park, a
Michigan joint venture, on behalf of such joint venture.
/s/Ruth M. Manz
----------------------------
Notary Public, Macomb County,
Michigan
My Commission Expires: July 16, 1994
Acting in Oakland County, MI
<PAGE>
EXHIBIT "C"
PAGE 9 OF 13
STATE OF MICHIGAN )
) ss.
COUNTY OF OAKLAND )
The foregoing instrument was acknowledged before me this 22nd day of
December, 1992 by Michael G. Damone, a general partner of RHEP Limited
Partnership, a Michigan limited partnership, one of the joint venturers of
Rochester Hills Executive Park, a Michigan joint venture, on behalf of such
joint venture.
/s/Ruth M. Manz
----------------------------
Notary Public, Macomb County,
Michigan
My Commission Expires: July 16, 1994
Acting in Oakland County, MI
STATE OF MICHIGAN )
) ss.
COUNTY OF OAKLAND )
The foregoing instrument was acknowledged before me this 22nd day of
December, 1992 by Michael G. Damone, a general partner of RHEP Limited
Partnership, a Michigan limited partnership, one of the joint venturers of
Rochester Hills Executive Park, a Michigan joint venture, on behalf of such
joint venture.
/s/Ruth M. Manz
----------------------------
Notary Public, Macomb County,
Michigan
My Commission Expires: July 16, 1994
Acting in Oakland County, MI
<PAGE>
EXHIBIT "C"
PAGE 10 OF 13
DRAFTED BY AND WHEN
RECORDED, RETURN TO:
Michael A. Lesha, Esq.
Dykema Gossett
35th Floor - 400 Renaissance Center
Detroit, Michigan 48243
<PAGE>
EXHIBIT A - LEGAL FOR LAND
Lots 1 through 37 inclusive, and one private park of Rochester Hills Executive
Park, a part of the S.W. 1/4 of Section 29, and a part of the S.E. 1/4 of
Section 30, T.3N., R.11E., City of Rochester Hills, Oakland County, Michigan, as
recorded in Liber 199, Pages 26 through 30, inclusive, Oakland County Records.
<PAGE>
EXHIBIT B - LEGAL FOR BASIN
One private park within Rochester Hills Executive Park, a part of the S.W. 1/4
of Section 29, and a part of the S.E. 1/4 of Section 30, T.3N., R.11E., City of
Rochester Hills, Oakland County, Michigan, as recorded in Liber 199, Pages 26
through 30, inclusive, Oakland County Records.
<PAGE>
EXHIBIT "D"
HAZARDOUS WASTES - DAMONE/ANDREW-COPLEY
Building Size: _______________ Sq. Ft. Address: Research Drive
Tenant: American Axle & Mfg., Inc. Contact: Mr. Joe Richards
Phone: (313) 974-2354 Fax: (313) 974-2246
- --------------------------------------------------------------------------------
Please answer the following key questions so the landlord can evaluate the
potential toxic hazard presented by the proposed tenant's occupancy:
1. What will the tenant do in the building? "Research" and/or "assembly" are
not adequate responses as both may involve processes and/or material usage
which are potentially hazardous even in small quantities.
Testing, research, product development, sales & procurement.
2. Assuming the tenant has a process of some type, is it wet or dry?
3. What are the materials used in the process?
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
What waste product is generated?
Lubricating Oils.
4. How will the materials/waste be stored, for how long, and what is the
method of disposal?
Oils to be stored inside and recycled.
5. Does the tenant intend to install any tanks, clarifiers, sumps, etc.?
No
6. Does the tenant require that drains be installed in the floor of the
building? If so, what materials will be discharged into the sanitary and/or
storm sewer?
N/A
<PAGE>
SECOND ADDENDUM to that certain Lease dated September 30, 1994, between FIRST
INDUSTRIAL, L.P., as Landlord, and AMERICAN AXLE & MANUFACTURING, INC., as
Tenant, covering premises at 2965 Technology Drive, Rochester Hills, Michigan.
- --------------------------------------------------------------------------------
NOTWITHSTANDING anything to the contrary contained in the Lease and Addendum to
which this Second Addendum is attached and made a part thereof, Landlord and
Tenant agree as follows:
o The Commencement Date of the Lease shall be July 1, 1995 and the
termination date June 30, 2005, as evidenced by the attached copy of the
Certificate of Substantial Completion issued by the Project Architect,
Smith + Schurman Associates, Inc., on June 30, 1995.
All other terms and conditions of said Lease and Addendum to remain in full
force and effect unless in conflict with the terms and conditions of this Second
Addendum in which event the terms and conditions of this Second Addendum to
remain in which event the terms and conditions of this Second Addendum shall
prevail and control.
LANDLORD:
FIRST INDUSTRIAL, L.P., a Delaware Limited
Partnership
By: First Industrial Realty Trust, Inc., its
General Partner
By: Daniel R. Andrew
Its: Regional Director
TENANT:
AMERICAN AXLE & MANUFACTURING,
INC., a Delaware corporation
By: /s/ Gary J. Witosky
Its: Treasurer
July 5, 1995
<PAGE>
THIRD ADDENDUM to that certain Lease dated September 30, 1994, between FIRST
INDUSTRIAL, L.P., as Landlord, and AMERICAN AXLE & MANUFACTURING, INC., as
Tenant, covering premises at 2965 Technology Drive, Rochester Hills, Michigan.
- --------------------------------------------------------------------------------
NOTWITHSTANDING anything to the contrary contained in the Lease and Addenda to
which this Third Addendum is attached and made a part thereof, Landlord and
Tenant agree that effective December 1, 1995, the following Section 42 shall be
operative:
Section 42
Maintenance of Premises;
Payment for Services Rendered by Landlord
42.01 For the additional rent set forth in Section 42.03 of this Addendum, the
Landlord agrees to provide the services set forth on Schedule A hereto (the
"Maintenance and Services"), as the same may be amended by the parties from time
to time, beginning December 1, 1995. It is agreed and understood that such
Maintenance and Services shall be performed by outside contractors retained by
Landlord to provide such Maintenance and Services. The costs, providers, nature,
and scope of the Maintenance and Services are subject to the advance written
approval of Tenant.
42.02 The following definitions shall be accepted by Landlord and Tenant:
(a) "Maintenance and Service Expenses" shall mean the actual, reasonable,
and necessary expenses incurred by Landlord for the operation and
maintenance of the Premises in accordance with accepted principals of
sound management and accounting practices as applied to the operation
and maintenance of first class accounting practices as applied to the
operation and maintenance of first class industrial-type buildings,
but limited solely to the Maintenance and Services, which shall be
comprised of following:
(i) Janitorial contracted labor and supplies
(ii) Operating and maintenance contract labor and materials related
thereto, including the Premises' HVAC units, but not Tenant's
equipment or appurtenances thereto.
(iii) Operating and maintenance supplies relating to the Premises, but
not the Tenant's equipment or appurtenances thereto.
(iv) Maintenance costs and upkeep of the Landscaping, irrigation
system and grounds surrounding the Premises; snow removal costs;
and expenses in connection with the maintenance of the parking
areas and driveways.
(b) "Maintenance and Service Expenses" shall not include expenses for
repairs or other work covered by standard form fire, vandalism,
malicious damage and mischief, or other work covered by standard form
fire, vandalism, malicious damage and mischief, or other incurable
casualty insurance.
<PAGE>
42.03 In consideration of the foregoing, Tenant agrees to pay Landlord, as
additional rent, the sum of the following"
(a) Maintenance and Service Expenses, together with any additional
expenses mutually agreed upon by Landlord and Tenant in advance, which
expenses shall be paid, if not disputed in good faith by Tenant, with
Tenant's basic rent payment due for the month following the month in
which such Maintenance and Service Expenses were incurred.
(b) A monthly administrative fee in the amount of $600.00 to manage,
supervise, arrange for, and coordinate the Maintenance and Services.
The first payment of the monthly administrative fee shall be due with
Tenant's basic rent payment due January 1, 1996, covering services
rendered for the prior month, and continuing through the remainder of
the term of the Lease or until such Lease or this Addendum are earlier
terminated. The amount of the monthly administrative fee shall be
subject to an annual adjustment commencing January 1, 1997. The amount
of such adjustment, if any, shall be by mutual agreement of the
Landlord and Tenant.
Payment of the Maintenance and Service Expenses and the monthly administrative
fee shall be additional rent, and failure by Tenant to pay same when due shall
constitute a default under the Lease and may result in the assessment of late
charges and interest under Section 5 of the Lease.
42.04 Landlord agrees that Tenant may audit Landlord's bills for Maintenance and
Service Expenses in order to substantiate such charges, and Landlord agrees to
make such bills and records available to Tenant upon advance written request
during normal business hours, Monday through Friday (excluding holidays),
inclusive.
42.05 Landlord shall not be liable for failure to furnish any of the Maintenance
and Services set forth in Schedule A when such failure is caused by accidents,
Acts of God, or any condition beyond the reasonable control of Landlord, or by
repairs, labor disturbances and labor disputes of any character, whether
resulting from or cause by acts of Landlord or otherwise; provided, however,
that Landlord shall make a prompt and diligent effort to cause the resumption of
such services. In the event, however, the interruption of services continues for
a period of seven (7) days, Tenant may, at its option, upon ten (10) days prior
written notice, contract for said services itself and terminate Section 42 of
this Lease Addendum, or any portion of the Maintenance and Services set forth on
Schedule A.
42.06 This Third Addendum, or any portion of Schedule A hereto, may be
terminated by Tenant at any time upon thirty (30) days advance written notice to
Landlord.
42.07 Except as herein expressly modified, the Lease and Addenda thereto shall
remain in full force and effect as originally written, except where in conflict
with the terms and conditions of this Third Addendum, in which event the terms
and conditions of this Third Addendum shall prevail and control, and Landlord
and Tenant each hereby formally acknowledge, reaffirm, and agree to perform all
of their respective obligations and commitments as set forth under the Lease and
Addenda thereto. Time is of the essence of this Third Addendum.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this Third Addendum to
be duly executed as of the date first written above.
FIRST INDUSTRIAL, L.P. AMERICAN AXLE &
Landlord MANUFACTURING, INC.
Tenant
By: /s/ Daniel R. Andrews By: /s/ Gary J. Witosky
--------------------- ------------------------------
Name:Daniel R. Andrews By: Gary J. Witosky
--------------------- ------------------------------
Title:Signing Officer Title: Treasurer
--------------------- --------------------------
<PAGE>
SCHEDULE "A" TO THIRD ADDENDUM TO
LEASE DATED SEPTEMBER 30, 1994
Landlord and Tenant agree that the following shall constitute Maintenance and
Services pursuant to Section 42.01:
(a) Janitorial Services
(i) Vacuum carpet (where applicable), dust all flat services, empty
baskets, replace liners in the general office, lunch room,
laboratories and test areas five (5) days per week, Monday
through Friday, inclusive.
(ii) Wet mop vinyl or ceramic tile floors in lobby and all lunch rooms
and restrooms; deodorize all water closets and urinals, clean
lavatories, replenish paper towels and sanitary napkin
dispensers, toilet paper, and liquid soap five (5) days per week,
Monday through Friday, inclusive.
(iii) Empty baskets, replace basket liners, and dust all desk tops in
Shop; sweep floor of Shop and test areas five (5) days per week,
Monday through Friday, inclusive.
(iv) Strip, rewax, and buff vinyl floor tiles as required.
(v) Provide dumpster service for janitorial waste only.
(b) General Building Services
Provide lamp and ballast replacement; repair and maintain Building
HVAC systems; plumbing; electrical service (excluding any distribution
from panels to Tenant's equipment or Detroit Edison feed to building);
repair interior and/or exterior element elements of the building;
parking lot and driveways; wash windows inside and outside four (4)
times per year.
(c) Lawn and Landscaping
Cut, mow, trim, and edge once per week during "cutting season"
including spring clean-up; fertilize once per month and apply weed
control as needed; maintain underground irrigation system.
(d) Snow Removal
Plow all driveway and parking lots when snowfall exceeds 1 1/2 inches
or more; salt driveways and walks as required.
Landlord and Tenant agree that the Lawn and Landscaping services and Snow
Removal services may be performed on the Premises as well as adjoining premises
leased by Tenant from Landlord pursuant to a certain lease dated September 30,
1994, at Tenant's discretion.
<PAGE>
1997 AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
REPLACEMENT PLAN
1. Purpose of the Plan
The purpose of the 1997 American Axle & Manufacturing of Michigan, Inc.
Replacement Plan (the "Plan") is to provide for the award of replacement stock
options ("Replacement Stock Options") to certain current or former employees or
directors (the "Eligible Holders") of American Axle & Manufacturing, Inc. whose
awards under the American Axle & Manufacturing, Inc. Phantom Stock Plan dated
March 1, 1994 (the "PSP Plan") were voluntarily cancelled in connection with the
recapitalization (the "Recapitalization") specified in the Recapitalization and
Stock Purchase Agreement among American Axle & Manufacturing of Michigan, Inc.
(the "Company"), American Axle & Manufacturing, Inc., Jupiter Capital
Corporation, Mr. Richard E. Dauch, Mr. Morton E. Harris, and AAM Acquisition,
Inc., dated as of September 19, 1997.
It is the intention of the Company that the terms of the Replacement Stock
Options will preserve the economic value of the cancelled awards under the PSP
Plan ("PSP Stock Options"). The Company expects that it will benefit from the
added interest which such Eligible Holders will have in the welfare of the
Company as a result of their proprietary interest in the Company's success.
2. Stock Subject to the Plan
The total number of shares of common stock of the Company ("Common Stock") which
may be issued under the Plan is equal to the aggregate number of shares subject
to Replacement Stock Options. The shares may consist, in whole or in part, of
unissued shares or treasury shares. Issuance of shares of Common Stock upon
exercise of a Replacement Stock Option shall reduce the total number of shares
of Common Stock available under the Plan.
3. One Time Grant
The only grant of Replacement Stock Options shall be to Eligible Holders, to the
extent they elect to rollover to this Plan, in whole or in part, the options
they held under the PSP Plan immediately prior to the consummation of the
Recapitalization (the "Effective Date"). The number of Replacement Stock Options
to be granted to each Eligible Holder is set forth on Schedule I hereto. The
Eligible Holders are Marion A. Cumo, George J.
Dellas, B.G. Mathis and James W. McLernon.
4. Administration
<PAGE>
2
The Board of Directors of the Company (the "Board") shall administer the Plan
and make all determinations in connection therewith which may be necessary or
advisable, and all such actions of the Board shall be binding upon all Eligible
Holders; provided, however, no such action by the Board may impair the rights of
any Eligible Holder under any award theretofore granted, without the Eligible
Holder's consent.
5. Terms and Conditions of Replacement Stock Options
The Replacement Stock Options granted under the Plan shall be non-qualified
stock options for federal income tax purposes, as evidenced by option grants,
and shall be subject to the foregoing and the following terms and conditions:
(a) Grant. On the Effective Date, each Eligible Holder will roll over into this
Plan the number of unexercised PSP Stock Options specified in the schedule
attached hereto. Each rolled PSP Stock Option shall be cancelled, and such
Eligible Holder shall receive a Replacement Stock Option pursuant to this Plan.
The exercise price of each Replacement Stock Option (the "Exercise Price") shall
remain the same as under the PSP Stock Option being replaced, and the number of
shares of Common Stock covered by each Replacement Stock Option ("Option
Shares") shall be the same as the number of shares of common stock of American
Axle & Manufacturing, Inc. under the PSP Stock Option being replaced. The
granting of a Replacement Stock Option under the Plan shall impose no obligation
on the Company or any subsidiary to continue the employment of an Eligible
Holder.
(b) Vesting. Replacement Stock Options granted under the Plan shall become
immediately vested and exercisable.
(c) Exercise of Replacement Stock Options. Except as otherwise provided in the
Plan, a Replacement Stock Option may be exercised for all, or from time to time
any part, of the shares for which it is then exercisable. Upon exercise a
Replacement Stock Option is cancelled. The Exercise Price shall be paid to the
Company in full at the time of exercise at the election of the optionee (i) in
cash, (ii) in shares of Common Stock (owned for at least six months) having a
fair market value equal to the Exercise Price or (iii) partly in cash and partly
in such shares of Common Stock (owned for at least six months) the aggregate
value of which equals the Exercise Price.
The exercising optionee may elect, with the consent of the Board, and subject to
such terms and conditions as the Board shall determine, to have the number of
shares deliverable to the exercising optionee as a result of the exercise
reduced by a number with a value sufficient to pay the amount the Company
determines to be necessary to withhold for federal, state or local taxes as a
result of the exercise of the Replacement Stock Option. An optionee shall have
rights to dividends and other rights of a shareholder with respect to shares
subject to a
<PAGE>
3
Replacement Stock Option when and only when the optionee exercises such option
into shares of Common Stock. The Board shall require payment of any amount the
Company may determine to be necessary to withhold for federal, state or local
taxes as a result of the exercise of a Replacement Stock Option.
(d) Nontransferability of Replacement Stock Options. Unless otherwise provided
by the Board, a Replacement Stock Option shall not be transferable by the
optionee other than by will or by the laws of descent and distribution. During
the lifetime of an optionee a Replacement Stock Option shall be exercisable only
by the optionee. A Replacement Stock Option exercisable after the death of an
optionee may be exercised by the legatees, personal representatives or
distributees of the optionee.
(e) Rights as Shareholders. Effective upon the purchase of Option Shares
pursuant to the exercise of a Replacement Stock Option, and until the earlier of
(i) the transfer of the Option Shares by such Eligible Holder or (ii) the
termination of the Stockholders' Agreement, each Eligible Holder hereby agrees
that upon the exercise of Replacement Stock Options for Option Shares that such
Eligible Holder shall be bound by all of the terms, conditions and obligations
and shall be entitled to all of the rights and privileges, in each case as are
applicable to the "Rollover Holders" or "Stockholders" as such terms are
referred to in the Stockholders' Agreement (as defined below) (including
limitation on transfer rights, tag-along rights, drag-along rights and
piggy-back registration rights), in each case as if such Eligible Holder was an
original party thereto.
As used herein, Stockholders' Agreement shall refer to the Stockholders'
Agreement dated as of October 29, 1997, by and among the Company, Blackstone
Capital Partners II, Merchant Banking Fund L.P., Blackstone Offshore Capital
Partners II L.P. and Blackstone Family Investment Partnership II L.P.
(collectively "Blackstone"), Jupiter Capital Corporation, Richard E. Dauch and
Morton E. Harris (the "Stockholders' Agreement").
6. Adjustments Upon Changes in Capitalization or Other Events
Upon changes in the Common Stock after the Effective Date by reason of a stock
dividend, stock split, reverse split, recapitalization, reorganization or
liquidation, the number and class of shares available under the Plan as to which
Replacement Stock Options may be granted (both in the aggregate and to any one
optionee), the number and class of shares under each unexercised Replacement
Stock Option and the Exercise Price per share shall be correspondingly adjusted.
In the event of a reorganization or other transaction after the Effective Date
in which the Company will not be the surviving corporation, an optionee shall be
entitled to Replacement Stock Options on that number of shares of stock in the
new corporation which the optionee would have received had the optionee
exercised all of the unexercised Replacement Stock Options available to the
<PAGE>
4
optionee under the Plan, at the instant immediately prior to the effective date
of such transaction. Thereafter, adjustments as provided above shall relate to
the stock options of the new corporation. However, notwithstanding the
foregoing, immediately prior to the consummation of a "Change of Control",
(unless the Board determines otherwise) each unexercised Replacement Stock
Option must be exercised by the Eligible Holders. The Company shall provide a
recourse loan to each Eligible Holder in an amount equal to the Exercise Price
for the Replacement Stock Options being exercised by such Eligible Holder at the
rate of interest per annum publicly announced by The Chase Manhattan Bank as its
prime rate in effect at its principal office in New York City on such date of
exercise. The recourse loan and the accrued interest on such loan shall be
payable by the Eligible Holders in one lump sum payment one year after the date
of exercise of the Replacement Stock Options pursuant to the foregoing
provisions of this Section 6. "Change of Control" shall mean the purchase or
other acquisition by any person, entity or group of persons, within the meaning
of section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended, or
any comparable successor provisions, other than Blackstone, employees or
directors of the Company or their respective affiliates, of ownership of fifty
percent (50%) or more of the combined voting power of the Company's then
outstanding voting securities entitled to vote generally.
7. Amendments
The Board may amend, alter or discontinue the Plan, but no amendment, alteration
or discontinuation shall be made which would impair the rights of any Eligible
Holder under any award theretofore granted, without the Eligible Holder's
consent.
8. Effectiveness of the Plan
The Plan shall become effective as of the Effective Date.
9. Choice of Law
The Plan shall be governed by and construed in accordance with the laws of the
State of New York applicable to contracts made and to be performed in the State
of New York.
<PAGE>
Schedule I
REPLACEMENT STOCK OPTIONS
1) Marion A. Cumo--83
2) George J. Dellas--83
3) B.G. Mathis--139
4) James W. McLernon--166
<PAGE>
THE AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
MANAGEMENT STOCK OPTION PLAN
This Management Stock Option Plan is hereby adopted by the Board of Directors
of American Axle & Manufacturing of Michigan, Inc., a corporation organized
under the laws of Michigan (the "Company"), as of October 29, 1997.
ARTICLE I
PURPOSE OF PLAN
The Plan is adopted by the Board for certain management Employees as a part of
the compensation and incentive arrangements for such Employees. The Plan is
intended to advance the Company's best interests by allowing such Employees to
acquire an ownership interest in the Company, thereby motivating them to
contribute to the success of the Company and to remain in the employ of the
Company and its Subsidiaries. It is anticipated that the availability of
Options under the Plan will also enhance the Company's ability to attract and
retain individuals of exceptional talent to contribute to the progress, growth
and profitability of the Company and its Subsidiaries.
ARTICLE II
DEFINITIONS
For purposes of the Plan, except where the context clearly indicates
otherwise, the following terms shall have the meanings set forth below:
"Acceleration Event" shall mean an event with respect to which the Plan
provides for the acceleration of the vesting of Options, as provided in
Section 5.3.
"Affiliate" shall mean, with respect to any Person, (i) any other Person that
directly or indirectly Controls, is Controlled by or is under common Control
with, such Person, or (ii) any director, officer, partner, member or employee
of such Person or any Person specified in clause (i) above; provided, that
officers, directors or employees of the Company (or one of its Subsidiaries)
shall be deemed not to be Affiliates of Blackstone for purposes hereof solely
by reason of being officers, directors or employees of the Company (or one of
its Subsidiaries).
"Blackstone" shall mean collectively, Blackstone Capital Partners II Merchant
Banking Fund L.P., Blackstone Offshore Capital Partners II L.P., The
Blackstone Group L.P., Blackstone Family Investment Partnership II L.P. and
their Affiliates (other than the Company and its Subsidiaries).
<PAGE>
2
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean (i) neglect of or willful and continuing refusal to perform
one's duties (other than due to Disability), (ii) a breach of any
non-competition/no raid covenants the Participant is subject to, (iii)
engaging in conduct which is demonstrably injurious to the Company, the
Company's Subsidiaries or Affiliates, or Blackstone (including, without
limitation, a breach of any confidentiality covenant the Participant is
subject to), or (iv) a conviction or plea of guilty or nolo contendere to a
felony or a misdemeanor involving moral turpitude, dishonesty or theft, in
each case as determined in the sole discretion of the Board.
"Change of Control" shall mean the purchase or other acquisition by any
person, entity or group of persons, within the meaning of section 13(d) or
14(d) of the Exchange Act, or any comparable successor provisions, other than
Blackstone, employees or directors of the Company or their respective
Affiliates, of ownership of fifty percent (50%) or more of the combined voting
power of the Company's then outstanding voting securities entitled to vote
generally.
"Class I Performance Options" shall mean the management case performance
options described in Section 5.2(c) hereof.
"Class II Performance Options" shall mean the performance options described in
Section 5.2(d) hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and any
successor statute.
"Committee" shall mean the Compensation Committee of the Board.
"Common Stock" shall mean the common shares of the Company.
"Company" shall mean American Axle & Manufacturing of Michigan, Inc., a
corporation organized under the laws of Michigan.
"Control" (including, with correlative meaning, all conjugations thereof)
shall mean with respect to any Person, the ability of another Person to
control or direct the actions or policies of such first Person, whether by
ownership of voting securities, by contract or otherwise.
"Cumulative EBITDA" shall mean with respect to any Performance Option, the sum
of the EBITDA for the period commencing on the January 1 of the year following
the Grant Date and ending on the Determination Date of the Plan Year.
"Cumulative EBITDA Targets" shall mean with respect to any Performance Option,
the sum of the relevant EBITDA Targets for the period commencing on the
January 1 of the year following the Grant Date and ending on the Determination
Date of the Plan Year.
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3
"Determination Date" shall mean the last day of the Plan Year.
"Disability" shall mean the inability of a Participant to perform in all
material respects his duties and responsibilities to the Company, or any
Subsidiary of the Company, by reason of a physical or mental disability or
infirmity which inability is reasonably expected to be permanent and has
continued (i) for a period of six consecutive months or (ii) such shorter
period as the Board may reasonably determine in good faith. The Disability
determination shall be in the sole discretion of the Board and a Participant
(or his Representative) shall furnish the Board with medical evidence
documenting the Participant's disability or infirmity which is satisfactory to
the Board.
"EBITDA" shall mean, with respect to the Company and its Subsidiaries on a
consolidated basis for any period, the net income of the Company and its
Subsidiaries for such period, plus the following (only to the extent used in
calculating net income for such period): (a) net interest expense; (b) tax
expense; (c) expenses related to Blackstone's monitoring and management fees;
(d) any one time charge or gain relating to the Recapitalization; (e) any gain
or loss on the sale of fixed assets; and (f) depreciation and amortization of
tangible and intangible assets, all as determined in accordance with generally
accepted accounting principles, with appropriate adjustments for non-recurring
events as determined by the Board.
"EBITDA Target" shall mean, with respect to each fiscal year, the EBITDA
amount that must be achieved to become vested in Criteria I as described in
Section 5.2.
"EBITDA Target (Class I)" shall mean, with respect to each fiscal year, the
amount set forth in the following table opposite such year:
Fiscal Year Ending EBITDA Target (Class I)
(in millions)
1998 $253.1
1999 $306.2
2000 $328.2
2001 $339.7
2002 $339.7
and such other targets as are established by the Committee with respect to
subsequent years. The Board shall make equitable adjustments to such targets
in the event (i) the fiscal year is modified or (ii) there are changes in the
Company's accounting policies. The Board may make adjustments to the above
targets to the extent that the expenses incurred by the Company, with respect
to new operating leases entered into after October 29, 1997 ("New Operating
Leases"), differ from the expenses projected for New Operating Leases in the
Confidential Information
<PAGE>
4
Memorandum relating to the Senior Secured Credit Facilities,
dated October 1997.
"EBITDA Target (Class II)" shall mean with respect to each fiscal year, the
amount set forth in the following table opposite such year:
Fiscal Year Ending EBITDA Target (Class II)
(in millions)
1998 $291.1
1999 $352.1
2000 $377.4
2001 $390.7
2002 $390.7
and such other targets as are established by the Committee with respect to
subsequent years. The Board shall make appropriate adjustments to such targets
in the event (i) the fiscal year is modified or (ii) there are changes in the
Company's accounting policies. The Board may make adjustments to the above
targets to the extent that the expenses incurred by the Company, with respect
to new operating leases entered into after October 29, 1997 ("New Operating
Leases"), differ from the expenses projected for New Operating Leases in the
Confidential Information Memorandum relating to the Senior Secured Credit
Facilities, dated October 1997.
"Employee" shall mean any employee of the Company or any of its
Subsidiaries.
"Employment Agreement" shall mean any employment agreement between a
Participant and the Company, as amended from time to time.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exercise Price" shall mean the amount that a Participant must pay to exercise
an Option with respect to one Option Share subject to such Option.
"Fair Market Value" shall mean, with respect to any Common Stock:
(i) prior to an initial Public Offering, the fair market value of the
Common Stock as determined in good faith by the Board based on the
value of the Company as a going concern, but without any discount
with respect to the minority ownership represented by such shares or
the contractual restrictions on the Transfer of the Shares; or
(ii) on and after an initial Public Offering, the average of its
closing price for the 20 trading days immediately preceding the day
of the valuation.
<PAGE>
5
"Financing Default" shall mean an event which would constitute (or with notice
or lapse of time or both would constitute) an event of default by the Company
or any of its Subsidiaries (which event of default has not been cured or
waived) under any of the following as they may be amended from time to time:
(i) The Credit Agreement (the "Credit Agreement") dated on or about the
Recapitalization Closing Date, among the Company, American Axle &
Manufacturing, Inc ("AAM"), The Chase Manhattan Bank, The Chase Manhattan Bank
Delaware and any other financial institutions party thereto, and any
extensions, renewals, refinancing or refundings thereof in whole or in part;
(ii) any other agreement under which an amount of indebtedness (in excess of
$5,000,000) of the Company or any of its Subsidiaries is outstanding as of the
time of the aforementioned event, and any extensions, renewals, refinancing or
refundings thereof in whole or in part; (iii) any amendment of, supplement to
or other modification of any of the instruments referred to in clauses (i) and
(ii) above; and (iv) any of the securities issued pursuant to or whose terms
are governed by the terms of any of the agreements set forth in clauses (i)
and (ii) above, and any extensions, renewals, refinancing or refundings
thereof in whole or in part.
"Good Reason" shall mean a material reduction in base salary, or a material
reduction in bonus, in either case as determined in the sole discretion of the
Board. The Participant shall be deemed to have voluntarily terminated
employment with Good Reason if he Retires on or after the third anniversary of
the Recapitalization Closing Date. However, if a Participant Retires prior to
the third anniversary, he shall be deemed to have voluntarily terminated
employment without Good Reason.
"Grant Date" shall mean the date an Option is granted pursuant to this Plan.
"Option" shall mean, with respect to any Participant, any Time Option or
Performance Option.
"Option Agreement" shall mean an option agreement between a Participant and
the Company, substantially in the form of one of the agreements attached
hereto as Exhibit A.
"Option Shares" shall mean, with respect to any Participant, any Shares
issuable or issued by the Company upon exercise of any Option by such
Participant, as adjusted as a result of any stock dividend, stock split,
merger, consolidation, reorganization or other recapitalization.
"Participant" shall mean any Employee who holds an outstanding Option granted
under this Plan.
"Performance Options" shall mean Class I Options and Class II Options,
collectively.
<PAGE>
6
"Person" shall mean an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department,
agency or political subdivision thereof.
"Plan" shall mean this Management Stock Option Plan, as amended from time to
time.
"Plan Year" shall mean initially the calendar year beginning January 1, 1998 and
ending on December 31, 1998, and thereafter each of the calendar years from 1999
through 2004.
"Public Offering" shall mean the sale of Shares pursuant to an effective
registration statement under the Securities Act, which results in an active
trading market in Common Stock. If the Common Stock is listed on a United States
securities exchange or is quoted on the NASDAQ National Market, it shall be
deemed to be actively traded.
"Recapitalization" shall be given the same meaning as in the Recapitalization
Agreement.
"Recapitalization Agreement" shall mean the agreement dated as of September 19,
1997 among the Company, American Axle & Manufacturing, Inc. ("AAM"), Jupiter
Capital Corporation, Mr. Richard E. Dauch, Mr. Morton E. Harris and AAM
Acquisition, Inc.
"Recapitalization Closing Date" shall mean the date of the closing of the
Recapitalization.
"Recapitalization Price" shall mean $16,811.78 per share.
"Representative" shall mean (i) in the case of death, the executor, liquidator
or administrator of the deceased Participant's estate or the Person or Persons
to whom the deceased Participant's rights under the Option shall pass by will
or the laws of descent and distribution and (ii) in the case of Disability,
his or her legal guardian or legal representative.
"Retire" shall mean, with respect to any Participant, such Participant's
voluntary resignation at any time after attaining age 65 (or at any earlier date
with the advanced permission of the Company).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shares" shall mean any shares of Common Stock issuable or issued by the
Company.
"Subsidiary" shall mean any corporation of which the Company owns, directly or
through one or more subsidiaries, securities having a majority of the ordinary
voting power in electing the board of directors of such corporation.
<PAGE>
7
"Time Options" shall mean the options described in Section 5.1 hereof.
"Transfer" shall mean, with respect to any Option, the gift, sale, assignment,
transfer, pledge, hypothecation or other disposition (whether for or without
consideration and whether voluntary, involuntary or by operation of law), or
any act thereof, of such Option or any interest therein.
ARTICLE III
LIMITATION ON AVAILABLE OPTION SHARES
3.1 Option Shares. The aggregate number of Shares with respect to which Options
may be granted under the Plan shall not exceed 1,425 Shares, which represents
12% of the Common Stock outstanding on a fully diluted basis as of the
Recapitalization Closing Date (to be divided equally among Time Options, Class I
Performance Options and Class II Performance Options); provided, however, that
the aggregate number of Shares with respect to which Options may be granted
shall be subject to adjustment in accordance with the provisions of Section 9.2
below.
3.2 Status of Option Shares. The Shares of Common Stock for which Options may be
granted under the Plan may be either authorized and unissued shares, treasury
shares or a combination thereof, as the Committee shall determine and shall be
reserved by the Committee for issuance under this Plan. To the extent any
Options are forfeited, expire or are terminated prior to exercise, the Option
Shares in respect of which such Options were issued shall become available for
reissuance to Employees pursuant to this Plan or any other plan or agreement
approved by the Board.
ARTICLE IV
GRANT OF OPTIONS
4.1 Options. Options granted on the Recapitalization Closing Date (the "Initial
Grant") shall be granted by the Board. Thereafter, the Committee shall grant
Options to such Employees as the Committee may determine. Each Participant
granted Options must execute an Option Agreement.
4.2 Exercise Price. The Exercise Price of Options granted hereunder shall be the
Fair Market Value of the Shares subject to the Option, determined as of the
Grant Date. For purposes of the Initial Grant, the Exercise Price of Options
shall be the Recapitalization Price.
4.3 Form of Option. Options granted under this Plan shall be non-qualified
stock options and are not intended to be "incentive
<PAGE>
8
stock options" within the meaning of Section 422 of the Code or any successor
provisions. Options shall be exercisable with respect to the number of Shares
covered by the Option to the extent they become both vested and exercisable
(as determined below) and shall thereafter be exercisable until they expire or
are terminated (as determined below).
4.4 Dilution of Options. Participants shall be subject to the same dilution as
the non-Participant holders of Common Stock, and shall not have any preemptive
or other special rights.
4.5 Regulatory Approvals. The grant of any Options hereunder following a Public
Offering shall be subject to the receipt by the Company of all necessary
regulatory approvals.
ARTICLE V
VESTING, EXERCISABILITY AND
EXPIRATION OF OPTIONS; PUTS AND CALLS
5.1 Time Options. Except as otherwise provided in the Option Agreement, all Time
Options granted pursuant to this Plan as part of the Initial Grant shall become
completely vested and exercisable in accordance with the following schedule:
Vested and Exercisable
Percentage
Prior to December 31, 1998 0%
On or after December 31, 1998 20%
On or after December 31, 1999 40%
On or after December 31, 2000 60%
On or after December 31, 2001 80%
On or after December 31, 2002 100%
For Participants granted Time Options after December 31, 1997, such Options
shall become vested and exercisable, with respect to 20% of the Shares subject
to such Options, on each of the first five anniversaries of the Grant Date.
5.2 Performance Options.
(a) Except as otherwise provided in the Option Agreement, all
Performance Options granted pursuant to this Plan shall become vested and
exercisable in accordance with this Section 5.2.
(b) In order for a Performance Option to become completely vested and
exercisable it must be vested in accordance with Criteria I and Criteria II.
(c) Class I Performance Options.
<PAGE>
9
(i) Criteria I. Beginning on the January 1 of the year
following the Grant Date, Class I Performance Options, with respect
to 20% of the Shares subject to each Option, shall become vested in
accordance with Criteria I on each Determination Date that the
Company's EBITDA for a Plan Year equals or exceeds the EBITDA Target
(Class I) for that Plan Year.
(ii) Criteria II. Class I Performance Options shall become
vested in accordance with Criteria II upon a Change of Control or a
Public Offering.
(d) Class II Performance Options.
(i) Criteria I. Beginning on the January 1 of the year
following the Grant Date, Class II Performance Options, with respect
to 20% of the Shares subject to each Option, shall become vested in
accordance with Criteria I on each Determination Date that the
Company's EBITDA for a Plan Year equals or exceeds the EBITDA Target
(Class II) for that Plan Year.
(ii) Criteria II. Class II Performance Options shall become
vested in accordance with Criteria II upon a Change of Control or a
Public Offering.
(e) Catch-Up. If, beginning January 1 after the Grant Date of a
Performance Option, the Company's EBITDA for a Plan Year is less than 100% of
the applicable EBITDA Target for such Plan Year (a "Missed Year"), no such
Performance Option shall become vested in Criteria I with respect to any
additional Shares (the "Missed Shares") on the Determination Date for such
Plan Year. If, in any Plan Year subsequent to a Missed Year EBITDA exceeds the
applicable EBITDA Target for such Plan Year and Cumulative EBITDA exceeds the
applicable Cumulative EBITDA Targets, then Performance Options shall become
vested in Criteria I with respect to the Missed Shares attributable to such
Missed Year (but only to the extent such Option has not otherwise terminated).
5.3 Acceleration Events. Notwithstanding anything in this Article V to the
contrary, Time Options shall become completely vested upon the first to occur
of the following Acceleration Events: (i) a Change of Control during a
Participant's period of employment, and (ii) to the extent provided in a
Participant's Option Agreement, a Participant's termination without Cause or
voluntary termination for Good Reason.
5.4 Exercisability in the Event Employment is Terminated. A Participant's
unvested Time Options and Performance Options which are unvested in accordance
with Criteria I shall expire upon the Participant's termination of employment
unless an applicable Acceleration Event has occurred.
<PAGE>
10
5.5 Reallocation of Options. Options that are terminated or forfeited may be
reallocated to other Employees as determined by the Board or Committee, in
consultation with the Chief Executive Officer.
5.6 Expiration Date. Options shall expire at 5:00 p.m. Eastern Standard Time
on the day prior to the 12th anniversary of the Grant Date (the "Expiration
Date").
5.7 Earlier Expiration Date. Notwithstanding Section 5.5, in the event of
termination of employment, Options shall expire prior to the Expiration Date
as follows:
(a) A Participant's Options shall expire immediately, without any
payment, upon the Participant's termination of employment if the Participant's
employment is terminated for Cause or if the Participant voluntarily
terminates employment without Good Reason;
(b) If the Participant voluntarily terminates employment with Good
Reason or if the Participant's employment is terminated without Cause, the
Participant's Options shall expire on the later of (i) six months after the
Participant's termination of employment or (ii) six months following a Public
Offering or Change of Control.
5.8 Calls. The Company shall have the rights specified in Section 5.8(a) to
purchase Options and Option Shares from a Participant ("Call") However, there
shall be no Calls after the consummation of an initial Public Offering.
(a) Call.
(i) Option Shares. On or after the date a Participant
exercises all or a portion of an Option granted hereunder,
the Company shall have the right and option to purchase for
a period of 90 days from the date of the Participant's
termination of employment for any reason (or, if later, for
a period of 200 days from the last date the Participant
exercised an Option), and if the Company exercises such
right, each Participant shall be required to sell to the
Company, any or all of his or her owned Option Shares at a
price per share equal to the Fair Market Value (as of the
date the Company exercises such right).
(ii) Options. The Company shall, after a Participant's
employment has terminated, have the right and option to
purchase and if the Company exercises such right each
Participant shall be required to sell to the Company, any or
all of his or her then outstanding Options at a price per
Option equal to the Fair Market Value minus the Exercise
Price.
<PAGE>
11
(iii) Notice. If the Company desires to exercise its option
to purchase any Options or Option Shares pursuant to this
Section 5.8(a), the Company shall, not later than 60 days
after the date of the Participant's termination of
employment (or, with respect to Section 5.8(a)(i), if later,
170 days from the last date an Option, or a portion of an
Option, was exercised), send written notice of its intention
to purchase such Shares or Options. The closing of the
purchase shall take place at the principal office of the
Company on the 30th day after the giving of notice by the
Company of its exercise of its option to purchase (the
"Closing").
(iv) If the Company is prohibited by applicable law from
exercising a right pursuant to this Section 5.8(a), then the
Company may assign such right to its stockholders on a pro
rata basis. In the event that a stockholder does not wish to
exercise its assigned right, Blackstone shall have the right
(but not the obligation) to exercise such assigned right.
(b) Deferral of Purchases.
(i) The Company shall not be obligated to purchase any
Options or Option Shares at any time pursuant to Section
5.8(a), (A) to the extent that the purchase of such Options
or Option Shares would result, after giving effect thereto,
in a Financing Default, or (B) if doing so would constitute
a Financing Default or if immediately prior to such purchase
there exists a Financing Default which prohibits such
purchase. The Company shall within 20 days of learning of
any of the foregoing facts notify the Participant that it is
not obligated to purchase the Options or Option Shares
pursuant to Section 5.8(a)
(c) Payment. If at any time the Company elects to purchase any
Options or Option Shares pursuant to Section 5.8(a), the Company shall, at the
Closing, pay the purchase price for such Options or Option Shares by delivery
of a bank cashier's check or certified check for the purchase price.
ARTICLE VI
EXERCISE OF OPTIONS
6.1 Right to Exercise. During the lifetime of a Participant, vested and
exercisable Options may be exercised only by such Participant (except that, in
the event of his or her death or Disability, Options may be exercised by his
or her Representative).
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12
6.2 Procedure for Exercise. Options may be exercised in whole or in part with
respect to any portion that is vested and exercisable. To exercise an Option a
Participant (or such other Person who shall be permitted to exercise the
Option as set forth in Section 6.1) must complete, sign and deliver to the
Company (to the attention of the Company's Secretary) a notice of exercise
substantially in the form attached hereto as Annex I (or in such other similar
form as the Committee may from time to time adopt and provide to a
Participant) (the "Exercise Notice"), together with payment in full of the
Exercise Price multiplied by the number of Shares with respect to which the
Option is exercised. Payment of the Exercise Price shall be made (i) in cash
(including certified check, bank draft or money order) or (ii) at the
discretion of the Committee, with shares of Common Stock with a Fair Market
Value equal to the Exercise Price; provided, that such shares of Common Stock
have been held by the Participant for no less than six months. Immediately
prior to the exercise of any of the Options, the Participant shall enter into
a stockholders' agreement in a form to be determined by the Board in its sole
discretion. The execution of such stockholders' agreement shall be a condition
to the exercise of such Options. A Participant's right to exercise the Option
shall be subject to the satisfaction of all conditions set forth in the
Exercise Notice.
6.3 Withholding of Taxes. The Company shall withhold from any Participant from
any amounts due and payable by the Company to such Participant (or secure
payment from such Participant in lieu of withholding) the amount of any
withholding or other tax due from the Company with respect to any Option
Shares issuable under the Plan, and the Company may defer such issuance unless
indemnified to its satisfaction.
ARTICLE VII
RIGHTS AND LIMITATIONS
7.1 Registration of Option Shares. Promptly following the first Public Offering,
the Company shall file, at its own expense, a registration statement on Form S-8
to register the Option Shares, which Option Shares shall be subject to
applicable stockholder agreements.
7.2 Transfer of Options. Unless otherwise provided by the Committee, Options
may not be Transferred (other than by will or the laws of descent or
distribution).
<PAGE>
13
ARTICLE VIII
ADMINISTRATION
8.1 Plan Administrator. This Plan shall be administered by the Committee;
provided, however, that the Committee may delegate responsibility for the
routine administration of the Plan to an officer or officers of the Company.
8.2 Committee Option Grants. The Committee shall have the authority to select
Employees to receive Options and to grant Options (except for the Options
granted as part of the Initial Grant, which shall be granted by the Board) to
Employees in such amounts as it shall determine, in its full discretion.
8.3 Committee Authority. The Committee shall have the sole and complete
responsibility and authority to (a) interpret and construe the terms of this
Plan; (b) correct any defect, error or omission or reconcile any inconsistency
in the Plan or in any Option granted hereunder; and (c) make all other
determinations and take all other actions necessary or advisable for the
implementation and administration of the Plan. The Committee's determinations
on matters within its authority, or the Board's determinations on matters
within its authority, as the case may be, shall be conclusive and binding upon
the Participants, the Company and all other Persons. The Committee may, in its
discretion, accelerate the vesting of Options at any time and for any reason.
8.4 Composition of Committee. At any time when the Company is subject to the
reporting requirements of Section 13 or Section 15(d) of the Exchange Act, the
Committee shall consist of two or more directors who are "non-employee
directors," within the meaning of Rule 16b-3 of the Exchange Act. At any time
when the Company has a class of common equity securities required to be
registered under Section 12 of the Exchange Act, the Committee shall consist
of at least two outside directors, within the meaning of Section 162(m)(4)(C)
of the Code.
ARTICLE IX
MISCELLANEOUS
9.1 Amendment, Suspension and Termination of Plan. The Board, at any time and
from time to time, may suspend, terminate or amend the Plan. However, no
suspension, termination or amendment of or to the Plan shall affect adversely
the rights of any Participant with respect to Options issued hereunder prior
to the date of such suspension, termination or amendment without the consent
of such Participant. Unless terminated earlier, the Plan shall terminate on
December 31, 2004.
<PAGE>
14
9.2 Adjustments. In the event of a merger, recapitalization, stock dividend,
reorganization, stock split, share consolidation or combination, or other
similar event, the Committee shall make such adjustments in the number and
type of Shares authorized by the Plan, the number and type of Shares covered
by outstanding Options and the Exercise Prices specified therein and other
amendments to the Plan as the Board, in good faith, determines to be
appropriate and equitable.
9.3 Future Acquisitions or Dispositions. The EBITDA Targets are based upon
certain revenue and expense assumptions about the future business of the
Company and its Subsidiaries as of the Recapitalization Closing Date.
Accordingly, if the Company or any Subsidiary acquires, by purchase or
otherwise, or disposes of, by sale of stock or assets, the business, property,
or fixed assets, of another Person, which acquisition or disposition, either
singly or together with one or more other such transactions, will, in the
Board's good faith determination, materially affect the Company's EBITDA, the
Committee shall, in good faith, adjust the EBITDA Targets to reflect the
projected effect of such transaction or transactions.
9.4 No Right to Participate. Except as otherwise agreed to by the Company, no
Employee shall have a right to be selected as a Participant or, having been so
selected, to be selected again to receive a grant of Options.
9.5 No Employment Contract. Nothing in this Plan shall interfere with or limit
in any way the right of the Company or any of its Subsidiaries to terminate
any Participant's employment at any time (with or without Cause), nor confer
upon any Participant any right to continued employment by the Company or any
of its Subsidiaries for any period of time or to continue such employee's
present (or any other) rate of compensation.
9.6 Construction of Plan. The terms of this Plan shall be administered in
accordance with the laws (excluding conflict of interest laws) of the State of
New York. Any dispute arising out of or relating to this Plan or its
interpretation, termination or validity shall be resolved by arbitration in
New York, New York pursuant to the Rules of the American Arbitration
Association for commercial arbitrations.
9.7 Effective Date. This Plan shall be effective as of October 29, 1997.
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made between AMERICAN AXLE & MANUFACTURING OF
MICHIGAN, INC., a Michigan corporation (the "Company") and RICHARD E. DAUCH (the
"Employee")
RECITALS
The Company and the Employee have reached an understanding with respect to
the employment of the Employee by the Company. The parties desire to set forth
their understanding with respect to such employment fully and completely in
writing.
NOW, THEREFORE, the parties agree as follows:
1. Position and Duties. The Company agrees to employ Employee and Employee
hereby accepts employment with the Company. The assignment shall be as the
Chairman, President and Chief Executive Officer of the Company. The Employee
shall be based in the Detroit metropolitan area, and shall have such powers and
duties as shall be designated from time to time by the Board of Directors of the
Company (the "Board") and shall be subject to the general supervision, advice
and direction of the Board.
2. Best Efforts of Employee. Employee agrees to perform faithfully,
industriously, and to the best of his ability, experience, and talents all of
the duties assigned to Employee during his employment and the term of this
Agreement. Employee will devote all of his business time and attention
exclusively to the Company's affairs. It is understood that occasional business
meetings and other activities which may not be directly related to the Company
affairs are permitted as long as such meetings and other activities do not
interfere with the intent of this paragraph.
3. Compensation and Benefits. In return for the Employee's complete and
satisfactory performance at all times of all the terms and conditions of this
Agreement, the Company will provide Employee with the following compensation and
benefits:
(a) Base Salary. The Company will pay Employee a salary at a per annum rate
of Seven Hundred and Fifty Thousand United States Dollars (U.S.$750,000),
payable in accordance with the Company's customary payroll procedures for senior
executives (the "Annual Base Salary").
(b) Bonus. In addition to the Annual Base Salary, Employee shall also be
eligible to receive an annual cash bonus calculated and determined as provided
in Exhibit A hereto (an "Annual Cash Bonus"). Any Annual Cash Bonus earned shall
be payable on or before March 15 of the year immediately succeeding the year in
respect of which such bonus was so determined. In
<PAGE>
2
addition to the Annual Cash Bonus, Employee will be eligible to receive such
discretionary cash bonuses as may be determined by the Board.
(c) Benefits. Employee shall also be eligible for the following benefits
during the term of his employment hereunder, subject to administration in
accordance with the Company's policies and procedures in effect from time to
time:
(i) Holidays and Vacations. The Employee shall be entitled to such
paid holidays as may be designated by the Company. In addition, the
Employee shall be entitled to five (5) weeks paid vacation for each year,
during which time Employee's compensation shall be paid in full.
Notwithstanding any other provisions of this Agreement, in the event of the
Employee's termination from the Company for any reason, Employee will be
entitled to a payment reflecting Employee's unused accrued vacation through
such date of termination;
(ii) Company Car. The Employee shall be entitled to the use of two
Company vehicles suitable for senior executives with all repair,
maintenance, insurance, fuel and other fluids being the responsibility of
the Company;
(iii) Club Membership and Dues. Company shall reimburse Employee for
any club membership and monthly dues to a club of Employee's choice;
(iv) Health and Disability Insurance. The Company will provide the
Employee with health and disability insurance coverage consistent with the
coverage provided to other senior executives of the Company from time to
time;
(v) Pension. Except as may be inconsistent with the qualification
requirements set forth in the Internal Revenue Code of 1986, as amended,
the Employee will be immediately eligible to participate, and fully vested,
in any and all Company Retirement, Pension and 401(k) retirement plans and
such other savings, retirement and pension plans as may be established by
the Company from time to time; provided however that (i) upon retirement at
age 62 Employee will receive a minimum monthly benefit of not less than
$13,500 or its equivalent or (ii) upon retirement at age 65 Employee will
receive a minimum monthly benefit of not less than $17,800 or its
equivalent, which amounts the parties hereto understand to be the
Employee's approximate accrued benefits on the date hereof;
(vi) Stock Options. The Employee is entitled to participate in the
Company Stock Option Plan as described in Exhibit B;
<PAGE>
3
(vii) Annual Physical Examination. The Employee shall be entitled to
an annual physical examination by a physician of Employee's choice at the
cost of the Company;
(viii) Life Insurance. Company has purchased for the Employee a five
million dollar ($5,000,000) life insurance policy. Company will maintain
the policy for the Employee's benefit and pay any and all premium costs
during the Employee's employment hereunder. The proceeds of such insurance
policy will inure to Employee's assignee or estate upon Employee's death.
Upon any termination of employment other than for death or for Cause,
Company will maintain Employee's life insurance policy for two years; and
(ix) Other Company Benefits. The Employee shall be entitled to
participate in such other benefits and perquisites, if any, which are
provided to all senior executives by the Company from time to time.
(d) Expense Reimbursement. Employee will be reimbursed for all reasonable
and necessary out-of-pocket expenses incurred by Employee for Company business
in accordance with the Company's policies and procedures, as in effect from time
to time.
(e) Sole Compensation. Employee expressly acknowledges and agrees that the
compensation and benefits set forth in this Agreement and the Nonqualified Stock
Option Agreement of even date herewith between Employee and the Company
constitute the sole and exclusive compensation to which Employee shall be
entitled or for which Employee may be eligible.
(f) Withholding. All payments made under this Agreement shall be reduced by
all applicable federal, state and local taxes required to be withheld from such
payments.
4. Board Membership and Seat Percentage. Company agrees that Employee shall
be a permanent voting member of the Board during Employee's employment
hereunder. Company further agrees that prior to an initial Public Offering and
during Employee's employment hereunder he shall maintain the right to fill a
number of Board seats equal to the number (rounded to the nearest whole number)
that bears the same relationship to the total Board seats as the votes
represented by his voting equity in the Company bears to the total votes
represented by all outstanding equity of the Company. For purposes of this
agreement, "Blackstone" shall mean collectively, Blackstone L.R. Capital
Partners L.P., Blackstone Capital Partners II Merchant Banking Fund L.P.,
Blackstone Offshore Capital Partners II L.P., The Blackstone Group L.P. and
their affiliates (other than the Company and its subsidiaries). "Public
Offering" shall mean the sale of common stock of the Company ("Common Stock")
pursuant to an effective registration statement under the Securities Act of
<PAGE>
4
1933, as amended, which results in an active trading market in the Common Stock.
5. (a) Confidential Information. Employee acknowledges that all information
obtained by Employee during the term of employment concerning the business and
affairs of the Company and its subsidiaries and affiliates are valuable, special
and unique assets of the Company and are the sole and exclusive property of the
Company ("Confidential Information"). Employee agrees that Employee will not at
any time or in any manner, directly or indirectly, use, exploit, disclose or
communicate in any manner such Confidential Information to any third party
without the prior written consent of the Company. All Confidential Information
will be protected in accordance with the Company's policies. The foregoing
obligations will not apply to the extent such Confidential Information (i)
becomes generally known to the public other than as a result of acts or
omissions of the Employee, or (ii) as may be required by law. At the time of
termination or expiration of this Agreement, Employee shall immediately deliver
to the Company all such Confidential Information under control or possession of
the Employee and all copies and notes thereon, regardless of the form of storage
or retrieval. The only exceptions to the foregoing shall be Employee's personal
files containing no Confidential Information. The obligations in this paragraph
shall survive for two (2) years following the termination or expiration of this
Agreement.
(b) Non-Compete Covenant. In consideration for the compensation paid under
this Agreement, Employee agrees and covenants that throughout the term of this
Agreement and for two (2) years following the termination or expiration of this
Agreement ("Covenant Period"); (which Covenant Period may be extended one
additional year at the Company's discretion, by Company's payment to Employee,
within 30 days after the expiration of the initial Covenant Period, of an amount
equal to his Annual Base Salary), Employee will not directly or indirectly
engage in any business competitive with the Company and its products and
business plans including, without limitation, the manufacture, assembly,
distribution and/or sale of forgings, axles, prop shafts and all related parts
and components and successor products thereto which are made, sold or used by
the Company. Engaging in competitive activity shall include, without limitation,
(i) engaging in a business as owner, partner, or agent, (ii) consulting,
becoming self-employed or becoming an employee or being associated in any
capacity with any third party that is engaged in such business, (iii) owning or
controlling any interest in such business, directly or indirectly, (iv)
soliciting, calling on or communicating with any customer of the Company for the
purpose of competing with the Company, (v) inducing or attempting to induce, or
assisting others to induce or attempt to induce, any employee, agent,
representative or other person employed by, associated with, doing business
with, or having a relationship with the Company to terminate his, her or its
employment, relationship or association with the Company,
<PAGE>
5
or in any way interfere with the relationship between the Company or any such
person or enterprise, or (vi) otherwise competing with the Company. This
obligation shall apply to any geographic area where the Company has a
manufacturing facility or conducts automotive-related sales and service
operations. The foregoing obligations shall survive the termination or
expiration of this Agreement.
(c) Remedies. The Employee agrees that the Company would suffer irreparable
harm from a breach by the Employee of any of the covenants or terms of this
Section 5. Therefore in the event of any actual or threatened breach by the
Employee of any of the provisions of this Section 5, the Company may seek
specific performance and/or injunctive or other relief in order to enforce this
Agreement.
6. Term. The term of this Agreement shall commence October 29, 1997 and end
on December 31, 2004. Unless earlier terminated in accordance with the
provisions of this Agreement, the Employee's employment hereunder shall be for
the entire term of the Agreement, including extensions. This Agreement shall be
renewed automatically for an additional twelve (12) consecutive month periods at
the end of the initial, and each subsequent, term of the Agreement unless either
party notifies the other by written notice received at least sixty (60) days
prior to the end of the term of the Agreement that such party is terminating
this Employment Agreement.
7. Termination. Employment may be terminated prior to the expiration date
on the first to occur of the following:
(a) Death, Disability. The Employee's employment hereunder shall terminate
if the Employee dies, or becomes Disabled. In such event, except as set forth in
Section 3(c)(viii), the applicable benefit plans and programs of the Company
shall apply and all other obligations hereunder to Employee and his heirs shall
cease. In addition, in the event of Employee's death while employed hereunder,
the Company shall make its best efforts to provide Employee's estate with
appropriate liquidity with regard to the Employee's stock and stock options.
"Disabled" shall mean any injury or sickness such that the Employee is
permanently prevented thereby from performing any and every duty of such
Employee's occupation, as determined by a physician mutually agreed upon by the
Employee and the Board. For this purpose the Employee shall not be deemed
"Disabled", if such Employee is engaged in regular employment or occupation for
remuneration or profit, and, to be "Disabled", the Employee must be found by
such physician to be permanently prevented from engaging in regular employment
or occupation with the Company at the location where the Employee last worked
for remuneration or profit as a result of bodily injury or disease, either
occupational or non-occupational in cause.
<PAGE>
6
(b) Termination for Cause. The Employee's employment hereunder may be
terminated for Cause (as defined below) by the Company at any time immediately
upon written notice of termination, except as provided otherwise below, given by
the Company to the Employee describing such Cause. For purposes of this
Agreement, "Cause" for termination shall be deemed to exist only if: (i) the
Employee is convicted of a felony which involves an intentional act of the
Employee; (ii) the Employee engages in dishonesty or fraud; or (iii) the
Employee breaches any of his material obligations as Chairman, President and
Chief Executive Officer of the Company, including, but not limited to, willful
neglect or misconduct of his duties hereunder or a willful and material breach
of any of the terms and conditions of this Agreement.
Any written notice of termination for Cause pursuant to this Section shall
be a written notice which (a) indicates the specific termination provision
relied upon; (b) sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Employee's employment; and (c) if
the date of termination is other than the date of receipt of such notice,
specifies the termination date. In the event that Employee's employment is
terminated pursuant to subsection 7(b)(iii) above, Employee shall have a period
of ninety (90) days to cure the breach of Employee's obligations under this
Agreement as described in the Notice of Termination. In the event that Employee
cures such breach within said ninety (90) day period, the notice of termination
shall be considered rescinded. In the event that Employee fails to cure such
breach, then this Agreement will terminate without further notice to Employee as
set forth in the Notice of Termination, and the Company shall promptly pay to
the Employee (or to the Employee's legal representatives) the amount of any
compensation otherwise due and payable with respect to periods of employment
prior to such termination, plus the amount of any reimbursable expenses. No
other compensation payments shall be due Employee. Employee shall not have the
opportunity to cure any termination for cause pursuant to subsections 7(b)(i) or
7(b)(ii) above.
(c) Termination by the Company Not for Cause or by Employee for Good
Reason. In the event the Employee's employment hereunder is terminated without
Cause or the Employee terminates employment hereunder for Good Reason, the
Employee is automatically entitled to severance payments equal to two (2) years
Annual Base Salary and continuation of existing health care benefits for two (2)
years. No other payments shall be due employee except any bonus payments which
may otherwise be due pursuant to Section 3(b). Said severance payments shall be
paid in the same manner and on the same schedule (i.e. monthly, weekly, etc.) as
employee was being paid on the date of termination. Severance payments being
made pursuant to this Section shall survive the death of Employee. For purposes
of this Agreement, "Good Reason" shall mean (i) a reduction in base salary or
bonus opportunity, (ii) a substantial reduction in the
<PAGE>
7
Employee's duties, responsibilities or reporting responsibility or (ii)
relocation from the Detroit metropolitan area.
(d) Additional Consequences of Termination. If the Employee ceases to be an
employee of the Company, Employee shall immediately return all Confidential
Information as set forth above and any other Company property in his possession
or control, such as keys, Company employee credit cards, employee pass,
equipment and the Company provided vehicle. Employee further agrees that at the
Company's request and subject to reasonable notice, Employee will cooperate at
any time in the future with and make himself available to the Company to testify
as a witness in any legal proceedings and/or assist in any investigation,
without need for a subpoena. Such cooperation will be without cost to the
Company except for reimbursement of all reasonable and necessary out-of-pocket
expenses.
8. Notices. All notices under this Agreement shall be in writing and sent
to each party at their address as they shall notify the other party. All notices
will be deemed delivered (i) as of the date of delivery if delivered in person
or by courier, or (ii) three (3) days after being deposited in the United States
Mail, postage paid.
9. Assignability. Neither Employee or the Company may assign this Agreement
or any rights, duties or obligations hereunder without the prior written consent
of the other party.
10. Severability. If any term or provision of this Agreement shall be
invalid or unenforceable to any extent, that provision shall be reformed to make
it enforceable if possible, and the remainder of the Agreement shall be valid
and enforceable to the full extent permitted by law.
11. Waiver. The failure of either party to enforce any provision of this
Agreement shall not be construed as a waiver or limitation of that party's
rights to subsequently enforce and compel strict compliance with this Agreement.
12. Entire Agreement; Amendments. This Agreement constitutes the entire
agreement between the Company and Employee concerning the subject matter hereof
and cancels and supersedes any and all other written or oral agreements or
understandings with respect to the subject hereof. No modification, amendment or
waiver of any term of this Agreement shall be effective in writing and signed by
all the parties. This Agreement may be executed in counterparts which together
will constitute one and the same instrument.
13. Governing Law. This Agreement will be governed by the laws of the State
of Michigan without regard to its conflicts of laws principles, except to the
extent state law is preempted by federal law.
<PAGE>
8
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Agreement this 6th day
of November, 1997.
AMERICAN AXLE & MANUFACTURING
OF MICHIGAN, INC.
Dated: 6th of November, 1997 By: /s/ Glen H. Hutchins
----------------------------
Its:Chair, Compensation Committee
Dated: 11/6/97 /s/ Richard E. Dauch
-------------------------------
Richard E. Dauch, Director
<PAGE>
EXHIBIT A
TO
EMPLOYMENT AGREEMENT
DETERMINATION AND CALCULATION OF ANNUAL CASH BONUS
1. Measurement Dates.
(a) Employee's cash bonus under Paragraph 3(b) of this Agreement shall be
determined as of December 31, 1997, and, except as provided in Section 1(b) of
this Exhibit A, as of December 31 of each calendar year thereafter until and
including December 31, 2003 (each such December 31 a "Measurement Date").
(b) If the Employee's employment with the Company ceases as a result of the
Employee's retirement, death or disability as provided in Paragraph 7(a) of the
Agreement, or as a result of a termination by the Company of the Employee's
employment with the Company without "Cause" (as defined herein) the December 31
being or next following (as the case may be) the date on which Employee's
retirement, death, disability or termination without cause (as the case may be)
occurred shall be the final Measurement Date. If the Employee terminates his
employment with the Company, or if the Company terminates the Employee's
employment with the Company for Cause, the December 31 being or immediately
preceding (as the case may be) the date of such termination shall be the final
Measurement Date.
2. Determination of Annual Cash Bonus.
(a) The Annual Cash Bonus shall be determined as of each Measurement Date
for the calendar year ending on such Measurement Date pursuant to the following:
Annual Cash Bonus Expressed
as a Percentage of
Employee's Annual Base
If the Audited Adjusted Salary for the calendar year
After-tax Net Income is: ending on the
Measurement Date:
Less than $20.0 million None
$20.0 million 25% of such Annual Base
Salary
<PAGE>
10
Between $20.0 million and 25% of such Annual Base
$60.0 million Salary plus a percentage of
such Annual Base Salary, which
percentage is the product of
75% multiplied by a fraction
the numerator of which is the
Audited Adjusted After-tax Net
Income less $20.0 million
and the denominator of which
is $40.0 million
$60.0 million or more 100%
"Audited Adjusted After-tax Net Income" is the net income of the Company for the
calendar year ending on the Measurement Date as determined by the Company's
certified public accountants in accordance with generally accepted accounting
principles consistently applied ("GAAP"), excluding any extraordinary gains and
excluding any extraordinary losses (such extraordinary gains and extraordinary
losses being determined in accordance with GAAP) (such net income as so
described referred to as "GAAP Net Income"), adjusted as follows: if the
cumulative GAAP Net Income for the calendar years preceding the calendar year
ending on such Measurement Date is negative (i.e. a cumulative net loss), the
Audited Adjusted After-tax Net Income is reduced by the amount of such
cumulative negative GAAP Net Income (i.e. cumulative net loss).
"Cumulative Negative GAAP Net Income" is the cumulative net losses (after taxes)
excluding cumulative extraordinary gains and cumulative extraordinary losses.
The Annual Cash Bonus will be calculated two ways on a "with and without" basis
as follows: (i) Annual Cash Bonus computed "with" the Annual Cash Bonus deducted
as an expense to arrive at Audit Adjusted After-tax Net Income; and, (ii) Annual
Cash Bonus computed "without" the annual bonus deducted as an expense to arrive
at Audit Adjusted After-tax Net Income. One-half of the difference between the
computations of (i) and (ii) will be added to the Annual Cash Bonus calculated
under (i) to arrive at the final Annual Cash Bonus.
(b) For purposes of determining the Annual Cash Bonus as of the December
31, 1997, Measurement Date, and only as of such Measurement Date: (i) the dollar
amount in the left hand column of the chart set forth above in Section 2(a) of
this Exhibit A shall be changed to $15.0 million in each place that $20 million
appears and changed to $45 million in each place that $60 million appears and
(ii) Employee's Annual Base Salary for the year ending on December 31, 1997
shall be $750,000.
<PAGE>
RECAPITALIZATION AND STOCK PURCHASE AGREEMENT
Among
AMERICAN AXLE & MANUFACTURING, INC.,
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.,
JUPITER CAPITAL CORPORATION,
MR. RICHARD E. DAUCH,
MR. MORTON E. HARRIS,
and
AAM ACQUISITION, INC.
dated as of
September 19, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
ARTICLE I PURCHASE AND SALE OF ACQUIRED SHARES; RECAPITALIZATION....................... 2
1.1 Purchase and Sale of Acquired Shares.................................... 2
1.2 Recapitalization........................................................ 2
1.3 The Closing............................................................. 3
1.4 Phantom Stock Options................................................... 5
1.5 Further Assurances...................................................... 6
ARTICLE II REPRESENTATIONS AND WARRANTIES REGARDING
THE STOCKHOLDERS............................................................. 7
2.1 Ownership of Stock...................................................... 7
2.2 Authorization, Etc. .................................................... 7
2.3 No Approvals or Conflicts............................................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING
THE COMPANY.................................................................. 8
3.1 Corporate Organization.................................................. 8
3.2 Capital Stock........................................................... 9
3.3 Authorization, Etc...................................................... 9
3.4 Financial Statements.................................................... 10
3.5 No Undisclosed Liabilities.............................................. 10
3.6 No Approvals or Conflicts............................................... 11
3.7 Compliance with Law; Governmental Authorizations........................ 11
3.8 Litigation.............................................................. 12
3.9 Title to Assets......................................................... 12
3.10 Absence of Certain Changes............................................. 12
3.11 Taxes.................................................................. 12
3.12 Employee Benefits...................................................... 14
3.13 Labor Relations........................................................ 15
3.14 Patents, Trademarks, Trade Names, Etc. ................................ 15
3.15 Contracts.............................................................. 16
3.16 Environmental Matters.................................................. 16
3.17 Brokers' and Other Fees................................................ 16
3.18 Affiliated Transactions................................................ 17
3.19 Recalls................................................................ 17
3.20 Product Liability Claims............................................... 17
3.21 Real Property.......................................................... 17
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
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<S> <C> <C>
3.22 Insurance.............................................................. 18
3.23 Required Assets........................................................ 19
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING
PURCHASER.................................................................... 19
4.1 Organization............................................................ 19
4.2 Authorization, Etc. .................................................... 19
4.3 No Approvals or Conflicts............................................... 19
4.4 Acquisition for Investment.............................................. 20
4.5 Financing............................................................... 20
4.6 No Brokers' or Other Fees............................................... 20
ARTICLE V COVENANTS AND AGREEMENTS..................................................... 21
5.1 Conduct of Business by Company.......................................... 21
5.2 Access to Books and Records; Cooperation................................ 22
5.3 Filings and Consents.................................................... 23
5.4 Tax Matters............................................................. 23
5.5 WARN Act................................................................ 26
5.6 Employee Benefits....................................................... 27
5.7 Supplements to Disclosure Schedule...................................... 27
5.8 Covenant to Satisfy Conditions.......................................... 27
5.9 Director and Officer Liability and Indemnification...................... 27
5.10 Contact with Customers and Suppliers................................... 28
5.11 Financing.............................................................. 28
5.12 Affiliated Transactions................................................ 28
5.13 Financial Statements and Reports....................................... 28
5.14 Section 338(h)(10) Election............................................ 29
5.15 Disclosure............................................................. 29
ARTICLE VI CONDITIONS TO THE STOCKHOLDERS'
OBLIGATIONS.................................................................. 30
6.1 Representations and Warranties.......................................... 30
6.2 Performance............................................................. 30
6.3 Preferred Stock Purchase and Redemption................................. 30
6.4 Officer's Certificate................................................... 31
6.5 HSR Act................................................................. 31
6.6 Injunctions............................................................. 31
6.7 Closing Certificates.................................................... 31
ii
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Page
ARTICLE VII CONDITIONS TO PURCHASER'S OBLIGATIONS............................. 31
7.1 Representations and Warranties.......................................... 31
7.2 Performance............................................................. 32
7.3 Preferred Stock Purchase and Redemption................................. 32
7.4 Park Corporation Guarantee.............................................. 32
7.5 Officer's Certificate................................................... 32
7.6 HSR Act................................................................. 32
7.7 Injunctions and Certain Other Matters................................... 32
7.8 Funding................................................................. 33
7.9 Resignation of Directors................................................ 33
7.10 Closing Certificates................................................... 33
7.11 Stockholder Approval................................................... 33
ARTICLE VIII TERMINATION.......................................................... 33
8.1 Termination............................................................. 33
8.2 Procedure and Effect of Termination..................................... 34
ARTICLE IX MISCELLANEOUS................................................................ 35
9.1 Indemnification......................................................... 35
9.2 The Stockholders' Obligations........................................... 38
9.3 Fees and Expenses....................................................... 38
9.4 Governing Law........................................................... 39
9.5 Amendment............................................................... 39
9.6 No Assignment........................................................... 39
9.7 Waiver.................................................................. 39
9.8 Notices................................................................. 40
9.9 Complete Agreement...................................................... 41
9.10 Counterparts........................................................... 41
9.11 Publicity.............................................................. 41
9.12 Headings............................................................... 42
9.13 Severability........................................................... 42
9.14 Third Parties.......................................................... 42
9.15 CONSENT TO JURISDICTION AND SERVICE OF
PROCESS.............................................................. 42
9.16 WAIVER OF JURY TRIAL................................................... 42
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C> <C>
SCHEDULE I
EXHIBIT A Form of Stockholders Agreement
EXHIBIT B Form of Park Corporation Guarantee
</TABLE>
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<PAGE>
RECAPITALIZATION AND STOCK PURCHASE AGREEMENT
This Recapitalization and Stock Purchase Agreement (this
"Agreement"), dated as of September 19, 1997, is entered into by and among
American Axle & Manufacturing, Inc., a Delaware corporation (the "Company"),
American Axle & Manufacturing of Michigan, Inc., a Michigan corporation and a
wholly owned subsidiary of the Company ("AAMM"), Jupiter Capital Corporation, an
Ohio corporation ("Jupiter"), Mr. Richard E. Dauch and Mr. Morton E. Harris
(each such individual owner and Jupiter is referred to herein as a "Stockholder"
and both such individuals and Jupiter are referred to herein collectively as the
"Stockholders"), and AAM Acquisition, Inc., a Delaware corporation
("Purchaser").
WHEREAS, the Stockholders collectively own, beneficially and
of record, an aggregate of 21,053 shares (the "Company Shares") of common stock,
par value $0.01 per share (the "Company Common Stock"), of the Company, 18,261
of which are owned by Jupiter, 1,488 of which are owned by Mr. Dauch and 1,304
of which are owned by Mr. Harris;
WHEREAS, the Company Shares constitute all of the issued and
outstanding shares of Company Common Stock as of the date hereof;
WHEREAS, the Stockholders desire to contribute the Company
Shares to AAMM in exchange for an aggregate of 21,053 newly issued shares (the
"AAMM Shares") of Common Stock, par value $0.01 per share (the "AAMM Common
Stock"), of AAMM, on the terms and subject to the conditions set forth herein;
WHEREAS, in connection with the foregoing, the parties hereto
desire to recapitalize the Company and the Subsidiaries by virtue of extensions
of credit to the Company and certain related transactions as more fully set
forth herein;
WHEREAS, the parties hereto desire that the proceeds from such
extensions of credit be used to (i) repay certain indebtedness of the Company,
(ii) redeem all of the Company's issued and outstanding shares of Class A
Preferred Stock, $.01 par value per share (the "Class A Preferred Stock"), (iii)
distribute a cash dividend to AAMM in an amount sufficient to (x) repurchase
11,125 AAMM Shares (the "Jupiter Recapitalization Shares") to be held by Jupiter
and 1,266 AAMM Shares (the "Harris Recapitalization Shares" and, together with
the Jupiter Recapitalization Shares, the "Recapitalization Shares") to be held
by Mr. Harris and (y) pay to Jupiter an amount equal to the estimated Election
Taxes, as set forth in Schedule I hereto
<PAGE>
(the "Election Taxes"), and (iv) consummate certain other transactions as more
fully set forth herein; and
WHEREAS, in connection with the foregoing transactions,
Jupiter desires to sell to Purchaser, and Purchaser desires to purchase from
Jupiter, 6,602 AAMM Shares (the "Jupiter Acquired Shares") to be held by
Jupiter, and Mr. Dauch desires to sell to Purchaser, and Purchaser desires to
purchase from Mr. Dauch 595 AAMM Shares (the "Dauch Acquired Shares" and,
together with the Jupiter Acquired Shares, the "Acquired Shares") to be held by
Mr. Dauch, on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants contained herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ACQUIRED SHARES; RECAPITALIZATION
1.1 Purchase and Sale of Acquired Shares. Each of Jupiter and
Mr. Dauch agrees to sell to Purchaser, and Purchaser agrees to purchase from
Jupiter and Mr. Dauch, the Acquired Shares at the Closing, free and clear of any
preemptive rights, options, rights, liens, claims or other encumbrances or
restrictions ("Encumbrances") and on the terms and subject to the conditions set
forth in this Agreement. The aggregate purchase price for the Jupiter Acquired
Shares is $110,991,372 (the "Jupiter Acquired Shares Purchase Price") and the
aggregate purchase price for the Dauch Acquired Shares is $10,003,009 (the
"Dauch Acquired Shares Purchase Price" and, together with the Jupiter Acquired
Shares Purchase Price, the "Acquired Shares Purchase Price"), in each case
payable in immediately available United States funds at the Closing in the
manner provided in Section 1.3(a)(ix).
1.2 Recapitalization. The Recapitalization will consist of the
following transactions, upon the terms and subject to the conditions set forth
in this Agreement (collectively, the "Recapitalization"), which transactions
will be consummated in the following order:
(a) At the Closing the Company shall borrow funds,
provided that Purchaser shall have caused certain financial institutions (the
"Lenders") to lend such funds to the Company (such borrowings are collectively
referred to herein as the "Financing"), such that, when taken together with
other cash available to the
2
<PAGE>
Company, the Company has sufficient cash at the Closing (net of any fees,
expenses and other costs required to be paid by the Company in connection with
the transactions contemplated hereby) to, among other things, (i) repay the
indebtedness of the Company set forth in Section 1.2(a) of the Disclosure
Schedule attached hereto and made a part hereof (the "Disclosure Schedule"), and
(ii) redeem all of the Class A Preferred Stock held by Jupiter.
(b) The Stockholders shall contribute the Company Shares
to AAMM in exchange for the AAMM Shares.
(c) In connection with the Recapitalization, AAMM and
Jupiter shall jointly cause the election under Section 338(h)(10) of the
Internal Revenue Code of 1986, as amended (the "Code"), and other related
elections as described in Section 5.14.
(d) The Company shall declare and pay a dividend to AAMM
in cash in an amount equal to the entire net proceeds of the Financing less
amounts paid by the Company in connection with the transactions set forth in
clauses (a)(i) and (a)(ii) of this Section 1.2, and immediately thereafter
cancel any shares of AAMM Common Stock owned by the Company.
(e) AAMM shall pay to Jupiter an amount equal to the
Election Taxes.
(f) AAMM shall repurchase the Jupiter Recapitalization
Shares for a purchase price of $187,031,053 (the "Jupiter Recapitalization Cash
Consideration") and shall repurchase the Harris Recapitalization Shares for a
purchase price of $21,283,713 (the "Harris Recapitalization Cash
Consideration"), in each case payable in immediately available funds at the
Closing in the manner provided in Section 1.3(a)(vii).
(g) Purchaser shall purchase from Jupiter and Mr. Dauch
the Acquired Shares as set forth in Section 1.1.
1.3 The Closing. The closing (the "Closing") of the
transactions contemplated in this Agreement shall take place at the offices of
Simpson Thacher & Bartlett at 425 Lexington Avenue, New York, New York, at 10:00
a.m., local time, on the second business day or as soon thereafter as
practicable following the satisfaction or waiver of all of the conditions set
forth in Articles VI and VII hereof
3
<PAGE>
(the "Closing Date"), or at such other place and time as may be agreed upon by
the Stockholders and Purchaser.
(a) At the Closing, the following transactions will be
consummated in the following order:
(i) the Company shall consummate the Financing,
provided that Purchaser shall have caused the Lenders to provide the
Financing;
(ii) the Company shall (x) repay all amounts of
outstanding indebtedness of the Company listed on Section 1.2(a) of the
Disclosure Schedule and (y) redeem all of the Class A Preferred Stock
held by Jupiter;
(iii) the Stockholders shall contribute the Company
Shares to AAMM in exchange for the AAMM Shares;
(iv) AAMM and Jupiter shall jointly cause the
election under Section 338(h)(10) of the Code, and other related
elections as described in Section 5.14;
(v) the Company shall declare and pay a dividend to
AAMM in cash in an amount equal to the entire net proceeds of the
Financing less amounts paid by the Company in connection with the
transactions set forth in clauses (a)(ii)(x) and (a)(ii)(y) of this
Section 1.3, and immediately thereafter cancel any shares of AAMM
Common Stock owned by the Company;
(vi) AAMM shall pay to Jupiter an amount equal to the
estimated Election Taxes, as set forth in Schedule I hereto;
(vii) AAMM shall pay to Jupiter the Jupiter
Recapitalization Cash Consideration and pay to Mr. Harris the Harris
Recapitalization Cash Consideration by wire transfer of immediately
available funds to such account or accounts as Jupiter and Mr. Harris
may direct by written notice delivered to AAMM at least two Business
Days before the Closing Date. Simultaneously with such payments and
deliveries, (A) Jupiter will assign and transfer to
4
<PAGE>
AAMM good and valid title in and to the Jupiter Recapitalization Shares
and (B) Mr. Harris will assign and transfer to AAMM good and valid
title in and to the Harris Recapitalization Shares. Each such
Recapitalization Share delivered by Jupiter and Mr. Harris to AAMM
shall be delivered free and clear of any Encumbrances and each
certificate representing such Recapitalization Shares delivered by
Jupiter and Mr. Harris shall be properly endorsed for transfer or
accompanied by duly executed stock powers, in either case executed in
blank or in favor of AAMM;
(viii) Purchaser will pay Jupiter the Jupiter
Acquired Shares Purchase Price and pay Mr. Dauch the Dauch Acquired
Shares Purchase Price by wire transfer of immediately available funds
to such account or accounts as Jupiter and Mr. Dauch may direct by
written notice delivered to Purchaser at least two Business Days before
the Closing Date. Simultaneously with such payment and delivery, (A)
Jupiter will assign and transfer to Purchaser good and valid title in
and to the Jupiter Acquired Shares held by Jupiter and (B) Mr. Dauch
will assign and transfer to Purchaser good and valid title in and to
the Dauch Acquired Shares held by Mr. Dauch. Each such Acquired Share
delivered by Jupiter and Mr. Dauch to Purchaser shall be delivered free
and clear of any Encumbrances and each certificate representing such
Acquired Shares delivered by Jupiter and Mr. Dauch shall be properly
endorsed for transfer or accompanied by duly executed stock powers, in
either case executed in blank or in favor of Purchaser; and
(ix) AAMM, Purchaser and the Stockholders shall enter
into a Stockholders Agreement (the "Stockholders Agreement"),
substantially in the form attached hereto as Exhibit A.
(b) All instruments and documents executed and delivered
to Purchaser pursuant hereto shall be in form and substance, and shall be
executed in a manner, reasonably satisfactory to Purchaser. All instruments and
documents executed and delivered to the Stockholders or the Company pursuant
hereto shall be in form and substance, and shall be executed in a manner,
reasonably satisfactory to the Stockholders or the Company, as applicable.
1.4 Phantom Stock Options. The Company shall take all actions
necessary to provide that, immediately prior to the Closing, each phantom stock
5
<PAGE>
option (each, a "Phantom Stock Option") granted to a Company employee pursuant
to the Company's Phantom Stock Plan (the "Phantom Stock Plan") that is listed in
Section 1.4 of the Disclosure Schedule and is outstanding immediately prior to
the Closing, whether or not then vested or exercisable, shall, effective as of
the Closing and subject to any required consent of the option holder, be
cancelled in exchange for (x) a single lump sum cash payment equal to the
product of (1) the number of phantom shares of Common Stock subject to such
Phantom Stock Option and (2) $16,811.78 less the exercise price per share of
such Phantom Stock Option (the "Phantom Stock Value"), (y) newly issued AAMM
options, each with a value on the Closing Date equal to the Phantom Stock Value
or (z) a combination of cash and shares of AAMM Common Stock, each with a value
equal to the Phantom Stock Value; provided that the foregoing shall not require
any action that violates the rights of any optionee under the Phantom Stock
Plan, the Phantom Stock Options or any agreements in respect thereof. The
parties will allocate the deduction attributable to the cancellation of options
under this Section 1.4 to the taxable period ending on the Closing Date. The
parties agree that the aggregate Phantom Stock Value that is exchanged for newly
issued options of AAMM (such aggregate value, the "Phantom Exchange Value")
shall be (i) deducted from the amount of Acquired Share Purchase Price paid by
Purchaser to Jupiter and (ii) added to the amount of Recapitalization Cash
Consideration paid to Jupiter. The parties also agree that (i) the number of
Jupiter Acquired Shares received from Jupiter by Purchaser shall be reduced by
an amount equal to the quotient of (x) the Phantom Exchange Value divided by (y)
16,811.78 (the "Phantom Share Adjustment Amount") and (ii) the number of
Recapitalization Shares purchased from Jupiter by AAMM shall be increased by the
Phantom Adjustment Amount.
1.5 Further Assurances. After the Closing, each party hereto
shall from time to time, at the request of the other party and without further
cost or expense to such other party, execute and deliver such other instruments
of conveyance and transfer and take such other actions as such other party may
reasonably request in order to more effectively consummate the transactions
contemplated hereby.
6
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES
REGARDING THE STOCKHOLDERS
Each Stockholder hereby represents and warrants to Purchaser,
with respect to such Stockholder only, as follows:
2.1 Ownership of Stock. Each Stockholder is the record and
beneficial owner of the number of shares of Company Common Stock set forth
opposite such Stockholder's name in Section 2.1 of the Disclosure Schedule. The
Company Shares owned by the Stockholders are owned free and clear of all
Encumbrances, other than the restrictions imposed by Federal and state
securities laws. Upon the consummation of the transactions contemplated hereby,
Purchaser will acquire title to the Acquired Shares, free and clear of all
Encumbrances, other than the restrictions imposed by Federal and state
securities laws and Encumbrances arising as a result of any action taken by
Purchaser or any of its affiliates ("Affiliates") as defined in Rule 12b-2 of
the regulations promulgated pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
2.2 Authorization, Etc. Each Stockholder has full power and
authority to execute and deliver this Agreement and to carry out the
transactions contemplated hereby. The Board of Directors and the sole
stockholder of Jupiter have duly approved and authorized the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby. No other action on the part of a Stockholder is necessary to approve and
authorize the execution and delivery by such Stockholder of this Agreement and
the consummation by each Stockholder of the transactions contemplated hereby.
This Agreement has been duly and validly executed by each Stockholder and,
assuming this Agreement constitutes the valid and binding agreement of the other
parties hereto, constitutes a valid and binding agreement of each Stockholder,
enforceable against such Stockholder in accordance with its terms, except that
(i) the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
2.3 No Approvals or Conflicts. Except as set forth in Section
2.3 of the Disclosure Schedule or expressly provided herein, neither the
execution and deliv-
7
<PAGE>
ery by the Stockholders of this Agreement nor the consummation by the
Stockholders of the transactions contemplated hereby will (i) violate, conflict
with or result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the creation of any lien, security interest, charge or
encumbrance upon the Stockholders' interest in the Shares under the Certificate
of Incorporation or Bylaws of Jupiter or any note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, lease, contract, agreement or other
instrument to which the Stockholders or any of their respective properties may
be bound, (iii) violate any order, injunction, judgment, ruling, law or
regulation of any court or governmental authority applicable to the Stockholders
or any of their respective properties or (iv) except for applicable requirements
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), require any consent, approval or authorization of, or notice to, or
declaration, filing or registration with, any governmental or regulatory
authority, which, in the case of clauses (ii), (iii) and (iv) above, would
reasonably be expected, individually or in the aggregate, to have a material
adverse effect on the ability of such Stockholder to consummate the transactions
contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
The Company hereby represents and warrants to Purchaser as
follows:
3.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has full corporate power and authority to own its
properties and assets and to carry on its business as now being conducted and is
duly qualified or licensed to do business as a foreign corporation in good
standing in the jurisdictions in which the ownership of its property or the
conduct of its business requires such qualification, except jurisdictions in
which the failure to be so qualified or licensed would not have a material
adverse effect on the business, results of operations or financial condition of
the Company and its subsidiaries, taken as a whole, or on the ability of the
Company to perform its obligations hereunder (it being understood that no
representation or warranty is being made by the Company regarding the ability to
finance the transactions contemplated hereby) (hereinafter referred to as a
"Material Adverse Effect"). The Company has delivered to Purchaser complete and
correct copies of the Certificate of Incorporation and all amendments thereto to
the date hereof, and the Bylaws as presently in effect of the Company.
8
<PAGE>
Section 3.1 of the Disclosure Schedule sets forth a list of each of the
Company's subsidiaries (the "Subsidiaries"). Each Subsidiary is a corporation
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, has the power and authority to carry on its business as now being
conducted and has the power and authority to own and operate the properties and
assets now owned and being operated by it. Except as set forth in Section 3.1 of
the Disclosure Schedule, the Company does not own, directly or indirectly, any
capital stock or other equity securities of any corporation or have any direct
or indirect equity or ownership interest in any partnership, joint venture or
other business.
3.2 Capital Stock. The authorized capital stock of the Company
consists of (i) 36,134 shares of Company Common Stock of which, as of the close
of business on the date of this Agreement, 21,053 shares were issued and
outstanding, (ii) 13,334 shares of Class A Preferred Stock, of which, as of the
close of business on the date of this Agreement, 13,334 shares were issued and
outstanding, and (iii) 50 shares of Class B 8% Non-Voting Preferred Stock, $0.01
par value per share, none of which is issued or outstanding. As of the date of
this Agreement, 1,747 shares of Common Stock were reserved for issuance upon
exercise of outstanding stock options ("Company Options") pursuant to the
Nonqualified Stock Option Agreement, dated as of February 27, 1994, by and
between the Company and Mr. Dauch. Except as set forth above, or as a result of
the exercise of the Company Options outstanding as of the date of this
Agreement, and except as set forth in Section 3.2 of the Disclosure Schedule,
there are no subscriptions, options, warrants, calls, rights, contracts,
commitments, understandings, restrictions or arrangements relating to the
issuance, sale, transfer or voting of any shares of common stock of the Company,
including any rights of conversion or exchange under any outstanding securities
or other instruments, other than restrictions imposed by Federal and state
securities laws. All of the outstanding shares of capital stock of the Company
have been validly issued and are fully paid, nonassessable and free of
preemptive rights. All of the issued and outstanding shares of each Subsidiary
are owned by the Company and all such shares have been duly authorized and
validly issued and are fully paid and nonassessable. The Company is, and always
has been, the sole owner of all the issued and outstanding shares of AAMM. The
AAMM Shares, when issued and delivered to the Stockholders at the Closing in
accordance with the terms hereof, shall have been duly authorized and validly
issued and, upon receipt by AAMM of the Company Shares, shall be fully paid and
nonassessable.
3.3 Authorization, Etc. Each of the Company and AAMM has
full corporate power and authority to execute and deliver this Agreement and
to carry out the transactions contemplated hereby. The Board of Directors of
each of the
9
<PAGE>
Company and AAMM, and the sole stockholder of AAMM, have duly approved and
authorized the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, and no other action on the part of the
Company or AAMM is necessary to approve and authorize the execution and delivery
by the Company and AAMM of this Agreement and the consummation by the Company
and AAMM of the transactions contemplated hereby. This Agreement has been duly
and validly executed by each of the Company and AAMM and, assuming this
Agreement constitutes the valid and binding agreement of the other parties
hereto, constitutes a valid and binding agreement of the Company and AAMM,
enforceable against the Company and AAMM in accordance with its terms, except
that (i) the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
3.4 Financial Statements. The Company has previously delivered
to Purchaser copies of the following financial statements: (a) the audited
Balance Sheets of the Company as of December 31, 1995 and 1996 and the
Statements of Income, Shareholders' Equity and Cash Flows of the Company for the
years ended December 31, 1995 and 1996, together with the notes thereto, and the
unqualified opinion of Ernst & Young LLP, the Company's independent auditors
(the "Audited Financial Statements") and (b) the balance sheet of the Company as
of June 30, 1997 (the "Balance Sheet") and the Statements of Income,
Shareholders' Equity and Cash Flows of the Company for the six months ended June
30, 1997 (collectively with the Audited Financial Statements, the "Financial
Statements"). The Financial Statements fairly present the consolidated financial
position and results of operations of the Company as of the dates and for the
periods indicated. Each of the Financial Statements has been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis except as disclosed in the footnotes thereto (if
applicable) and, with respect to financial statements referred to in clause (b),
subject to normal year-end adjustments.
3.5 No Undisclosed Liabilities. Except as disclosed in Section
3.5 of the Disclosure Schedule, the Company and the Subsidiaries have no
liabilities or obligations, whether accrued, absolute or contingent that are
required to be reflected on or disclosed in a balance sheet of the Company
prepared in accordance with GAAP (including appropriate footnote disclosure),
other than (i) liabilities and obligations that are reflected, accrued or
reserved for or disclosed in the Balance Sheet, (ii) obligations incurred in the
ordinary course of business and consistent with past
10
<PAGE>
practice since the date of the Balance Sheet and (iii) other liabilities and
obligations that would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
3.6 No Approvals or Conflicts. Except as set forth in Section
3.6 of the Disclosure Schedule or expressly provided herein, neither the
execution and delivery by the Company and AAMM of this Agreement nor the
consummation by the Company and AAMM of the transactions contemplated hereby
will (i) violate, conflict with or result in a breach of any provision of the
Certificate of Incorporation or Bylaws of the Company or AAMM, (ii) violate,
conflict with or result in a breach of any provision of, or constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties of the Company or any of the
Subsidiaries, under any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, lease, contract, agreement or other instrument to which the
Company or any of the Subsidiaries or any of their respective properties may be
bound, (iii) violate any order, injunction, judgment, ruling, law or regulation
of any court or governmental authority applicable to the Company or any of the
Subsidiaries or any of their respective properties or (iv) except for applicable
requirements of the HSR Act, require any consent, approval or authorization of,
or notice to, or declaration, filing or registration with, any governmental or
regulatory authority, which, in the case of clauses (ii), (iii) and (iv) above,
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
3.7 Compliance with Law; Governmental Authorizations. Except
as set forth in Section 3.7 of the Disclosure Schedule, neither the Company nor
any of the Subsidiaries are in violation of any order, injunction, judgment,
ruling, law or regulation of any court or governmental authority applicable to
the property or business of the Company which violation or violations would be
reasonably expected, individually or in the aggregate, to have a Material
Adverse Effect. Except as set forth in Section 3.7 of the Disclosure Schedule,
the licenses, permits and other governmental authorizations held by the Company
and its Subsidiaries are valid and sufficient for the conduct of the Company's
businesses as currently conducted, except where the failure to hold such
licenses, permits and other governmental authorizations would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
3.8 Litigation. Except as set forth in Section 3.8 of the
Disclosure Schedule, as of the date of this Agreement, there are no actions,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the
11
<PAGE>
Company or any of the Subsidiaries, before any court or governmental or
regulatory authority or body which, if adversely determined, would reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
3.9 Title to Assets. Except as set forth in Section 3.9 of the
Disclosure Schedule, on June 30, 1997, the Company had and, except with respect
to assets disposed of in the ordinary course of business since June 30, 1997,
the Company now has, good and valid title to all the properties and assets owned
by the Company and reflected on the Balance Sheet or which would have been
reflected on the Balance Sheet if acquired prior to June 30, 1997 free and clear
of all Encumbrances of any nature except for (i) exceptions to title as set
forth in Section 3.9 of the Disclosure Schedule; (ii) mortgages and encumbrances
which secure indebtedness or obligations which are properly reflected on the
Balance Sheet; (iii) liens for Taxes (as defined in Section 3.11) not yet
payable or any Taxes being contested in good faith; (iv) liens arising as a
matter of law in the ordinary course of business, provided that the obligations
secured by such liens are not delinquent or are being contested in good faith;
and (v) such imperfections of title and encumbrances, if any, as would not
reasonably be expected, individually or in the aggregate, to materially impair
the value of such properties and assets, taken as a whole (together, the
"Permitted Encumbrances"). The Company owns, or has valid leasehold interests or
other contractual rights in, all material tangible properties and assets used in
the conduct of the Company's business as presently conducted. None of the
Subsidiaries owns any material tangible properties or assets.
3.10 Absence of Certain Changes. Except as disclosed in
Section 3.10 of the Disclosure Schedule, since June 30, 1997 (i) the business of
the Company has been conducted only in the ordinary course and consistent with
past practice in all material respects, (ii) the Company has not suffered a
Material Adverse Effect and (iii) neither the Company nor any of the
Subsidiaries has taken any action which would require the consent of Purchaser
under Section 5.1(b) had such action been taken by the Company or any Subsidiary
after the date hereof.
3.11 Taxes. (a) The Company, or an Affiliate or other
representative of the Company on its behalf, has (i) duly filed with the
appropriate Federal, state, local and foreign taxing authorities all material
Tax Returns (as defined below) required to be filed by or with respect to the
Company and the Subsidiaries, and (ii) paid or made provision for in the Balance
Sheet all material Taxes (as defined below) due and required to be paid by the
Company and the Subsidiaries regardless of whether shown as being owed on such
required Tax Returns. Except as set forth in Section 3.11 of the Disclosure
Schedule, as of the date of this Agreement, (i) neither
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the Company nor any Affiliate or, to the Company's knowledge, other
representative of the Company has received any written notice of deficiency or
assessment from any Federal, state, local or foreign taxing authority with
respect to liabilities for material Taxes of the Company or any member of the
consolidated, combined or unitary group, of which the Company is or was at any
time a member (the "Tax Group") which have not been paid or finally settled and
any such deficiency or assessment disclosed in Section 3.11 of the Disclosure
Schedule is being contested in good faith through appropriate proceedings; (ii)
no audit of any Tax Return concerning the Company or any member of the Tax Group
is pending, being conducted, or, to the knowledge of the Company and the
Stockholders, threatened to be instituted by a Tax authority for periods during
which the Company was a member of the Tax Group; (iii) no extension of the
statute of limitations on the assessment of any Taxes has been granted to the
Company or any member of the Tax Group and is currently in effect for periods
during which the Company was a member of the Tax Group; (iv) no consent under
Section 341(f) of the Internal Revenue Code of 1986, as amended (the "Code") has
been filed with respect to the Company or any member of the Tax Group; (v)
neither the Company nor any of the Subsidiaries is a party to any agreement or
arrangement that would result, separately or in the aggregate, in the actual or
deemed payment by the Company of any "excess parachute payments" within the
meaning of Section 280G of the Code; (vi) the Company has not been at any time a
member of any partnership or joint venture or the holder of a beneficial
interest in any trust for any period for which the statute of limitations for
any Tax has not expired; (vii) the Company has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code;
(viii) the Company is not doing business in or engaged in a trade or business in
any jurisdiction in which it has not filed all required income or franchise Tax
Returns; (ix) all Taxes required to be withheld, collected or deposited by or
with respect to the Company and the Subsidiaries have been timely withheld,
collected or deposited, as the case may be, and, to the extent required, have
been paid to the relevant taxing authority; (x) no power of attorney that is
currently in force has been granted with respect to any matter relating to Taxes
that could materially affect the Tax liability of the Company and the
Subsidiaries; (xi) neither the Company nor any of the Subsidiaries is a party to
any written or unwritten tax sharing agreement or indemnity agreement or
agreement executed or agreed to on or prior to the date of this Agreement; (xii)
Section 3.11 of the Disclosure Schedule sets forth, to the Company's best
knowledge as of the date of this Agreement, the actual and estimated tax bases
of the Company's inventory and property, plant and equipment as of December 31,
1996 and the date of this Agreement; and (xiii) the Company has no liability for
any due and owing Taxes of any person other than the Company under
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Treasury regulation section 1.1502-6 (or any similar provision of state, local
or foreign law).
(b) For purposes of this Agreement, "Taxes" shall mean all
taxes, charges, fees, levies, penalties or other assessments imposed by any
United States Federal, state, local or foreign taxing authority, including, but
not limited to, income, gross receipts, service, leasing, occupation, excise,
property, sales and use, transfer, gains, franchise, payroll, withholding,
social security or other taxes, including any interest, penalties or additions
attributable thereto.
(c) For purposes of this Agreement, "Tax Return" shall
mean any return, amended return, report, information return or other document
(including any related or supporting information) filed or required to be filed
with any taxing authority with respect to Taxes.
3.12 Employee Benefits. (a) Section 3.12 of the Disclosure
Schedule sets forth a true and complete list of each employee benefit or
compensation plan, program and contract, including, but not limited to, any
employee benefit plan within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and any
multiemployer plan within the meaning of Section 3(37) of ERISA, to which the
Company or any of the Subsidiaries is a party, under which any employee or
former employee of the Company has any present or future right to benefits, with
respect to which the Company or any of the Subsidiaries could incur liability
under ERISA or the Code that is maintained for employees or former employees of
the Company or any of the Subsidiaries and to which the Company or any of the
Subsidiaries or any trade or business, whether or not incorporated, that
together with the Company or any of the Subsidiaries would be deemed a "single
employer" within the meaning of Section 4001(b) of ERISA (an "ERISA Affiliate"),
is obligated to contribute (the "Plans"). Each Plan has been maintained in
substantial compliance with all applicable laws and has been operated in all
material respects in compliance with its terms. Except as set forth in Section
3.12 of the Disclosure Schedule, (i) no Plan has an accumulated or waived
funding deficiency within the meaning of Section 412 of the Internal Revenue
Code of 1986, as amended (the "Code"), and (ii) no proceedings have been
instituted to terminate any Plan that is subject to Title IV of ERISA. Any Plan
intended to be "qualified" (within the meaning of Section 401(a) of the Code)
either (x) has received a favorable Determination Letter from the Internal
Revenue Service and, to the knowledge of the Company, no event has occurred nor
condition exists which could reasonably be expected to result in the revocation
of such Determination Letter, or (y) is the subject of an application for such a
Determination Letter.
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(b) No event has occurred which would subject the
Company or any of the Subsidiaries to liability under the terms of any Plan
(including solely for this purpose, any Plan maintained by any ERISA Affiliate
of the Company) under ERISA, the Code or any other applicable law which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
3.13 Labor Relations. Except as set forth in Section 3.13 of
the Disclosure Schedule, neither the Company nor any of the Subsidiaries is a
party to any collective bargaining agreement, labor contract or letter of
understanding with a union or labor organization applicable to employees of the
Company nor are any of its employees represented by any other union or labor
organization. Except as set forth in Section 3.13 of the Disclosure Schedule,
(i) the Company and the Subsidiaries are in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except for such violations that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Affect, (ii) neither the Company nor any of the Subsidiaries is engaged
in any unfair labor practice which has had or is reasonably expected to have a
Material Adverse Effect, and (iii) there is no labor strike, material slowdown
or stoppage or material labor dispute actually pending or, to the knowledge of
the Company, threatened against the Company or any of the Subsidiaries.
3.14 Patents, Trademarks, Trade Names, Etc. Section 3.14 of
the Disclosure Schedule contains a list of all patents, trademarks, trade names
and copyrights (collectively, "Intellectual Property") used or owned by the
Company or any of the Subsidiaries as of the date of this Agreement which are
material to the Company and the Subsidiaries, taken as a whole, and a list of
all material licenses and other agreements (collectively, "License Agreements")
relating thereto. Except as set forth in Section 3.14 of the Disclosure
Schedules, (i) the consummation of the transactions contemplated by this
Agreement will not materially impair any right to use the Intellectual Property
or the License Agreements, and (ii) as of the date of this Agreement, the
Company has received no written notice of any claims by any person to the use of
any such Intellectual Property, or challenging or questioning the validity or
effectiveness of any such License Agreement, which claims, if adversely decided,
would reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect. Since January 1, 1995, to the knowledge of the Company,
no third party has interfered with, infringed upon, misappropriated, or violated
any such Intellectual Property rights of the Company in any material respect.
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3.15 Contracts. Except as may be permitted by Section 5.1,
Section 3.15 of the Disclosure Schedule sets forth a complete and accurate list
of all material contracts, agreements and understandings to which the Company or
any of the Subsidiaries is a party which require ongoing annual payments in
excess of $1.0 million. Except as set forth in Section 3.15 of the Disclosure
Schedule, (i) each of the contracts, agreements and understandings to which the
Company or any of the Subsidiaries is a party or by which any of their
respective assets or operations may be bound is in full force and effect, except
where the failure to be in full force and effect would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect
and (ii) there are no existing defaults by the Company or any of the
Subsidiaries thereunder, which defaults would reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect.
3.16 Environmental Matters. Except as set forth in Section
3.16 of the Disclosure Schedule, since January 1, 1995 neither the Company nor
any of the Subsidiaries has received any written notice alleging the present or
past violation of any applicable Federal, state or local laws or regulations
related to the protection of human health or the environment ("Environmental
Laws") which would reasonably be expected to result in a Material Adverse Effect
and (i) the Company and the Subsidiaries are and have been in compliance with
all Environmental Laws, (ii) the Company and the Subsidiaries have obtained and
are and have been in compliance with all required governmental environmental
permits with respect to the business of the Company as currently conducted,
(iii) no hazardous waste, substance or material has been stored, treated,
released or disposed of by the Company or any of the Subsidiaries or, to the
knowledge of the Company, by any other person, on the real property owned,
operated or leased by the Company except in compliance with applicable
Environmental Laws and (iv) the Company and the Subsidiaries have disposed of
their respective hazardous waste products with respect to the operations of the
Company's business in compliance with Environmental Laws except, in each case
referred to in clauses (i) through (iv) above, where such failure to be in
compliance or to obtain, store, treat or dispose of would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
3.17 Brokers' and Other Fees. Except for the fees payable by
the Company as set forth in Section 9.3, no broker, finder or investment banker
is entitled to any fee or commission from the Company in connection with the
transactions contemplated hereby upon arrangements made by or on behalf of the
Stockholders.
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3.18 Affiliated Transactions. Section 3.18 of the Disclosure
Schedule contains accurate summaries of the principal terms of all arrangements,
relationships and transactions between the Company or any of the Subsidiaries
and any of the Stockholders or any director, officer, employee or any other
Affiliate of the Company, the Subsidiaries or any of the Stockholders since
January 1, 1995 other than arrangements, relationships and transactions with
officers or employees in the ordinary course of employment.
3.19 Recalls. Section 3.19 of the Disclosure Schedule sets
forth a summary of each recall (voluntary or involuntary) of products
manufactured by the Company or any of the Subsidiaries (or recalls of any
vehicles because of a problem relating to products manufactured by the Company
or any of the Subsidiaries) since January 1, 1995, describing in each case the
nature of the problem giving rise to such recall, the number of vehicles or
products recalled, and the aggregate costs incurred by the Company for each such
recall. Except as set forth on Section 3.19 of the Disclosure Schedule, the
Company has no knowledge of any defects which could reasonably be expected to
result in a recall (voluntary or involuntary) of products manufactured by the
Company or any Subsidiary (or vehicles containing products manufactured by the
Company or any Subsidiary) within the next two years.
3.20 Product Liability Claims. Section 3.20 of the Disclosure
Schedule sets forth a summary of each Product Liability Claim (as defined below)
in excess of $50,000 paid by the Company or any of the Subsidiaries during the
past three years, and each outstanding Product Liability Claim in excess of
$50,000. Except as set forth on Section 3.20 of the Disclosure Schedule, the
Company has no knowledge of any design or manufacturing defects which could
reasonably be expected to result in future Product Liability Claims that would
reasonably be expected to result in a Material Adverse Effect. For purposes of
this Section 3.20, the term "Product Liability Claim" shall mean any claim
arising out of any injury to individuals or property as a result of the
ownership, possession, or use of any vehicle or product manufactured, sold,
leased or delivered by the Company or any of the Subsidiaries.
3.21 Real Property. (a) The Company has good and marketable
fee simple title to the real property owned by the Company (the "Real
Property"), free and clear of all Encumbrances other than Permitted
Encumbrances, and the Company is in possession of the Real Property. The Company
has rights of ingress and egress with respect to the Real Property and the
manufacturing plants and other facilities located on such Real Property (the
"Facilities") adequate to conduct its business as currently conducted.
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(b) The Company has valid and subsisting leasehold estate
in and the right to quiet enjoyment of the real properties subject to the real
property leases (the "Real Property Leases") for the full term thereof. Each
Real Property Lease is in full force and effect except where the failure to be
in full force and effect would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect.
(c) The Company has heretofore made available to
Purchaser prior to the execution of this Agreement true and complete copies (to
the extent in the possession of the Company) of (i) all legal descriptions and
surveys with respect to the Real Property and (ii) all Real Property Leases
(including any amendments and renewal letters).
(d) No material Real Property is subject to any option,
rights of first refusal or other contractual rights to purchase, acquire, sell
or dispose of such Real Property or any portion thereof or interest therein.
There are no condemnation or appropriation proceedings pending or, to the
knowledge of the Company, threatened against any of the Real Property or the
Facilities.
(e) The Subsidiaries do not own any Real Property and are
not parties to any Real Property Leases.
3.22 Insurance. Section 3.22 of the Disclosure Schedule sets
forth a list of the material insurance policies applicable to the business of
the Company and, as of the date of this Agreement, all current claims under such
policies, except for workers' compensation claims incurred in the ordinary
course of business. Each policy referred to in the Disclosure Schedule is valid
and binding and in full force and effect, no premiums due thereunder have not
been paid (within any applicable grace period) and the Company has not received
any notice of cancellation or termination in respect of any such policy or is in
default thereunder in any material respect. Except as disclosed in Section 3.22
of the Disclosure Schedule and except for workers' compensation claims incurred
in the ordinary course of business, the Company has not received written notice,
as of the date of this Agreement, that any insurer under any such policy is
denying liability with respect to a current claim thereunder or defending any
claim under a reservation of rights clause.
3.23 Required Assets. The Company and the Subsidiaries own,
lease or have licenses or other contractual rights to use all of the material
tangible and intangible assets used by them in the conduct of the Company's
business as presently conducted.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING PURCHASER
Purchaser hereby represents and warrants to the Stockholders
as follows:
4.1 Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
4.2 Authorization, Etc. Purchaser has full corporate power and
authority to execute and deliver this Agreement and to carry out the
transactions contemplated hereby. The Board of Directors of Purchaser has duly
approved and authorized the execution and delivery by Purchaser of this
Agreement and the consummation by Purchaser of the transactions contemplated
hereby, and no other corporate proceedings on the part of Purchaser are
necessary to approve and authorize the execution and delivery by Purchaser of
this Agreement and the consummation by Purchaser of the transactions
contemplated hereby. This Agreement has been duly and validly executed by
Purchaser and, assuming this Agreement constitutes the valid and binding
agreement of the other parties hereto, constitutes a valid and binding agreement
of Purchaser, enforceable against Purchaser in accordance with its terms, except
that (i) the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
4.3 No Approvals or Conflicts. Except as set forth in Section
4.3 of the Disclosure Schedule, neither the execution and delivery by Purchaser
of this Agreement nor the consummation by Purchaser of the transactions
contemplated hereby will (i) violate, conflict with or result in a breach of any
provision of the Certificate of Incorporation or By-laws of Purchaser, (ii)
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of Purchaser's properties under, any
note, bond, mortgage, indenture, deed of trust, license, franchise, permit,
lease, contract, agreement or other instrument to which Purchaser or its
subsidiaries or any of their respective properties may be bound, (iii) violate
any
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order, injunction, judgment, ruling, law or regulation of any court or
governmental authority applicable to Purchaser or its subsidiaries or any of
their respective properties, or (iv) except for applicable requirements of the
Exchange Act and the HSR Act, require any consent, approval or authorization of,
or notice to, or declaration, filing or registration with, any governmental or
regulatory authority or other third party, which, in the case of clauses (ii),
(iii) and (iv) above, would have a material adverse effect on the business,
operations or financial condition of Purchaser and its subsidiaries, considered
as a single enterprise or on Purchaser's ability to consummate the transactions
contemplated hereby.
4.4 Acquisition for Investment. Purchaser acknowledges that
neither the offer nor the sale of the Shares has been registered under the
Securities Act. Purchaser is acquiring the Shares solely for its own account and
not with a view to any distribution or other disposition of such Shares, and the
Shares will not be transferred except in a transaction registered or exempt from
registration under the Securities Act.
4.5 Financing. Purchaser has delivered to the Stockholders
true and complete copies of all debt commitment letters of the Lenders received
by Purchaser with respect to the Financing (the "Debt Commitment Letters"), as
well as the equity commitment letter of Blackstone Capital Partners II Merchant
Banking Fund L.P. ("Blackstone") with respect to the Acquired Shares Purchase
Price (together with the Debt Commitment Letters, the "Commitment Letters"). The
proceeds of the Financing and the equity contribution referred to above will be
sufficient to enable AAMM, the Company and Purchaser to consummate the
transactions contemplated by this Agreement. On the Closing Date, the capital
structure of Purchaser will be as set forth in Section 4.5 of the Disclosure
Schedule.
4.6 No Brokers' or Other Fees. Except for the fees payable by
Purchaser, AAMM or the Company as set forth in Section 9.3, no broker, finder or
investment banker is entitled to any fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Purchaser.
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ARTICLE V
COVENANTS AND AGREEMENTS
5.1 Conduct of Business by Company. The Company covenants
that, except (i) for actions taken to implement this Agreement and the
transactions contemplated hereby, (ii) as disclosed in Section 5.1 of the
Disclosure Schedule, or (iii) as consented to in writing by Purchaser, from and
after the date of this Agreement and until the Closing Date, the Company shall:
(a) use reasonable best efforts consistent with good
business judgment to preserve intact the present business organization of the
Company and to operate the Company in the ordinary course of business consistent
with past practice in all material respects;
(b) not (i) issue or sell any shares of capital stock
or other securities of the Company or any options, warrants or commitments of
any kind with respect thereto, other than the issuance of Common Stock upon
exercise of the Company Options to purchase up to 1,747 shares of Common Stock,
(ii) directly or indirectly purchase, redeem or otherwise acquire or dispose of
any shares of capital stock of the Company; (iii) declare, set aside or pay any
dividend or other distribution or advance on its capital stock or make any other
distribution to its stockholders, except for the payment of accrued and unpaid
dividends on the outstanding Class A Preferred Stock if and as declared; (iv)
borrow or agree to borrow any funds or incur, whether directly or by way of
guarantee, any obligation for borrowed money; (v) subject any of the property or
assets of the Company (real, personal or mixed, tangible or intangible) to any
material mortgage, pledge, lien or encumbrance or otherwise permit or allow the
sale or other disposition of any material property or assets of the Company
(real, personal or mixed, tangible or intangible), other than the sale of the
Company's products in the ordinary course of business consistent with past
practice; (vi) make any material change in its accounting policies from those
applied in the preparation of the Financial Statements; (vii) make any capital
expenditures not set forth in the Capital Plan dated July 17, 1997, a copy of
which has been previously provided to Purchaser, except for capital expenditures
not in excess of $250,000 individually or $500,000 in the aggregate; (viii)
modify or change in any material respect, or enter into or terminate, any
material contract or commitment; (ix) acquire an equity interest in, or the
assets of, any other corporation or entity; (x) waive any claims or rights
relating to the Company's business, except in the ordinary course of business
and consistent with past practice in an amount not to exceed $100,000 in the
aggregate; (xi) increase the compensation payable or to
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become payable to any of its directors, officers or employees or take any action
with respect to the grant of any severance or termination pay, or stay bonus or
other incentive arrangement (other than pursuant to benefit plans and policies
in effect on the date of this Agreement), except any increases or grants made in
the ordinary course of business consistent with past practice; (xii) make any
material Tax election or pay any amounts under, or in respect of, any tax
sharing agreement or arrangement, except for payments in accordance with the Tax
Sharing Agreement; (xiii) amend its certificate of incorporation or bylaws;
(xiv) enter into any agreements or arrangements with an Affiliate; (xv) take any
action that would, or that could reasonably be expected to, result in any of the
representations or warranties of the Company set forth in this Agreement to
become untrue; or (xvi) agree to do any of the foregoing.
5.2 Access to Books and Records; Cooperation.
(a) The Company shall, and shall cause each of its
Subsidiaries to, afford to Purchaser, and to Purchaser's accountants, counsel
and other representatives, reasonable access and permit them to make such
inspections as they may reasonably require during normal business hours,
including all available environmental reviews or audits, during the period from
the date of this Agreement through the Closing to their respective properties,
books, contracts, commitments and records. The Company and its Subsidiaries
shall furnish or cause to be furnished to Purchaser such financial and operating
data and other information with respect to the business and properties of the
Company, including access to the work papers of the Company's independent
auditors, as Purchaser may from time to time reasonably request, and Purchaser
and its representatives shall be entitled, in consultation with the Company, to
such access to the representatives, officers and employees of the Company as
Purchaser may reasonably request. Purchaser will hold, and will cause its
affiliates, associates and representatives to hold, any nonpublic information in
accordance with the terms of the Confidentiality Agreement, dated as of February
19, 1997, between The Blackstone Group L.P. and the Company (the
"Confidentiality Agreement").
(b) AAMM, the Company and Purchaser agree that from
the Closing Date and until the fifth anniversary of the Closing, during normal
business hours, AAMM and the Company shall permit, at no charge, cost or expense
to AAMM, the Company or Purchaser and without disruption of AAMM's, the
Company's or Purchaser's businesses, the Stockholders and their respective
auditors and other representatives to have reasonable access to the tax,
financial and
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accounting records relating to the Company's business prior to the Closing Date
and to examine and, at the Stockholders' expense, take copies thereof.
(c) AAMM and the Company agree not to destroy at any time
prior to the fifth anniversary of the Closing Date any books or records of AAMM
or the Company without giving reasonable notice to the Stockholders, and within
30 days of receipt of such notice, the Stockholders may cause to be delivered to
the Stockholders the records intended to be destroyed, at the Stockholders'
expense.
5.3 Filings and Consents. Each of the Stockholders, the
Company and AAMM, on the one hand, and Purchaser, on the other hand, shall use
all reasonable efforts to obtain and to cooperate in obtaining any consent,
approval, authorization or order of, and in making any registration or filing
with, any governmental agency or body or other third party required in
connection with the execution, delivery or performance of this Agreement. The
parties agree to cause to be made all appropriate filings under the HSR Act as
soon as practicable and to diligently pursue early termination of the waiting
period under such Act.
5.4 Tax Matters.
(a) Mutual Cooperation. As soon as practicable, but in any
event within 30 days after any Stockholder's or Purchaser's request, as the case
may be, Purchaser shall cause the Company to deliver to the Stockholders, or the
Stockholders shall deliver to the Company, such information and other data in
the possession of the Stockholders, Purchaser or the Company relating to the
Company's business prior to the Closing Date, as the case may be, and shall
provide such other assistance as may reasonably be requested, relating to the
Tax Returns and Taxes of the Company, including such information and assistance
customarily required by the Stockholders or Purchaser, as the case may be, to
cause the payment of all Taxes or to permit the preparation of any Tax Returns
or to respond to audits by any taxing authorities with respect to any Tax
Returns or Taxes of the Company or to otherwise enable the Stockholders or the
Company, as the case may be, to satisfy their accounting or Tax requirements.
The party requesting information or assistance hereunder shall reimburse the
other party for reasonable expenses incurred in connection therewith.
Notwithstanding Section 5.2(c), for a period of seven years after the Closing,
and, if at the expiration thereof any Tax audit or judicial proceeding is in
progress or the applicable statute of limitations has been extended, for such
longer period as such audit or judicial proceeding is in progress or such
statutory period is extended, Purchaser shall cause the Company to, maintain and
make available to the Stockholders, on the Stockholders' reasonable request,
copies of any and all
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information, books and records referred to in this Section 5.4(a). After
such period, Purchaser or the Company may dispose of such information, books and
records, provided that prior to such disposition Purchaser shall give the
Stockholders a reasonable opportunity to take possession of such information,
books and records. Purchaser shall have the right to review any Tax Returns or
portions thereof filed with respect to the Company prior to the Closing Date,
which Tax Returns shall be filed and prepared in accordance with past practice
utilized in filing prior Tax Returns, including estimated Tax Returns.
(b) Contests. Whenever any taxing authority asserts a
claim, makes an assessment or otherwise disputes or affects the Tax reporting
position of the Company for periods ending prior to the Closing Date, the
Company shall, promptly upon receipt by Purchaser or the Company of notice
thereof, inform the Stockholders, and the Stockholders shall have the right,
at their expense, to control any resulting proceedings and to determine whether
and when to settle any such claim, assessment or dispute, to the extent such
proceedings affect the amount of Taxes with respect to which the Company and
Purchaser are entitled to indemnification pursuant to Section 9.1, provided that
the Stockholders shall not be entitled to settle any claim for Taxes that would
have the consequence of adversely affecting the liability for Taxes of the
Company or its Subsidiaries for any period after the Closing Date to any extent
(including, but not limited to, the imposition of income tax deficiencies,
reduction of asset basis or cost adjustments, the lengthening of any
amortization or depreciation periods or the denial of amortization or
depreciation deductions) without the prior written consent of Purchaser. Such
consent shall not be unreasonably withheld and shall not be necessary to the
extent the Stockholders have indemnified Purchaser and the Company against the
effects of any such settlement. Purchaser, the Company and their representatives
may also participate in any such proceedings at their own expense. Whenever any
taxing authority asserts a claim, makes an assessment or otherwise disputes the
amount of Taxes with respect to which the Company and Purchaser are not entitled
to indemnification pursuant to Section 9.1 because such Taxes are not covered by
the indemnification provisions set forth in this Agreement, the Stockholders
shall, promptly upon receiving notice thereof, inform Purchaser. The Company
shall have the right to control any resulting proceedings and to determine
whether and when to settle any such claim, assessment or dispute, but only to
the extent such proceedings affect the amount of Taxes for which the Company is
not entitled to indemnification pursuant to Section 9.1. The Stockholders and
their representatives may also participate in any such proceedings at their own
expense. Purchaser shall not (and shall cause the Company not to) file or amend
any Tax Return with respect to periods ending on or prior to the Closing Date.
Notwithstanding anything set forth herein, if a taxing authority requests an
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extension of the statute of limitations for assessment and the Stockholders
control such proceeding, the extension shall not be granted if the statute of
limitations would be extended to a date after five years following the Closing
Date.
(c) Tax Sharing Agreements. (i) All tax sharing agreements
or similar agreements with respect to or involving the Company and its
Subsidiaries shall be terminated as of the Closing Date and, after the Closing
Date, the Company and its Subsidiaries shall not be bound thereby or have any
liability thereunder, provided that Jupiter shall allocate the Taxes paid with
respect to the consolidated, combined or unitary group of which Jupiter is a
member (the "Tax Group") to the Tax liability of the Company and its
Subsidiaries for purposes of Regulation ss. 1.1502-75(f)(2). Neither Jupiter nor
any other member of the Tax Group shall seek a refund with respect to Taxes
attributable to the Company's inclusion in the Tax Group without the prior
written consent of the Company. In the event the Company consents to the
application for such a refund, Jupiter shall pay to the Company any amounts
received pursuant to such refund application. Notwithstanding the foregoing,
Jupiter or any member of the Tax Group may seek and retain a refund with respect
to Taxes attributable to adjustments to the income, deductions, or other items
of any entity that is part of the Tax Group for the period relating to the
refund; provided, that any such refund that results from adjustments to the
Taxes of the Company prior to the Closing Date shall be paid to the Company;
provided, further, that notwithstanding the foregoing, any refund or credit
resulting from an ineffective or invalid election under Section 338(h)(10) of
the Code, or any comparable state or local laws, shall be paid to Jupiter.
(ii) Upon the later of (i) 60 days following the
Closing Date and (ii) the first quarterly estimated payment date for
Federal income taxes following the Closing Date, the Company, in
consultation with Jupiter, shall deliver written notice of (x) the
total amount of Federal income tax due from the Company for 1997
through the Closing Date (the "Closing Period"), as determined
consistent with past practices, calculated assuming no Section
338(h)(10) election is made (the "Total Hypothetical Taxes"), and (y)
the sum of all amounts paid by the Company to Jupiter or any Affiliate
of Jupiter (other than the Company) with respect to the Closing Period
pursuant to the terms of the Tax Sharing Agreement (the "Sharing
Payments"). Within two business days after receipt of such notice (i)
the Company shall deliver an amount equal to the Total Hypothetical
Taxes less the Sharing Payments to an account or accounts specified in
writing by Jupiter by wire transfer of immediately available funds,
in the event
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the Total Hypothetical Taxes exceed the Sharing Payments, or (ii)
Jupiter shall deliver an amount equal to the Sharing Payments less the
Total Hypothetical Taxes to an account or accounts specified in writing
by the Company by wire transfer of immediately available funds, in the
event the Sharing Payments exceed the Total Hypothetical Taxes.
(d) Certain Taxes. All transfer, gains, documentary,
sales, use, stamp, registration and other such Taxes and fees (including any
penalties and interest) imposed on the Company or the Stockholders and
incurred in connection with this Agreement which accrue on or prior to the
Closing Date ("Transfer Taxes") shall be paid by the Stockholders
when due, and the Stockholders will, at their own expense,
file all necessary Tax Returns and other documentatio
with respect to all such transfer, documentary, sales, use,
stamp, registration and other Taxes and fees, and if required by applicable law.
Purchaser will, and will cause the Company and its Subsidiaries to, join in the
execution of any such Tax Returns and other documentation (including
documentation providing exemptions or refunds of Transfer Taxes, any such
refunds to be paid to the Stockholders).
(e) Certain Other Matters. Except for obligations with
respect to Taxes for which the Company and Purchaser are entitled to
indemnification pursuant to Section 9.1, the Company shall be liable for and
shall pay promptly any and all Taxes imposed on the Stockholders (or promptly
reimburse the Stockholders for any such Taxes paid by the Stockholders) with
respect to the Company or imposed on the Company.
(f) Prior to the Closing Date, the Company shall
either (i) file its Tax Returns for the taxable year ending December 31, 1996
and provide such Tax Returns to Purchaser or (ii) provide a pro forma Tax
Return to Purchaser, as filed and/or prepared, as the case may be, by the
Company in accordance with past practice utilized in filing prior Tax Returns,
including estimated Tax Returns.
5.5 WARN Act. Purchaser and the Stockholders agree that for
purposes of the United States Worker Adjustment and Retraining Notification Act
(the "WARN Act"), the Closing Date shall be the "effective date" as such term is
used in the WARN Act. Purchaser acknowledges and represents that it has no
present intent to effectuate a "mass layoff" or "plant closing" with respect to
AAMM or the Company as defined in the WARN Act. Purchaser agrees that from and
after the Closing Date AAMM and the Company shall be responsible for any
notification required under the WARN Act with respect to AAMM or the Company, as
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applicable, and AAMM and the Company shall indemnify the Stockholders and hold
the Stockholders harmless from and against all fines and other payments which
may become due under the WARN Act with respect to AAMM and the Company.
5.6 Employee Benefits. Immediately after the Closing, the
Company shall have the same responsibilities and rights with respect to any Plan
or employee benefit or labor contract, plan, program, agreement, policy or
arrangement including any employment agreement, severance agreement, option
agreement or collective bargaining agreement in effect and disclosed to
Purchaser on the date hereof as the Company had prior to the Closing.
5.7 Supplements to Disclosure Schedule. From time to time
prior to the Closing, the Stockholders, the Company and Purchaser will promptly
supplement or amend the sections of the Disclosure Schedule relating to their
respective representations and warranties in this Agreement with respect to any
matter, condition or occurrence hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in their respective sections of the Disclosure Schedule.
Except with respect to a supplement or amendment not objected to in writing by
the Stockholders, the Company or Purchaser within ten business days after
receipt thereof, no supplement or amendment by the Stockholders, the Company or
Purchaser shall have any effect for the purpose of (i) determining satisfaction
by the Stockholders of the conditions set forth in Sections 6.1 and 6.2 hereof
or (ii) determining satisfaction by Purchaser of the conditions set forth in
Sections 7.1 and 7.2 hereof.
5.8 Covenant to Satisfy Conditions. Each party agrees to use
reasonable best efforts to ensure that the conditions set forth in Article VI
and Article VII hereof are satisfied, insofar as such matters are within the
control of such party.
5.9 Director and Officer Liability and Indemnification. For a
period of seven years after the Closing, Purchaser shall not permit AAMM or the
Company to amend, repeal or modify any provision in its respective Certificate
of Incorporation or Bylaws relating to the exculpation or indemnification of
former officers and directors (unless required by law), it being the intent of
the parties that the officers and directors of AAMM and the Company prior to the
Closing shall continue to be entitled to such exculpation and indemnification to
the fullest extent permitted under applicable law. Notwithstanding the
foregoing, the provisions of this Section 5.9 may not be relied upon by the
Stockholders to avoid liability in connection with any indemnification claim
made by a Purchaser Indemnified Party (as defined herein) pursuant to Section
9.1(a) of this Agreement.
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5.10 Contact with Customers and Suppliers. Purchaser and its
representatives shall contact and communicate with the employees, customers,
suppliers and licensors of the Company in connection with the transactions
contemplated hereby only with the prior written consent of the Stockholders,
which consent may be conditioned upon a designee of the Stockholders being
present at any such meeting or conference.
5.11 Financing. The Company, AAMM and their respective
officers and employees will provide all reasonable cooperation in connection
with the arrangement of the Financing, including without limitation the
execution and delivery of any commitment letters, pledge and security documents,
other definitive financing documents, or other requested agreements,
certificates or documents, including any indemnity agreements, in connection
with the closing of the Financing as may be reasonably requested by Purchaser.
Purchaser hereby agrees to use its reasonable best efforts, subject only to the
conditions set forth in the Commitment Letters, to arrange the Financing,
including using its reasonable best efforts (i) to assist the Company in the
negotiation of definitive agreements with respect to the Financing and (ii) to
satisfy all conditions applicable to Purchaser in such definitive agreements;
provided, however, that the Company shall not be responsible for funding any
commitment fees or other fees and expenses in connection with the foregoing
unless the transactions contemplated by this Agreement are consummated.
Purchaser will keep the Company informed of the status of its efforts to arrange
the Financing, including making reports with respect to significant
developments.
5.12 Affiliated Transactions. Except as set forth in Section
5.12 of the Disclosure Schedule, prior to or concurrently with the Closing, all
contracts, arrangements or obligations between the Company or any of the
Subsidiaries, on the one hand, and the Stockholders or any of their Affiliates,
on the other hand, shall be terminated without the payment of any monies
required by the Company or the Subsidiaries.
5.13 Financial Statements and Reports. As promptly as
practicable, the Company shall provide to Purchaser true and complete copies of
the Company's monthly unaudited Balance Sheets and Statements of Income,
Shareholders' Equity and Cash Flows, together with the notes thereto, if any
(the "Interim Financial Statements"). The Interim Financial Statements shall be
prepared on a basis consistent with the Financial Statements referred to in
Section 3.4 and shall fairly present the financial position and results of
operations of the Company in accordance with GAAP as of the dates and for the
periods set forth in such interim financial statements. As promptly as
practicable, the Company shall deliver to Purchaser true
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and complete copies of such other regularly prepared financial statements,
reports and analyses as may be prepared by the Company and delivered to the
Company's existing lenders under its credit facilities.
5.14 Section 338(h)(10) Election. Within 60 days after the
Closing Date, AAMM and Jupiter shall jointly cause an election on Form 8023 or
in such other manner as may be required by rule or regulation of the Internal
Revenue Service under Section 338(h)(10) and 338(g) of the Code and comparable
state and local tax laws, concerning the transactions contemplated by this
Agreement. AAMM shall, with the assistance and cooperation of the Stockholders,
prepare all Section 338(h)(10) forms in accordance with applicable Tax laws, and
AAMM shall deliver such forms and related documents to Jupiter at least 40 days
prior to the due date of filing. Jupiter shall deliver to AAMM at least 20 days
prior to the due date of filing such completed forms as are reasonably requested
by AAMM and required to be filed under Section 338(h)(10) of the Code and
comparable state and local tax laws. Jupiter and AAMM shall use their best
efforts to agree, as soon as practicable after the Closing, on the computation
of the Modified Aggregate Deemed Sale Price ("MADSP") (as defined under Treasury
Regulations) and the allocation of the MADSP among the assets as of the Closing
Date. AAMM, the Company and the Stockholders will not take any position in any
Tax Return or proceeding that is inconsistent with the election under Section
338(h)(10) of the Code, including the allocation of purchase price among the
assets. Assuming the parties hereto make the timely, effective and valid
election under Section 338(h)(10) and Section 338(g) of the Code (as well as
comparable elections under state and local tax laws) as contemplated herein (the
"Election"), Jupiter will pay all Election Taxes accruing on or before the
Closing Date which result from the Election and from any comparable timely,
effective and valid election under state or local tax laws.
5.15 Disclosure. The Company shall promptly notify Purchaser
of, and furnish Purchaser with any information Purchaser may reasonably request
with respect to the occurrence, to the best knowledge of the Stockholders, of
any event or condition or the existence of any fact that would cause any of the
conditions to Purchaser's obligations to consummate the transactions
contemplated by this Agreement not to be fulfilled. Purchaser shall promptly
notify the Stockholders of, and furnish the Stockholders with any information
the Stockholders may reasonably request with respect to the occurrence, to the
best knowledge of Purchaser, of any event or condition or the existence of any
fact that would cause any of the conditions to the Stockholders' obligations to
consummate the transactions contemplated by this Agreement not to be fulfilled.
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ARTICLE VI
CONDITIONS TO THE STOCKHOLDERS' OBLIGATIONS
The obligations of the Stockholders to effect the Closing
under this Agreement are subject to the satisfaction, at or prior to the
Closing, of each of the following conditions, unless waived in writing by the
Stockholders.
6.1 Representations and Warranties. The representations and
warranties made by Purchaser in this Agreement that are qualified by materiality
shall be true and correct in all respects on the Closing Date as though such
representations and warranties were made at such date, except to the extent such
representations and warranties speak as of an earlier date, in which case they
shall be true in all respects as of such earlier date, and the representations
and warranties made by Purchaser in this Agreement that are not qualified by
materiality shall be true and correct in all material respects as though such
representations and warranties were made at such date, except to the extent such
representations and warranties speak as of an earlier date, in which case they
shall be true in all material respects as of such earlier date.
6.2 Performance. Purchaser shall have performed and complied
in all material respects with all agreements, obligations and conditions
required by this Agreement to be so performed or complied with by Purchaser
prior to the Closing.
6.3 Preferred Stock Purchase and Redemption. Jupiter shall
have purchased from General Motors Corporation ("GM"), and the Company shall
have redeemed from Jupiter, all of the issued and outstanding shares of Class A
Preferred Stock upon the terms set forth in the Class A Preferred Stock Purchase
Agreement, by and between the Company and GM (the "Preferred Stock Purchase
Agreement"), plus, in the case of the redemption of such shares by the Company,
an amount equal to the interest carrying expenses associated with such Class A
Preferred Stock from the date of the purchase of such shares by Jupiter through
and including the Closing Date, and all of the other obligations under the
Preferred Stock Purchase Agreement shall have been satisfied or waived.
6.4 Officer's Certificate. Purchaser shall have delivered to
the Stockholders a certificate, dated as of the Closing Date and executed by the
President or a Vice President of Purchaser, certifying to the fulfillment of the
conditions specified in Sections 6.1 and 6.2 hereof.
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6.5 HSR Act. All applicable waiting periods under the HSR Act
with respect to the transactions contemplated hereby shall have expired or been
terminated.
6.6 Injunctions. On the Closing Date there shall be no
injunction, writ, preliminary restraining order or other order in effect of any
nature issued by a court or governmental agency of competent jurisdiction
directing that the transactions provided for herein not be consummated as
provided herein and no provision of any applicable law or regulation shall
prohibit the consummation of the transactions contemplated by this Agreement.
6.7 Closing Certificates. The Stockholders shall have received
all certificates and other documents evidencing Purchaser action to approve the
transactions contemplated by this Agreement, in form and substance reasonably
satisfactory to the Stockholders.
ARTICLE VII
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser to effect the Closing under this
Agreement are subject to the satisfaction, at or prior to the Closing, of each
of the following conditions, unless waived in writing by Purchaser.
7.1 Representations and Warranties. The representations and
warranties made by the Stockholders and the Company in this Agreement that are
qualified by materiality shall be true and correct in all respects on the
Closing Date as though such representations and warranties were made at such
date, except to the extent such representations and warranties speak as of an
earlier date, in which case they shall be true in all respects as of such
earlier date, and the representations and warranties made by the Stockholders in
this Agreement that are not qualified by materiality shall be true and correct
in all material respects as though such representations and warranties were made
at such date, except to the extent such representations and warranties speak as
of an earlier date, in which case they shall be true in all material respects
as of such earlier date.
7.2 Performance. The Stockholders, AAMM and the Company shall
have performed and complied in all material respects with all agreements,
obligations and conditions required by this Agreement to be so performed or
complied with by the Stockholders, AAMM and the Company prior to the Closing.
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7.3 Preferred Stock Purchase and Redemption. Jupiter shall
have purchased from GM, and the Company shall have redeemed from Jupiter, all of
the issued and outstanding shares of Class A Preferred Stock upon the terms set
forth in the Preferred Stock Purchase Agreement, plus, in the case of the
redemption of such shares by the Company, an amount equal to the interest
carrying expenses associated with such Class A Preferred Stock from the date of
the purchase of such shares by Jupiter through and including the Closing Date,
and all of the other obligations under the Preferred Stock Purchase Agreement
shall have been satisfied or waived.
7.4 Park Corporation Guarantee. The Stockholders shall have
delivered or caused to be delivered an executed copy of the Park Corporation
Guarantee, substantially in the form attached hereto as Exhibit B.
7.5 Officer's Certificate. The Stockholders shall have
delivered to Purchaser a certificate, dated as of the Closing Date and executed
by the President or Chief Financial Officer of the Company, certifying to the
fulfillment of the conditions specified in Sections 7.1 and 7.2 hereof.
7.6 HSR Act. All applicable waiting periods under the HSR Act
with respect to the transactions contemplated hereby shall have expired or been
terminated.
7.7 Injunctions and Certain Other Matters. On the Closing Date
there shall be no injunction, writ, preliminary restraining order or other order
in effect of any nature issued by a court or governmental agency of competent
jurisdiction directing that the transactions provided for herein not be
consummated as provided herein and no provision of any applicable law or
regulation shall prohibit the consummation of the transactions contemplated by
this Agreement. Since the date of this Agreement, (i) there shall not have been
instituted or, to the knowledge of the Company, threatened against the Company
any action, proceeding or investigation before any court or governmental or
regulatory authority or body and (ii) the Company shall not have received
written notice that any insurer under any material insurance policy applicable
to the business of the Company is denying liability with respect to a current
claim thereunder or defending any claim under a reservation of rights clause
except, in the case of clause (i), actions, proceedings or investigations or, in
the case of clause (ii), liabilities which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
7.8 Funding. The entire amount of the funds set forth in the
Debt Commitment Letters shall have been received by the Company.
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7.9 Resignation of Directors. All directors of the Company and
any Subsidiary whose resignation shall have been requested by Purchaser prior to
the Closing Date shall have submitted their resignations or been removed from
office effective as of the close of business on the Closing Date.
7.10 Closing Certificates. Purchaser shall have received all
certificates and other documents evidencing the Company and the Stockholder
action to approve the transactions contemplated by this Agreement, in form and
substance reasonably satisfactory to Purchaser.
7.11 Stockholder Approval. The Stockholders (including the
shareholders of Jupiter) shall have approved the transactions contemplated in
the letter dated September 19, 1997 between Mr. Dauch and Purchaser (as such
letter contemplates actions to be taken by AAMM) in the manner set forth in
Section 280(b)(5)(B) of the Code and the proposed regulations thereunder, to the
extent applicable.
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated and
abandoned at any time prior to the Closing:
(a) by the mutual consent of the Stockholders and
Purchaser;
(b) by either the Stockholders or Purchaser in the
event the Closing has not occurred on or before October 29, 1997 (the "Cut-Off
Date"), unless the failure of such consummation shall be due to the failure of
the party seeking to terminate this Agreement to comply in all material respects
with the agreements and covenants contained herein to be performed by such party
on or before the Cut-Off Date; or
(c) by either the Stockholders or Purchaser in the
event any court or governmental agency of competent jurisdiction shall have
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated hereby and such
order, decree or ruling or other action shall have become final and
nonappealable.
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8.2 Procedure and Effect of Termination. In the event of the
termination and abandonment of this Agreement by the Stockholders or Purchaser
pursuant to Section 8.1 hereof, written notice thereof shall forthwith be given
to the other parties. If the transactions contemplated by this Agreement are
terminated as provided herein:
(a) Each party will redeliver all documents, work papers
and other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same;
(b) All confidential information received by Purchaser
with respect to the business of the Company shall be treated in accordance with
the provisions of the Confidentiality Agreement, which shall survive the
termination of this Agreement in accordance with its terms; and
(c) No party to this Agreement will have any liability
under this Agreement to the other except (i) as stated in subparagraphs (a) and
(b) of this Section 8.2, (ii) for any willful breach of any provision of this
Agreement and (iii) as provided in the Confidentiality Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 Indemnification. (a) Subject to Sections 9.1(c), 9.1(d)
and 9.1(e), the Company, AAMM, Purchaser, and their respective directors,
officers, employees, affiliates, advisors, representatives, successors and
assigns (collectively, "Purchaser Indemnified Parties") shall be indemnified and
held harmless as follows:
(i) by each Stockholder, with respect to any and all
damages, claims, losses, liabilities, costs, deficiencies and expenses
(including without limitation interest, penalties and reasonable legal,
accounting and other expert or advisory fees and expenses, but not
including consequential damages, claims, losses, liabilities, costs,
deficiencies and expenses) (collectively, "Damages") incurred or
sustained by a Purchaser Indemnified Party as a result of any breach by
such Stockholder of its or his covenants or agreements
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contained herein or the breach of its or his representations and
warranties set forth in Article II;
(ii) by Jupiter with respect to any and all Damages
incurred or sustained by the Company for any unpaid Taxes (A) of any
members of the Tax Group (other than the Company and its Subsidiaries)
under Reg. ss. 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise
and (B) for which Jupiter is responsible pursuant to Section 5.14; and
(iii) by Jupiter with respect to any and all Damages
incurred or sustained by the Company for any unpaid ERISA liabilities
of any Person (other than the Company and its Subsidiaries) resulting
solely from the Company's affiliation with any entity which was a
member of the Company's Controlled Group at any time prior to the
Closing Date. For purposes of this Section 9.1 (a)(vi), "Controlled
Group" means any entity which is a member of a controlled group of
organizations within the meaning of Section 414(b), (c), (m) or (o) of
the Code as of the date hereof.
(b) The Company, AAMM and Purchaser jointly and severally
shall indemnify and hold the Stockholders, and the Stockholders' directors,
officers, employees, affiliates, advisors, representatives, successors and
assigns (collectively, "Stockholder Indemnified Parties") harmless from and
against and in respect of:
(i) any and all Damages incurred or sustained by a
Stockholder Indemnified Party as a result of any breach by Purchaser of
its covenants or agreements contained herein;
(ii) any and all Damages incurred or sustained by a
Stockholder Indemnified Party as a result of any breach by the Company
or AAMM of their respective covenants or agreements contained herein
which relate to actions or omissions by AAMM or the Company after the
Closing; and
(iii) any and all Damages incurred or sustained by a
Stockholder Indemnified Party as a result of any breach by the
Purchaser of the representations and warranties set forth in Article
IV; provided that (A) the Stockholders agree to aggregate their claims
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submitted pursuant to this clause (iii) so that the aggregate amount of
any such claim is $100,000 or greater and (B) any claim for
indemnification under this clause (iii) must be made in writing with
specificity reasonable to the Company by a Stockholder Indemnified
Party during the applicable survival period set forth in Section 9.1(c)
below.
(c) The representations and warranties included in
Sections 2.1, 2.2, 2.3, 4.1, 4.2 and 4.3 shall survive the Closing indefinitely.
All other representations and warranties included in this Agreement shall expire
and be terminated at the Closing. After expiration and termination of the
respective representation or warranty, the Stockholders and Purchaser shall have
no liability whatsoever with respect to any such representation or warranty with
respect to any claim not asserted in writing with reasonable specificity before
such expiration or termination.
(d) Promptly after receipt by an indemnified party
under this Section 9.1 of notice of any claim or the commencement of any action,
the indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under this Section 9.1, notify the indemnifying party in
writing of the claim or the commencement of that action, provided that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to the indemnified party unless the indemnifying party is
materially prejudiced in its ability to defend such action. If any such claim
shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled at its
expense to participate therein, and to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party, and to settle and compromise
any such claim or action; provided, however, (i) the indemnifying party must
acknowledge in writing its obligation to indemnify the indemnified party with
respect to such claim and (ii) if the indemnified party has elected to be
represented by separate counsel pursuant to the proviso to the following
sentence or if such settlement or compromise does not include an unconditional
release of the indemnified party for any liability arising out of such claim or
action, such settlement or compromise shall be effected only with the consent of
the indemnified party, which consent shall not be unreasonably withheld. After
notice from the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party shall not be
liable to the indemnified party under this Section 9.1 for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation, provided, however,
that the indemnified party shall have the right to employ counsel to represent
it if, in the opinion of counsel to the indemnified party, it is advisable for
the indemnified party to be represented by separate counsel
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due to actual or potential conflicts of interest, and in that event the
reasonable fees and expenses of such separate counsel shall be paid by the
indemnifying party; provided that in no event shall the indemnifying party be
responsible for the fees of more than one counsel retained to represent the
indemnified parties. The parties hereto shall each render to each other such
assistance as may reasonably be requested in order to ensure the proper and
adequate defense of any such claim or proceeding. For purposes of this Section
9.1(d) and Section 9.1(e) below, the Stockholders shall be deemed to be
"indemnifying parties" with respect to matters subject to indemnification under
clause (i) of Section 9.1(a). In the event that the provisions contained in this
Section 9.1(d) are inconsistent with the provisions contained in Section 5.4,
with respect to matters governed by Section 5.4, the provisions of such Section
5.4 shall govern.
(e) The indemnities provided in this Agreement shall
survive the Closing. The indemnity provided in this Section 9.1 shall be the
sole and exclusive remedy of the indemnified party against the indemnifying
party at law or equity for any matter covered by paragraphs (a) and (b) of this
Section 9.1. For Tax purposes, any payments made pursuant to this Section 9.1
shall be considered by the parties as an adjustment to the purchase price for
the Shares or Acquired Shares, as the case may be.
(f) In the event a Stockholder Indemnified Party or a
Purchaser Indemnified Party receives insurance proceeds or realizes
a Tax Benefit
in respect of Damages for which a claim for indemnification under this Article
IX is pending or is subsequently made, such claim for Damages shall be reduced
by the amount of any such insurance proceeds or Tax Benefit. In the event a
Stockholder Indemnified Party or a Purchaser Indemnified Party receives
insurance proceeds or realizes a Tax Benefit in respect of Damages for which a
claim for indemnification under this Article IX has previously been made, any
payment by the Stockholders under Section 9.1(a)(i), by Jupiter and/or Park
Corporation under Sections 9.1(a)(ii) and 9.1(a)(iii) or by the Company, AAMM
and/or Purchaser under Section 9.1(b), as the case may be, resulting from such
claim for Damages shall be reimbursed within five business days after receipt of
such insurance proceeds or realization of such Tax Benefit, provided that such
reimbursement shall not exceed the amount of such insurance proceeds or Tax
Benefit, as the case may be. For purposes of this Section 9.1(f), a "Tax
Benefit" shall mean an actual reduction in Taxes paid by the Indemnified Party
taking into account the benefit associated with the payment of the Damages that
gave rise to the claim for indemnification compared to the Taxes that would be
payable by the Indemnified Party by excluding the payment of such Damages;
provided, that a Tax Benefit will not result solely by reason of payments
pursuant to Section
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5.4(c)(ii), which represent additional proceeds to the Stockholders. Each
Stockholder Indemnified Party and Purchaser Indemnified Party agrees to use
reasonable efforts to obtain any such Tax Benefit and any such insurance
proceeds, file all appropriate forms and take all necessary actions in
connection therewith. To the extent (i) the Company is required to pay any Taxes
attributable to a Tax period ending on or prior to the Closing Date, (ii) the
Company does not receive indemnification for such Taxes from the Stockholders
pursuant to any of the indemnification provisions of this Agreement and (iii)
the Stockholders realize a Stockholder Tax Benefit attributable to the change in
position that gave rise to such Tax, then the Stockholders shall pay the Company
the amount of such Stockholder Tax Benefit. For purposes of this Section 9.1(f),
a "Stockholder Tax Benefit" shall mean any actual reduction in Taxes paid by the
Stockholders taking into account the change in position that gave rise to the
increased Tax on the Company compared to the Taxes payable by the Stockholders
by excluding the change in position that gave rise to the increased Tax of the
Company.
9.2 The Stockholders' Obligations. The obligations of the
Stockholders herein are several and not joint, except as otherwise provided in
Section 9.1.
9.3 Fees and Expenses. Except as otherwise specifically
provided in this Agreement, the Stockholders shall bear their own respective
expenses and Purchaser shall bear its own expenses in connection with the
negotiation and consummation of the transactions contemplated by this Agreement;
provided that if the Closing occurs the Company and AAMM shall be solely
responsible for all such fees and expenses (i) incurred by Purchaser and (ii)
incurred by the Company, including the fees and expenses of Merrill Lynch & Co.,
Berenson Minella & Company and Skadden, Arps, Slate, Meagher & Flom LLP and its
affiliated entities, to the extent that the aggregate of such fees and expenses,
together with the bonus payable, under certain circumstances, to Mr. McLernon as
set forth in Schedule 5.1(b) of the Disclosure Schedule and the payments
required at closing pursuant to the Phantom Stock Plan, as amended, do not
exceed $30.0 million, it being understood and agreed that the Stockholders shall
be responsible for such fees and expenses in excess of such amount; provided,
however, that the parties hereto agree that any holder of a Phantom Stock Option
who takes newly issued AAMM options in lieu of a single lump sum cash payment
equal to the Phantom Stock Value for such Phantom Stock Option shall be deemed
to have received a cash payment equal to the Phantom Stock Value for purposes of
calculating the amount of the expenses set forth in this Section 9.3.
38
<PAGE>
9.4 Governing Law. This Agreement shall be construed under and
governed by the laws of the State of Delaware without regard to the conflicts of
laws provisions thereof.
9.5 Amendment. This Agreement may not be amended, modified or
supplemented except upon the execution and delivery of a written agreement
executed by Purchaser and the Stockholders.
9.6 No Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party hereto
without the prior written consent of Purchaser, in the case of assignment by any
Stockholder, and the Stockholders, in the case of any assignment by Purchaser;
provided that Purchaser shall be entitled to assign its rights under this
Agreement to one or more Affiliates of Purchaser.
9.7 Waiver. Any of the terms or conditions of this Agreement
which may be lawfully waived may be waived in writing at any time by each party
which is entitled to the benefits thereof. Any waiver of any of the provisions
of this Agreement by any party hereto shall be binding only if set forth in an
instrument in writing signed on behalf of such party. No failure to enforce any
provision of this Agreement shall be deemed to or shall constitute a waiver of
such provision and no waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
39
9.8 Notices. Any notice, demand, or communication required or
permitted to be given by any provision of this Agreement shall be deemed to have
been sufficiently given or served for all purposes if (a) personally delivered,
(b) received by registered or certified first-class mail, prepaid with return
receipt requested, (c) delivered by a nationally recognized overnight courier
service, to the recipient at the address below indicated or (d) delivered by
facsimile which is confirmed in writing by sending a copy of such facsimile to
the recipient thereof pursuant to clause (a) or (c) above:
<PAGE>
If to Purchaser:
David A. Stockman
AAM Acquisition, Inc.
c/o Blackstone Management
Associates II L.L.C.
345 Park Avenue -- 31st Floor
New York, NY 10154
(212) 754-8720 (telecopier)
(212) 836-9818 (telephone)
with a copy to:
Robert L. Friedman, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
(212) 455-2502 (telecopier)
(212) 455-2780 (telephone)
If to the Stockholders:
c/o Raymond P. Park
Park Corporation
6200 Riverside Drive
Cleveland, OH 44135
(216) 265-2559 (telecopier)
(216) 265-2560 (telephone)
With copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Attention: Blaine V. Fogg, Esq.
(212) 735-2000 (telecopier)
(212) 735-3000 (telephone)
or to such other address as any party hereto may, from time to time, designate
in a written notice given in like manner.
40
<PAGE>
Except as otherwise provided herein, any notice under this Agreement will be
deemed to have been given (x) on the date such notice is personally delivered or
delivered by facsimile, (y) four days after the date of mailing if sent by
certified or registered mail or (z) the next succeeding business day after the
date such notice is delivered to the overnight courier service if sent by
overnight courier; provided that in each case notices received after 4:00 p.m.
(local time of the recipient) shall be deemed to have been duly given on the
next business day.
9.9 Complete Agreement. This Agreement, the Confidentiality
Agreement and the other documents and writings referred to herein or delivered
pursuant hereto contain the entire understanding of the parties with respect to
the subject matter hereof and thereof and supersede all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and thereof. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
9.10 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
9.11 Publicity. The Stockholders and Purchaser will consult
with each other and will mutually agree upon any publication or press release of
any nature with respect to this Agreement or the transactions contemplated
hereby and shall not issue any such publication or press release prior to such
consultation and agreement except as may be required by applicable law, in which
case the party proposing to issue such publication or press release shall use
reasonable efforts to consult in good faith with the other party or parties
before issuing any such publication or press release.
9.12 Headings. The headings contained in this Agreement are
for reference only and shall not affect in any way the meaning or interpretation
of this Agreement.
9.13 Severability. Any provision of this Agreement which is
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this Agreement
invalid, illegal or unenforceable in any other jurisdiction.
41
<PAGE>
9.14 Third Parties. Except as specifically set forth or
referred to herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any person or corporation, other than the
parties hereto and their permitted successors or assigns, any rights or remedies
under or by reason of this Agreement.
9.15 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE
PARTIES HERETO HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE AREA ENCOMPASSED BY THE STATE OF DELAWARE AND IRREVOCABLY
AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT SHALL BE LITIGATED IN SUCH COURTS. THE PARTIES HERETO EACH ACCEPT FOR
ITSELF AND HIMSELF, AS THE CASE MAY BE, AND IN CONNECTION WITH ITS OR HIS, AS
THE CASE MAY BE, RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
EXCLUSIVE JURISDICTION AND VENUE OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE
OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY NON-
APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT.
9.16 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
LAW, THE PARTIES HERETO HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE
PARTIES HERETO ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH
MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF ANY OF THE OTHER PARTIES. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT
MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF
DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE PARTIES HERETO
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. THE PARTIES HERETO FURTHER WARRANT AND REPRESENT THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS OR HIS, AS THE CASE MAY BE, LEGAL COUNSEL, AND
42
<PAGE>
THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS OR HIS, AS THE CASE MAY BE, JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THE TRANSACTION CONTEMPLATED HEREBY. IN THE EVENT OF LITIGATION,
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
43
<PAGE>
IN WITNESS WHEREOF, each of Purchaser, the Company and the
Stockholders have caused this Agreement to be executed by their duly authorized
officers as of the day and year first above written.
AAM ACQUISITION, INC.
By
------------------------------------
Name: David A. Stockman
Title: President
AMERICAN AXLE & MANUFACTURING, INC.
By
------------------------------------
Name: Richard E. Dauch
Title: President & Chief Executive
Officer
AMERICAN AXLE & MANUFACTURING
OF MICHIGAN, INC.
By
------------------------------------
Name: Richard E. Dauch
Title: President & Chief Executive
Officer
44
<PAGE>
JUPITER CAPITAL CORPORATION
By
------------------------------------
Name: Raymond P. Park
Title: President
---------------------------------------
Richard E. Dauch
---------------------------------------
Morton E. Harris
45
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STOCKHOLDERS' AGREEMENT
dated as of October 29, 1997
among
BLACKSTONE CAPITAL PARTNERS II MERCHANT BANKING FUND L.P.,
BLACKSTONE OFFSHORE CAPITAL PARTNERS II L.P.,
BLACKSTONE FAMILY INVESTMENT PARTNERSHIP II L.P.,
JUPITER CAPITAL CORPORATION,
RICHARD E. DAUCH,
MORTON E. HARRIS
and
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS..................................................... 1
1.1 Defined Terms......................................... 1
1.2 Other Definitional Provisions; Interpretation......... 2
SECTION 2. TRANSFERS....................................................... 3
2.1 Limitations on Transfer............................... 3
2.2 Transfers to Affiliates............................... 3
2.3 Effect of Void Transfers.............................. 4
2.4 Legend on Securities.................................. 4
2.5 Tag-Along Rights...................................... 4
2.6 Drag-Along Rights..................................... 6
2.7 Piggy-Back Rights..................................... 7
2.8 Demand Registration................................... 8
2.9 Other Registration-Related Matters.................... 9
2.10 Participation Rights.................................. 12
SECTION 3. OTHER........................................................... 13
3.1 Additional Securities Subject to Agreement............ 13
3.2 Termination........................................... 13
3.3 Injunctive Relief..................................... 13
3.4 Other Stockholders' Agreements........................ 14
3.5 Amendments............................................ 14
3.6 Successors, Assigns and Transferees................... 14
3.7 Notices............................................... 14
3.8 Integration........................................... 15
3.9 Severability.......................................... 15
3.10 Counterparts.......................................... 16
3.11 Governing Law......................................... 16
3.12 Approval of Affiliate Transactions.................... 16
-i-
<PAGE>
STOCKHOLDERS' AGREEMENT, dated as of October 29, 1997, among
Blackstone Capital Partners II Merchant Banking Fund L.P., a Delaware limited
partnership ("BCPII"), Blackstone Offshore Capital Partners II, a Cayman
Islands exempted limited partnership ("BOCPII") and Blackstone Family
Investment Partnership II L.P., a Delaware limited partnership (together with
BCPII and BOCPII, the "Blackstone Entities"), American Axle & Manufacturing of
Michigan, Inc., a Michigan corporation (the "Company"), Jupiter Capital
Corporation, an Ohio corporation ("Jupiter"), Morton E. Harris ("Harris") and
Mr. Richard E. Dauch ("Dauch" and together with Harris and Jupiter, the
"Rollover Holders").
W I T N E S S E T H :
WHEREAS, prior to the closing of the transactions
contemplated by the Recapitalization Agreement (defined below), AAM
Acquisition, Inc., a Delaware corporation, assigned its rights and obligations
under the Recapitalization Agreement to the Blackstone Entities; and
WHEREAS, the Blackstone Entities as of the date hereof are
the beneficial holders of a majority of the outstanding shares of Common Stock
(as defined below) of the Company; and
WHEREAS, the parties hereto wish to enter into certain
agreements with respect to the holdings by the Blackstone Entities and the
Rollover Holders;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, terms defined
in the heading and the recitals shall have their respective assigned meanings,
and the following capitalized terms shall have the meanings ascribed to them
below:
"Affiliate" shall mean, with respect to any Person, (i) any
Person that directly or indirectly controls, is controlled by or is
under common control with, such Person, (ii) any director, officer,
member, partner (including limited partners) or employee of such
Person or any Person specified in clause (i) above; provided, that
officers, directors or employees of the Company shall be deemed not
to be Affiliates of the Blackstone Entities for purposes hereof
solely by reason of being officers, directors or employees of the
Company or (iii) in the case of Jupiter, Dauch or
<PAGE>
2
Harris, any member of Ray Park's, Dauch's or Harris's family or any
entity established for estate planning purposes.
"Agreement" shall mean this Stockholders' Agreement, as the
same may be amended, supplemented or otherwise modified from time to
time.
"Business Day" shall mean a day other than a Saturday,
Sunday, federal, New York State or Michigan holiday or other day on
which commercial banks in New York City or Michigan are authorized or
required by law to close.
"Common Stock" shall mean the common stock, par value $.01
per share, of the Company.
"Other Agreements" shall mean any management stock
subscription or similar agreements providing for the purchase by
management of the Company's Common Stock.
"Person" shall mean any individual, corporation, limited
liability company, partnership, trust, joint stock company, business
trust, unincorporated association, joint venture, governmental
authority or other entity of any nature whatsoever.
"Public Offering" shall mean the sale of shares of Common
Stock to the public pursuant to an effective registration statement
(other than a registration statement on Form S-4 or S-8 or any
similar or successor form) filed under the Securities Act.
"Recapitalization Agreement" shall mean the Recapitalization
and Stock Purchase Agreement dated as of September 19, 1997, among
AAM Acquisition, Inc., American Axle & Manufacturing, Inc., the
Company, Harris, Jupiter and Dauch.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, as the
same may be amended from time to time.
"Stockholders" shall mean each of the Blackstone Entities,
Jupiter, Harris and Dauch and any of their permitted transferees
hereunder and "Stockholder" shall mean any one of the Stockholders.
"Transfer" shall mean any transfer, sale, assignment,
exchange, mortgage, pledge, hypothecation or other disposition of any
Common Stock or any interest therein.
<PAGE>
3
1.2 Other Definitional Provisions; Interpretation. (a) The
words "hereof", "herein", and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and section and subsection references
are to this Agreement unless otherwise specified.
(b) The headings in this Agreement are included for
convenience of reference only and shall not limit or otherwise affect the
meaning or interpretation of this Agreement.
(c) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.
SECTION 2. TRANSFERS
2.1 Limitations on Transfer. (a) Each Stockholder hereby
agrees that, except for Transfers effected pursuant to an effective
registration statement filed under the Securities Act, no Transfer shall occur
unless the Company has been furnished with an opinion in form and substance
reasonably satisfactory to the Company of counsel reasonably satisfactory to
the Company that such Transfer is exempt from the provisions of Section 5
under the Securities Act and from the provisions of any other applicable
securities laws.
(b) Each Stockholder hereby agrees that, except for (i)
Transfers in connection with a Public Offering, (ii) Transfers pursuant to
Rule 144 under the Securities Act, (iii) Transfers to the Company in one or
more transactions approved by the Board of Directors of the Company and (iv)
Transfers pursuant to Sections 2.5 and 2.6, no Transfer shall occur unless the
transferee shall agree in a writing reasonably satisfactory in form and
substance to the Company to become a party to, and be bound to the same extent
as its transferor by the terms of, this Agreement.
(c) Notwithstanding anything contained herein to the
contrary, the Stockholders hereby agree that, except for (i) Transfers to
Affiliates, (ii) Transfers by the Blackstone Entities that trigger the right
of the other Stockholders to "tag along" with the Transfer of shares of Common
Stock by the Blackstone Entities pursuant to Section 2.5, (iii) Transfers by
the Blackstone Entities that trigger the right to "drag along" shares of the
other Stockholders pursuant to Section 2.6 and (iv) the sale of shares of
Common Stock pursuant to an effective registration statement filed under the
Securities Act pursuant to the registration rights set forth in Sections 2.7
and 2.8 of this Agreement, no Transfer shall occur until three years from the
date hereof. For purposes of this Section 2.1(c), both the Transfer by the
Blackstone Entities and the Transfer by the other Stockholders pursuant to
Sections 2.5 and 2.6 shall be exempt from the Transfer restrictions of this
Section 2.1(c).
<PAGE>
4
2.2 Transfers to Affiliates. Notwithstanding anything
contained herein to the contrary, but subject to Section 2.1(c), each of the
Stockholders shall be entitled from time to time, to transfer any or all of
the shares of Common Stock beneficially owned by it to any of its Affiliates
who agree to become a party to, and be bound to the same extent as its
transferor by the terms of, this Agreement. Any Transfer by the Blackstone
Entities or their Affiliates to any of their respective stockholders (or other
equity owners) of any or all of the shares of Common Stock beneficially owned
by them (including a distribution of such shares of Common Stock upon a
liquidation of any of the Blackstone Entities or any of their Affiliates or
otherwise) shall be deemed to be a Transfer to Affiliates of the Blackstone
Entities for purposes of this Section 2.2.
2.3 Effect of Void Transfers. In the event of any purported
Transfer of any shares of Common Stock in violation of the provisions of this
Agreement, such purported Transfer shall be void and of no effect and the
Company shall not give effect to such Transfer.
2.4 Legend on Securities. Each certificate representing
shares of Common Stock issued to any Stockholder shall bear the following
legend on the face thereof:
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO A STOCKHOLDERS' AGREEMENT AMONG BLACKSTONE CAPITAL
PARTNERS II MERCHANT BANKING FUND L.P., BLACKSTONE OFFSHORE CAPITAL
PARTNERS II L.P., BLACKSTONE FAMILY INVESTMENT PARTNERS II L.P.,
JUPITER CAPITAL CORPORATION, MORTON E. HARRIS, RICHARD E. DAUCH, AND
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC. (THE "COMPANY"), A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. NO
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE
MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH STOCKHOLDERS'
AGREEMENT AND (A) PURSUANT TO A REGISTRATION STATEMENT EFFECTIVE
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) IF THE COMPANY
HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO THE COMPANY THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT OF 1933, AS AMENDED, THE RULES AND
REGULATIONS THEREUNDER AND ANY OTHER APPLICABLE SECURITIES LAWS. THE
HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES
TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH STOCKHOLDERS'
AGREEMENT."
2.5 Tag-Along Rights. (a) So long as this Agreement
shall remain in effect and the Blackstone Entities and their
Affiliates beneficially own collectively an aggregate number of
<PAGE>
5
shares of Common Stock not less than one-third (1/3) of the aggregate number of
shares of Common Stock beneficially owned by the Blackstone Entities on the date
hereof (taking into consideration any stock dividends on, or subdivisions,
reclassifications, combinations or other similar adjustments to, the Common
Stock), with respect to any proposed Transfer (a "Proposed Transfer") by the
Blackstone Entities or any of their Affiliates (in such capacity, a
"Transferring Stockholder") of Common Stock permitted hereunder, other than (1)
as provided in Section 2.2 and (2) in a Public Offering, the Transferring
Stockholder shall have the obligation, and each of the Rollover Holders (but not
any of their non-Affiliate transferees or their Affiliate's transferees) shall
have the right, to require the proposed transferee (the "Proposed Transferee")
to purchase from such Rollover Holder (in such capacity, a "Tagging
Stockholder") a number of shares of Common Stock up to the product (rounded up
to the nearest whole number) of (i) the quotient determined by dividing (A) the
aggregate number of shares of Common Stock owned by such Tagging Stockholder by
(B) the aggregate number of shares of Common Stock beneficially owned by the
Blackstone Entities, the Tagging Stockholder and any other Persons who are
permitted to include shares of Common Stock in such sale pursuant to this
Agreement or any of the Other Agreements (including the other Rollover Holders),
and (ii) the total number of shares of Common Stock proposed to be directly or
indirectly transferred to the Proposed Transferee in the Proposed Transfer, and
at the same price per share of Common Stock and upon the same terms and
conditions (including without limitation time of payment and form of
consideration) as to be paid and given to the Transferring Stockholder;
provided, that in order to be entitled to exercise its right to sell shares of
Common Stock to the Proposed Transferee pursuant to this Section 2.5, the
Tagging Stockholder must agree to make to the Proposed Transferee the same
representations, warranties, covenants, indemnities and agreements as the
Transferring Stockholder agrees to make in connection with the Proposed Transfer
of the shares of Common Stock of the Transferring Stockholder; provided further,
that all representations and warranties shall be made by the Tagging
Stockholders and the Transferring Stockholder severally and not jointly and that
the liability of the Transferring Stockholder and the Tagging Stockholders
(whether pursuant to a representation, warranty, covenant, indemnification
provision or agreement) for liabilities in respect of the Company shall be
evidenced in writings executed by them and the Proposed Transferee and shall be
borne by each of them on a pro rata basis.
(b) The Transferring Stockholder shall give notice to the
other Stockholders of each Proposed Transfer giving rise to the rights of the
Tagging Stockholders set forth in the first sentence of Section 2.5(a) at
least 20 days prior to the proposed consummation date of such Transfer,
setting forth the aggregate number of shares of Common Stock proposed to be so
transferred, the name and address of the Proposed Transferee, the proposed
<PAGE>
6
amount and form of consideration and other terms and conditions of payment
offered by the Proposed Transferee, and a representation that the Proposed
Transferee has been informed of the tag-along rights provided for in this
Section 2.5 and has agreed to purchase shares of Common Stock in accordance
with the terms hereof. The tag-along rights provided by this Section 2.5 must
be exercised by the Tagging Stockholders within 10 Business Days following
receipt of the notice required by the preceding sentence, by delivery of a
written notice to the Transferring Stockholder indicating such Tagging
Stockholder's desire to exercise its rights and specifying the number of
shares of Common Stock it desires to sell. The Transferring Stockholder shall
be entitled under this Section 2.5 to transfer to the Proposed Transferee the
number of shares of Common Stock equal to the difference between (x) the
number referred to in clause (ii) of paragraph (a) above and (y) the sum of
(1) the aggregate number of shares of Common Stock set forth in the written
notice, if any, delivered by the Tagging Stockholders pursuant to the
preceding sentence; provided, however, that the number of shares of Common
Stock that a Tagging Stockholder may include in such notice and sell to the
Proposed Transferee is limited to the number of shares calculated pursuant to
the first sentence of Section 2.5(a) and (2) the aggregate number of shares of
Common Stock required to be purchased by the Proposed Transferee pursuant to
any other agreement. If the Proposed Transferee fails to purchase shares of
Common Stock from any Tagging Stockholders that has properly exercised its
tag-along rights under Section 2.5(a), then the Transferring Stockholder shall
not be permitted to make the Proposed Transfer, and any such attempted
Transfer shall be void and of no effect, as provided in Section 2.3 hereof.
(c) If a Tagging Stockholder exercises its rights under
Section 2.5(a), the closing of the purchase of the Common Stock with respect
to which such rights have been exercised shall take place concurrently with
the closing of the sale of the Transferring Stockholder's Common Stock.
2.6 Drag-Along Rights. (a) So long as this Agreement shall
remain in effect and the Blackstone Entities and their respective Affiliates
beneficially own collectively an aggregate number of shares of Common Stock
not less than one-third (1/3) of the aggregate number of shares of Common
Stock beneficially owned collectively by the Blackstone Entities on the date
hereof (taking into consideration any stock dividends on, or subdivisions,
reclassifications, combinations or other similar adjustments to, the Common
Stock), if any of the Blackstone Entities or their Affiliates receives an offer
from a Person or any of its Affiliates (a "Third Party") to purchase all, or
substantially all (pursuant to a recapitalization or other transaction), of the
outstanding shares of Common Stock owned by the Stockholders and such offer is
accepted by the Blackstone Entities or their Affiliates, then each Rollover
Holder (and its Affiliates and transferees) hereby agrees that it will transfer
<PAGE>
7
all shares of Common Stock owned by it (or substantially all the shares of
Common Stock held by it pursuant to the terms of the proposed transaction in
the same proportion as is being transferred/retained by the Blackstone
Entities) to such Third Party on the terms of the offer so accepted by the
Blackstone Entities, including the same per share consideration.
(b) The Blackstone Entities shall give notice (the
"Drag-Along Notice") to the Rollover Holders and their Affiliates that hold
Common Stock of any proposed Transfer giving rise to the drag-along rights set
forth in Section 2.6(a) as soon as practicable following the acceptance of the
offer referred to in Section 2.6(a). The Drag-Along Notice shall set forth the
number of shares of Common Stock proposed to be so transferred, the name of
the proposed transferee, the proposed amount and form of consideration and the
other terms and conditions of the offer.
2.7 Piggy-Back Rights. (a) Each time the Company is planning
to file a registration statement under the Securities Act (other than a
registration statement on Form S-4 or S-8) in connection with the proposed
offer and sale of Common Stock by the Company and/or a stockholder has
exercised its demand registration rights pursuant to this Agreement or any
Other Agreement (the "Initiating Party"), the Company will give prompt written
notice thereof to the Stockholders who are not the Initiating Party (the
"Non-Initiating Parties") of their rights under this Section 2.7, at least 30
days prior to the anticipated filing date of such registration statement;
provided, that no member of the Non-Initiating Parties shall have any rights
pursuant to this Section 2.7 with respect to the first Public Offering of
Common Stock, if the Company is the only Person including shares of Common
Stock in such registration statement. Notwithstanding the foregoing, the
parties acknowledge and agree that the Company will use its reasonable best
efforts to include the shares of Common Stock held by Jupiter and Harris in
the first Public Offering and will only exclude such shares if the
underwriters in good faith advise the Company, that in their opinion, the
inclusion of such shares of Common Stock in the first Public Offering of
Common Stock will have an adverse effect on the offering (including the price
at which the shares of Common Stock can be sold). Upon the written request of
any member of the Non-Initiating Parties made within 10 Business Days after
the receipt of any such notice from the Company, which request shall specify
the shares of Common Stock (the "Piggy-Back Shares") intended to be disposed
of by such Stockholder in such offering, the Company will use its reasonable
efforts to effect the registration under the Securities Act of all the
Piggy-Back Shares which the Company has been so requested to register by the
Stockholders, only to the extent required to permit the disposition of the
Piggy-Back Shares to be registered; provided, that (i) if, at any time after
giving written notice of its intention to register any Common Stock and prior
to the effective date of the registration statement filed in connection with
such registration, the Initiating Party shall determine for any reason
<PAGE>
8
not to proceed with the proposed registration, the Company may at its election
give written notice of such determination to the holders of Piggy-Back Shares
and thereupon shall be relieved of its obligation to register any Piggy-Back
Shares in connection with such registration, and (ii) if such registration
involves an underwritten offering, each holder of Piggy-Back Shares requesting
to be included in the Company's registration must sell its shares to the
underwriters on the same terms and conditions as apply to the Blackstone
Entities and their respective Affiliates.
(b) If a registration pursuant to this Section 2.7 involves
an underwritten offering and the managing underwriter or underwriters in good
faith advise the Company, in writing that, in their opinion, the number of
shares of Common Stock which the Company and the holders of the Piggy-Back
Shares and any other Persons intend to include in such registration exceeds
the largest number of shares of Common Stock which can be sold in such
offering without having an adverse effect on such offering (including the
price at which the shares of Common Stock can be sold), then the Company will
include in such registration (i) first, the shares of Common Stock the Company
proposes to sell for its own account, if any, and (ii) second, to the extent
that the number of shares of Common Stock which the Company proposes to sell
is less than the number of shares of Common Stock which the Company has been
advised can be sold in such offering without having the adverse effect
referred to above, such amount of Piggy-Back Shares shall be allocated pro
rata among the Stockholders based upon their relative proportionate holdings
of Common Stock on the date such registration statement is filed.
2.8 Demand Registration. (a) Upon the written request from
time to time (a "Request") of any Blackstone Entity or any Affiliate of a
Blackstone Entity that holds Common Stock that the Company effect the
registration under the Securities Act of all or part of the shares of Common
Stock owned by such Blackstone Entity and Affiliates, the Company will as
expeditiously as practicable use its reasonable best efforts to effect the
registration under the Securities Act of such shares and cause such
registration statement to remain effective for a period of not less than 180
days; provided, however, that the Company shall not be required to effect more
than five registrations pursuant to this Section 2.8(a). The Blackstone
Entities shall have the right to select the managing underwriter or
underwriters to administer the offerings covered by its Requests.
(b) For so long as Dauch and his Affiliates beneficially own
not less than 40% of the aggregate number of shares of Common Stock
beneficially owned by Dauch on the date hereof (taking into consideration any
stock dividends on, or subdivisions, reclassifications, combinations or other
similar adjustments to, the Common Stock), upon the written request of Dauch,
at any time after 180 days following the first Public
<PAGE>
9
Offering, that the Company effect the registration under the Securities Act of
all or part of the shares of Common Stock owned by Dauch and his Affiliates,
the Company will as expeditiously as practicable effect the registration under
the Securities Act of such shares and cause such registration statement to
remain effective for a period of not less than 180 days; provided, however,
that the Company shall not be required to effect more than one registration
pursuant to this Section 2.8(b); provided, further, if the Company is
requested to effect such a demand by Dauch and the Blackstone Entities
reasonably determine in good faith it would be detrimental to the Company and
its securityholders for such registration statement to be filed on or before
the date such filing would otherwise be required hereunder, the filing shall
be deferred for a period of not more than 180 days after receipt of the
request for such registration from Dauch.
(c) For so long as Jupiter and Harris and their Affiliates
together beneficially own not less than 40% of the aggregate number of shares
of Common Stock beneficially owned by Jupiter and Harris on the date hereof
(taking into consideration any stock dividends on, or subdivisions,
reclassifications, combinations or other similar adjustments to, the Common
Stock), upon the written request of a majority in interest of Jupiter and
Harris, at any time after 180 days following the first Public Offering, that
the Company effect the registration under the Securities Act of all or part of
the shares of Common Stock owned by Jupiter and Harris and their Affiliates,
the Company will as expeditiously as practicable effect the registration under
the Securities Act of such shares and cause such registration statement to
remain effective for a period of not less than 180 days; provided, however,
that the Company shall not be required to effect more than one registration
pursuant to this Section 2.8(c); provided, further, if the Company is
requested to effect such a demand by Jupiter and Harris and the Blackstone
Entities reasonably determine in good faith it would be detrimental to the
Company and its securityholders for such registration statement to be filed on
or before the date such filing would otherwise be required hereunder, the
filing shall be deferred for a period of not more than 180 days after receipt
of the request for such registration from Jupiter and Harris.
2.9 Other Registration-Related Matters.
(a) Each Stockholder agrees that it shall not effect any
sales of Common Stock or securities convertible into Common Stock during the
14 days prior to and up to a 180 day period beginning on the effective date of
a registration statement in which any Stockholder is participating in
connection with an underwritten offering of Common Stock (whether pursuant to
Section 2.7 or 2.8 or otherwise, except as part of such registration), or in
the case of the Company's first Public Offering, if and to the extent
requested in writing (with reasonable prior notice) by the managing
underwriter of the
<PAGE>
10
underwritten public offering. Notwithstanding the foregoing, the parties
acknowledge and agree that Jupiter and Harris will not be subject to the
foregoing restriction unless the underwriters in good faith advise the
Company, that in their opinion, the failure to restrict the Transfer of such
shares will have an adverse effect on the offering (including the price at
which the shares of Common Stock can be sold).
(b) The Company agrees not to effect any sales of Common
Stock or securities convertible into or exercisable or exchangeable for Common
Stock during the 14 days prior to and the 180 day period beginning on the
effective date of any registration statement in which any Stockholder is
participating in connection with an underwritten Public Offering of Common
Stock, if and to the extent reasonably requested in writing (with reasonable
prior written notice) by the managing underwriter of the underwritten Public
Offering.
(c) The Company may require any Person that is selling
shares of Common Stock in a Public Offering pursuant to Section 2.7 or 2.8 to
furnish to the Company in writing such information regarding such Person and
such other information reasonably requested by the Company in order to comply
with the Securities Act.
(d) The Company will pay all reasonable out-of-pocket costs
and expenses (including the reasonable fees and expenses of counsel for the
Stockholders to be selected by the Stockholders who own a majority of the
shares of Common Stock included in the proposed registration) incurred in
connection with the registration of Common Stock pursuant to Sections 2.7 and
2.8 (except as otherwise expressly provided therein).
(e) Before filing a registration statement or prospectus, or
any amendments or supplements thereto, in connection with any registration or
proposed registration of Common Stock pursuant to Section 2.7 or 2.8, the
Company will furnish to each of the Stockholders copies of all documents
proposed to be filed.
(f) The Company will furnish to each seller of Common Stock
such number of copies of the applicable registration statement and of each
amendment or supplement thereto (in each case including all exhibits), such
number of copies of the prospectus included in such registration statement
(including each preliminary prospectus and summary prospectus), in conformity
with the requirements of the Securities Act, and such other documents as such
seller may reasonably request in order to facilitate the disposition of Common
Stock by such seller.
(g) The Company will use its reasonable best efforts to
register or qualify Common Stock covered by a registration statement under
such other securities or blue sky laws of such jurisdictions as each seller
shall reasonably request, and do any
<PAGE>
11
and all other acts and things which may be reasonably necessary or advisable
to enable such seller to consummate the disposition in such jurisdictions of
the Common Stock owned by such seller, except that the Company shall not for
any such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction where, but for the requirements of this
paragraph (g), it would not be obligated to be so qualified, to subject itself
to taxation in any such jurisdiction, or to consent to general service of
process in any such jurisdiction.
(h) The Company will use its reasonable best efforts to
cause the Common Stock covered by a registration statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary to enable the seller thereof to consummate the disposition thereof.
(i) The Company will notify each seller of Common Stock
covered by a registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act within the
appropriate period of the Company's becoming aware that the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing, and at the request of any such
seller, prepare and furnish to such seller a reasonable number of copies of an
amended or supplemental prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Common Stock, such prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing.
(j) The Company will enter into such customary agreements
(including an underwriting agreement in customary form) and take such other
actions as sellers of a majority of such Common Stock or the underwriters, if
any, reasonably request in order to expedite or facilitate the disposition of
such Common Stock.
(k) The Company will make available for inspection by any
seller of Common Stock covered by a registration statement, by any underwriter
participating in any disposition to be effected pursuant to such registration
statement and by any attorney, accountant or other agent retained by any such
seller or any such underwriter, all pertinent financial and other records,
pertinent corporate documents and properties of the Company, and cause all of
the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement.
<PAGE>
12
(l) The Company will obtain a "cold comfort" letter or
letters from the Company's independent public accountants in customary form
and covering matters of the type customarily covered by "cold comfort" letters
as the sellers of a majority of the outstanding shares of Common Stock covered
by the registration statement shall reasonably request.
(m) Each Stockholder agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in
paragraph (i) such Stockholder will forthwith discontinue disposition of
Common Stock pursuant to the registration statement covering such Common Stock
until such Stockholder's receipt of the copies of the amended or supplemented
prospectus contemplated by paragraph (i) and, if so directed by the Company,
such Stockholder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Stockholder's
possession, of the prospectus covering such Common Stock current at the time
of receipt of such notice. In the event the Company shall give any such
notice, the period for which the Company shall be required to keep the
registration statement effective shall be extended by the number of days
during the period from and including the date of the giving of such notice
pursuant to paragraph (i) and including the date when each seller of Common
Stock covered by such registration statement shall have received the copies of
the supplemented or amended prospectus.
(n) If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or a registration statement pursuant to
the requirements of the Securities Act, the Company covenants that it will
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder (or,
if the Company is not required to file such reports, it will, upon the request
of a majority in interest of the Stockholders, make publicly available such
information), and it will take such further action as any Stockholder may
reasonably request, all to the extent required from time to time to enable
such Stockholder to sell shares of Common Stock without registration under the
Securities Act within the limitations of the exemptions provided by (i) Rule
144 under the Securities Act, as such Rule may be amended from time to time,
or (ii) any similar rule or regulation hereafter adopted by the SEC. Upon the
request of any Stockholder, the Company will deliver to such Stockholder a
written statement as to whether it has complied with such requirements.
Notwithstanding anything contained in this paragraph (n) to the contrary, the
Company may deregister under Section 12 of the Exchange Act if it then is
permitted to do so pursuant to the Exchange Act and the rules and regulations
thereunder.
(o) The Company agrees that if the first Public Offering is
not consummated within three years from the date of
<PAGE>
13
this Agreement, that it will, in good faith, use its reasonable best efforts
to provide Jupiter and Harris liquidity for all of the shares of Common Stock
held by Jupiter and Harris on such date.
2.10 Participation Rights. (a) So long as this Agreement
shall remain in effect, the Company shall not issue additional shares of
Common Stock to any of the Blackstone Entities or any of their Affiliates (an
"Issuance") unless, prior to such Issuance, the Company notifies the other
Stockholders in writing of the proposed Issuance and grants to each other
Stockholder the right (the "Right") to subscribe for and purchase such
additional shares of Common Stock so issued at the same price and upon the
same terms and conditions as issued in the Issuance such that immediately
after giving effect to the Issuance and exercise of the Right, the shares of
Common Stock owned by each of the Stockholders and its Affiliates (rounded to
the nearest whole share) shall represent the same percentage of the aggregate
number of shares of Common Stock outstanding on a fully diluted basis as was
owned by each of the Stockholders and its Affiliates immediately prior to the
Issuance.
(b) The Right may be exercised by the Stockholders at any
time by written notice to the Company within 10 Business Days after the date
on which the Stockholders receive notice from the Company of the proposed
Issuance, and the closing of the purchase and sale pursuant to the exercise of
the Right shall occur at least 30 days after the Company receives notice of
the exercise of the Right and prior to or concurrently with the closing of the
Issuance. Notwithstanding the foregoing, the Right shall not apply to (i) any
issuance of Common Stock to all holders of Common Stock on a pro rata basis or
(ii) any issuance of Common Stock pursuant to a Public Offering.
SECTION 3. OTHER
3.1 Additional Securities Subject to Agreement. Each
Stockholder agrees that any other shares of Common Stock which they shall
hereafter acquire by means of a stock split, stock dividend, distribution or
otherwise (other than pursuant to a Public Offering) shall be subject to the
provisions of this Agreement to the same extent as if held on the date hereof.
If any of the Stockholders is issued any warrants, rights, calls, options or
other securities exchangeable or exercisable for or convertible into Common
Stock, the Stockholders agree to amend this Agreement to the extent necessary to
reflect such issuance in a manner consistent with the terms and conditions
hereof.
3.2 Termination. This Agreement shall terminate, and thereby
become null and void, in full on the earliest date on which the Blackstone
Entities and their respective Affiliates do not collectively own 20% or more
of the Common Stock then outstanding on a fully diluted basis; provided, that
the provisions of Sections 2.7, 2.8 and 2.9 shall survive until such
<PAGE>
14
time as none of the Blackstone Entities and their respective Affiliates own
any shares of Common Stock.
3.3 Injunctive Relief. The Stockholders acknowledge and
agree that a violation of any of the terms of this Agreement will cause
irreparable injury for which adequate remedy at law is not available.
Accordingly, it is agreed that each Stockholder shall be entitled to an
injunction, restraining order or other equitable relief to prevent breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court of competent jurisdiction in the United States or
any state thereof, in addition to any other remedy to which they may be entitled
at law or equity.
3.4 Other Stockholders' Agreements. Except for the Other
Agreements, none of the Stockholders shall enter into any stockholder
agreement or other arrangement of any kind with any Person with respect to
shares of the Common Stock, and none of the Stockholders has previously
entered into such an agreement that remains in full force and effect as of the
date hereof, which is inconsistent with the provisions of this Agreement or
which may impair its ability to comply with this Agreement.
3.5 Amendments. This Agreement may be amended only by a
written instrument signed by the Blackstone Entities so long as it (or its
Affiliates) owns Common Stock and by Jupiter, Harris and Dauch so long as they
own (or their Affiliates own) Common Stock, and provided further that any
amendment which adversely affects the Company or imposes an additional
obligation on the Company must be approved in writing by the Company.
3.6 Successors, Assigns and Transferees. The provisions of
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and transferees permitted
hereunder (except for transferees that are transferred Common Stock pursuant to
a Public Offering or pursuant to Section 2.5), each of which shall agree in a
writing reasonably satisfactory in form and substance to the Company to become a
party hereto and be bound to the same extent hereby as the transferor that has
transferred the Common Stock to such transferees; provided, that if a
Stockholder transfers a portion of its or his Common Stock to a transferee which
is entitled to rights of the transferor hereunder, then such transferee(s) of
such transferor shall exercise such rights as a single group with that
transferor and its Affiliates.
3.7 Notices. All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including
by telecopy), and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when delivered by hand, or two days after
being delivered to a recognized courier (whose stated terms of delivery are
three days or less to the destination of such notice) or, in the case of
telecopy notice, when received, addressed as follows to the
<PAGE>
15
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto:
When Jupiter Capital Corporation is the intended recipient:
Jupiter Capital Corporation
c/o Ray Park
Park Corporation
6200 Riverside Drive
Cleveland, OH 44135
Telecopy: 216-265-2559
with a copy to:
When Richard E. Dauch is the intended recipient:
Richard E. Dauch
c/o American Axle & Manufacturing, Inc.
1840 Holbrook Avenue
Detroit, Michigan 48212-3488
Attention: Richard E. Dauch
Telecopy: 313-974-3204
with a copy to:
When Morton E. Harris is the intended recipient:
to the address provided in the stock transfer
books of the Company
When the Company is the intended recipient:
American Axle & Manufacturing
of Michigan, Inc.
1840 Holbrook Avenue
Detroit, Michigan 48212-3488
Attention: Patrick Lancaster
Telecopy: 313-974-3204
<PAGE>
16
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Robert L. Friedman
Telecopy: 212-455-2502
When the Blackstone Entities are the intended recipient:
Blackstone Capital Partners II
Merchant Banking Fund L.P.
Blackstone Offshore Capital Partners
II L.P.
Blackstone Family Investment
Partnership II L.P.
c/o Blackstone Management Associates
II L.P.
345 Park Avenue--31st Floor
New York, New York 10154
Attention: David A. Stockman
Telecopy: (914) 241-3786
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Robert L. Friedman
Telecopy: 212-455-2502
3.8 Integration. This Agreement and the Recapitalization
Agreement, and the documents referred to herein or therein, or delivered
pursuant hereto or thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and thereof. There are no
agreements, representations, warranties, covenants or undertakings with
respect to the subject matter hereof and thereof other than those expressly
set forth herein and therein. This Agreement supersedes all other prior
agreements and understandings between the parties with respect to such subject
matter.
3.9 Severability. If one or more of the provisions,
paragraphs, words, clauses, phrases or sentences contained herein, or the
application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the remaining provisions, paragraphs,
words, clauses, phrases or sentences hereof shall not be in any way impaired,
it being intended that all rights, powers and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.
<PAGE>
17
3.10 Counterparts. This Agreement may be executed in two or
more counterparts, and by different parties on separate counterparts each of
which shall be deemed an original, but all of which shall constitute one and
the same instrument.
3.11 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without regard to the conflicts of law principles thereof. The parties
executing this Agreement hereby agree to submit to the non-exclusive
jurisdiction of the federal and state courts located in the State of New York
in any action or proceeding arising out of or relating to this Agreement.
3.12 Approval of Affiliate Transactions. Until such time as
the Rollover Holders own less than 10% of the shares of Common Stock then
outstanding on a fully diluted basis, the Company shall not agree to, engage
in or otherwise complete any Affiliate Transaction that would require written
approval of the banks under the Credit Agreement, dated as of October 27, 1997
among the Company and the several lenders from time to time thereto, other
than a transaction determined in advance of such transaction by the Board of
Directors of the Company as being upon terms no less favorable to the Company
than terms obtainable from a third party on an arms-length basis. For purposes
of this Section 3.13, "Affiliate Transaction" means any transaction or series
of related transactions (including, but not limited to, the purchase, sale,
lease or exchange of any property or the rendering of any service pursuant to
any management or consulting arrangement or otherwise, but excluding (v) the
payment of management or monitoring fees (which initially shall be the greater
of (i) $2.0 million and (ii) 1% of EBITDA per annum (subject to adjustment in
the event of acquisitions by the Company) to any Blackstone Entity or an
Affiliate of a Blackstone Entity, (w) the reimbursement of out-of-pocket
expenses of directors for services rendered in such capacity, (x) the payment
of customary directors' fees, (y) the payment of customary investment banking
fees to any Blackstone Entity or an Affiliate of a Blackstone Entity in
consideration of services rendered and (z) transactions expressly contemplated
by the Recapitalization Agreement and the exhibits thereto) between the
Company or any of its subsidiaries, on the one hand, and any Affiliate of the
Company (other than the Company or any of its subsidiaries), on the other
hand, or by the Company or any of its subsidiaries for the benefit of any
Affiliate of the Company (other than the Company or any of its subsidiaries).
<PAGE>
18
IN WITNESS WHEREOF, each of the undersigned has executed
this Agreement or caused this Agreement to be executed on its behalf as of the
date first written above.
BLACKSTONE CAPITAL PARTNERS II
MERCHANT BANKING FUND L.P.
BLACKSTONE OFFSHORE CAPITAL PARTNERS
II L.P.
BLACKSTONE FAMILY INVESTMENT
PARTNERS II L.P.
By: Blackstone Management Associates
II L.L.C., general partner
By: /s/ David A. Stockman
-----------------------------------
Name: David A. Stockman
Title: General Partner
JUPITER CAPITAL CORPORATION
By: /s/ Raymond Park
------------------------------------
Name: Raymond Park
Title: President
/s/ Richard E. Dauch
---------------------------------------
RICHARD E. DAUCH
/s/ Morton E. Harris
---------------------------------------
MORTON E. HARRIS
AMERICAN AXLE & MANUFACTURING OF
MICHIGAN, INC.
By: /s/ Richard E. Dauch
-----------------------------------
Name: Richard E. Dauch
Title: President
<PAGE>
MONITORING AGREEMENT
This Monitoring Agreement (this "Agreement"), dated as of
October 29, 1997, between American Axle & Manufacturing of Michigan, Inc., a
Michigan corporation (together with its subsidiaries, the "Company"), and
Blackstone Management Partners L.P., a Delaware limited partnership
("Blackstone").
WHEREAS, Blackstone, by and through itself, its affiliates
and their respective officers, employees and representatives, has expertise in
the areas of management, finance, strategy, investment, acquisitions and other
matters relating to the business of the Company; and
WHEREAS, the Company desires to avail itself, for the term
of this Agreement, of the expertise of Blackstone in the aforesaid areas and
Blackstone wishes to provide the services to the Company as herein set forth.
NOW, THEREFORE, in consideration of the foregoing recitals
and the covenants and conditions contained herein, the parties hereto agree as
follows:
1. Appointment. The Company hereby appoints Blackstone to
render the advisory and consulting services described in Section 2 hereof for
the term of this Agreement.
2. Services. Blackstone hereby agrees that during the term
of this Agreement it shall render to the Company and its subsidiaries, by and
through itself, its affiliates, and their respective officers, members,
employees and representatives as Blackstone in its sole discretion shall
designate from time to time, advisory and consulting services in relation to
the affairs of the Company and its subsidiaries in connection with ongoing
strategic and operational oversight of the Company, including, without
limitation, (i) advice in designing financing structures and advice regarding
relationships with the Company's lenders and bankers; (ii) advice regarding
the structure and timing of public offerings of debt and equity securities of
the Company; (iii) advice regarding property dispositions or acquisitions; and
(iv) such other advice directly related or ancillary to the above financial
advisory services as may be reasonably requested by the Company. It is
expressly agreed that the services to be performed hereunder shall not include
investment banking or other financial advisory services rendered by Blackstone
or its affiliates to the Company in connection with any specific acquisition,
divestiture, refinancing or recapitalization by the Company or any of its
subsidiaries. Blackstone may be entitled to receive additional compensation
for providing services of the type specified in the preceding sentence by
mutual agreement of the Company or such subsidiary and Blackstone.
<PAGE>
2
3. Fees. In consideration of the services contemplated by
Section 2, for the term of this Agreement, the Company and its successors
agree to pay to Blackstone an annual monitoring fee (the "Monitoring Fee")
which will be paid semi-annually and in advance. The first payment of $838,356
shall be paid on the Closing Date (as defined in the Recapitalization and
Stock Purchase Agreement, dated as of September 19, 1997, between the Company,
American Axle & Manufacturing, Inc., AAM Acquisition, Inc., Jupiter Capital
Corporation, Richard E. Dauch and Morton E. Harris). On each March 31 and
September 30, the Company shall pay Blackstone $1 million. In addition, on
each March 31 commencing on March 31, 1999, the Company shall pay Blackstone
an amount equal to 1% of EBITDA (as defined below) for the most recently
completed fiscal year less $2,000,000 (if such amount is positive). For
purposes of this Section 3, "EBITDA" shall have the meaning set forth in the
Credit Agreement, dated as of October 27, 1997 among the Company, American
Axle & Manufacturing, Inc., the lenders named therein, The Chase Manhattan
Bank, as administrative agent and collateral agent and Chase Manhattan Bank
Delaware, as fronting bank (the "Credit Agreement").
4. Reimbursements. In addition to the Monitoring Fee payable
pursuant to this Agreement, the Company shall pay directly or reimburse
Blackstone for its Out-of-Pocket Expenses (as defined below). Promptly following
the Company's request therefor, Blackstone will provide written back-up relating
to any Out-of-Pocket Expenses to be paid or reimbursed by the Company pursuant
to this Agreement. For the purposes of this Agreement, the term "Out-of-Pocket
Expenses" shall mean the reasonable out-of-pocket costs and expenses incurred by
Blackstone or its affiliates in connection with the services rendered hereunder,
including, without limitation, (i) fees and disbursements of any independent
professionals and organizations, including independent accountants, outside
legal counsel or consultants, (ii) costs of any outside services or independent
contractors such as financial printers, couriers, business publications, on-line
financial services or similar services, (iii) research and research related
expenses and (iv) transportation, per diem costs, word processing expenses or
any similar expense not associated with its ordinary operations. All
reimbursements for Out-of-Pocket Expenses shall be made promptly upon or as soon
as practicable after presentation by Blackstone to the Company of a written
statement thereof.
5. Indemnification. The Company will indemnify and hold
harmless Blackstone, its affiliates and their respective partners (both general
and limited), members (both managing and otherwise), officers, directors,
employees, agents and representatives (each such person being an "Indemnified
Party") from and against any and all losses, claims, damages and liabilities,
whether joint or several (the "Liabilities"), related to, arising out of or in
connection with the advisory and consulting services contemplated by this
Agreement or the
<PAGE>
3
engagement of Blackstone pursuant to, and the performance by Blackstone of the
services contemplated by, this Agreement, whether or not pending or
threatened, whether or not an Indemnified Party is a party, whether or not
resulting in any liability and whether or not such action, claim, suit,
investigation or proceeding is initiated or brought by the Company. The
Company will reimburse any Indemnified Party for all reasonable costs and
expenses (including reasonable attorneys' fees and expenses) as they are
incurred in connection with investigating, preparing, pursuing, defending or
assisting in the defense of any action, claim, suit, investigation or
proceeding for which the Indemnified Party would be entitled to
indemnification under the terms of the previous sentence, or any action or
proceeding arising therefrom, whether or not such Indemnified Party is a party
thereto, provided that, subject to the following sentence, the Company shall
be entitled to assume the defense thereof at its own expense, with counsel
satisfactory to such Indemnified Party in its reasonable judgment. Any
Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense, and in any action, claim, suit, investigation or
proceeding in which both the Company and/or one or more of its subsidiaries,
on the one hand, and an Indemnified Party, on the other hand, is, or is
reasonably likely to become, a party, such Indemnified Party shall have the
right to employ separate counsel at the expense of the Company and to control
its own defense of such action, claim, suit, investigation or proceeding if,
in the reasonable opinion of counsel to such Indemnified Party, a conflict or
potential conflict exists between the Company, on the one hand, and such
Indemnified Party, on the other hand, that would make such separate
representation advisable. The Company agrees that it will not, without the
prior written consent of the applicable Indemnified Party, settle, compromise
or consent to the entry of any judgment in any pending or threatened claim,
suit, investigation, action or proceeding relating to the matters contemplated
hereby (if any Indemnified Party is a party thereto or has been threatened to
be made a party thereto) unless such settlement, compromise or consent
includes an unconditional release of the applicable Indemnified Party and each
other Indemnified Party from all liability arising or that may arise out of
such claim, suit, investigation, action or proceeding. Provided the Company is
not in breach of its indemnification obligations hereunder, no Indemnified
Party shall settle or compromise any claim subject to indemnification
hereunder without the consent of the Company. The Company will not be liable
under the foregoing indemnification provision with respect to any Indemnified
Party, to the extent that any loss, claim, damage, liability, cost or expense
is determined by a court, in a final judgment from which no further appeal may
be taken, to have resulted primarily from the gross negligence or willful
misconduct of Blackstone. If an Indemnified Party is reimbursed hereunder for
any expenses, such reimbursement of expenses shall be refunded to the extent
it is finally judicially determined
<PAGE>
4
that the Liabilities in question resulted primarily from the gross negligence
or willful misconduct of Blackstone.
The Company agrees that if any indemnification sought by any
Indemnified Party pursuant to this Section 5 is unavailable for any reason or
is insufficient to hold the Indemnified Party harmless against any Liabilities
referred to herein, then the Company shall contribute to the Liabilities for
which such indemnification is held unavailable or insufficient in such
proportion as is appropriate to reflect the relative benefits received (or
anticipated to be received) by the Company, on the one hand, and Blackstone,
on the other hand, in connection with the transactions which gave rise to such
Liabilities or, if such allocation is not permitted by applicable law, not
only such relative benefits but also the relative faults of the Company, on
the one hand, and Blackstone, on the other hand, as well as any other
equitable considerations, subject to the limitation that in any event the
aggregate contribution by the Indemnified Parties to all Liabilities with
respect to which contribution is available hereunder shall not exceed the fees
actually received by Blackstone in connection with the transaction which gave
rise to such Liabilities (excluding any amounts paid as reimbursement of
expenses).
6. Accuracy of Information. The Company shall furnish or
cause to be furnished to Blackstone such information as Blackstone believes
appropriate to its assignment (all such information so furnished being the
"Information"). The Company recognizes and confirms that Blackstone (i) will
use and rely primarily on the Information and on information available from
generally recognized public sources in performing the services contemplated by
this Agreement without having independently verified the same, (ii) does not
assume responsibility for the accuracy or completeness of the Information and
such other information and (iii) is entitled to rely upon the Information
without independent verification.
7. Term. This Agreement shall be effective as of the date
hereof and shall continue until Blackstone and its affiliates beneficially own
less than one-half the percentage of the aggregate voting power represented by
the issued and outstanding capital stock beneficially owned by Blackstone and
its affiliates on the Closing Date (such termination date, the "Termination
Date"), provided that Section 4 shall remain in effect with respect to
Out-of-Pocket Expenses incurred prior to the Termination Date. The provisions
of Sections 5, 7 and 9 and otherwise as the context so requires shall survive
the termination of this Agreement.
8. Permissible Activities. Subject to applicable law,
nothing herein shall in any way preclude Blackstone, its affiliates or their
respective partners (both general and limited), members (both managing and
otherwise), officers, directors, employees, agents or representatives from
engaging in
<PAGE>
5
any business activities or from performing services for its or their own
account or for the account of others, including for companies that may be in
competition with the business conducted by the Company.
9. Miscellaneous.
(a) No amendment or waiver of any provision of
this Agreement, or consent to any departure by either party hereto from any
such provision, shall be effective unless the same shall be in writing and
signed by all of the parties hereto. Any amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. The waiver by any party of any breach of this Agreement shall not
operate as or be construed to be a waiver by such party of any subsequent
breach.
(b) Any notices or other communications required
or permitted hereunder shall be sufficiently given if delivered personally or
sent by telecopier, Federal Express, or other overnight courier, addressed as
follow or to such other address of which the parties may have given notice:
If to Blackstone: Blackstone Management Partners L.P.
345 Park Avenue, 31st Floor
New York, New York 10154
Attention: David A. Stockman
Telecopy: (212) 754-8704
Telephone: (212) 836-9805
If to the Company: American Axle & Manufacturing
of Michigan, Inc.
1840 Holbrook Avenue
Detroit, Michigan 48212
Attention: General Counsel
Telecopy: (313) 974-2000
Telephone: (765) 974-3204
Unless otherwise specified herein, such notices or other communications shall
be deemed received (i) on the date delivered, if delivered personally or sent
by telecopier, and (ii) one business day after being sent by Federal Express
or other overnight courier.
(c) This Agreement shall constitute the entire
agreement between the parties with respect to the subject matter hereof, and
shall supersede all previous oral and written (and all contemporaneous oral)
negotiations, commitments, agreements and understandings relating hereto.
(d) This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the
State of New York. This Agreement shall inure to the benefit of,
and be binding upon, Blackstone, the Company and their respective
<PAGE>
6
successors and assigns. The provisions of Section 5 shall inure to the benefit
of each Indemnified Party.
(e) This Agreement may be executed by one or more
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the
same instrument.
(f) The waiver by any party of any breach of this
Agreement shall not operate as or be construed to be a waiver by such party of
any subsequent breach.
(g) Any provision of this 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 provision in any other jurisdiction.
<PAGE>
7
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed and delivered by their duly authorized officers or agents as of
the date first above written.
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.
By: /s/ Richard E. Dauch
---------------------------------
Name: Richard E. Dauch
Title: President
BLACKSTONE MANAGEMENT PARTNERS L.P.
By: Blackstone Management Partners
L.L.C., its General Partner
By: /s/ David A. Stockman
----------------------------------
Name: David A. Stockman
Title: Member
<PAGE>
EXECUTION COPY
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CREDIT AGREEMENT
Dated as of October 27, 1997,
Among
AMERICAN AXLE & MANUFACTURING OF MICHIGAN, INC.,
AMERICAN AXLE & MANUFACTURING, INC.,
THE LENDERS NAMED HEREIN,
THE CHASE MANHATTAN BANK,
as Administrative Agent and
Collateral Agent,
and
CHASE MANHATTAN BANK DELAWARE,
as Fronting Bank
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<PAGE>
TABLE OF CONTENTS
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ARTICLE I. DEFINITIONS
SECTION 1.01. Defined Terms.............................................................................2
SECTION 1.02. Terms Generally..........................................................................23
ARTICLE II. THE CREDITS
SECTION 2.01. Commitments..............................................................................23
SECTION 2.02. Loans....................................................................................26
SECTION 2.03. Borrowing Procedure......................................................................27
SECTION 2.04. Evidence of Debt; Repayment of Loans.....................................................28
SECTION 2.05. Fees.....................................................................................28
SECTION 2.06. Interest on Loans........................................................................29
SECTION 2.07. Default Interest.........................................................................29
SECTION 2.08. Alternate Rate of Interest...............................................................30
SECTION 2.09. Termination and Reduction of Commitments.................................................30
SECTION 2.10. Conversion and Continuation of Term Borrowings...........................................30
SECTION 2.11. Repayment of Term Borrowings.............................................................32
SECTION 2.12. Prepayment...............................................................................33
SECTION 2.13. Reserve Requirements; Change in Circumstances............................................35
SECTION 2.14. Change in Legality.......................................................................36
SECTION 2.15. Indemnity................................................................................37
SECTION 2.16. Pro Rata Treatment.......................................................................37
SECTION 2.17. Sharing of Setoffs.......................................................................38
SECTION 2.18. Payments.................................................................................38
SECTION 2.19. Taxes....................................................................................39
SECTION 2.20. Letters of Credit........................................................................41
SECTION 2.21. Replacement of Lenders...................................................................45
ARTICLE III. REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Organization; Powers.....................................................................46
SECTION 3.02. Authorization............................................................................46
SECTION 3.03. Enforceability...........................................................................46
SECTION 3.04. Governmental Approvals...................................................................46
SECTION 3.05. Financial Statements.....................................................................47
SECTION 3.06. No Material Adverse Change...............................................................47
SECTION 3.07. Title to Properties; Possession Under Leases.............................................47
SECTION 3.08. Subsidiaries.............................................................................48
SECTION 3.09. Litigation; Compliance with Laws.........................................................48
SECTION 3.10. Agreements...............................................................................48
SECTION 3.11. Federal Reserve Regulations..............................................................48
SECTION 3.12. Investment Company Act; Public Utility Holding
Company Act..................................................................49
SECTION 3.13. Use of Proceeds..........................................................................49
SECTION 3.14. Tax Returns..............................................................................49
SECTION 3.15. No Material Misstatements................................................................49
SECTION 3.16. Employee Benefit Plans...................................................................49
SECTION 3.17. Environmental Matters....................................................................50
SECTION 3.18. Capitalization of AAMM and the Borrower..................................................51
SECTION 3.19. Security Documents.......................................................................51
SECTION 3.20. Location of Real Property and Leased Premises............................................52
SECTION 3.21. Solvency.................................................................................52
SECTION 3.22. Labor Matters............................................................................52
SECTION 3.23. Insurance................................................................................53
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SECTION 3.24. AAMCM....................................................................................53
ARTICLE IV. CONDITIONS OF LENDING
SECTION 4.01. All Credit Events........................................................................53
SECTION 4.02. First Credit Event--The Escrow Funding. ................................................53
SECTION 4.03. The Escrow Release. ....................................................................56
ARTICLE V. AFFIRMATIVE COVENANTS
SECTION 5.01. Existence; Businesses and Properties.....................................................57
SECTION 5.02. Insurance................................................................................58
SECTION 5.03. Taxes....................................................................................59
SECTION 5.04. Financial Statements, Reports, etc.......................................................59
SECTION 5.05. Litigation and Other Notices.............................................................61
SECTION 5.06. Employee Benefits........................................................................61
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections..................................................................61
SECTION 5.08. Use of Proceeds..........................................................................62
SECTION 5.09. Compliance with Environmental Laws.......................................................62
SECTION 5.10. Preparation of Environmental Reports.....................................................62
SECTION 5.11. Further Assurances.......................................................................62
SECTION 5.12. Fiscal Year; Accounting..................................................................63
SECTION 5.13. Dividends................................................................................63
SECTION 5.14. Interest Rate Protection Agreements......................................................63
SECTION 5.15. Surveys..................................................................................63
SECTION 3.23. Dissolution of AAMCM.....................................................................63
ARTICLE VI. NEGATIVE COVENANTS
SECTION 6.01. Indebtedness.............................................................................64
SECTION 6.02. Liens....................................................................................65
SECTION 6.03. Sale and Lease-Back Transactions.........................................................68
SECTION 6.04. Investments, Loans and Advances..........................................................68
SECTION 6.05. Mergers, Consolidations, Sales of Assets and
Acquisitions.................................................................69
SECTION 6.06. Dividends and Distributions..............................................................70
SECTION 6.07. Transactions with Affiliates.............................................................71
SECTION 6.08. Business of AAMM, the Borrower and the Subsidiaries......................................72
SECTION 6.09. Permitted Lease Financings, Additional Lease
Financings, Permitted Receivables Financings
and Other Material Agreements................................................72
SECTION 6.10. Capital Expenditures.....................................................................73
SECTION 6.11. Interest Coverage Ratio..................................................................73
SECTION 6.12. Net Leverage Ratio.......................................................................74
SECTION 6.13. Minimum Retained Cash Earnings...........................................................75
ARTICLE VII. EVENTS OF DEFAULT
ARTICLE VIII. THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT
ARTICLE IX. MISCELLANEOUS
SECTION 9.01. Notices..................................................................................80
SECTION 9.02. Survival of Agreement....................................................................80
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SECTION 9.03. Binding Effect...........................................................................81
SECTION 9.04. Successors and Assigns...................................................................81
SECTION 9.05. Expenses; Indemnity......................................................................84
SECTION 9.06. Right of Setoff..........................................................................85
SECTION 9.07. Applicable Law...........................................................................85
SECTION 9.08. Waivers; Amendment.......................................................................86
SECTION 9.09. Interest Rate Limitation.................................................................87
SECTION 9.10. Entire Agreement.........................................................................87
SECTION 9.11. WAIVER OF JURY TRIAL.....................................................................87
SECTION 9.12. Severability.............................................................................87
SECTION 9.13. Counterparts.............................................................................87
SECTION 9.14. Headings.................................................................................87
SECTION 9.15. Jurisdiction; Consent to Service of Process..............................................87
SECTION 9.16. Confidentiality..........................................................................88
SECTION 9.17. Release of Liens and Guarantees..........................................................88
SECTION 9.18. Pre-Funding Escrow Arrangements..........................................................89
</TABLE>
Exhibits and Schedules
Exhibit A Form of Administrative Questionnaire
Exhibit B Form of Assignment and Acceptance
Exhibit C Form of Borrowing Request
Exhibit D Form of Indemnity, Subrogation and Contribution
Agreement
Exhibit E Form of Intellectual Property Security Agreement
Exhibit F Form of Mortgage
Exhibit G Form of Parent Guarantee Agreement
Exhibit H Form of Pledge Agreement
Exhibit I Form of Security Agreement
Exhibit J Form of Subsidiary Guarantee Agreement
Exhibit K-1 Form of Opinion of Simpson Thacher & Bartlett
Exhibit K-2 Form of Opinion of Patrick Lancaster
Exhibit K-3 Form of Opinion of Dykema Gossett PLLC
Schedule B Pricing Adjustments
Schedule C Lease Terms
Schedule D GAAP Deviations
Schedule E Park Fees
Schedule F Existing Lease
Schedule 1.01 Existing Indebtedness
Schedule 2.01 Commitments
Schedule 2.20 Letters of Credit
Schedule 3.05 Contingent Liabilities
Schedule 3.07(c) Intellectual Property
Schedule 3.07(d) Condemnation Proceedings
Schedule 3.07(e) Mortgaged Property Rights
Schedule 3.08 Subsidiaries
Schedule 3.09 Litigation
Schedule 3.14 Taxes
Schedule 3.17 Environmental Matters
Schedule 3.18 Capitalization
Schedule 3.19 Filing Offices
Schedule 3.20 Real Property and Leased Premises
Schedule 3.22 Labor Matters
Schedule 3.23 Insurance
Schedule 6.01 Indebtedness
Schedule 6.02 Liens
<PAGE>
Contents, p. 4
Schedule 6.04 Investments
Schedule 6.07 Transactions with Affiliates
<PAGE>
1
CREDIT AGREEMENT dated as of October 27,
1997, among AMERICAN AXLE & MANUFACTURING OF
MICHIGAN, INC., a Michigan corporation ("AAMM"),
AMERICAN AXLE & MANUFACTURING, INC., a Delaware
corporation (the "Borrower"), the financial
institutions listed on Schedule 2.01 (the "Lenders"),
THE CHASE MANHATTAN BANK, a New York banking
corporation, as administrative agent (in such
capacity, the "Administrative Agent") and as
collateral agent (in such capacity, the "Collateral
Agent") for the Lenders, and CHASE MANHATTAN BANK
DELAWARE, as fronting bank (in such capacity, the
"Fronting Bank").
Pursuant to or in connection with the transactions
contemplated by the Recapitalization Agreement (such term and each other
capitalized term used but not defined herein having the meaning given to it in
Article I), (a) the Fund and certain other investors (such investors, together
with the Fund, the "Investors") designated by (and consisting principally of
affiliates of) the Fund, propose to acquire (the "Stock Purchase") from Jupiter
Capital Corporation ("Jupiter") and Dauch (Jupiter and Dauch, together with
Harris, the "Continuing Shareholders"), for an aggregate amount of not less than
$120,000,000 in cash (to be reduced by up to $16,000,000 in the aggregate on a
dollar-for-dollar basis by the value of the options to acquire shares of the
common stock of AAMM ("AAMM Common Stock") issued in connection with the
Borrower's existing phantom stock plan that are rolled over (the "Phantom Equity
Rollover") in connection with the Recapitalization (as such term is defined
below)), a certain number of shares of AAMM Common Stock, so that, after giving
effect to the Stock Purchase and the Continuing Shareholders Redemption, the
Investors will own not less than 68.0% (or such lesser percentage, but not less
than 58%, resulting after giving effect to the Phantom Equity Rollover) of the
AAMM Common Stock, (b) the Continuing Shareholders will receive in the aggregate
not more than $580,000,000 (which includes the amount required to effect the
Jupiter Preferred Stock Repurchase and the amounts paid as dividends and used
for the redemption of AAMM Common Stock in accordance with clauses (g) and (h)
below) in cash, consisting of (i) proceeds from the Continuing Shareholders
Redemption and (ii) not less than $120,000,000 (subject to reduction as
described above) in proceeds from the Stock Purchase, (c) three Business Days
prior to the consummation of the Stock Purchase, Jupiter will purchase from GM
all of the Borrower's issued and outstanding shares of Class A Preferred Stock
(the "GM Preferred Stock Purchase") pursuant to the Class A Preferred Stock
Purchase Agreement (the "GM Preferred Stock Purchase Agreement") dated as of
September 19, 1997, between GM and Jupiter, (d) the Borrower will repurchase
from Jupiter all of the Borrower's issued and outstanding shares of Class A
Preferred Stock (the "Jupiter Preferred Stock Repurchase"), (e) the Continuing
Shareholders will contribute all of the Borrower's outstanding shares of common
stock to AAMM in exchange for an equal number of newly issued shares of AAMM
Common Stock, (f) one or more newly formed, wholly owned, bankruptcy-remote,
special-purpose subsidiaries or trusts of the Borrower will obtain the
Receivables Facility, (g) the Borrower will declare and pay a cash dividend to
AAMM and any AAMM Common Stock owned by the Borrower will be canceled, (h) AAMM
will redeem shares of AAMM Common Stock held by Jupiter and Harris (the
"Continuing Shareholders Redemption") and will reimburse Jupiter for the
election tax payable in connection therewith, (i) the Continuing Shareholders
will retain AAMM Common Stock and Dauch will retain unexercised options on the
common stock of the Borrower having a combined value of at least $52,000,000
(based on the price per share of AAMM Common Stock paid to the Continuing
Shareholders pursuant to the Stock Purchase and the Continuing Shareholders
Redemption), (j) the Borrower will repay all the Existing Indebtedness, (k)
costs and expenses incurred in connection with the foregoing transactions will
be paid and (l) not more than $30,000,000 of the Borrower's fees and expenses in
connection with the Recapitalization, including fees, expenses and payments in
connection with the Borrower's stock options (including phantom options) plan
payable by the Borrower (the "Company Closing Costs"), will be paid. After
giving effect to the foregoing transactions (such transactions being
collectively referred to as the "Recapitalization"), AAMM will have a net equity
value (consisting of the AAMM Common Stock purchased by the Investors, the
<PAGE>
2
AAMM Common Stock held by the Continuing Shareholders and the unexercised
options on the common stock of the Borrower held by Dauch, and based on the
purchase price paid by the Investors to the Continuing Shareholders pursuant to
the Stock Purchase) of at least $175,000,000 and not more than 32.0% (or such
greater percentage, but not greater than 42%, resulting after giving effect to
the Phantom Equity Rollover) of the AAMM Common Stock will be owned by the
Continuing Shareholders.
The Borrower has requested the Lenders to extend credit in the
form of (a) Tranche A Term Loans from time to time on and after the Closing Date
and prior to 24 months after the Closing Date, in an aggregate principal amount
not in excess of $125,000,000, (b) Tranche B Term Loans on the Closing Date, in
an aggregate principal amount not in excess of $375,000,000, (c) Revolving Loans
and Swingline Loans at any time and from time to time prior to the Revolving
Credit Maturity Date, in an aggregate principal amount at any time outstanding
not in excess of the difference between (i) $250,000,000 and (ii) the Revolving
L/C Exposure at such time and (d) Letters of Credit, at any time and from time
to time prior to the Revolving Credit Maturity Date, in an aggregate stated
amount at any time outstanding not in excess of $30,000,000.
The proceeds of the Tranche B Term Loans will be used on the
Closing Date, together with (a) available cash of the Borrower on the Closing
Date, (b) up to $100,000,000 of the proceeds of Revolving Loans and (c) the
proceeds of the initial sale by the Borrower and the Subsidiaries on the Closing
Date of receivables and related property under the Receivables Facility, solely
(i) to pay the cash dividend to AAMM that AAMM will use to make the cash payment
to Jupiter and Harris in connection with the Continuing Shareholders Redemption,
(ii) to repay in full the Existing Indebtedness, (iii) to pay related fees,
expenses and other transaction costs (including tax liabilities), (iv) to
finance the Jupiter Preferred Stock Repurchase and (v) to pay the Company
Closing Costs. The proceeds of the Tranche A Term Loans will be used to finance
Capital Expenditures and to refinance Revolving Loans. The proceeds of Revolving
Loans (except as described above) will be used for general corporate purposes,
including the financing of purchases by the Borrower of Manufacturing Equipment
or other equipment in connection with or prior to any Permitted Lease Financing
or Additional Lease Financing. The Letters of Credit and Swingline Loans will be
used for general corporate purposes.
The Lenders are willing to extend such credit to the Borrower
and the Fronting Bank is willing to issue Letters of Credit for the account of
the Borrower, in each case on the terms and subject to the conditions set forth
herein. Accordingly, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms shall have the meanings specified below:
"AAMCM" shall mean American Axle & Manufacturing Capital
Management, a Michigan co-partnership.
"AAMM" shall have the meaning given such term in the
introductory paragraph of this Agreement.
"AAMM Common Stock" shall have the meaning given such term in
the preamble to this Agreement.
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any ABR Term Loan, ABR Revolving Loan or
Swingline Loan.
<PAGE>
3
"ABR Revolving Loan" shall mean any Revolving Loan bearing
interest at a rate determined by reference to the Alternate Base Rate in
accordance with the provisions of Article II.
"ABR Term Borrowing" shall mean a Borrowing comprised of ABR
Term Loans.
"ABR Term Loan" shall mean any Term Loan bearing interest at a
rate determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Acquisitionco" shall mean AAM Acquisition, Inc., a Delaware
corporation.
"Additional Lease Financing" shall mean one or more lease
financings, other than any Permitted Lease Financing, of Manufacturing Equipment
or other equipment, pursuant to leases and related documentation (including
leveraged leases and single investor leases) to be entered into by the Borrower
or any Subsidiary, as lessee, and one or more institutional equity investors or
agents or affiliates thereof or one or more banks or trust companies or agents
or affiliates thereof acting as trustee for one or more institutional equity
investors or agents or affiliates thereof, as lessor, after the Closing Date and
prior to the termination of this Agreement. Any such lease shall contain terms
and conditions substantially as set forth on Schedule C and other customary
terms and conditions not inconsistent with Schedule C that are approved by the
Administrative Agent (such approval not to be unreasonably withheld).
"Adjusted LIBO Rate" shall mean, with respect to any
Eurodollar Borrowing for any Interest Period, an interest rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the product of
(a) the LIBO Rate in effect for such Interest Period and (b) Statutory Reserves,
if any.
"Administrative Agent" shall have the meaning given such term
in the introductory paragraph of this Agreement.
"Administrative Agent Fees" shall have the meaning given such
term in Section 2.05(c).
"Administrative Questionnaire" shall mean an Administrative
Questionnaire in the form of Exhibit A.
"Affiliate" shall mean, when used with respect to a specified
person, another person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with the
person specified.
"Aggregate Revolving Credit Exposure" shall mean the aggregate
amount of the Lenders' Revolving Credit Exposures.
"Alternate Base Rate" shall mean, for any day, a rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate, including the failure of the Federal Reserve Bank of New
York to publish rates or the inability of the Administrative Agent to obtain
quotations in accordance with the terms thereof, the Alternate Base Rate shall
be determined without regard to clause (b) of the preceding sentence until the
circumstances giving rise to such inability no longer exist. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Percentage" of any Revolving Credit Lender at any
time shall mean the percentage of the Total Revolving Credit Commitment
represented by such Lender's Revolving
<PAGE>
4
Credit Commitment. In the event the Revolving Credit Commitments shall have
expired or been terminated, the Applicable Percentages shall be determined on
the basis of the Revolving Credit Commitments most recently in effect, but
giving effect to any assignments pursuant to Section 9.04.
"Approved Fund" shall mean, with respect to any Lender that is
a fund that invests in bank loans, any other fund that invests in bank loans and
is advised or managed by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Lender and an assignee, and accepted by the
Administrative Agent and the Borrower, in the form of Exhibit B or such other
form as shall be approved by the Administrative Agent.
"Board" shall mean the Board of Governors of the Federal
Reserve System of the United States.
"Borrower" shall have the meaning given such term in the
introductory paragraph of this Agreement.
"Borrowing" shall mean a group of Loans of a single Type under
a single Tranche or consisting solely of Revolving Loans or Swingline Loans and
made on a single date and, in the case of Eurodollar Loans, as to which a single
Interest Period is in effect.
"Borrowing Request" shall mean a request by the Borrower in
accordance with the terms of Section 2.03 and substantially in the form of
Exhibit C.
"Business Day" shall mean any day other than a Saturday,
Sunday or day on which banks in New York City are authorized or required by law
to close; provided, however, that when used in connection with a Eurodollar
Loan, the term "Business Day" shall also exclude any day on which banks are not
open for dealings in dollar deposits in the London interbank market.
"Capital Expenditures" shall mean, for any person in respect
of any period, the aggregate of all expenditures incurred by such person during
such period that, in accordance with GAAP, are or should be included in
"additions to property, plant or equipment" or similar items reflected in the
statement of cash flows of such person (which shall be deemed to include
expenditures by such person to acquire stock or other evidence of beneficial
ownership of any other person for the purpose of acquiring the capital assets of
such person); provided, however, that Capital Expenditures for the Borrower and
the Subsidiaries shall not include (a) expenditures to the extent they are made
with the proceeds of the issuance of Capital Stock of AAMM after the Closing
Date (to the extent not previously used to prepay Indebtedness (other than
Revolving Loans or Swingline Loans), make any investment or capital expenditure
or otherwise for any purpose resulting in a deduction to Excess Cash Flow in any
fiscal year) or with funds that if not so spent would constitute Net Proceeds
under clause (a) of the definition of the term "Net Proceeds", (b) expenditures
of proceeds of insurance settlements, condemnation awards and other settlements
in respect of lost, destroyed, damaged or condemned assets, equipment or other
property to the extent such expenditures are made to replace or repair such
lost, destroyed, damaged or condemned assets, equipment or other property or
otherwise to acquire assets or properties useful in the business of the Borrower
and the Subsidiaries within 12 months of receipt of such proceeds, (c) interest
capitalized during such period, (d) expenditures that are accounted for as
capital expenditures of such person and that actually are paid for by a third
party (excluding AAMM or any subsidiary thereof) and for which neither AAMM nor
any subsidiary thereof has provided or is required to provide or incur, directly
or indirectly, any consideration or obligation to such third party or any other
person (whether before, during or after such period) or (e) the book value of
any asset owned by such person prior to or during such period to the extent that
such book value is included as a capital expenditure during such period as a
result of such person reusing or beginning to reuse such asset during such
period without a corresponding expenditure actually having been made in such
period, provided that any expenditure necessary in order to permit such asset to
be reused shall be included as a Capital
<PAGE>
5
Expenditure during the period that such expenditure actually is made and such
book value shall have been included in Capital Expenditures when such asset was
originally acquired.
"Capital Lease Obligations" of any person shall mean the
obligations of such person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such person under GAAP
and, for purposes hereof, the amount of such obligations at any time shall be
the capitalized amount thereof at such time determined in accordance with GAAP.
"Capital Stock" of any person shall mean any and all shares,
interests, rights to purchase, warrants, options, participation or other
equivalents of or interests in (however designated) equity of such person,
including any preferred stock, any limited or general partnership interest and
any limited liability company membership interest, but excluding any debt
securities convertible into such equity.
"Cash Interest Expense" shall mean, with respect to AAMM, the
Borrower and the Subsidiaries on a consolidated basis for any period, Interest
Expense for such period less the sum of (a) pay-in-kind Interest Expense, (b) to
the extent included in Interest Expense, the amortization of fees paid by AAMM,
the Borrower or any Subsidiary on or prior to the Closing Date in connection
with the Recapitalization, (c) the amortization of debt discounts, if any, or
fees in respect of Interest Rate Protection Agreements and (d) gross interest
income of AAMM, the Borrower and the Subsidiaries for such period.
"CERCLA" shall have the meaning given such term in the
definition of the term "Environmental Law".
A "Change in Control" shall be deemed to have occurred if,
subsequent to the consummation of the Recapitalization (a) AAMM should fail to
own directly, beneficially and of record, free and clear of any and all Liens
(other than Liens in favor of the Collateral Agent pursuant to the Pledge
Agreement), 100% of the issued and outstanding capital stock of the Borrower
(other than options on the common stock of the Borrower issued to Dauch prior to
the date hereof (the "Dauch Options") and common stock of the Borrower issued to
Dauch pursuant to the exercise of such options, representing on a combined basis
not more than 16.8% of the common stock of the Borrower on a fully diluted
basis); (b) any person or group (within the meaning of Rule 13d-5 of the
Securities Exchange Act of 1934 as in effect on the date hereof), other than the
Fund, Fund Affiliates and members of management of AAMM or the Borrower holding
voting stock of AAMM or options to acquire such stock on the Closing Date
(collectively, the "Designated Persons") or any combination of Designated
Persons, shall own beneficially, directly or indirectly, in the aggregate shares
representing more than 25% of the aggregate ordinary voting power represented by
the issued and outstanding capital stock of AAMM at a time when Designated
Persons or any combination of Designated Persons shall fail to own beneficially,
directly or indirectly, shares representing at least a majority of the aggregate
ordinary voting power represented by the issued and outstanding capital stock of
AAMM; (c) the Designated Persons or any combination of Designated Persons shall
fail to own beneficially, directly or indirectly, in the aggregate shares
representing at least 51% of the aggregate ordinary voting power represented by
the issued and outstanding capital stock of AAMM (such 51% to be reduced by the
percentage of such voting power represented by the shares sold by such persons
in any public offering of shares of AAMM or by the dilution suffered by such
persons in such public offering, but in any event not to a percentage below
35%); (d) any person or group (within the meaning of Rule 13d-5 of the
Securities Exchange Act of 1934 as in effect on the date hereof), other than
management of AAMM or the Borrower, shall own beneficially, directly or
indirectly, in the aggregate shares representing a greater percentage of the
aggregate ordinary voting power represented by the issued and outstanding
capital stock of AAMM than the aggregate ordinary voting power at such time
represented by the issued and outstanding capital stock of AAMM owned
beneficially, directly or indirectly, by the Fund and Fund Affiliates
(excluding, for this purpose, from the definition of Fund Affiliates management
of AAMM or the Borrower), provided that, a Change
<PAGE>
6
of Control shall be deemed to have occurred at any time when both (i) management
of AAMM or the Borrower shall own beneficially, directly or indirectly, in the
aggregate shares representing a greater percentage of the aggregate ordinary
voting power represented by the issued and outstanding capital stock of AAMM
than the aggregate ordinary voting power at such time represented by the issued
and outstanding capital stock of AAMM owned beneficially, directly or
indirectly, by the Fund and Fund Affiliates (excluding, for this purpose, from
the definition of Fund Affiliates management of AAMM or the Borrower), and (ii)
the Fund and Fund Affiliates shall fail to own beneficially, directly or
indirectly, in the aggregate shares representing at least one-half the
percentage of the aggregate ordinary voting power represented by the issued and
outstanding capital stock of AAMM owned by the Fund and Fund Affiliates
(excluding, for this purpose, from the definition of Fund Affiliates management
of AAMM or the Borrower) on the Closing Date; (e) a majority of the seats
(excluding vacant seats) on the board of directors of AAMM shall at any time
after the Closing Date have been occupied by persons who were neither (i)
nominated by any one or more Designated Persons or by a majority of the board of
directors of AAMM, nor (ii) appointed by directors so nominated; or (f) a change
in control with respect to AAMM or the Borrower (or similar event, however
denominated) shall occur under any indenture or agreement in respect of
Indebtedness or Lease Financings in an aggregate outstanding principal amount or
with a Remaining Present Value in excess of $25,000,000 to which AAMM, the
Borrower or any Subsidiary is party and all the holders of such Indebtedness or
lessors in respect of such Lease Financings have exercised any right arising as
a result of such change in control to require AAMM, the Borrower or any
Subsidiary to redeem or repurchase such Indebtedness or to purchase the
equipment subject to such Lease Financing. For purposes of clauses (b) and (c)
of this definition, the term "Designated Person" shall be deemed to include any
other holder or holders of shares of AAMM having ordinary voting power if AAMM
or the Fund or any Fund Affiliate shall have the power to vote (or cause to be
voted at its discretion), pursuant to contract, irrevocable proxy or otherwise,
the shares held by such holder.
"Closing Date" shall mean a single date (which shall in no
event be later than October 29, 1997) on which the initial Borrowing or issuance
of a Letter of Credit (which shall in no event be later than the second Business
Day after the consummation of the GM Preferred Stock Purchase) occurs hereunder.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall mean all the "Collateral" as defined in any
Security Document and shall also include the Mortgaged Properties.
"Collateral Agent" shall have the meaning given such term in
the introductory paragraph of this Agreement.
"Commitment Fee" shall have the meaning given such term in
Section 2.05(a).
"Commitments" shall mean, with respect to any Lender, such
Lender's Revolving Credit Commitment, Term Commitments and Swingline Loan
Commitment and, with respect to any Fronting Bank, its Revolving L/C Commitment.
"Company Closing Costs" shall have the meaning given such term
in the preamble to this Agreement.
"Continuing Shareholders" shall have the meaning given such
term in the preamble to this Agreement.
"Continuing Shareholders Redemption" shall have the meaning
given such term in the preamble to this Agreement.
<PAGE>
7
"Control" shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, and "Controlling" and "Controlled" shall have meanings correlative
thereto.
"Credit Event" shall have the meaning given such term in
Article IV.
"Current Assets" shall mean, with respect to AAMM, the
Borrower and the Subsidiaries on a consolidated basis at any date of
determination, all assets (other than cash and Permitted Investments or other
cash equivalents) that would, in accordance with GAAP, be classified on a
consolidated balance sheet of AAMM, the Borrower and the Subsidiaries as current
assets at such date of determination.
"Current Liabilities" shall mean, with respect to AAMM, the
Borrower and the Subsidiaries on a consolidated basis at any date of
determination, all liabilities that would, in accordance with GAAP, be
classified on a consolidated balance sheet of AAMM, the Borrower and the
Subsidiaries as current liabilities at such date of determination, other than
(a) the current portion of long-term debt, (b) accruals of Interest Expense
(excluding Interest Expense that is due and unpaid), (c) Revolving Loans or
Swingline Loans classified as current, (d) accruals, if any, of transaction
costs resulting from the Recapitalization and (e) accruals of any costs or
expenses related to severance or termination of employees prior to the date
hereof.
"Dauch" shall mean Richard E. Dauch.
"Dauch Options" shall have the meaning given such term in the
definition of the term "Change in Control".
"Debt Service" shall mean, with respect to AAMM, the Borrower
and the Subsidiaries on a consolidated basis for any period, Interest Expense
for such period plus scheduled principal amortization of Total Debt for such
period (whether or not such payments are made).
"Default" shall mean any event or condition that upon notice,
lapse of time or both would constitute an Event of Default, provided that no
Default will be deemed to have occurred with respect to any event described in
clause (i) of paragraph (g) of Article VII until the grace period (or ten-day
period, as applicable) referred to in such clause shall have expired.
"Delivered Funds" shall have the meaning given such term in
Section 9.18.
"Dollars" or "$" shall mean lawful money of the United States
of America.
"EBITDA" shall mean, with respect to AAMM, the Borrower and
the Subsidiaries on a consolidated basis for any period, the consolidated net
income of AAMM, the Borrower and the Subsidiaries for such period plus, to the
extent deducted in computing such consolidated net income, without duplication,
the sum of (a) income tax expense, (b) gross interest expense (including
interest-equivalent costs associated with any Permitted Receivables Financing,
whether accounted for as interest expense or loss on the sale of receivables),
(c) depreciation and amortization expense, (d) any special charges (including
any non-cash fees or expenses incurred in connection with the Recapitalization)
and any extraordinary or nonrecurring losses, (e) monitoring and management fees
paid to the Fund and/or any of its Affiliates or the Fund Affiliates, (f) other
non-cash items reducing consolidated net income (including any non-cash items
resulting from purchase accounting adjustments) and (g) the Park Fees paid
during such period, minus, to the extent added in computing such consolidated
net income, without duplication, (i) interest income, (ii) extraordinary or
nonrecurring gains and (iii) other noncash items increasing consolidated net
income, provided that all effects, if any, of the transactions forming a part of
the Recapitalization shall be eliminated in computing EBITDA.
<PAGE>
8
"Employee Equity Sales" shall have the meaning given such term
in the definition of the term Net Proceeds.
"environment" shall mean ambient air, surface water and
groundwater (including potable water, navigable water and wetlands), the land
surface or subsurface strata, the workplace or as otherwise defined in any
Environmental Law.
"Environmental Claim" shall mean any written accusation,
allegation, notice of violation, claim, demand, order, directive, cost recovery
action or other cause of action by, or on behalf of, any Governmental Authority
or any person for damages, injunctive or equitable relief, personal injury
(including sickness, disease or death), Remedial Action costs, tangible or
intangible property damage, natural resource damages, nuisance, pollution, any
adverse effect on the environment caused by any Hazardous Material, or for
fines, penalties or restrictions, resulting from or based upon: (a) the threat,
the existence, or the continuation of the existence of a Release (including
sudden or non-sudden, accidental or non-accidental Releases); (b) exposure to
any Hazardous Material; (c) the presence, use, handling, transportation,
storage, treatment or disposal of any Hazardous Material; or (d) the violation
or alleged violation of any Environmental Law or Environmental Permit.
"Environmental Law" shall mean any and all applicable current
and future treaties, laws, rules, regulations, codes, ordinances, orders,
decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
treatment, storage, disposal, Release or threatened Release of any Hazardous
Material or to human health or safety, including the Hazardous Materials
Transportation Act, 49 U.S.C. ss.ss. 1801 et seq., the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. ss.ss. 9601 et seq. ("CERCLA"), the Solid Waste Disposal Act, as amended,
42 U.S.C. ss.ss. 6901 et seq., the Federal Water Pollution Control Act, as
amended, 33 U.S.C. ss.ss. 1251 et seq., the Clean Air Act of 1970, as amended,
42 U.S.C. ss.ss. 7401 et seq., the Toxic Substances Control Act of 1976, 15
U.S.C. ss.ss. 2601 et seq., the Emergency Planning and Community Right-to-Know
Act of 1986, 42 U.S.C. ss.ss. 11001 et seq., the National Environmental Policy
Act of 1975, 42 U.S.C. ss.ss. 4321 et seq., the Safe Drinking Water Act of 1974,
as amended, 42 U.S.C. ss.ss. 300(f) et seq., and any similar or implementing
state, local or foreign law, and all amendments or regulations promulgated under
any of the foregoing.
"Environmental Permit" shall mean any permit, approval,
authorization, certificate, license, variance, filing or permission required by
or from any Governmental Authority pursuant to any Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or
not incorporated) that, together with the Borrower, is treated as a single
employer under Section 414(b) or (c) of the Code, or, solely for purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.
"Escrow Account" shall have the meaning given such term in
Section 9.18.
"Escrow Funding" shall mean the funding on the Escrow Funding
Date by the Lenders into the Escrow Account of an amount equal to the aggregate
principal amount of all Loans to be made to the Borrower on the Closing Date in
accordance with the procedures set forth in Section 9.18.
"Escrow Funding Date" shall have the meaning given such term
in Section 9.18. In no event shall the Escrow Funding Date be later than October
27, 1997.
<PAGE>
9
"Escrow Release" shall have the meaning given such term in
Section 9.19.
"Eurodollar Borrowing" shall mean a Borrowing comprised of
Eurodollar Loans.
"Eurodollar Loan" shall mean any Eurodollar Term Loan or
Eurodollar Revolving Loan.
"Eurodollar Revolving Loan" shall mean any Revolving Loan
bearing interest at a rate determined by reference to the Adjusted LIBO Rate in
accordance with the provisions of Article II.
"Eurodollar Term Borrowing" shall mean a Borrowing comprised
of Eurodollar Term Loans.
"Eurodollar Term Loan" shall mean any Term Loan bearing
interest at a rate determined by reference to the Adjusted LIBO Rate in
accordance with the provisions of Article II.
"Event of Default" shall have the meaning given such term in
Article VII.
"Excess Cash Flow" shall mean, with respect to AAMM, the
Borrower and the Subsidiaries on a consolidated basis for any fiscal year,
EBITDA of AAMM, the Borrower and the Subsidiaries on a consolidated basis for
such fiscal year, minus, without duplication, (a) Debt Service for such fiscal
year, (b) any voluntary prepayments of Term Loans during the period beginning on
April 1 of such fiscal year and ending on March 31 of the immediately succeeding
fiscal year and any permanent reductions to the Revolving Credit Commitments to
the extent that an equal amount of the Revolving Loans simultaneously is repaid,
(c) Capital Expenditures by the Borrower and the Subsidiaries on a consolidated
basis during such fiscal year that are paid in cash and the aggregate
consideration paid in cash during such fiscal year in respect of Permitted
Business Acquisitions, (d) Capital Expenditures that the Borrower or any
Subsidiary shall, during such fiscal year, become obligated to make but that are
not made during such fiscal year, provided that the Borrower shall deliver a
certificate to the Administrative Agent not later than 90 days after the end of
such fiscal year of the Borrower, signed by a Responsible Officer of the
Borrower and certifying that such Capital Expenditures and the delivery of the
related equipment will be made in the following fiscal year, (e) taxes paid in
cash by AAMM, the Borrower and the Subsidiaries on a consolidated basis during
such fiscal year or which are payable or will be paid within six months after
the close of such fiscal year and for which reserves have been established,
including income tax expense and withholding tax expense incurred in connection
with cross-border transactions involving non-domestic Subsidiaries (other than
in connection with any transaction that is part of the Recapitalization), (f) an
amount equal to any increase in Working Capital of AAMM, the Borrower and the
Subsidiaries for such fiscal year, (g) to the extent not deducted in determining
EBITDA, monitoring and management fees paid to the Fund and/or any of its
Affiliates or the Fund Affiliates during such fiscal year, (h) cash expenditures
made in respect of Interest Rate Protection Agreements during such fiscal year,
to the extent not reflected in the computation of EBITDA or Interest Expense,(i)
permitted dividends or repurchases of its Capital Stock paid in cash by AAMM or
the Borrower during such fiscal year and permitted dividends paid by any
Subsidiary to any person other than the Borrower or any of the other
Subsidiaries during such fiscal year, in each case in accordance with Section
6.06, (j) amounts paid in cash during such fiscal year on account of items that
were accounted for as noncash reductions of consolidated net income of AAMM, the
Borrower and the Subsidiaries in the current or a prior period, (k) special
charges or any extraordinary or nonrecurring loss paid in cash during such
fiscal year, (l) to the extent not deducted in the computation of Net Proceeds
in respect of any asset disposition or condemnation giving rise thereto,
mandatory prepayments of Indebtedness (other than Indebtedness created hereunder
or under any other Loan Document) and (m) to the extent included in determining
EBITDA, all items that did not result from a cash payment to AAMM, the Borrower
and the Subsidiaries on a consolidated basis during such fiscal year plus,
without duplication, (i) an amount equal to any decrease in Working Capital for
such fiscal year, (ii) all proceeds received during such fiscal year of Capital
Lease Obligations, purchase
<PAGE>
10
money Indebtedness, Sale and Lease-Back Transactions pursuant to Section 6.03
and any other Indebtedness, in each case to the extent used to finance any
Capital Expenditure (other than Indebtedness under this Agreement to the extent
there is no corresponding deduction to Excess Cash Flow above in respect of the
use of such Borrowings), (iii) all amounts referred to in (c) above to the
extent funded with the proceeds of the issuance of Capital Stock of AAMM after
the Closing Date (to the extent not previously used to prepay Indebtedness
(other than Revolving Loans or Swingline Loans), make any investment or capital
expenditure or otherwise for any purpose resulting in a deduction to Excess Cash
Flow in any fiscal year) or any amount that would have constituted Net Proceeds
under clause (a) of the definition of the term "Net Proceeds" if not so spent,
in each case to the extent there is a corresponding deduction to Excess Cash
Flow above, (iv) to the extent any permitted Capital Expenditures and the
corresponding delivery of equipment referred to in (d) above do not occur in the
fiscal year of the Borrower specified in the certificate of the Borrower
provided pursuant to (d) above, such amounts of Capital Expenditures that were
not so made in the fiscal year of the Borrower specified in such certificates,
(v) cash payments received in respect of Interest Rate Protection Agreements
during such fiscal year to the extent not (A) included in the computation of
EBITDA or (B) reducing Interest Expense, (vi) any extraordinary or nonrecurring
gain realized in cash during such fiscal year (except to the extent such gain is
subject to Section 2.12(c)), (vii) to the extent deducted in the computation of
EBITDA, interest income and (viii) to the extent subtracted in determining
EBITDA, all items that did not result from a cash payment by AAMM, the Borrower
and the Subsidiaries on a consolidated basis during such fiscal year.
"Existing Hedging Agreement" shall mean the hedging
arrangement in effect on the date hereof pursuant to the ISDA Master Agreement
dated as of August 22, 1996 between Mellon Bank and the Borrower.
"Existing Indebtedness" shall mean the Indebtedness of the
Borrower and the Subsidiaries (including AAMM) in existence immediately prior to
the Stock Purchase and described on Schedule 1.01, in an aggregate principal
amount of up to $50,000,000.
"Existing Lease" shall mean the leases described on Schedule
F.
"Federal Funds Effective Rate" shall mean, for any day, the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by it.
"Fees" shall mean the Commitment Fees, the L/C Participation
Fees, the Fronting Bank Fees and the Administrative Agent Fees.
"Financial Officer" of any corporation shall mean the chief
financial officer, principal accounting officer, Treasurer, Assistant Treasurer
or Controller of such corporation.
"Fronting Bank" shall have the meaning given such term in the
introductory paragraph of this Agreement.
"Fronting Bank Fees" shall have the meaning given to such term
in Section 2.05(b).
"Fund" shall mean Blackstone Capital Partners II Merchant
Banking Fund L.P., a Delaware limited partnership, and Blackstone Offshore
Capital Partners II L.P., a Delaware limited partnership.
"Fund Affiliates" shall mean each Affiliate of the Fund that
is not an operating company or Controlled by an operating company and each
general partner of the Fund or any Fund Affiliate who is a partner or employee
of The Blackstone Group L.P., provided that each of
<PAGE>
11
Blackstone Capital Partners III Merchant Banking Fund L.P. and Blackstone
Offshore Capital Partners III L.P. shall be deemed to be a Fund Affiliate.
"GAAP" shall mean generally accepted accounting principles in
effect from time to time in the United States, applied on a consistent basis,
except as set forth on Schedule D.
"GM" shall mean General Motors Corporation, a Delaware
corporation.
"GM Agreements" shall mean (i) the Component Supply Agreement,
as amended, dated as of February 28, 1994, between the Borrower and GM, (ii) the
GMCL Purchase Order Agreement, as amended, dated as of February 17, 1994, and
effective on March 1, 1994, between the Borrower and General Motors of Canada
Limited ("GMCL") and (iii) any agreements entered into between the Borrower and
GM or GMCL succeeding or replacing the agreements in clauses (i) and (ii),
including the Lifetime Program Contracts.
"GM MOU" shall mean the Amended and Restated Memorandum of
Understanding dated as of September 2, 1997, as amended pursuant to an Extension
Agreement dated as of September 22, 1997, between the Borrower and GM, pursuant
to which the Borrower and GM have agreed, among other things, to enter into
individual Lifetime Program Contracts with respect to each product supplied or
to be supplied by the Borrower to GM.
"GM Preferred Stock Purchase" shall have the meaning given
such term in the preamble to this Agreement.
"GM Preferred Stock Purchase Agreement" shall have the meaning
given such term in the preamble to this Agreement.
"Governmental Authority" shall mean any Federal, state, local
or foreign court or governmental agency, authority, instrumentality or
regulatory body or, in the case of references to "Governmental Authority" in
Article II and Sections 9.04 and 9.16, the National Association of Insurance
Commissioners.
"Guarantee" of or by any person shall mean (a) any obligation,
contingent or otherwise, of such person guaranteeing or having the economic
effect of guaranteeing any Indebtedness of any other person (the "primary
obligor") in any manner, whether directly or indirectly, and including any
obligation of such person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness
(whether arising by virtue of partnership arrangements, by agreement to keep
well, to purchase assets, goods, securities or services, to take-or-pay or
otherwise) or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Indebtedness, (ii) to purchase or lease
property, securities or services for the purpose of assuring the owner of such
Indebtedness of the payment of such Indebtedness, (iii) to maintain working
capital, equity capital or any other financial statement condition or liquidity
of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or (iv) entered into for the purpose of assuring in any other
manner the holders of such Indebtedness of the payment thereof or to protect
such holders against loss in respect thereof (in whole or in part), or (b) any
Lien on any assets of such person securing any Indebtedness of any other person,
whether or not such Indebtedness is assumed by such person; provided, however,
that the term "Guarantee" shall not include endorsements for collection or
deposit, in either case in the ordinary course of business, or customary and
reasonable indemnity obligations in effect on the Closing Date or entered into
in connection with any acquisition or disposition of assets permitted under this
Agreement.
"Guarantee Agreements" shall mean the Parent Guarantee
Agreement and the Subsidiary Guarantee Agreement.
"Guarantors" shall mean AAMM and the Subsidiary Guarantors.
<PAGE>
12
"Harris" shall mean Morton E. Harris.
"Hazardous Materials" shall mean any material meeting the
definition of a "hazardous substance" in CERCLA 42 U.S.C. ss. 9601(14) and all
explosive or radioactive substances or wastes; hazardous or toxic substances or
wastes; pollutants; solid, liquid or gaseous wastes, including petroleum,
petroleum distillates or fractions or residues, asbestos or asbestos containing
materials, polychlorinated biphenyls ("PCBs") or materials or equipment
containing PCBs in excess of 50 parts per million (ppm), radon gas, infectious
or medical wastes, and all other substances or wastes of any nature regulated
pursuant to any Environmental Law, or that reasonably could form the basis of an
Environmental Claim.
"Indebtedness" of any person shall mean, without duplication,
(a) all obligations of such person for borrowed money or with respect to
deposits or advances of any kind, (b) all obligations of such person evidenced
by bonds, debentures, notes or similar instruments, (c) all obligations of such
person upon which interest charges are customarily paid (other than trade
payables incurred in the ordinary course of business), (d) all obligations of
such person under conditional sale or other title retention agreements relating
to property or assets purchased by such person, (e) all obligations of such
person issued or assumed as the deferred purchase price of property or services
(other than current trade liabilities incurred in the ordinary course of
business), (f) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such person, whether or not the
obligations secured thereby have been assumed, (g) all Guarantees by such person
of Indebtedness of others, (h) all Capital Lease Obligations of such person, (i)
all payments that such person would have to make in the event of an early
termination, on the date Indebtedness of such person is being determined, in
respect of outstanding interest rate protection agreements, foreign currency
exchange agreements or other interest or exchange rate hedging arrangements and
(j) all obligations of such person as an account party in respect of letters of
credit and bankers' acceptances. Obligations of the Borrower and the
Subsidiaries in connection with a Permitted Lease Financing, a Permitted
Receivables Financing and the Existing Lease shall be deemed not to constitute
Indebtedness. The Indebtedness of any person shall include the Indebtedness of
any partnership in which such person is a general partner, other than to the
extent that the instrument or agreement evidencing such Indebtedness expressly
limits the liability of such person in respect thereof, provided that, if the
sole asset of such person is its general partnership interest in such
partnership, the amount of such Indebtedness shall be deemed equal to the value
of such general partnership interest and the amount of any Indebtedness in
respect of any Guarantee of such partnership Indebtedness shall be limited to
the same extent as such Guarantee may be limited.
"Indemnity, Subrogation and Contribution Agreement" shall mean
the Indemnity, Subrogation and Contribution Agreement, substantially in the form
of Exhibit D, to be entered into by the Borrower, the Subsidiary Guarantors and
the Collateral Agent pursuant to and in accordance with the terms of Section
5.11.
"Information Memorandum" shall have the meaning given such
term in Section 3.15.
"Installment Date" shall have the meaning given such term in
Section 2.11.
"Intellectual Property Security Agreement" shall mean the
Intellectual Property Security Agreement, substantially in the form of Exhibit
E, between the Borrower and certain Subsidiaries and the Collateral Agent for
the benefit of the Secured Parties.
"Interest Coverage Ratio" shall have the meaning given such
term in Section 6.11.
"Interest Expense" shall mean, with respect to AAMM, the
Borrower and the Subsidiaries on a consolidated basis for any period, the sum of
(a) gross interest expense of AAMM, the Borrower and the Subsidiaries for such
period on a consolidated basis, including (i) the
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13
amortization of debt discounts, (ii) the amortization of all fees (including
fees with respect to interest rate protection agreements) payable in connection
with the incurrence of Indebtedness to the extent included in interest expense
and (iii) the portion of any payments or accruals with respect to Capital Lease
Obligations allocable to interest expense, (b) capitalized interest of AAMM, the
Borrower and the Subsidiaries on a consolidated basis and (c)
interest-equivalent costs associated with any Permitted Receivables Financing,
whether accounted for as interest expense or loss on the sale of receivables.
For purposes of the foregoing, gross interest expense shall be determined after
giving effect to any net payments made or received by the Borrower and the
Subsidiaries with respect to interest rate protection agreements.
"Interest Payment Date" shall mean, (a) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part and, in the case of a Eurodollar Borrowing with an
Interest Period of more than three months' duration, each day that would have
been an Interest Payment Date had successive Interest Periods of three months'
duration been applicable to such Borrowing, and, in addition, the date of any
refinancing or conversion of such Borrowing with or to a Borrowing of a
different Type and (b) with respect to any ABR Loan, the last day of each
calendar quarter.
"Interest Period" shall mean as to any Eurodollar Borrowing,
the period commencing on the date of such Borrowing or on the last day of the
immediately preceding Interest Period applicable to such Borrowing, as the case
may be, and ending on the numerically corresponding day (or, if there is no
numerically corresponding day, on the last day) in the calendar month that is 1,
2, 3 or 6 months thereafter (or 9 or 12 months, if at the time of the relevant
Borrowing, all Lenders make interest periods of such length available), as the
Borrower may elect, and the date any Eurodollar Borrowing is converted to an ABR
Borrowing in accordance with Section 2.10 or repaid or prepaid in accordance
with Section 2.11 or 2.12; provided, however, that if any Interest Period would
end on a day other than a Business Day, such Interest Period shall be extended
to the next succeeding Business Day unless such next succeeding Business Day
would fall in the next calendar month, in which case such Interest Period shall
end on the next preceding Business Day. Interest shall accrue from and including
the first day of an Interest Period to but excluding the last day of such
Interest Period.
"Interest Rate Protection Agreement" shall mean (i) any
interest rate hedging agreement or arrangement approved by the Administrative
Agent (such approval not to be unreasonably withheld) entered into by the
Borrower or a Subsidiary and designed to protect against fluctuations in
interest rates and (ii) the Existing Hedging Agreement. Notwithstanding the
foregoing, the approval of the Administrative Agent shall not be required with
respect to any interest rate hedging agreement or arrangement not required
pursuant to Section 5.14.
"Investors" shall have the meaning given such term in the
preamble to this Agreement.
"IPO Merger" means a merger of AAMM and the Borrower in
connection with an initial public offering of common stock by the surviving
corporation in such merger.
"Jupiter" shall have the meaning given such term in the
preamble to this Agreement.
"Jupiter Preferred Stock Repurchase" shall have the meaning
given such term in the preamble to this Agreement.
"L/C Disbursement" shall mean a payment or disbursement made
by a Fronting Bank pursuant to a Letter of Credit.
"L/C Participation Fee" shall have the meaning given such term
in Section 2.05(b).
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14
"Lease Financing" shall mean any lease financing of
Manufacturing Equipment or other equipment pursuant to a lease or leases to be
entered into by AAMM, the Borrower or any Subsidiary, as the lessee thereunder.
"Lease Financing Proceeds" shall mean 100% of the cash
proceeds actually received by AAMM, the Borrower or any Subsidiary (including
any cash payments received by way of deferred payment of principal pursuant to a
note or installment receivable or purchase price adjustment receivable or
otherwise, but only as and when received), net of (i) attorneys' fees,
accountants' fees, investment banking fees, survey costs, title insurance
premiums, related search and transfer taxes, deed or mortgage recording taxes,
other customary expenses and brokerage, consultant and other customary fees
actually incurred in connection therewith and (ii) taxes paid or payable as a
result thereof, from the consummation of any Permitted Lease Financing or
Additional Lease Financing.
"Lease Present Value" shall mean (a) in the case of any Sale
and Lease-Back Transaction, the purchase price paid by AAMM, the Borrower or any
Subsidiary for the equipment being sold and leased back thereunder and (b) in
the case of any other Lease Financing, the fair market value as of the
commencement of the related lease or leases of such equipment.
"Lenders" shall have the meaning given such term in the
introductory paragraph of this Agreement.
"Lessor" shall mean a lessor under a lease entered into
pursuant to a Permitted Lease Financing or an Additional Lease Financing.
"Letter of Credit" shall mean any letter of credit issued
pursuant to this Agreement.
"LIBO Rate" shall mean, with respect to any Eurodollar
Borrowing for any Interest Period, the rate (rounded upwards, if necessary, to
the next 1/16 of 1%) at which dollar deposits approximately equal in principal
amount to the Administrative Agent's portion of such Eurodollar Borrowing and
for a maturity comparable to such Interest Period are offered to the principal
London office of the Administrative Agent in immediately available funds in the
London interbank market at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period.
"Lien" shall mean, with respect to any asset, (a) any
mortgage, deed of trust, lien, pledge, encumbrance, charge or security interest
in or on such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.
"Lifetime Program Contracts" shall mean the Lifetime Program
Contracts to be entered into pursuant to the GM MOU between GM and the Borrower
with respect to each product supplied or to be supplied by the Borrower to GM.
"Loan Documents" shall mean this Agreement, the Letters of
Credit, the Guarantee Agreements, the Security Documents and the Indemnity,
Subrogation and Contribution Agreement.
"Loan Parties" shall mean the Borrower and the Guarantors.
"Loans" shall mean the Revolving Loans, the Term Loans and the
Swingline Loans.
"Manufacturing Equipment" shall mean any automobile parts
manufacturing equipment owned or to be purchased by the Borrower or any
Subsidiary and located at or to be delivered to the Borrower's or any
Subsidiary's manufacturing facilities, together with modifications,
<PAGE>
15
alterations and improvements thereto, and substitutions and replacements
thereof, and including any and all insurance, confiscation, expropriation and
other proceeds thereof.
"Margin Stock" shall have the meaning given such term in
Regulation U.
"Material Adverse Effect" shall mean (a) a materially adverse
effect on the assets, business, operations, properties or financial condition of
AAMM, the Borrower and the Subsidiaries, taken as a whole, (b) a material
impairment of the ability of AAMM, the Borrower or any Subsidiary to perform any
of its material obligations under any Loan Document to which it is or will be a
party or to consummate the Recapitalization or (c) an impairment of the validity
or enforceability of, or a material impairment of the material rights, remedies
or benefits available to the Lenders, the Fronting Bank, the Administrative
Agent or the Collateral Agent under, any Loan Document.
"Mortgaged Properties" shall mean the owned real properties of
the Loan Parties specified on Schedule 3.20 that are expressly designated
"Mortgaged Properties".
"Mortgages" shall mean the mortgages, deeds of trust,
assignments of leases and rents and other security documents delivered pursuant
to clause (i) of Section 4.02(h) or pursuant to Section 5.11, each substantially
in the form of Exhibit G.
"Multiemployer Plan" shall mean a multiemployer plan as
defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA
Affiliate (other than one considered an ERISA Affiliate only pursuant to
subsection (m) or (o) of Code Section 414) is making or accruing an obligation
to make contributions, or has within any of the preceding five plan years made
or accrued an obligation to make contributions.
"Net Leverage Ratio" shall mean, on any date, the ratio of (a)
Total Net Debt as of such date to (b) EBITDA for the period of four consecutive
fiscal quarters of the Borrower most recently ended as of such date, all
determined on a consolidated basis in accordance with GAAP.
"Net Proceeds" shall mean (a) 100% of the cash proceeds
actually received by AAMM, the Borrower or any Subsidiary (including any cash
payments received by way of deferred payment of principal pursuant to a note or
installment receivable or purchase price adjustment receivable or otherwise and
including casualty insurance settlements and condemnation awards, but only as
and when received), net of (i) attorneys' fees, accountants' fees, investment
banking fees, survey costs, title insurance premiums, and related search and
recording charges, transfer taxes, deed or mortgage recording taxes, required
debt payments (other than pursuant hereto), other customary expenses and
brokerage, consultant and other customary fees actually incurred in connection
therewith and (ii) taxes paid or payable as a result thereof, from any loss,
damage, destruction or condemnation of, or any sale, transfer or other
disposition (including any sale and leaseback of assets (other than any sale of
Manufacturing Equipment or other equipment to a Lessor in connection with (A) a
Permitted Lease Financing or (B) an Additional Lease Financing, unless (in the
case of this clause (B)) the Manufacturing Equipment or other equipment being
financed pursuant to such Additional Lease Financing would appear as an asset on
a consolidated balance sheet of the Borrower and the Subsidiaries prepared in
accordance with GAAP as of the Closing Date or as of any date prior to the date
that is one year prior to the consummation of such Additional Lease Financing
(any such equipment that would so appear being referred to herein as "Balance
Sheet Equipment")) and any mortgage or lease of real property) to any person of
any asset or assets of AAMM, the Borrower or any Subsidiary (other than those
pursuant to Sections 6.05(a), 6.05(b), 6.05(e) and 6.05(h) or any other
financing subject to clause (ii) of the definition of the term "Excess Cash
Flow"), provided that if the Borrower shall deliver a certificate of a
Responsible Officer to the Administrative Agent promptly following receipt of
any such proceeds (other than any proceeds in respect of Balance Sheet
Equipment) setting forth the Borrower's intention to use any portion of such
proceeds to purchase assets useful in the business of the Borrower and the
Subsidiaries within 12 months of such receipt, such portion of such proceeds
shall not constitute Net Proceeds except to the extent not so used within such
12-month period, and provided further that (x) no proceeds
<PAGE>
16
realized in a single transaction or series of related transactions shall
constitute Net Proceeds unless such proceeds shall exceed $200,000 and (y) no
such proceeds shall constitute Net Proceeds in any fiscal year until the
aggregate amount of all such proceeds in such fiscal year shall exceed
$2,000,000 or the aggregate of all such proceeds received after the Closing Date
shall exceed $5,000,000, (b) 100% of the cash proceeds from the incurrence,
issuance or sale by AAMM, the Borrower or any Subsidiary of any Indebtedness
(other than Indebtedness permitted pursuant to Section 6.01), net of all taxes
and fees (including investment banking fees), commissions, costs and other
expenses incurred in connection with such issuance or sale and (c) 50% of the
cash proceeds from the issuance or the sale by AAMM of any equity security of
AAMM (other than (i) sales of Capital Stock of AAMM to directors, officers or
employees of AAMM, the Borrower or any Subsidiary in connection with permitted
employee compensation and incentive arrangements ("Employee Equity Sales") and
(ii) sales of Capital Stock of AAMM to the extent the net proceeds of such sales
are used to fund permitted Capital Expenditures or investments within three
months after the receipt of such net proceeds), net of all taxes and fees
(including investment banking fees), commissions, costs and other expenses
incurred in connection with such issuance or sale. For purposes of calculating
the amount of Net Proceeds, fees, commissions and other costs and expenses
payable to AAMM or the Borrower or any Affiliate of either of them shall be
disregarded, except for financial advisory fees customary in type and amount
paid to Affiliates of The Blackstone Group L.P.
"New York Real Property" shall mean all owned real property of
AAMM, the Borrower or any Subsidiary that is located in the State of New York.
"Notes" shall mean any promissory note of the Borrower issued
pursuant to this Agreement.
"Obligations" shall mean all obligations defined as
"Obligations" in the Guarantee Agreements and the Security Documents.
"Other Investments" shall mean, as to any person, any
corporation, partnership or other legal entity or arrangement in which such
person has any direct or indirect equity interest and that is not a subsidiary
of such person or that is a subsidiary of such person in which less than 90% of
the Capital Stock is owned by such person.
"Parent Guarantee Agreement" shall mean the Parent Guarantee
Agreement, substantially in the form of Exhibit H, made by AAMM and the Borrower
in favor of the Collateral Agent for the benefit of the Secured Parties.
"Park Fees" shall mean the fees paid by the Borrower to
Raymond Park or any of his affiliates (Schedule E sets forth the Borrower's
estimates of such fees).
"PBGC" shall mean the Pension Benefit Guaranty Corporation
referred to and defined in ERISA.
"Permitted Business Acquisition" shall mean any acquisition of
all or substantially all the assets of, or shares or other equity interests in,
a person or division or line of business of a person (or any subsequent
investment made in a previously acquired Permitted Business Acquisition) if
immediately after giving effect thereto: (a) no Default or Event of Default
shall have occurred and be continuing or would result therefrom, (b) all
transactions related thereto shall be consummated in accordance with applicable
laws, (c) at least 90% of the Capital Stock of any acquired or newly formed
corporation, partnership, association or other business entity are owned
directly by the Borrower or a domestic Wholly Owned Subsidiary (unless there is
a material tax or legal or other economic disadvantage in not having a foreign
Subsidiary hold such Capital Stock, in which case such Capital Stock may be held
directly by a foreign Subsidiary) and all actions required to be taken, if any,
with respect to such acquired or newly formed subsidiary under Section 5.11
shall have been taken and (d)(i) AAMM, the Borrower and the Subsidiaries shall
be in compliance, on a pro forma
<PAGE>
17
basis after giving effect to such acquisition or formation, with the covenants
contained in Sections 6.11, 6.12 and 6.13 recomputed as at the last day of the
most recently ended fiscal quarter of AAMM, the Borrower and the Subsidiaries as
if such acquisition had occurred on the first day of each relevant period for
testing such compliance, and the Borrower shall have delivered to the
Administrative Agent an officers' certificate to such effect, together with all
relevant financial information for such subsidiary or assets, and (ii) any
acquired or newly formed subsidiary shall not be liable for any Indebtedness
(except for Indebtedness permitted by Section 6.01).
"Permitted Investments" shall mean: (a) direct obligations of
the United States of America or any agency thereof or obligations guaranteed by
the United States of America or any agency thereof; (b) time deposit accounts,
certificates of deposit and money market deposits maturing within 180 days of
the date of acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America, any state thereof or
any foreign country recognized by the United States of America having capital,
surplus and undivided profits aggregating in excess of $250,000,000 (or the
foreign currency equivalent thereof) and whose long-term debt, or whose parent
holding company's long-term debt, is rated A (or such similar equivalent rating
or higher by at least one nationally recognized statistical rating organization
(as defined in Rule 436 under the Securities Act of 1933, as amended)); (c)
repurchase obligations with a term of not more than 30 days for underlying
securities of the types described in clause (a) above entered into with a bank
meeting the qualifications described in clause (b) above; (d) commercial paper,
maturing not more than 180 days after the date of acquisition, issued by a
corporation (other than an Affiliate of the Borrower) organized and in existence
under the laws of the United States of America or any foreign country recognized
by the United States of America with a rating at the time as of which any
investment therein is made of P-1 (or higher) according to Moody's Investors
Service, Inc., or A-1 (or higher) according to Standard & Poor's Ratings Group;
(e) securities with maturities of six months or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States of America, or by any political subdivision or taxing
authority thereof, and rated at least A by Standard & Poor's Ratings Group or A
by Moody's Investors Service, Inc.; (f) in the case of any Subsidiary organized
in a jurisdiction outside the United States: (i) direct obligations of the
sovereign nation (or any agency thereof) in which such Subsidiary is organized
and is conducting business or in obligations fully and unconditionally
guaranteed by such sovereign nation (or any agency thereof), (ii) investments of
the type and maturity described in clauses (a) through (e) above of foreign
obligors, which investments or obligors (or the parents of such obligors) have
ratings described in such clauses or equivalent ratings from comparable foreign
rating agencies or (iii) investments of the type and maturity described in
clauses (a) through (e) above of foreign obligors (or the parents of such
obligors), which investments or obligors (or the parents of such obligors) are
not rated as provided in such clauses or in clause (ii) above but which are, in
the reasonable judgment of the Borrower, comparable in investment quality to
such investments and obligors (or the parents of such obligors); (g) shares of
mutual funds whose investment guidelines restrict 95% of such funds' investments
to those satisfying the provisions of clauses (a) through (e) above; and (h)
time deposit accounts, certificates of deposit and money market deposits in an
aggregate face amount not in excess of 1/2 of 1% of total assets of the Borrower
and the Subsidiaries, on a consolidated basis, as of the end of the Borrower's
most recently completed fiscal year.
"Permitted Lease Financing" shall mean one or more lease
financings of Manufacturing Equipment with aggregate gross proceeds of
approximately $200,000,000, pursuant to leases (including leveraged leases and
single investor leases) and related documentation to be entered into by the
Borrower, as lessee, and one or more institutional equity investors or agents or
affiliates thereof or one or more banks or trust companies or agents or
affiliates thereof acting as trustee for one or more institutional equity
investors or agents or affiliates thereof, as lessor. Any such lease shall
contain terms and conditions substantially as set forth on Schedule C and other
customary terms and conditions not inconsistent with Schedule C that are
approved by the Administrative Agent (such approval not to be unreasonably
withheld).
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18
"Permitted Receivables Financing" shall mean (a) the
Receivables Facility and (b) refinancings of the Receivables Facility or the
consummation of one or more additional receivables financings, with combined
proceeds in an aggregate principal amount not to exceed $400,000,000 at any
time, in each case pursuant to a structured receivables financing consisting of
a securitization of receivables under the Receivables Facility on substantially
the same terms as the Receivables Facility or terms no less favorable in the
aggregate to the Borrower and the Subsidiaries than the terms of the Receivables
Facility or on other terms reasonably satisfactory to the Borrower, the
Receivables Subsidiary and the Administrative Agent on behalf of the Lenders.
"person" shall mean any natural person, corporation, business
trust, joint venture, association, company, partnership, limited liability
company or government, or any agency or political subdivision thereof.
"Plan" shall mean any employee pension benefit plan (other
than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Code and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Pledge Agreement" shall mean, collectively, the Pledge
Agreement, substantially in the form of Exhibit I, among AAMM, the Borrower,
certain Subsidiaries and the Collateral Agent for the benefit of the Secured
Parties and each other document delivered on the Escrow Funding Date pursuant to
which AAMM, the Borrower or any domestic Subsidiary pledged Capital Stock of any
foreign subsidiary to secure the Obligations.
"Pre-Funding Request" shall have the meaning given such term
in Section 9.18.
"Prime Rate" shall mean the rate of interest per annum
publicly announced from time to time by the Administrative Agent as its prime
rate in effect at its principal office in New York City; each change in the
Prime Rate shall be effective on the date such change is publicly announced as
being effective.
"Properties" shall have the meaning given such term in Section
3.17(a).
"Recapitalization" shall have the meaning given such term in
the preamble to this Agreement.
"Recapitalization Agreement" shall mean the Recapitalization
and Stock Purchase Agreement dated as of September 19, 1997, among
Acquisitionco, AAMM, the Borrower, Jupiter, Harris and Dauch.
"Receivables Facility" shall mean a receivables purchase
facility with an aggregate commitment amount of not less than $100,000,000,
consisting of (a) the sale by the Borrower of accounts receivable and related
assets to the Receivables Subsidiary pursuant to the Receivables Sale Agreement
and (b) the sale or other transfer of such accounts receivable and related
assets (or participation interests therein) by the Receivables Subsidiary and
the servicing of such accounts receivable by the Servicer, each pursuant to the
Receivables Purchase Documentation.
"Receivables Purchase Documentation" shall mean (i) the
Pooling Agreement among the Receivables Subsidiary, the Servicer and the trustee
thereunder on behalf of the purchasers of interests in the trust created
thereby, (ii) the Series 1997-A Supplement thereto, among the Receivables
Subsidiary, the Servicer, such trustee, such purchasers and the agent for such
purchasers and (iii) the Servicing Agreement among the Receivables Subsidiary,
the Servicer and such trustee, in each case relating to the Receivables Facility
and as amended, restated, supplemented or replaced from time to time.
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19
"Receivables Sale Agreement" shall mean the Receivables Sale
Agreement relating to the Receivables Facility, between the Receivables
Subsidiary and the Borrower (including in its capacity as Servicer), as amended,
restated, supplemented or replaced from time to time.
"Receivables Subsidiary" shall mean AAMM Receivables Corp. or
any successor thereto or other bankruptcy-remote, special-purpose Wholly Owned
Subsidiary formed for purposes of a Permitted Receivables Financing.
"Register" shall have the meaning given such term in Section
9.04(d).
"Regulation G" shall mean Regulation G of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Regulation U" shall mean Regulation U of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Regulation X" shall mean Regulation X of the Board as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.
"Release" shall have the meaning given such term in CERCLA, 42
U.S.C. ss. 9601(22).
"Remaining Present Value" shall mean, as of any date with
respect to any lease, the present value as of such date of the scheduled future
lease payments with respect to such lease, determined with a discount rate equal
to a market rate of interest for such lease reasonably determined at the time
such lease was entered into.
"Remedial Action" shall mean (a) "remedial action" as such
term is defined in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other
actions, including studies and investigations, required by any Governmental
Authority or voluntarily undertaken to (i) clean up, remove, treat, abate or in
any other way respond to any Hazardous Material in the environment or (ii)
prevent the Release or threatened Release, or minimize the further Release, of
any Hazardous Material.
"Reportable Event" shall mean any reportable event as defined
in Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate that is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414).
"Required Lenders" shall mean, at any time, Lenders having
Loans (other than Swingline Loans), Revolving L/C Exposures, Swingline Exposures
and unused Commitments (excluding commitments to issue Letters of Credit or make
Swingline Loans) representing more than 50% of the sum of all Loans (other than
Swingline Loans) outstanding, Revolving L/C Exposures, Swingline Exposures and
unused Commitments (excluding commitments to issue Letters of Credit or make
Swingline Loans) at such time.
"Responsible Officer" of any corporation shall mean any
executive officer or Financial Officer of such corporation and any other officer
or similar official thereof responsible for the administration of the
obligations of such corporation in respect of this Agreement.
"Retained Cash Earnings" shall mean, with respect to AAMM, the
Borrower and the Subsidiaries on a consolidated basis as of the last day of any
fiscal year, $175,000,000 plus (a) the consolidated net income of AAMM, the
Borrower and the Subsidiaries for the period from the Closing Date to December
31, 1997, determined in accordance with GAAP but excluding year end adjustments
that pertain to the period prior to the Closing Date and that were not included
in the financial projections referred to in Section 3.15(b) plus (b) for each
fiscal year after the year ending
<PAGE>
20
December 31, 1997, the consolidated net income of AAMM, the Borrower and the
Subsidiaries for such fiscal year and each other prior completed fiscal year
commencing after the Closing Date, determined in accordance with GAAP plus (c)
the aggregate amount of proceeds received by AAMM in respect of the issuance of
Capital Stock of AAMM after the Closing Date minus (d) permitted cash dividends
or other distributions made in respect of, or repurchases of, Capital Stock of
AAMM after the Closing Date (excluding for purposes of computing Retained Cash
Earnings, all transactions included in the Recapitalization).
"Revolving Credit Borrowing" shall mean a Borrowing comprised
of Revolving Loans.
"Revolving Credit Commitment" shall mean, with respect to each
Lender, the commitment of such Lender to make Revolving Loans hereunder as set
forth in Section 2.01(c) or in the Assignment and Acceptance pursuant to which
such Lender assumed its Revolving Credit Commitment, as applicable, as the same
may be reduced from time to time pursuant to Section 2.09 and pursuant to
assignments by such Lender pursuant to Section 9.04.
"Revolving Credit Exposure" shall mean, with respect to any
Lender at any time, the aggregate principal amount at such time of all
outstanding Revolving Loans of such Lender plus the amount at such time of such
Lender's Revolving L/C Exposure plus the amount at such time of such Lender's
Swingline Exposure.
"Revolving Credit Lender" shall mean a Lender with a Revolving
Credit Commitment.
"Revolving Credit Maturity Date" shall mean October 30, 2004.
"Revolving L/C Commitment" shall mean, with respect to the
Fronting Bank, the commitment of the Fronting Bank to issue Letters of Credit
pursuant to Section 2.20(a).
"Revolving L/C Exposure" shall mean at any time the sum of (a)
the aggregate undrawn amount of all outstanding Letters of Credit at such time
plus (b) the aggregate principal amount of all L/C Disbursements that have not
yet been reimbursed at such time. The Revolving L/C Exposure of any Revolving
Credit Lender at any time shall mean its Applicable Percentage of the aggregate
Revolving L/C Exposure at such time.
"Revolving Loans" shall mean the revolving loans made by the
Lenders to the Borrower pursuant to Section 2.01(c). Each Revolving Loan shall
be a Eurodollar Revolving Loan or an ABR Revolving Loan.
"Sale and Lease-Back Transaction" shall have the meaning given
such term in Section 6.03.
"Secured Parties" shall have the meaning given such term in
the Security Agreement.
"Security Agreement" shall mean the Security Agreement,
substantially in the form of Exhibit K, among AAMM, the Borrower, certain
Subsidiaries and the Collateral Agent for the benefit of the Secured Parties.
"Security Documents" shall mean the Mortgages, the Security
Agreement, the Intellectual Property Security Agreement, the Pledge Agreement
and each of the security agreements, mortgages and other instruments and
documents executed and delivered pursuant to any of the foregoing or pursuant to
Section 5.11.
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21
"Servicer" shall mean the Borrower or any special purpose
Wholly Owned Subsidiary formed for the purpose of acting as a servicer under any
Permitted Receivables Financing.
"Statutory Reserves" shall mean a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board and any other banking authority, domestic
or foreign, to which the Administrative Agent is subject with respect to
Eurocurrency Liabilities (as defined in Regulation D of the Board) or other
categories of liabilities or deposits by reference to which the LIBO Rate is
determined. Such reserve percentages shall include those imposed pursuant to
such Regulation D. Eurodollar Loans shall be deemed to constitute Eurocurrency
Liabilities and to be subject to such reserve requirements without benefit of or
credit for proration, exemptions or offsets that may be available from time to
time to any Lender under such Regulation D. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"Stock Purchase" shall have the meaning given such term in the
preamble to this Agreement.
"subsidiary" shall mean, with respect to any person (herein
referred to as the "parent"), any corporation, partnership, association or other
business entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or more than 50% of the general partnership interests are, at the time any
determination is being made, directly or indirectly, owned, controlled or held,
or (b) that is, at the time any determination is made, otherwise Controlled, by
the parent or one or more subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent.
"Subsidiary" shall mean each subsidiary of the Borrower,
provided that for purposes of Article III references to the term Subsidiary
shall be deemed not to include AAMCM or the Receivables Subsidiary (except for
purposes of Sections 3.01 and 3.02 with respect to the Receivables Subsidiary).
"Subsidiary Guarantee Agreement" shall mean the Subsidiary
Guarantee Agreement, substantially in the form of Exhibit J, to be entered into
by the Subsidiary Guarantors pursuant to and in accordance with the terms of
Section 5.11 in favor of the Collateral Agent for the benefit of the Secured
Parties.
"Subsidiary Guarantor" shall mean each domestic Subsidiary
entering into the Subsidiary Guarantee Agreement pursuant to and in accordance
with the terms of Section 5.11.
"Swingline Exposure" shall mean at any time the aggregate
principal amount of all outstanding Swingline Loans at such time. The Swingline
Exposure of any Revolving Credit Lender at any time shall mean its Applicable
Percentage of the aggregate Swingline Exposure at such time.
"Swingline Lender" shall mean The Chase Manhattan Bank in its
capacity as Swingline Lender hereunder.
"Swingline Loan Commitment" shall mean the commitment of the
Swingline Lender to make Swingline Loans as set forth in Section 2.01(d).
"Swingline Loans" shall mean the swingline loans made by the
Swingline Lender to the Borrower pursuant to Section 2.01(d).
"Term Borrowing" shall mean a Borrowing comprised of Term
Loans.
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22
"Term Commitments" shall mean the Tranche A Term Loan
Commitments and the Tranche B Term Loan Commitments.
"Term Loans" shall mean the term loans made by the Lenders to
the Borrower pursuant to Section 2.01(a). Each Term Loan shall be a Eurodollar
Term Loan or an ABR Term Loan.
"Total Debt" shall mean, with respect to AAMM, the Borrower
and the Subsidiaries on a consolidated basis at any time (without duplication),
all Indebtedness consisting of Capital Lease Obligations, Indebtedness for
borrowed money and Indebtedness in respect of the deferred purchase price of
property or services of AAMM, the Borrower and the Subsidiaries on a
consolidated basis at such time.
"Total Net Debt" shall mean Total Debt, minus the aggregate
amount of cash and cash equivalents in excess of $5,000,000 set forth on the
consolidated balance sheet of AAMM, the Borrower and the Subsidiaries prepared
as of such time and in accordance with GAAP.
"Total Revolving Credit Commitment" shall mean, at any time,
the aggregate amount of the Revolving Credit Commitments, as in effect at such
time.
"Tranche A Lender" shall mean a Lender with a Tranche A Term
Loan Commitment.
"Tranche A Maturity Date" shall mean October 30, 2004.
"Tranche A Term Borrowing" shall mean a Borrowing comprised of
Tranche A Term Loans.
"Tranche A Term Loan Closing Date" shall mean each date on
which Tranche A Term Loans are made.
"Tranche A Term Loan Commitment" shall mean with respect to
each Lender, the commitment of such Lender to make Tranche A Term Loans
hereunder as set forth in Section 2.01(a)(i), as the same may be reduced from
time to time pursuant to Section 2.09.
"Tranche A Term Loans" shall mean the term loans made by the
Lenders to the Borrower pursuant to Section 2.01(a)(i).
"Tranche B Maturity Date" shall mean April 30, 2006.
"Tranche B Term Borrowing" shall mean a Borrowing comprised of
Tranche B Term Loans.
"Tranche B Term Loan Commitment" shall mean with respect to
each Lender, the commitment of such Lender to make Tranche B Term Loans
hereunder as set forth in Section 2.01(a)(ii), as the same may be reduced from
time to time pursuant to Section 2.09.
"Tranche B Term Loans" shall mean the term loans made by the
Lenders to the Borrower pursuant to Section 2.01(a)(ii).
"Type", when used in respect of any Loan or Borrowing, shall
refer to the Rate by reference to which interest on such Loan or on the Loans
comprising such Borrowing is determined. For purposes hereof, the term "Rate"
shall include the Adjusted LIBO Rate and the Alternate Base Rate.
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23
"Wholly Owned Subsidiary" means a Subsidiary, at least 99% of
the Capital Stock of which (other than directors' qualifying shares) is owned by
the Borrower or another Wholly Owned Subsidiary.
"Withdrawal Liability" shall mean liability to a Multiemployer
Plan as a result of a complete or partial withdrawal from such Multiemployer
Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
"Working Capital" shall mean, with respect to AAMM, the
Borrower and the Subsidiaries on a consolidated basis at any date of
determination, Current Assets at such date of determination minus Current
Liabilities at such date of determination.
SECTION 1.02. Terms Generally. The definitions in Section 1.01
shall apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, (a) any reference in this Agreement to any Loan
Document shall mean such document as amended, restated, supplemented or
otherwise modified from time to time and (b) all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect from
time to time; provided, however, that for purposes of determining compliance
with the covenants contained in Section 2.12(d) and Article VI all accounting
terms herein shall be interpreted and all accounting determinations hereunder
(in each case, unless otherwise provided for or defined herein) shall be made in
accordance with GAAP as in effect on the date of this Agreement and applied on a
basis consistent with the application used in the financial statements referred
to in Section 3.05; and provided further that if the Borrower notifies the
Administrative Agent that the Borrower wishes to amend any covenant in Section
2.12(d) or Article VI or any related definition to eliminate the effect of any
change in GAAP occurring after the date of this Agreement on the operation of
such covenant (or if the Administrative Agent notifies the Borrower that the
Required Lenders wish to amend Section 2.12(d) or Article VI or any related
definition for such purpose), then (i) the Borrower and the Administrative Agent
shall negotiate in good faith to agree upon an appropriate amendment to such
covenant and (ii) the Borrower's compliance with such covenant shall be
determined on the basis of GAAP in effect immediately before the relevant change
in GAAP became effective until such covenant is amended in a manner satisfactory
to the Borrower and the Required Lenders. For the purposes of determining
compliance under Sections 6.01, 6.02, 6.04, 6.05 and 6.10 with respect to any
amount in a currency other than Dollars, such amount shall be deemed to equal
the Dollar equivalent thereof at the time such amount was incurred or expended,
as the case may be.
ARTICLE II. THE CREDITS
SECTION 2.01. Commitments. (a) Subject to the terms and
conditions and relying upon the representations and warranties of AAMM and the
Borrower herein set forth, each Lender agrees, severally and not jointly:
(i) to make Tranche A Term Loans to the Borrower at any time
and from time to time on or after the Closing Date and until the
earlier of the date that is 24 months after the Closing Date and the
termination of the Tranche A Term Loan Commitment of such Lender in
accordance with the terms hereof, in an aggregate principal amount at
any time outstanding not to exceed the Tranche A Term Loan Commitment
set forth opposite its name on Schedule 2.01, as the same may be
reduced from time to time pursuant to Section 2.09, provided that the
Borrower shall not be permitted to make more than five Tranche A Term
Borrowings that increase the aggregate principal amount of Tranche A
Term Borrowings outstanding; and
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(ii) to make a Tranche B Term Loan to the Borrower on the
Closing Date in a principal amount not to exceed the Tranche B Term
Loan Commitment set forth opposite its name on Schedule 2.01, as the
same may be reduced from time to time pursuant to Section 2.09.
(b) Subject to the terms and conditions and relying upon the
representations and warranties of AAMM and the Borrower herein set forth, each
Lender agrees, severally and not jointly, to make Revolving Loans to the
Borrower, at any time and from time to time on or after the date hereof, and
until the earlier of the Revolving Credit Maturity Date and the termination of
the Revolving Credit Commitment of such Lender in accordance with the terms
hereof, in an aggregate principal amount at any time outstanding that will not
result in such Lender's Revolving Credit Exposure at such time exceeding the
Revolving Credit Commitment set forth opposite its name on Schedule 2.01, as the
same may be reduced from time to time pursuant to Section 2.09, provided that
the aggregate principal amount of Revolving Loans made to the Borrower on the
Closing Date shall not exceed $100,000,000.
(c) (i) The Swingline Lender hereby agrees, subject to the
terms and conditions and relying upon the representations and warranties of AAMM
and the Borrower herein set forth, and subject to the limitations set forth
below with respect to the maximum amount of Swingline Loans permitted to be
outstanding from time to time, to make a portion of the Revolving Credit
Commitments available to the Borrower from time to time during the period from
the Closing Date through and excluding the earlier of the Revolving Credit
Maturity Date and the termination of the Revolving Credit Commitments in an
aggregate principal amount not to exceed the Swingline Loan Commitment, by
making Swingline Loans to the Borrower. Swingline Loans may be made
notwithstanding the fact that such Swingline Loans, when aggregated with the
Swingline Lender's outstanding Revolving Loans, Revolving L/C Exposure and
outstanding Swingline Loans, may exceed the Swingline Lender's Revolving Credit
Commitment. The original amount of the Swingline Loan Commitment is $20,000,000.
The Swingline Loan Commitment shall expire on the date the Revolving Credit
Commitments are terminated and all Swingline Loans and all other amounts owed
hereunder with respect to Swingline Loans shall be paid in full no later than
that date. The Borrower shall give the Swingline Lender telephonic, written or
telecopy notice (in the case of telephonic notice, such notice shall be promptly
confirmed in writing or by telecopy) not later than 12:00 (noon), New York City
time, on the day of a proposed borrowing. Such notice shall be delivered on a
Business Day, shall be irrevocable and shall refer to this Agreement and shall
specify the requested date (which shall be a Business Day) and amount of such
Swingline Loan. The Swingline Lender shall give the Administrative Agent, which
shall in turn give to each Lender, prompt written or telecopy advice of any
notice received from the Borrower pursuant to this paragraph.
(ii) In no event shall (A) the aggregate principal amount of
Swingline Loans outstanding at any time exceed the aggregate Swingline Loan
Commitment in effect at such time, (B) the Aggregate Revolving Credit Exposure
at any time exceed the Total Revolving Credit Commitment at such time or (C) the
aggregate Swingline Loan Commitment exceed at any time the aggregate Revolving
Credit Commitments in effect at such time. Swingline Loans may only be made as
ABR Loans.
(iii) With respect to any Swingline Loans that have not been
voluntarily prepaid by the Borrower, the Swingline Lender (by request to the
Administrative Agent) or Administrative Agent at any time may, and shall at any
time Swingline Loans in an amount not less than $5,000,000 shall have been
outstanding for more than five days, on one Business Day's notice, require each
Revolving Credit Lender, including the Swingline Lender, and each such Lender
hereby agrees, subject to the provisions of this Section 2.01(c), to make a
Revolving Loan (which shall be funded as an ABR Loan) in an amount equal to such
Lender's Applicable Percentage of the amount of the Swingline Loans ("Refunded
Swingline Loans") outstanding on the date notice is given which the Swingline
Lender requests the Lenders to prepay.
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(iv) In the case of Revolving Loans made by Lenders other than
the Swingline Lender under the immediately preceding paragraph (iii), each such
Lender shall make the amount of its Revolving Loan available to the
Administrative Agent, in same day funds, at the office of the Administrative
Agent located at 270 Park Avenue, New York, New York, not later than 1:00 p.m.,
New York City time, on the Business Day next succeeding the date such notice is
given. The proceeds of such Revolving Loans shall be immediately delivered to
the Swingline Lender (and not to the Borrower) and applied to repay the Refunded
Swingline Loans. On the day such Revolving Loans are made, the Swingline
Lender's Applicable Percentage of the Refunded Swingline Loans shall be deemed
to be paid with the proceeds of a Revolving Loan made by the Swingline Lender
and such portion of the Swingline Loans deemed to be so paid shall no longer be
outstanding as Swingline Loans and shall be outstanding as Revolving Loans of
Lenders. The Borrower authorizes the Administrative Agent and the Swingline
Lender to charge the Borrower's account with the Administrative Agent (up to the
amount available in such account) in order to pay immediately to the Swingline
Lender the amount of such Refunded Swingline Loans to the extent amounts
received from Lenders, including amounts deemed to be received from the
Swingline Lender, are not sufficient to repay in full such Refunded Swingline
Loans. If any portion of any such amount paid (or deemed to be paid) to the
Swingline Lender should be recovered by or on behalf of the Borrower from the
Swingline Lender in bankruptcy, by assignment for the benefit of creditors or
otherwise, the loss of the amount so recovered shall be ratably shared among all
Lenders in the manner contemplated by Section 2.17. Subject to the compliance by
the Swingline Lender with the provisions of subparagraph (vii) below, each
Lender's obligation to make the Revolving Loans referred to in this paragraph
shall be absolute and unconditional and shall not be affected by any
circumstance, including (A) any setoff, counterclaim, recoupment, defense or
other right that such Lender may have against the Swingline Lender, the Borrower
or any other person for any reason whatsoever; (B) the occurrence or continuance
of an Event of Default or a Default; (C) any adverse change in the condition
(financial or otherwise) of AAMM or any of its subsidiaries; (D) any breach of
this Agreement by AAMM, the Borrower or any other Lender; or (E) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing. Nothing in this Section 2.01(c) shall be deemed to relieve any
Lender from its obligation to fulfill its Commitments hereunder or to prejudice
any rights that the Borrower may have against any Lender as a result of any
default by such Lender hereunder.
(v) A copy of each notice given by the Swingline Lender or the
Administrative Agent pursuant to this Section 2.01(c) shall be promptly
delivered by the Swingline Lender to the Administrative Agent and the Borrower.
Upon the making of a Revolving Loan by a Lender pursuant to this Section
2.01(c), the amount so funded shall no longer be owed in respect of Swingline
Loans.
(vi) If as a result of any bankruptcy or similar proceeding,
Revolving Loans are not made pursuant to this Section 2.01(c) sufficient to
repay any amounts owed to the Swingline Lender as a result of a nonpayment of
outstanding Swingline Loans, each Revolving Credit Lender agrees to purchase,
and shall be deemed to have purchased, a participation in such outstanding
Swingline Loans in an amount equal to its Applicable Percentage of the unpaid
amount together with accrued interest thereon. Upon one Business Day's notice
from the Swingline Lender, each Revolving Credit Lender shall deliver to the
Swingline Lender an amount equal to its respective participation in same day
funds at the office of the Swingline Lender in New York, New York. In order to
evidence such participation each Revolving Credit Lender agrees to enter into a
participation agreement at the request of the Swingline Lender in form and
substance reasonably satisfactory to all parties. In the event any Revolving
Credit Lender fails to make available to the Swingline Lender the amount of such
Revolving Credit Lender's participation as provided in this Section 2.01(c), the
Swingline Lender shall be entitled to recover such amount on demand from such
Revolving Credit Lender together with interest at the customary rate set by the
Swingline Lender for correction of errors among banks in New York City for one
Business Day and thereafter at the Alternate Base Rate plus the ABR Margin then
in effect as set forth on Schedule B.
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26
(vii) Notwithstanding anything herein to the contrary, the
Swingline Lender shall not make any Swingline Loans at any time the Swingline
Lender is aware that the conditions to the making of such Swingline Loan set
forth in Section 4.01 have not been satisfied unless such conditions shall have
been waived in accordance with this Agreement.
(d) Within the limits set forth in paragraphs (b) and (c)
above, the Borrower may borrow, pay or prepay (including pursuant to a
refinancing permitted by Section 2.02(f)) and reborrow Revolving Loans and
Swingline Loans on or after the Closing Date and prior to the Revolving Credit
Maturity Date, subject to the terms, conditions and limitations set forth
herein. Amounts paid or prepaid in respect of Term Loans may not be reborrowed.
SECTION 2.02. Loans. (a) Each Loan shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their applicable Commitments; provided, however, that the failure of any Lender
to make any Loan shall not relieve any other Lender of its obligation to lend
hereunder (it being understood, however, that no Lender shall be responsible for
the failure of any other Lender to make any Loan required to be made by such
other Lender). The Loans comprising any Borrowing shall be in an aggregate
principal amount which is (i) an integral multiple of $1,000,000 (or, in the
case of Swingline Loans, $500,000) and not less than $5,000,000 (or, in the case
of Swingline Loans, $500,000) or (ii) equal to the remaining available balance
of the applicable Commitments, provided that Revolving Loans used to pay
Refunded Swingline Loans may be in the amount of such Refunded Swingline Loans.
(b) Subject to Sections 2.08 and 2.14, each Borrowing shall be
comprised entirely of ABR Loans or (except in the case of Swingline Loans)
Eurodollar Loans as the Borrower may request pursuant to Section 2.03. Each
Lender may at its option make any Eurodollar Loan by causing any domestic or
foreign branch or Affiliate of such Lender to make such Loan, provided that any
exercise of such option shall not affect the obligation of the Borrower to repay
such Loan in accordance with the terms of this Agreement and such Lender shall
not be entitled to any amounts payable under Section 2.13 or Section 2.19 in
respect of increased costs arising as a result of such exercise. Borrowings of
more than one Type may be outstanding at the same time; provided, however, that
the Borrower shall not be entitled to request any Borrowing that, if made, would
result in more than 20 Eurodollar Borrowings outstanding hereunder at any time.
For purposes of the foregoing, Borrowings having different Interest Periods,
regardless of whether they commence on the same date, shall be considered
separate Borrowings.
(c) Subject to paragraph (f) below, each Lender shall make
each Loan to be made by it hereunder on the proposed date thereof by wire
transfer to such account as the Administrative Agent may designate in federal
funds not later than 11:00 a.m., New York City time, and the Administrative
Agent shall by 12:00 (noon), New York City time, (a) in the case of any Loan
made to reimburse any L/C Disbursement or to refund any Swingline Loan, apply
the amounts so received to effect such reimbursement or refund as contemplated
by Section 2.20 or Section 2.01(d) and (b) in the case of each Loan the proceeds
of which are to be received by the Borrower, credit the amounts so received to
an account designated by the Borrower in the applicable Borrowing Request;
provided, however, that if a Borrowing shall not occur on such date because any
condition precedent herein specified shall not have been met, the Administrative
Agent shall return the amounts so received to the respective Lenders.
(d) Unless the Administrative Agent shall have received notice
from a Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's portion of such Borrowing,
the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with paragraph (c) above and may, in reliance upon such assumption,
make available to the Borrower on such date a corresponding amount. If the
Administrative Agent shall have so made funds available then, to the extent that
such Lender shall not have made such portion available to the Administrative
Agent, such Lender and the Borrower severally agree to repay to the
Administrative Agent forthwith on demand such corresponding amount together with
interest thereon, for each day
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27
from the date such amount is made available to the Borrower until the date such
amount is repaid to the Administrative Agent, at (i) in the case of the
Borrower, the interest rate applicable at the time to the Loans comprising such
Borrowing and (ii) in the case of such Lender, a rate determined by the
Administrative Agent to represent its cost of overnight or short-term funds
(which determination shall be conclusive absent manifest error). If such Lender
shall repay to the Administrative Agent such corresponding amount, such amount
shall constitute such Lender's Loan as part of such Borrowing for purposes of
this Agreement.
(e) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request any Borrowing if the Interest Period
requested with respect thereto would end after the Revolving Credit Maturity
Date, Tranche A Maturity Date or Tranche B Maturity Date, as applicable.
(f) The Borrower may refinance all or any part of a Revolving
Credit Borrowing with another Revolving Credit Borrowing. Any Revolving Credit
Borrowing or part thereof so refinanced shall be deemed to be repaid or prepaid
in accordance with the applicable provisions of this Agreement with the proceeds
of the new Revolving Credit Borrowing and the proceeds of such new Borrowing, to
the extent they do not exceed the principal amount of the Borrowing being
refinanced, shall not be paid by the Lenders to the Administrative Agent or by
the Administrative Agent to the Borrower pursuant to paragraph (c) above.
SECTION 2.03. Borrowing Procedure. In order to request a
Borrowing, the Borrower shall hand deliver or telecopy to the Administrative
Agent a duly completed Borrowing Request substantially in the form of Exhibit C
(a) in the case of a Eurodollar Borrowing, not later than 12:00 (noon), New York
City time, three Business Days before a proposed Borrowing, and (b) in the case
of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business
Day before a proposed Borrowing; provided, however, that Borrowing Requests with
respect to Borrowings to be made on the Closing Date may, at the discretion of
the Administrative Agent, be delivered later than the times specified above.
Each Borrowing Request shall be irrevocable, shall be signed by or on behalf of
the Borrower and shall specify the following information: (i) whether the
Borrowing then being requested is to be a Term Borrowing or a Revolving Credit
Borrowing (and in the case of a Term Borrowing the Commitments pursuant to which
the Loans comprising such Borrowing are to be made), and whether such Borrowing
is to be a Eurodollar Borrowing or an ABR Borrowing; (ii) the date of such
Borrowing (which shall be a Business Day), (iii) in the case of a Borrowing the
proceeds of which are to be received by the Borrower, the number and location of
the account to which funds are to be disbursed (which shall be an account that
complies with the requirements of Section 2.02(c)); (iv) the amount of such
Borrowing; and (v) if such Borrowing is to be a Eurodollar Borrowing, the
Interest Period with respect thereto; provided, however, that, notwithstanding
any contrary specification in any Borrowing Request, each requested Borrowing
shall comply with the requirements set forth in Section 2.02. If no election as
to the Type of Borrowing is specified in any such notice, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period with respect to any
Eurodollar Borrowing is specified in any such notice, then the Borrower shall be
deemed to have selected an Interest Period of one month's duration. The
Administrative Agent shall promptly (and in any event on the same day that the
Administrative Agent receives such notice, if received by 1:00 p.m., New York
City time, on such day) advise the applicable Lenders of any notice given
pursuant to this Section 2.03 and of each Lender's portion of the requested
Borrowing.
If the Borrower shall not have delivered a Borrowing Request
in accordance with this Section 2.03 prior to the end of the Interest Period
then in effect for any Revolving Credit Borrowing requesting that such Borrowing
be refinanced, then the Borrower shall (unless the Borrower has notified the
Administrative Agent, not less than three Business Days prior to the end of such
Interest Period, that such Borrowing is to be repaid at the end of such Interest
Period) be deemed to have delivered a Borrowing Request requesting that such
Borrowing be refinanced with a new Borrowing of equivalent amount, and such new
Borrowing shall be an ABR Borrowing.
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SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The
outstanding principal balance of each Loan shall be payable (i) in the case of a
Revolving Loan or a Swingline Loan, on the Revolving Credit Maturity Date and
(ii) in the case of a Term Loan, as provided in Section 2.11. Each Loan shall
bear interest from the date of the first Borrowing hereunder on the outstanding
principal balance thereof as set forth in Section 2.06.
(b) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness to such Lender
resulting from each Loan made by such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Agreement.
(c) The Administrative Agent shall maintain accounts in which
it will record (i) the amount of each Loan made hereunder, the Type of each Loan
made and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder from the Borrower and each Lender's share
thereof.
(d) The entries made in the accounts maintained pursuant to
paragraph (b) and (c) of this Section 2.04 shall be prima facie evidence of the
existence and amounts of the obligations therein recorded; provided, however,
that the failure of any Lender or the Administrative Agent to maintain such
accounts or any error therein shall not in any manner affect the obligations of
the Borrower to repay the Loans in accordance with their terms.
(e) Notwithstanding any other provision of this Agreement, in
the event any Lender shall request and receive a Note as provided in Section
9.04(h) or otherwise the interests represented by that Note shall at all times
(including after any assignment of all or part of such interests pursuant to
Section 9.04) be represented by one or more Notes payable to the payee named
therein or its registered assigns.
SECTION 2.05. Fees. (a) The Borrower agrees to pay to each
Lender, through the Administrative Agent, on the last day of March, June,
September and December in each year, and on the date on which the Commitments of
all the Lenders shall be terminated as provided herein, a commitment fee (a
"Commitment Fee") on the average daily unused amount of the Commitments of such
Lender during the preceding quarter (or other period ending with the date on
which the last of the Commitments of such Lender shall be terminated) at either
(i) a rate equal to 0.50% per annum or (ii) for any such period commencing on or
after the date of the Borrower's delivery to the Administrative Agent of the
Borrower's consolidated financial statements for the first full fiscal quarter
of the Borrower commencing after the Closing Date, at the rate per annum
effective for each day in such period as set forth on Schedule B. All Commitment
Fees shall be computed on the basis of the actual number of days elapsed in a
year of 365 or 366 days, as applicable. For the purpose of calculating any
Lender's Commitment Fee, the outstanding Swingline Loans during the period for
which such Lender's Commitment Fee is calculated shall be deemed to be zero. The
Commitment Fee due to each Lender shall commence to accrue on the Closing Date
and shall cease to accrue on the date on which the last of the Commitments of
such Lender shall be terminated as provided herein.
(b) The Borrower from time to time agrees to pay (i) to each
Revolving Credit Lender, through the Administrative Agent, on the last day of
March, June, September and December of each year and on the date on which the
Revolving Credit Commitments of all the Lenders shall be terminated as provided
herein, a fee (an "L/C Participation Fee") on such Lender's Applicable
Percentage of the average daily aggregate Revolving L/C Exposure (excluding the
portion thereof attributable to unreimbursed L/C Disbursements), during the
preceding quarter (or shorter period commencing with the date hereof or ending
with the Revolving Credit Maturity Date or the date on which the Revolving
Credit Commitments shall be terminated) at the rate per annum equal to the LIBOR
Margin effective for each day in such period for Revolving Loans as set forth on
Schedule B and (ii) to the Fronting Bank, the fees separately agreed upon by the
Borrower and the Fronting Bank plus, in connection with the issuance, amendment
or transfer of any such Letter of Credit or any L/C
<PAGE>
29
Disbursement thereunder, the Fronting Bank's customary documentary and
processing charges (collectively, the "Fronting Bank Fees"). All L/C
Participation Fees and Fronting Bank Fees that are payable on a per annum basis
shall be computed on the basis of the actual number of days elapsed in a year of
360 days.
(c) The Borrower agrees to pay to the Administrative Agent,
for its own account, the fees set forth in the Amended and Restated Fee Letter
dated as of September 22, 1997, at the times specified therein (the
"Administrative Agent Fees").
(d) All Fees shall be paid on the dates due, in immediately
available funds, to the Administrative Agent for distribution, if and as
appropriate, among the Lenders, except that the Fronting Bank Fees shall be paid
directly to the Fronting Bank. Once paid, none of the Fees shall be refundable
under any circumstances.
SECTION 2.06. Interest on Loans. (a) Subject to the provisions
of paragraph (c) below and Section 2.07, the Loans comprising each ABR Borrowing
shall bear interest (computed on the basis of the actual number of days elapsed
over a year of 365 or 366 days, as the case may be, when determined by reference
to the Prime Rate and over a year of 360 days at all other times) at a rate per
annum equal to the Alternate Base Rate plus, in the case of (i) Tranche A Term
Loans, Revolving Loans or Swingline Loans, 1.00% or (ii) Tranche B Term Loans,
1.25%.
(b) Subject to the provisions of paragraph (c) below and
Section 2.07, the Loans comprising each Eurodollar Borrowing shall bear interest
(computed on the basis of the actual number of days elapsed over a year of 360
days) at a rate per annum equal to the Adjusted LIBO Rate for the Interest
Period in effect for such Borrowing plus, in the case of (i) Tranche A Term
Loans or Revolving Loans, 2.00% or (ii) Tranche B Term Loans, 2.25%.
(c) Subject to the provisions of Section 2.07, Tranche A Term
Loans, Revolving Loans and Swingline Loans comprising any ABR Borrowing or
Eurodollar Borrowing shall bear interest (computed as set forth in paragraph (a)
or (b) above, as applicable) for any date on or after the date of the Borrower's
delivery to the Administrative Agent of the Borrower's consolidated financial
statements for the first full fiscal quarter of the Borrower commencing after
the Closing Date, at a rate per annum equal to the Alternate Base Rate or the
Adjusted LIBO Rate, as applicable, plus the ABR Margin or the LIBOR Margin, as
applicable, effective for such date as set forth on Schedule B.
(d) Interest on each Loan shall be payable on the Interest
Payment Dates applicable to such Loan except as otherwise provided in this
Agreement. The applicable Alternate Base Rate or Adjusted LIBO Rate for each
Interest Period or day within an Interest Period, as the case may be, shall be
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error. The Administrative Agent shall give the
Borrower prompt notice of each such determination.
SECTION 2.07. Default Interest. If the Borrower shall default
in the payment of the principal of or interest on any Loan or any other amount
becoming due hereunder, by acceleration or otherwise, the Borrower shall on
demand from time to time pay interest, to the extent permitted by law, on such
defaulted amount for the period beginning on the date of such default up to (but
not including) the date of actual payment (after as well as before judgment) at
a rate per annum (computed on the basis of the actual number of days elapsed
over a year of 360 days) equal to (a) in the case of (i) overdue Loans, overdue
interest thereon, overdue Commitment Fees or other overdue amounts owing in
respect of Loans or other obligations (or the related Commitments) under a
particular Tranche or in respect of the Revolving Credit Commitments or (ii)
other overdue amounts owing to a Lender participating in no more than one of the
Tranches or the Revolving Credit Commitments, the rate that would otherwise be
applicable to ABR Loans under such Tranche or to ABR Revolving Loans, as
applicable, pursuant to Section 2.06 plus 2.0% or (b) in the case of any
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30
other overdue amount, the Alternate Base Rate plus the ABR Margin for Tranche A
Term Loans and Revolving Loans effective for such date as set forth on Schedule
B plus 2.0%.
SECTION 2.08. Alternate Rate of Interest. In the event, and on
each occasion, that on the day two Business Days prior to the commencement of
any Interest Period for a Eurodollar Borrowing the Administrative Agent shall
have determined that dollar deposits in the principal amounts of the Loans
comprising such Borrowing are not generally available in the London interbank
market, or that the rates at which such dollar deposits are being offered will
not adequately and fairly reflect the cost to any Lender of making or
maintaining its Eurodollar Loan during such Interest Period, or that reasonable
means do not exist for ascertaining the Adjusted LIBO Rate, the Administrative
Agent shall, as soon as practicable thereafter, give written or telecopy notice
of such determination to the Borrower and the Lenders. In the event of any such
determination, until the Administrative Agent shall have advised the Borrower
and the Lenders that the circumstances giving rise to such notice no longer
exist, any request by the Borrower for a Eurodollar Borrowing pursuant to
Section 2.03 or 2.10 shall be deemed to be a request for an ABR Borrowing. Each
determination by the Administrative Agent hereunder shall be conclusive absent
manifest error.
SECTION 2.09. Termination and Reduction of Commitments. (a)
The Tranche B Term Loan Commitments shall be automatically and permanently
terminated at 5:00 p.m., New York City time, on the Closing Date. The Tranche A
Term Loan Commitments shall be automatically and permanently terminated at 5:00
p.m., New York City time, on the second anniversary of the Closing Date. Prior
to the termination thereof in full, the Tranche A Term Loan Commitments shall be
automatically and permanently reduced at 5:00 p.m., New York City time, on each
Tranche A Term Loan Closing Date, by an aggregate amount equal to the aggregate
principal amount of the Tranche A Term Loans made on such date. The Total
Revolving Credit Commitment shall be automatically and permanently terminated at
5:00 p.m., New York City time, on the Revolving Credit Maturity Date.
(b) Upon at least three Business Days' prior irrevocable
written or telecopy notice to the Administrative Agent, the Borrower may at any
time in whole permanently terminate, or from time to time in part permanently
reduce, any of the Term Commitments or the Revolving Credit Commitments;
provided, however, that (i) each partial reduction of any Commitments shall be
in an integral multiple of $1,000,000 and in a minimum principal amount of
$5,000,000 (or, if less, the remaining amount of the applicable Commitments) and
(ii) the Total Revolving Credit Commitment shall not be reduced to an amount
that is less than the Revolving Credit Exposure at the time.
(c) The Tranche A Term Loan Commitments shall be automatically
and permanently reduced by an amount equal to any amount applied under paragraph
(c) or (d) of Section 2.12 to prepay Tranche A Term Borrowings prior to the
second anniversary of the Closing Date.
(d) Each reduction in the Commitments hereunder shall be made
ratably among the Lenders in accordance with their respective applicable
Commitments. The Borrower shall pay to the Administrative Agent for the account
of the Lenders, on the date of each termination or reduction, the Commitment
Fees and, to the extent applicable, L/C Participation Fees on the amount of the
Commitments so terminated or reduced accrued to but excluding the date of such
termination or reduction.
SECTION 2.10. Conversion and Continuation of Term Borrowings.
The Borrower shall have the right at any time upon prior irrevocable notice to
the Administrative Agent (a) not later than 12:00 (noon), New York City time,
one Business Day prior to conversion, to convert any Eurodollar Term Borrowing
into an ABR Term Borrowing, (b) not later than 10:00 a.m., New York City time,
three Business Days prior to conversion or continuation, to convert any ABR Term
Borrowing into a Eurodollar Term Borrowing or to continue any Eurodollar Term
Borrowing as a Eurodollar Term Borrowing for an additional Interest Period, and
(c) not later than 10:00 a.m., New York City time, three Business Days prior to
conversion, to convert the Interest
<PAGE>
31
Period with respect to any Eurodollar Term Borrowing to another permissible
Interest Period, subject in each case to the following:
(i) each conversion or continuation shall be made pro rata
among the relevant Lenders in accordance with the respective principal
amounts of the Loans comprising the converted or continued Term
Borrowing;
(ii) if less than all the outstanding principal amount of any
Term Borrowing shall be converted or continued, then each resulting
Term Borrowing shall satisfy the limitations specified in Sections
2.02(a) and (b) regarding the principal amount and maximum number of
Borrowings of the relevant Type;
(iii) each conversion shall be effected by each Lender by
recording for the account of such Lender the new Term Loan of such
Lender resulting from such conversion and reducing the Term Loan (or
portion thereof) of such Lender being converted by an equivalent
principal amount; accrued interest on a Term Loan (or portion thereof)
being converted shall be paid by the Borrower at the time of
conversion;
(iv) if any Eurodollar Term Borrowing is converted at a time
other than the end of the Interest Period applicable thereto, the
Borrower shall pay, upon demand, any amounts due to the Lenders
pursuant to Section 2.15;
(v) any portion of a Term Borrowing maturing or required to be
repaid in less than one month may not be converted into or continued as
a Eurodollar Term Borrowing;
(vi) any portion of a Eurodollar Term Borrowing which cannot
be converted into or continued as a Eurodollar Term Borrowing by reason
of the immediately preceding clause shall be automatically converted at
the end of the Interest Period in effect for such Borrowing into an ABR
Term Borrowing; and
(vii) no Interest Period may be selected for any Eurodollar
Term Borrowing that would end later than an Installment Date occurring
on or after the first day of such Interest Period if, after giving
effect to such selection, the aggregate outstanding amount of (A) the
Eurodollar Term Borrowings made pursuant to the same Commitments with
Interest Periods ending on or prior to such Installment Date and (B)
the ABR Term Borrowings made pursuant to the same Commitments would not
be at least equal to the principal amount of Term Borrowings made
pursuant to the same Commitments to be paid on such Installment Date.
Each notice pursuant to this Section 2.10 shall be irrevocable
and shall refer to this Agreement and specify (i) the identity and amount of the
Term Borrowing that the Borrower requests be converted or continued, (ii)
whether such Term Borrowing is to be converted to or continued as a Eurodollar
Borrowing or an ABR Borrowing, (iii) if such notice requests a conversion, the
date of such conversion (which shall be a Business Day) and (iv) if such Term
Borrowing is to be converted to or continued as a Eurodollar Borrowing, the
Interest Period with respect thereto. If no Interest Period is specified in any
such notice with respect to any conversion to or continuation as a Eurodollar
Borrowing, the Borrower shall be deemed to have selected an Interest Period of
one month's duration. The Administrative Agent shall advise the other Lenders of
any notice given pursuant to this Section 2.10 and of each Lender's portion of
any converted or continued Term Borrowing. If the Borrower shall not have given
notice in accordance with this Section 2.10 to continue any Term Borrowing into
a subsequent Interest Period (and shall not otherwise have given notice in
accordance with this Section 2.10 to convert such Term Borrowing), such Term
Borrowing shall, at the end of the Interest Period applicable thereto (unless
repaid pursuant to the terms hereof), automatically be converted into an ABR
Borrowing.
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SECTION 2.11. Repayment of Term Borrowings. (a) (i) The
Tranche A Term Borrowings shall be payable as to principal in the amounts and on
the dates set forth below (each such date being called a "Tranche A Term Loan
Installment Date").
Tranche A
Term Loan
Date Amount
March 31, 2000 $7,500,000
September 30, 2000 $7,500,000
March 31, 2001 $10,000,000
September 30, 2001 $10,000,000
March 31, 2002 $12,500,000
September 30, 2002 $12,500,000
March 31, 2003 $15,000,000
September 30, 2003 $15,000,000
March 31, 2004 $17,500,000
October 30, 2004 $17,500,000
(ii) The Tranche B Term Loans shall be payable as to principal
in the amounts and on the dates set forth below (each such date being
called a "Tranche B Term Loan Installment Date" and, together with the
Tranche A Term Loan Installment Dates, the "Installment Dates").
Tranche B
Term Loan
Date Amount
March 31, 2000 $500,000
September 30, 2000 $500,000
March 31, 2001 $500,000
September 30, 2001 $500,000
March 31, 2002 $500,000
September 30, 2002 $500,000
March 31, 2003 $500,000
September 30, 2003 $500,000
March 31, 2004 $10,500,000
September 30, 2004 $10,500,000
March 31, 2005 $87,500,000
September 30, 2005 $87,500,000
April 30, 2006 $175,000,000
(b) Except as set forth in paragraphs (c), (d) and (e) below,
(i) all Net Proceeds and Excess Cash Flow to be applied at any
time to prepay Term Borrowings and, if applicable, to reduce Tranche A
Term Loan Commitments pursuant to Sections 2.12(c) and (d),
respectively, shall be applied as follows: (A) a portion of such Net
Proceeds equal to (x) the amount of such Net Proceeds multiplied by (y)
a fraction, the numerator of which is the outstanding principal amount
of Tranche B Term Borrowings at such time and the denominator of which
is the sum of the outstanding principal amount of Term Borrowings at
such time and the unused Tranche A Term Loan Commitments at such time
shall be applied to prepay Tranche B Term Borrowings and (B) a portion
of such Net Proceeds equal to (x) the amount of such Net Proceeds
multiplied by (y) a fraction, the numerator of which is the sum of the
outstanding principal amount of Tranche A Term
<PAGE>
33
Borrowings at such time and the unused Tranche A Term Loan Commitments
at such time and the denominator of which is the sum of the outstanding
principal amount of Term Borrowings at such time and the unused Tranche
A Term Loan Commitments at such time shall be applied, first, to prepay
Tranche A Term Borrowings and, after all outstanding Tranche A Term
Borrowings have been prepaid, to reduce Tranche A Term Loan Commitments
and
(ii) each prepayment of principal of the Term Borrowings
pursuant to Section 2.12(a) shall be applied to the Tranche A Term
Borrowings and the Tranche B Term Borrowings ratably in accordance with
the respective outstanding amounts thereof.
Such prepayments made pursuant to Section 2.12(a) and
prepayments or reductions in the Tranche A Term Loan Commitments made pursuant
to Section 2.12(d) shall reduce scheduled payments required under paragraph (a)
above after the date of such prepayment in the scheduled order of maturity and
such prepayments and reductions in the Tranche A Term Loan Commitments made
pursuant to Section 2.12(c) shall reduce scheduled payments required under
paragraph (a) above after the date of such prepayment on a pro rata basis. To
the extent not previously paid, all Tranche A Term Borrowings shall be due and
payable on the Tranche A Maturity Date and all Tranche B Term Borrowings shall
be due and payable on the Tranche B Maturity Date. Each payment of Borrowings
pursuant to this Section 2.11 shall be accompanied by accrued interest on the
principal amount paid to but excluding the date of payment.
(c) In the event and on each occasion Tranche A Term Loan
Commitments shall be reduced or shall expire or terminate other than as a result
of the making of Tranche A Term Loans or as a result of (i) the making of any
mandatory or optional prepayment or (ii) the reduction of the Tranche A Term
Loan Commitments, in the case of clauses (i) and (ii), pursuant to Section
2.12(a), (c) or (d), the installments payable on each Tranche A Term Loan
Installment Date shall be reduced pro rata by an aggregate amount equal to the
amount of such reduction, expiration or termination.
(d) Notwithstanding the provisions of paragraph (b) above, at
the election of the Borrower, the first $20,000,000 in aggregate (i) mandatory
prepayments that would otherwise be made pursuant to Section 2.12(d) to Lenders
holding Tranche B Term Loans, or (ii) optional prepayments that would otherwise
be made pursuant to Section 2.12(a) to Lenders holding Tranche B Term Loans, in
either case shall be applied, until the Tranche A Term Borrowings shall have
been paid in full and the Tranche A Term Loan Commitments have been reduced to
zero, to prepay Tranche A Term Borrowings and, after all outstanding Tranche A
Term Borrowings have been prepaid, to reduce Tranche A Term Loan Commitments,
and shall reduce scheduled payments in respect of such Borrowings under Section
2.11(a) after the date of any such prepayment or reduction in the scheduled
order of maturity.
(e) Any Lender holding Tranche B Term Loans may, to the extent
Tranche A Term Borrowings are outstanding or the Tranche A Term Loan Commitments
are greater than zero, elect on not less than one Business Day's prior written
notice to the Administrative Agent with respect to (i) any optional prepayment
made pursuant to Section 2.12(a), if the Borrower shall have consented to the
availability of such election pursuant to this Section 2.11(e), or (ii) any
mandatory prepayment made pursuant to Section 2.12(d), not to have such
prepayment applied to such Lender's Tranche B Term Loans until all Tranche A
Term Borrowings shall have been paid in full and the Tranche A Term Loan
Commitments have been reduced to zero, in which case the amount not so applied
shall be applied to prepay Tranche A Term Borrowings and, after all outstanding
Tranche A Term Borrowings have been prepaid, to reduce Tranche A Term Loan
Commitments, and shall reduce scheduled payments under Section 2.11(a) after the
date of any prepayment in the scheduled order of maturity.
SECTION 2.12. Prepayment. (a) The Borrower shall have the
right at any time and from time to time to prepay any Borrowing, in whole or in
part, upon at least three Business Days' prior written or telecopy notice (or
telephone notice promptly confirmed by written or telecopy
<PAGE>
34
notice) to the Administrative Agent, before 11:00 a.m., New York City time;
provided, however, that (i) each partial prepayment (other than of a Swingline
Loan) shall be in an amount that is an integral multiple of $1,000,000 and not
less than $5,000,000 (or, if less, the aggregate outstanding amount under the
applicable Tranche) and (ii) each prepayment of Term Borrowings shall be applied
as set forth in paragraphs (b), (c) and (d) of Section 2.11.
(b) In the event of any termination of the Revolving Credit
Commitments, the Borrower shall on the date of such termination repay or prepay
all its outstanding Swingline Loans and Revolving Credit Borrowings, reduce the
Revolving L/C Exposure to zero and cause all Letters of Credit to be canceled
and returned to the Fronting Bank. In the event of any partial reduction of the
Revolving Credit Commitments, then (i) at or prior to the effective date of such
reduction, the Administrative Agent shall notify the Borrower, the Swingline
Lender and the Revolving Credit Lenders of the Aggregate Revolving Credit
Exposure and (ii) if the Aggregate Revolving Credit Exposure would exceed the
Total Revolving Credit Commitment after giving effect to such reduction, then
the Borrower shall, on the date of such reduction, repay or prepay Swingline
Loans and Revolving Credit Borrowings, or reduce the Revolving L/C Exposure, in
an aggregate amount sufficient to eliminate such excess. Notwithstanding the
foregoing, on the date of any termination or reduction of the Revolving Credit
Commitments pursuant to Section 2.09, the Borrower shall pay or prepay so much
of, first, the Swingline Loans and, second, the Revolving Credit Borrowings as
shall be necessary in order that the Aggregate Revolving Credit Exposure will
not exceed the Total Revolving Credit Commitment after giving effect to such
termination or reduction.
(c) The Borrower shall apply all Net Proceeds promptly upon
receipt thereof by AAMM, the Borrower or any Subsidiary to prepay Term
Borrowings and, if applicable, to reduce Tranche A Term Loan Commitments in
accordance with Section 2.11(b).
(d) Not later than 90 days after the end of each fiscal year
of the Borrower, commencing with the fiscal year ending December 31, 1998, the
Borrower shall calculate Excess Cash Flow for such fiscal year and shall apply
75% of such Excess Cash Flow to prepay Term Borrowings and, if applicable, to
reduce Tranche A Term Loan Commitments in accordance with Section 2.11(b),
provided that if, at the time of such prepayment, the ABR Margin and the LIBOR
Margin are determined by reference to Level 4, Level 5 or Level 6 as set forth
on Schedule B, the Borrower shall be required to apply only 50% of such Excess
Cash Flow to prepay such Borrowings and, if applicable, to reduce such
Commitments. Not later than the date on which the Borrower is required to
deliver financial statements with respect to the end of each fiscal year under
Section 5.04(a), the Borrower will deliver to the Administrative Agent a
certificate signed by a Financial Officer of the Borrower setting forth the
amount, if any, of Excess Cash Flow for such fiscal year and the calculation
thereof in reasonable detail.
(e) The Borrower shall apply all Lease Financing Proceeds
(other than any such proceeds that constitute Net Proceeds) promptly upon
receipt thereof by AAMM, the Borrower or any Subsidiary to prepay Revolving
Credit Borrowings to the extent of such Borrowings and may retain the balance of
such proceeds.
(f) Each notice of prepayment or reduction pursuant to this
Section 2.12 shall specify the prepayment date and the principal amount of each
Borrowing (or portion thereof) to be prepaid (or, if applicable, the reduction
in the Tranche A Term Loan Commitments), shall be irrevocable and shall commit
the Borrower to prepay such Borrowing by the amount stated therein on the date
stated therein. All prepayments under this Section 2.12 shall be subject to
Section 2.15 but otherwise without premium or penalty. All prepayments under
this Section 2.12 shall be accompanied by accrued interest on the principal
amount being prepaid to but excluding the date of payment.
(g) In the event the amount of any prepayment required to be
made above shall exceed the aggregate principal amount of the ABR Loans
outstanding under the Tranches required to be prepaid (the amount of any such
excess being called the "Excess Amount"), the Borrower shall
<PAGE>
35
have the right, in lieu of making such prepayment in full, to prepay all the
outstanding applicable ABR Loans and to deposit an amount equal to the Excess
Amount with the Collateral Agent in a cash collateral account maintained
(pursuant to documentation reasonably satisfactory to the Administrative Agent)
by and in the sole dominion and control of the Collateral Agent. Any amounts so
deposited shall be held by the Collateral Agent as collateral for the
Obligations and applied to the prepayment of the applicable Eurodollar Loans at
the end of the current Interest Periods applicable thereto. On any Business Day
on which (i) collected amounts remain on deposit in or to the credit of such
cash collateral account after giving effect to the payments made on such day
pursuant to this Section 2.12(g) and (ii) the Borrower shall have delivered to
the Collateral Agent a written request or a telephonic request (which shall be
promptly confirmed in writing) that such remaining collected amounts be invested
in the Permitted Investments specified in such request, the Collateral Agent
shall use its reasonable efforts to invest such remaining collected amounts in
such Permitted Investments; provided, however, that the Collateral Agent shall
have continuous dominion and full control over any such investments (and over
any interest that accrues thereon) to the same extent that it has dominion and
control over such cash collateral account and no Permitted Investment shall
mature after the end of the Interest Period for which it is to be applied. The
Borrower shall not have the right to withdraw any amount from such cash
collateral account until the applicable Eurodollar Loans and accrued interest
thereon are paid in full or if a Default or Event of Default then exists or
would result.
SECTION 2.13. Reserve Requirements; Change in Circumstances.
(a) Notwithstanding any other provision herein, if after the date of this
Agreement any change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall change the basis of taxation of payments to any Lender or the
Fronting Bank in respect of any Letter of Credit or of the principal of or
interest on any Eurodollar Loan made by such Lender or any Fees or other amounts
payable hereunder (other than changes in respect of (i) taxes imposed on the
overall net income of such Lender or the Fronting Bank by the jurisdiction in
which such Lender or the Fronting Bank has its principal office or by any
political subdivision or taxing authority therein and (ii) any Taxes described
in Section 2.19), or shall impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets or deposits with or for
the account of or credit extended by or, in the case of the Letters of Credit,
participated in by such Lender (except any such reserve requirement which is
reflected in the Adjusted LIBO Rate) or the Fronting Bank or shall impose on
such Lender or the Fronting Bank or the interbank Eurodollar market any other
condition affecting this Agreement, any Letter of Credit (or any participation
with respect thereto), the Revolving L/C Exposure or any Eurodollar Loans of
such Lender or the Fronting Bank, and the result of any of the foregoing shall
be to increase the cost to such Lender or the Fronting Bank of making or
maintaining its Revolving L/C Exposure or any Eurodollar Loan (or, in the case
of the Fronting Bank, of making any payment under any Letter of Credit) or to
reduce the amount of any sum received or receivable by such Lender or the
Fronting Bank hereunder (whether of principal, interest or otherwise) by an
amount deemed by such Lender or the Fronting Bank to be material, then from time
to time the Borrower will pay to such Lender or the Fronting Bank upon demand
such additional amount or amounts as will compensate such Lender or the Fronting
Bank for such additional costs incurred or reduction suffered.
(b) If any Lender or the Fronting Bank shall have determined
that the adoption after the date hereof of any law, rule, regulation or
guideline regarding capital adequacy, or any change after the date hereof in any
of the foregoing or in the interpretation or administration of any of the
foregoing by any Governmental Authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by any
Lender (or any lending office of such Lender) or the Fronting Bank or any
Lender's or the Fronting Bank's holding company with any request or directive
regarding capital adequacy (whether or not having the force of law) made or
issued after the date hereof by any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on such
Lender's or the Fronting Bank's capital or on the capital of such Lender's or
the Fronting Bank's holding company, if any, as a consequence of this Agreement
or its obligations pursuant hereto to a level below that which such Lender or
the Fronting
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36
Bank or such Lender's or the Fronting Bank's holding company would have achieved
but for such adoption, change or compliance (taking into consideration such
Lender's or the Fronting Bank's policies and the policies of such Lender's or
the Fronting Bank's holding company with respect to capital adequacy) by an
amount deemed by such Lender or the Fronting Bank to be material, then from time
to time the Borrower shall pay to such Lender or the Fronting Bank upon demand
such additional amount or amounts as will compensate such Lender or the Fronting
Bank or such Lender's or the Fronting Bank's holding company for any such
reduction suffered.
(c) A certificate of each Lender or the Fronting Bank setting
forth such amount or amounts as shall be necessary to compensate such Lender or
the Fronting Bank or its holding company as specified in paragraph (a) or (b)
above, as the case may be, shall be delivered to the Borrower through the
Administrative Agent and shall be conclusive absent manifest error. The Borrower
shall pay each Lender or the Fronting Bank the amount shown as due on any such
certificate delivered by it within 10 days after its receipt of the same.
(d) In the event any Lender or the Fronting Bank delivers a
notice pursuant to paragraph (e) below, the Borrower may require, at the
Borrower's expense and subject to Section 2.15, such Lender or the Fronting Bank
to assign, at par plus accrued interest and fees, without recourse (in
accordance with Section 9.04) all its interests, rights and obligations
hereunder (including, in the case of a Lender, all of its Commitments and the
Loans at the time owing to it and participations in Letters of Credit held by it
and its obligations to acquire such participations) to a financial institution
specified by the Borrower, provided that (i) such assignment shall not conflict
with or violate any law, rule or regulation or order of any court or other
Governmental Authority, (ii) the Borrower shall have received the written
consent of the Administrative Agent (which consent shall not be unreasonably
withheld) and the Fronting Bank to such assignment, (iii) the Borrower shall
have paid to the assigning Lender or the Fronting Bank all monies accrued and
owing hereunder to it (including pursuant to this Section 2.13) and (iv) in the
case of a required assignment by the Fronting Bank, all outstanding Letters of
Credit issued by the Fronting Bank shall be canceled and returned to the
Fronting Bank.
(e) Promptly after any Lender or the Fronting Bank has
determined, in its sole judgment, that it will make a request for increased
compensation pursuant to this Section 2.13, such Lender or the Fronting Bank
will notify the Borrower thereof. Failure on the part of any Lender or the
Fronting Bank so to notify the Borrower or to demand compensation for any
increased costs or reduction in amounts received or receivable or reduction in
return on capital with respect to any period shall not constitute a waiver of
such Lender's or the Fronting Bank's right to demand compensation with respect
to such period or any other period, provided that the Borrower shall not be
under any obligation to compensate any Lender or the Fronting Bank under
paragraph (b) above with respect to increased costs or reductions with respect
to any period prior to the date that is six months prior to such request if such
Lender or the Fronting Bank knew or could reasonably have been expected to be
aware of the circumstances giving rise to such increased costs or reductions and
of the fact that such circumstances would in fact result in a claim for
increased compensation by reason of such increased costs or reductions and
provided further that the foregoing limitation shall not apply to any increased
costs or reductions arising out of the retroactive application of any law,
regulation, rule, guideline or directive as aforesaid within such six month
period. The protection of this Section 2.13 shall be available to each Lender
and the Fronting Bank regardless of any possible contention as to the invalidity
or inapplicability of the law, rule, regulation, guideline or other change or
condition which shall have occurred or been imposed.
SECTION 2.14. Change in Legality. (a) Notwithstanding any
other provision herein, if the adoption of or any change in any law or
regulation or in the interpretation thereof by any Governmental Authority
charged with the administration or interpretation thereof shall make it unlawful
for any Lender to make or maintain any Eurodollar Loan or to give effect to its
obligations
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37
as contemplated hereby with respect to any Eurodollar Loan, then, by written
notice to the Borrower and to the Administrative Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter be made
by such Lender hereunder, whereupon any request by the Borrower for a
Eurodollar Borrowing shall, as to such Lender only, be deemed a request
for an ABR Loan unless such declaration shall be subsequently
withdrawn; and
(ii) require that all outstanding Eurodollar Loans made by it
be converted to ABR Loans, in which event all such Eurodollar Loans
shall be automatically converted to ABR Loans as of the effective date
of such notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under subparagraphs (i) and
(ii) above, all payments and prepayments of principal that would otherwise have
been applied to repay the Eurodollar Loans that would have been made by such
Lender or the converted Eurodollar Loans of such Lender shall instead be applied
to repay the ABR Loans made by such Lender in lieu of, or resulting from the
conversion of, such Eurodollar Loans.
(b) For purposes of this Section 2.14, a notice to the
Borrower by any Lender shall be effective as to each Eurodollar Loan, if lawful,
on the last day of the Interest Period currently applicable to such Eurodollar
Loan; in all other cases such notice shall be effective on the date of receipt
by the Borrower.
SECTION 2.15. Indemnity. The Borrower shall indemnify each
Lender against any loss or expense (other than taxes) that such Lender may
sustain or incur as a consequence of (a) any failure by the Borrower to fulfill
on the date of any Borrowing or proposed Borrowing hereunder the applicable
conditions set forth in Article IV, (b) any failure by the Borrower to borrow or
to refinance, convert or continue any Loan hereunder after irrevocable notice of
such Borrowing, refinancing, conversion or continuation has been given pursuant
to Section 2.03 or 2.10, (c) any payment, prepayment or conversion of a
Eurodollar Loan required by any other provision of this Agreement or otherwise
made or deemed made on a date other than the last day of the Interest Period
applicable thereto, (d) any default in payment or prepayment of the principal
amount of any Loan or any part thereof or interest accrued thereon, as and when
due and payable (at the due date thereof, whether by scheduled maturity,
acceleration, irrevocable notice of prepayment or otherwise) or (e) the
occurrence of any Event of Default, including, in each such case, any loss or
reasonable expense sustained or incurred or to be sustained or incurred in
liquidating or employing deposits from third parties acquired to effect or
maintain such Loan or any part thereof as a Eurodollar Loan. Such loss or
reasonable expense shall exclude loss of margin hereunder but shall include an
amount equal to the excess, if any, as reasonably determined by such Lender, of
(i) its cost of obtaining the funds for the Loan being paid, prepaid, converted
or not borrowed, converted or continued (assumed to be the Adjusted LIBO Rate
applicable thereto) for the period from the date of such payment, prepayment,
conversion or failure to borrow, convert or continue to the last day of the
Interest Period for such Loan (or, in the case of a failure to borrow, convert
or continue, the Interest Period for such Loan which would have commenced on the
date of such failure) over (ii) the amount of interest (as reasonably determined
by such Lender) that would be realized by such Lender in reemploying the funds
so paid, prepaid, converted or not borrowed, converted or continued for such
period or Interest Period, as the case may be. A certificate of any Lender
setting forth any amount or amounts that such Lender is entitled to receive
pursuant to this Section 2.15 (and the reasons therefor) shall be delivered to
the Borrower through the Administrative Agent and shall be conclusive absent
manifest error.
SECTION 2.16. Pro Rata Treatment. Except as required under
Section 2.14 and subject to Section 2.11, each Borrowing, each payment or
prepayment of principal of any Borrowing, each payment of interest on the Loans,
each reimbursement of L/C Disbursements, each payment of the Commitment Fees or
L/C Participation Fees, each reduction of the Term Commitments or the Revolving
Credit Commitments and each refinancing of any Borrowing with, conversion of any
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38
Borrowing to or continuation of any Borrowing as a Borrowing of any Type shall
be allocated (except in the case of Swingline Loans) pro rata among the Lenders
in accordance with their respective applicable Commitments (or, if such
Commitments shall have expired or been terminated, in accordance with the
respective principal amounts of their applicable outstanding Loans or
participations in L/C Disbursements, as applicable). Each Lender agrees that in
computing such Lender's portion of any Borrowing or L/C Disbursement, the
Administrative Agent may, in its discretion, round each Lender's percentage of
such Borrowing or L/C Disbursement, computed in accordance with Section 2.01, to
the next higher or lower whole dollar amount.
SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if
it shall, through the exercise of a right of banker's lien, setoff or
counterclaim against the Borrower or pursuant to a secured claim under Section
506 of Title 11 of the United States Code or other security or interest arising
from, or in lieu of, such secured claim, received by such Lender under any
applicable bankruptcy, insolvency or other similar law or otherwise, or by any
other means, obtain payment (voluntary or involuntary) in respect of any Loan or
L/C Disbursement as a result of which the unpaid principal portion of its Loans
or L/C Disbursements made pursuant to any Commitment (or, after acceleration of
the Loans pursuant to Article VII, applicable to any Loan or L/C Disbursement)
shall be proportionately less than the unpaid principal portion of the Loans or
L/C Disbursements of any other Lender made pursuant to such Commitments (or,
after acceleration of the Loans pursuant to Article VII, applicable to any Loan
or L/C Disbursement), it shall be deemed simultaneously to have purchased from
such other Lender at face value, and shall promptly pay to such other Lender the
purchase price for, an interest in the Loans or L/C Disbursements of such other
Lender, so that the aggregate unpaid principal amount of the Loans or L/C
Disbursements and interests in Loans or L/C Disbursements held by each such
Lender shall be in the same proportion to the aggregate unpaid principal amount
of all Loans or L/C Disbursements then outstanding under such Commitments as the
principal amount of its Loans or L/C Disbursements under such Commitments prior
to such exercise of banker's lien, setoff or counterclaim or other event was to
the principal amount of all such Loans or L/C Disbursements outstanding prior to
such exercise of banker's lien, setoff or counter claim or other event;
provided, however, that, if any such purchase or purchases or adjustments shall
be made pursuant to this Section 2.17 and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price or prices or
adjustment restored without interest. The Borrower expressly consents to the
foregoing arrangements and agrees that any Lender holding an interest in a Loan
or L/C Disbursement deemed to have been so purchased may exercise any and all
rights of banker's lien, setoff or counterclaim with respect to any and all
moneys owing by the Borrower to such Lender by reason thereof as fully as if
such Lender had made a Loan directly to, or L/C Disbursement directly for the
benefit of, the Borrower in the amount of such interest.
SECTION 2.18. Payments. (a) The Borrower shall make each
payment without setoff or counterclaim (including principal of or interest on
any Borrowing or L/C Disbursement or any Fees or other amounts) required to be
made by it hereunder and under any other Loan Document not later than 12:00
noon, New York City time, on the date when due in Dollars to the Administrative
Agent at its offices at 270 Park Avenue, New York, New York, Attention of Agent
Bank Services, in immediately available funds, for credit to The Chase Manhattan
Bank, ABA Number 0210 00021, Account Number 323-516076. The Administrative Agent
shall distribute such payments to the Lenders and the Fronting Bank promptly
upon receipt in like funds as received.
(b) Whenever any payment (including principal of or interest
on any Borrowing or L/C Disbursement or any Fees or other amounts) hereunder or
under any other Loan Document shall become due, or otherwise would occur, on a
day that is not a Business Day, such payment may be made on the next succeeding
Business Day (except in the case of payment of principal of a Eurodollar
Borrowing if the effect of such extension would be to extend such payment into
the next succeeding month, in which event such payment shall be due on the
immediately preceding Business Day), and such extension of time shall in such
case be included in the computation of interest or Fees, if applicable.
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39
SECTION 2.19. Taxes. (a) Any and all payments by the Borrower
to the Administrative Agent, the Fronting Bank or the Lenders hereunder or under
the other Loan Documents shall be made, in accordance with Section 2.18, free
and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding (i) in the case of each Lender, the Fronting Bank and
the Administrative Agent, taxes that would not be imposed but for a connection
between such Lender, the Fronting Bank or the Administrative Agent (as the case
may be) and the jurisdiction imposing such tax, other than a connection arising
solely by virtue of the activities of such Lender, the Fronting Bank or the
Administrative Agent (as the case may be) pursuant to or in respect of this
Agreement or under any other Loan Document, including entering into, lending
money or extending credit pursuant to, receiving payments under, or enforcing,
this Agreement or any other Loan Document, and (ii) in the case of each Lender,
the Fronting Bank and the Administrative Agent, any United States withholding
taxes payable with respect to any payments made hereunder or under the other
Loan Documents under laws (including any statute, treaty, ruling, determination
or regulation) in effect on the Initial Date (as hereinafter defined) applicable
to such Lender, the Fronting Bank or the Administrative Agent, as the case may
be, but not excluding any United States withholding taxes payable solely as a
result of any change in such laws occurring after the Initial Date (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). For purposes of this
Section 2.19, the term "Initial Date" shall mean (i) in the case of the
Administrative Agent, the Fronting Bank or any Lender, the date on which such
person became a party to this Agreement and (ii) in the case of any assignment,
including any assignment by a Lender or the Fronting Bank to a new lending
office, the date of such assignment. If any Taxes shall be required by law to be
deducted from or in respect of any sum payable hereunder or under any other Loan
Document to any Lender, the Fronting Bank or the Administrative Agent, (i) the
sum payable by the Borrower shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.19) such Lender, the Fronting Bank or the
Administrative Agent, as the case may be, receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Borrower shall
make such deductions and (iii) the Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law. The Borrower shall not, however, be required to pay any amounts
pursuant to clause (i) of the preceding sentence to any Lender, the Fronting
Bank or the Administrative Agent not organized under the laws of the United
States of America or a state thereof if such Lender, the Fronting Bank or the
Administrative Agent fails to comply with the requirements of paragraph (f) or
(g), as the case may be, and paragraph (h) of this Section 2.19.
(b) In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from the execution, delivery or registration of,
or otherwise with respect to, this Agreement or any other Loan Document
(hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender, the Fronting Bank
and the Administrative Agent for the full amount of Taxes and Other Taxes
(including any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.19) paid by such Lender, the Fronting Bank or the
Administrative Agent, as the case may be, and any liability (including
penalties, interest and expenses including reasonable attorney's fees and
expenses) arising therefrom or with respect thereto whether or not such Taxes or
Other Taxes were correctly or legally asserted. A certificate as to the amount
of such payment or liability prepared by a Lender (or Transferee), the Fronting
Bank or the Administrative Agent, absent manifest error, shall be final,
conclusive and binding for all purposes, provided that if the Borrower
reasonably believes that such Taxes were not correctly or legally asserted, such
Lender, the Fronting Bank or the Administrative Agent, as the case may be shall
use reasonable efforts to cooperate with the Borrower to obtain a refund of such
Taxes or Other Taxes. Such indemnification shall be made within 10 days after
the date any Lender, the Fronting Bank or the Administrative Agent, as the case
may be, makes written demand therefor. If a Lender, the Fronting Bank or the
Administrative Agent shall become aware that it is entitled to receive a refund
in respect of Taxes or Other Taxes, it shall promptly notify the Borrower of the
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40
availability of such refund and shall, within 30 days after receipt of a request
by the Borrower, pursue or timely claim such refund at the Borrower's expense.
If any Lender, the Fronting Bank or the Administrative Agent receives a refund
in respect of any Taxes or Other Taxes for which such Lender, the Fronting Bank
or the Administrative Agent has received payment from the Borrower hereunder, it
shall promptly repay such refund (plus any interest received) to the Borrower
(but only to the extent of indemnity payments made, or additional amounts paid,
by the Borrower under this Section 2.19 with respect to the Taxes or Other Taxes
giving rise to such refund), provided that the Borrower, upon the request of
such Lender, the Fronting Bank or the Administrative Agent, agrees to return
such refund (plus any penalties, interest or other charges required to be paid)
to such Lender, the Fronting Bank or the Administrative Agent in the event such
Lender, such Fronting Bank or the Administrative Agent is required to repay such
refund to the relevant taxing authority.
(d) Within 30 days after the date of any payment of Taxes or
Other Taxes withheld by the Borrower in respect of any payment to any Lender,
the Fronting Bank or the Administrative Agent, the Borrower will furnish to the
Administrative Agent, at its address referred to in Section 9.01, the original
or a certified copy of a receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 2.19
shall survive the payment in full of principal and interest hereunder, the
expiration of the Letters of Credit and the termination of the Commitments.
(f) In the case of any Borrowing by, or L/C Disbursement for
the benefit of, the Borrower, this paragraph (f) shall apply. Each Lender, the
Fronting Bank and the Administrative Agent that is not organized under the laws
of the United States of America or a state thereof agrees that at least 10 days
prior to the first Interest Payment Date following the Initial Date in respect
of the Fronting Bank or such Lender, it will deliver to the Borrower and the
Administrative Agent (if appropriate) two duly completed copies of either (i)
United States Internal Revenue Service Form 1001 or 4224 or successor applicable
form, as the case may be, certifying in each case that the Fronting Bank, such
Lender or the Administrative Agent, as the case may be, is entitled to receive
payments under this Agreement and the other Loan Documents payable to it without
deduction or withholding of any United States federal income taxes and backup
withholding taxes or is entitled to receive such payments at a reduced rate
pursuant to a treaty provision or (ii) in the case of a Lender that is not a
"bank" within the meaning of Section 881(c)(3) of the Code, (A) deliver to the
Borrower and the Administrative Agent (I) a statement under penalties of perjury
that such Lender (w) is not a "bank" under Section 881(c)(3)(A) of the Code, is
not subject to regulatory or other legal requirements as a bank in any
jurisdiction, and has not been treated as a bank for purposes of any tax,
securities law or other filing or submission made to any Governmental Authority,
any application made to a rating agency or qualification for any exemption from
tax, securities law or other legal requirements, (x) is not a 10-percent
shareholder within the meaning of Section 881(c)(3)(B) of the Code, (y) is not a
controlled foreign corporation receiving interest from a related person within
the meaning of Section 881(c)(3)(c) of the Code and (z) is not a "conduit
entity" within the meaning of U.S. Treasury Regulations Section 1.881-3 and (II)
an Internal Revenue Service Form W-8; (B) deliver to the Borrower and the
Administrative Agent a further copy of said Form W-8, or any successor
applicable form or other manner of certification on or before the date that any
such Form W-8 expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously delivered by such Lender;
and (C) obtain such extensions of time for filing and complete such forms or
certifications as may be reasonably requested by the Borrower or the
Administrative Agent; unless in any such case an event (including any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders any such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Borrower and the
Administrative Agent. Such Lender shall certify (i) in the case of a Form 1001
or 4224, that it is entitled to receive payments under this Agreement without
deduction or withholding of any United States Federal income taxes or is
entitled to receive such payments at a reduced rate pursuant to a treaty
provision and (ii) in the case of a Form W-8 or W-9, that it is
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41
entitled to an exemption from United States backup withholding tax. Each Person
that shall become a participant pursuant to Section 9.04 shall, upon the
effectiveness of the related transfer, be required to provide all the forms and
statements required pursuant to this paragraph (f) to the Lender from which the
related participation shall have been purchased. Unless the Borrower and the
Administrative Agent have received forms, certificates and other documents
required by this Section 2.19(f) indicating that payments hereunder or under
this Agreement, any other Loan Document or the Letters of Credit to or for the
Fronting Bank or Lender not incorporated under the laws of the United States or
a state thereof are not subject to United States withholding tax or are subject
to such tax at a rate reduced by an applicable tax treaty, the Borrower or the
Administrative Agent shall withhold such taxes from such payments at the
applicable statutory rate.
(g) The Fronting Bank and any Lender claiming any additional
amounts payable pursuant to this Section 2.19 shall use reasonable efforts
(consistent with legal and regulatory restrictions) to file any certificate or
document requested in writing by the Borrower to change the jurisdiction of its
applicable lending office, if the making of such a filing or change would avoid
the need for or reduce the amount of any such additional amounts which would be
payable or may thereafter accrue and would not, in the sole determination of the
Fronting Bank or such Lender, be otherwise disadvantageous to the Fronting Bank
or such Lender.
(h) Nothing contained in this Section 2.19 shall require any
Lender or the Fronting Bank or the Administrative Agent to make available any of
its tax returns (or any other information that it deems to be confidential or
proprietary).
SECTION 2.20. Letters of Credit. (a) Letters of Credit. (i)
General. The Borrower may request the issuance of a Letter of Credit, in a form
reasonably acceptable to the Administrative Agent and the Fronting Bank,
appropriately completed, for the account of the Borrower at any time and from
time to time while the Revolving Credit Commitments remain in effect. This
Section 2.20(a) shall not be construed to impose an obligation upon the Fronting
Bank to issue any Letter of Credit that is inconsistent with the terms and
conditions of this Agreement or that would result in there existing Letters of
Credit in an aggregate stated amount at any time in excess of $30,000,000.
(ii) Notice of Issuance, Amendment, Renewal, Extension;
Certain Conditions. In order to request the issuance of a Letter of Credit (or
to request that the Fronting Bank amend, renew or extend an existing Letter of
Credit), the Borrower shall hand deliver or telecopy to the Fronting Bank and
the Administrative Agent (reasonably in advance of the requested date of
issuance, amendment, renewal or extension) a notice requesting the issuance of
such Letter of Credit, or identifying any Letter of Credit to be amended,
renewed or extended, and specifying the date of issuance, amendment, renewal or
extension, the date on which such Letter of Credit is to expire (which shall
comply with paragraph (iii) below), the amount of such Letter of Credit to be
issued, amended, renewed or extended, the name and address of the account party
(which shall be the Borrower) and the beneficiary thereof and such other
information as shall be necessary to prepare such Letter of Credit or grant such
issuance, amendment, renewal or extension. Following receipt of such notice and
prior to the issuance, amendment, renewal or extension of any Letter of Credit
the Administrative Agent shall notify the Borrower and the Fronting Bank of the
amount of the Aggregate Revolving Credit Exposure after giving effect to (A) the
issuance, amendment, renewal or extension of such Letter of Credit, (B) the
issuance or expiration of any other Letter of Credit that is to be issued or
will expire prior to the requested date of issuance of such Letter of Credit and
(C) the borrowing or repayment of any Revolving Credit Loans and Swingline Loans
that (based upon notices delivered to the Administrative Agent by the Borrower)
are to be borrowed or repaid prior to the requested date of issuance of such
Letters of Credit. Each Letter of Credit shall be issued, amended, renewed or
extended subject to the terms and conditions and relying on the representations
and warranties of AAMM and the Borrower set forth herein, and in any case only
if, and upon issuance, amendment, renewal or extension of each Letter of Credit
the Borrower shall be deemed to represent and warrant that, after giving effect
to such issuance, amendment, renewal or extension the
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42
Aggregate Revolving Credit Exposure shall not exceed the Total Revolving Credit
Commitment in effect at such time.
(iii) Expiration Date. Each Letter of Credit shall expire at
the close of business on the earlier of the date one year after the date of the
issuance of such Letter of Credit and the date that is five Business Days prior
to the Revolving Credit Maturity Date, unless such Letter of Credit expires by
its terms on an earlier date, provided that a Letter of Credit shall not be
issued (nor shall a Letter of Credit be amended, renewed or extended) that would
result in the Aggregate Revolving Credit Exposure exceeding the Total Revolving
Credit Commitment in effect at such time. Compliance with the foregoing proviso
shall be determined based upon the assumption that (A) each Letter of Credit
remains outstanding and undrawn in accordance with its terms until its
expiration date (taking into account any rights of renewal or extension that do
not require written notice by or consent of any Fronting Bank, in its sole
discretion, in order to effect such renewal or extension) and (B) the Revolving
Credit Commitments will not be reduced pursuant to Section 2.09.
(iv) Participations. By the issuance of a Letter of Credit and
without any further action on the part of the Fronting Bank or the Revolving
Credit Lenders, the Fronting Bank will grant to each Revolving Credit Lender,
and each such Lender will acquire from the Fronting Bank, a participation in
such Letter of Credit equal to such Revolving Credit Lender's Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit, effective upon the issuance of such Letter of Credit. In consideration
and in furtherance of the foregoing, each Revolving Credit Lender hereby
absolutely and unconditionally agrees to pay to the Administrative Agent, for
the account of the Fronting Bank, such Revolving Credit Lender's Applicable
Percentage of each L/C Disbursement made by the Fronting Bank under such Letter
of Credit and not reimbursed by the Borrower (or, if applicable, another party
pursuant to its obligations under any other Loan Document) on or before the next
Business Day as provided in paragraph (v) below. Each Revolving Credit Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this paragraph in respect of Letters of Credit is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including the
occurrence and continuance of a Default or an Event of Default, and that each
such payment shall be made without any offset, abatement, withholding or
reduction whatsoever, provided that nothing in this Agreement shall be construed
to excuse the Fronting Bank from liability to the Revolving Credit Lenders
caused by the gross negligence or wilful misconduct of the Fronting Bank.
(v) Reimbursement. If the Fronting Bank shall make any L/C
Disbursement in respect of a Letter of Credit, the Borrower shall pay to the
Administrative Agent, on or before the Business Day immediately following the
date of such L/C Disbursement, an amount equal to such L/C Disbursement. If the
Borrower shall fail to pay any amount required to be paid under this paragraph
on or before such Business Day (or to cause payment thereof when due pursuant to
a Revolving Credit Borrowing), then (A) such unpaid amount shall bear interest,
for each day from and including such Business Day to but excluding the date of
payment, at a rate per annum equal to the interest rate applicable to overdue
ABR Loans that are Revolving Credit Loans pursuant to Section 2.07 (provided
that the 2.00% margin referred to therein shall not be applicable until the
first Business Day after the Borrower receives notice from the Administrative
Agent that such L/C Disbursement has been or will be made), (B) the
Administrative Agent shall notify the Fronting Bank and the Revolving Credit
Lenders thereof, (C) each Revolving Credit Lender shall comply with its
obligation under paragraph (iv) above by wire transfer of immediately available
funds, in the same manner as provided in Section 2.02(c) with respect to Loans
made by such Revolving Credit Lender (and Section 2.02(d) shall apply, mutatis
mutandis, to the payment obligations of the Revolving Credit Lenders) and (D)
the Administrative Agent shall promptly pay to the Fronting Bank amounts so
received by it from the Revolving Credit Lenders. The Administrative Agent shall
promptly pay to the Fronting Bank on a pro rata basis with respect to
outstanding L/C Disbursements any amounts received by it from the Borrower (or,
if applicable, another party pursuant to its obligations under any other Loan
Document) pursuant to this paragraph prior to the time that any Revolving Credit
Lender makes any payment pursuant to paragraph (iv) above; any such amounts
received by the Administrative Agent thereafter shall be promptly remitted by
the Administrative Agent to the
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43
Revolving Credit Lenders that shall have made such payments and to the Fronting
Bank, as their interests may appear.
(b) Obligations Absolute. The Borrower's obligations to
reimburse L/C Disbursements as provided in paragraph (a) above shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, under any and all circumstances
whatsoever, and irrespective of:
(i) any lack of validity or enforceability of any Letter of
Credit or any Loan Document, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure
from all or any of the provisions of any Letter of Credit or any Loan
Document;
(iii) the existence of any claim, setoff, defense or other
right that the Borrower, any other party guaranteeing, or otherwise
obligated with, the Borrower or any Subsidiary or other Affiliate
thereof or any other person may at any time have against the
beneficiary under any Letter of Credit, the Fronting Bank, the
Administrative Agent or any Lender (other than the defense of payment
in accordance with the terms of this Agreement or a defense based on
the gross negligence or wilful misconduct of the Fronting Bank) or any
other person, whether in connection with this Agreement, any other Loan
Document or any other related or unrelated agreement or transaction;
(iv) any draft or other document presented under 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, provided that payment by the applicable Fronting Bank shall
not have constituted gross negligence or wilful misconduct of the
Fronting Bank;
(v) payment by the Fronting Bank under a Letter of Credit
against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, provided that payment by the
Fronting Bank shall not have constituted gross negligence or wilful
misconduct of such Fronting Bank;
(vi) any other act or omission to act or delay of any kind of
the Fronting Bank, the Lenders, the Administrative Agent or any other
person or any other event or circumstance whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions of
this Section 2.20(b), constitute a legal or equitable discharge of the
Borrower's obligations hereunder, provided that such act or omission
shall not have constituted gross negligence or wilful misconduct of
such Fronting Bank.
(c) Disbursement Procedures. The Fronting Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Fronting Bank shall as promptly
as possible give telephonic notification, confirmed by telecopy, to the
Administrative Agent and the Borrower of such demand for payment and whether the
Fronting Bank has made or will make an L/C Disbursement thereunder, provided
that any failure to give or delay in giving such notice shall not relieve the
Borrower of its obligation to reimburse the Fronting Bank and the Lenders with
respect to any such L/C Disbursement. The Administrative Agent shall promptly
give each Revolving Credit Lender notice thereof.
(d) Interim Interest. If the Fronting Bank shall make any L/C
Disbursement in respect of a Letter of Credit, then, unless the Borrower shall
reimburse such L/C Disbursement in full on such date, the unpaid amount thereof
shall bear interest for the account of the Fronting Bank, for each day from and
including the date of such L/C Disbursement, to but excluding the earlier of the
date of payment or the date on which interest shall commence to accrue thereon
as provided in subparagraph (a)(v) above, at the rate per annum that would apply
to such amount if such amount were an ABR Loan.
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44
(e) Liability of the Fronting Bank. Without limiting the
generality of paragraph (b) above, it is expressly understood and agreed that
the absolute and unconditional obligation of the Borrower to reimburse L/C
Disbursements will not be excused by the gross negligence or wilful misconduct
of the Fronting Bank, except as otherwise expressly provided in said paragraph
(b). However, nothing in this Agreement shall be construed to excuse the
Fronting Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by
the Borrower that are caused by the Fronting Bank's gross negligence or wilful
misconduct in determining whether drafts and other documents presented under a
Letter of Credit comply with the terms thereof. It is understood that the
Fronting Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation in making any payment under any
Letter of Credit and, except as otherwise expressly provided in said paragraph
(b), (i) the Fronting Bank's exclusive reliance on the documents presented to it
under such Letter of Credit as to any and all matters set forth therein,
including reliance on the amount of any draft presented under such Letter of
Credit, whether or not the amount due to the beneficiary thereunder equals the
amount of such draft and whether or not any document presented pursuant to such
Letter of Credit proves to be insufficient in any respect, if such document on
its face appears to be in order, and whether or not any other statement or any
other document presented pursuant to such Letter of Credit proves to be forged
or invalid or any statement therein proves to be inaccurate or untrue in any
respect whatsoever and (ii) any noncompliance in any immaterial respect of the
documents presented under such Letter of Credit with the terms thereof shall, in
each case, be deemed not to constitute wilful misconduct or gross negligence of
such Fronting Bank.
(f) Resignation or Removal of a Fronting Bank. The Fronting
Bank may resign at any time by giving 180 days' prior written notice to the
Administrative Agent, the Lenders and the Borrower, and may be removed at any
time by the Borrower by notice to the Fronting Bank, the Administrative Agent
and the Lenders, subject in each case to the appointment by the Borrower of a
replacement Fronting Bank reasonably satisfactory to the Administrative Agent,
provided that (i) The Chase Manhattan Bank shall not resign as the Fronting Bank
hereunder for any reason other than compliance with applicable legal and
regulatory requirements and (ii) no Fronting Bank may resign as to any Letter of
Credit previously issued by it. Subject to the next succeeding sentences of this
paragraph (f), upon the acceptance of any appointment as the Fronting Bank
hereunder by a successor Fronting Bank, such successor shall succeed to and
become vested with all the interests, rights and obligations of the retiring
Fronting Bank and the retiring Fronting Bank shall be discharged from its
obligations to issue additional Letters of Credit hereunder to the extent of the
commitment of the successor Fronting Bank to provide Letters of Credit. At the
time such removal or resignation shall become effective, the Borrower shall pay
all accrued and unpaid fees of such Fronting Bank pursuant to Section
2.05(b)(ii). The acceptance of any appointment as Fronting Bank hereunder by a
successor Fronting Bank shall be evidenced by an agreement entered into by such
successor, in a form satisfactory to the Borrower and the Administrative Agent,
and, from and after the effective date of such agreement, (i) such successor
Fronting Bank shall have all the rights and obligations of its predecessor
Fronting Bank under this Agreement and the other Loan Documents and (ii)
references herein and in the other Loan Documents to the term "Fronting Bank"
shall be deemed to refer to such successor or to such predecessor Fronting Bank,
or to such successor and all predecessor and current Fronting Banks, as the
context shall require. After the resignation or removal of a Fronting Bank
hereunder, such retiring Fronting Bank shall remain a party hereto and shall
continue to have all the rights and obligations of a Fronting Bank under this
Agreement and the other Loan Documents with respect to Letters of Credit issued
by it prior to such resignation or removal, but shall not be required to issue
additional Letters of Credit.
(g) Cash Collateralization. If any Event of Default shall
occur and be continuing, the Borrower shall, on the Business Day the Borrower
receives notice from the Administrative Agent or Revolving Credit Lenders with
combined Revolving Credit Commitments representing a majority of the aggregate
Revolving Credit Commitments (or, if the maturity of the Loans has been
accelerated, Revolving Credit Lenders holding participations in outstanding
Letters of Credit representing a majority of the aggregate undrawn amount of all
outstanding Letters of Credit) thereof
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45
and of the amount to be deposited, deposit in an account with the Collateral
Agent, for the benefit of the Revolving Credit Lenders an aggregate amount in
cash equal to the Revolving L/C Exposure as of such date. Such deposit shall be
held by the Collateral Agent as collateral for the payment and performance of
the Obligations. The Collateral Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal, over such account. Other than any
interest earned on the investment of such deposits in Permitted Investments,
which investments shall be made at the option and sole discretion of the
Collateral Agent (provided that the Collateral Agent shall use reasonable
efforts to make such investments), such deposits shall not bear interest.
Interest or profits, if any, on such investments shall accumulate in such
account. Moneys in such account shall (a) automatically be applied by the
Administrative Agent to reimburse the Fronting Bank for L/C Disbursements that
have not been reimbursed, (b) be held for the satisfaction of the reimbursement
obligations of the Borrower for the Revolving L/C Exposure and (c) if the
maturity of the Loans has been accelerated (but subject to the consent of
Revolving Credit Lenders holding participations in outstanding Letters of Credit
representing greater than 50% of the aggregate undrawn amount of all outstanding
Letters of Credit), be applied to satisfy the Obligations. If the Borrower is
required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower within three Business Days after
all Events of Default have been cured or waived.
(h) Additional Fronting Banks. From time to time, the Borrower
may by notice to the Administrative Agent designate additional Fronting Banks
reasonably satisfactory to the Administrative Agent. Such additional Fronting
Banks shall execute a counterpart of this Agreement upon approval of the
Administrative Agent (which shall not be unreasonably withheld) and shall
thereafter be Fronting Banks hereunder for all purposes and shall have the
Revolving L/C Commitment noted under their signature and, if applicable, the
Revolving L/C Commitment of any other Fronting Bank shall be reduced by the
amount or amounts specified to the Administrative Agent and each affected
Fronting Bank and delivered concurrently with any notice of designation of an
additional Fronting Bank.
SECTION 2.21. Replacement of Lenders. If any Lender is subject
to an order, judgment or decree of any Governmental Authority that purports to
enjoin or restrain such Lender from making Loans hereunder, then the Borrower
may, at its sole expense and effort and subject to Section 2.15, upon notice to
such Lender and the Administrative Agent, require such Lender to assign and
delegate, at par plus accrued interest and fees, without recourse (in accordance
with and subject to the restrictions contained in Section 9.04), all its
interests, rights and obligations under this Agreement (including all of its
Commitments and the Loans at the time owing to it and participations in Letters
of Credit held by it and its obligations to acquire such participations) to a
financial institution specified by the Borrower (which may be another Lender, if
a Lender accepts such assignment), provided that (i) the Borrower shall have
received the prior written consent of the Administrative Agent (and, if a
Revolving Commitment is being assigned, the Fronting Bank and Swingline Lender),
which consent shall not unreasonably be withheld or delayed, (ii) such
assignment shall not conflict with or violate any law, rule or regulation or
order of any court or other Governmental Authority and (iii) the Borrower shall
have paid to the assigning Lender all monies accrued and owing hereunder to it
(including pursuant to this Section 2.21).
ARTICLE III. REPRESENTATIONS AND WARRANTIES
Each of AAMM and the Borrower represents and warrants to each
of the Lenders that:
SECTION 3.01. Organization; Powers. Each of AAMM, the Borrower
and each of the Subsidiaries (a) is a corporation duly organized, validly
existing and in good standing (or, if applicable in a foreign jurisdiction,
enjoys the equivalent status under the laws of any jurisdiction of organization
outside the United States) under the laws of the jurisdiction of its
organization, (b) has all requisite power and authority to own its property and
assets and to carry on its business as now
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46
conducted, (c) is qualified to do business in every jurisdiction where such
qualification is required, except where the failure so to qualify could not
reasonably be expected to result in a Material Adverse Effect, and (d) has the
corporate power and authority to execute, deliver and perform its obligations
under each of the Loan Documents and each other agreement or instrument
contemplated thereby to which it is or will be a party and, in the case of the
Borrower, to borrow and otherwise obtain credit hereunder.
SECTION 3.02. Authorization. The execution, delivery and
performance by AAMM, the Borrower and each of the Subsidiaries of each of the
Loan Documents to which it is a party, and, in the case of Acquisitionco, the
Recapitalization Agreement, and the borrowings hereunder and the transactions
forming a part of the Recapitalization (a) have been duly authorized by all
corporate and stockholder action required to be obtained by AAMM, the Borrower,
the Subsidiaries and Acquisitionco and (b) will not (i) violate (A) any
provision of law, statute, rule or regulation, or of the certificate or articles
of incorporation or other constitutive documents or By-laws of AAMM, the
Borrower, any Subsidiary or Acquisitionco, (B) any applicable order of any court
or any rule, regulation or order of any Governmental Authority or (C) any
provision of any indenture, certificate of designation for preferred stock,
agreement or other instrument to which AAMM, the Borrower, any Subsidiary or
Acquisitionco is a party or by which any of them or any of their property is or
may be bound, (ii) be in conflict with, result in a breach of or constitute
(alone or with notice or lapse of time or both) a default under any such
indenture, certificate of designation for preferred stock, agreement or other
instrument, where any such conflict, violation, breach or default referred to in
clause (i) or (ii) of this Section 3.02, individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect, or (iii) result in the
creation or imposition of any Lien upon or with respect to any property or
assets now owned or hereafter acquired by AAMM, the Borrower, any Subsidiary or
Acquisitionco, other than the Liens created by the Loan Documents. Neither AAMM
nor the Borrower has any knowledge that the execution, delivery and performance
by GM of the Preferred Stock Purchase Agreement (as such term is defined in the
Recapitalization Agreement) and each other agreement relating to the
Recapitalization to which it is a party have not been duly authorized by all
stockholder and corporate action required to be obtained by GM.
SECTION 3.03. Enforceability. This Agreement has been duly
executed and delivered by AAMM and the Borrower and constitutes, and each other
Loan Document when executed and delivered by AAMM, the Borrower and each other
Loan Party that is party thereto will constitute, a legal, valid and binding
obligation of AAMM, the Borrower and such Loan Party enforceable against AAMM,
the Borrower and such Loan Party in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting creditors' rights generally and
except as enforceability may be limited by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
SECTION 3.04. Governmental Approvals. No action, consent or
approval of, registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Recapitalization, except
for (a) the filing of Uniform Commercial Code financing statements and filings
with the United States Patent and Trademark Office and the United States
Copyright Office and comparable offices in foreign jurisdictions and equivalent
filings in foreign jurisdictions, (b) recordation of the Mortgages, (c) such as
have been made or obtained and are in full force and effect and (d) such
actions, consents and approvals the failure to obtain or make which could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.05. Financial Statements. The Borrower has
heretofore furnished to the Lenders its consolidated balance sheets and
consolidated statements of operations, cash flows and stockholders' equity (i)
as of and for the fiscal years ended December 31, 1994, December 31, 1995 and
December 31, 1996, audited by and accompanied by the opinion of Ernst & Young
L.L.P., independent public accountants, and (ii) as of and for the fiscal
quarter and the portion of the fiscal year ended June 30, 1997 (in the case of
clause (ii), without footnotes), certified by its chief financial officer. Such
financial statements present fairly the financial condition and results of
operations of
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47
the Borrower and its consolidated subsidiaries (including AAMM) as of such dates
and for such periods. None of the Borrower, its consolidated subsidiaries and
AAMM has or shall have as of the Closing Date any material Guarantee, contingent
liability or liability for taxes, or any long-term lease or unusual forward or
long-term commitment, including any interest rate or foreign currency hedging
transaction, which is not reflected in the foregoing statements or the notes
thereto, other than pursuant to the Loan Documents and except as specifically
disclosed to the Administrative Agent prior to the date hereof in a written
notice that refers to this Section 3.05. Such financial statements were prepared
in accordance with GAAP.
SECTION 3.06. No Material Adverse Change. There has been no
material adverse change in the assets, business, operations, properties or
financial condition of AAMM, the Borrower and the Subsidiaries, taken as a
whole, since December 31, 1996.
SECTION 3.07. Title to Properties; Possession Under Leases.
(a) Each of AAMM, the Borrower and each of the Subsidiaries has good and
marketable title to, or valid leasehold interests in, or easements or other
limited property interests in, all its material properties and assets (including
all Mortgaged Properties), except for minor defects in title that do not
interfere with its ability to conduct its business as currently conducted or to
utilize such properties and assets for their intended purposes. All such
material properties and assets are free and clear of Liens, other than Liens
expressly permitted by Section 6.02.
(b) Each of AAMM, the Borrower and each of the Subsidiaries
has complied with all obligations under all material leases to which it is a
party, except where the failure to comply would not have a Material Adverse
Effect, and all such leases are in full force and effect, except leases in
respect of which the failure to be in full force and effect could not reasonably
be expected to have a Material Adverse Effect. Each of AAMM, the Borrower and
each of the Subsidiaries enjoys peaceful and undisturbed possession under all
such material leases, other than leases which, individually or in the aggregate,
are not material to the Borrower and the Subsidiaries, taken as a whole, and in
respect of which the failure to enjoy peaceful and undisturbed possession could
not reasonably be expected to, individually or in the aggregate, result in a
Material Adverse Effect.
(c) Each of AAMM, the Borrower and each of the Subsidiaries
owns or possesses, or could obtain ownership or possession of, on terms not
materially adverse to it, all patents, trademarks, service marks, trade names,
copyrights, licenses and rights with respect thereto necessary for the present
conduct of its business, without any known conflict with the rights of others,
and free from any burdensome restrictions, except where such conflicts and
restrictions could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect and except as set forth on Schedule 3.07(c).
(d) Except as set forth on Schedule 3.07(d), as of the Escrow
Funding Date, none of AAMM, the Borrower and the Subsidiaries has received any
notice of, or has any knowledge of, any pending or contemplated condemnation
proceeding affecting any of the Mortgaged Properties or any sale or disposition
thereof in lieu of condemnation that remains unresolved as of the Escrow Funding
Date.
(e) None of AAMM, the Borrower and the Subsidiaries is
obligated under any right of first refusal, option or other contractual right to
sell, assign or otherwise dispose of any Mortgaged Property or any interest
therein, except as permitted under Sections 6.02 or 6.05 or as set forth on
Schedule 3.07(e).
SECTION 3.08. Subsidiaries. (a) Schedule 3.08 sets forth as of
the Closing Date the name and jurisdiction of incorporation of each Subsidiary
and, as to each such Subsidiary, the percentage of each class of Capital Stock
owned by the Borrower or by any Subsidiary.
(b) As of the Closing Date, there are no outstanding
subscriptions, options, warrants, calls, rights or other agreements or
commitments (other than stock options granted to
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48
employees or directors and directors' qualifying shares) of any nature relating
to any Capital Stock of the Borrower or any Subsidiary, except under the Loan
Documents and except for the Dauch Options.
SECTION 3.09. Litigation; Compliance with Laws. (a) Except as
set forth in Schedule 3.09, there are not any material actions, suits or
proceedings at law or in equity or by or before any Governmental Authority now
pending or, to the knowledge of the Borrower, threatened against or affecting
AAMM, the Borrower or any Subsidiary or any business, property or rights of any
such person (i) which involve any Loan Document or, as of the Escrow Funding
Date, the Recapitalization or (ii) as to which there is a reasonable possibility
of an adverse determination and which, if adversely determined, could,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect or materially adversely affect the Recapitalization.
(b) None of AAMM, the Borrower, the Subsidiaries and their
respective material properties or assets is in violation of (nor will the
continued operation of their material properties and assets as currently
conducted violate) any law, rule or regulation (including any zoning, building,
Environmental Law, ordinance, code or approval or any building permit) or any
restriction of record or agreement affecting any Mortgaged Property, or is in
default with respect to any judgment, writ, injunction or decree of any
Governmental Authority, where such violation or default could reasonably be
expected to result in a Material Adverse Effect.
SECTION 3.10. Agreements. (a) None of AAMM, the Borrower and
the Subsidiaries is a party to any agreement or instrument or subject to any
corporate restriction that has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(b) None of AAMM, the Borrower and the Subsidiaries is in
default in any manner under any provision of any indenture or other agreement or
instrument evidencing Indebtedness, or any other material agreement or
instrument (including the GM Agreements and the GM MOU) to which it is a party
or by which it or any of its properties or assets are or may be bound, in either
case where such default could reasonably be expected to result in a Material
Adverse Effect. Immediately after giving effect to the Recapitalization, no
Default or Event of Default shall have occurred and be continuing.
(c) As of the Closing Date, each of the GM Agreements (other
than the Lifetime Program Contracts) and the GM MOU are in full force and effect
in accordance with their terms.
SECTION 3.11. Federal Reserve Regulations. (a) None of AAMM,
the Borrower and the Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
(b) No part of the proceeds of any Loan will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately, (i)
to purchase or carry Margin Stock or to extend credit to others for the purpose
of purchasing or carrying Margin Stock or to refund indebt edness originally
incurred for such purpose, or (ii) for any purpose which entails a violation of,
or which is inconsistent with, the provisions of the Regulations of the Board,
including Regulation G, U or X.
SECTION 3.12. Investment Company Act; Public Utility Holding
Company Act. None of AAMM, the Borrower and the Subsidiaries is (a) an
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940 or (b) a "holding company" as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.
SECTION 3.13. Use of Proceeds. The Borrower will use the
proceeds of the Loans and will request the issuance of Letters of Credit only
for the purposes specified in the preamble to this Agreement.
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49
SECTION 3.14. Tax Returns. Each of AAMM, the Borrower and each
of the Subsidiaries has timely filed or caused to be timely filed all Federal,
and all material state and local, tax returns required to have been filed by it
and has paid or caused to be paid all taxes shown thereon to be due and payable
by it and all assessments in excess of $2,000,000 in the aggregate received by
it, except taxes or assessments that are being contested in good faith by
appropriate proceedings in accordance with Section 5.03 and for which the
Borrower has set aside on its books adequate reserves and taxes, assessments,
charges, levies or claims in respect of property taxes for property that AAMM,
the Borrower or a Subsidiary has determined to abandon where the sole recourse
for such tax, assessment, charge, levy or claim is to such property. Each of
AAMM, the Borrower and each of the Subsidiaries has paid in full or made
adequate provision (in accordance with GAAP) for the payment of all taxes due
with respect to all periods ending on or before the Closing Date, which taxes,
if not paid or adequately provided for, could reasonably be expected to have a
Material Adverse Effect. Except as set forth on Schedule 3.14, as of the Escrow
Funding Date, with respect to each of AAMM, the Borrower and each of the
Subsidiaries, (a) no material claims are being asserted in writing with respect
to any taxes, (b) no presently effective waivers or extensions of statutes of
limitation with respect to taxes have been given or requested, (c) no tax
returns are being examined by, and no written notification of intention to
examine has been received from, the Internal Revenue Service or, with respect to
any material potential tax liability, any other taxing authority and (d) no
currently pending issues have been raised in writing by the Internal Revenue
Service or, with respect to any material potential tax liability, any other
taxing authority. For purposes hereof, "taxes" shall mean any present or future
tax, levy, impost, duty, charge, assessment or fee of any nature (including
interest, penalties and additions thereto) that is imposed by any Governmental
Authority.
SECTION 3.15. No Material Misstatements. (a) The written
information, reports, financial statements, exhibits and schedules furnished by
or on behalf of AAMM, the Borrower or any of the Subsidiaries to the
Administrative Agent or any Lender in connection with the negotiation of any
Loan Document or included therein or delivered pursuant thereto (including the
Confidential Information Memorandum dated September 1997 relating to the
Borrower (the "Information Memorandum") but excluding the financial projections
referred to in Section 3.16(b)), when taken as a whole, did not contain, and as
they may be amended, supplemented or modified from time to time, will not
contain, as of the Closing Date any material misstatement of fact and did not
omit, and as they may be amended, supplemented or modified from time to time,
will not omit, to state as of the Closing Date any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were, are or will be made, not materially misleading in their presentation of
the Recapitalization or of AAMM, the Borrower and the Subsidiaries taken as a
whole.
(b) All financial projections concerning AAMM, the Borrower
and the Subsidiaries that are or have been made available to the Administrative
Agent or any Lender by AAMM, the Borrower or any Subsidiary have been or will be
prepared in good faith based upon assumptions (including with respect to the
pricing for the products to be sold by the Borrower to GM and the cost of
productive materials therefor) believed by AAMM and the Borrower to be
reasonable on the Closing Date.
SECTION 3.16. Employee Benefit Plans. Each of AAMM, the
Borrower and the ERISA Affiliates is in compliance with the applicable
provisions of ERISA and the provisions of the Code relating to ERISA and the
regulations and published interpretations thereunder and any similar applicable
non-U.S. law except for such noncompliance which could not reasonably be
expected to result in a Material Adverse Effect. No Reportable Event has
occurred as to which AAMM, the Borrower or any ERISA Affiliate was required to
file a report with the PBGC, other than reports for which the 30 day notice
requirement is waived, reports that have been filed and reports the failure of
which to file could not reasonably be expected to result in a Material Adverse
Effect. As of the Closing Date, the present value of all benefit liabilities
under each Plan of AAMM, the Borrower and the ERISA Affiliates (on a termination
basis and based on those assumptions used to fund such Plan) did not, as of the
last annual valuation date applicable thereto for which a valuation is
available, exceed by more than $10,000,000 the value of the assets of such Plan,
and the present value of all
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50
benefit liabilities of all underfunded Plans (based on those assumptions used to
fund each such Plan) did not, as of the last annual valuation dates applicable
thereto for which valuations are available, exceed by more than $10,000,000 the
value of the assets of all such underfunded Plans. None of AAMM, the Borrower
and the ERISA Affiliates has incurred or could reasonably be expected to incur
any Withdrawal Liability that could reasonably be expected to result in a
Material Adverse Effect. None of AAMM, the Borrower and the ERISA Affiliates
have received any written notification that any Multiemployer Plan is in
reorganization or has been terminated within the meaning of Title IV of ERISA,
and no Multiemployer Plan is reasonably expected to be in reorganization or to
be terminated, where such reorganization or termination has resulted or could
reasonably be expected to result, through increases in the contributions
required to be made to such Plan or otherwise, in a Material Adverse Effect.
SECTION 3.17. Environmental Matters. Except as set forth in
Schedule 3.17:
(a) There has not been a Release or threatened Release of
Hazardous Materials at, on, under or around the properties currently or
formerly owned, operated or leased by AAMM, the Borrower and the
Subsidiaries (the "Properties") in amounts or concentrations which (i)
constitute or constituted a violation of Environmental Laws, except as
could not reasonably be expected to have a Material Adverse Effect;
(ii) would reasonably be expected to give rise to an Environmental
Claim that, in any such case or in the aggregate, is reasonably likely
to result in a Material Adverse Effect; or (iii) could reasonably be
expected to impair materially the fair saleable value of any material
Property;
(b) The Properties and all operations of AAMM, the Borrower
and the Subsidiaries are in compliance, and in all prior periods have
been in compliance, with all Environmental Laws, and all necessary
Environmental Permits have been obtained and are in effect, except to
the extent that such non-compliance or failure to obtain any necessary
permits, in the aggregate, are not reasonably likely to result in a
Material Adverse Effect;
(c) None of AAMM, the Borrower and the Subsidiaries has
received any Environmental Claim in connection with the Properties or
the operations of the Borrower or the Subsidiaries or with regard to
any person whose liabilities for environmental matters AAMM, the
Borrower or the Subsidiaries has retained or assumed, in whole or in
part, contractually, by operation of law or otherwise, which, in either
such case or in the aggregate, is reasonably likely to result in a
Material Adverse Effect;
(d) Hazardous Materials have not been transported from the
Properties, nor have Hazardous Materials been generated, treated,
stored or disposed of at, on, under or around any of the Properties in
a manner that could reasonably give rise to liability under any
Environmental Law, nor have any of AAMM, the Borrower and the
Subsidiaries retained or assumed any liability, contractually, by
operation of law or otherwise, with respect to the generation,
treatment, storage or disposal of Hazardous Materials, which, in each
case, individually or in the aggregate, is reasonably likely to result
in a Material Adverse Effect;
(e) No Lien in favor of any Governmental Authority for (i) any
liability under any Environmental Law or (ii) damages arising from or
costs incurred by such Governmental Authority in response to a Release
or threatened Release of Hazardous Materials into the environment has
been recorded with respect to the Properties except for Liens permitted
by Section 6.02.
For purposes of this Section 3.17, in determining whether any
matter described or referred to in this Section 3.17 would be reasonably likely
to result in a Material Adverse Effect, the fact that GM has indemnified AAMM,
the Borrower or the Subsidiaries with respect thereto shall be taken into
account.
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SECTION 3.18. Capitalization of AAMM and the Borrower. The
authorized Capital Stock, the par value thereof and the amount of such
authorized Capital Stock issued and outstanding for each of AAMM and the
Borrower is set forth on Schedule 3.18 as of the Closing Date (after giving
effect to the Recapitalization). All outstanding shares of Capital Stock of the
Borrower are fully paid and nonassessable and, on and after the Closing Date,
will be owned beneficially and of record by AAMM and, on and after the Closing
Date, will be free and clear of all Liens and encumbrances whatsoever other than
the Liens created by the Loan Documents.
SECTION 3.19. Security Documents. (a) The Pledge Agreement is
effective to create in favor of the Collateral Agent, for the ratable benefit of
the Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined in the Pledge Agreement) and, when the Pledged Stock is
delivered to the Collateral Agent (or, as applicable in the case of Capital
Stock of foreign Subsidiaries, the requisite filings or registrations are made),
the Pledge Agreement will constitute a fully perfected first priority Lien on,
and security interest in, all right, title and interest of the pledgors
thereunder in such Pledged Stock, in each case prior and superior in right to
any other person.
(b) The Security Agreement is effective to create in favor of
the Collateral Agent, for the ratable benefit of the Secured Parties, a legal,
valid and enforceable security interest in the Collateral (as defined in the
Security Agreement) and, when financing statements in appropriate form are filed
in the offices specified on the schedules to the Security Agreement, the
Security Agreement will constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the grantors thereunder in such
Collateral and, to the extent contemplated therein and subject to ss. 9-306 of
the Uniform Commercial Code, the proceeds thereof, in each case prior and
superior in right to any other person, other than with respect to Liens
expressly permitted by Section 6.02.
(c) The Mortgages are effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid
and enforceable Lien on all of the Loan Parties' right, title and interest in
and to the Mortgaged Properties thereunder and, to the extent contemplated
therein and subject to ss. 9-306 of the Uniform Commercial Code, the proceeds
thereof, and when the Mortgages are filed in the offices specified on the
schedules thereto and when financing statements in appropriate form are filed in
the offices specified on the schedules thereto, each Mortgage will constitute an
enforceable mortgage Lien on, and fully perfected security interest in, all
right, title and interest of the Loan Parties in the Mortgaged Property subject
thereto and, to the extent contemplated therein and subject to ss. 9-306 of the
Uniform Commercial Code, the proceeds thereof, in each case prior and superior
in right to any other person, other than with respect to the rights of persons
pursuant to Liens expressly permitted by Section 6.02.
(d) The Intellectual Property Security Agreement is effective
to create in favor of the Collateral Agent, for the ratable benefit of the
Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined in the Intellectual Property Security Agreement), and
when financing statements in appropriate form are filed in the offices specified
on Schedule 3.19 and the Intellectual Property Security Agreement is filed in
the United States Patent and Trademark Office and the United States Copyright
Office, the Intellectual Property Security Agreement will constitute a fully
perfected Lien on, and security interest in, all right, title and interest of
the Loan Parties in such Collateral and, to the extent contemplated therein and
subject to ss. 9-306 of the Uniform Commercial Code, the proceeds thereof, in
each case prior and superior in right to any other person (it being understood
that subsequent recordings in the United States Patent and Trademark Office and
the United States Copyright Office may be necessary to perfect a lien on
registered trademarks, trademark applications and copyrights acquired by the
Loan Parties after the date hereof), other than with respect to the rights of
persons pursuant to Liens expressly permitted by Section 6.02.
SECTION 3.20. Location of Real Property and Leased Premises.
(a) Schedule 3.20 lists completely and correctly as of the Closing Date all real
property owned by the Borrower and the Subsidiaries and the addresses thereof,
other than individual properties that have
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52
an original cost of less than $200,000. As of the Closing Date, the Borrower and
the Subsidiaries own in fee all the real property set forth as being owned by
them on Schedule 3.20.
(b) Schedule 3.20 lists completely and correctly as of the
Closing Date all real property leased by the Borrower and the Subsidiaries and
the addresses thereof. As of the Closing Date, the Borrower and the Subsidiaries
have valid leases in all the real property set forth as being leased by them on
Schedule 3.20.
SECTION 3.21. Solvency. (a) Immediately after the consummation
of the Recapitalization and the other transactions to occur on the Closing Date
and immediately following the making of each Loan made, and the issuance of each
Letter of Credit issued, on the Closing Date and after giving effect to the
application of the proceeds thereof, (i) the fair value of the assets of AAMM,
the Borrower and the Subsidiaries on a consolidated basis, at a fair valuation,
will exceed the debts and liabilities, direct, subordinated, contingent or
otherwise, of AAMM, the Borrower and the Subsidiaries on a consolidated basis;
(ii) the present fair saleable value of the property of AAMM, the Borrower and
the Subsidiaries on a consolidated basis will be greater than the amount that
will be required to pay the probable liability of AAMM, the Borrower and the
Subsidiaries on a consolidated basis on their debts and other liabilities,
direct, subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured; (iii) AAMM, the Borrower and the
Subsidiaries on a consolidated basis will be able to pay their debts and
liabilities, direct, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (iv) AAMM, the Borrower and the
Subsidiaries on a consolidated basis will not have unreasonably small capital
with which to conduct the businesses in which they are engaged as such
businesses are now conducted and are proposed to be conducted following the
Closing Date.
(b) The Borrower does not intend to, and does not believe that
it or any Subsidiary will, incur debts beyond its ability to pay such debts as
they mature, taking into account the timing and amounts of cash to be received
by it or any such Subsidiary and the timing and amounts of cash to be payable on
or in respect of its Indebtedness or the Indebtedness of any such Subsidiary.
SECTION 3.22. Labor Matters. Except as set forth in Schedule
3.22, there are no strikes pending or threatened against AAMM, the Borrower or
any Subsidiary that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. The hours worked and payments
made to employees of AAMM, the Borrower and the Subsidiaries have not been in
violation in any material respect of the Fair Labor Standards Act or any other
applicable law dealing with such matters. All material payments due from AAMM,
the Borrower or any Subsidiary or for which any claim may be made against AAMM,
the Borrower or any Subsidiary, on account of wages and employee health and
welfare insurance and other benefits have been paid or accrued as a liability on
the books of AAMM, the Borrower or such Subsidiary to the extent required by
GAAP. The consummation of the Recapitalization will not give rise to a right of
termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which AAMM, the Borrower or any Subsidiary
(or any predecessor) is a party or by which AAMM, the Borrower or any Subsidiary
(or any predecessor) is bound, other than collective bargaining agreements
which, individually or in the aggregate, are not material to AAMM, the Borrower
and the Subsidiaries taken as a whole.
SECTION 3.23. Insurance. Schedule 3.23 sets forth a true,
complete and correct description of all insurance maintained by or on behalf of
AAMM, the Borrower or the Subsidiaries as of the Closing Date. As of such date,
such insurance is in full force and effect and all premiums have been duly paid.
SECTION 3.24. AAMCM. AAMCM (a) has total assets not in excess
of $100,000, (b) has no Indebtedness and (c) does not own or hold any Capital
Stock of any person.
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53
ARTICLE IV. CONDITIONS OF LENDING
The obligations of (a) the Lenders (i) to make Loans and (ii)
to advance their respective pro rata shares of the Delivered Funds and (b) the
Fronting Bank to issue Letters of Credit hereunder (each, a "Credit Event") are
subject to the satisfaction of the following conditions:
SECTION 4.01. All Credit Events. On the Escrow Funding Date,
on the date of each Borrowing and on the date of each issuance or renewal of a
Letter of Credit (other than a Borrowing in which Revolving Loans are refinanced
with new Revolving Loans as contemplated by Section 2.02(f) without any increase
in the aggregate principal amount of Revolving Loans outstanding and any
extension or renewal of any Letter of Credit without any increase in the stated
amount of such Letter of Credit):
(a) The Administrative Agent shall have received the
Pre-Funding Request or, in the case of a Borrowing, a notice of such
Borrowing as required by Section 2.03 (or such notice shall have been
deemed given in accordance with the last paragraph of Section 2.03) or,
in the case of the issuance of a Letter of Credit, the Fronting Bank
and the Administrative Agent shall have received a notice requesting
the issuance of such Letter of Credit as required by Section 2.20(a).
(b) The representations and warranties set forth in Article
III hereof shall be true and correct in all material respects on and as
of the date of the Escrow Funding or such Borrowing or issuance of such
Letter of Credit, as the case may be, with the same effect as though
made on and as of such date, except to the extent such representations
and warranties expressly relate to an earlier date.
(c) At the time of and immediately after the Escrow Funding or
such Borrowing or issuance of such Letter of Credit, as the case may
be, no Event of Default or Default shall have occurred and be
continuing.
The Escrow Funding, each Borrowing and each issuance of a Letter of Credit
(except those specified in the parenthetical contained in the introductory
paragraph of this Section 4.01) shall be deemed to constitute a representation
and warranty by the Borrower on the date of the Escrow Funding or such Borrowing
or issuance, as the case may be, as to the matters specified in paragraphs (b)
and (c) of this Section 4.01. The conditions set forth in this Section 4.01
shall not be required to be satisfied on the Closing Date.
SECTION 4.02. First Credit Event--The Escrow Funding. On the
Escrow Funding Date:
(a) The Administrative Agent shall have received, on behalf of
itself, the Lenders and the Fronting Bank, a favorable written opinion
of (i) Simpson Thacher & Bartlett, special counsel for AAMM and the
Borrower, substantially to the effect set forth in Exhibit K-1, (ii)
Patrick Lancaster, general counsel for the Borrower, substantially to
the effect set forth in Exhibit K-2, and (iii) Dykema, Gossett PLLC,
special counsel for the Borrower, substantially to the effect set forth
in Exhibit K-3, in each case (A) dated the Escrow Funding Date, (B)
addressed to the Fronting Bank, the Administrative Agent and the
Lenders, and (C) covering such other matters relating to the Loan
Documents and the Recapitalization as the Administrative Agent shall
reasonably request, and each of AAMM and the Borrower hereby instructs
its counsel to deliver such opinions.
(b) All legal matters incident to this Agreement, the
borrowings and extensions of credit hereunder and the other Loan
Documents shall be reasonably satisfactory to the Administrative Agent,
to the Lenders and to the Fronting Bank.
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(c) The Administrative Agent shall have received in the case
of each Loan Party each of the items referred to in clauses (A), (B)
and (C) below: (A) a copy of the certificate or articles of
incorporation, including all amendments thereto, of each Loan Party,
certified as of a recent date by the Secretary of State of the state of
its organization, and a certificate as to the good standing of each
Loan Party as of a recent date from such Secretary of State; (B) a
certificate of the Secretary or Assistant Secretary of each Loan Party
dated the Escrow Funding Date and certifying (w) that attached thereto
is a true and complete copy of the by-laws of such Loan Party as in
effect on the Closing Date and at all times since a date prior to the
date of the resolutions described in clause (x) below, (x) that
attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of such Loan Party authorizing the
execution, delivery and performance of the Loan Documents to which such
person is a party and, in the case of the Borrower, the borrowings
hereunder, and that such resolutions have not been modified, rescinded
or amended and are in full force and effect, (y) that the certificate
or articles of incorporation of such Loan Party have not been amended
since the date of the last amendment thereto shown on the certificate
of good standing furnished pursuant to clause (A) above, and (z) as to
the incumbency and specimen signature of each officer executing any
Loan Document or any other document delivered in connection herewith on
behalf of such Loan Party; (C) a certificate of another officer as to
the incumbency and specimen signature of the Secretary or Assistant
Secretary executing the certificate pursuant to (B) above; and (b) such
other documents as the Administrative Agent, the Lenders and the
Fronting Bank may reasonably request.
(d) The Administrative Agent shall have received a certificate
of the Borrower, dated the Escrow Funding Date and signed by a
Financial Officer of and on behalf of the Borrower, confirming
compliance with the conditions precedent set forth in paragraphs (b)
and (c) of Section 4.01.
(e) Each of the Guarantee Agreements and the Indemnity,
Subrogation and Contribution Agreement shall have been duly executed by
the parties thereto and delivered to the Collateral Agent and shall be
in full force and effect.
(f) (i) The Pledge Agreement shall have been duly executed by
the parties thereto and delivered to the Collateral Agent and shall be
in full force and effect, and all the outstanding Capital Stock of the
Borrower owned by AAMM and all the outstanding Capital Stock of each
domestic Subsidiary, and 65% of the outstanding Capital Stock of each
foreign Subsidiary (or, if less, all such Capital Stock) owned directly
by the Borrower or any domestic Subsidiary, shall have been duly and
validly pledged thereunder to the Collateral Agent for the ratable
benefit of the Secured Parties and certificates representing such
shares, accompanied in the case of certificated shares by stock powers
endorsed in blank, shall be in the actual possession of the Collateral
Agent; and (ii) the Security Agreement and the Intellectual Property
Security Agreement shall have been duly executed by the Loan Parties
party thereto and shall have been delivered to the Collateral Agent and
shall be in full force and effect on such date and each document
(including each Uniform Commercial Code financing statement) required
by law or reasonably requested by the Administrative Agent to be filed,
registered or recorded in order to create in favor of the Collateral
Agent for the benefit of the Secured Parties a valid, legal and
perfected first-priority security interest in and lien on the
Collateral described in such agreement (subject to any Lien expressly
permitted by Section 6.02) shall have been delivered to the Collateral
Agent.
(g) The Collateral Agent shall have received (i) the results
of a search of the Uniform Commercial Code filings made with respect to
the Loan Parties in the states in which the chief executive office of
each such person is located and the other jurisdictions in which
Uniform Commercial Code filings are to be made pursuant to the
preceding paragraph, together with copies of the financing statements
disclosed by such search and (ii) the results of equivalent searches
made in each other jurisdiction requested by the Administrative Agent,
in each case accompanied by evidence satisfactory to the
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Administrative Agent that the Liens indicated in any such financing
statement (or similar document) or otherwise disclosed in such searches
would be permitted under Section 6.02 or have been released.
(h) (i) Each of the Mortgages, substantially in the form of
Exhibit G, relating to each of the Mortgaged Properties shall have been
duly executed by the parties thereto and delivered to the Collateral
Agent and shall be in full force and effect, (ii) each of such
Mortgaged Properties shall not be subject to any Lien other than those
expressly permitted under Section 6.02, (iii) a lender's title
insurance policy, paid for by the Borrower, in form and substance
acceptable to the Administrative Agent, insuring such Mortgage as a
first lien on such Mortgaged Property (subject to any Lien expressly
permitted by Section 6.02 or otherwise agreed to by the Administrative
Agent) shall have been received by the Administrative Agent and (iv)
the Collateral Agent shall have received such other documents,
including a policy or policies of title insurance issued by a
nationally recognized title insurance company, together with such
endorsements, coinsurance and reinsurance as may be requested by the
Administrative Agent, insuring the Mortgages as valid first liens on
the Mortgaged Properties, free of Liens other than those expressly
permitted under Section 6.02 or otherwise agreed to by the
Administrative Agent, together with such surveys, abstracts, appraisals
and legal opinions required to be furnished pursuant to the terms of
the Mortgages or this Agreement or as reasonably requested in writing
by the Administrative Agent or the Lenders.
(i) The Administrative Agent shall have received copies of, or
an insurance broker's or agent's certificate as to coverage under, the
insurance policies required by Section 5.02 and the applicable
provisions of the Security Documents, each of which policies shall be
endorsed or otherwise amended to include a "standard" or "New York"
lender's loss payable endorsement and to name the Collateral Agent as
additional insured, in form and substance satisfactory to the
Administrative Agent.
(j) The Administrative Agent shall have received an
environmental assessment report in form, scope and substance reasonably
satisfactory to the Lenders, from Environmental Strategies Corporation,
as to any environmental hazards, liabilities or Remedial Action to
which AAMM, the Borrower or any of their respective subsidiaries may be
subject.
(k) The GM Preferred Stock Purchase shall have been
consummated simultaneously with the Escrow Funding in accordance in all
material respects with applicable law, the GM Preferred Stock Purchase
Agreement and all related documentation, in each case in the form
previously approved by the Administrative Agent and otherwise on terms
reasonably satisfactory to the Administrative Agent in all material
respects; the conditions to Acquisitionco's obligations set forth in
the Recapitalization Agreement shall have been satisfied (other than
any conditions that, by their terms, cannot be satisfied on the Escrow
Funding Date) without giving effect to any waiver or amendment in any
manner adverse to the Lenders that was not approved by all the Lenders;
the Administrative Agent shall be reasonably satisfied that the
Recapitalization will occur at or before 5:00 p.m., New York City time,
on the date that is two Business Days after the consummation of the GM
Preferred Stock Purchase; and the Lenders shall be satisfied that the
aggregate level of fees and expenses to be paid in connection with the
Recapitalization and this Agreement and the transactions contemplated
hereby shall not exceed $51,000,000.
(l) The Lenders shall be reasonably satisfied that the
Borrower will be able to consummate the Permitted Lease Financing and
that the definitive documentation with respect thereto will be executed
on a timely basis consistent with the Borrower's projected capital
expenditures for Manufacturing Equipment based on the information and
projections and the financial model delivered to the Lenders prior to
the date hereof.
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(m) The GM Agreements and the GM MOU shall be in full force
and effect in accordance with their respective terms, in each case in
the form previously approved by the Administrative Agent, without
giving effect to any waiver or amendment in any manner materially
adverse to the Lenders.
(n) The Lenders shall be reasonably satisfied that, after
giving effect to the Recapitalization, including the repayment of the
Existing Indebtedness (i) AAMM, the Borrower and the Subsidiaries shall
have outstanding no preferred stock and no Indebtedness other than
Loans hereunder and Indebtedness otherwise permitted under Section
6.01, (ii) AAMM shall have no outstanding Capital Stock other than
common stock owned by the Investors and the Continuing Shareholders and
(iii) the Borrower shall have no outstanding Capital Stock other than
the common stock owned by AAMM and the Dauch Options.
(o) The Administrative Agent shall have received a pro forma
consolidated balance sheet of AAMM, together with a certificate of the
Borrower, dated the Escrow Funding Date and signed by a Financial
Officer of the Borrower, to the effect that such statement fairly
presents the pro forma financial position of AAMM, the Borrower and the
Subsidiaries after giving effect to the Recapitalization and the Credit
Events to occur on the Closing Date as if such transactions occurred as
of the last day of the most recent fiscal month ended before the
Closing Date for which financial statements are available, and the
Lenders shall be reasonably satisfied that such balance sheet and the
Recapitalization and the financing arrangements contemplated hereby are
consistent with the sources and uses of funds delivered to the Lenders
prior to the date hereof and are not materially inconsistent with the
information, projections and financial models delivered to the Lenders
prior to the date hereof.
(p) The Lenders shall have received a solvency letter in form
and substance satisfactory to the Administrative Agent from Murray,
Devine & Co. as to the solvency of AAMM, the Borrower and the
Subsidiaries on a consolidated basis, after giving effect to the
Recapitalization and the consummation of the other transactions
contemplated hereby.
SECTION 4.03. The Escrow Release. On the Closing Date:
(a) At or prior to 5:00 p.m., New York City time, the
Recapitalization (other than the GM Preferred Stock Purchase) shall be
consummated simultaneously with the Escrow Release in accordance with
applicable law, the Recapitalization Agreement and all related
documentation, in each case in the form in effect on the Escrow Funding
Date, without any amendment adverse to the Lenders.
(b) The Recapitalization (other than the GM Preferred Stock
Purchase) shall have been consummated on the date that is no more than
three Business Days after the consummation of the GM Preferred Stock
Purchase.
(c) No order, judgment or decree shall purport to enjoin or
restrain (i) the consummation of the Recapitalization or (ii) any
Lender from making Loans to the Borrower, provided that if fewer than
all the Lenders are so enjoined or restrained, the Borrower shall have
the opportunity to replace the Commitments of any such affected Lender
pursuant to the terms and conditions of Section 2.21.
(d) There shall not have occurred and be continuing any event
that would constitute an Event of Default under paragraph (i) or (j) of
Article VII (in the case of paragraph (i) of Article VII, without
regard to the requirement that the applicable petition or proceeding
continue undismissed for 60 days).
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(e) The Administrative Agent shall have received a certificate
of the Borrower, dated the Closing Date and signed by a Financial
Officer of and on behalf of the Borrower, confirming compliance with
the condition precedent set forth in paragraph (d) above.
(f) The Administrative Agent shall have received all Fees and
other amounts due and payable on or prior to the Closing Date,
including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by the
Borrower hereunder or under any other Loan Document.
(g) Each of the Receivables Purchase Documentation and the
Receivables Sale Agreement shall have been or simultaneously with the
Escrow Release shall be executed and delivered by all parties thereto
and shall be in full force and effect, and the initial purchase of
participations in the receivables pool pursuant to the Receivables
Purchase Documentation shall have occurred or simultaneously with the
Escrow Release shall occur.
ARTICLE V. AFFIRMATIVE COVENANTS
Each of AAMM and the Borrower covenants and agrees with each
Lender that so long as this Agreement shall remain in effect and until the
Commitments have been terminated and the principal of and interest on each Loan,
all Fees and all other expenses or amounts payable under any Loan Document shall
have been paid in full and all Letters of Credit have been canceled or have
expired and all amounts drawn thereunder have been reimbursed in full, unless
the Required Lenders shall otherwise consent in writing, each of AAMM and the
Borrower will, and will cause each of the Subsidiaries (other than the
Receivables Subsidiary) to:
SECTION 5.01. Existence; Businesses and Properties. (a) Do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its legal existence, except as otherwise expressly permitted under
Section 6.05, and except for the liquidation or dissolution of Subsidiaries if
the assets of such corporations to the extent they exceed estimated liabilities
are acquired by the Borrower or a Wholly Owned Subsidiary in such liquidation or
dissolution, provided that Subsidiaries that are Guarantors may not be
liquidated into Subsidiaries that are not Guarantors and domestic Subsidiaries
may not be liquidated into foreign Subsidiaries.
(b) Do or cause to be done all things necessary to obtain,
preserve, renew, extend and keep in full force and effect the rights, licenses,
permits, franchises, authorizations, patents, copyrights, trademarks and trade
names material to the conduct of its business; comply in all material respects
with all applicable laws, rules, regulations (including any zoning, building,
Environmental Law, ordinance, code or approval or any building permits or any
restrictions of record or agreements affecting the Mortgaged Properties) and
orders of any Governmental Authority, whether now in effect or hereafter
enacted; and at all times maintain and preserve all property material to the
conduct of such business and keep such property in good repair, working order
and condition and from time to time make, or cause to be made, all needful and
proper repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection therewith, if any,
may be properly conducted at all times (in each case except as expressly
permitted by this Agreement).
SECTION 5.02. Insurance. (a) Keep its insurable properties
insured at all times by financially sound and reputable insurers in such amounts
as shall be customary for similar businesses and maintain such other reasonable
insurance (including, to the extent consistent with past practices,
self-insurance), of such types, to such extent and against such risks, as is
customary with companies in the same or similar businesses, and maintain such
other insurance as may be required by law or any other Loan Document.
(b) Cause all such property and casualty insurance policies
with respect to the Mortgaged Properties to be endorsed or otherwise amended to
include a "standard" or "New York"
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lender's loss payable endorsement, in form and substance reasonably satisfactory
to the Administrative Agent and the Collateral Agent, which endorsement shall
provide that, from and after the Closing Date, if the insurance carrier shall
have received written notice from the Administrative Agent or the Collateral
Agent of the occurrence of an Event of Default, the insurance carrier shall pay
all proceeds otherwise payable to the Borrower or the Loan Parties under such
policies directly to the Collateral Agent; cause all such policies to provide
that neither the Borrower, the Administrative Agent, the Collateral Agent nor
any other party shall be a coinsurer thereunder and to contain a "Replacement
Cost Endorsement", without any deduction for depreciation, and such other
provisions as the Administrative Agent or the Collateral Agent may reasonably
(in light of a Default or a material development in respect of the insured
Mortgaged Property) require from time to time to protect their interests;
deliver original or certified copies of all such policies or a certificate of an
insurance broker to the Collateral Agent; cause each such policy to provide that
it shall not be canceled, modified or not renewed upon not less than 30 days'
prior written notice thereof by the insurer to the Administrative Agent and the
Collateral Agent; deliver to the Administrative Agent and the Collateral Agent,
prior to the cancelation, modification or nonrenewal of any such policy of
insurance, a copy of a renewal or replacement policy (or other evidence of
renewal of a policy previously delivered to the Administrative Agent and the
Collateral Agent), or insurance certificate with respect thereto, together with
evidence satisfactory to the Administrative Agent and the Collateral Agent of
payment of the premium therefor.
(c) If at any time the area in which the Premises (as defined
in the Mortgages) are located is designated a "flood hazard area" in any Flood
Insurance Rate Map published by the Federal Emergency Management Agency (or any
successor agency), obtain flood insurance in such reasonable total amount as the
Administrative Agent, the Collateral Agent or the Required Lenders may from time
to time reasonably require, and otherwise comply with the National Flood
Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as
it may be amended from time to time.
(d) With respect to each Mortgaged Property, carry and
maintain comprehensive general liability insurance including the "broad form CGL
endorsement" and coverage on an occurrence basis against claims made for
personal injury (including bodily injury, death and property damage) and
umbrella liability insurance against any and all claims, in no event for a
combined single limit of less than $1,000,000, naming the Collateral Agent as an
additional insured, on forms reasonably satisfactory to the Collateral Agent.
(e) Notify the Administrative Agent and the Collateral Agent
promptly whenever any separate insurance concurrent in form or contributing in
the event of loss with that required to be maintained under this Section 5.02 is
taken out by AAMM, the Borrower or any Subsidiary; and promptly deliver to the
Administrative Agent and the Collateral Agent a duplicate original copy of such
policy or policies, or insurance certificate with respect thereto.
(f) In connection with the covenants set forth in this Section
5.02, it is understood and agreed that:
(i) none of the Administrative Agent, the Lenders, the
Fronting Bank and their respective agents or employees shall be liable
for any loss or damage insured by the insurance policies required to be
maintained under this Section 5.02, it being understood that (A) the
Borrower and the other Loan Parties shall look solely to their
insurance companies or any other parties other than the aforesaid
parties for the recovery of such loss or damage and (B) such insurance
companies shall have no rights of subrogation against the
Administrative Agent, the Collateral Agent, the Lenders, the Fronting
Bank or their agents or employees. If, however, the insurance policies
do not provide waiver of subrogation rights against such parties, as
required above, then each of AAMM and the Borrower hereby agree, to the
extent permitted by law, to waive, and to cause each Subsidiary to
waive, its right of recovery, if any, against the Administrative Agent,
the Collateral Agent, the Lenders, the Fronting Bank and their agents
and employees; and
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(ii) the designation of any form, type or amount of insurance
coverage by the Administrative Agent, the Collateral Agent or the
Required Lenders under this Section 5.02 shall in no event be deemed a
representation, warranty or advice by the Administrative Agent, the
Collateral Agent or the Lenders that such insurance is adequate for the
purposes of the business of AAMM, the Borrower and the Subsidiaries or
the protection of their properties.
SECTION 5.03. Taxes. Pay and discharge promptly when due all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits or in respect of its property, before the same shall
become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise which, if unpaid, might give rise to a Lien
upon such properties or any part thereof; provided, however, that such payment
and discharge shall not be required with respect to any such tax, assessment,
charge, levy or claim so long as (a) the validity or amount thereof shall be
contested in good faith by appropriate proceedings and AAMM, the Borrower or the
affected Subsidiary, as applicable, shall have set aside on its books reserves
in accordance with GAAP with respect thereto, (b) such tax, assessment, charge,
levy or claim is in respect of property taxes for property that AAMM, the
Borrower or one of the Subsidiaries has determined to abandon and the sole
recourse for such tax, assessment, charge, levy or claim is to such property or
(c) the amount of such taxes, assessments, charges, levies and claims and
interest and penalties thereon does not exceed $2,000,000 in the aggregate.
SECTION 5.04. Financial Statements, Reports, etc. In the case
of the Borrower, furnish to the Administrative Agent and each Lender:
(a) within 120 days after the end of fiscal 1997 and within 90
days after the end of each subsequent fiscal year, a consolidated
balance sheet and related statements of operations, cash flows and
stockholders' equity showing the financial condition of AAMM, the
Borrower and the Subsidiaries as of the close of such fiscal year and
the consolidated results of their operations during such year, all
audited by independent public accountants of recognized national
standing reasonably acceptable to the Administrative Agent and
accompanied by an opinion of such accountants (which shall not be
qualified in any material respect) to the effect that such consolidated
financial statements fairly present the financial condition and results
of operations of AAMM, the Borrower and the Subsidiaries on a
consolidated basis in accordance with GAAP;
(b) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year, a consolidated balance sheet and
related statements of operations, cash flows and stockholders' equity
showing the financial condition of AAMM, the Borrower and the
Subsidiaries as of the close of such fiscal quarter and the
consolidated results of their operations during such fiscal quarter and
the then-elapsed portion of the fiscal year, all certified by one of
its Financial Officers on behalf of the Borrower as fairly presenting
the financial condition and results of operations of AAMM, the Borrower
and the Subsidiaries on a consolidated basis in accordance with GAAP
(except for the absence of footnotes), subject to normal year-end audit
adjustments;
(c) concurrently with any delivery of financial statements
under (a) or (b) above, a certificate of the accounting firm or
Financial Officer on behalf of the Borrower opining on or certifying
such statements (which certificate, when furnished by an accounting
firm, may be limited to accounting matters and disclaim responsibility
for legal interpretations) (i) certifying that no Event of Default or
Default has occurred or, if such an Event of Default or Default has
occurred, specifying the nature and extent thereof and any corrective
action taken or proposed to be taken with respect thereto and (ii)
setting forth computations in reasonable detail satisfactory to the
Administrative Agent demonstrating compliance with the covenants
contained in Sections 6.10, 6.11, 6.12 and 6.13 (it being understood
that the information required by this clause (ii) may be provided in a
certificate of a Financial Officer on behalf of the Borrower instead of
from such accounting firm);
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(d) promptly after the same become publicly available, copies
of all periodic and other publicly available reports, proxy statements
and, to the extent requested by the Administrative Agent, other
materials filed by AAMM, the Borrower or any Subsidiary with the
Securities and Exchange Commission, or any governmental authority
succeeding to any of or all the functions of said Commission, or with
any national securities exchange, or distributed to its shareholders
generally, as the case may be;
(e) if, as a result of any change in accounting principles and
policies from those as in effect on the date of this Agreement, the
consolidated financial statements of AAMM, the Borrower and the
Subsidiaries delivered pursuant to paragraph (a) or (b) above will
differ in any material respect from the consolidated financial
statements that would have been delivered pursuant to such clauses had
no such change in accounting principles and policies been made, then,
together with the first delivery of financial statements pursuant to
paragraph (a) and (b) above following such change, a schedule prepared
by a Financial Officer on behalf of the Borrower reconciling such
changes to what the financial statements would have been without such
changes;
(f) within 90 days after the beginning of each fiscal year, a
copy of an operating and capital expenditure budget for such fiscal
year;
(g) promptly following the creation or acquisition of any
Subsidiary, a certificate from a Responsible Officer, identifying such
new Subsidiary and the ownership interest of the Borrower and the
Subsidiaries therein;
(h) simultaneously with the delivery of any financial
statements pursuant to paragraph (a) or (b) above, a balance sheet and
related statements of operations, cash flows and stockholder's equity
for each unconsolidated Subsidiary for the applicable period;
(i) promptly, a copy of all reports submitted in connection
with any material interim or special audit made by independent
accountants of the books of AAMM, the Borrower or any Subsidiary; and
(j) promptly, from time to time, such other information
regarding the operations, business affairs and financial condition of
AAMM, the Borrower or any Subsidiary, or compliance with the terms of
any Loan Document, or such consolidating financial statements, as in
each case the Administrative Agent or any Lender, acting through the
Administrative Agent, may reasonably request.
SECTION 5.05. Litigation and Other Notices. Furnish to the
Administrative Agent written notice of the following promptly after any
Responsible Officer of the Borrower obtains actual knowledge thereof:
(a) any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) proposed to be taken
with respect thereto;
(b) the delivery of any notice by GM to AAMM, the Borrower or
any Subsidiary pursuant to the terms of any GM Agreement (i) to the
effect that GM intends to exercise any right GM may have under such
agreement not to renew such agreement with respect to any product
supplied by the Borrower or any Subsidiary to GM thereunder, (ii) to
the effect that any product supplied by the Borrower or any Subsidiary
to GM thereunder is not competitive in terms of technology, design or
quality with similar products available to GM from other suppliers or
(iii) with respect to any other event or circumstance that could
reasonably be expected to result in a Material Adverse Effect;
(c) the filing or commencement of, or any written threat or
notice of intention of any person to file or commence, any action, suit
or proceeding, whether at law or in equity or by
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or before any Governmental Authority, against AAMM, the Borrower or any
Subsidiary in respect of which there is a reasonable possibility of an
adverse determination and which, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect; and
(d) any other development specific to AAMM, the Borrower or
any Subsidiary that is not a matter of general public knowledge and
that has resulted in, or could reasonably be expected to result in, a
Material Adverse Effect.
SECTION 5.06. Employee Benefits. (a) Comply in all material
respects with the applicable provisions of ERISA and the provisions of the Code
relating to ERISA and any applicable similar non-U.S. law and (b) furnish to the
Administrative Agent (i) as soon as possible after, and in any event within 30
days after any Responsible Officer of AAMM, the Borrower or any ERISA Affiliate
knows or has reason to know that, any Reportable Event has occurred, a statement
of a Financial Officer setting forth details as to such Reportable Event and the
action proposed to be taken with respect thereto, together with a copy of the
notice, if any, of such Reportable Event given to the PBGC, (ii) promptly after
any Responsible Officer learns of receipt thereof, a copy of any notice that the
Borrower or any ERISA Affiliate may receive from the PBGC relating to the
intention of the PBGC to terminate any Plan or Plans (other than a Plan
maintained by an ERISA Affiliate that is considered an ERISA Affiliate only
pursuant to subsection (m) or (o) of Code Section 414) or to appoint a trustee
to administer any such Plan, (iii) within 30 days after the due date for filing
with the PBGC pursuant to Section 412(n) of the Code a notice of failure to make
a required installment or other payment with respect to a Plan, a statement of a
Financial Officer setting forth details as to such failure and the action
proposed to be taken with respect thereto, together with a copy of any such
notice given to the PBGC and (iv) promptly after any Responsible Officer learns
thereof and in any event within 30 days after receipt thereof by AAMM, the
Borrower or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy
of each notice received by AAMM, the Borrower or any ERISA Affiliate concerning
(A) the imposition of Withdrawal Liability or (B) a determination that a
Multiemployer Plan is, or is expected to be, terminated or in reorganization, in
each case within the meaning of Title IV of ERISA, provided that in the case of
each of clauses (i) through (iv) above, notice to the Administrative Agent shall
only be required if such event or condition, together with all other events or
conditions referred to in clauses (i) through (iv) above, could reasonably be
expected to result in liability of AAMM, the Borrower or any Subsidiary in an
aggregate amount exceeding $10,000,000.
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections. Maintain all financial records in accordance with GAAP and permit
any persons designated by the Administrative Agent or any Lender to visit and
inspect the financial records and the properties of AAMM, the Borrower or any
Subsidiary at reasonable times, upon reasonable prior notice to AAMM or the
Borrower, and as often as reasonably requested and to make extracts from and
copies of such financial records, and permit any persons designated by the
Administrative Agent or any Lender upon reasonable prior notice to AAMM or the
Borrower to discuss the affairs, finances and condition of the Borrower or any
Subsidiary with the officers thereof and independent accountants therefor
(subject to reasonable requirements of confidentiality, including requirements
imposed by law or by contract).
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans
and request the issuance of Letters of Credit only for the purposes set forth in
the preamble to this Agreement.
SECTION 5.09. Compliance with Environmental Laws. Comply, and
make reasonable efforts to cause all lessees and other persons occupying its
Properties to comply, with all Environmental Laws and Environmental Permits
applicable to its operations and Properties; obtain and renew all material
Environmental Permits necessary for its operations and Properties; and conduct
any Remedial Action in accordance with Environmental Laws, except, in each case
with respect to this Section 5.09, to the extent the failure to do so,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
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SECTION 5.10. Preparation of Environmental Reports. If a
default caused by reason of a breach of Section 3.18 or 5.09 shall have occurred
and be continuing, at the request of the Required Lenders through the
Administrative Agent, provide to the Lenders within 90 days after such request,
at the expense of the Borrower, an environmental site assessment report for the
Properties which are the subject of such default prepared by an environmental
consulting firm acceptable to the Administrative Agent, indicating the presence
or absence of Hazardous Materials and the estimated cost of any Remedial Action
required under any applicable Environmental Law in connection with such
Properties.
SECTION 5.11. Further Assurances. Execute any and all further
documents, financing statements, agreements and instruments, and take all
further action (including filing Uniform Commercial Code and other financing
statements, mortgages and deeds of trust) that may be required under applicable
law, or which the Collateral Agent may reasonably request, in order to
effectuate the transactions contemplated by the Loan Documents and in order to
grant, preserve, protect and perfect the validity and first priority (subject to
Liens permitted by Section 6.02) of the security interests created or intended
to be created by the Security Documents. In addition, from time to time, AAMM,
the Borrower and the Subsidiaries will, at their cost and expense, on or
promptly (but in any event within 10 Business Days) following the date of
acquisition by the Borrower or any Subsidiary of any new subsidiary (subject to
the receipt of any required consents from Governmental Authorities) promptly
secure the Obligations by causing the following to occur: (i) promptly upon
creating or acquiring any additional subsidiary, the Capital Stock of such
subsidiary will (unless such subsidiary is a subsidiary of a foreign Subsidiary)
be pledged pursuant to the Pledge Agreement, provided that no more than 65% of
the Capital Stock of any foreign subsidiary shall be required to be pledged
pursuant to this Section 5.11, and (ii) such subsidiary will (unless such
subsidiary is a foreign subsidiary or less than 90% of the Capital Stock of such
subsidiary is owned by the Borrower and the Subsidiaries) (A) become a party to
the Security Agreement, the Intellectual Property Security Agreement and the
Pledge Agreement (if such subsidiary owns Capital Stock of any subsidiary) as
contemplated under each such agreement, (B) enter into the Subsidiary Guarantee
agreement (or become a party thereto if the Subsidiary Guaranty Agreement shall
be in effect at such time) and, together with the Borrower, the Indemnity,
Subrogation and Contribution Agreement (or become a party thereto if the
Indemnity, Subrogation and Contribution Agreement shall be in effect at such
time) and (C) if such subsidiary owns any real property located in the United
States having a value at the time of acquisition of such subsidiary in excess of
$2,500,000, enter into and deliver to the Collateral Agent a Mortgage in respect
of such property. All such security interests and Liens will be created under
the Security Documents and other instruments and documents in form and substance
reasonably satisfactory to the Collateral Agent, and AAMM, the Borrower and the
Subsidiaries shall deliver or cause to be delivered to the Administrative Agent
all such instruments and documents (including legal opinions and lien searches)
as the Required Lenders shall reasonably request to evidence compliance with
this Section 5.11. AAMM and the Borrower agree to provide, and to cause each
Subsidiary to provide, such evidence as the Collateral Agent shall reasonably
request as to the perfection and priority status of each such security interest
and Lien. The Borrower will not be required to (i) cause any Subsidiary in which
it has made an investment pursuant to Section 6.04(k) to comply with the
provisions of this Section 5.11 or (ii) pledge its equity interest in any Other
Investments or Subsidiary in which it has made an investment pursuant to Section
6.04(k) if the creation of such pledge would violate a contractual obligation
applicable to the Borrower or any Subsidiary of which the Borrower has been
unable to obtain a waiver despite its use of reasonable efforts to do so.
SECTION 5.12. Fiscal Year; Accounting. In the case of each of
AAMM, the Borrower and each of the Subsidiaries, cause its respective fiscal
year to end on December 31.
SECTION 5.13. Dividends. In the case of the Borrower, permit
its Subsidiaries to pay dividends and cause such dividends to be paid to the
extent required to pay the monetary Obligations, subject to restrictions
permitted by Section 6.09(e) and to prohibitions imposed by applicable
requirements of law.
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SECTION 5.14. Interest Rate Protection Agreements. In the case
of the Borrower, as promptly as practicable and in any event within 60 days
after the Closing Date, enter into, and thereafter maintain in effect for a
period of at least three years following the Closing Date, one or more Interest
Rate Protection Agreements with any of the Lenders or other financial
institutions reasonably satisfactory to the Administrative Agent, the effect of
which shall be to limit at all times the interest payable in connection with
Indebtedness having an aggregate outstanding principal amount not less than an
amount equal to 30% of the aggregate principal amount of Term Borrowings to a
maximum rate and on terms and conditions reasonably acceptable, taking into
account current market conditions, to the Administrative Agent (it being agreed
that the terms and conditions of the Existing Hedging Agreement are acceptable
to the Administrative Agent), and deliver evidence of the execution and delivery
thereof to the Administrative Agent.
SECTION 5.15. Surveys. Within 60 days after the Closing Date,
furnish the Collateral Agent with (a) an as-built survey of each Mortgaged
Property, in form and substance satisfactory to the Collateral Agent and (b)
endorsements to the title policies required by Section 4.02(h), providing
access, survey, comprehensive (Restrictions, Encroachments and Minerals), tax
lot and contiguity coverage.
SECTION 5.16. Dissolution of AAMCM. As promptly as practicable
and in any event within 60 days after the Closing Date, dissolve AAMCM and
distribute its assets, if any, to AAMM or the Borrower. AAMM and the Borrower
shall and shall cause AAMCM to do all things necessary to ensure that the
representation set forth in Section 3.24 will remain true at all times prior to
such dissolution and distribution.
ARTICLE VI. NEGATIVE COVENANTS
Each of AAMM and the Borrower covenants and agrees with each
Lender that, so long as this Agreement shall remain in effect and until the
Commitments have been terminated and the principal of and interest on each Loan,
all Fees and all other expenses or amounts payable under any Loan Document have
been paid in full and all Letters of Credit have been canceled or have expired
and all amounts drawn thereunder have been reimbursed in full, unless the
Required Lenders shall otherwise consent in writing, neither AAMM nor the
Borrower will, and neither will cause or permit any of the Subsidiaries (other
than the Receivables Subsidiary, except in the case of Section 6.08(c)) to:
SECTION 6.01. Indebtedness. Incur, create, assume or permit to
exist any Indebtedness, except:
(a) Indebtedness existing on the date hereof and set forth in
Schedule 6.01, but not any extensions, renewals or replacements of such
Indebtedness except (i) renewals and extensions expressly provided for
in the agreements evidencing any such Indebtedness as the same are in
effect on the date of this Agreement and (ii) refinancings and
extensions of any such Indebtedness if the average life to maturity
thereof is greater than or equal to that of the Indebtedness being
refinanced or extended, provided that such extending, renewal or
replacement Indebtedness shall not be (A) Indebtedness of an obligor
that was not an obligor with respect to the Indebtedness being
extended, renewed or refinanced or (B) in a principal amount which
exceeds the Indebtedness being renewed, extended or refinanced (plus
unpaid accrued interest and premium thereon);
(b) Indebtedness created hereunder and under the other Loan
Documents;
(c) in the case of the Guarantors, the Guarantees under the
Guarantee Agreements;
(d) Indebtedness of the Borrower and the Subsidiaries pursuant
to Interest Rate Protection Agreements entered into in order to fix the
effective rate of interest on the Loans
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and other Indebtedness, provided that such transactions shall be
entered into to hedge actual interest rate exposures and not for the
purpose of speculation;
(e) Indebtedness owed to (including obligations in respect of
letters of credit for the benefit of) any person providing worker's
compensation, health, disability or other employee benefits or
property, casualty or liability insurance to the Borrower or any
Subsidiary, pursuant to reimbursement or indemnification obligations to
such person;
(f) (i) Indebtedness of the Borrower or any Wholly Owned
Subsidiary that is a Guarantor to any Subsidiary or to the Borrower;
(ii) Indebtedness of the Borrower or any Wholly Owned Subsidiary that
is not a Guarantor to any Subsidiary that is not a Guarantor; and (iii)
Indebtedness of any Subsidiary to the Borrower or any Subsidiary
arising from an investment made pursuant to Section 6.04;
(g) Indebtedness of the Borrower or a Subsidiary which
represents the assumption by the Borrower or such Subsidiary of
Indebtedness of a Subsidiary in connection with the permitted merger of
such Subsidiary with or into the assuming person or the purchase of all
or substantially all the assets of such Subsidiary;
(h) Indebtedness of the Borrower or the Subsidiaries in
respect of performance bonds, bid bonds, appeal bonds, surety bonds and
similar obligations and trade-related letters of credit, in each case
provided in the ordinary course of business, including those incurred
to secure health, safety and environmental obligations in the ordinary
course of business, and any extension, renewal or refinancing thereof
to the extent not provided to secure the repayment of other
Indebtedness and to the extent that the amount of refinancing
Indebtedness is not greater than the amount of Indebtedness being
refinanced;
(i) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument drawn
against insufficient funds in the ordinary course of business, provided
that such Indebtedness is extinguished within two Business Days of its
incurrence;
(j) Indebtedness of a Subsidiary acquired after the date
hereof and Indebtedness of a corporation merged or consolidated with or
into the Borrower or a Subsidiary after the date hereof, which
Indebtedness in each case exists at the time of such acquisition,
merger, consolidation or conversion into a Subsidiary and is not
created in contemplation of such event and where such acquisition,
merger or consolidation is permitted by this Agreement, provided that
the aggregate principal amount of Indebtedness under this paragraph (j)
shall not at any time exceed $15,000,000 for the Borrower and all
Subsidiaries;
(k) Capital Lease Obligations, Mortgage financings and
purchase money Indebtedness incurred by the Borrower or any Subsidiary
prior to or within 270 days after a Capital Expenditure permitted under
Section 6.10 in order to finance such Capital Expenditure, and
extensions, renewals and refinancings thereof in an aggregate principal
amount outstanding at any time not in excess of $25,000,000, provided
that any such refinancing Indebtedness shall not be (i) Indebtedness of
an obligor that was not an obligor with respect to the Indebtedness
being extended, renewed or refinanced or (ii) in a principal amount
which exceeds the Indebtedness being renewed, extended or refinanced;
(l) Capital Lease Obligations incurred by the Borrower or any
Subsidiary in respect of any Sale and Leaseback Transaction that is
permitted under Section 6.03;
(m) Indebtedness in respect of the Existing Lease;
(n) Indebtedness of the Borrower or any Subsidiary supported
by a Letter of Credit, in a principal amount not in excess of the
stated amount of such Letter of Credit;
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(o) Indebtedness incurred pursuant to any Permitted
Receivables Financing, Permitted Lease Financing or Additional Lease
Financing;
(p) other Indebtedness of the Borrower and the domestic
Subsidiaries, provided that at no time shall the sum of (i) the
aggregate principal amount of Indebtedness incurred pursuant to this
paragraph (p) plus (ii) the aggregate Remaining Present Value of leases
entered into pursuant to Section 6.03(b) exceed $25,000,000;
(q) other Indebtedness of foreign Subsidiaries in an aggregate
principal amount at any time outstanding not in excess of $5,000,000;
and
(r) all premium (if any), interest (including post-petition
interest), fees, expenses, indemnities, charges and additional or
contingent interest on obligations described in clauses (a) through (q)
above.
SECTION 6.02. Liens. Create, incur, assume or permit to exist
any Lien on any property or assets (including stock or other securities of any
person, including any Subsidiary) at the time owned by it or on any income or
revenues or rights in respect of any thereof, or sell or transfer any account
receivable or any right in respect thereof, except:
(a) Liens on property or assets of the Borrower and the
Subsidiaries existing on the date hereof and set forth in Schedule
6.02, provided that such Liens shall secure only those obligations
which they secure on the date hereof (and extensions, renewals and
refinancings of such obligations permitted by Section 6.01(a)) and
shall not subsequently apply to any other property or assets of AAMM,
the Borrower or any Subsidiary (other than pursuant to existing after
acquired property clauses);
(b) any Lien created under the Loan Documents or permitted in
respect of any Mortgaged Property by the terms of the applicable
Mortgage;
(c) any Lien existing on any property or asset of the Borrower
or any Subsidiary prior to the acquisition thereof by the Borrower or
any Subsidiary, provided that (i) such Lien is not created in
contemplation of or in connection with such acquisition and (ii) such
Lien does not apply to any other property or asset of the Borrower or
any Subsidiary;
(d) any Lien on any property or asset of a Subsidiary securing
Indebtedness permitted by Section 6.01(j), provided that such Lien does
not apply to any other property or assets of AAMM, the Borrower or any
Subsidiary not securing such Indebtedness at the date of acquisition of
such property or asset (other than after acquired property subjected to
a Lien securing Indebtedness and other obligations incurred prior to
such date and permitted hereunder which contains a requirement for the
pledging of after acquired property);
(e) Liens for taxes, assessments or other governmental charges
or levies not yet delinquent, or which are for less than $2,000,000 in
the aggregate, or which are being contested in compliance with Section
5.03 or for property taxes on property that AAMM, the Borrower or one
of the Subsidiaries has determined to abandon if the sole recourse for
such tax, assessment, charge, levy or claim is to such property;
(f) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business and securing obligations that are not due and payable or that
are being contested in good faith by appropriate proceedings and in
respect of which, if applicable, AAMM, the Borrower or the relevant
Subsidiary shall have set aside on its books reserves in accordance
with GAAP;
(g) pledges and deposits made in the ordinary course of
business in compliance with the Federal Employers Liability Act or any
other workmen's compensation, unemployment
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insurance and other social security laws or regulations and deposits
securing liability to insurance carriers under insurance or
self-insurance arrangements in respect of such obligations;
(h) deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases (other than Capital
Lease Obligations), statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in
the ordinary course of business, including those incurred to secure
health, safety and environmental obligations in the ordinary course of
business;
(i) zoning restrictions, easements, trackage rights, leases
(other than Capital Lease Obligations), licenses, special assessments,
rights-of-way, restrictions on use of real property and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and do not materially detract
from the value of the property subject thereto or interfere with the
ordinary conduct of the business of AAMM, the Borrower or any of the
Subsidiaries;
(j) purchase money security interests in real property,
improvements thereto or equipment hereafter acquired (or, in the case
of improvements, constructed) by the Borrower or any Subsidiary
(including the interests of vendors and lessors under conditional sale
and title retention agreements), provided that (i) such security
interests secure Indebtedness or Sale and Lease-Back Transactions
permitted by Section 6.01, (ii) such security interests are incurred,
and the Indebtedness secured thereby is created, within 270 days after
such acquisition (or construction), (iii) the Indebtedness secured
thereby does not exceed 100% of the cost of such real property,
improvements or equipment at the time of such acquisition (or
construction), including transaction costs incurred by the Borrower or
any Subsidiary in connection with such acquisition (or construction),
(iv) such expenditures are permitted by this Agreement and (v) such
security interests do not apply to any other property or assets of the
Borrower or any Subsidiary (other than to accessions to such real
property, improvements or equipment and provided that individual
financings of equipment provided by a single lender may be
cross-collateralized to other financings of equipment provided solely
by such lender);
(k) Liens arising out of capitalized or operating lease
transactions permitted under Section 6.03 (including Liens arising out
of any Permitted Lease Financing or Additional Lease Financing) and
Liens arising out of the Existing Lease, so long as such Liens attach
only to the property sold and being leased in such transaction and any
accessions thereto or proceeds thereof and related property;
(l) Liens consisting of interests of lessors under capital or
operating leases permitted by Section 6.01;
(m) Liens securing judgments for the payment of money in an
aggregate amount not in excess of $10,000,000 (except to the extent
covered by insurance), unless such judgments shall remain undischarged
for a period of more than 30 consecutive days during which execution
shall not be effectively stayed;
(n) any leases or subleases to other persons of properties or
assets owned or leased by the Borrower or a Subsidiary;
(o) any Lien arising by operation of law pursuant to Section
107(1) of the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. ss.9607(1), or pursuant to analogous state
law, for costs or damages which are not yet due (by virtue of a written
demand for payment by a Governmental Authority) or which are being
contested in compliance with the standard set forth in Section 5.03(a),
or on property that the Borrower or a Subsidiary has determined to
abandon if the sole recourse for such costs or
<PAGE>
67
damages is to such property, provided that the liability of the
Borrower and the Subsidiaries with respect to the matter giving rise to
all such Liens shall not, in the reasonable estimate of the Borrower
(in light of all attendant circumstances, including the likelihood of
contribution by third parties), exceed $10,000,000;
(p) Liens that are contractual rights of setoff (i) relating
to the establishment of depository relations with banks not given in
connection with the issuance of Indebtedness or (ii) pertaining to
pooled deposit and/or sweep accounts of the Borrower and/or any
Subsidiary to permit satisfaction of overdraft or similar obligations
incurred in the ordinary course of business of the Borrower and the
Subsidiaries;
(q) Liens securing obligations in respect of trade-related
letters of credit permitted under Section 6.01 and covering the goods
(or the documents of title in respect of such goods) financed by such
letters of credit;
(r) other Liens with respect to property or assets not
constituting collateral for the Obligations with an aggregate fair
market value (valued at the time of creation thereof) of not more than
$25,000,000 at any time;
(s) (i) Liens on or the sale of accounts receivable and
related assets pursuant to any Permitted Receivables Financing and (ii)
the sale of accounts receivable (other than any accounts receivable for
which GM or any subsidiary of GM is the obligor) in connection with
collection in the ordinary course of business;
(t) Liens disclosed by the title insurance policies delivered
pursuant to Sections 4.02 and 5.11;
(u) construction liens arising in the ordinary course of
business, including liens for work performed for which payment has not
been made, securing obligations that are not due and payable or are
being contested in good faith by appropriate proceedings and in respect
of which, if applicable, AAMM, the Borrower or the relevant Subsidiary
shall have set aside on its books reserves in accordance with GAAP;
(v) the replacement, extension or renewal of any Lien
permitted by clause (c), (d), (j) or (t) above; provided that such
replacement, extension or renewal Lien shall not cover any property
other than the property that was subject to such Lien prior to such
replacement, extension or renewal; and provided further that the
Indebtedness and other obligations secured by such replacement,
extension or renewal Lien are permitted by this Agreement.
Notwithstanding the foregoing, in no event will AAMM, the
Borrower or any Subsidiary create, incur, assume or permit to exist any Lien on
the New York Real Property other than Liens referred to in paragraphs (a), (c),
(d), (e), (f), (i), (j), (l), (m), (o), (u) and (v) of this Section 6.02.
SECTION 6.03. Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property or
other property which it intends to use for substantially the same purpose or
purposes as the property being sold or transferred (a "Sale and Lease-Back
Transaction"), other than (a) any Sale and Lease-Back Transaction entered into
in connection with a Permitted Lease Financing or an Additional Lease Financing,
provided that the proceeds of any such Permitted Lease Financing or Additional
Lease Financing shall be deemed subject to Section 2.12(e) unless such proceeds
constitute Net Proceeds and (b) other Sale and Lease-Back Transactions, provided
that at no time will the sum of (i) the aggregate Remaining Present Value of all
leases entered into pursuant to this clause (b) plus (ii) the aggregate
principal amount of Indebtedness outstanding at such time that was incurred
pursuant to Section 6.01(p), exceed $25,000,000.
<PAGE>
68
SECTION 6.04. Investments, Loans and Advances. Purchase, hold
or acquire any capital stock, evidences of indebtedness or other securities of,
make or permit to exist any loans or advances to, or make or permit to exist any
investment or any other interest in, any other person, except:
(a) investments (i) existing on the date hereof in the capital
stock of the Subsidiaries; (ii) by AAMM in the capital stock of the
Borrower; (iii) by the Borrower or any Subsidiary in any Wholly Owned
Subsidiary that is a Guarantor (so long as such Guarantor shall remain
a Wholly Owned Subsidiary after giving effect to such investment); (iv)
by any Wholly Owned Subsidiary in any Wholly Owned Subsidiary that is a
Guarantor; (v) by any Subsidiary that is not a Guarantor in any Wholly
Owned Subsidiary that is not a Guarantor (so long as such Subsidiary
shall remain a Wholly Owned Subsidiary after giving effect to such
investment); or (vi) by the Borrower or the Subsidiaries in the
Receivables Subsidiary pursuant to any Permitted Receivables Financing;
(b) Permitted Investments and investments that were Permitted
Investments when made;
(c) investments arising out of the receipt by the Borrower or
any Subsidiary of noncash consideration for the sale of assets
permitted under Section 6.05 provided that such consideration (if the
stated amount or value thereof is in excess of $2,000,000) is pledged
upon receipt pursuant to the Pledge Agreement to the extent required
thereby;
(d) intercompany loans permitted to be incurred as
Indebtedness under Section 6.01;
(e) (i) loans and advances to employees of AAMM, the Borrower
or the Subsidiaries not to exceed $20,000,000 in the aggregate at any
time outstanding and (ii) advances of payroll payments and expenses to
employees in the ordinary course of business;
(f) (i) accounts receivable arising and trade credit granted
in the ordinary course of business and any securities received in
satisfaction or partial satisfaction thereof from financially troubled
account debtors to the extent reasonably necessary in order to prevent
or limit loss and (ii) prepayments and other credits to suppliers made
in the ordinary course of business;
(g) Interest Rate Protection Agreements permitted pursuant to
Section 6.01(d);
(h) investments, other than investments listed in paragraphs
(a) through (g) of this Section, existing on the Closing Date and set
forth on Schedule 6.04;
(i) investments resulting from pledges and deposits referred
to in Section 6.02(g) or (h);
(j) investments constituting Permitted Business Acquisitions
not to exceed $50,000,000 (net of any return representing return on
capital in respect of any such investment and valued at the time of the
making thereof) in the aggregate and investments constituting Permitted
Business Acquisitions and made with funds that if not so spent would
constitute Net Proceeds under clause (a) of the definition thereof;
(k) other investments in an aggregate amount not to exceed
$15,000,000 plus 25% of Excess Cash Flow since the Closing Date (to the
extent not previously used to prepay Indebtedness (other than Revolving
Loans or Swingline Loans), make any investment or capital expenditure
or otherwise for any purpose resulting in a deduction to Excess Cash
Flow in any fiscal year) (net of any return representing return on
capital in respect of any such investment and valued at the time of the
making thereof);
<PAGE>
69
(l) investments in Permitted Business Acquisitions or other
investments to the extent made with proceeds of the issuance of Capital
Stock of AAMM (to the extent not previously used to prepay Indebtedness
(other than Revolving Loans or Swingline Loans), make any investment or
capital expenditure or otherwise for any purpose resulting in a
deduction to Excess Cash Flow in any fiscal year) issued after the
Closing Date if such proceeds have been contributed to the Borrower;
and
(m) investments in foreign Subsidiaries at least 90% of the
stock of which is owned directly by the Borrower or a domestic Wholly
Owned Subsidiary in an aggregate amount not to exceed $100,000,000 (net
of any return representing return on capital in respect of any such
investment and valued at the time of the making thereof), provided that
(i) at least 80% of such investments are used by such foreign
Subsidiaries to make Capital Expenditures pursuant to Section 6.10 and
(ii) any portion of such investments not used for Capital Expenditures
will be used to pay other costs and expenses related to such Capital
Expenditures, in each case within a reasonable period of time after the
respective dates such investments are made .
SECTION 6.05. Mergers, Consolidations, Sales of Assets and
Acquisitions. Merge into or consolidate with any other person, or permit any
other person to merge into or consolidate with it, or sell, transfer, lease or
otherwise dispose of (in one transaction or in a series of transactions) all or
any substantial part of its assets (whether now owned or hereafter acquired), or
any Capital Stock of any Subsidiary, or purchase, lease or otherwise acquire (in
one transaction or a series of transactions) all or any substantial part of the
assets of any other person, except that this Section shall not prohibit:
(a) the purchase and sale of inventory in the ordinary course
of business by the Borrower or any Subsidiary or the acquisition of any
asset of any person in the ordinary course of business;
(b) if at the time thereof and immediately after giving effect
thereto no Event of Default or Default shall have occurred and be
continuing (i) the merger of any Subsidiary into the Borrower in a
transaction in which the Borrower is the surviving corporation and (ii)
the merger or consolidation of any Subsidiary into or with any other
Wholly Owned Subsidiary in a transaction in which the surviving entity
is a Wholly Owned Subsidiary (which shall be a domestic Subsidiary if
the non-surviving person shall be a domestic Subsidiary) and, (A) in
the case of each of clauses (i) and (ii), no person other than the
Borrower or a Wholly Owned Subsidiary receives any consideration and
(B) in the case of clause (ii), if any non-surviving person was a
Guarantor the surviving person must be a Guarantor;
(c) Sale and Lease-Back Transactions permitted by Section 6.03
(including sales of Manufacturing Equipment or other equipment to
Lessors in connection with Permitted Lease Financings or Additional
Lease Financings);
(d) investments permitted by Section 6.04;
(e) subject to Section 6.07, sales, leases or transfers (i)
from the Borrower or any Subsidiary to the Borrower or to a domestic
Wholly Owned Subsidiary or (ii) from any foreign Subsidiary to any
foreign Wholly Owned Subsidiary or to the Borrower;
(f) sales, leases or other dispositions of equipment or real
property of the Borrower or the Subsidiaries determined by the Board of
Directors or senior management of the Borrower to be no longer useful
or necessary in the operation of the business of the Borrower or the
Subsidiaries, provided that the Net Proceeds thereof shall be applied
in accordance with Section 2.12(c);
<PAGE>
70
(g) sales, leases or other dispositions of inventory of the
Borrower and the Subsidiaries not made in the ordinary course of
business determined by the Board of Directors or senior management of
the Borrower to be no longer useful or necessary in the operation of
the business of the Borrower and the Subsidiaries, provided that the
Net Proceeds thereof shall be applied in accordance with Section
2.12(c);
(h) sales and other dispositions by the Borrower and the
Subsidiaries of accounts receivable and related assets to the
Receivables Subsidiary pursuant to any Permitted Receivables Financing;
(i) the sale of any Capital Stock of any Subsidiary in which
less than 90% of the Capital Stock is owned by the Borrower or a
domestic Wholly Owned Subsidiary and that was acquired pursuant to
Section 6.04(k) or (l);
(j) AAMM and the Borrower may effect the IPO Merger and the
initial public offering of common stock by the surviving corporation in
the IPO Merger, so long as the IPO Merger and the release of the pledge
to the Collateral Agent of the common stock of the Borrower held by
AAMM immediately prior to the IPO Merger shall have received the prior
written approval of the Required Lenders;
(k) sales, leases or other dispositions of property having a
net book value not in excess of $20,000,000 in any fiscal year,
provided that the Net Proceeds thereof are applied in accordance with
Section 2.12(c) or are used within one year of the date of receipt
thereof to purchase assets useful in the business of the Borrower and
the Subsidiaries, and provided further that no sale may be made of the
Capital Stock of any Subsidiary except in connection with the sale of
all its outstanding Capital Stock that is held by the Borrower and any
other Subsidiary; and
(l) the Recapitalization.
SECTION 6.06. Dividends and Distributions. Declare or pay,
directly or indirectly, any dividend or make any other distribution (by
reduction of capital or otherwise), whether in cash, property, securities or a
combination thereof, with respect to any shares of its Capital Stock (other than
dividends and distributions on the common stock of AAMM payable solely by the
issuance of additional shares of common stock of AAMM) or directly or indirectly
redeem, purchase, retire or otherwise acquire for value (or permit any
Subsidiary to purchase or acquire) any shares of any class of its Capital Stock
or set aside any amount for any such purpose; provided, however, that:
(a) any Subsidiary may declare and pay dividends to,
repurchase its Capital Stock from or make other distributions to the
Borrower or to any Wholly Owned Subsidiary (or, in the case of
non-Wholly Owned Subsidiaries, to the Borrower or any Subsidiary and to
each other owner of Capital Stock of such Subsidiary on a pro rata
basis (or more favorable basis from the perspective of the Borrower or
such Subsidiary) based on their relative ownership interests);
(b) AAMM and the Borrower may effect the Recapitalization;
(c) the Borrower may declare and pay dividends or make other
distributions to AAMM in respect of overhead, tax liabilities, legal,
accounting and other professional fees and expenses and other fees and
expenses in connection with the maintenance of its existence and its
ownership of the Borrower; and
(d) the Borrower may purchase or redeem, or declare and pay
dividends or make other distributions to AAMM the proceeds of which are
to be used to purchase or redeem, shares of Capital Stock of AAMM
(including related stock appreciation rights or similar securities)
held by present or former officers or employees of AAMM, the Borrower
or any
<PAGE>
71
Subsidiary or by any Plan upon such person's death, disability,
retirement or termination of employment or under the terms of any such
Plan or any other agreement under which such shares of stock or related
rights were issued, provided that the aggregate amount of such
purchases or redemption (or dividends or distributions to AAMM) under
this paragraph (d) shall not exceed in any calendar year $7,500,000
(plus the amount of net proceeds received by AAMM or the Borrower
during such calendar year from Employee Equity Sales) which, if not
used in any year may be carried forward to any subsequent calendar
year; provided, however, that the aggregate amount of such purchases or
redemptions (or dividends or distributions to AAMM) that may be made
pursuant to this paragraph (d) shall not exceed $20,000,000 (plus the
amount of net proceeds received by AAMM or the Borrower after the date
of this Agreement from Employee Equity Sales).
SECTION 6.07. Transactions with Affiliates. (a) Sell or
transfer any property or assets to, or purchase or acquire any property or
assets from, or otherwise engage in any other transaction with, any of its
Affiliates or any known direct or indirect holder of 10% or more of any class of
capital stock of AAMM, unless such transaction forms a part of the
Recapitalization or is (i) otherwise permitted under this Agreement (including
pursuant to any Permitted Receivables Financing, Permitted Lease Financing or
Additional Lease Financing) and (ii) upon terms no less favorable to AAMM, the
Borrower or such Subsidiary, as the case may be, than it would obtain in a
comparable arm's-length transaction with a person which was not an Affiliate,
provided that the foregoing restriction shall not apply to (A) the payment to
the Fund or any of its Affiliates or the Fund Affiliates of the monitoring and
management fees referred to in paragraph (c) below or fees payable on the
Closing Date or (B) the indemnification of directors of AAMM, the Borrower and
the Subsidiaries in accordance with customary practice.
(b) The foregoing paragraph (a) shall not prohibit, to the
extent otherwise permitted under this Agreement, (i) any issuance of securities,
or other payments, awards or grants in cash, securities or otherwise pursuant
to, or the funding of, employment arrangements, stock options and stock
ownership plans approved by the Board of Directors of AAMM, (ii) loans or
advances to employees of AAMM, the Borrower or any Subsidiary in accordance with
Section 6.04(e), (iii) transactions among AAMM, the Borrower and Wholly Owned
Subsidiaries and transactions among Wholly Owned Subsidiaries otherwise
permitted by this Agreement, (iv) the payment of fees and indemnities to
directors, officers and employees of the Borrower and the Subsidiaries in the
ordinary course of business, (v) transactions pursuant to permitted agreements
in existence on the Closing Date and set forth on Schedule 6.07, (vi) any
employment agreements entered into by any of the Borrower or any of the
Subsidiaries in the ordinary course of business, (vii) dividends and repurchases
permitted under Section 6.06, and (viii) any purchase by the Investors or the
Continuing Shareholders of Capital Stock of AAMM or any purchase by AAMM or by
Dauch (pursuant to the exercise of the Dauch Options) of Capital Stock of the
Borrower or any contribution by AAMM to the equity capital of the Borrower,
provided that any Capital Stock of the Borrower purchased by AAMM shall be
pledged to the Collateral Agent on behalf of the Lenders pursuant to the Pledge
Agreement.
(c) Make any payment of or on account of monitoring or
management fees payable to the Fund or its Affiliates or the Fund Affiliates in
an aggregate amount in any fiscal year in excess of the greater of (i)
$2,000,000 or (ii) an amount equal to 1.0% of EBITDA for the prior fiscal year.
SECTION 6.08. Business of AAMM, the Borrower and the
Subsidiaries. Engage at any time in any business or business activity other than
(a) in the case of the Borrower and the Subsidiaries (other than the Receivables
Subsidiary), any business or business activity conducted by it on the date
hereof and any business or business activities incidental or related thereto,
(b) in the case of AAMM, (i) the ownership of all the capital stock of the
Borrower, together with activities directly related thereto, (ii) performance of
its obligations under and in connection with the Loan Documents and under the
Recapitalization Agreement, the Stockholders Agreement executed in connection
with the Recapitalization Agreement and other agreements contemplated thereby,
(iii) actions incidental to the consummation of the Recapitalization and (iv)
actions required by law
<PAGE>
72
to maintain its status as a corporation and (c) in the case of the Receivables
Subsidiary, the purchase and sale of receivables and related assets (or
participation interests therein) pursuant to any Permitted Receivables
Financing, together with activities related thereto.
SECTION 6.09. Permitted Lease Financings, Additional Lease
Financings, Permitted Receivables Financings and Other Material Agreements. (a)
Amend or modify, or grant any waiver or release under, any Existing Lease in any
manner materially adverse to the Lenders or under any leases or other agreements
or documents entered into in connection with any Permitted Lease Financing or
any Additional Lease Financing in any manner (i) that would cause the terms of
such lease or other agreement to not be in compliance with Schedule C or (ii)
materially adverse to the Lenders.
(b) Amend or modify, or grant any waiver or release under, any
GM Agreement or the GM MOU if such amendment, modification, waiver or release
would reasonably be expected (A) to reduce EBITDA for the first four
fiscal-quarter period of the Borrower commencing on or after the date of such
amendment, modification, waiver or release by an amount equal to or greater than
25% of EBITDA for the last four-fiscal-quarter period of the Borrower ended on
or prior to such date or (B) to be materially adverse to the Lenders.
(c) Amend or modify, or grant any waiver or release under, the
Receivables Sale Agreement or the Receivables Purchase Documentation or any
other agreements or documents entered into in connection with any Permitted
Receivables Financing in any manner materially adverse to the Lenders.
(d) Amend or modify in any manner materially adverse to the
Lenders, or grant any waiver or release under or terminate in any manner (if
such action shall be adverse to the Lenders), the certificate of incorporation
or By-laws in any material respect of AAMM, the Borrower or any Subsidiary or
the Recapitalization Agreement.
(e) Permit any Subsidiary (other than the Receivables
Subsidiary) to enter into any agreement or instrument which by its terms
restricts the payment of dividends or the making of cash advances by such
Subsidiary to the Borrower or any Subsidiary that is a direct or indirect parent
of such Subsidiary other than those arising under any Loan Document.
SECTION 6.10. Capital Expenditures. Permit AAMM to make any
Capital Expenditure or to consummate any Lease Financing, permit the Borrower or
any Subsidiary to consummate any Lease Financing other than the Permitted Lease
Financing, any Additional Lease Financing and any Lease Financing permitted by
Section 6.03(b) or permit the aggregate amount of Capital Expenditures, the
Lease Present Values of Additional Lease Financings and the Lease Present Values
of Permitted Lease Financings made or entered into, as applicable, by the
Borrower and the Subsidiaries in any fiscal year to exceed the sum of (a) the
amount set forth opposite such fiscal year below plus (b) 25% of Excess Cash
Flow for the prior fiscal year (to the extent not previously used to prepay
Indebtedness (other than Revolving Loans or Swingline Loans), make any
investment or capital expenditure or otherwise for any purpose resulting in a
deduction to Excess Cash Flow in any fiscal year) (it being understood that, to
the extent the Borrower or any Subsidiary makes a Capital Expenditure after the
date of this Agreement in respect of Manufacturing Equipment or other equipment
and subsequently finances such equipment pursuant to a Permitted Lease Financing
or Additional Lease Financing, whether in the same or in a different fiscal
year, the Lease Present Value of any such Lease Financing that relates to such
equipment shall be reduced (but not below zero) by the amount of such prior
Capital Expenditure in respect of such equipment for purposes of determining
compliance with this Section 6.10 during the fiscal year in which such
subsequent financing is effected); provided, however, that the Borrower may in
any fiscal year, upon written notice to the Administrative Agent, increase the
amount of Capital Expenditures permitted to be made pursuant to this Section
6.10 by an amount equal to the total unused amount of Capital Expenditures
permitted to be made pursuant to this Section 6.10 for the immediately preceding
fiscal year (minus the amount of any unused Capital Expenditures permitted to be
made pursuant to this
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73
Section 6.10 that were carried forward to such preceding fiscal year pursuant to
this proviso). For purposes of this Section 6.10 only, the amount of Capital
Expenditures made by the Borrower and the Subsidiaries in any fiscal year will
be deemed not to include the purchase price actually paid by the Borrower or any
Subsidiary during such fiscal year for any Manufacturing Equipment or other
equipment acquired by the Borrower or the Subsidiaries pursuant to the exercise
of any purchase option under any lease entered into pursuant to any Permitted
Lease Financing or any Additional Lease Financing (but not under any Existing
Lease).
Year Amount
1997 $488,000,000
1998 $200,000,000
1999 $250,000,000
2000 $150,000,000
2001 $100,000,000
2002 $100,000,000
2003 $100,000,000
2004 $100,000,000
2005 $100,000,000
2006 $100,000,000
SECTION 6.11. Interest Coverage Ratio. Permit the ratio (the
"Interest Coverage Ratio") as of the last day of any fiscal quarter, which last
day occurs in any period set forth below, for the four quarter period ended as
of such day of (a) EBITDA of AAMM, the Borrower and the Subsidiaries to (b) Cash
Interest Expense to be less than the ratio set forth below for such period,
provided that for purposes of this Section 6.11 Cash Interest Expense for the
four quarter period ending on (i) March 31, 1998, shall be deemed to be Cash
Interest Expense for the fiscal quarter ending on such date, multiplied by four,
(ii) June 30, 1998, shall be deemed to be Cash Interest Expense for the two
fiscal quarter period ending on June 30, 1998, multiplied by two and (iii)
September 30, 1998, shall be deemed to be Cash Interest Expense for the three
fiscal quarter period ending on September 30, 1998, multiplied by 4/3:
Period: Ratio:
March 31, 1998 to June 30, 1998 2.25
July 1, 1998 to September 30, 1998 2.50
October 1, 1998 to March 31, 1999 2.75
April 1, 1999 to June 30, 1999 3.00
July 1, 1999 to September 30, 1999 3.25
October 1, 1999 to March 31, 2000 3.50
April 1, 2000 to September 30, 2000 3.75
October 1, 2000 to June 30, 2001 4.00
July 1, 2001 to December 31, 2001 4.25
January 1, 2002 to June 30, 2002 4.50
July 1, 2002 and thereafter 5.00
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74
SECTION 6.12. Net Leverage Ratio. Permit the Net Leverage
Ratio as of the last day of any fiscal quarter, which last day occurs in any
period set forth below, to be in excess of the ratio set forth below for such
period:
Period: Ratio:
March 31, 1998 to June 30, 1998 4.00
July 1, 1998 to December 31, 1998 3.75
January 1, 1999 to March 31, 1999 3.50
April 1, 1999 to June 30, 1999 3.25
July 1, 1999 to September 30, 1999 3.00
October 1, 1999 to June 30, 2000 2.50
July 1, 2000 to September 30, 2000 2.25
October 1, 2000 to March 31, 2001 2.00
April 1, 2001 to September 30, 2001 1.75
October 1, 2001 to March 31, 2002 1.50
April 1, 2002 and thereafter 1.00
SECTION 6.13. Minimum Retained Cash Earnings. Permit Retained
Cash Earnings as of the last day of any fiscal quarter, which last day occurs in
any period set forth below, to be less than the amount set forth below for such
period:
<TABLE>
<CAPTION>
From and including Closing To and including last day of Amount:
Date or first day of first quarter fiscal year:
of fiscal year:
<S> <C> <C>
Closing 1997 $165,000,000
1998 1998 $165,000,000
1999 1999 $180,000,000
2000 2000 $200,000,000
2001 2001 $250,000,000
2002 2002 $300,000,000
2003 2003 $350,000,000
2004 2004 $400,000,000
2005 2005 $425,000,000
2006 2006 $450,000,000
</TABLE>
ARTICLE VII. EVENTS OF DEFAULT
In case of the happening of any of the following events
("Events of Default"):
(a) any representation or warranty made or deemed made by
AAMM, the Borrower or any Loan Party in any Loan Document, or any
representation, warranty, statement or information contained in any
report, certificate, financial statement or other instrument furnished
in connection with or pursuant to any Loan Document, shall prove to
have been false or misleading in any material respect when so made,
deemed made or furnished by AAMM, the Borrower or any other Loan Party;
(b) default shall be made in the payment of any principal of
any Loan or the reimbursement with respect to any L/C Disbursement when
and as the same shall become
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75
due and payable, whether at the due date thereof or at a date fixed for
prepayment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on
any Loan or on any L/C Disbursement or in the payment of any Fee or any
other amount (other than an amount referred to in (b) above) due under
any Loan Document, when and as the same shall become due and payable,
and such default shall continue unremedied for a period of five
Business Days;
(d) default shall be made in the due observance or performance
by AAMM, the Borrower or any Subsidiary of any covenant, condition or
agreement contained in Section 5.01(a) (with respect to the Borrower),
5.05(a) or 5.08 or in Article VI;
(e) default shall be made in the due observance or performance
by AAMM, the Borrower or any Subsidiary of any covenant, condition or
agreement contained in any Loan Document (other than those specified in
(b), (c) or (d) above) and such default shall continue unremedied for a
period of 30 days after notice thereof from the Administrative Agent or
the Required Lenders to the Borrower;
(f) (i) AAMM or the Borrower shall fail to observe or perform
any term, covenant, condition or agreement contained in any agreement
or instrument evidencing or governing any Indebtedness (other than any
Indebtedness under any Loan Document) having an aggregate principal or
notional amount in excess of $10,000,000 if the effect of any such
failure is to cause, or to permit the holder or holders of such
Indebtedness or a trustee on its or their behalf to cause, such
Indebtedness to become due prior to its stated maturity, or AAMM or the
Borrower shall fail to pay any principal in respect of any such
Indebtedness at the stated maturity thereof or (ii) any default or
other event (other than expiration at the end of the scheduled term
thereof or in connection with a refinancing thereof that is a Permitted
Receivables Financing) shall have occurred under the Receivables Sale
Agreement, the Receivables Purchase Documentation or any other document
governing any Permitted Receivables Financing if the effect of such
default or other event is to cause, or to permit the Receivables
Subsidiary to cause, the termination of purchases of Receivables by the
Receivables Subsidiary from the Borrower;
(g) the Borrower or any Subsidiary shall (i) fail to pay (A)
any amount other than scheduled or basic rent without disputing the
payment of such amount in good faith or (B) any scheduled or basic rent
due in respect of any lease having a Remaining Present Value in excess
of $10,000,000, after the expiration of any grace period for such
payments or the date ten days after such payment was due, if sooner, or
(ii) fail to pay any amount other than amounts covered by clause (i)
above or to observe or perform any other term, covenant, condition or
agreement contained in any such lease if the effect of any failure
referred to this clause (ii) with respect to any such lease is to cause
the termination of such lease or any payment of scheduled rent or
payment in lieu of scheduled rent (including payments in the form of
liquidated damages) to become due or payable prior to the scheduled
date of payment;
(h) any one or more of the GM Agreements or the GM MOU shall
cease to be in full force and effect with respect to any product or
products supplied by the Borrower or the Subsidiaries to GM pursuant to
any such GM Agreement and such cessation would reasonably be expected
(i) to reduce EBITDA for the first four-fiscal-quarter period of the
Borrower commencing on or after the date of such cessation by an amount
equal to or greater than 25% of EBITDA for the last four-fiscal-quarter
period of the Borrower ended on or prior to such date or (ii) to be
materially adverse to the Lenders.
(i) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of AAMM, the
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76
Borrower or any Subsidiary, or of a substantial part of the property or
assets of AAMM, the Borrower or a Subsidiary, under Title 11 of the
United States Code, as now constituted or hereafter amended, or any
other Federal, state or foreign bankruptcy, insolvency, receivership or
similar law, (ii) the appointment of a receiver, trustee, custodian,
seques trator, conservator or similar official for AAMM, the Borrower
or any Subsidiary or for a substantial part of the property or assets
of AAMM, the Borrower or a Subsidiary or (iii) the winding-up or
liquidation of AAMM, the Borrower or any Subsidiary; and such
proceeding or petition shall continue undismissed for 60 days or an
order or decree approving or ordering any of the foregoing shall be
entered;
(j) AAMM, the Borrower or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking relief under Title
11 of the United States Code, as now constituted or hereafter amended,
or any other Federal, state or foreign bankruptcy, insolvency,
receivership or similar law, (ii) consent to the institution of, or
fail to contest in a timely and appropriate manner, any proceeding or
the filing of any petition described in paragraph (i) above, (iii)
apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for AAMM, the
Borrower or any Subsidiary or for a substantial part of the property or
assets of AAMM, the Borrower or any Subsidiary, (iv) file an answer
admitting the material allegations of a petition filed against it in
any such proceeding, (v) make a general assignment for the benefit of
creditors, (vi) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take any action
for the purpose of effecting any of the foregoing;
(k) one or more judgments for the payment of money in an
aggregate amount in excess of $10,000,000 (except to the extent covered
by insurance as to which the insurer has acknowledged in writing its
obligation to cover) shall be rendered against AAMM, the Borrower, any
Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken
by a judgment creditor to levy upon assets or properties of AAMM, the
Borrower or any Subsidiary to enforce any such judgment;
(l) (i) a Reportable Event or Reportable Events, or a failure
to make a required installment or other payment (within the meaning of
Section 412(n)(1) of the Code), shall have occurred with respect to any
Plan or Plans, (ii) a trustee shall be appointed by a United States
district court to administer any Plan or Plans, (iii) the PBGC shall
institute proceedings (including giving notice of intent thereof) to
terminate any Plan or Plans, (iv) the Borrower or any ERISA Affiliate
shall have been notified by the sponsor of a Multiemployer Plan that it
has incurred Withdrawal Liability to such Multiemployer Plan and the
Borrower or such ERISA Affiliate does not have reasonable grounds for
contesting such Withdrawal Liability or is not contesting such
Withdrawal Liability in a timely and appropriate manner, (v) the
Borrower or any ERISA Affiliate shall have been notified by the sponsor
of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV
of ERISA, (vi) the Borrower or any ERISA Affiliate shall engage in any
"prohibited transaction" (as defined in Section 406 of ERISA or Section
4975 of the Code) involving any Plan, (vii) any other similar event or
condition shall occur or exist with respect to a Plan; and in each case
in clauses (i) through (vii) above, such event or condition, together
with all other such events or conditions, if any, could reasonably be
expected to have a Material Adverse Effect;
(m) (i) any Loan Document shall for any reason be asserted by
AAMM, the Borrower or any Subsidiary not to be a legal, valid and
binding obligation of any party thereto, (ii) any security interest
purported to be created by any Security Document and to extend to
assets that are not immaterial to AAMM, the Borrower and the
Subsidiaries on a consolidated basis shall cease to be, or shall be
asserted by the Borrower or any other Loan Party not to be, a valid and
perfected security interest (having the priority required by this
<PAGE>
77
Agreement or the relevant Security Agreement) in the securities, assets
or properties covered thereby, except to the extent that any such loss
of perfection or priority results from the failure of the Collateral
Agent to maintain possession of certificates representing securities
pledged under the Pledge Agreement or to file UCC continuation
statements and except to the extent that such loss is covered by a
lender's title insurance policy and the related insurer promptly after
such loss shall have acknowledged in writing that such loss is covered
by such title insurance policy and the Administrative Agent shall be
reasonably satisfied with the credit of such insurer or (iii) the
Obligations of AAMM and the Borrower and the guarantee by AAMM thereof
pursuant to the Parent Guarantee Agreement shall cease to constitute
senior indebtedness under the subordination provisions of any document
or instrument evidencing any permitted subordinated Indebtedness or
such subordination provisions shall be invalidated or otherwise cease
to be legal, valid and binding obligations of the parties thereto,
enforceable in accordance with their terms; or
(n) there shall have occurred a Change in Control; then, and
in every such event (other than an event with respect to the Borrower described
in paragraph (i) or (j) above), and at any time thereafter during the
continuance of such event, the Administrative Agent, at the request of the
Required Lenders, shall, by notice to the Borrower, take any or all of the
following actions, at the same or different times: (i) terminate forthwith the
Commitments, (ii) declare the Loans then outstanding to be forthwith due and
payable in whole or in part and (iii) demand cash collateral pursuant to Section
2.20(g), whereupon the principal of the Loans so declared to be due and payable,
together with accrued interest thereon and any unpaid accrued Fees and all other
liabilities of the Borrower accrued hereunder and under any other Loan Document,
shall become forthwith due and payable, without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived by the
Borrower, anything contained herein or in any other Loan Document to the
contrary notwithstanding; and in any event with respect to the Borrower
described in paragraph (i) or (j) above, the Commitments shall automatically
terminate, the principal of the Loans then outstanding, together with accrued
interest thereon and any unpaid accrued Fees and all other liabilities of the
Borrower accrued hereunder and under any other Loan Document, shall
automatically become due and payable and the Administrative Agent shall be
deemed to have made a demand for cash collateral to the full extent permitted
under Section 2.20(g), without presentment, demand, protest or any other notice
of any kind, all of which are hereby expressly waived by the Borrower, anything
contained herein or in any other Loan Document to the contrary notwithstanding.
ARTICLE VIII. THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT
In order to expedite the transactions contemplated by this
Agreement, The Chase Manhattan Bank is hereby appointed to act as Administrative
Agent and Collateral Agent on behalf of the Lenders and the Fronting Bank (for
purposes of this Article VIII, the Administrative Agent and the Collateral Agent
are referred to collectively as the "Agents"). Each of the Lenders and each
assignee of any such Lender hereby irrevocably authorizes the Agents to take
such actions on behalf of such Lender or assignee or the Fronting Bank and to
exercise such powers as are specifically delegated to the Agents by the terms
and provisions hereof and of the other Loan Documents, together with such
actions and powers as are reasonably incidental thereto. The Administrative
Agent is hereby expressly authorized by the Lenders and the Fronting Bank,
without hereby limiting any implied authority, (a) to receive on behalf of the
Lenders and the Fronting Bank all payments of principal of and interest on the
Loans, all payments in respect of L/C Disbursements and all other amounts due to
the Lenders and the Fronting Bank hereunder, and promptly to distribute to each
Lender or the Fronting Bank its proper share of each payment so received; (b) to
give notice on behalf of each of the Lenders to the Borrower of any Event of
Default specified in this Agreement of which the Administrative Agent has actual
knowledge acquired in connection with its agency hereunder; and (c) to
distribute to each Lender copies of all notices, financial statements and other
materials delivered by the Borrower pursuant to this Agreement as received by
the Administrative
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78
Agent. Without limiting the generality of the foregoing, the Agents are hereby
expressly authorized to execute any and all documents (including releases) with
respect to the Collateral and the rights of the Secured Parties with respect
thereto, as contemplated by and in accordance with the provisions of this
Agreement and the Security Documents. In the event that any party other than the
Lenders and the Agents shall participate in all or any portion of the Collateral
pursuant to the Security Documents, all rights and remedies in respect of such
Collateral shall be controlled by the Collateral Agent.
Neither the Agents nor any of their respective directors,
officers, employees or agents shall be liable as such for any action taken or
omitted by any of them except for its or his own gross negligence or wilful
misconduct, or be responsible for any statement, warranty or representation
herein or the contents of any document delivered in connection herewith, or be
required to ascertain or to make any inquiry concerning the performance or
observance by the Borrower or any other Loan Party of any of the terms,
conditions, covenants or agreements contained in any Loan Document. The Agents
shall not be responsible to the Lenders for the due execution, genuineness,
validity, enforceability or effectiveness of this Agreement or any other Loan
Documents or other instruments or agreements. The Agents shall in all cases be
fully protected in acting, or refraining from acting, in accordance with written
instructions signed by the Required Lenders and, except as otherwise
specifically provided herein, such instructions and any action or inaction
pursuant thereto shall be binding on all the Lenders. Each Agent shall, in the
absence of knowledge to the contrary, be entitled to rely on any instrument or
document believed by it in good faith to be genuine and correct and to have been
signed or sent by the proper person or persons. Neither the Agents nor any of
their respective directors, officers, employees or agents shall have any
responsibility to the Borrower or any other Loan Party on account of the failure
of or delay in performance or breach by any Lender or the Fronting Bank of any
of its obligations hereunder or to any Lender or the Fronting Bank on account of
the failure of or delay in performance or breach by any other Lender or the
Fronting Bank or the Borrower or any other Loan Party of any of their respective
obligations hereunder or under any other Loan Document or in connection herewith
or therewith. Each of the Agents may execute any and all duties hereunder by or
through agents or employees and shall be entitled to rely upon the advice of
legal counsel selected by it with respect to all matters arising hereunder and
shall not be liable for any action taken or suffered in good faith by it in
accordance with the advice of such counsel.
The Lenders hereby acknowledge that neither Agent shall be
under any duty to take any discretionary action permitted to be taken by it
pursuant to the provisions of this Agreement unless it shall be requested in
writing to do so by the Required Lenders. The Lenders further acknowledge and
agree that so long as an Agent shall make any determination to be made by it
hereunder or under any other Loan Document in good faith, such Agent shall have
no liability in respect of such determination to any person.
Subject to the appointment and acceptance of a successor Agent
as provided below, either Agent may resign at any time by notifying the Lenders
and the Borrower. Upon any such resignation, the Required Lenders shall have the
right to appoint a successor with the consent of the Borrower (not to be
unreasonably withheld or delayed). If no successor shall have been so appointed
by the Required Lenders and approved by the Borrower and shall have accepted
such appointment within 30 days after the retiring Agent gives notice of its
resignation, then the retiring Agent may, on behalf of the Lenders with the
consent of the Borrower (not to be unreasonably withheld or delayed), appoint a
successor Agent which shall be a bank with an office in New York, New York,
having a combined capital and surplus of at least $500,000,000 or an Affiliate
of any such bank. Upon the acceptance of any appointment as Agent hereunder by a
successor bank, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent and the retiring
Agent shall be discharged from its duties and obligations hereunder. After the
Agent's resignation hereunder, the provisions of this Article and Section 9.05
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Agent.
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79
With respect to the Loans made by it hereunder, each Agent in
its individual capacity and not as Agent shall have the same rights and powers
as any other Lender and may exercise the same as though it were not an Agent,
and the Agents and their Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if it were not an Agent.
Each Lender agrees (a) to reimburse the Agents, on demand, in
the amount of its pro rata share (based on its Commitments hereunder (or if such
Commitments shall have expired or been terminated, in accordance with the
respective principal amounts of its applicable outstanding Loans or
participations in L/C Disbursements, as applicable)) of any reasonable expenses
incurred for the benefit of the Lenders by the Agents, including counsel fees
and compensation of agents and employees paid for services rendered on behalf of
the Lenders, which shall not have been reimbursed by the Borrower and (b) to
indemnify and hold harmless each Agent and any of its directors, officers,
employees or agents, on demand, in the amount of such pro rata share, from and
against any and all liabilities, taxes, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against it in
its capacity as Agent or any of them in any way relating to or arising out of
this Agreement or any other Loan Document or any action taken or omitted by it
or any of them under this Agreement or any other Loan Document, to the extent
the same shall not have been reimbursed by the Borrower, provided that no Lender
shall be liable to an Agent for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the gross negligence or wilful misconduct of such
Agent or any of its directors, officers, employees or agents.
Each Lender acknowledges that it has, independently and
without reliance upon the Agents or any other Lender and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agents or any other Lender and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement or any other Loan Document, any related
agreement or any document furnished hereunder or thereunder.
As soon as practicable after it becomes aware of a Default or
an Event of Default that has occurred and is continuing, the Administrative
Agent shall notify each Lender thereof.
ARTICLE IX. MISCELLANEOUS
SECTION 9.01. Notices. Notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
telecopy, as follows:
(a) if to the Borrower, to it at 1840 Holbrook Avenue,
Detroit, MI 48212, Attention of Mr. Gary Witosky (Telecopy No. (313)
974-2229) and Attention of Mr. Patrick Lancaster (Telecopy No. (313)
974-3204), and if to AAMM, to it in care of the Borrower, in each case
with a copy to The Blackstone Group, 345 Park Avenue, New York, New
York 10154, Attention of Mr. John Woodard (Telecopy No. (212)754-8710);
(b) if to the Administrative Agent, to The Chase Manhattan
Bank, Loan and Agency Services Group, One Chase Manhattan Plaza, 8th
Floor, New York, New York 10081, Attention of Ms. Janet Belden
(Telecopy No. (212) 552-5658), with a copy to The Chase Manhattan Bank,
270 Park Avenue, New York, New York 10017, Attention of Ms.
Rosemary Bradley (Telecopy No. (212) 972-9854);
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(c) if to the Fronting Bank to it at its address (or telecopy
number) set forth in Schedule 2.20; and
(d) if to a Lender, to it at its address (or telecopy number)
set forth in the Administrative Questionnaire delivered to the
Administrative Agent by such Lender in connection with the execution of
this Agreement or in the Assignment and Acceptance pursuant to which
such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 9.01 or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants,
agreements, representations and warranties made by the Borrower and the
Guarantors herein, in the other Loan Documents and in the certificates or other
instruments prepared or delivered in connection with or pursuant to this
Agreement or any other Loan Document shall be considered to have been relied
upon by the Lenders and the Fronting Bank and shall survive the making by the
Lenders of the Loans, the execution and delivery to the Lenders of the Loan
Documents and the issuance of the Letters of Credit, regardless of any
investigation made by the Lenders or on their behalf, and shall continue in full
force and effect as long as the principal of or any accrued interest on any Loan
or L/C Disbursement or any Fee or any other amount payable under this Agreement
or any other Loan Document is outstanding and unpaid or any Letter of Credit is
outstanding and so long as the Commitments have not been terminated. Without
prejudice to the survival of any other agreements contained herein,
indemnification and reimbursement obligations contained herein (including
pursuant to Sections 2.13, 2.15, 2.19 and 9.05) shall survive the payment in
full of the principal and interest hereunder, the expiration of the Letters of
Credit and the termination of the Commitments or this Agreement.
SECTION 9.03. Binding Effect. This Agreement shall become
effective when it shall have been executed by AAMM, the Borrower, and the
Administrative Agent and when the Administrative Agent shall have received
copies hereof which, when taken together, bear the signatures of each of the
other parties hereto, and thereafter shall be binding upon and inure to the
benefit of AAMM, the Borrower, the Fronting Bank, the Administrative Agent and
each Lender and their respective permitted successors and assigns.
SECTION 9.04. Successors and Assigns. (a) Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the permitted successors and assigns of such party; and all
covenants, promises and agreements by or on behalf of AAMM, the Borrower, the
Administrative Agent, the Fronting Bank or the Lenders that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
(b) Each Lender may assign to one or more assignees all or a
portion of its interests, rights and obligations as a Lender under this
Agreement (including all or a portion of its Commitments, the Loans and L/C
Disbursements at the time owing to it and participations in Letters of Credit
held by it, it being understood that Lenders shall not be required to assign pro
rata amounts of their Loans, L/C Disbursements, Revolving Credit Commitments and
Term Commitments); provided, however, that (i) except in the case of an
assignment to another Lender or an Affiliate of, or an Approved Fund with
respect to, such Lender, (A) in each case, the Borrower and the Administrative
Agent must each give its prior written consent to such assignment (which consent
shall not in either case be unreasonably withheld or delayed) and (B) in the
case of participations in Letters of Credit or Revolving Credit Commitments, the
Fronting Bank must give its prior written consent to such assignment (which
consent shall not in any case be unreasonably withheld or delayed), (ii) except
in the case of an assignment to another Lender or an Affiliate of, or an
Approved
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81
Fund with respect to, such Lender, the amount of the Loans, L/C Disbursements,
Commitments or participations in Letters of Credit of the assigning Lender
subject to such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Administrative
Agent) shall be an amount not less than $5,000,000 and an integral multiple of
$1,000,000 unless the Borrower shall have given its prior written consent to an
assignment of a lesser amount, or shall be the entire remaining amount of such
Loans, L/C Disbursements, Commitments or participations in Letters of Credit
held by such assigning Lender, (iii) unless the assignor ceases to be a Lender,
the aggregate amount of the Loans and L/C Disbursements owing to and unused
Commitments of such Lender after giving effect to such assignment shall be not
less than $5,000,000, (iv) the parties to each such assignment shall execute and
deliver to the Administrative Agent an Assignment and Acceptance, together with
a processing and recordation fee of $3,500 and (v) the assignee, if it shall not
be a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire. Upon acceptance and recording pursuant to paragraph (e) of this
Section 9.04, from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five Business Days after the
execution thereof unless agreed otherwise by the Administrative Agent, (i) the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of a
Lender under this Agreement and (ii) the assigning Lender thereunder shall, to
the extent of the interest assigned by such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Sections
2.13, 2.15, 2.19 and 9.05, as well as to any Fees accrued for its account and
not yet paid).
(c) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Term Commitments and Revolving Credit Commitment, and the outstanding
balances of its Loans and L/C Disbursements and its participations in Letters of
Credit, in each case without giving effect to assignments thereof that have not
become effective, are as set forth in such Assignment and Acceptance; (ii)
except as set forth in clause (i) above, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement, or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto or thereto, or the financial
condition of the Borrower or any Guarantor or the performance or observance by
the Borrower or any Guarantor of any of its obligations under this Agreement,
any other Loan Document or any other instrument or document furnished pursuant
hereto or thereto; (iii) such assignee represents and warrants that it is
legally authorized to enter into such Assignment and Acceptance; (iv) such
assignee confirms that it has received copies of this Agreement and the other
Loan Documents, together with copies of the most recent financial statements
delivered pursuant to this Agreement and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance; (v) such assignee will independently and
without reliance upon the Administrative Agent, the Fronting Bank, such
assigning Lender or any other Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement; (vi) such
assignee appoints and authorizes the Administrative Agent and the Collateral
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement and the other Loan Documents as are delegated to the
Administrative Agent and the Collateral Agent by the terms hereof or thereof,
together with such powers as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(d) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at its address referred to in subsection
9.01 a copy of each Assignment and
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Acceptance delivered to it and a register (the "Register") for the recordation
of the names and addresses of the Lenders and the Commitments of, and principal
amount of the Loans and L/C Disbursements owing to, each Lender from time to
time. The Administrative Agent shall also record the Revolving L/C Exposure of
each Lender in the Register. The entries in the Register shall be conclusive, in
the absence of manifest error, and the Borrower, the Administrative Agent, the
Fronting Bank and the Lenders shall treat each person whose name is recorded in
the Register as the owner of Commitments and the Loans and Revolving L/C
Exposures recorded therein for all purposes of this Agreement. The Register
shall be available for inspection by the Borrower, the Fronting Bank, any Lender
and their representatives (including counsel and accountants), at any reasonable
time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee, an Administrative
Questionnaire completed in respect of the assignee (unless the assignee shall
already be a Lender hereunder), the processing and recordation fee referred to
in paragraph (b) above and, if required, the written consent of the Borrower,
the Fronting Bank and the Administrative Agent to such assignment, the
Administrative Agent shall (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Lenders. Notwithstanding anything to the contrary
contained herein, no assignment under Section 9.04(b) of any rights or
obligations shall be effective unless and until the Administrative Agent shall
have recorded such assignment in the Register. The Administrative Agent shall
record the name of the transferor, the name of the transferee, and the amount of
the transfer in the Register after receipt of all documents required pursuant to
this Section 9.04 and such other documents as the Administrative Agent may
reasonably request.
(f) Each Lender may without the consent of the Borrower, the
Fronting Bank or the Administrative Agent sell participations to one or more
banks or other entities in all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Commitments, the Loans owing
to it, its Revolving L/C Exposure and the participations in Letters of Credit
held by it); provided, however, that (i) such Lender's obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the participating banks or other entities shall be entitled to the benefit
of the cost protection provisions contained in Sections 2.13, 2.15, 2.19 and
9.06 to the same extent as if they were Lenders, provided that no such
participating bank or entity shall be entitled to receive any greater amount
pursuant to such Sections than a Lender would have been entitled to receive in
respect of the amount of the participation sold by such Lender to such
participating bank or entity had no sale occurred, and (iv) the Borrower, the
Administrative Agent, the Fronting Bank and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement, and such Lender shall retain the
sole right to enforce the obligations of the Borrower or any other Loan Party,
as the case may be, relating to its Loans, Revolving L/C Exposure and
participations in Letters of Credit and Fees and to approve any amendment,
modification or waiver of any provision of this Agreement or any other Loan
Document (other than amendments, modifications or waivers decreasing any Fee
payable hereunder or the amount of principal of or the rate at which interest is
payable on the Loans or L/C Disbursements, extending any final maturity date or
increasing any Commitment, in each case in respect of an Obligation in which the
relevant participating bank or entity is participating, or releasing all or
substantially all of the Collateral or any Guarantor from its Guarantee
Agreement unless all or substantially all the Capital Stock of such Guarantor is
sold in a transaction permitted by this Agreement or as provided in Section
9.18). Each Lender will disclose the identity of its participants to the
Borrower and Administrative Agent if requested by the Borrower or the
Administrative Agent.
(g) Any Lender or participant may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section 9.04, disclose to the assignee or participant or proposed assignee
or participant any information relating to the Borrower or any Guarantor
furnished to such Lender by or on behalf of the Borrower or any Guarantor,
provided that, prior to any such disclosure, each such assignee or participant
or proposed assignee or
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participant shall execute an agreement whereby such assignee or participant
shall agree to be bound by Section 9.16.
(h) Any Lender may at any time assign all or any portion of
its rights under this Agreement to a Federal Reserve Bank, provided that no such
assignment shall release a Lender from any of its obligations hereunder. In
order to facilitate such an assignment to a Federal Reserve Bank, the Borrower
shall, at the request of the assigning Lender, duly execute and deliver to the
assigning Lender a promissory note or notes evidencing the Loans made to the
Borrower by the assigning Lender hereunder.
(i) In the event that Standard & Poor's Ratings Group or
Moody's Investors Service, Inc. shall, after the date that any Lender becomes a
Lender, downgrade the long-term certificate deposit ratings or long-term senior
unsecured debt ratings of such Lender (or the parent company thereof), and the
resulting ratings shall be BBB+ or Baa1 or lower, then the Fronting Bank shall
have the right, but not the obligation, at its own expense, upon notice to such
Lender and the Administrative Agent, to replace (or to request the Borrower, at
the sole expense of the Fronting Bank, to use its reasonable efforts to replace)
such Lender with respect to such Lender's Revolving Credit Commitment with an
assignee (in accordance with and subject to the restrictions contained in
paragraph (b) above), and such Lender hereby agrees to transfer and assign
without recourse (in accordance with and subject to the restrictions contained
in paragraph (b) above) all its interests, rights and obligations in respect of
its Revolving Credit Commitment to such assignee; provided, however, that (i) no
such assignment shall conflict with any law, rule and regulation or order of any
Governmental Authority and (ii) such assignee shall pay to such Lender in
immediately available funds on the date of such assignment the principal of and
interest accrued to the date of payment on the Loans and L/C Disbursements of
such Lender hereunder and all other amounts accrued for such Lender's account or
owed to it hereunder.
(j) Neither AAMM nor the Borrower shall assign or delegate any
of its rights or duties hereunder and any attempted assignment shall be null and
void.
(k) Except as provided in Section 2.13(d), the Fronting Bank
shall not assign or delegate any of its interests, rights or obligations as a
Fronting Bank under this Agreement without the prior written consent of the
Borrower, the Administrative Agent and the Required Lenders.
SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to
pay all reasonable out-of-pocket expenses incurred by the Administrative Agent
and the Collateral Agent in connection with the preparation of this Agreement
and the other Loan Documents, or by the Administrative Agent or the Collateral
Agent in connection with the syndication of the Commitments or the
administration of this Agreement (including expenses incurred in connection with
due diligence and initial and ongoing Collateral examination to the extent
incurred with the reasonable prior approval of the Borrower) or in connection
with any amendments, modifications or waivers of the provisions hereof or
thereof (whether or not the transactions hereby contemplated shall be
consummated) or incurred by the Administrative Agent, the Collateral Agent or
any Lender in connection with the enforcement or protection of their rights in
connection with this Agreement and the other Loan Documents or in connection
with the Loans made or the Letters of Credit issued hereunder, including the
reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel
for the Administrative Agent and the Collateral Agent, and, in connection with
any such enforcement or protection, the reasonable fees, charges and
disbursements of any other counsel (including the reasonable allocated costs of
internal counsel if a Lender elects to use internal counsel in lieu of outside
counsel) for the Administrative Agent, the Fronting Bank or any Lender (but no
more than one such counsel for any Lender).
(b) The Borrower agrees to indemnify the Administrative Agent,
the Collateral Agent, the Fronting Bank, each Lender and each of their
respective directors, trustees, officers, employees and agents (each such person
being called an "Indemnitee") against, and to hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities and related expenses,
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84
including reasonable counsel fees, charges and disbursements, incurred by or
asserted against any Indemnitee arising out of, in any way connected with, or as
a result of (i) the execution or delivery of this Agreement or any other Loan
Document or any agreement or instrument contemplated hereby or thereby, the
performance by the parties hereto and thereto of their respective obligations
thereunder or the consummation of the Recapitalization and the other
transactions contemplated hereby and thereby, (ii) the use of the proceeds of
the Loans or the use of any Letter of Credit or (iii) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto, provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses result from the gross negligence or wilful
misconduct of such Indemnitee (treating, for this purpose only, the
Administrative Agent, the Fronting Bank or any Lender and its directors,
trustees, officers and employees as a single Indemnitee). Subject to and without
limiting the generality of the foregoing sentence, the Borrower agrees to
indemnify each Indemnitee against, and hold each Indemnitee harmless from, any
and all losses, claims, damages, liabilities and related expenses, including
reasonable counsel or consultant fees, charges and disbursements, incurred by or
asserted against any Indemnitee arising out of, in any way connected with, or as
a result of (A) any Environmental Claim related in any way to AAMM, the Borrower
or any Subsidiary, or (B) any actual or alleged presence, Release or threatened
Release of Hazardous Materials on any Property or any property owned, leased or
operated by any predecessor of AAMM, the Borrower or any Subsidiary, provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are,
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or wilful misconduct of such
Indemnitee or any of its directors, trustees, officers or employees. The
provisions of this Section 9.05 shall remain operative and in full force and
effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of any of
the Obligations, the invalidity or unenforceability of any term or provision of
this Agreement or any other Loan Document, or any investigation made by or on
behalf of the Administrative Agent, the Fronting Bank or any Lender. All amounts
due under this Section 9.05 shall be payable on written demand therefor.
(c) Unless an Event of Default shall have occurred and be
continuing, the Borrower shall be entitled to assume the defense of any action
for which indemnification is sought hereunder with counsel of its choice at its
expense (in which case the Borrower shall not thereafter be responsible for the
fees and expenses of any separate counsel retained by an Indemnitee except as
set forth below); provided, however, that such counsel shall be reasonably
satisfactory to each such Indemnitee. Notwithstanding the Borrower's election to
assume the defense of such action, each Indemnitee shall have the right to
employ separate counsel and to participate in the defense of such action, and
the Borrower shall bear the reasonable fees, costs and expenses of such separate
counsel, if (i) the use of counsel chosen by the Borrower to represent such
Indemnitee would present such counsel with a conflict of interest; (ii) the
actual or potential defendants in, or targets of, any such action include both
the Borrower and such Indemnitee and such Indemnitee shall have reasonably
concluded that there may be legal defenses available to it that are different
from or additional to those available to the Borrower (in which case the
Borrower shall not have the right to assume the defense or such action on behalf
of such Indemnitee); (iii) the Borrower shall not have employed counsel
reasonably satisfactory to such Indemnitee to represent it within a reasonable
time after notice of the institution of such action; or (iv) the Borrower shall
authorize such Indemnitee to employ separate counsel at the Borrower's expense.
The Borrower will not be liable under this Agreement for any amount paid by an
Indemnitee to settle any claims or actions if the settlement is entered into
without the Borrower's consent, which consent may not be withheld or delayed
unless such settlement is unreasonable in light of such claims or actions
against, and defenses available to, such Indemnitee.
(d) Notwithstanding anything to the contrary in this Section
9.05, this Section 9.05 shall not apply to taxes, it being understood that the
Borrower's only obligations with respect to taxes shall arise under Sections
2.13 and 2.19.
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SECTION 9.06. Right of Setoff. If an Event of Default shall
have occurred and be continuing, each Lender and the Fronting Bank is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Lender or the Fronting Bank to or for the credit or the
account of the Borrower against any of and all the obligations of the Borrower
now or hereafter existing under this Agreement or any other Loan Document held
by such Lender or the Fronting Bank, irrespective of whether or not such Lender
or the Fronting Bank shall have made any demand under this Agreement or such
other Loan Document and although such obligations may be unmatured. The rights
of each Lender and the Fronting Bank under this Section 9.06 are in addition to
other rights and remedies (including other rights of setoff) which such Lender
or the Fronting Bank may have.
SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER
LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF
CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF
COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT
GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No failure or delay of
the Administrative Agent, the Fronting Bank or any Lender in exercising any
right or power hereunder or under any Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Administrative Agent, the
Fronting Bank and the Lenders hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of this Agreement or any other Loan
Document or consent to any departure by AAMM, the Borrower or any Guarantor
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice or demand
on AAMM, the Borrower or any Guarantor in any case shall entitle the Borrower to
any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any other Loan Document nor any
provision hereof or thereof may be waived, amended or modified except, in the
case of this Agreement, pursuant to an agreement or agreements in writing
entered into by AAMM, the Borrower and the Required Lenders or, in the case of
any other Loan Document, pursuant to an agreement or agreements in writing
entered into by each party thereto and the Collateral Agent and consented to by
the Required Lenders; provided, however, that no such agreement shall (i)
decrease the principal amount of, or extend the final maturity of, or decrease
the rate of interest on, any Loan or any L/C Disbursement, without the prior
written consent of each Lender directly affected thereby, (ii) extend any
Installment Date (other than any final maturity) or extend any date on which
payment of interest on any Loan or any L/C Disbursement is due, without the
prior written consent of (A) in the case of Term Loans, the Required Lenders and
Lenders holding Term Loans representing at least 80% of the aggregate principal
amount of each Tranche affected by such action or (B) in the case of Loans under
the Revolving Credit Commitments and L/C Disbursements, Lenders with Revolving
Credit Commitments representing at least 80% of the aggregate Revolving Credit
Commitments then in effect, (iii) advance any Installment Date without the prior
written consent of Lenders holding Term Loans representing (A) at least 80% of
the aggregate principal amount of the then outstanding Tranche A Term Loans and
(B) at least 80% of the aggregate principal amount of the then outstanding
Tranche B Term Loans, (iv) increase or extend the Commitment of any Lender or
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decrease the Commitment Fees or L/C Participation Fees or other fees of any
Lender without the prior written consent of such Lender, (v) effect any waiver,
amendment or modification of the provisions of Section 2.11(b) or that by its
terms adversely affects the rights in respect of payments or collateral of
Lenders participating in any Tranche differently from those of Lenders
participating in other Tranches, without the consent of a majority in interest
of the Lenders participating in the adversely affected Tranche, or change the
relative rights in respect of payments or collateral of the Lenders
participating in different Tranches without the consent of a majority in
interest of Lenders participating in each affected Tranche, or (vi) amend or
modify the provisions of Section 2.09(d) or Section 2.16, the provisions of this
Section or the definition of the term "Required Lenders", or release all or
substantially all the Collateral (it being understood and agreed that the
release of the pledge of the common stock of the Borrower pledged by AAMM to the
Collateral Agent under the Pledge Agreement in connection with the IPO Merger
shall require the consent of only the Required Lenders) or release any Guarantor
from its Guarantee Agreement unless all or substantially all the Capital Stock
of such Guarantor is sold in a transaction permitted by this Agreement or as
provided in Section 9.17, without the prior written consent of each Lender
adversely affected thereby, provided further that no such agreement shall amend,
modify or otherwise affect the rights or duties of the Administrative Agent or
the Fronting Bank hereunder without the prior written consent of the
Administrative Agent or the Fronting Bank acting as such at the effective date
of such agreement, as the case may be. Each Lender shall be bound by any waiver,
amendment or modification authorized by this Section 9.08 and any consent by any
Lender pursuant to this Section 9.08 shall bind any assignee of such Lender.
SECTION 9.09. Interest Rate Limitation. Notwithstanding
anything herein to the contrary, if at any time the applicable interest rate,
together with all fees and charges that are treated as interest under applicable
law (collectively, the "Charges"), as provided for herein or in any other
document executed in connection herewith, or otherwise contracted for, charged,
received, taken or reserved by any Lender or the Fronting Bank, shall exceed the
maximum lawful rate (the "Maximum Rate") that may be contracted for, charged,
taken, received or reserved by such Lender in accordance with applicable law,
the rate of interest payable hereunder, together with all Charges payable to
such Lender or the Fronting Bank, shall be limited to the Maximum Rate, provided
that such excess amount shall be paid to such Lender or the Fronting Bank on
subsequent payment dates to the extent not exceeding the legal limitation.
SECTION 9.10. Entire Agreement. This Agreement, the other Loan
Documents and the agreements regarding certain Fees referred to herein
constitute the entire contract between the parties relative to the subject
matter hereof. Any previous agreement among or representations from the parties
with respect to the subject matter hereof is superseded by this Agreement and
the other Loan Documents. Nothing in this Agreement or in the other Loan
Documents, expressed or implied, is intended to confer upon any party other than
the parties hereto and thereto any rights, remedies, obligations or liabilities
under or by reason of this Agreement or the other Loan Documents.
SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 9.11.
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SECTION 9.12. Severability. In the event any one or more of
the provisions contained in this Agreement or in any other Loan Document should
be held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The parties shall endeavor
in good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
SECTION 9.13. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one contract, and shall become
effective as provided in Section 9.03.
SECTION 9.14. Headings. Article and Section headings and the
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and are not to affect the construction of, or to be taken
into consideration in interpreting, this Agreement.
SECTION 9.15. Jurisdiction; Consent to Service of Process. (a)
Each of AAMM and the Borrower hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of any New York
State court or Federal court of the United States of America sitting in New York
City, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that any Lender or the Fronting Bank may otherwise have to bring any
action or proceeding relating to this Agreement or the other Loan Documents
against AAMM, the Borrower or any Guarantor or their properties in the courts of
any jurisdiction.
(b) Each of AAMM and the Borrower hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
the other Loan Documents in any New York State or Federal court. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 9.01. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
SECTION 9.16. Confidentiality. Each of the Lenders, the
Fronting Bank and the Administrative Agent agrees that it shall maintain in
confidence any information relating to AAMM, the Borrower and the other Loan
Parties furnished to it by or on behalf of AAMM, the Borrower or the other Loan
Parties (other than information that (a) has become generally available to the
public other than as a result of a disclosure by such party, (b) has been
independently developed by such Lender, the Fronting Bank or the Administrative
Agent without violating this Section 9.16 or (c) was available to such Lender,
the Fronting Bank or the Administrative Agent from a third party having, to such
person's knowledge, no obligations of confidentiality to AAMM, the Borrower or
any other Loan Party) and shall not reveal the same other than (i) to its
directors, trustees, officers, employees and advisors with a need to know or to
any person that approves or administers the Loans on behalf of such Lender (so
long as each such person shall have been instructed to keep the same
confidential in accordance with this Section 9.16) and (ii) as contemplated by
Section 9.04(g), except: (A) to the extent necessary to comply with law or any
legal process or the requirements of any Governmental Authority or of any
securities exchange on which securities of the disclosing party or any Affiliate
of
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the disclosing party are listed or traded, (B) as part of normal reporting or
review procedures to Governmental Authorities, (C) to its parent companies,
Affiliates or auditors (so long as each such person shall have been instructed
to keep the same confidential in accordance with this Section 9.16) and (D) in
order to enforce its rights under any Loan Document in a legal proceeding.
SECTION 9.17. Release of Liens and Guarantees. In the event
that AAMM, the Borrower or any Subsidiary conveys, sells, leases, assigns,
transfers or otherwise disposes of all or any portion of any of the Capital
Stock, assets or property of AAMM, the Borrower or any of the Subsidiaries in a
transaction not prohibited by Section 6.05, the Administrative Agent and the
Collateral Agent shall promptly (and the Lenders hereby authorize the
Administrative Agent and the Collateral Agent to) take such action and execute
any such documents as may be reasonably requested by the Borrower and at the
Borrower's expense to release any Liens created by any Loan Document in respect
of such Capital Stock, assets or property, including the release and
satisfaction of record of any mortgage or deed of trust granted in connection
herewith, and, in the case of a disposition of all or substantially all the
Capital Stock or assets of any Subsidiary Guarantor, terminate such Subsidiary
Guarantor's obligations under the Subsidiary Guarantee Agreement. In addition,
the Administrative Agent and the Collateral Agent agree to take such actions as
are reasonably requested by the Borrower and at the Borrower's expense to
terminate the Liens and security interests created by the Loan Documents when
all the Obligations are paid in full and all Letters of Credit and Commitments
are terminated. Any representation, warranty or covenant contained in any Loan
Document relating to any such Capital Stock, assets, property or Subsidiary
shall no longer be deemed to be made once such Capital Stock, assets or property
is conveyed, sold, leased, assigned, transferred or disposed of.
SECTION 9.18. Pre-Funding Escrow Arrangements. The Borrower
intends that the consummation of the Recapitalization and the Closing Date occur
on October 29, 1997, and desires that the Lenders make on the Closing Date
substantially simultaneously with the consummation of the Recapitalization
Revolving Loans in an aggregate principal amount equal to not more than
$100,000,000 and Tranche B Term Loans in an aggregate principal amount equal to
$375,000,000 (such aggregate amount of the Loans to be made on the Closing Date,
the "Initial Loan Amount"). In order to ensure that the Initial Loan Amount will
be available at the time of the consummation of the Recapitalization on the
Closing Date, the Borrower (a) has delivered a Borrowing Request (the
"Pre-Funding Request") to the Administrative Agent, and (b) desires that the
Lenders, pursuant to the Pre-Funding Request, transfer an amount equal to the
Initial Loan Amount (such amount, the "Delivered Funds") to the account of the
Administrative Agent specified in Section 2.18(a) (such account, the "Escrow
Account") on the date hereof and substantially simultaneously with the
consummation of the GM Preferred Stock Purchase (the "Escrow Funding Date"). The
following agreements and understandings will apply with respect to (a) the
arrangements for the Escrow Funding upon the satisfaction of the conditions set
forth in Sections 4.01 and 4.02 and (b) the release (the "Escrow Release") of
the Delivered Funds to the Borrower as the Initial Loan Amount upon the
satisfaction of the conditions set forth in Section 4.03:
(i) The Administrative Agent, on behalf of the Lenders, shall
have sole and exclusive dominion over and control of the Escrow Account
and all property from time to time deposited therein.
(ii) Upon receipt from the Borrower of the Pre-Funding
Request, the Administrative Agent will provide notice to each Lender,
in the manner that would be applicable to a Borrowing Request under
Section 2.03, that such Lender should make available to the
Administrative Agent not later than 2:00 p.m., New York City time, on
the Escrow Funding Date, such Lender's pro rata portion of the
Delivered Funds, as determined by the Administrative Agent based on the
respective Commitments of the Lenders as set forth in Schedule 2.01.
Subject to the terms and conditions and relying upon the
representations and warranties of AAMM and the Borrower herein set
forth, each Lender agrees, severally and not jointly, to make its pro
rata portion, based on such Lender's Commitment to make Loans hereunder
as set forth on Schedule 2.01, of the Delivered Funds
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available to the Administrative Agent by wire transfer of immediately
available funds to the Escrow Account.
(iii) Notwithstanding anything in this Agreement or any other
document to the contrary, (A) the Administrative Agent shall hold the
Delivered Funds for the account of the Lenders pending release of the
Delivered Funds pursuant to paragraph (v) below and (B) the Borrower
shall have no right, title or interest in or to the Delivered Funds
pending such release. To the extent that the Administrative Agent has
any interest in the Delivered Funds, the Administrative Agent hereby
grants a Lien on such interest to the Collateral Agent for the benefit
of the Lenders. The Administrative Agent shall use its reasonable
efforts to invest (in any of (1) a time deposit with the Nassau,
Bahamas, branch of The Chase Manhattan Bank, (2) United States
government repurchase obligations or (3) commercial paper issued by The
Chase Manhattan Bank, as determined by the Administrative Agent) such
of the Delivered Funds as are on deposit in the Escrow Account at 2:00
p.m., New York City time, on the Escrow Funding Date. All earnings on
the Delivered Funds (the "Investment Earnings") shall be paid into the
Escrow Account. The Administrative Agent shall not be liable to any
person for any loss suffered in connection with any investment of funds
made by it in accordance with this Section 9.18.
(iv) The Borrower shall reimburse each Lender for its cost of
delivery of the Delivered Funds to the Administrative Agent. Such
reimbursement shall, as to each Lender, be equal to the product of (A)
such Lender's pro rata portion (determined as set forth above) of the
Delivered Funds times (B) a percentage equal to the Alternate Base Rate
plus the margin that would be applicable to such Lender's ABR Loans as
of the Closing Date multiplied by (C) a fraction the numerator of which
is the actual number of days elapsed from and including the Escrow
Funding Date to but excluding the date such Delivered Funds are
released pursuant to paragraph (v) below and the denominator of which
is 365. Such reimbursement in respect of the Delivered Funds shall be
paid by the Borrower to the Administrative Agent on behalf of the
Lenders on the first Interest Payment Date to occur after the Closing
Date pursuant to the terms of this Agreement, provided that if the
Delivered Funds are released to the Lenders (and not to the Borrower)
pursuant to paragraph (v) below, such reimbursement amount shall be
payable by the Borrower immediately upon release of the Delivered
Funds.
(v) Upon the occurrence of the Escrow Release on the Closing
Date, the Administrative Agent is authorized to release to and thereby
make available to the Borrower (A) the Delivered Funds as the Initial
Loan Amount and (B) all Investment Earnings. If the Escrow Release has
not occurred by 5:00 p.m., New York City time, on or before the date
that is two Business Days after the Escrow Funding Date, the Delivered
Funds shall be immediately released to the Administrative Agent for
distribution to the Lenders on the Business Day next following such
date, and all Investment Earnings shall be released to the
Administrative Agent to the extent necessary to offset amounts payable
by the Borrower to the Lenders.
(vi) In order to induce the Administrative Agent to act under
this Section 9.18, AAMM, the Borrower, the Administrative Agent and the
Lenders agree that:
(A) The duties and obligations of the Administrative
Agent under this Section 9.18 are those herein specifically
provided and no other. The Administrative Agent shall not
incur any liability whatsoever other than for its own wilful
misconduct or gross negligence.
(B) The Administrative Agent shall not have any
responsibility for the genuineness or validity of any document
or other material presented to or deposited with it pursuant
to this Section 9.18, nor any liability for any action taken,
suffered or omitted in accordance with any written
instructions or certificates given to it
<PAGE>
90
hereunder and believed by it to be signed by the proper party
or parties pursuant to this Section 9.18.
(C) In the event that the Administrative Agent shall
be uncertain as to its duties or rights hereunder or shall
receive instructions, claims or demands from any party hereto
that, in its opinion, conflict with any of the provisions
under this Section 9.18, the Administrative Agent shall be
entitled to refrain from taking any action and its sole
obligation shall be to keep safely all property held in escrow
until it shall be directed otherwise in writing by all the
other parties hereto or by a final order or judgment of a
court of competent jurisdiction.
(D) The Administrative Agent shall not be bound by
any modification, amendment, termination, cancelation,
rescission or supersession of this Section 9.18 unless the
same shall be in writing and signed by all the other parties
hereto, and, if its rights, duties or immunities as
Administrative Agent are affected thereby, unless it shall
have given its prior written consent thereto.
<PAGE>
91
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
AMERICAN AXLE & MANUFACTURING OF
MICHIGAN, INC.,
by /s/ Gary J. Witosky
----------------------------
Name: Gary J. Witosky
Title: Vice President
AMERICAN AXLE & MANUFACTURING, INC.,
by /s/ Gary J. Witosky
----------------------------
Name: Gary J. Witosky
Title: Vice President
THE CHASE MANHATTAN BANK,
by /s/ Deborah Davey
----------------------------
Name: Deborah Davey
Title: Vice President
CHASE MANHATTAN BANK DELAWARE, as
Fronting Bank
by /s/ Michael P.Handago
----------------------------
Name: Michael P. Handago
Title: Vice President
<PAGE>
1
SCHEDULE B
<TABLE>
<CAPTION>
LIBOR Margin for ABR Margin for
Revolving Loans LIBOR Margin Revolving Loans ABR Margin
Net Leverage and Tranche A for Tranche B and Tranche A for Tranche B Commitment
Level Ratio Term Loans Term Loans Term Loans Term Loans Fee
<S> <C> <C> <C> <C> <C> <C>
Greater than
1 3.50 to 1.00 2.25% 2.50% 1.25% 1.50% 0.50%
Greater than
2 2.50 to 1.00 2.00% 2.25% 1.00% 1.25% 0.50%
Greater than
3 2.00 to 1.00 1.50% 1.75% 0.50% 0.75% 0.375%
Greater than
4 1.50 to 1.00 1.25% 1.50% 0.25% 0.50% 0.375%
Greater than
5 1.00 to 1.00 1.00% 1.50% --- 0.50% 0.375%
Less than or
equal to
6 1.00 to 1.00 0.75% 1.50% --- 0.50% 0.25%
</TABLE>
The "LIBOR Margin", the "ABR Margin" and the Commitment Fee for any date
shall be determined by reference to the Net Leverage Ratio as of the
last day of the fiscal quarter most recently ended as of such date and
any change shall become effective upon the delivery to the
Administrative Agent of the financial statements to be delivered
pursuant to Section 5.04 for the most recently ended fiscal quarter
together with a certificate of a Responsible Officer of the Borrower (a)
setting forth in reasonable detail the calculation of the Net Leverage
Ratio for the end of such fiscal quarter and (b) stating that the signer
has reviewed the terms of this Agreement and the other Loan Documents
and has made, or caused to be made under his or her supervision, a
review in reasonable detail of the transactions and condition of AAMM,
the Borrower and the Subsidiaries during the accounting period, and that
the signer does not have knowledge of the existence as at the date of
such officers' certificate of any Event of Default or Default. It is
understood that the foregoing certificate of a Responsible Officer shall
be permitted to be delivered prior to, but in no event later than, the
time of the actual delivery of the financial statements required to be
delivered pursuant to Section 5.04. Notwithstanding the foregoing, at
any time during which the Borrower has failed to deliver the certificate
required under Section 5.04(c) with respect to a fiscal quarter
following the date the delivery thereof is due, the Net Leverage Ratio
shall be deemed, solely for the purposes of this Schedule B, to be
greater than 3.50 to 1.00, until such time as the Borrower shall deliver
such certificate.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY, AS OF APRIL 30, 1998
<TABLE>
<CAPTION>
% OWNED
ORGANIZED UNDER BY IMMEDIATE
SUBSIDIARY LAWS OF PARENT(1)
- --------------------------------------------------------------------------------- ---------------- -------------
<S> <C> <C>
American Axle & Manufacturing of Michigan, Inc................................... Michigan
American Axle & Manufacturing, Inc.......................................... Delaware 100
American Axle & Manufacturing de Mexico, S.A. de C.V................... Mexico 99.99(2)
AAM Receivables Corp................................................... Delaware 100
American Axle International Sales, Ltd................................. U.S. Virgin 100
Islands
</TABLE>
- ------------------
(1) All subsidiaries set forth herein are reported in the Company's financial
statements through consolidations.
(2) Remaining shares owned by American Axle & Manufacturing of Michigan, Inc.
<PAGE>
EXHIBIT 23.02
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption 'Experts' and to the
use of our report dated May 15, 1998, in the Registration Statement Form S-1 and
related Prospectus of American Axle & Manufacturing Holdings, Inc. dated May 22,
1998 for the registration of $100 million of its common stock.
/s/ Ernst & Young LLP
Detroit, Michigan
May 22, 1998
