TOWER AUTOMOTIVE INC, S-3/A, 1997-03-25

TOWER AUTOMOTIVE INC
S-3/A, 1997-03-25
METAL FORGINGS & STAMPINGS

Previous: EVANS WITHYCOMBE RESIDENTIAL INC, S-3/A, 1997-03-25

Next: NUVEEN TAX EXEMPT UNIT TRUST SERIES 770, 485BPOS, 1997-03-25

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 25, 1997

REGISTRATION NO. 333-21943

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 1
TO
FORM S-3

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------

TOWER AUTOMOTIVE, INC.

(Exact name of Registrant as specified in its charter)
--------------------------

<TABLE>
<S> <C>
DELAWARE 41-1746238
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>

4508 IDS CENTER
MINNEAPOLIS, MINNESOTA 55402
TELEPHONE: (612) 342-2310

(Address, including zip code, and telephone number, including area code, of
Registrant's principal offices)

ANTHONY A. BARONE
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
TOWER AUTOMOTIVE, INC.
6303 28TH STREET S.E.
GRAND RAPIDS, MICHIGAN 49546
TELEPHONE: (616) 954-7600

(Name, address, including zip code, and telephone number, including area code,
of agent for service)

COPIES TO:

<TABLE>
<S> <C>
CARTER W. EMERSON, ESQ. DEWEY B. CRAWFORD, ESQ.
Kirkland & Ellis Gardner, Carton & Douglas
200 East Randolph Drive 321 North Clark Street
Chicago, Illinois 60601 Chicago, Illinois 60610-4795
(312) 861-2052 (312) 245-8422
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
--------------------------

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /

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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
- ----------------

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ----------------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /

--------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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.
<PAGE>

SUBJECT TO COMPLETION, DATED MARCH 25, 1997

PROSPECTUS
, 1997

10,090,000 SHARES

[LOGO]

COMMON STOCK

Of the 10,090,000 shares of Common Stock, par value $.01 per share (the
"Common Stock"), being offered (the "Offering"), 8,500,000 shares are being sold
by Tower Automotive, Inc. (the "Company"), and 1,590,000 shares are being sold
by the Selling Stockholders. See "Selling Stockholders." The Company will not
receive any part of the proceeds from the sale of shares by the Selling
Stockholders. The Common Stock is traded on the New York Stock Exchange ("NYSE")
under the symbol "TWR." On March 21, 1997, the last reported sale price of the
Common Stock on the NYSE was $39.625 per share. See "Market Price of Common
Stock."

On January 27, 1997, the Company agreed to acquire substantially all of the
assets of Automotive Products Company ("APC"), a division of A.O. Smith
Corporation. The Company expects to complete the acquisition of APC by the end
of April 1997. Certain of the information set forth in this Prospectus assumes
that the acquisition of APC will be completed upon the terms set forth in the
purchase agreement. If the acquisition of APC is not completed, the shares of
Common Stock offered hereby would represent an ownership interest in the Company
as it exists on the date hereof and not of the Company as combined with APC.
Therefore, if the acquisition of APC is not completed, the information set forth
in this Prospectus giving effect to such acquisition would not be relevant. See
"Risk Factors-- Risks Associated with the Failure to Complete the APC
Acquisition."

SEE "RISK FACTORS" BEGINNING ON PAGE 10 OF THIS PROSPECTUS FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
- --------------------------------------------------------------------------------
Per Share.............. $ $ $ $
Total(3)............... $ $ $ $
- --------------------------------------------------------------------------------
</TABLE>

(1) THE COMPANY AND THE SELLING STOCKHOLDERS HAVE AGREED TO INDEMNIFY THE
UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SEE "UNDERWRITING."

(2) BEFORE DEDUCTING ESTIMATED EXPENSES OF $1,300,000 WHICH WILL BE PAID BY THE
COMPANY.

(3) THE COMPANY HAS GRANTED TO THE UNDERWRITERS AN OPTION, EXERCISABLE WITHIN 30
DAYS HEREOF, TO PURCHASE UP TO AN AGGREGATE OF 1,513,500 ADDITIONAL SHARES
OF COMMON STOCK AT THE PRICE TO THE PUBLIC, LESS UNDERWRITING DISCOUNTS AND
COMMISSIONS, SOLELY TO COVER OVER-ALLOTMENTS, IF ANY. IF SUCH OPTION IS
EXERCISED IN FULL, THE TOTAL PRICE TO THE PUBLIC, UNDERWRITING DISCOUNTS AND
COMMISSIONS AND PROCEEDS TO THE COMPANY WILL BE $ , $ AND
$ , RESPECTIVELY. SEE "UNDERWRITING."

The shares offered hereby are offered by the several Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that delivery of
the shares will be made in New York, New York, on or about , 1997.

DONALDSON, LUFKIN & JENRETTE PAINEWEBBER INCORPORATED
SECURITIES CORPORATION

MORGAN STANLEY & CO.
INCORPORATED

ROBERT W. BAIRD & CO.
INCORPORATED

PIPER JAFFRAY INC.

<PAGE>

The following diagrams illustrate the products produced by the Company and APC:

[Illustrations depicting the principal products of the Company and APC]

/ / Currently produced by the Company.

/ / Currently produced by APC.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING AND
MAY BID FOR AND PURCHASE SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL
INFORMATION IN THIS SUMMARY AND ELSEWHERE IN THIS PROSPECTUS ASSUMES THAT THE
UNDERWRITERS' OVER-ALLOTMENT OPTION HAS NOT BEEN EXERCISED. UNLESS THE CONTEXT
INDICATES OTHERWISE, AS USED IN THIS PROSPECTUS THE TERM "COMPANY" REFERS TO
TOWER AUTOMOTIVE, INC., ITS CONSOLIDATED SUBSIDIARIES AND THEIR RESPECTIVE
PREDECESSORS. THE COMPANY ACQUIRED TRYLON CORPORATION ("TRYLON") ON JANUARY 16,
1996 AND MASCOTECH STAMPING TECHNOLOGIES, INC. ("MSTI") ON MAY 31, 1996 AND
EXPECTS TO COMPLETE THE ACQUISITION OF SUBSTANTIALLY ALL OF THE ASSETS OF
AUTOMOTIVE PRODUCTS COMPANY ("APC"), A DIVISION OF A.O. SMITH CORPORATION ("A.O.
SMITH"), BY THE END OF APRIL 1997. SUCH ACQUISITIONS ARE REFERRED TO HEREIN AS
THE "TRYLON ACQUISITION," THE "MSTI ACQUISITION" AND THE "APC ACQUISITION,"
RESPECTIVELY. UNLESS OTHERWISE INDICATED, FINANCIAL AND OPERATING DATA PRESENTED
HEREIN FOR 1996 ON A PRO FORMA BASIS GIVE EFFECT TO THE MSTI ACQUISITION AND THE
APC ACQUISITION AS IF THEY HAD EACH OCCURRED ON JANUARY 1, 1996. SEE "UNAUDITED
PRO FORMA FINANCIAL STATEMENTS."

THE COMPANY

GENERAL

The Company is a leading designer and producer of high-quality body
structure components and assemblies used by the major North American automotive
original equipment manufacturers ("OEMs"), Ford, Chrysler and General Motors,
and certain foreign OEMs with manufacturing operations in North America
("Transplants"), including Honda, Toyota, Nissan and Mazda. The Company's
current products range from large structural stampings and assemblies, such as
body pillars, chassis, suspension and floor pan components and major housing
assemblies, to engineered assemblies, such as hood and deck lid hinges and brake
components. On January 27, 1997, the Company agreed to acquire A.O. Smith's APC
division, a leading manufacturer of light truck frames, automotive engine
cradles and other structural and suspension components, assemblies and modules
used by major North American OEMs and Transplants. Following the APC
Acquisition, the Company believes it will be one of the largest independent
suppliers of structural components and assemblies to the North American
automotive market (based on net sales).

Since its inception in April 1993, the Company's revenues have grown rapidly
through a focused strategy of internal growth and a highly disciplined
acquisition program. During the last three years, the Company has successfully
completed and fully integrated four acquisitions. As a result of such
acquisitions and internal growth, the Company's revenues have increased from
approximately $86 million in 1993 to approximately $474 million in 1996 (pro
forma only for the MSTI Acquisition), representing a compound annual growth rate
of approximately 76%. The Company's North American content per vehicle has
increased from $6.23 in 1993 to $26.74 in 1996 on an actual basis. The APC
Acquisition will be the Company's largest acquisition to date and will increase
the Company's pro forma revenues to approximately $1.3 billion and its pro forma
North American content per vehicle to $77.49 for 1996.

The Company operates in the large and highly fragmented structural segment
of the automotive supply industry, which has recently begun to undergo
significant consolidation. To lower costs and improve quality, OEMs are reducing
their supplier base by awarding sole-source contracts to full-service suppliers
who are able to supply larger portions of a vehicle on a global basis. OEMs'
criteria for supplier selection include not only cost, quality and
responsiveness, but also full-service design, engineering and program management
capabilities. OEMs are increasingly seeking suppliers capable of providing
complete systems or modules rather than suppliers who only provide separate
component parts. In addition, OEMs are increasingly requiring their suppliers to
have the capability to design and manufacture their products in multiple
geographic markets. As a full-service supplier with strong OEM relationships,
the Company expects to continue to benefit from these trends within the
structural segment of the automotive supply industry.

3
<PAGE>

The Company's business objective is to capitalize on the consolidation,
globalization and system/ modular sourcing trends in the automotive supply
industry in order to be the leading provider of structural and suspension
components to OEMs worldwide. The Company's growth strategy focuses on the
identification and pursuit of (i) strategic acquisitions; (ii) modular product
opportunities; (iii) increased vehicle penetration; and (iv) "world car"
opportunities.

THE APC ACQUISITION

APC is a leading designer and producer of structural and suspension
components for the automotive, light truck and heavy truck markets. APC's
products include light truck frames, automotive engine cradles, suspension and
other components and heavy truck frame rails. In 1996, over 70% of APC's
revenues was derived from the sale of structural components for light trucks and
sport utility vehicles, a growing segment of the North American automotive
market. APC's customers include the three major North American OEMs as well as
certain Transplants, including Toyota, Nissan, Isuzu and Honda. APC's three
largest customers, Ford, General Motors and Chrysler, accounted for
approximately 46%, 23% and 20%, respectively, of APC's revenues in 1996.
Approximately 11% of APC's revenues in 1996 was derived from the production of
heavy truck frame rails for North American heavy truck OEMs. The Company
believes APC is the largest supplier in this segment, with a market share of
approximately 51% in 1996. APC conducts its operations through 15 facilities
which, when added to the Company's existing 19 facilities, will result in a
total of over seven million square feet of manufacturing floor space.

The Company believes that the APC Acquisition will provide the Company with
several strategic
benefits, including the following:

EXPANDED PRODUCT OFFERINGS AND MODULAR PRODUCT OPPORTUNITIES. The APC
Acquisition will significantly expand the Company's product offerings by adding
lower body structural components to the Company's existing line of upper body
structural components. In addition, APC's products provide an ideal platform for
developing modular product offerings for the Company's customers. APC's frame
and engine cradle products can be combined with a number of the Company's
existing product offerings, including control arms, suspension components,
exhaust hanger assemblies and spring towers and hangers to deliver more complete
systems or modules to its OEM customers at a lower overall cost. The APC
Acquisition will enable the Company to produce a larger portion of a vehicle,
which the Company believes will afford it significant opportunities to increase
revenues as OEMs continue to consolidate their supplier base. See
"Business--Industry Trends."

INCREASED CUSTOMER PENETRATION. The APC Acquisition will significantly
expand the Company's penetration within each of the three major North American
OEMs. Following the APC Acquisition, the Company believes it will be the largest
supplier of structural components to Chrysler, the largest supplier of metal
components to Ford and a major supplier of structural components to General
Motors. The APC Acquisition will also expand the Company's penetration within
certain Transplants by doubling the Company's sales to Toyota, expanding its
already significant position at Honda, increasing sales to Nissan and adding
Isuzu as a new customer.

INCREASED PENETRATION IN LIGHT TRUCK SEGMENT AND OTHER KEY MODELS. The APC
Acquisition will increase the Company's North American content per vehicle from
$26.74 in 1996 to $77.49 on a pro forma basis and will triple the Company's
content per vehicle in the expanding light truck/sport utility market segment,
which segment represented approximately 60% of the Company's pro forma revenues
for 1996. The APC Acquisition will increase the Company's content per vehicle on
key light truck/sport utility vehicles such as the Ford Explorer and Ranger and
the Chrysler Dakota, Durango and Ram as well as on high volume passenger cars
such as the Ford Taurus/Sable and the Chrysler Intrepid/Concorde/Vision. The
Company believes that this increased model penetration will afford it greater
opportunities to supply additional parts and modules for such models.

4
<PAGE>
COMPLEMENTARY NEW TECHNOLOGY. The APC Acquisition will provide the Company
with a variety of new and enhanced design and manufacturing technology,
including APC's patented three piece side rail frame and patented Simulform-TM-
forming technology, the latter of which may result in cost savings and quality
improvements over conventional stamping technology in certain specialized
applications. In addition, APC's existing hydroforming technology complements
the Company's initiatives in this area. The APC Acquisition will also provide
the Company with additional painting, coating and welding technologies and
advanced logistical parts management systems. The Company believes that these
acquired technologies will provide significant additional opportunities to serve
existing customers and obtain new business.

OPERATIONAL EFFICIENCIES. The APC Acquisition will provide the Company with
a number of opportunities to reduce costs and improve operational efficiency.
For example, APC currently outsources many of its stamping needs, some of which
will be able to be supplied by the Company's existing stamping facilities. In
addition, the Company's and APC's facilities are geographically located in such
a way as to allow the Company to optimize its management and logistical
capabilities on a regional basis. APC's facilities are strategically located
close to many of its and the Company's major customers, allowing for inventory
and freight cost-savings. The increased size of the Company may also improve the
Company's ability to negotiate more favorable terms on its purchasing and supply
contracts, as well as achieve other operational cost savings.

EXPANDED GLOBAL CAPABILITIES. OEMs are increasingly demanding that their
suppliers have global production capabilities. APC's presence in China, Japan
and South America complements the Company's current European initiatives to
provide expanded global production capabilities for both North American and
international OEMs. See "Business--Global Initiatives."

The aggregate purchase price of APC is approximately $625 million, plus an
additional $25 million for related fees and expenses and management's estimate
of certain post-closing adjustments. The Company expects to complete the APC
Acquisition by the end of April 1997. Pursuant to the terms of the purchase
agreement, the Company may elect not to complete the APC Acquisition if there is
a material adverse change in the operating results or financial condition of APC
prior to the closing date. Currently, the Company believes that such a change
has not occurred and that it is unlikely that such a change will occur prior to
the closing date. If the APC Acquisition is not completed, the shares of Common
Stock offered hereby would represent an ownership interest in the Company as it
exists on the date hereof and not of the Company as combined with APC. In such
an event, the net proceeds of the Offering will be used for general corporate
purposes, which may include repayment of existing indebtedness, acquisitions or
capital expenditures. See "Risk Factors--Risks Associated with the Failure to
Complete the APC Acquisition."

5
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by the Company.... 8,500,000 shares(1)

Common Stock Offered by Selling
Stockholders......................... 1,590,000 shares
Total.............................. 10,090,000 shares

Common Stock to be Outstanding after
the Offering......................... 22,840,800 shares(2)

Use of Proceeds........................ The net proceeds to be received by the Company from
the Offering are expected to be used to pay a
portion of the cash purchase price of the APC
Acquisition. The Company will not receive any
proceeds from the sale of the shares by the
Selling Stockholders. See "Use of Proceeds."

New York Stock Exchange Symbol......... TWR(3)
</TABLE>

- --------------------------

(1) Does not include the Underwriters' over-allotment option granted by the
Company for an aggregate of 1,513,500 shares of Common Stock.

(2) Does not include: (i) 1,019,477 shares of Common Stock reserved for issuance
under the Company's stock option plans and employee stock discount purchase
plan, of which options to purchase 459,250 shares were outstanding; (ii)
102,984 shares issuable upon the exercise of stock options issued in
connection with the acquisition of Edgewood Tool and Manufacturing Company
and its affiliate; (iii) 407,743 shares issuable upon conversion of
convertible subordinated notes issued in connection with the acquisition of
Edgewood (the "Convertible Notes"); and (iv) 200,000 shares issuable upon
the exercise of outstanding warrants issued to MascoTech, Inc. ("MascoTech")
in connection with the MSTI Acquisition (the "Warrants").

(3) The Company's Common Stock commenced trading on the NYSE on February 19,
1997. Prior thereto, the Common Stock was traded on the Nasdaq National
Market under the symbol "TWER."

RISK FACTORS

In analyzing an investment in the Common Stock offered hereby, prospective
investors should carefully consider, along with other matters referred to
herein, the risks relating to: (i) the failure of the Company to complete the
APC Acquisition; (ii) the degree to which the Company will be leveraged
following the APC Acquisition; (iii) the Company's reliance on major customers
and selected models; (iv) the cyclicality and seasonality of the automotive
market; (v) the failure to realize the benefits of the APC Acquisition; (vi)
obtaining new business on new and redesigned models; and (vii) the Company's
ability to continue to implement its acquisition strategy. See "Risk Factors."

6
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA OF THE COMPANY

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
PRO FORMA
AS ADJUSTED
1994 1995 1996(1) 1996(2)
(IN THOUSANDS, EXCEPT PER SHARE AND PER VEHICLE
AMOUNTS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................... $ 165,526 $ 222,801 $ 399,925 $ 1,323,105
Gross profit........................................... 22,540 37,413 61,635 181,958
Operating income....................................... 14,302 21,920 39,440 114,078
Net income............................................. 7,361 12,071 20,637 52,481
Net income applicable to common stockholders........... 7,476 12,247 20,765 52,609
Net income per common and common equivalent share(3)... $ 0.86 $ 1.05 $ 1.55 $ 2.25
---------- ---------- ---------- ------------
---------- ---------- ---------- ------------
Weighted average common and common equivalent shares
outstanding.......................................... 8,720 11,697 13,423 23,432

OTHER DATA:
Capital expenditures, net.............................. $ 28,524 $ 26,148 $ 16,253 $ 167,787
EBITDA(4).............................................. 18,440 28,469 52,194 166,976
Cash provided by (used in):
Operating activities................................. (10,375) 13,905 30,049 NA
Investing activities................................. (73,266) (34,054) (88,924) NA
Financing activities................................. 82,848 21,051 97,514 NA
North American content per vehicle(5).................. 10.83 14.92 26.74 77.49
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED(6)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.................................................................... $ 81,535 $ 115,955
Total assets....................................................................... 398,607 1,200,877
Total debt......................................................................... 114,182 406,486
Stockholders' investment........................................................... 181,877 500,877
</TABLE>

- --------------------------

(1) Includes the results of operations of MSTI from the date of acquisition, May
31, 1996.

(2) The unaudited pro forma as adjusted statement of operations data reflect:
(i) the MSTI Acquisition (including related financing transactions); (ii)
the APC Acquisition; (iii) the sale by the Company of 2,232,900 shares of
Common Stock in June 1996 (the "1996 Offering") and the application of the
proceeds therefrom; (iv) the refinancing of the Company's existing credit
agreement (the "Existing Credit Agreement") and the redemption of the
Company's senior notes (the "Senior Notes") in connection with the APC
Acquisition; and (v) the Offering and the application of the net proceeds to
the Company as described in "Use of Proceeds," as if such transactions had
occurred on January 1, 1996. The Company acquired Trylon on January 16,
1996. Results of operations of Trylon for the period January 1, 1996 through
the acquisition date are not material and therefore have not been included
in the Company's pro forma results of operations for the year ended December
31, 1996. See "Use of Proceeds" and "Unaudited Pro Forma Financial
Statements." Net income, net income applicable to common stockholders and
net income per common and common equivalent share are presented before
extraordinary loss on early extinguishment of debt.

(3) The Company has not declared or paid any cash dividends on its Common Stock
in the past, currently intends to retain its earnings to support its growth
strategy and does not anticipate paying dividends in the foreseeable future.
See "Dividend Policy."

(FOOTNOTES CONTINUED ON FOLLOWING PAGE)

7
<PAGE>

(4) "EBITDA" is operating income plus depreciation and amortization. EBITDA does
not represent and should not be considered as an alternative to net income
or cash flow from operations as determined by generally accepted accounting
principles ("GAAP") and the Company's calculation thereof may not be
comparable to that reported by other companies. The Company believes that it
is widely accepted that EBITDA provides useful information regarding a
company's ability to service and/or incur indebtedness. This belief is based
on the Company's negotiations with its lenders who have indicated that the
amount of indebtedness the Company will be permitted to incur will be based,
in part, on the Company's EBITDA. EBITDA does not take into account the
Company's working capital requirements, debt service requirements and other
commitments and, accordingly, is not necessarily indicative of amounts that
may be available for discretionary uses. Set forth below is a reconciliation
of the Company's operating income, as reported, to EBITDA for the periods
indicated:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
PRO FORMA
AS ADJUSTED
1994 1995 1996 1996
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Operating income.................................................. $ 14,302 $ 21,920 $ 39,440 $ 114,078
Depreciation and amortization..................................... 4,138 6,549 12,754 52,898
--------- --------- --------- -----------
EBITDA............................................................ $ 18,440 $ 28,469 $ 52,194 $ 166,976
--------- --------- --------- -----------
--------- --------- --------- -----------
</TABLE>

(5) "North American content per vehicle" on an actual basis is the Company's
revenues divided by total North American vehicle production, which is
comprised of car and light truck production in the United States, Canada and
Mexico, as estimated by the Company from industry sources. Pro forma as
adjusted "North American content per vehicle" also includes the automotive
revenues of APC (excluding APC's heavy truck revenues).

(6) The unaudited pro forma as adjusted balance sheet data reflect: (i) the APC
Acquisition; (ii) the refinancing of the Company's Existing Credit Agreement
and redemption of the Senior Notes; and (iii) the Offering and the
application of the net proceeds to the Company as described in "Use of
Proceeds," as if such transactions had occurred on December 31, 1996. See
"Use of Proceeds," "Capitalization" and "Unaudited Pro Forma Financial
Statements."

8
<PAGE>
SUMMARY HISTORICAL FINANCIAL AND OTHER DATA OF APC

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
(IN THOUSANDS, EXCEPT PER VEHICLE
AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................................................... $ 722,718 $ 845,305 $ 862,977
Gross profit............................................................... 97,952 95,174 92,882
Operating income........................................................... 63,931 57,741 55,649
Income before provision for income taxes................................... 59,880 52,384 48,820

OTHER DATA:
Capital expenditures, net(1)............................................... $ 59,023 $ 78,908 $ 151,534
EBITDA(2).................................................................. 98,031 99,562 106,417
Cash provided by (used in):
Operating activities..................................................... 41,510 40,089 92,554
Investing activities..................................................... (59,023) (82,658) (168,436)
Financing activities..................................................... 17,513 42,569 75,882
North American content per vehicle(3)...................................... 39.23 48.25 50.75
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
1996
<S> <C>
BALANCE SHEET DATA:
Working capital................................................................................... $ 63,822
Total assets...................................................................................... 601,311
Parent company investment......................................................................... 392,614
</TABLE>

- --------------------------

(1) APC made capital expenditures of $4.3 million and $63.1 million in the years
ended December 31, 1995 and 1996, respectively, to finance the construction
of and to purchase equipment for its new Plymouth, Michigan and Roanoke,
Virginia manufacturing facilities.

(2) "EBITDA" is operating income plus depreciation and amortization. EBITDA does
not represent and should not be considered as an alternative to net income
or cash flow from operations as determined by GAAP and the Company's
calculation thereof may not be comparable to that reported by other
companies. The Company believes that it is widely accepted that EBITDA
provides useful information regarding a company's ability to service and/or
incur indebtedness. This belief is based on the Company's negotiations with
its lenders who have indicated that the amount of indebtedness the Company
will be permitted to incur will be based, in part, on the Company's EBITDA.
EBITDA does not take into account APC's working capital requirements, debt
service requirements and other commitments and, accordingly, is not
necessarily indicative of amounts that may be available for discretionary
uses. Set forth below is a reconciliation of APC's operating income, as
reported, to EBITDA for the periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Operating income.............................................................. $ 63,931 $ 57,741 $ 55,649
Depreciation and amortization................................................. 34,100 41,821 50,768
--------- --------- ---------
EBITDA........................................................................ $ 98,031 $ 99,562 $ 106,417
--------- --------- ---------
--------- --------- ---------
</TABLE>

(3) "North American content per vehicle" is APC's automotive revenues (excluding
heavy truck revenues) divided by total North American vehicle production,
which is comprised of car and light truck production in the United States,
Canada and Mexico, as estimated by the Company from industry sources.

9
<PAGE>
RISK FACTORS

THIS PROSPECTUS, INCLUDING THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN,
CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED ("SECURITIES ACT"). ALSO, DOCUMENTS
SUBSEQUENTLY FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION
(THE "COMMISSION") AND INCORPORATED HEREIN BY REFERENCE WILL CONTAIN
FORWARD-LOOKING STATEMENTS. 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 OR APC, ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH
INCLUDE STATEMENTS RELATING TO, AMONG OTHER THINGS, (I) THE CONSUMMATION OF THE
APC ACQUISITION; (II) THE INTEGRATION OF THE OPERATIONS OF APC WITH THOSE OF THE
COMPANY; AND (III) THE STRATEGIC BENEFITS OF THE APC ACQUISITION. ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS
AS A RESULT OF THE RISK FACTORS SET FORTH BELOW, THE MATTERS SET FORTH OR
INCORPORATED IN THE PROSPECTUS GENERALLY AND CERTAIN ECONOMIC AND BUSINESS
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 FILINGS WITH THE COMMISSION. 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.

RISKS ASSOCIATED WITH THE FAILURE TO COMPLETE THE APC ACQUISITION

Prior to the Offering, there were 14,340,800 shares of Common Stock
outstanding. Upon consummation of the Offering, there will be 22,840,800 shares
of Common Stock outstanding. If the APC Acquisition is not consummated, the size
of the Company will not increase, but the number of outstanding shares will
have, and thus the value of each share of the Common Stock would be
significantly diluted. The Company's net income per common and common equivalent
share before extraordinary item ("EPS") for 1996 on a pro forma as adjusted
basis would have been $2.25 per share. If the APC Acquisition is not completed,
the Company's EPS for 1996 on a pro forma as adjusted basis would have been
$1.17 per share. In addition, the net proceeds to the Company from the Offering
are expected to be used to pay a portion of the cash purchase price of the APC
Acquisition. In the event the APC Acquisition is not consummated, the Company
intends to use the net proceeds of the Offering for general corporate purposes,
which may include repayment of existing indebtedness, acquisitions or capital
expenditures.

In connection with the APC Acquisition, the Company expects to enter into a
new credit agreement (the "New Credit Agreement") to finance a portion of the
APC Acquisition. The commitments of its bank lender under the New Credit
Agreement expire if the APC Acquisition is not consummated on or prior to April
30, 1997. If such commitments expire and are not renewed by such lender, the
Company would be required to seek alternative sources of financing. There can be
no assurance that the Company would be able to secure such alternative financing
or that such financing, if available, would be on terms acceptable to the
Company. If the Company does not consummate the APC Acquisition because it fails
to secure financing, the Company is required to pay A.O. Smith a fee of $15.0
million. In addition, if the APC Acquisition is not consummated by June 30,
1997, A.O. Smith's obligation to consummate the APC Acquisition will lapse and
there can be no assurance that the Company will be able to purchase APC on the
terms disclosed herein, on terms acceptable to the Company or at all.

10
<PAGE>
RISKS ASSOCIATED WITH LEVERAGE

The APC Acquisition will significantly increase the Company's debt service
obligations. As of December 31, 1996 on a pro forma basis, the Company would
have had total outstanding long-term indebtedness of approximately $405.8
million, or 44.8% of the Company's total capitalization. The degree to which the
Company is leveraged could make it more difficult for the Company to adjust to
rapidly changing market conditions and could make it more vulnerable in the
event of a downturn in general economic conditions or its business. See
"Description of New Credit Agreement."

RELIANCE ON MAJOR CUSTOMERS AND SELECTED MODELS

Ford, Chrysler and General Motors accounted for approximately 67%, 10% and
4%, respectively, of the Company's revenues during 1996 and approximately 53%,
17% and 17%, respectively, on a pro forma basis. Although the Company and APC
have contracts with many of their customers, such contracts provide for
supplying the customers' requirements for a particular model, rather than for
manufacturing a specific quantity of products. The loss of any one of their
major customers or a significant decrease in demand for certain key models or a
group of related models sold by any of their major customers could have a
material adverse effect on the Company and APC. There is substantial and
continuing pressure from OEMs to reduce costs, including the cost of products
purchased from outside suppliers such as the Company and APC. Certain of the
Company's products are sold under long-term agreements that require the Company
to provide annual cost reductions to such purchasers (directly through price
reductions or indirectly through suggestions regarding manufacturing
efficiencies or other cost savings) by certain percentages each year. Although
the Company has been able to achieve a portion of such reductions through
production cost savings, there can be no assurance that the Company will be able
to continue to generate such cost savings in the future. If the Company were
unable to generate sufficient production cost savings in the future to offset
such price reductions, the Company's gross margin could be adversely affected.
See "Business--Customers and Marketing."

RISKS RELATED TO INDUSTRY CYCLICALITY AND SEASONALITY

The automotive market is highly cyclical and is dependent on consumer
spending. Economic factors adversely affecting automotive production and
consumer spending could adversely impact the Company. In addition, the Company's
business is somewhat seasonal. The Company typically experiences decreased
revenue and operating income during the third quarter of each year due to the
impact of OEM plant shutdowns in July for vacations and model changeovers. The
Company expects such seasonality to continue following the APC Acquisition. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Seasonality."

FAILURE TO REALIZE BENEFITS OF APC ACQUISITION

The Company believes the APC Acquisition will significantly enhance its
competitive position and business prospects. There can be no assurance, however,
that such benefits will be realized or that the combination of the Company and
APC will be successful. In addition, the Company expects to achieve cost savings
through the integration of the operations of APC with those of the Company.
There can be no assurance that the Company will not experience difficulties in
integrating the operations of APC with those of the Company or that the expected
cost savings will be realized. The integration of APC will require the
experience and expertise of certain key managers of APC who are expected to be
retained by the Company. There can be no assurance that the APC managers
retained by the Company will remain with the Company for the time period
necessary to successfully integrate APC into the Company.

11
<PAGE>

RISKS ASSOCIATED WITH OBTAINING BUSINESS FOR NEW AND REDESIGNED MODEL
INTRODUCTIONS

The Company and APC principally compete for new business both at the
beginning of the development of new models and upon the redesign of existing
models by their major customers. New model development generally begins two to
five years prior to the marketing of such models to the public. There can be no
assurance that the Company and APC will be successful in obtaining significant
new business on new models and in supplying additional parts for existing models
as they are redesigned by their customers. The failure of the Company and APC to
obtain new business on new models or to retain or increase business on
redesigned existing models could adversely affect the Company. See "Business--
Competition."

RISKS ASSOCIATED WITH ACQUISITION STRATEGY

Acquiring businesses that complement the Company's existing business has
been and will continue to be an important element of the Company's strategy for
achieving profitable growth. There can be no assurance that suitable acquisition
candidates will be identified and acquired in the future, that financing for any
such acquisitions will be available on satisfactory terms, that the Company will
be able to accomplish its strategic objectives as a result of any such
acquisition or that any business or assets acquired by the Company will be
integrated successfully into the Company's operations. The Company is
continually evaluating possible acquisitions and engages in discussions with
acquisition candidates from time to time. The Company does not currently have
any pending acquisitions that are probable other than as described herein. See
"Business--Strategy."

RISKS FROM COMPETITION

The automotive components supply industry is highly competitive. Some of the
competitors of the Company and APC, including certain divisions of its OEM
customers, are larger and have greater financial and other resources than the
Company and APC. There can be no assurance that the Company will be able to
maintain its current competitive position and continue to supply its products to
OEMs. See "Business-- Competition."

ANTI-TAKEOVER PROVISIONS COULD PREVENT OR DELAY A CHANGE IN CONTROL

Certain provisions of the Company's Amended and Restated Certificate of
Incorporation, which permit the Board of Directors to issue up to 5,000,000
shares of preferred stock without further stockholder approval, as well as
certain provisions of the Delaware General Corporation Law, could have the
effect of delaying, deterring or preventing a change in control of the Company.

POSSIBLE VOLATILITY OF STOCK PRICE

The public offering price per share of the Common Stock has been determined
by negotiations among the Company and representatives of the Underwriters based
in part on the trading price of the Common Stock on the NYSE and may not be
indicative of the price at which the Common Stock will trade after completion of
the Offering. In addition, the stock markets have from time to time experienced
extreme price and volume volatility. These fluctuations may be unrelated to the
operating performance of particular companies whose shares are traded. Market
fluctuations may adversely affect the market price of the Common Stock. The
market price of the Common Stock could be subject to significant fluctuations in
response to the Company's operating results and other factors, some of which may
be beyond the Company's control. There can be no assurance that the market price
of the Common Stock will not decline below the price at which the shares of the
Common Stock are sold in this Offering.

12
<PAGE>
THE COMPANY

The Company was formed to acquire R.J. Tower Corporation (the
"Predecessor"), the acquisition of which was completed in April 1993 (the "R.J.
Tower Acquisition") for an aggregate cost of approximately $26 million. Since
the R.J. Tower Acquisition, the Company has successfully completed and fully
integrated four strategic acquisitions:

EDGEWOOD. In May 1994, the Company acquired Edgewood Tool and Manufacturing
Company and its affiliate, Ann Arbor Assembly Corporation (collectively,
"Edgewood") for approximately $30 million in aggregate consideration. Edgewood
is a leading supplier of hood and deck lid hinges as well as structural
stampings and assemblies. The acquisition of Edgewood: (i) added engineered
mechanical stampings, primarily hood and deck lid hinges, and additional
structural components to the Company's product offerings; (ii) increased model
penetration with the Company's existing customers; and (iii) provided the
Company with a significant new customer, Mazda.

KALAMAZOO. In June 1994, the Company acquired Kalamazoo Stamping and Die
Company ("Kalamazoo"), a supplier of structural stampings and assemblies, for
approximately $12 million in cash. The acquisition of Kalamazoo added additional
structural components to the Company's product offerings and increased model
penetration with Ford.

TRYLON. In January 1996, the Company acquired Trylon from MascoTech for
approximately $25 million in cash, including transaction costs. The Trylon
Acquisition: (i) broadened the Company's product offerings to include small,
precision metal stampings and assemblies, which were previously outsourced to
third parties; (ii) established a relationship between the Company and General
Motors; and (iii) increased content on Ford models, primarily the Villager.
Trylon generated $47.9 million in revenues in 1995.

MSTI. In May 1996, the Company acquired MSTI from MascoTech for
approximately $79 million (including the payment of related fees and expenses),
plus additional earn-out payments if certain operating targets are achieved by
the MSTI facilities in the first three years following the acquisition. The MSTI
Acquisition: (i) expanded the Company's product capabilities into chassis and
suspension components; (ii) provided chassis and suspension technology as well
as value-added processing technologies including assembling, painting and
welding; and (iii) increased the Company's content per vehicle on key light
truck and sport utility vehicles such as the Ford F-Series, Explorer and
Windstar and the Chrysler Ram and Dakota as well as on high volume passenger
cars such as the Ford Taurus/Sable. MSTI had revenues of $152.9 million in 1995.

The Company completed an initial public offering (the "IPO") of its Common
Stock in August 1994 and the sale of an additional 2,232,900 shares in June
1996. The Company's principal executive offices are located at 4508 IDS Center,
Minneapolis, Minnesota 55402, and its telephone number is (612) 342-2310.

APC ACQUISITION FINANCING

The Company expects to complete the APC Acquisition by the end of April
1997. The aggregate purchase price of APC is approximately $625 million, plus an
additional $25 million for related fees and expenses and management's estimate
of certain post-closing adjustments. The Company has executed a commitment
letter with its principal bank lender pursuant to which such lender has agreed,
subject to the satisfaction of certain conditions, to enter into the New Credit
Agreement. The Company anticipates that the New Credit Agreement will provide
for a six year revolving credit facility of up to $750 million (the "Revolving
Credit Facility.") The Company intends to finance the APC Acquisition by using
the proceeds from this Offering and a portion of its available borrowings under
the New Credit Agreement. In the event that the Offering has not been completed
at the time of the consummation of the APC Acquisition, an additional loan of up
to $200 million will be made available to the Company under the New Credit
Agreement in the form of a term loan. This loan would have a term of 18 months
and would be fully repaid from the proceeds of the Offering. See "Description of
New Credit Agreement."

13
<PAGE>
The following table sets forth the anticipated sources and uses of funds for
the APC Acquisition (dollars in thousands):

<TABLE>
<S> <C>
SOURCES:
Revolving Credit Facility....................................... $ 357,304
Proceeds from the Offering(1)................................... 322,000
Cash on hand.................................................... 39,596
---------
Total sources................................................. $ 718,900
---------
---------
USES:
Cash consideration for the APC Acquisition...................... $ 625,000
Redemption of Senior Notes, including prepayment costs(2)....... 68,900
Fees and expenses and estimated post-closing adjustments........ 25,000
---------
Total uses.................................................... $ 718,900
---------
---------
</TABLE>

- ------------------------------

(1) Assumes a public offering price of $39.63 per share and after deducting the
underwriting discounts and commissions and estimated offering expenses
payable by the Company.

(2) Includes the redemption of the Senior Notes in aggregate principal amount of
$65.0 million and a prepayment penalty of approximately $3.9 million. The
Senior Notes were issued by the Company in May 1996 to finance the cash
portion of the purchase price of MSTI.

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
8,500,000 shares of Common Stock offered by the Company hereby (at an assumed
public offering price of $39.63 per share and after deducting the underwriting
discounts and commissions and estimated offering expenses payable by the
Company) are estimated to be $322.0 million ($379.6 million if the Underwriters'
over-allotment option is exercised in full). The Company expects to use the net
proceeds to pay a portion of the cash purchase price of the APC Acquisition. The
Company expects to use borrowings under the New Credit Agreement of $357.3
million, together with cash on hand of $39.6 million, to pay the remaining
portion of the purchase price of the APC Acquisition.

In the event that the APC Acquisition is not consummated, the Company
reserves the right to use the net proceeds of the Offering for general corporate
purposes, which may include repayment of existing indebtedness, acquisitions or
capital expenditures. Pending such uses, the Company expects that such proceeds
will be invested in short-term, interest bearing, investment grade securities.
See "Risk Factors-- Risks Associated with the Failure to Complete the APC
Acquisition."

The Company is continually evaluating possible acquisitions and engages in
discussions with acquisition candidates from time to time. The Company does not
currently have any pending acquisitions that are probable other than as
described herein.

The Company will not receive any of the proceeds from the sale of Common
Stock by the Selling Stockholders. See "Selling Stockholders."

14
<PAGE>
MARKET PRICE OF COMMON STOCK

The Company's Common Stock is traded on the NYSE under the symbol "TWR." The
Common Stock commenced trading on the Nasdaq National Market on August 12, 1994
under the symbol "TWER." The Common Stock commenced trading on the NYSE on
February 19, 1997. The following table sets forth, for the periods indicated,
the high and low closing sale prices for the Common Stock on the Nasdaq National
Market or the NYSE.

<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
1995
- ----------------------------------------------------------------------------
First Quarter............................................................... $ 10 5/8 $ 7 1/2
Second Quarter.............................................................. 10 1/2 8 1/4
Third Quarter............................................................... 14 1/2 10 3/8
Fourth Quarter.............................................................. 17 1/2 13 1/8

1996
- ----------------------------------------------------------------------------
First Quarter............................................................... $ 16 1/8 $ 14 1/8
Second Quarter.............................................................. 25 1/4 16
Third Quarter............................................................... 27 23 3/4
Fourth Quarter.............................................................. 32 1/8 24

1997
- ----------------------------------------------------------------------------
First Quarter (through March 21, 1997)...................................... $ 45 1/16 $ 29 3/4
</TABLE>

The reported last sale price of the Common Stock on the NYSE as of a recent
date is set forth on the cover page of this Prospectus.

As of December 31, 1996, there were approximately 125 holders of record of
the outstanding Common Stock. The Company believes it has a significantly larger
number of beneficial holders of its Common Stock.

DIVIDEND POLICY

The Company has not declared or paid any cash dividends on its Common Stock
in the past, currently intends to retain its earnings to support its growth
strategy and does not anticipate paying dividends in the foreseeable future. Any
future payment of dividends is within the discretion of the Company's Board of
Directors and will depend upon, among other factors, the capital requirements,
operating results and financial condition of the Company from time to time. In
addition, the Company's ability to pay cash dividends is expected to be limited
by the terms of the New Credit Agreement. As of December 31, 1996, under the
most restrictive terms of the New Credit Agreement as currently proposed, the
Company would not have been permitted to pay any dividends. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources Following the APC Acquisition."

15
<PAGE>
CAPITALIZATION

The following table sets forth: (i) the actual consolidated capitalization
of the Company at December 31, 1996; and (ii) the pro forma as adjusted
capitalization of the Company giving effect to (a) the APC Acquisition, (b) the
refinancing of the Existing Credit Agreement and redemption of the Senior Notes
and (c) the sale by the Company of 8,500,000 shares of Common Stock in the
Offering and the application of the net proceeds therefrom to the Company as
described under "Use of Proceeds," as if such transactions had occurred on such
date. See "APC Acquisition Financing," "Use of Proceeds" and "Unaudited Pro
Forma Financial Statements." This table should be read in conjunction with the
consolidated financial statements of the Company and notes thereto included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
----------------------
PRO FORMA
ACTUAL AS ADJUSTED
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
Cash and cash equivalents................................................................. $ 39,596 $ --
--------- -----------
--------- -----------
Long-term debt:
Existing Credit Agreement............................................................... $ -- $ --
New Credit Agreement:
Revolving Credit Facility............................................................. -- 357,304
Senior Notes............................................................................ 65,000 --
Industrial development revenue bonds(1)................................................. 46,643 46,643
Convertible Notes....................................................................... 2,508 2,508
Other................................................................................... 31 31
Less: current maturities................................................................ (722) (722)
--------- -----------
Total long-term debt.................................................................. 113,460 405,764
--------- -----------
Stockholders' investment:
Preferred stock, par value $1.00; 5,000,000 shares authorized; no shares issued or
outstanding........................................................................... -- --
Common stock, par value $.01; 30,000,000 shares authorized; 14,283,793 shares on an
actual basis; and 22,783,793 shares on a pro forma as adjusted basis(2)............... 143 228
Additional paid-in capital.............................................................. 136,759 458,674
Warrants(3)............................................................................. 2,000 2,000
Retained earnings....................................................................... 43,150 40,150
Common stock subscriptions receivable................................................... (175) (175)
--------- -----------
Total stockholders' investment........................................................ 181,877 500,877
--------- -----------
Total capitalization.................................................................. $ 295,337 $ 906,641
--------- -----------
--------- -----------
</TABLE>

- --------------------------

(1) Long-term debt includes an aggregate of $43.8 million of indebtedness from
the issuance of industrial development revenue bonds ("IRBs") to finance the
construction of the Company's Bardstown facility and the purchase of related
equipment. The $10.8 million of uncommitted proceeds from these IRBs is
reflected as "restricted cash" on the Company's balance sheet as of December
31, 1996.

(2) Does not include: (i) 48,655 shares of Common Stock issued since December
31, 1996 under the Company's employee stock purchase plan; (ii) 5,602 shares
of Common Stock issued since December 31, 1996 upon the conversion of
certain of the Convertible Notes; (iii) 1,022,227 shares of Common Stock
reserved for issuance under the Company's stock option plans and employee
stock purchase plan, of which options to purchase 270,750 shares were
outstanding as of December 31, 1996; (iv) 102,984 shares issuable upon the
exercise of stock options issued in connection with the acquisition of
Edgewood; (v) 407,743 shares issuable upon conversion of the Convertible
Notes; or (vi) 200,000 shares issuable upon the exercise of the Warrants.

(3) Valued as of the time of the MSTI Acquisition using the Black-Scholes option
pricing model.

16
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS

The following Unaudited Pro Forma Statement of Operations for the year ended
December 31, 1996 gives effect to: (i) the MSTI Acquisition (including related
financing transactions); (ii) the 1996 Offering and the application of the net
proceeds therefrom; (iii) the APC Acquisition; (iv) the refinancing of the
Existing Credit Agreement and redemption of the Senior Notes; and (v) the
Offering and the application of the net proceeds therefrom to the Company as
described in "Use of Proceeds," as if such transactions had occurred on January
1, 1996. The Company acquired Trylon on January 16, 1996. Results of operations
of Trylon for the period from January 1, 1996 through the acquisition date are
not material and therefore have not been included in the Company's results of
operations for the year ended December 31, 1996 on a pro forma basis. See "The
Company" and "Use of Proceeds" on pages 13 and 14, respectively, for a more
detailed description of the transactions included in the Unaudited Pro Forma
Financial Statements.

The information set forth under the heading Pro Forma As Adjusted included
in the Unaudited Pro Forma Balance Sheet as of December 31, 1996 reflects: (i)
the APC Acquisition; (ii) the refinancing of the Existing Credit Agreement and
redemption of the Senior Notes; and (iii) the Offering and the application of
the net proceeds therefrom to the Company as described under "Use of Proceeds,"
as if such transactions had occurred on such date. The historical balance sheet
of the Company as of December 31, 1996 already reflects the Trylon Acquisition,
the MSTI Acquisition and the 1996 Offering.

The Company expects to achieve cost savings through the integration of the
operations of APC with those of the Company. See "Business--APC Acquisition."
The Unaudited Pro Forma Financial Statements set forth herein do not reflect any
of these anticipated cost savings.

The Company expects to complete the APC Acquisition by the end of April
1997. Pursuant to the terms of the purchase agreement, the Company may elect not
to complete the APC Acquisition if there is a material adverse change in the
operating results or financial condition of APC prior to the closing date.
Currently, the Company believes that such a change has not occurred and that it
is unlikely that such a change will occur prior to the closing date. If the APC
Acquisition is not consummated, the size of the Company will not increase, but
the number of outstanding shares will have, and thus the value of each share of
Common Stock would be significantly diluted. The Company's EPS for 1996 on a pro
forma as adjusted basis would have been $2.25 per share. If the APC Acquisition
is not completed, the Company's EPS for 1996 on a pro forma as adjusted basis
would have been $1.17 per share. See "Risk Factors--Risks Associated with the
Failure to Complete the APC Acquisition." The Company is required to pay A.O.
Smith a fee of $15.0 million in the event that the APC Acquisition is not
completed. The Company currently believes that the APC Acquisition will be
completed. As a result, the Company has not reflected this payment in the
accompanying Unaudited Pro Forma Financial Statements.

The unaudited pro forma financial data presented herein are based on the
assumptions and adjustments described in the accompanying notes. The Unaudited
Pro Forma Statement of Operations does not purport to represent what the
Company's results of operations actually would have been if the events described
above had occurred as of the dates indicated or what such results will be for
any future periods. The Unaudited Pro Forma Financial Statements are based upon
assumptions and adjustments that the Company believes are reasonable. The
Unaudited Pro Forma Financial Statements and the accompanying notes should be
read in conjunction with the historical financial statements of the Company and
of APC, including the notes thereto, included elsewhere in this Prospectus.

Each of the acquisitions referred to in these Unaudited Pro Forma Financial
Statements have been or will be accounted for using the purchase method of
accounting and, accordingly, the assets acquired and liabilities assumed have
been or will be recorded at their fair values as of the dates of their
respective acquisitions. These amounts have been recorded based upon preliminary
estimates as of the dates of the acquisitions. The Company does not believe that
any changes to these estimates that may occur will have a material impact on the
pro forma financial information included herein.

17
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1996

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
HISTORICAL
---------------------------------- PRO FORMA PRO FORMA
COMPANY(1) MSTI(2) APC(3) ADJUSTMENTS AS ADJUSTED
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues...................................... $ 399,925 $ 73,803 $ 862,977 $ (13,600)(4) $ 1,323,105
Cost of sales................................. 338,290 64,224 770,095 (31,462)(5) 1,141,147
----------- --------- ---------- --------------- ------------
Gross profit.................................. 61,635 9,579 92,882 17,862 181,958
Selling, general and administrative
expenses.................................... 20,004 3,404 37,233 -- 60,641
Amortization expense.......................... 2,191 683 -- 4,365(6) 7,239
----------- --------- ---------- --------------- ------------
Operating income.............................. 39,440 5,492 55,649 13,497 114,078
Interest expense, net......................... 5,103 37 6,829 14,640(7) 26,609
----------- --------- ---------- --------------- ------------
Income before provision for income taxes...... 34,337 5,455 48,820 (1,143) 87,469
Provision for income taxes.................... 13,700 1,640 20,000 (352)(8) 34,988
----------- --------- ---------- --------------- ------------
Income before extraordinary item.............. 20,637 3,815 28,820 (791) 52,481
Extraordinary loss on early extinguishment of
debt, net of income taxes................... -- -- -- (3,000)(9) (3,000)
----------- --------- ---------- --------------- ------------
Net income.................................. $ 20,637 $ 3,815 $ 28,820 $ (3,791) $ 49,481
----------- --------- ---------- --------------- ------------
----------- --------- ---------- --------------- ------------
Income applicable to common stockholders:
Before extraordinary item................. $ 20,765 $ 52,609
----------- ------------
----------- ------------
Net income................................ $ 20,765 $ 49,609
----------- ------------
----------- ------------
Income per common and common equivalent
share:
Before extraordinary item................. $ 1.55 $ 2.25
----------- ------------
----------- ------------
Net income................................ $ 1.55 $ 2.12
----------- ------------
----------- ------------
Weighted average common and common
equivalent shares outstanding............. 13,423 10,009(10) 23,432
</TABLE>

See accompanying Notes to Unaudited Pro Forma Statement of Operations.

18
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)

(1) Represents the results of operations of the Company for the year ended
December 31, 1996 and the results of operations of Trylon and MSTI from the
dates of their respective acquisitions.

(2) Represents the results of operations for MSTI from January 1, 1996 through
the date of acquisition, May 31, 1996.

(3) Represents the results of operations for APC for the year ended December
31, 1996.

(4) To eliminate sales of stampings from the Company to APC during 1996.

(5) To eliminate purchases made by APC from the Company during 1996 of $13,600
(See Note 4) and to reflect the change in depreciation expense resulting
from adjustments to the depreciable lives of property, plant and equipment
of MSTI and APC to their estimated useful lives at the time of their
acquisition and from adjustments to value such property, plant and equipment
at fair value as of the dates of acquisition ($17,862).

(6) Represents the amortization of goodwill arising from the acquisition of
MSTI ($415) and APC ($4,633), net of amortization of goodwill previously
recorded by MSTI ($683) which has been eliminated. Goodwill will be
amortized on a straight-line basis over a forty-year period.

(7) Represents incremental interest expense arising from indebtedness incurred
in connection with the acquisitions of MSTI ($2,314) and APC ($40,069), net
of the reduction in interest expense which results from the application of
the proceeds from the 1996 Offering ($993) and the Offering ($26,750).
Adjustments to interest expense have been calculated based on an assumed
weighted average borrowing rate of 6.75% during the pro forma period. If the
assumed interest rate were to change by 1/8 of 1%, interest expense would
change by approximately $440 and net income would change by approximately
$265.

(8) To adjust the provision for income taxes on a pro forma basis to reflect
the Company's incremental tax rate of 40%.

(9) Represents the payment of a prepayment penalty of $3,900 on the redemption
of the Senior Notes and the write-off of $1,100 of related deferred
financing costs, net of the related income tax effect of $2,000.

(10) Represents the pro forma effect from the shares issued to MascoTech in
connection with the MSTI Acquisition, the 2,232,900 shares issued in the
1996 Offering, including shares issued upon the exercise of the
underwriters' over-allotment option, and the issuance of 8,500,000 shares of
the Common Stock in the Offering.

19
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
AS OF DECEMBER 31, 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
HISTORICAL
---------------------- PRO FORMA PRO FORMA AS
COMPANY APC ADJUSTMENTS(1) ADJUSTED
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 39,596 $ -- $ (39,596)(6) $ --
Accounts receivable...................................... 61,073 68,827 -- 129,900
Inventories.............................................. 21,864 32,883 15,763(2) 70,510
Prepaid tooling and other................................ 14,433 69,432 (7,600)(3) 76,265
---------- ---------- -------------- ------------
Total current assets................................... 136,966 171,142 (31,433) 276,675
Property, plant and equipment, net......................... 156,248 407,549 48,197(4) 611,994
Restricted cash............................................ 10,833 -- -- 10,833
Goodwill and other intangible assets, net.................. 85,638 -- 185,326(5) 270,964
Other assets............................................... 8,922 22,620 (1,131)(6) 30,411
---------- ---------- -------------- ------------
$ 398,607 $ 601,311 $ 200,959 $ 1,200,877
---------- ---------- -------------- ------------
---------- ---------- -------------- ------------

LIABILITIES AND STOCKHOLDERS' INVESTMENT

Current liabilities:
Accounts payable......................................... $ 32,280 $ 69,485 $ -- $ 101,765
Accrued liabilities...................................... 22,429 37,835 (2,031)(6) 58,233
Current maturities of long-term debt..................... 722 -- -- 722
---------- ---------- -------------- ------------
Total current liabilities.............................. 55,431 107,320 (2,031) 160,720
Long-term debt, net of current maturities.................. 113,460 -- 292,304(6) 405,764

Other noncurrent liabilities............................... 47,839 101,377 (15,700)(7) 133,516
---------- ---------- -------------- ------------
Stockholders' investment:
Preferred stock.......................................... -- -- -- --
Common stock............................................. 143 -- 85(6) 228
Additional paid-in capital............................... 136,759 -- 321,915(6) 458,674
Warrants................................................. 2,000 -- -- 2,000
Retained earnings........................................ 43,150 -- (3,000)(6) 40,150
Net assets to be acquired................................ -- 392,614 (392,614)(8) --
Subscriptions receivable................................. (175) -- -- (175)
---------- ---------- -------------- ------------
Total stockholders' investment......................... 181,877 392,614 (73,614) 500,877
---------- ---------- -------------- ------------
$ 398,607 $ 601,311 $ 200,959 $ 1,200,877
---------- ---------- -------------- ------------
---------- ---------- -------------- ------------
</TABLE>

See accompanying Notes to Unaudited Pro Forma Balance Sheet.

20
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
(DOLLARS IN THOUSANDS)

(1) The following table sets forth the components of the aggregate purchase
price of the APC Acquisition and the allocation of such purchase price:

<TABLE>
<S> <C>
APC purchase price................................................ $ 625,000
Fees and expenses and estimated post-closing adjustments.......... 25,000
---------
Total purchase price to be allocated............................ $ 650,000
---------
---------
Historical net book value of assets acquired...................... $ 392,614
Elimination of LIFO reserve (Note 2).............................. 15,763
Adjustment of property, plant and equipment to fair value (Note
4).............................................................. 48,197
Elimination of historical deferred tax assets (Note 3)............ (7,600)
Elimination of historical deferred tax liability (Note 7)......... 35,700
Reserves established in connection with the APC Acquisition (Note
7).............................................................. (20,000)
Excess purchase price over net assets acquired allocated to
goodwill........................................................ 185,326
---------
Total purchase price allocated.................................. $ 650,000
---------
---------
</TABLE>

(2) To record inventories at estimated fair value, including the elimination of
APC's historical LIFO reserve.

(3) To write off APC's historical deferred tax benefit.

(4) To state property, plant and equipment acquired in the APC Acquisition at
estimated fair value and eliminate historical accumulated depreciation.

(5) To adjust goodwill to the amount recognized in connection with the APC
Acquisition. The goodwill will be amortized on a straight-line basis over a
forty-year period.

(6) To reflect the financing transactions related to the APC Acquisition and the
application of the net proceeds to the Company of the Offering. Upon the
consummation of the APC Acquisition, the Company intends to refinance the
Existing Credit Agreement and retire certain other indebtedness with
borrowings under the New Credit Agreement. See "Description of New Credit
Agreement" for a detailed description of the terms of the New Credit
Agreement. In connection with the retirement of certain indebtedness, the
Company will write-off $1,100 of previously capitalized deferred financing
costs and expects to pay a prepayment penalty of $3,900 on the redemption of
the Senior Notes. This will result in a reduction in current income taxes
payable of $2,000 and an extraordinary loss, net of income taxes, of $3,000.

The following table sets forth the sources and uses of funds in the APC
Acquisition:

<TABLE>
<S> <C>
SOURCES:
Revolving Credit Facility....................................... $ 357,304
Proceeds from the Offering...................................... 322,000
Cash on hand.................................................... 39,596
---------
Total sources................................................. $ 718,900
---------
---------
USES:
Cash consideration for the APC Acquisition...................... $ 625,000
Redemption of Senior Notes, including prepayment costs.......... 68,900
Fees and expenses and estimated post-closing adjustments........ 25,000
---------
Total uses.................................................... $ 718,900
---------
---------
</TABLE>

(7) To write off historical deferred taxes of $35,700 and to record management's
preliminary estimate of reserves to be established in connection with the
APC Acquisition, including $15,500 of losses to be incurred on the sale of
products which have costs in excess of selling prices and $4,500 of costs to
be incurred to rationalize certain facilities of APC. These reserves have
been established based on preliminary estimates.

(8) To eliminate APC's historical stockholder's investment.

21
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
OF THE COMPANY

The consolidated financial data for the year ended December 31, 1992 and the
three and one-half month period ended April 14, 1993 are derived from the
audited consolidated financial statements of the Predecessor. The consolidated
financial data for the eight and one-half month period ended December 31, 1993
has been derived from the audited consolidated financial statements of the
Company. The consolidated financial data for the years ended December 31, 1994,
1995 and 1996 have been derived from the audited consolidated financial
statements of the Company, which are included as part of this Prospectus. The
financial data for the combined year ended December 31, 1993 have been derived
from the financial statements of the Predecessor and the Company and are
unaudited. The selected financial data below should be read in conjunction with
the consolidated financial statements and the notes thereto of the Company
included elsewhere in this Prospectus and "Management's Discussion and Analysis
of Results of Operations and Financial Condition."

PREDECESSOR(1) THE COMPANY
-------------------------- -----------------------------------------------------------
JANUARY 1 APRIL 15 YEAR ENDED DECEMBER 31,
YEAR ENDED THROUGH THROUGH --------------------------------------------
DECEMBER 31, APRIL 14, DECEMBER 31, COMBINED
1992 1993 1993 1993(2) 1994 1995 1996(3)
(IN THOUSANDS, EXCEPT PER SHARE AND PER VEHICLE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues.................... $ 80,830 $ 25,037 $ 61,297 $ 86,334 $ 165,526 $ 222,801 $ 399,925
Cost of sales............... 70,431 20,426 51,941 72,367 142,986 185,388 338,290
------------- ----------- ------------- ----------- --------- --------- ---------
Gross profit.............. 10,399 4,611 9,356 13,967 22,540 37,413 61,635
Selling, general and
administrative expenses... 4,440 1,223 3,155 4,378 7,435 14,308 20,004
Amortization expense........ -- -- 197 197 803 1,185 2,191
------------- ----------- ------------- ----------- --------- --------- ---------
Operating income.......... 5,959 3,388 6,004 9,392 14,302 21,920 39,440
Interest expense, net....... 539 93 636 729 1,899 1,799 5,103
Other income, net........... (229) (25) -- (25) -- -- --
------------- ----------- ------------- ----------- --------- --------- ---------
Income before provision
for income taxes........ 5,649 3,320 5,368 8,688 12,403 20,121 34,337
Provision for income
taxes..................... 2,395 1,392 2,287 3,679 5,042 8,050 13,700
------------- ----------- ------------- ----------- --------- --------- ---------
Net income................ $ 3,254 $ 1,928 $ 3,081 $ 5,009 $ 7,361 $ 12,071 $ 20,637
------------- ----------- ------------- ----------- --------- --------- ---------
------------- ----------- ------------- ----------- --------- --------- ---------
Net income applicable to
common stockholders(4).. $ 3,254 $ 1,928 $ 3,081 $ 5,009 $ 7,476 $ 12,247 $ 20,765
------------- ----------- ------------- ----------- --------- --------- ---------
------------- ----------- ------------- ----------- --------- --------- ---------
Net income per common and
common equivalent
share................... $ 0.45 $ 0.74 $ 0.86 $ 1.05 $ 1.55
Weighted average common
and common equivalent
shares outstanding...... 6,812 6,812 8,720 11,697 13,423

OTHER DATA:
Capital expenditures, net... $ 3,066 $ 5,156 $ 28,524 $ 26,148 $ 16,253
EBITDA(5)................... 7,851 12,143 18,440 28,469 52,194
Cash provided by (used in):
Operating activities...... 4,682 9,241 (10,375) 13,905 30,049
Investing activities...... (22,344) (24,434) (73,266) (34,054) (88,924)
Financing activities...... 18,510 15,024 82,848 21,051 97,514
North American content per
vehicle(6)................ NA 6.23 10.83 14.92 26.74

PRO FORMA
AS ADJUSTED 1996

<S> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues.................... $1,323,105
Cost of sales............... 1,141,147
----------------
Gross profit.............. 181,958
Selling, general and
administrative expenses... 60,641
Amortization expense........ 7,239
----------------
Operating income.......... 114,078
Interest expense, net....... 26,609
Other income, net........... --
----------------
Income before provision
for income taxes........ 87,469
Provision for income
taxes..................... 34,988
----------------
Net income................ $ 52,481
----------------
----------------
Net income applicable to
common stockholders(4).. $ 52,609
----------------
----------------
Net income per common and
common equivalent
share................... $ 2.25
Weighted average common
and common equivalent
shares outstanding...... 23,432
OTHER DATA:
Capital expenditures, net... $ 167,787
EBITDA(5)................... 166,976
Cash provided by (used in):
Operating activities...... NA
Investing activities...... NA
Financing activities...... NA
North American content per
vehicle(6)................ 77.49
</TABLE>

22
<PAGE>

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------------
PRO FORMA
AS
BALANCE SHEET DATA (AT END ADJUSTED
OF PERIOD): 1993 1994 1995 1996 1996
Working capital................................................ $ 1,440 $ 33,145 $ 32,245 $ 81,535 $ 115,955
<S> <C> <C> <C> <C> <C> <C> <C>
Total assets................................................... 51,358 178,398 209,476 398,607 1,200,877
Total debt..................................................... 14,433 50,403 71,079 114,182 406,486
Stockholders' investment....................................... 10,823 73,139 85,585 181,877 500,877

<CAPTION>
BALANCE SHEET DATA (AT END
OF PERIOD):
Working capital................................................
<S> <C> <S> <C> <C> <C> <C> <C>
Total assets...................................................
Total debt.....................................................
Stockholders' investment.......................................
</TABLE>

- ------------------------------

(1) On April 15, 1993, the Company acquired the Predecessor. Accordingly,
certain information provided for the year ended December 31, 1992, and the
three and one-half month period ended April 14, 1993, is not comparable to
the Statement of Operations Data of the Company due to the effects of
certain purchase accounting adjustments and the financing of the R.J. Tower
Acquisition. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition."

(2) Operating data for the Predecessor for the period January 1, 1993 to April
14, 1993 have been combined for presentation purposes with the operating
data of the Company for the eight and one-half month period ended December
31, 1993, without giving effect to purchase accounting or the impact of the
financing of the R.J. Tower Acquisition.

(3) Includes the results of operations of MSTI from the date of acquisition, May
31, 1996.

(4) The Company has not declared or paid any cash dividends on its Common Stock
in the past, currently intends to retain its earnings to support its growth
strategy and does not anticipate paying dividends in the foreseeable future.
See "Dividend Policy."

(5) "EBITDA" is operating income plus amortization and depreciation. EBITDA does
not represent and should not be considered an alternative to net income or
cash flow from operations as determined by GAAP and the Company's
calculation thereof may not be comparable to that reported by other
companies. The Company believes that it is widely accepted that EBITDA
provides useful information regarding a company's ability to service and/or
incur indebtedness. This belief is based on the Company's negotiations with
its lenders who have indicated that the amount of indebtedness the Company
will be permitted to incur will be based, in part, on the Company's EBITDA.
EBITDA does not take into account the Company's working capital
requirements, debt service requirements and other commitments and,
accordingly, is not necessarily indicative of amounts that may be available
for discretionary uses. Set forth below is a reconciliation of the Company's
operating income, as reported, to EBITDA for the periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
APRIL 15 --------------------------------------------------------------
THROUGH COMBINED PRO FORMA
DECEMBER 31, 1993 1993 1994 1995 1996 AS ADJUSTED 1996
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>

Operating income................ $ 6,004 $ 9,392 $ 14,302 $ 21,920 $ 39,440 $ 114,078
Depreciation and amortization... 1,847 2,751 4,138 6,549 12,754 52,898
------ ----------- --------- --------- --------- --------
EBITDA.......................... $ 7,851 $ 12,143 $ 18,440 $ 28,469 $ 52,194 $ 166,976
------ ----------- --------- --------- --------- --------
------ ----------- --------- --------- --------- --------
</TABLE>

(6) "North American content per vehicle" is the Company's revenues divided by
total North American vehicle production, which is comprised of car and light
truck production in the United States, Canada and Mexico, as estimated by
the Company from industry sources.

23
<PAGE>
SELECTED COMBINED FINANCIAL DATA OF APC

The combined financial data for the years ended December 31, 1994, 1995 and
1996 are derived from the audited combined financial statements of APC, which
are included as a part of this Prospectus. The selected financial data below
should be read in conjunction with the combined financial statements of APC and
the notes thereto included elsewhere in this Prospectus and "Management's
Discussion and Analysis of Results of Operations and Financial
Condition--Results of Operations--APC."

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
(IN THOUSANDS, EXCEPT PER
VEHICLE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................................................................... $ 722,718 $ 845,305 $ 862,977
Cost of sales...................................................................... 624,766 750,131 770,095
--------- --------- ---------
Gross profit..................................................................... 97,952 95,174 92,882
Selling, general and administrative expenses....................................... 34,021 37,433 37,233
--------- --------- ---------
Operating income................................................................. 63,931 57,741 55,649
Interest expense, net.............................................................. 4,051 5,357 6,829
--------- --------- ---------
Income before provision for income taxes......................................... $ 59,880 $ 52,384 $ 48,820
--------- --------- ---------
--------- --------- ---------

OTHER DATA:
Capital expenditures, net(1)....................................................... $ 59,023 $ 78,908 $ 151,534
EBITDA(2).......................................................................... 98,031 99,562 106,417
Cash provided by (used in):
Operating activities............................................................. 41,510 40,089 92,554
Investing activities............................................................. (59,023) (82,658) (168,436)
Financing activities............................................................. 17,513 42,569 75,882
North American content per vehicle(3).............................................. 39.23 48.25 50.75
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
BALANCE SHEET DATA: 1996
<S> <C>
Working capital..................................................................................... $ 63,822
Total assets........................................................................................ 601,311
Parent company investment........................................................................... 392,614
</TABLE>

- ------------------------------

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Operating income................................................... $ 63,931 $ 57,741 $ 55,649
Depreciation and amortization...................................... 34,100 41,821 50,768
--------- --------- ---------
EBITDA............................................................. $ 98,031 $ 99,562 $ 106,417
--------- --------- ---------
--------- --------- ---------
</TABLE>

24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

GENERAL

The Company was organized to effect the R.J. Tower Acquisition, which was
financed with a combination of common equity and secured indebtedness. Since the
R.J. Tower Acquisition, the Company has successfully completed and fully
integrated four strategic acquisitions. See "The Company." The Company expects
to complete the APC Acquisition by the end of April 1997. No assurance can be
given, however, that the APC Acquisition will be completed. See "Risk
Factors--Risks Associated with the Failure to Complete the APC Acquisition."

The Company's four previous acquisitions have affected, and the APC
Acquisition will prospectively affect, the Company's results of operations in
certain significant respects. As a result of the APC Acquisition, the Company
will increase the historical book value of APC's assets, including intangible
assets such as goodwill, which will significantly increase the amount of
amortization expense reported in the Company's ongoing operations. In addition,
the Company's interest expense will increase significantly due to increased
borrowings to finance the APC Acquisition. The Company expects to achieve cost
savings through the integration of the operations of APC with those of the
Company.

The Company believes that its overall gross margin has been slightly higher
than that of APC, primarily because the Company has historically sold a greater
percentage of complex, high value-added products than APC. In addition, APC's
overall gross margin has been negatively impacted in recent years as a result of
APC's beginning production of certain products that require a greater proportion
of components purchased from outside suppliers and higher launch costs and
depreciation expense related to the new production. The Company expects that, as
a result of the APC Acquisition, its overall gross margin will be lower in
future periods.

RESULTS OF OPERATIONS--THE COMPANY

The following table sets forth the percentage relationship of certain items
to revenues for the periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
PRO FORMA
1994 1995 1996 1996
<S> <C> <C> <C> <C>
Revenues............................................. 100.0% 100.0% 100.0% 100.0%
Cost of sales........................................ 86.4 83.2 84.6 86.2
--------- --------- --------- -----
Gross profit....................................... 13.6 16.8 15.4 13.8
Selling, general and administrative expenses......... 4.5 6.5 5.0 4.6
Amortization expense................................. 0.5 0.5 0.5 0.6
--------- --------- --------- -----
Operating income................................... 8.6 9.8 9.9 8.6
Interest and other expense........................... 1.1 0.8 1.3 2.0
--------- --------- --------- -----
Income before provision for income taxes........... 7.5 9.0 8.6 6.6
Provision for income taxes........................... 3.0 3.6 3.4 2.6
--------- --------- --------- -----
Net income before extraordinary item............... 4.5% 5.4% 5.2% 4.0%
--------- --------- --------- -----
--------- --------- --------- -----
</TABLE>

COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995

REVENUES. Revenues for the year ended December 31, 1996 increased by $177.1
million, or 79.5%, to $399.9 million compared to $222.8 million for the year
ended December 31, 1995. Approximately $134.3 million of the increase in
revenues over 1995 is attributable to the acquisitions of MSTI in May 1996 and
Trylon in January 1996. The remaining increase is due to new business awarded to
the Company, including

25
<PAGE>
business relating to the Ford Escort, Econoline and Expedition, Dodge Ram Club
Cab pick-up and Toyota Camry. These increases were partially offset by
production decreases in the first half of the year on key models served by the
Company, including the Ford Aerostar, Villager, Econoline and Chrysler Intrepid/
Concorde/Vision.

COST OF SALES. Cost of sales as a percentage of revenues for the year ended
December 31, 1996 was 84.6% compared to 83.2% for the year ended December 31,
1995. The decrease in gross margin was due to a higher proportion of components
purchased from outside suppliers as a result of the Trylon and MSTI Acquisitions
and launch costs associated with new business. These decreases were partially
offset by operating efficiencies and enhanced productivity.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $20.0 million, or 5.0% of revenues, for the
year ended December 31, 1996 compared to $14.3 million, or 6.4% of revenues, for
the year ended December 31, 1995. The percentage decrease related to revenues
reflects the economies of scale of higher gross sales. The increased expense was
due primarily to incremental costs associated with the Company's acquisitions of
MSTI and Trylon in 1996.

AMORTIZATION EXPENSE. Amortization expense for the year ended December 31,
1996 was $2.2 million compared to $1.2 million for the year ended December 31,
1995. The increase was due to incremental goodwill amortization related to the
acquisitions of MSTI and Trylon.

INTEREST EXPENSE. Interest expense for the year ended December 31, 1996 was
$5.1 million compared to $1.8 million for the year ended December 31, 1995. The
increase was due principally to increased borrowings incurred to fund the
acquisitions of MSTI and Trylon, partially offset by the application of the
proceeds from the 1996 Offering, and the absence of capitalization of interest
costs for the new Bardstown, Kentucky plant which was under construction during
1995.

INCOME TAXES. The effective income tax rate was 39.9% for the year ended
December 31, 1996 and 40.0% for the year ended December 31, 1995. The effective
rates differed from the statutory rates primarily as a result of state taxes and
nondeductible goodwill amortization.

COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994

REVENUES. Revenues for the year ended December 31, 1995 increased $57.3
million, or 34.6%, to $222.8 million compared to $165.5 million for the year
ended December 31, 1994. Revenues increased despite significant production
decreases on key vehicles served by the Company including the Ford Escort,
Taurus/Sable, and Econoline and Chrysler Intrepid/Concorde/Vision. These
decreases were offset by new business that began production during the year and
the full year effects of the Company's acquisitions of Edgewood in May 1994 and
Kalamazoo in June 1994.

COST OF SALES. Cost of sales, as a percentage of revenues, decreased to
83.2% for the year ended December 31, 1995 compared to 86.4% for the year ended
December 31, 1994. The improvement in gross margin was a result of the
productivity improvement initiatives in place and synergies realized from the
acquisitions of Edgewood and Kalamazoo. These were partially offset by higher
raw material costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $14.3 million, or 6.4% of revenues, for the
year ended December 31, 1995 compared to $7.4 million, or 4.5% of revenues, for
the year ended December 31, 1994. The increased expense was due in part to the
full year effect of the acquisitions of Edgewood and Kalamazoo combined with the
incremental engineering, technical and development costs associated with future
programs.

OTHER. Amortization expense increased to $1.2 million for the year ended
December 31, 1995 from $0.8 million for the year ended December 31, 1994 due to
incremental goodwill amortization related to the Company's 1994 acquisitions.
Interest expense decreased to $1.8 million in 1995 from $1.9 million in 1994.

26
<PAGE>

The decrease is due to the effect of the application of the proceeds from the
Company's IPO to reduce indebtedness. The provision for income taxes was at an
effective rate of 40.0% for the year ended December 31, 1995 and 40.7% for the
year ended December 31, 1994. The effective rates were higher than federal
statutory rates as a result of nondeductible goodwill amortization and state
income taxes.

RESULTS OF OPERATIONS--APC

The following table sets forth the percentage relationship of certain items
to revenues for the periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
<S> <C> <C> <C>
Revenues.............................................................................. 100.0% 100.0% 100.0%
Cost of sales......................................................................... 86.4 88.7 89.2
--------- --------- ---------
Gross profit........................................................................ 13.6 11.3 10.8
Selling, general and administrative expenses.......................................... 4.7 4.5 4.3
--------- --------- ---------
Operating income.................................................................... 8.9% 6.8% 6.5%
--------- --------- ---------
--------- --------- ---------
</TABLE>

COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995

REVENUES. Revenues for the year ended December 31, 1996 increased $17.7
million, or 2.1%, to $863.0 million compared to $845.3 million for the year
ended December 31, 1995. This increase in revenue is attributable to new
business associated with the redesigned Nissan pick-up and the effects of the
full year's production of the Dodge Ram Club Cab pick-up, as well as overall
production increases on key vehicles served by APC, including the Ford
Taurus/Sable and the General Motors Yukon/Chevrolet Tahoe. These increases were
partially offset by lower production of the Dodge Dakota pick-up as a result of
the launch of a redesigned version of this vehicle during 1996.

COST OF SALES. Cost of sales, as a percentage of revenues, was 89.2% for
the year ended December 31, 1996, compared to 88.7% for the year ended December
31, 1995. APC's gross margin was negatively impacted by higher incremental costs
associated with the launch of new products during 1996, along with relative
increases in depreciation expense associated with capital equipment placed in
service during 1995 and 1996 related to this new business. These increases were
partially offset by improved labor efficiencies and productivity.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $37.2 million, or 4.3% of revenues, for the year
ended December 31, 1996 compared to $37.4 million for the prior year, a decrease
of approximately 0.5%. These costs include incremental design and engineering
expenditures associated with new business to be introduced in future periods,
including the Ford Ranger, which was launched late in 1996, the Dodge Durango,
Chrysler's entry into the sport utility market, and the front and rear
suspension modules for the Chrysler Intrepid/Concorde/Vision. These incremental
costs were offset by lower overall general and administrative costs.

COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31, 1994

REVENUES. Revenues for the year ended December 31, 1995 increased $122.6
million, or 17.0%, to $845.3 million compared to $722.7 million for the year
ended December 31, 1994. This increase was attributable to new business
associated with the launches of the redesigned Ford Explorer and General Motors
Yukon/Chevrolet Tahoe, as well as the effect of the full year's production of
the Ford Contour/ Mercury Mystique, which was launched during 1994.

27
<PAGE>
COST OF SALES. Cost of sales, as a percentage of revenues, was 88.7% for
the year ended December 31, 1995, compared to 86.4% for the year ended December
31, 1994. Higher costs associated with the launch of new products during 1995
contributed to the overall increase in these costs. In addition, APC also
experienced higher relative labor costs as a result of the increase in overall
product demand during 1995. Higher depreciation expense associated with capital
equipment used in the production of new products launched during 1994 and 1995
also contributed to these higher costs. Gross margin was also negatively
impacted as a result of APC's beginning production of certain products that
require a greater proportion of components purchased from outside suppliers.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $37.4 million, or 4.5% of revenues, for the year
ended December 31, 1995 compared to $34.0 million, or 4.7% of revenues, for the
prior year, an increase of approximately 10.0%. Higher design and engineering
costs associated with products to be launched in future periods, including the
redesigned Ford Ranger and Dodge Dakota pick-ups, contributed to this increase.
In addition, selling and general administrative costs increased to support the
overall higher revenues in 1995 compared to 1994.

SEASONALITY

The Company's performance is dependent on automotive vehicle production,
which is seasonal in nature. The third calendar quarter is historically the
weakest, due to the impact of OEM plant shutdowns in July for vacation and model
changeovers. Additionally, general industry levels are only a partial
explanation of volume changes throughout the year. Individual vehicle platforms
are also a cause of variations in revenues depending upon market response and
acceptance of the specific platform models.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1996, the Company had no indebtedness outstanding under the
revolving credit facility portion of its Existing Credit Agreement. The Existing
Credit Agreement consists of a revolving credit facility with a committed amount
of $75.0 million (subject to eligible accounts receivable and inventory, as
defined in the Existing Credit Agreement, which exceeded $75.0 million at
December 31, 1996). The Existing Credit Agreement matures in January 2001 and
bears interest at variable rates equal to, at the Company's option, either a
prime-based rate or LIBOR plus a variable margin. The Existing Credit Agreement
provides for the issuance of up to $50 million in letters of credit to
collateralize the outstanding IRBs described below.

At December 31, 1996, the Company also had $43.8 million of indebtedness
outstanding pursuant to IRBs issued with the City of Bardstown, Kentucky.
Proceeds from these IRBs were used to finance construction of a 240,000 square
foot manufacturing facility and the related purchase of equipment. The Bardstown
IRBs, which mature on June 1, 2024 and March 1, 2025, are collateralized by a
letter of credit. As of December 31, 1996, $34.2 million of the proceeds had
been expended or committed for the first phase of the facility and related
equipment. The unexpended proceeds from the Bardstown IRBs of $10.8 million at
December 31, 1996, are invested in treasury securities and will be used to
finance the second phase of the facility. These IRBs bear interest at a floating
rate which is adjusted weekly as determined by the bond remarketing agent (5.8%
at December 31, 1996). The second phase of the facility, which includes the
purchase and installation of additional processing equipment, is anticipated to
be completed by the end of 1998.

At December 31, 1996, the Company had $2.9 million in outstanding
indebtedness relating to IRBs issued in connection with the construction of its
Auburn, Indiana plant. The Auburn IRBs are collateralized by a letter of credit,
certain equipment and a mortgage on the Company's Auburn, Indiana plant. The
Auburn IRBs are payable in annual installments of $720,000 through September
2000 and bear interest at a floating rate which is adjusted weekly as determined
by the bond remarketing agent (4.4% at December 31, 1996).

28
<PAGE>
On January 16, 1996, the Company acquired all of the outstanding common
stock of Trylon for total cash consideration of approximately $25 million, which
included transaction costs. To finance the acquisition, the Company incurred a
$25.0 million term loan, which was repaid in May 1996 using a portion of the
proceeds from the sale of the Senior Notes and borrowings under the Existing
Credit Agreement.

On May 31, 1996, the Company purchased all of the outstanding common stock
of MSTI from MascoTech for an aggregate purchase price of approximately $79
million, including payment of related fees and expenses. Pursuant to the terms
of the acquisition, the Company is required to make additional earn-out payments
to MascoTech if certain operating targets are achieved by the MSTI facilities in
the first three years following the acquisition. If all such operating targets
are met, the total payments will not exceed $30.0 million.

The Company financed the cash portion of the purchase price of MSTI through
the issuance in two series of Senior Notes having an aggregate principal amount
of $65.0 million. The $40.0 million of Series A Senior Notes have a final
maturity on June 1, 2006 and require annual principal payments commencing on
June 1, 2000 and continuing every year thereafter until their final maturity.
The $25.0 million of Series B Senior Notes have a final maturity on June 1, 2008
and require annual principal payments commencing on June 1, 2004 and continuing
every year thereafter until their final maturity. The Senior Notes require the
Company to make semi-annual interest payments commencing December 1, 1996. Net
proceeds from the sale of the Senior Notes in excess of the amounts used to
finance the cash portion of the MSTI Acquisition were used, together with
borrowings under the revolving credit facility, to repay in full the remaining
balance outstanding on the $25.0 million term loan incurred by the Company in
connection with the Trylon Acquisition.

In June 1996, the Company completed an offering of 2,232,900 shares of
Common Stock at an offering price of $24.50 per share. Approximately $32 million
of the net proceeds from the 1996 Offering were used by the Company to retire
borrowings under its Existing Credit Agreement. The remaining proceeds are
included in cash and cash equivalents in the December 31, 1996 consolidated
balance sheet and will be used for other general corporate purposes, which may
include prepayment of other indebtedness, acquisitions or capital expenditures.

During the year ended December 31, 1996, the Company generated $30.0 million
of cash from operations, which was partially used to fund capital expenditures.

The Company has made substantial investments in manufacturing technology and
product design capability to support its products. The Company made capital
expenditures of approximately $16.3 million for the year ended December 31,
1996, primarily for equipment and dedicated tooling purchases related to new or
replacement programs.

LIQUIDITY AND CAPITAL RESOURCES FOLLOWING THE APC ACQUISITION

The aggregate purchase price of the APC Acquisition is approximately $625
million, plus an additional $25 million for related fees and expenses and
management's estimates of certain post-closing adjustments. The Company expects
to complete the APC Acquisition by the end of April 1997. This acquisition will
be accounted for as a purchase and, accordingly, APC's assets and liabilities
will be recorded at fair value as of the acquisition date, with any excess
purchase price recorded as goodwill.

In connection with the APC Acquisition, the Company expects to enter into
the New Credit Agreement. The New Credit Agreement will provide for borrowings
under the Revolving Credit Facility of up to $750 million over six years. In
addition, a term loan facility with up to $200 million in borrowings, payable
within 18 months, will be made available in the event the APC Acquisition is
completed prior to the completion of the Offering. Interest will be payable on
borrowings under the New Credit Agreement at the bank's Base Rate or the reserve
adjusted LIBOR Rate plus a margin ranging from 17 to 50 basis points, depending
upon the ratio of the consolidated indebtedness of the Company to stockholders'

29
<PAGE>

investment. The New Credit Agreement will also include certain restrictive
covenants, which the Company expects will be similar in nature to those in the
Existing Credit Agreement. The New Credit Agreement will become effective
contemporaneously with the completion of the APC Acquisition.

Proceeds from borrowings under the New Credit Agreement will be used to: (i)
finance the APC Acquisition; (ii) refinance existing indebtedness of the
Company, including the redemption of the Senior Notes; and (iii) pay transaction
fees and expenses associated with the APC Acquisition. In connection with the
redemption of the Senior Notes, the Company will record an extraordinary loss of
approximately $3.0 million, net of income taxes, related to prepayment penalties
and the write-off of previously capitalized deferred financing costs.

Proceeds from this Offering will be used to fund a portion of the purchase
price related to the APC Acquisition or to repay indebtedness incurred under the
New Credit Agreement in the event that the APC Acquisition is consummated prior
to the completion of the Offering.

APC's capital expenditures for the year ended December 31, 1996 were
approximately $152 million, of which approximately $63 million was used to
finance the construction and to purchase equipment for its new Plymouth,
Michigan and Roanoke, Virginia manufacturing facilities. APC's remaining capital
expenditures were used primarily to purchase equipment and dedicated tooling
related to new or replacement programs. The Company's capital expenditures for
the year ended December 31, 1996 on a pro forma basis were approximately $168
million. After completing the APC Acquisition, the Company expects its budget
for capital expenditures during the remainder of 1997 to be approximately $75
million. Capital expenditures in 1997 are expected to be financed either with
cash generated from operations or borrowings under the New Credit Agreement.

The Company believes the borrowing availability under the New Credit
Agreement, together with funds generated by operations, should provide the
Company with the liquidity and capital resources to pursue its business strategy
through 1997, with respect to working capital, capital expenditures and other
operating needs. Under present conditions, management does not believe access to
funds will restrict its ability to pursue its acquisition strategy.

EFFECTS OF INFLATION

Inflation generally affects the Company by increasing the interest expense
of floating rate indebtedness and by increasing the cost of labor, equipment and
raw materials. Management believes that inflation has not significantly impacted
the Company's business over the past 12 months. However, because selling prices
generally cannot be increased until a model changeover, the effects of inflation
must be offset by productivity improvements and volume from new business awards.

30
<PAGE>
BUSINESS

MARKET DATA USED THROUGHOUT THIS PROSPECTUS WERE OBTAINED FROM INDUSTRY
PUBLICATIONS AND INTERNAL COMPANY SURVEYS. INDUSTRY PUBLICATIONS GENERALLY
STATED THAT THE INFORMATION CONTAINED THEREIN HAS BEEN OBTAINED FROM SOURCES
BELIEVED TO BE RELIABLE. THE COMPANY HAS NOT INDEPENDENTLY VERIFIED THESE MARKET
DATA. SIMILARLY, INTERNAL COMPANY SURVEYS, WHILE BELIEVED BY THE COMPANY TO BE
RELIABLE, HAVE NOT BEEN VERIFIED BY ANY INDEPENDENT SOURCES. THE COMPANY HAS
INCLUDED INFORMATION REGARDING THE OPERATIONS OF APC AS A RESULT OF ITS BELIEF
THAT THE APC ACQUISITION WILL BE COMPLETED IN ACCORDANCE WITH THE TERMS SET
FORTH HEREIN. IF THE APC ACQUISITION IS NOT COMPLETED, THE INFORMATION SET FORTH
IN THIS PROSPECTUS GIVING EFFECT TO SUCH ACQUISITION WOULD NOT BE RELEVANT. SEE
"RISK FACTORS--RISKS ASSOCIATED WITH THE FAILURE TO COMPLETE THE APC
ACQUISITION."

GENERAL

The Company is a leading designer and producer of high-quality body
structure components and assemblies used by the major North American automotive
OEMs, Ford, Chrysler and General Motors, and certain Transplants, including
Honda, Toyota, Nissan and Mazda. The Company's current products range from large
structural stampings and assemblies, such as body pillars, chassis, suspension
and floor pan components and major housing assemblies, to engineered assemblies,
such as hood and deck lid hinges and brake components. On January 27, 1997, the
Company agreed to acquire A.O. Smith's APC division, a leading manufacturer of
light truck frames, automotive engine cradles and other structural and
suspension components, assemblies and modules used by major North American OEMs
and Transplants. Following the APC Acquisition, the Company believes it will be
one of the largest independent suppliers of structural components and assemblies
to the North American automotive market (based on net sales).

Since its inception in April 1993, the Company's revenues have grown rapidly
through a focused strategy of internal growth and a highly disciplined
acquisition program. During the last three years, the Company has successfully
completed and fully integrated four acquisitions. As a result of such
acquisitions and internal growth, the Company's revenues have increased from $86
million in 1993 to approximately $474 million in 1996 (pro forma only for the
MSTI Acquisition), representing a compound annual growth rate of approximately
76%. The Company's North American content per vehicle has increased from $6.23
in 1993 to $26.74 in 1996 on an actual basis. The APC Acquisition will be the
Company's largest acquisition to date and will increase the Company's pro forma
revenues to approximately $1.3 billion and its pro forma North American content
per vehicle to $77.49 for 1996.

INDUSTRY TRENDS

The Company's performance and growth is directly related to certain trends
within the automotive market, including the consolidation of the component
supply industry, the increase in global sourcing and the growth of
system/modular sourcing.

SUPPLIER CONSOLIDATION. The automotive supply industry has recently begun
to undergo significant consolidation. To lower costs and improve quality, OEMs
are reducing their supplier base by awarding sole-source contracts to
full-service suppliers who are able to supply larger segments of a vehicle.
OEMs' criteria for supplier selection include not only cost, quality and
responsiveness, but also full-service design, engineering and program management
capabilities. For full-service suppliers such as the Company, the new
environment provides an opportunity to grow by obtaining business previously
provided by other non-full service suppliers and by acquiring suppliers that
further enhance product, manufacturing and service capabilities. OEMs rigorously
evaluate suppliers on the basis of product quality, cost control, reliability of
delivery, product design capability, financial strength, new technology
implementation, quality and condition of facilities and overall management.
Suppliers that obtain superior ratings are considered for sourcing new business.
Although these new supplier policies have already resulted in significant
consolidation of component suppliers in certain segments, the Company believes
that consolidation within the

31
<PAGE>
structural and suspension component segments of the automotive industry will
continue to provide attractive opportunities to acquire high-quality companies
that complement its existing business.

GLOBAL SOURCING. Regions such as Asia, Latin America, Mexico and Eastern
Europe are expected to experience significant growth in vehicle demand over the
next ten years. OEMs are positioning themselves to reach these emerging markets
in a cost-effective manner by seeking to design and produce "world cars" which
can be designed in one vehicle center to a single global standard but produced
and sold in different geographic markets, thereby allowing OEMs to reduce design
costs, take advantage of low-cost manufacturing locations and improve product
quality and consistency. OEMs increasingly are requiring their suppliers to have
the capability to design and manufacture their products in multiple geographic
markets.

SYSTEM/MODULAR SOURCING. OEMs are increasingly seeking suppliers capable of
providing complete systems or modules rather than suppliers who only provide
separate component parts. A system is a group of component parts which operate
together to provide a specific engineering driven functionality whereas a module
is a group of systems and/or component parts which are assembled and shipped to
the OEM for installation in a vehicle as a unit. By outsourcing complete systems
or modules, OEMs are able to reduce their costs associated with the design and
integration of different components and improve quality by enabling their
suppliers to assemble and test major portions of the vehicle prior to beginning
production. As a result of the APC Acquisition, the Company will be in an
improved position to capitalize on this trend by designing its products to
function together and by providing designs that are integrated into the design
of the entire vehicle.

STRATEGY

The Company's business objective is to capitalize upon the consolidation,
globalization and system/ modular sourcing trends in the automotive supply
industry in order to be the leading provider of structural and suspension
components to OEMs on a worldwide basis. Key elements of the Company's operating
and growth strategies are outlined below:

OPERATING STRATEGY

FULL-SERVICE TECHNICAL DESIGN, ENGINEERING AND PROGRAM MANAGEMENT
CAPABILITIES. The Company strives to maintain a competitive advantage through
investment in research and product development, advanced engineering and program
management. The Company works with OEMs throughout the product development
process from concept vehicle and prototype development through the design and
implementation of manufacturing processes to provide full-service capabilities
to its customers. In some cases, the Company places design engineers at customer
facilities to coordinate its product design efforts with those of its OEM
customers.

EFFICIENT MANUFACTURING/CONTINUOUS IMPROVEMENT PROGRAMS. In response to
OEMs' increasingly stringent demands, the Company has implemented manufacturing
practices designed to maximize product quality and timeliness of delivery and
eliminate waste and inefficiency. The Company has continued to upgrade its
manufacturing equipment and processes through substantial investment in new
equipment, maintenance of existing equipment and utilization of manufacturing
engineering personnel.

GLOBAL PRESENCE. The Company strives to offer manufacturing and support
services to its customers on a global basis through a combination of
international wholly owned facilities and by entering into joint ventures and
partnerships with foreign suppliers. Since 1993, in furtherance of its global
expansion strategy, the Company has opened a European sales and engineering
office to service U.K. and German OEM customers and has established an
industrial partnership with The Kirchhoff Group ("Kirchhoff") in Germany. With
the APC Acquisition, the Company will further expand its ability to service OEMs
on a global basis. The Company also has relocated certain technical personnel
resources to locations where OEMs are developing "world cars."

32
<PAGE>
DECENTRALIZED, PARTICIPATIVE CULTURE. The Company's decentralized approach
to managing its manufacturing facilities encourages decision making and employee
participation in areas such as manufacturing processes and customer service. The
Company's management team meets frequently at various Company locations in order
to maintain a unified Company culture. To increase employee productivity, the
Company utilizes incentive programs for all salaried and hourly employees and
provides incentives for employees who take advantage of its continuous
improvement programs and who provide cost savings ideas.

GROWTH STRATEGY

STRATEGIC ACQUISITIONS. The Company continues to believe that consolidation
in the automotive supply industry will provide further attractive opportunities
to acquire high-quality companies that complement its existing business. The
Company seeks to make acquisitions that (i) provide additional product,
manufacturing and technical capabilities; (ii) broaden the Company's geographic
coverage domestically and strengthen its ability to supply products on a global
basis; (iii) increase the number of models for which the Company supplies
products and the content supplied for existing models; and (iv) add new
customers. With the consummation of the APC Acquisition, the Company will have
acquired five businesses since 1993. The Company intends to seek future
acquisitions or develop strategic alliances that will strengthen the Company's
ability to supply its products on a global basis.

MODULAR PRODUCT OPPORTUNITIES. The Company has capitalized on the
system/modular sourcing trend among OEMs by offering customers higher
value-added supply capabilities through an increasing focus on the production of
assemblies consisting of multiple component parts that are welded or otherwise
fastened together by the Company. The APC Acquisition will significantly expand
the Company's ability to supply OEMs with modules consisting of integrated
assemblies and component parts that can be installed as a unit in a vehicle at
the OEM assembly plant.

INCREASE VEHICLE PENETRATION. The Company has developed strong
relationships with certain OEM engineering and purchasing personnel which allow
it to identify business opportunities and to react to customer needs in the
early stages of vehicle design. The Company believes that these relationships
give it a competitive advantage over smaller and less capable suppliers in
marketing its broad range of products and in developing new product concepts,
such as expanded use of modules, that complement its existing product lines.

PURSUIT OF "WORLD CAR" OPPORTUNITIES. The Company has been working closely
with certain customers on the development of "world cars," which are designed by
OEMs in one vehicle center to a single global standard but produced and sold in
different geographic markets. Suppliers for a specific "world car" are often
required to provide their products on a worldwide basis. The Company believes
that it has a competitive advantage in potentially supplying certain world cars
given its international presence, full-service capabilities and existing
position as a leading supplier on the Ford Escort and DEW98 luxury car, as well
as on other existing vehicle platforms which may eventually evolve into world
cars.

THE APC ACQUISITION

33
<PAGE>
conducts its operations through 15 facilities which, when added to the Company's
existing 19 facilities, will result in a total of over seven million square feet
of manufacturing floor space.

The Company believes that the APC Acquisition will provide the Company with
several strategic benefits, including the following:

COMPLEMENTARY NEW TECHNOLOGY. The APC Acquisition will provide the Company
with a variety of new and enhanced design and manufacturing process technology,
including APC's patented three piece side rail frame and patented Simulform-TM-
forming technology, the latter of which may result in cost savings and quality
improvements over conventional stamping technology in certain specialized
applications. In addition, APC's existing hydroforming technology complements
the Company's initiatives in this area. The APC Acquisition will also provide
the Company with additional painting, coating and welding technologies and
advanced logistical parts management systems. The Company believes that these
acquired technologies will provide significant additional opportunities to serve
existing customers and obtain new business.

34
<PAGE>
EXPANDED GLOBAL CAPABILITIES. OEMs are increasingly demanding that their
suppliers have global production capabilities. APC's presence in China, Japan
and South America complements the Company's current European initiatives to
provide expanded global production capabilities for both North American and
international OEMs. See "--Global Initiatives."

PRODUCTS

GENERAL. The Company's current products consist of a broad array of
stamped, formed, welded and assembled metal components, many of which are
critical to the structural integrity of a vehicle. As a result of the APC
Acquisition, the Company will expand its product offerings and will be able to
manufacture and supply its customers with, among other products, light truck
frames, automotive engine cradles, trailing axles and heavy truck frame rails.
These additional products will complement the Company's existing base of
products, many of which are currently attached directly to the frame of a
vehicle at the OEM assembly plant. Following the APC Acquisition, the Company's
products will generally include structural components, suspension components and
engineered assemblies.

STRUCTURAL COMPONENTS. The Company's current structural component products
form the basic upper body structure of the vehicle and include large metal
stampings such as body pillars, roofrails, side sills, parcel shelves and
intrusion beams. APC's structural component products form the basic lower body
structure of the vehicle and include light truck frames, automotive engine
cradles and heavy truck frame rails. Critical to the strength and safety of
vehicles, structural products carry the load of the vehicle and provide crash
integrity.

SUSPENSION COMPONENTS. The Company's current suspension component products
include stamped, formed and welded products such as control arms, suspension
links, track bars and spring/shock towers. APC's suspension components include
control arms, suspension links and trailing axles. Critical to the ride,
handling and noise characteristics of a vehicle, suspension components are a
natural extension of the Company's larger structural components.

ENGINEERED ASSEMBLIES. The Company's current engineered assemblies include
a broad array of highly engineered parts such as hood and deck lid hinges, brake
components and fuel filler assemblies. Such engineered assemblies are a natural
extension to the Company's other products in that they are attached to both
structural and suspension components. The APC Acquisition will not add
materially to the Company's existing array of engineered assembly products.

OTHER. In addition to the Company's and APC's structural, suspension and
mechanical component products, each of the Company and APC manufactures a
variety of other products, including heat shields and other precision stampings,
for their OEM customers.

The following table sets forth the percentage of revenues derived from the
sale of certain products in 1996:

PERCENTAGE OF REVENUES BY PRODUCT

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------
PRODUCT CATEGORY COMPANY APC PRO FORMA
<S> <C> <C> <C>
Structural components....................................... . 48.6% 90.9% 77.5%
Suspension components....................................... . 22.7 5.0 10.6
Engineered assemblies....................................... . 16.1 -- 5.1
Other......................................................... 12.6 4.1 6.8
----- --------- -----
Total..................................................... 100.0% 100.0% 100.0%
----- --------- -----
----- --------- -----
</TABLE>

35
<PAGE>
Although a portion of the Company's products are sold directly to OEMs as
finished products, most are used by the Company to produce assemblies consisting
of multiple parts that are welded or otherwise
fastened together by the Company. Systems and assemblies currently produced by
the Company include front and rear structural suspension systems comprised of
control arms, suspension links and axle assemblies consisting of stamped metal
trailing axles, assembled brake shoes, hoses and tie rods. As a result of the
APC Acquisition, the Company will significantly expand its ability to supply
OEMs with systems and modules consisting of integrated assemblies and component
parts that can be installed as a unit in a vehicle at the OEM assembly plant.

CUSTOMERS AND MARKETING

The North American automotive market is dominated by General Motors, Ford
and Chrysler, with Transplants representing approximately 20% of this market in
1996. The Company currently supplies its products primarily to Ford, Chrysler,
Honda, General Motors, Toyota, Nissan and Mazda. The APC Acquisition will
significantly expand the Company's penetration within each of the three major
North American OEMs. In addition, the APC Acquisition will also expand the
Company's penetration with certain Transplants, including doubling the Company's
sales to Toyota, expanding its already significant position at Honda, increasing
sales to Nissan and adding Isuzu as a new customer. APC sells its heavy truck
products primarily to Ford, Freightliner Corporation, PACCAR Inc., Volvo/GM
Heavy Truck Corp. and Navistar International Corp.

The following table sets forth the percentage of revenues derived from the
sale of products to certain customers in 1996:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------
CUSTOMER COMPANY APC PRO FORMA
<S> <C> <C> <C>
Ford.......................................................... 66.9% 46.4% 52.9%
Chrysler...................................................... 10.2 20.0 16.9
General Motors................................................ 3.5 23.1 16.9
Honda......................................................... 9.2 -- 2.9
Other......................................................... 10.2 10.5 10.4
----- --------- -----
Total..................................................... 100.0% 100.0% 100.0%
----- --------- -----
----- --------- -----
</TABLE>

OEMs typically award contracts that cover parts to be supplied for a
particular car model. Such contracts range from one year to over the life of the
model, which is generally three to seven years and do not require the purchase
by the customer of any minimum number of parts. The Company and APC also compete
for new business to supply parts for successor models and therefore are subject
to the risk that the OEM will not select the Company to produce parts on a
successor model. The Company and APC supply parts for a broad cross-section of
both new and mature models, thereby reducing their reliance on any particular
model. For example, the Company supplies parts for substantially all models
produced by Ford, Honda and Chrysler and APC currently supplies Chrysler with
substantially all of its full frame requirements.

36
<PAGE>

The following table presents an overview of the major models for which the
Company supplies products. Those models added as a result of the APC Acquisition
are shown with an asterisk, and those models for which the APC Acquisition will
increase the Company's content per vehicle have been italicized.

<TABLE>
<CAPTION>
CUSTOMER CAR MODELS LIGHT TRUCK MODELS
<S> <C> <C>
Ford............ TAURUS/SABLE, CONTOUR/MYSTIQUE, EXPLORER, RANGER, F-Series,
Mustang, Escort, Crown Victoria, ECONOLINE,Villager, WINDSTAR, Medium
Grand Marquis, Probe, CONTINENTAL Trucks, Expedition
Chrysler........ CONCORDE/INTREPID/VISION, Neon, RAM PICK-UP, DAKOTA, Grand Cherokee,
Viper, Stratus/Cirrus/Breeze Voyager, Caravan, RAM VAN, Wrangler,
Durango*
General Cavalier, Sunfire, Grand Am, Lumina, C/K PICK-UP, BLAZER,
Motors...... . Grand Prix SUBURBAN,Tahoe*, Yukon*, Astro*,
Safari*, Chevy Van
Honda........... Accord, Civic, Acura Integra
Mazda........... 626, MX6
Toyota.......... Avalon, CAMRY Mini-van
Nissan.......... Sentra Quest, Pick-up*
Isuzu........... Rodeo*, Amigo*
</TABLE>

Most of the parts the Company and APC produce have a lead time of two to
five years from product development to production. See "--Design and Engineering
Support." Since 1988, the Company has been the leading supplier for hood and
deck hinges at Ford and Chrysler and is responsible for the design and
production of such products. The selling prices of these products are generally
negotiated between the Company and its customers and are typically not subject
to a competitive bid process. APC is currently the largest supplier of
structural components to Chrysler.

The Company has been awarded new business (i.e., parts not previously
supplied by the Company) for the calendar year indicated for the models set
forth below:

<TABLE>
<CAPTION>
MODEL YEAR MODELS
<S> <C>
1997............... Ford Escort Coupe, Ranger, Continental; Honda Accord; Toyota Mini-van
1998............... Ford Medium Truck, Lincoln, DEW98; General Motors Saturn, Innovate;
Acura
1999............... Ford Escort, Mini-Explorer, Jaguar X200
</TABLE>

APC has been awarded new business (i.e., parts not previously supplied by
APC) for the calendar year indicated for the models set forth below:

<TABLE>
<CAPTION>
MODEL YEAR MODELS
<S> <C>
1997............... Toyota Corolla; Chrysler LH, B-Van; General Motors Prizm; Isuzu Rodeo,
Amigo
1998............... Probe replacement; GMT800(C/K platform); Acura; Chrysler Durango
</TABLE>

Sales of the Company's and APC's products to OEMs are made directly by their
respective sales and engineering forces, each headquartered in their respective
technical centers located in Farmington Hills, Michigan. Through their technical
centers, the Company and APC service their OEM customers and manage their
continuing programs of product design improvement and development. The Company
and APC each periodically place engineering staff at various customer facilities
to facilitate the development of

37
<PAGE>
new programs. After the APC Acquisition, the Company's sales and engineering
force will consist of approximately 460 individuals.

DESIGN AND ENGINEERING SUPPORT

The Company strives to maintain a technological advantage through investment
in product development and advanced engineering capabilities. The Company's
manufacturing engineering capabilities enable it to design and build
high-quality and efficient manufacturing systems, processes and equipment and to
continually improve its production processes and equipment. The Company's
manufacturing engineers are located at each of its manufacturing facilities.

As a result of the APC Acquisition, the Company's engineering staff will
increase from approximately 140 to approximately 400 full-time engineers, whose
responsibilities range from research and development, advanced product
development, product design, testing and initial prototype development to the
design and implementation of manufacturing processes.

Because assembled parts must be designed at an early stage in the
development of new vehicles or model revisions, the Company is increasingly
given the opportunity to utilize its product engineering resources early in the
planning process. Advanced development engineering resources create original
engineering designs, computer-aided designs, feasibility studies, working
prototypes and testing programs to meet customer specifications. The Company's
advanced development capabilities have resulted in several innovations in hinge
design that have provided significant benefits to the Company's customers. The
Company also has full service design capability for chassis components. APC has
a long history of developing innovative new designs both to improve the quality
and to lower the cost of its designs. Recent innovations include the patented
three piece side rail, the use of aluminum and other alternative material
applications in its structural components and the use of high-performance
alternative coatings for its structural components, including epoxy coated
primer, two-coat water-reducible coatings, ultrasolids and hybrid coatings.

GLOBAL INITIATIVES

The Company has formed, or is in the process of forming, strategic alliances
with other suppliers throughout the world, including in Europe, Asia and Latin
America. The Company has recently opened a European sales and engineering office
to service its U.K. and German OEM customers. In addition, the Company has a
joint manufacturing and marketing agreement with Kirchhoff, a German automobile
parts supplier, pursuant to which the Company and Kirchhoff have agreed to
provide manufacturing and marketing services to each other when and as required
by each company's OEM customers. A current focus of the Company's acquisition
strategy is to acquire European suppliers, which would provide the Company with
a manufacturing presence in Europe and afford the Company access to new customer
opportunities.

The APC Acquisition will significantly expand the Company's global
initiatives. In addition to a Japanese sales office, APC has a 60% ownership
interest in a joint venture located in Changchun, China, which will manufacture
automobile parts for Volkswagen A.G. APC also has a Brazilian subsidiary, which
will be supplying frame components for the Dodge Dakota and has a manufacturing
arrangement to provide cross beams for the Ford Fiesta. Prior to entering into
negotiations with APC, the Company had been investigating the possibility of
opening a sales office in Japan and acquiring an interest in a Brazilian
operation.

MANUFACTURING

After the APC Acquisition, the Company's manufacturing operations will
consist primarily of stamping operations, system and modular assembly
operations, roll-forming and hydroforming operations and associated coating and
other ancillary operations. The APC Acquisition will provide the Company with
significant additional stamping and assembly capacity.

38
<PAGE>
Stamping involves passing metal through dies in a stamping press to form the
metal into three-dimensional parts. The Company produces stamped parts using
over 240 precision single-stage, progressive and transfer presses, ranging in
size from 150 to 2,000 tons, which perform multiple functions as raw material
proceeds through the press and is converted into a finished product. The Company
continually invests in its press technology to increase flexibility, improve
safety and minimize die changeover time. The APC Acquisition will broaden the
Company's stamping capabilities by adding over 400 stamping presses ranging from
200 to 4,000 tons in size.

After forming is completed, stampings that are to be used in assemblies are
placed in work-in-progress staging areas from which they are fed into
cell-oriented assembly operations that produce complex, value-added assemblies
through the combination of multiple parts that are welded or fastened together.
The Company's assembly operations are performed on either dedicated, high-volume
welding/fastening machines or on flexible-cell oriented robotic lines for units
with lower volume production runs. The assembly machines attach additional
parts, fixtures or stampings to the original metal stampings. In addition to
standard production capabilities, the Company's assembly machines are also able
to perform various statistical control functions and identify improper welds and
attachments. The Company continually works with manufacturers of fixed/robotic
welding systems to develop faster, more flexible machinery. Several of the
Company's welding systems were designed by the Company.

APC's manufacturing and assembly processes are state-of-the-art. Using
highly-automated assembly processes, APC's new Plymouth, Michigan light truck
frame assembly facility requires no changeover time between the six frame models
it assembles for Chrysler's new Dodge Dakota. Line programmable controllers
adjust assembly equipment to accommodate various frame wheelbase configurations
at various stages of assembly, while robotic welding and material handling
processes are responsible for 99 percent of the facility's frame welding. In
comparison, conventional light truck frame assembly requires equipment and tool
reconfiguration to accommodate various frame models. APC's patented
Simulform-TM- forming process, currently being tested for production use,
simultaneously forms, pierces and joins components of an engine cradle assembly,
resulting in cost savings over traditional stamping techniques, due to a
reduction in the number of presses and operators required and the enhanced
quality and lighter weight of the products manufactured through this method. In
addition, APC's solid state welding capabilities allow it to weld at lower
temperatures which results in less structural distortion of products,
exceptional weld quality and higher production rates than conventional welding
processes. APC also utilizes a significant number of robots in its frame
riveting processes and automated transfer systems in addition to their use in
welding operations.

The products manufactured by the Company and APC use various grades and
thicknesses of steel and aluminum, including hot and cold rolled, galvanized,
organically coated, stainless and aluminized steel. Neither the Company nor APC
produces exposed sheet metal components, such as exterior body panels. See
"--Suppliers and Raw Materials."

OEMs have established quality rating systems involving rigorous inspections
of suppliers' facilities and operations. OEMs' factory rating programs provide a
quantitative measure of a company's success in improving the quality of its
operations. The Company and APC have each received quality awards from Ford (Q1)
and Chrysler (Pentastar) and the Company has consistently received one of Ford's
highest commercial ratings for suppliers in the stamping segment. The automotive
industry has recently adopted a quality rating system known as QS-9000. The
Company has recently received QS-9000 certification and APC expects to receive
such certification by the end of 1997.

COMPETITION

The Company operates in a highly competitive, fragmented market segment of
the automotive supply industry, with a limited number of competitors generating
revenues in excess of $200 million. The number of the Company's competitors has
decreased in recent years and is expected to continue to decrease due to the
supplier consolidation resulting from changing OEM policies. The Company's
largest competitors include The Budd Company, a subsidiary of Thyssen AG
("Budd"), Magna International Inc. ("Magna"),

39
<PAGE>
Midway Products Corp., Modern Tool & Die Co., L&W Engineering and divisions of
OEMs with internal stamping and assembly operations, all of which have
substantial financial resources. The Company competes with Magna across most of
the Company's product lines, and with its other significant competitors in
various segments of its product lines. For example, the Company competes with
Budd for large stampings, while it competes with ITT Automotive for hinge
business. Aetna Industries, Active Tool & Die Co., AG Simpson, Lobdell-Emory
Mfg. Co. and L&W Engineering compete with the Company for medium-size structural
stampings.

APC also operates in a highly competitive market segment that is
significantly less fragmented than the Company's market segment. APC's principal
competitors include Dana Corporation, Magna and internal divisions of OEMs, all
of which are large and have substantial resources. APC also competes with
Midland Corporation across its heavy truck product lines.

The Company and APC principally compete for new business both at the
beginning of the development of new models and upon the redesign of existing
models. New model development generally begins two to five years before the
marketing of such models to the public. Once a producer has been designated to
supply parts for a new program, an OEM usually will continue to purchase those
parts from the designated producer for the life of the program, although not
necessarily for a redesign. Competitive factors in the market for the Company's
and APC's products include product quality and reliability, cost and timely
delivery, technical expertise and development capability, new product innovation
and customer service.

SUPPLIERS AND RAW MATERIALS

The primary raw material used to produce the majority of the Company's
products is steel. The Company purchases hot and cold rolled, galvanized,
organically coated, stainless and aluminized steel from a variety of suppliers.
The Company employs just-in-time manufacturing and sourcing systems enabling it
to meet customer requirements for faster deliveries while minimizing its need to
carry significant inventory levels. The Company has not experienced any
significant shortages of raw materials and normally does not carry inventories
of raw materials or finished products in excess of those reasonably required to
meet production and shipping schedules. Raw materials costs represented
approximately 53% of the Company's revenues in 1996, and steel represented
approximately 70% to 75% of raw material costs in 1996.

Honda and Chrysler currently purchase all of the steel used by the Company
for their models directly from steel producers. Ford is in the process of
implementing a similar program. As a result, the Company will have minimal
exposure to changes in steel prices for parts supplied to Ford, Honda and
Chrysler, which collectively represented 86% of the Company's revenues in 1996.
APC currently purchases substantially all of the steel used in its manufacturing
operations from steel manufacturers, either directly or through distributors.
The Company expects that APC will adopt a similar arrangement with such
customers following the APC Acquisition.

The Company expects that the content level of metal in cars and light trucks
will remain constant or increase slightly due to the trend toward increased
vehicle size and a greater emphasis on metal recycling. Although the search for
improved fuel economy and weight reduction has resulted in attempts to reduce
the sheet metal content of light vehicles, an efficient, cost-effective
substitute for steel used in the Company's structural products has not been
found. While various polymers have been used recently for fenders, hoods and
decks, such products do not have the inherent strength or structural integrity
on a cost-effective basis to be used for structural components. The Company and
APC are involved in ongoing evaluations of the potential for the use of aluminum
and of specialty steel in their products.

Other raw materials purchased by the Company include dies, fasteners,
tubing, springs, rivets and rubber products, all of which are available from
numerous sources. APC currently outsources many of its stamping needs, some of
which can be supplied by the Company's existing stamping facilities.

40
<PAGE>
FACILITIES

The Company maintains several manufacturing facilities located in close
proximity to many of the high-volume vehicle assembly plants in the United
States. In addition, APC has located its facilities close to its major OEM
customers in order to facilitate the just-in-time delivery requirements of its
customers and to minimize freight delivery costs. The Company's and APC's
facilities are geographically located in such a way as to enable the Company to
optimize their management and logistical capabilities on a regional basis.

The following table provides information regarding the Company's and APC's
principal facilities:

<TABLE>
<CAPTION>
TOWER AUTOMOTIVE
SQUARE TYPE OF
LOCATION FOOTAGE INTEREST DESCRIPTION OF USE
Bardstown, Kentucky.................... 240,000 Owned(1) Manufacturing
<S> <C> <C> <C>
Kalamazoo, Michigan
(2 locations)........................ 222,000 Mixed Manufacturing/Warehouse/Office
Traverse City, Michigan
(4 locations)........................ 220,000 Owned Manufacturing
Greenville, Michigan................... 160,000 Owned Manufacturing/Office
Auburn, Indiana........................ 132,000 Owned(1) Manufacturing/Office
Kendallville, Indiana.................. 132,000 Owned Manufacturing
Romulus, Michigan...................... 115,000 Leased Manufacturing/Office
Bluffton, Ohio......................... 102,000 Owned Manufacturing
Rochester Hills, Michigan.............. 89,000 Leased Office/Engineering/Design
Manchester, Michigan................... 61,000 Owned Manufacturing
Upper Sandusky, Ohio................... 56,000 Owned Manufacturing
Grand Rapids, Michigan................. 23,000 Leased Operating Headquarters
Farmington Hills, Michigan............. 12,000 Leased Engineering/Design/Sales
Minneapolis, Minnesota................. 5,700 Leased Corporate Headquarters

APC

<CAPTION>
SQUARE TYPE OF
LOCATION FOOTAGE INTEREST DESCRIPTION OF USE
<S> <C> <C> <C>
Milwaukee, Wisconsin................... 3,527,000 Owned Manufacturing
Milan, Tennessee....................... 533,000 Owned(1) Manufacturing
Granite City, Illinois................. 458,000 Owned Manufacturing
Plymouth, Michigan..................... 221,000 Leased Manufacturing
Roanoke, Virginia...................... 185,000 Owned Manufacturing
Corydon, Indiana....................... 155,000 Leased Manufacturing
Rockford, Illinois..................... 140,000 Leased Manufacturing
Belcamp, Maryland...................... 68,000 Owned Manufacturing
Bellevue, Ohio......................... 66,000 Owned Manufacturing
Farmington Hills, Michigan............. 47,000 Leased Engineering/Design/Sales
Fenton, Missouri....................... 40,000 Leased Warehouse
Barrie, Ontario........................ 40,000 Leased Manufacturing
Bowling Green, Kentucky................ 39,000 Owned Manufacturing
Yokohama, Japan........................ 800 Leased Sales
Changchun, China....................... 140,500 Leased(2) Manufacturing
</TABLE>

- ------------------------------

(1) Facility is subject to an IRB financing arrangement pursuant to which the
Company or APC makes periodic lease payments and has the option to acquire
such facility for nominal consideration at the end of the term.

(2) Facility is leased by a joint venture in which APC holds a 60% equity
interest.

Management believes that substantially all of the Company's and APC's
property and equipment is in good condition. In order to increase efficiency,
the Company expects to make capital expenditures for equipment upgrades at the
facilities recently acquired in the MSTI Acquisition. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources."

The Company believes that its existing facilities will be adequate to meet
its production demands for the foreseeable future. The Company's facilities were
specifically designed for the manufacturing of the

41
<PAGE>
Company's products. The utilization and capacity of such facilities are
dependent upon the mix of products being produced by the Company.

EMPLOYEES

The Company currently has approximately 2,900 employees, of whom
approximately 1,100 are covered under collective bargaining agreements, one of
which expires in July 1997. The Company currently anticipates that it will enter
into a new collective bargaining agreement prior to the expiration of such
agreement. The remaining collective bargaining agreements expire in 1999. The
Company believes that its future success will depend in part on its ability to
continue to recruit, retain and motivate qualified personnel at all levels of
the Company. The Company has instituted a large number of employee programs to
increase employee morale and expand the employees' participation in the
Company's business. The Company has not experienced any work stoppages and
considers its relations with its employees to be good.

APC currently has approximately 5,300 employees, of whom approximately 2,900
are covered under several collective bargaining agreements, the earliest of
which expires in September 1998. The Company believes APC's relations with its
employees are generally good. The Company expects to retain APC's employees on
substantially the same terms and conditions of employment as were in place prior
to the APC Acquisition.

ENVIRONMENTAL MATTERS

The Company believes it conducts its operations in substantial compliance
with applicable environmental and occupational health and safety laws. The
Company does not expect to incur material capital expenditures for environmental
compliance during its current or succeeding fiscal year. However, as is the case
with manufacturers in general, if a release of hazardous substances occurs on or
from the Company's properties or at any associated offsite disposal location, if
contamination from prior activities is discovered at any of the Company's
properties or if non-compliance with environmental regulations or permits is
discovered, the Company may be held liable and the amount of such liability
could be material. In connection with the Trylon and MSTI Acquisitions,
MascoTech has agreed to indemnify the Company for certain environmental matters,
including replacement of underground storage tanks at the Traverse City
facilities and any remediation that may be required at the Kendallville
facility.

In connection with the APC Acquisition, A.O. Smith has agreed, subject to
certain limitations, to indemnify the Company for environmental matters relating
to APC arising from events occurring, or conditions arising, prior to the date
of the APC Acquisition. This indemnification obligation applies to claims to the
extent exceeding $250,000 submitted by the Company within three years of the
acquisition date. To the extent that such claims exceed $5.0 million in the
aggregate, A.O. Smith will indemnify 70% of such losses, up to A.O. Smith's
maximum $75.0 million indemnification obligation under the purchase agreement.
In addition, A.O. Smith has agreed to retain certain environmental liabilities
for, among other things, liabilities arising from offsite disposal of hazardous
substances prior to the APC Acquisition.

LEGAL PROCEEDINGS

The Company is not currently involved in any material lawsuits. The Company
believes it maintains adequate insurance, including product liability coverage.
The Company historically has not been required to pay any material liability
claims. APC is subject to a number of outstanding lawsuits arising in the
ordinary course of its business. A.O. Smith has agreed, however, to retain
responsibility for all material lawsuits relating to APC and to indemnify the
Company for any losses it may incur in connection with such lawsuits.

A.O. Smith is a party to a lawsuit alleging, among other things, that APC
misappropriated trade secrets from one of its competitors in developing certain
techniques used in a hydroforming process being developed by APC. In connection
with the APC Acquisition, A.O. Smith has retained the liability relating to this
litigation and has agreed to indemnify the Company for any monetary damages it
may incur as a result of such litigation. A.O. Smith has informed the Company
that it believes this suit to be without merit and is asserting various defenses
to such allegations. The hydroforming process currently being used by APC is not
the subject of this lawsuit. As a result, the Company does not currently believe
that its ability to utilize APC's hydroforming technology will be materially
impaired even if A.O. Smith is found liable in such suit.

42
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS

The following table sets forth certain information with respect to the
executive officers of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
<S> <C> <C>
S. A. Johnson.......................... 56 Chairman and Director
Adrian Vander Starre................... 64 Vice Chairman and Director
Dugald K. Campbell..................... 50 President, Chief Executive Officer and Director
James R. Lozelle....................... 51 Executive Vice President and Director
Michael W. Doherty..................... 54 Vice President
Anthony A. Barone...................... 47 Vice President and Chief Financial Officer
Paul D. Rysenga........................ 55 Vice President
Ronald E. Gavalis...................... 58 Vice President
Scott D. Rued.......................... 40 Vice President, Corporate Development and Director
Luigi Candusso......................... 47 Vice President
</TABLE>

S. A. (TONY) JOHNSON has served as Chairman and a Director of the Company
since April 1993. Mr. Johnson is the founder, Chief Executive Officer and
President of Hidden Creek Industries ("Hidden Creek"), a private industrial
management company based in Minneapolis which has provided certain management
and other services to the Company. Mr. Johnson is also the Managing Partner of
J2R Partners ("J2R"), an investment partnership that participated in the R.J.
Tower Acquisition. Prior to forming Hidden Creek, Mr. Johnson served from 1985
to 1989 as Chief Operating Officer of Pentair, Inc., a diversified industrial
company. From 1981 to 1985, Mr. Johnson was President and Chief Executive
Officer of Onan Corp., a diversified manufacturer of electrical generating
equipment and engines for commercial, defense and industrial markets. Mr.
Johnson currently serves as Chairman and a director of Dura Automotive Systems,
Inc., a manufacturer of mechanical assemblies and integrated systems for the
automotive industry, and served as Chairman and a director of Automotive
Industries Holding, Inc., a supplier of automotive interior trim components,
from May 1990 until its sale to Lear Corporation in August 1995.

ADRIAN VANDER STARRE has served as Vice Chairman and a Director of the
Company since April 1993. Mr. Vander Starre served as President, Chief Executive
Officer and a director of the Predecessor from 1978 to 1993. Mr. Vander Starre
originally joined the Predecessor in 1965 as Controller and later served as
Treasurer from 1974 to 1978. Mr. Vander Starre has entered into a consulting
agreement with the Company under which he performs such duties as may be
assigned by the Board of Directors.

DUGALD K. CAMPBELL has served as President, Chief Executive Officer and a
Director of the Company since December 1993. From 1991 to 1993, Mr. Campbell
served as a consultant to Hidden Creek. From 1988 to 1991, he served as Vice
President and General Manager of the Sensor Systems Division of Siemens
Automotive, a manufacturer of engine management systems and components. From
1972 to 1988, he held various executive, engineering and marketing positions
with Allied Automotive, a manufacturer of vehicle systems and components and a
subsidiary of AlliedSignal, Inc.

JAMES R. LOZELLE has served as Executive Vice President for the Tower
Automotive Technical Centers, with responsibility for advanced product
development and customer service, and a Director of the Company since the
Company's acquisition of Edgewood in May 1994. Mr. Lozelle served as President
of Edgewood from 1982 until it was acquired by the Company. Mr. Lozelle joined
Edgewood in 1970 and served as Vice President from 1971 to 1982. Mr. Lozelle is
chairman of the Near Zero Stamping research project of the Autobody Consortium.

MICHAEL W. DOHERTY has served as Vice President, with responsibility for
program management and overall business planning including global strategy,
since April 1993. From October 1992 until April 1993,

43
<PAGE>
Mr. Doherty served as Senior Vice President of the Predecessor, with
responsibility for sales and engineering. From 1978 to 1992, Mr. Doherty served
as the Predecessor's Vice President, Sales and Engineering.

ANTHONY A. BARONE has served as Vice President and Chief Financial Officer
of the Company since May 1995. From 1984 to 1995, Mr. Barone served as Chief
Financial Officer of O'Sullivan Corporation, a manufacturer of interior trim
components for the automotive industry.

PAUL D. RYSENGA has served as Vice President of the Company, with
responsibility for the Company's operations in Kendallville, Indiana, Bluffton
and Upper Sandusky, Ohio and Traverse City, Michigan, since August 1996. From
October 1995 to August 1996, Mr. Rysenga had responsibility for the Company's
operations in Greenville, Romulus and Traverse City, Michigan. Mr. Rysenga is
also responsible for the MSTI operating facilities. From June 1994 to October
1995, Mr. Rysenga had responsibility for the Company's operations in Auburn,
Indiana. From July 1991 to June 1994, Mr. Rysenga served as Executive Vice
President and General Manager at Kalamazoo. From 1988 to July 1991, Mr. Rysenga
was Executive Director of Eastman Sterling Pharmaceutical, a division of Eastman
Kodak.

RONALD E. GAVALIS has served as Vice President of the Company, with
responsibility for capacity planning, quality operating systems and QS-9000
certification, since April 1995. From June 1994 to April 1995, Mr. Gavalis had
responsibility for the Company's Greenville, Michigan operations. Mr. Gavalis
joined the Predecessor in 1983 as Director of Manufacturing, and served as the
Predecessor's Vice President, Manufacturing, from 1985 until 1989 and as its
Vice President, Operations, from 1989 until June 1994.

SCOTT D. RUED has served as Vice President, Corporate Development, and a
Director of the Company since April 1993. Mr. Rued served as Vice President,
Chief Financial Officer and a director of Automotive Industries Holding, Inc.
from April 1990 until its sale to Lear Corporation in August 1995. Mr. Rued, a
partner of J2R, has also served as Executive Vice President and Chief Financial
Officer of Hidden Creek since January 1994 and served as its Vice
President-Finance and Corporate Development from June 1989 through 1993. Mr.
Rued is also a director of The Rottlund Company, Inc., a corporation engaged in
the development and sale of residential real estate.

LUIGI CANDUSSO has served as Vice President of the Company, with
responsibility for the Company's operations in Kalamazoo, Michigan and
Bardstown, Kentucky, since April 1995 and Romulus, Michigan since August 1996.
From October 1995 to August 1996, Mr. Candusso also had responsibility for the
Company's operations in Auburn, Indiana. From 1990 to April 1995, Mr. Candusso
served as Vice President and General Manager of the Sensor Systems Division of
Siemens Automotive, a manufacturer of engine management systems and components.
From 1988 to 1990, Mr. Candusso served as Vice President of Operations of
Fabricated Steel Products (FABCO), a division of Indal Canada.

After the consummation of the APC Acquisition, the Company expects to retain
the services of certain key executives of APC. The Company is currently in the
process of identifying such key executives, determining what positions such
executives would hold with the Company and determining the terms and conditions
upon which it will retain such executives.

44
<PAGE>
PRINCIPAL STOCKHOLDERS

Unless otherwise noted, the following table sets forth certain information
regarding ownership of the Common Stock as of March 25, 1997 and after
completion of the Offering by (i) the beneficial owners of more than 5% of the
Common Stock of the Company, (ii) each Director and executive officer of the
Company and (iii) all Directors and executive officers of the Company as a
group. To the knowledge of the Company, each of such stockholders has sole
voting and investment power as to the shares shown unless otherwise noted.
Beneficial ownership of the Common Stock listed in the table has been determined
in accordance with the applicable rules and regulations promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act").

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF SHARES BENEFICIALLY OWNED(1)
BENEFICIALLY OWNED -----------------------------
PRIOR TO THE PRIOR TO THE AFTER THE
5% STOCKHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS OFFERING OFFERING OFFERING
<S> <C> <C> <C>
Onex Corporation(2)(3)............................................... 3,064,120 21.4% 2.2%
RCM Capital Management, L.L.C.(4).................................... 1,002,800 7.0 4.4
First Union Corporation(5)........................................... 765,204 5.3 3.4
Chancellor Entities(6)............................................... 717,400 5.0 3.1
S. A. Johnson(7)..................................................... 634,182 4.4 2.3
Adrian Vander Starre(8).............................................. 19,351 * *
Dugald K. Campbell(9)................................................ 226,276 1.6 1.0
James R. Lozelle(10)................................................. 348,820 2.4 1.5
Michael W. Doherty(11)............................................... 158,020 1.1 *
Anthony A. Barone.................................................... 11,700 * *
Paul D. Rysenga...................................................... 7,150 * *
Ronald E. Gavalis.................................................... 71,444 * *
Scott D. Rued(12).................................................... 590,836 4.1 2.1
Luigi Candusso....................................................... 12,750 * *
W. H. Clement(13).................................................... 676,926 4.7 2.5
Eric J. Rosen(2)..................................................... 10,000 * *
Matthew O. Diggs, Jr.(14)............................................ 8,500 * *
Kim B. Clark......................................................... 2,500 * *
F. J. Loughrey....................................................... 4,500 * *
All Directors and executive officers as a group (15 persons)......... 1,634,326 11.1 6.6
</TABLE>

- ------------------------

* Less than one percent.

(1) Does not reflect the exercise of the Underwriters' over-allotment option and
does not give effect to any purchases, if any, by such persons in the
Offering other than an affiliate of Onex Corporation. See Footnote 2. In the
event the over-allotment option is exercised in full, the Company will sell
an additional 1,513,500 shares in the Offering.

(2) Prior to the Offering, Onex Corporation ("Onex") had shared voting power of
3,064,120 shares and sole dispositive power of 1,486,778 shares. Onex has
indicated its intention to sell an aggregate of 1,486,778 shares of Common
Stock in the Offering. In addition, OMI Quebec FCI LLC ("OMI"), an indirect
wholly owned subsidiary of Onex, has indicated its intention to purchase an
aggregate of 500,000 shares in the Offering in order to realign its
ownership interest in the Company. See "Selling Stockholders." Eric J.
Rosen, a Director of the Company, is Managing Director of Onex Investment
Corp. and disclaims beneficial ownership of all shares of Common Stock owned
by Onex. The record holder of such shares listed in the table as owned by
Onex is ONEX DHC LLC, an affiliate of Onex ("Onex DHC"). Onex DHC and Onex
Investment Corp. are both wholly owned subsidiaries of Onex. The address for
Onex, Onex DHC and Mr. Rosen is c/o Onex Investment Corp., 712 Fifth Avenue,
40th Floor, New York, New York 10019.

(3) Onex, Messrs. Johnson, Vander Starre, Campbell, Lozelle, Doherty, Gavalis,
Rued, Clement and certain of the Company's other existing stockholders have
entered into agreements pursuant to which such stockholders agreed to vote
their shares of the Company's voting stock in the same manner as Onex votes
its shares on all matters presented to the Company's stockholders for a vote
and, to the extent permitted by law, granted to Onex a proxy to effectuate
such agreement. These voting arrangements will terminate upon completion of
the Offering.

45
<PAGE>

(4) RCM Capital Management, L.L.C. ("RCM Capital") reported as of December 31,
1996 sole voting power with respect to 897,800 shares of Common Stock and
sole dispositive power with respect to 1,002,800 shares of Common Stock. RCM
Limited L.P., as the Managing Agent of RCM Capital, and RCM General
Corporation, as the General Partner of RCM Limited L.P., also reported
beneficial ownership of such shares. The address for such entities is Four
Embarcadero Center, Suite 2900, San Francisco, California 94111. Dresdner
Bank AG also reported beneficial ownership of 1,002,800 shares of Common
Stock as a result of its being the parent corporation of RCM Capital. The
address for Dresdner Bank AG is Jurgen-Ponto-Platz 1, 60301 Frankfurt,
Germany.

(5) First Union Corporation reported as of December 31, 1996 sole voting and
dispositive power with respect to 765,204 shares of Common Stock, which
represented approximately 5.4% of the outstanding Common Stock at that time.
The address for First Union Corporation is One First Union Center,
Charlotte, North Carolina 28288.

(6) Chancellor LGT Asset Management, Inc. ("Chancellor Asset") and Chancellor
LGT Trust Company ("Chancellor Trust"), as investment advisors for various
fiduciary accounts, and LGT Asset Management, Inc. ("Asset Management") as
the holding company for Chancellor Asset, reported as of December 31, 1996
the sole power to vote and dispose of an aggregate of 717,400 shares of
Common Stock, which represented approximately 5.4% of the outstanding Common
Stock at that time. The address for Chancellor Asset and Chancellor Trust is
1166 Avenue of the Americas, New York, New York 10036 and the address for
Asset Management is 50 California Street, San Francisco, California 94111.

(7) Includes the shares owned by J2R, of which Mr. Johnson is Managing Partner,
and 57,700 shares owned by Mr. Johnson.

(8) Includes: 19,351 shares held in an irrevocable trust for the benefit of Mr.
Vander Starre's children as to all of which Mr. Vander Starre's children are
the trustees. Mr. Vander Starre disclaims beneficial ownership of the shares
held in trust.

(9) Includes: (i) 3,195 shares owned by Mr. Campbell's wife; (ii) 350 shares
owned by Mr. Campbell's child; (iii) 74,805 shares held in an annuity trust,
of which Mr. Campbell is the trustee; and (iv) 15,000 shares issuable upon
the exercise of currently exercisable options held by Mr. Campbell. Mr.
Campbell disclaims beneficial ownership of the shares held by his wife, his
child and in trust.

(10) Includes 266,600 shares of Common Stock issuable upon the conversion of
Convertible Notes and 78,816 shares issuable upon the exercise of currently
exercisable options held by Mr. Lozelle.

(11) Includes 150,816 shares owned by Mr. Doherty and 7,000 shares issuable upon
the exercise of currently exercisable options held by Mr. Doherty.

(12) Includes the shares owned by J2R, of which Mr. Rued is a partner, and
14,354 shares owned by Mr. Rued. Mr. Rued disclaims beneficial ownership of
those shares owned by J2R in which he does not have a pecuniary interest.

(13) Includes the shares owned by J2R, of which Mr. Clement is a partner, 69,744
shares owned by Mr. Clement and an aggregate of 30,700 shares held in trusts
for the benefit of Mr. Clement's grandchildren, as to all of which trusts
Mr. Clement serves as the sole trustee. Mr. Clement disclaims beneficial
ownership of those shares owned by J2R and the shares held in trust in which
he does not have a pecuniary interest.

(14) Includes 6,000 shares owned by EJJM Partnership, of which Mr. Diggs is the
General Partner and 2,500 shares issuable upon the exercise of currently
exercisable options held by Mr. Diggs. Mr. Diggs disclaims beneficial
ownership of the shares owned by EJJM Partnership in which he does not have
a pecuniary interest.

46
<PAGE>
SELLING STOCKHOLDERS

The following table sets forth certain information regarding the Common
Stock beneficially owned by the Selling Stockholders, before and after this
Offering, and the number of shares of Common Stock to be sold in this Offering.
To the knowledge of the Company, each of such stockholders has sole voting and
investment power as to the shares shown unless otherwise noted. Beneficial
ownership of the Common Stock listed in the table has been determined in
accordance with the applicable rules and regulations promulgated under the
Exchange Act.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING AFTER THE OFFERING
------------------------ ------------------------
NO. OF PERCENT OF NO. OF SHARES NO. OF PERCENT OF
SELLING STOCKHOLDERS SHARES CLASS OFFERED HEREBY SHARES CLASS
<S> <C> <C> <C> <C> <C>
Onex (1).............................................. 3,064,120 21.4% 1,486,778 500,000 2.2%
J2R Partners (2).................................... . 576,482 4.0 103,222 473,260 2.1
</TABLE>

- ------------------------

(1) Prior to the Offering, Onex had shared voting power of 3,064,120 shares and
sole dispositive power of 1,486,778 shares. OMI has informed the Company of
its intention to purchase an aggregate of 500,000 shares in the Offering in
order for Onex to realign its ownership interest in the Company. As a
result, the Company has requested that the Underwriters reserve up to
500,000 shares for sale to OMI at the public offering price. Upon completion
of the Offering, Onex is expected to have beneficial ownership of 500,000
shares. See "Underwriting."

(2) The partners of J2R are S. A. Johnson, Scott D. Rued, W. H. Clement, Robert
R. Hibbs, Mary L. Johnson and Carl E. Nelson.

Set forth below are the material relationships which existed between the
Company and the Selling Stockholders during the last three years:

The Company, Onex and certain stockholders, including J2R and its partners,
are parties to a registration agreement pursuant to which the Company has
granted such stockholders rights to register their shares of Common Stock.
Pursuant to the terms of such agreement, the Company will pay all expenses of
the Offering attributable to the Selling Stockholders other than underwriting
discounts and commissions that may be incurred by them.

The Company, Onex, J2R and its partners and certain other investors, who
collectively own 2,310,836 shares of Common Stock (prior to the Offering), are
parties to an Investor Stockholders Agreement pursuant to which each party has
agreed to vote his or its shares in the same manner that Onex votes its shares
of Common Stock. In addition, certain members of management, who collectively
own 753,284 shares of Common Stock, have executed irrevocable proxies that grant
Onex the right to vote such shares on all matters presented to the Company's
stockholders for a vote. These voting arrangements will terminate upon
completion of the Offering.

In 1994, Hidden Creek, a partnership affiliated with Onex and J2R, received
$333,000 for providing strategic direction, management and financial services to
the Company. In addition, in 1994 the Company paid Hidden Creek an aggregate of
$500,000 for services rendered in connection with the acquisitions of Edgewood
and Kalamazoo. In 1996, the Company paid Hidden Creek an aggregate of $750,000
for services in connection with the acquisitions of Trylon and MSTI. The Company
expects to pay Hidden Creek an aggregate of $1,250,000 for services rendered in
connection with the APC Acquisition.

In May 1994, Onex acquired 788,831 shares of Common Stock for aggregate
consideration of $2,543,599 and J2R acquired 197,207 shares of Common Stock for
aggregate consideration of $4,176. Onex and J2R are parties to a Co-Investment
Agreement pursuant to which they have agreed to an allocation of the purchase
price of their investments. As a result of this allocation, the combined price
per share paid by Onex and J2R in connection with the purchase of the
above-described shares is the same price per share paid by all other
stockholders acquiring shares at such time.

47
<PAGE>
DESCRIPTION OF NEW CREDIT AGREEMENT

In connection with the APC Acquisition, the Company's principal operating
subsidiary expects to enter into the New Credit Agreement. Proceeds from
borrowings under the New Credit Agreement will be used to (i) pay a portion of
the cash purchase price of the APC Acquisition; (ii) redeem the Senior Notes;
and (iii) pay transaction fees and expenses associated with the APC Acquisition.
In the event that this Offering has not been completed at the time of the
consummation of the APC Acquisition, the Company will finance the entire APC
Acquisition with the proceeds from borrowings under the New Credit Agreement.
The Company anticipates that the New Credit Agreement will provide for a six
year revolving credit facility of up to $750 million, with a letter of credit
sublimit of $100 million and an alternative currency facility sublimit of $55
million. In addition, an additional loan of up to $200 million will be made
available to the Company in the event the APC Acquisition is consummated prior
to the receipt of the proceeds of the Offering. This loan would have a term of
18 months and would be fully repaid from the proceeds of the Offering. The
following description of the material terms of the New Credit Agreement is
qualified in its entirety by reference to the executed letter agreement relating
to the New Credit Agreement, which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.

Indebtedness under the New Credit Agreement will be guaranteed by the
Company and certain of its subsidiaries (with exceptions for foreign
subsidiaries to be mutually agreed upon).

The loans under the New Credit Agreement will bear interest at a rate per
annum equal to, at the Company's option, (i) the Base Rate or (ii) the reserve
adjusted LIBOR Rate plus a margin ranging from 17 to 50 basis points, depending
upon the ratio of the consolidated indebtedness of the Company to stockholders'
investment. Adjustments to the margin set forth above will be made according to
the pricing matrix that will be attached to the New Credit Agreement.

The New Credit Agreement will require the Company to meet certain financial
tests, including but not limited to minimum interest coverage, minimum
debt/capital and maximum leverage ratio. The New Credit Agreement will also
contain covenants which, among other things, will limit (i) the incurrence of
additional indebtedness and contingent obligations; (ii) the creation of liens
and encumbrances; (iii) the payment of dividends; (iv) additional investments;
(v) prepayments of other indebtedness; (vi) asset sales, acquisitions, joint
ventures, mergers and consolidations; (vii) transactions with affiliates; and
(viii) other matters customarily restricted in such agreements.

The New Credit Agreement will contain customary events of default including
but not limited to (i) payment defaults; (ii) breach of representations and
warranties; (iii) noncompliance with covenants; (iv) bankruptcy; (v) judgments
in excess of specified amounts; (vi) failure of any guaranty or security
agreement supporting the New Credit Agreement to be in full force and effect;
(vii) defaults under other instruments or agreements of indebtedness; and (viii)
a Change of Control (as such term will be defined in the New Credit Agreement).

48
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement among the
Company, the Selling Stockholders and the Underwriters named below (the
"Underwriting Agreement"), Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), PaineWebber Incorporated, Morgan Stanley & Co. Incorporated, Robert W.
Baird & Co. Incorporated ("Baird") and Piper Jaffray Inc. (the "Underwriters")
have severally agreed to purchase from the Company and the Selling Stockholders
the respective number of shares of Common Stock set forth opposite their names
below:

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
UNDERWRITER COMMON STOCK
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation......................
PaineWebber Incorporated.................................................
Morgan Stanley & Co. Incorporated........................................
Robert W. Baird & Co. Incorporated.......................................
Piper Jaffray Inc........................................................
-------------------
Total................................................................ 10,090,000
-------------------
-------------------
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of the Common Stock
offered hereby are subject to approval of certain legal matters by counsel and
to certain other conditions. The Underwriters are obligated to take and pay for
all the shares of the Common Stock if any are taken.

The Company has been advised that the Underwriters propose to offer the
shares of the Common Stock in part directly to the public initially at the
public offering price set forth on the cover page of this Prospectus and in part
to certain dealers at such price less a concession not in excess of $. per
share; that the Underwriters may allow, and such dealers may reallow, a
concession not in excess of $. per share on sales to other dealers; and that
after the public offering, the public offering price and other selling terms may
be changed by the Underwriters. The Underwriters have informed the Company that
they do not intend to confirm sales to any accounts over which they exercise
discretionary authority.

The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an aggregate of
1,513,500 additional shares of Common Stock at the price to the public less
underwriting discounts and commissions. The Underwriters may exercise such
option only for the purpose of covering over-allotments, if any, incurred in
connection with the sales of Common Stock offered hereby. To the extent that the
Underwriters exercise such option, each Underwriter will become obligated,
subject to certain conditions, to purchase the same percentage of such
additional shares as the number of other shares to be purchased by that
Underwriter bears to the total number of shares set forth on the cover page of
this Prospectus.

The Company, its Directors and executive officers, the Selling Stockholders
and certain other stockholders have agreed with the Underwriters not to offer,
sell, contract to sell, grant any other option to purchase or otherwise dispose
of any shares of the Common Stock or any securities convertible into or
exercisable for, or warrants, rights or options to acquire, shares of Common
Stock for a period of 90 days without the prior written consent of DLJ, other
than sales of Common Stock under the Underwriting Agreement, the issuance of
shares of Common Stock upon the exercise of outstanding options and certain
transfers to affiliates.

At the request of the Company, the Underwriters have reserved up to 500,000
shares of Common Stock for sale at the public offering price to OMI. The number
of shares of Common Stock available to the general public will be reduced to the
extent OMI purchases any of the reserved shares. Any reserved shares of Common
Stock that are not so purchased by OMI at the closing of the Offering will be
offered by the Underwriters to the general public on the same terms as the other
shares in the Offering.

49
<PAGE>
The Company, its principal operating subsidiaries and the Selling
Stockholders have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that they may be required to make in respect thereof.

In connection with the Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock.
Specifically, the Underwriters may overallot the Offering, creating a syndicate
short position. Underwriters may bid for and purchase shares of Common Stock in
the open market to cover syndicate short positions. In addition, the
Underwriters may bid for and purchase shares of Common Stock in the open market
to stabilize the price of the Common Stock. These activities may stabilize or
maintain the market price of the Common Stock above independent market levels.
The Underwriters are not required to engage in these activities, and may end
these activities at any time.

DLJ was retained by the Company to deliver a fairness opinion to the Board
of Directors of the Company in connection with the APC Acquisition and received
usual and customary compensation for such services. Baird will receive an
advisory fee for services as financial advisor to the Company in connection with
the APC Acquisition. DLJ, Baird and the other Underwriters have in the past
provided and may continue to provide investment banking services to the Company
and its affiliates, and have received usual and customary compensation for their
services.

LEGAL MATTERS

Certain legal matters regarding the issuance of the shares of Common Stock
being offered hereby have been passed upon for the Company by Kirkland & Ellis,
Chicago, Illinois (a partnership which includes professional corporations).
Certain legal matters will be passed upon for the Underwriters by Gardner,
Carton & Douglas, Chicago, Illinois. A partner of Gardner, Carton & Douglas
holds 2,000 shares of Common Stock.

EXPERTS

The audited financial statements included in this Prospectus and elsewhere
in the Registration Statement, to the extent and for the periods indicated in
their reports, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Commission a registration statement (the
"Registration Statement," which term shall include any amendments thereto) on
Form S-3 under the Securities Act, with respect to the shares of Common Stock
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits and schedules thereto, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission and to which reference is hereby made. Summaries included in this
Prospectus of any documents filed as an exhibit to the Registration Statement
describe all material provisions of such documents but are not necessarily
complete. With respect to each such document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved and each such statement shall be deemed
qualified in its entirety by such reference. The Registration Statement may be
inspected and copied at the public reference facilities maintained by the
Commission referred to below.

The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and information
filed by the Company with the Commission pursuant to the informational
requirements of the Exchange Act may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C.

50
<PAGE>

20549, and at the Commission's regional offices located at Seven World Trade
Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may
be obtained at prescribed rates by writing the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549. Such material may also
be accessed electronically by means of the Commission's home page on the
Internet at http://www.sec.gov. Any reports, proxy statements and other
information filed with the Commission prior to February 19, 1997 can be
inspected at the offices of the Nasdaq National Market, 1735 K Street, N.W.,
Washington, D.C. 20006. Reports, proxy statements and other information filed
with the Commission after such date are available for inspection at the offices
of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are incorporated by reference in this Prospectus
and shall be deemed to be a part hereof:

1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (Commission File No. 1-12733).

2. The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed on February 11, 1997.

All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the Offering shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from their respective
dates of filing. Any statement contained herein or in any document incorporated
or deemed to be incorporated shall be deemed to be modified or superseded for
all purposes of this Prospectus to the extent that a statement contained in this
Prospectus or in any subsequently filed document which also is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, upon written or oral request of such person,
a copy of any and all of the information that has been incorporated by reference
in this Prospectus (other than exhibits thereto, unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates). Requests should be directed to: Tower Automotive, Inc., 4508 IDS
Center, Minneapolis, Minnesota 55402, Attention: Shareholder Services (telephone
number (612) 342-2310).

51
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

Report of Independent Public Accountants................................................................. F-2

Consolidated Balance Sheets as of December 31, 1995 and 1996............................................. F-3

Consolidated Statements of Operations for the years ended December 31, 1994, 1995 and 1996............... F-4

Consolidated Statements of Stockholders' Investment for the years ended December 31, 1994, 1995 and
1996................................................................................................... F-5

Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996............... F-6

Notes to Consolidated Financial Statements............................................................... F-7

AUTOMOTIVE PRODUCTS COMPANY, A DIVISION OF A.O. SMITH CORPORATION

Report of Independent Public Accountants................................................................. F-23

Combined Statements of Net Assets to be Acquired as of December 31, 1995 and 1996........................ F-24

Combined Statements of Revenues and Expenses for the years ended December 31, 1994, 1995 and 1996........ F-25

Combined Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996................... F-26

Notes to Combined Financial Statements................................................................... F-27
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Tower Automotive, Inc.:

We have audited the accompanying consolidated balance sheets of Tower
Automotive, Inc. (a Delaware corporation) and Subsidiaries as of December 31,
1995 and 1996, and the related consolidated statements of operations,
stockholders' investment and cash flows for each of the three years in the
period ended December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tower
Automotive, Inc. and Subsidiaries as of December 31, 1995 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996 in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Minneapolis, Minnesota,

February 18, 1997

F-2
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................... $ 957 $ 39,596
Accounts receivable..................................................................... 39,133 61,073
Inventories............................................................................. 11,398 21,864
Prepaid tooling and other............................................................... 10,338 14,433
---------- ----------
Total current assets.................................................................. 61,826 136,966
---------- ----------
Property, plant and equipment, at cost:
Land.................................................................................... 984 1,989
Buildings and improvements.............................................................. 22,934 34,417
Machinery and equipment................................................................. 56,826 118,567
Construction in progress................................................................ 17,034 21,839
---------- ----------
97,778 176,812
Less-Accumulated depreciation........................................................... (10,191) (20,564)
---------- ----------
Net property, plant and equipment..................................................... 87,587 156,248
Restricted cash........................................................................... 14,385 10,833
Other assets:
Goodwill................................................................................ 40,027 89,429
Other................................................................................... 7,836 9,507
Less-Accumulated amortization........................................................... (2,185) (4,376)
---------- ----------
Net other assets...................................................................... 45,678 94,560
---------- ----------
$ 209,476 $ 398,607
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current liabilities:
Current maturities of long-term debt.................................................... $ 779 $ 722
Accounts payable........................................................................ 19,022 32,280
Accrued liabilities..................................................................... 9,780 22,429
---------- ----------
Total current liabilities............................................................. 29,581 55,431
---------- ----------
Long-term debt, net of current maturities................................................. 70,300 113,460
Deferred income taxes..................................................................... 1,305 12,302
Other noncurrent liabilities.............................................................. 22,705 35,537
---------- ----------
Commitments and contingencies (Notes 3, 4 and 8)
Stockholders' investment:
Preferred stock, par value $1; 5,000,000 shares authorized; no shares issued or
outstanding........................................................................... -- --
Common stock, par value $.01; 30,000,000 shares authorized; 10,830,389 and 14,283,793
issued and outstanding................................................................ 108 143
Warrants to acquire common stock........................................................ -- 2,000
Additional paid-in capital.............................................................. 63,461 136,759
Retained earnings....................................................................... 22,513 43,150
Common stock subscriptions receivable................................................... (497) (175)
---------- ----------
Total stockholders' investment........................................................ 85,585 181,877
---------- ----------
$ 209,476 $ 398,607
---------- ----------
---------- ----------
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-3
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
<S> <C> <C> <C>
Revenues..................................................................... $ 165,526 $ 222,801 $ 399,925
Cost of sales................................................................ 142,986 185,388 338,290
---------- ---------- ----------
Gross profit............................................................... 22,540 37,413 61,635
Selling, general and administrative expenses................................. 7,435 14,308 20,004
Amortization expense......................................................... 803 1,185 2,191
---------- ---------- ----------
Operating income........................................................... 14,302 21,920 39,440
Interest expense............................................................. 1,956 2,027 7,636
Interest income.............................................................. (57) (228) (2,533)
---------- ---------- ----------
Income before provision for income taxes................................... 12,403 20,121 34,337
Provision for income taxes................................................... 5,042 8,050 13,700
---------- ---------- ----------
Net income................................................................... $ 7,361 $ 12,071 $ 20,637
---------- ---------- ----------
---------- ---------- ----------
Net income applicable to common stockholders................................. $ 7,476 $ 12,247 $ 20,765
---------- ---------- ----------
---------- ---------- ----------
Net income per common and common equivalent share............................ $ 0.86 $ 1.05 $ 1.55
---------- ---------- ----------
---------- ---------- ----------
Weighted average common and common equivalent shares outstanding............. 8,720 11,697 13,423
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-4
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT

(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL COMMON STOCK WARRANTS TO
------------------------- PAID-IN RETAINED SUBSCRIPTIONS ACQUIRE COMMON
SHARES AMOUNT CAPITAL EARNINGS RECEIVABLE STOCK
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993............. 4,358,708 $ 44 $ 8,137 $ 3,081 $ (439) $ --
Retirement of common stock............. (5,327) -- (14) -- 5 --
Private placement of common stock...... 1,585,365 15 4,081 -- (404) --
Initial public offering of common
stock, net........................... 4,887,500 49 51,223 -- -- --
Net income............................. -- -- -- 7,361 -- --
------------ ----- ---------- --------- ----- ------
Balance, December 31, 1994............. 10,826,246 108 63,427 10,442 (838) --
Sales of stock under Employee Stock
Discount Purchase Plan............... 4,143 -- 34 -- -- --
Collection of common stock
subscriptions receivable............. -- -- -- -- 341 --
Net income............................. -- -- -- 12,071 -- --
------------ ----- ---------- --------- ----- ------
Balance, December 31, 1995............. 10,830,389 108 63,461 22,513 (497) --
Conversion of subordinated notes....... 410,529 4 2,488 -- -- --
Exercise of options.................... 6,625 -- 48 -- -- --
Sales of stock under Employee Stock
Discount Purchase Plan............... 18,350 1 262 -- -- --
Collection of common stock
subscriptions receivable............. -- -- -- -- 322 --
Public offering of common stock, net... 2,232,900 22 51,275 -- -- --
Issuance of shares and warrants in
acquisition of MSTI.................. 785,000 8 19,225 -- -- 2,000
Net income............................. -- -- -- 20,637 -- --
------------ ----- ---------- --------- ----- ------
Balance, December 31, 1996............. 14,283,793 $ 143 $ 136,759 $ 43,150 $ (175) $ 2,000
------------ ----- ---------- --------- ----- ------
------------ ----- ---------- --------- ----- ------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-5
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1994 1995 1996
<S> <C> <C> <C>
Operating activities:
Net income............................................................. $ 7,361 $ 12,071 $ 20,637
Adjustments to reconcile net income to net cash provided by (used for)
operating activities:
Depreciation and amortization........................................ 4,138 6,549 12,754
Deferred income tax provision........................................ 2,149 5,659 6,326
Changes in other operating items--
Accounts receivable................................................ (9,923) (4,124) 5,967
Inventories........................................................ (551) 468 (693)
Prepaid tooling and other.......................................... (4,248) (922) (1,091)
Accounts payable and accrued liabilities........................... (6,411) 2,323 (3,354)
Other assets and liabilities....................................... (2,890) (8,119) (10,497)
----------- ------------ ------------
Net cash provided by (used for) operating activities............. (10,375) 13,905 30,049
----------- ------------ ------------
Investing activities:
Capital expenditures, net.............................................. (28,524) (26,148) (16,253)
Acquisitions, net of cash acquired..................................... (38,263) -- (76,223)
Change in restricted cash.............................................. (6,479) (7,906) 3,552
----------- ------------ ------------
Net cash used for investing activities........................... (73,266) (34,054) (88,924)
----------- ------------ ------------
Financing activities:
Proceeds from issuance of debt......................................... 51,313 183,103 197,813
Repayments of debt..................................................... (23,420) (162,427) (152,229)
Proceeds from sale of stock, net....................................... 54,964 -- 51,297
Proceeds from sales of stock under Employee Stock Discount Purchase
Plan................................................................. -- 34 263
Other, net............................................................. (9) 341 370
----------- ------------ ------------
Net cash provided by financing activities........................ 82,848 21,051 97,514
----------- ------------ ------------
Net change in cash and cash equivalents.................................. (793) 902 38,639
Cash and cash equivalents:
Beginning of period.................................................... 848 55 957
----------- ------------ ------------
End of period.......................................................... $ 55 $ 957 $ 39,596
----------- ------------ ------------
----------- ------------ ------------
Supplemental cash flow information:
Cash paid for--
Interest, net of amounts capitalized................................. $ 1,914 $ 2,993 $ 7,372
----------- ------------ ------------
----------- ------------ ------------
Income taxes......................................................... $ 2,338 $ 1,702 $ 6,091
----------- ------------ ------------
----------- ------------ ------------
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

F-6
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION:

Tower Automotive, Inc. (the Company) designs and manufactures structural
metal stampings and assemblies for use by original equipment manufacturers in
the North American automotive industry and has manufacturing facilities located
in Michigan, Indiana, Kentucky and Ohio.

2. SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION:

The accompanying consolidated financial statements include the accounts of
Tower Automotive, Inc. and its wholly owned subsidiaries. All material
intercompany accounts and transactions have been eliminated in consolidation.

CASH EQUIVALENTS:

Cash equivalents consist of highly liquid investments with an original
maturity of three months or less. Cash equivalents are stated at cost which
approximates fair value.

INVENTORIES:

Inventories are valued at the lower of first-in, first-out (FIFO) cost or
market.

Inventories consisted of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
<S> <C> <C>
Raw materials........................................................... $ 4,836 $ 9,517
Work in process......................................................... 3,431 5,949
Finished goods.......................................................... 3,131 6,398
--------- ---------
$ 11,398 $ 21,864
--------- ---------
--------- ---------
</TABLE>

CUSTOMER TOOLING AND OTHER DESIGN COSTS:

Customer tooling represents costs incurred by the Company in the development
of new tooling used in the manufacture of the Company's products. Once customer
approval is obtained for the manufacture of a new product, the Company is
reimbursed by its customers for the cost of certain of the tooling, at which
time the tooling becomes the property of the customers.

In addition, the Company has certain other tooling and design costs related
to previously proven product designs which are reimbursed by the Company's
customers as the related product is sold through an incremental increase in each
product's unit selling price. Such costs are capitalized and amortized using the
unit of production method over the life of the related tool. Amounts capitalized
and included in other assets were $3.8 million at December 31, 1995 and $3.7
million at December 31, 1996. If the Company forecasts that the amount of
capitalized tooling and design costs exceeds the amount to be realized through
the sale of product, a loss is recognized currently.

F-7
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment acquired in the acquisitions discussed in Note
3 was recorded at its fair value, determined based on appraisals, as of the
respective acquisition dates. Additions to property, plant and equipment
following the acquisitions are stated at cost. For financial reporting purposes,
depreciation and amortization are provided using the straight-line method over
the following estimated useful lives:

<TABLE>
<S> <C>
15 to 30
Buildings and improvements................................... years
Machinery and equipment...................................... 3 to 20 years
</TABLE>

Accelerated depreciation methods are used for tax reporting purposes.

Start-up costs related to major facilities and new platforms are capitalized
and amortized over the life of the related platform, generally five years. The
unamortized start-up cost balance was $876,000 at December 31, 1995 and
$1,011,000 at December 31, 1996.

Interest is capitalized during the construction of major facilities and is
amortized over the related estimated useful lives. Interest costs of $1,157,000
were capitalized during the year ended December 31, 1995. No interest was
capitalized during the year ended December 31, 1996.

Maintenance and repairs are charged to expense as incurred. Major
betterments and improvements which extend the useful life of the related item
are capitalized and depreciated. The cost and accumulated depreciation of
property, plant and equipment retired or otherwise disposed of are removed from
the related accounts, and any residual values are charged or credited to income.

OTHER ASSETS:

Goodwill represents the excess of the purchase price over the fair value of
the net assets acquired and is being amortized on a straight-line basis over 40
years. Debt issue costs are amortized on a straight-line basis over the term of
the related obligations.

The Company periodically evaluates whether events and circumstances have
occurred which may affect the estimated useful life or the recoverability of the
remaining balance of its goodwill and other long-lived assets. If such events or
circumstances were to indicate that the carrying amount of these assets were not
recoverable, the Company would estimate the future cash flows expected to result
from the use of the assets and their eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) were less
than the carrying amount of goodwill, the Company would recognize an impairment
loss.

FAIR VALUE OF FINANCIAL INSTRUMENTS:

The carrying amounts of the Company's borrowings under the outstanding
industrial development revenue bonds approximates fair value as the floating
rates applicable to these financial instruments reflect changes in the overall
market interest rates. The carrying amount of the Company's outstanding series A
and series B senior notes also approximate fair value as interest rates have not
changed materially since their issuance in May 1996.

F-8
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)

REVENUE RECOGNITION:

The Company recognizes revenue as its products are shipped to its customers.

INCOME TAXES:

The Company accounts for income taxes under the liability method, whereby
deferred income taxes are recognized at currently enacted income tax rates to
reflect the tax effect of temporary differences between the financial reporting
and tax bases of assets and liabilities.

NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE:

Net income per common and common equivalent share is computed by dividing
net income applicable to common stockholders by the weighted average number of
common and common stock equivalent shares outstanding during each period
presented. Common stock issued and common stock options granted within one year
immediately preceding the initial public offering of common stock (Common Stock)
discussed in Note 4 at prices below the public offering price have been
reflected in the net income per share calculation as if they had been
outstanding for all periods presented. Net income for purposes of computing net
income per common and common equivalent share reflects the elimination of
interest expense on the convertible subordinated notes, net of the related
income tax benefit.

STOCK OPTIONS:

The Company accounts for stock options under the provisions of APB No. 25,
under which no compensation expense is recognized when the stock options are
granted. The pro forma effects had the Company followed the provisions of SFAS
No. 123 are included in Note 4.

USE OF ESTIMATES:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The ultimate results could differ from those estimates.

3. ACQUISITIONS:

On May 4, 1994, the Company acquired the operating assets and assumed
certain operating liabilities and indebtedness of Edgewood Tool and
Manufacturing Company (Edgewood), a manufacturer of hood and deck lid hinges and
structural metal components for the automotive industry, for total consideration
of $24.6 million in cash and assumed indebtedness and the issuance of $5.0
million of Convertible Subordinated Notes. In addition, the Company entered into
a five year employment agreement with Edgewood's former president and issued an
option to acquire 102,984 shares of Common Stock at an exercise price of $6.55
per share.

On June 29, 1994, the Company acquired the capital stock of Kalamazoo
Stamping and Die Company (Kalamazoo), a supplier of structural metal stampings
and assemblies for the automotive industry, for net consideration of
approximately $12.3 million in cash.

F-9
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. ACQUISITIONS: (CONTINUED)
On January 16, 1996, the Company acquired all of the outstanding common
stock of Trylon Corporation (Trylon) for total consideration of approximately
$25 million. The acquisition was financed with the proceeds of a $25 million
term loan. Trylon manufactures metal stampings and assemblies for the North
American automotive industry from four facilities in Traverse City, Michigan.

On May 31, 1996, the Company acquired all of the outstanding common stock of
MascoTech Stamping Technologies, Inc. (MSTI), a wholly owned subsidiary of
MascoTech, Inc. (MascoTech). Consideration consisted of $55 million in cash,
785,000 shares of the Company's Common Stock and warrants to acquire 200,000
shares of the Company's Common Stock at an exercise price of $18 per share. The
Company may also make additional payments of up to $30 million to MascoTech if
certain operating targets are achieved by the MSTI facilities in the first three
years following the acquisition. The amounts to be paid to MascoTech are equal
to two times the amount by which operating profit, as defined, of the MSTI
facilities exceeds $24 million each year. Based on results of operations of the
MSTI facilities through December 31, 1996, no contingent payments are due.
Contingent consideration paid in future periods, if any, will be recorded as
additional goodwill. MSTI manufactures metal chassis and suspension components
and assemblies for the North American automotive industry from facilities in
Ohio, Indiana and Michigan.

These acquisitions have been accounted for using the purchase method of
accounting and, accordingly, the assets acquired and liabilities assumed have
been recorded at fair value as of the dates of the acquisitions. The assets and
liabilities of Trylon and MSTI have been recorded based upon preliminary
estimates of fair value as of the dates of acquisition. The Company does not
believe the final allocations of the purchase price will be materially different
than the preliminary allocations. The excess of the purchase price over the fair
value of the assets acquired and liabilities assumed has been recorded as
goodwill. Results of operations for these acquisitions have been included in the
accompanying consolidated financial statements since the dates of acquisition.
The accompanying unaudited consolidated pro forma results of operations for the
years ended December 31, 1995 and 1996 give effect to the 1996 Offering (as
defined in Note 4) and the acquisitions of Trylon and MSTI as if they were
completed at the beginning of the respective periods. The unaudited pro forma
financial information does not purport to represent what the Company's results
of operations would actually have been if such transactions in fact had occurred
at such date or to project the Company's results of future operations (in
thousands, except per share data):

<TABLE>
<CAPTION>
PRO FORMA YEARS ENDED
DECEMBER 31,
----------------------
1995 1996
<S> <C> <C>
Revenues.............................................................. $ 423,607 $ 473,728
---------- ----------
---------- ----------
Net income applicable to common stockholders.......................... $ 17,249 $ 23,982
---------- ----------
---------- ----------
Weighted average common and common equivalent shares outstanding...... 14,482 14,802
---------- ----------
---------- ----------
Net income per common and common equivalent share..................... $ 1.19 $ 1.62
---------- ----------
---------- ----------
</TABLE>

F-10
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. STOCKHOLDERS' INVESTMENT:

PUBLIC OFFERINGS OF COMMON STOCK:

In August 1994, the Company completed an initial public offering, including
shares issued pursuant to the underwriters' over-allotment option, of 4,887,500
shares of its Common Stock at $11.50 per share resulting in net proceeds to the
Company of approximately $51.3 million.

During 1996, the Company completed an offering of 2,232,900 shares of its
Common Stock at an offering price of $24.50 per share (the 1996 Offering)
resulting in net proceeds of approximately $51.3 million. Proceeds from the 1996
Offering were used by the Company to retire borrowings under its secured credit
agreement and for general corporate purposes.

PRIVATE PLACEMENTS:

During 1993, the Company sold 522,640 shares of its Common Stock to certain
employees for aggregate proceeds of approximately $981,000. Approximately
$434,000 of this amount was financed through notes to the Company which bear
interest at prime plus 1% (9.5% at December 31, 1995 and 9.25% at December 31,
1996) and are due in 1998. These notes are reflected as a reduction of
stockholders' investment in the accompanying consolidated financial statements.
Approximately $248,000 and $330,000 of these notes had been collected as of
December 31, 1995 and 1996.

As a component of the financing for the acquisition of Edgewood in May 1994
(See Note 3), the existing stockholders and members of the Company's management
participated in a $4.1 million private placement of 1,585,365 shares of Common
Stock, resulting in net cash proceeds to the Company of $3.7 million.
Approximately $404,000 of this amount was financed through notes to the Company
which bear interest at prime plus 1% and are due in 1999. These notes are
reflected as a reduction of stockholders' investment in the accompanying
consolidated financial statements. Approximately $93,000 and $333,000 of these
notes had been collected as of December 31, 1995 and 1996.

STOCK OPTION PLAN:

The Company sponsors the 1994 Key Employee Stock Option Plan (the Stock
Option Plan), under which any person who is a full-time, salaried employee of
the Company (excluding non-management directors) is eligible to participate in
the Stock Option Plan (an Employee Participant). A committee of the board of
directors selects the Employee Participants and determines the terms and
conditions of the options. The Stock Option Plan provides for the issuance of
options up to 500,000 shares of Common Stock at exercise prices equal to the
stock market price on the date of grant to Employee Participants,

F-11
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. STOCKHOLDERS' INVESTMENT: (CONTINUED)
subject to certain adjustments reflecting changes in the Company's
capitalization. Information regarding the Stock Option Plan is as follows:

<TABLE>
<CAPTION>
1995 1996
----------------------------------------- -----------------------------------------
WEIGHTED WEIGHTED
SHARES AVERAGE SHARES AVERAGE
UNDER EXERCISE EXERCISE UNDER EXERCISE EXERCISE
OPTION PRICES PRICE OPTION PRICES PRICE
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of $ -- $8.00-10.00
year.......................... -- $ -- 120,750 $ 8.182
Granted....................... 133,750 8.00-10.00 8.164 139,000 15.125 15.125
Exercised..................... -- -- -- (6,625) 8.00 8.00
Forfeited..................... (13,000) 8.00 8.00 (4,875) 8.00-15.125 10.192
---------- -------------- ------ ---------- -------------- -------------
Outstanding at end of year...... 120,750 $8.00-10.00 8.182 248,250 $8.00-15.125 $ 12.035
---------- -------------- ------ ---------- -------------- -------------
Exercisable at end of year...... -- $ -- $ -- 27,625 $8.00-10.00 $ 8.182
---------- -------------- ------ ---------- -------------- -------------
Weighted average fair value of
options granted............... $ 4.23 $ 9.51
---------- ----------
</TABLE>

As of December 31, 1996, the outstanding stock options granted in 1995 have
a remaining contractual life of approximately 8.5 years and the outstanding
stock options granted in 1996 have a remaining contractual life of approximately
9.5 years.

INDEPENDENT DIRECTOR STOCK OPTION PLAN:

In February 1996, the Company's board of directors approved the Tower
Automotive, Inc. Independent Director Stock Option Plan (the Director Option
Plan) that provides for the issuance of options to Independent Directors, as
defined, to acquire up to 100,000 shares of the Company's Common Stock, subject
to certain adjustments reflecting changes in the Company's capitalization. The
option exercise price must be at least equal to the fair value of the Common
Stock at the time the option is issued. Vesting is determined by the Board of
Directors at the date of grant and in no event can be less than six months from
the date of grant. As of December 31, 1996, the Company had granted stock
options under this plan to acquire 22,500 shares of Common Stock at an exercise
price of $15.125 per share. None of these director options were exercisable or
vested at December 31, 1996.

EMPLOYEE STOCK PURCHASE PLAN:

The Company also sponsors an employee stock discount purchase plan which
provides for the sale of up to 500,000 shares of the Company's Common Stock at
discounted purchase prices, subject to certain limitations. The cost per share
under this plan is 85% of the market value of the Company's Common Stock at the
date of purchase, as defined. During the year ended December 31, 1995, 4,143
shares of Common Stock were issued to employees pursuant to this plan and during
the year ended December 31, 1996, 18,350 shares of Common Stock were issued. The
weighted average fair value of shares sold in 1995 and 1996 were $8.11 and
$14.32, respectively.

STOCK-BASED COMPENSATION PLANS:

As discussed above, the Company has two stock option plans, the Stock Option
Plan and the Independent Director Stock Option Plan, and an Employee Stock
Purchase Plan. The Company accounts

F-12
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. STOCKHOLDERS' INVESTMENT: (CONTINUED)
for these plans under APB Opinion No. 25, under which no compensation cost has
been recognized. Had compensation cost for these plans been determined
consistent with Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," (SFAS No. 123), the Company's pro forma net
income and pro forma earnings per share would have been as follows (in
thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------
1995 1996
<S> <C> <C> <C>
Net income applicable to common stockholders........... As Reported $ 12,247 $ 20,765
Pro Forma $ 12,213 $ 20,611

Net income per common and common equivalent share...... As Reported $ 1.05 $ 1.55
Pro Forma $ 1.04 $ 1.54
</TABLE>

Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years. The
effect of the stock offered under the Employee Stock Purchase Plan was not
material for 1995 and 1996.

The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted average
assumptions: risk free interest rates of 6.5%, 6.9% and 6.93% in 1995 and 5.57%
in 1996; expected life of seven years for 1995 and 1996; expected volatility of
35%, 37% and 41% in 1995 and 56% in 1996.

OTHER COMMON STOCK EQUIVALENTS:

In connection with the acquisition of Edgewood in May 1994, the Company
issued an option to acquire 102,984 shares of Common Stock at an exercise price
of $6.55 per share. The options expire in 2004. As of December 31, 1996, 34,328
options were vested and exercisable.

In connection with the acquisition of MSTI in May 1996, the Company issued
warrants to MascoTech to acquire 200,000 shares of Common Stock at an exercise
price of $18 per share. The warrants expire in 2006.

DIVIDENDS:

The Company has not declared or paid any cash dividends in the past, as
discussed in Note 5, the Company's debt agreements restrict the amount of
dividends the Company can declare or pay. As of December 31, 1996, under the
most restrictive debt covenants, the Company could not have paid any cash
dividends.

F-13
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. LONG-TERM DEBT:

Long-term debt consisted of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996
<S> <C> <C>
Revolving credit facility, due January 2001, interest at prime or LIBOR
plus .75% (8.5% at December 31, 1995)................................ $ 18,631 $ --
Series A senior notes, due June 1, 2006, interest at 7.65% payable
semi-annually........................................................ -- 40,000
Series B senior notes, due June 1, 2008, interest at 7.82% payable
semi-annually........................................................ -- 25,000
Industrial development revenue bonds, due June 1, 2024, interest
payable monthly at a rate adjusted weekly by the bond remarketing
agent (5.85% at December 31, 1995 and 5.82% at December 31, 1996).... 23,765 23,765
Industrial development revenue bonds, due March 1, 2025, interest
payable monthly at a rate adjusted weekly by the bond remarketing
agent (5.85% at December 31, 1995 and 5.82% at December 31, 1996).... 20,000 20,000
Industrial development revenue bonds, due in annual installments of
$720 through September 2000, interest payable monthly at a rate
adjusted weekly as determined by the bond remarketing agent (4.65% at
December 31, 1995 and 4.4% at December 31, 1996)..................... 3,600 2,878
Convertible subordinated notes, due May 2003, interest at 5.75% payable
quarterly............................................................ 5,000 2,508
Other.................................................................. 83 31
--------- ----------
71,079 114,182
Less-Current maturities................................................ (779) (722)
--------- ----------
$ 70,300 $ 113,460
--------- ----------
--------- ----------
</TABLE>

Future maturities of long-term debt as of December 31, 1996 are as follows
(in thousands):

<TABLE>
<S> <C>
1997.............................................................. $ 722
1998.............................................................. 720
1999.............................................................. 720
2000.............................................................. 6,434
2001.............................................................. 5,714
Thereafter........................................................ 99,872
---------
$ 114,182
---------
---------
</TABLE>

Included in the Company's credit agreement, as amended (the Credit
Agreement), is a revolving credit facility which provides for borrowings of up
to $75 million. The Credit Agreement also provides for the issuance of up to $50
million in letters of credit to collateralize the outstanding industrial
development

F-14
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. LONG-TERM DEBT: (CONTINUED)
revenue bonds. Available credit under this agreement is limited to eligible
accounts receivable and inventories, as defined, which exceeded $75 million at
December 31, 1996. The weighted average interest rate for borrowings under the
revolving credit facility was 7.4% for the year ended December 31, 1995 and 6.1%
for the year ended December 31, 1996. In connection with the transaction
described in Note 10, the Company obtained a commitment from a bank to refinance
the existing Credit Agreement.

The Company financed the cash portion of the MSTI acquisition through the
issuance in two series of Senior Notes having an aggregate principal amount of
$65 million. The Senior Notes require the Company to make semi-annual interest
payments commencing December 1, 1996, while principal is payable in varying
annual installments beginning in 2000. Net proceeds from the sale of the Senior
Notes in excess of the amounts used to finance the cash portion of the MSTI
acquisition, together with borrowings under the revolving credit facility, were
used to repay in full the remaining balance outstanding on a $25 million term
loan incurred by the Company in connection with the acquisition of Trylon.

In connection with the acquisition of Edgewood in May 1994, the Company
issued the $5.0 million Convertible Subordinated Notes, which generally are
convertible at any time into 823,874 shares of Common Stock. The Convertible
Subordinated Notes are subject to prepayment in the event of, and become
convertible upon, a sale of the Company and are subordinated to all other debt
of the Company which is not expressly subordinated to the Convertible
Subordinated Notes. As of December 31, 1996, approximately $2.5 million of these
notes had been converted into 410,529 shares of Common Stock.

In June 1994 and March 1995, the Company issued $25.0 million and $20.0
million, respectively, of industrial development revenue bonds related to the
construction and equipping of a manufacturing facility in Bardstown, Kentucky.
The bonds are collateralized by letters of credit. The facility will be
completed in two phases. The undispersed proceeds from these bonds are invested
in treasury securities and reflected as restricted cash in the accompanying
consolidated balance sheets. The Company also has approximately $2.9 million in
outstanding indebtedness relating to industrial development revenue bonds issued
in connection with the construction of its Auburn, Indiana plant. The bonds are
collateralized by a letter of credit, certain equipment and a mortgage on this
plant.

The debt agreements described above contain various restrictive covenants
which, among other matters, require the Company to maintain certain financial
ratios. The agreements also limit additional indebtedness, capital expenditures
and cash dividends. The Company was in compliance with all debt covenants as of
December 31, 1995 and 1996.

6. INCOME TAXES:

The income tax provision consisted of the following (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
<S> <C> <C> <C>
Currently payable............................................... $ 2,893 $ 2,391 $ 7,374
Deferred income tax provision................................... 2,149 5,659 6,326
--------- --------- ---------
$ 5,042 $ 8,050 $ 13,700
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-15
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. INCOME TAXES: (CONTINUED)
The deferred income tax provision consisted of the following (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
<S> <C> <C> <C>
Depreciation lives and methods................................... $ 542 $ 2,624 $ 3,348
Accrued compensation costs....................................... 316 1,064 (915)
Other reserves and accruals...................................... 1,291 1,971 3,893
--------- --------- ---------
Net deferred income tax provision................................ $ 2,149 $ 5,659 $ 6,326
--------- --------- ---------
--------- --------- ---------
</TABLE>

A reconciliation of income taxes computed at the statutory rates to the
reported income tax provision is as follows for the years ended December 31 (in
thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
<S> <C> <C> <C>
Taxes at federal statutory rates................................ $ 4,341 $ 7,042 $ 12,018
State income taxes, net of federal benefit...................... 496 829 1,199
Effect of permanent differences, primarily goodwill
amortization.................................................. 205 179 483
--------- --------- ---------
Provision for income taxes...................................... $ 5,042 $ 8,050 $ 13,700
--------- --------- ---------
--------- --------- ---------
</TABLE>

Current deferred income taxes as of December 31, 1995 and 1996 are not
material and accordingly are included in the deferred income tax liability. A
summary of deferred income tax liabilities (assets) is as follows as of December
31 (in thousands):

<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Depreciation lives and methods........................................... $ 8,485 $ 28,770
Postretirement benefit obligations....................................... (4,084) (5,486)
Accrued compensation costs............................................... (947) (2,453)
Other reserves and accruals not currently deductible for tax purposes.... (4,494) (8,529)
Valuation allowance...................................................... 2,345 --
--------- ---------
Net deferred income tax liability........................................ $ 1,305 $ 12,302
--------- ---------
--------- ---------
</TABLE>

As of December 31, 1995, the Company had provided a valuation allowance for
certain deferred tax assets as their realization was not reasonably assured.
During 1996, the Company determined it was more likely than not that the
deferred tax assets would be realized. Accordingly, the valuation allowance was
eliminated as a reduction to goodwill.

F-16
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. MAJOR CUSTOMERS:

The Company sells its products directly to automobile manufacturers.
Following is a summary of customers that accounted for more than 10% of
consolidated revenues for the three years in the period ended December 31, 1996:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
<S> <C> <C> <C>
Ford..................................................................... 68% 68% 67%
Honda.................................................................... 11% 15% 9%
Chrysler................................................................. 9% 10% 10%
</TABLE>

Receivables from these customers represented 85% of total accounts
receivable at December 31, 1995 and 70% of total accounts receivable at December
31, 1996.

8. COMMITMENTS:

RETIREMENT PLANS:

The Company contributes to a union sponsored multi-employer pension plan
providing defined benefits to certain Michigan hourly employees. Contributions
to the pension plan are based on rates set forth in the Company's union
contracts. The expense related to this plan was $680,000 for the year ended
December 31, 1994, $788,000 for the year ended December 31, 1995 and $852,000
for the year ended December 31, 1996. The plan was substantially fully funded as
of the latest valuation date.

The Company also has a qualified profit sharing retirement plan and 401(k)
employee savings plan covering certain salaried and hourly employees. The
expense related to these plans was $1,137,000 during 1994, $1,157,000 during
1995 and $2,803,000 during 1996.

The Company sponsors a 401(k) employee savings plans covering certain union
employees. The Company matches a portion of the employee contributions made to
these plans. The expense under this plan in each of the three years in the
period ended December 31, 1996 was not material.

The Company's UAW Retirement Income Plan covers substantially all union
employees at its Kalamazoo and Bluffton facilities. Benefits under the plan are
based on years of service. Contributions by the Company are intended to provide
not only for benefits attributed to service to date, but also for those benefits
expected to be earned in the future. The Company's funding policy is to
contribute annually the amounts sufficient to meet the higher of the minimum
funding requirements set forth in the Employee Retirement Income Security Act of
1974 or the minimum funding requirements under the Company's UAW contract. Net
pension expense for the years ended December 31, 1994, 1995 and 1996 consisted
of the following (in thousands):

<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Service cost-benefits earned during the period...................... $ 51 $ 117 $ 219
Interest cost on projected benefit obligation....................... 77 170 219
Return on plan assets............................................... 83 (504) (337)
Net amortization and deferral....................................... (192) 282 136
--------- --------- ---------
Net pension expense................................................. $ 19 $ 65 $ 237
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-17
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. COMMITMENTS: (CONTINUED)
The following table sets forth the UAW plan's funded status as of December
31 (in thousands):

<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation................................................ $ 2,509 $ 2,464
--------- ---------
--------- ---------
Accumulated and projected benefit obligation............................. $ 3,113 $ 3,031
Plan assets at fair value.................................................. 2,838 3,146
--------- ---------
Projected benefit obligation (greater) less than plan assets............. (275) 115
Unrecognized net transition asset.......................................... (254) (223)
Unrecognized prior service cost............................................ 706 770
Additional minimum liability............................................... (694) (70)
Unrecognized net loss (gain)............................................... 242 (350)
--------- ---------
Prepaid (accrued) pension costs............................................ $ (275) $ 242
--------- ---------
--------- ---------
</TABLE>

The discount rate used in determining the actual present value of the
projected benefit obligation was 7% in 1995 and 7.5% 1996. The expected
long-term rate of return on plan assets was 8% for December 31, 1995 and 1996.
Plan assets consist principally of mutual funds invested in bonds and equity
securities.

DEFERRED COMPENSATION PLAN:

The Company had salary continuation agreements with three employees which
provided for certain payments beginning with the later of retirement or
attainment of age 62, or in the event of death or disability. During 1995 two of
these employees received payments totaling $529,000 as a result of their
retirement. The expense under this plan has not historically been significant.
The Company's total obligation under these agreements was $318,000 as of
December 31, 1995 and $334,000 as of December 31, 1996 and was included in
noncurrent liabilities in the accompanying consolidated balance sheets.

POSTRETIREMENT PLANS:

The Company provides certain medical insurance benefits for retired
employees. Certain employees of the Company are eligible for these benefits if
they remain employed until age 55 or 59 and fulfill other eligibility
requirements specified by the plans. Certain retirees between the ages of 55 and
62 must contribute 100% of the group rate for active employees. No contributions
are required for retirees 62 or older. Benefits are continued for dependents of
eligible retiree participants after the death of the retiree.

Net periodic postretirement benefit cost consisted of the following for the
periods ended December 31 (in thousands):

<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Service cost-benefits earned during the period........................ $ 175 $ 276 $ 174
Interest cost on accumulated postretirement benefit obligation........ 463 636 707
--------- --------- ---------
Net periodic postretirement benefit cost.............................. $ 638 $ 912 $ 881
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-18
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. COMMITMENTS: (CONTINUED)

The Company funds benefits under the plan as they are incurred. A summary of
the accumulated present value of the postretirement benefit obligation included
in other noncurrent liabilities as of December 31 is as follows (in thousands):

<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Retirees................................................................ $ 4,613 $ 5,920
Active employees eligible to retire..................................... 1,523 1,752
Active employees not eligible to retire................................. 4,020 6,341
--------- ---------
Accrued postretirement benefit costs.................................. $ 10,156 $ 14,013
--------- ---------
--------- ---------
</TABLE>

The projected postretirement benefit obligation is calculated using a 7.5%
annual rate of increase in per capita claims cost in 1995 and 7.0% in 1996. This
rate is assumed to decrease by one half of one percent per year through 1997. In
1998, the rate is assumed to be 6.5% and remain at that level for all years
thereafter.

If the health care cost trend rate were increased one percentage point, the
accumulated postretirement benefit obligation and the aggregate of the service
and interest cost discussed above would have increased by 12%.

LEASES:

The Company leases office and manufacturing space, including the lease
described in Note 9, and certain equipment under operating lease agreements
which require it to pay maintenance, insurance, taxes and other expenses in
addition to annual rentals. Future annual rental commitments at December 31,
1996 under these operating leases are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR AMOUNT
<S> <C>
1997....................................................................... $ 1,799
1998....................................................................... 1,450
1999....................................................................... 1,969
2000....................................................................... 107
2001....................................................................... 24
Thereafter................................................................. 52
---------
$ 5,401
---------
---------
</TABLE>

Rent commitments associated with acquired facilities which will not be
utilized by the Company have been excluded from the above amounts and will be
provided for in the recording of the related acquisition, as discussed in Note
3.

9. RELATED PARTY TRANSACTIONS:

The Company leases a manufacturing facility from a partnership whose major
partners are former stockholders of Edgewood and are current employees of the
Company. The lease expires February 28, 1999. Expense under this lease was
$298,000 for the period from the acquisition of Edgewood through December 31,
1994, $454,000 for the year ended December 31, 1995 and $475,000 for the year
ended December 31, 1996.

F-19
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. RELATED PARTY TRANSACTIONS: (CONTINUED)
The Company has made payments to Hidden Creek Industries, an affiliate of
the Company, for certain acquisition related and other management services
totaling $833,000 during 1994 and $750,000 during 1996.

10. AGREEMENT TO ACQUIRE AUTOMOTIVE PRODUCTS COMPANY:

On January 27, 1997, the Company entered into an agreement to acquire and
assume substantially all of the assets and liabilities of the Automotive
Products Company (APC), a division of A.O. Smith Corporation, for $625 million
in cash, subject to certain adjustments. APC, which had revenues of
approximately $860 million for the year ended December 31, 1996, designs and
manufactures frames, frame components, engine cradles, suspension components and
modules for the North American automotive and heavy truck industries. This
acquisition is expected to close during the second quarter of 1997. This
acquisition will be accounted for as a purchase and, accordingly, APC's assets
and liabilities will be recorded at fair value as of the acquisition date, with
any excess purchase price recorded as goodwill.

In connection with this acquisition, the Company agreed to enter into a new
credit facility with a bank, which will provide a total financing availability
of up to $865 million. The specific terms of the new credit facility are
currently being negotiated with the bank. The new credit facility will also
include certain restrictive covenants, which the Company expects will be similar
in nature to those in its existing credit agreement. This facility will become
effective contemporaneously with the completion of the acquisition discussed
above.

As part of this refinancing, the Company expects a portion of the proceeds
from the new credit facility will be used to retire the Senior Notes discussed
in Note 5. If the Senior Notes are retired, the Company will record an
extraordinary loss of approximately $3 million, net of income taxes, related to
prepayment penalties and the write-off of previously capitalized deferred
financing costs.

On February 18, 1997, the Company filed a registration statement on Form S-3
with the Securities and Exchange Commission related to the proposed sale of up
to 8,500,000 shares of the Company's Common Stock to the public. The Company
expects this offering will be completed early in the second quarter of 1997.
Proceeds from this offering will be used to fund a portion of the purchase price
related to the acquisition discussed above.

The acquisition of APC will be accounted for as a purchase and, accordingly,
APC's assets and liabilities will be recorded at fair values as of the
acquisition date. Following is an unaudited pro forma balance sheet of the
Company, based on preliminary estimates of the allocation of the purchase price,
as if

F-20
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. AGREEMENT TO ACQUIRE AUTOMOTIVE PRODUCTS COMPANY: (CONTINUED)

the acquisition of APC and the offering described above had been completed as of
December 31, 1996 (in thousands):

<TABLE>
<S> <C>
ASSETS

Current Assets.................................................. $ 276,675
Property, Plant and Equipment, net.............................. 611,994
Restricted Cash................................................. 10,833
Other Assets, net............................................... 301,375
---------
$1,200,877
---------
---------

LIABILITIES AND STOCKHOLDERS' INVESTMENT

Current Liabilities............................................. $ 160,720
Long-Term Debt, net of current maturities....................... 405,764
Other Noncurrent Liabilities.................................... 133,516
Stockholders' Investment........................................ 500,877
---------
$1,200,877
---------
---------
</TABLE>

Following are unaudited pro forma results of operations for the year ended
December 31, 1996 as if the acquisitions of APC and MSTI, the offering described
above and the 1996 Offering had been completed at the beginning of the year (in
thousands, except per share data):

<TABLE>
<S> <C>
Revenues........................................................ $1,323,105
---------
---------
Operating Income................................................ $ 114,078
---------
---------
Net Income...................................................... $ 52,481
---------
---------
Net Income per Common and Common Equivalent Share............... $ 2.25
---------
---------
</TABLE>

The unaudited pro forma financial information does not purport to represent
what the Company's financial position or results of operations would actually
have been if these transactions had occurred at such dates or to project the
Company's future results of operations.

F-21
<PAGE>
TOWER AUTOMOTIVE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. QUARTERLY FINANCIAL DATA (UNAUDITED):

The following is a condensed summary of quarterly results of operations for
1995 and 1996 (in thousands except per share amounts):

<TABLE>
<CAPTION>
NET INCOME PER
COMMON AND
COMMON
GROSS OPERATING EQUIVALENT
REVENUES PROFIT INCOME NET INCOME SHARE
<S> <C> <C> <C> <C> <C>
1995:
First................. $ 58,423 $ 9,696 $ 5,810 $ 3,296 $ 0.29
Second................ 55,175 9,689 5,658 3,060 0.27
Third................. 51,166 8,012 4,126 2,250 0.20
Fourth................ 58,037 10,016 6,326 3,465 0.30
--------- --------- ----------- ----------- -----
$ 222,801 $ 37,413 $ 21,920 $ 12,071 $ 1.05
--------- --------- ----------- ----------- -----
--------- --------- ----------- ----------- -----

1996:
First................. $ 68,921 $ 10,515 $ 6,626 $ 3,188 $ 0.28
Second................ 96,521 15,351 10,307 5,302 0.44
Third................. 114,583 17,041 10,155 5,236 0.36
Fourth................ 119,900 18,728 12,352 6,911 0.47
--------- --------- ----------- ----------- -----
$ 399,925 $ 61,635 $ 39,440 $ 20,637 $ 1.55
--------- --------- ----------- ----------- -----
--------- --------- ----------- ----------- -----
</TABLE>

The sum of the per share amounts for the year ended December 31, 1995 does
not equal the total for
the year due to the effects of rounding.

F-22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To A.O. Smith Corporation:

We have audited the accompanying combined statements of net assets to be
acquired of the Automotive Products Company (a division of A.O. Smith
Corporation--a Delaware corporation) as of December 31, 1995 and 1996, and the
related combined statements of revenues and expenses and cash flows for each of
the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

These financial statements have been prepared to reflect the operations of
A.O. Smith Corporation to be acquired pursuant to the transaction discussed in
Note 1 and are not intended to be a complete presentation of A.O. Smith
Corporation's assets and liabilities, revenues and expenses or cash flows.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets to be acquired of the Automotive
Products Company pursuant to the Asset Purchase Agreement discussed in Note 1 as
of December 31, 1995 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Minneapolis, Minnesota,
January 31, 1997

F-23
<PAGE>
AUTOMOTIVE PRODUCTS COMPANY
(A DIVISION OF A.O. SMITH CORPORATION)

COMBINED STATEMENTS OF NET ASSETS TO BE ACQUIRED

(AMOUNTS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
<S> <C> <C>
Current assets:
Accounts receivable, net of reserves of $1,700 and $1,200............................. $ 83,758 $ 68,827
Inventories........................................................................... 28,458 32,883
Other current assets.................................................................. 36,725 61,832
Deferred income tax benefit........................................................... 7,600 7,600
----------- -----------
Total current assets................................................................ 156,541 171,142
----------- -----------
Property, plant and equipment, at cost:
Land.................................................................................. 2,854 2,854
Buildings and improvements............................................................ 103,013 104,479
Machinery and equipment............................................................... 499,591 556,717
Construction in progress.............................................................. 22,135 104,439
----------- -----------
627,593 768,489
Less-Accumulated depreciation......................................................... (320,738) (360,940)
----------- -----------
Net property, plant and equipment................................................... 306,855 407,549
Other assets, net....................................................................... 5,646 22,620
----------- -----------
Total assets........................................................................ 469,042 601,311
----------- -----------

LIABILITIES

Current liabilities:
Accounts payable...................................................................... 49,620 69,485
Accrued compensation costs............................................................ 25,137 27,336
Other accrued liabilities............................................................. 15,007 10,499
----------- -----------
Total current liabilities........................................................... 89,764 107,320
Postretirement benefit obligation....................................................... 63,566 65,677
Deferred income taxes................................................................... 27,800 35,700
----------- -----------
Commitments and contingencies (Note 7)
Total liabilities................................................................... 181,130 208,697
----------- -----------
Net assets to be acquired......................................................... $ 287,912 $ 392,614
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of these combined statements.

F-24
<PAGE>
AUTOMOTIVE PRODUCTS COMPANY
(A DIVISION OF A.O. SMITH CORPORATION)

COMBINED STATEMENTS OF REVENUES AND EXPENSES

(AMOUNTS IN THOUSANDS)

The accompanying notes are an integral part of these combined statements.

F-25
<PAGE>
AUTOMOTIVE PRODUCTS COMPANY
(A DIVISION OF A.O. SMITH CORPORATION)

COMBINED STATEMENTS OF CASH FLOWS

(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1995 1996
<S> <C> <C> <C>
Operating activities:
Net income.................................................................. $ 35,480 $ 30,984 $ 28,820
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................. 34,100 41,821 50,768
Deferred income tax provision (benefit)................................... (900) 3,900 7,900
Changes in other operating items--
Accounts receivable..................................................... (4,483) (24,770) 14,931
Inventories............................................................. (17,850) 4,492 (4,425)
Other current assets.................................................... (5,919) (8,950) (25,107)
Accounts payable, accrued liabilities and other......................... 1,082 (7,388) 19,667
---------- ---------- ----------
Net cash provided by operating activities............................. 41,510 40,089 92,554
---------- ---------- ----------
Investing activities:
Capital expenditures, net................................................... (59,023) (78,908) (151,534)
Investments in unconsolidated subsidiary.................................... -- (3,750) (16,902)
---------- ---------- ----------
Net cash used in investing activities..................................... (59,023) (82,658) (168,436)

Financing activities:
Advances from Parent........................................................ 17,513 42,569 75,882
---------- ---------- ----------
Net change in cash............................................................ -- -- --

Cash:
Beginning of period......................................................... -- -- --
---------- ---------- ----------
End of period............................................................... $ -- $ -- $ --
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

The accompanying notes are an integral part of these combined statements.

F-26
<PAGE>
AUTOMOTIVE PRODUCTS COMPANY

(A DIVISION OF A.O. SMITH CORPORATION)

NOTES TO COMBINED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION:

During the periods presented, Automotive Products Company (APC) was a
division of A.O. Smith Corporation (A.O. Smith or Parent). On January 27, 1997,
a wholly owned subsidiary of R.J. Tower Corporation (R.J. Tower) agreed to
acquire and assume substantially all of the assets and liabilities of APC (the
Acquisition--see Note 8). R.J. Tower is a wholly owned subsidiary of Tower
Automotive, Inc. (Tower). The accompanying financial statements reflect the
assets and liabilities, revenues and expenses and cash flows of the operations
conducted by APC to be acquired by R.J. Tower. This presentation is intended to
provide a meaningful representation of the historical financial information of
the acquired operations and is not intended to represent a presentation of the
financial position and results of operations of A.O. Smith. The operations
included in the accompanying financial statements are referred to herein as APC
or the Company. The accompanying financial statements have not been adjusted to
reflect the effects of the Acquisition.

The Company designs, engineers and manufactures stamped structural and
suspension components and assemblies for the automotive and heavy truck
industries and has fifteen facilities in the United States, Canada, South
America, Japan and China.

2. SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF COMBINATION:

The combined financial statements of APC include the accounts of APC, a
division of A.O. Smith, as well as the following operations:

- The automotive products division of A.O. Smith Enterprises Ltd., a
Canadian corporation and a wholly owned subsidiary of the Parent.

- A.O. Smith do Brasil Industria E Comerico Ltda., a Brazilian limited
liability company.

All significant intercompany accounts and transactions have been eliminated
in combination.

INVENTORIES:

Inventories are valued at the lower of last-in, first-out (LIFO) cost or
market and include materials, labor and overhead costs. Inventories consisted of
the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996
<S> <C> <C>
Raw materials......................................................... $ 4,805 $ 7,858
Work in process....................................................... 24,473 23,393
Finished goods........................................................ 14,872 17,395
LIFO reserve.......................................................... (15,692) (15,763)
---------- ----------
$ 28,458 $ 32,883
---------- ----------
---------- ----------
</TABLE>

During 1996, the Company purchased stamped components from Tower totaling
approximately $13.6 million for use in the manufacture of certain of its
products.

F-27
<PAGE>
AUTOMOTIVE PRODUCTS COMPANY

(A DIVISION OF A.O. SMITH CORPORATION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
OTHER CURRENT ASSETS:

Other current assets consisted of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
<S> <C> <C>
Prepaid customer tooling................................................ $ 31,104 $ 54,368
Prepaid expenses........................................................ 5,621 7,464
--------- ---------
$ 36,725 $ 61,832
--------- ---------
--------- ---------
</TABLE>

Prepaid customer tooling represents costs incurred by the Company in the
development of new tooling used in the manufacture of the Company's products
over the amount of such costs billed to the Company's customers. The Company
receives specific purchase orders for this tooling and is reimbursed by its
customers. Costs incurred are deferred until reimbursed by the customer.

PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment are stated at cost. For financial reporting
purposes, depreciation and amortization are provided using the straight-line
method over the following estimated useful lives:

<TABLE>
<S> <C>
10 to 40
Buildings and improvements................................... years
Machinery and equipment...................................... 5 to 17 years
</TABLE>

Accelerated depreciation methods are used for tax reporting purposes.

Interest of $0.7 million, $0.4 million and $1.7 million was capitalized to
fixed assets under construction during 1994, 1995 and 1996.

Maintenance and repairs are charged to expense as incurred. Major
improvements which extend the useful life of the related item are capitalized
and depreciated. The cost and accumulated depreciation of property, plant and
equipment retired or otherwise disposed of are removed from the related
accounts, and any residual values are charged or credited to income.

CAPITALIZED SOFTWARE COSTS:

Incremental direct costs associated with the customization and
implementation of purchased software are expensed until the Company is
reasonably certain that the specific new system (or substantial revision) will
be completed and will fulfill its intended use. Such costs are then capitalized
and amortized over their estimated useful lives--generally 3 to 10 years.
Training and nonincremental costs incurred in these activities are expensed as
incurred. Unamortized computer software costs were $6.9 million and $16.0
million as of December 31, 1995 and 1996. Amortization of these costs which was
charged to expense amounted to $1.6 million, $0.6 million and $0.7 million
during 1994, 1995 and 1996.

F-28
<PAGE>
AUTOMOTIVE PRODUCTS COMPANY

(A DIVISION OF A.O. SMITH CORPORATION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
ACCRUED COMPENSATION COSTS:

Accrued compensation costs consisted of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
<S> <C> <C>
Payroll................................................................. $ 16,572 $ 17,982
Workers' compensation................................................... 5,904 5,980
Other................................................................... 2,661 3,374
--------- ---------
$ 25,137 $ 27,336
--------- ---------
--------- ---------
</TABLE>

REVENUE RECOGNITION:

The Company recognizes revenue upon shipment of product to the customer.

FOREIGN CURRENCY TRANSLATION:

For all subsidiaries outside the United States, the Company uses the local
currency as the functional currency. For these operations, assets and
liabilities are translated to U.S. dollars at year-end exchange rates and
weighted average exchange rates are used for revenues and expenses. The
resulting translation adjustments are reflected as a change in the Parent's
investment in the Company. Gains and losses from foreign currency transactions
are included in results of operations.

DERIVATIVES:

As a result of having various foreign operations, the Parent and Company are
exposed to the effect of foreign currency rate fluctuations on the U.S. dollar
value of their foreign operations. Further, the Parent and Company conduct
business in various foreign currencies. To minimize the effect of fluctuating
foreign currencies on its operating results, the Parent has historically entered
into foreign currency forward contracts. The contracts were used to hedge known
foreign currency transactions for both the Parent and the Company on a
continuing basis for periods consistent with the Parent's exposures. The effect
of such transactions as they related to the Company was not material.

INCOME TAXES:

The accompanying financial statements reflect income taxes accounted for
under the liability method, whereby deferred income taxes are recognized at
currently enacted income tax rates to reflect the tax effect of temporary
differences between the financial reporting and tax bases of certain assets and
liabilities.

CHARGES FROM A.O. SMITH:

The Parent has historically provided various services to APC and its other
operating units, including income tax, internal audit, benefits, corporate
technology, legal, strategic and treasury related services. Specific
determination of the costs associated with these services that relate directly
to the Company is not practicable; accordingly, the amounts presented in the
accompanying financial statements related to these

F-29
<PAGE>
AUTOMOTIVE PRODUCTS COMPANY

(A DIVISION OF A.O. SMITH CORPORATION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
services reflect estimates, which management believes were reasonable and
appropriate in the circumstances. Management does not believe that such
estimates differ materially from actual amounts had it been practicable to
specifically identify such actual amounts. The estimated amount of corporate
expenses included in the accompanying combined statements of revenues and
expenses for the years ended December 31, 1994, 1995 and 1996 was $6 million,
$6.5 million and $5 million.

In addition to the above expense reimbursement charges, the accompanying
financial statements reflect charges for the Company's proportionate share of
the Parent's interest expense, allocated based on the relationship of the
Company's net assets to the Parent's total consolidated net assets.

NEW ACCOUNTING PRONOUNCEMENT:

During 1996, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." This statement provides
guidance for determining whether the value of certain long-lived assets,
identifiable intangibles and goodwill has been impaired. The adoption of this
statement had no impact on the Company's financial position or results of
operations.

USE OF ESTIMATES:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Such estimates relate primarily to the carrying amounts of
inventories and customer tooling balances and to the determination of charges
for services provided by the Parent. The ultimate results could differ from
those estimates.

3. MAJOR CUSTOMERS:

The Company sells its products directly to automobile manufacturers.
Following is a summary of customers that accounted for a significant portion of
the Company's revenues:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1994 1995 1996
<S> <C> <C> <C>
Ford................................................................... 45% 48% 46%
Chrysler............................................................... 25% 21% 20%
General Motors......................................................... 19% 19% 23%
</TABLE>

Receivables from these customers represented 68% and 76% of net accounts
receivable at December 31, 1995 and 1996.

4. SALES TO METALSA:

APC sells certain automotive frame components to Metalsa S.A. de C.V., a
Mexican joint venture in which the Parent is an investor. Sales were $11.0
million in 1994, $11.6 million in 1995 and $15.7 million in

F-30
<PAGE>
AUTOMOTIVE PRODUCTS COMPANY

(A DIVISION OF A.O. SMITH CORPORATION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

4. SALES TO METALSA: (CONTINUED)
1996. Receivables related to the transaction activity were $.8 million, and $1.0
million as of December 31, 1995 and 1996. Such transactions were priced to
approximate fair market value.

5. INVESTMENT IN JOINT VENTURE:

In 1995, APC entered into a joint venture to produce certain of its parts in
China. This investment, equal to 60% of the joint venture equity, is accounted
for using the equity method of accounting as a result of the Company's voting
rights and general business restrictions within China. At December 31, 1995 and
1996, the carrying amount of the investment was $3.8 million and $20.6 million
and is included in other assets in the accompanying combined statements of net
assets to be acquired. The carrying amounts of the investment have not exceeded
the Company's equity in the underlying net assets. No income or distributions
were recognized or paid out by the joint venture in 1995 or 1996. Facility
operations are scheduled to begin in early 1997.

6. INCOME TAXES:

The Company's results of operations have been historically included in the
consolidated federal income tax returns of A.O. Smith. As a result, all tax
payments were made by A.O. Smith. The provisions for income taxes in the
accompanying combined statements of revenues and expenses for the years ended
December 31, 1994, 1995 and 1996 were computed as if the Company had filed
separate tax returns.

The income tax provision consisted of the following (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
<S> <C> <C> <C>
Currently payable............................................ $ 25,300 $ 17,500 $ 12,100
Deferred income tax provision (benefit)...................... (900) 3,900 7,900
--------- --------- ---------
$ 24,400 $ 21,400 $ 20,000
--------- --------- ---------
--------- --------- ---------
</TABLE>

The deferred income tax provision (benefit) consisted of the following (in
thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
<S> <C> <C> <C>
Depreciation lives and methods............................... $ 2,300 $ 2,300 $ 8,000
Reserves and accruals not currently deductible............... (3,300) 1,100 (400)
Other, net................................................... 100 500 300
--------- --------- ---------
Deferred income tax provision (benefit)...................... $ (900) $ 3,900 $ 7,900
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-31
<PAGE>
AUTOMOTIVE PRODUCTS COMPANY

(A DIVISION OF A.O. SMITH CORPORATION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

6. INCOME TAXES: (CONTINUED)
A reconciliation of income taxes computed at the statutory rate to the
reported income tax provision is as follows (in thousands):

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
<S> <C> <C> <C>
Taxes at federal statutory rates............................. $ 21,100 $ 18,500 $ 17,300
State income taxes, net of federal benefit................... 3,100 2,700 2,500
Effect of permanent differences.............................. 200 200 200
--------- --------- ---------
Provision for income taxes................................... $ 24,400 $ 21,400 $ 20,000
--------- --------- ---------
--------- --------- ---------
</TABLE>

A summary of the net deferred income tax benefit and liability is as follows
(in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996
<S> <C> <C>
Reserves and accruals not currently deductible........................ $ 7,300 $ 7,200
Other................................................................. 300 400
---------- ----------
Net current deferred tax benefit...................................... $ 7,600 $ 7,600
---------- ----------
---------- ----------
Depreciation lives and methods........................................ $ 51,100 $ 59,400
Reserves and accruals not currently deductible........................ (23,700) (24,200)
Other................................................................. 400 500
---------- ----------
Net long-term deferred tax liability.................................. $ 27,800 $ 35,700
---------- ----------
---------- ----------
</TABLE>

7. COMMITMENTS AND CONTINGENCIES:

RETIREMENT AND BENEFIT PLANS:

Employees of the Company may be eligible to participate in a variety of
retirement and benefit plans that are sponsored by the Company and the Parent.
Participation in these plans is subject to certain eligibility conditions.

The Parent sponsors a qualified noncontributory defined benefit plan which
was established on December 31, 1995 through the merger of its various defined
benefit plans in the United States into one plan. Benefits for salaried
employees are based on the employee's years of service and compensation.
Benefits for hourly employees are generally based on years of service. The
Parent's policy is to contribute amounts which are actuarially determined to
provide sufficient assets to meet future benefit payment requirements consistent
with the funding requirements of federal law and regulations. Plan assets
consist primarily of marketable equities and debt securities. The Company
recognized pension expense of $3.0 million, $5.4 million and $3.3 million during
1994, 1995 and 1996 related to its contributions to this plan. As of December
31, 1996, net plan assets exceeded the projected benefit obligation under the
plan.

The Parent sponsors several defined contribution employee benefit plans for
hourly and salaried personnel in the United States and Canada. Under the plans,
the Company matches employee contributions based upon formulas established in
the plans. Company contributions under these plans for the benefit of Company
employees were $1.4 million during each of 1994, 1995 and 1996.

F-32
<PAGE>
AUTOMOTIVE PRODUCTS COMPANY

(A DIVISION OF A.O. SMITH CORPORATION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

7. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
POSTRETIREMENT HEALTHCARE:

The Company participates in a defined benefit postretirement plan sponsored
by the Parent which provides medical and life insurance benefits to certain
hourly and salaried employees from retirement to age 65. Salaried employees
retiring after January 1, 1995, are covered by an unfunded defined contribution
plan with benefits based on years of service. Certain hourly employees retiring
after January 1, 1996, will be subject to a maximum annual benefit limit.
Salaried employees hired after December 31, 1993, are not eligible for
postretirement medical benefits.

Net periodic postretirement benefit costs associated with those employees of
the Company that participate in this plan included the following components for
the years ended December 31 (in thousands):

<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Service cost--benefits attributed to employee service during the
year........................................................... $ 1,354 $ 1,067 $ 1,168
Interest cost on accumulated postretirement benefit obligation... 5,925 5,613 5,758
Amortization of prior service cost............................... -- -- 156
Amortization of unrecognized net (gain) loss..................... 294 (28) 546
--------- --------- ---------
$ 7,573 $ 6,652 $ 7,628
--------- --------- ---------
--------- --------- ---------
</TABLE>

The following table summarizes the components of the postretirement benefit
obligation related to the employees of the Company that participate in this plan
(in thousands):

<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Accumulated postretirement benefit obligation (APBO):
Retirees............................................................ $ 33,416 $ 27,389
Fully eligible active plan participants............................. 15,778 19,870
Other active plan participants...................................... 26,857 30,692
---------- ----------
76,051 77,951
Unrecognized prior service cost....................................... (1,100) (946)
Unrecognized net loss................................................. (11,385) (11,328)
---------- ----------
Accrued postretirement benefit obligation............................. $ 63,566 $ 65,677
---------- ----------
---------- ----------
</TABLE>

The assumed healthcare cost trend rate used in measuring the APBO is 6
percent. The weighted average discount rate used in determining the APBO was 7.5
and 8.0 percent at December 31, 1995 and 1996. If the healthcare cost trend rate
were increased by 1 percent, the APBO at December 31, 1996 would increase by
$1.8 million and net periodic postretirement benefit cost for 1996 would
increase $.2 million.

ENVIRONMENTAL AND LEGAL MATTERS:

Due to the nature of its business, the Company has, from time to time, been
exposed to potential liabilities to clean up environmental contaminants. In
addition, the Company is periodically involved in

F-33
<PAGE>
AUTOMOTIVE PRODUCTS COMPANY

(A DIVISION OF A.O. SMITH CORPORATION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

7. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
legal proceedings during the ordinary course of business. In the opinion of
management, such matters are not expected to have a material impact on the
Company's future operating results or financial position.

OPERATING LEASE COMMITMENTS:

The Company leases manufacturing facilities and equipment under operating
lease agreements which require it to pay maintenance, insurance, taxes and other
expenses in addition to rentals. Future annual rental commitments at December
31, 1996 under these operating leases are as follows (in thousands):

<TABLE>
<CAPTION>
1997............................................................... $ 22,268
<S> <C>
1998............................................................... 21,283
1999............................................................... 19,229
2000............................................................... 9,003
2001............................................................... 5,206
Thereafter......................................................... 17,856
---------
$ 94,845
---------
---------
</TABLE>

Rent expense, including payments under operating lease commitments, totaled
$21.3 million, $21.2 million and $24.1 million during 1994, 1995 and 1996.

8. ACQUISITION BY TOWER AUTOMOTIVE, INC.:

On January 27, 1997, a wholly owned subsidiary of R.J. Tower agreed to
acquire and assume substantially all of the assets and liabilities of the
Company. Terms of the agreement provided for the payment of cash consideration
of approximately $625 million, subject to certain adjustments. The Acquisition
is expected to be completed during the second quarter of 1997. Subsequent to the
Acquisition, the operations of the Company will be continued by R.J. Tower on a
basis substantially consistent with that which existed prior to the Acquisition.
The Acquisition will be accounted for as a purchase and, accordingly, the
Company's assets and liabilities will be recorded at fair value as of the
acquisition date.

F-34
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 10
The Company.................................... 13
APC Acquisition Financing...................... 13
Use of Proceeds................................ 14
Market Price of Common Stock................... 15
Dividend Policy................................ 15
Capitalization................................. 16
Unaudited Pro Forma Financial Statements....... 17
Selected Consolidated Financial Data of the
Company...................................... 22
Selected Combined Financial Data of APC........ 24
Management's Discussion and Analysis of Results
of Operations and Financial Condition........ 25
Business....................................... 31
Management..................................... 43
Principal Stockholders......................... 45
Selling Stockholders........................... 47
Description of New Credit Agreement............ 48
Underwriting................................... 49
Legal Matters.................................. 50
Experts........................................ 50
Available Information.......................... 50
Incorporation of Certain Documents by
Reference.................................... 51
Index to Financial Statements.................. F-1
</TABLE>

10,090,000 SHARES

[LOGO]

TOWER AUTOMOTIVE, INC.

COMMON STOCK

-----------------

PROSPECTUS

-----------------

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

PAINEWEBBER INCORPORATED

MORGAN STANLEY & CO.

INCORPORATED

ROBERT W. BAIRD & CO.
INCORPORATED

PIPER JAFFRAY INC.

, 1997

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses of the Registrant in connection
with the issuance and distribution of the securities being registered, other
than underwriting discounts and commissions. All such amounts are estimates,
other than the filing fees payable to the Commission, the National Association
of Securities Dealers, Inc. ("NASD") and the listing fee to the New York Stock
Exchange.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 150,318
NASD filing fee................................................. 30,500
New York Stock Exchange listing fee............................. 65,300
Printing and mailing expenses................................... 200,000
Legal fees and expenses......................................... 500,000
Blue sky fees and expenses...................................... 10,000
Accounting fees and expenses.................................... 325,000
Miscellaneous................................................... 18,882
---------
Total....................................................... $1,300,000
---------
---------
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 102(b)(7) of the General Corporation Law of the State of Delaware
permits a Delaware corporation to limit the personal liability of its directors
in accordance with the provisions set forth therein. The Restated Certificate of
Incorporation of the Registrant provides that the personal liability of its
directors shall be limited to the fullest extent permitted by applicable law.

Section 145 of the General Corporation Law of the State of Delaware contains
provisions permitting corporations organized thereunder to indemnify directors,
officers, employees or agents against expenses, judgments and fines reasonably
incurred and against certain other liabilities in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person was or is a director, officer, employee or agent of the corporation. The
Restated Certificate of Incorporation of the Registrant provide for
indemnification of its directors and officers to the fullest extent permitted by
applicable law.

The form of Underwriting Agreement attached hereto as Exhibit 1.1, which
provides for, among other things, the Registrant's sale to the Underwriters of
the securities being registered herein, will obligate the Underwriters to
indemnify the registrant and the Registrant's officers and directors against
certain liabilities under the Securities Act of 1933, as amended (the
"Securities Act").

ITEM 16. EXHIBITS.

The following exhibits are filed pursuant to Item 601 of Regulation S-K:

II-1
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
*4.1 Specimen Certificate for shares of Common Stock, incorporated by reference to Exhibit 4.1 of the
Company's Form S-1 Registration Statement (Registration No. 33-80320) (the "Form S-1").
*4.2 Amended and Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit
3.1 of the Form S-1.
*4.3 Amended and Restated By-Laws of the Company, incorporated by reference to Exhibit 3.2 of the Form S-1.
**4.4 Letter agreement, dated December 10, 1996, between Bank of America National Savings and Trust
Association and the Company, relating to the New Credit Agreement.
**5.1 Opinion of Kirkland & Ellis regarding legality of securities being registered.
23.1 Consent of Arthur Andersen LLP.
**23.2 Consent of Kirkland & Ellis - included in Exhibit 5.1.
*24.1 Powers of Attorney included in Part II of Registration Statement.
*27.1 Financial Data Schedule of the Company.
</TABLE>

- ------------------------

* Previously filed.

** To be filed by amendment.

+ The Company agrees to furnish supplementally to the Commission a copy of any
omitted schedule or exhibit to such agreement upon request of the Commission.

ITEM 17. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be the initial bona fide offering thereof.

(b) 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.

(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 a part of this
Registration Statement as of the time it was declared effective.

(2) For purposes 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 offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.

II-2
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe it meets all the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Minneapolis, Minnesota, as of March 25, 1997.

TOWER AUTOMOTIVE, INC.

By: /s/ S. A. JOHNSON
-----------------------------------------
S. A. Johnson
CHAIRMAN OF THE BOARD

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to Registration Statement has been signed by the following
persons in the capacities and as of the dates indicated.

SIGNATURE TITLE DATE

*
- ------------------------ Chairman of the Board and March 25, 1997
S. A. Johnson Director

*
- ------------------------ Director March 25, 1997
Adrian Vander Starre

President, Chief Executive
* Officer and
- ------------------------ Director (Principal March 25, 1997
Dugald K. Campbell Executive Officer)

Vice President and Chief
* Financial Officer
- ------------------------ (Principal Financial and March 25, 1997
Anthony A. Barone Accounting Officer)

*
- ------------------------ Director March 25, 1997
James R. Lozelle

*
- ------------------------ Director March 25, 1997
Scott D. Rued

*
- ------------------------ Director March 25, 1997
W. H. Clement

*
- ------------------------ Director March 25, 1997
Eric J. Rosen

*
- ------------------------ Director March 25, 1997
Matthew O. Diggs, Jr.

*
- ------------------------ Director March 25, 1997
F. J. Loughrey

*
- ------------------------ Director March 25, 1997
Kim B. Clark

/s/ SCOTT D. RUED
- ------------------------ Attorney-in-Fact March 25, 1997
Scott D. Rued

II-3
<PAGE>

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <S>
**1.1 Form of Underwriting Agreement.
2.1 Asset Purchase Agreement, dated January 27, 1997, by and among A.O. Smith Corporation, A.O. Smith
Enterprises Ltd., Tower Automotive Acquisition, Inc., Tower Automotive, Inc. and R.J. Tower
Corporation.+
*4.1 Specimen Certificate for shares of Common Stock, incorporated by reference to Exhibit 4.1 of the
Company's Form S-1 Registration Statement (Registration No. 33-80320) (the "Form S-1").
*4.2 Amended and Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit
3.1 of the Form S-1.
*4.3 Amended and Restated By-Laws of the Company, incorporated by reference to Exhibit 3.2 of the Form S-1.
**4.4 Letter agreement, dated December 10, 1996, between Bank of America National Savings and Trust
Association and the Company, relating to the New Credit Agreement.
**5.1 Opinion of Kirkland & Ellis regarding legality of securities being registered.
23.1 Consent of Arthur Andersen LLP.
**23.2 Consent of Kirkland & Ellis - included in Exhibit 5.1.
*24.1 Powers of Attorney included in Part II of Registration Statement.
*27.1 Financial Data Schedule of the Company.
</TABLE>

- ------------------------

* Previously filed.

** To be filed by amendment.

+ The Company agrees to furnish supplementally to the Commission a copy of any
omitted schedule or exhibit to such agreement upon request of the Commission.

<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

ASSET PURCHASE AGREEMENT

among

A. O. SMITH CORPORATION,

A. O. SMITH ENTERPRISES LTD.

TOWER AUTOMOTIVE ACQUISITION, INC.,

TOWER AUTOMOTIVE, INC.

and

R. J. TOWER CORPORATION

________________________

Dated as of January 27, 1997

________________________

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>

TABLE OF CONTENTS

Page

1. Purchase and Sale of Assets; Assumption of Liabilities. . . . . . . . . . 1
1.1. Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3. Instruments of Conveyance and Transfer . . . . . . . . . . . . . . . 5
1.4. Assumed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . 5
1.5. Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 7
1.6. Nonassignable Contracts and Rights . . . . . . . . . . . . . . . . . 8

2. Closing; Payment of Purchase Price at Closing and Closing Adjustment. . . 9
2.1. Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2. Purchase Price and Payment . . . . . . . . . . . . . . . . . . . . .10
2.3. Determination of Net Book Value; PostClosing Adjustment. . . . . . .10
2.4. Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . .14

3. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . .14
3.1. Representations and Warranties of the Sellers. . . . . . . . . . . .14
3.2. Representations and Warranties of Buyer and Parents. . . . . . . . .27
3.3. Expiration of Representations and Warranties . . . . . . . . . . . .30
3.4. No Other Representations or Warranties; Memorandum; Projections. . .30

4. Transactions Prior to Closing . . . . . . . . . . . . . . . . . . . . . .31
4.1. Access to Information Concerning Properties and Records;
Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . .31
4.2. Conduct of the Business Pending the Closing Date . . . . . . . . . .31
4.3. Further Actions. . . . . . . . . . . . . . . . . . . . . . . . . . .32
4.4. HSR Act Compliance . . . . . . . . . . . . . . . . . . . . . . . . .33
4.5. Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
4.6. Real Estate Covenants. . . . . . . . . . . . . . . . . . . . . . . .33
4.7. Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
4.8. Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
4.9. Expiration of Covenants to be Performed Before Closing . . . . . . .35

5. Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . . . . .35
5.1. Conditions Precedent to Obligations of Buyer . . . . . . . . . . . .35
5.2. Conditions Precedent to the Obligations of the Sellers . . . . . . .36

6. Employee Relations and Benefits . . . . . . . . . . . . . . . . . . . . .37
6.1. Union Represented Employees. . . . . . . . . . . . . . . . . . . . .37
6.2. Hourly Paid NonUnion Represented Employees and Salaried
Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
6.3. Required Notice. . . . . . . . . . . . . . . . . . . . . . . . . . .45
6.4. Vacation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45

<PAGE>

6.5. Payroll Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . .45

7. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
7.1. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
7.2. Post-Termination Obligations . . . . . . . . . . . . . . . . . . . .46
7.3. No Liabilities in Event of Termination . . . . . . . . . . . . . . .47

8. Transactions Subsequent to Closing. . . . . . . . . . . . . . . . . . . .47
8.1. Post-Closing Access to Information and Assistance. . . . . . . . . .47
8.2. Further Agreements . . . . . . . . . . . . . . . . . . . . . . . . .47
8.3. No Competition . . . . . . . . . . . . . . . . . . . . . . . . . . .48
8.4. Assistance and Cooperation Regarding Taxes and Financial
Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
8.5. Corporate Names. . . . . . . . . . . . . . . . . . . . . . . . . . .49
8.6. Company's Insurers or Administrators . . . . . . . . . . . . . . . .50
8.7. Certain Post-Closing Services. . . . . . . . . . . . . . . . . . . .51
8.8. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . .51
8.9. License of Certain Patents . . . . . . . . . . . . . . . . . . . . .51
8.10. Financial Statement Audits. . . . . . . . . . . . . . . . . . .51
8.11. Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
8.12. TWI License Agreement . . . . . . . . . . . . . . . . . . . . .53
8.13. Certain Litigation. . . . . . . . . . . . . . . . . . . . . . .53
8.14. Certain Contracts . . . . . . . . . . . . . . . . . . . . . . .54

9. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
9.1. Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
9.2. Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . .55
9.3. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . .55
9.4. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67
9.5. Resolution of Disputes . . . . . . . . . . . . . . . . . . . . . . .68
9.6. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .70
9.7. Binding Effect; Benefit. . . . . . . . . . . . . . . . . . . . . . .70
9.8. Bulk Sales Law . . . . . . . . . . . . . . . . . . . . . . . . . . .70
9.9. Assignability. . . . . . . . . . . . . . . . . . . . . . . . . . . .70
9.10. Amendment; Waiver . . . . . . . . . . . . . . . . . . . . . . .70
9.11. Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . .71
9.12. Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . .71
9.13. Section Headings; Table of Contents . . . . . . . . . . . . . .71
9.14. Severability. . . . . . . . . . . . . . . . . . . . . . . . . .71
9.15. No Strict Construction. . . . . . . . . . . . . . . . . . . . .71
9.16. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . .71
9.17. Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . .71

<PAGE>

SCHEDULES

Schedule 1.1(b) - Owned Real Property
Schedule 1.1(c) - Leased Real Property
Schedule 1.1(d) - Equipment Leases
Schedule 1.1(l) - Corporate Technology Business Unit Property
Schedule 1.2(e) - Excluded Contracts
Schedule 1.2(l) - Excluded Assets
Schedule 2.3(c) - Closing Statement Exceptions
Schedule 3.1(c) - Governmental Approvals or Notice Required; Conflicts
with Instruments
Schedule 3.1(d) - Financial Statements
Schedule 3.1(e) - Owned and Leased Real Property
Schedule 3.1(f) - Liens and Encumbrances
Schedule 3.1(g) - Material Contracts
Schedule 3.1(h) - Defects
Schedule 3.1(i) - Legal Proceedings
Schedule 3.1(j) - Labor Controversies
Schedule 3.1(k) - Trade Rights
Schedule 3.1(l) - Government Licenses, Permits and Related Approvals
Schedule 3.1(m) - Conduct of Business in Compliance with Regulatory
Requirements
Schedule 3.1(n) - Employee Benefit Plans and Arrangements
Schedule 3.1(o) - Environmental Matters
Schedule 3.1(q) - Tax Matters
Schedule 3.1(r) - Absence of Changes or Events
Schedule 3.1(s) - Affiliates
Schedule 3.1(t) - Absence of Undisclosed Liabilities
Schedule 3.1(u) - Product Warranties
Schedule 3.1(v) - Product Liability
Schedule 3.2(c) - Governmental Approvals or Notice Required; Conflicts
with Instruments
Schedule 3.2(h) - Financial Information
Schedule 8.3 - Management and Key Employees
Schedule 8.9 - Patents to be Licensed
Schedule 9.12 - Knowledge of the Sellers

EXHIBITS

Exhibit 1.5(h) - Certain Liabilities
Exhibit 4.2 - Exceptions Concerning Conduct of the Business
Exhibit 8.7 - Transition Services Agreement
Exhibit 8.9 - License Agreement

iii

<PAGE>

ASSET PURCHASE AGREEMENT

ASSET PURCHASE AGREEMENT, dated as of January 27, 1997, among A. O.
SMITH CORPORATION, a Delaware corporation (the "COMPANY"), A. O. SMITH
ENTERPRISES LTD., a corporation organized under the laws of Canada
("ENTERPRISES") (the Company and Enterprises are hereinafter collectively
referred to as the "SELLERS"), TOWER AUTOMOTIVE, INC., a Delaware corporation
("TOWER"), and R. J. TOWER CORPORATION, a Michigan corporation ("RJT") (Tower
and RJT are hereinafter collectively referred to as "PARENTS"), and TOWER
AUTOMOTIVE ACQUISITION, INC., a Delaware corporation and wholly-owned subsidiary
of Parents ("BUYER").

W I T N E S S E T H :

WHEREAS, the Sellers desire to sell, transfer and assign to Buyer, and
Buyer desires to purchase and assume from the Sellers, substantially all of the
assets and liabilities associated with the Automotive Products Company division
of the Sellers (the "DIVISION") all upon and subject to the terms and conditions
contained herein.

WHEREAS, the Division is engaged in the business of designing,
engineering, manufacturing and marketing of structural and suspension
components, structural and suspension assemblies and structural and suspension
modules for light vehicles, medium trucks and heavy trucks (the "BUSINESS").
Such term shall include, except as otherwise specifically provided herein, all
operations carried on by or related to products associated by trade name or
otherwise with the Division on the date hereof. Where the context allows, the
term "BUSINESS" shall also mean the Sellers insofar as the operation of the
Business, as above defined, is concerned.

NOW, THEREFORE, in consideration of the premises and of the mutual
covenants of the parties hereto, it is hereby agreed as follows:

1. PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES

1.1. TRANSFER OF ASSETS. On the basis of the representations,
warranties, covenants and agreements and subject to the satisfaction or waiver
of the conditions set forth in this Agreement, on the Closing Date (as defined
in SECTION 2.1) and subject to the provisions of SECTION 1.2, the Sellers shall
sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase
and acquire from the Sellers, all of the Sellers' right, title and interest in
the assets, rights, properties, claims, contracts, business and goodwill of the
Sellers at the Closing Date that are utilized primarily in the Business, of
every kind, nature, character and description, tangible and intangible, real,
personal or mixed, wherever located, including without limitation the following
(hereinafter referred to collectively as the "ASSETS"):

(a) Any Trade Rights utilized primarily in the Business. As
used herein, the term "TRADE RIGHTS" shall mean and include: (i) all
trademarks, business identifiers, trade dress, service marks, trade
names and brand names; (ii) all copyrights, chip registrations and
chip registration applications and all other

<PAGE>

rights associated therewith and the underlying works of authorship; (iii)
all patents and patent applications, patent disclosures, any reissuances,
reexaminations, divisions, continuations in part or continuations thereof
and any other proprietary rights associated therewith; (iv) all contracts
or agreements granting any right, title, license or privilege under the
intellectual property rights of any third party; (v) all production
records, quality control records, finished product specifications,
ingredient specifications, packaging supply specifications, technical
information, marketing plans, sales records and histories, market research
data, customer lists, vendor lists, catalogs, promotional, advertising and
marketing materials, label and shipping carton dies, mechanical art, films,
photographs, artwork, research, inventions, know-how, processes,
discoveries, improvements, designs, trade secrets, shop and royalty rights,
employee or third party covenants and agreements respecting intellectual
property, confidentiality or non-competition, and all other types of
intellectual property; and (vi) all registrations of any of the foregoing,
all applications and renewals therefor, all goodwill associated with any of
the foregoing, all international rights associated with the foregoing, and
all claims for infringement, misappropriation or breach thereof;

(b) All of the owned real properties of the Sellers associated
primarily with the Business, which are identified on SCHEDULE 1.1(B),
including the buildings and other improvements situated thereon
(collectively, the "OWNED REAL PROPERTY"), and all easements,
privileges, rights-of-way, riparian and other water rights and
appurtenances pertaining to or accruing to the benefit of such
property, in each case subject to the matters discussed in
SECTION 3.1(F);

(c) Rights under all of the leases with respect to real property
leased by the Sellers for use primarily in the Business, which are
identified on SCHEDULE 1.1(C) (the "LEASED REAL PROPERTY" and,
together with the Owned Real Property, the "FACILITIES");

(d) All equipment, furniture, furnishings, fixtures, leasehold
improvements, machinery, vehicles, tools, tooling, molds, dies, spare
parts, supplies and other tangible personal property utilized
primarily in the Business (the "EQUIPMENT"), including without
limitation rights under all leases of tangible personal property
leased by the Sellers pursuant to leases identified on SCHEDULE 1.1(D)
(collectively, the "EQUIPMENT LEASES"), and all warranties and
guarantees, if any, express or implied, existing for the benefit of
the Sellers in connection with the Equipment to the extent
transferable;

(e) The Division's inventory of finished products (the "FINISHED
GOODS"), raw materials and work in process for Division products
(including all such in transit), together with the spare parts,
supplies and promotional and packaging materials that are utilized
primarily in connection with the Business (the "MATERIALS" and,
together with the Finished Goods, the "INVENTORY");

-2-

<PAGE>

(f) All management information systems and software related
primarily to the operations of the Facilities, the ownership of the
Assets or the Business except to the extent such systems, software,
data or documentation are licensed from a third party and not
transferable and thus subject to SECTION 1.6.;

(g) Rights under all contracts, arrangements, agreements,
purchase or sale commitments for materials and other services,
advertising and promotional agreements, leases and other agreements
("CONTRACTS") primarily related to the Business, whether or not
entered into in the ordinary course of the Business, including, but
not limited to, any Contracts with suppliers, customers, sales
representatives, distributors, agents, Equipment lessors, licensors,
licensees, consignors and consignees specified therein, including
without limitation those Contracts set forth on SCHEDULE 3.1(G) and
the Equipment Leases, but excluding those Contracts listed on
SCHEDULE 1.2(E) (the Contracts described in this SECTION 1.1(G),
"ASSUMED CONTRACTS");

(h) All licenses, permits or franchises issued by any foreign,
federal, state or municipal authority relating primarily to the
development, use, maintenance or occupation of the Facilities or the
Business ("DIVISION PERMITS") to the extent that such Division Permits
are transferable;

(i) Accounts receivable of the Sellers (whether or not billed)
to the extent attributable to Division products sold and delivered to
a customer or to a bona fide third-party transportation company for
delivery to a customer prior to the Effective Time (as defined in
SECTION 2.1), excluding all intercompany receivables (the
"RECEIVABLES");

(j) All rights to goods and services and all other economic
benefits arising out of prepayments, payments in advance and deposits
by the Sellers to the extent related primarily to the Facilities or
the Business;

(k) The equity securities or other equity interest owned by the
Company in the following (collectively, "DIVISION AFFILIATES"): A. O.
Smith do Brasil Industria E Comercio Ltda., a Brazilian limited
liability company ("BRAZIL SUB"); and Changchun A. O. Smith Golden
Ring Automotive Products Co., Ltd., a corporation formed under the
laws of China ("CHINA JV"). It is expressly understood and agreed (i)
that none of the terms "Division," "Assets" or "Business" as used in
this Agreement includes the business, assets, liabilities or
obligations of the Division Affiliates or of Metalsa, S.A. de C.V., a
corporation organized under the terms of Mexico ("METALSA"); (ii) that
the terms and conditions of this Agreement shall apply to the Division
Affiliates only to the extent that the equity securities of the
Division Affiliates owned by the Company are Assets to be transferred
to Buyer at Closing or as otherwise specifically set forth herein and
(iii)

-3-

<PAGE>

except as set forth in SECTION 4.7, that the terms and conditions of this
Agreement shall not apply to Metalsa;

(l) the tangible personal property associated with the Corporate
Technology business unit of the Company and identified on
SCHEDULE 1.1(1);

(m) the following, to the extent related primarily to the
Business: all lists, records and other information pertaining to
accounts, personnel and referral sources, all lists and records
pertaining to suppliers and customers, and all books and records of
every kind, whether evidenced in writing, electronically (including,
without limitation, by computer) or otherwise; and

(n) All claims for collection, indemnity rights, and other
claims and causes of action arising out of occurrences before or after
the Closing, privileges and other intangible rights and assets in each
case relating primarily to the other Assets described in this
SECTION 1.1 or to the Assumed Liabilities (as defined in SECTION 1.5).

1.2. EXCLUDED ASSETS. It is expressly understood and agreed that the
Assets shall not include the following (together, the "EXCLUDED ASSETS"):

(a) Any equity interest in the Sellers;

(b) Any of the Division assets that are consumed, sold or
disposed of in the ordinary course of the Business or otherwise in
accordance with SECTION 4.2 prior to the Closing Date;

(c) Any refunds or credits with respect to any Income Taxes (as
defined in SECTION 1.5(A)) paid or incurred by the Sellers (plus any
related interest received or due from the relevant taxing authority),
any prepaid Income Taxes of the Sellers and any other rights related
to Income Taxes of the Sellers;

(d) Any assets of the Sellers not utilized primarily in the
Business and all rights of the Sellers under this Agreement or related
to the transaction contemplated by this Agreement;

(e) The Sellers' right, title and interest in and to the
Contracts listed on SCHEDULE 1.2(E);

(f) All intercompany receivables of the Sellers;

(g) Cash and cash equivalents or similar type investments (other
than petty cash balances at the Facilities), deposits in transit,
certificates of deposit,

-4-

<PAGE>

treasury bills and other marketable securities of the Sellers, whether or
not reflected as assets of the Division;

(h) Any rights in or to the use of the name, mark, trade name,
trademark or service mark incorporating "A. O. Smith" or "Smith", and
any corporate symbols or logos related thereto, except to the extent
provided in SECTION 8.5;

(i) Any insurance policies (including executive split-dollar
policies), or rights under such policies, held by the Sellers;

(j) Assets (other than the tangible personal property identified
on SCHEDULE 1.1(1)) used primarily in the Corporate Technology
business unit of the Company, whether or not located at the
Facilities, including but not limited to any Trade Rights developed,
or being developed, but not yet employed in the Division or any of the
Sellers' other business units;

(k) Except as expressly provided in SECTION 6, any rights of the
Sellers with respect to (i) any Benefit Plan or Benefit Arrangement
(as such terms are defined in SECTIONS 3.1(N)(I)(A) and 3.1(N)(I)(B),
respectively) that is a defined benefit or defined contribution
retirement plan or (ii) any assets held under the trust agreement or
other funding arrangement related to any Benefit Plan or Benefit
Arrangement that is a defined benefit or defined contribution
retirement plan;

(l) Any assets identified on SCHEDULE 1.2(L);

(m) The equity securities of Metalsa; and

(n) All prepaid items, claims for collection, indemnity rights
and other claims and causes of action arising out of occurrences
before or after the Closing, privileges and other intangible rights
relating primarily to the other Excluded Assets described in this
SECTION 1.2 or to the liabilities described in SECTION 1.5.

1.3. INSTRUMENTS OF CONVEYANCE AND TRANSFER. On the Closing Date, the
Sellers shall (a) deliver or cause to be delivered to Buyer such deeds, bills of
sale, endorsements, consents, assignments, and other good and sufficient
instruments of conveyance and assignment as shall be effective to vest in Buyer
all right, title and interest of the Sellers in and to the Assets and (b)
transfer to Buyer all the books, records, files and other data (or copies
thereof) relating primarily to the Assets and reasonably necessary for the
continued operation of the Business by Buyer.

1.4. ASSUMED LIABILITIES. As used in this Agreement, the term
"LIABILITY" or "LIABILITIES" shall mean and include any direct or indirect
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, fixed or unfixed,

-5-

<PAGE>

known or unknown, asserted or unasserted, liquidated or unliquidated, secured or
unsecured. Subject to the terms and conditions of this Agreement, on the
Closing Date, Buyer and Parents, jointly and severally, shall assume and agree
to pay, perform and discharge when due, subject to the provisions of
SECTION 1.5, all of the Liabilities of the Sellers to the extent relating to the
Division, the Business or the Assets, whether arising before or after the
Closing Date, to the extent the same are unpaid, undelivered or unperformed on
the Closing Date (the "ASSUMED LIABILITIES"), including but not limited to:

(a) all Liabilities relating to the Assumed Contracts;

(b) except as provided in SECTION 1.5(D), all Liabilities
arising in connection with any Environmental Action (as defined below)
where any such Environmental Action or Liability (i) is related in any
way to the Sellers' or any previous owner's or operator's ownership,
operation or occupancy of the Business or the Facilities and Assets
being transferred to Buyer, and (ii) in whole or in part occurred,
existed, arose out of conditions or circumstances that existed, or was
caused on or before the Closing Date, whether or not known to Buyer or
Parents. As used herein, "ENVIRONMENTAL ACTION" means any pollution,
threat to the environment, or exposure to, or manufacture, processing,
distribution, use, treatment, generation, existence, transport,
handling, holding, removal, abatement, remediation, recycling,
reclamation, management, presence, disposal, emission, discharge,
storage, escape, seepage, leakage or release of, or threatened release
of, any Hazardous Substances (as defined below) in any location. As
used herein, "HAZARDOUS SUBSTANCE" means pollutants, contaminants,
chemicals, compounds or industrial, toxic, hazardous or petroleum or
petroleum-based substances or wastes, waste waters or byproducts,
including without limitation asbestos, polychlorinated biphenyls or
urea formaldehyde, and any other substances subject to regulation
under any Environmental Law (as defined in SECTION 3.1(O)). The
Liabilities assumed pursuant to this SECTION 1.4(B) include, without
limitation, Liabilities arising under any applicable federal or state
Environmental Law, including, without limitation, the Federal
Comprehensive Environmental Response, Compensation and Liability Act,
as amended, 42 U.S.C. Section 9601 ET SEQ. ("CERCLA");

(c) all Liabilities to the extent relating to or arising out of
any employment action or practice in connection with persons
previously employed, employed or seeking to be employed in the
Business, including without limitation Liabilities based upon breach
of employment or labor contract, employment discrimination, wrongful
termination, wage and hour or health and safety requirements, workers
compensation, the Consolidated Omnibus Budget Reconciliation Act, the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
the Worker Adjustment Retraining Notification Act of 1988, as amended
(the "WARN ACT"), the Occupational Safety and Health Act of 1970, as
amended, or the National Labor Relations Act, constructive
termination, wrongful

-6-

<PAGE>

termination, failure to give reasonable notice or pay-in-lieu-of-notice,
severance pay or termination pay (collectively, "LABOR LIABILITIES");

(d) all Liabilities (i) to the extent arising out of the
Business for Taxes (as defined below), including without limitation
the Taxes described as obligations of Buyer pursuant to SECTION 9.2,
but excluding those Taxes described in SECTION 1.5(A), and (ii) for
the expenses described as obligations of Buyer and Parents in
SECTION 9.2. As used herein, "TAXES" shall mean income, profit,
payroll, social security, turnover, withholding, franchise, gross
receipts, sales, use, transfer, registration, recording, value added,
ad valorem, real or personal property, excise, occupation, customs,
import and export or other taxes or governmental fees imposed by the
United States, any foreign country, any state, municipality,
subdivision or agency of the United States or any foreign country or
any other governmental or other authority charged with levying taxes
or fees, and all interest, penalties, deficiencies and assessments due
on account thereof whether disputed or undisputed;

(e) all Liabilities to the extent relating to actions, suits,
proceedings, disputes, claims or investigations arising primarily out
of or related primarily to the Business, the Division or the Assets
(whether or not such Liabilities relate to actions taken prior to the
Closing Date);

(f) all Liabilities to the extent arising on account of Buyer's
conduct of the Business, operation of the Division, use of the Assets
and/or sale of any products manufactured and/or sold by Buyer on or
after the Closing Date;

(g) all Liabilities to the extent arising out of or in any way
relating to or resulting from any product designed, manufactured,
assembled, installed, sold, leased or licensed, or any service
rendered, prior to the Closing Date (including any Liabilities of the
Sellers for claims made for injury to person, damage to property or
other damage, whether made in product liability, tort, breach of
warranty or otherwise, or for returns of Division products sold prior
to the Closing Date); and

(h) all other Liabilities to the extent arising out of or
related to the Business, the Division or the Assets.

Buyer is not assuming, nor shall be deemed to have assumed, any other
Liabilities of the Sellers of any kind or nature whatsoever, except as expressly
provided in this Agreement or any instrument delivered pursuant to
SECTION 5.2(D).

1.5. EXCLUDED LIABILITIES. It is expressly understood and agreed that
Assumed Liabilities shall not include the following:

-7-

<PAGE>

(a) Liabilities of the Sellers for any Taxes based on, or
measured by, income ("INCOME TAXES"), including, without limitation,
any Income Taxes arising from the operation of the Business on or
prior to the Closing Date or from the consummation of the transactions
contemplated hereby;

(b) All intercompany Liabilities and Liabilities arising under
or related to any indebtedness for borrowed money, except for
Liabilities under the industrial revenue bond financing relating to
the Milan, Tennessee Facility;

(c) Liabilities covered by the insurance policies of the Sellers
in effect on or prior to the Closing Date (the "INSURANCE POLICIES"),
but only to the extent either of the Sellers receives proceeds
thereunder; provided that any such Liability will become an Assumed
Liability to the extent any such proceeds are subsequently required to
be remitted back to the insurance carrier;

(d) Liabilities of the Sellers whether or not set forth on
SCHEDULE 3.1(O) and whether or not known to Buyer, Parents or the
Sellers (i) arising from the offsite transportation, treatment,
storage, disposal, or arrangement for disposal of Hazardous Substances
generated or used on or prior to the Closing Date by Sellers or any of
their predecessors or (ii) arising in connection with any
Environmental Action arising from or relating to any property or
facility other than the Facilities (Liabilities of the type described
in CLAUSES (I) and (II) of this SECTION 1.5(D) are collectively
referred to as "OFFSITE LIABILITIES"); provided, however, that any
Liability that involves the migration of a Hazardous Substance from
any of the Facilities shall not be deemed to be an Offsite Liability;

(e) Liabilities resulting from any special incentive or other
bonus agreements or arrangements between the Sellers and any of their
employees relating primarily to the consummation of the transactions
contemplated by this Agreement;

(f) Except as otherwise provided herein, all Liabilities that do
not arise primarily out of or relate primarily to the Business or the
Assets;

(g) (i) Except as expressly provided in SECTION 6, any Liability
of the Sellers for benefits accrued through the Closing Date under any
Benefit Plan or Benefit Arrangement that is a defined benefit or
defined contribution retirement plan and (ii) Liabilities for eligible
claims incurred prior to the Effective Time for health, dental,
prescription drug, life and accidental death and dismemberment
benefits as provided in SECTION 6.1(E) and SECTION 6.2(E);

(h) Liabilities arising out of the matters described on EXHIBIT
1.5(H); and

(i) Liabilities arising under the Contracts listed on
SCHEDULE 1.2(E).

-8-

<PAGE>

1.6. NONASSIGNABLE CONTRACTS AND RIGHTS. Notwithstanding anything to
the contrary in this Agreement, no Contracts, properties, rights or other assets
of the Sellers shall be deemed sold, transferred or assigned to Buyer pursuant
to this Agreement if the attempted sale, transfer or assignment thereof to Buyer
without the consent or approval of another party or governmental entity would be
ineffective or would constitute a breach of Contract or a violation of any law
or regulation or would in any other way materially and adversely affect the
rights of the Sellers (or Buyer as transferee or assignee) and such consent or
approval is not obtained on or prior to the Closing Date. In such case, to the
extent possible, (i) the beneficial interest in or to such Contracts,
properties, rights or other assets (collectively, the "BENEFICIAL RIGHTS") shall
in any event pass as of the Closing Date to Buyer under this Agreement; and (ii)
pending such consent or approval, Buyer shall assume or discharge the
Liabilities of the Sellers under such Beneficial Rights (to the extent such
obligations are Assumed Liabilities) as agent for the Sellers, and the Sellers
shall act as Buyer's agent in the receipt of any benefits, rights or interest
received from the Beneficial Rights. Buyer and the Sellers shall use their
reasonable best efforts (and bear their respective costs of such efforts)
without payment of any material penalty, fee or any other amounts to any third
parties, subject to SECTION 9.2, to obtain and secure any and all consents and
approvals that may be necessary to effect the legal and valid sale, transfer or
assignment of the Contracts, properties, rights or other assets underlying the
Beneficial Rights, including without limitation their formal assignment or
novation, if advisable. Buyer and the Sellers will make or complete such
transfers as soon as reasonably possible and cooperate with each other in any
other reasonable arrangement designed to provide for Buyer the Beneficial Rights
including enforcement at the cost and for the account of Buyer of any and all
rights of the Sellers, or either one of them, against the other party thereto
arising out of the breach or cancellation thereof by such other party or
otherwise, and to provide for the discharge by Buyer and Parents, jointly and
severally, of any Liability under such Contracts, properties, rights or other
assets, to the extent such Liability constitutes an Assumed Liability. With
respect to any Contracts, properties, rights or other assets referred to above
that are not assigned to Buyer because of the failure to obtain a required
consent ("NONTRANSFERRED ASSETS"), Buyer and Parents, jointly and severally,
shall indemnify, defend and hold harmless the Sellers from and against any
Liability that the Sellers may have in connection with such Nontransferred
Assets as a result of the transactions contemplated by this Agreement, except to
the extent of the Sellers' gross negligence or willful malfeasance.

2. CLOSING; PAYMENT OF PURCHASE PRICE AT CLOSING AND CLOSING ADJUSTMENT

2.1. CLOSING DATE. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
SECTION 7.1, and provided that the conditions to the Closing set forth in
SECTION 5.1 and SECTION 5.2 are satisfied or waived, the closing with respect to
the transactions provided for in this Agreement (the "CLOSING") shall take place
at the offices of Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee,
Wisconsin, at 10:00 a.m., Milwaukee time, on the earliest of (a) April 20, 1997;
(b) the fifth business day after the latest of (i) the satisfaction or waiver of
the conditions to the Closing set forth in SECTION 5.1(C) and SECTION 5.2(C),
(ii) the date the Company, in its sole discretion, delivers a notice to Buyer to
commence the time period described in this CLAUSE (b)(II) (the "CLOSING NOTICE")
and (iii) February 21, 1997; or (c) at such other time, date and place as shall
be agreed upon by the Sellers

-9-

<PAGE>

and Buyer. Notwithstanding the foregoing, if the Closing does not take place in
accordance with the preceding sentence because any condition to the obligations
of the Sellers, on the one hand, or Buyer, on the other hand, under this
Agreement is not met on that date, then either party may postpone the Closing
from time to time to any designated subsequent business day not more than five
(5) business days after the original or postponed date on which the Closing was
to occur by delivering notice of such postponement on the date the Closing was
to occur. The actual time and date of the Closing are herein called the
"CLOSING DATE". All acts and transactions occurring under this Agreement at
the Closing shall be effective as of 11:59 p.m., Milwaukee time, on the Closing
Date (the "EFFECTIVE TIME").

2.2. PURCHASE PRICE AND PAYMENT. In consideration for the Assets, and
subject to the terms and conditions of this Agreement, Buyer shall on the
Closing Date (a) assume the Assumed Liabilities as provided in SECTION 1.4 and
(b) transfer cash to the Company in the amount of $625,000,000, subject to the
following adjustments:

(i) INCREASE. An increase equal to the amount, if any, by which
the Net Book Value (as defined in SECTION 2.3(A)) as reflected on the
Estimated Closing Statement (as defined in SECTION 2.3(B)) is greater
than $411,500,000; and

(ii) DECREASE. A reduction equal to the amount, if any, by which
the Net Book Value as reflected on the Estimated Closing Statement is
less than $411,500,000

(the amounts paid by Buyer pursuant to SECTIONS 2.2(A) AND (B) are hereinafter
collectively referred to as the "INITIAL PURCHASE PRICE"). The amount of the
Initial Purchase Price payable pursuant to SECTION 2.2(B) shall be paid on the
Closing Date by wire transfer of immediately available funds to an account the
Company has designated, at least two (2) business days prior to the Closing
Date, in writing to Buyer. The value tendered by Buyer pursuant to this
SECTION 2.2, as adjusted pursuant to the provisions of Section 2.3, shall be
hereinafter referred to as the "PURCHASE PRICE."

2.3. DETERMINATION OF NET BOOK VALUE; POST-CLOSING ADJUSTMENT.

(a) NET BOOK VALUE. The term "NET BOOK VALUE" shall mean the
total book value, as of the Effective Time, of the Assets less the
total book value of the Assumed Liabilities, in each case as reflected
on the Estimated Closing Statement, the Closing Statement or the
Adjusted Closing Statement, as the case may be; provided, that (i) Net
Book Value shall not include the value of any Asset where neither the
Asset nor its Beneficial Rights is actually transferred to Buyer
(including without limitation any Receivable that has been assigned or
purported to be assigned to Norwest Bank Minnesota, National
Association), (ii) in the event the equity interests in any Division
Affiliate are not actually transferred, Net Book Value shall not
include the value of any assets held by such Division Affiliate and
(iii) Net Book Value shall not reflect any Liability that is not an
Assumed Liability or any reserve therefor.

-10-

<PAGE>

(b) ESTIMATED CLOSING STATEMENT. For purposes of determining an
estimate of the Net Book Value to be reflected on the Closing
Statement and the Purchase Price payable by Buyer at the Closing, not
less than five (5) business days prior to the Closing Date, the
Company shall, in consultation with Buyer, prepare and deliver to
Buyer a balance sheet which shall represent the Company's reasonable
estimate of the Closing Statement; such balance sheet to be in
accordance with GAAP, and to the extent in accordance with GAAP, using
accounting principles and policies, consistent with the balance sheet
of the Division as of December 31, 1996, attached hereto as part of
SCHEDULE 3.1(D) (the "PRELIMINARY STATEMENT"), except that such
balance sheet shall reflect only the Assets and the Assumed
Liabilities. In the event Buyer shall object to any of the
information set forth on such balance sheet or accompanying schedules
as presented by the Company, the parties shall negotiate in good faith
and attempt to agree on appropriate adjustments such that such balance
sheet and accompanying schedules reflect a reasonable estimate of the
Closing Statement and of the Net Book Value to be reflected on the
Closing Statement, but in the absence of such agreement, the most
recent month-end balance sheet of the Division shall control (the
estimated balance sheet as agreed to by the parties pursuant to this
subsection, or in the absence of such agreement, the most recent
month-end balance sheet of the Division, is herein referred to as the
"ESTIMATED CLOSING STATEMENT"). In connection with the determination
of the Estimated Closing Statement, the Company shall provide to Buyer
such information and detail and access to such books, records and work
papers as Buyer shall reasonably request.

(c) CLOSING STATEMENT. Within fifteen (15) days following the
Closing, the Company shall prepare, or cause to be prepared, and
deliver to Buyer an unaudited statement (the "CLOSING STATEMENT")
which shall set forth the Net Book Value as of the Effective Time and,
except as set forth on SCHEDULE 2.3(c), shall be prepared (i) in
accordance with generally accepted accounting principles in the United
States ("GAAP"), as in effect on the date of such preparation, (ii) in
a manner involving application of GAAP and otherwise consistent with
the preparation of the Preliminary Statement as to accounting methods,
policies, practices and procedures, with consistent classifications,
judgments and estimation methodologies to the extent such methods,
policies, practices and procedures are in accordance with GAAP, and
(iii) based only on the information relating to the content of the
Closing Statement that is known to Buyer or the Company on the date 30
days after the Closing Date. The parties agree that the adjustment
contemplated by this SECTION 2.3(c) is solely intended to show changes
in the Assets and the Assumed Liabilities reflected in the Preliminary
Statement to the Effective Time and that any such change can only be
measured if the Closing Statement is prepared using the same
principles, methods, policies, practices and procedures (subject to
the immediately preceding sentence) as were used in connection with
the preparation of the Preliminary Statement provided that such
principles, methods, policies, practices and procedures are in
accordance with

-11-

<PAGE>

GAAP. In preparing the Closing Statement, the respective amounts included
therein for reserves (in the form of an accrued Liability or an offset to
an Asset or similar item) relating to any of the Assets or the Assumed
Liabilities, the amount of which was determined for the Preliminary
Statement by subjective estimates, shall be equal to the respective amounts
(including the absence of a reserve or zero) included in respect of such
items on the Preliminary Statement except to reflect (A) changes in
circumstances or events (including changes to reserves to reflect costs
incurred or payments made by or on behalf of the Sellers) occurring between
the date of the Preliminary Statement and the Closing Date to the knowledge
of Buyer and the Sellers on the date 30 days after the Closing Date or (B)
changes occurring between the date of the Preliminary Statement and the
date 30 days after the Closing Date in information known to Buyer and the
Sellers on the Closing Date concerning circumstances or events occurring
prior to the date of the Preliminary Statement (in which event the first
sentence of this SECTION 2.3(C) shall govern the determination of any
changes in the reserve).

(d) DISPUTES REGARDING CLOSING STATEMENT. Buyer shall, within
thirty (30) days after the delivery by the Company of the Closing
Statement, complete its review of the Net Book Value derived from the
Closing Statement. If Buyer determines that the Closing Statement has
not been prepared in accordance with SECTION 2.3(C), then Buyer shall
inform the Company on or before the last day of such 30-day period by
delivering a notice to the Company ("BUYER'S OBJECTION") (i) setting
forth a specific description of the basis of Buyer's Objection and the
adjustments to Net Book Value that Buyer believes should be made and
(ii) only including objections based on mathematical errors or based
on the Closing Statement not being prepared in accordance with
SECTION 2.3(C). The Company shall then have thirty (30) days to
review and respond to Buyer's Objection. The Sellers and Buyer shall
seek in good faith to resolve in writing any differences which they
may have with respect to any matter specified in Buyer's Objection and
the Sellers shall have full access to the working papers of Buyer
prepared in connection with Buyer's preparation of Buyer's Objection.
If the Company and Buyer are unable to resolve all of their
disagreements with respect to the determination of the foregoing items
within twenty (20) days following the completion of the Company's
review of Buyer's Objection, then the Company and Buyer shall refer
their remaining differences to Price Waterhouse, LLP or another
internationally recognized firm of independent public accountants as
to which the Company and Buyer mutually agree (the "CPA FIRM"), who
shall, acting as experts and not as arbitrators, determine on the
basis of the standards set forth in SECTION 2.3(C), and only with
respect to the remaining accounting-related differences so submitted
by Buyer to the Company (and not by independent review), whether and
to what extent, if any, Net Book Value as derived from the Closing
Statement requires adjustment. In connection with the engagement of
the CPA Firm, each of the parties shall execute reasonable engagement
letters with the CPA Firm. The Company and Buyer shall direct the CPA
Firm to use its

-12-

<PAGE>

reasonable best efforts to render its determination within forty-five (45)
days. The CPA Firm's determination shall be conclusive and binding upon
Buyer and the Sellers. The fees and disbursements of the CPA Firm shall be
shared equally by Buyer and the Company. Buyer and the Sellers shall make
readily available to the CPA Firm all relevant books and records and any
work papers (including those of the parties' respective accountants)
relating to the Preliminary Statement and the Closing Statement and all
other items reasonably requested by the CPA Firm. The "ADJUSTED CLOSING
STATEMENT" shall be (i) the Closing Statement in the event that (x) no
Buyer's Objection is delivered to the Company during the 30-day period
specified above, or (y) the Company and Buyer so agree, (ii) the Closing
Statement, adjusted in accordance with Buyer's Objection in the event that
the Company does not respond to Buyer's Objection within the 30-day period
following receipt by the Company of Buyer's Objection, or (iii) the Closing
Statement, as adjusted by either (x) the agreement of the Company and Buyer
or (y) the CPA Firm.

(e) COOPERATION. Buyer and the Company agree that, following
the Closing, neither will take any actions with respect to the
accounting books, records, policies and procedures of the Division
that would obstruct or prevent the preparation of the Closing
Statement. Buyer shall cooperate with the Company in the preparation
of the Closing Statement including, but not limited to, (i) providing
the Company and the Company's representatives with full access during
normal business hours to the books, records (including work papers,
schedules, memoranda and other documents), facilities and employees of
the Business, (ii) causing employees of the Business to provide the
Company as promptly as practicable following the Closing Date (but in
no event later than ten (10) days after the Closing Date) with normal
year-end closing financial information for the Division for the period
ending as of the close of business on the day immediately prior to the
Closing Date, and (iii) cooperating fully with the Company and the
Company's representatives, including the provision on a timely basis
of all other information necessary or useful in connection with the
preparation of the Closing Statement. Buyer and its accountants shall
have full access to all information used by the Company in preparing
the Closing Statement, including the work papers of its accountants.

(f) ADJUSTMENT PAYMENT TO BUYER. In the event the Net Book
Value as derived from the Adjusted Closing Statement is less than the
Net Book Value as reflected on the Estimated Closing Statement, the
Company shall make an adjustment payment to Buyer in an amount equal
to the difference between (i) the Net Book Value as reflected on the
Estimated Closing Statement and (ii) the Net Book Value as derived
from the Adjusted Closing Statement. Any payment required by the
first sentence of this SECTION 2.3(F) shall be made by the Company to
Buyer, together with interest thereon at an annual rate of eight and
one-half percent (8.5%) (the "APPLICABLE RATE") calculated on the
basis of the number of

-13-

<PAGE>

days elapsed from and including the Closing Date to and excluding the date
of payment, in immediately available funds within five (5) business days
after the determination of the Adjusted Closing Statement.

(g) ADJUSTMENT PAYMENT TO THE COMPANY. In the event the Net
Book Value as derived from the Adjusted Closing Statement is greater
than the Net Book Value as reflected on the Estimated Closing
Statement, Buyer shall make an adjustment payment to the Company in an
amount equal to the difference between (i) the Net Book Value as
reflected on the Estimated Closing Statement and (ii) the Net Book
Value as derived from the Adjusted Closing Statement. Any payment
required by the first sentence of this SECTION 2.3(G) shall be made by
Buyer to the Company, together with interest thereon at the Applicable
Rate calculated on the basis or the number of days elapsed from and
including the Closing Date to and excluding the date of payment, in
immediately available funds within five (5) business days after the
determination of the Adjusted Closing Statement.

2.4. ALLOCATION OF PURCHASE PRICE. The aggregate Purchase Price shall
be allocated among the Assets for tax purposes on the basis of the relative fair
market values of such properties as of the Closing Date. The amount of the
aggregate Purchase Price allocated to the equity interests of the Company in
China JV shall be $25,000,000. All other values, and the value of the aggregate
Purchase Price, shall be reasonably determined by Buyer and delivered to the
Company within one hundred eighty (180) days following Closing Date and shall be
subject to the Company's consent, which consent shall not be unreasonably
withheld. The Company and Buyer will follow and use such allocation in all tax
returns, filings or other related reports made by them to any governmental
agencies. To the extent that disclosures of this allocation are required to be
made by the parties to the Internal Revenue Service ("IRS") under the provisions
of Section 1060 of the Internal Revenue Code of 1986, as amended (the "CODE"),
or any regulations thereunder, Buyer and the Company will disclose such reports
to the other prior to filing with the IRS.

3. REPRESENTATIONS AND WARRANTIES

3.1. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. To allocate risk
between the Sellers, on the one hand, and Buyer, on the other hand, for purposes
of and subject to SECTION 9.3, the Sellers, jointly and severally, represent and
warrant to Buyer as follows:

(a) DUE ORGANIZATION AND POWER. The Sellers are each duly
organized, validly existing and in good standing under the laws of the
jurisdiction of their respective incorporation and have the requisite
power and authority to own, lease and operate their properties to be
sold hereunder and to conduct the Business as now conducted by them.
The Sellers have all requisite power and authority to enter into and
deliver this Agreement and any other agreement contemplated hereby and
to perform their obligations hereunder and thereunder, including the
power and authority to convey good title to Buyer with respect to the
Assets owned

-14-

<PAGE>

by the Sellers. The Sellers are duly authorized, qualified or licensed to
do business as foreign corporations in each of the jurisdictions in which
their right, title or interest in or to any of the Assets, or the conduct
of the Business, requires such authorization, qualification or licensing.
Each of the Division Affiliates is validly existing under the laws of the
jurisdiction of their respective incorporation.

(b) AUTHORIZATION AND VALIDITY OF AGREEMENT. The execution,
delivery and performance by each of the Sellers of this Agreement and
any other agreements contemplated hereby and the consummation by each
of them of the transactions contemplated hereby and thereby have been
duly authorized by the respective boards of directors of the Sellers.
No other corporate or stockholder action is necessary for the
authorization, execution, delivery and performance by the Sellers of
this Agreement and any other agreements contemplated hereby and the
consummation by the Sellers of the transactions contemplated hereby or
thereby. This Agreement and the other agreements contemplated hereby
have been, or will be at or prior to Closing, duly executed and
delivered by each of the Sellers, and each constitutes, or will when
so executed and delivered constitute, a valid and legally binding
obligation of each of the Sellers, enforceable against each of them in
accordance with its respective terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors rights generally
or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

(c) NO GOVERNMENTAL APPROVALS OR NOTICES REQUIRED; NO CONFLICT
WITH INSTRUMENTS TO WHICH THE SELLERS ARE A PARTY. Except as
described in SCHEDULE 3.1(C) and except for the requirement that the
applicable waiting periods expire pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), the
execution, delivery and performance of this Agreement and any other
agreements contemplated hereby by the Sellers, or either one of them,
and the consummation by each of them of the transactions contemplated
hereby and thereby (i) will not violate (with or without the giving of
notice or the lapse of time or both), or require any authorization,
consent, approval, filing or notice under, any provision of any law,
rule or regulation, court order, judgment or decree applicable to the
Sellers or Brazil Sub, or any one of them, or applicable to any of the
Assets and (ii) will not conflict with, or result in the breach or
termination of any provision of, or constitute a default under, or
result in the acceleration of the performance of the obligations of
the Sellers or Brazil Sub, or any one of them, under, or result in the
creation of the right to accelerate, terminate, modify or cancel, or
result in the creation of a lien, charge or encumbrance upon a portion
of the Assets pursuant to, or require any notice under, the charter or
by-laws of the Sellers or Brazil Sub, or any one of them, or the
express terms of any Contract required to be disclosed on SCHEDULE
3.1(g) to which the Sellers or Brazil Sub, or any one of them, is a
party or by which the

-15-

<PAGE>

Sellers or Brazil Sub, or any one of them, or any of the Assets is bound or
affected. The parties hereto agree that no event, occurrence or
circumstance that would constitute a breach of a representation or warranty
contained in SECTION 3.2(c) will be a basis for a breach of a
representation or warranty contained in this SECTION 3.1(c).

(d) FINANCIAL STATEMENTS. SCHEDULE 3.1(D) contains certain
historical balance sheets of the Division as of December 31, 1996,
1995 and 1994 and statements of operations for the Division for the
fiscal years ended December 31, 1996, 1995 and 1994 (collectively, the
"FINANCIAL STATEMENTS"). The Financial Statements were prepared in
accordance with GAAP, as in effect on the date of such Financial
Statements and applied on a consistent basis during the periods
involved (except as may be indicated in the notes or comments to such
Financial Statements), and such Financial Statements and notes or
comments fairly present, in all material respects, the financial
position and results of operations of the Division as of their
respective dates and for the respective periods covered thereby.

(e) OWNED AND LEASED REAL PROPERTY

(i) SCHEDULE 1.1(B) contains a complete and correct list of
the real property owned by either Seller that is used primarily
by the Division;

(ii) SCHEDULE 1.1(C) contains a complete and correct list of
the real property leased or subleased by either Seller that is
used primarily by the Division;

(iii) except as set forth on SCHEDULE 3.1(e), there is
no other real property used by the Division or Brazil Sub other
than as set forth on SCHEDULE 1.1(b) and SCHEDULE 1.1(c), and to
the knowledge of the Sellers, there is no other real property
used by China JV except as set forth on SCHEDULE 3.1(e);

(iv) the current use of the Facilities does not violate any
covenant, condition, restriction or instrument of record
affecting such Owned Real Property or, to the knowledge of the
Sellers, Leased Real Property;

(v) except as set forth on SCHEDULE 3.1(e) and except for
Permitted Encumbrances (as defined in SECTION 3.1(f)), there are
no leases, subleases, licenses, concessions, or other agreements,
written or oral, granting to any party or parties the right of
use or occupancy of any portion of the Owned Real Properties or
Leased Real Properties and there are no parties (other than
Sellers) in possession of the Owned Real Properties or Leased
Real Properties; and

-16-

<PAGE>

(vi) with respect to each lease relating to Leased Real
Property listed on SCHEDULE 1.1(c), the Sellers have not
assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the lease.

(f) TITLE TO PROPERTIES AND ABSENCE OF LIENS AND ENCUMBRANCES.

(i) Except as set forth on SCHEDULE 3.1(f), the Sellers own all
of the Assets (real, personal and mixed, tangible and intangible),
free and clear of all claims, covenants, conditions, restrictions,
liens, security interests, charges, mortgages, pledges, easements,
leases, options, rights of first refusal or offer, encumbrances,
licenses or sublicenses, conditional sales or other title retention
agreements (an "ENCUMBRANCE") other than Permitted Encumbrances (as
defined below). Upon payment for the Assets as contemplated herein,
the Sellers will convey to Buyer all of the Sellers' right, title and
interest in and to the Assets free and clear of all exceptions to
title or Encumbrances, except in each case (A) as specifically set
forth in SCHEDULE 3.1(f), (B) liens for current taxes and assessments
not yet due and payable or being contested in good faith by
appropriate proceedings and for which appropriate GAAP reserves have
been made, (C) as reflected in the public records relating to real
property included in the Assets (other than judgement or other liens
securing financial obligations of the Sellers except those described
in CLAUSE (B) or (D)) which do not materially impair the current use
of the property subject thereto and (D) for contractors, materialmen
and mechanics statutory liens incurred in the ordinary course of
business for which amounts are not delinquent and in the aggregate do
not materially impair the Business (such exceptions, collectively, the
"PERMITTED ENCUMBRANCES").

(ii) The Assets, together with the rights received under the
Transition Services Agreement referred to in SECTION 8.7 comprise all
of the assets and rights of the Sellers, tangible and intangible
(including Trade Rights), that the Sellers use in the conduct of the
Business as presently conducted, except for the assets described on
SCHEDULE 3.1(f).

(iii) The Company obtained a building permit for and
initiated construction of the Facility of the Business located in
Botetourt County, Virginia (the "ROANOKE FACILITY") prior to
August 1, 1996. Taking into account the Company's investments
prior to the date of this Agreement and investments the Division
will make pursuant to Contracts disclosed on SCHEDULE 3.1(G) or
not required to be disclosed on SCHEDULE 3.1(G), the Division
will have constructed the Roanoke Facility with a total
investment in excess of $24,000,000. In December 1996, the
Company employed 56 employees at the Roanoke Facility.

-17-

<PAGE>

(g) MATERIAL CONTRACTS. SCHEDULE 3.1(g) sets forth a list as of
the date of this Agreement of each of the following types of written
Contracts to which either or both of the Sellers (or, in the case of
CLAUSE (XI), Brazil Sub) are a party that relate primarily to the
Business or to which the Assets are bound:

(i) any employment Contract with any officer or director of
the Sellers that has future liability in excess of $200,000 per
annum and is not terminable by notice of not more than sixty (60)
calendar days;

(ii) any collective bargaining agreement applicable to
employees of the Business (the "COLLECTIVE BARGAINING
AGREEMENT(S)");

(iii) any covenant not to compete that restricts the
Sellers;

(iv) any Contract to lease real or personal property which
has future liability in excess of $150,000 per annum and is not
terminable by notice of not more than sixty (60) calendar days;

(v) any Contract for loaning any money or directly or
indirectly guaranteeing Liabilities of others (other than
endorsements for the purpose of collection, loans made to
employees for relocation, travel or other employment-related
purposes, or purchases of equipment or materials made under
conditional sales contracts, in each case in the ordinary course
of the Business), in each case having an outstanding principal
amount in excess of $250,000;

(vi) any Contract under which any other person has directly
or indirectly guaranteed Liabilities of either or both of the
Sellers (other than endorsements for the purpose of collection in
the ordinary course of the Business), in each case having an
outstanding principal amount or aggregate future liability in
excess of $250,000;

(vii) any Contract under which the Sellers or either one
of them licenses to or from any third party any Trade Rights
which requires payments per annum of more than $250,000;

(viii) any agreement or indenture relating to the
borrowing of money or the mortgaging, pledging or otherwise
placing a lien on any of the Assets;

(ix) product distribution or sales representative Contracts;

(x) any other Contract, in each case of a type not
described in any of CLAUSES (I) through (IX) above (without
reference to disclosure

-18-

<PAGE>

thresholds set forth therein), to which either or both of the Sellers
are a party or by or to which any of their assets are bound or subject
which has future liability in excess of $1,000,000 per annum and is
not terminable by the Sellers by notice of not more than sixty (60)
calendar days (other than purchase orders of either of the Sellers for
the purchase of Materials or other Inventory in the ordinary course of
the Business consistent with past practice);

(xi) any material Contract to which Brazil Sub is a party;
or

(xii) any Contract that is terminable by the Sellers
only by notice of more than sixty (60) calendar days and that
expressly provides for the payment of a penalty or premium in
excess of $250,000 upon such termination (other than purchase
orders of either of the Sellers for the purchase of Materials or
other Inventory in the ordinary course of the Business consistent
with past practice).

The Sellers have delivered to, or made available for inspection
by, Buyer a copy of each Contract listed on SCHEDULE 3.1(G) as amended
to date. Except as disclosed on SCHEDULE 3.1(G) or the other
Schedules hereto, each Contract described on SCHEDULE 3.1(G)
(collectively, the "MATERIAL CONTRACTS") is valid, binding and in full
force and effect and is enforceable by the Company, Enterprises or
Brazil Sub, as the case may be, in accordance with its terms, and the
Sellers have no knowledge of any cancellation, breach or anticipated
breach of any Material Contract. Except as disclosed in
SCHEDULE 3.1(G) or the other Schedules hereto, the Company,
Enterprises or Brazil Sub, as the case may be, has performed all
obligations required to be performed by it to date under the Material
Contracts and is not (with or without the lapse of time or the giving
of notice, or both) in breach or default in any manner.

(h) DEFECTS. Except as described on SCHEDULE 3.1(H), to the
knowledge of the Sellers, the Facilities and Equipment currently in
use in connection with the Business, taken as a whole, are in normal
operating condition and repair, subject to normal wear and tear.
Except with respect to the representations and warranties contained in
this Agreement, Buyer is acquiring the Assets AS IS, WHERE IS. THE
SELLERS MAKE NO OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
WITH RESPECT TO THE DESIGN, CONDITION, CAPACITY, VALUE, UTILITY,
PERFORMANCE OR QUALITY OF THE ASSETS (INCLUDING INVENTORY) AND THE
SELLERS MAKE NO IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT THERETO.

(i) LEGAL PROCEEDINGS. Except as described in SCHEDULE 3.1(I),
as of the date of this Agreement, there is no pending, or to the
knowledge of the Sellers,

-19-

<PAGE>

threatened (in a reasonably serious manner or in writing), litigation,
proceeding, action, suit or investigation relating to the Division to which
the Sellers, or either one of them, is a party relating primarily to the
Assets or the Business or the transactions contemplated by this Agreement.

(j) LABOR CONTROVERSIES. Except as set forth on
SCHEDULE 3.1(j), as of the date of this Agreement, there are no
pending or, to the knowledge of Sellers, threatened (in a reasonably
serious manner or in writing) grievances, labor arbitrations or other
labor disputes relating to Division Employees (as defined in
SECTION 3.1(n)(i)(1)). Except as set forth on SCHEDULE 3.1(j), as of
the date of this Agreement, the Sellers have not suffered any strike,
picketing or work stoppage by any group of Division Employees
affecting the Business during the three (3) years preceding the date
of this Agreement. Except as set forth on SCHEDULE 3.1(j), there are
no union organizing campaigns, or other questions concerning
representation, relating to Division Employees, and there are no
unfair labor practice charges pending or, to the knowledge of Sellers,
threatened (in a reasonably serious manner or in writing) which could
result in the imposition of new bargaining relationships with any
employee representative. To the Sellers' knowledge, no key executive
Division Employee who is a member of the Division's leadership team
(other than those identified on SCHEDULE 3.1(j)) and no group of
employees acting as a group has plans to terminate his, her or its
employment with the Division.

(k) TRADE RIGHTS. SCHEDULE 3.1(k) lists all patented,
registered and applied for, and material unregistered, Trade Rights of
the Business of the type described in CLAUSES (i), (ii) and (iii) of
SECTION 1.1(a) (including any registrations thereof or applications
therefor) and indicates whether such Trade Rights are owned or
licensed by the Sellers. To the knowledge of the Sellers, the Sellers
have not interfered with, infringed upon, misappropriated, or violated
any Trade Rights of any third party in the operation of the Business.
Except as set forth on SCHEDULE 3.1(k), the Sellers, or either one of
them, in connection with the Business, have not received within the
past three years any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation or
violation, or asserting the invalidity, unenforceability or misuse of
any of the Sellers' Trade Rights, and no such charge, complaint,
claim, demand or notice is currently outstanding or is threatened (in
a reasonably serious manner or in writing), nor to the knowledge of
the Sellers has any third party interfered with, infringed upon,
misappropriated, or violated any material Trade Rights of the Sellers
with respect to the Business.

(l) GOVERNMENT LICENSES, PERMITS AND RELATED APPROVALS.
SCHEDULE 3.1(L) sets forth a complete list of all of the Sellers'
material licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities relating
primarily to the Business. Except as described

-20-

<PAGE>

on SCHEDULE 3.1(l), each of the Sellers has all licenses, permits,
consents, approvals, authorizations, qualifications and orders of
governmental authorities required for the conduct of the Business as
presently conducted by it.

(m) CONDUCT OF BUSINESS IN COMPLIANCE WITH REGULATORY
REQUIREMENTS. Except as described on SCHEDULE 3.1(m), the Sellers
have conducted the Business and operated the Facilities so as to
comply with all applicable laws, ordinances and regulations,
including, without limitation, all applicable laws, ordinances and
regulations pertaining to human health or safety.

(n) EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS.

(i) SCHEDULE 3.1(n) hereto identifies:

(A) Each "EMPLOYEE BENEFIT PLAN", as such term is
defined in Section 3(3) of ERISA, that is covered by ERISA
and that is maintained or otherwise contributed to by the
Sellers for the benefit of the current or former employees
of either of the Sellers in the Business (such employees,
who include without limitation those persons listed on
SCHEDULE 3.1(n), "DIVISION EMPLOYEES"). The Sellers have
delivered or made available to Buyer copies or descriptions
of such plans (each, a "BENEFIT PLAN" and, collectively, the
"BENEFIT PLANS"), together with the most recent
determination letter issued by the Internal Revenue Service
(where applicable).

(B) Each plan or arrangement not subject to ERISA
maintained or otherwise contributed to by the Sellers for
the benefit of Division Employees and providing for deferred
compensation (including foreign deferred compensation
arrangements), bonuses, severance, stock options, employee
insurance coverage or any similar compensation or welfare
benefit arrangement (a "BENEFIT ARRANGEMENT" and
collectively, the "BENEFIT ARRANGEMENTS"), copies or
descriptions of which have been delivered or made available
to Buyer or shall be furnished upon request.

(ii) Subject to the exceptions set forth on SCHEDULE 3.1(n),
each Benefit Plan and Benefit Arrangement has been maintained and
administered at all times in compliance with its terms and all
applicable laws, rules and regulations, including but not limited
to ERISA and the Code, applicable to such Benefit Plan or Benefit
Arrangement.

(iii) No "reportable event" (as such term is used in
Section 4043 of ERISA), "prohibited transaction" (as such term is
used in Section 406 of ERISA or Section 4975 of the Code) or
"accumulated funding

-21-

<PAGE>

deficiency" (as such term is used in Section 412 of ERISA or
Section 4971 of the Code) has heretofore occurred with respect to any
Benefit Plan.

(iv) The Sellers are not a participating or contributing
employer in any multiemployer benefit plan (as defined in Section
3(37) of ERISA) with respect to the Division Employees nor have
the Sellers incurred any withdrawal liability with respect to any
multiemployer plan.

(v) Each Benefit Plan that is intended to be qualified
under Section 401(a) of the Code is so qualified and has received
from the Internal Revenue Service ("IRS") a favorable
determination letter within the last two years. The Sellers have
not incurred, and have no reason to expect that they will incur,
any Liability to the Pension Benefit Guaranty Corporation
("PBGC") (other than PBGC premium payments) or otherwise under
Title IV of ERISA (including any withdrawal Liability) or under
the Code with respect to any employee pension benefit plan that
the Sellers or any member of their Controlled Group (within the
meaning of Code Section 414(b) and (c)) maintains or ever has
maintained or to which any of them contributes, ever has
contributed, or ever has been required to contribute.

(o) ENVIRONMENTAL MATTERS. Except as set forth on
SCHEDULE 3.1(o):

(i) Each of the Division, the Assets and the Facilities
have complied (except instances of past noncompliance that have
been fully corrected, where all fines and penalties have been
paid and where all related government and third party actions
have been resolved) and comply with all applicable federal, state
or local statutes, regulations, ordinances, codes or decrees
regarding protection of the environment (including, without
limitation, those protecting the quality of the ambient air,
soil, surface water or groundwater or otherwise regulating
Environmental Actions) in effect as of or, to the extent
applicable, at any time prior to the Closing Date (collectively,
the "ENVIRONMENTAL LAWS") and all permits, licenses,
registrations and other authorizations required under applicable
Environmental Laws to own or operate the Facilities and the
Assets as they are currently operated;

(ii) No Hazardous Substances have been produced, sold, used,
stored, transported, handled, released, discharged or disposed of
at or from the Facilities by any person in a manner that violated
any applicable Environmental Law (except instances of past
violations that have been fully corrected, where all fines and
penalties have been paid and where all related government and
third party actions have been resolved), or has given or would
give rise to Liabilities pursuant to any Environmental Law or
common law;

-22-

<PAGE>

(iii) The Sellers have not received written notice from
any person, entity or governmental authority that the Facilities
are in violation or allegedly in violation of, do not comply or
allegedly do not comply with any applicable Environmental Law, or
are subject to liability or alleged liability under any
applicable Environmental Law or common law (except for notices
where the subject matter of such notices has been fully
corrected, where all fines, penalties, damages and remedial costs
have been paid and where all related government and third party
actions have been resolved); and

(iv) The off-site waste disposal sites identified on
SCHEDULE 3.1(o) constitute all of the off-site waste disposal
sites relating primarily to the Business that have been
identified to the Sellers as off-site waste disposal sites
requiring remediation under one or more Environmental Laws.

(p) CERTAIN FEES. Neither the Sellers, the Division Affiliates
nor any of their respective officers, directors or employees, has
employed any broker or finder or incurred any other liability for any
brokerage fees, commissions or finders' fees in connection with the
transactions contemplated hereby, except for those brokers whose fees
will be paid by the Sellers.

(q) TAX MATTERS.

(i) Each Seller has timely filed (taking into account any
extensions granted) all Tax Returns (as defined in CLAUSE (IV) of
this SECTION 3.1(q)) required to be filed by it with respect to
Taxes arising out of the Business, each such Tax Return has been
prepared in compliance with all applicable laws and regulations,
and such Tax Returns are true and accurate in all respects. All
Taxes arising out of the Business that are due and payable by the
Sellers have been paid.

(ii) Except as set forth in SCHEDULE 3.1(q) attached hereto:

(A) no deficiency or proposed adjustment which has not
be settled or otherwise resolved for any amount of Tax arising
out of the Business has been proposed, asserted or assessed by
any taxing authority against either Seller and there is no
action, suit, taxing authority proceeding or audit now in
progress, pending, or to the Sellers' knowledge, threatened
against or with respect to the Sellers;

(B) each Seller has withheld and paid all Taxes
arising out of the Business required to have been withheld and
paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third
party;

-23-

<PAGE>

(C) no claim has ever been made by a taxing authority
in a jurisdiction where the Sellers do not file Tax Returns that
the Sellers are or may be subject to Taxes assessed by such
jurisdiction; and

(D) there are no liens for Taxes (other than for
current Taxes not yet due and payable) upon the Assets.

(iii) each Seller shall furnish to Buyer prior to the
Closing a certification pursuant to Treasury Regulation Section
1.1445-2(b)(2) that such Seller is not a foreign person.

(iv) As used herein, the term "TAX RETURNS" means returns,
declarations, reports, claims for refund, information returns or
other documents (including any related or supporting schedules,
statements or information) filed or required to be filed in
connection with the determination, assessment or collection of
Taxes of any party or the administration of any laws, regulations
or administrative requirements relating to any Taxes.

(r) ABSENCE OF CHANGES OR EVENTS. Except as set forth on
SCHEDULE 3.1(r) or the other Schedules hereto, and except as to
matters relating to Metalsa, since December 31, 1996, neither of the
Sellers has

(i) suffered a change having a Material Adverse Effect (as
defined below) other than (A) changes resulting from developments
or occurrences relating to or affecting United States or foreign
economies in general or the industry of the Division in general
and not specifically relating to the Division ("GENERAL CHANGES")
and (B) changes that are the result of actions taken by Buyer
prior to the Closing Date or as contemplated herein that have an
effect on the Division ("TRANSACTION CHANGES"), which shall
include without limitation any disruptions to the Business as a
result of the execution of this Agreement, the announcement by
Buyer of its intention to purchase the Division or the
announcement by the Company of its intention to sell the
Division, and the consummation of the transactions contemplated
hereby, and Buyer agrees that any General Changes or Transaction
Changes do not and shall not constitute a breach of this
SECTION 3.1(r). As used in this Agreement, the phrase "MATERIAL
ADVERSE EFFECT" shall mean a material adverse effect on the
results of operations or financial condition of the Division and
the Division Affiliates taken as a whole;

(ii) sold, leased, assigned or transferred any material
portion of its tangible assets or Trade Rights used in the
Business, except in the ordinary course of business;

-24-

<PAGE>

(iii) entered into, amended or terminated any Contract
or any other transaction in connection with the Business
involving in excess of $1,000,000, other than in the ordinary
course of business and on a basis consistent with past practice;
or

(iv) in connection with the Business, made or granted any
bonus or any wage, salary or compensation increase in excess of
$50,000 per year to any employee, sales representative or
consultant or made or granted any increase in benefits under any
Benefit Plan or Benefit Arrangement, or amended or terminated any
existing Benefit Plan or Benefit Arrangement or adopted any new
Benefit Plan or Benefit Arrangement, in each case other than on a
basis consistent with past practice.

AFFILIATES.

(i) The Division Affiliates and Metalsa constitute the only
business organizations operating within the Division in which the
Sellers own any equity interest.

(ii) The authorized and outstanding equity interests in
Brazil Sub consist of 25,000 quotas, all of which are owned by
the Company and a subsidiary of the Company. Except as set forth
on SCHEDULE 3.1(s), Brazil Sub has no outstanding stock or
securities convertible or exchangeable for any of its equity
interests, and Brazil Sub does not have outstanding any rights or
options to subscribe for or to purchase its equity interests or
any securities convertible into or exchangeable for its equity
interests. Except as set forth on SCHEDULE 3.1(s), Brazil Sub is
not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any of its equity
interests or any warrants, options or other rights to acquire its
equity interests. All of the outstanding shares of Brazil Sub's
capital stock are validly issued, fully paid and nonassessable.
After giving effect to the transactions contemplated herein,
Buyer will own 100% of the issued and outstanding equity
interests of Brazil Sub.

(iii) SCHEDULE 3.1(s) identifies any agreement to which
the Sellers are a party, of which the Sellers have knowledge or
which the Sellers' appointees to the board of directors of China
JV have voted to approve relating to (A) the authorized and
outstanding equity interests in China JV; (B) any outstanding
equity interests of China JV or securities convertible or
exchangeable for any of its equity interests; (C) any rights or
options to subscribe for or to purchase its equity interests or
any securities convertible into or exchangeable for its equity
interests; (D) any obligation (contingent or otherwise) to which
China JV is subject to repurchase or otherwise acquire or retire
any of its equity interests or any warrants, options or other

-25-

<PAGE>

rights to acquire its equity interests; or (E) the assessability of
the Sellers' equity interests in China JV. To the knowledge of the
Sellers, subject to the rights of the other equity interest holders of
China JV as set forth in, and compliance with the other terms and
restrictions of, the agreements relating to China JV identified on
SCHEDULE 3.1(s), after giving effect to the transactions contemplated
herein, Buyer will own 60% of the issued and outstanding equity
interests of China JV.

(iv) Except as set forth on SCHEDULE 3.1(s), there are no
contractual stockholders preemptive rights or rights of refusal
with respect to the sale of Brazil Sub's equity interest
hereunder or, to the knowledge of the Sellers, to the sale of
China JV's equity interest hereunder and there are no agreements
among the Sellers and the Division Affiliates' other equity
interests holders with respect to the voting or transfer of the
Division Affiliates' equity interests or with respect to any
other aspect of the Division Affiliates' corporate affairs.

(t) ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
SCHEDULE 3.1(t), the Sellers have no Liabilities (including without
limitation Labor Liabilities) arising out of transactions entered into
at or prior to the Closing, or any action or inaction at or prior to
the Closing, or any state of facts existing at or prior to the
Closing, except (i) Liabilities under Contracts disclosed on
SCHEDULE 3.1(g), under Contracts that are not required to be disclosed
on SCHEDULE 3.1(g) (but not Liabilities for breaches thereof) or under
Contracts entered into after the date of this Agreement in accordance
with the terms and conditions of this Agreement, (ii) Liabilities
reflected on the December 31, 1996 balance sheet of the Division or on
the Adjusted Closing Statement, and (iii) Liabilities disclosed in
this Agreement or as set forth in any other Schedule to this
Agreement.

(u) PRODUCT WARRANTIES. Except as set forth on SCHEDULE 3.1(u),
no product processed, manufactured, sold or delivered by the Sellers
is subject to any guaranty, warranty or indemnity beyond the
applicable standard terms of sale or lease, other than statutory
warranties.

(v) PRODUCT LIABILITY; RECALLS. Except as set forth in
SCHEDULE 3.1(v), there is no Liability relating to or resulting from
any product installed, sold, leased or licensed, or any service
rendered, prior to the Closing Date (including any Liabilities of the
Sellers for claims made for injury to person, damage to property or
other damage, whether made in product liability, tort, breach of
warranty or otherwise, or for returns of Division products sold prior
to the Closing Date). Since January 1, 1994, there have been no
product recalls or requests therefor by any governmental entities or
customers.

-26-

<PAGE>

(w) INVENTORY. The inventories of the Sellers reflected on the
Recent Balance Sheet and to be reflected on the Adjusted Closing
Statement are reflected at the lower of cost or market in accordance
with GAAP and will be realizable in the ordinary course of business.

(x) NOTES AND ACCOUNTS RECEIVABLE. The Receivables reflected on
the Preliminary Statement were (except to the extent Receivables
reflected on the Preliminary Statement were subject to the Receivables
Purchase Facility to the Company from Norwest Bank Minnesota, National
Association), and Receivables reflected on the Adjusted Closing
Statement will be, valid receivables subject to no setoffs or
counterclaims.

(y) CLOSING DATE. All of the representations and warranties
contained in this SECTION 3.1 will be true and correct on the Closing
Date except for representations and warranties that speak as of a
specific date or time and except to the extent that the Sellers have
advised Buyer otherwise in writing prior to the Closing.

3.2. REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENTS. Buyer and
Parents, jointly and severally, represent and warrant to the Sellers as follows:

(a) DUE ORGANIZATION AND POWER. Buyer and Parents are
corporations duly organized and validly existing under the laws of
their respective jurisdictions of incorporation. Buyer and Parents
each have each all requisite power and authority to enter into this
Agreement and any other agreement contemplated hereby and to perform
their respective obligations hereunder and thereunder. Buyer and
Parents are each duly authorized, qualified or licensed to do business
as a foreign corporation, and are each validly existing, in each of
the jurisdictions in which their respective rights, titles or
interests in or to any asset, or the conduct of their respective
businesses, require such authorization, qualification or licensing.
Tower owns all of the issued and outstanding capital stock of RJT and
has no other subsidiaries (other than Tower Automotive Export, Inc.),
and RJT owns all of the issued and outstanding capital stock of Buyer.

(b) AUTHORIZATION AND VALIDITY OF AGREEMENT. The execution,
delivery and performance by Buyer and Parents of this Agreement and
any other agreements contemplated hereby and the consummation by Buyer
and Parents of the transactions contemplated hereby and thereby have
been duly authorized by their respective boards of directors. No
other corporate or stockholder action is necessary for the
authorization, execution, delivery and performance by Buyer and
Parents of this Agreement and any other agreement contemplated hereby
and the consummation by Buyer and Parents of the transactions
contemplated hereby or thereby. This Agreement and the other
agreements contemplated hereby have been, or will be at or prior to
Closing, duly executed and delivered by each of

-27-

<PAGE>

Buyer and Parents, and each constitutes, or will when so executed and
delivered constitute, a valid and legally binding obligation of each of
Buyer and Parents, enforceable against each of them in accordance with its
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally or by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

(c) NO GOVERNMENTAL APPROVALS OR NOTICES REQUIRED; NO CONFLICT
WITH INSTRUMENTS TO WHICH BUYER OR PARENTS ARE A PARTY. Except as
described in SCHEDULE 3.2(C) and except for the requirement that the
applicable waiting periods expire pursuant to the HSR Act, the
execution, delivery and performance of this Agreement and any other
agreements contemplated hereby by Buyer and Parents and the
consummation by each of them of the transactions contemplated hereby
and thereby (including without limitation consummation of the
Financing (as defined in SECTION 3.2(E)) (i) will not violate (with or
without the giving of notice or the lapse of time or both), or require
any consent, approval, filing or notice under, any provision of any
law, rule or regulation, court order, judgment or decree applicable to
Buyer or Parents, or any one of them, and (ii) will not conflict with,
or result in the breach or termination of any provision of, or
constitute a default under, or result in the acceleration of the
performance of the obligations of Buyer or Parents, or any one of
them, under, the charter or by-laws of either Buyer or Parents, or any
one of them, or any indenture, mortgage, deed of trust, lease,
licensing agreement, contract, instrument or other agreement to which
Buyer or Parents, or any one of them, is a party or by which Buyer or
Parents, or any one of them, or any of their assets or properties is
bound.

(d) CERTAIN FEES. Neither Buyer or Parents, nor any of their
officers, directors or employees, has employed any broker or finder or
incurred any other liability for any brokerage fees, commissions or
finders' fees in connection with the transactions contemplated hereby,
except for those brokers whose fees will be paid by Buyer or Parents.

(e) FINANCIAL CAPACITY. Buyer has commitments from financial
institutions pursuant to the Bank of America commitment letter dated
January 24, 1997 delivered to the Company, to enable it to consummate
the transactions contemplated by this Agreement (the "FINANCING").

(f) FACILITIES CLOSINGS AND MASS LAYOFFS. Buyer does not
currently plan or contemplate any plant closings, reductions in force
or terminations of employees that, in the aggregate, would constitute
a plant closing, mass layoff of Division Employees or similar event
under the Warn Act or any similar foreign, federal, state or local
statute or ordinance during any period as to which either of the

-28-

<PAGE>

Sellers may have a notice obligation and/or potential Liability in
connection therewith under applicable law.

(g) ACQUISITION OF EQUITY SECURITIES OF DIVISION AFFILIATES FOR
INVESTMENT. The equity securities of the Division Affiliates to be
purchased by Buyer pursuant to this Agreement are being acquired for
investment only and not with a view to any public distribution
thereof, and Buyer will not offer to sell or otherwise dispose of the
equity securities so acquired by it in violation of any of the
registration requirements of the Securities Act of 1933, as amended,
or any comparable state law. Buyer acknowledges that it has received
all information it has requested from the Company regarding its
decision as to whether to purchase the equity securities of each of
the Division Affiliates.

(h) FINANCIAL INFORMATION.

(i) 1996 FINANCIALS. Set forth on SCHEDULE 3.2(H) are the
consolidated balance sheets of Buyer and Parents as of December
31, 1996 and the consolidated statements of income and expense
for Buyer and Parents for the year then ended (collectively, the
"1996 FINANCIALS"). The 1996 Financials have been prepared in
accordance with GAAP applied on a consistent basis (except as
otherwise noted therein) and fairly present in all material
respects the financial position of Buyer and Parents as of such
date and the results of their operations for the year then ended
subject to potential audit adjustments that will not be material.

(ii) MATERIAL ADVERSE CHANGE. Since December 31, 1996,
there has been no material adverse change in the financial
position or results of Buyer or Parents from that reflected in
the 1996 Financials.

(iii) SOLVENCY OF BUYER AND PARENTS. Upon consummation
of the transactions provided for in this Agreement, each of Buyer
and Parents will be solvent and will have adequate working
capital to pay, discharge or perform all of their Liabilities,
including without limitation the Assumed Liabilities, as such
become due and payable.

(iv) CAPITALIZATION OF BUYER AND PARENTS. SCHEDULE 3.2(H)
sets forth the current consolidated capitalization of Buyer and
Parents and the anticipated consolidated capitalization of Buyer
and Parents immediately following the Closing.

(v) PROJECTIONS. Set forth on SCHEDULE 3.2(H) are Buyer's
and Parents' reasonable good faith projections of the
consolidated balance sheets of Buyer and Parents as of December
31, 1997 and 1998 and the consolidated statements of income and
expense for Buyer and Parents for

-29

<PAGE>

the years then ending, in each case assuming consummation of the
transactions contemplated hereby. The Sellers acknowledge that there
are uncertainties inherent in Buyer's and Parents' attempting to make
such projections and that the actual results may differ from the
projected results in a material manner.

(i) CLOSING DATE. All of the representation and warranties contained
in this Section 3.2 will be true and correct on the Closing Date except for
representations and warranties that speak as of a specific date or time and
except to the extent that Buyer has advised the Sellers otherwise in
writing prior to the Closing.

3.3. EXPIRATION OF REPRESENTATIONS AND WARRANTIES. None of the
respective representations and warranties of the Sellers, Buyer and Parents
contained herein or in any certificate or other document delivered prior to or
on the Closing Date shall survive the Closing, except that (a) the
representations and warranties as to the matters set forth in SECTION 3.1 that
the Sellers make on the date hereof and at the Closing, by delivering the
certificate described in SECTION 5.1(a) (the "SURVIVING REPRESENTATIONS"), shall
survive the Closing for a period lasting until (i) with respect to claims made
under matters set forth in SECTIONS 3.1(b) (Authorization) and 3.1(q) (Taxes)
(or under SECTION 3.1(y) in respect of such matters), the expiration of the
applicable statute of limitations, (ii) with respect to claims made under
matters set forth in SECTIONS 3.1 (f)(i) (Title to Properties) (or under SECTION
3.1(y) in respect of such matters), the second anniversary of the Closing, (iii)
with respect to claims made under matters set forth in SECTION 3.1(O)
(Environmental) (or under SECTION 3.1(y) in respect of such matters), the third
anniversary of the Closing, (iv) with respect to claims in respect of the
Sellers' compliance with their respective obligations and covenants to be
performed or complied with prior to the Closing under SECTION 4.2, the six month
anniversary of the Closing, and (v) with respect to claims arising under matters
otherwise set forth in SECTION 3.1 (or under SECTION 3.1(y) in respect of such
matters), the fifteen month anniversary of the Closing and (b) the
representations and warranties as to the matters set forth in SECTION 3.2 that
Buyer and Parents make on the date hereof and at the Closing, by delivering the
certificate described in SECTION 5.2(a), shall survive the Closing until the
fifteen month anniversary of the Closing.

3.4. NO OTHER REPRESENTATIONS OR WARRANTIES; MEMORANDUM; PROJECTIONS.
Except for the representations and warranties contained in SECTION 3.1, Buyer
and Parents acknowledge that neither the Sellers nor any other person or entity,
acting on behalf of the Sellers, makes or has made any other express or implied
representation or warranty to Buyer or Parents as to the accuracy or
completeness of any information regarding the Business or any other matter.
Buyer and Parents further agree that neither the Sellers nor any other person or
entity will have or be subject to any liability to Buyer or Parents, or any one
of them, or any other person resulting from the distribution to Buyer or
Parents, or Buyer's or Parents' use, of any such information, including the
Memorandum prepared by Merrill Lynch, Pierce, Fenner & Smith Incorporated in
October 1996 and any information, document or material made available to Buyer
or Parents, or any one of them, in certain "data rooms," management
presentations or any other

-30-

<PAGE>

form in expectation of the transactions contemplated by this Agreement except to
the extent any such information is incorporated into this Agreement or the
Schedules hereto.

Without limitation, in connection with Buyer's or Parents'
investigation of the Business, the Division or the Assets, Buyer and Parents
have received from or on behalf of the Sellers certain projections, including,
without limitation, projected statements of operating revenues and income from
operations of the Business for the fiscal year ending on December 31, 1996 and
for subsequent fiscal years and certain business plan information for such
fiscal year and succeeding fiscal years. Buyer and Parents acknowledge that
there are uncertainties inherent in attempting to make such estimates,
projections and other forecasts and plans, that Buyer and Parents are familiar
with such uncertainties, that Buyer or Parents are taking full responsibility
for making their own evaluation of the adequacy and accuracy of all estimates,
projections and other forecasts and plans so furnished to it (including the
reasonableness of the assumptions underlying such estimates, projections and
forecasts), and that Buyer and Parents shall have no claim against the Sellers
or any other person acting on behalf of the Sellers with respect thereto.
Accordingly, the Sellers make no representation or warranty with respect to such
estimates, projections and other forecasts and plans (including the
reasonableness of the assumptions underlying such estimates, projections and
forecasts).

4. TRANSACTIONS PRIOR TO CLOSING

4.1. ACCESS TO INFORMATION CONCERNING PROPERTIES AND RECORDS;
CONFIDENTIALITY. Except (a) for information which, if provided, would adversely
affect the ability of the Sellers or any of their affiliates to assert attorney-
client or attorney work product privilege or other similar privilege and (b) as
prohibited by applicable law, the Sellers agree that, during the period
commencing on the date hereof and ending on the Closing Date, (i) they will give
or cause to be given to Buyer and its representatives (including its Financing
sources and their representatives) such access, during normal business hours, to
the Facilities, properties, books and records of the Sellers relating to the
Assets or the Business as Buyer may from time to time reasonably request, (ii)
they will furnish or cause to be furnished to Buyer such financial and operating
data and other information with respect to the Business and the properties of
the Division, including access to the work papers of the Company's independent
auditors (with the consent of such auditors, which the Company shall use its
reasonable best efforts to obtain), as Buyer may from time to time reasonably
request, and (iii) Buyer and its representatives shall be entitled, upon
reasonable advance notice to and with the consent of the Company (which shall
not be unreasonably withheld), to such access to the representatives, customers,
suppliers, union officials, officers and employees of the Sellers involved in
the Business as Buyer may reasonably request. In connection with the foregoing,
Buyer may complete "Phase I" environmental assessments of the Facilities of
customary scope and conduct such other environmental assessments and
investigations as to which Buyer and the Company agree in writing. Buyer and
Parents will continue to comply with the terms of that certain access agreement
entered into between Tower and the Company dated January 10, 1997 (the "ACCESS
AGREEMENT").

-31-

<PAGE>

4.2. CONDUCT OF THE BUSINESS PENDING THE CLOSING DATE. The Sellers
agree that, except as required or contemplated by this Agreement and except for
any actions taken by the Sellers of the type set forth in EXHIBIT 4.2, or
otherwise consented to by Buyer, during the period commencing on the date hereof
and ending on the Closing Date, they will:

(a) operate the Business only in the usual, regular and ordinary
manner, on a basis consistent with past practice and, to the extent
consistent with such operation, use commercially reasonable efforts,
consistent with past practice, to preserve the Division's present
business organization intact, keep available the services of the
Division Employees and preserve its present relationships with persons
having business dealings with the Division;

(b) not dispose of any of the fixed Assets that are material to
the Business, except in the ordinary course of the Business consistent
with past practices;

(c) not (i) permit or allow any of the Assets to become subject
to any Encumbrances except Permitted Encumbrances, (ii) grant any
increase in the compensation of Division Employees (including any such
increase pursuant to any bonus, pension, profit-sharing or other plan
or commitment), except for reasonable increases in the ordinary course
of the Business and consistent with past practice or as a result of
contractual arrangements or sales compensation plans existing on the
date hereof or (iii) enter into any Contracts giving rise to specific
obligations with respect to the Division in excess of $1,000,000,
except Contracts to purchase Materials or other Inventory and other
trade obligations in the ordinary course of the Business and Contracts
entered into in connection with quotes or proposals that either of the
Sellers has delivered to customers prior to the date of this
Agreement;

(d) do the following in respect of the Division, in each case in
a manner consistent with past practice: keep in full force and effect
all Trade Rights; maintain the Assets in normal repair, order and
condition consistent with current needs; replace in accordance with
past practices inoperable, worn out or obsolete assets; in the event
of a casualty, loss or damage to any material Assets prior to the
Closing Date, either repair or replace such damaged property or use
the proceeds of any insurance (other than business interruption
coverage, which shall be subject to SECTION 8.6) in such other manner
as mutually agreed upon by Buyer and the Sellers; and comply with all
material legal requirements and contractual obligations applicable to
the operation of the Business; and

(e) not, and shall cause their affiliates not to, take any
material action that would require disclosure under SECTION 3.1(R) of
this Agreement if such action had occurred immediately prior to the
signing of this Agreement.

-32-

<PAGE>

4.3. FURTHER ACTIONS. Subject to the terms and conditions hereof, the
Sellers and Buyer shall use their reasonable best efforts to take, or cause to
be taken, all action and to do, or cause to be done, and to cooperate fully with
each other with respect to, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement,
including using all reasonable best efforts: (i) to obtain prior to the Closing
Date all licenses, permits, consents, approvals, authorizations, qualifications,
orders, non-disturbance agreements in reasonable form, landlord estoppel letters
in reasonable form and releases of liens set forth on item 2.d. of SCHEDULE
3.1(F) of governmental authorities and parties to Contracts with the Sellers
that are necessary for the consummation of the transactions contemplated hereby,
(ii) to effect all necessary registrations and filings (including but not
limited to the filings contemplated by SECTION 4.4); PROVIDED, HOWEVER, that
such assistance shall not include any requirement of the Sellers to expend
money, commence any litigation or offer or grant any accommodation (financial or
otherwise) to any third party, except as provided in SECTION 9.2, (iii) to
complete the actions contemplated by SECTION 8.11(A), SECTION 8.11(D) and
SECTION 8.14 to the extent practicable prior to the Closing and (iv) to cause
the conditions to Buyer's and the Sellers' obligations to close to be satisfied.
Without limiting the generality of the foregoing or the provisions of this
SECTION 4.3, for purposes of this SECTION 4.3, the "REASONABLE BEST EFFORTS" of
the Sellers shall include without limitation an obligation of the Sellers to
cause the Sellers' appointees to the board of directors of China JV to approve
the transfer of the Sellers' equity interest in China JV to Buyer in accordance
with this Agreement.

4.4. HSR ACT COMPLIANCE. Buyer and the Company shall each file or
cause to be filed with the Federal Trade Commission and the United States
Department of Justice any notifications required to be filed under the HSR Act
with respect to the transactions contemplated hereby and Buyer and the Company
shall bear the costs and expenses of their respective filings; PROVIDED THAT
Buyer shall pay the filing fee in connection therewith. Buyer and the Company
shall use their respective reasonable best efforts to make such filings promptly
(and in any event within five (5) business days) following the date hereof, to
respond to any requests for additional information made by either of such
agencies, to cause the waiting periods under the HSR Act to terminate or expire
at the earliest possible date and to resist in good faith, at each of their
respective cost and expense (including the institution or defense of legal
proceedings), any assertion that the transactions contemplated hereby constitute
a violation of the antitrust laws, all to the end of expediting consummation of
the transactions contemplated hereby. Each of Buyer and the Company shall
consult with the other prior to any meetings, by telephone or in person, with
the staff of the Federal Trade Commission or the United States Department of
Justice, and each of Buyer and the Company shall have the right to have a
representative present at any such meeting.

4.5. NOTIFICATION. The Sellers shall promptly (after the Sellers have
notice thereof) notify Buyer and Buyer and Parents shall promptly (after they
have notice thereof) notify the Sellers and keep such other party advised as to
(i) any litigation or administrative proceeding pending and known to such party
or, to its actual knowledge, threatened against such party that challenges the
transactions contemplated hereby; (ii) any material damage or destruction of any
of the Assets; (iii) any material adverse change in the results of operations or
financial condition

-33-

<PAGE>

of the Division or Buyer, as the case may be; (iv) as to the notification
obligation of the Sellers, any circumstance as a result of which any of their
representations and warranties contained in SECTION 3.1 are not true and correct
in all material respects to the knowledge of such parties or any material breach
of any of their respective covenants hereunder; or (v) as to the notification
obligation of Buyer and Parents, any circumstance as a result of which any of
their representations and warranties contained in SECTION 3.2 are not true and
correct in all material respects to the knowledge of such parties or any
material breach of any of their respective covenants hereunder.

4.6. REAL ESTATE COVENANTS.

(a) TITLE INSURANCE. Buyer shall obtain, and the Sellers shall
provide reasonable assistance necessary for Buyer to obtain, in
preparation for Closing, a commitment for an ALTA Owners or Leasehold
Title Insurance, Form B-1970 and endorsements, for each of the Owned
Real Properties and Leased Real Property (the "TITLE COMMITMENTS")
insuring Buyer's interest in such parcel as of Closing, subject only
to Permitted Encumbrances, and final title policies issued in
accordance with the Title Commitments.

(b) SURVEYS. Buyer shall obtain, and the Sellers shall provide
reasonable assistance necessary for Buyer to obtain, in preparation
for the Closing, current 1992 ALTA/ACSM Land Title Surveys (including
Table A items, except Item 5 thereof regarding contours and
elevations) (the "SURVEYS") of each of the Owned Real Properties and
Leased Real Properties.

(c) BOWLING GREEN. Prior to the Closing, the Company shall
obtain good and marketable title to the real property, fixtures and
improvements located at 311 Vanderbilt Drive, Bowling Green, Kentucky
42104, free and clear of all Encumbrances other than Permitted
Encumbrances.

4.7. EXCLUSIVITY. Until this Agreement has been terminated in
accordance with its terms, but not beyond the Effective Time, the Sellers will
not, and will cause their respective officers, directors and agents to not,
discuss a possible sale or other disposition of (a) all or any part of the
Assets other than inventory, immaterial assets in the ordinary course of
business and the Company's equity interest in China JV (only to the extent
necessary to comply with the right of first refusal requirement (or similar
requirement) set forth in the relevant joint venture agreement) or (b) the
Company's equity interest in Metalsa other than in connection with the possible
sale or other disposition of such interest to other investors in Metalsa, in
each case whether indirectly or directly, or by merger, sale of stock,
reorganization, recapitalization or otherwise, with any party other than Buyer
(an "ACQUISITION PROPOSAL") or provide any information to any other party
regarding the Division (other than information which is traditionally provided
in the regular course of its business operations to third parties where the
Sellers and their officers, directors and agents have no reason to believe that
such information may be utilized to evaluate a possible acquisition of the
Division and other than information relating to Metalsa). The Sellers and their
officers and directors (i) do not have any agreement,

-34-

<PAGE>

arrangement or understanding with respect to any Acquisition Proposal and (ii)
will cease and cause to be terminated any and all discussions with third parties
regarding any Acquisition Proposal.

FINANCING.

(a) Buyer and Parents will use their reasonable best efforts to
consummate the Financing. If any portion of the Financing becomes
unavailable, regardless of fault, then Buyer and Parents will use
their reasonable best efforts to obtain from other sources the
financing necessary for the consummation of the transactions
contemplated hereby. Consistent with the foregoing, neither Buyer nor
Parents will take any action or omit to take any action that may
impair their ability, or the lenders' willingness, to consummate the
Financing. Buyer will keep the Company reasonably informed as to the
status of the Financing and will notify the Company promptly of any
material developments with respect to the Financing.

(b) As a condition and inducement to the Seller's willingness to
enter into and perform this Agreement and to give Buyer and Parents
the rights associated with the condition to the Closing set forth in
SECTION 5.1(d), in the event that the Trigger Event (as hereinafter
defined) has occurred, then Buyer and Parents shall pay to the Company
a fee of $15,000,000. Such fee shall be payable in immediately
available funds within two days following the occurrence of the
Trigger Event. As used herein, the "TRIGGER EVENT" shall mean that
(i) Buyer has relied on the failure of the condition to the Closing
set forth in SECTION 5.1(d) to be satisfied or waived as a basis for
not consummating the Closing and (ii) this Agreement has been
terminated pursuant to SECTION 7.1 for any reason other than a willful
and material breach of this Agreement by the Sellers.

4.9. EXPIRATION OF COVENANTS TO BE PERFORMED BEFORE CLOSING. None of
the obligations to perform the respective covenants of the Sellers and Buyer
contained in this SECTION 4 shall survive the Closing, claims with respect to
breaches of such covenants must be made prior to the six month anniversary of
the Closing and claims with respect to breaches of the covenants of the Sellers
in SECTION 4.2 may be made solely on the basis of the representations and
warranties of the Sellers as to compliance with such covenants that the Sellers
make by delivering the certificate contemplated by SECTION 5.1(a).

5. CONDITIONS PRECEDENT.

5.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. The obligations of
Buyer under this Agreement are subject to the satisfaction (or waiver by Buyer)
at or prior to the Closing Date of each of the following conditions:

-35-

<PAGE>

(a) NO MATERIAL ADVERSE CHANGE. The representations and
warranties of the Sellers made in SECTION 3.1 shall be true and
correct in all material respects on and as of the Closing Date in
respect of the period between the date hereof and the Closing Date, as
though made on and as of the Closing Date, except (i) to the extent of
General Changes, Transaction Changes or changes or developments
contemplated by the terms of this Agreement, including those arising
in the ordinary course of the Business to the extent the Business is
conducted in accordance with SECTION 4.2, (ii) for exceptions thereto
that, in the aggregate, would not have a Material Adverse Effect,
(iii) for exceptions thereto that have been cured (including without
limitation through the granting of a post-Closing indemnity for any
Losses (as defined in SECTION 9.3(a)(i)) related thereto) and (iv) for
representations and warranties that speak as of a specific date or
time, and the Sellers shall have performed and complied in all
material respects with the obligations and covenants required by this
Agreement to be performed or complied with by the Sellers by the time
of the Closing; and the Company shall have delivered to Buyer a
certificate dated the Closing Date and signed by an officer of the
Company in the officer's capacity as such confirming the foregoing to
the best of such officer's knowledge.

(b) NO INJUNCTION, ETC. No preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or
governmental authority or other legal restraint or prohibition that
restrains, enjoins or otherwise prohibits the transactions
contemplated hereby shall be in effect.

(d) RECEIPT OF PROCEEDS. Buyer shall have received proceeds of
the Financing pursuant to the Bank of America commitment letter
previously delivered to the Sellers dated January 24, 1997 or from
other sources.

5.2. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS. The
obligations of the Sellers under this Agreement are subject to the satisfaction
(or waiver by the Sellers) at or prior to the Closing Date of each of the
following conditions:

(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Buyer and Parents made in this
Agreement shall be true and correct in all material respects as of the
date hereof and on and as of the Closing Date, as though made on and
as of the Closing Date, except to the extent of changes or
developments contemplated by the terms of the Agreement, except for
representations and warranties that speak as of a specific date or
time (which need only be true and correct as of such date or time),
and Buyer and Parents shall have performed or complied in all material
respects with the obligations and covenants required by this Agreement
to be performed or complied with by Buyer and/or

-36-

<PAGE>

Parents by the time of the Closing; and Buyer and Parents shall have
delivered to the Company a certificate dated the Closing Date and signed by
an officer of Buyer and Parents confirming the foregoing to the best of
such officer's knowledge.

(d) ASSUMPTION OF LIABILITIES. Buyer and Parents shall have
executed and delivered to the Sellers such document or documents as
reasonably requested by the Company or the Company's counsel to
evidence assumption by Buyer and Parents of the Assumed Liabilities.

6. EMPLOYEE RELATIONS AND BENEFITS.

6.1. UNION REPRESENTED EMPLOYEES.

(a) ASSUMPTION OF COLLECTIVE BARGAINING AGREEMENTS. At the
Closing, the Sellers shall assign to Buyer and, except as otherwise
provided herein, Buyer shall offer to assume the Collective Bargaining
Agreements set forth on SCHEDULE 3.1(g)(ii) that cover Division
Employees who are or were represented by a collective bargaining agent
(the "UNION REPRESENTED EMPLOYEES"). Buyer shall inform each union
representing Division Employees that it is willing to assume their
respective Collective Bargaining Agreement.

(b) EMPLOYMENT OF UNION REPRESENTED EMPLOYEES. All of the Union
Represented Employees who are in active employment status on the day
immediately prior to the Closing Date ("ACTIVE UNION REPRESENTED
EMPLOYEES") shall cease their employment status with the Sellers at
the Effective Time and simultaneously therewith shall be offered
employment by Buyer under the terms and conditions of the respective
Collective Bargaining Agreements and under terms that recognize prior
employment with the Sellers (or their predecessors) for purposes of
all Benefit Plans, Benefit Arrangements or other seniority based
programs or benefits. For purposes of this SECTION 6.1, the term
"ACTIVE EMPLOYMENT STATUS" includes any individual not actively at
work due to illness, short-term disability or sick leave, authorized
leave of absence, layoff for lack of work or service in the Armed
Forces of the United States, but does not include any individual not
actively at work due to retirement, resignation, permanent dismissal
or long-term disability. In addition, any Union Represented Employee
who is not an Active Union Represented Employee in accordance with the
foregoing

-37-

<PAGE>

provisions of this SECTION 6.1(b) ("NON-ACTIVE UNION REPRESENTED EMPLOYEES") but
who has a right to return to employment with Buyer under the Collective
Bargaining Agreement applicable to such employee or pursuant to any applicable
law shall be extended an employment offer by Buyer at the time each such
employee is eligible to return to work, if at all, under the Collective
Bargaining Agreement applicable to such employee or pursuant to any applicable
law, and if employed, shall become an Active Union Represented Employee at that
time.

(i) The Sellers shall retain all of the assets of the A.O.
Smith Retirement Plan ("RETIREMENT PLAN") and the liabilities for
(A) all benefits payable under the Retirement Plan with respect
to Non-Active Union Represented Employees who retired or
otherwise terminated employment on or prior to the Closing Date,
(B) the "basic retirement benefit" accrued by Active Union
Represented Employees through the Closing Date, and (C) to the
extent provided under SECTION 6.1(c)(iii), (iv) and (v), the
subsidized value of early retirement benefits, early retirement
supplements, retiree benefit increases and pension enhancements
related to Medicare eligibility for Active Union Represented
Employees. For purposes of this SECTION 6.1, the term "basic
retirement benefit" means the monthly normal retirement age
benefit accrued under the Retirement Plan on the Closing Date
based upon the employee's credited service under the Retirement
Plan through the Closing Date, exclusive of the subsidized value
of any early retirement benefit, early retirement supplements,
pension enhancements related to Medicare eligibility, retiree
benefit increases, or any other benefit, supplement or subsidy
under the Retirement Plan that the employee would have earned in
addition thereto had he continued employment with the Sellers.

(ii) As of the Effective Time, Buyer shall establish for
Active Union Represented Employees a pension plan or plans
intended to qualify under Section 401(a) of the Code and that are
identical to the Retirement Plan as in effect for Union
Represented Employees ("BUYER PENSION PLAN"). For purposes of
eligibility, vesting and benefit accrual, Buyer Pension Plan
shall credit each Active Union Represented Employee with service
for periods prior to the Effective Time equal to the service
credited to such employee under the Retirement Plan; provided,
however, that Buyer Pension Plan may offset benefits provided
under the Retirement Plan in order to avoid duplication of
benefits on account of periods of service recognized under both
the Retirement Plan and Buyer Pension Plan. To the extent not
provided by the Retirement Plan in accordance with SECTION
6.1(c)(iii), (iv) and (v), Buyer Pension Plan shall be
responsible for the subsidized value of early retirement
benefits, early retirement supplements, pension enhancements
related to Medicare eligibility and retiree benefit increases
provided to Active Union Represented Employees. Further, Buyer
Pension Plan shall be solely responsible for providing disability
benefits for Active Union Represented Employees who become
disabled on or after the Closing Date other than for any
participant who is in the disability waiting period as of the
Effective Time, for whom the Retirement Plan shall be solely
responsible.

(iii) As of the Effective Time, the Sellers shall amend
the Retirement Plan in the following respects:

(A) An Active Union Represented Employee shall be
entitled to commence his benefit under the Retirement Plan only
if the employee, in addition to satisfying the otherwise
applicable requirements for commencement of his benefit, has
retired or terminated from employment with Buyer;

(B) For purposes of determining the employee's
eligibility for early retirement benefits, early retirement
supplements, retiree benefit increases and pension enhancements
related to Medicare eligibility, but not for purposes of
determining an employee's credited service under the Retirement
Plan or for any other purpose, the Retirement Plan shall
recognize an Active Union Represented Employee's employment with
the Buyer as if such employment were rendered to the Sellers.

(C) In the case of an Active Union Represented
Employee who is a participant in the Retirement Plan, who retires
on or after the Closing Date with an entitlement to a normal or
early retirement benefit under the terms of Buyer Pension Plan,
and who either is eligible for a normal or early retirement
benefit from the Retirement Plan or would have been eligible for
a normal or early retirement benefit under the Retirement Plan
had his employment with Buyer instead been rendered to the
Sellers, then:

(I) The employee shall be eligible for retiree
benefit increases in accordance with the terms of the
Retirement Plan as in effect on the Closing Date based on
the employee's credited service through the Closing Date.
Buyer Pension Plan shall be responsible for all remaining
retiree benefit increases.

(II) The employee shall be eligible for a pension
enhancement related to Medicare eligibility in accordance
with the terms of the Retirement Plan as in effect on the
Closing Date that

-39-

<PAGE>

is prorated between the Retirement Plan and Buyer Pension Plan in
accordance with SECTION 6.1(c)(iv).

(III) If the employee elects early retirement
benefits, the Retirement Plan shall be responsible for the
subsidized value of early retirement benefits payable from
the Retirement Plan, and Buyer Pension Plan shall be
responsible for the subsidized value of early retirement
benefits payable from Buyer Pension Plan, and the early
retirement supplement (if any) shall be prorated between the
Retirement Plan and Buyer Pension Plan in accordance with
SECTION 6.1(c)(v).

(iv) The pension enhancement related to Medicare eligibility
to be provided under the Retirement Plan shall be equal to the
lesser of (A) the pension enhancement calculated under the terms
of the Retirement Plan as in effect on the day prior to the
Closing Date multiplied by a fraction, the numerator of which is
the employee's years of credited service under the Retirement
Plan through the Closing Date, and the denominator of which is
the sum of the numerator and the employee's service with Buyer
from the Closing Date through the employee's retirement or
termination of employment from Buyer, or (B) the pension
enhancement calculated under the terms of Buyer's Pension Plan as
in effect on the employee's retirement or termination of
employment from Buyer (prior to reduction for the portion of the
enhancement to be paid from the Retirement Plan) multiplied by a
fraction, the numerator of which is the employee's years of
credited service under the Retirement Plan through the Closing
Date, and the denominator of which is the sum of the numerator
and the employee's service with Buyer from the Closing Date
through the employee's retirement or termination of employment
from Buyer. Buyer Pension Plan shall be responsible for any
remaining pension enhancement related to Medicare eligibility.

(v) The early retirement supplement to be provided under
the Retirement Plan shall be equal to the lesser of (A) the early
retirement supplement calculated under the terms of the
Retirement Plan as in effect on the day prior to the Closing Date
multiplied by a fraction, the numerator of which is the
employee's years of credited service under the Retirement Plan
through the Closing Date, and the denominator of which is the sum
of the numerator and the employee's service with Buyer from the
Closing Date through the employee's retirement or termination of
employment from Buyer, or (B) the early retirement supplement
calculated under the terms of Buyer's Pension Plan as in effect
on the employee's retirement or termination of employment from
Buyer (prior to reduction for the portion of the supplement to be
paid from the Retirement Plan) multiplied by a

-40-

<PAGE>

fraction, the numerator of which is the employee's years of credited
service under the Retirement Plan through the Closing Date, and the
denominator of which is the sum of the numerator and the employee's
service with Buyer from the Closing Date through the employee's
retirement or termination of employment from Buyer. Buyer Pension
Plan shall be responsible for any remaining early retirement
supplement. Notwithstanding the foregoing, an early retirement
supplement shall not be paid from the Retirement Plan, and Buyer's
Pension Plan shall be solely responsible for any early retirement
supplement payable with respect to an Active Union Represented
Employee retiring on or after the Closing Date if such employee's
involuntary retirement or termination of employment is the result of
any event which requires notice to be given to such employee pursuant
to WARN, including any reduction in force, mass layoff or plant
closing; provided, that this exclusion shall not apply to any employee
whose retirement or termination of employment occurs in the ordinary
course of business, is connected with the transfer of the heavy truck
business to the Roanoke facility, or where the employee has been
offered a comparable position within the organization and has declined
the offer.

(vi) Buyer and the Sellers agree that the provisions of this
Section 6.1(c) are intended to be consistent with applicable law,
including, without limitation, the requirements of Section 414(l)
of the Code. Accordingly, nothing in this Section 6.1(c) is
intended to result in a transfer from the Retirement Plan to
Buyer Pension Plan within the meaning of Section 414(l) of the
Code.

(d) DEFINED CONTRIBUTION RETIREMENT PLANS. At Closing, Buyer
shall assume sponsorship of the A. O. Smith Employee 401(k) Savings
Plan, A. O. Smith Employee Savings Plan and A. O. Smith Savings
Investment Plan. In addition, Buyer shall establish or designate a
defined contribution retirement plan that is substantially comparable
to the portion of the A. O. Smith Corporation Savings and Security
Plan covering Union Represented Employees ("BUYER SAVINGS PLAN"). On
or before the last day of the remedial amendment period described in
Section 401(b) of the Code and the regulations thereunder, Buyer shall
file with the Internal Revenue Service an appropriate application for
a determination letter holding that Buyer Savings Plan satisfies the
applicable requirements for qualification and exemption under Sections
401(a) and 501(a) of the Code, and shall, no later than the last day
of such remedial amendment period, take such corrective action as may
be necessary in order to secure such determination letter. Upon
evidence satisfactory to the Sellers relative to the establishment of
Buyer Savings Plan and the filing of a determination letter
application, the Sellers shall cause the trustee of the A. O. Smith
Corporation Savings and Security Plan to transfer the account balances
of Active Union Represented Employees to Buyer Savings Plan.

-41-

<PAGE>

(e) WELFARE BENEFIT PLANS AND ARRANGEMENTS. The Sellers (or the
Sellers' third party administrator or insurer) shall process and pay
all eligible claims for health, dental, prescription drug, life, and
accidental death and dismemberment benefits on behalf of Union
Represented Employees that are incurred prior to the Effective Time
(including, without limitation, benefits for claims incurred prior to
the Effective Time but for which the claim is received on or after the
Effective Time). Buyer (or Buyer's third party administrator or
insurer) shall process and pay all eligible claims for benefits on
behalf of Union Represented Employees (including Union Represented
Employees who retired or terminated employment prior to the Effective
Time) that are incurred at or after the Effective Time. The Sellers
shall use their reasonable best efforts (i) to assign or otherwise
transfer to Buyer any group policy or Contract governing welfare
benefits (including, but not limited to, those relating to health,
dental, prescription drug, life, accidental death and dismemberment,
and sickness and accident) for Union Represented Employees that is
maintained on a stand-alone basis, and (ii) in the case of a group
policy or Contract governing welfare benefits (including, but not
limited to, those relating to health, dental, prescription drug, life,
accidental death and dismemberment, and sickness and accident) for
Union Represented Employees but maintained under a Contract or policy
covering both Union Represented and Employees and other employees of
the Sellers, to assign or otherwise transfer to Buyer the portion of
the policy or Contract covering Union Represented Employees.

6.2. HOURLY PAID NON-UNION REPRESENTED EMPLOYEES AND SALARIED EMPLOYEES.

(a) EMPLOYMENT. All of the hourly paid Division Employees not
represented by a collective bargaining agent and all of the Division
Employees who are paid on a salaried or commission basis
(collectively, "NON-REPRESENTED EMPLOYEES") who are in active
employment status on the day immediately prior to the Closing Date
("ACTIVE NON-REPRESENTED EMPLOYEES") shall cease their employment
status with the Sellers at the Effective Time and simultaneously
therewith shall be offered employment by Buyer under terms that,
except as provided in SECTION 6.2(c), recognize prior employment with
the Sellers (or their predecessors) for purposes of all Benefit Plans,
Benefit Arrangements or other seniority based programs or benefits.
For purposes of this SECTION 6.2, the term "ACTIVE EMPLOYMENT STATUS"
includes any individual not actively at work due to illness, short-
term disability or sick leave, authorized leave of absence, layoff for
lack of work, or service in the Armed Forces of the United States but
does not include any individual not actively at work due to
retirement, resignation, permanent dismissal or long-term disability.
In addition, any Non-Represented Employee who is not an Active Non-
Represented Employee in accordance with the foregoing provisions of
this SECTION 6.2 ("NON-REPRESENTED NON-ACTIVE EMPLOYEES") but who has
a right to return to employment under the applicable policies of the
Sellers or pursuant to any applicable law shall be extended an

-42-

<PAGE>

employment offer by Buyer at the time each such employee is eligible to
return to work or additional employment in the applicable job
classification is deemed warranted by Buyer. If such Non-Represented Non-
Active Employee is employed by Buyer pursuant to the preceding sentence,
then such employee shall become an Active Non-Represented Employee as of
the date the person returns to employment.

(b) WAGE RATES. Buyer shall make each Active Non-Represented
Employee an offer an employment at the same current base rate of pay
or salary, as applicable, that was in effect for such employee
immediately prior to the Closing Date, provided that Buyer may adjust
any individual Non-Represented Employee's wage rate at any time after
employment is accepted.

(c) DEFINED BENEFIT PENSION PLANS. The Sellers shall retain all
of the assets of the Retirement Plan and the A. O. Smith Enterprises
Ltd. Stratford Plant Industrial Pension Plan ("CANADIAN PLAN") and the
liabilities for benefits accrued through the Closing Date under such
plans. Effective as of the Effective Time, Buyer shall establish for
Active Non-Represented Employees a defined benefit pension plan or
plans that is or are substantially comparable to the Retirement Plan
as in effect for Non-Represented Employees. Buyer's plan shall
recognize employment with the Sellers for purposes of eligibility and
vesting under Buyer's plan, but need not recognize employment with the
Sellers for purposes of benefit accrual. Effective as of the
Effective Time, Seller shall amend the Retirement Plan and the
Canadian Plan to provide (1) an Active Non-Represented Employee shall
be entitled to commence his benefit under the Retirement Plan or
Canadian Plan only if the employee, in addition to satisfying the
otherwise applicable requirements for commencement of his benefit, has
retired or terminated from employment with Buyer, and (2) an Active
Non-Represented Employee's service with Buyer shall be considered for
purposes of determining the employee's eligibility for early
retirement benefits under each plan (but not for purposes of accruing
additional benefits thereunder).

(d) DEFINED CONTRIBUTION RETIREMENT PLANS. (i) Effective as of
the Effective Time, Buyer shall establish for Active Non-Represented
Employees (or otherwise include Active Non-Represented Employees in) a
defined contribution plan or plans that either continue a level of
benefits provided by the Sellers or that provide benefits comparable
to those provided by Buyer to its non-represented employees ("BUYER
DEFINED CONTRIBUTION PLAN"); provided that in the case of an Active
Non-Represented Employee who either participated in or was eligible to
participate in the A.O. Smith Profit Sharing Retirement Plan, the
minimum level of employer matching contributions under Buyer Defined
Contribution Plan for the period beginning on January 1, 1997 and
ending on December 31, 1997 shall be 35 cents for each dollar of pre-
tax contributions (including pre-tax contributions made between
January 1, 1997 and the Effective Time under the A.O. Smith Profit

-43-

<PAGE>

Sharing Retirement Plan) up to six percent of the employee's compensation
for the year (including compensation paid between January 1, 1997 and the
Effective Time by Sellers). Buyer's plan shall recognize employment with
the Sellers for purposes of eligibility and vesting under Buyer's plan.

(ii) On or before the last day of the remedial amendment period
described in Section 401(a) of the Code and the regulations
thereunder, Buyer shall file with the Internal Revenue Service an
appropriate application for a determination letter holding that Buyer
Defined Contribution Plan satisfies the applicable requirements for
qualification and exemption under Section 401(a) and 501(a) of the
Code, and shall, no later than the last day of such remedial amendment
period, take such corrective action as may be necessary in order to
secure such determination letter. Upon evidence satisfactory to the
Sellers relative to the establishment of Buyer Defined Contribution
Plan and the filing of a determination letter application, the Sellers
shall cause the trustee of the applicable A.O. Smith defined
contribution plan to transfer the account balances of Active Non-
Represented Employees to Buyer's Defined Contribution Plan; provided,
that participant loans shall be transferred in-kind.

(e) WELFARE BENEFIT PLANS AND ARRANGEMENTS. The Sellers (or the
Sellers' third party administrator or insurer) shall process and pay
all eligible claims for health, dental, prescription drug, life, and
accidental death and dismemberment benefits on behalf of Non-
Represented Employees that are incurred prior to the Effective Time
(including, without limitation, benefits for claims incurred prior to
the Effective Time but for which the claim is received on or after the
Effective Time). Buyer (or Buyer's third party administrator or
insurer) shall process and pay all eligible claims for benefits on
behalf of Non-Represented Employees (including Non-Represented
Employees who retired or terminated employment prior to the Effective
Time) that are incurred on or after the Effective Time. The Sellers
shall use their reasonable best efforts (i) to assign or otherwise
transfer to Buyer any group policy or Contract governing welfare
benefits (including, but not limited to, those relating to health,
dental, prescription drug, life, accidental death and dismemberment,
and sickness and accident) for Non-Represented Employees that is
maintained on a stand-alone basis, and (ii) in the case of a group
policy or Contract governing welfare benefits (including, but not
limited to, those relating to health, dental, prescription drug, life,
accidental death and dismemberment, and sickness and accident) for
Non-Represented Employees but maintained under a Contract or policy
covering both Non-Represented and Employees and other employees of the
Sellers, to assign or otherwise transfer to Buyer the portion of the
policy or Contract covering Non-Represented Employees.

(f) SEVERANCE BENEFITS. Effective as of the Effective Time,
Buyer shall establish and maintain for a period of at least twelve
(12) months a severance pay plan that recognizes prior employment with
the Sellers (or their predecessors) and

-44-

<PAGE>

that provides severance benefits under the same conditions and at least as
generous in amount as those provided under the A. O. Smith Severance Pay
Plan identified on SCHEDULE 3.1(N). In addition, Buyer agrees to indemnify
the Sellers for all severance benefits payable by the Sellers under the
A. O. Smith Severance Pay Plan and costs incurred in connection with such
benefits (including, without limitation, attorneys' fees incurred in
defending against a claim for severance benefits) to the extent that any
such claim for severance benefits is based, in whole or in part, on Buyer's
failure or refusal to offer employment to Division Employees in accordance
with the terms of this SECTION 6 or the termination of any Division
Employee within twelve (12) months after the Closing.

(g) BONUS PAYMENTS. Buyer shall continue Seller's bonus plans
that are in effect as of the Effective Time for the duration of the
1997 calendar year and shall pay bonuses in accordance therewith.
Buyer and Seller shall cooperate in the determination of the bonuses
that are payable thereunder for 1997. Seller shall promptly reimburse
Buyer for the portion of the 1997 bonuses paid by Buyer which is
attributable to the pre-closing period, such proportion shall be
determined by dividing the number of calendar days preceding the
Effective Time by 365.

(h) SECTION 125 PLAN. Buyer shall assume, and Seller shall
transfer, the portion of the A.O. Smith Flexible Benefits Plan which
is attributable to the 1997 plan year participation of Business
employees.

(i) EXECUTIVE RETIREMENT BENEFITS. Seller shall remain liable
for obligations accrued under the A.O. Smith Corporation Executive
Life Insurance Plan and the A.O. Smith Supplemental Benefit Plan with
respect to any employee of the Business and Buyer shall not assume any
liability or obligation with respect thereto.

(j) WORKERS' COMPENSATION OBLIGATIONS. Seller shall remain
liable for all workers' compensation obligations which relate to
injuries incurred prior to the Effective Time; provided that in the
case of an injury for which the date of incurrence cannot be
ascertained (including, without limitation, occupational disease or
repetitive motion claims), Seller shall be liable only for claims
filed prior to the Effective Time and Buyer shall be liable for all
claims filed on or after the Effective Time.

6.3. REQUIRED NOTICE. Buyer will provide any plant closing notices as
required under federal, provincial, state or local law (including without
limitation, the Warn Act) as a result of the transactions contemplated in this
Agreement, and Buyer and Parents shall indemnify, defend and hold the Sellers
harmless from and against any and all liability incurred by the Sellers, or
either one of them, as a result of Buyer's failure to provide such notice on a
timely and effective basis.

-45-

<PAGE>

6.4. VACATION. With respect to any accrued but unused vacation time
to which any Active Non-Represented Employee is entitled pursuant to the
vacation policy applicable to such employee immediately prior to the Closing
Date (the "VACATION POLICY"), Buyer shall allow such employee to use such
accrued vacation; provided, however, that if Buyer deems it necessary to
disallow such employee from taking such accrued vacation, then Buyer shall be
liable for and pay in cash to each such employee an amount equal to such
vacation time in accordance with terms of the Vacation Policy.

6.5. PAYROLL TAX. The Company and Buyer agree that, with respect to
Division Employees who are employed by Buyer following to Closing pursuant to
this ARTICLE 6 ("CONTINUING EMPLOYEES"), they respectively meet the definitions
of "predecessor" and "successor" as defined in Revenue Procedure 96-60. For
purposes of reporting employee remuneration to the IRS on Forms W-2 and W-3 for
the calendar year within which the Closing Date occurs, the Company and Buyer
will utilize the "Standard Procedure" described in Section 4 of Revenue
Procedure 96-60. The Company and Buyer agree that, for purposes of reporting
employee remuneration for Federal Insurance Contributions Act ("FICA") purposes
for the calendar year within which the Closing Date occurs, the Company meets
the definition of "predecessor" and Buyer meets the definition of "successor" as
defined in IRS Regulation Section 31.3121(a)(1)-1(b). The Company will supply
to Buyer, with respect to all Continuing Employees, all cumulative payroll
information as of the Closing Date that Buyer shall require in order to employ
IRS Regulation Section 31.3121(a)(1)-1(b).

7. TERMINATION.

7.1. GENERAL. This Agreement may be terminated and the transactions
contemplated herein may be abandoned,

(a) by mutual consent of Buyer and the Company;

(b) by the Company if any of the conditions set forth in
SECTION 5.2 shall have become incapable of fulfillment and shall not
have been waived by the Company;

(c) by Buyer if any of the conditions set forth in SECTION 5.1
shall have become incapable of fulfillment and shall not have been
waived by Buyer; or

(d) by either party if the Closing has not occurred on or prior
to June 30, 1997;

PROVIDED, that if a party seeking termination pursuant to CLAUSE (b), (c) or (d)
is in breach in any material respect of any of its representations and
warranties, covenants or agreements contained in this Agreement, that party may
not terminate the Agreement on the basis of such breach.

-46-

<PAGE>

7.2. POST-TERMINATION OBLIGATIONS. In the event of termination by the
Company or Buyer pursuant to SECTION 7.1, written notice thereof shall forthwith
be given to the other party and the transactions contemplated by this Agreement
shall be terminated, without further action by any party, and:

(a) Buyer and Parents shall return all documents and copies and
other materials received from or on behalf of the Sellers relating to
the transactions contemplated hereby, whether so obtained before or
after the execution hereof, to the Sellers;

(b) all information received or accumulated by Buyer and Parents
shall be treated as "Proprietary Information" in accordance with the
Letter Agreement (as defined in SECTION 9.6 and as modified or
supplemented by this Agreement and the Access Agreement) which shall
remain in full force and effect, as modified or supplemented by this
Agreement and the Access Agreement, notwithstanding the termination of
this Agreement; and

(c) to the extent required thereunder, Buyer and Parents shall
pay all fees to the Company required under SECTION 4.8(b).

7.3. NO LIABILITIES IN EVENT OF TERMINATION. In the event of any
termination of this Agreement as provided in SECTION 7.1, this Agreement shall
forthwith become wholly void and of no further force and effect and there shall
be no liability on the part of Buyer or the Sellers, except that the respective
obligations of Buyer, Parents and/or the Sellers, as the case may be, under
SECTIONS 4.1, 4.8(b), 9.1, 9.2 and SECTION 7.2 of this Agreement shall remain in
full force and effect, and except that termination shall not preclude any party
from suing the other party for breach of this Agreement or impair the right of
any party to compel specific performance by another party of its obligations
under SECTIONS 4.1, 4.8(b), 9.1, 9.2 and SECTION 7.2 of this Agreement.

8. TRANSACTIONS SUBSEQUENT TO CLOSING.

8.1. POST-CLOSING ACCESS TO INFORMATION AND ASSISTANCE.

(a) For a period of seven (7) years after the Closing Date, each
party hereto shall provide, and shall cause its appropriate personnel
to provide, when reasonably requested to do so by another party,
access to all tax, financial and accounting records and any other
records transferred to Buyer or retained by the Sellers, as
applicable, in accordance with this Agreement (other than in
connection with a dispute between the parties relating to the
transactions contemplated by this Agreement) and the right to make
copies or extracts therefrom at its expense. Neither party shall, nor
shall it permit its affiliates to, intentionally dispose of, alter or
destroy any such books, records and other data without giving thirty
(30) days' prior written notice to the other party and permitting the
other parties hereto,

-47-

<PAGE>

at their expense, to examine, duplicate or repossess such records, files,
documents and correspondence.

(b) Each party agrees to cooperate with the other party in the
preparation for and prosecution of the defense of any claim, action or
cause of action arising out of or relating to any Liability relating
to the Business which arose prior to the Closing and which, in the
case of Buyer and Parents, has been assumed by Buyer and Parents, or,
in the case of the Sellers, has been retained by the Sellers,
including, without limitation, by making available evidence within the
cooperating party's control and persons needed as witnesses employed
by the cooperating party, as reasonably needed for such defense.
Except as provided in SECTION 9.3, the requesting party shall
reimburse the cooperating party for its actual out-of-pocket costs
relating to its cooperation under this SECTION 8.1(B) and for a pro
rata portion of the salary (including fringe benefits, with such pro
rata portion determined based upon the time spent in connection with
such cooperation) and for travel and subsistence expenses directly
relating to the cooperation of any of the cooperating party's
employees who assist the requesting party.

8.2. FURTHER AGREEMENTS. The Sellers authorize and empower Buyer on
and after the Closing Date to receive and open all mail received by Buyer
relating to the Business or the Assets and to deal with the contents of such
communications in any proper manner. The Sellers shall promptly deliver to
Buyer any mail or other communication received by them after the Closing Date
pertaining to the Business or the Assets and any cash, checks or other
instruments of payment to which Buyer is entitled. Buyer shall promptly deliver
to the Sellers any mail or other communication received by it after the Closing
Date pertaining to the assets and liabilities described in SECTIONS 1.2 AND 1.5,
and any cash, checks or other instruments of payment in respect thereof.

8.3. NO COMPETITION.

(a) During the period commencing on the Closing Date and ending
on the fifth anniversary of the Closing Date, the Sellers will not,
and will cause any person that is a subsidiary of either or both of
them not to, directly or indirectly, conduct or engage in the design,
engineering, manufacturing and marketing of structural and suspension
components, structural and suspension assemblies and structural and
suspension modules for light vehicles, medium trucks and heavy trucks
(the "RESTRICTED BUSINESS"). Notwithstanding the foregoing, neither
the Sellers nor any of their existing or future subsidiaries shall be
in violation of this SECTION 8.3 if either or both of them continue to
operate the assets excluded from sale hereunder pursuant to
SECTION 1.2 in substantially the same manner as their current
operations.

(b) For a period of one year from the Closing Date, the Sellers
will not, without the prior written consent of Buyer, directly or
indirectly contact or solicit

-48-

<PAGE>

for the purpose of offering employment to or hiring (whether as an
employee, consultant, agent, independent contractor or otherwise) any
management or other key employee employed by the Sellers in the Business at
any time during the 180 days prior to the Closing Date other than those
identified on SCHEDULE 8.3, but the foregoing shall not prohibit
solicitations to the public in general.

8.4. ASSISTANCE AND COOPERATION REGARDING TAXES AND FINANCIAL
STATEMENTS. After the Closing Date, Buyer shall cooperate and shall cause its
appropriate personnel to cooperate in providing the Sellers with such
information and assistance with respect to financial and tax matters as the
Sellers shall reasonably request to enable (i) the Sellers to prepare their
returns and pay Taxes, including all Taxes related to the Sellers' operation of
the Division prior to the Closing Date for which Buyer is not otherwise
responsible pursuant to this Agreement and (ii) the Company to prepare its
consolidated financial statements. The Company shall reimburse Buyer for its
actual out-of-pocket costs relating to its cooperation under this SECTION 8.4
and for a pro rata portion of the salary (including fringe benefits, with such
pro rata portion determined based upon the time spent in connection with such
cooperation) and for travel and subsistence expenses directly relating to the
cooperation of any of Buyer's employees who assist the Sellers under this
SECTION 8.4.

8.5. CORPORATE NAMES.

(a) USE OF NAMES. Effective from and after the Closing and up
to the date six (6) months from the Closing Date, the Company hereby
grants Buyer the nonexclusive, royalty-free right to use (without
right of sublicense) the name "A. O. Smith" or any derivation thereof
and any corporate symbols or logos related thereto, but only in
connection with the conduct and operation of the Business relating to:

(i) INVENTORIES. The use of existing Inventories which
bear the name "A. O. Smith" or derivations thereof; and

(ii) SUPPLIES. The use of existing stationery, packaging,
shipping, invoices, purchase orders and marketing materials
("SUPPLIES") which bear the name "A. O. Smith" or derivations
thereof; PROVIDED, HOWEVER, that Buyer shall overprint,
overstamp, apply on an appropriate label or otherwise obliterate
such names and logos on such items or otherwise indicate that
Buyer, and not the Sellers, is the party contracting or otherwise
performing in connection with such Supplies;

PROVIDED, HOWEVER, that neither Buyer, China JV (following the
Closing) nor Brazil Sub (following the Closing) shall represent or
hold itself out as representing the Sellers or any one of them and
PROVIDED FURTHER, HOWEVER, that Buyer and Parents shall indemnify and
hold harmless the Sellers from any loss, damage, cost or expense
(including reasonable attorneys' fees) incurred by the Sellers as a
result

-49-

<PAGE>

of Buyer's, China JV's (following the Closing) or Brazil Sub's (following
the Closing) use of such names or symbols or logos. The rights provided
for in SECTION 8.5(a)(i) are subject to the Company's right to require the
Buyer to take such reasonable action as the Company deems necessary to
maintain appropriate quality control of the Inventories.

(b) CHANGE OF NAME. Buyer acknowledges that, except for the
limited right granted by this Section, it has no right or interest in
the name "A. O. Smith" or "Smith". Prior to the date sixty (60) days
from the Closing Date, Buyer shall take all such action as is
necessary to cause China JV and Brazil Sub to take any and all such
action and to make all filings as necessary to change their corporate
names to names that do not contain "A. O. Smith" or "Smith" or any
substantially or confusingly similar name or reference and, except as
provided in SECTION 8.5(a), to thereafter cease from using any name,
trade name, trademark or service mark or any related logos
incorporating "A. O. Smith" or "Smith" in any manner whatsoever.

8.6. COMPANY'S INSURERS OR ADMINISTRATORS.

(a) Buyer acknowledges that the Company or an affiliate thereof
may be making payments after the Closing to the Company's insurers or
claims processors or administrators ("COMPANY'S INSURERS") in respect
of (i) the self-insured retention portion of any workers compensation,
product liability, general liability and automobile liability claims
relating to the Company or any of its affiliates made or to be made in
the future in respect of periods prior to the Closing, and (ii)
medical and other claims and related administrative costs relating to
the Company or any of its affiliates made or to be made in the future
in respect of periods prior to the Closing, in each case including
associated claims handling charges, for which the Company or any of
its affiliates is responsible with respect to Company's Insurers and
for which Buyer and Parents have assumed the Liability pursuant to
SECTION 1.4 (collectively, "CLAIMS"). Without in any way limiting the
generality of SECTION 1.4, Buyer and Parents will pay each Claim or
reimburse the Company therefor within five (5) days after the Company
advises Buyer of the amount thereof and provides Buyer with an invoice
from Company's Insurers or other documentation reasonably satisfactory
to Buyer to the Claim (the "ADVICE DATE"). If Buyer or Parents fail
to pay any Claim or reimburse the Company therefor within five (5)
days of the Advice Date, then Buyer and Parents shall pay to the
Company interest on the amount thereof at an annual rate equal to the
Applicable Rate from and including the Advice Date to but not
including the date of payment.

(b) The Sellers shall take all legally proper and appropriate
actions (i) to maintain the effectiveness and enforceability of each
Insurance Policy with respect to insurance coverage for events
occurring, or facts existing, on or prior

-50-

<PAGE>

to the Closing Date, including without limitation satisfying all conditions
precedent and all other obligations under such Insurance Policies in each
case that are within the control of the Sellers, and (ii) following the
Closing at the written request of Buyer, to obtain the proceeds of such
insurance coverage under each Insurance Policy, provided that Buyer has
delivered its request on a timely basis and delivered to the Sellers all
information reasonably requested by the Sellers; provided, however, that
this SECTION 8.6(B) shall not obligate the Sellers to commence litigation
unless (A) Buyer requests the Sellers to do so and agrees to bear the
Sellers' reasonable expenses incurred in pursuing such litigation and (B)
the Sellers conclude, in the exercise of their reasonable business
judgement based on advice of counsel, that litigation is a viable remedy.
If the Sellers receive notice of a matter as to which it is reasonably
apparent that Buyer would be reasonably likely to request the Sellers to
obtain proceeds under an Insurance Policy with respect to the matter under
this SECTION 8.6(B) assuming Buyer was aware of such matter, then Buyer
will be deemed to have submitted a request to the Sellers pursuant to
CLAUSE (II) above.

(c) With respect to Insurance Policies covering business
interruptions, if an event is occurring, or is reasonably likely to
occur, prior to the Effective Time that would entitle the Sellers to
any insurance proceeds under such Insurance Policies, the Sellers
shall (i) take all legally proper and appropriate actions to maintain
the effectiveness and enforceability of such Insurance Policies until
such event, or the likelihood of such event, has ceased and (ii) at
the Closing in respect of any proceeds received prior to the Closing
and immediately as to proceeds received thereafter, deliver to Buyer
all proceeds of such coverage that relate to any period of time
following the Closing Date. The Sellers have complied, or will comply
within the requisite period, with the "Reporting Requirements" of the
applicable "Business Interruption Endorsement."

8.7. CERTAIN POST-CLOSING SERVICES. At the Closing, Buyer and the
Sellers shall enter into an agreement in the form of EXHIBIT 8.7 (the
"TRANSITION SERVICES AGREEMENT") pursuant to which the Sellers shall perform
certain services for Buyer and Buyer shall perform certain services for the
Sellers on the terms and conditions set forth in the Transition Services
Agreement and such other terms and conditions to which the Sellers and Buyer
agree, subject to the following: (a) Buyer shall be obligated to provide
services relating to the defense of the matters described in items 2 and 3 of
EXHIBIT 1.5(h) until their resolution; (b) the Sellers' obligation to provide
services shall expire no later than December 31, 1997; (c) the Sellers shall be
obligated to provide services only in respect of all or a portion of the matters
identified in item 2.c. of SCHEDULE 3.1(f); and (d) the charge for providing
services shall reflect the provider's actual out-of-pocket costs relating to the
provision of such services and a pro rata portion of the salary (including
fringe benefits, with such pro rata portion determined based upon the time spent
in connection with providing services) and travel and subsistence expenses
directly relating to the provision of services by any of the provider's
employees who assist in providing services. Subject

-51-

<PAGE>

to the foregoing, prior to the Closing, the Sellers and Buyer shall negotiate in
good faith with respect to the remaining terms of the Transition Services
Agreement.

8.8. FURTHER ASSURANCES. From time to time after the Closing Date,
the Sellers, on the one hand, and Buyer, on the other hand, will execute and
deliver, or cause to be executed and delivered, such other instruments of
conveyance, assignment, transfer and delivery and will take such other actions
as the other may reasonably request in order to more effectively consummate the
transactions contemplated hereby, such as to transfer, convey, assign, and
deliver to Buyer any of the Assets, or enable Buyer and Parents to discharge the
Assumed Liabilities, or enable Buyer to exercise and enjoy all rights, benefits
and obligations of the Sellers with respect thereto.

8.9. LICENSE OF CERTAIN PATENTS. On the Closing Date, Buyer and the
Sellers shall enter into a License Agreement in the form attached hereto as
EXHIBIT 8.9 .

8.10. FINANCIAL STATEMENT AUDITS. If Buyer or Parents, or any one
of them, desires to have completed audited or interim financial statements for
the Business for any period commencing on or after January 1, 1994, then, at
Buyer's election, the Sellers shall request the Company's external auditors to
complete such statements at Buyer's expense and use reasonable best efforts to
cause such auditors to do so or allow Buyer's external auditors to complete such
statements at Buyer's expense.

8.11. LEASES.

(a) The Sellers, Parents and Buyers shall have a continuing
obligation to use all reasonable best efforts to take, or cause to be taken, all
action and to do, or cause to be done, and to cooperate fully with the other
party with respect to, all things necessary, proper or advisable (i) to cause
the lessors under the Equipment Leases to bifurcate such leases into leases
relating to equipment, machinery, vehicles or other tangible personal property
utilized primarily in the Business ("BUSINESS LEASES") and leases relating to
equipment, machinery, vehicles or other tangible personal property not relating
primarily to the Business ("OTHER LEASES"), (ii) to cause the Sellers to be
released from all Liabilities under the Business Leases, any Equipment Leases
where the lessor does not agree to such bifurcation and real estate leases with
respect to Leased Real Property identified on SCHEDULE 1.1(c) and (iii) to cause
Buyer to have no Liability under the Other Leases.

(b) Buyer or Parents shall not agree to any modifications or
amendments to any of the Equipment Leases or any of the real estate leases
identified on SCHEDULE 3.1(g) as to which the Sellers remain a party that
increase the Sellers' Liabilities or potential Liabilities thereunder,
including, without limitation, renewing any Equipment Lease as to any leased
asset, extending the term of an Equipment Lease in whole or as to any leased
asset, adding assets to any Equipment Lease, extending the term of any real
estate lease or exercising any option thereunder, without the prior written
consent of the Sellers. Notwithstanding the foregoing, and subject to the
continuing obligation of Buyer and Parents under SECTION 8.11(a)(ii), Buyer
shall be entitled

-52-

<PAGE>

to exercise the two consecutive five-year renewal options set forth in Section 3
of the lease dated February, 1989 and amended June 6, 1989, by and between FCBII
Limited Partnership, Lessor, and the Company.

(c) So long as Buyer has any Liability under Equipment Leases in
respect of any equipment, machinery, vehicles or other tangible personal
property not relating primarily to the Business ("RETAINED EQUIPMENT"), the
Sellers shall comply with all terms of the obligations under the Equipment
Leases with respect to the Retained Equipment (including without limitation the
obligation to make all payments pursuant to the Equipment Leases), and shall use
commercially reasonable best efforts to prevent and/or cure any defaults that
may arise under the Equipment Leases as a result of the Sellers' or their
affiliates' actions or inactions. The Sellers shall indemnify and hold harmless
Buyer and Parents with respect to any Liabilities arising in connection with the
Equipment Leases as to Retained Equipment or in connection with the Other
Leases. Buyer and Parents shall indemnify and hold harmless the Sellers with
respect to any Liabilities arising in connection with the Equipment Leases as to
equipment, machinery, vehicles or other tangible personal property utilized
primarily in the Business, in connection with the Business Leases or in
connection with real estate leases with respect to Leased Real Property
identified on SCHEDULE 1.1(c). Notwithstanding the foregoing, nothing set forth
herein shall prohibit Buyer from terminating any Equipment Leases after the
Closing Date provided that Buyer shall give the Sellers ninety days advance
written notice of its intent to do so.

(d) Notwithstanding SECTION 8.11(a), Buyer and the Sellers shall
have a continuing obligation to use all reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, and to cooperate
fully with the other party with respect to, all things necessary, proper or
advisable (A) to obtain an amendment of the lease, dated January 26, 1990, by
and between Harrison County Progress Corporation and the Company, and the
related Consent and Agreement dated January 23, 1990, by the Company in favor of
Prudential Insurance Company of America (together, the "CORYDON LEASE"), on
terms reasonably acceptable to Buyer and to the Sellers that shall have the
effect, without limitation, of releasing the Sellers from all obligations under
the Corydon Lease upon an assignment thereof to Buyer and deleting and/or
modifying the covenants in Article XI thereof in a manner reasonably acceptable
to Buyer and to the Sellers; (B) in the event either party shall reasonably deem
the alternative described in CLAUSE (A) unattainable, to pursue alternatives
reasonably acceptable to the Sellers and to Buyer (it being understood that,
depending upon the circumstances, the purchase of the property by Buyer and/or
prepayment of the related loan might be reasonable alternatives) that give Buyer
beneficial use of the property; and (C) in the event the Sellers and Buyer shall
fail to agree on, and consummate the actions required under, an alternative
under CLAUSE (A) or CLAUSE (B) prior to Closing, to obtain the lessor's consent
to the form of a sublease agreement for the property, complying with the terms
of Article XXIII of the Corydon Lease, requiring Buyer to comply with terms,
covenants and conditions substantially the same as those in the Corydon Lease
(including a covenant substantially the same as Section 11.3.5 thereof but
excluding the other covenants in Article XI thereof) and providing that the
Sellers shall not be liable to Buyer for any default under the Corydon Lease and
otherwise in a form reasonably acceptable to Buyer and to the Sellers, which
Buyer, Parents and the Company shall enter into at the Closing or as soon
thereafter as such

-53-

<PAGE>

consent is received; provided, however, that if the parties are not able to
obtain such consent, then (1) the beneficial interest in or to the Corydon Lease
(the "CORYDON BENEFICIAL RIGHTS") shall in any event pass as of the Closing Date
to Buyer under this Agreement and (ii) pending such consent, Buyer shall assume
or discharge the Liabilities of the Sellers under the Corydon Beneficial Rights
(to the extent such obligations are Assumed Liabilities) as agent for the
Sellers, and the Sellers shall act as Buyer's agent in the receipt of any
benefits, rights or interests received from the Corydon Beneficial Rights,
pursuant to SECTION 1.6.

8.12. TWI LICENSE AGREEMENT. Upon the written request of Buyer,
the Sellers shall use commercially reasonable best efforts to cause The Welding
Institute ("TWI"), pursuant to Section 2.4 of the License Agreement between the
Company and TWI dated February 20, 1996 (the "TWI AGREEMENT"), to grant Buyer a
license. Buyer and the Sellers shall share all fees, costs and payments
associated with obtaining such a license between Buyer and TWI in accordance
with SECTION 9.2. In the event that TWI gives written notice, that it has made
a good faith determination that such a license between Buyer and TWI would, in
the opinion of TWI, damage its legitimate business interests, the Sellers'
obligation under this SECTION 8.12 shall be considered terminated. In the event
the TWI Agreement is terminated or expires, the Sellers' obligation under this
SECTION 8.12 shall be considered terminated.

8.13. CERTAIN LITIGATION. The Company shall defend the litigation
described in item 2 of EXHIBIT 1.5(h) (the "VEHMA LITIGATION") in good faith.
Buyer shall nonetheless have the right to participate in the defense thereof and
to employ counsel, at its own expense, separate from the counsel employed by the
Company, it being understood, however, that the Company shall control the
defense of such litigation. Further, Parents and Buyer shall cooperate with the
Company in the defense of such litigation in accordance with SECTION 8.1(b).
Notwithstanding the Company's control of the defense of such litigation, (a) the
Company shall consult with Buyer regarding the defense of and the strategy with
respect to such litigation, (b) Buyer shall be free to actively monitor such
litigation, to review the files of the Company's counsel with respect thereto
(to the extent doing so will not nullify any available privileges) and to
provide input to the Company and the Company's counsel in connection therewith
and (c) the Company shall not consent to the entry of any judgment with respect
to such litigation or settle such litigation on terms that would impose any
nonmonetary relief on Buyer without the prior written consent of Buyer, which
consent shall not be unreasonably withheld or delayed.

8.14. CERTAIN CONTRACTS.

(a) Upon the written request of Buyer, the Sellers and Buyer
shall use their commercially reasonable best efforts to cause Fourth Shift
Corporation ("FOURTH SHIFT") to enter into agreements to amend the Volume
Purchase Agreement and Software License Agreement dated January 18, 1996,
between the Company and Fourth Shift (the "FOURTH SHIFT AGREEMENTS"), and to
enter into a new agreement with Buyer for the purposes of obtaining for Buyer
the rights under the Fourth Shift Agreements associated with China JV's site of
operations and preserving for the Company its other rights under the Fourth
Shift Agreements. The Sellers and Buyer shall

-54-

<PAGE>

share any fees, costs and payments associated with entering into such agreements
in accordance with SECTION 9.2.

(b) Upon the written request of Buyer, the Sellers and Buyer
shall use their commercially reasonable best efforts to establish or enter into
an arrangement to enable Buyer to be eligible to obtain the benefits of the
Joint Venture Agreement dated September, 1995, among the Company, Caterpillar,
Inc., U.S. Steel and the Lincoln Electric Company, for Fabrication of Advanced
Structures Using Intelligent and Synergistic Materials Processing, but the
Sellers shall not be obligated to forgo any benefits to which the Company is
entitled in connection with such joint venture. The Sellers and Buyer shall
share any fees, costs and payments associated with obtaining such benefits in
accordance with SECTION 9.2.

(c) As to the Contracts described in paragraphs h, i, j, k, n,
p, q, r and s of Item 2 of SCHEDULE 3.1(f), upon the written request of Buyer,
the Sellers shall introduce Buyer to the other parties to such Contracts and
provide reasonable assistance to Buyer in negotiating its own arrangements with
such parties, but the Seller shall not be obligated to agree to any amendments
to Contracts between the Sellers and such other parties.

9. MISCELLANEOUS.

9.1. PUBLICITY. The Sellers, Buyer and Parents agree that, from the
date hereof through the Closing Date, no public release or announcement
concerning the transactions contemplated hereby shall be issued or made by any
party without the prior consent of the other party (which consent shall not be
unreasonably withheld), except (i) as such release or announcement may, in the
judgment of the releasing party, be required by law or the rules or regulations
of any United States securities exchange, in which case the party required to
make the release or announcement shall allow the other party reasonable time to
comment on such release or announcement in advance of such issuance, and (ii)
that the Sellers may make such announcements to their employees.
Notwithstanding the foregoing, Buyer and the Company shall cooperate to prepare
a joint press release to be issued at the time of the signing of this Agreement
and on the Closing Date. The Sellers, Buyer and Parents agree to keep the terms
of this Agreement confidential, except to the extent required by applicable law
or for financial reporting purposes and except that the parties may disclose
such terms to their respective accountants and other representatives as
necessary in connection with the ordinary conduct of their respective businesses
(so long as such persons agree to keep the terms of this Agreement
confidential).

9.2. FEES AND EXPENSES. Except as otherwise stated in this Agreement
or as set forth below, all expenses incurred by the parties hereto shall be
borne solely and entirely by the party that has incurred such expenses:

TITLE INSURANCE PREMIUMS. All premiums for the issuance of title
insurance policies on the Sellers' owned or leased real property conveyed
pursuant to this Agreement and the cost of any surveys performed on such
property shall be borne and paid for exclusively by Buyer.

-55-

<PAGE>

(b) TRANSFER TAXES AND RECORDING EXPENSES. Buyer and Parents,
jointly and severally, on the one hand, and the Sellers, jointly and
severally, on the other hand, shall each pay 50% of all sales, transfer,
motor vehicle, registration or similar Taxes and recording expenses, and
any consent fees, royalties or similar payments, if any, required to be
paid in connection with the transfer of the Assets (including any interest
charge, penalty or addition to tax with respect thereto) without regard to
whether such Taxes or expenses are imposed on Buyer or the Sellers, or any
one of them, except that (i) Buyer shall pay 100% of the HSR Act filing fee
and (ii) neither party shall be liable for consent fees, royalties or
similar payments incurred without the party's consent, which consent shall
not be unreasonably withheld or delayed.

9.3. INDEMNIFICATION.

(a) INDEMNIFICATION BY THE COMPANY.

(i) Subject to the terms and conditions of this
SECTION 9.3, the Company shall indemnify, defend and hold
harmless Buyer and Parents, and their directors, officers,
employees and controlling persons, from and against all Losses
(as defined below) asserted against, resulting to, imposed upon
or incurred by any such person, directly or indirectly, by reason
of or resulting from (A) any Liabilities described in
SECTION 1.5, (B) any breach of the Surviving Representations, (C)
subject to SECTION 4.9, any breach of any covenant or agreement
made by the Sellers contained in this Agreement, (D) the matters
described on EXHIBIT 9.3, (E) the matters set forth on
SCHEDULE 3.1(O), or (F) any business interruption Losses of Buyer
attributable to any period after the Closing arising out of any
casualty, loss or damage to any material Assets prior to the
Closing Date, but the Company's obligation under this CLAUSE (F)
shall be limited to the amount of the proceeds the Sellers
receive in respect of any such period under Insurance Policies
covering business interruptions. As used in this Agreement, the
term "LOSS" or "LOSSES" shall include (1) all Liabilities; (2)
all losses, damages (BUT EXCLUDING consequential damages, lost
profits or punitive damages other than those awarded to a third
party), judgments, awards, penalties and settlements; (3) all
demands, claims, suits, actions, causes of action, proceedings
and assessments, whether or not ultimately determined to be
valid; and (4) all costs and expenses (including, without
limitation, interest (including prejudgment interest in any
litigated or arbitrated matter), court costs and fees and
expenses of attorneys and expert witnesses) of investigating,
defending or asserting any of the foregoing. Notwithstanding
such exclusion from "Losses" of consequential damages and lost
profits, "Losses" will include the amount by which Buyer's
profits decrease due to a permanent loss of revenues by Buyer
(without limitation, a decrease in certain revenues in one time
period that is offset by the recovery of those certain revenues
in one or more other time periods shall

-56-

<PAGE>

not constitute a permanent loss of revenue) and/or an increase in
Buyer's expenses, in either case as a result of an interruption in
Buyer's ability to conduct any manufacturing or production operation
for any period of time at any Facility where the cause of the
interruption is due to a matter as to which Buyer is entitled to
indemnification hereunder provided that Buyer has taken reasonable
actions to mitigate such effects to the extent required by law. That
Losses of Buyer for which Buyer is entitled to indemnification under
SECTION 9.3(a)(i)(b) also constitute Assumed Liabilities shall not
preclude Buyer's right to indemnification under SECTION 9.3(a)(i)(b).

(ii) The Company's obligations under SECTION 9.3(a)(i) shall
be subject to the following general limitations and other terms:

(A) Buyer shall have no right to indemnification under
SECTION 9.3(a)(i)(b) or SECTION 9.3(a)(i)(e) with respect to any
Loss or alleged Loss if Buyer requested a reduction in the Net
Book Value reflected on the Adjusted Closing Statement on account
of any matter forming the basis for such Loss or alleged Loss,
unless there was no amount reflected on the Adjusted Closing
Balance (excluding footnotes thereto) on account of the matter
due to the fact that reflecting an amount on the Adjusted Closing
Statement with respect to such matter would not have been in
accordance with GAAP, or if Buyer would have been precluded from
requesting such a reduction in the Net Book Value due to the
provisions of SECTION 2.3(C) even if the Company and/or Buyer had
knowledge of the matter forming the basis for such Loss or
alleged Loss on the Closing Date;

(B) if a reserve (in the form of an accrued Liability
or an offset to an Asset or similar item) was reflected on the
Adjusted Closing Statement relating to any matter for which Buyer
would otherwise be entitled to indemnification under
SECTION 9.3(a)(i), then the calculation of Buyer's Losses in
respect of such matter shall be reduced by the sum of the full
amount of the reserve as reflected in the calculation of Net Book
Value on the Adjusted Closing Statement LESS any previous
reductions pursuant to this CLAUSE (B);

(C) in determining the existence of a breach of the
Sellers' representations and warranties as to the matters set
forth in SECTION 3.1(o) for purposes of this SECTION 9.3, no
effect will be given to items set forth on SCHEDULE 3.1(o) or any
other Schedule hereto as exceptions to such representations and
warranties;

(D) the Company's obligations pursuant to
SECTION 9.3(a)(i)(b) shall terminate as to each Surviving
Representation when such Surviving Representation

-57-

<PAGE>

terminates pursuant to SECTION 3.3 and the Company's obligations
pursuant to SECTION 9.3(a)(i)(e) shall terminate on the third
anniversary of the Closing; PROVIDED, HOWEVER, that such obligations
shall not terminate with respect to any item as to which Buyer shall
have, prior to the expiration of the applicable period, previously
made a claim by delivering an Indemnification Notice (as defined in
SECTION 9.3(c)); and

(E) without expanding liability the Company would
otherwise have pursuant to this SECTION 9.3(a), the Company shall
not have any liability under SECTION 9.3(a)(i)(b) or SECTION
9.3(a)(i)(e) in respect of Losses to the extent arising out of
Buyer's operation of the Business after the date 45 days after
the Closing.

(iii) The Company's obligations under SECTION
9.3(a)(i)(b) and SECTION 9.3(a)(i)(e) in respect of Losses for
which the Company may be liable in accordance with, and
notwithstanding the limitations set forth in, SECTION 9.3(a)(ii)
shall be subject to the following additional limitations:

(A) the Company shall not have any liability for any
Losses resulting from a claim with respect to any particular
breach to the extent such Losses are less than $250,000, provided
that (1) if the Losses related to such claim equal or exceed
$250,000, then the Company (subject to the other provisions of
this SECTION 9.3(a)(iii)) shall be liable for Losses related
thereto only to the extent such Losses exceed $250,000 and (2) in
each case, any claim or series of claims arising out of or
relating to the same, substantially similar or substantially
related facts, circumstances, occurrences, transactions or
conditions shall constitute one claim with respect to any
particular breach;

(B) the Company shall not have any liability in
respect of Buyer Environmental Losses for which the Company may
be liable notwithstanding the limitation set forth in CLAUSE (A)
above unless such Buyer Environmental Losses are incurred in
accordance with SECTION 9.3(f), and in such case the Company
shall have liability only if the aggregate of all such Buyer
Environmental Losses for which the Company would, but for this
CLAUSE (B), be required to indemnify Buyer (excluding without
limitation Losses for which the Company has no liability as a
result of CLAUSE (A) above) exceeds on a cumulative basis an
amount equal to $5,000,000, at which point the Company, subject
to CLAUSE (E) of this SUBSECTION (a)(iii), shall indemnify Buyer
for 70% of such Losses, but only to the extent such Losses exceed
$5,000,000;

-58-

<PAGE>

(C) the Company shall not have any liability in
respect of Customer Losses for which the Company may be liable
notwithstanding the limitation set forth in CLAUSE (A) above
unless such Customer Losses are incurred in accordance with
SECTION 9.3(g);

(D) the Company shall not have any liability in
respect of Customer Losses for which the Company may be liable
notwithstanding the limitations set forth in CLAUSES (A) and (C)
above or Other Buyer Losses (other than Losses resulting from the
breach of the representation and warranty set forth in SECTION
3.1(b) for which the Company may be liable notwithstanding the
limitation set forth in CLAUSE (A) above unless the aggregate of
all such Customer Losses and such Other Buyer Losses for which
the Company would, but for this CLAUSE (D) be required to
indemnify Buyer (excluding without limitation Losses for which
the Company has no liability as a result of CLAUSE (A) above)
exceeds on a cumulative basis an amount equal to $5,000,000, at
which point the Company, subject to CLAUSE (E) of this SUBSECTION
(a)(iii), shall indemnify Buyer for the full amount of such
Losses but only to the extent such Losses exceed $5,000,000;

(E) the Company shall not have any liability under
SECTION 9.3(a)(i)(b) or 9.3(a)(i)(e) to the extent the aggregate
amount of Losses (other than Losses resulting from the breach of
the representation and warranty set forth in SECTION 3.1(b)) for
which the Company would otherwise be liable exceeds $75,000,000.

As used in this Agreement, "BUYER ENVIRONMENTAL LOSSES" shall mean
Losses of Buyer under SECTION 9.3(a)(i)(b) arising from any breach of
the Surviving Representations set forth in SECTION 3.1(o), whether or
not such Losses also arise from any breach of any other Surviving
Representation, and Losses of Buyer arising under
SECTION 9.3(a)(i)(e); "CUSTOMER LOSSES" shall mean Losses of Buyer
under SECTION 9.3(a)(i)(b) arising from any breach of any of the
Surviving Representations in connection with Liabilities or potential
Liabilities to customers of the Business or the allocation between the
Business and any customer of responsibility for Losses or potential
Losses; and "OTHER BUYER LOSSES" shall mean all Losses of Buyer under
SECTION 9.3(a)(i)(b) other than Buyer Environmental Losses and
Customer Losses.

(b) BY BUYER AND PARENTS. Subject to the terms and conditions of
this SECTION 9.3, Buyer and Parents, jointly and severally, shall
indemnify, defend and hold harmless the Sellers, and their respective
directors, officers, employees and controlling persons, from and against
all Losses asserted against, resulting to, imposed upon or incurred by any
such person, directly or indirectly, by reason of or resulting from (i) the
breach of any covenant of Buyer or Parents, or any one of them, contained
in this Agreement (including without limitation the other indemnification
obligations of Buyer and

-59-

<PAGE>

Parents provided for in this Agreement); (ii) the breach of the
representations or warranties of Buyer and/or Parents described in
SECTION 3.3(b); (iii) failure of Buyer or Parents, or any one of them, to
pay, perform and discharge, when due, any of the Assumed Liabilities; or
(iv) subject to any indemnity obligation the Sellers may have in respect of
the period described in SECTION 9.3(a)(ii)(e), the operation of the
Business by Buyer following the Closing. Notwithstanding the foregoing,
(A) the obligations to indemnify and hold the Company harmless pursuant to
SECTION 9.3(b)(ii) shall terminate when the representations and warranties
of Buyer and Parents terminate pursuant to SECTION 3.3; PROVIDED, HOWEVER,
that such obligations to indemnify and hold harmless shall not terminate
with respect to any item as to which the Company shall have, prior to the
expiration of the applicable period, previously made a claim by delivering
an Indemnification Notice and (B) the amount of Losses for which Buyer and
Parents would otherwise be liable in respect of any breach of this
Agreement prior to the Closing shall be reduced (but not below zero) by the
amount of any payment actually made to the Sellers pursuant to SECTION
4.8(b).

(c) PROCEDURES RELATING TO INDEMNIFICATION AMONG BUYER, PARENTS AND
THE SELLERS. Following the discovery of any facts or conditions which
could reasonably be expected to give rise to a Loss or Losses for which
indemnification under this SECTION 9 can be obtained, the party seeking
indemnification under this SECTION 9 (the "INDEMNIFIED PARTY") shall,
within a reasonable period of time thereafter, provide written notice to
the party from whom indemnification is sought (the "INDEMNIFYING PARTY"),
setting forth the specific facts and circumstances, in reasonable detail,
relating to such Loss or Losses and the amount of Loss or Losses (or a non-
binding, reasonable estimate thereof if the actual amount is not known or
not capable of reasonable calculation) ("INDEMNIFICATION NOTICE");
PROVIDED, HOWEVER, that failure to give such Indemnification Notice on a
timely basis shall not affect the indemnification provided hereunder except
to the extent the Indemnifying Party shall have been actually prejudiced as
a result of such failure.

(d) PROCEDURES RELATING TO INDEMNIFICATION FOR THIRD PARTY CLAIMS.
From and after the Closing, subject to SECTION 9.3(f) with respect to Buyer
Environmental Losses and subject to SECTION 9.3(g) with respect to Customer
Losses, and subject to SECTION 8.13 with respect to the Vehma Litigation,

(i) In order for an Indemnified Party to be entitled to any
indemnification provided for under this Agreement arising out of
or involving a claim or demand made by any other person, firm,
governmental authority or corporation (a "THIRD PARTY CLAIM"),
the Indemnified Party must provide an Indemnification Notice to
the Indemnifying Party relating to the Third Party Claim as
promptly as reasonably possible after receipt by such Indemnified
Party of notice of the Third Party Claim. Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, within
five (5) business days after the Indemnified Party's receipt
thereof, copies of all notices and documents (including court
papers) received by the Indemnified

-60-

<PAGE>

Party relating to the Third Party Claim; provided, however, that
failure to provide an Indemnification Notice, or deliver copies of all
notices and documents, on a timely basis shall not affect the
indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of
such failure.

(ii) If a Third Party Claim is made against the Indemnified
Party, the Indemnifying Party shall be entitled to participate in
the defense thereof and, if the Indemnifying Party so chooses and
acknowledges its obligation in writing to indemnify the
Indemnified Party therefor, to assume the defense thereof with
counsel selected by the Indemnifying Party and reasonably
satisfactory to Indemnified Party (except that the Indemnifying
Party may not so elect without the Indemnified Party's consent
unless (A) the suit, action, claim, liability or obligation does
not seek to impose any liability or obligation upon the
Indemnified Party other than for money damages and (B) such suit,
action, claim, liability or obligation does not relate to the
Indemnified Party's relationship with its customers).
Notwithstanding any acknowledgment made pursuant to the
immediately preceding sentence, the Company shall continue to be
entitled to assert any limitation on its indemnification
responsibility contained in SECTION 9.3(a)(ii) or (iii). Should
the Indemnifying Party so elect to assume the defense of a Third
Party Claim, the Indemnifying Party shall not be liable to the
Indemnified Party for legal expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof. If the
Indemnifying Party assumes such defense, then the Indemnified
Party shall have the right to participate in the defense thereof
and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnifying Party, it being understood,
however, that the Indemnifying Party shall control such defense.
The Indemnifying Party shall be liable for the fees and expenses
of counsel employed by the Indemnified Party for any period
during which the Indemnifying Party has not assumed the defense
thereof. If the Indemnifying Party chooses to defend any Third
Party Claim, all the parties hereto shall cooperate in the
defense or prosecution of such Third Party Claim. Such
cooperation shall include the retention and (upon the
Indemnifying Party's request) the provision to the Indemnifying
Party of records and information which are reasonably relevant to
such Third Party Claim, and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder. If the
Indemnifying Party, within a reasonable time after receipt of an
Indemnification Notice relating to a Third Party Claim, chooses
not to assume defense of a Third Party Claim or fails to defend
such Third Party Claim actively and in good faith, the
Indemnified Party will (upon further notice) have the right to
undertake the defense, compromise or settlement of such Third
Party Claim or consent

-61-

<PAGE>

to the entry of judgment with respect to such Third Party Claim, on
behalf of, and for the account and risk of, the Indemnifying Party,
and the Indemnifying Party shall have no right to challenge the
Indemnifying Party's defense, compromise, settlement or consent to
judgment.

(e) EXCLUSIVE REMEDY. Except for rights expressly provided in
SECTIONS 5.1, 5.2 and 7.1, the indemnification provisions of this
SECTION 9.3 constitute the sole and exclusive remedy with respect to any
and all claims relating to the subject matter of this Agreement (or any
related agreements, except to the extent otherwise expressly set forth
therein) and no other remedy shall be had in contract, tort or otherwise by
Buyer, Parents or the Sellers and their respective officers, directors,
employees, agents, affiliates, attorneys, consultants, successors and
assigns, all such remedies being hereby expressly waived to the fullest
extent permitted under applicable law. Without limitation, the procedures
set forth in this SECTION 9.3 constitute the sole and exclusive remedy of
Buyer and the Sellers arising out of any breach or claimed breach of the
representations and warranties set forth in SECTION 3.1 (other than SECTION
3.1(y)) made as of the date of this Agreement relating to events occurring
on or prior to the date hereof that becomes known to the Buyer on or prior
to the Closing Date. In furtherance of the foregoing, the Sellers, on the
one hand, and Buyer and Parents, on the other hand, hereby waive to the
fullest extent permitted under applicable law, any and all rights, claims
and causes of action they may have against the Buyer and the Parents, on
the one hand, the Sellers, or either one of them, on the other hand,
relating to the subject matter of this Agreement arising under or based
upon any federal, state, provincial, local or foreign statute, law,
ordinance, rule or regulation or otherwise, including, without limitation,
such rights, claims and causes of action Buyer may have against the Sellers
under CERCLA. In addition to the foregoing, the amount of indemnification
obligations of the Sellers, Buyers and Parents set forth in this
SECTION 9.3 shall be the maximum amount of indemnification obligations set
forth hereunder and the Sellers, Buyer and Parents shall not be entitled to
a rescission of this Agreement (or any related agreements) or any further
indemnification rights or claims of any nature whatsoever, all of which the
Sellers, Buyer and Parents hereby waive.

(f) ENVIRONMENTAL PROCEDURES. In addition to SECTION 9.3(d), to the
extent such section is applicable, this SECTION 9.3(f) shall apply to Buyer
Environmental Losses:

(i) The Company shall only be required to indemnify Buyer
for any Buyer Environmental Losses (A) that arise from or relate
to any investigation, removal, remedial, cleanup, corrective or
compliance action ("REMEDIAL ACTION") that (1) is required
pursuant to Environmental Laws in effect at the time of such
Remedial Action, or by any governmental authority having
jurisdiction over such laws whereby such authority purports to be
acting pursuant to such laws, unless the requirement reasonably
appears to be outside the authority of the governmental authority
(a "REQUIRED REMEDIAL ACTION"), or (2) is a Prudent Remedial
Action (as defined in SUBSECTION (vii)); (B) that exceed any net
recovery by Buyer or

-62-

<PAGE>

its affiliates from any third parties, which recovery Buyer shall
assess in good faith and, if reasonably determined to be viable by
Buyer based on advice of counsel, pursue; and (C) if Buyer complies in
all material respects with its obligations under the remainder of this
SECTION 9.3(f). Notwithstanding the foregoing, if any Remedial Action
is performed (other than by the Company) that is not a Permitted
Remedial Action (as defined below), then the Company shall have no
indemnity obligation in respect of Buyer Environmental Losses that are
discovered or incurred as a consequence of such Remedial Action
unless, and then only to the extent that, there is an independent
basis for the Company's indemnity obligation under this SECTION
9.3(f). Notwithstanding anything in this SECTION 9.3(f) to the
contrary, the failure of either party to comply with the obligations
of this SECTION 9.3(f) shall not affect the indemnification or rights
provided hereunder except to the extent that the other party shall
have been actually prejudiced as a result of such failure. A
"PERMITTED REMEDIAL ACTION" shall mean a Required Remedial Action or a
Prudent Remedial Action.

(ii) During the period that (A) Buyer Environmental Losses
that would otherwise be subject to indemnification under this
SECTION 9.3 have not exceeded the sum described in CLAUSE (B) of
SECTION 9.3(a)(iii) or (B) the Company has no obligation with
respect to Buyer Environmental Losses due to the limitation set
forth in CLAUSE (E) of SECTION 9.3(a)(iii), Buyer shall have the
right to control and direct any Remedial Action. During the
period described in CLAUSE (A) above, Buyer shall keep the
Company reasonably apprised of material developments relating to
any Remedial Action, including providing the Company with copies
of material reports, agency notices, correspondence to or from
governmental agencies and other material documents related to
such Remedial Action as well as, upon the reasonable request of
the Company, provide the Company an opportunity to discuss with
Buyer any investigation proposed to be performed by Buyer prior
to the start of such investigation. During the period that Buyer
Environmental Losses subject to indemnification under this
SECTION 9.3 have not exceeded the sum described in CLAUSE (B) of
SECTION 9.3(a)(iii) but exceed eighty percent (80%) of that
amount, Buyer shall in addition to providing the Company the
information described in the preceding sentence: (1) give the
Company reasonable advance notice of, and a reasonable
opportunity to participate in, material decisions with respect
any Remedial Actions controlled or directed by the Buyer and (2)
notify the Company regarding any material meetings with agency
representatives and allow the Company to attend such meetings at
the Company's expense. During the period that Buyer
Environmental Losses that would otherwise be subject to
indemnification under this SECTION 9.3 exceed the sum described
in CLAUSE (B) of SECTION 9.3(a)(iii), but do not exceed the
limitation set forth in CLAUSE (E) of SECTION 9.3(a)(iii), the
Company shall

-63-

<PAGE>

have the right to control and direct any Permitted Remedial Action
subject to indemnification under this SECTION 9.3, subject to the
following procedure: (W) prior to controlling and directing such
matter, the Company shall provide Buyer with written acknowledgment of
its intention to indemnify Buyer with respect to such Permitted
Remedial Action in accordance with this Agreement; (X) at any time
during the Permitted Remedial Action, the Company may, subject to its
obligation to do so as soon as practicable and with reasonable
justification, inform Buyer in writing that the Company has determined
it does not have an obligation to indemnify Buyer with respect to the
Permitted Remedial Action or any portion thereof; (Y) in such event,
Buyer may by notice to the Company assume the right to control and
direct such Permitted Remedial Action (or portion thereof), and in any
event the Company may cease controlling and directing such Permitted
Remedial Action (or portion thereof) by notice to Buyer; and (Z) if
the Company does not have an obligation to indemnify Buyer with
respect to such Permitted Remedial Action (or portion thereof), then
Buyer shall reimburse the Company for reasonable expenses the Company
has incurred in connection therewith; provided, however, that the
Company shall be responsible for Losses of Buyer to the extent Buyer
is prejudiced by the failure of the Company to inform Buyer as soon as
practicable that the Company has determined it does not have an
obligation to indemnify Buyer. During the period the Company is
controlling and directing any Permitted Remedial Action, the Company
shall: (1) give Buyer reasonable advance notice of, and a reasonable
opportunity to participate in, material decisions with respect
thereto, (2) obtain Buyer's consent prior to undertaking any material
action with respect to such Permitted Remedial Action, PROVIDED THAT
such consent shall not be unreasonably withheld or delayed, (3)
provide Buyer with copies of reports, agency notices, correspondence
to or from governmental agencies and other material documents related
to such Permitted Remedial Action, and (4) notify Buyer regarding any
material meetings with agency representatives and allow Buyer to
attend such meetings at Buyer's expense. During the period that Buyer
Environmental Losses exceed the limitation set forth in SECTION
9.3(a)(iii)(e), and upon the reasonable request of the Company, and at
the Company's sole cost and expense, Buyer shall provide non-
privileged information to the Company concerning any Remedial Action
conducted by Buyer and shall provide the Company with the opportunity
to discuss any such Remedial Action with Buyer. To "CONTROL AND
DIRECT," as used in this SECTION 9.3(f), shall include, without
limitation, the right (1) to hire and discharge consultants,
contractors, and experts, (2) obtain any tests, reports, and surveys
necessary to define and delineate the extent of any contamination or
noncompliance, (3) contact governmental authorities, make any reports
to such authorities, submit any remediation or compliance plans to
such authorities, negotiate with such

-64-

<PAGE>

authorities, and otherwise deal with such authorities, (4) prepare the
work plan for any remediation or correction of noncompliance, and (5)
conduct or direct any such remediation or correction of noncompliance.

(iii) To better delineate the respective obligations of
the Company, on the one hand, and Buyer and Parents, on the other
hand, with respect to environmental matters, Buyer and Parents
shall use commercially reasonable best efforts to cause the
Business to be operated after the Closing Date in material
compliance with Environmental Laws so as not to knowingly
compound or aggravate any Environmental Action for which the
Company may be responsible under this Agreement. Buyer and
Parents shall not take action intended to initiate or encourage a
claim by a third party, including any governmental agency,
concerning an Environmental Action for which the Company is
obligated to indemnify Buyer under SECTION 9.3.

(iv) Buyer and Parents and the Company shall treat
information concerning any Environmental Action that may be
subject to indemnification under this SECTION 9.3 as confidential
information. Notwithstanding the foregoing, Buyer or the Company
may disclose such information (A) in confidence to any person
with whom it proposes to enter into contract for any commercial
purpose, including financing entities; (B) as required by law,
including Environmental Laws; (C) in order to attain compliance
with Environmental Laws; (D) as requested by a court; (E) as
requested by a governmental agency or other governmental
authority whereby such authority purports to be acting pursuant
to Law, unless the requirement reasonably appears to be outside
the authority of the governmental agency or governmental
authority; or (F) that is otherwise publicly available. If
either Parents or Buyer, on the one hand, or the Company, on the
other hand, intends to disclose information concerning an
Environmental Action that may be subject to indemnification under
this SECTION 9.3, then Buyer or the Company shall notify the
other party prior to such proposed disclosure pursuant to SECTION
9.4.

(v) The party not controlling and directing a Remedial
Action shall cooperate in good faith with the party controlling
and directing the Remedial Action, and vice versa. Such
cooperation shall include (A) cooperation in connection with
efforts to seek reimbursement under applicable governmental
underground storage tank or other reimbursement programs; (B)
cooperation in connection with any efforts to seek reimbursement
under applicable insurance policies relating to the Remedial
Action; and (C) providing, upon reasonable advance notice,
reasonable access to the property involved and to all non-
privileged documents, personnel and other sources of information
that relate to the Remedial

-65-

<PAGE>

Action or are otherwise necessary to effectuate the Remedial Action.
While it is controlling and directing any Permitted Remedial Action,
the Company shall not unreasonably interfere with Buyer's use of any
property involved or the conduct of Buyer's business.

(vi) With respect to any Remedial Action conducted at any
time prior to such time as Buyer Environmental Losses exceed the
limitation set forth in CLAUSE (E) of SECTION 9.3(a)(iii), (A)
the parties shall perform such Remedial Action in accordance with
Environmental Laws in effect as of the time of such Remedial
Action to allow the continued use of the property for uses
substantially the same as those for which the Company used the
property; (B) no Remedial Action shall be undertaken until after
notice is provided to and approval received from such
governmental authority with jurisdiction over the Environmental
Action, if such notice and approval process is required; and (C)
such Remedial Action shall be performed in a cost-effective and
reasonable manner.

(vii) A "PRUDENT REMEDIAL ACTION" pursuant to SECTION
9.3(f)(i)(a)(2) shall be a Remedial Action (A) that is undertaken
in response to Material Facts (as defined below), (B) where Buyer
has, prior to commencing the Remedial Action, either requested
and obtained the Company's consent subject to SECTION
9.3(f)(viii) or received a determination under SECTION 9.5 that
the Company's consent has been unreasonably withheld or delayed,
such determination to be made subject to the provisions of
SECTION 9.3(f)(viii), and (C) where the scope of the Remedial
Action undertaken is reasonable in relation to the perceived
risk. "MATERIAL FACTS" shall mean material facts that represent
reliable objective evidence indicating that a Hazardous Substance
is present in a manner that would reasonably be expected to
present a significant risk to human health or the environment.
Buyer acknowledges that the facts specifically disclosed in this
Agreement or in the Schedules hereto (including documents
incorporated by reference therein) or otherwise known to Parents
or Buyer based on the information it has received from Environ
Corporation as of the date of this Agreement (it being understood
that prior to the date of this Agreement, Parents and Buyer have
requested, and Environ Corporation has provided to Parents and
Buyer, an oral report containing all material information it has
learned up to the date of this Agreement), do not currently
represent reliable objective evidence indicating that a Hazardous
Substance is present in a manner that would reasonably be
expected to present a significant risk to human health or the
environment, but the Company acknowledges that there may be
changes in circumstances relating to such facts, or changes in
information known to Buyer with respect to such facts, that
together with such facts could represent reliable objective
evidence indicating that a Hazardous Substance

-66-

<PAGE>

is present in a manner that would reasonably be expected to present a
significant risk to human health or the environment.

(viii) At the time that Buyer requests the consent of
the Company pursuant to SECTION 9.3(f)(vii)(b), Buyer shall
disclose to the Company all material information relating to the
proposed Remedial Action and the basis for conducting the
Remedial Action. The Company's consent shall not be unreasonably
withheld or delayed; however, (1) the reasonableness of the
Company's decision will be determined based solely upon the
information disclosed to or known by the Company at the time such
consent is requested; (2) evidence that a Hazardous Substance may
be present shall not result in any presumption that the Hazardous
Substance would reasonably be expected to present a significant
risk to human health or the environment; and (3) the parties
recognize that a determination not to further investigate
evidence indicating that a Hazardous Substance is present may,
under some circumstances, be a reasonable determination.

(g) CUSTOMER PROCEDURES. Following the Closing, Buyer shall notify
the Company of the receipt by Buyer or Parents of any Third Party Claim
involving Customer Losses that may be reasonably expected to exceed the
limitations set forth in SECTION 9.3(a)(iii)(d). Buyer and the Company
shall negotiate in good faith as to the reasonable administration,
satisfaction and discharge of any such Customer Losses in a commercially
reasonable manner, and Buyer shall administer, satisfy and discharge such
Customer Losses only in a manner approved in all material respects by the
Company in advance, which approval shall not be unreasonably withheld or
delayed. Buyer shall as soon as practicable notify the Company as to
material developments with respect to such Third Party Claims.

9.4. NOTICES. Except as otherwise set forth in this Agreement, all
notices, requests, demands and other communications which are required or may be
given under this Agreement shall be in writing and shall be deemed to have been
duly given if delivered personally, if telecopied or mailed, first class mail,
postage prepaid, return receipt requested, as follows:

(a) if to the Sellers:

A. O. Smith Corporation
11270 West Park Place
P. O. Box 23972
Milwaukee, Wisconsin 53223-0972
Attention: Glen R. Bomberger
Telecopy: (414) 359-7450

-67-

<PAGE>

with copies to:

A. O. Smith Corporation
11270 West Park Place
P. O. Box 23972
Milwaukee, Wisconsin 53223-0972
Attention: W. David Romoser
Telecopy: (414) 359-7450

and

Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5367
Attention: Patrick G. Quick
Telecopy: (414) 297-4900

(b) if to Buyer:

Tower Automotive, Inc.
6308 28th Street, S.E.
Grand Rapids, MI 49546
Attention: Anthony A. Barone
Telecopy: (616) 954-7554

with a copy to:

Hidden Creek Industries
4508 IDS Center
Minneapolis, MN 55402
Attention: Scott D. Rued
Telecopy: (612) 332-2012

and

Kirkland & Ellis
200 East Randolph
Chicago, IL 60601
Attention: Jeffrey C. Hammes
Telecopy: (312) 861-2200

or to such other address as either party shall have specified by notice in
writing to the other party. All such notices, requests, demands and
communications shall be deemed to have been received on the date of personal
delivery or telecopy or on the third business day after the mailing thereof.

-68-

<PAGE>

9.5. RESOLUTION OF DISPUTES.

(a) NEGOTIATION. In the event of any dispute or disagreement between
the Sellers and Buyer or Parents as to the interpretation of any provision
of, or the performance of obligations under, this Agreement (except for
such disputes or disagreements regarding the Closing Statement which shall
be resolved exclusively pursuant to SECTION 2.4(d)), the matter, upon
written request of either party, shall be referred to representatives of
the parties for decision, each party being represented by a senior
executive officer who has no direct operational responsibility for the
matters contemplated by this Agreement (the "REPRESENTATIVES"). The
Representatives shall promptly meet in a good faith effort to resolve the
dispute. If the Representatives do not agree upon a decision within thirty
(30) calendar days after reference of the matter to them, Buyer and the
Sellers shall be free to exercise the remedies available to them under this
SECTION 9.5.

(b) ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement or the negotiation hereof or entry hereunto or
any Contract entered into pursuant hereto or the performance by the parties
of its or their terms shall be settled by binding arbitration administered
by the Center for Public Resources in accordance with its then prevailing
Rules for Non-Administered Arbitration of Business Disputes (except as
otherwise provided herein). The arbitration shall be held in Milwaukee,
Wisconsin. This SECTION 9.5 shall be construed and enforced in accordance
with the Federal Arbitration Act, notwithstanding any other choice of law
provision in this Agreement. Notwithstanding the foregoing, Buyer may, in
its discretion, apply to a court of competent jurisdiction for equitable
relief from any violation or threatened violation of the covenants of the
Sellers, or any one of them, under SECTION 8.3. Such an application shall
not be deemed a waiver of the right to compel arbitration pursuant to this
SECTION 9.5.

(c) ARBITRATORS. If the matter in controversy (exclusive of attorney
fees and expenses) shall appear, as at the time of the demand for
arbitration, to exceed $2,000,000, then the panel to be appointed shall
consist of three (3) neutral arbitrators; otherwise, one neutral
arbitrator.

(d) PROCEDURES; NO APPEAL. The arbitrator(s) shall allow such
discovery as the arbitrator(s) determine appropriate under the
circumstances and shall resolve the dispute as expeditiously as
practicable, and if reasonably practicable, within one hundred twenty (120)
days after the selection of the arbitrator(s). The arbitrator(s) shall
give the parties written notice of the decision, with the reasons therefor
set out, and shall have thirty (30) days thereafter to reconsider and
modify such decision if any party so requests within ten (10) days after
the decision. Thereafter, the decision of the arbitrator(s) shall be
final, binding, and nonappealable with respect to all persons, including
(without limitation) persons who have failed or refused to participate in
the arbitration process.

-69-

<PAGE>

(e) AUTHORITY. The arbitrator(s) shall have authority to award
relief under legal or equitable principles, including interim or
preliminary relief, and to allocate responsibility for the costs of the
arbitration and to award recovery of attorneys fees and expenses in such
manner as is determined to be appropriate by the arbitrator(s).
Notwithstanding the foregoing, the arbitrator(s) shall not be empowered to
award any past consequential damages, loss profits (except as provided in
the penultimate sentence of SECTION 9.3(a)(i)) or punitive damages in
connection with any dispute between Buyer and Parents, on the one hand, and
the Sellers, on the other hand, or either one of them, arising out of or
relating in any way to this Agreement or the transactions arising
hereunder, and each party hereby irrevocably waives any right to recover
such damages.

(f) ENTRY OF JUDGMENT. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having in personam and subject
matter jurisdiction. The Sellers, Buyer and Parents hereby submit to the
in personam jurisdiction of the federal and state courts in Wisconsin, for
the purpose of confirming any such award and entering judgment thereon.

(g) CONFIDENTIALITY. All proceedings under this SECTION 9.5, and all
evidence given or discovered pursuant hereto, shall be maintained in
confidence by all parties and by the arbitrator or arbitrators.

(h) CONTINUED PERFORMANCE. The fact that the dispute resolution
procedures specified in this SECTION 9.5 shall have been or may be invoked
shall not excuse any party from performing its obligations under this
Agreement, and during the pendency of any such procedure all parties shall
continue to perform their respective obligations in good faith.

(i) TOLLING. All applicable statutes of limitation shall be tolled
while the procedures specified in this SECTION 9.5 are pending. The
parties will take such action, if any, required to effectuate such tolling.

9.6. ENTIRE AGREEMENT. This Agreement (including the Exhibits and
schedules hereto), the Access Agreement and the letter agreement entered into
between Tower and the Company dated October 18, 1996 constitute the entire
agreement between the parties hereto and supersede all prior agreements and
understandings, oral and written, between the parties hereto with respect to the
subject matter hereof.

9.7. BINDING EFFECT; BENEFIT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.

-70-

<PAGE>

9.8. BULK SALES LAW. Buyer and the Sellers each agree to waive
compliance by the other with the provisions of the bulk sales law of any
jurisdiction, and the Sellers agree to indemnify Buyer for any Losses arising
from such non-compliance other than in respect of Losses constituting Assumed
Liabilities.

9.9. ASSIGNABILITY. This Agreement shall not be assignable by the
Sellers without the prior written consent of Buyer or by Buyer or Parents
without the prior written consent of the Sellers, provided that (a) Buyer may
assign its rights and delegate its duties hereunder for collateral security
purposes to its lenders providing the Financing and (b) Buyer may assign its
rights and delegate its duties hereunder to an affiliate or affiliates, so long
as Parents, Buyer and such affiliate agree to be jointly and severally liable
for all obligations hereunder, but any such assignments shall be subject to all
of the terms and conditions applicable to such rights and obligations under this
Agreement.

9.10. AMENDMENT; WAIVER. This Agreement may be amended,
supplemented or otherwise modified only by a written instrument executed by the
parties hereto. No waiver by either party of any of the provisions hereof shall
be effective unless explicitly set forth in writing and executed by the party so
waiving. Except as provided in the preceding sentence, no action taken pursuant
to this Agreement, including without limitation any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representations, warranties, covenants, or
agreements contained herein, and in any documents delivered or to be delivered
pursuant to this Agreement and in connection with the Closing hereunder. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach.

9.11. SCHEDULES. Any fact or item disclosed on any Schedule to
this Agreement shall be deemed disclosed on all other Schedules to this
Agreement to which such fact or item may reasonably apply so long as such
disclosure is in sufficient detail to enable a party hereto to identify the
facts or items to which it applies. Any fact or item disclosed on any Schedule
hereto shall not by reason only of such inclusion be deemed to be material and
shall not be employed as a point of reference in determining any standard of
materiality under this Agreement. Prior to the Closing, the Sellers shall have
the right to supplement, modify or update the Schedules hereto to reflect
changes in the ordinary course of the Business prior to the Closing; PROVIDED,
HOWEVER, that any such supplements, modifications or updates shall be subject to
Buyer's rights under SECTION 5.1(A).

9.12. KNOWLEDGE. The term "KNOWLEDGE" when used in the phrases
"to the knowledge of the Sellers" or "Sellers have no knowledge" or words of
similar import shall mean, and shall be limited to, the actual knowledge of the
individuals listed with respect to the Sellers on SCHEDULE 9.12 and shall only
include their actual knowledge obtained in their respective capacities with the
Sellers, without any duty to investigate; provided, however, that the knowledge
of the Sellers as of a particular time after the Closing for purposes of SECTION
9.3(f)(vii) shall not be deemed to include the knowledge of any individual who
is not employed by the Sellers or any of their affiliates as of such time.

-71-

<PAGE>

9.13. SECTION HEADINGS; TABLE OF CONTENTS. The Section headings
contained in this Agreement and the Table of Contents to this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.

9.14. SEVERABILITY. If any provision of this Agreement shall be
declared by any court of competent jurisdiction to be illegal, void or
unenforceable, then all other provisions of this Agreement shall not be affected
and shall remain in full force and effect.

9.15. NO STRICT CONSTRUCTION. Notwithstanding the fact that this
Agreement has been drafted or prepared by one of the parties, each of the
parties confirms that both it and its counsel have reviewed, negotiated and
adopted this Agreement as the joint agreement and understanding of the parties,
and the language used in this Agreement shall be deemed to be the language
chosen by the parties hereto to express their mutual intent, and no rule of
strict construction shall be applied against any person.

9.16. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument.

9.17. APPLICABLE LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware without regard
to conflicts of laws principles thereof.

-72-

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.

A. O. SMITH CORPORATION
(the "Company")

By: /s/ Glen Bomberger
-------------------------------
Title:

A. O. SMITH ENTERPRISES LTD.
("Enterprises")

By: /s/ Glen Bomberger
-------------------------------
Title:

TOWER AUTOMOTIVE ACQUISITION, INC.
("Buyer")

By: /s/ Scott D. Rued
-------------------------------
Title:

TOWER AUTOMOTIVE, INC.
("Tower")

By: /s/ Scott D. Rued
-------------------------------
Title:

R. J. TOWER CORPORATION
("RJT")

By: /s/ Scott D. Rued
-------------------------------
Title:

-73-

<PAGE>

SCHEDULES TO ASSET PURCHASE AGREEMENT

-74-

<PAGE>

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we here by consent to the use of our reports
(and to all references to our firm) included in or made apart of this
registration statement.

ARTHUR ANDERSEN LLP

Minneapolis, Minnesota
March 25, 1997