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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-21803
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AFTERMARKET TECHNOLOGY CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4486486
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
33309 FIRST WAY SOUTH, SUITE A-206
FEDERAL WAY, WASHINGTON 98003
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (206) 838-0346
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates
of the Registrant (based on the closing price of such stock, as reported by The
Nasdaq National Market, on February 28, 1997) was $92,848,490.
The number of shares outstanding of the Registrant's Common Stock, as
of February 28, 1997, was 16,980,794 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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AFTERMARKET TECHNOLOGY CORP.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
Page
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ITEM 1. BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ITEM 2. PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
ITEM 3. LEGAL PROCEEDINGS.. . . . . . . . . . . . . . . . . . . . . . . . .8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.. . . . . . . .9
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.. . . . . . . . . . . . . . . . . . . . . . . .9
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . .9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.. . . . . . . . . . . . . . . 11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.. . . . . . . . . . . 16
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.. . . . . . . . . . . . . . . 35
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. . . . . . . . 35
ITEM 11. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . 37
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. . 41
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . . . . 43
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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PART I
ITEM 1. BUSINESS.
BACKGROUND
Aftermarket Technology Corp. ("ATC") was incorporated under the laws
of Delaware in July 1994 at the direction of Aurora Capital Partners L.P.
("ACP") to acquire Aaron's Automotive Products, Inc. ("Aaron's"), H.T.P., Inc.
("HTP"), Mamco Converters, Inc. ("Mamco") and RPM Merit, Inc. ("RPM")
(collectively, the "Initial Acquisitions"). Aaron's, HTP, Mamco and RPM as they
existed prior to the Initial Acquisitions are hereinafter collectively referred
to as the "Predecessor Companies." Subsequent to the Initial Acquisitions, the
Company acquired Component Remanufacturing Specialists, Inc. ("CRS") and Mascot
Truck Parts Inc. ("Mascot") in June 1995, and King-O-Matic Industries Limited
("King-O-Matic") in September 1995 (collectively, the "1995 Acquisitions"),
Tranzparts, Inc. ("Tranzparts") in April 1996 and Diverco, Inc. ("Diverco") in
October 1996 (collectively, the "1996 Acquisitions") and Replacement and
Exchange Parts Co., Inc. ("Repco") in January 1997. ATC conducts all of its
operations through its wholly-owned subsidiaries and each of their respective
subsidiaries. Throughout this Annual Report, except where the context otherwise
requires, the "Company" refers collectively to ATC and its subsidiaries and the
Predecessor Companies.
On December 20, 1996, ATC consummated an initial public offering of
its Common Stock (the "IPO"). Simultaneous with the consummation of the IPO,
Aftermarket Technology Holdings Corp., the sole stockholder of ATC prior to the
IPO ("Holdings") was merged into ATC (the "Reorganization"). Upon the
effectiveness of such merger, each outstanding share of Holdings Common Stock
was converted into one share of ATC Common Stock, and each outstanding share of
Holdings Redeemable Exchangeable Cumulative Preferred Stock (the "Holdings
Preferred Stock") was converted into one share of ATC Redeemable Exchangeable
Cumulative Preferred Stock (the "Preferred Stock"), which was immediately
thereafter redeemed for an amount in cash equal to $100.00 plus an amount in
cash equal to accrued and unpaid dividends on the Holdings Preferred Stock to
the date of the Reorganization.
GENERAL
The Company is a leading remanufacturer and distributor of drive train
products used in the aftermarket repair of passenger cars and light trucks. The
Company's principal products include remanufactured transmissions, torque
converters and engines, as well as remanufactured and new parts for the repair
of automotive drive train and engine assemblies. The Company's principal
customers include: (i) independent transmission rebuilders, general repair shops
and distributors (the "Independent Aftermarket"); (ii) original equipment
manufacturers ("OEMs"), principally Chrysler, for use as replacement parts by
their dealers; and (iii) retail automotive parts stores.
The Company believes the key elements of its success are the quality
and breadth of its product offerings and the Company's emphasis on strong
customer relationships, promoted by strong technical support, rapid delivery
time, innovative product development and competitive pricing. In addition, the
Company has benefited from the increasing use of remanufactured transmissions,
engines and other parts for aftermarket repairs as the industry recognizes that
remanufacturing provides a higher quality, lower cost alternative to rebuilding
the assembly or replacing it with a new assembly manufactured by an OEM.
The automotive aftermarket in the United States and Canada consists of
sales of parts and services for vehicles after their original purchase. The
Company competes specifically in the aftermarket segment for automotive
transmissions, engines and other drive train related products.
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PRODUCTS
The Company's product lines include remanufactured transmissions,
remanufactured engines and hard parts used in drive train repairs. In addition,
the Company distributes repair kits used in drive train repairs and certain
other products.
In its remanufacturing operations, the Company obtains used
transmissions, hard parts, engines and related components, commonly known as
"cores," which are sorted by make and model and either placed into immediate
production or stored until needed. In the remanufacturing process, the cores
are evaluated and disassembled into their component parts. The components that
can be incorporated into the remanufactured product are cleaned, tested and
refurbished. All components determined not reusable or repairable are replaced
by other remanufactured or new components. The units are then reassembled using
high-volume precision manufacturing techniques into finished assemblies.
Inspection and testing are conducted at various stages of the remanufacturing
process, and each finished assembly is tested on equipment designed to simulate
performance under operating conditions. Primarily as a result of its rigorous
quality control procedures, the Company has experienced an insignificant number
of warranty claims on its products. After testing, completed products are then
packaged for immediate delivery or shipped to one of the Company's distribution
centers.
Generally, the cores used in the Company's remanufacturing process for
sale to its OEM customers are provided to the Company by the OEM or its dealer
network. The majority of the cores used in the Company's remanufacturing
process for sale to its Independent Aftermarket and retail customers are
obtained from customers as trade-ins. The Company encourages its Independent
Aftermarket and retail customers to return cores on a timely basis and charges
customers a supplemental core charge in connection with purchases of engines and
critical hard parts. The customer can satisfy this charge by returning a usable
core or making a cash payment equal to the amount of the supplemental core
charge. If cores are not returned in a timely manner, the Company then must
procure cores through its network of independent core brokers. While core
prices are subject to supply and demand price volatility, the Company believes
its procurement network for cores will continue to provide cores at reasonable
prices. The preceding sentence contains a forward-looking statement, and there
can be no assurance that actual results will not differ materially from the
information contained in the preceding sentence.
TRANSMISSIONS
The Company remanufactures transmissions which are factory approved
and suitable for warranty and post-warranty replacement of transmissions for
Chrysler and 12 foreign OEMs, including Hyundai Motor America, Subaru of America
and American Isuzu, for their United States dealer networks. The number of
transmission models remanufactured by the Company has been increasing to
accommodate the greater number of models currently used in vehicles manufactured
by the Company's OEM customers. The majority of the Company's transmissions are
sold to Chrysler under Chrysler's MOPAR brand name. In addition, the Company
rebuilds heavy duty and light duty truck transmissions and air compressors.
HARD PARTS
The Company remanufactures torque converters (the coupler between the
transmission and engine), planetary gears (speed regulating devices inside the
transmission) and transmission fluid pumps. These "hard" parts are sold
principally to the Independent Aftermarket for use in drive train repairs. Hard
parts are sold under the RPM, HTP, MAMCO, TRANZPARTS and DIVERCO brand names.
ENGINES
The Company remanufactures engines designed as replacement engines for
use in many domestic passenger cars and light trucks. Principal customers are
Western Auto and O'Reilly Auto Parts, as well as the Independent Aftermarket.
Over the past three years, the variety of engine models remanufactured by the
Company has increased as the Company has expanded the range of engines offered
to meet customer requirements.
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REPAIR KITS AND OTHER PRODUCTS
Repair kits sold by the Company consist of gaskets, friction plates,
seals, bands, filters and other "soft" parts that are used in rebuilding
transmissions for substantially all domestic and most imported passenger cars
and light trucks. Kits are currently sold principally to the Independent
Aftermarket. Each kit is designed specifically to include substantially all of
the soft parts necessary for rebuilding a particular model of transmission. In
addition to manufacturing or remanufacturing certain of the components that are
used in its kits, the Company maintains a variety of supply relationships that
allow it to purchase components for its kits at competitive prices. The
components manufactured or remanufactured by the Company include various
friction plates, gaskets and bands. The repair kits are sold under the RPM,
HTP, KING-O-MATIC, TRANZPARTS and DIVERCO brand names.
Other products consist principally of remanufactured rack and pinion
assemblies and CV axles for passenger cars and light trucks for the Independent
Aftermarket, and cleaning and testing equipment for the Independent Aftermarket
and other industrial businesses. These products are sold under the RPM, HTP,
KING-O-MATIC, TRANZPARTS and INTERCONT brand names.
MARKETING AND DISTRIBUTION
The Company distributes its products to: (i) the Independent
Aftermarket; (ii) its OEM customers for use as replacement parts by their
dealers; and (iii) retail automotive parts stores.
INDEPENDENT AFTERMARKET
The Company supplies transmission repair kits and hard parts used in
drive train repairs to independent transmission rebuilders and distributors in
the United States and Canada, such as AAMCO Transmissions Inc., MOTRA Corp. and
Lee Myles Associates Corp. These products are used in the Independent
Aftermarket to rebuild transmissions and other assemblies using remanufactured
and new component parts purchased from a variety of suppliers. In addition, the
Company supplies transmission and engine repair kits, hard parts used in drive
train repairs, remanufactured engines and certain remanufactured components such
as CV axles to general repair shops in the United States. Transmission and
engine repairs performed in the Independent Aftermarket are generally for
vehicles no longer covered by warranty or for OEM dealers who do not have access
to remanufactured assemblies. The Company believes that it currently supplies
less than one-third of the remanufactured or new drive train component
requirements of its Independent Aftermarket customers.
There are two characteristics of the Independent Aftermarket that
influence the Company's business strategy. First, as the number of vehicle
models has proliferated and repairs have become increasingly complex, the
Independent Aftermarket has grown more dependent on its suppliers for technical
support and for assistance in managing inventory by delivering product on a
just-in-time basis at competitive prices. Second, Independent Aftermarket
customers (including those affiliated with larger organizations such as AAMCO,
MOTRA and Lee Myles) generally purchase parts at the individual repair shop
level. Independent Aftermarket customers tend to make purchasing decisions
based on availability and rapid delivery of products, competitive pricing,
breadth of product offering and technical assistance. To respond to these
requirements, the Company has developed a strategy of geographic expansion of
its distribution system to provide its Independent Aftermarket customers with
short-notice rapid delivery, high service levels and technical support for a
broad product offering in each local market. This is accomplished through
47 distribution centers located throughout the United States and Canada from
which the Company provides local technical support and a wide range of products
delivered by Company-operated trucks to its customers.
The Company has developed a common product identification and
numbering system which is currently being implemented on a Company-wide basis.
In addition, the Company is in the process of electronically linking its
distribution centers through a computer network that will enable each center to
determine more quickly if and where a particular part is located within the
distribution system, thereby further enhancing customer service. The Company
expects to implement this process in stages during 1997 and 1998, and it
believes that the process will be completed by the third quarter of 1998. These
changes are expected to improve customer service, increase
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product availability, enhance inventory management and improve operational
efficiencies. The preceding sentence contains a forward-looking statement, and
there can be no assurance that actual results will not differ materially from
the information contained in the preceding sentence.
New customers are developed by a direct sales force operating from the
Company's local distribution centers, by national and local trade publication
advertising and by telemarketing. The Company also participates in trade shows.
The Company believes its RPM, HTP, KING-O-MATIC, MAMCO, TRANZPARTS, INTERCONT
and DIVERCO brand names are well recognized and respected in their regional
markets. Net sales to Independent Aftermarket customers accounted for 47.8% of
the Company's revenues in 1995 and 41.1% in 1996.
OEM CUSTOMERS
The Company provides factory-approved remanufactured transmissions to
OEMs for use in warranty and, to a lesser extent, post-warranty repair work by
their dealers. The Company's largest OEM customer is Chrysler, to whom the
Company also supplies certain factory-approved remanufactured engines. The
Company sells to 12 foreign OEMs, including Hyundai Motor America, Subaru of
America and American Isuzu. Products are sold to each OEM pursuant to supply
arrangements for individual transmission models. Net sales to the Company's OEM
customers accounted for 44.7% of the Company's 1995 revenues and 51.9% of
revenues in 1996. Net sales to Chrysler accounted for 35.4% and 37.2% of the
Company's revenues in 1995 and 1996, respectively. Net sales to Chrysler grew
from $67.6 million in 1995 to $101.5 million in 1996.
Over the past 12 years, the Company has developed and maintained
strong relationships at many levels of both the corporate and the factory
organizations of Chrysler. In recognition of the Company's consistently high
level of service and product quality throughout its relationship with Chrysler,
in 1995 and 1996 the Company was awarded the Platinum Pentastar award, the
highest award Chrysler bestows on a supplier. Chrysler awarded only 14 Platinum
Pentastar awards in 1995 and only 13 in 1996. The 1995 award marked the first
time that the Platinum Pentastar had been awarded to a remanufacturer or to a
supplier that serves exclusively as a MOPAR aftermarket parts supplier. In
addition to its Platinum Pentastar, the Company received Gold Pentastar awards
in 1993, 1994, 1995 and 1996. Only seven suppliers received the Gold Pentastar
award in each of these years.
Chrysler began implementing remanufacturing programs for its
transmission models in 1986 and selected the Company as its sole supplier of
remanufactured transmissions in 1989. Chrysler has advised the Company that, by
implementing a remanufacturing program, Chrysler has realized substantial
warranty cost savings, standardized the quality of its dealers' aftermarket
repairs and reduced its own inventory of replacement parts. Currently, Chrysler
has remanufacturing programs for transmission models that are used in less than
70% of its vehicles, and the Company is the only factory-approved supplier of
remanufactured transmissions for these models.
As part of its expanding relationship with Chrysler and in response to
a periodic shortage of cores, in 1996 the Company established a central core
return center for all of Chrysler's transmission models. Chrysler dealers make
arrangements to ship transmission and engine cores to a regional depot, which
then ships directly to the Company's central core return center located near its
main remanufacturing facility. The Company thus assists Chrysler by improving
the efficient and timely return of cores at a cost savings to Chrysler.
Furthermore, the Company performs value-added services such as core audit and
analysis in conjunction with Chrysler engineers. The Company is currently
working with Chrysler to improve the tracking and management of cores, which
will allow the Company to schedule its production more efficiently. The Company
believes that this central core facility has reduced the risk of future Chrysler
core shortages.
Although the Company is currently the only factory-approved supplier
of remanufactured transmissions to Chrysler, Chrysler is not obligated to
continue to purchase the Company's products and there can be no assurance that
the Company will be able to maintain or increase the level of its sales to
Chrysler or that Chrysler will not approve other suppliers in the future. In
addition, Chrysler reduced its standard new vehicle warranty from seven
years/70,000 miles to three years/36,000 miles and could implement a shorter
warranty in the
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future. Any such action could have the effect of reducing the amount of warranty
work performed by Chrysler dealers.
RETAIL AUTOMOTIVE PARTS STORES
The Company supplies remanufactured engines, transmission filter kits,
engine components and engine repair kits to automotive aftermarket retail stores
throughout the United States, which offer new and remanufactured parts and
assemblies to a broad range of customers, principally "do-it-yourself" customers
and general repair shops. The retail automotive parts store market is highly
fragmented with most retail stores obtaining products similar to those provided
by the Company from a variety of regional suppliers. These customers tend to
make purchasing decisions based on price, rapid delivery of products and breadth
of product offering. As a supplier with a national scope and a broader product
line than many of its competitors, the Company provides high quality products,
competitive prices and high service levels as well as promotional literature and
advertisements. The Company's principal retail customers are Western Auto,
O'Reilly Auto Parts and Advance Auto. Net sales to retail automotive parts
stores accounted for 7.6% of the Company's revenues in 1995 and 7.1% in 1996.
ACQUISITIONS
Strategic acquisitions have been an important element in the Company's
historical growth. By integrating an acquired company's products into the
Company's distribution system, the Company is able to offer these products to a
substantially greater number of markets than was the case prior to the
acquisition. In addition, the Company expects to realize economies of scale in
areas including purchasing, administration and inventory management. The
Company's management is experienced in identifying acquisition opportunities and
completing and integrating acquisitions within the automotive aftermarket.
Since its formation and acquisition of Aaron's, HTP, Mamco and RPM in 1994, ATC
has acquired CRS, Mascot and King-O-Matic in 1995, Tranzparts and Diverco in
1996 and Repco in 1997.
COMPETITION
The Company competes in the highly fragmented yet highly competitive
automobile aftermarket for transmissions, engines and other drive train
components, in which the majority of industry supply comes from small
local/regional participants. However, certain of the Company's competitors are
larger than the Company and have greater financial and other resources available
to them than does the Company. Competition is based primarily on product
quality, service, delivery, technical support and price.
EMPLOYEES
As of January 31, 1997, the Company employed approximately 3,250
people. The Company believes its employee and labor relations are good. None
of the Company's subsidiaries has experienced a work stoppage in its history,
and the Company has not experienced any work stoppage since its formation in
1994. None of the Company's employees are members of any labor union.
ENVIRONMENTAL
The Company is subject to various evolving federal, state, local and
foreign environmental laws and regulations governing, among other things,
emissions to air, discharge to waters and the generation, handling, storage,
transportation, treatment and disposal of a variety of hazardous and
non-hazardous substances and wastes. These laws and regulations provide for
substantial fines and criminal sanctions for violations. The operation of
automotive parts remanufacturing plants involves environmental risks.
Prior to the RPM Acquisition, the company from which RPM acquired its
assets (the "Prior RPM Company") leased nine properties in the City of Azusa,
California (the "Azusa Properties") from a general partnership consisting of the
Prior RPM Company shareholders. The Azusa Properties are within an area which,
as a result of regional groundwater contamination, has been designated by the
Environmental Protective Agency (the
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"EPA") as the Baldwin Park Operable Unit ("BPOU") of the San Gabriel Valley
Superfund Sites. The federal Superfund law (the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended ("CERCLA")) both
provides for the appropriate cleanup of contaminated sites and assigns liability
for the cost of such cleanups. The parties held responsible for cleanup costs
are broadly defined under CERCLA, and generally include present owners and
operators of a site and certain past owners and operators. Liability for
cleanup costs imposed against such "responsible parties" is strict, joint and
several. However, such costs are typically allocable among responsible parties
through settlement or litigation based on factors including each particular
party's relative contribution of contaminants to the site and ability to pay.
The EPA has proposed a groundwater treatment system as an interim
remedial measure for the BPOU. The EPA has estimated that it will cost
approximately $47 million to construct this system and approximately $4 million
per year for an indefinite period to operate it. The Company has not
independently evaluated this estimate, and the actual cost may vary
substantially from this estimate. In addition, the EPA has incurred substantial
costs to date and will likely continue to incur such costs in overseeing the
implementation of remedial measures. The EPA has informally estimated that
these costs may be in excess of $1 million. Further, if the EPA determines that
the interim remedial measures are not adequate, additional costs could be
incurred. As discussed above, the "responsible parties" for this site could be
held liable for these EPA costs. In addition to cleanup costs, the responsible
parties may be required to pay for damages for injuries to natural resources
such as soil, groundwater or wildlife caused by the contamination at the BPOU.
To date, the government agencies authorized to claim natural resource damages
for this site have not made any assessment of the value, if any, of such
damages. In 1993, the EPA notified the Prior RPM Company, the general
partnership consisting of the Prior RPM Company shareholders which owns the
Azusa Properties and approximately 100 other entities that they may be
potentially responsible parties ("PRPs") for the San Gabriel Valley Superfund
Sites as present or former owners or operators of properties located within that
Site. In January 1995, the EPA sent letters to 16 of these parties with respect
to 15 properties in the BPOU, describing 4 of those properties as apparently the
"largest contributors to the groundwater contamination" and the remaining 11
properties as apparently in a range of moderate to lesser contributors. The
letters identify the recipients as PRPs for the proposed interim remediation and
request that they enter into negotiations to design, construct and operate the
cleanup remedy. The recipients of the letters included a general partnership
comprised of the Prior RPM Company shareholders, which was informed that the EPA
considers it responsible for two of the sites described as lesser to moderate
contributors to the contamination.
In conjunction with the federal and state environmental investigation
of this area, the Prior RPM Company has been required by the California Regional
Water Quality Control Board (the "Water Board") to conduct an investigation on
the Azusa Properties. This investigation has detected soil contamination on
certain of the Azusa Properties formerly leased by RPM and as a result, the
Prior RPM Company is being required by the Water Board to undertake further
investigations and may be required to undertake remedial action on those
properties.
For one year after the RPM Acquisition, the Company leased the Azusa
Properties pursuant to leases which provide that the Company has not assumed any
liabilities with respect to environmental conditions existing on or about these
properties prior to the commencement of the lease period, although the Company
could be held responsible for such liabilities under various legal theories.
Since the RPM Acquisition, the Company has been engaged in negotiations with the
EPA to settle any liability that it may have for this site. The RPM acquisition
agreement provides that the Company did not assume any environmental liabilities
associated with hazardous substances existing on or about the Azusa Properties
occupied by the Prior RPM Company prior to the RPM Acquisition and that the
Prior RPM Company and the Prior RPM Company shareholders will jointly and
severally indemnify the Company for all liabilities or damages (other than
consequential damages) that the Company may reasonably incur as a result of any
claim asserted against the Company relating to unassumed environmental
liabilities. There can be no assurance, however, that the Company would be able
to make any recovery under any indemnification provisions. The Company also
could become responsible if the conduct of its business contributed to any
environmental contamination on these properties. The Company took steps to
ensure that its business at these properties was conducted in compliance with
applicable environmental laws and in a manner that does not contribute to any
environmental contamination. Moreover, the Company has significantly reduced
its presence at the site and has moved all manufacturing operations off-site.
Since July 18, 1995, the Company's only real property
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interest in the Azusa Properties has been the lease of a 6,000 square foot
storage and distribution facility. The Company believes, although there can be
no assurance, that it will not incur any material liability as a result of the
pre-existing environmental conditions.
In connection with the CRS, Mascot, King-O-Matic, Aaron's, RPM, HTP,
Mamco, Tranzparts, Diverco and Repco acquisitions, the Company conducted certain
investigations of these companies' facilities and their compliance with
applicable environmental laws. The investigations, which included "Phase I"
assessments by independent consultants of all manufacturing and certain
distribution facilities, found that certain remedial, reporting and other
regulatory requirements, including certain waste management procedures, were not
or may not have been satisfied. Based in part on the investigations conducted,
and the indemnification provisions of the agreements entered into in connection
with these acquisitions, the Company believes, although there can be no
assurance, that its liabilities relating to these environmental matters will not
have a material adverse effect, individually or in the aggregate, on the
Company.
ITEM 2. PROPERTIES.
The Company currently leases 60 facilities with total leased space of
approximately 2.1 million square feet. The following table sets forth certain
information regarding the manufacturing facilities and distribution centers of
the Company.
LEASE
APPROXIMATE EXPIRATION TYPE OF FACILITY/PRODUCTS
LOCATION SQ. FEET DATE MANUFACTURED
- -------- ----------- ---------- --------------------------
Phoenix, Arizona 22,000 1997 Distribution Center
Tucson, Arizona 6,400 1998 Distribution Center
Azusa, California 6,000 1998 Distribution Center
Fresno, California 14,000 1997 Distribution Center
Los Angeles, California 4,700 1998 Distribution Center
Oakland, California 10,000 1997 Distribution Center
Rancho Cucamonga, California 153,000 2002 Distribution Center, Torque
Converters, Repair Kits, Hard
Parts
Sacramento, California 11,200 1998 Distribution Center
San Diego, California 10,000 1997 Distribution Center
San Jose, California 10,000 2000 Distribution Center
Van Nuys, California 6,800 2000 Distribution Center
Colorado Springs, Colorado 5,000 1997 Distribution Center
Denver, Colorado 9,000 1997 Distribution Center
Orlando, Florida 11,900 2001 Distribution Center
Atlanta, Georgia 14,900 1998 Distribution Center
Hillside, Illinois 20,000 2000 Distribution Center
Harvey, Illinois 46,000 2001 Distribution Center,
Transmissions, Hard Parts,
Engine Repair Kits
Louisville, Kentucky 51,500 1999 Distribution Center, Repair
Kits, Hard Parts
Louisville, Kentucky 9,200 (1) CV Axles
Grand Rapids, Michigan 9,000 1998 Distribution Center
Taylor, Michigan 12,200 2000 Distribution Center
Joplin, Missouri 264,000 1998 Transmissions, Engines
Creve Coeur, Missouri 9,700 1998 Distribution Center
Kansas City, Missouri 10,200 2000 Distribution Center
Springfield, Missouri 280,800 2004 Transmissions, Engines
Springfield, Missouri 30,000 1998 Torque Converters
Springfield, Missouri 12,100 2001 Distribution Center
Springfield, Missouri 34,000 1998 Cleaning and Testing Equipment
Springfield, Missouri 60,400 2000 Core Storage
Springfield, Missouri 98,800 (1) Core Storage
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Springfield, Missouri 10,000 (1) Core Storage
Springfield, Missouri 200,000 2006 Core Storage
Las Vegas, Nevada 7,500 1999 Distribution Center
Mahwah, New Jersey 92,900 2002 Distribution Center,
Transmissions
Albuquerque, New Mexico 7,000 1997 Distribution Center
Charlotte, North Carolina 23,000 2001 Distribution Center
Dayton, Ohio 42,000 1999 Torque Converters
Portland, Oregon 20,000 1997 Distribution Center
Memphis, Tennessee 37,800 2003 Distribution Center, Repair
Kits
Austin, Texas 5,000 1997 Distribution Center
Dallas, Texas 93,000 2011 Distribution Center, Repair
Kits, Hard Parts
Houston, Texas 13,500 2011 Distribution Center
San Antonio, Texas 13,000 2001 Distribution Center
Salt Lake City, Utah 15,000 1997 Distribution Center
Norfolk, Virginia 9,700 2000 Distribution Center
Federal Way, Washington 1,600 1998 Corporate Offices
Seattle, Washington 22,000 1997 Distribution Center
Spokane, Washington 9,500 2000 Distribution Center
Janesville, Wisconsin 30,000 2001 Distribution Center, Repair
Kits, Hard Parts
Calgary, Alberta 9,200 2001 Distribution Center
Edmonton, Alberta 14,800 1998 Distribution Center, Heavy
Duty Truck Transmissions
Vancouver, British Columbia 7,800 1997 Distribution Center
Vancouver, British Columbia 7,300 1997 Distribution Center
Moncton, New Brunswick 12,000 2000 Distribution Center
Mississauga, Ontario 35,100 1998 Distribution Center, Heavy
Duty Truck Transmissions and
Air Compressors
Mississauga, Ontario 12,200 2001 Repair Kits
Mississauga, Ontario 24,000 2000 Distribution Center
Montreal, Quebec 11,200 2000 Distribution Center
Regina, Saskatchewan 600 (1) Distribution Center
Mexicali, Mexico 77,100 1998 Torque Converters, Cleaning
and Testing Equipment
- -------------
(1) Month-to-month lease.
The Company believes that its current manufacturing facilities and
distribution centers are adequate for the current level of the Company's
activities. The Company's transmission and engine remanufacturing facility in
Springfield, Missouri is currently employing two work shifts, seven days a week.
Other manufacturing sites have the flexibility to add both additional shifts and
production workers needed to accommodate additional demand for products and
services. However, in the event the Company were to experience a material
increase in sales, the Company may require additional manufacturing facilities.
The Company believes such additional facilities are readily available on a
timely basis on commercially reasonable terms. Further, the Company believes
that the leased space housing its existing manufacturing and distribution
facilities is not unique and could be readily replaced, if necessary, at the end
of the terms of its existing leases on commercially reasonable terms. Many of
the Company's leases are renewable at the option of the Company.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, the Company has been and is involved in various
legal proceedings. Management believes that all of such litigation is routine
in nature and incidental to the conduct of its business, and that none of such
litigation, if determined adversely to the Company, would have a material
adverse effect, individually or in the aggregate, on the Company.
8
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
One matter was submitted to a vote of the sole stockholder of the
Company during the quarter ended December 31, 1996. On December 13, 1996, a
special meeting of the sole stockholder was held to approve the amendment and
restatement of the Company's Certificate of Incorporation to increase the
authorized number of shares of Common Stock to 30,000,000 and Preferred Stock to
5,000,000. All 1,000 votes held by the sole stockholder were cast in favor of
the proposal.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock presently is traded on the Nasdaq National
Market under the symbol "ATAC." As of February 28, 1997, there were
approximately 1,680 record holders of its Common Stock. The Common Stock was
not listed on the Nasdaq National Market for a full quarterly period during the
fiscal year ended December 31, 1996.
The Company has not paid cash dividends on its Common Stock to date.
Because the Company currently intends to retain any earnings to provide funds
for the operation and expansion of its business and for the servicing and
repayment of indebtedness, the Company does not intend to pay cash dividends on
the Common Stock in the foreseeable future. Furthermore, as a holding company
with no independent operations, the ability of the Company to pay cash dividends
will be dependent upon the receipt of dividends or other payments from its
subsidiaries. Under the terms of the indentures governing the Company's senior
subordinated notes due 2004, the Company is not permitted to pay any dividends
on the Common Stock unless certain financial ratio tests are satisfied. In
addition, the Company's revolving credit facility contains certain covenants
that, among other things, prohibit the payment of dividends by the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." Any determination to pay cash
dividends on the Common Stock in the future will be at the sole discretion of
the Company's Board of Directors.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data presented below with respect to the
statements of income data for the seven months ended July 31, 1994, five months
ended December 31, 1994, and the years ended December 31, 1995 and 1996 and the
balance sheet data at December 31, 1995 and 1996 are derived from the Combined
Financial Statements of the Predecessor Companies and Consolidated Financial
Statements of the Company that have been audited by Ernst & Young LLP,
independent auditors, and are included elsewhere herein, and are qualified by
reference to such financial statements and notes related thereto. The selected
financial data with respect to the statement of income data for the year ended
December 31, 1992 and 1993 and the balance sheet data at December 31, 1992, 1993
and 1994, are derived from the audited Combined Financial Statements of the
Predecessor Companies that have been audited by Ernst & Young LLP, independent
auditors, but are not included herein. The data provided should be read in
conjunction with the Consolidated Financial Statements, related notes, and other
financial information included in this Annual Report.
9
<PAGE>
<TABLE>
<CAPTION>
COMBINED CONSOLIDATED
--------------------------------- ---------------------------------
FOR THE FOR THE FOR THE YEAR
YEAR ENDED SEVEN MONTHS FOR THE FIVE ENDED
DECEMBER 31, ENDED MONTHS ENDED DECEMBER 31,
-------------------- JULY 31, DECEMBER 31, --------------------
1992 1993 1994(1) 1994 1995 1996
-------- --------- --------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales. . . . . . . . . . $75,264 $110,702 $90,056 $67,736 $190,659 $272,879
Cost of sales. . . . . . . . 45,588 66,687 52,245 40,112 115,499 166,811
-------- --------- --------- -------- --------- --------
Gross profit . . . . . . . . 29,676 44,015 37,811 27,624 75,160 106,068
Selling, general and
administrative expenses . . 22,103 25,682 20,475 14,206 38,971 55,510
Amortization of intangible
assets. . . . . . . . . . . 28 28 16 1,210 3,308 3,738
Operating income . . . . . . 7,545 18,305 17,320 12,208 32,881 46,820
Interest expense (income),
net . . . . . . . . . . . . (258) (302) (158) 6,032 16,915 19,106
Income taxes (2) . . . . . . 150 471 (5) 2,565 6,467 11,415
-------- --------- --------- -------- --------- --------
Net income . . . . . . . . . $ 7,653 $ 18,136 $ 17,483 $ 3,611 $ 9,499 $ 16,299
-------- --------- ---------
-------- --------- ---------
Preferred stock dividends. . 853 2,093 2,222
-------- --------- --------
Net income available to
common stockholders . . . . $ 2,758 $ 7,406 $ 14,077
-------- --------- --------
-------- --------- --------
Pro forma (unaudited) (3)
Net income per share. . . . $ 0.65 $ 1.02
Shares used in computation
of net income per share . . 14,616 15,918
OTHER DATA:
Capital expenditures (4) . . $ 1,141 $ 2,310 $ 1,850 $ 1,336 $ 5,187 $ 7,843
</TABLE>
<TABLE>
<CAPTION>
COMBINED CONSOLIDATED
------------------- ---------------------------------
DECEMBER 31,
-------------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital. . . . . . . . . . . . $18,639 $26,651 $40,499 $60,012 $103,371
Property, plant and
equipment (net) . . . . . . . . . . . 3,274 4,678 6,196 10,784 17,482
Total assets . . . . . . . . . . . . . 32,654 45,618 187,293 247,932 320,747
Long-term debt (5) . . . . . . . . . . 1,497 998 121,483 165,724 167,233
Preferred stock. . . . . . . . . . . . -- -- 20,853 22,946 --
Common stockholders' equity. . . . . . 22,107 31,720 22,757 30,188 105,832
</TABLE>
- -----------------
(1) The combined financial statements for the seven months ended July 31, 1994
include the operations of the Predecessor Companies up to their respective
acquisition dates; operations for RPM between July 20, 1994 and July 31,
1994 and for the other three Predecessor Companies for August 1st and 2nd,
1994 are not significant. All material transactions between the
Predecessor Companies have been eliminated.
(2) Two of the Predecessor Companies elected to be taxed as S Corporations for
all periods through consummation of the Initial Acquisitions; therefore,
for federal and state income tax purposes, any income or loss generally was
not taxed to these companies but was reported by their respective
stockholders. A pro forma provision for taxes based on income reflecting
the estimated provision for federal and state income taxes which would have
been provided had these companies been C Corporations and included in
consolidated returns with the Company is as follows: $3,036 and $7,334 for
the years ended December 31, 1992 and 1993, respectively, and $7,004 for
the seven months ended July 31, 1994.
(3) See Note 1 to consolidated financial statements.
10
<PAGE>
(4) Excludes capital expenditures made by each of CRS, Mascot, King-O-Matic,
Tranzparts and Diverco prior to such subsidiaries' respective acquisitions
and any capital expenditures made in connection with such acquisitions.
(5) Includes deferred tax liabilities of $1,438, $3,478 and $5,252 at
December 31, 1994, 1995 and 1996, respectively.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
The following discussion should be read in conjunction with the
Combined Financial Statements of the Predecessor Companies and the Consolidated
Financial Statements of the Company and notes thereto included elsewhere in this
Annual Report. The Combined Financial Statements of the Predecessor Companies
represent the combination of the historical financial statements of the four
separate businesses of the Predecessor Companies.
The Company's revenues are generated through the sale of drive train
products used in the automotive aftermarket repair of passenger cars and light
trucks. Since its formation, the Company has benefited from a combination of
internal and acquisition-related revenue growth. The Company achieved compound
annual growth in revenue of 38.0% from 1992 through 1996 (29.2% if the 1995 and
1996 Acquisitions are excluded).
The Company's revenues from sales to Independent Aftermarket customers
increased by 17.7% compounded annually from $58.5 million to $112.1 million
between 1992 and 1996. This growth was due to geographic expansion through the
addition of distribution centers, a broadened product line, enhanced customer
service, effective sales efforts and acquisitions. During the same period,
revenues from sales to OEM customers increased by 70.4% compounded annually from
$16.8 million to $141.5 million due to increased sales to existing customers,
including Chrysler, and the addition of new customers. Revenues from sales to
retail automotive parts stores increased from virtually zero in 1992 to $19.3
million in 1996.
The primary components of the Company's cost of goods sold are the
cost of cores and component parts, labor costs and overhead. While certain of
these costs have fluctuated as a percentage of sales over time, cost of goods
sold as a percentage of sales has remained relatively constant from 1992 through
1996. Selling, general and administrative ("SG&A") expenses consist primarily
of salaries, commissions, rent, marketing expenses and other management
infrastructure expenses. SG&A expenses as a percentage of sales declined from
29.4% in 1992 to 20.3% in 1996 principally due to the effect of spreading
certain fixed costs over a larger sales base.
In the fourth quarter of 1996, the Company recorded a non-cash charge
of approximately $485,000 for deferred compensation expense relating to the
difference between the exercise price and the intrinsic value for financial
statement presentation purposes of the Company's Common Stock for 628,176
options granted in October 1996. Substantially all of such options were granted
to Mr. Stephen J. Perkins, the Company's Chief Executive Officer, and other
members of senior management at $4.67 per share. This compensation expense will
aggregate $3.3 million, and will be recognized over the respective vesting
periods of the options, which generally range from three to five years.
RESULTS OF OPERATIONS
The following table sets forth certain financial statement data
expressed in millions of dollars and as a percentage of net sales. The pro
forma statement of income for the year ended December 31, 1994 reflects the
combined financial statements for the seven months ended July 31, 1994 for
Aaron's, HTP, Mamco and RPM, and the consolidated operations of these companies
for the five months ended December 31, 1994. Pro forma expense adjustments were
made to reflect the Initial Acquisitions as if they had occurred on January 1,
1994.
11
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
PRO FORMA CONSOLIDATED CONSOLIDATED
1994 1995 1996
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . $157.8 100.0% $190.7 100.0% $ 272.9 100.0%
Cost of sales. . . . . . . . . . . . . . . . 92.9 58.9 115.5 60.6 166.8 61.1
------- ------- ------- ------- ------- -------
Gross profit . . . . . . . . . . . . . . . . 64.9 41.1 75.2 39.4 106.1 38.9
Selling, general and administrative. . . . . 30.4 19.2 39.0 20.5 55.5 20.3
Amortization of intangible assets. . . . . . 3.0 1.9 3.3 1.7 3.8 1.4
------- ------- ------- ------- ------- -------
Operating income . . . . . . . . . . . . . . 31.5 20.0 32.9 17.2 46.8 17.2
Interest expense (income), net . . . . . . . 14.5 9.2 16.9 8.8 19.1 7.0
Provision for income taxes . . . . . . . . . 6.9 4.4 6.5 3.4 11.4 4.2
------- ------- ------- ------- ------- -------
Net income . . . . . . . . . . . . . . . . . $ 10.1 6.4% $ 9.5 5.0% $16.3 6.0%
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
</TABLE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net income increased 71.6% from $9.5 million in 1995 to $16.3 million
in 1996, as the Company experienced significant revenue growth from all three of
its customer groups, OEMs, retail automotive parts stores and the Independent
Aftermarket. More than half of the revenue growth occurred from OEM customers.
Growth from the Independent Aftermarket was achieved largely through two
strategic acquisitions (Tranzparts and Diverco), and to a lesser extent from
internal growth. The higher net income was primarily achieved from the
Company's ability to spread its overhead expenses over a larger revenue base.
Although the Company's IPO resulted in an increase in the number of
shares used in the earnings per share ("EPS") calculation, EPS increased
significantly from $0.65 in 1995 to $1.02 in 1996. The numbers of shares used
in the calculation of EPS were 14.6 million for 1995 and 15.9 million for 1996 .
NET SALES. Net sales increased $82.2 million or 43.1%, from $190.7
million in 1995 to $272.9 million in 1996. Of this increase, $42.8 million was
due to internal growth and $39.4 million was due to the incremental net sales
generated by the companies acquired in 1995 and 1996: CRS, Mascot, King-O-Matic,
Tranzparts and Diverco, which were acquired on June 1, 1995, June 9, 1995,
September 12, 1995, April 2, 1996 and October 1, 1996, respectively.
The internal growth was generated primarily from increased sales
volumes with existing OEM customers. To a lesser extent, internal growth was
also generated by the incremental sales from five new distribution centers
opened during the second half of 1995, increased sales volumes through existing
distribution centers and increased sales volumes with existing retail customers.
Net sales to Chrysler of $101.5 million in 1996 represented 37.2% of
the Company's total net sales for the year, as compared to $67.6 million and
35.4% in 1995. The increase in net sales to Chrysler is partially reflective of
an effort by Chrysler during the third quarter of 1995 to reduce its inventory
of remanufactured transmissions. Management believes that the Chrysler
inventory reduction during the third quarter of 1995 was a one-time effort to
reverse an inventory build-up in 1994 and is not expected to recur. The
preceding sentence contains a forward-looking statement, and there can be no
assurance that actual results will not differ materially from the information
contained in the preceding sentence.
GROSS PROFIT. Gross profit as a percentage of net sales decreased
slightly from 39.4% in 1995 to 38.9% in 1996. The decrease in gross profit
margin was largely attributable to certain non-recurring start-up costs incurred
during 1996 in connection with the Company's new plant in Joplin, Missouri and
the expansion of capacity at the Company's plant in Springfield, Missouri needed
to support sales growth to retail and OEM customers.
12
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses decreased
slightly as a percentage of net sales from 20.4% in 1995 to 20.3% in 1996.
However, SG&A expenses increased in absolute dollars from $39.0 million in 1995
to $55.5 million in 1996, representing an increase of $16.5 million or 42.4%.
The increase in SG&A expenses was due largely to the ongoing incremental SG&A
expenses of the companies acquired in 1995 and 1996: CRS, Mascot, King-O-Matic,
Tranzparts and Diverco. Other significant factors contributing to the increase
in SG&A expenses include the ongoing incremental expenses associated with the
five new distribution centers opened during the second half of 1995, and certain
start-up and ongoing SG&A expenses incurred in connection with the Company's new
plant in Joplin, Missouri. In addition, SG&A expenses in 1996 included a charge
of $0.7 million for certain planned reorganization costs associated with the
relocation of the Company's corporate headquarters to the Chicago area and the
integration of the Independent Aftermarket division.
AMORTIZATION OF INTANGIBLE ASSETS. Amortization of intangible assets
increased $0.4 million in 1996 as compared to 1995, reflecting the increase in
intangible assets that occurred as a result of the acquisitions of CRS, Mascot,
King-O-Matic, Tranzparts and Diverco.
INCOME FROM OPERATIONS. Principally as a result of the factors
described above, income from operations increased 42.2%, from $32.9 million in
1995 to $46.8 million in 1996. As a percentage of net sales, income from
operations in 1996 was 17.2%, equal to the same percentage of net sales in 1995.
INTEREST EXPENSE (INCOME), NET. Interest expense increased $2.3
million from $18.0 million in 1995 to $20.3 million in 1996. The increase was
due to a full year of interest expense on the Series D senior subordinated notes
which were used to finance the acquisitions of CRS, Mascot and King-O-Matic, and
the related amortization of debt issuance costs. The Series D notes were issued
on June 1, 1995 and therefore were only outstanding for the last seven months of
1995.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO PRO FORMA YEAR ENDED DECEMBER 31,
1994
The Company experienced revenue growth of 20.8% in 1995, its first
full year of operation since its formation. However, net income decreased from
$10.1 million in 1994 (on a pro forma basis) to $9.5 million in 1995. The
decrease in net income resulted from the combined effect on 1995 results of
higher interest expense and a lower percentage of income from operations. On
June 1, 1995, the Company issued its Series D senior subordinated notes, which
added $2.7 million of interest expense for the year. Income from operations
decreased from 20.0% of net sales in 1994 to 17.2% in 1995, principally as a
result of a lower gross profit margin and higher SG&A expenses as discussed
below.
NET SALES. Net sales increased by $32.9 million or 20.8% from $157.8
million in 1994 to $190.7 in 1995 primarily as a result of the acquisitions of
CRS, Mascot, and King-O-Matic. The three new acquisitions provided
$24.7 million in additional revenues. Net sales of remanufactured transmissions
increased from $68.4 million in 1994 to $85.9 million in 1995. The volume
increase of remanufactured transmissions resulted principally from the
acquisitions of CRS and Mascot, partially offset by a reduction in net sales of
remanufactured transmissions to Chrysler from $66.8 million in 1994 to $64.8
million in 1995. Net sales to Chrysler reflected a decrease from $19.8 million
during the third quarter of 1994 to $13.2 million for the third quarter of 1995
as Chrysler reduced its inventory of remanufactured transmissions, partially
offset by an increase from $16.4 million during the fourth quarter of 1994 to
$18.9 million for the fourth quarter of 1995. Net sales of repair kits, hard
parts and other drive train products increased $6.0 million from $69.0 million
in 1994 to $75.0 million in 1995 primarily as a result of the Company's
acquisition of King-O-Matic. Net sales of remanufactured engines increased $4.6
million from $15.2 million in 1994 to $19.8 million in 1995. The volume
increase of remanufactured engines resulted from increased demand from Western
Auto at its retail outlets, and the addition of new retail customers.
GROSS PROFIT. Gross profit as a percentage of net sales decreased
from 41.1% in 1994 to 39.4% in 1995. The gross profit decrease of 1.7% of net
sales was due in large part to increased labor costs relating to remanufactured
engines and transmissions. The Company was not able to recover all of the
additional costs through increased selling prices.
13
<PAGE>
In addition, the aggregate gross profit was affected by the
acquisitions that occurred in 1995. Total net sales in 1995 includes $24.7
million for CRS, Mascot and King-O-Matic at a combined gross profit, which was
somewhat lower than that of the Company as a whole for 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased
from $30.4 million in 1994 to $39.0 in 1995 or, as a percentage of net sales,
from 19.2% in 1994 to 20.5% in 1995. The increase was partly due to the
Company's acquisitions of CRS, Mascot and King-O-Matic, which comprised $3.3
million of the Company's SG&A expenses in 1995. Other significant factors that
contributed to the increase in SG&A expenses were the relocation of RPM's main
facilities from Azusa, California to Rancho Cucamonga, California and the
addition of a new manufacturing plant in Joplin, Missouri, both of which
resulted in an increase in ongoing SG&A expenses and a significant amount of
non-recurring SG&A expenses being incurred during 1995. Legal, audit, tax and
other professional fees were also higher in 1995 principally due to a full year
of ATC operations as compared with only five months of operations in 1994.
AMORTIZATION OF INTANGIBLE ASSETS. Amortization of intangible assets
increased $0.3 million in 1995, reflecting the increase in intangible assets
that occurred as a result of the acquisitions of CRS, Mascot and King-O-Matic.
INCOME FROM OPERATIONS. Principally as a result of the factors
described above, income from operations increased 4.4% from $31.5 million in
1994 to $32.9 million in 1995. As a percentage of net sales, income from
operations decreased from 20.0% in 1994 to 17.2% in 1995.
INTEREST EXPENSE (INCOME), NET. Interest expense increased $2.4
million from $14.5 million in 1994 to $16.9 million in 1995. The increase in
interest expense reflects additional interest on the Series D notes that were
issued principally to finance the acquisitions of CRS, Mascot and King-O-Matic
and the related amortization of debt issuance costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company raised total net proceeds of $61.6 million in its IPO and
concurrent private placement of Common Stock in December 1996. From the
Company's inception in July 1994 to December 1996, the Company had funded its
operations and investments in property and equipment, including acquisitions,
through the issuance of senior subordinated notes totaling $162.4 million, the
private sale of Preferred Stock of $20 million and Common Stock of $20.0
million, and to a lesser extent through cash provided by operating activities
and revolving bank lines. In December 1996, the Preferred Stock was redeemed
and, in February 1997, $40 million of the Senior Subordinated notes were
redeemed, with a combination of the proceeds from the IPO and borrowings under
the Company's revolving credit facility.
The Company had total cash and cash equivalents on hand of $46.5
million at December 31, 1996, representing an increase in net cash of $37.7
million for the year then ended. Net cash provided by operating activities was
$17.8 million in 1996. Net cash used in investing activities was $20.0 million
in 1996, including a total of $12.2 million for the acquisition of Tranzparts
and Diverco, and $7.8 million in capital expenditures largely for transmission
and engine remanufacturing equipment and other improvements related to the
Company's new plant in Joplin, Missouri. Net cash provided by financing
activities was $39.9 million, including net proceeds of $61.6 million from the
IPO and concurrent private placement of Common Stock, payments totaling $25.2
million in connection with the redemption of Preferred Stock, and net borrowings
of $3.5 million on bank lines of credit.
The Company has budgeted a total of $9.6 million for capital
expenditures in 1997, including approximately $2.0 million carried over from the
1996 budget. The 1997 budget consists primarily of additional transmission,
engine and torque converter remanufacturing equipment and other improvements to
support planned increases in production capacity in the Joplin, Missouri,
Springfield, Missouri and Mahwah, New Jersey plants. Overall, planned capital
expenditures for 1997 are considered adequate for normal replacement and
consistent with projections for future sales and earnings.
14
<PAGE>
As of December 31, 1996, the Company had approximately $27.0 million
available on its then existing $30 million revolving credit facility with The
Chase Manhattan Bank ("Chase") that had been scheduled to mature in July 1999.
In February 1997, the Company terminated that facility and replaced it with a
new $100 million revolving credit facility with Chase. The new revolving credit
facility is available to finance the Company's working capital requirements,
future acquisitions and other general corporate needs, and will expire in
December 2001. Amounts advanced under the agreement are secured by
substantially all assets of the Company.
In July 1996, the Company entered into an agreement with Bank of
Montreal for a revolving credit facility to accommodate the working capital
needs of the Company's Canadian subsidiaries. Borrowings under the agreement
are limited to certain advance rates based upon the eligible accounts receivable
and inventory of King-O-Matic and Mascot up to an aggregate maximum of C$3.0
million.
In January 1997, the Company acquired Repco, a drive train parts
distributor based in Dallas, Texas with three additional distribution centers in
Texas and one in Florida, for a purchase price of approximately $12.0 million.
With the acquisition of Repco, the Company has entered geographic markets of
distribution in several cities where it previously had little or no presence.
The Company evaluates potential acquisitions on an ongoing basis and expects to
continue to do so in the future.
The Company believes that cash on hand, cash flow from operations and
existing borrowing capacity will be sufficient to fund its ongoing operations.
In pursuing future acquisitions, the Company expects to have to consider the
effect any such acquisition costs may have on its liquidity. In order to
consummate such acquisitions, the Company may need to raise additional capital
through additional debt or equity financings.
INFLATION; LACK OF SEASONALITY
Although the Company is subject to the effects of changing prices, the
impact of inflation has not been a significant factor in results of operations
for the periods presented. In some circumstances, market conditions or customer
expectations may prevent the Company from increasing the prices of its products
to offset the inflationary pressures that may increase its costs in the future.
Historically, there has been little seasonal fluctuation in the Company's
business.
ENVIRONMENTAL MATTERS
See "Business -- Environmental" for a discussion of certain
environmental matters relating to the Company.
15
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Aftermarket Technology Corp.
Consolidated Financial Statements
Years Ended December 31, 1994, 1995 and 1996
CONTENTS
Report of Ernst & Young LLP, Independent Auditors.....................17
Audited Consolidated Financial Statements
Consolidated Balance Sheets...........................................18
Consolidated Statements of Income.....................................19
Consolidated Statements of Stockholders' Equity.......................20
Consolidated Statements of Cash Flows.................................21
Notes to Consolidated Financial Statements............................22
16
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Stockholders and Board of Directors
Aftermarket Technology Corp.
We have audited the accompanying consolidated balance sheets of
Aftermarket Technology Corp. (the Company) as of December 31, 1995 and 1996, and
the related consolidated statements of income, stockholders' equity, and cash
flows for the five months ended December 31, 1994 and for the years ended
December 31, 1995 and 1996. We have also audited the accompanying combined
statements of income, stockholders' equity, and cash flows of the Predecessor
Companies to Aftermarket Technology Corp. (the Predecessor Companies) for the
seven months ended July 31, 1994. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These financial
statements are the responsibility of the Company's and Predecessor Companies'
managements. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Aftermarket Technology Corp. at December 31, 1995 and 1996, and the
consolidated results of the Company's operations and cash flows for the five
months ended December 31, 1994, and for the years ended December 31, 1995 and
1996 and the combined results of the operations of the Predecessor Companies to
Aftermarket Technology Corp. and their cash flows for the seven months ended
July 31, 1994, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth herein.
ERNST & YOUNG LLP
Seattle, Washington
February 14, 1997
17
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
CONSOLIDATED BALANCE SHEETS
December 31,
------------- -------------
1995 1996
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . $ 8,755,691 $ 46,498,249
Accounts receivable, net. . . . . . . . . . . 32,965,874 38,779,538
Inventories . . . . . . . . . . . . . . . . . 43,064,712 60,586,056
Prepaid and other assets. . . . . . . . . . . 2,032,671 2,916,197
Deferred tax assets . . . . . . . . . . . . . 2,267,000 2,272,000
------------- -------------
Total current assets . . . . . . . . . . . . . 89,085,948 151,052,040
Equipment and leasehold improvements:
Machinery and equipment . . . . . . . . . . . 7,187,840 12,907,232
Autos and trucks. . . . . . . . . . . . . . . 1,503,760 2,012,450
Furniture and fixtures. . . . . . . . . . . . 858,070 1,552,660
Leasehold improvements. . . . . . . . . . . . 2,860,711 4,584,329
------------- -------------
12,410,381 21,056,671
Less accumulated depreciation
and amortization. . . . . . . . . . . . . . (1,625,917) (3,574,276)
------------- -------------
10,784,464 17,482,395
Debt issuance costs, net . . . . . . . . . . . 7,162,690 6,320,179
Cost in excess of net assets acquired, net . . 140,652,620 145,430,296
Other assets . . . . . . . . . . . . . . . . . 245,897 461,714
------------- -------------
Total assets . . . . . . . . . . . . . . . . . $ 247,931,619 $ 320,746,624
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . $ 12,951,575 $ 25,225,797
Accrued payroll and related costs . . . . . . 2,094,237 4,429,339
Accrued interest payable. . . . . . . . . . . 8,097,647 7,995,405
Other accrued expenses. . . . . . . . . . . . 3,170,162 3,371,562
Bank lines of credit. . . . . . . . . . . . . 811,067 4,334,686
Income taxes payable. . . . . . . . . . . . . 1,912,116 321,299
Due to former stockholders. . . . . . . . . . 36,734 2,002,824
------------- -------------
Total current liabilities. . . . . . . . . . . 29,073,538 47,680,912
12% Series B and D Senior Subordinated Notes . 162,245,762 161,981,356
Deferred tax liabilities . . . . . . . . . . . 3,478,000 5,252,000
Commitments and contingencies. . . . . . . . .
Stockholders' equity:
Preferred stock, $.01 par value:
Authorized shares - 5,000,000
Issued and outstanding shares - 200,000
and 0 at December 31, 1995 and 1996,
respectively . . . . . . . . . . . . . . . 22,946,300 --
Common stock, $.01 par value:
Authorized shares - 30,000,000
Issued and outstanding shares - 12,000,000
and 16,980,794 at December 31, 1995 and
1996, respectively . . . . . . . . . . . . 20,000,000 81,549,668
Retained earnings . . . . . . . . . . . . . . 10,163,019 24,239,467
Cumulative translation adjustment . . . . . . 25,000 43,221
------------- -------------
Total stockholders' equity . . . . . . . . . . 53,134,319 105,832,356
------------- -------------
Total liabilities and stockholders' equity . . $ 247,931,619 $ 320,746,624
------------- -------------
------------- -------------
18
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Combined Consolidated
------------- ------------------------------------------
Seven Months Five Months
Ended Ended
July 31, December 31, Year Ended December 31,
1994 1994 1995 1996
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . $ 90,055,996 $ 67,735,869 $190,659,143 $272,878,458
Cost of sales. . . . . . . . . . . . . 52,245,178 40,111,819 115,499,023 166,810,941
------------- ------------ ------------ ------------
Gross profit . . . . . . . . . . . . . 37,810,818 27,624,050 75,160,120 106,067,517
Selling, general, and
administrative expense. . . . . . . . 20,475,113 14,205,750 38,971,230 55,509,529
Amortization of intangible assets. . . 15,534 1,209,971 3,307,563 3,738,382
------------- ------------ ------------ ------------
Income from operations . . . . . . . . 17,320,171 12,208,329 32,881,327 46,819,606
Interest and other income. . . . . . . 288,059 341,342 1,099,588 1,181,473
Interest expense . . . . . . . . . . . 130,036 6,373,921 18,015,346 20,287,419
------------- ------------ ------------ ------------
Income before income taxes . . . . . . 17,478,194 6,175,750 15,965,569 27,713,660
Provision (benefit) for income
taxes . . . . . . . . . . . . . . . . (5,000) 2,565,000 6,467,000 11,415,000
------------- ------------ ------------ ------------
Net income . . . . . . . . . . . . . . $ 17,483,194 3,610,750 9,498,569 16,298,660
------------- ------------ ------------ ------------
-------------
Dividends accrued on preferred
stock . . . . . . . . . . . . . . . . 853,288 2,093,012 2,222,212
------------ ------------ ------------
Net income available to common
stockholders. . . . . . . . . . . . . $ 2,757,462 $ 7,405,557 $ 14,076,448
------------ ------------ ------------
------------ ------------ ------------
Pro forma (unaudited):
Income before income taxes per
above . . . . . . . . . . . . . . . $ 17,478,194
Provision for income taxes. . . . . . 7,004,000
-------------
Pro forma net income. . . . . . . . . $ 10,474,194
-------------
-------------
Net income per share. . . . . . . . . $0.65 $1.02
------------ ------------
------------ ------------
Shares used in calculation of pro
forma net income per share. . . . . 14,616,160 15,918,384
------------ ------------
------------ ------------
</TABLE>
19
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Combined
Seven Months
Ended
July 31,
1994
------------
Stockholders' equity at beginning of period............ $31,719,717
Distributions to stockholders........................ (5,503,000)
Net income........................................... 17,483,194
------------
Stockholders' equity at end of period.................. $43,699,911
------------
------------
<TABLE>
<CAPTION>
Consolidated
------------------------------------------------------------------------
Cumulative
Preferred Common Retained Translation
Stock Stock Earnings Adjustment Total
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Issuance of 200,000 shares of
preferred stock for cash at $100
per share, August 2, 1994. . . . . . $ 20,000,000 $ -- $ -- $ -- $20,000,000
Issuance of 12,000,000 shares of
common stock for cash at $1.67
per share, August 2, 1994. . . . . . -- 20,000,000 -- -- 20,000,000
Net income for the five months
ended December 31, 1994. . . . . . . -- -- 3,610,750 -- 3,610,750
Accrued dividends on preferred
stock. . . . . . . . . . . . . . . . 853,288 -- (853,288) -- --
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1994 . . . . . 20,853,288 20,000,000 2,757,462 -- 43,610,750
Translation adjustment . . . . . . . . -- -- -- 25,000 25,000
Net income for the year ended
December 31, 1995. . . . . . . . . . -- -- 9,498,569 -- 9,498,569
Accrued dividends on preferred
stock. . . . . . . . . . . . . . . . 2,093,012 -- (2,093,012) -- --
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1995 . . . . . 22,946,300 20,000,000 10,163,019 25,000 53,134,319
Issuance of 4,980,794 shares of
common stock for cash at
$13.50 per share, December 17,
1996 net of offering costs of
$4,787,832 . . . . . . . . . . . . . -- 61,549,668 -- -- 61,549,668
Accrued dividends on preferred
stock. . . . . . . . . . . . . . . . 2,222,212 -- (2,222,212) -- --
Redeem preferred stock,
December 20, 1996. . . . . . . . . . (25,168,512) -- -- -- (25,168,512)
Translation adjustment . . . . . . . . -- -- -- 18,221 18,221
Net income for the year ended
December 31, 1996. . . . . . . . . . -- -- 16,298,660 -- 16,298,660
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1996 . . . . . $ -- $81,549,668 $24,239,467 $ 43,221 $105,832,356
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
20
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Combined Consolidated
------------ ------------------------------------------
Seven Months Five Months
Ended Ended
July 31, December 31, Year Ended December 31,
1994 1994 1995 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . $17,483,194 $ 3,610,750 $ 9,498,569 $ 16,298,660
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization. . . . . 726,761 1,598,491 4,680,388 5,773,238
Amortization of debt issuance costs. . -- 268,650 710,281 842,511
Increase (decrease) in allowance for
losses on accounts receivable. . . . 249,176 192,208 496,591 (1,149,916)
Loss (gain) on sale of equipment . . . 24,276 4,804 (5,955) 21,912
Increase in net deferred tax
liabilities . . . . . . . . . . . . . -- 50,000 1,274,000 1,769,000
Changes in operating assets and
liabilities:
Accounts receivable . . . . . . . . (6,218,650) (1,799,626) (3,172,303) (2,719,859)
Inventories . . . . . . . . . . . . (2,716,807) (576,145) (8,118,364) (12,574,161)
Prepaid and other assets. . . . . . (519,553) 299,101 (1,137,901) (987,949)
Accounts payable and accrued
expenses . . . . . . . . . . . . . 2,102,961 4,249,395 6,555,947 10,520,582
------------ ------------ ------------ ------------
Net cash provided by operating
activities. . . . . . . . . . . . . . . 11,131,358 7,897,628 10,781,253 17,794,018
INVESTING ACTIVITIES:
Purchases of equipment . . . . . . . . . (1,850,224) (1,335,551) (5,187,400) (7,843,401)
Acquisition of companies, net of cash
received. . . . . . . . . . . . . . . . -- (146,954,457) (40,264,452) (12,199,106)
Proceeds from sale of fixed assets . . . 78,657 55,603 7,685 86,271
------------ ------------ ------------ ------------
Net cash used in investing activities. . (1,771,567) (148,234,405) (45,444,167) (19,956,236)
FINANCING ACTIVITIES:
Issuance of senior subordinated notes. . -- 120,000,000 42,400,000 --
Borrowings on revolving credit facility. -- 18,160,000 3,500,000 --
Payments on revolving credit facility. . -- (17,000,000) (4,742,458) --
Borrowings (payments) on bank lines
of credit . . . . . . . . . . . . . . . (1,000,000) -- -- 3,523,619
Payment of debt issuance costs . . . . . -- (5,697,413) (2,179,167) --
Payment of offering costs. . . . . . . . -- (5,339,855) -- --
Payment of initial public
offering costs. . . . . . . . . . . . . -- -- -- (4,787,832)
Net payments on other long-term debt . . (100,584) (358,637) -- --
Sale of common stock . . . . . . . . . . -- 20,000,000 -- 66,337,500
Sale of preferred stock. . . . . . . . . -- 20,000,000 -- --
Preferred stock redemption . . . . . . . -- -- -- (25,168,511)
Net payments to related parties. . . . . (88,737) -- -- --
Distributions to stockholders. . . . . . (5,503,000) -- -- --
Payments on amounts due to former
stockholders. . . . . . . . . . . . . . -- -- (4,987,088) --
------------ ------------ ------------ ------------
Net cash provided by (used in)
financing activities. . . . . . . . . . (6,692,321) 149,764,095 33,991,287 39,904,776
Increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . 2,667,470 9,427,318 (671,627) 37,742,558
Cash and cash equivalents at
beginning of period . . . . . . . . . . 581,680 -- 9,427,318 8,755,691
------------ ------------ ------------ ------------
Cash and cash equivalents at end
of period . . . . . . . . . . . . . . . $ 3,249,150 $ 9,427,318 $ 8,755,691 $ 46,498,249
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Cash paid during the period for:
Interest. . . . . . . . . . . . . . . . $ 128,259 $ 185,817 $ 15,376,365 $ 19,411,691
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Income taxes. . . . . . . . . . . . . . $ 209,671 $ 2,571,000 $ 3,221,356 $ 10,970,402
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
21
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements of Aftermarket Technology Corp.
(ATC or the Company) include the results of the following remanufactured
automotive products businesses which sell to customers throughout the United
States and Canada: (i) Aaron's Automotive Products, Inc. (Aaron's), a
Springfield, Missouri-based remanufacturer of transmissions, engines, torque
converters, and other drive train parts for automotive original equipment
manufacturers, independent rebuilders and distributors, and retail chain store
customers; (ii) Component Remanufacturing Specialists (CRS), a Mahwah, New
Jersey-based remanufacturer and distributor of automotive drive train and
transmission components; (iii) H.T.P., Inc. (HTP), a Louisville, Kentucky-based
remanufacturer and warehouse distributor of new and remanufactured parts for
independent transmission rebuilders; (iv) Mamco Converters, Inc. (Mamco), a
Dayton, Ohio-based remanufacturer of torque converters for independent
transmission rebuilders and distributors; (v) King-O-Matic (King) and Mascot
Truck Parts Inc. (Mascot), Canadian-based remanufacturers and distributors of
automotive components and a rebuilder of heavy duty truck transmissions,
respectively, are located in Mississauga, Canada; (vi) RPM Merit (RPM), a Rancho
Cucamonga, California (formerly Azusa, California)-based remanufacturer of
torque converters, constant velocity axles, and transmission fluid pumps, and a
warehouse distributor of remanufactured parts and new part kits to independent
transmission rebuilders; (vii) Tranzparts, Inc. (Tranzparts), a Janesville,
Wisconsin-based remanufacturer and warehouse distributor of new and
remanufactured parts for independent transmission rebuilders; (viii) ATC
Components, Inc. (ATAC), a Memphis, Tennessee-based warehouse distributor of
transmission parts, engines, engine kits, and parts to independent transmission
and engine rebuilders; and (ix) Diverco, Inc. (Diverco) a Harvey, Illinois-based
distributor of standard drive train parts, engine parts, gaskets, and other soft
parts for transmission and engine repair and complete transmissions for light
trucks and automobiles.
The combined financial statements of the Predecessor Companies to
Aftermarket Technology Corp. (the Predecessor Companies) represent the
combination of the historical financial statements of Aaron's, RPM, HTP, and
Mamco. The Company was formed for the purpose of effecting the acquisitions of
the Predecessor Companies. The Predecessor Companies were acquired pursuant to
four separate purchase agreements for a total purchase price of approximately
$160.4 million (the Initial Acquisitions). The combined financial statements for
the seven months ended July 31, 1994 include the operations of the Predecessor
Companies up to their respective closing dates, which approximated July 31,
1994.
PRINCIPLES OF CONSOLIDATION
The Company's acquisitions have been accounted for as purchases, and
the consolidated financial statements for the years ended December 31, 1995 and
1996 and the five months ended December 31, 1994 include operations of the
Company and its wholly owned operating subsidiaries from the dates of
acquisition. Significant intercompany accounts and transactions have been
eliminated in consolidation.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
22
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out
method) or market and consist primarily of new and used engine and transmission
parts, and cores and finished goods. Appropriate consideration is given to
deterioration, obsolescence, and other factors in evaluating estimated market
value.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are stated at cost. Depreciation
is computed using accelerated and straight-line methods over the estimated
useful lives of the assets, which range from three to fifteen years.
Depreciation expense was $711,227, $388,520, $1,372,825 and $2,034,856 for the
seven months ended July 31, 1994, the five months ended December 31, 1994, and
the years ended December 31, 1995 and 1996, respectively.
FOREIGN CURRENCY TRANSLATION
The financial statements of Canadian subsidiaries have been translated
into U.S. dollars in accordance with Statement of Financial Accounting Standards
(SFAS) No. 52, "Foreign Currency Translation." All balance sheet accounts have
been translated using the exchange rates in effect at the balance sheet date.
Income statement amounts have been translated using the average exchange rate
for the year. The translation gain resulting from the changes in exchange rates
has been reported separately as a component of stockholders' equity.
The effect on the statements of income of transaction gains or losses
is insignificant for the periods presented.
DEBT ISSUANCE COSTS
Debt issuance costs incurred in connection with the sale of the 12%
Series B and Series D Senior Subordinated Notes (Note 6) and Revolving Credit
Facility (Note 5) are being amortized over the life of the debt of ten, nine,
and seven years, respectively.
COST IN EXCESS OF NET ASSETS ACQUIRED
The excess of the purchase price over the fair value of the assets
purchased is being amortized over 40 years on a straight-line basis. Cost in
excess of net assets acquired is reflected net of accumulated amortization of
$4,466,669 and $8,261,622 at December 31, 1995 and 1996, respectively.
In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of," the Company
assesses the recoverability of cost in excess of net assets acquired by
determining whether the amortization of the asset balance over its remaining
life can be recovered through the undiscounted future operating cash flows of
the acquired operation. The amount of the impairment, if any, is measured based
on projected discounted future operating cash flows. The Company believes that
no impairment has occurred and that no reduction in the estimated useful life is
warranted.
23
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to a
significant concentration of credit risk consist of accounts receivable from its
customers, which are primarily in the automotive aftermarket industry throughout
the United States and Canada. The credit risk associated with the Company's
accounts receivable is mitigated by its credit evaluation process, reasonably
short collection terms and, except for one significant customer, the
geographical dispersion of sales transactions.
The Company grants credit to certain customers who meet
pre-established credit requirements. Customers who do not meet those
requirements are required to pay for products upon delivery. Credit losses are
provided for in the financial statements and consistently have been within
management's expectations.
Accounts receivable is reflected net of an allowance for doubtful
accounts of $2,469,000 and $1,326,000 December 31, 1995 and 1996, respectively.
WARRANTY POLICY
For certain products on which the Company provides a warranty, the
warranty period is generally up to twelve months or 12,000 miles.
STOCK-BASED COMPENSATION
Effective January 1, 1996, the Company adopted SFAS No. 123,
"Accounting for Stock-Based Compensation." As permitted under SFAS No. 123, the
Company has continued its current accounting for employee stock-based
compensation in accordance with Accounting Principles Board Opinion No. 25. The
effect of applying SFAS No. 123 to the Company's stock-based awards on net
income and earnings per share is immaterial.
RECLASSIFICATIONS
Certain prior-year amounts have been reclassified to conform to the
1996 presentation.
PRO FORMA DATA (UNAUDITED)
INCOME TAXES
Two of the Predecessor Companies elected to be taxed as S Corporations
for all periods through the respective closing dates of the Acquisitions;
therefore, for federal and state income tax purposes, any income or loss accrued
prior to that date generally was not taxed to these companies but was reported
by their respective stockholders. The pro forma provision for taxes reflects the
estimated provision for federal and state income taxes which could have been
provided had these companies been C Corporations and filed consolidated returns.
Because these pro forma income taxes do not represent obligations of, and will
not be paid by, the Predecessor Companies, they have not been reflected in the
combined balance sheets or in the combined statements of cash flows.
PRO FORMA NET INCOME PER SHARE
Pro forma net income per share is based on the weighted average number
of shares of common stock and common equivalent shares outstanding using the
treasury stock method and the estimated number of shares of common stock issued
in the Company's initial public offering whose net proceeds were used to redeem
the outstanding preferred stock including accrued dividends. Pursuant to the
Securities and Exchange Commission requirements, common and common equivalent
shares issued during the 12-month period prior to the filing of the
24
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Company's initial public offering have been included in the calculation as if
they were outstanding for all periods presented using the treasury stock method,
based on the initial public offering price.
Historical earnings per share is not considered meaningful due to the
significant changes in the Company's capital structure that occurred upon the
closing of the Company's initial public offering; accordingly, such per share
information is not presented.
2. ACQUISITIONS
During the year ended December 31, 1995, the Company acquired three
companies for a total purchase price of approximately $42.8 million. The CRS and
Mascot acquisitions closed on June 1, 1995, and June 9, 1995 respectively, and
the King acquisition closed on September 12, 1995 (collectively, the 1995
Acquisitions). The Company issued $40 million in principal amount of 12% Senior
Subordinated Notes due in 2004 concurrently with the acquisition of CRS, the
proceeds of which financed the 1995 Acquisitions (Note 6). In addition, on
April 2, 1996, the Company acquired Tranzparts, Inc. for $4.0 million and on
October 1, 1996 the Company acquired Diverco, Inc. for $10.5 million
(collectively the 1996 Acquisitions). All such acquisitions have been accounted
for as purchases. Accordingly, the allocation of the cost of the acquired assets
and liabilities has been made on the basis of the estimated fair value.
The consolidated financial statements include the operating results of
each business from the date of acquisition. The following unaudited pro forma
information for the year ended December 31, 1995 gives effect to the 1995
acquisitions as if such acquisitions had occurred on January 1, 1995. Pro forma
information to reflect the 1996 acquisitions has not been presented because the
effect of such acquisitions was not material to prior periods. The pro forma
information includes adjustments for interest expense that would have been
incurred to finance the acquisitions, additional depreciation based on the fair
market values of the property, plant, and equipment acquired, and amortization
of intangibles arising from the transactions. The pro forma financial
information is not necessarily indicative of the results of operations as they
would have been had the transactions been effected on the assumed dates.
YEAR ENDED
DECEMBER 31, 1995
-----------------
(IN THOUSANDS)
Net sales.......................... $ 210,958
Net income......................... 10,043
3. RELATED-PARTY TRANSACTIONS
The Company had liabilities to former stockholders totaling $36,734 at
December 31, 1995 and $2,002,824 at December 31, 1996. The 1996 amounts are
composed primarily of an additional purchase price payable to Diverco's former
stockholder. The remaining amount will be paid in the first quarter of 1997.
The Company paid Aurora Capital Partners (ACP), a significant
stockholder, approximately $1.1 million in fees for investment banking services
provided in connection with the 1995 and 1996 acquisitions. In addition, ACP was
paid management fees of $500,000 and $513,015 in 1995 and 1996, respectively.
ACP is also entitled to various additional fees depending on the Company's
profitability or future acquisitions. No such additional fees were paid in 1995
and 1996.
25
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INVENTORIES
Inventories consist of the following:
DECEMBER 31,
------------------------
1995 1996
----------- -----------
Raw materials, including core inventories........ $19,015,530 $30,412,730
Work-in-process.................................. 1,394,479 1,166,275
Finished goods................................... 22,654,703 29,007,051
----------- -----------
$43,064,712 $60,586,056
----------- -----------
----------- -----------
Finished goods include purchased parts which are available for sale.
5. BANK LINES OF CREDIT
CURRENT LIABILITIES
In July 1996, the Company entered into a Revolving Credit Agreement
with Bank of Montreal (BOM Revolving Credit Agreement) providing for a revolving
credit facility to accommodate the working capital needs of King and Mascot (the
Canadian subsidiaries). Advances under the BOM Revolving Credit Agreement may
be made, due upon demand, up to an aggregate of 75% of the eligible accounts
receivable and 50% of the eligible inventory of the Canadian subsidiaries, in
each case as defined in the BOM Revolving Credit Agreement, up to a maximum of
C$3.0 million. Amounts advanced are secured by substantially all assets of the
Canadian subsidiaries and are guaranteed by the Company. The agreement will
expire initially in June 1997 and may be renewed subject to an annual review.
Interest is payable monthly at the Bank of Montreal prime lending rate plus
0.25%. At December 31, 1996, $1.4 million was outstanding under this line of
credit and the interest rate in effect was 5.0%. At December 31, 1995, $0.8
million was outstanding under a former credit line used by the Canadian
subsidiaries.
In January 1996, the Company entered into an agreement with Commerce
Bank, N.A. providing financing for equipment purchases by Aaron's up to a
maximum of $2.9 million, secured by the underlying equipment purchased.
Interest is payable monthly at a fixed rate equal to 70% of the bank's prime
lending rate at the date of the advance plus 1%. As of December 31, 1996, $2.9
million was outstanding under this loan agreement. The agreement contains
several covenants including levels of net worth, leverage, interest coverage and
earnings before interest, taxes, depreciation, and amortization (EBITDA).
REVOLVING CREDIT FACILITY
On July 19, 1994, the Company entered into an agreement with The Chase
Manhattan Bank, as agent, providing for a $30 million revolving credit facility
(Revolving Credit Facility) to finance the Initial Acquisitions and for working
capital purposes. The funds available to be advanced may not exceed 85% of the
Company's eligible accounts receivable and 60% of the Company's eligible
inventories, as defined in the agreement. The available borrowing base at
December 31, 1996 was approximately $27 million. All amounts advanced are
secured by all accounts receivable and inventories and become due on July 31,
1999. The Company may prepay outstanding advances in whole or in part without
incurring any premium or penalty.
At the Company's election, amounts advanced under the Revolving Credit
Facility will bear interest at either (i) the Alternate Base Rate plus 1.25% or
(ii) the Eurodollar Rate plus 2.25%. The Alternate Base Rate is equal to the
highest of (a) the Bank's prime rate, (b) the secondary market rate for
three-month certificates of deposit plus 1.0%, or (c) the federal funds rate
plus 0.5%. Interest payments on advances which bear interest based upon the
Alternate Base Rate are due quarterly in arrears, and interest payments on
advances which bear interest
26
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. BANK LINES OF CREDIT(CONTINUED)
based upon the Eurodollar Rate are due on the last day of each relevant interest
period (or, if such period exceeds three months, quarterly after the first day
of such period).
The Company paid the Bank a one-time facility and commitment fee upon
establishing the Revolving Credit Facility and is required to pay the Bank
quarterly in arrears a commitment fee of 0.5% per annum of the average daily
unused portion of the Revolving Credit Facility.
The Revolving Credit Facility contains several covenants, including
levels of net worth, leverage, EBITDA and cash flow coverage, and certain limits
on the Company to incur indebtedness, make capital expenditures, create liens,
engage in mergers and consolidations, make restricted payments (including
dividends), make asset sales, make investments, issue stock, and engage in
transactions with affiliates of the Company and its subsidiaries. At
December 31, 1996, no amounts were outstanding under this line of credit.
6. 12% SERIES B AND SERIES D SENIOR SUBORDINATED NOTES
On August 2, 1994, the Company completed a private placement issuance
of $120 million in principal amount of 12% Series A Senior Subordinated Notes
due in 2004. Proceeds from the issuance were used to partially finance the
Initial Acquisitions. The privately placed debt was exchanged for public debt
(designated Series B) on February 22, 1995.
On June 1, 1995, the Company completed another private placement
issuance of $40 million in principal amount of 12% Series C Senior Subordinated
Notes due in 2004. Proceeds of $42.4 million from the issuance were used to
finance the 1995 Acquisitions. These notes have an effective interest rate of
10.95%. The privately placed debt was exchanged for public debt (designated
Series D) on September 10, 1995.
Interest on the Notes is payable semiannually on February 1 and
August 1 of each year, commencing on February 1, 1995 for the Series B Notes and
August 1, 1995 for the Series D Notes. The Notes will mature on August 1, 2004.
On or after August 1, 1999, the Notes may be redeemed at the option of the
Company, in whole or in part, at specified redemption prices plus accrued and
unpaid interest:
Year Redemption Price
---- ----------------
1999..................................... 106%
2000..................................... 104
2001..................................... 102
2002 and thereafter...................... 100
In addition, at any time on or prior to August 1, 1997, the Company
may, subject to certain requirements, redeem up to $30 million of the Series B
Notes and $10 million of the Series D Notes aggregate principal amounts with the
net cash proceeds of one or more public equity offerings, at a price equal to
112% of the principal amount to be redeemed plus accrued and unpaid interest. On
February 16, 1997 the Company exercised its right and redeemed $30 million in
principal amount of the Series B Notes and $10 million in principal amount of
the Series D Notes resulting in a loss on early extinguishment of debt of $4.8
million.
In the event of a change in control, the Company would be required to
offer to repurchase the Notes at a price equal to 101% of the principal amount
plus accrued and unpaid interest.
The Notes are general obligations of the Company, subordinated in
right of payment to all existing and future senior debt (including the Revolving
Credit Facility). The Notes are guaranteed by each of the Company's existing and
future subsidiaries other than any subsidiary designated as an unrestricted
subsidiary (as defined). The Company may incur additional indebtedness,
including borrowings under its $30 million Revolving Credit Facility (Note 5),
subject to certain limitations.
27
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. 12% SERIES B AND SERIES D SENIOR SUBORDINATED NOTES (CONTINUED)
The indenture under which the Notes were issued contains certain
covenants that, among other things, limit the Company from incurring other
indebtedness, issuing disqualified capital stock, engaging in transactions with
affiliates, incurring liens, making certain restricted payments (including
dividends), making certain asset sales, and permitting certain restrictions on
the ability of its subsidiaries to make distributions. As of December 31, 1996,
the Company was in compliance with such covenants.
7. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets are
as follows:
DECEMBER 31
---------- ----------
1995 1996
---------- ----------
Deferred tax liabilities:
Book basis of intangible assets
in excess of tax amounts.................. $3,208,000 $4,630,000
Other...................................... 270,000 622,000
---------- ----------
Total deferred tax liabilities.................. 3,478,000 5,252,000
Deferred tax assets:
Inventory obsolescence reserve............. 898,000 1,182,000
Bad debt reserves.......................... 545,000 778,000
Product warranty accruals.................. 438,000 312,000
Other...................................... 386,000 --
---------- ----------
Total deferred tax assets....................... 2,267,000 2,272,000
---------- ----------
Net deferred tax liability...................... $1,211,000 $2,980,000
---------- ----------
---------- ----------
Significant components of the provision for income taxes attributable
to operations are as follows:
YEAR ENDED
FIVE MONTHS ENDED DECEMBER 31,
DECEMBER 31, -------------------------
1994 1995 1996
---------- ---------- -----------
Current:
Federal.................... $2,136,000 $4,429,000 $8,499,000
State...................... 379,000 764,000 1,147,000
---------- ---------- -----------
Total current................... 2,515,000 5,193,000 9,646,000
Deferred:
Federal.................... 53,000 1,137,000 1,621,000
State...................... (3,000) 137,000 148,000
---------- ---------- -----------
Total deferred.................. 50,000 1,274,000 1,769,000
---------- ---------- -----------
$2,565,000 $6,467,000 $11,415,000
---------- ---------- -----------
---------- ---------- -----------
28
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
The components of the provision for deferred income taxes are as
follows:
FIVE MONTHS YEAR ENDED
ENDED DECEMBER 31,
DECEMBER 31, ------------------------
1994 1995 1996
---------- ---------- -----------
Amortization of intangible assets......... $754,000 $1,759,000 $1,422,000
Inventory obsolescence reserve............ (483,000) (333,000) (284,000)
Bad debt reserves......................... (85,000) (223,000) (233,000)
Product warranty accruals................. (56,000) (20,000) 126,000
Depreciation.............................. 2,000 339,000 427,000
Other..................................... (82,000) (248,000) 311,000
---------- ---------- -----------
Provision for deferred income taxes....... $50,000 $1,274,000 $1,769,000
---------- ---------- -----------
---------- ---------- -----------
The reconciliation of income tax expense computed at the U.S. federal
statutory tax rates to income tax expense is as follows:
<TABLE>
<CAPTION>
FIVE MONTHS YEAR ENDED
ENDED DECEMBER 31, 1995
-------------------- ---------------------------------------------
DECEMBER 31, 1994 1995 1996
-------------------- -------------------- ---------------------
Amount Percent Amount Percent Amount Percent
---------- ------- ---------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Tax at U.S. statutory rates............... $2,159,000 35.0% $5,588,000 35.0% $9,700,000 35.0%
State income taxes, net of
federal tax benefit...................... 244,000 3.9 529,000 3.3 842,000 3.0
Other..................................... 162,000 2.7 350,000 2.2 873,000 3.2
---------- ------- ---------- ------- ----------- -------
$2,565,000 41.6% $6,467,000 40.5% $11,415,000 41.2%
---------- ------- ---------- ------- ----------- -------
---------- ------- ---------- ------- ----------- -------
</TABLE>
8. COMMON AND PREFERRED STOCK
On December 13, 1996, the Company amended and restated its charter to
increase its authorized Common Stock to 30,000,000 shares and consummated a
six-for-one stock split, and to increase its authorized Preferred Stock to
5,000,000 shares. The accompanying financial statements have been retroactively
adjusted to reflect the stock split.
The Company sold 4,025,000 shares of common stock through a public
offering (Public Offering). The price per share for such Common Stock was
$13.50 (Public Offering Price). At approximately the same time, the Company
sold to General Electric Pension Trust (GEPT) $12.0 million of Common Stock
(955,794 shares) in a private placement. The price per share for such privately
placed Common Stock was the price per share paid by the Underwriters in the
Public Offering ($12.555), that is the public offering price per share less
Underwriters' discounts and commissions. Although GEPT received Common Stock
which has not been registered under the Securities Act of 1933, it also received
a "demand" registration right and a "piggyback" registration right with respect
to such stock and 300,000 shares of Common Stock it currently owns, which rights
are not exercisable until after June 14, 1997.
29
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. COMMON AND PREFERRED STOCK (CONTINUED)
STOCK OPTION PLAN
The Company adopted its 1994 Stock Incentive Plan (Plan) in July 1994
in order to provide incentives to employees and directors of the Company. The
Company had reserved 1,800,000 shares of common stock for issuance under the
plan. On September 19, 1996, the shareholders approved an amendment to the Plan
to increase the number of shares available for issuance to 2,400,000. Options
are generally granted at the fair value on the date of grant and vest over a
period of time to be determined by the Board of Directors, generally from three
to five years. The options expire 10 years from the date of grant.
The following table summarizes the stock option activity:
SHARES SUBJECT PRICE
TO OPTION PER SHARE
-------------- -----------
Granted in 1994..................... 1,403,514 $ 1.67
--------------
Balance, December 31, 1994.............. 1,403,514 1.67
Granted in 1995..................... 123,264 1.67
--------------
Balance, December 31, 1995.............. 1,526,778 1.67
Granted in 1996..................... 745,440 4.67
--------------
Balance, December 31, 1996.............. 2,272,218 $1.67-4.67
--------------
--------------
At December 31, 1996, 1,117,098 options are exercisable and 127,782
options remain available for future grant.
In connection with the prior acquisitions, warrants to purchase
350,880 shares of common stock at $1.67 per share were issued to two
individuals. The warrants are exercisable through 2004. The Company has also
issued a warrant to one member of the Board of Directors to purchase 70,176
shares of common stock at $1.67 per share, the fair value of the common stock on
the date of grant.
At December 31, 1996, the Company had 2,821,056 shares of common stock
reserved for the exercise and future granting of stock options and warrants.
Following the completion of the Public Offering, the Company redeemed
its outstanding Preferred Stock.
9. EMPLOYEE RETIREMENT PLAN
The Company sponsors several defined contribution plans to provide
substantially all U.S. salaried and hourly employees of the Company an
opportunity to accumulate personal funds for their retirement, subject to
minimum duration of employment requirements. Contributions are made on a
before-tax basis to substantially all of these plans.
As determined by the provisions of each plan, the Company matches a
portion of the employees' basic voluntary contributions. Company matching
contributions to the plans were approximately $65,000, $108,000, and $206,000
for the plan years ending in 1994, 1995, and 1996, respectively. The net assets
of these plans approximated $2.6 million as of the 1996 plan year ends.
30
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company leases certain facilities under various operating lease
agreements, which expire on various dates through 2004. Leases that expire
generally are expected to be renewed or replaced by other leases. Future minimum
lease payments as of December 31, 1996 are as follows:
YEAR ENDING DECEMBER 31
-----------------------
1997............................................. $ 5,062,498
1998............................................. 4,230,712
1999............................................. 3,383,449
2000............................................. 2,690,464
2001............................................. 2,369,592
Thereafter....................................... 4,042,372
------------
$21,779,087
------------
------------
Rent expense under operating leases approximated $1,159,000, $902,000,
$3,114,999 and $4,582,000 for the seven months ended July 31, 1994, the five
months ended December 31, 1994, and the years ended December 31, 1995 and 1996,
respectively.
Rent expense includes amounts paid to related parties of $254,000,
$611,000, and $940,000 for the five months ended December 31, 1994, the year
ended December 31, 1995, and the year ended December 31, 1996, respectively.
The Company is subject to various evolving federal, state, local and
foreign environmental laws and regulations governing, among other things,
emissions to air, discharge to waters and the generation, handling, storage,
transportation, treatment and disposal of a variety of hazardous and
non-hazardous substances and wastes. These laws and regulations provide for
substantial fines and criminal sanctions for violations. The operation of
automotive parts remanufacturing plants involves environmental risks.
Prior to the RPM Acquisition, the company from which RPM acquired its
assets (the "Prior RPM Company") leased nine properties in the City of Azusa,
California (the "Azusa Properties") from a general partnership consisting of the
Prior RPM Company shareholders. The Azusa Properties are within an area which,
as a result of regional groundwater contamination, has been designated by the
Environmental Protection Agency (EPA) as the Baldwin Park Operable Unit ("BPOU")
of the San Gabriel Valley Superfund Sites. The federal Superfund law (the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended ("CERCLA")) both provides for the appropriate cleanup of contaminated
sites and assigns liability for the cost of such cleanups. The parties held
responsible for cleanup costs are broadly defined under CERCLA, and generally
include present owners and operators of a site and certain past owners and
operators. Liability for cleanup costs imposed against such "responsible
parties" is strict, joint and several. However, such costs are typically
allocable among responsible parties through settlement or litigation based on
factors including each particular party's relative contribution of contaminants
to the site and ability to pay.
The EPA has proposed a groundwater treatment system as an interim
remedial measure for the BPOU. The EPA has estimated that it will cost
approximately $47 million to construct this system and approximately $4 million
per year for an indefinite period to operate it. The Company has not
independently evaluated this estimate, and the actual cost may vary
substantially from this estimate. In addition, the EPA has incurred substantial
costs to date and will likely continue to incur such costs in overseeing the
implementation of remedial measures. The EPA has informally estimated that
these costs may be in excess of $1 million. Further, if the EPA determines that
the interim remedial measures are not adequate, additional costs could be
incurred. As discussed above, the "responsible parties" for this site could be
held liable for these EPA costs. In addition to
31
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
cleanup costs, the responsible parties may be required to pay for damages for
injuries to natural resources such as soil, groundwater, or wildlife caused by
the contamination at the BPOU. To date, the government agencies authorized to
claim natural resource damages for this site have not made any assessment of the
value, if any, of such damages. In 1993, the EPA notified the Prior RPM
Company, the general partnership consisting of the Prior RPM Company
shareholders which owns the Azusa Properties and approximately 100 other
entities that they may be potentially responsible parties ("PRPs") for the San
Gabriel Valley Superfund Sites as present or former owners or operators of
properties located within that Site. In January 1995, the EPA sent letters to
16 of these parties with respect to 15 properties in the BPOU, describing four
of those properties as apparently the "largest contributors to the groundwater
contamination" and the remaining 11 properties as apparently in a range of
moderate to lesser contributors. The letters identify the recipients as PRPs
for the proposed interim remediation and request that they enter into
negotiations to design, construct, and operate the cleanup remedy. The
recipients of the letters included a general partnership comprised of the Prior
RPM Company shareholders, which was informed that the EPA considers it
responsible for two of the sites described as lesser to moderate contributors to
the contamination.
In conjunction with the federal and state environmental investigation
of this area, the Prior RPM Company has been required by the California Regional
Water Quality Control Board (the "Water Board") to conduct an investigation on
the Azusa Properties. This investigation has detected soil contamination on
certain of the Azusa Properties formerly leased by RPM and as a result, the
Prior RPM Company is being required by the Water Board to undertake further
investigations and may be required to undertake remedial action on those
properties.
For one year after the RPM Acquisition, the Company leased the Azusa
Properties pursuant to leases which provide that the Company has not assumed any
liabilities with respect to environmental conditions existing on or about these
properties prior to the commencement of the lease period, although the Company
could be held responsible for such liabilities under various legal theories.
Since the RPM Acquisition, the Company has been engaged in negotiations with the
EPA to settle any liability that it may have for this site. The RPM acquisition
agreement provides that the Company did not assume any environmental liabilities
associated with hazardous substances existing on or about the Azusa Properties
occupied by the Prior RPM Company prior to the RPM Acquisition and that the
Prior RPM Company and the Prior RPM Company shareholders will jointly and
severally indemnify the Company for all liabilities or damages (other than
consequential damages) that the Company may reasonably incur as a result of any
claim asserted against the Company relating to unassumed environmental
liabilities. There can be no assurance, however, that the Company would be able
to make any recovery under any indemnification provisions. The Company also
could become responsible if the conduct of its business contributed to any
environmental contamination on these properties. The Company took steps to
ensure that its business at these properties was conducted in compliance with
applicable environmental laws and in a manner that does not contribute to any
environmental contamination. Moreover, the Company has significantly reduced
its presence at the site and has moved all manufacturing operations off-site.
Since July 18, 1995, the Company's only real property interest in the Azusa
Properties has been the lease of a 6,000 square foot storage and distribution
facility. The Company believes, although there can be no assurance, that it
will not incur any material liability as a result of the pre-existing
environmental conditions.
In connection with the CRS, Mascot, King-O-Matic, Aaron's, RPM, HTP,
Mamco, Tranzparts, and Diverco acquisitions, the Company conducted certain
investigations of these companies' facilities and their compliance with
applicable environmental laws. The investigations, which included "Phase I"
assessments by independent consultants of all manufacturing and certain
distribution facilities, found that certain remedial, reporting, and other
regulatory requirements, including certain waste management procedures, were not
or may not have been satisfied. Based in part on the investigations conducted,
and the indemnification provisions of the agreements entered into in connection
with these acquisitions, the Company believes, although there can be no
assurance, that its liabilities relating to these environmental matters will not
have a material adverse effect, individually or in the aggregate, on the
Company.
32
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company is also involved in several lawsuits which arise in the
ordinary course of business which management believes will not have a material
adverse effect, individually or in the aggregate, on the Company's consolidated
financial position or results of operations.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of all financial instruments approximate their
fair values at December 31, 1995 and 1996, except for the Series B and Series D
subordinated debt.
The fair values of the Company's Series B and Series D subordinated
debt are estimated using discounted cash flow analyses, based on the Company's
current incremental borrowing rates for similar types of borrowing arrangements.
The carrying amounts and fair values of these financial instruments at
December 31 are as follows:
1995 1996
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(IN THOUSANDS)
12% subordinated notes (Series B)....... $120,000 $126,600 $120,000 $126,900
12% subordinated notes (Series D)....... 40,000 42,200 40,000 42,300
12. SIGNIFICANT CUSTOMER
For the seven months ended July 31, 1994, the five months ended
December 31, 1994, the year ended December 31, 1995, and the year ended
December 31, 1996, sales to one customer accounted for 43%, 45%, 35%, and 37% of
net sales, respectively. Additionally, at December 31, 1995 and 1996, this
customer accounted for approximately 46% and 51% of accounts receivable,
respectively. No other customer accounted for more than 10% of net sales in any
period.
13. SUBSEQUENT EVENTS
On February 14, 1997 the Company terminated its $30 million revolving
credit facility and replaced it with a new $100 million revolving credit
facility with The Chase Manhattan Bank, as agent, (New Revolving Credit
Facility) to finance the Company's working capital requirements, future
acquisitions, and other general corporate needs. Amounts advanced under the New
Revolving Credit Facility are secured by substantially all assets of the Company
and will become due on December 31, 2001, although the Company may prepay
outstanding advances in whole or in part without incurring any premium or
penalty. The New Revolving Credit Facility contains several covenants,
including levels of net worth, leverage, EBITDA, and cash flow coverage, and
certain limits on the Company to incur indebtedness, make capital expenditures,
create liens, engage in mergers and consolidations, make restricted payments
(including dividends), make asset sales, make investments, issue stock, and
engage in transactions with affiliates of the Company and its subsidiaries.
33
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. QUARTERLY RESULTS (UNAUDITED)
Quarter
-------------------------------------
First Second Third Fourth
------- -------- ------- --------
1995
- ----
Net sales....................... $40,638 $45,094 $46,740 $58,187
Gross profit.................... 15,668 18,066 16,686 24,740
Net income...................... 1,953 2,924 1,344 3,278
Pro forma earnings per share.... $0.14 $0.20 $0.09 $0.22
1996
- ----
Net sales....................... $64,146 $66,873 $68,287 $73,572
Gross profit.................... 25,788 25,063 25,998 29,219
Net income...................... 4,399 3,891 4,051 3,958
Pro forma earnings per share.... $0.28 $0.25 $0.26 $0.23
34
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth the name, age and position with the
Company of each of the persons who serve as directors and executive officers of
the Company. Each director of the Company will hold office until the next annual
meeting of stockholders of the Company or until his successor has been elected
and qualified. Officers of the Company are elected by the Board of Directors of
the Company and serve at the discretion of the Board.
NAME AGE POSITIONS
---- --- ---------
William A. Smith 51 Chairman of the Board of Directors
Stephen J. Perkins 49 President, Chief Executive Officer and
Director
John C. Kent 45 Chief Financial Officer
Wesley N. Dearbaugh 45 President and General Manager,
Independent Aftermarket
James R. Wehr 43 President, Aaron's
Michael L. LePore 43 President, CRS
Robert Anderson 75 Director
Richard R. Crowell 42 Director
Mark C. Hardy 33 Director
Dr. Michael J. Hartnett 51 Director
William E. Myers, Jr. 37 Director
Gerald L. Parsky 55 Director
Richard K. Roeder 48 Director
WILLIAM A. SMITH has been the Chairman of the Board of Directors since
July 1994. Mr. Smith was the President and Chief Executive Officer of the
Company from July 1994 until October 1996. From March 1993 to July 1994,
Mr. Smith served as a consultant to ACP in connection with the Initial
Acquisitions. From March 1992 to March 1993, Mr. Smith was President of the
Rucker Fluid Power Division of Lucas Industries, plc. From October 1988 to
March 1992, Mr. Smith was Vice President of Parts Operations for Navistar
International Transportation Corporation, a truck engine manufacturer, where
Mr. Smith managed its aftermarket parts business, including four new aftermarket
business lines. From July 1985 to October 1988, Mr. Smith served as President
for Labinal, Inc., a French automotive and aerospace equipment manufacturer,
where he was in charge of its North American operations. From 1979 to 1985,
Mr. Smith was Vice President of Marketing of the Cummins Diesel Recon business,
Cummins Engine Company's aftermarket remanufacturing division. From 1972 to
1979, Mr. Smith held several director level positions at Cummins Engine Company
covering distribution, technical service, service training, market planning,
parts marketing, service publications and warranty administration.
STEPHEN J. PERKINS was elected as the President and Chief Executive
Officer of the Company in October 1996. From February 1992 to October 1996, Mr.
Perkins was President and Chief Executive Officer of Senior Flexonics, an
international division of Senior Engineering, plc. Senior Flexonics included 20
operations in 13 countries which manufactured and distributed engineered
flexible tubular products for the automotive, aerospace and industrial markets.
From September 1983 to February 1992, Mr. Perkins was President and Chief
Executive Officer of Flexonics, Inc., the privately held predecessor of Senior
Flexonics. From March 1979 to September 1983, Mr. Perkins was the Director of
Manufacturing and then Vice President and General Manager of the Flexonics
Division of what is now Allied Signal. From July 1971 to March 1979, Mr. Perkins
held several management positions in manufacturing at multiple facilities for
the Steel Tubing Group of Copperweld Corporation. Mr. Perkins began his career
with U.S. Steel as an Industrial Engineer.
JOHN C. KENT became Chief Financial Officer of the Company in
July 1994. From March 1990 to July 1994, Mr. Kent was Vice President, Finance
and Chief Financial Officer of Aerotest, Inc., an aircraft
35
<PAGE>
maintenance and modification company. In March 1995, Aerotest filed a voluntary
petition for relief under Chapter 11 of the United States Bankruptcy Code. The
Aerotest bankruptcy proceedings are still pending. From 1987 to March 1990,
Mr. Kent was an Assistant Treasurer at Security Pacific Auto Finance. From 1978
to 1987 Mr. Kent served in several capacities at Western Airlines, Inc.,
including Director of Cash and Risk Management.
WESLEY N. DEARBAUGH joined ATC as President and General Manager of
Independent Aftermarket in June 1996. From 1993 to June 1996, Mr. Dearbaugh was
a Partner and Vice President of Marketing for Cummins, S.W., a multi-branch
distributor of heavy duty parts and service. From 1992 to 1993, he was Vice
President of Marketing for SEI, a large pension consulting firm. From 1983 to
1992, Mr. Dearbaugh held senior management and partner positions in value
investment funds and limited partnerships. From 1979 to 1983, Mr. Dearbaugh held
positions at Cummins Diesel Recon, Cummins Engine Company's Aftermarket
Remanufacturing Division including General Manager of Fuel Systems,
Director-Product Management, and Manager of Sales & Marketing. From 1974 to
1979, Mr. Dearbaugh held several positions in industrial engineering and
technical sales at Atlas Crankshaft, a manufacturing division of Cummins Engine
Company.
JAMES R. WEHR has been President of Aaron's, since August 1990 and has
responsibility for developing and maintaining the relationships between Aaron's
and Chrysler, other OEMs and Western Auto. In 1983 Mr. Wehr founded
Intercont, Inc., a cleaning and testing equipment division of Aaron's. Mr. Wehr
has been involved in the automotive aftermarket since 1969.
MICHAEL L. LEPORE has been President of CRS since 1984. From 1976 to
1984 Mr. LePore was manager of U.S. Operations for Borg-Warner Parts and Service
Division, a subsidiary of Borg Warner LTD U.K.
ROBERT ANDERSON became a director of the Company in March 1997. Mr.
Anderson has been associated with Rockwell International Corporation since 1968,
where he has been Chairman Emeritus since 1990 and served previously as Chairman
of the Executive Committee from 1988 to 1990 and as Chairman of the Board and
Chief Executive Officer from 1979 to 1988. Mr. Anderson is a director of
Gulfstream Aerospace Corporation, Optical Data Systems Company and Timken
Company.
RICHARD R. CROWELL became a director of the Company in July 1994.
Mr. Crowell is a founding partner and Managing Director of ACP. Prior to forming
ACP in 1991, Mr. Crowell was a Managing Director of Rosecliff, Inc., the
management company for Acadia Partners L.P. since its inception in 1987. Mr.
Crowell is a also director of Astor Corporation.
MARK C. HARDY became a director of the Company in July 1994. Mr. Hardy
is a Vice President of ACP and joined ACP in June 1993. Prior to joining ACP,
Mr. Hardy was an Associate at Bain & Company, a consulting firm. Mr. Hardy is
also a director of Astor Corporation.
DR. MICHAEL J. HARTNETT became a director of the Company in July 1994.
Since March 1992 Dr. Hartnett has been Chairman, President and Chief Executive
Officer of Roller Bearing Company of America, Inc., a manufacturer of ball and
roller bearings that is controlled by an affiliate of ACP. Prior to joining
Roller Bearing in 1990 as General Manager of its Industrial Tectonics
subsidiary, Dr. Hartnett spent 18 years with The Torrington Company, a bearing
manufacturer.
WILLIAM E. MYERS, JR. became a director of the Company in July 1994.
Mr. Myers has been, for more than the past five years, the Chairman of the Board
and Chief Executive Officer of W.E. Myers and Company, a private merchant bank.
GERALD L. PARSKY became a director of the Company in March 1997. Mr.
Parsky is the Chairman and a founding partner of ACP. Prior to forming ACP in
1991, Mr. Parsky was a senior partner and a member of the Executive and
Management Committees with the law firm of Gibson, Dunn & Crutcher LLP. Prior
to that, he served as an official with the United States Treasury Department and
the Federal Energy Office, and as Assistant Secretary of the Treasury for
International Affairs.
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<PAGE>
RICHARD K. ROEDER became a director of the Company in July 1994.
Mr. Roeder is a founding partner and Managing Director of ACP. Prior to forming
ACP in 1991, Mr. Roeder was a partner in the law firm of Paul, Hastings,
Janofsky & Walker, where he served as Chairman of the firm's Corporate Law
Department and a member of its National Management Committee. Mr. Roeder is a
also director of Astor Corporation.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Exchange Act requires the Company's officers, directors and
persons who own more than 10% of any equity security of the Company to file
reports of ownership and changes in ownership with the SEC and to furnish copies
of these reports to the Company. Based solely on a review of the copies of the
forms that the Company received, the Company believes that Forms 4 were not
timely filed on January 10, 1997 by reporting persons to report (i) the purchase
of shares in the Company's IPO and/or (ii) the redemption of preferred stock
following the Reorganization, which purchases and redemptions occurred on
December 20, 1996. These transactions were subsequently reported on Forms 5
that were timely filed on February 14, 1997, thereby correcting the oversight.
The reporting persons who purchased shares in the IPO are William A. Smith,
Stephen J. Perkins, John C. Kent, Wesley N. Dearbaugh, Michael L. LePore and
Gerald L. Parsky. The reporting persons who's preferred stock was redeemed
following the Reorganization are William A. Smith, James R. Wehr, Richard R.
Crowell, Mark C. Hardy, Kurt B. Larsen (a former director), Gerald L. Parsky and
Richard K. Roeder.
ITEM 11. EXECUTIVE COMPENSATION.
COMPENSATION SUMMARY. The following table sets forth, for the period
beginning with the commencement of the Company's operations in July 1994 and
ending on December 31, 1994, and for the years ended December 31, 1995 and 1996,
the cash compensation paid or awarded by the Company to the Chief Executive
Officer, and the other four most highly compensated executive officers of ATC
and its subsidiaries (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
------------------------- --------------
NUMBER OF
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)(1) COMPENSATION($)
- --------------------------- ------ ---------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C>
William A. Smith (2) 1996 $319,196 $315,803 -- --
Chairman of the Board of Directors 1995 300,000 -- -- --
1994 150,000 -- 842,106 $250,000(3)
Stephen J. Perkins (4) 1996 70,385 125,000 498,000 --
President and Chief Executive Officer 1995 -- -- -- --
1994 -- -- -- --
James R. Wehr 1996 284,070 300,000 -- --
President, Aaron's 1995 258,000 -- -- --
1994 109,000 -- 140,352 --
Michael L. LePore 1996 226,520 181,745 -- --
President, CRS 1995 160,838(5) 179,038(6) 70,176 --
1994 120,451 131,119 -- --
John C. Kent 1996 127,918 100,000 35,088 --
Chief Financial Officer 1995 124,615 12,000 -- --
1994 56,154 -- 70,176 --
Kenneth A. Bear 1996 107,467 80,000 -- --
Executive Vice President and General 1995 103,200 60,000 -- --
Manager, Aaron's 1994 44,140 32,960 70,176 --
</TABLE>
- ---------------
(1) Includes only options to purchase securities of the Company, which options
were issued pursuant to the Stock Incentive Plan. Pursuant to the Stock
Incentive Plan, the Compensation Committee of the Board of Directors
determines the terms and conditions of each option granted.
37
<PAGE>
(2) Mr. Smith served as the Company's Chief Executive Officer until October
1996.
(3) In July 1994 the Company paid Mr. Smith $250,000 for consultation services
rendered in connection with the Initial Acquisitions.
(4) Mr. Perkins was appointed as the Company's President and Chief Executive
Officer in October 1996. See "Management Compensation and Employment
Agreements" below.
(5) Includes five months salary of $56,777 prior to the acquisition by the
Company of CRS in April 1995.
(6) Includes $86,759 of bonus earned prior to the acquisition by the Company of
CRS in April 1995.
OPTION GRANTS. Shown below is information concerning grants of
options issued by the Company to the Named Executive Officers for the year ended
December 31, 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL VALUE AT
GRANTS ASSUMED ANNUAL RATES
--------------------------------- OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(1)
OPTIONS GRANTED EMPLOYEES IN PRICE EXPIRATION -----------------------------
NAME (#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
---- ---------------- --------------- ----------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
William A. Smith. . . . . . -- -- -- -- -- --
Stephen J. Perkins. . . . . 498,000(2) 66.8% $4.67 10/7/06 $1,462,608 $3,706,404
James R. Wehr . . . . . . . -- -- -- -- -- --
John C. Kent. . . . . . . . 35,088(3) 4.7 4.67 10/1/06 103,052 261,145
Michael L. LePore . . . . . -- -- -- -- -- --
Kenneth A. Bear . . . . . . -- -- -- -- -- --
</TABLE>
- -------------
(1) The potential gains shown are net of the option exercise price and do not
include the effect of any taxes associated with exercise. The amounts shown
are for the assumed rates of appreciation only, do not constitute
projections of future stock price performance, and may not necessarily be
realized. Actual gains, if any, on stock option exercises depend on the
future performance of the Common Stock, continued employment of the
optionee through the term of the options, and other factors.
(2) These options were granted under the Stock Incentive Plan. One third of the
options vest and become exercisable on each of the first three
anniversaries of the date of grant.
(3) These options were granted under the Stock Incentive Plan. One third of the
options vest and become exercisable on the first, third and fifth
anniversaries of the date of the grant.
EXERCISES OF OPTIONS AND AGGREGATE YEAR-END OPTION VALUES. Shown
below is information with respect to the year-end values of all options held by
the Named Executive Officers. No Named Executive Officer exercised any options
during the fiscal year ended December 31, 1996.
38
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END (1)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ------------ -------------
William A. Smith....... 842,106 -- $13,120,012 --
Stephen J. Perkins..... -- 498,000 -- $6,264,840
James R. Wehr.......... 93,568 46,784 1,457,789 728,895
John C. Kent........... 23,392 81,872 364,447 1,170,302
Michael L. LePore...... 23,392 46,784 364,447 728,895
Kenneth A. Bear........ 23,392 46,784 364,447 728,895
- ----------
(1) Calculated using closing price on December 31, 1996 of $17.25 per share.
MANAGEMENT COMPENSATION AND EMPLOYMENT AGREEMENTS
William A. Smith has an employment agreement with the Company
pursuant to which he serves as Chairman of the Board of Directors of the
Company at an annual salary of $316,000 (subject to cost-of-living
adjustments). The employment agreement with Mr. Smith contains a noncompete
provision for a period of five years from the cessation of his employment
with the Company and a nondisclosure provision which is effective for the
term of the employment agreement and indefinitely thereafter. Mr. Smith is
also entitled to participate in any bonus, incentive or other benefit plans
provided by the Company to its employees.
Stephen J. Perkins entered into an employment agreement with the
Company effective as of October 7, 1996, pursuant to which he will serve as
President and Chief Executive Officer of the Company at an annual salary of
$300,000 for a period of three years. The employment agreement with Mr. Perkins
contains a noncompete provision for a period of 18 months from the cessation of
his employment with the Company and a nondisclosure provision which is effective
for the term of the employment agreement and indefinitely thereafter.
Mr. Perkins is also entitled to participate in any bonus, incentive or other
benefit plans provided by the Company to its employees.
John C. Kent entered into an employment agreement with the Company
effective as of October 1, 1996, pursuant to which he will serve as Chief
Financial Officer of the Company at an annual salary of $150,000 for a period of
three years. The employment agreement with Mr. Kent contains a noncompete
provision for a period of 18 months from the cessation of his employment with
the Company and a nondisclosure provision which is effective for the term of the
employment agreement and indefinitely thereafter. Mr. Kent is also entitled to
participate in any bonus, incentive or other benefit plans provided by the
Company to its employees.
James R. Wehr entered into an employment agreement with Aaron's
effective as of August 2, 1994, pursuant to which he will serve as President of
Aaron's at an annual salary of $260,000 (subject to cost-of-living adjustments
which make the current annual salary approximately $274,000) for a period of
three years, which Aaron's may renew annually for an additional one year term.
The employment agreement and related agreements with Mr. Wehr contain a
noncompete provision for a period ending August 1, 1999 and a nondisclosure
provision which is effective for the term of his employment with Aaron's and
indefinitely thereafter. Mr. Wehr is also entitled to participate in any bonus,
incentive or other benefit plans provided by Aaron's to its employees.
Michael L. LePore entered into an employment agreement with CRS
effective as of June 1, 1995, pursuant to which he will serve as President of
CRS at an annual salary of approximately $180,000 (subject to
39
<PAGE>
cost-of-living adjustments which make the current annual salary approximately
$185,000) for a period of five years, which CRS may renew for an additional one
year term. The employment agreement and related agreements with Mr. LePore
contain a noncompete provision for a period ending June 1, 2002 and a
nondisclosure provision which is effective for the term of his employment with
CRS and indefinitely thereafter. Mr. LePore is also entitled to participate in
any bonus, incentive or other benefit plans provided by CRS to its employees.
Kenneth A. Bear entered into an employment agreement with Aaron's
effective July 28, 1994, pursuant to which he will serve as Executive Vice
President and General Manager of Aaron's at an annual salary of $104,000 for a
period of three years, which Aaron's may renew annually for an additional one
year term. The employment agreement with Mr. Bear contains a nondisclosure
provision which is effective for the term of his employment with Aaron's and
indefinitely thereafter. Mr. Bear is also entitled to participate in any bonus,
incentive or other benefit plans provided by Aaron's to its employees.
The Compensation Committee is also considering implementation of one
or more forms of retirement or similar plans for its officers and employees. In
addition, the Compensation Committee reviews the employment contracts described
above on an annual basis.
1996 STOCK INCENTIVE PLAN. In 1994, Holdings adopted the 1994 Stock
Incentive Plan in order to provide incentives to employees and directors of the
Company by granting them awards tied to the common stock of Holdings. In
February 1995, the plan was amended to include non-employee directors and
independent contractors. Upon effectiveness of the Reorganization, the plan
became the stock incentive plan of ATC and was renamed the 1996 Stock Incentive
Plan (the "Stock Incentive Plan"). The Stock Incentive Plan is administered by
the Compensation Committee, which has broad authority in administering and
interpreting the Stock Incentive Plan. Awards are not restricted to any
specified form or structure and may include, without limitation, sales or
bonuses of stock, restricted stock, stock options, reload stock options, stock
purchase warrants, other rights to acquire stock, securities convertible into or
redeemable for stock, stock appreciation rights, phantom stock, dividend
equivalents, performance units or performance shares (collectively, "Awards").
Options granted to employees under the Stock Incentive Plan may be options
intended to qualify as incentive stock options under Section 422 of the Internal
Revenue Code of 1986, as amended, or options not intended to so qualify. An
Award granted under the Stock Incentive Plan to an employee or independent
contractor may include a provision terminating the Award upon termination of
employment under certain circumstances or accelerating the receipt of benefits
upon the occurrence of specified events, including, at the discretion of the
Compensation Committee, any change of control of the Company.
As of February 28, 1997, the Company had granted options to purchase
an aggregate of up to 2,272,218 shares of Common Stock to officers and employees
of the Company. The exercise price for these options to purchase an aggregate of
1,526,778 shares is $1.67 per share and $4.67 per share for options to purchase
an aggregate of 745,440 shares. Each option is subject to certain vesting
provisions. All options expire on the tenth anniversary of the date of grant.
As of February 28, 1997, the number of shares available for issuance pursuant to
options not yet granted under the Stock Incentive Plan was 127,782. For certain
information regarding options granted to officers of the Company, see "Security
Ownership of Certain Beneficial Owners and Management."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. The
members of the Compensation Committee are Richard K. Roeder, William A. Smith
and Richard R. Crowell. Mr. Smith does not participate in any matters considered
by the Committee relating to his compensation. Messrs. Roeder and Crowell are
(i) two of the three stockholders and directors of Aurora Advisors, Inc., the
general partner of ACP, which is the general partner of Aurora Equity Partners,
a significant stockholder of ATC, and (ii) two of the three stockholders and
directors of Aurora Overseas Advisors, Ltd., the general partner of Aurora
Overseas Capital Partners L.P., the general partner of Aurora Overseas Equity
Partners I, L.P., also a significant stockholder of ATC. See "Security
Ownership of Certain Beneficial Owners and Management." In addition, Messrs.
Roeder and Crowell are two of the three managing directors of ACP, which
provides management services to the Company pursuant to a management services
agreement. See "Certain Relationships and Related Transactions."
40
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of each class
of issued and outstanding voting securities of the Company, as of February 28,
1997, by each director of the Company, each of the Named Executive Officers, the
directors and executive officers of the Company as a group and each person who
at such time beneficially owned more than 5% of the outstanding shares of any
class of voting securities of the Company.
NUMBER OF VOTING
SHARES (1) PERCENTAGE
------------ ---------
Aurora Equity Partners L.P. (Other beneficial owners:
Richard R. Crowell, Richard K. Roeder and
Gerald L. Parsky) (2)(4)(5). . . . . . . . . . . . . 11,772,339 69.3
Aurora Overseas Equity Partners I, L.P. (Other
beneficial owners: Richard R. Crowell, Richard K.
Roeder and Gerald L. Parsky) (3)(4)(5) . . . . . . . 5,519,889 32.5
General Electric Pension Trust(4). . . . . . . . . . . 2,018,652 11.9
3003 Summer Street
Stamford, CT 06905 . . . . . . . . . . . . . . . . .
William A. Smith (6)(7). . . . . . . . . . . . . . . . 895,984 5.0
Stephen J. Perkins (7)(8). . . . . . . . . . . . . . . 1,000 *
John C. Kent (7)(9). . . . . . . . . . . . . . . . . . 24,392 *
James R. Wehr (10)(11) . . . . . . . . . . . . . . . . 971,068 5.7
Michael L. LePore (12) . . . . . . . . . . . . . . . . 24,992 *
400 Corporate Drive
Mahwah, NJ 07430
Kenneth A. Bear (11)(12) . . . . . . . . . . . . . . . 23,692 *
Robert Anderson (13) . . . . . . . . . . . . . . . . . 18,918 *
10877 Wilshire Boulevard, Suite 1405
Los Angeles, CA 90024-4341
Richard R. Crowell (2)(3)(4)(14)(15) . . . . . . . . . 12,960,489 76.3
Mark C. Hardy (14)(15) . . . . . . . . . . . . . . . . 8,460 *
Dr. Michael J. Hartnett (16) . . . . . . . . . . . . . 70,176 *
60 Round Hill Road
Fairfield, CT 06430
William E. Myers, Jr. (16) . . . . . . . . . . . . . . 280,704 1.6
2 North Lake Avenue, Suite 650
Pasadena, CA 91101
Gerald L. Parsky (2)(3)(4)(14)(15)(17) . . . . . . . . 12,960,489 76.3
Richard K. Roeder (2)(3)(4)(14)(15). . . . . . . . . . 12,960,489 76.3
All directors and officers as a group (14 persons)(18) 15,259,787 83.2
- -----------
* Less than 1%.
(1) The shares of Common Stock underlying options, warrants, rights or
convertible securities that are exercisable as of February 28, 1997 or that
will become exercisable within 60 days thereafter are deemed to be
outstanding for the purpose of calculating the beneficial ownership of the
holder of such options, warrants, rights or convertible securities, but are
not deemed to be outstanding for the purpose of computing the beneficial
ownership of any other person.
(2) Includes 2,313,087 shares of Common Stock that are subject to an
irrevocable proxy granted to Aurora Equity Partners L.P. ("AEP") and Aurora
Overseas Equity Partners I, L.P. ("AOEP") by certain holders of Common
Stock, including Messrs. Crowell, Hardy, Parsky, Roeder, certain other
limited partners of AEP and certain affiliates of a limited partner of
AOEP. The proxy terminates upon the transfer of such shares. AEP is a
Delaware limited partnership the general partner of which is ACP, a
Delaware limited partnership
41
<PAGE>
whose general partner is Aurora Advisors, Inc. ("AAI"). Messrs. Crowell,
Parsky and Roeder are the sole stockholders and directors of AAI, are
limited partners of ACP and may be deemed to beneficially share ownership
of the Company's Common Stock beneficially owned by AEP and may be deemed
to be the organizers of the Company under regulations promulgated under the
Securities Act. Also includes the 2,018,652 shares of the Company's Common
Stock held by General Electric Pension Trust ("GEPT"). See Footnote (4)
below.
(3) Includes 2,313,087 shares of the Company's Common Stock that are subject to
an irrevocable proxy granted to AEP and AOEP by certain holders of Common
Stock, including Messrs. Crowell, Hardy, Parsky, Roeder, certain other
limited partners of AEP and certain affiliates of a limited partner of
AOEP. The proxy terminates upon the transfer of such shares. AOEP is a
Cayman Islands limited partnership the general partner of which is Aurora
Overseas Capital Partners, L.P. ("AOCP"), a Cayman Islands limited
partnership whose general partner is Aurora Overseas Advisors, Ltd.
("AOAL"). Messrs. Crowell, Parsky and Roeder are the sole stockholders and
directors of AOAL, are limited partners of AOCP and may be deemed to
beneficially own the shares of the Company's Common Stock beneficially
owned by AOEP. Also includes the 2,018,652 shares of the Company's Common
Stock held by GEPT. See Footnote (4) below.
(4) With limited exceptions, GEPT has agreed to vote these shares in the same
manner as AEP and AOEP vote their respective shares of the Company's Common
Stock. This provision terminates upon the transfer of such shares.
(5) The address for this beneficial holder is West Wind Building, P.O. Box
1111, Georgetown, Grand Cayman, Cayman Islands, B.W.I.
(6) Includes 842,106 shares of Common Stock subject to options granted under
the Stock Incentive Plan that are exercisable as of February 28, 1997 or
that will become exercisable within 60 days thereafter.
(7) The address for this beneficial holder is 33309 First Way South,
Suite A-206, Federal Way, WA 98003.
(8) Excludes 498,000 shares of Common Stock subject to options granted under
the Stock Incentive Plan that are not exercisable within 60 days of
February 28, 1997.
(9) Consists of 23,392 shares of Common Stock subject to options granted under
the Stock Incentive Plan that are exercisable as of February 28, 1997 or
that will become exercisable within 60 days thereafter. Excludes 81,872
shares of Common Stock subject to options granted under the Stock Incentive
Plan that are not exercisable within 60 days of February 28, 1997.
(10)Includes 93,568 shares of Common Stock subject to options granted under the
Stock Incentive Plan that are exercisable as of February 28, 1997 or that
will become exercisable within 60 days thereafter. Excludes 46,784 shares
of Common Stock subject to options granted under the Stock Incentive Plan
that are not exercisable within 60 days of February 28, 1997.
(11)The address for this beneficial holder is 2699 North Westgate, Springfield,
MO 65803.
(12)Consists of 23,392 shares of Common Stock subject to options granted under
the Stock Incentive Plan that are exercisable as of February 28, 1997 or
that will become exercisable within 60 days thereafter. Excludes
46,784 shares of Common Stock subject to options granted under the Stock
Incentive Plan that are not exercisable within 60 days of February 28,
1997.
(13)Includes 4,290 shares held by Mr. Anderson's wife (including 2,790 shares
held by her as trustee for her relatives), as to which Mr. Anderson
disclaims beneficial ownership.
(14)The address for this beneficial holder is 1800 Century Park East,
Suite 1000, Los Angeles, CA 90067.
42
<PAGE>
(15)The holder of these shares has granted an irrevocable proxy covering these
shares to AEP and AOEP.
(16)Consists of shares of Common Stock subject to exercisable warrants.
(17)Includes 2,000 shares held by Mr. Parsky's wife, as to which Mr. Parsky
disclaims beneficial ownership.
(18)Includes 1,356,730 shares of Common Stock subject to warrants and employee
stock options that are exercisable as of February 28, 1997 or that will
become exercisable within 60 days thereafter.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company believes the transactions described below that were
entered into by the Company and its subsidiaries were beneficial to the
respective companies, and were at least as favorable to the respective companies
as could have been obtained from unaffiliated third parties pursuant to
arms-length negotiations.
RELATIONSHIP WITH ACP
Fees of approximately $1.1 million were paid to ACP for investment
banking services provided in connection with the acquisitions of Mascot, CRS and
King-O-Matic in 1995 and Tranzparts and Diverco in 1996. The Company has also
agreed to pay to ACP a base annual management fee of approximately $530,000 for
advisory and consulting services pursuant to a written management services
agreement (the "Management Services Agreement"). ACP is also entitled to
reimbursements from the Company for all of its reasonable out-of-pocket costs
and expenses incurred in connection with the performance of its obligations
under the Management Services Agreement. The base annual management fee is
subject to increase, at the discretion of the disinterested members of the
Company's Board of Directors, by up to an aggregate of $250,000 in the event the
Company consummates one or more significant corporate transactions. The base
annual management fee was not increased as a result of the acquisitions of CRS,
Mascot, King-O-Matic, Tranzparts and Diverco. The base annual management fee is
also subject to increase for specified cost of living increases. If the
Company's EBITDA in any year exceeds management's budgeted EBITDA by 15.0% or
more for that year, ACP will be entitled to receive an additional management fee
equal to one half of its base annual management fee for such year. Because the
Company's EBITDA did not exceed management's budgeted EBITDA by 15.0% in 1995
and 1996, ACP did not receive this additional management fee in 1995 or 1996. In
the event the Company consummates any significant corporate transaction, ACP
will be entitled to receive a closing fee from the Company equal to 2.0% of the
first $75.0 million of the acquisition consideration (including debt assumed and
current assets retained) and 1.0% of acquisition consideration (including debt
assumed and current assets retained) in excess of $75.0 million. Notwithstanding
the foregoing, no payment will be made to ACP pursuant to the Management
Services Agreement at any time that certain events of default shall have
occurred and be then continuing under either of the indentures governing the
Company's senior subordinated notes or the Revolving Credit Agreement. The
Management Services Agreement also provides that the Company shall provide ACP
and its directors, employees, partners and affiliates with customary
indemnification against all actions not involving gross negligence or willful
misconduct. The base annual management fee payable to ACP will be reduced as the
collective beneficial ownership of Common Stock by AEP and AOEP declines below
50%: for any period during which the collective beneficial ownership of AEP and
AOEP is less than 50% but at least 40%, the base annual management fee payable
for the period will be 80% of the original base annual management fee (as such
original base annual management fee may previously have been adjusted due to
discretionary increases by the Board of Directors or cost of living increases as
described above, the "Original Fee"); for any period during which AEP's and
AOEP's collective beneficial ownership is less than 40% but at least 30%, the
base annual management fee payable for the period will be 60% of the Original
Fee; and for any period during which the collective beneficial ownership of AEP
and AOEP is less than 30% but at least 20%, the base annual management fee
payable for the period will be 40% of the Original Fee. If AEP's and AOEP's
collective beneficial ownership declines below 20%, the Management Services
Agreement will terminate. For information regarding the general and certain of
the limited partners of ACP, see "Security Ownership of Certain Beneficial
Owners and Management."
43
<PAGE>
In October 1996, the Company granted options for an aggregate of
48,000 shares to certain directors and consultants of the Company who are
employees of ACP, including Mr. Hardy.
FACILITY LEASES
In connection with its acquisition of Aaron's, the Company entered
into a lease with an affiliate of James R. Wehr for Aaron's headquarters and
primary remanufacturing facility located in Springfield, Missouri with an
initial term beginning January 1, 1994 and expiring December 31, 2004, subject
to the Company's option to extend the term for a period of five years. The
monthly base rent is $33,105 and the Company is responsible for paying property
taxes, insurance and maintenance expenses for the leased premises. The Company
also entered into three leases with affiliates of Mr. Wehr for three
manufacturing facilities comprising approximately 84,000 square feet for an
aggregate rent of $12,000 per month with an initial term beginning January 1,
1994 and expiring December 31, 1996 and December 31, 1998 (depending upon the
facility), subject to the Company's option to extend the term of the lease for a
30,000 square foot facility for one successive period of five years through
December 31, 2003. In November 1994, the Company entered into another lease with
the same parties for a 98,800 square foot storage facility for monthly rent of
$7,300 per month. The initial term of the lease expired during 1995 and pursuant
to its terms, continues as a month-to-month lease until terminated. In January
1996, the Company entered into a new lease with an affiliate of Mr. Wehr' for
Aaron's 200,000 square foot core storage facility for an initial term of ten
years, expiring October 31, 2006, with an option to renew for five years. The
base monthly rent is currently $36,667 for the initial term, with specified
increases every three years. The Company is also required to pay taxes,
maintenance and operating expenses. On January 1, 1997 the Company entered into
a three-year lease with an affiliate of Mr. Wehr for a 60,430 square foot
facility used for core storage, warehousing and office space for rent of $5,973
per month. The Company also leases from Mr. Wehr eight acres adjacent to the
manufacturing facility in Joplin, Missouri. This acreage is used for employee
parking at the manufacturing facility. The lease was entered into on July 1,
1996 and expires on June 30, 2006 with a monthly base rent of $1,265. The
Company is responsible for paying property taxes, insurance and maintenance
expenses for each of these leased premises. Mr. Wehr is an executive officer of
the Company.
PAYMENT OF PREFERRED STOCK REORGANIZATION CONSIDERATION
In connection with the formation of Holdings, in July and August 1994
it issued Holdings Preferred Stock to each purchaser of its common stock for
consideration of $100 per share, totaling an aggregate of 200,000 outstanding
shares. In the Reorganization, each outstanding shares of Holdings preferred
stock was converted into one share of the Company's Preferred Stock, following
which the Preferred Stock was redeemed for an amount in cash equal to
$100.00 plus an amount in cash equal to accrued and unpaid dividends on the
Holdings Preferred Stock to the date of the Reorganization. Messrs. Smith,
Wehr, Anderson, Crowell, Hardy, Parsky and Roeder (each of whom is a director
and/or executive officer of the Company) held the following numbers of shares of
Preferred Stock, respectively: 563; 11,250; 188; 1,264; 109; 1,401; and 243.
Upon redemption of such shares, Messrs. Smith, Wehr, Anderson, Crowell, Hardy,
Parsky and Roeder received the following amounts, respectively: $70,765;
$1,414,051; $23,630; $159,195; $13,701; $176,403; and $30,596. AEP and AOEP
originally purchased 95,392 and 15,233 shares of Preferred Stock, respectively,
which were subsequently distributed to their general and limited partners,
including AOCP and ACP, which received $19,183 and $120,159, respectively, upon
redemption of ATC's Preferred Stock.
REGISTRATION RIGHTS
The holders of the Company's Common Stock outstanding before the IPO
have been granted certain "demand" and "piggyback" registration rights pursuant
to a Stockholders Agreement. In addition, GEPT was granted certain "demand" and
"piggyback" registration rights with respect to 300,000 shares of Common Stock
owned by GEPT and 955,794 shares sold to GEPT in a private placement
concurrently with the IPO.
44
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a) Index to Financial Statements, Financial Statement Schedules and Exhibits:
1. Financial Statements Index
See Index to Financial Statements and Supplemental Data on page 16.
2. Financial Statement Schedules Index
II -- Valuation and Qualifying Accounts.......................S-1
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have been
omitted.
3. Exhibit Index
The following exhibits are filed as part of this Annual Report on Form
10-K, or are incorporated herein by reference.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
*3.1 Amended and Restated Certificate of Incorporation of Aftermarket
Technology Corp.
*3.2 Certificate of Designations, Preferences, and Relative, Participating,
Option and Other Special Rights of Preferred Stock and
Qualifications, Limitations and Restrictions Thereof of
Redeemable Exchangeable Cumulative Preferred Stock of Aftermarket
Technology Corp.
*3.3 Amended and Restated Bylaws of Aftermarket Technology Corp.
4.1 Indenture, dated August 2, 1994, among Aftermarket Technology Corp.,
the Guarantors named therein and Firstar Bank of Minnesota, N.A.
(formerly known as American Bank N.A.), as Trustee for the Series
B Notes (previously filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-4 filed on November 30, 1994,
Commission File No. 33-86838, and incorporated herein by this
reference)
4.2 Indenture, dated June 1, 1995, among Aftermarket Technology Corp., the
Guarantors named therein and Firstar Bank of Minnesota, N.A.
(formerly known as American Bank N.A.), as Trustee for the
Series D Notes (previously filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-4 filed on June 21, 1995,
Commission File No. 33-93776, and incorporated herein by this
reference)
4.3 First Supplemental Indenture, dated as of February 23, 1995, among
Aftermarket Technology Corp., the Guarantors named therein and
Firstar Bank of Minnesota, N.A. (formerly known as American Bank
N.A.), as Trustee for the Series B Notes (previously filed as
Exhibit 4.3 to Amendment No. 1 to the Company's Registration
Statement on Form S-1 filed on October 25, 1996, Commission File
No. 333-6697, and incorporated herein by this reference)
4.4 Second Supplemental Indenture, dated as of June 1, 1995, among
Aftermarket Technology Corp., the Guarantors named therein and
Firstar Bank of Minnesota, N.A. (formerly known as American
Bank N.A.), as Trustee for the Series B Notes (previously filed
as Exhibit 4.4 to Amendment No. 1 to the Company's Registration
Statement on Form S-1 filed on October 25, 1996, Commission
File No. 333-5597, and incorporated herein by this reference)
4.5 Third Supplemental Indenture to the Series B Indenture and First
Supplemental Indenture to the Series D Indenture, dated as of July
25, 1996, among Aftermarket Technology Corp., the Guarantors
named therein and Firstar Bank of Minnesota, N.A. (formerly known
as American Bank N.A.), as Trustee for the Notes (previously
filed as Exhibit 4.5 to Amendment No. 1 to the Company's
Registration Statement on Form S-1 filed on October 25, 1996,
Commission File No. 333-5597, and incorporated herein by this
reference)
45
<PAGE>
10.1 Stockholders Agreement, dated as of August 2, 1994, among Holdings,
and certain of its stockholders, optionholders and warrant holders
(the "Stockholders Agreement") (previously filed as Exhibit 10.1
to the Company's Registration Statement on Form S-4 filed on
November 30, 1994, Commission File No. 33-86838, and incorporated
herein by this reference)
10.2 Amendment No. 1 to the Stockholders Agreement, dated as of June 24,
1996 (previously filed as Exhibit 10.38 to Amendment No. 2 to the
Company's Registration Statement on Form S-1 filed on November 6,
1996, Commission File No. 333-5597, and incorporated herein by
this reference)
10.3 Amendment No. 2 to the Stockholders Agreement, dated as of October 24,
1996 (previously filed as Exhibit 10.39 to Amendment No. 2 to the
Company's Registration Statement on Form S-1 filed on November 6,
1996, Commission File No. 333-5597, and incorporated herein by
this reference)
*10.4 Amendment No. 3 to Stockholders Agreement, dated as of December 4,
1996
*10.5 Amendment No. 4 to Stockholders Agreement, dated as of December 16,
1996
*10.6 Credit Agreement, dated as of February 14, 1996, among Aftermarket
Technology Corp., the Lenders from time to time parties thereto
and The Chase Manhattan Bank (the "Credit Agreement")
*10.7 Guarantee and Collateral Agreement, dated as of February 14, 1996, by
Aftermarket Technology Corp. and each of the signatories thereto
in favor of The Chase Manhattan Bank as Agent for the banks and
other financial institutions from time to time parties to the
Credit Agreement
*10.8 Amended and Restated Tax Sharing Agreement, dated as of December 20,
1996, among Aftermarket Technology Holdings Corp., Aaron's
Automotive Products, Inc., ATC Components, Inc., CRS Holdings
Corp., Diverco Acquisition Corp., H.T.P., Inc., Mamco Converters,
Inc., R.P.M. Merit, Inc. and Tranzparts Acquisition Corp.
10.9 Amended and Restated Management Services Agreement, dated as of
November 18, 1996, by and among Aftermarket Technology Corp., the
subsidiaries of Aftermarket Technology Corp., and Aurora Capital
Partners L.P. (previously filed as Exhibit 10.4 to Amendment No.
4 to the Company's Registration Statement on Form S-1 filed on
October 25, 1996, Commission File No. 333-5597, and incorporated
herein by this reference)
*10.10 Aftermarket Technology Corp. 1996 Stock Incentive Plan
10.11 Form of Incentive Stock Option Agreement (previously filed as Exhibit
10.36 to Amendment No. 1 to the Company's Registration Statement
on Form S-1 filed on October 25, 1996, Commission File No.
333-5597, and incorporated herein by this reference)
10.12 Form of Non-Qualified Stock Option Agreement (previously filed as
Exhibit 10.37 to Amendment No. 1 to the Company's Registration
Statement on Form S-1 filed on October 25, 1996, Commission File
No. 333-5597, and incorporated herein by this reference)
10.13 Employment Agreement, dated as of October 7, 1996, between Aftermarket
Technology Corp. and William A. Smith (previously filed as
Exhibit 10.6 to the Company's Registration Statement on
Form S-4 filed on November 30, 1994, Commission File
No. 33-86838, and incorporated herein by this reference)
10.14 Employment Agreement, dated as of October 7, 1996, between Stephen J.
Perkins and Aftermarket Technology Corp. (previously filed as
Exhibit 10.35 to Amendment No. 1 to the Company's Registration
Statement on Form S-1 filed on October 25, 1996, Commission File
No. 333-5597, and incorporated herein by this reference)
10.15 Employment Agreement, dated as of October 1, 1996, between John C.
Kent and Aftermarket Technology Corp. (previously filed as
Exhibit 10.7 to Amendement No. 2 to the Company's Registration
Statement on Form S-1 filed on November 6, 1996, Commission
File No. 333-5597, and incorporated herein by this reference)
10.16 Employment Agreement, dated August 2, 1994, between James R. Wehr and
Aaron's Automotive Products, Inc. (previously filed as Exhibit
10.9 to the Company's Registration Statement on Form S-4 filed on
November 30, 1994, Commission File No. 33-86838, and incorporated
herein by this reference)
10.17 Employment Agreement, dated as of June 1, 1995, between Michael L.
LePore and Component Remanufacturing Specialists, Inc. (previously
filed as Exhibit 10.11 to the Company's Registration Statement on
Form S-4 filed on June 21, 1995, Commission File No. 33-93776, and
incorporated herein by this reference)
46
<PAGE>
*10.18 Amended and Restated Warrant Certificate, dated as of August 2, 1994,
for 280,704 warrants issued to William E. Myers, Jr.
*10.19 Amended and Restated Warrant Certificate, dated as of August 2, 1994,
for 70,176 warrants issued to Brian E. Sanderson
*10.20 Amended and Restated Warrant Certificate, dated June 24, 1996, for
70,176 warrants issued to Michael J. Hartnett
10.21 Stock Purchase Agreement, dated May 16, 1994, by and among C.R. Wehr,
Jr., Rev. Liv. Trust, James R. Wehr, Aaron's Automotive Products,
Inc. and AAP Acquisition Corp. (previously filed as Exhibit 10.14
to the Company's Registration Statement on Form S-4 filed on
November 30, 1994, Commission File No. 33-86838, and incorporated
herein by this reference)
10.22 Stock Purchase Agreement, dated July 21, 1994, by and among John B.
Maynard, Kenneth T. Hester, H.T.P., Inc. and HTP Acquisition Corp.
(previously filed as Exhibit 10.15 to the Company's Registration
Statement on Form S-4 filed on November 30, 1994, Commission File
No. 33-86838, and incorporated herein by this reference)
10.23 Stock Purchase Agreement, dated July 21, 1994, by and among John B.
Maynard, Mamco Converters, Inc. and Mamco Acquisition Corp.
(previously filed as Exhibit 10.16 to the Company's Registration
Statement on Form S-4 filed on November 30, 1994, Commission File
No. 33-86838, and incorporated herein by this reference)
10.24 Asset Purchase Agreement, dated June 24, 1994, by and among RPM Merit,
Donald W. White, John A. White, The White Family Trust and RPM
Acquisition Corp. (previously filed as Exhibit 10.17 to the
Company's Registration Statement on Form S-4 filed on
November 30, 1994, Commission File No. 33-86838, and incorporated
herein by this reference)
10.25 Agreement and Plan of Merger and Reorganization, dated May 10, 1995,
by and among Component Remanufacturing Specialists, Inc., James
R. Crane, Michael L. LePore, Aftermarket Technology Corp., CRS
Holdings Corp. and CRS Acquisition Corp. (previously filed as
Exhibit 2 to the Company's Current Report on Form 8-K filed on
June 15, 1995, Commission File No. 33-80838-01, and incorporated
herein by this reference)
10.26 Stock Purchase Agreement, dated June 9, 1995, by and among Dianne
Hanthorn, Jobian Limited, Randall Robinson, Barry E. Schwartz,
Bradley Schwartz, Angela White, John White, Incorporated
Investments Limited, Glenn M. Hanthorn, Guido Sala and Tony
Macharacek, Mascot Truck Parts Inc. and Mascot Acquisition
Corp. (previously filed as Exhibit 10.22 to the Company's
Registration Statement on Form S-4 filed on June 21, 1995,
Commission File No. 33-93776, and incorporated herein by this
reference)
10.27 Stock Purchase Agreement, dated September 12, 1995, by and among
Gordon King, 433644 Ontario Limited, 3179338 Canada Inc.,
King-O-Matic Industries Limited, KOM Acquisition Corp. and
Aftermarket Technology Corp. (previously filed as Exhibit 10.23
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 and incorporated herein by
this reference)
10.28 Stock Purchase Agreement, dated as of April 2, 1996, by and among the
Charles T. and Jean F. Gorham Charitable Remainder Trust dated
March 27, 1996, Charles T. Gorham, J. Peter Donoghue, Tranzparts,
Inc. and Tranzparts Acquisition Corp. (previously filed as Exhibit
10.23 to Amendment No. 1 to the Company's Registration Statement
on Form S-1 filed on October 25, 1996, Commission File
No. 333-5597, and incorporated herein by this reference)
10.29 Stock Purchase Agreement, dated as of October 1, 1996, by and among
Robert T. Carren Qualified Annuity Trust, Robert T. Carren,
Diverco, Inc., and Diverco Acquisition Corp. (previously filed
as Exhibit 10.34 to Amendment No. 1 to the Company's
Registration Statement on Form S-1 filed on October 25, 1996,
Commission File No. 333-5597, and incorporated herein by this
reference)
*10.30 Stock Purchase Agreement, dated as of January 31, 1997, by and among
S. Jay Wilemon, Ricki J. Wilemon, Bradley J. Wilemon, Corby L.
Wilemon, Replacement & Exchange Parts Co., Inc., Aftermarket
Technology Corp. and Repco Acquisition Corp.
10.31 Lease, dated February 24, 1995, between 29 Santa Anita Partnership
L.P. and Replacement Parts Manufacturing with respect to
property located at 12250 E. 4th Street, Rancho Cucamonga,
California (previously filed as Exhibit 10.24 to Amendment No.
2 to the Company's Registration Statement on Form S-1 filed on
November 6, 1996, Commission File No. 333-5597, and
incorporated herein by this reference)
47
<PAGE>
10.32 Lease, dated January 1, 1994, between CRW, Incorporated and Aaron's
Automotive Products, Inc. with respect to property located at
2600 North Westgate, Springfield, Missouri (previously filed as
Exhibit 10.4 to the Company's Registration Statement on Form
S-4 filed on November 30, 1994, Commission File No. 33-86838,
and incorporated herein by this reference)
10.33 Lease Purchase Agreement, dated April 21, 1995, between Fleming
Companies, Inc. and Aaron 's Automotive Products, Inc. with
respect to property located at 3001 Davis Boulevard, Joplin,
Missouri, as amended (previously filed as Exhibit 10.26 to
Amendment No. 2 to the Company's Registration Statement on Form
S-1 filed on November 6, 1996, Commission File No. 333-5 597,
and incorporated herein by this reference)
10.34 Sublease, dated April 20, 1994, between Troll Associates, Inc. and
Component Remanufacturing Specialists, Inc. with respect to
property located at 400 Corporate Drive, Mahwah, New Jersey
(previously filed as Exhibit 10.40 to Amendment No. 2 to the
Company's Registration Statement on Form S-1 filed on November
6, 1996, Commission File No. 333-5597, and incorporated herein
by this reference)
10.35 Sublease Modification and Extension Agreement, dated as of February
28, 1996, between Olde Holding Company and Component
Remanufacturing Specialists, Inc. with respect to property
located at 400 Corporate Drive, Mahwah, New Jersey (previously
filed as Exhibit 10.41 to Amendment No. 2 to the Company's
Registration Statement on Form S-1 filed on November 6, 1996,
Commission File No. 333-55 97, and incorporated herein by this
reference)
10.36 Exchange and Registration Rights Agreement, dated August 2, 1994, by
and among Aftermarket Technology Corp., the subsidiaries of
Aftermarket Technology Corp., Chemical Securities Inc., and
Donaldson, Lufkin & Jenrette Securities Corporation (previously
filed as Exhibit 10.13 to the Company's Registration Statement
on Form S-4 filed on November 30, 1994, Commission File No.
33-83868, and incorporated herein by this reference)
10.37 Exchange and Registration Rights Agreement, dated June 1, 1995, by and
among Aftermarket Technology Corp., the subsidiaries of
Aftermarket Technology Corp., Chemical Securities Inc., and
Donaldson, Lufkin & Jenrette Securities Corporation (previously
filed as Exhibit 10.16 to the Company's Registration Statement on
Form S-4 filed on June 21, 1995, Commission File No. 33-93776,
and incorporated herein by this reference)
10.38 Firstbank Lending Agreement, dated as of June 28, 1996, between Mascot
Trust Parts Inc. and/or King-O-Matic Industries Ltd. and Bank of
Montreal (previously filed as Exhibit 10.33 to Amendment No. 1 to
the Company's Registration Statement on Form S-1 filed on October
25, 1996, Commission File No. 333-5597, and incorporated herein
by this reference)
10.29 Stock Subscription Agreement, dated as of November 18, 1996, between
Aftermarket Technology Corp. and the Trustees of the General
Electric Pension Trust (previously filed as Exhibit 10.44 to
Amendment No. 4 to the Company's Registration Statement on Form
S-1 filed on October 25, 1996, Commission File No. 333-5597,
and incorporated herein by this reference)
*11.1 Computation of Pro Forma Net Income Per Share
*21.1 List of Subsidiaries
*23.1 Consent of Ernst & Young LLP, independent auditors
- -----------
* Filed herewith
(b) Reports on Form 8-K
The Company filed no Reports on Form 8-K during the last quarter of
the 1996 fiscal year.
(c) Refer to (a) 3 above.
(d) Refer to (a) 2 above.
48
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized,
on March 14, 1997.
AFTERMARKET TECHNOLOGY CORP.
By: /S/ STEPHEN J. PERKINS
-------------------------
Stephen J. Perkins
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Annual Report on Form 10-K has been signed by the following persons in the
capacities indicated on the dates indicated.
SIGNATURE TITLE DATE
- -------------------------- ----------------------------- ------------------
/S/ STEPHEN J. PERKINS
-------------------------
Stephen J. Perkins Chief Executive Officer
(Principal Executive Officer) March 14, 1997
/S/ JOHN C. KENT
-------------------------
John C. Kent Chief Financial Officer
(Principal Financial Officer) March 14, 1997
/S/ DANIEL C. BUIE
-------------------------
Daniel C. Buie Corporate Controller
(Principal Accounting Officer) March 14, 1997
/S/ WILLIAM A. SMITH
-------------------------
William A. Smith Chairman of the Board of
Directors March 14, 1997
/S/ ROBERT ANDERSON
-------------------------
Robert Anderson Director March 14, 1997
/S/ RICHARD R. CROWELL
-------------------------
Richard R. Crowell Director March 14, 1997
/S/ MARK C. HARDY
-------------------------
Mark C. Hardy Director March 14, 1997
/S/ MICHAEL J. HARTNETT
-------------------------
Michael J. Hartnett Director March 14, 1997
/S/ WILLIAM E. MYERS, JR.
-------------------------
William E. Myers, Jr. Director March 14, 1997
49
<PAGE>
/S/ GERALD L. PARSKY
-------------------------
Gerald L. Parsky Director March 14, 1997
/S/ RICHARD K. ROEDER
-------------------------
Richard K. Roeder Director March 14, 1997
50
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
---------------------------
BALANCE AT CHARGED TO CHARGE TO
BEGINNING OF COSTS AND OTHER BALANCE AT END
PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Combined:
Seven months ended July 31, 1994:
Reserve and allowances deducted from asset accounts:
Allowance for uncollectible accounts $324,750 $ 308,550 $ - $ 32,588(1) $ 600,712
Consolidated:
Five months ended December 31, 1994:
Reserve and allowances deducted from asset accounts:
Allowance for uncollectible accounts 600,712 190,044 - 24,756(1) 766,000
Reserve for inventory obsolescence - 785,603 - - 785,603
Year ended December 31, 1995:
Reserve and allowances deducted from asset accounts:
Allowance for uncollectible accounts 766,000 1,239,138 1,216,529(2) 752,667(1) 2,469,000
Reserve for inventory obsolescence 785,603 1,034,259 294,442(2) - 2,114,304
Year ended December 31, 1996:
Reserve and allowances deducted from asset accounts:
Allowance for Uncollectible accounts 2,469,000 667,857 14,594(2) 1,825,368(1) 1,326,476
Reserve for inventory obsolescence 2,114,304 1,411,013 - 784,543 2,740,774
(1) Accounts written off, net of recoveries
(2) Balances added through new acquisitionsh
</TABLE>
S-1
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
AFTERMARKET TECHNOLOGY CORP.
A DELAWARE CORPORATION
The undersigned, for the purpose of amending and restating the
Certificate of Incorporation of Aftermarket Technology Corp., a Delaware
corporation (the "Corporation"), does hereby certify that:
1. The date of filing of the Corporation's original Certificate of
Incorporation with the Secretary of State of the State of Delaware was April 25,
1994 and the name under which it originally incorporated was Aftermarket
Technologies & Components, Inc. A Restated Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on June 21, 1996.
2. This Amended and Restated Certificate of Incorporation has been
duly adopted pursuant to Section 228, 242 and 245 of the Delaware General
Corporation Law. Written consent of the Corporation's stockholders has been
given in accordance with Section 228 of the DGCL and written notice has been
given as provided in such Section.
3. The Certificate of Incorporation of the Corporation is hereby
amended and restated in its entirety as follows:
ARTICLE I
NAME OF CORPORATION
The name of this corporation is:
Aftermarket Technology Corp.
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the Corporation in the
State of Delaware is 9 East Loockerman Street, in the city of Dover, County
of Kent and the name of its registered agent at that address is National
Registered Agents, Inc.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.
<PAGE>
ARTICLE IV
AUTHORIZED CAPITAL STOCK
SECTION 1. AUTHORIZED SHARES. The Corporation shall be authorized
to issue two classes of shares of stock to be designated, respectively,
"Preferred Stock" and "Common Stock"; the total number of shares that the
Corporation shall have authority to issue is Thirty-Five Million
(35,000,000); the total number of shares of Preferred Stock shall be Five
Million (5,000,000) and all such shares shall have a par value of one cent
($.01); and the total number of shares of Common Stock shall be Thirty
Million (30,000,000), and each such share shall have a par value of one cent
($.01).
SECTION 2. PREFERRED STOCK. The shares of Preferred Stock may be
issued from time to time in one or more series. The Board of Directors of
the Corporation (the "Board") is hereby vested with authority to fix by
resolution or resolutions the designations and the powers, preferences and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including, without
limitation, the dividend rate, conversion or exchange rights, redemption
price and liquidation preference, of any series of shares of Preferred Stock,
and to fix the number of shares constituting any such series, and to increase
or decrease the number of shares of any such series (but not below the number
of shares thereof then outstanding). In case the number of shares of any
such series shall be so decreased, the shares constituting such decrease
shall resume the status that they had prior to the adoption of the resolution
or resolutions originally fixing the number of shares of such series.
SECTION 3. DISTRIBUTIONS UPON LIQUIDATION. In the event of any
dissolution, liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, after payment or provision for payment of
the debts and other liabilities of the Corporation, the holders of each
series of Preferred Stock shall be entitled to receive, out of the net assets
of the Corporation, an amount for each share of such series of Preferred
Stock equal to the amount fixed and determined by the Board in the resolution
or resolutions creating such series and providing for the issuance of such
shares, and no more, before any of the assets of the Corporation shall be
distributed or paid over to the holders of Common Stock. After payment in
full of said amounts to the holders of Preferred Stock of all series, the
remaining assets and funds of the Corporation shall be divided among and paid
to the holders of shares of Common Stock. If, upon such dissolution,
liquidation or winding up, the assets of the Corporation distributable as
aforesaid among the holders of Preferred Stock of all series shall be
insufficient to permit full payment to them of said preferential amounts,
then such assets shall be distributed ratably among such holders of Preferred
Stock in proportion to the respective total amounts that they shall be
entitled to receive as provided in this Section 3.
2
<PAGE>
ARTICLE V
ANNUAL MEETINGS OF STOCKHOLDERS
The annual meeting of stockholders shall be held at such time, on
such date and at such place (within or without the State of Delaware) as
provided in the Bylaws of the Corporation. Subject to any requirement of
applicable law, the books of the Corporation may be kept outside the State of
Delaware at such place or places as may be designated from time to time by
the Board or in the Bylaws of the Corporation. Elections of directors need
not be by written ballot unless the Bylaws of the Corporation shall so
provide.
ARTICLE VI
CALL OF SPECIAL MEETINGS OF STOCKHOLDERS
Special meetings of stockholders of the Corporation for any purpose
or purposes may be called at any time (i) by a majority of the members of the
Board or (ii) by a committee of the Board that has been duly designated by
the Board and whose power and authority, as provided in a resolution by the
Board or in the Bylaws of the Corporation, includes the power to call such
meetings; but such special meetings of stockholders of the Corporation may
not be called by any other Person or Persons or in any other manner;
PROVIDED, HOWEVER, that if and to the extent that any special meeting of
stockholders may be called by any other Person or Persons specified in any
certificate of designations filed under Section 151(g) of the Delaware
General Corporation Law (or its successor statute as in effect from time to
time), then such special meeting may also be called by the Person or Persons,
in the manner, at the times and for the purposes so specified.
ARTICLE VII
STOCKHOLDER ACTION BY WRITTEN CONSENT
Any election of directors or other action by the stockholders of
the Corporation must be effected at an annual or special meeting of
stockholders and may not be effected by written consent without a meeting.
ARTICLE VIII
ELECTION OF DIRECTORS
SECTION 1. BALLOT. Elections of directors need not be by written
ballot unless the Bylaws of the Corporation shall so provide.
SECTION 2. ELECTION OF DIRECTORS BY PREFERRED STOCKHOLDERS.
During any period when the holders of any Preferred Stock or any one or more
series thereof,
3
<PAGE>
voting as a class, shall be entitled to elect a specified number of
directors, by reason of dividend arrearages or other provisions giving them
the right to do so, then and during such time as such right continues (1) the
then otherwise authorized number of directors shall be increased by such
specified number of directors, and the holders of such Preferred Stock or
such series thereof, voting as a class, shall be entitled to elect the
additional directors so provided for, pursuant to the provisions of such
Preferred Stock or series; (2) each such additional director shall serve for
such term, and have such voting powers, as shall be stated in the provisions
pertaining to such Preferred Stock or series; PROVIDED, HOWEVER, that,
notwithstanding the foregoing, any such director's term shall earlier expire
upon the due election and qualification of a successor to such director or
upon any resignation, disqualification or removal of such director in
accordance with law. Whenever the holders of shares of any series of
Preferred Stock are divested of such rights to elect a specified number of
directors pursuant to the resolution or resolutions of the Board creating
such series and providing for the issuance of such shares, the terms of
office of all directors elected by the holders of such series of Preferred
Stock pursuant to such rights, or elected to fill any vacancies resulting
from the death, resignation or removal of directors so elected by the holders
of such series of Preferred Stock, shall forthwith terminate and the
authorized number of directors shall be reduced accordingly.
SECTION 3. STOCKHOLDER NOMINEES. Nominations by stockholders of
persons for election to the Board shall be made only in accordance with the
procedures set forth in the Bylaws of the Corporation.
SECTION 4. REMOVAL. Subject to the rights of the holders of any
series of Preferred Stock then outstanding, any director, or the entire
Board, may be removed from office with or without cause, at any time, and
only by the affirmative vote of the holders of a majority of the shares of
Voting Stock then outstanding.
ARTICLE IX
LIABILITY AND INDEMNIFICATION
To the fullest extent permitted by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (the "Delaware Law"), a
director of the Corporation shall not be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
The Corporation shall indemnify, in the manner and to the fullest extent
permitted by the Delaware Law, any person (or the estate of any person) who
is or was a party to, or is threatened to be made a party to, any threatened,
pending or completed action, suit or proceeding, whether or not by or in the
right of the Corporation, and whether civil, criminal, administrative,
investigative or otherwise, by reason of the fact that such person is or was
a director or officer of the Corporation, or is or was serving at the request
of the Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise. The Corporation may
indemnify, in the manner and to the fullest extent permitted by the Delaware
Law, any person (or the estate of any person) who is or was a party to, or is
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threatened to be made a party to, any threatened, pending or completed
action, suit or proceeding, whether or not by or in the right of the
Corporation, and whether civil, criminal, administrative, investigative or
otherwise, by reason of the fact that such person is or was an employee or
agent of the Corporation, or is or was serving at the request of the
Corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise. Expenses incurred by any such
director, officer, employee or agent in defending any such action, suit or
proceeding may be advanced by the Corporation prior to the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director, officer, employee or agent to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified as authorized by the Delaware Law and this Article X. The
Corporation may, to the fullest extent permitted by the Delaware Law,
purchase and maintain insurance on behalf of any such director, officer,
employee or agent against any liability which may be asserted against such
person. To the fullest extent permitted by the Delaware Law, the
indemnification provided herein shall include expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement and, in the manner
provided by the Delaware Law, any such expenses may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding. The indemnification provided herein shall not be deemed to limit
the right of the Corporation to indemnify any other person for any such
expenses to the fullest extent permitted by the Delaware Law, nor shall it be
deemed exclusive of any other rights to which any person seeking
indemnification from the Corporation may be entitled under any agreement,
vote of stockholders or disinterested directors, or otherwise, both as to
action in such person's official capacity and as to action in another
capacity while holding such office.
No repeal or modification of the foregoing paragraph shall
adversely affect any right or protection of a director of the Corporation
existing by virtue of the foregoing paragraph at the time of such repeal or
modification.
ARTICLE X
CREDITOR COMPROMISE OR ARRANGEMENT
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application of this
Corporation or of any creditor or stockholder thereof or on the application
of any receiver or receivers appointed for this Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as
the case may be, to be summoned in such manner as the said court directs. If
a majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of
this Corporation,
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as the case may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been
made, be binding on all the creditors or class of creditors, and/or on all
the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
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IN WITNESS WHEREOF, the undersigned has executed this Amended and
Restated Certificate of Incorporation on behalf of the Corporation and does
hereby verify and affirm, under penalty of perjury, that this Amended and
Restated Certificate of Incorporation is the act and deed of the Corporation
and that the facts stated herein are true as of December 13, 1996.
/s/ John C. Kent
--------------------------------
John C. Kent, Secretary
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CERTIFICATE OF DESIGNATIONS, PREFERENCES, AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL
RIGHTS OF PREFERRED STOCK AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS THEREOF
OF
REDEEMABLE EXCHANGEABLE CUMULATIVE PREFERRED STOCK
OF
AFTERMARKET TECHNOLOGY CORP.
______________________________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
______________________________
Aftermarket Technology Corp., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article IV of its
Certificate of Incorporation, and in accordance with the provisions of
Section 151 of the General Corporation Law of the State of Delaware, its
Board of Directors, by unanimous written consent of the Board of Directors
dated as of December 13, 1996, adopted the following resolution creating a
series of its Preferred Stock, par value $0.01 per share, designated as
Redeemable Exchangeable Cumulative Preferred Stock:
WHEREAS, in connection with the future merger of Aftermarket Technology
Holdings Corp., a Delaware corporation and the Corporation's parent
("Holdings"), with and into the Corporation with the Corporation as the
surviving corporation (the "Merger"), each outstanding share of preferred
stock of Holdings will be converted into one share of preferred stock of the
Corporation; and
WHEREAS, the Certificate of Incorporation of the Corporation authorizes
a class of shares known as Preferred Stock, par value $0.01 per share, to be
issuable from time to time in one or more series;
RESOLVED, that pursuant to the authority expressly granted to and vested
in the Board of Directors of the Corporation by the provisions of the
Certificate of Incorporation, the Board hereby creates a series of the class
of authorized Preferred Stock of the Corporation, and hereby fixes the
designation and amount thereof and the voting powers, preferences and
relative, participating, optional and other special rights of the shares of
such series, and the qualifications, limitations or restrictions thereof as
follows:
<PAGE>
1. DESIGNATION, ISSUANCE AND STATED VALUE. The designation of the
series of Preferred Stock authorized by this resolution shall be "Redeemable
Exchangeable Cumulative Preferred Stock" (the "Redeemable Preferred Stock").
The number of shares of Redeemable Preferred Stock issuable hereunder shall
be 200,000. The shares of Redeemable Preferred Stock shall be issued by the
Corporation in such amounts, at such times and to such persons as shall be
specified by the Corporation's Board of Directors, from time to time. For
the purposes hereof, the "Stated Value" of each share of Redeemable Preferred
Stock (regardless of its par value) shall be $100 plus an amount equal to the
accrued but unpaid dividends with respect to a share of Redeemable Exchange
Cumulative Preferred Stock, par value $0.01 per share, of Holdings as of the
effective date of the Merger, which Stated Value shall be proportionately
increased or decreased for any stock consolidation or stock split,
respectively, of the outstanding shares of Redeemable Preferred Stock.
2. RANK. The Redeemable Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding up and dissolution, rank
junior to all classes and series of stock of the Corporation now or hereafter
authorized, issued or outstanding (collectively, the "Senior Securities")
other than the Corporation's "Junior Securities." For the purposes hereof,
"Junior Securities" means all series and classes of common stock, $.01 par
value per share (the "Common Stock"), of the Corporation, and such classes or
series of stock of the Corporation as shall be designated as junior to the
Redeemable Preferred Stock. The Corporation shall not issue any series or
class of stock ranking senior to the Redeemable Preferred Stock without the
affirmative vote of a majority of the outstanding shares of Redeemable
Preferred Stock.
3. DIVIDENDS.
(a) AMOUNT. On the last business day of June in each calendar year
(the "Dividend Accrual Date"), the holder of record of each share of the
Redeemable Preferred Stock as their names appear in the stock register of the
Corporation on such date shall become entitled to receive (when, as and if
declared by the Board of Directors of the Corporation) a dividend (the
"Annual Dividend") equal to the sum of (i) ten percent (10%) of the Stated
Value of such share (pro-rated for any portion of a full year that such share
shall have been issued and outstanding) plus (ii) ten percent (10%) of the
Unpaid Dividend Amount (as defined below) as of the previous Dividend Accrual
Date. The Unpaid Dividend Amount with respect to each share of the
Redeemable Preferred Stock shall be equal to the aggregate of all Annual
Dividends that the holder of such share shall have theretofore become
entitled to receive for such share but that shall not have been declared and
paid by the Board of Directors of the Corporation.
(b) ACCUMULATION AND TIME OF PAYMENT. Dividends on each share of
the Redeemable Preferred Stock shall be cumulative and shall accrue from day
to day, whether or not earned or declared, commencing with the date of issue
of such share. Dividends shall be payable annually, when, as and if declared
by the Board of Directors of the Corporation.
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<PAGE>
(c) PAYMENT OF ACCUMULATED DIVIDENDS. Accumulated dividends not
paid on prior Dividend Accrual Dates may be declared by the Board of
Directors and paid to the holders of record of outstanding shares of
Redeemable Preferred Stock as their names shall appear on the stock register
of the Corporation on a record date to be established by the Board of
Directors, which record date shall be not more than sixty (60) nor less than
thirty (30) days preceding the date of payment, whether or not such date is a
Dividend Accrual Date. Holders of outstanding shares of Redeemable Preferred
Stock shall not be entitled to receive any dividends in excess of the full
cumulative dividends to which such holders are entitled as provided in this
Section 3.
(d) RESTRICTIONS ON PAYMENT OF DIVIDENDS. Notwithstanding anything
contained herein to the contrary, no dividends on shares of Redeemable
Preferred Stock shall be declared by the Board of Directors or paid or set
apart for payment by the Corporation: (i) unless, prior to or concurrently
with such declaration, payment or setting apart, all accrued and unpaid
dividends, if any, on shares of Senior Securities shall have been paid or
declared and set apart for payment through the dividend payment period with
respect to such Senior Securities which next precedes or coincides with the
Dividend Accrual Date; or (ii) at such time as such declaration, payment or
setting apart is prohibited by the Delaware General Corporation Law (the
"DGCL"); or (iii) at such time as the terms and provisions of any contract or
other agreement of the Corporation or any of its subsidiaries entered into or
assumed providing financing (including acquisition financing) or working
capital to the Corporation or any of its subsidiaries (whether or not entered
into prior to, at or after the issuance of the Redeemable Preferred Stock),
specifically prohibits such declaration, payment or setting apart for payment
or provides that such declaration, payment or setting apart for payment would
constitute a breach thereof or a default thereunder.
4. RESTRICTIONS ON JUNIOR PAYMENTS. So long as any shares of
Redeemable Preferred Stock are outstanding, the Corporation shall not (a)
declare, pay or set apart for payment any dividend on, or make any
distribution in respect of, Junior Securities or any warrants, rights, calls
or options exercisable or convertible into any Junior Securities, either
directly or indirectly, whether in cash, obligations or shares of the
Corporation or other property (other than distributions or dividends solely
in the form of a particular class or series of Junior Securities, or
warrants, rights or options exercisable for such Junior Securities, to
holders of such Junior Securities), (b) make any payment on account of, or
set apart for payment money for a sinking or other similar fund for, the
purchase, redemption, retirement or other acquisition for value of any of, or
redeem, purchase, retire or otherwise acquire for value any of, the Junior
Securities (other than as a result of a reclassification of Junior Securities
or the exchange or conversion of one class or series of Junior Securities for
or into another class or series of Junior Securities) or any warrants,
rights, calls or options exercisable for or convertible into any of the
Junior Securities, or (c) permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase, redeem, retire or
otherwise acquire for value any of the Junior Securities or any warrants,
rights, calls or options exercisable for or convertible into any Junior
Securities; PROVIDED, HOWEVER, that the restrictions of this Section 4 may be
waived by the affirmative vote of a majority of the
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outstanding shares of Redeemable Preferred Stock; PROVIDED FURTHER, HOWEVER,
that the restrictions of this Section 4 shall not apply to the repurchase or
redemption of shares of Common Stock or Redeemable Preferred Stock under that
certain Stockholders Agreement dated as of July 18, 1994 among Holdings and
certain of its stockholders, optionholders and warrantholders, to which the
Corporation will become a party at the effective time of the Merger, as the
same may be supplemented, amended or otherwise modified from time to time,
(i) out of the net cash proceeds derived by the Corporation out of a prior or
substantially contemporaneous issuance of Junior Securities or (ii) for an
aggregate purchase price not to exceed the lesser of (A) 25% of the net
income of Holdings and its subsidiaries for the period commencing July 1,
1994 through the effective time of the Merger plus 25% of the net income of
the Corporation and its subsidiaries for the period commencing at the
effective time of the Merger through the date of determination, in each case
determined on a consolidated basis in accordance with generally accepted
accounting principles consistently applied for such periods, and (B)
$1,000,000.
5. LIQUIDATION PREFERENCE.
(a) THE LIQUIDATION PREFERENCE. In the event of any voluntary or
involuntary liquidation, dissolution or winding up the affairs of the
Corporation, the holders of shares of Redeemable Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, whether such assets are
capital or surplus and whether or not any dividends are declared, an amount
equal to the Stated Value for each share outstanding plus an amount equal to
all accrued but unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding up (the "Liquidation Preference"), before any payment
shall be made or any assets distributed to the holders of Junior Securities.
If the assets of the Corporation are not sufficient to pay in full the
liquidation payments payable to the holders of outstanding shares of the
Redeemable Preferred Stock and any series of preferred stock or any other
class of stock on a parity, as to rights on liquidation, dissolution or
winding up, with the Redeemable Preferred Stock, then the holders of all such
shares shall share ratably in such distribution of assets in accordance with
the amount that would be payable on such distribution if the amounts to which
the holders of outstanding shares of Redeemable Preferred Stock and the
holders of outstanding shares of such other securities are entitled were paid
in full. Nothing herein contained shall be deemed to prevent redemption of
shares of the Redeemable Preferred Stock by the Corporation in the manner
provided in Section 6. The liquidation payment with respect to each
outstanding fractional share of Redeemable Preferred Stock shall be equal to
a ratably proportionate amount of the liquidation payment with respect to
each outstanding share of Redeemable Preferred Stock. All payments for which
this Section 5 provides shall be in cash, property (valued at its fair market
value, as determined by an independent nationally recognized investment
banking firm) or a combination thereof; PROVIDED, HOWEVER, that no cash shall
be paid to holders of Junior Securities unless each holder of the outstanding
shares of Redeemable Preferred Stock has been paid in cash the full amount
of the Liquidation Preference to which such holder is entitled as provided
herein. After payment of the full amount of the Liquidation Preference to
which each holder is entitled, such holders of shares
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of Redeemable Preferred Stock will not be entitled to any further
participation in any distribution of the assets of the Corporation.
(b) EVENTS NOT CONSTITUTING LIQUIDATION. For the purposes of this
Section 5, neither the voluntary sale, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all of the property or assets of the Corporation nor the
consolidation or merger of the Corporation with or into any other corporation
shall be deemed to be a voluntary or involuntary liquidation, dissolution or
winding up of the Corporation.
6. REDEMPTION.
(a) OPTIONAL REDEMPTION. Subject to the restrictions set forth in
Section 6(c) hereof, the Corporation may, at the option of the Board of
Directors, at any time or from time to time, in whole or in part, redeem the
shares of Redeemable Preferred Stock at the time outstanding, at a redemption
price equal to the Stated Value per share, together with an amount equal to
accrued and unpaid dividends thereon to the date fixed for such redemption.
(b) MANNER OF REDEMPTION. No prior notice of redemption of
outstanding shares of Redeemable Preferred Stock pursuant to Section 6(a) to
the holders of record of outstanding shares of Redeemable Preferred Stock
selected for redemption shall be required. If, as a result of a redemption,
a holder would be left with a fraction of a share of Redeemable Preferred
Stock, the Corporation shall redeem the number of shares of such holder that
it otherwise would redeem rounded up or down, in the Corporation's sole
discretion, to the nearest whole number.
(c) RESTRICTIONS ON REDEMPTIONS. No shares of Redeemable Preferred
Stock shall be redeemed in whole or part under Sections 6(a) or 6(b) hereof:
(i) at any time that such redemption is prohibited by the DGCL; (ii) at any
time that the terms and provisions of any contract or other agreement of the
Corporation or any of its subsidiaries entered into or assumed providing
financing (including acquisition financing) or working capital to the
Corporation or any of its subsidiaries (whether or not entered into prior to,
at or after the issuance of the Redeemable Preferred Stock), specifically
prohibits such redemption or provides that such redemption would constitute a
breach thereof or a default thereunder; (iii) unless, prior to or
concurrently with such redemption, all unpaid and accrued dividends on Senior
Securities for dividend periods preceding or ending on the redemption date
have been paid in full or have been declared and set aside for payment in
full; or (iv) at any time that the Corporation shall be in default in respect
of any of its redemption obligations on or under Senior Securities.
(d) PRIORITY AS TO JUNIOR SECURITIES. The Corporation shall take
no action that would otherwise require the Corporation to redeem any
outstanding shares of Redeemable Preferred Stock pursuant to Section 6(a)
hereof (each a "Redemption Obligation")
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if at such time the Corporation is unable to discharge its Redemption
Obligation; PROVIDED, HOWEVER, that if the Corporation fails to discharge any
Redemption Obligation (without regard as to the circumstances pursuant to
which such Redemption Obligation arose), (x) the Redemption Obligation shall
be discharged as soon as the Corporation is able to discharge such Redemption
Obligation, and (y) so long as such Redemption Obligation shall be
outstanding but shall not be fully discharged, the Corporation shall not (i)
declare, pay or set apart for payment any dividend on, or make any
distribution in respect of, the Junior Securities or any warrants, rights,
calls or options exercisable for or convertible into any of the Junior
Securities, either directly or indirectly, whether in cash, obligations or
shares of the Corporation or other property (other than distributions or
dividends of a particular class or series of Junior Securities, or warrants,
rights or options exercisable for such Junior Securities, to holders of such
Junior Securities), or (ii) make any payment on account of, or set apart for
payment money for a sinking or other similar fund for, the purchase,
redemption, retirement or other acquisition for value of any of, or redeem,
purchase, retire or otherwise acquire for value any of, the Junior Securities
(other than as a result of a reclassification of Junior Securities or the
exchange or conversion of one class or series of Junior Securities for or
into another class or series of Junior Securities, other than through the use
of the proceeds of a substantially contemporaneous sale of other Junior
Securities) or any warrants, rights, calls or options exercisable for or
convertible into any of the Junior Securities, or (iii) permit any
corporation or other entity directly or indirectly controlled by the
Corporation to purchase, redeem, retire or otherwise acquire for value any of
the Junior Securities or any warrants, rights, calls or options exercisable
for or convertible into any of the Junior Securities. Notwithstanding the
immediately preceding sentence, the restrictions of this Section 6(d) shall
not apply to the repurchase or redemption of shares of the Corporation's
capital stock in accordance with Section 4 hereof.
7. EXCHANGE. The Redeemable Preferred Stock is exchangeable to the
extent of funds legally available for the redemption thereof on the date of
exchange, at the sole option of the Corporation, in whole or in part from
time to time, on or after January 1, 1995, for the Corporation's Subordinated
Exchange Debentures due July 31, 2006 (the "Exchange Debentures"). The
Exchange Debentures shall be issued pursuant to an indenture, the form of
which shall have been approved by the Corporation and the holders of a
majority of the then outstanding shares of Redeemable Preferred Stock.
Holders of the outstanding shares of Redeemable Preferred Stock will be
entitled to receive $100.00 principal amount of the Exchange Debentures in
exchange for each share of Redeemable Preferred Stock held by them at the
time of exchange and, at the option of the Corporation, cash or such
principal amount of the Exchange Debentures equal to all accrued but unpaid
dividend amounts at the time of the exchange. Such holders may receive
Exchange Debentures in amounts less than $100.00 as may be necessary due to
the issuance of fractional shares of Redeemable Preferred Stock. The
Corporation will cause the Exchange Debentures to be authenticated as of the
date on which the exchange is effective and dated the Dividend Accrual Date
that coincides with the date of exchange.
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8. PROCEDURE FOR REDEMPTION OR EXCHANGE.
(a) SELECTION. In the event that fewer than all of the outstanding
shares of Redeemable Preferred Stock are to be redeemed or exchanged pursuant
to Section 6 or 7 hereof, the number of shares to be redeemed or exchanged,
shall be determined by the Board of Directors at its sole option and shall be
redeemed or exchanged pro rata among all holders of the Redeemable Preferred
Stock.
(b) NOTICE. If the Corporation exchanges shares of Redeemable
Preferred Stock, notice of every exchange of shares of Redeemable Preferred
Stock shall be mailed by first class mail, postage prepaid, not less than
thirty (30) days nor more than sixty (60) days prior to the exchange date
addressed to the holders of record of the shares to be exchanged at their
respective last addresses as they shall appear on the books of the
Corporation; PROVIDED, HOWEVER, that the failure to give such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
exchange of any shares so to be exchanged except as to the holder to whom the
Corporation has failed to give such notice or except as to the holder to whom
such notice was defective. Each such notice shall state: (i) the exchange
date; (ii) that shares of Redeemable Preferred Stock are to be exchanged and,
if less than all the shares held by such holder are to be exchanged, the
number of such shares to be exchanged; (iii) the exchange price; (iv) the
place or places where certificates for such shares are to be surrendered for
payment of the exchange price; and (v) that dividends on the shares to be
exchanged will cease to accrue on such redemption date.
(c) EFFECT OF REDEMPTION OR EXCHANGE. From and after the
redemption date or as of the exchange date, dividends on the shares of
Redeemable Preferred Stock so called for redemption or exchange shall cease
to accrue, and said shares shall no longer be deemed to be outstanding and
shall be retired and shall have the status of authorized but unissued shares
of preferred stock, unclassified as to series, and shall not be reissued as
shares of Redeemable Preferred Stock, and all rights of the holders thereof
as stockholders of the Corporation (except the right to receive from the
Corporation the redemption price as provided in Section 6 or the Exchange
Debentures upon exchange and any accrued and unpaid dividends, in cash or
Exchange Debentures as provided in Section 7) shall cease and terminate. In
the event of redemption, if prior to the date of redemption all said funds
necessary for such redemption shall have been irrevocably deposited in trust,
for the account of the holders of the shares of the Redeemable Preferred
Stock to be redeemed (and so as to be and continue to be available therefor),
with a bank or trust company thereupon and without awaiting the redemption
date, all shares of the Redeemable Preferred Stock with respect to which such
deposit shall have been so made, shall be deemed to be no longer outstanding
and all rights with respect to such shares of the Redeemable Preferred Stock
shall forthwith upon such deposit in trust cease and terminate (except the
right of the holders thereof on or after the redemption date to receive from
such deposit the amount payable upon the redemption). In case the holders of
shares of the Redeemable Preferred Stock that shall have been called for
redemption shall not within two years (or any longer period if required by
law) after the redemption date claim any amount so deposited in trust for the
redemption of such shares, such
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bank or trust company shall, upon demand and if permitted by applicable law,
pay over to the Corporation any such unclaimed amount so deposited with it
and shall thereupon be relieved of all responsibility in respect thereof, and
thereafter the holders of such shares shall, subject to applicable escheat
laws, look only to the Corporation for payment of the redemption price
thereof. Upon surrender of the certificates for any shares so redeemed or
exchanged (properly endorsed or assigned for transfer, if the Board of
Directors of the Corporation shall so require), the redemption price provided
in Section 6 or the Exchange Debentures and any cash to be delivered by the
Corporation pursuant to Section 6 shall be delivered to the registered holder
of such certificates. In case fewer than all the shares represented by any
such certificate are redeemed or exchanged, a new certificate shall be issued
representing the unredeemed or unexchanged shares without cost to the holder
thereof.
9. VOTING RIGHTS. Except as specifically set forth herein or in the
DGCL, the holders of shares of Redeemable Preferred Stock shall not be
entitled to any voting rights with respect to any matters voted upon by
stockholders of the Corporation.
10. SECTION HEADINGS. Section headings are for convenience of reference
only and shall not constitute a part of this Certificate or be referred to in
connection with the interpretation or construction hereof.
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IN WITNESS WHEREOF, the Corporation has caused this certificate to be
executed, signed and acknowledged by Mark C. Hardy, its Vice President, and
to be attested by John C. Kent, its Secretary, this 13th day of December,
1996.
/s/ MARK C. HARDY
-------------------------------------
Mark C. Hardy, Vice President
Attest: /s/ JOHN C. KENT
- -------------------------------------
John C. Kent, Secretary
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BYLAWS
OF
AFTERMARKET TECHNOLOGY CORP.
AMENDED AS OF JANUARY 31, 1997
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
(A DELAWARE CORPORATION)
BYLAWS
ARTICLE I
OFFICES
SECTION 1.01 REGISTERED OFFICE. The registered office of Aftermarket
Technology Corp. (hereinafter called the Corporation) in the State of Delaware
shall be at 1013 Centre Road, City of Wilmington, County of New Castle, and the
name of the registered agent in charge thereof shall be Corporation Service
Company.
SECTION 1.02 OTHER OFFICES. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors (hereinafter called the Board) may from time
to time determine or as the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.01 ANNUAL MEETINGS. Annual meetings of the stockholders of the
Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings may be held at such
time, date and place as the Board shall determine by resolution.
SECTION 2.02 SPECIAL MEETINGS. A special meeting of the stockholders for
the transaction of any proper business may be called at any time by the Board or
by the President.
SECTION 2.03 PLACE OF MEETINGS. All meetings of the stockholders shall
be held at such places, within or without the State of Delaware, as may from
time to time be designated by the person or persons calling the respective
meeting and specified in the respective notices or waivers of notice thereof.
SECTION 2.04 NOTICE OF MEETINGS. Except as otherwise required by law,
notice of each meeting of the stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder of record entitled to vote at such meeting by delivering a
typewritten or printed notice thereof to him personally, or by depositing such
notice in the United States mail, in a postage prepaid envelope, directed to him
at his post office address furnished by him to the Secretary of the Corporation
for such purpose or, if he shall not have furnished to the Secretary his address
for such purpose, then at his post office address last known to the Secretary,
or by transmitting a notice thereof to him at
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such address by telegraph, cable, or wireless. Except as otherwise expressly
required by law, no publication of any notice of a meeting of the stockholders
shall be required. Every notice of a meeting of the stockholders shall state
the place, date and hour of the meeting, and, in the case of a special
meeting, shall also state the purpose or purposes for which the meeting is
called. Notice of any meeting of stockholders shall not be required to be
given to any stockholder who shall have waived such notice and such notice
shall be deemed waived by any stockholder who shall attend such meeting in
person or by proxy, except as a stockholder who shall attend such meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Except as otherwise expressly required by law, notice of any
adjourned meeting of the stockholders need not be given if the time and place
thereof are announced at the meeting at which the adjournment is taken.
SECTION 2.05 QUORUM. Except in the case of any meeting for the election
of directors summarily ordered as provided by law, the holders of record of a
majority in voting interest of the shares of stock of the Corporation entitled
to be voted thereat, present in person or by proxy, shall constitute a quorum
for the transaction of business at any meeting of the stockholders of the
Corporation or any adjournment thereof. In the absence of a quorum at any
meeting or any adjournment thereof, a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat or, in
the absence therefrom of all the stockholders, any officer entitled to preside
at, or to act as secretary of, such meeting may adjourn such meeting from time
to time. At any such adjourned meeting at which a quorum is present any
business may be transacted which might have been transacted at the meeting as
originally called.
SECTION 2.06 VOTING.
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation having voting rights on the matter in question and
which shall have been held by him and registered in his name on the books of the
Corporation:
(i) on the date fixed pursuant to Section 6.05 of these Bylaws as
the record date for the determination of stockholders entitled to notice
of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then (a) at
the close of business on the day next preceding the day on which notice
of the meeting shall be given or (b) if notice of the meeting shall be
waived, at the close of business on the day next preceding the day on
which the meeting shall be held.
(b) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity
shall be entitled to vote such stock. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
Corporation he shall have expressly empowered the
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pledgee to vote thereon, in which case only the pledgee, or his proxy, may
represent such stock and vote thereon. Stock having voting power standing of
record in the names of two or more persons, whether fiduciaries, members of a
partnership, joint tenants in common, tenants by entirety or otherwise, or
with respect to which two or more persons have the same fiduciary
relationship, shall be voted in accordance with the provisions of the General
Corporation Law of the State of Delaware.
(c) Any such voting rights may be exercised by the stockholder entitled
thereto in person or by his proxy appointed by an instrument in writing,
subscribed by such stockholder or by his attorney thereunto authorized and
delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders
all matters, except as otherwise provided in the Certificate of Incorporation,
in these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon, a quorum being present. The vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting. On a vote by ballot each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and it shall state
the number of shares voted.
SECTION 2.07 LIST OF STOCKHOLDERS. The Secretary of the Corporation
shall prepare and make, at least 10 days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 2.08 JUDGES. If at any meeting of the stockholders a vote by
written ballot shall be taken on any question, the chairman of such meeting may
appoint a judge or judges to act with respect to such vote. Each judge so
appointed shall first subscribe an oath faithfully to execute the duties of a
judge at such meeting with strict impartiality and according to the best of his
ability. Such judges shall decide upon the qualification of the voters and
shall report the number of shares represented at the meeting and entitled to
vote on such question, shall conduct and accept the votes, and, when the voting
is completed, shall ascertain and report the number of shares voted respectively
for and against the question. Reports of judges shall be in writing and
subscribed and delivered by them to the Secretary of the Corporation. The
judges need not be stockholders of the Corporation, and any officer of the
Corporation may be a judge on any question other than a vote for or against a
proposal in which he shall have a material interest.
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ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01 GENERAL POWERS. The property, business and affairs of the
Corporation shall be managed by the Board.
SECTION 3.02 NUMBER AND TERM OF OFFICE. The number of directors shall be
not less than one nor more than 15 until changed in accordance with applicable
law. The exact number of directors shall be fixed from time to time, within the
limits specified, by resolutions of the Board or the stockholders. Subject to
the foregoing provisions for changing the exact number of directors, the number
of directors of the Corporation shall be nine. Directors need not be
stockholders. Each of the directors of the Corporation shall hold office until
his successor shall have been duly elected and shall qualify or until he shall
resign or shall have been removed in the manner hereinafter provided.
SECTION 3.03 ELECTION OF DIRECTORS. The directors shall be elected
annually by the stockholders of the Corporation and the persons receiving the
greatest number of votes, up to the number of directors to be elected, shall be
the directors.
SECTION 3.04 RESIGNATIONS. Any director of the Corporation may resign at
any time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 3.05 VACANCIES. Except as otherwise provided in the Certificate
of Incorporation, any vacancy in the Board, whether because of death,
resignation, disqualification, an increase in the number of directors, or any
other cause, may be filled by vote of the majority of the remaining directors,
although less than a quorum. Each director so chosen to fill a vacancy shall
hold office until his successor shall have been elected and shall qualify or
until he shall resign or shall have been removed in the manner hereinafter
provided.
SECTION 3.06 PLACE OF MEETING, ETC. The Board may hold any of its
meetings at such place or places within or without the State of Delaware as the
Board may from time to time by resolution designate or as shall be designated by
the person or persons calling the meeting or in the notice or a waiver of notice
of any such meeting. Directors may participate in any regular or special
meeting of the Board by means of conference telephone or similar communications
equipment pursuant to which all persons participating in the meeting of the
Board can hear each other, and such participation shall constitute presence in
person at such meeting.
SECTION 3.07 FIRST MEETING. The Board shall meet as soon as practicable
after each annual election of directors and notice of such first meeting shall
not be required.
SECTION 3.08 REGULAR MEETINGS. Regular meetings of the Board may be held
at such times as the Board shall from time to time by resolution determine. If
any day fixed for a
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regular meeting shall be a legal holiday at the place where the meeting is to
be held, then the meeting shall be held at the same hour and place on the
next succeeding business day not a legal holiday. Except as provided by law,
notice of regular meetings need not be given.
SECTION 3.09 SPECIAL MEETINGS. Special meetings of the Board shall be
held whenever called by the President or a majority of the authorized number of
directors. Except as otherwise provided by law or by these Bylaws, notice of
the time and place of each such special meeting shall be given to each director
in writing and delivered personally, mailed to his or her address appearing on
the records of the Corporation, or given by telegram, cable, telephone,
telecopy, facsimile or a nationally recognized overnight delivery service.
(i) Notice to directors by mail shall be given at least two business
days before the meeting and shall be deemed to be given when mailed to
the director at his or her address appearing on the records of the
Corporation.
(ii) Notice to directors by telegram, cable, personal delivery,
telephone or wireless shall be given a reasonable time before the meeting
but in no event less than one hour before the meeting. Notice by
telegram or cable shall be deemed to be given when the telegram or cable
addressed to the director at his or her address appearing on the records
of the Corporation is delivered to the telegraph company. Notice by
telephone or wireless shall be deemed to be given when transmitted by
telephone or wireless to the telephone number or wireless call
designation appearing on the records of the Corporation for the director
(regardless of whether the director shall have personally received such
telephone call or wireless message), provided confirmation of
transmission shall be made promptly by telegram or cable in the manner
specified above.
Except where otherwise required by law or by these Bylaws, notice of the
purpose of a special meeting need not be given. Notice of any meeting of the
Board shall not be required to be given to any director who is present at such
meeting, except a director who shall attend such meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
SECTION 3.10 QUORUM AND MANNER OF ACTING. Except as otherwise provided
in these Bylaws or by law, the presence of a majority of the authorized number
of directors shall be required to constitute a quorum for the transaction of
business at any meeting of the Board, and all matters shall be decided at any
such meeting, a quorum being present, by the affirmative votes of a majority of
the directors present. In the absence of a quorum, a majority of directors
present at any meeting may adjourn the same from time to time until a quorum
shall be present. Notice of any adjourned meeting need not be given. The
directors shall act only as a Board, and the individual directors shall have no
power as such.
SECTION 3.11 ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case
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may be, and such written consent is filed with the minutes of proceedings of
the Board or committee.
SECTION 3.12 REMOVAL OF DIRECTORS. Subject to the provisions of the
Certificate of Incorporation, any director may be removed at any time, either
with or without cause, by the affirmative vote of the stockholders having a
majority of the voting power of the Corporation given at a special meeting of
the stockholders called for the purpose.
SECTION 3.13 COMPENSATION. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him on account of his attendance at
any meetings of the Board or Committees of the Board. Neither the payment of
such compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.
SECTION 3.14 COMMITTEES. The Board may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. Any such committee,
to the extent provided in the resolution of the Board and except as otherwise
limited by law, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. Any such committee shall keep written minutes of its meetings and
report the same to the Board at the next regular meeting of the Board. In the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board to act at the meeting in the place of any such absent or disqualified
member.
ARTICLE IV
OFFICERS
SECTION 4.01 NUMBER. The officers of the Corporation shall be a
President, one or more Vice Presidents (the number thereof and their respective
titles to be determined by the Board), a Secretary and a Chief Financial
Officer.
SECTION 4.02 ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers
of the Corporation, except such officers as may be appointed in accordance with
Section 4.03, shall be elected annually by the Board at the first meeting
thereof held after the election thereof. Each officer shall hold office until
his successor shall have been duly chosen and shall qualify or until his
resignation or removal in the manner hereinafter provided.
SECTION 4.03 ASSISTANTS, AGENTS AND EMPLOYEES, ETC. In addition to the
officers specified in Section 4.01, the Board may appoint other assistants,
agents and employees as it may deem necessary or advisable, including one or
more Assistant Secretaries, and one or more Assistant Treasurers, each of whom
shall hold office for such period, have such authority,
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and perform such duties as the Board may from time to time determine. The
Board may delegate to any officer of the Corporation or any committee of the
Board the power to appoint, remove and prescribe the duties of any such
assistants, agents or employees.
SECTION 4.04 REMOVAL. Any officer, assistant, agent or employee of the
Corporation may be removed, with or without cause, at any time: (i) in the case
of an officer, assistant, agent or employee appointed by the Board, only by
resolution of the Board; and (ii) in the case of an officer, assistant, agent or
employee, by any officer of the Corporation or committee of the Board upon whom
or which such power of removal may be conferred by the Board.
SECTION 4.05 RESIGNATIONS. Any officer or assistant may resign at any
time by giving written notice of his resignation to the Board or the Secretary
of the Corporation. Any such resignation shall take effect at the time
specified therein, or, if the time be not specified, upon receipt thereof by the
Board or the Secretary, as the case may be; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 4.06 VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or other cause, may be filled for the
unexpired portion of the term thereof in the manner prescribed in these Bylaws
for regular appointments or elections to such office.
SECTION 4.07 THE PRESIDENT. The President of the Corporation shall be
the chief executive officer of the Corporation and shall have, subject to the
control of the Board, general and active supervision and management over the
business of the Corporation and over its several officers, assistants, agents
and employees.
SECTION 4.08 THE VICE PRESIDENTS. Each Vice President shall have such
powers and perform such duties as the Board may from time to time prescribe. At
the request of the President, or in case of the President's absence or inability
to act upon the request of the Board, a Vice President shall perform the duties
of the President and when so acting, shall have all the powers of, and be
subject to all the restrictions upon, the President.
SECTION 4.09 THE SECRETARY. The Secretary shall, if present, record the
proceedings of all meetings of the Board, of the stockholders, and of all
committees of which a secretary shall not have been appointed in one or more
books provided for that purpose; he shall see that all notices are duly given in
accordance with these Bylaws and as required by law; he shall be custodian of
the seal of the Corporation and shall affix and attest the seal to all documents
to be executed on behalf of the Corporation under its seal; and, in general, he
shall perform all the duties incident to the office of Secretary and such other
duties as may from time to time be assigned to him by the Board.
SECTION 4.10 THE CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall have the general care and custody of the funds and securities of the
Corporation, and shall deposit all such funds in the name of the Corporation in
such banks, trust companies or other depositories as shall be selected by the
Board. He shall receive, and give receipts for, moneys
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due and payable to the Corporation from any source whatsoever. He shall
exercise general supervision over expenditures and disbursements made by
officers, agents and employees of the Corporation and the preparation of such
records and reports in connection therewith as may be necessary or desirable.
He shall, in general, perform all other duties incident to the office of
Chief Financial Officer and such other duties as from time to time may be
assigned to him by the Board.
SECTION 4.11 COMPENSATION. The compensation of the officers of the
Corporation shall be fixed from time to time by the Board. None of such
officers shall be prevented from receiving such compensation by reason of the
fact that he is also a director of the Corporation. Nothing contained herein
shall preclude any officer from serving the Corporation, or any subsidiary
corporation, in any other capacity and receiving such compensation by reason of
the fact that he is also a director of the Corporation. Nothing contained
herein shall preclude any officer from serving the Corporation, or any
subsidiary corporation, in any other capacity and receiving proper compensation
therefor.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 5.01 EXECUTION OF CONTRACTS. The Board, except as in these
Bylaws otherwise provided, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances; and unless so authorized by the Board or by these Bylaws, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or in any amount.
SECTION 5.02 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
payment of money, notes or other evidence of indebtedness, issued in the name of
or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board. Each such officer, assistant, agent or attorney shall
give such bond, if any, as the Board may require.
SECTION 5.03 DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board may select, or
as may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the
purpose of collection for the account of the Corporation, the President, any
Vice President or the Chief Financial Officer (or any other officer or officers,
assistant or assistants, agent or agents, or attorney or attorneys of the
Corporation who shall from time to time be determined by the Board) may endorse,
assign and deliver checks, drafts and other orders for the payment of money
which are payable to the order of the Corporation.
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SECTION 5.04 GENERAL AND SPECIAL BANK ACCOUNTS. The Board may from time
to time authorize the opening and keeping of general and special bank accounts
with such banks, trust companies or other depositories as the Board may select
or as may be selected by any officer or officers, assistant or assistants, agent
or agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
SHARES AND THEIR TRANSFER
SECTION 6.01 CERTIFICATES FOR STOCK. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
President or a Vice President, and by the Secretary or an Assistant Secretary or
by the Chief Financial Officer or an Assistant Treasurer. Any of or all of the
signatures on the certificates may be a facsimile. In case any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed upon, any such certificate, shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, such certificate
may nevertheless be issued by the Corporation with the same effect as though the
person who signed such certificate, or whose facsimile signature shall have been
placed thereupon, were such officer, transfer agent or registrar at the date of
issue. A record shall be kept of the respective names of the persons, firms or
corporations owning the stock represented by such certificates, the number and
class of shares represented by such certificates, respectively, and the
respective dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be cancelled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so cancelled, except in cases provided for in Section 6.04.
SECTION 6.02 TRANSFERS OF STOCK. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary, or with a transfer clerk or a
transfer agent appointed as provided in Section 6.03, and upon surrender of the
certificate or certificates for such shares properly endorsed and the payment of
all taxes thereon. The person in whose name shares of stock stand on the books
of the Corporation shall be deemed the owner thereof for all purposes as regards
the Corporation. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact shall be so expressed in the entry of
transfer if, when the certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
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SECTION 6.03 REGULATIONS. The Board may make such rules and regulations
as it may deem expedient, not inconsistent with these Bylaws, concerning the
issue, transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.
SECTION 6.04 LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. In any
case of loss, theft, destruction or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sum as the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when, in the judgment of
the Board, it is proper so to do.
SECTION 6.05 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any other change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board may fix, in advance, a record date, which shall not be more than 60
nor less than 10 days before the date of such meeting, nor more than 60 days
prior to any other action. If in any case involving the determination of
stockholders for any purpose other than notice of or voting at a meeting of
stockholders or expressing consent to corporate action without a meeting the
Board shall not fix such a record date, the record date for determining
stockholders for such purpose shall be the close of business on the day on which
the Board shall adopt the resolution relating thereto. A determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of such meeting; provided, however, that the Board may
fix a new record date for the adjourned meeting.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 ACTION, ETC., OTHER THAN BY OR IN THE RIGHT OF THE
CORPORATION. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and with respect to any criminal action
or proceeding, had no reasonable cause to
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believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation,
and, with respect to any criminal action or proceeding, that he had
reasonable cause to believe that his conduct was unlawful.
SECTION 7.02 ACTIONS, ETC., BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 7.03 DETERMINATION OF RIGHT OF INDEMNIFICATION. Any
indemnification under Section 7.01 or 7.02 (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 7.01 and 7.02. Such determination shall be made
(i) by the Board by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (ii) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors
so directs, by independent legal counsel in a written opinion, or (iii) by
the stockholders.
SECTION 7.04 INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Article, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 7.01 or 7.02, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
SECTION 7.05 PREPAID EXPENSES. Expenses incurred by an officer or
director in defending a civil or criminal action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay
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such amount unless it shall ultimately be determined that he is entitled to
be indemnified by the Corporation as authorized in this Article. Such
expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board deems appropriate.
SECTION 7.06 OTHER RIGHTS AND REMEDIES. The indemnification provided by
this Article shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 7.07 INSURANCE. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article.
SECTION 7.08 CONSTITUENT CORPORATIONS. For the purposes of this Article,
references to "the Corporation" include all constituent corporations absorbed in
a consolidation or merger as well as the resulting or surviving corporation, so
that any person who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity.
SECTION 7.09 OTHER ENTERPRISES, FINES AND SERVING AT CORPORATION'S
REQUEST. For purposes of this Article, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
Article.
13
<PAGE>
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 SEAL. The Board shall provide a corporate seal, which shall
be in the form of a circle and shall bear the name of the Corporation and words
and figures showing that the Corporation was incorporated in the State of
Delaware and the year of incorporation.
SECTION 8.02 WAIVER OF NOTICES. Whenever notice is required to be given
by these Bylaws or the Certificate of Incorporation or by law, the person
entitled to said notice may waive such notice in writing, either before or after
the time stated therein, and such waiver shall be deemed equivalent to notice.
SECTION 8.03 AMENDMENTS. These Bylaws, or any of them, may be altered,
amended or repealed, and new Bylaws may be made, (i) by the Board, by vote of a
majority of the number of directors then in office as directors, acting at any
meeting of the Board, or (ii) by the stockholders, at any annual meeting of
stockholders, without previous notice, or at any special meeting of
stockholders, provided that notice of such proposed amendment, modification,
repeal or adoption is given in the notice of special meeting. Any Bylaws made
or altered by the stockholders may be altered or repealed by either the Board or
the stockholders.
14
<PAGE>
CERTIFICATE OF SECRETARY
The undersigned, being the duly elected Secretary of Aftermarket Technology
Corp., a Delaware corporation, hereby certifies that the Bylaws to which this
Certificate is attached were duly adopted by the Board of Directors of said
Corporation as of January 31, 1997.
--------------------------------------
John C. Kent
15
<PAGE>
AMENDMENT NO. 3 TO
STOCKHOLDERS AGREEMENT
This Amendment No. 3 to Stockholders Agreement (this "Amendment") is
made and entered into as of December 4, 1996 by and between Aftermarket
Technology Holdings Corp., a Delaware corporation (the "Company"), Aurora
Equity Partners L.P., a Delaware limited partnership ("AEP"), Aurora Overseas
Equity Partners I, L.P., a Cayman Islands exempted limited partnership
("AOEP"), and each of the stockholders of the Company who are signatories
hereto (the "Stockholders").
WHEREAS, Section 10.2 of that certain Stockholders Agreement dated as of
August 2, 1994 among the Company and certain of its stockholders,
optionholders and warrantholders, as amended (the "Stockholders Agreement"),
permits the amendment thereof by a written agreement signed by (a) the
Company, (b) AEP and AOEP and (c) the holders of a majority in voting
interest of the outstanding shares of Common Stock and Preferred Stock of the
Company;
WHEREAS, the Stockholders hold a majority in voting interest of the
outstanding shares of Common Stock and Preferred Stock of the Company; and
WHEREAS, the parties hereto desire to amend the Stockholders Agreement
as follows: (i) to clarify that from and after the effective date of the
merger (the "Merger") of the Company into Aftermarket Technology Corp., the
Company's wholly-owned subsidiary ("ATC"), any reference to the "Company"
shall be deemed to be a reference to ATC; (ii) to add demand registration
rights for the benefit of any stockholder who is a party to the Stockholders
Agreement and who, after a distribution of shares by AEP or AOEP to their
limited partners, owns at least 10% of the outstanding common stock and is
therefore unable to resell his shares without registration because his stock
ownership causes him to be an affiliate of ATC (and therefore subject to
certain statutory resale restrictions); (iii) to clarify that the Company
will pay all expenses relating to the registration of securities resulting
from an exercise of the "piggyback" or demand registration rights granted
therein; and (iv) to clarify that the holdback agreement provision applicable
to underwritten offerings applies to
<PAGE>
a Qualified IPO (as defined in the Stockholders Agreement) that is
consummated on or before March 31, 1997.
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto hereby agree as follows:
1. AMENDMENT.
(a) Section 10.6 of the Stockholders Agreement is hereby deleted in
its entirety and the following is hereby substituted in its place:
"10.6 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, this Agreement shall be binding upon and inure to the
benefit of the Company, its successors and assigns, and the Stockholders
and their respective heirs, personal representatives, successors and
permitted assigns. In the event that the Company is merged into Aftermarket
Technology Corp., a Delaware corporation and the Company's wholly-owned
subsidiary ("ATC"), upon the effectiveness of such merger, any reference
in this Agreement to the "Company" shall be deemed to be a reference to
ATC."
(b) Exhibit D to the Stockholders Agreement is hereby deleted in its
entirety and the attached Annex A is hereby substituted in its place.
2. GOVERNING LAW. This Amendment shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware without
reference to choice or conflicts of law principles thereof.
3. EFFECT OF AMENDMENT. Except as amended by this Amendment, the
Stockholders Agreement shall remain unchanged and shall remain in full force
and effect.
2
<PAGE>
IN WITNESS WHEREOF, the Company, AEP, AOEP and each of the Stockholders
have duly executed this Amendment as of the date first above written.
AFTERMARKET TECHNOLOGY
HOLDINGS CORP.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
THE CLASS A STOCKHOLDERS:
----------------------------------
WILLIAM A. SMITH
JAMES R. WEHR REVOCABLE TRUST
----------------------------------
James R. Wehr, Grantor/Trustee
----------------------------------
KENNETH T. HESTER
3
<PAGE>
THE CLASS B STOCKHOLDERS:
ALLENWOOD VENTURES, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
----------------------------------
JOHN E. ANDERSON
ROBERT ANDERSON VARIABLE TRUST
By:
-------------------------------
Robert Anderson, Trustee
THE ANDREW W. MELLON FOUNDATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
AURORA CAPITAL PARTNERS L.P.
By: Aurora Advisors, Inc.,
its general partner
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
4
<PAGE>
AURORA OVERSEAS CAPITAL
PARTNERS, L.P.
By: Aurora Overseas Advisors Ltd.,
its general partner
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
BANCBOSTON INVESTMENTS, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
BANKAMERICA CAPITAL CORPORATION
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
CALIFORNIA PUBLIC EMPLOYEES'
RETIREMENT SYSTEM
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
5
<PAGE>
CASTLEROCK INVESTMENTS LTD.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
CHEMICAL EQUITY ASSOCIATES
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
CHEMICAL INVESTMENTS, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
----------------------------------
RICHARD R. CROWELL
----------------------------------
ROBERT L. CUMMINGS III
THE TRUSTEES OF DARTMOUTH COLLEGE
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
6
<PAGE>
DEAN WITTER AS CUSTODIAN FOR AURORA
CAPITAL PARTNERS VIP PLUS 401(K) PLAN
FBO RICHARD R. CROWELL
By:
-------------------------------
Richard R. Crowell, Trustee
By:
-------------------------------
Richard K. Roeder, Trustee
DEAN WITTER AS CUSTODIAN FOR AURORA
CAPITAL PARTNERS VIP PLUS 401(K) PLAN
FBO MARK C. HARDY
By:
-------------------------------
Richard R. Crowell, Trustee
By:
-------------------------------
Richard K. Roeder, Trustee
DEAN WITTER AS CUSTODIAN FOR AURORA
CAPITAL PARTNERS VIP PLUS 401(K) PLAN
FBO KURT B. LARSEN
By:
-------------------------------
Richard R. Crowell, Trustee
By:
-------------------------------
Richard K. Roeder, Trustee
7
<PAGE>
DEAN WITTER AS CUSTODIAN FOR AURORA
CAPITAL PARTNERS VIP PLUS 401(K) PLAN
FBO GERALD L. PARSKY
By:
-------------------------------
Richard R. Crowell, Trustee
By:
-------------------------------
Richard K. Roeder, Trustee
DEAN WITTER AS CUSTODIAN FOR AURORA
CAPITAL PARTNERS VIP PLUS 401(K) PLAN
FBO W. MONTAGUE YORT
By:
-------------------------------
Richard R. Crowell, Trustee
By:
-------------------------------
Richard K. Roeder, Trustee
DELTA MASTER TRUST
By:
-------------------------------
Trustee
----------------------------------
JEFFREY S. DEUTSCHMAN
----------------------------------
FREDERICK J. ELSEA, III
8
<PAGE>
GENERAL ELECTRIC PENSION TRUST
By:
-------------------------------
Name:
-----------------------------
Title: Trustee
HARBOURTON REASSURANCE, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
----------------------------------
MARK C. HARDY
HELLER FINANCIAL, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
----------------------------------
AMBASSADOR JAMES D. HODGSON
----------------------------------
CLEON T. KNAPP
9
<PAGE>
L-A&A GIFT TRUST FBO
ELLIOT LEEDOM ACKERMAN
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
L-A&A GIFT TRUST FBO
NATHANEL LEEDOM ACKERMAN
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
----------------------------------
KURT B. LARSEN
LODWRICK AND CAROLE COOK AS
TRUSTEES OF THE COOK FAMILY
TRUST DATED SEPTEMBER 16, 1991
By:
-------------------------------
Trustee
----------------------------------
JOHN T. MAPES
10
<PAGE>
NHL HOLDINGS LTD.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
OGAC LIMITED
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
ORYX EQUITY PARTNERS FUND I LTD.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
----------------------------------
GERALD L. PARSKY
G.M. ROEDER AND R.K. ROEDER, JTWROS
By:
-------------------------------
Gloria M. Roeder
By:
-------------------------------
Richard K. Roeder
11
<PAGE>
SOMERVILLE S TRUST
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
SPRINGBROOK, G.P.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
----------------------------------
PATRICK J. STEINER
SUMITOMO BANK OF CA TTEE FOR GIBSON, DUNN
& CRUTCHER RETIREMENT PLAN FBO
H. RICHARD DALLAS
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
SUMITOMO BANK OF CA TTEE FOR
GIBSON, DUNN & CRUTCHER RETIREMENT
PLAN FBO BRUCE D. MEYER
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
12
<PAGE>
UNIVERSITY OF SOUTHERN CALIFORNIA
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
W. S. INVESTMENTS L.P.
By:
-------------------------------
Name:
-----------------------------
General Partner
----------------------------------
JEROME C. WEINTRAUB
----------------------------------
W. MONTAGUE YORT
13
<PAGE>
THE CLASS C STOCKHOLDERS:
AURORA EQUITY PARTNERS L.P.
By: Aurora Capital Partners L.P.,
its general partner
By: Aurora Advisors, Inc.,
its general partner
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
AURORA OVERSEAS EQUITY
PARTNERS I, L.P.
By: Aurora Overseas Capital Partners, L.P.,
its general partner
By: Aurora Overseas Advisors Ltd.,
its general partner
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
14
<PAGE>
ANNEX A
EXHIBIT D
REGISTRATION RIGHTS
1. "PIGGY-BACK" REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. Except in the case of a
Qualified IPO that is consummated on or before March 31, 1997, if the Company
at any time proposes to effect a Qualified IPO or, following a Qualified IPO,
proposes to register any of its equity securities under the Act (other than
by a registration on Form S-4 or S-8 or any successor or similar forms),
whether or not for sale for its own account, in a manner which would permit
registration of Registrable Securities for sale to the public under the Act,
then the Company will each such time give prompt written notice (which shall
be at least 30 days prior to filing) to all Eligible Holders of Registrable
Securities of its intention to do so and of such Eligible Holders' rights
under this Paragraph 1. Upon the written request of any such Eligible Holder
made within 20 days after the receipt of any such notice (which request shall
specify the Registrable Securities intended to be disposed of by such
Eligible Holder and the intended method of disposition thereof), the Company
will use its best efforts to effect the registration under the Act of all
Registrable Securities which the Company has been so requested to register by
the holders thereof, to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered, by inclusion of such Registrable Securities
in the registration statement which covers the securities which the Company
proposes to register or in a separate registration statement concurrently
filed and on terms substantially the same as those being offered to the
Company; PROVIDED that if, at any time after giving written notice of its
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to register or to delay
registration of such securities, the Company may, at its election, give
written notice of such determination to each Eligible Holder of Registrable
Securities and, thereupon:
(i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay
the Registration Expenses in connection therewith), and
(ii) in the case of a delay in registering, shall be permitted
to delay registering any Registrable Securities for the same period
as the delay in registering such other securities.
(b) PRIORITY IN "PIGGY-BACK" REGISTRATIONS. If a registration
pursuant to this Paragraph 1 involves an underwritten offering and the managing
underwriter advises the Company in writing that, in its opinion, the number of
securities
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-1
<PAGE>
requested to be included in such registration exceeds the number which can be
sold in such offering without adversely affecting the offering, the Company will
include in such registration to the extent of the number which the Company is so
advised can be sold in such offering without adversely affecting the offering,
securities determined as follows:
(i) first, the securities proposed by the Company to be sold
for its own account,
(ii) second, any Registrable Securities requested to be included
in such registration PRO RATA among the holders thereof requesting such
registration on the basis of the number of shares of such securities
requested to be included by such holders, and
(iii) third, any other securities of the Company proposed to be
included in such registration statement in accordance with the priorities,
if any, then existing among the holders of such securities.
2. DEMAND REGISTRATION RIGHT OF CERTAIN ELIGIBLE HOLDERS.
(a) RIGHT TO REQUIRE REGISTRATION. Subject to the provisions of this
Paragraph 2, if, at any time after the first anniversary of the consummation
of a Qualified IPO, any Eligible Holder (other than the Aurora Entities) is
the record owner of 10% or more of the outstanding Common Stock immediately
after a distribution of shares by either or both of the Aurora Entities to
their limited partners (such Eligible Holder being a "Demand Holder"), such
Demand Holder shall have the right to require the Company to file a registration
statement under the Securities Act for a public offering of all or any portion
of the Registrable Securities held by such Holder when such right is exercised
(the Registrable Securities to be subject to such registration being the "Demand
Registration Securities"), PROVIDED that any demand for registration under this
Paragraph 2 (a "Registration Demand") shall not be otherwise deemed to be
effective unless such Registration Demand is with respect to Registrable
Securities constituting at least five percent of the outstanding shares of the
class of Registrable Securities. The demand registration rights granted to the
Demand Holders in this Paragraph 2 are subject to the following limitations:
(i) each Demand Holder may make a Registration Demand under this
Paragraph 2 only one time, PROVIDED, HOWEVER, that if, after completion of
the resulting registered offering, such Demand Holder continues to hold
10% or more of the outstanding Common Stock or holds 10% or more of the
outstanding Common Stock as the result of a subsequent distribution of
shares by either or both of the Aurora Entities to their limited
partners, such Demand
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-2
<PAGE>
Holder shall have the right to make one additional Registration Demand;
(ii) the Company shall not be obligated to cause any registration
statement filed under this Paragraph 2 to be declared effective less than
six months after the effective date of the most recent registration
statement filed by the Company on its own behalf;
(iii) the managing underwriter of any such offering shall be a
nationally recognized investment banking firm selected by the Company and
approved by the Demand Holder making the Registration Demand (which
approval shall not be unreasonably withheld);
(iv) notwithstanding the giving of a Registration Demand by a
Demand Holder, the Company may elect to convert the required registration
into a registration of shares for sale by the Company pursuant to
Paragraph 1 hereof by providing notice to the Eligible Holders in
accordance with Paragraph 1, and in such event the provisions of
Paragraph 1 shall apply to such registration rather than the provisions
of this Paragraph 2 and such registration shall not count as the exercise
of such Demand Holder's registration right under this Paragraph 2;
(v) during any two-year period, the Company may make a one-time
election to postpone the filing or the effectiveness of a registration
statement in response to a Registration Demand for up to six months if
the Board determines, in its good faith judgment, that (x) such
registration would reasonably be expected to have an adverse effect on,
interfere with or delay any proposal or plan by the Company or any of its
subsidiaries to engage in any acquisition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender offer
or similar transaction, (y) the filing of a registration statement or a
sale of Registrable Securities pursuant thereto would require disclosure
of material information that the Company has a bona fide business purpose
for preserving as confidential, or (z) the Company is unable to comply
with the registration requirements of the Commission; PROVIDED, that, in
such event, the Demand Holder making the Registration Demand will be
entitled to withdraw such demand and, if such demand is withdrawn, such
demand will not count as a Registration Demand hereunder and the Company
will pay all Registration Expenses in connection with such withdrawn
demand; and
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-3
<PAGE>
(vi) any Registration Demand under this Paragraph 2 shall be for
for a firm commitment underwritten offering, with respect to which the
Company shall be required to maintain an effective registration statement
for a maximum of 30 days.
(b) NOTICE OF REGISTRATION DEMAND; PARTICIPATION RIGHTS. Any Demand
Holder desiring to make a Registration Demand shall do so by providing
written notice to the Company (which notice shall state the number of shares
of Registrable Securities the Demand Holder desires the Company to register),
and the Company promptly shall provide written notice of such Registration
Demand to all of the other Eligible Holders and all of the Eligible Holders
then will have the opportunity to include in the offering shares of
Registrable Securities then owned by such Eligible Holders, but in each case
only to the extent permitted by subdivision (c) of this Paragraph 2. In
addition, subject to subdivision (c) of this Paragraph 2, the Company may
elect to include in any registration statement and offering pursuant to this
Paragraph 2 newly issued shares of Registrable Securities. Solely for
purposes of Paragraphs 3 through 9 below, any securities registered pursuant
to this Paragraph 2 shall be deemed to be Registrable Securities.
(c) PRIORITY. Notwithstanding the foregoing, if the managing
underwriter of a registered offering being made in response to a Registration
Demand advises the Company in writing that the number of shares of
Registrable Securities desired to be offered by the Company or Eligible
Holders other than the Demand Holder who made the Registration Demand,
together with the Demand Registration Securities of such Demand Holder,
exceeds the maximum number of such shares which the managing underwriter
considers, in good faith, to be appropriate based on market conditions and
other relevant factors (including, without limitation, pricing) (the "Maximum
Number"), then the securities proposed to be included by Eligible Holders
other than such Demand Holder (the "Other Sellers") shall be excluded from
such registration before any such securities of such Demand Holder or the
Company shall be excluded. If, and to the extent that, after the exclusion
of the securities proposed to be included by the Other Sellers, the number of
securities proposed to be included by such Demand Holder and the Company
exceeds the Maximum Number, such securities to be included on behalf of the
Company shall be excluded to the extent necessary to avoid exceeding the
Maximum Number. Each of the Demand Holder, the Other Sellers and the Company
(in the event that any securities are to be offered by the Company) may
withdraw from any demand registration pursuant to this Paragraph 2 by giving
written notice to the Company prior to the filing date of such registration
statement and, in the event of a withdrawal by the Demand Holder whose
Registration Demand gave rise to the registration, such withdrawn
Registration Demand shall not be deemed to be a Registration Demand counting
against the permissible number of Registration Demands set forth in Paragraph
2(a)(i) if the Demand Holder pays or promptly reimburses the Company for all
Registration Expenses incurred by the Company in connection with such
withdrawn Registration Demand.
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-4
<PAGE>
3. REGISTRATION PROCEDURES. If and whenever the Company is required
to use its best efforts to effect the registration of any Registrable
Securities under the Act as provided in Paragraph 1 or 2, the Company will as
expeditiously as possible (and, in any event, within 90 days), subject to the
terms and conditions of Paragraph 1 or 2:
(a) prepare and file with the Commission the requisite registration
statement to effect such registration and use its best efforts to cause
such registration statement to become effective; PROVIDED, HOWEVER, that
the Company may discontinue any registration of its securities which are
not Registrable Securities at any time prior to the effective date of
the registration statement relating thereto;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Act with
respect to the disposition of all securities covered by such registration
statement until the earlier of such time as all of such securities have
been disposed of in accordance with the intended methods of disposition
by the seller or sellers thereof set forth in such registration statement
or the expiration of 90 days after such registration statement becomes
effective; PROVIDED that if less than all the Registrable Securities are
withdrawn from registration after the expiration of such period, the shares
so withdrawn shall be allocated PRO RATA among the holders thereof on the
basis of the respective numbers of Registrable Securities held by them
included in such registration;
(c) furnish to each seller of Registrable Securities covered by such
registration statement such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus contained
in such registration statement (including each preliminary prospectus and
any summary prospectus) and any other prospectus filed under Rule 424
under the Act, in conformity with the requirements of the Act, and such
other documents, as such seller may reasonably request;
(d) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such securities or blue sky laws of such jurisdictions as each
seller thereof shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement
remains in effect, and take any other action which may be reasonably
necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the securities owned by such seller,
except that the Company shall not for any such purpose be required to:
(i) qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of
this subdivision (d) be obligated to be so qualified,
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-5
<PAGE>
(ii) subject itself to taxation in any such jurisdiction, or
(iii) consent to general service of process in any such
jurisdiction;
(e) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(f) furnish to each seller of Registrable Securities a signed
counterpart, addressed to such seller (and the underwriters, if any), of:
(i) an opinion of counsel for the Company, dated the effective
date of such registration statement (or, if such registration includes
an underwritten public offering, an opinion of counsel for the Company
dated the date of the closing under the underwriting agreement),
reasonably satisfactory in form and substance to such seller, and
(ii) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, a "comfort" letter dated the date of the
closing under the underwriting agreement), signed by the independent
public accountants who have certified the Company's financial
statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of
such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the underwriters
in underwritten public offerings of securities and, in the case of the
accountants' letter, such other financial matters as such seller or such
holder (or the underwriters, if any) may reasonably request;
(g) immediately notify each holder of Registrable Securities covered
by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Act, of the happening of
any event or the existence of any condition as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under
which they were made, or if in the opinion of counsel for the Company it
is necessary to supplement or amend such prospectus to comply with law
and, at the request of any such holder promptly prepare and furnish to
such holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-6
<PAGE>
be necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made or such prospectus,
as supplemented or amended, shall comply with law;
(h) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first full calendar month after the effective
date of such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Act and the rules and
regulations of the Commission thereunder, and not file any amendment or
supplement to such registration statement or prospectus to which any such
seller of Registrable Securities covered by such registration statement
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the requirements
of the Act or of the rules or regulations thereunder, having been furnished
with a copy thereof at least five business days prior to the filing
thereof;
(i) provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement;
(j) use its best efforts to list all Registrable Securities covered
by such registration statement on any securities exchange on which any
of the Registrable Securities are then listed; and
(k) pay all Registration Expenses relating to any such registration.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish the Company with such
information and undertakings as it may reasonably request regarding such
seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities as follows:
(A) that upon receipt of any notice from the Company of the
happening of any event of the kind described in subdivision (g) of
this Paragraph 3, such holder will forthwith discontinue such
holder's disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until
such holder's receipt of the copies of the supplemented or
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-7
<PAGE>
amended prospectus contemplated by subdivision (g) of this
Paragraph 3 and, if so directed by the Company, will deliver to
the Company (at the Company's expense) all copies, other than
permanent file copies, then in such holder's possession of the
prospectus relating to such Registrable Securities current at the
time of receipt of such notice, and
(B) that it will immediately notify the Company, at any time
when a prospectus relating to the registration of such Registrable
Securities is required to be delivered under the Act, of the
happening of any event as a result of which information previously
furnished by such holder to the Company in writing for inclusion in
such prospectus contains an untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances under which they were made.
In the event the Company or any such holder shall give any such notice,
the period referred to in subdivision (b) of this Paragraph 3 shall be
extended by a number of days equal to the number of days during the period
from and including the giving of notice pursuant to subdivision (g) of this
Paragraph 3 to and including the date when each seller of any Registrable
Securities covered by such registration statement shall have received the
copies of the supplemented or amended prospectus contemplated by subdivision
(g) of this Paragraph 3.
4. UNDERWRITTEN OFFERINGS.
(a) UNDERWRITING AGREEMENT. If the Company at any time proposes
to register any of its securities under the Act as contemplated by
Paragraph 1 and such securities are to be distributed by or through one
or more underwriters or if the Company at any time is required to
register any of its securities under the Act as contemplated by
Paragraph 2, the Company will, subject to the provisions of subdivision
(b) of Paragraph 1 or subdivision (c) of Paragraph 2, use its best
efforts to arrange for such underwriters to include the Registrable
Securities to be offered and sold by each holder among the securities to
be distributed by such underwriters, and each holder of Registrable
Securities agrees, by acquisition of such Registrable Securities, that
all Registrable Securities of such holder to be included in such
registration shall be distributed and sold through such underwriters.
The holders of Registrable Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between the
Company and such underwriters and may, at their option, require that any
or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders
of Registrable Securities and that any or all of the conditions
precedent to the obligations of such
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-8
<PAGE>
underwriters shall also be made to and for the benefit of such holders
of Registrable Securities. No holder of Registrable Securities shall be
required to make any representations or warranties to or agreements with
the Company or the underwriters other than representations, warranties
or agreements regarding such holder and such holder's intended method of
distribution and any other representation required by law.
(b) SELECTION OF UNDERWRITERS. The selection of the underwriter
or underwriters for the public offering to be made pursuant to a
registration statement filed under Paragraph 1 shall be made by the
Company, in its sole discretion, from amongst underwriting firms of
national reputation. Notwithstanding anything else in this Exhibit D to
the contrary, if General Electric Pension Trust ("GEPT") is eligible to
participate in an underwriting pursuant to the terms hereof and the
General Electric Company is directly or indirectly the beneficial owner
of five percent (5%) or more of the outstanding equity interests of an
underwriter or underwriters acting in such underwriting, GEPT shall have
the absolute right to disapprove such underwriter or underwriters so
owned by General Electric Company.
(c) HOLDBACK AGREEMENTS.
(i) Each holder of Registrable Securities agrees by
acquisition of such Registrable Securities, if so required by the
managing underwriter, not to effect any public sale or distribution
of such securities or sales of such securities pursuant to Rule 144
under the Act or otherwise, during the seven days prior to and the
90 days after any firm commitment underwritten registration
pursuant to Paragraph 1 or 2 or any Qualified IPO that is
consummated on or before March 31, 1997 has become effective or, if
the managing underwriter advises the Company in writing that, in
its opinion, no such public sale or distribution should be effected
for a specific period longer than 90 days after such underwritten
registration in order to complete the sale and distribution of
securities included in such registration and the Company gives
notice to such holder of Registrable Securities of such advice,
during a reasonable longer period of up to 270 days after such
underwritten registration, except as part of such underwritten
registration, whether or not such holder participates in such
registration.
(ii) The Company agrees:
(A) not to effect any public sale or distribution of its
equity securities or securities convertible into or
exchangeable or exercisable for any of such securities during
the seven days prior to and the 90 days after any firm
commitment underwritten registration pursuant to Paragraph 1
or 2 has become effective,
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-9
<PAGE>
except as part of such underwritten registration and except
pursuant to registrations on Form S-4 or S-8 or any successor
or similar forms thereto, and
(B) to use its best efforts to cause each holder of its
equity securities or any securities convertible into or
exchangeable or exercisable for any of such securities, in
each case purchased from the Company at any time after the
date hereof (other than in a public offering) to agree not to
effect any such public sale or distribution of such
securities, during such period or, in either case, if the
managing underwriter advises the Company in writing that in
its opinion, no such public sale or distribution should be
effected for a specified period longer than 90 days after such
underwritten registration in order to complete the sale and
distribution of securities included in such registration,
during a reasonably longer period after such underwritten
registration, except as part of such underwritten registration.
5. PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement under the Act, the
Company will give the holders of Registrable Securities registered under such
registration statement, their underwriters, if any, and their respective
counsel and accountants, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with
the Commission, and each amendment thereof or supplement thereto, and will
give each of them such access to its books and records and such opportunities
to discuss the business, finances and accounts of the Company and its
subsidiaries with its officers, directors and the independent public
accountants who have certified its financial statements as shall be
necessary, in the opinion of such holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
6. CERTAIN RIGHTS OF HOLDERS. The Company will not file any
registration statement under the Act which refers to any holder of
Registrable Securities by name or otherwise as the holder of any securities
of the Company, unless it shall first have given such holder the right to
require:
(a) the insertion therein of language, in form and substance
satisfactory to such holder, to the effect that, in the opinion of such
holder, the holding by such holder of such securities does not make such
holder a "controlling person" of the Company within the meaning of the
Act and is not to be construed as a recommendation by such holder of the
investment quality of the Company's securities covered thereby and that
such holding does not imply that such holder will assist in meeting any
future financial requirements of the Company, or
(b) in the event that such reference to such holder by name or
otherwise is not required by the Act or any rules and regulations
promulgated thereunder, the deletion of the reference to such holder.
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-10
<PAGE>
7. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any
registration of any securities of the Company under the Act, the Company
will, and hereby does, indemnify and hold harmless the seller of any
Registrable Securities covered by any registration statement filed
pursuant to Paragraph 1 or 2, its directors, officers, partners,
employees, agents and investment advisors, each other Person who
participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such seller or
any such underwriter within the meaning of either Section 15 of the Act
or Section 20 of the Exchange Act, from and against any losses, claims,
damages or liabilities, joint or several (or actions or proceedings,
whether commenced or threatened, in respect thereof) (collectively,
"Claims"), to which such seller or any such director or officer or
employee or agent or investment advisor or underwriter or controlling
person may become subject under either Section 15 of the Act or Section
20 of the Exchange Act or otherwise, insofar as such Claims arise out of
or are based upon any untrue statement or alleged untrue statement of
any material fact contained in any registration statement under which
such securities were registered under the Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or
any amendment or supplement thereto (if used during the period the
Company is required to keep the registration statement current)
(collectively, "Registration Documents"), or any omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of
the circumstances in which made, or any violation by the Company of the
Act or any state securities law, or any rule or regulation promulgated
under the Act or any state securities law, or any other law applicable
to the Company relating to any such registration or qualification, and
the Company will reimburse such seller and each such director, officer,
employee, agent, investment advisor, underwriter and controlling person
for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such Claim; PROVIDED that
the Company shall not be liable in any such case to the extent that any
such Claim or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in any
such Registration Document in reliance upon and in conformity with
written information furnished to the Company through an instrument duly
executed by such seller stating that it is for use in the preparation
thereof; PROVIDED FURTHER that the Company shall not be liable to any
Person who participates as an underwriter in the offering or sale of
Registrable Securities or any other Person, if any, who controls such
underwriter within the meaning of either Section 15 of the Act or
Section 20 of the Exchange Act in any such case to the extent that any
such Claim, or expense arises out of such Person's failure to send or
give a copy of the final prospectus to the Person claiming an untrue
statement or alleged untrue statement or omission or alleged omission at
or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-11
<PAGE>
full force and effect regardless of any investigation made by or on
behalf of such seller or any such director, officer, employee, agent,
investment advisor, partner, underwriter or controlling person and shall
survive the transfer of such securities by such seller.
(b) INDEMNIFICATION BY THE SELLERS. The Company may require, as a
condition to including any Registrable Securities in any registration
statement filed pursuant to Paragraph 1 or 2, that the Company shall
have received an undertaking satisfactory to it from the prospective
seller of such securities, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in subdivision (a) of this
Paragraph 7) the Company, each director of the Company, each officer of
the Company and each other person, if any, who controls the Company
within the meaning of either Section 15 of the Act or Section 20 of the
Exchange Act, with respect to any statement or alleged statement or
omission or alleged omission from such Registration Document, if such
statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to
the Company through an instrument duly executed by such seller
specifically stating that it is for use in the preparation of such
Registration Document. Notwithstanding the foregoing, in no event shall
any selling stockholder or any director, officer, employee, agent,
investment advisor or controlling person thereof be liable to indemnify
the Company pursuant to this subdivision (b) of this Paragraph 7 hereof
in an amount in excess of the amount of the net proceeds of the
Registrable Securities sold by him, her or it in any such offering.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company of any such director,
officer or controlling person and shall survive the transfer of such
securities by such seller.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party of notice of the commencement of any action or
proceeding involving a Claim referred to in the preceding subdivisions
of this Paragraph 7, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action; PROVIDED that the
failure of any indemnified party to give notice as provided herein shall
not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Paragraph 7, except to the extent that
the indemnifying party is actually prejudiced by such failure to give
notice. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict
of interest between such indemnified and indemnifying parties may exist
in respect of such claim, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified to the extent that it may wish,
with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party
shall not be liable to such indemnified party
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-12
<PAGE>
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall consent to entry of any
judgment or enter into any settlement of any pending or threatened
proceeding in respect of which an indemnified party is or could have
been a party and indemnity could have been sought under subdivision (a)
of this Paragraph 7 without the consent of the indemnified party which
does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.
(d) OTHER INDEMNIFICATION. Indemnification similar to that
specified in the preceding subdivisions of this Paragraph 7 (with
appropriate modifications) shall be given by the Company and each seller
of Registrable Securities with respect to any required registration or
other qualification of securities under any Federal or state law or
regulation of any governmental authority, other than the Act. If the
indemnification provided for in subdivision (a), (b) or (c) of this
Paragraph 7 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to
therein, then each indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying party or
parties on the one hand and the indemnified party or parties on the
other hand from the offering of the securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the
indemnified party or parties on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations;
PROVIDED, HOWEVER, that in no event shall any contribution by the
selling stockholder or any director, officer, employee, agent,
investment advisor or controlling person thereof pursuant to this
subdivision (d) of this Paragraph 7 exceed the amount of the net
proceeds of the Registrable Securities sold by him, her or it in any
such offering.
(e) INDEMNIFICATION PAYMENTS. The indemnification required by
this Paragraph 7 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when
bills are received or expense, loss, damage or liability is incurred.
8. ADJUSTMENT AFFECTING REGISTRABLE SECURITIES. The Company will not
effect or permit to occur any combination or subdivision of shares which
would adversely affect the ability of the holders of Registrable Securities
to effect the registration of such securities in the manner contemplated by
these registration rights provisions.
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-13
<PAGE>
9. COVENANTS RELATING TO RULE 144. At all times after the effective
date of the registration statement under the Act of the initial underwritten
public offering of Common Stock, and until such time as all of the
Registrable Securities are deregistered, the Company will file reports in
compliance with the Exchange Act and will, at its expense, forthwith upon the
request of any holder of Restricted Securities, deliver to such holder a
certificate, signed by the Company's principal financial officer, stating:
(a) the Company's name, address and telephone number (including
area code),
(b) the Company's Internal Revenue Service identification number,
(c) the Company's Commission file number,
(d) the number of shares of Common Stock of the Company
outstanding as shown by the most recent report or statement published by
the Company, and
(e) whether the Company has filed the reports required to be filed
under the Exchange Act for a period of at least 90 days prior to the
date of such certificate and in addition has filed the most recent
annual report required to be filed thereunder.
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-14
<PAGE>
AMENDMENT NO. 4 TO
STOCKHOLDERS AGREEMENT
This Amendment No. 4 to Stockholders Agreement (this "Amendment") is
made and entered into as of December 16, 1996 by and between Aftermarket
Technology Holdings Corp., a Delaware corporation (the "Company"), Aurora
Equity Partners L.P., a Delaware limited partnership ("AEP"), Aurora Overseas
Equity Partners I, L.P., a Cayman Islands exempted limited partnership
("AOEP"), and each of the stockholders of the Company who are signatories
hereto (the "Stockholders").
WHEREAS, Section 10.2 of that certain Stockholders Agreement dated as of
August 2, 1994 among the Company and certain of its stockholders,
optionholders and warrantholders, as amended (the "Stockholders Agreement"),
permits the amendment thereof by a written agreement signed by (a) the
Company, (b) AEP and AOEP and (c) the holders of a majority in voting
interest of the outstanding shares of Common Stock and Preferred Stock of the
Company;
WHEREAS, the Stockholders hold a majority in voting interest of the
outstanding shares of Common Stock and Preferred Stock of the Company; and
WHEREAS, the parties hereto desire to amend the Stockholders Agreement
to make certain changes to the registration rights provided in Amendment No.
3 to the Stockholders Agreement to stockholders holding more than 10% of the
outstanding common stock under certain circumstances.
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto hereby agree as follows:
1. AMENDMENT. Exhibit D to the Stockholders Agreement is hereby
deleted in its entirety and the attached Annex A is hereby substituted in its
place.
2. GOVERNING LAW. This Amendment shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware without
reference to choice or conflicts of law principles thereof.
3. EFFECT OF AMENDMENT. Except as amended by this Amendment, the
Stockholders Agreement shall remain unchanged and shall remain in full force
and effect.
<PAGE>
IN WITNESS WHEREOF, the Company, AEP, AOEP and each of the Stockholders
have duly executed this Amendment as of the date first above written.
AFTERMARKET TECHNOLOGY HOLDINGS CORP.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
THE CLASS A STOCKHOLDERS:
--------------------------------------
WILLIAM A. SMITH
JAMES R. WEHR REVOCABLE TRUST
--------------------------------------
James R. Wehr, Grantor/Trustee
--------------------------------------
KENNETH T. HESTER
2
<PAGE>
THE CLASS B STOCKHOLDERS:
ALLENWOOD VENTURES, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
-------------------------------------
JOHN E. ANDERSON
ROBERT ANDERSON VARIABLE TRUST
By:
----------------------------------
Robert Anderson, Trustee
THE ANDREW W. MELLON FOUNDATION
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
AURORA CAPITAL PARTNERS L.P.
By: Aurora Advisors, Inc.,
its general partner
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
3
<PAGE>
AURORA OVERSEAS CAPITAL PARTNERS, L.P.
By: Aurora Overseas Advisors Ltd.,
its general partner
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
BANCBOSTON INVESTMENTS, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
BANKAMERICA CAPITAL CORPORATION
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
CALIFORNIA PUBLIC EMPLOYEES'
RETIREMENT SYSTEM
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
4
<PAGE>
CASTLEROCK INVESTMENTS LTD.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
CHEMICAL EQUITY ASSOCIATES
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
CHEMICAL INVESTMENTS, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
--------------------------------------
RICHARD R. CROWELL
--------------------------------------
ROBERT L. CUMMINGS III
THE TRUSTEES OF DARTMOUTH COLLEGE
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
5
<PAGE>
DEAN WITTER AS CUSTODIAN FOR AURORA
CAPITAL PARTNERS VIP PLUS 401(K) PLAN
FBO RICHARD R. CROWELL
By:
-----------------------------------
Richard R. Crowell, Trustee
By:
-----------------------------------
Richard K. Roeder, Trustee
DEAN WITTER AS CUSTODIAN FOR AURORA
CAPITAL PARTNERS VIP PLUS 401(K) PLAN
FBO MARK C. HARDY
By:
-----------------------------------
Richard R. Crowell, Trustee
By:
-----------------------------------
Richard K. Roeder, Trustee
DEAN WITTER AS CUSTODIAN FOR AURORA
CAPITAL PARTNERS VIP PLUS 401(K) PLAN
FBO KURT B. LARSEN
By:
-----------------------------------
Richard R. Crowell, Trustee
By:
-----------------------------------
Richard K. Roeder, Trustee
6
<PAGE>
DEAN WITTER AS CUSTODIAN FOR AURORA
CAPITAL PARTNERS VIP PLUS 401(K) PLAN
FBO GERALD L. PARSKY
By:
-----------------------------------
Richard R. Crowell, Trustee
By:
-----------------------------------
Richard K. Roeder, Trustee
DEAN WITTER AS CUSTODIAN FOR AURORA
CAPITAL PARTNERS VIP PLUS 401(K) PLAN
FBO W. MONTAGUE YORT
By:
-----------------------------------
Richard R. Crowell, Trustee
By:
-----------------------------------
Richard K. Roeder, Trustee
DELTA MASTER TRUST
By:
-----------------------------------
Trustee
--------------------------------------
JEFFREY S. DEUTSCHMAN
--------------------------------------
FREDERICK J. ELSEA, III
7
<PAGE>
GENERAL ELECTRIC PENSION TRUST
By:
-----------------------------------
Name:
---------------------------------
Title: Trustee
HARBOURTON REASSURANCE, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
--------------------------------------
MARK C. HARDY
HELLER FINANCIAL, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
--------------------------------------
AMBASSADOR JAMES D. HODGSON
--------------------------------------
CLEON T. KNAPP
8
<PAGE>
L-A&A GIFT TRUST FBO
ELLIOT LEEDOM ACKERMAN
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
L-A&A GIFT TRUST FBO
NATHANEL LEEDOM ACKERMAN
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
--------------------------------------
KURT B. LARSEN
LODWRICK AND CAROLE COOK AS
TRUSTEES OF THE COOK FAMILY
TRUST DATED SEPTEMBER 16, 1991
By:
-----------------------------------
Trustee
--------------------------------------
JOHN T. MAPES
9
<PAGE>
NHL HOLDINGS LTD.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
OGAC LIMITED
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
ORYX EQUITY PARTNERS FUND I LTD.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
--------------------------------------
GERALD L. PARSKY
G.M. ROEDER AND R.K. ROEDER, JTWROS
By:
-----------------------------------
Gloria M. Roeder
By:
-----------------------------------
Richard K. Roeder
10
<PAGE>
SOMERVILLE S TRUST
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
SPRINGBROOK, G.P.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
--------------------------------------
PATRICK J. STEINER
SUMITOMO BANK OF CA TTEE FOR GIBSON,
DUNN & CRUTCHER RETIREMENT PLAN FBO
H. RICHARD DALLAS
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
SUMITOMO BANK OF CA TTEE FOR
GIBSON, DUNN & CRUTCHER RETIREMENT
PLAN FBO BRUCE D. MEYER
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
11
<PAGE>
UNIVERSITY OF SOUTHERN CALIFORNIA
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
W. S. INVESTMENTS L.P.
By:
-----------------------------------
Name:
---------------------------------
General Partner
--------------------------------------
JEROME C. WEINTRAUB
--------------------------------------
W. MONTAGUE YORT
12
<PAGE>
THE CLASS C STOCKHOLDERS:
AURORA EQUITY PARTNERS L.P.
By: Aurora Capital Partners L.P.,
its general partner
By: Aurora Advisors, Inc.,
its general partner
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
AURORA OVERSEAS EQUITY PARTNERS I, L.P.
By: Aurora Overseas Capital
Partners, L.P.,
its general partner
By: Aurora Overseas Advisors Ltd.,
its general partner
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
13
<PAGE>
ANNEX A
EXHIBIT D
REGISTRATION RIGHTS
1. "PIGGY-BACK" REGISTRATION.
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES. Except in the case of
a Qualified IPO that is consummated on or before March 31, 1997, if the
Company at any time proposes to effect a Qualified IPO or, following a
Qualified IPO, proposes to register any of its equity securities under the
Act (other than by a registration on Form S-4 or S-8 or any successor or
similar forms), whether or not for sale for its own account, in a manner
which would permit registration of Registrable Securities for sale to the
public under the Act, then the Company will each such time give prompt
written notice (which shall be at least 30 days prior to filing) to all
Eligible Holders of Registrable Securities of its intention to do so and of
such Eligible Holders' rights under this Paragraph 1. Upon the written
request of any such Eligible Holder made within 20 days after the receipt of
any such notice (which request shall specify the Registrable Securities
intended to be disposed of by such Eligible Holder and the intended method of
disposition thereof), the Company will use its best efforts to effect the
registration under the Act of all Registrable Securities which the Company
has been so requested to register by the holders thereof, to the extent
requisite to permit the disposition (in accordance with the intended methods
thereof as aforesaid) of the Registrable Securities so to be registered, by
inclusion of such Registrable Securities in the registration statement which
covers the securities which the Company proposes to register or in a separate
registration statement concurrently filed and on terms substantially the same
as those being offered to the Company; PROVIDED that if, at any time after
giving written notice of its intention to register any securities and prior
to the effective date of the registration statement filed in connection with
such registration, the Company shall determine for any reason not to register
or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to each Eligible Holder
of Registrable Securities and, thereupon:
(i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay
the Registration Expenses in connection therewith), and
(ii) in the case of a delay in registering, shall be permitted to
delay registering any Registrable Securities for the same period as
the delay in registering such other securities.
(b) PRIORITY IN "PIGGY-BACK" REGISTRATIONS. If a registration
that is subject to this Paragraph 1 (except for a registration that is
subject to Paragraph 2, which shall be governed by Paragraph 2(d) rather than
this Paragraph 1(b)) involves
EXHIBIT D TO STOCKHOLDERS AGREEMENT
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an underwritten offering and the managing underwriter advises the Company in
writing that the number of securities requested to be included in such
registration pursuant to this Paragraph 1, together with all other securities
to be included in such registration, exceeds the Maximum Number (as defined
below), then such securities shall be included in the offering up to the
Maximum Number in the following priority:
(i) first, (x) in the case of a Company Registration (as
defined below), the securities proposed to be sold by the Company or
(y) in the case of an Investor Registration (as defined below), the
securities proposed to be sold by the Demand Investors (as defined
below) on such basis as shall be provided in the agreement(s) pursuant
to which the Demand Investors have the right to demand or include
securities in an Investor Registration;
(ii) second, in the case of an Investor Registration, the
securities, if any, proposed to be sold by the Company for its own
account;
(iii) third, any Registrable Securities requested to be included
in such registration pursuant to this Paragraph 1 PRO RATA among the
holders thereof requesting such registration on the basis of the
number of shares of such securities requested to be included by such
holders; and
(iv) fourth, any other securities of the Company proposed to be
included in such registration statement in accordance with the
priorities, if any, then existing among the holders of such
securities.
If at the time that the registration statement ceases to be effective in
accordance with Paragraph 3(b) there remain unsold securities under such
registration, such securities will be withdrawn and shall be allocated as
follows:
(1) first, among the holders of the securities referred to in
clause (iv) above in accordance with the priorities, if any, then
existing among the holders of such securities;
(2) second, on a pro rata basis among the holders of Registrable
Securities included in such registration pursuant to this Paragraph 1
on the basis of the respective numbers of Registrable Securities of
each such holder included in such registration
(3) third, in the case of an Investor Registration, to the
Company in the event that any securities were offered by the Company;
and
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(4) fourth, (x) in the case of a Company Registration, to the
Company or (y) in the case of an Investor Registration, among the
Demand Investors on such basis as shall be provided in the agreements
pursuant to which the Demand Investors have the right to demand or
include securities in an Investor Registration.
As used herein, the following terms have the following meanings:
"Company Registration" means a registration the primary purpose
of which is to sell securities for the account of the Company.
"Demand Investor" means any Person who is exercising (x) a
"demand" right to require the Company register securities held by such
Person or (y) a "piggyback" right to include securities in a
registration on a pro rata basis with the Person whose demand right
results in such registration.
"Investor Registration" means a registration the primary purpose
of which is to sell securities for the account of one or more Demand
Investors.
"Maximum Number" means, in the case of an underwritten offering,
the maximum number of securities that the managing underwriter
considers, in good faith, to be appropriate based on market conditions
and other relevant factors (including, without limitation, pricing).
2. REGISTRATION RIGHTS OF CERTAIN ELIGIBLE HOLDERS.
(a) RIGHT TO REQUIRE REGISTRATION. Subject to the provisions of
this Paragraph 2, if, at any time after the first anniversary of the
consummation of a Qualified IPO, any Eligible Holder (other than the Aurora
Entities) is the record owner of 10% or more of the outstanding Common Stock
immediately after a distribution of shares by either or both of the Aurora
Entities to their limited partners (such Eligible Holder, so long as it
continues to own 10% or more of the outstanding Common Stock, is hereinafter
referred to as a "10% Holder"), such 10% Holder shall have the right to
require the Company to file a registration statement under the Securities Act
for a public offering of all or any portion of the Registrable Securities
held by such Holder when such right is exercised (the "Paragraph 2 Securities"),
PROVIDED that any demand for registration under this Paragraph 2(a) (a "Demand
Registration Demand") shall not be otherwise deemed to be effective unless such
Demand Registration Demand is with respect to Paragraph 2 Securities
constituting at least five percent of the outstanding shares of
EXHIBIT D TO STOCKHOLDERS AGREEMENT
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the class of Registrable Securities. The demand registration rights granted
to the 10% Holders in this Paragraph 2(a) are subject to the following
limitations:
(i) each 10% Holder may make a Demand Registration Demand
under this Paragraph 2(a) only one time, PROVIDED, HOWEVER, that if,
after completion of the resulting registered offering, such Person
continues to be a 10% Holder or becomes a 10% Holder as the result of
a subsequent distribution of shares by either or both of the Aurora
Entities to their limited partners, such 10% Holder shall have the
right to make one additional Demand Registration Demand;
(ii) the Company shall not be obligated to cause any
registration statement filed under this Paragraph 2(a) to be declared
effective less than six months after the effective date of the most
recent Company Registration;
(iii) the managing underwriter of any such offering shall be a
nationally recognized investment banking firm selected by the Company
and approved by the 10% Holder making the Demand Registration Demand
(which approval shall not be unreasonably withheld);
(iv) notwithstanding the giving of a Demand Registration Demand
by a 10% Holder, the Company may elect to convert the required
registration into a Company Registration by providing notice to the
Eligible Holders in accordance with Paragraph 1, and in such event the
provisions of Paragraph 1 shall apply to such registration rather than
the provisions of this Paragraph 2 and such registration shall not
count as the exercise of such 10% Holder's registration right under
this Paragraph 2(a);
(v) during any two-year period, the Company may make a one-time
election to postpone the filing or the effectiveness of a registration
statement in response to a Demand Registration Demand for up to six
months if the Board determines, in its good faith judgment, that (x)
such registration would reasonably be expected to have an adverse
effect on, interfere with or delay any proposal or plan by the Company
or any of its subsidiaries to engage in any acquisition of assets
(other than in the ordinary course of business) or any merger,
consolidation, tender offer or similar transaction, (y) the filing of
a registration statement or a sale of Registrable Securities pursuant
thereto would require disclosure of material information that the
Company has a bona fide business purpose for preserving as
confidential, or (z) the Company is unable to comply with the
registration requirements of the Commission; PROVIDED,
EXHIBIT D TO STOCKHOLDERS AGREEMENT
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<PAGE>
that, in such event, the 10% Holder making the Demand Registration
Demand will be entitled to withdraw such demand and, if such demand is
withdrawn, such demand will not count as a Demand Registration Demand
hereunder and the Company will pay all Registration Expenses in
connection with such withdrawn demand; and
(vi) any Demand Registration Demand under this Paragraph 2(a)
shall be for a firm commitment underwritten offering, with respect to
which the Company shall be required to maintain an effective
registration statement until the earlier of (x) such time as all the
securities covered by such registration statement shall have been
disposed of or (y) the expiration of 45 days after the effectiveness
of such registration statement.
(b) PIGGY BACK REGISTRATION. If after the date of Amendment No. 4
to this Agreement the Company enters into a registration rights agreement
with any third party (the "Subsequent Investor") pursuant to which the
Subsequent Investor is granted the right to thereafter require the Company on
one or more occasions to file a registration statement under the Act for a
public offering of all or any of the Subsequent Investor's shares of the
capital stock of the Company, such registration rights agreement (the
"Subsequent Agreement") must provide that all 10% Holders shall have the
right to require the Company to include any or all of such Holders' Paragraph
2 Securities in any registration statement filed pursuant to the Subsequent
Agreement. The piggy back registration right granted to the 10% Holders in
this Section 2(b) is subject to the following limitations:
(i) a 10% Holder may not make a demand for inclusion of
Paragraph 2 Securities in a registration statement under a Subsequent
Agreement (a "Piggy Back Registration Demand") (x) before the first
anniversary of the consummation of a Qualified IPO or (y) after such
Holder's exercise of both its rights under Paragraph 2(a);
(ii) the rights of the Company and limitations on the Company's
obligations provided for in the Subsequent Agreement shall apply to
the 10% Holders to the same extent that they apply to the Subsequent
Investor; and
(iii) the method of distribution shall be selected by the
Subsequent Investor.
As used herein, the term "Registration Demand" means either the Demand
Registration Demand or a Piggyback Registration Demand, as the case may be.
EXHIBIT D TO STOCKHOLDERS AGREEMENT
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<PAGE>
(c) NOTICE OF REGISTRATION DEMAND; PARTICIPATION RIGHTS. Any 10%
Holder desiring to make a Registration Demand shall do so by providing
written notice to the Company (which notice shall state the number of shares
of Paragraph 2 Securities the 10% Holder desires the Company to register),
and the Company promptly shall provide written notice of such Registration
Demand to (i) the Subsequent Investor (in the case of a Piggy Back
Registration Demand) and any other 10% Holders, (ii) all of the other
Eligible Holders and (iii) any other Person who then has "piggy back"
registration rights (an "Additional Securityholder"), and all of the other
10% Holders, Eligible Holders and Additional Securityholders then will have
the opportunity to include in the offering shares of Registrable Securities
then owned by such 10% Holders, Eligible Holders and Additional
Securityholders, but in each case only to the extent permitted by Paragraph
2(d). In addition, subject to Paragraph 2(d), the Company may elect to
include in any registration statement and offering pursuant to this Paragraph
2 newly issued shares of Registrable Securities. Solely for purposes of
Paragraphs 2 through 9, any securities registered pursuant to this Paragraph
2 shall be deemed to be Registrable Securities.
(d) PRIORITY. Notwithstanding the foregoing, if the managing
underwriter of a registered offering being made in response to the
Registration Demand advises the Company in writing that the number of shares
of Registrable Securities desired to be offered by the 10% Holders, the
Subsequent Investor (if any), the Company, the Eligible Holders and the
Additional Securityholders exceeds the Maximum Number, then Registrable
Securities shall be included in the offering, up to the Maximum Number, in
the following priority:
(i) First, (A) in the case of a Demand Registration Demand,
the Registrable Securities desired to be offered by the 10% Holders
on a pro rata basis based on the number of Paragraph 2 Securities
then owned by each such 10% Holder, or (B) in the case of a Piggy
Back Registration Demand, the Registrable Securities desired to be
offered by the 10% Holders and the Registrable Securities desired
to be offered by the Subsequent Investor, PROVIDED that if such
Registrable Securities exceed the Maximum Number, the 10% Holders and
the Subsequent Investor shall be entitled to include Registrable
Securities on a pro rata basis based on the number of Paragraph 2
Securities then owned by each such 10% Holder and the number of shares
of Common Stock then owned by the Subsequent Investor that are subject
to the Subsequent Agreement;
(ii) Second, the Registrable Securities desired to be offered
by the Company;
(iii) Third, the Registrable Securities desired to be offered
by Eligible Holders pursuant to Paragraph 1; and
EXHIBIT D TO STOCKHOLDERS AGREEMENT
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<PAGE>
(iv) Fourth, the Registrable Securities desired to be offered
by Additional Securityholders in such relative amounts and priorities
as shall be provided in the agreements that define the relative rights
of the Additional Securityholders.
Each of the 10% Holders, the Subsequent Investor, the Eligible Holders, the
Additional Securityholders and the Company (in the event that any securities
are to be offered by the Company) may withdraw from the registration by
giving written notice to the Company prior to the filing date of such
registration statement. In the event of a withdrawal by a 10% Holder of a
Demand Registration Demand, such withdrawn demand shall not be deemed to be
one of the Demand Registration Demands to which such 10% Holder is entitled
PROVIDED that such 10% Holder pays or promptly reimburses the Company for all
Registration Expenses incurred by the Company in connection with such
withdrawn demand. In the event of a withdrawal of a Demand Registration
Demand where any other 10% Holder does not withdraw from the registration,
such nonwithdrawing 10% Holder shall be deemed to have made a Demand
Registration Demand. In the event that the Subsequent Investor withdraws
from the registration but any 10% Holder does not withdraw its Piggyback
Registration Demand, such Piggyback Registration Demand shall thereafter
constitute a Demand Registration Demand by such 10% Holder. If at the time
that the registration statement ceases to be effective in accordance with
Paragraph 2(a)(vi) or, in the case of a registration subject to Paragraph
2(b), in accordance with the Subsequent Agreement there remain unsold
Registrable Securities, such Registrable Securities will be withdrawn and
shall be allocated as follows:
(1) first, among the Additional Securityholders on the basis
of the relative amounts and priorities as shall be provided in the
agreements that define the relative rights of the Additional
Securityholders;
(2) second, on a pro rata basis among the Eligible Holders
(other than 10% Holders) on the basis of the respective numbers of
Registrable Securities of each of them included in such registration;
(3) third, to the Company (in the event that any securities
were offered by the Company); and
(4) fourth, (x) in the case of a Demand Registration Demand, to
the 10% Holders on the basis of the respective numbers of Registrable
Securities of each of them included in such registration or (y) in
the case of a Piggy Back Registration Demand, to the 10% Holders and
the Subsequent Investor on the basis of the respective numbers of
Registrable Securities of each of them included in such registration.
EXHIBIT D TO STOCKHOLDERS AGREEMENT
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<PAGE>
3. REGISTRATION PROCEDURES. If and whenever the Company is required to
use its best efforts to effect the registration of any Registrable Securities
under the Act as provided in Paragraph 1 or 2, the Company will as expeditiously
as possible (and, in any event, within 90 days), subject to the terms and
conditions of Paragraph 1 or 2:
(a) prepare and file with the Commission the requisite registration
statement to effect such registration and use its best efforts to cause
such registration statement to become effective; PROVIDED, HOWEVER, that
the Company may discontinue any registration of its securities which are
not Registrable Securities at any time prior to the effective date of the
registration statement relating thereto;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Act with
respect to the disposition of all securities covered by such registration
statement until the earlier of such time as all of such securities have
been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof set forth in such registration statement or
the expiration of 90 days after such registration statement becomes
effective or, in the case of a registration pursuant to Paragraph 2(a), the
period provided in Paragraph 2(a)(vi); PROVIDED that if less than all the
Registrable Securities are withdrawn from registration after the expiration
of such period, the shares so withdrawn shall be allocated PRO RATA among
the holders thereof on the basis of the to respective numbers of
Registrable Securities held by them included in such registration;
(c) furnish to each seller of Registrable Securities covered by such
registration statement such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus contained
in such registration statement (including each preliminary prospectus and
any summary prospectus) and any other prospectus filed under Rule 424 under
the Act, in conformity with the requirements of the Act, and such other
documents, as such seller may reasonably request;
(d) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such securities or blue sky laws of such jurisdictions as each seller
thereof shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains
in effect, and take any other action which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to:
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-8
<PAGE>
(i) qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of
this subdivision (d) be obligated to be so qualified,
(ii) subject itself to taxation in any such jurisdiction, or
(iii) consent to general service of process in any such
jurisdiction;
(e) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(f) furnish to each seller of Registrable Securities a signed
counterpart, addressed to such seller (and the underwriters, if any), of:
(i) an opinion of counsel for the Company, dated the effective
date of such registration statement (or, if such registration includes
an underwritten public offering, an opinion of counsel for the Company
dated the date of the closing under the underwriting agreement),
reasonably satisfactory in form and substance to such seller, and
(ii) a "comfort" letter, dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, a "comfort" letter dated the date of the
closing under the underwriting agreement), signed by the independent
public accountants who have certified the Company's financial
statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities and, in the case of the
accountants' letter, such other financial matters as such seller or such
holder (or the underwriters, if any) may reasonably request;
(g) immediately notify each holder of Registrable Securities covered
by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Act, of the happening of any
event or the existence of any condition as a result of which the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under
EXHIBIT D TO STOCKHOLDERS AGREEMENT
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<PAGE>
which they were made, or if in the opinion of counsel for the Company it
is necessary to supplement or amend such prospectus to comply with law and,
at the request of any such holder promptly prepare and furnish to such
holder a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made or such
prospectus, as supplemented or amended, shall comply with law;
(h) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months, but not more than eighteen months,
beginning with the first full calendar month after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act and the rules and regulations of the
Commission thereunder, and not file any amendment or supplement to such
registration statement or prospectus to which any such seller of
Registrable Securities covered by such registration statement shall have
reasonably objected on the grounds that such amendment or supplement does
not comply in all material respects with the requirements of the Act or of
the rules or regulations thereunder, having been furnished with a copy
thereof at least five business days prior to the filing thereof;
(i) provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement;
(j) use its best efforts to list all Registrable Securities covered
by such registration statement on any securities exchange on which any of
the Registrable Securities are then listed; and
(k) pay all Registration Expenses relating to any such registration.
The Company may require each seller of Registrable Securities as to which
any registration is effected to furnish the Company with such information and
undertakings as it may reasonably request regarding such seller and the
distribution of such securities as the Company may from time to time reasonably
request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities as follows:
(A) that upon receipt of any notice from the Company of the
happening of any event of the kind described in
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-10
<PAGE>
subdivision (g) of this Paragraph 3, such holder will forthwith
discontinue such holder's disposition of Registrable Securities
pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies
of the supplemented or amended prospectus contemplated by
subdivision (g) of this Paragraph 3 and, if so directed by the
Company, will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, then in such
holder's possession of the prospectus relating to such
Registrable Securities current at the time of receipt of such
notice, and
(B) that it will immediately notify the Company, at any time
when a prospectus relating to the registration of such
Registrable Securities is required to be delivered under the Act,
of the happening of any event as a result of which information
previously furnished by such holder to the Company in writing for
inclusion in such prospectus contains an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they
were made.
In the event the Company or any such holder shall give any such notice,
the period referred to in subdivision (b) of this Paragraph 3 shall be
extended by a number of days equal to the number of days during the period
from and including the giving of notice pursuant to subdivision (g) of this
Paragraph 3 to and including the date when each seller of any Registrable
Securities covered by such registration statement shall have received the
copies of the supplemented or amended prospectus contemplated by subdivision
(g) of this Paragraph 3.
4. UNDERWRITTEN OFFERINGS.
(a) UNDERWRITING AGREEMENT. If the Company at any time proposes to
register any of its securities under the Act as contemplated by Paragraph 1
and such securities are to be distributed by or through one or more
underwriters or if the Company at any time is required to register any of
its securities under the Act as contemplated by Paragraph 2, the Company
will, subject to the provisions of subdivision (b) of Paragraph 1 or
subdivision (d) of Paragraph 2, use its best efforts to arrange for such
underwriters to include the Registrable Securities to be offered and sold
by each holder among the securities to be distributed by such underwriters,
and each holder of Registrable Securities agrees, by acquisition of such
Registrable Securities, that all Registrable Securities of such holder to
be included in such registration shall be distributed and sold through such
underwriters. The holders of Registrable Securities to be distributed by
such underwriters shall be parties to the
EXHIBIT D TO STOCKHOLDERS AGREEMENT
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<PAGE>
underwriting agreement between the Company and such underwriters and may,
at their option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and
for the benefit of such underwriters shall also be made to and for the
benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters shall also
be made to and for the benefit of such holders of Registrable Securities.
No holder of Registrable Securities shall be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding
such holder and such holder's intended method of distribution and any other
representation required by law.
(b) SELECTION OF UNDERWRITERS. The selection of the underwriter or
underwriters for the public offering to be made pursuant to a registration
statement filed under Paragraph 1 shall be made by the Company, in its sole
discretion, from amongst underwriting firms of national reputation.
Notwithstanding anything else in this Exhibit D to the contrary, if General
Electric Pension Trust ("GEPT") is eligible to participate in an
underwriting pursuant to the terms hereof and the General Electric Company
is directly or indirectly the beneficial owner of five percent (5%) or more
of the outstanding equity interests of an underwriter or underwriters
acting in such underwriting, GEPT shall have the absolute right to
disapprove such underwriter or underwriters so owned by General Electric
Company.
(c) HOLDBACK AGREEMENTS.
(i) Each holder of Registrable Securities agrees by acquisition
of such Registrable Securities, if so required by the managing
underwriter, not to effect any public sale or distribution of such
securities or sales of such securities pursuant to Rule 144 under the
Act or otherwise, during the seven days prior to and the 90 days after
any firm commitment underwritten registration pursuant to Paragraph 1
or 2 or any Qualified IPO that is consummated on or before March 31,
1997 has become effective or, if the managing underwriter advises the
Company in writing that, in its opinion, no such public sale or
distribution should be effected for a specific period longer than 90
days after such underwritten registration in order to complete the
sale and distribution of securities included in such registration and
the Company gives notice to such holder of Registrable Securities of
such advice, during a reasonable longer period of up to 270 days after
such underwritten registration, except as part of such underwritten
registration, whether or not such holder participates in such
registration.
(ii) The Company agrees:
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-12
<PAGE>
(A) not to effect any public sale or distribution of its equity
securities or securities convertible into or exchangeable or
exercisable for any of such securities during the seven days
prior to and the 90 days after any firm commitment underwritten
registration pursuant to Paragraph 1 or 2 has become effective,
except as part of such underwritten registration and except
pursuant to registrations on Form S-4 or S-8 or any successor or
similar forms thereto, and
(B) to use its best efforts to cause each holder of its equity
securities or any securities convertible into or exchangeable or
exercisable for any of such securities, in each case purchased
from the Company at any time after the date hereof (other than in
a public offering) to agree not to effect any such public sale or
distribution of such securities, during such period or, in either
case, if the managing underwriter advises the Company in writing
that in its opinion, no such public sale or distribution should
be effected for a specified period longer than 90 days after such
underwritten registration in order to complete the sale and
distribution of securities included in such registration, during
a reasonably longer period after such underwritten registration,
except as part of such underwritten registration.
5. PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement under the Act, the
Company will give the holders of Registrable Securities registered under such
registration statement, their underwriters, if any, and their respective
counsel and accountants, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with
the Commission, and each amendment thereof or supplement thereto, and will
give each of them such access to its books and records and such opportunities
to discuss the business, finances and accounts of the Company and its
subsidiaries with its officers, directors and the independent public
accountants who have certified its financial statements as shall be
necessary, in the opinion of such holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
6. CERTAIN RIGHTS OF HOLDERS. The Company will not file any registration
statement under the Act which refers to any holder of Registrable Securities by
name or otherwise as the holder of any securities of the Company, unless it
shall first have given such holder the right to require:
(a) the insertion therein of language, in form and substance
satisfactory to such holder, to the effect that, in the opinion of such
holder, the holding by such holder of such securities does not make such
holder a "controlling person" of the Company within the meaning of the Act
and is not to be construed as a
EXHIBIT D TO STOCKHOLDERS AGREEMENT
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recommendation by such holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such
holder will assist in meeting any future financial requirements of the
Company, or
(b) in the event that such reference to such holder by name or
otherwise is not required by the Act or any rules and regulations
promulgated thereunder, the deletion of the reference to such holder.
7. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any registration
of any securities of the Company under the Act, the Company will, and
hereby does, indemnify and hold harmless the seller of any Registrable
Securities covered by any registration statement filed pursuant to
Paragraph 1 or 2, its directors, officers, partners, employees, agents and
investment advisors, each other Person who participates as an underwriter
in the offering or sale of such securities and each other Person, if any,
who controls such seller or any such underwriter within the meaning of
either Section 15 of the Act or Section 20 of the Exchange Act, from and
against any losses, claims, damages or liabilities, joint or several (or
actions or proceedings, whether commenced or threatened, in respect
thereof) (collectively, "Claims"), to which such seller or any such
director or officer or employee or agent or investment advisor or
underwriter or controlling person may become subject under either Section
15 of the Act or Section 20 of the Exchange Act or otherwise, insofar as
such Claims arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto (if used during the period
the Company is required to keep the registration statement current)
(collectively, "Registration Documents"), or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances in which made, or any violation by the Company of the Act or
any state securities law, or any rule or regulation promulgated under the
Act or any state securities law, or any other law applicable to the Company
relating to any such registration or qualification, and the Company will
reimburse such seller and each such director, officer, employee, agent,
investment advisor, underwriter and controlling person for any legal or any
other expenses reasonably incurred by them in connection with investigating
or defending any such Claim; PROVIDED that the Company shall not be liable
in any such case to the extent that any such Claim or expense arises out of
or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in any such Registration Document in
reliance upon and in conformity with written information furnished to the
Company through an instrument duly executed by such seller stating that it
is for use in the preparation thereof; PROVIDED FURTHER that the Company
shall not be liable to any Person who
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-14
<PAGE>
participates as an underwriter in the offering or sale of Registrable
Securities or any other Person, if any, who controls such underwriter
within the meaning of either Section 15 of the Act or Section 20 of the
Exchange Act in any such case to the extent that any such Claim, or
expense arises out of such Person's failure to send or give a copy of the
final prospectus to the Person claiming an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director,
officer, employee, agent, investment advisor, partner, underwriter or
controlling person and shall survive the transfer of such securities by
such seller.
(b) INDEMNIFICATION BY THE SELLERS. The Company may require, as a
condition to including any Registrable Securities in any registration
statement filed pursuant to Paragraph 1 or 2, that the Company shall have
received an undertaking satisfactory to it from the prospective seller of
such securities, to indemnify and hold harmless (in the same manner and to
the same extent as set forth in subdivision (a) of this Paragraph 7) the
Company, each director of the Company, each officer of the Company and each
other person, if any, who controls the Company within the meaning of either
Section 15 of the Act or Section 20 of the Exchange Act, with respect to
any statement or alleged statement or omission or alleged omission from
such Registration Document, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Company through an instrument
duly executed by such seller specifically stating that it is for use in the
preparation of such Registration Document. Notwithstanding the foregoing,
in no event shall any selling stockholder or any director, officer,
employee, agent, investment advisor or controlling person thereof be liable
to indemnify the Company pursuant to this subdivision (b) of this Paragraph
7 hereof in an amount in excess of the amount of the net proceeds of the
Registrable Securities sold by him, her or it in any such offering. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company of any such director,
officer or controlling person and shall survive the transfer of such
securities by such seller.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
Claim referred to in the preceding subdivisions of this Paragraph 7, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action; PROVIDED that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying
party of its obligations under the preceding subdivisions of this Paragraph
7, except to the extent that the indemnifying party is actually prejudiced
by such failure to give notice. In case any
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-15
<PAGE>
such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim,
the indemnifying party shall be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall consent to entry of
any judgment or enter into any settlement of any pending or threatened
proceeding in respect of which an indemnified party is or could have been a
party and indemnity could have been sought under subdivision (a) of this
Paragraph 7 without the consent of the indemnified party which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in
respect to such claim or litigation.
(d) OTHER INDEMNIFICATION. Indemnification similar to that specified
in the preceding subdivisions of this Paragraph 7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification
of securities under any Federal or state law or regulation of any
governmental authority, other than the Act. If the indemnification
provided for in subdivision (a), (b) or (c) of this Paragraph 7 is
unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party or parties on the other hand from the
offering of the securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the indemnified party or
parties on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as
any other relevant equitable considerations; PROVIDED, HOWEVER, that in no
event shall any contribution by the selling stockholder or any director,
officer, employee, agent, investment advisor or controlling person thereof
pursuant to this subdivision (d) of this Paragraph 7 exceed the amount of
the net proceeds of the Registrable Securities sold by him, her or it in
any such offering.
(e) INDEMNIFICATION PAYMENTS. The indemnification required by this
Paragraph 7 shall be made by periodic payments of the amount thereof during
the
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-16
<PAGE>
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
8. ADJUSTMENT AFFECTING REGISTRABLE SECURITIES. The Company will not
effect or permit to occur any combination or subdivision of shares which would
adversely affect the ability of the holders of Registrable Securities to effect
the registration of such securities in the manner contemplated by these
registration rights provisions.
9. COVENANTS RELATING TO RULE 144. At all times after the effective date
of the registration statement under the Act of the initial underwritten public
offering of Common Stock, and until such time as all of the Registrable
Securities are deregistered, the Company will file reports in compliance with
the Exchange Act and will, at its expense, forthwith upon the request of any
holder of Restricted Securities, deliver to such holder a certificate, signed by
the Company's principal financial officer, stating:
(a) the Company's name, address and telephone number (including area
code),
(b) the Company's Internal Revenue Service identification number,
(c) the Company's Commission file number,
(d) the number of shares of Common Stock of the Company outstanding
as shown by the most recent report or statement published by the Company,
and
(e) whether the Company has filed the reports required to be filed
under the Exchange Act for a period of at least 90 days prior to the date
of such certificate and in addition has filed the most recent annual report
required to be filed thereunder.
EXHIBIT D TO STOCKHOLDERS AGREEMENT
D-17
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REVOLVING
CREDIT AGREEMENT
AMONG
AFTERMARKET TECHNOLOGY CORP.,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO,
AND
THE CHASE MANHATTAN BANK,
AS AGENT
DATED AS OF FEBRUARY 14, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Other Definitional Provisions . . . . . . . . . . . . . . . .17
SECTION 2. AMOUNT AND TERMS OF CREDIT COMMITMENTS. . . . . . . . . . . .17
2.1. Commitments . . . . . . . . . . . . . . . . . . . . . . . . .17
2.2. Procedure for Borrowing . . . . . . . . . . . . . . . . . . .18
2.3. Termination or Reduction of Commitments . . . . . . . . . . .18
2.4. Swing Line Commitments. . . . . . . . . . . . . . . . . . . .19
SECTION 3. LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . .20
3.1. L/C Commitment. . . . . . . . . . . . . . . . . . . . . . . .20
3.2. Procedure for Issuance of Letters of Credit.. . . . . . . . .21
3.3. L/C Participations. . . . . . . . . . . . . . . . . . . . . .21
3.4. Reimbursement Obligation of the Borrower. . . . . . . . . . .22
3.5. Obligations Absolute. . . . . . . . . . . . . . . . . . . . .23
3.6. Letter of Credit Payments.. . . . . . . . . . . . . . . . . .23
3.7. Application.. . . . . . . . . . . . . . . . . . . . . . . . .24
SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS
OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . .24
4.1. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
4.2. Repayment of Loans; Evidence of Debt. . . . . . . . . . . . .25
4.3. Optional and Mandatory Prepayments. . . . . . . . . . . . . .26
4.4. Conversion and Continuation Options . . . . . . . . . . . . .27
4.5. Maximum Number of Tranches. . . . . . . . . . . . . . . . . .27
4.6. Interest Rates and Payment Dates. . . . . . . . . . . . . . .28
4.7. Computation of Interest and Fees. . . . . . . . . . . . . . .28
4.8. Inability to Determine Interest Rate. . . . . . . . . . . . .28
4.9. Pro Rata Treatment and Payments . . . . . . . . . . . . . . .29
4.10. Illegality. . . . . . . . . . . . . . . . . . . . . . . . . .29
4.11. Requirements of Law . . . . . . . . . . . . . . . . . . . . .30
4.12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
4.13. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . .32
4.14. Change of Lending Office. . . . . . . . . . . . . . . . . . .33
SECTION 5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . .33
5.1. Financial Condition . . . . . . . . . . . . . . . . . . . . .33
5.2. No Change; Solvency . . . . . . . . . . . . . . . . . . . . .34
5.3. Corporate Existence; Compliance with Law. . . . . . . . . . .34
5.4. Corporate Power; Authorization; Enforceable Obligations . . .34
5.5. No Legal Bar. . . . . . . . . . . . . . . . . . . . . . . . .35
5.6. No Material Litigation. . . . . . . . . . . . . . . . . . . .35
i
<PAGE>
5.7. No Default. . . . . . . . . . . . . . . . . . . . . . . . . .35
5.8. Ownership of Property; Liens. . . . . . . . . . . . . . . . .35
5.9. Intellectual Property . . . . . . . . . . . . . . . . . . . .35
5.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
5.11. Federal Regulations . . . . . . . . . . . . . . . . . . . . .36
5.12. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
5.13. Investment Company Act; Other Regulations . . . . . . . . . .37
5.14. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . .37
5.15. Purpose of Loans. . . . . . . . . . . . . . . . . . . . . . .37
5.16. Environmental Matters . . . . . . . . . . . . . . . . . . . .37
5.17. No Burdensome Restrictions. . . . . . . . . . . . . . . . . .38
5.18. No Material Misstatements . . . . . . . . . . . . . . . . . .38
5.19. Collateral. . . . . . . . . . . . . . . . . . . . . . . . . .38
5.20. Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . .39
SECTION 6. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . .39
6.1. Conditions to Extensions of Credit. . . . . . . . . . . . . .39
6.2. Conditions to Each Extension of Credit. . . . . . . . . . . .41
SECTION 7. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . .42
7.1. Financial Statements. . . . . . . . . . . . . . . . . . . . .42
7.2. Certificates; Other Information . . . . . . . . . . . . . . .43
7.3. Payment of Obligations. . . . . . . . . . . . . . . . . . . .44
7.4. Conduct of Business and Maintenance of Existence. . . . . . .44
7.5. Maintenance of Property; Insurance. . . . . . . . . . . . . .44
7.6. Inspection of Property; Books and Records; Discussions. . . .45
7.7. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . .45
7.8. Environmental Laws. . . . . . . . . . . . . . . . . . . . . .46
7.9. Additional Collateral . . . . . . . . . . . . . . . . . . . .46
7.10. Further Assurances. . . . . . . . . . . . . . . . . . . . . .47
7.11. Redemption of Senior Subordinated Notes . . . . . . . . . . .48
7.12. Property Matters. . . . . . . . . . . . . . . . . . . . . . .48
SECTION 8. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . .48
8.1. Financial Condition Covenants . . . . . . . . . . . . . . . .48
8.2. Limitation on Indebtedness. . . . . . . . . . . . . . . . . .49
8.3. Limitation on Liens . . . . . . . . . . . . . . . . . . . . .51
8.4. Limitation on Guarantee Obligations . . . . . . . . . . . . .52
8.5. Limitation on Fundamental Changes . . . . . . . . . . . . . .53
8.6. Limitation on Sale of Assets. . . . . . . . . . . . . . . . .53
8.7. Limitation on Leases. . . . . . . . . . . . . . . . . . . . .54
8.8. Limitation on Dividends . . . . . . . . . . . . . . . . . . .54
8.9. Limitation on Capital Expenditures. . . . . . . . . . . . . .54
8.10. Limitation on Investments, Loans and Advances . . . . . . . .55
8.11. Limitation on Optional Payments and Modifications of Debt I .57
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<PAGE>
8.12. Limitation on Transactions with Affiliates. . . . . . . . . .57
8.13. Limitation on Sales and Leasebacks. . . . . . . . . . . . . .58
8.14. Limitation on Changes in Fiscal Year. . . . . . . . . . . . .58
8.15. Limitation on Negative Pledge Clauses . . . . . . . . . . . .58
8.16. Limitation on Lines of Business; Creation of Subsidiaries . .58
8.17. Limitation on Borrowings. . . . . . . . . . . . . . . . . . .58
SECTION 9. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . .58
SECTION 10. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . .62
10.1. Appointment . . . . . . . . . . . . . . . . . . . . . . . . .62
10.2. Delegation of Duties. . . . . . . . . . . . . . . . . . . . .62
10.3. Exculpatory Provisions. . . . . . . . . . . . . . . . . . . .62
10.4. Reliance by Agent . . . . . . . . . . . . . . . . . . . . . .62
10.5. Notice of Default . . . . . . . . . . . . . . . . . . . . . .63
10.6. NonReliance on Agent and Other Lenders. . . . . . . . . . . .63
10.7. Indemnification . . . . . . . . . . . . . . . . . . . . . . .63
10.8. Agent in Its Individual Capacity. . . . . . . . . . . . . . .64
10.9. Successor Agent . . . . . . . . . . . . . . . . . . . . . . .64
SECTION 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . .64
11.1. Amendments and Waivers. . . . . . . . . . . . . . . . . . . .64
11.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . .65
11.3. No Waiver; Cumulative Remedies. . . . . . . . . . . . . . . .66
11.4. Survival of Representations and Warranties. . . . . . . . . .66
11.5. Payment of Expenses and Taxes . . . . . . . . . . . . . . . .66
11.6. Successors and Assigns; Participations and Assignments. . . .67
11.7. Adjustments; Setoff . . . . . . . . . . . . . . . . . . . . .70
11.8. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . .70
11.9. Severability. . . . . . . . . . . . . . . . . . . . . . . . .70
11.10. Integration . . . . . . . . . . . . . . . . . . . . . . . . .70
11.11. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . .71
11.12. Submission To Jurisdiction; Waivers . . . . . . . . . . . . .71
11.13. Acknowledgements. . . . . . . . . . . . . . . . . . . . . . .71
11.14. WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . . . . . . .72
iii
<PAGE>
SCHEDULES
A Performance Pricing Grid
1.1 Commitments and Address of Lenders
5.14 Subsidiaries
5.16 Environmental Matters
8.3 Existing Liens
EXHIBITS
A-1 Form of Revolving Credit Note
A-2 Form of Swing Line Note
B Form of Guarantee and Collateral Agreement
C-1 Form of Opinion of Borrower's Counsel
C-2 Form of Opinion of Local Counsel
D Form of Borrowing Certificate
E Form of Assignment and Acceptance
F Terms and Conditions of Senior Subordinated Notes
G Form of Exemption Certificate
iv
<PAGE>
CREDIT AGREEMENT, dated as of February 14, 1997, among AFTERMARKET
TECHNOLOGY CORP., a Delaware corporation (the "BORROWER"), the several banks and
other financial institutions from time to time parties to this Agreement (the
"LENDERS") and THE CHASE MANHATTAN BANK, a New York banking corporation, as
agent for the Lenders hereunder.
The parties hereto hereby agree as follows:
WHEREAS, the Borrower has requested that the Lenders make available to
it a revolving credit facility in the amount of $100,000,000 upon the terms and
subject to the conditions set forth herein; and
WHEREAS, the Lenders are willing to provide such financing to the
Borrower on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in
effect on such day, (b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%.
For purposes hereof: "PRIME RATE" shall mean the rate of interest per
annum publicly announced from time to time by the Agent as its prime rate
in effect at its principal office in New York City (the Prime Rate not
being intended to be the lowest rate of interest charged by the Chase
Manhattan Bank in connection with extensions of credit to debtors); "BASE
CD RATE" shall mean the sum of (a) the product of (i) the Three-Month
Secondary CD Rate and (ii) a fraction, the numerator of which is one and
the denominator of which is one minus the C/D Reserve Percentage and (b)
the C/D Assessment Rate; "C/D ASSESSMENT RATE" shall mean, for any day, the
annual assessment rate in effect on such day which is payable by a member
of the Bank Insurance Fund maintained by the Federal Deposit Insurance
Corporation (the "FDIC") classified as well-capitalized and within
supervisory subgroup "B" (or a comparable successor assessment risk
classification) within the meaning of 12 C.F.R. Section 327.3(d) (or any
successor provision) to the FDIC (or any successor) for the FDIC's (or such
successor's) insuring time deposits at offices of such institution in the
United States; "C/D RESERVE PERCENTAGE" shall mean, for any day, that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor), for determining the maximum reserve requirement for a
Depositary Institution (as defined in Regulation D of the Board) in respect
of new non-personal time deposits in Dollars having a maturity of 30 days
or more; "THREE-MONTH
1
<PAGE>
SECONDARY CD RATE" shall mean, for any day, the secondary market rate for
three-month certificates of deposit reported as being in effect on such day
(or, if such day shall not be a Business Day, the next preceding Business
Day) by the Board of Governors of the Federal Reserve System (the "BOARD")
through the public information telephone line of the Federal Reserve Bank
of New York (which rate will, under the current practices of the Board, be
published in Federal Reserve Statistical Release H.15(519) during the week
following such day), or, if such rate shall not be so reported on such day
or such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center
banks in New York City received at approximately 10:00 A.M., New York City
time, on such day (or, if such day shall not be a Business Day, on the next
preceding Business Day) by the Agent from three New York City negotiable
certificate of deposit dealers of recognized standing selected by it; and
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted
average of the rates on overnight federal funds transactions with members
of the Federal Reserve System arranged by federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for the day of such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by it. Any change in the ABR due to a change
in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate shall be effective as of the opening of business on the
effective day of such change in the Prime Rate, the Three-Month Secondary
CD Rate or the Federal Funds Effective Rate, respectively.
"ABR LOANS": Loans the rate of interest applicable to which is based
upon the ABR.
"ADJUSTMENT DATE": each date on or after June 30, 1997, that is the
second Business Day following receipt by the Agent of both (i) the
financial statements required to be delivered pursuant to subsection 7.1(a)
or 7.1(b), as applicable, for the most recently completed four fiscal
quarters and (ii) the related Compliance Certificate required to be
delivered pursuant to subsection 7.2(b) with respect to such four fiscal
quarters.
"AFFILIATE": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. For purposes of this
definition, "control" of a Person means the power, directly or indirectly,
either to (a) vote 10% or more of the securities having ordinary voting
power for the election of directors of such Person or (b) direct or cause
the direction of the management and policies of such Person, whether by
contract or otherwise.
"AGENT": the Chase Manhattan Bank, together with its affiliates, as
the arranger of the Commitments and as the agent for the Lenders under this
Agreement and the other Loan Documents.
2
<PAGE>
"AGGREGATE OUTSTANDING EXTENSIONS OF CREDIT": as to any Lender at any
time, an amount equal to the sum of (a) the aggregate principal amount of
all Loans made by such Lender then outstanding, (b) such Lender's
Commitment Percentage of the aggregate unpaid principal amount at such time
of all Swing Line Loans, PROVIDED that for purposes of calculating
Available Commitments pursuant to subsection 4.1(a) such amount shall be
zero and (c) such Lender's Commitment Percentage of the L/C Obligations
then outstanding.
"AGREEMENT": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"APPLICABLE MARGIN": for the period from the Closing Date until the
first Adjustment Date, the Applicable Margin in respect of Loans shall
equal the rate per annum set forth under the relevant column heading below:
Eurodollar
Abr Loans Loans
--------- ---------
0.25% 1.25%
PROVIDED such Applicable Margin will be adjusted on each Adjustment Date to
the applicable rate per annum set forth under the heading "ABR Applicable
Margin" or "Eurodollar Applicable Margin" on Schedule A which corresponds
to the Leverage Ratio determined from the financial statements and
Compliance Certificate relating to the end of the four fiscal quarters of
the Borrower immediately preceding such Adjustment Date; PROVIDED, FURTHER
that in the event that the financial statements required to be delivered
pursuant to subsection 7.1(a) or 7.1(b), as applicable, and the related
Compliance Certificate required to be delivered pursuant to subsection
7.2(b), are not delivered when due, then
(a) if such financial statements and Compliance Certificate are
delivered after the date such financial statements and Compliance
Certificate were required to be delivered (without giving effect to
any applicable cure period) and the Applicable Margin increases from
that previously in effect as a result of the delivery of such
financial statements and Compliance Certificate, then the Applicable
Margin in respect of the Loans during the period from the date upon
which such financial statements and Compliance Certificate were
required to be delivered (without giving effect to any applicable cure
period) until the date upon which they actually are delivered shall,
except as otherwise provided in clause (c) below, be the Applicable
Margin as so increased;
(b) if such financial statements and Compliance Certificate are
delivered after the date such financial statements and Compliance
Certificate were required to be delivered and the Applicable Margin
decreases from that previously in effect as a result of the delivery
of such financial statements and Compliance Certificate, then such
decrease in the Applicable Margin shall not
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become applicable until the date upon which such financial statements
and Compliance Certificate actually are delivered; and
(c) if such financial statements and Compliance Certificate are
not delivered prior to the expiration of the applicable cure period,
then, effective upon such expiration, for the period from the date
upon which such financial statements and Compliance Certificate were
required to be delivered (after the expiration of the applicable cure
period) until two Business Days following the date upon which such
financial statements and Compliance Certificate actually are
delivered, the Applicable Margin in respect of the Loans shall be
0.25% per annum, in the case of ABR Loans, and 1.25% per annum, in the
case of Eurodollar Loans.
"APPLICATION": an application, in such form as the Issuing Lender may
specify from time to time, requesting the Issuing Lender to open a Letter
of Credit.
"ASSIGNEE": as defined in subsection 11.6(c).
"AVAILABLE COMMITMENT": as to any Lender at any time, an amount equal
to the excess, if any, of (a) the amount of such Lender's Commitment over
(b) such Lender's Aggregate Outstanding Extensions of Credit.
"AURORA": Aurora Capital Partners L.P., a California limited
partnership.
"BANK ASSIGNEE": as defined in subsection 11.6(c).
"BORROWING CERTIFICATE": a certificate of the Borrower, substantially
in the form of Exhibit D.
"BORROWING DATE": any Business Day specified in a notice pursuant to
subsection 2.2 or 2.4 as a date on which the Borrower requests the Lenders
to make Loans hereunder.
"BUSINESS": as defined in subsection 5.16.
"BUSINESS DAY": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law
to close.
"CANADIAN SUBSIDIARIES": Mascot and King-O-Matic.
"CAPITAL STOCK": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing.
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"CASH EQUIVALENTS": (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured by
the United States Government or any agency thereof, (b) certificates of
deposit of any Lender, eurodollar deposits, time deposits, overnight bank
deposits, bankers acceptances and repurchase agreements of any commercial
bank which has capital and surplus in excess of $200,000,000 having
maturities of one year or less from the date of acquisition, (c) commercial
paper of an issuer rated at least A-2 by Standard & Poor's Corporation and
P-2 by Moody's Investors Service, Inc., or carrying an equivalent rating by
a nationally recognized rating agency if both of the two named rating
agencies cease publishing ratings of investments having maturities of six
months or less from the date of acquisition, (d) securities with maturities
of one year or less from the date of acquisition issued or fully guaranteed
by any state, commonwealth or territory of the United States, by any
political subdivision or taxing authority of any such state, commonwealth
or territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or foreign
government (as the case may be) are rated at least AA by S&P or Aa by
Moody's, (e) securities with maturities of one year or less from the date
of acquisition fully backed by standby letters of credit issued by any
Lender or any commercial bank in each case satisfying the requirements of
clause (b) of this definition and (f) money market accounts or funds which
invest primarily in the types of securities described in (a) through (c)
above.
"CHANGE OF CONTROL": the occurrence of any of the following events:
(i) any sale, transfer or other conveyance, whether direct or indirect, of
all or substantially all of the assets of the Borrower, on a consolidated
basis, in one transaction or a series of related transactions, if,
immediately after giving effect to such transaction, any Person or "group"
(within the meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended) other than any Excluded Person is or becomes the
"beneficial owner," directly or indirectly, of more than 35% of the total
voting power in the aggregate normally entitled to vote in the election of
directors, managers or trustees, as applicable, of the transferee, (ii) any
Person or "group" (within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended) other than any Excluded Person
is or becomes the "beneficial owner," directly or indirectly, of more than
35% of the total voting power in the aggregate of all classes of Capital
Stock of the Borrower then outstanding normally entitled to vote in
elections of directors, unless the percentage so owned by Excluded Persons
is greater or (iii) during any period of 12 consecutive months after the
Closing Date, individuals who at the beginning of any such 12 month period
constituted the Board of Directors of the Borrower (together with any new
directors whose election by such Board or whose nomination for election by
the shareholders of the Borrower was approved by a vote of a majority of
the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of
the Board of Directors of the Borrower then in office.
"CHASE": the Chase Manhattan Bank, a New York banking corporation.
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<PAGE>
"CLOSING DATE": the date on which the conditions precedent set forth
in subsection 6.1 shall be satisfied or waived.
"CODE": the Internal Revenue Code of 1986, as amended.
"COLLATERAL": all assets of the Loan Parties, now owned or
hereinafter acquired, upon which a Lien is purported to be created by any
Security Agreement.
"COMMERCIAL LETTER OF CREDIT": as defined in subsection.
"COMMITMENT": as to any Lender, the obligation of such Lender to make
Loans to and/or issue or participate in Letters of Credit on behalf of the
Borrower in a principal amount not to exceed the amount set forth opposite
such Lender's name on Schedule 1.1, as such amount may be reduced from time
to time in accordance with the provisions of this Agreement.
"COMMITMENT PERCENTAGE": as to any Lender at any time, the percentage
which such Lender's Commitment then constitutes of the aggregate
Commitments (or, at any time after the Commitments shall have expired or
been terminated, the percentage which the aggregate principal amount of
such Lender's Loans then outstanding constitutes of the aggregate principal
amount of the Loans then outstanding).
"COMMITMENT PERIOD": the period from and including the Closing Date
to but not including the Termination Date or such earlier date on which the
Commitments shall terminate as provided herein.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of
Section 4001 of ERISA or is part of a group which includes the Borrower and
which is treated as a single employer under Section 414 of the Code.
"COMPLIANCE CERTIFICATE": as defined in subsection 7.2(b).
"CONSOLIDATED CAPITAL EXPENDITURES": of any Person for any period,
the amount of expenditures of such Person, determined on a consolidated
basis in accordance with GAAP (whether accrued under Capital Leases or
otherwise), for such period in respect of the purchase or other acquisition
of fixed or capital assets (excluding any such asset acquired in connection
with normal replacement and maintenance programs properly charged to
current operations).
"CONSOLIDATED EBITDA": of any Person for any period, Consolidated Net
Income of such Person for such period PLUS, without duplication and to the
extent reflected as a charge in the statement of such Consolidated Net
Income, the sum of (a) provision for income and franchise tax expense, (b)
Consolidated Interest Expense, (c) depreciation and amortization expense,
(d) amortization of intangibles (including, but not limited to, goodwill),
organization costs and deferred financing costs, (e)
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<PAGE>
writeoff of goodwill and other non cash charges, including, without
limitation, interest expense representing payment in the form of non-cash
"payment-in-kind" instruments, and (f) any extraordinary losses (including,
whether or not otherwise includable as a separate item in the statement of
such Consolidated Net Income, losses on the sales of assets outside of the
ordinary course of business), MINUS, without duplication and to the extent
reflected as a charge in the statement of such Consolidated Net Income, any
extraordinary gains (including, whether or not otherwise includable as a
separate item in the statement of such Consolidated Net Income, gains on
the sales of assets outside of the ordinary course of business).
"CONSOLIDATED INTEREST EXPENSE": of any Person for any period the
amount of cash interest expense, determined on a consolidated basis in
accordance with GAAP, for such period on the aggregate principal amount of
its Indebtedness.
CONSOLIDATED LEASE EXPENSE": for any Person for any period, the
aggregate amount of fixed and contingent rentals payable by such Person
with respect to such period, determined on a consolidated basis in
accordance with GAAP, for such period with respect to operating leases of
real and personal property.
"CONSOLIDATED NET INCOME": of any Person for any period, net income
of such Person for such period, determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED NET WORTH": of any Person, as of the date of
determination, the sum of (i) all items which in conformity with GAAP would
be included under shareholders' equity on a consolidated balance sheet of
such Person at such date PLUS (ii) mandatorily redeemable preferred stock
of the Borrower which by its terms is not mandatorily redeemable or
redeemable at the option of the holder thereof prior to the Termination
Date.
"CONSOLIDATED TOTAL INDEBTEDNESS": of any Person, as of the date of
determination, all Indebtedness of such Person which, in accordance with
GAAP, would be included as Indebtedness on a consolidated balance sheet of
such Person at such date.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"CSI": Chase Securities Inc.
"DEFAULT": any of the events specified in Section 9, whether or not
any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"DOLLARS" and "$": dollars in lawful currency of the United States of
America.
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<PAGE>
"ELIGIBLE ACCOUNTS": the gross outstanding balance, determined in
accordance with GAAP and stated on a basis consistent with the historical
practices of the Borrower as of the date hereof, of accounts receivable of
the Borrower and its Subsidiaries arising out of sales of goods or services
made by the Borrower and its Subsidiaries in the ordinary course of
business ("ACCOUNTS") that the Borrower, in its reasonable discretion,
shall deem eligible, less all finance charges, late fees and other fees
that are unearned, and less (i) the value of any accrual which has been
recorded by the Borrower with respect to downward price adjustments and
(ii) such other reserves as the Borrower, in its reasonable discretion,
shall deem appropriate.
"ELIGIBLE INVENTORY": all inventory of the Borrower and its
Subsidiaries ("INVENTORY"), valued at the lower of (i) cost determined in
accordance with GAAP and stated on a basis consistent with the historical
practices of the Borrower as of the date hereof or (ii) market value, that
the Borrower, in its reasonable discretion, shall deem eligible, reduced by
(x) the value of reserves which have been recorded by the Borrower with
respect to obsolete, slow-moving or excess Inventory and (y) such other
reserves as the Borrower, in its reasonable discretion, shall deem
appropriate.
"ENVIRONMENTAL LAWS": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements
of Law (including common law) regulating, relating to or imposing liability
or standards of conduct concerning protection of human health or the
environment, as now or may at any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities"
in Regulation D of such Board) maintained by the Agent.
"EURODOLLAR BASE RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum equal to the
rate at which Chase is offered Dollar deposits at or about 10:00 A.M., New
York City time, two Business Days prior to the beginning of such Interest
Period in the interbank eurodollar market where the eurodollar and foreign
currency and exchange operations in respect of its Eurodollar Loans are
then being conducted for delivery on the first day of such Interest Period
for the number of days comprised therein and in an amount comparable to the
amount of its Eurodollar Loan to be outstanding during such Interest
Period.
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<PAGE>
"EURODOLLAR LOANS": Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
"EURODOLLAR RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
EURODOLLAR BASE RATE
----------------------------------
1.00 - Eurocurrency Reserve Requirements
"EURODOLLAR TRANCHE": the collective reference to Eurodollar Loans
the then current Interest Periods with respect to all of which begin on the
same date and end on the same later date (whether or not such Loans shall
originally have been made on the same day).
"EVENT OF DEFAULT": any of the events specified in Section 9,
PROVIDED that any requirement for the giving of notice, the lapse of time,
or both, or any other condition, has been satisfied.
"EXCLUDED PERSON": (a) the Borrower or any wholly-owned Subsidiary
which is a Guarantor, (b) any employee benefit plan of the Borrower or any
wholly owned Subsidiary which is a Guarantor or any trustee or similar
fiduciary holding Capital Stock of the Borrower for or pursuant to the
terms of any such plan and (c) all Related Persons of the Borrower as of
the Closing Date and any Person that becomes a Related Person of such
Related Person thereafter.
"EXISTING CREDIT AGREEMENTS": the Credit Agreement, dated as of July
19, 1994, among the Borrower, the several banks and other financial
institutions from time to time parties thereto and the Chase Manhattan Bank
(as successor to Chemical Bank) as agent, and the $6,500,000 Promissory
Note, dated January 31, 1997 made by the Borrower for the benefit of Chase.
"EXTENSION OF CREDIT": as to any Lender, the making of (a) a Loan by
such Lender, (b) a Swing Line Loan or (c) the issuance of, or participation
in, a Letter of Credit by such Lender.
"FINANCING LEASE": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of the lessee.
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time.
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"GOVERNMENTAL AUTHORITY": any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GUARANTEE AND COLLATERAL AGREEMENT": the guarantee and collateral
agreement to be executed and delivered by the Borrower and its domestic
Subsidiaries, substantially in the form of Exhibit B, as the same may be
amended, supplemented or otherwise modified from time to time.
"GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING PERSON"),
any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to
induce the creation of which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
or other obligations (the "PRIMARY OBLIGATIONS") of any other third Person
(the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly,
including, without limitation, any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or
any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (iv) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; PROVIDED,
HOWEVER, that the term Guarantee Obligation shall not include endorsements
of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing
person as of any date of determination shall be deemed to be the lower of
(a) an amount equal to the then stated or determinable amount of the
primary obligation in respect of which such Guarantee Obligation is made
and (b) the maximum amount for which such guaranteeing person may be liable
pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which
such guaranteeing person may be liable are not stated or determinable, in
which case the amount of such Guarantee Obligation shall be such
guaranteeing person's maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith.
"GUARANTOR": any Person delivering a guarantee pursuant to the
Guarantee and Collateral Agreement.
"HEDGING AGREEMENT": with respect to any Person, any interest rate or
currency exchange rate swap agreement, interest or currency exchange rate
future, interest or currency exchange rate option, interest or currency
exchange rate cap or other interest or currency rate hedge arrangement, to
or under which such Person is a party or a beneficiary.
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"INDEBTEDNESS": of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of
property or services (other than trade liabilities and accrued expenses
incurred in the ordinary course of business and payable not more than 12
months after the incurrence thereof in accordance with customary
practices), (b) any other indebtedness of such Person which is evidenced by
a note, bond, debenture or similar instrument, (c) all obligations of such
Person under Financing Leases, (d) all obligations of such Person in
respect of acceptances issued or created for the account of such Person,
(e) all liabilities secured by any Lien on any property owned by such
Person even though such Person has not assumed or otherwise become liable
for the payment thereof, (f) unreimbursed drawings under letters of credit
and (g) for the purposes of subsection 8.2 (other than clauses (a) through
(f) and (h) thereof) and 9(e) only, all obligations or liabilities under
Hedging Agreements, PROVIDED that for the purposes of subsection 9(e), the
"principal amount" of the obligations of such Person in respect of any
Hedging Agreement at any time shall be the maximum aggregate amount (giving
effect to any netting agreements) that such Person would be required to pay
if such Hedging Agreement were terminated at such time. For the purposes
of any financial calculation hereunder, the amount of any Indebtedness at
any date shall be the principal or similar primary amount of such
obligation on such date, including capitalized interest (i.e., indebtedness
issued in lieu of cash payment of interest or interest on which interest is
accruing) and capitalized payment obligations with respect thereto, in each
such case, as of such date.
"INDENTURES": as defined in subsection 5.20.
"INSOLVENCY": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTEREST PAYMENT DATE": (a) as to any ABR Loan, the last day of each
March, June, September and December to occur while such Loan is
outstanding, (b) as to any Eurodollar Loan having an Interest Period of
three months or less, the last day of such Interest Period and (c) as to
any Eurodollar Loan having an Interest Period longer than three months,
each day which is three months, or a whole multiple thereof, after the
first day of such Interest Period and the last day of such Interest Period.
"INTEREST PERIOD": with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Loan and ending one, two, three, six or, if available, nine months
thereafter, as selected by the Borrower in its notice of borrowing or
notice of conversion, as the case may be, given with respect thereto;
and
(ii) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan and
ending one,
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two, three, six or, if available, nine months thereafter, as selected
by the Borrower by irrevocable notice to the Agent not less than three
Business Days prior to the last day of the then current Interest
Period with respect thereto;
PROVIDED that, all of the foregoing provisions relating to Interest Periods are
subject to the following:
(1) if any Interest Period pertaining to a Eurodollar Loan
would otherwise end on a day that is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless
the result of such extension would be to carry such Interest Period
into another calendar month in which event such Interest Period shall
end on the immediately preceding Business Day;
(2) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date; and
(3) any Interest Period pertaining to a Eurodollar Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day
of a calendar month.
"ISSUING LENDER": Chase or one of its Affiliates or another Lender or
Lenders designated by the Borrower and the Agent.
"KING-O-MATIC": King-O-Matic Industries Limited, a Canadian
subsidiary of the Borrower.
"L/C OBLIGATIONS": at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then outstanding Letters
of Credit and (b) the aggregate amount of drawings under Letters of Credit
which have not then been reimbursed pursuant to subsection.
"L/C PARTICIPANTS": the collective reference to all the Lenders
holding Commitments other than the Issuing Lender.
"LETTERS OF CREDIT": as defined in subsection.
"LEVERAGE RATIO": as of the end of each fiscal quarter of the
Borrower, with respect to the Borrower and its Subsidiaries on a
consolidated basis, the ratio of Consolidated Total Indebtedness as of such
date to Consolidated EBITDA for the four fiscal quarters of the Borrower
then ended.
"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any
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preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever which makes any property or
asset available for the payment or performance of any liability in priority
to the payment or performance of ordinary, unsecured creditors (including,
without limitation, any conditional sale or other title retention agreement
and any Financing Lease having substantially the same economic effect as
any of the foregoing).
"LOAN": any loan made by any Lender pursuant to this Agreement.
"LOAN DOCUMENTS": this Agreement, the Notes, the Applications and the
Security Agreements.
"LOAN PARTIES": the Borrower and each Subsidiary which is a party to
a Loan Document.
"MASCOT": Mascot Truck Parts Inc., a Canadian subsidiary of the
Borrower.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
business, operations, property, condition (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole or (b) the validity or
enforceability of this Agreement, any of the Notes or any Application or
any of the other Loan Documents or the material rights or remedies of the
Agent or the Lenders hereunder or thereunder.
"MATERIALS OF ENVIRONMENTAL CONCERN": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"NEW LENDING OFFICE": as defined in subsection 4.12(b).
"NET PROCEEDS": with respect to any asset sale, the net amount equal
to the aggregate amount received in cash (including any cash received by
way of deferred payment pursuant to a note receivable, other non-cash
consideration or otherwise, but only as and when such cash is so received)
in connection with such asset sale MINUS the sum of (i) the principal
amount of Indebtedness which is secured by any such asset (other than
Indebtedness assumed by the purchaser of such asset) and which is required
to be, and is, repaid in connection with the sale or disposition thereof
(other than Indebtedness outstanding hereunder), (ii) the reasonable fees
(including, without limitation, reasonable attorneys' fees), commissions
and other out-of-pocket expenses (as evidenced by supporting documentation
provided to the Agent and as reasonably approved by the Agent) incurred by
the Borrower in connection with such asset sale
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and (iii) federal, state and local taxes incurred by the Borrower in
connection with such sale, whether payable at such time or thereafter.
"1994 SENIOR SUBORDINATED NOTES": the senior subordinated notes due
2004, in aggregate principal amount at any time outstanding not exceeding
$120,000,000, issued by the Borrower pursuant to the Indenture dated as of
August 2, 1994.
"1995 SENIOR SUBORDINATED NOTES": the senior subordinated notes due
2004, in aggregate principal amount at any time outstanding not exceeding
$40,000,000, issued by the Borrower pursuant to the Indenture dated as of
June 1, 1995.
"NON-EXCLUDED TAXES": as defined in subsection 4.12(a).
"NON-U.S. LENDER": as the context requires, as defined in subsections
4.12(b) and 11.6(d).
"NOTES": the collective reference to the Revolving Credit Notes and
the Swing Line Note.
"PARTICIPANT": as defined in subsection 11.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"PERSON": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"PLAN": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"PROHIBITED TRANSACTION": a transaction that is prohibited under
Section 4975 of the Code or Section 406 of ERISA and not exempt under
Section 4975 of the Code or Section 408 of ERISA, respectively.
"PROPERTIES": as defined in subsection 5.16.
"REGISTER": as defined in subsection 11.6(d).
"REGULATION U": Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
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"REIMBURSEMENT OBLIGATION": the obligation of the Borrower to
reimburse the Issuing Lender pursuant to subSection for amounts drawn under
Letters of Credit.
"RELATED PERSON": (a) any Person who controls, is controlled by or
under common control with such Excluded Person; PROVIDED, HOWEVER, that for
purposes of this definition "control" means the beneficial ownership of
more than 50% of the total voting power of a Person normally entitled to
vote in the election of directors, managers or trustees, as applicable of a
Person and (b) as to any natural person, (i) such person's spouse, parents
and descendants (whether by blood or adoption, and including stepchildren)
and the spouses of any of such natural persons and (ii) any corporation,
partnership, trust or other Person in which no one has any interest
(directly or indirectly) except for any of such natural person, such
spouse, parents and descendants (whether by blood or adoption, and
including stepchildren) and the spouses of any of such natural persons.
"REORGANIZATION": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section
4241 of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
Section 4043.
"REQUIRED LENDERS": at any time, Lenders holding more than 50% of the
Commitments in effect at such time or, if the Commitments have then
terminated or are no longer in effect, the then outstanding Loans and the
then outstanding participations, or potential participations, in the
outstanding L/C Obligations (including, in the case of the Issuing Lender,
its remaining direct interest therein).
"REQUIREMENT OF LAW": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"RESPONSIBLE OFFICER": the chief executive officer, the president or
the chief financial officer of the Borrower.
"REVOLVING CREDIT LOANS": as defined in Section 2.1.
"REVOLVING CREDIT NOTES": as defined in Section 4.2(e).
"SECURITY AGREEMENTS": the collective reference to the Guarantee and
Collateral Agreement, any leasehold mortgages and all other security
documents hereafter delivered to the Agent granting a Lien on any asset or
assets of any Person to secure the obligations and liabilities of the
Borrower hereunder or under any of the
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other Loan Documents or to secure any guarantee of any such obligations and
liabilities.
"SENIOR SUBORDINATED NOTES": the collective reference to the 1994
Senior Subordinated Notes and the 1995 Senior Subordinated Notes.
"SENIOR SUBORDINATED NOTE INDENTURE": each of the respective
Indentures described in the definitions of "1994 Senior Subordinated Notes"
and "1995 Senior Subordinated Notes".
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"SOLVENT" and "SOLVENCY": with respect to any Person on a particular
date, the condition that on such date, (a) the fair value of the property
of such Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person, (b) the present
fair salable value of the assets of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured, (c) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond
such Person's ability to pay as such debts and liabilities mature, and (d)
such Person is not engaged in business or a transaction, and is not about
to engage in business or a transaction, for which such Person's property
would constitute an unreasonably small amount of capital.
"SPECIFIED PREFERRED STOCK": any preferred stock of the Borrower (as
designated in the Borrower's charter documents in effect on the date
hereof) issued to common stockholders from time to time (i) compliance with
the terms of which would not violate or be inconsistent with any of the
provisions of this Agreement and (ii) which does not have any mandatory
payment, dividend, redemption or similar covenants.
"STANDBY LETTER OF CREDIT": as defined in paragraph.
"SUBSIDIARY": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through
one or more intermediaries, or both, by such Person. Unless otherwise
qualified, all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.
"SWING LINE COMMITMENT": the Swing Line Lender's obligation to make
Swing Line Loans pursuant to subsection 2.4.
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"SWING LINE LENDER": Chase in its capacity as provider of the Swing
Line Loans.
"SWING LINE LOANS": as defined in subsection 2.4.
"SWING LINE NOTE": as defined in subsection 2.4.
"TERMINATION DATE": December 31, 2001.
"TRANSFEREE": as defined in subsection 11.6(f).
"TYPE": as to any Loan, its nature as an ABR Loan or a Eurodollar
Loan.
"UNIFORM CUSTOMS": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, as the same may be amended from time to time.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Notes or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms
partly defined in subsection 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF CREDIT COMMITMENTS
2.1 COMMITMENTS. (a) Subject to the terms and conditions hereof,
each Lender severally agrees to make revolving credit loans (each a "REVOLVING
CREDIT LOAN", collectively, "REVOLVING CREDIT LOANS") to the Borrower from time
to time during the Commitment Period in an aggregate principal amount at any one
time outstanding which, when added to such Lender's Commitment Percentage of the
then outstanding L/C Obligations and Swing Line Loans (after giving effect to
any repayment of Swing Line Loans at the time of the making of such Revolving
Credit Loans), does not exceed the amount of such Lender's Commitment.
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(b) The Revolving Credit Loans may from time to time be (i)
Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined
by the Borrower and notified to the Agent in accordance with subsections 2.2 or
4.4, as applicable, PROVIDED that no Revolving Credit Loan shall be made as a
Eurodollar Loan after the day that is one month prior to the Termination Date.
During the Commitment Period the Borrower may use the Commitments by borrowing,
prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all
in accordance with the terms and conditions hereof.
2.2 PROCEDURE FOR BORROWING. The Borrower may borrow under the
Commitments during the Commitment Period on any Business Day, PROVIDED that the
Borrower shall give the Agent, except as expressly set forth in subsections 3.4
and 4.8, irrevocable notice (which notice must be received by the Agent prior to
11:00 A.M., New York City time, (a) three Business Days prior to the requested
Borrowing Date, if all or any part of the requested Loans are to be initially
Eurodollar Loans or (b) one Business Day prior to the requested Borrowing Date,
otherwise), specifying (i) the amount to be borrowed, (ii) the requested
Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR
Loans or a combination thereof and (iv) if the borrowing is to be entirely or
partly of Eurodollar Loans, the respective amounts of each such Type of Loan and
the respective lengths of the initial Interest Periods therefor. Each borrowing
under the Commitments shall be in an amount equal to $1,000,000 or a whole
multiple of $500,000 in excess thereof (or, if the then aggregate Available
Commitments are less than $500,000, such lesser amount). Upon receipt of any
such notice from the Borrower, the Agent shall promptly notify each Lender
thereof. Each Lender will make the amount of its pro rata share of each
borrowing available to the Agent for the account of the Borrower at the office
of the Agent specified in subsection 11.2 prior to 1:00 P.M., New York City
time, on the Borrowing Date requested by the Borrower in funds immediately
available to the Agent, PROVIDED that, the Borrower shall give the Agent and the
Lenders irrevocable notice by 11:00 A.M. New York City time one Business Day
before the requested Borrowing Date, if the Closing Date is a Borrowing Date,
and on such date each Lender shall make such funds available to the Agent prior
to 10:00 A.M., New York City time. Such borrowing will then be made available
to the Borrower by the Agent crediting the account of the Borrower on the books
of such office with the aggregate of the amounts made available to the Agent by
the Lenders and in like funds as received by the Agent.
2.3 TERMINATION OR REDUCTION OF COMMITMENTS. The Borrower shall have
the right, upon not less than five Business Days' notice to the Agent, to
terminate the Commitments or, from time to time, to reduce the amount of the
Commitments. Any such reduction shall be in an amount equal to $1,000,000 or a
whole multiple of $1,000,000 in excess thereof and shall reduce permanently the
applicable Commitments then in effect, PROVIDED that no such termination or
reduction shall be permitted if, after giving effect thereto and to any
prepayments of the Revolving Credit Loans and Swing Line Loans made on the
effective date thereof, the aggregate principal amount of the Revolving Credit
Loans then outstanding, when added to the then outstanding L/C Obligations and
the then outstanding Swing Line Loans, would exceed the Commitments then in
effect.
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2.4 SWING LINE COMMITMENTS. (a) Subject to the terms and conditions
hereof, the Swing Line Lender agrees to make swing line loans (individually, a
"SWING LINE LOAN"; collectively, the "SWING LINE LOANS") to the Borrower from
time to time during the Commitment Period in an aggregate principal amount at
any one time outstanding not to exceed $3,000,000, PROVIDED that at no time may
the sum of the then outstanding Swing Line Loans, Revolving Credit Loans and L/C
Obligations exceed the Commitments then in effect. Amounts borrowed by the
Borrower under this subsection 2.4 may be repaid and, through but excluding the
Termination Date, reborrowed. All Swing Line Loans shall be made as ABR Loans
and shall not be entitled to be converted into Eurodollar Loans. The Borrower
shall give the Swing Line Lender irrevocable notice (which notice must be
received by the Swing Line Lender prior to 3:00 p.m., New York City time) on the
requested Borrowing Date specifying the amount of the requested Swing Line Loan
which shall be in an amount equal to $250,000 or a whole multiple of $50,000 in
excess thereof. The proceeds of the Swing Line Loan will be made available by
the Swing Line Lender to the Borrower at the office of the Swing Line Lender by
crediting the account of the Borrower at such office with such proceeds in
Dollars.
(b) The Borrower agrees that, upon the request to the Agent by the
Swing Line Lender made on or prior to the Closing Date or in connection with any
assignment pursuant to subsection 11.6, to evidence the Swing Line Loans the
Borrower will execute and deliver to the Swing Line Lender a promissory note
substantially in the form of Exhibit A-3, with appropriate insertions (as the
same may be amended, supplemented, replaced or otherwise modified from time to
time, the "SWING LINE NOTE"), payable to the order of the Swing Line Lender and
representing the obligation of the Borrower to pay the amount of the Swing Line
Commitment or, if less, the unpaid principal amount of the Swing Line Loans made
to the Borrower, with interest thereon as prescribed in subsection 4.6. The
Swing Line Note shall (a) be dated the Closing Date, (b) be stated to mature on
the Termination Date and (c) provide for the payment of interest in accordance
with subsection 4.6.
(c) The Swing Line Lender, at any time in its sole and absolute
discretion may, and, at any time as there shall be a Swing Line Loan outstanding
for more than seven Business Days, the Swing Line Lender shall, on behalf of the
Borrower (which hereby irrevocably directs and authorizes the Swing Line Lender
to act on its behalf), request each Lender, including the Swing Line Lender, to
make a Revolving Credit Loan as an ABR Loan in an amount equal to such Lender's
Commitment Percentage of the principal amount of all of the Swing Line Loans
(the "REFUNDED SWING LINE LOANS") outstanding on the date such notice is given;
PROVIDED that the provisions of this subsection shall not affect the obligations
of the Borrower to prepay Swing Line Loans in accordance with the provisions of
subsection 4.3. Unless the Commitments shall have expired or terminated for any
reason, including but not limited to, the occurrence of any of the events
described in paragraph (f) of Section 9 hereto with respect to the Borrower (in
which event the procedures of paragraph (d) of this subsection 2.4 shall apply),
each Lender will make the proceeds of its Revolving Credit Loan available to the
Agent for the account of the Swing Line Lender at the office of the Agent prior
to 12:00 Noon, New York City time, in funds immediately available on the
Business Day next succeeding the date such notice is given. The proceeds of
such Revolving Credit Loans shall be immediately applied to repay the Refunded
Swing Line Loans.
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(d) If the Revolving Credit Commitments shall expire or terminate
(for any reason, including but not limited to the occurrence of any of the
events described in paragraph (f) of Section 9 hereto with respect to the
Borrower) at any time while Swing Line Loans are outstanding, each Lender shall,
at the option of the Swing Line Lender exercised reasonably, either (i)
notwithstanding the expiration or termination of the Revolving Credit
Commitments, make a Revolving Credit Loan as an ABR Loan (which Revolving Credit
Loan shall be deemed a "Revolving Credit Loan" for all purposes of this
Agreement and the other Loan Documents) or (ii) purchase an undivided
participating interest in such Swing Line Loans, in either case in an amount
equal to such Lender's Commitment Percentage determined on the date of, and
immediately prior to, expiration or termination of the Commitments of the
aggregate principal amount of such Swing Line Loans. Each Lender will make the
proceeds of any Revolving Credit Loan made pursuant to the immediately preceding
sentence available to the Agent for the account of the Swing Line Lender at the
office of the Agent prior to 12:00 Noon, New York City time, in funds
immediately available on the Business Day next succeeding the date on which the
Commitments expire or terminate. The proceeds of such Revolving Credit Loans
shall be immediately applied to repay the Swing Line Loans outstanding on the
date of termination or expiration of the Commitments. In the event that the
Lenders purchase undivided participating interests pursuant to the first
sentence of this paragraph (d), each Lender shall immediately transfer to the
Swing Line Lender, in immediately available funds, the amount of its
participation.
(e) Whenever, at any time after the Swing Line Lender has received
from any Lender such Lender's participating interest in a Swing Line Loan and
the Swing Line Lender receives any payment on account thereof, the Swing Line
Lender will distribute to such Lender its participating interest in such amount
(appropriately adjusted, in the case of interest payments, to reflect the period
of time during which such Lender's participating interest was outstanding and
funded); PROVIDED, HOWEVER, that in the event that such payment received by the
Swing Line Lender is required to be returned, such Lender will return to the
Swing Line Lender any portion thereof previously distributed by the Swing Line
Lender to it.
(f) Notwithstanding anything herein to the contrary, the Swing Line
Lender shall not be obligated to make any Swing Line Loan if the conditions set
forth in subsection 6.2 have not been satisfied.
SECTION 3. LETTERS OF CREDIT
3.1 L/C COMMITMENT. (a) Subject to the terms and conditions hereof,
the Issuing Lender, in reliance on the agreements of the other Lenders set forth
in subsection , agrees to issue letters of credit ("LETTERS OF CREDIT") for the
account of the Borrower on any Business Day during the Commitment Period in such
form as may be approved from time to time by the Issuing Lender; PROVIDED that
the Issuing Lender shall have no obligation to issue any Letter of Credit if,
after giving effect to such issuance, (i) the L/C Obligations would exceed
$10,000,000 or (ii) the aggregate Available Commitments of all Lenders would be
less than zero.
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(b) Each Letter of Credit shall:
(i) be denominated in Dollars and shall be either (1) a
standby letter of credit issued to support obligations of the Borrower
and its Subsidiaries, contingent or otherwise, incurred in the
ordinary course of its business (a "STANDBY LETTER OF CREDIT"), or (2)
a commercial letter of credit issued to provide a primary means of
payment in respect of the purchase of goods or services by the
Borrower and its Subsidiaries in the ordinary course of business (a
"COMMERCIAL LETTER OF CREDIT"); and
(ii) expire no later than the earlier of (x) the date that is
12 months after the date of its issuance and (y) the fifth Business
Day prior to the Termination Date.
(c) Each Letter of Credit shall be subject to the Uniform Customs
and, to the extent not inconsistent therewith, the laws of the State of New
York.
(d) The Issuing Lender shall not at any time be obligated to issue
any Letter of Credit hereunder if such issuance would conflict with, or cause
the Issuing Lender or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
(e) As of the Closing Date, any and all letters of credit issued and
outstanding under the Existing Credit Agreements shall be deemed to have been
issued hereunder and be deemed Letters of Credit for all purposes hereof.
3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. The Borrower may
from time to time request that the Issuing Lender issue a Letter of Credit by
delivering to the Issuing Lender at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Lender, and
such other certificates, documents and other papers and information as the
Issuing Lender may reasonably request. Upon receipt of any Application, the
Issuing Lender will process such Application and the certificates, documents and
other papers and information delivered to it in connection therewith in
accordance with its customary procedures and shall issue the Letter of Credit
requested thereby not later than four Business Days (or such later date as the
Borrower shall request) after its receipt of the Application therefor and all
such other certificates, documents and other papers and information relating
thereto as the Issuing Lender may reasonably request (but in no event shall the
Issuing Lender be required to issue any Letter of Credit earlier than three
Business Days after its receipt of the Application therefor and all such other
certificates, documents and other papers and information relating thereto) by
issuing the original of such Letter of Credit to the beneficiary thereof or as
otherwise may be agreed by the Issuing Lender and the Borrower. The Issuing
Lender shall furnish a copy of such Letter of Credit to the Borrower promptly
following the issuance thereof.
3.3 L/C PARTICIPATIONS. (a) The Issuing Lender irrevocably agrees
to grant and hereby grants to each L/C Participant, and, to induce the Issuing
Lender to issue Letters
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of Credit hereunder, each L/C Participant irrevocably agrees to accept and
purchase and hereby accepts and purchases from the Issuing Lender, on the terms
and conditions hereinafter stated, for such L/C Participant's own account and
risk an undivided interest equal to such L/C Participant's Commitment Percentage
in the Issuing Lender's obligations and rights under each Letter of Credit
issued hereunder and the amount of each draft paid by the Issuing Lender
thereunder. Each L/C Participant unconditionally and irrevocably agrees with the
Issuing Lender that, if a draft is paid under any Letter of Credit for which the
Issuing Lender is not reimbursed in full by the Borrower in accordance with the
terms of this Agreement, such L/C Participant shall pay to the Issuing Lender
upon demand at the Issuing Lender's address for notices specified herein an
amount equal to such L/C Participant's Commitment Percentage of the amount of
such draft, or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Lender pursuant to subsection 3.3(a) in respect of any unreimbursed
portion of any payment made by the Issuing Lender under any Letter of Credit is
paid to the Issuing Lender within three Business Days after the date such
payment is due, such L/C Participant shall pay to the Issuing Lender on demand
an amount equal to the product of (i) such amount, times (ii) the daily average
Federal Funds Effective Rate (as defined in the definition of ABR in subsection
1.1) during the period from and including the date such payment is required to
be made to the date on which such payment is made available to the Issuing
Lender, times (iii) a fraction the numerator of which is the number of days that
elapse during such period and the denominator of which is 360. If any such
amount required to be paid by any L/C Participant pursuant to paragraph 3.3(a)
is not in fact made available to the Issuing Lender by such L/C Participant
within three Business Days after the date such payment is due, the Issuing
Lender shall be entitled to recover from such L/C Participant, on demand, such
amount with interest thereon calculated from such due date at the rate per annum
applicable to ABR Loans hereunder. A certificate of the Issuing Lender
submitted to any L/C Participant with respect to any amounts owing under this
subsection shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Lender has made payment
under any Letter of Credit and has received from any L/C Participant its pro
rata share of such payment in accordance with subsection 3.3(a), the Issuing
Lender receives any payment related to such Letter of Credit (whether directly
from the Borrower or otherwise, including proceeds of collateral applied thereto
by the Issuing Lender), or any payment of interest on account thereof, the
Issuing Lender will distribute to such L/C Participant its pro rata share
thereof; PROVIDED, HOWEVER, that in the event that any such payment received by
the Issuing Lender shall be required to be returned by the Issuing Lender, such
L/C Participant shall return to the Issuing Lender the portion thereof
previously distributed by the Issuing Lender to it.
3.4 REIMBURSEMENT OBLIGATION OF THE BORROWER. (a) The Borrower
agrees to reimburse the Issuing Lender on each date on which the Issuing Lender
notifies the Borrower of the date and amount of a draft presented under any
Letter of Credit and paid by the Issuing Lender for the amount of (i) such draft
so paid and (ii) any taxes, fees, charges or other costs or expenses incurred by
the Issuing Lender in connection with such payment. Each such
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payment shall be made to the Issuing Lender at its address for notices specified
herein in Dollars and in immediately available funds.
(b) Interest shall be payable on any and all amounts remaining unpaid
by the Borrower under this subsection from the date such amounts become payable
(whether at stated maturity, by acceleration or otherwise) until payment in full
at the rate which would be payable on any outstanding ABR Loans which were then
overdue.
(c) Each drawing under any Letter of Credit shall constitute a
request by the Borrower to the Agent for a borrowing pursuant to subsection 2.2
of ABR Loans in the amount of such drawing. The requirement of one Business
Day's prior notice for an ABR Loan set forth in subsection 2.2 shall not apply
to any borrowing under this subsection 3.4 in respect of a drawing under any
Letter of Credit. The Borrowing Date with respect to such borrowing shall be
the date of such drawing.
3.5 OBLIGATIONS ABSOLUTE. (a) To the fullest extent permitted by
applicable law, the Borrower agrees that the Borrower's obligations under this
Section 3 shall be absolute and unconditional under any and all circumstances
and irrespective of any set-off, counterclaim or defense to payment which the
Borrower may have or have had against the Issuing Lender or any beneficiary of a
Letter of Credit.
(b) To the fullest extent permitted by applicable law, the Borrower
also agrees with the Issuing Lender that the Issuing Lender shall not be
responsible for, and the Borrower's Reimbursement Obligations under subsection
3.4(a) shall not be affected by (i) the validity or genuineness of documents or
of any endorsements thereon, even though such documents shall in fact prove to
be invalid, fraudulent or forged, or (ii) any dispute between or among the
Borrower and any beneficiary of any Letter of Credit or any other party to which
such Letter of Credit may be transferred or (iii) any claims whatsoever of the
Borrower against any beneficiary of such Letter of Credit or any such
transferee.
(c) To the fullest extent permitted by applicable law, the Borrower
agrees that the Issuing Lender shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except for
errors or omissions caused by the Issuing Lender's gross negligence or willful
misconduct.
(d) To the fullest extent permitted by applicable law, the Borrower
agrees that any action taken or omitted by the Issuing Lender under or in
connection with any Letter of Credit or the related drafts or documents, if done
in the absence of gross negligence or willful misconduct and in accordance with
the standards of care specified in the Uniform Commercial Code of the State of
New York, shall be binding on the Borrower and shall not result in any liability
of the Issuing Lender to the Borrower.
3.6 LETTER OF CREDIT PAYMENTS. If any draft shall be presented for
payment under any Letter of Credit, the Issuing Lender shall promptly notify the
Borrower and each L/C Participant of the date and amount thereof. The
responsibility of the Issuing Lender to
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the Borrower in connection with any draft presented for payment under any Letter
of Credit shall, in addition to any payment obligation expressly provided for in
such Letter of Credit, be limited to determining that the documents (including
each draft) delivered under such Letter of Credit in connection with such
presentment are in conformity with such Letter of Credit.
3.7 APPLICATION. To the extent that any provision of any Application
related to any Letter of Credit is inconsistent with the provisions of this
Section 3, the provisions of this Section 3 shall apply.
SECTION 4. GENERAL PROVISIONS APPLICABLE
TO LOANS AND LETTERS OF CREDIT
4.1 FEES. (a) The Borrower agrees to pay to the Agent for the
account of each Lender a fee for the period from and including the Closing Date
to the Termination Date, at the rate indicated on Schedule A hereto
corresponding to the Leverage Ratio in effect from time to time on the average
daily Available Commitment of such Lender during the period for which payment is
made, payable quarterly in arrears on the last day of each March, June,
September and December and on the Termination Date PROVIDED that for the period
from the Closing Date to the first Adjustment Date, the commitment fee rate
shall be .375%.
(b) The Borrower shall pay to the Agent, for the account of the
Issuing Lender a fronting fee with respect to each Letter of Credit computed at
a rate per annum equal to 1/8 of 1% on the daily average undrawn amount of such
Letter of Credit. Such fronting fee shall be payable quarterly in arrears on
the last day of each March, June, September and December and on the Termination
Date and shall be nonrefundable.
(c) The Borrower shall pay to the Agent, for the account of the
Issuing Lender and the L/C Participants, a letter of credit commission with
respect to each Letter of Credit on the daily average undrawn amount of such
Letter of Credit, computed at a rate per annum equal to the Applicable Margin
for Loans which are Eurodollar Loans. Such fee shall be payable to the L/C
Participants and the Issuing Lender to be shared ratably among them in
accordance with their respective Commitment Percentages. Such commissions shall
be payable quarterly in arrears on the last day of each March, June, September
and December and on the Termination Date and shall be nonrefundable.
(d) In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse the Issuing Lender for such normal and customary costs
and expenses as are incurred or charged by the Issuing Lender in issuing,
effecting payment under, amending or otherwise administering any Letter of
Credit.
(e) The Borrower agrees to pay to Chase the amounts set forth in the
Fee Letter dated December 20, 1996 between Chase, CSI and the Borrower in the
amounts and on the dates set forth therein.
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4.2 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The Borrower hereby
unconditionally promises to pay to the Agent for the account of each Lender the
then unpaid principal amount of each Loan of such Lender, on the Termination
Date (or such earlier date on which the Loans become due and payable pursuant to
Section 9). The Borrower hereby further agrees to pay interest on the unpaid
principal amount of the Loans made to it from time to time outstanding from the
date hereof until payment in full thereof at the rates per annum, and on the
dates, set forth in subsection 4.6.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of the Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.
(c) The Agent, acting for this purpose as an agent of the Borrower,
shall maintain the Register pursuant to subsection 11.6(f) and a subaccount
therein for each Lender, in which shall be recorded (i) the amount of each Loan
and each Obligation evidenced by a Note made hereunder, the Type thereof and, in
the case of Eurodollar Loans, each Interest Period applicable thereto, (ii) each
continuation thereof and each conversion of all or a portion thereof to another
Type, (iii) the amount of any principal or interest due and payable or to become
due and payable from the Borrower to each Lender hereunder and (iv) both the
amount of any sum received by the Agent hereunder from the Borrower and each
Lender's share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to subsection 4.2(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; PROVIDED, HOWEVER, that the
failure of any Lender or the Agent to maintain the Register or any such account,
as the case may be, or any error therein, shall not in any manner affect any of
the obligations of the Borrower hereunder, including, without limitation, the
obligation to repay (with applicable interest) the Loans made to the Borrower by
such Lender in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon request to the Agent by any
Lender, the Borrower will execute and deliver to such Lender a promissory note
of the Borrower evidencing the Loans of such Lender, substantially in the form
of Exhibit A-1, with appropriate insertions as to date and principal amount (a
"REVOLVING CREDIT NOTE"), payable to the order of such Lender and representing
the obligation of the Borrower to pay a principal amount equal to the aggregate
unpaid principal amount of all Loans of such Lender, with interest on the unpaid
principal amount thereof from time to time outstanding under such Note as set
forth in subsection 4.6. A Note and the Obligation evidenced thereby may be
assigned or otherwise transferred in whole or in part only by registration of
such assignment or transfer of such Note and the Obligation evidenced thereby in
the Register (and each Note shall expressly so provide). Any assignment or
transfer of all or part of an Obligation evidenced by a Note shall be registered
in the Register only upon surrender for registration of assignment or transfer
of the Note evidencing such Obligation, accompanied by an Assignment and
Acceptance substantially in the form of Exhibit E duly executed by the
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Assignor thereof, and thereupon one or more new Notes shall be issued to the
designated Assignee and the old Note shall be returned by the Agent to the
Borrower marked "cancelled." No assignment of a Note and the obligation
evidenced thereby shall be effective unless it shall have been recorded in the
Register by the Agent as provided in this subsection 4.2(e).
Each Lender is hereby authorized to record the date, Type and amount of each
Loan made by such Lender, each continuation thereof, each conversion of all or a
portion thereof to another Type, the date and amount of each payment or
repayment of principal thereof and, in the case of Eurodollar Loans, the length
of each Interest Period with respect thereto, on the schedule annexed to and
constituting a part of any Revolving Credit Note requested by it to evidence
such Loan, and any such recordation shall constitute PRIMA FACIE evidence of the
accuracy of the information so recorded, PROVIDED that the failure by any Lender
to make any such recordation or any error in any such recordation shall not in
any manner affect any of the obligations of the Borrower hereunder, including,
without limitation, the obligation to repay (with applicable interest) the Loans
made to the Borrower by such Lender in accordance with the terms of this
Agreement.
4.3 OPTIONAL AND MANDATORY PREPAYMENTS. (a) The Borrower may at any
time and from time to time prepay the Loans made to it, in whole or in part,
without premium or penalty, upon at least three Business Days' in the case of
Eurodollar Loans, or one Business Day's in the case of ABR Loans (including
Swing Line Loans), irrevocable notice to the Agent, specifying whether the
prepayment is (i) of Revolving Credit Loans or Swing Line Loans, or a
combination thereof, and in each case if a combination thereof, the amount
allocable to each, (ii) the date and amount of prepayment of such Loan(s) and
(iii) whether the prepayment is of Eurodollar Loans, ABR Loans or a combination
thereof, and, if of a combination thereof, the amount allocable to each. Upon
receipt of any such notice the Agent shall promptly notify each affected Lender
thereof. If any such notice is given, the amount specified in such notice shall
be due and payable on the date specified therein, together with any amounts
payable pursuant to subsection 4.13. Partial voluntary prepayments shall be in
an aggregate principal amount of $250,000 or a whole multiple of $250,000 in
excess thereof.
(b) If at any time the sum of the Loans and the L/C Obligations
exceeds the Commitments, the Borrower shall make a payment in the amount of such
excess which payment shall be applied FIRST, to the payment of the Swing Line
Loans then outstanding, SECOND, to the payment of any Revolving Credit Loans
then outstanding, THIRD, to payment of any Reimbursement Obligations then
outstanding and LAST, to cash collateralize any outstanding Letters of Credit on
terms reasonably satisfactory to the Required Lenders. The application of
prepayments of Loans referred to in the preceding sentence shall be made first
to ABR Loans and second to Eurodollar Loans.
(c) If, subsequent to the Closing Date, the Borrower or any of its
Subsidiaries shall receive Net Proceeds from any asset sale or other disposition
(including as a result of condemnation or casualty) permitted by subsection
8.6(b), then 100% of such Net Proceeds shall on the first Business Day after
receipt thereof, be applied toward the prepayment of the Loans and the permanent
reduction of the Commitments in accordance with the prepayment
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provisions of 4.3(b); PROVIDED that such Net Proceeds shall not be required to
be so applied to the extent the Borrower delivers to the Agent a certificate
that it intends to use such Net Proceeds to acquire fixed or capital assets for
the Borrower or any of its Subsidiaries within 330 days of receipt of such Net
Proceeds, it being expressly understood that any Net Proceeds not so reinvested
shall be applied to prepay the Loans and permanently reduce the Commitments on
the date 330 days after the receipt thereof.
(d) In the event of a Change of Control, not later than five days
thereafter, (A) the Commitments shall be terminated, (B) the Borrower shall
prepay in full all Loans then outstanding together with interest accrued to the
date of such prepayment and any amounts payable under subsection 4.13, (C) the
Borrower shall repay any Reimbursement Obligations then outstanding and (D) the
Borrower shall cash collateralize any outstanding L/C Obligations on terms
reasonably satisfactory to the Required Lenders.
4.4 CONVERSION AND CONTINUATION OPTIONS. (a) The Borrower may elect
from time to time to convert Eurodollar Loans to ABR Loans by giving the Agent
at least one Business Day's prior irrevocable notice of such election, PROVIDED
that any such conversion may only be made on the last day of an Interest Period
with respect thereto. The Borrower may elect from time to time to convert ABR
Loans to Eurodollar Loans by giving the Agent at least three Business Days'
prior irrevocable notice of such election. Any such notice of conversion to
Eurodollar Loans shall specify the length of the initial Interest Period or
Interest Periods therefor. Upon receipt of any such notice the Agent shall
promptly notify each affected Lender thereof. All or any part of outstanding
Eurodollar Loans and ABR Loans may be converted as provided herein, PROVIDED
that (i) no Loan may be converted into a Eurodollar Loan when any Event of
Default has occurred and is continuing and the Agent has or the Required Lenders
have determined that such a conversion is not appropriate and (ii) no Loan may
be converted into a Eurodollar Loan after the date that is one month prior to
the Termination Date.
(b) Any Eurodollar Loans may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower giving
notice to the Agent, in accordance with the applicable provisions of the term
"Interest Period" set forth in subsection 1.1, of the length of the next
Interest Period to be applicable to such Loans; PROVIDED that no Eurodollar Loan
may be continued as such (i) when any Event of Default has occurred and is
continuing and the Agent has or the Required Lenders have determined that such a
continuation is not appropriate or (ii) after the date that is one month prior
to the Termination Date and PROVIDED, FURTHER, that if the Borrower shall fail
to give such notice or if such continuation is not permitted such Loans shall be
automatically converted to ABR Loans on the last day of such then expiring
Interest Period.
4.5 MAXIMUM NUMBER OF TRANCHES. All borrowings, conversions and
continuations of Loans hereunder and all selections of Interest Periods
hereunder shall be made pursuant to such elections so that, after giving effect
thereto, the aggregate number of Eurodollar Tranches outstanding at any time
shall not exceed twelve.
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4.6 INTEREST RATES AND PAYMENT DATES. (a) Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin.
(b) Each ABR Loan shall bear interest for each day at a rate per
annum equal to the ABR for such day plus the Applicable Margin.
(c) If all or a portion of (i) the principal amount of any Loan or
Reimbursement Obligation, (ii) any interest payable thereon or (iii) any
commitment fee or other amount payable hereunder shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise), such overdue
amount shall bear interest at a rate per annum which is (x) in the case of
overdue principal, the rate that would otherwise be applicable thereto pursuant
to the foregoing provisions of this subsection plus 2% or (y) in the case of
overdue interest, commitment fee or other amount, the rate described in
paragraph (b) of this subsection plus 2%, in each case from the date of such
non-payment until such amount is paid in full (as well after as before
judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date, PROVIDED that interest accruing pursuant to paragraph (c) of this
subsection shall be payable from time to time on demand.
4.7 COMPUTATION OF INTEREST AND FEES. (a) Commitment fees, Letter of
Credit fees and, whenever it is calculated on the basis of the Prime Rate
component of the ABR, interest shall be calculated on the basis of a 365- (or
366-, as the case may be) day year for the actual days elapsed; and, otherwise,
interest shall be calculated on the basis of a 360-day year for the actual days
elapsed. The Agent shall as soon as practicable notify the Borrower and the
Lenders of each determination of a Eurodollar Rate. Any change in the interest
rate on a Loan resulting from a change in the ABR or the Eurocurrency Reserve
Requirements shall become effective as of the opening of business on the day on
which such change becomes effective. The Agent shall as soon as practicable
notify the Borrower and the Lenders of the effective date and the amount of each
such change in interest rate.
(b) To the fullest extent permitted by applicable law, each
determination of an interest rate by the Agent pursuant to any provision of this
Agreement shall be conclusive and binding on the Borrower and the Lenders in the
absence of manifest error. The Agent shall, at the request of the Borrower,
deliver to the Borrower a statement showing the quotations used by the Agent in
determining any interest rate pursuant to subsection 4.6(a), (b) or (c).
4.8 INABILITY TO DETERMINE INTEREST RATE. If prior to the first day
of any Interest Period, the Agent shall have determined (which determination
shall be conclusive and binding upon the Borrower) that, by reason of
circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate for such Interest Period, the
Agent shall give telecopy or telephonic notice thereof to the Borrower and the
Lenders as soon as practicable thereafter. If such notice is given (x) any
Eurodollar Loans requested to be made on the first day of such Interest Period
shall be made as ABR Loans, (y) any Loans that were to have been converted on
the first day of such Interest Period
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to Eurodollar Loans shall be converted to or continued as ABR Loans and (z) any
outstanding Eurodollar Loans with respect to which the Interest Period shall
have expired shall be converted, on the first day of such Interest Period, to
ABR Loans. Until such notice has been withdrawn by the Agent, no further
Eurodollar Loans shall be made or continued as such, nor shall the Borrower have
the right to convert ABR Loans to Eurodollar Loans.
4.9 PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing by the
Borrower from the Lenders hereunder, each payment by the Borrower on account of
any commitment fee hereunder and any reduction of the Commitments of the
Lenders shall be made (in each case, other than in respect of the Swing Line
Loans) pro rata according to the respective Commitment Percentages of the
Lenders. Each payment (including each prepayment) by the Borrower on account of
principal of and interest on the Loans (other than the Swing Line Loans) shall
be made pro rata according to the respective outstanding principal amounts of
the Loans then held by the Lenders. All payments (including prepayments) to be
made by the Borrower hereunder, whether on account of principal, interest, fees
or otherwise, shall be made without set off or counterclaim and shall be made
prior to 12:00 Noon, New York City time, on the due date thereof to the Agent,
for the account of the Lenders, at the Agent's office specified in subsection
12.2, in Dollars and in immediately available funds. The Agent shall distribute
such payments to the Lenders promptly upon receipt in like funds as received. If
any payment hereunder becomes due and payable on a day other than a Business
Day, such payment shall be extended to the next succeeding Business Day, and,
with respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension.
(b) Unless the Agent shall have been notified in writing by any
Lender prior to a borrowing that such Lender will not make the amount that would
constitute its Commitment Percentage of such borrowing available to the Agent,
the Agent may assume that such Lender is making such amount available to the
Agent, and the Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such amount is not made available to
the Agent by the required time on the Borrowing Date therefor, such Lender shall
pay to the Agent, on demand, such amount with interest thereon at a rate equal
to the daily average Federal Funds Effective Rate for the period until such
Lender makes such amount immediately available to the Agent. A certificate of
the Agent submitted to any Lender with respect to any amounts owing under this
subsection shall be conclusive in the absence of manifest error. If such
Lender's Commitment Percentage of such borrowing is not made available to the
Agent by such Lender within three Business Days of such Borrowing Date, the
Agent shall also be entitled to recover such amount with interest thereon at the
rate per annum applicable to ABR Loans hereunder, on demand, from the Borrower.
4.10 ILLEGALITY. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law (other than a requirement of
the Certificate of Incorporation, By-Laws or other organizational or governing
documents of the relevant Lender) or in the interpretation or application
thereof (except as aforesaid) shall make it unlawful for any Lender to make or
maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment
of such Lender hereunder to make Eurodollar Loans,
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continue Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans
shall forthwith be cancelled and (b) such Lender's Loans then outstanding as
Eurodollar Loans, if any, shall be converted automatically to ABR Loans on the
respective last days of the then current Interest Periods with respect to such
Loans or within such earlier period as required by law. If any such conversion
of a Eurodollar Loan occurs on a day which is not the last day of the then
current Interest Period with respect thereto, the Borrower agrees to pay to such
Lender such amounts, if any, as may be required pursuant to subsection 4.13.
4.11 REQUIREMENTS OF LAW. (a) If the adoption of or any change in
any Requirement of Law (other than a requirement of the Certificate of
Incorporation, By-Laws or other organizational or governing documents of the
relevant Lender) or in the interpretation or application thereof (except as
aforesaid) or compliance by any Lender with any request or directive (whether or
not having the force of law) from any central bank or other Governmental
Authority having jurisdiction over such Lender made subsequent to the date
hereof (or, in the case of any Lender that becomes a party hereto after the
Closing Date, subsequent to the date on which such party becomes a Lender):
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Note, any Letter of Credit, any
Application or any Eurodollar Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for
Non-Excluded Taxes covered by subsection 4.12 and changes in the rate
of tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay such Lender,
upon its demand, any additional amounts necessary to compensate such Lender for
such increased cost or reduced amount receivable.
(b) If any Lender shall have determined in good faith that the
adoption of or any change in any Requirement of Law (other than a requirement of
the Certificate of Incorporation, By-Laws or other organizational or governing
documents of the relevant Lender) regarding capital adequacy or in the
interpretation or application thereof (except as aforesaid) or compliance by
such Lender or any corporation controlling such Lender with any request or
directive regarding capital adequacy (whether or not having the force of law)
from any Governmental Authority made subsequent to the date hereof (or, in the
case of any Lender that becomes a party hereto after the Closing Date,
subsequent to the date on which
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such party becomes a Lender) shall have the effect of reducing the rate of
return on such Lender's or such corporation's capital as a consequence of its
obligations hereunder or under any Letter of Credit to a level below that which
such Lender or such corporation could have achieved but for such adoption,
change or compliance (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy) by an amount deemed by
such Lender to be material, then the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such reduction,
PROVIDED that the Borrower shall be not be obligated to compensate any Lender
pursuant to this subsection 4.11 for amounts accruing prior to the date which is
90 days before the Borrower is notified of such event, it being understood that
such notice need not include a computation of amounts in respect thereof.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify the Borrower, through the
Agent, of the event by reason of which it has become so entitled. A certificate
as to any additional amounts payable pursuant to this subsection 4.11 submitted
by such Lender, through the Agent, to the Borrower shall, to the fullest extent
permitted by applicable law, be conclusive in the absence of manifest error.
This covenant shall survive the termination of this Agreement and the payment of
the Loans and all other amounts payable hereunder.
4.12 TAXES. (a) All payments made by the Borrower under this
Agreement and the Notes shall be made free and clear of, and without deduction
or withholding for or on account of, any present or future income, stamp or
other taxes, levies, imposts, duties, charges, fees, deductions or withholdings,
now or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Agent or any Lender as a result of a
present or former connection between the Agent or such Lender and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such
connection arising solely from the Agent or such Lender having executed,
delivered or performed its obligations or received a payment under, or enforced,
this Agreement or the Notes). If any such non-excluded taxes, levies, imposts,
duties, charges, fees, deductions or withholdings ("NON-EXCLUDED TAXES") are
required to be withheld from any amounts payable to the Agent or any Lender
hereunder or under the Notes, the amounts so payable to the Agent or such Lender
shall be increased to the extent necessary to yield to the Agent or such Lender
(after payment of all Non-Excluded Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this Agreement and
the Notes, PROVIDED, HOWEVER, that the Borrower shall not be required to
increase any such amounts payable to any Lender that is not organized under the
laws of the United States of America or a state thereof if such Lender fails to
comply with the requirements of paragraph (b) of this subsection. Whenever any
Non-Excluded Taxes are payable by the Borrower, as promptly as possible
thereafter the Borrower shall send to the Agent for its own account or for the
account of such Lender, as the case may be, a certified copy of an original
official receipt received by the Borrower showing payment thereof. If the
Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing
authority or fails to remit to the Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Agent and the Lenders for
any incremental taxes, interest or
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penalties that may become payable by the Agent or any Lender as a result of any
such failure. The agreements in this subsection shall survive the termination of
this Agreement and the payment of the Notes and all other amounts payable
hereunder.
(b) Each Lender (or Transferee) that is not a citizen or resident of
the United States of America, a corporation or partnership created or organized
under the laws of the United States of America, or any estate that is subject to
Federal income taxation regardless of the source of its income or any trust
which is subject to the supervision of a court within the United States and the
control of a United States fiduciary as described in section 7701(a)(30) of the
Code (a "NON-U.S. LENDER") shall deliver to the Borrower and the Agent two
copies of either U.S. Internal Revenue Service Form 1001 or Form 4224, or, in
the case of a Non-U.S. Lender claiming exemption from U.S. Federal withholding
tax under Section 871(h) or 881(c) of the Code with respect to payments of
"portfolio interest", a Form W-8, or any subsequent versions thereof or
successors thereto (and, if such Non-U.S. Lender delivers a Form W-8, a
certificate in the form of Exhibit G, representing that such Non-U.S. Lender is
not a bank for purposes of Section 881(c) of the Code, is not a 10-percent
shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the
Borrower and is not a controlled foreign corporation related to the Borrower
(within the meaning of Section 864(d)(4) of the Code)), properly completed and
duly executed by such Non-U.S. Lender claiming complete exemption from U.S.
Federal withholding tax on all payments by the Borrower under this Agreement and
the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender
on or before the date it becomes a party to this Agreement (or, in the case of a
Transferee that is a participation holder, on or before the date such
participation holder becomes a Transferee hereunder) and on or before the date,
if any, such Non-U.S. Lender changes its applicable lending office by
designating a different lending office (a "NEW LENDING OFFICE"). In addition,
each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered by such Non-U.S. Lender.
Notwithstanding any other provision of this subsection 4.12(b), a Non-U.S.
Lender that has previously complied with this subsection 4.12(b) shall not be
required to deliver any Form 1001 or Form 4224 pursuant to this subsection
4.12(b) that such Non-U.S. Lender is not legally able to deliver.
4.13 INDEMNITY. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may
reasonably sustain or incur as a consequence of (a) default by the Borrower in
making a borrowing of, conversion into or continuation of Eurodollar Loans after
the Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement or (b) the making of a prepayment of Eurodollar
Loans on a day which is not the last day of an Interest Period with respect
thereto. Such indemnification shall be an amount equal to the excess, if any,
of (i) the amount of interest which would have accrued on the amount so prepaid,
or not so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Lender
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on such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market. In the event that the
Borrower defaults in making any prepayment after the Borrower has given a notice
thereof in accordance with the provisions of this Agreement, any Eurodollar
Loans in respect of which such notice has been given shall be converted
automatically to ABR Loans on the date such prepayment would have been made
pursuant to such notice. This covenant shall survive the termination of this
Agreement and the payment of the Notes and all other amounts payable hereunder
until the second anniversary of such termination and payment.
4.14 CHANGE OF LENDING OFFICE. Each Lender agrees that if it makes
any demand for payment under subsection 4.11 or 4.12(a), it shall use reasonable
efforts (consistent with its internal policy and legal and regulatory
restrictions and so long as such efforts would not be disadvantageous to it, as
determined in its sole discretion) to designate a different lending office if
the making of such a designation would reduce or obviate the need for the
Borrower to make payments under subsection 4.11 or 4.12(a).
SECTION 5. REPRESENTATIONS AND WARRANTIES
To induce the Agent and each Lender to enter into this Agreement and
to make the Extensions of Credit requested to be made by it (including the
initial Extension of Credit requested to be made by it on the Closing Date), the
Borrower hereby represents and warrants, on the Closing Date and on every
Borrowing Date thereafter, to the Agent and each Lender that:
5.1 FINANCIAL CONDITION. (a) (i) the consolidated balance sheets of
the Borrower and its consolidated Subsidiaries as of December 31, 1994 and
December 31, 1995 and the related consolidated statements of income and of cash
flows for the fiscal years ended on such dates, reported on by Ernst & Young,
copies of which have heretofore been furnished to each Lender, are complete and
correct and present fairly the consolidated financial condition of the Borrower
and its consolidated Subsidiaries as at such dates, and the consolidated results
of their operations and their consolidated cash flows for the fiscal years then
ended, (ii) the unaudited consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at September 30, 1996 and the related unaudited
consolidated statements of income and of cash flows for the nine-month period
ended on such date, certified by a Responsible Officer, copies of which have
heretofore been furnished to each Lender, are complete and correct and present
fairly the consolidated financial condition of the Borrower and its consolidated
Subsidiaries as at such date, and the consolidated results of their operations
and their consolidated cash flows for the nine-month period then ended (subject
to normal year-end audit adjustments). All such financial statements, including
the related schedules and notes thereto, have been prepared in accordance with
GAAP applied consistently throughout the periods involved (except as approved by
such accountants or Responsible Officer, as the case may be, and as disclosed
therein). Neither the Borrower nor any of its consolidated Subsidiaries had, at
the date of the most recent balance sheet referred to above, any material
Guarantee Obligation, contingent liability or liability for taxes, or any
long-term lease or other material agreement or unusual forward or long-term
commitment,
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including, without limitation, any interest rate or foreign currency swap or
exchange transaction, which is not reflected in the foregoing statements or in
the notes thereto. During the period from December 31, 1995 to and including
the Closing Date there has been no sale, transfer or other disposition by the
Borrower or any of its consolidated Subsidiaries of any material part of its
business or property and, no purchase or other acquisition of any business or
property (including any capital stock of any other Person) material in relation
to the consolidated financial condition of the Borrower and its consolidated
Subsidiaries at December 31, 1995 of which the Agent and the Lenders have not
been made aware in writing by the Borrower.
(b) The PRO FORMA balance sheet of the Borrower and its consolidated
Subsidiaries (the "PRO FORMA BALANCE SHEET"), copies of which have heretofore
been furnished to each Lender, is the balance sheet of the Borrower and its
consolidated Subsidiaries as of December 31, 1996 (the "PRO FORMA DATE"),
adjusted to give effect (as if such events had occurred on such date) to (i) the
repayment in full of all loans under, and all other amounts due in respect of,
the Existing Credit Agreements, (ii) the retirement of Senior Subordinated Notes
in an aggregate principal amount of not less than $33,800,000 and (iii) the
making of the Loans and other extensions of credit hereunder to be made on the
Closing Date and the application of the proceeds thereof as contemplated hereby.
5.2 NO CHANGE; SOLVENCY. Since December 31, 1995, there has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect. As of the Closing Date, the Borrower and its
Subsidiaries are Solvent, on a consolidated basis and on an individual basis.
5.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of the Borrower
and its Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
corporate power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification and (d) is in compliance with all Requirements of
Law (other than Requirements of Law with respect to which representations as to
compliance are made in subsections 5.13 and 5.16) except to the extent that the
failure to comply therewith could not, in the aggregate, reasonably be expected
to have a Material Adverse Effect.
5.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each
Loan Party has the corporate power and authority, and the legal right, to make,
deliver and perform the Loan Documents to which it is a party and in the case of
the Borrower, to borrow hereunder and the Borrower has taken all necessary
corporate action to authorize the borrowings on the terms and conditions of this
Agreement, the Applications and the Notes, and each Loan Party has authorized
the execution, delivery and performance of the Loan Documents to which it is a
party. No consent or authorization of, filing with, notice to or other act by
or in respect of, any Governmental Authority or any other Person is required in
connection with the borrowings hereunder or with the execution, delivery,
performance,
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validity or enforceability of the Loan Documents to which any Loan Party is a
party (other than the filing of UCC financing statements, which have, to the
extent then necessary to perfect the Liens provided for in the Security
Agreements, been duly filed). This Agreement has been duly executed and
delivered on behalf of the Borrower, and each other Loan Document will be, duly
executed and delivered on behalf of each Loan Party thereto. This Agreement
constitutes a legal, valid and binding obligation of the Borrower, and each
other Loan Document to which the Borrower or any other Loan Party is a party
when executed and delivered will constitute, a legal, valid and binding
obligation of such Loan Party enforceable against such Loan Party in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally (including, without limitation, laws
respecting fraudulent transfers and preferential transfers) and by general
equitable principles (whether enforcement is sought by proceedings in equity or
at law).
5.5 NO LEGAL BAR. The execution, delivery and performance of the
Loan Documents to which any Loan Party is a party, the borrowings hereunder and
the use of the proceeds thereof will not violate any Requirement of Law or any
material provision of any material Contractual Obligation or, to the knowledge
of the Borrower, any other provision of any Contractual Obligation of the
Borrower or of any of its Subsidiaries, in each such case the effect of which
would be to cause a Material Adverse Effect and will not result in, or require,
the creation or imposition of any Lien on any of its or their respective
properties or revenues pursuant to any such Requirement of Law or Contractual
Obligation (other than pursuant to the Loan Documents).
5.6 NO MATERIAL LITIGATION. No litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Borrower, threatened by or against the Borrower or any
of its Subsidiaries or against any of its or their respective properties or
revenues (a) with respect to any of the Loan Documents or any of the
transactions contemplated hereby or thereby or (b) which could reasonably be
expected to have a Material Adverse Effect.
5.7 NO DEFAULT. Neither the Borrower nor any of its Subsidiaries is
in default under or with respect to any of its Contractual Obligations in any
respect which could reasonably be expected to have a Material Adverse Effect.
No Event of Default has occurred and is continuing.
5.8 OWNERSHIP OF PROPERTY; LIENS. Each of the Borrower and its
Subsidiaries has good record and valid title in fee simple to, or a valid
leasehold interest in, all its real property, and good title to, or a valid
leasehold interest in, all its other property, and none of such property is
subject to any Lien except as permitted by subsection 8.3.
5.9 INTELLECTUAL PROPERTY. The Borrower and each of its Subsidiaries
owns, or is licensed to use, all trademarks, tradenames, copyrights, technology,
know-how and processes necessary for the conduct of its business as currently
conducted except for those the failure to own or license which could not
reasonably be expected to have a Material Adverse Effect (the "INTELLECTUAL
PROPERTY"). No claim has been asserted and is pending by any Person
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challenging or questioning the use of any such Intellectual Property or the
validity or effectiveness of any such Intellectual Property, nor does the
Borrower know of any valid basis for any such claim that could reasonably be
expected to have a Material Adverse Effect. The Borrower has no knowledge, nor
any reason to know, that the use of such Intellectual Property by the Borrower
and its Subsidiaries infringes on the rights of any Person, except for such
claims and infringements that, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
5.10 TAXES. Each of the Borrower and its Subsidiaries has filed or
caused to be filed all Federal and material other tax returns which, to the
knowledge of the Borrower, are required to be filed and has paid all taxes shown
to be due and payable on said returns or on any assessments made against it or
any of its property and all other taxes, fees or other charges imposed on it or
any of its property by any Governmental Authority (other than any (i) the amount
or validity of which are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided on the books of the Borrower or its Subsidiaries, as the case may be or
(ii) imposed by any Governmental Authority other than the Federal Government the
non-payment of which could not reasonably be expected to give rise to any
Material Adverse Effect); no tax Lien has been filed, and, to the knowledge of
the Borrower, no claim is being asserted, with respect to any such tax, fee or
other charge other than any such Lien or claim by any Governmental Authority
which could not reasonably be expected to have a Material Adverse Effect.
5.11 FEDERAL REGULATIONS. No part of the proceeds of any Loans will
be used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation G or Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect or for any purpose which violates the provisions of the
Regulations of such Board of Governors. If requested by any Lender or the
Agent, the Borrower will furnish to the Agent and each Lender a statement to the
foregoing effect in conformity with the requirements of FR Form G-1 or FR Form
U-1 referred to in said Regulation G or Regulation U, as the case may be.
5.12 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied with the applicable provisions of ERISA and the Code where the
failure to so comply could reasonably be expected to have a Material Adverse
Effect. No termination of a Single Employer Plan has occurred so as to subject,
directly or indirectly, any asset of the Borrower or any Commonly Controlled
Entity to any liability, contingent or otherwise, and no Lien in favor of the
PBGC or a Plan has arisen, during such five-year period. The present value of
the accrued benefit obligations under each Single Employer Plan (based on those
assumptions used to fund such Plans) did not, as of the last annual valuation
date prior to the date on which this representation is made or deemed made,
exceed the value of the assets of such Plan allocable to such accrued benefit
obligations. Neither the Borrower nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan, and neither the
Borrower nor any Commonly Controlled Entity would become subject to any
liability under
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ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw
completely from all Multiemployer Plans as of the valuation date most closely
preceding the date on which this representation is made or deemed made. No such
Multiemployer Plan is in Reorganization or Insolvent. The present value
(determined using actuarial and other assumptions which are reasonable in
respect of the benefits provided and the employees participating) of the
liability of the Borrower and each Commonly Controlled Entity for post
retirement benefits to be provided to their current and former employees under
Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA) does
not, in the aggregate, exceed the assets under all such Plans allocable to such
benefits.
5.13 INVESTMENT COMPANY ACT; OTHER REGULATIONS. The Borrower is not
an "investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. The
Borrower is not subject to regulation under any Federal or State statute or
regulation (other than Regulation X of the Board of Governors of the Federal
Reserve System) which limits its ability to incur Indebtedness.
5.14 SUBSIDIARIES. The Subsidiaries listed on Schedule 5.14 hereto
constitute all the Subsidiaries of the Borrower on the Closing Date.
5.15 PURPOSE OF LOANS. The proceeds of the Loans shall be used by
the Borrower to (i) refinance indebtedness under the Existing Credit Agreements
and (ii) finance the continuing working capital requirements and general
corporate purposes of the Borrower and its Subsidiaries in the ordinary course
of business, including permitted acquisitions permitted pursuant to subsection
8.10 hereof.
5.16 ENVIRONMENTAL MATTERS. Except as disclosed on Schedule 5.16
hereto, (a) the facilities and properties owned, leased or operated by the
Borrower or any of its Subsidiaries (the "PROPERTIES") do not contain, and have
not previously contained, any Materials of Environmental Concern in amounts or
concentrations which (i) constitute or constituted a violation of, or could
reasonably be expected to give rise to liability under, any Environmental Law
and (ii) which could reasonably be expected to have a Material Adverse Effect.
(b) The Properties and all operations at the Properties are in
compliance, and have been in compliance, in all material respects, with all
applicable Environmental Laws, and there is no contamination at, under or about
the Properties or violation of any Environmental Law with respect to the
Properties or the business operated by the Borrower or any of its Subsidiaries
(the "BUSINESS") which could reasonably be expected to have a Material Adverse
Effect.
(c) Neither the Borrower nor any of its Subsidiaries has received any
notice of violation, alleged violation, non-compliance, liability or potential
liability regarding environmental matters or compliance with Environmental Laws
with regard to any of the Properties or the Business that could reasonably be
expected to have a Material Adverse
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Effect, nor does the Borrower have knowledge or reason to believe that any such
notice will be received or is being threatened.
(d) Materials of Environmental Concern have not been transported or
disposed of from the Properties in violation of, or in a manner or to a location
which could reasonably be expected to give rise to liability under, any
Environmental Law and that could reasonably be expected to have a Material
Adverse Effect, nor have any Materials of Environmental Concern been generated,
treated, stored or disposed of at, on or under any of the Properties in
violation of, or in a manner that could reasonably be expected to give rise to
liability under, any applicable Environmental Law and that could reasonably be
expected to have a Material Adverse Effect.
(e) No judicial proceeding or governmental or administrative action
is pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower or any Subsidiary is or will be named as
a party with respect to the Properties or the Business, nor are there any
consent decrees or other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements outstanding under any
Environmental Law with respect to the Properties or the Business and that could
reasonably be expected to have a Material Adverse Effect.
(f) There has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related to
the operations of the Borrower or any Subsidiary in connection with the
Properties or otherwise in connection with the Business, in violation of or in
amounts or in a manner that could reasonably be expected to give rise to
liability under Environmental Laws and that could reasonably be expected to have
a Material Adverse Effect.
5.17 NO BURDENSOME RESTRICTIONS. No Requirement of Law or
Contractual Obligation of the Borrower or any of its Subsidiaries could
reasonably be expected to have a Material Adverse Effect.
5.18 NO MATERIAL MISSTATEMENTS. The written information, reports,
financial statements, exhibits and schedules furnished by or on behalf of the
Borrower and each other Loan Party to the Agent and the Lenders in connection
with the negotiation of any Loan Document or included therein or delivered
pursuant thereto do not contain, and will not contain as of the Closing Date,
any material misstatement of fact and do not, taken as a whole, omit, and will
not, taken as a whole, omit as of the Closing Date, to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not materially misleading.
5.19 COLLATERAL. The provisions of each of the Security Agreements,
when executed and delivered, will constitute in favor of the Agent for the
ratable benefit of the Lenders, a legal, valid and enforceable security interest
in all right, title, and interest of the Borrower and any of the other Loan
Parties which is a party to such Security Document, as the case may be, in the
Collateral described in such Security Document. As of the Closing Date, all
Equipment and Inventory (as each of such terms is defined in the Guarantee and
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Collateral Agreement) of the Borrower and each of its Subsidiaries will be kept
at, or will be in transit to, the locations listed on Schedule 5.19, and when
financing statements have been filed in the offices in the jurisdictions listed
in Schedule 3 to the Guarantee and Collateral Agreement, when appropriate
filings have been made in the U.S. Patent and Trademark Office and the U.S.
Copyright Office, and when such other actions as are described in each of the
Security Agreements have been taken in accordance with the Security Agreements,
each of the Security Agreements shall constitute a perfected security interest
in all right, title and interest of the Borrower or such other Loan Parties, as
the case may be, in the Collateral described therein, and except for Liens
existing on the Closing Date which are permitted by subsection 8.3 and whose
priority cannot be superseded by the provisions hereof or of any Security
Document and the filings hereunder or thereunder, a perfected first lien on, and
security interest in, all right, title and interest of the Borrower or such
other Loan Parties, as the case may be, in the Collateral described in each
Security Document.
5.20 Senior Debt. The unpaid principal of and interest on the Loans
and the Reimbursement Obligations and all other obligations and liabilities of
each of the Borrower and the other Loan Parties pursuant to this Agreement and
the other Loan Documents shall constitute "Senior Debt" of the Borrower with
respect to both the Borrower's 12% Series B and 12% Series D Senior Subordinated
Notes due 2004 (as such term is defined in both the Indenture dated as of August
2, 1994 (the "1994 Indenture"), among the Borrower, the Guarantors named therein
and the Trustee (as defined therein) and the Indenture dated as of June 1, 1995
(the "1995 Indenture", and together with the 1994 Indenture, the "Indentures"),
among the Borrower, the Guarantors named therein and the Trustee (as defined
therein)) and this Agreement and the other Loan Documents shall collectively
constitute the "Credit Agreement" as such term is defined in the Indentures.
SECTION 6. CONDITIONS PRECEDENT
6.1 CONDITIONS TO EXTENSIONS OF CREDIT. This Agreement, including,
without limitation, the agreement of each Lender to make the Extensions of
Credit requested to be made by it hereunder, shall become effective on the date
on which the following conditions precedent shall have been satisfied or waived:
(a) LOAN DOCUMENTS. The Agent shall have received (i) this
Agreement, executed and delivered by a duly authorized officer of the
Borrower, with a counterpart for each Lender, (ii) the Guarantee and
Collateral Agreement, executed and delivered by a duly authorized
officer of each party thereto, with a counterpart or a conformed copy
for each Lender and (iii) for the account of each of the Lenders which
has requested a Note, a Revolving Credit Note or a Swing Line Note, as
the case may be, each conforming to the requirements hereof and
executed and delivered by a duly authorized officer of the Borrower.
(b) REPAYMENT OF INDEBTEDNESS. All outstanding indebtedness of
the Borrower and its Subsidiaries (under the Existing Credit
Agreements) shall have been paid in full, including, without
limitation, all interest and fees owing with respect to such
indebtedness, and the commitments thereunder shall have been
terminated.
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(c) FINANCIAL STATEMENTS. The Agent shall have received, with a
copy for each Lender, (i) the financial statements referred to in
subsection 5.1(a)(i) as of December 31, 1994 and December 31, 1995,
(ii) the financial statements referred to in subsection 5.1(a)(ii) and
(iii) the PRO FORMA balance sheet of the Borrower and its Subsidiaries
referred to in subsection 5.1(b)(i), which shall be in form and
substance satisfactory to the Lenders.
(d) SOLVENCY CERTIFICATE. The Agent shall have received a
certificate reasonably satisfactory in form and substance to it from a
Responsible Officer which shall document the solvency of the Borrower
and its Subsidiaries on a combined basis taken as a single entity
after giving effect to the consummation of the transactions and the
financings contemplated hereby.
(e) FEES. The Agent shall have received the fees to be received
on the Closing Date referred to in subsection 4.1.
(f) LEGAL OPINIONS. The Agent shall have received, with a
counterpart for each Lender, the following executed legal opinions:
(i) the executed legal opinion of Gibson, Dunn & Crutcher LLP
counsel to the Borrower and the other Loan Parties, substantially in
the form of Exhibit C-1; and
(ii) the executed legal opinion of special local counsel of
the Borrower, in such jurisdictions as the Agent shall request,
substantially in the form of Exhibit C-2.
(g) ACTIONS TO PERFECT LIENS. The Agent shall have received evidence
in form and substance satisfactory to it that all filings, recordings,
registrations and other actions, including, without limitation, the delivery of
original stock certificates together with undated stock powers executed in blank
and the filing of duly executed financing statements on form UCC-1, necessary
or, in the opinion of the Agent, desirable to perfect the Liens created by the
Security Agreements delivered on the Closing Date shall have been completed.
(h) LIEN SEARCHES. The Agent shall have received the results of
recent searches by a Person satisfactory to the Agent, of the Uniform Commercial
Code, judgement and tax lien filings which may have been filed with respect to
personal property of the Borrower and its Subsidiaries, and the results of such
search shall be satisfactory to the Agent.
(i) BORROWING CERTIFICATE. The Agent shall have received, with a
counterpart for each Lender, a Borrowing Certificate dated the Closing Date,
with appropriate insertions and attachments satisfactory in form and substance
to the Agent, executed by a Responsible Officer of the Borrower.
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(j) CORPORATE PROCEEDINGS OF THE LOAN PARTIES. The Agent shall have
received, with a counterpart for each Lender, a copy of the resolutions, in form
and substance satisfactory to the Agent, of the Board of Directors of each Loan
Party authorizing (i) the execution, delivery and performance of this Agreement,
the Notes and the other Loan Documents delivered on the Closing Date to which it
is or will be a party, (ii) the borrowings contemplated hereunder and (iii) the
granting by it of the Liens created pursuant to the Security Agreements
delivered on the Closing Date to which it is or will be a party, certified by
the Secretary or an Assistant Secretary of such Loan Party as of the Closing
Date, which certificate shall be in form and substance satisfactory to the Agent
and shall state that the resolutions thereby certified have not been amended,
modified, revoked or rescinded.
(k) LOAN PARTY INCUMBENCY CERTIFICATES. The Agent shall have
received, with a counterpart for each Lender, a Certificate of each Loan Party,
dated the Closing Date, as to the incumbency and signature of the officers of
such Loan Party executing any Loan Document delivered on the Closing Date
satisfactory in form and substance to the Agent, executed by the President or
any Vice President and the Secretary or any Assistant Secretary of such Loan
Party.
(l) CORPORATE DOCUMENTS. The Agent shall have received, with a
counterpart for each Lender, true and complete copies of the certificate of
incorporation and by-laws of each Loan Party to any Loan Document delivered on
the Closing Date, certified as of the Closing Date as complete and correct
copies thereof by the Secretary or an Assistant Secretary of the such Loan
Party.
(m) LEASES. The Agent shall be reasonably satisfied in all material
respects with the terms and conditions of each material lease to which the
Borrower or any of its Subsidiaries will be bound immediately following the
Closing Date.
(n) INSURANCE. The Agent shall have received evidence in form and
substance satisfactory to it that all of the requirements of subsection 7.5
hereof shall have been satisfied.
(o) ADDITIONAL MATTERS. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be reasonably satisfactory in form and substance to the Agent, and the Agent
shall have received such other documents and legal opinions in respect of any
aspect or consequence of the transactions contemplated hereby or thereby as it
shall reasonably request.
6.2 CONDITIONS TO EACH EXTENSION OF CREDIT. The agreement of each
Lender to make any Extension of Credit requested to be made by it on any date
(including, without limitation, the initial Extension of Credit) is subject to
the satisfaction or waiver of the following conditions precedent:
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(a) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties made by the Borrower and each of its Subsidiaries in or
pursuant to the Loan Documents shall be true and correct in all
material respects on and as of such date as if made on and as of such
date (except to the extent that such representations and warranties
were expressly made only as of a specific date).
(b) NO DEFAULT. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the
extensions of credit requested to be made on such date.
(c) LETTER OF CREDIT APPLICATIONS. With respect to the issuance
of any Letter of Credit, the Issuing Lender shall have received an
Application, completed to its reasonable satisfaction and duly
executed by a Responsible Officer.
(d) BORROWING CERTIFICATE. The Agent shall have received, with
a counterpart for each Lender, a borrowing certificate dated the
requested Borrowing Date, with appropriate insertions and attachments
satisfactory in form and substance to the Agent, executed by the
President or any Vice President and the Secretary or any Assistant
Secretary of the Borrower.
Each borrowing by and each issuance of a Letter of Credit on behalf of
the Borrower hereunder shall constitute a representation and warranty by the
Borrower as of the date of such Loan or issuance that the conditions contained
in this subsection 6.2 have been satisfied.
SECTION 7. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Loan or Letter of Credit remains outstanding and unpaid or any other
amount is owing to any Lender or the Agent hereunder, it shall and (except in
the case of delivery of financial information, reports and notices) shall cause
each of its Subsidiaries to:
7.1 FINANCIAL STATEMENTS. Furnish to each Lender:
(a) as soon as available, but in any event within 90 days after
the end of each fiscal year of the Borrower, a copy of the
consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such year and the related consolidated
and consolidating statements of income and retained earnings and of
cash flows for such year, setting forth in each case in comparative
form the figures for the previous year, reported on without a "going
concern" or like qualification or exception, or qualification arising
out of the scope of the audit, by Ernst & Young or other independent
certified public accountants of nationally recognized standing not
unacceptable to the Required Lenders; and
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Borrower, the
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unaudited consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such quarter and the related unaudited
consolidated statements of income and retained earnings and of cash flows
of the Borrower and its consolidated Subsidiaries for such quarter and the
portion of the fiscal year through the end of such quarter, setting forth
in each case in comparative form the figures for the previous year,
certified by a Responsible Officer as being fairly stated in all material
respects (subject to normal year-end audit adjustments)
All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein and except that the financial statements delivered
pursuant to subsection 7.1(b) may not include notes thereto).
7.2 CERTIFICATES; OTHER INFORMATION. Furnish to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge
was obtained of any Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial statement
referred to in subsections 7.1(a) and (b), a certificate of a
Responsible Officer ("COMPLIANCE CERTIFICATE") stating that, to the
best of such officer's knowledge, during such period (i) no Subsidiary
has been formed or acquired (or, if any such Subsidiary has been
formed or acquired, the Borrower has complied with the requirements of
subsection 7.9 with respect thereto), (ii) neither the Borrower nor
any of its Subsidiaries has changed its name, its principal place of
business, its chief executive office or the location of any material
item of tangible Collateral without either giving prompt written
notice of such event to the Agent or complying with the requirements
of this Agreement and the Security Agreements with respect thereto,
(iii) the Borrower has observed or performed all of its covenants and
other agreements, and satisfied every condition, contained in this
Agreement and the other Loan Documents to be observed, performed or
satisfied by it other than with respect to those matters which have
been cured within the grace periods specified herein or expressly
waived by the Lenders or the Required Lenders, as appropriate, and
(iv) the Borrower has set forth in reasonable detail any and all
calculations necessary to show compliance with all of the financial
condition covenants set forth in subsections 8.1 and 8.9, including,
without limitation, calculations and reconciliations, if any,
necessary to show compliance with such financial condition covenants
on the basis of generally accepted accounting principles in the United
States of America consistent with those utilized in preparing the
audited financial statements referred to in subsection 5.1, and that
such Officer has obtained no knowledge of any Default or Event of
Default except as specified in such certificate;
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(c) not later than 60 days after the end of each fiscal year of
the Borrower, a copy of the projections of the operating budget and
cash flow budget of the Borrower and its Subsidiaries for the
succeeding fiscal year, such projections to be accompanied by a
certificate of a Responsible Officer to the effect that such
projections have been prepared on the basis of sound financial
planning practice and that such Officer has no reason to believe they
are incorrect or misleading in any material respect;
(d) as soon as practicable after the same are sent, copies of
all financial statements and reports which the Borrower or any of its
Subsidiaries sends to its stockholders in their capacities as such,
and as soon as practicable after the same are filed, copies of all
financial statements and reports which the Borrower or any of its
Subsidiaries may make to, or file with, the Securities and Exchange
Commission or any successor or analogous Governmental Authority;
(e) promptly upon receipt thereof, copies of all final reports
submitted to the Borrower or any of its Subsidiaries by independent
certified public accountants in connection with each annual, interim
or special financial audit of the books of the Borrower or any of its
Subsidiaries made by such accountants, including, without limitation,
any final comment letter submitted by such accountants to management
in connection with their annual audit PROVIDED, in each case, that
such final report or letter, as the case may be, concerns an event or
events which could reasonably be expected to have a Material Adverse
Effect; and
(f) promptly, such additional financial and other information as
any Lender may from time to time reasonably request.
7.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent in accordance with current
business practice, as the case may be, all its material obligations of whatever
nature, except where the amount or validity thereof is currently being contested
in good faith by appropriate proceedings and reserves in conformity with GAAP
with respect thereto have been provided on the books of the Borrower or any of
its Subsidiaries, as the case may be.
7.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue to
engage in business of the same general type as now conducted by it and preserve,
renew and keep in full force and effect its corporate existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business except as otherwise permitted
pursuant to subsection 8.5; comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith could
not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
7.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep (except as permitted by
subsection 8.6) all property that is useful and necessary in the then current
conduct of its business in good working order and condition (ordinary wear and
tear excepted); maintain with financially sound and reputable insurance
companies insurance on all its property in at least such amounts and against at
least such risks (but including in any event public liability,
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product liability and business interruption) as are usually insured against in
the same general area by companies engaged in the same or a similar business;
and furnish to the Agent, upon written request, full information as to the
insurance carried.
7.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep
proper books of records and account in which proper entries in conformity with
GAAP and all Requirements of Law shall be made of all dealings and transactions
in relation to its business and activities; and permit representatives of the
Agent and any Lender to visit and inspect any of its properties and examine and
make abstracts from any of its books and records at any reasonable time and as
often as may reasonably be desired following reasonable notice (including topics
for discussion), and to discuss the business, operations, properties and
financial and other condition of the Borrower and the its Subsidiaries with
officers of the Borrower and its Subsidiaries and with its independent certified
public accountants.
7.7 NOTICES. Promptly give notice to the Agent and each Lender of:
(a) any Responsible Officer becoming aware of the occurrence of
any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries or (ii)
litigation, investigation or proceeding which may exist at any time
between the Borrower or any of its Subsidiaries and any Governmental
Authority, which in either case, if not cured or if adversely
determined, as the case may be, could reasonably be expected to have a
Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or any
of its Subsidiaries in which the amount involved is $1,000,000 or more
and not covered by insurance or in which injunctive or similar relief
is sought if the granting of such injunctive or other relief could
reasonably be expected to have a Material Adverse Effect;
(d) the following events, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know thereof:
(i) the occurrence (or the reasonable expectation of the occurrence)
of any Reportable Event with respect to any Plan, a failure to make
any required contribution to a Plan, the creation of any Lien in favor
of the PBGC or a Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan or (ii) the
institution of proceedings or the taking of any other action by the
PBGC or any Multiemployer Plan to effect a termination or
Reorganization of any Multiemployer Plan or any Single Employer Plan
or (iii) the termination or partial termination of any Single Employer
Plan by the Borrower or any Commonly Controlled Entity;
(e) (i) any release or discharge by the Borrower or any of its
Subsidiaries of any Material of Environmental Concern required to be
reported under Environmental Laws to any Governmental Authority; (ii) any
condition, circumstance, occurrence or event that could result in a
material liability under Environmental Laws or could result
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in the imposition of any Lien or other restriction on the title, ownership
or transferability of any material Property; and (iii) any proposed action
to be taken by the Borrower or any of its Subsidiaries that could
reasonably be expected to subject the Borrower or any of its Subsidiaries
to any material additional or different requirements or liabilities under
Environmental Law;
(f) any development or event which could reasonably be expected to
have a Material Adverse Effect; and
(g) promptly upon the occurrence thereof, the occurrence of a Change
of Control or a "Change of Control" (as defined in the Senior Subordinated
Note Indenture).
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower or such Subsidiary proposes to take with
respect thereto.
7.8 Environmental Laws.
(a) Comply in all material respects with, and make reasonable efforts
to ensure compliance in all material respects by all tenants and subtenants, if
any, with, all applicable Environmental Laws and obtain and comply with and
maintain, and ensure that all tenants and subtenants obtain and comply in all
material respects with, and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required by Governmental
Authorities under Environmental Laws and promptly comply with all lawful orders
and directives of all Governmental Authorities regarding Environmental Laws
other than such orders and directives as to which an appeal or other challenge
has been timely and properly taken in good faith and the pendency of any and all
such appeals and other challenges does not give rise to a Material Adverse
Effect.
7.9 Additional Collateral.
(a) With respect to any assets (or any interest therein) acquired
after the Closing Date by the Borrower or any of its Subsidiaries that are
intended to be subject to the Lien created by any of the Security Agreements but
which are not so subject promptly (and in any event within 60 days after the
acquisition thereof): (i) execute and deliver to the Agent such amendments to
the relevant Security Agreements or such other documents as the Agent shall deem
necessary or advisable to grant to the Agent, for the benefit of the Lenders, a
Lien on such assets (or such interest therein), (ii) take all actions necessary
or advisable to cause such Lien to be duly perfected in accordance with all
applicable Requirements of Law, including, without limitation, the filing of
financing statements and the recording of leasehold mortgages in such
jurisdictions as may be requested by the Agent, (iii) if requested by the
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Agent, deliver to the Agent legal opinions relating to the matters described in
clauses (i) and (ii) immediately preceding, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Agent, and (iv) if
requested by the Agent, deliver to the Agent surveys, title insurance and flood
insurance reasonably satisfactory to the Agent.
(b) With respect to any Person that, subsequent to the Closing Date,
becomes a domestic Subsidiary, promptly upon the request of the Agent: (i)
execute and deliver to the Agent, for the benefit of the Lenders, a new pledge
agreement, or such amendments to the Guarantee and Collateral Agreement as the
Agent shall deem necessary or advisable to grant to the Agent, for the benefit
of the Lenders, a Lien on the Capital Stock of such Subsidiary which is owned by
the Borrower or any of its Subsidiaries, (ii) deliver to the Agent the
certificates representing such Capital Stock, together with undated stock powers
executed and delivered in blank by a duly authorized officer of the Borrower or
such Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to
become a party to the Guarantee and Collateral Agreement or to a new security
agreement in each case pursuant to an annex to the Guarantee and Collateral
Agreement which is in form and substance satisfactory to the Agent, and (B) to
take all actions necessary or advisable to cause the Lien created by the
Guarantee and Collateral Agreement or such security agreement, to be duly
perfected in accordance with all applicable Requirements of Law, including,
without limitation, the filing of financing statements in such jurisdictions as
may be requested by the Agent and (iv) if requested by the Agent, deliver to the
Agent legal opinions relating to the matters described in clauses (i), (ii) and
(iii) immediately preceding, which opinions shall be in form and substance, and
from counsel, reasonably satisfactory to the Agent.
(c) With respect to any Person that subsequent to the Closing Date
becomes a foreign Subsidiary (other than a foreign Subsidiary owned by another
foreign Subsidiary), promptly upon the request of the Agent: (i) execute and
deliver to the Agent a foreign stock pledge agreement relating to the pledge of
the shares of such foreign Subsidiary executed and delivered by a duly
authorized officer of the Borrower or its domestic Subsidiary, as the case may
be, with a counterpart or a conformed copy for each Lender, (ii) deliver to the
Agent the certificate[s] representing 65% of the Capital Stock of such foreign
Subsidiary, together with, if required by such foreign stock pledge agreement,
undated stock powers for each such certificate executed in blank by a duly
authorized officer of the pledgor thereof, (iii) complete such other actions as
are necessary or, in the opinion of the Agent, desirable to perfect the Liens
created by such foreign stock pledge agreement and (iv) cause the delivery of
the executed legal opinion of special foreign counsel with respect to such
foreign stock pledge agreement, in form and substance reasonably satisfactory to
the Agent.
7.10 FURTHER ASSURANCES. Upon the request of the Agent, promptly
perform or cause to be performed any and all acts and execute or cause to be
executed any and all documents (including, without limitation, financing
statements and continuation statements) for filing under the provisions of the
Uniform Commercial Code or any other Requirement of Law which are necessary or
advisable to maintain in favor of the Agent, for the benefit of the Lenders,
Liens on the Collateral that are duly perfected in accordance with all
applicable Requirements of Law.
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7.11 REDEMPTION OF SENIOR SUBORDINATED NOTES. Within 75 days after
the Closing Date, complete the purchase and cancellation of not less than
$33,800,000 in aggregate principal amount of its 1994 and 1995 Senior
Subordinated Notes, PROVIDED that in no event shall the aggregate amount paid
(including premiums, fees and expenses) in connection with such purchase exceed
$47,200,000.
7.12 PROPERTY MATTERS. No later than 90 days following the Closing
Date, at its own expense, request and use reasonable best efforts to obtain (i)
a consent, or landlord waiver or leasehold mortgage, each in form and substance
reasonably satisfactory to the Agent, from each of the landlords of such
facilities as the Agent may reasonably designate and (ii) take all actions
necessary or, in the opinion of the Agent, desirable to cause any liens created
by any leasehold mortgage to be duly perfected in accordance with all applicable
Requirements of Law, including, without limitation, the recording of such
leasehold mortgages in such jurisdictions as may be requested by the Agent.
SECTION 8. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Loan or Letter of Credit remains outstanding and unpaid or any other
amount is owing to any Lender or the Agent hereunder, it shall not, and (except
with respect to subsection 8.1) shall not permit any of its Subsidiaries to,
directly or indirectly:
8.1 FINANCIAL CONDITION COVENANTS.
(a) TOTAL INDEBTEDNESS TO EBITDA. Permit the ratio of
Consolidated Total Indebtedness of the Borrower on the last day of any
fiscal quarter of the Borrower to Consolidated EBITDA of the Borrower
for the period of four consecutive fiscal quarters of the Borrower
ending on such date to be greater than the amount set forth below
opposite the last day of such fiscal quarter:
Date Ratio
---- -----
March 31, 1997 3.75 to 1.0
June 30, 1997 3.75 to 1.0
September 30, 1997 3.75 to 1.0
December 31, 1997 3.75 to 1.0
March 31, 1998 3.75 to 1.0
June 30, 1998 3.75 to 1.0
September 30, 1998 3.75 to 1.0
December 31, 1998 3.75 to 1.0
March 31, 1999 3.25 to 1.0
June 30, 1999 3.25 to 1.0
September 30, 1999 3.25 to 1.0
December 31, 1999 3.25 to 1.0
March 31, 2000 3.00 to 1.0
June 30, 2000 3.00 to 1.0
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September 30, 2000 3.00 to 1.0
December 31, 2000 3.00 to 1.0
March 31, 2001 3.00 to 1.0
June 30, 2001 3.00 to 1.0
September 30, 2001 3.00 to 1.0
December 31, 2001 3.00 to 1.0
(b) INTEREST COVERAGE. Permit for any period of four
consecutive fiscal quarters ending on any date set forth below the
ratio of (A) the difference of Consolidated EBITDA of the Borrower for
such period minus Consolidated Capital Expenditures of the Borrower
for such period to (B) Consolidated Interest Expense of the Borrower
for such period to be less than the ratio set forth below opposite the
date on which the last of such fiscal quarters ends:
Date Ratio
---- -----
March 31, 1997 2.25 to 1.0
June 30, 1997 2.25 to 1.0
September 30, 1997 2.25 to 1.0
December 31, 1997 2.25 to 1.0
March 31, 1998 2.25 to 1.0
June 30, 1998 2.25 to 1.0
September 30, 1998 2.25 to 1.0
December 31, 1998 2.25 to 1.0
March 31, 1999 2.50 to 1.0
June 30, 1999 2.50 to 1.0
September 30, 1999 2.50 to 1.0
December 31, 1999 2.50 to 1.0
March 31, 2000 3.00 to 1.0
June 30, 2000 3.00 to 1.0
September 30, 2000 3.00 to 1.0
December 31, 2000 3.00 to 1.0
March 31, 2001 3.00 to 1.0
June 30, 2001 3.00 to 1.0
September 30, 2001 3.00 to 1.0
December 31, 2001 3.00 to 1.0
(c) MAINTENANCE OF NET WORTH. Permit the Consolidated Net Worth
of the Borrower at any time to be less than the sum of $80,000,000
plus 50% of the cumulative sum of Consolidated Net Income for each
fiscal quarter (if positive) beginning after the Closing Date and
ended at or prior to such time.
8.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to
exist any Indebtedness, except:
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(a) Indebtedness of the Borrower under this Agreement;
(b) Indebtedness of (i) the Borrower to any Subsidiary and (ii)
any Subsidiary which is a party to the Guarantee and Collateral
Agreement or another subsidiary guarantee to the Borrower; PROVIDED
that the Borrower hereby agrees that all such Indebtedness of any such
Subsidiary to the Borrower permitted pursuant to clause (ii) above is
subordinated to the payment in full of the obligations of such
Subsidiary under the Guarantee and Collateral Agreement or another
subsidiary guarantee to which it is a party, and any payment received
by the Borrower in respect thereof while an Event of Default shall
have occurred and be continuing shall be held by the Borrower in trust
for the Agent and paid over to the Agent, for the benefit of the
Lenders, in the event of any demand in respect of the Guarantee and
Collateral Agreement or such subsidiary guarantee;
(c) Indebtedness of the Borrower and any of its Subsidiaries
incurred not later than 180 days after the acquisition of fixed or
capital assets to finance the acquisition of such fixed or capital
assets (whether pursuant to a loan, a Financing Lease or otherwise),
in an initial amount not less than 75% of the original purchase price
of such property at the time it was acquired, and any renewals,
extensions, refundings or refinancings of such indebtedness; PROVIDED
that the terms of such Indebtedness shall not prohibit or limit the
ability of any Subsidiary to declare or pay any dividend or make any
payment or other distribution (other than a distribution of the assets
financed by such Indebtedness), either directly or indirectly, to or
for the account of the Borrower or any Subsidiary of the Borrower;
(d) Indebtedness outstanding on the date hereof and listed on
Schedule 8.2, not to exceed an aggregate outstanding principal amount
of $250,000 on the Closing Date, and any renewals, extensions,
refundings or refinancings of such Indebtedness, provided the amount
thereof is not increased, the maturity of any installment of principal
thereof is not shortened and the subordination provisions thereof are
not amended or modified except on terms and conditions satisfactory to
the Required Lenders;
(e) (i) Indebtedness under the 1994 Senior Subordinated Notes
(including any 1994 Senior Subordinated Notes exchanged for other 1994
Senior Subordinated Notes) and (ii) Indebtedness under the 1995 Senior
Subordinated Notes (including any 1995 Senior Subordinated Notes
exchanged for other 1995 Senior Subordinated Notes) PROVIDED that, in
the case of both clauses (i) and (ii) above, the Borrower shall not,
directly or indirectly, without the consent of the Required Lenders,
permit the modification, waiver or amendment of any of the terms
(including, without limitation, the subordination provisions) of the
Senior Subordinated Notes (other than any such amendment, modification
or change which (i) would extend the maturity or mandatory redemption
date thereof or reduce the amount of any principal or redemption
payments in respect thereof, (ii) would reduce the rate or extend the
date for payment of interest or (iii) would not adversely affect the
interests of the Agent or any Lender under any
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Loan Document, or (iv) is of a technical or clarifying nature and can be
made without the consent of any holder of such Senior Subordinated Notes);
(f) Indebtedness of the Canadian Subsidiaries at any time not
exceeding an aggregate principal amount outstanding equivalent at such time to
$2,750,000 (U.S. Dollars);
(g) Indebtedness in respect of (i) Hedging Agreements not involving
more than $50,000,000 in aggregate notional amount at any one time outstanding
or (ii) rate caps, collars or similar agreements in respect of interest or
currency rate fluctuations that require payment by the Borrower only of fixed
fees determined at or prior to the effectiveness thereof and not termination
payments or other payments or liabilities that change in amount based on changes
in underlying rates; provided that in each case such Hedging Agreements are
entered into for legitimate hedging purposes related to the business of the
Borrower and its Subsidiaries and not for speculative purposes; and
(h) additional Indebtedness of the Borrower in aggregate principal
amount outstanding at any time not exceeding $10,000,000.
8.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes, assessments or other governmental charges
not yet overdue or which are being contested in good faith by
appropriate proceedings, PROVIDED that adequate reserves with respect
thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business which are not overdue for a period of more than 60 days or
which are being contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation and deposits securing liability to insurance carriers
under insurance or self-insurance arrangements;
(d) deposits to secure the performance of bids, tenders, trade
or government contracts (other than for borrowed money), leases,
licenses, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature incurred in the ordinary
course of business;
(e) easements, rights-of-way, building, zoning and other similar
restrictions, utility agreements, covenants, reservations and
encroachments and other similar encumbrances or title defects
incurred, or leases or subleases granted to others in the ordinary
course of business which, in the aggregate, do not materially detract
from the
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aggregate value of the properties of the Borrower and its Subsidiaries, taken as
a whole, or in the aggregate materially interfere with the ordinary conduct of
the business of the Borrower and its Subsidiaries, taken as a whole;
(f) Liens in existence on the date hereof listed on Schedule
8.3, securing Indebtedness permitted by subsection 8.2(d), PROVIDED
that no such Lien is spread to cover any additional property after the
Closing Date and that the amount of Indebtedness secured thereby is
not increased;
(g) Liens securing Indebtedness of the Borrower and its
Subsidiaries permitted by subsection 8.2(c) incurred to finance the
acquisition of fixed or capital assets, PROVIDED that (i) such Liens
shall be created not later than 180 days after the acquisition of such
fixed or capital assets, (ii) such Liens do not at any time encumber
any property other than the property financed by such Indebtedness,
(iii) the principal amount of Indebtedness secured thereby is not
increased and (iv) the principal amount of Indebtedness secured by any
such Lien shall at no time exceed 100% of the original purchase price
of such property at the time it was acquired;
(h) Liens on property other than the Collateral (not otherwise
permitted hereunder) which secure obligations not exceeding (as to the
Borrower and all Subsidiaries) $5,000,000 in an aggregate amount at
any time outstanding;
(i) Liens created pursuant to the Loan Documents;
(j) Liens on assets of corporations which become Subsidiaries of
the Company after the date hereof existing on the date of such
acquisition, PROVIDED that (i) such Liens do not at any time encumber
any property other than the property financed by such Indebtedness,
(ii) the principal amount of Indebtedness secured thereby is not
increased and (iv) such Lien or indebtedness is not created or
incurred in connection with or contemplation of such acquisition; and
(k) Liens on assets of the Canadian Subsidiaries of the Borrower
securing Indebtedness permitted by subsection 8.2(f).
8.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations in existence on the date hereof not to
exceed $100,000 in the aggregate;
(b) Guarantee Obligations in respect of the Senior Subordinated
Notes; PROVIDED that such Guarantee Obligations are subordinated and
junior in all respects to the obligations of the Loan Parties under
the Loan Documents;
(c) Guarantee Obligations incurred after the date hereof in an
aggregate amount not to exceed $5,000,000 at any one time outstanding;
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(d) the Guarantee and Collateral Agreement and any other
subsidiary guarantee entered into from time to time pursuant to the
terms of this Agreement;
(e) Guarantee Obligations in respect of Letters of Credit;
(f) guarantees made by the Borrower or any Subsidiary of
obligations of any Subsidiary which is a Guarantor or of the Borrower,
which Indebtedness is otherwise permitted under this Agreement; and
(g) guarantees made in the ordinary course of its business by
the Borrower or any Subsidiary of obligations of any Subsidiary which
is a Guarantor or of the Borrower, which obligations are otherwise
permitted under this Agreement.
8.5 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its lines of business, except that (i)
any Subsidiary of the Borrower may be merged or consolidated with or into, or
may sell, lease, transfer or otherwise dispose of any of its assets to, the
Borrower (PROVIDED that the Borrower shall be the continuing, surviving, or
acquiring corporation) or with, into or to any one or more wholly-owned
Subsidiaries of the Borrower which is a Guarantor (PROVIDED that the wholly-
owned Subsidiary or Subsidiaries, which is a Guarantor, shall be the continuing,
surviving or acquiring corporation) and (ii) any Subsidiary of the Borrower
formed for the purpose of effecting an acquisition of assets permitted hereunder
may be merged or consolidated with any other Person (PROVIDED that the
continuing or surviving corporation of such merger or consolidation shall be a
Subsidiary of the Borrower).
8.6 LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the case of any Subsidiary, issue or
sell any shares of such Subsidiary's Capital Stock to any Person other than the
Borrower or any wholly owned Subsidiary, except:
(a) the sale or other disposition of obsolete or worn out
property in the ordinary course of business;
(b) the sale or other disposition of any property (other than
inventory or obsolete or worn out property in the ordinary course of
business) in the ordinary course of business PROVIDED that the
aggregate consideration received in any fiscal year shall not exceed
20% of the Consolidated EBITDA of the Borrower for such fiscal year;
(c) the sale or return of inventory in the ordinary course of
business;
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(d) the sublease of real or personal property on commercially
reasonable terms to the extent that the Borrower determines that such
property is no longer necessary in the conduct of the business of the
Borrower and its Subsidiaries; and
(e) as permitted by subsection 8.5(i).
8.7 LIMITATION ON LEASES. Permit Consolidated Lease Expense for any
fiscal year of the Borrower to exceed an amount equal to $8,000,000 for the
fiscal year ending December 31, 1997, and $10,000,000 for each fiscal year
thereafter.
8.8 LIMITATION ON DIVIDENDS. (a) Declare or pay any dividend (other
than dividends payable solely in common stock of the Borrower) on, or make any
payment on account of, or set apart assets for a sinking or other analogous fund
for, the purchase, redemption, defeasance, retirement or other acquisition of,
any shares of any class of Capital Stock of the Borrower or any warrants or
options to purchase any such Capital Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of the Borrower or
any Subsidiary (such declarations, payments, setting apart, purchases,
redemptions, defeasance, retirements, acquisitions and distributions being
herein called "RESTRICTED PAYMENTS"); PROVIDED THAT so long as no Default or
Event of Default has occurred and is continuing, the Borrower and its
Subsidiaries may (i) make Restricted Payments in any fiscal year not to exceed
$1,000,000 in the aggregate, (ii) make Restricted Payments not to exceed
$3,000,000 in the aggregate in any fiscal year or $6,000,000 in the aggregate on
a cumulative basis after the Closing Date to permit the Borrower to repurchase
shares of its common stock or rights, options or units thereof in respect of any
management subscription or similar employment agreement and (iii) make
Restricted Payments consisting of Specified Preferred Stock.
(b) Permit the terms of any Contractual Obligation of any Subsidiary
to prohibit or limit the ability of any Subsidiary to declare or pay any
dividend or make any payment or other distribution, either directly or
indirectly, to or for the account of the Borrower or any other wholly-owned
Subsidiary of the Borrower provided that this subsection 8.8(b) shall not apply
to (A) purchase money obligations or Financing Leases (or refinancings thereof
that impose no more restrictive restrictions ) for property acquired in the
ordinary course of business that impose restrictions solely on the property so
acquired, (B) restrictions with respect to a Subsidiary imposed pursuant to a
binding agreement which has been entered into for the sale or disposition
(including by merger or consolidation) of all or substantially all of the
Capital Stock or assets of such Subsidiary, provided that such restrictions
apply solely to such Capital Stock or asset of such Subsidiary and such sale or
disposition is otherwise permitted pursuant to this Agreement and (C)
restrictions arising by reason of customary non-assignment or no-subletting
clauses in leases or other contracts entered into in the ordinary course of
business.
8.9 LIMITATION ON CAPITAL EXPENDITURES. Make any expenditure in
respect of the purchase or other acquisition of fixed or capital assets
(excluding any such asset acquired in connection with normal replacement and
maintenance programs properly charged to current operations and any expenditure
from the proceeds of casualty insurance used to repair or
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replace the assets affected by such casualty loss) except for expenditures in
the ordinary course of business not exceeding, in the aggregate for the Borrower
and its Subsidiaries (i) during any of the fiscal years of the Borrower set
forth below, the amount set forth opposite such fiscal year below:
Fiscal Year Amount
----------- ------
1997 $10,000,000
1998 $10,000,000
1999 $12,000,000
2000 $13,000,000
2001 $13,000,000
PROVIDED, that in the event that the amount set forth above for any fiscal year
set forth (before giving effect to any carry-over amount pursuant to this
proviso) above exceeds the actual amount of all capital expenditures for such
fiscal year determined in accordance with GAAP, the entire amount of such excess
may be carried over for expenditure in that portion of the fiscal year
immediately following such fiscal year which follows delivery of the financial
statements delivered pursuant to subsection 7.1(a) with respect to such fiscal
year.
8.10 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any
advance, loan, extension of credit or capital contribution to, or purchase any
stock, bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or make any other investment in, any Person,
except:
(a) extensions of trade credit in the ordinary course of
business;
(b) investments in Cash Equivalents;
(c) loans or advances to officers or employees to pay relocation
costs of such officers or employees in connection with their
employment by the Borrower or any of its Subsidiaries;
(d) any notes, securities or other instruments received as
consideration for any sale of assets permitted hereunder in an
aggregate amount not to exceed $500,000 in any fiscal year of the
Borrower;
(e) any notes, securities or other instruments received as part
of the settlement of litigation or in satisfaction of extensions of
credit to any Person otherwise permitted hereunder pursuant to the
reorganization, bankruptcy or liquidation of such Person;
(f) (i) investments by the Borrower in its Subsidiaries which
are or, immediately after giving effect thereto, become parties to the
Guarantee and Collateral Agreement and the Capital Stock of which is
pledged to the Agent to secure the Borrower's obligations hereunder
and under the other Loan Documents, (ii) investments by Subsidiaries
of the Borrower which are not parties to the Guarantee and Collateral
Agreement in other Subsidiaries of the Borrower, (iii) investments by
Subsidiaries of the Borrower which are parties to the Guarantee
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and Collateral Agreement in the Borrower and in other Subsidiaries of the
Borrower which are parties to the Guarantee and Collateral Agreement and
(iv) investments by the Borrower or Subsidiaries of the Borrower which are
parties to the Guarantee and Collateral Agreement in Mascot and King-O-
Matic in an aggregate amount not exceeding $5,000,000 at any time;
(g) payroll advances in the ordinary course of business;
(h) travel and entertainment advances and other loans to
officers and employees, PROVIDED that the aggregate principal amount
of all such loans and advances outstanding at any one time shall not
exceed $100,000;
(i) acquisitions by the Borrower and its Subsidiaries, of assets or
Capital Stock of one or more corporations or other Persons so long as (i)
each such acquisition and all transactions related thereto shall be
consummated in accordance with applicable Requirements of Law; (ii) the
total consideration for each such acquisition shall not exceed $10,000,000;
(iii) each such acquisition, in the case of an acquisition of Capital
Stock, shall result in such corporation or Person becoming a Subsidiary;
(iv) after giving effect to any such acquisition, no Default or Event of
Default shall have occurred and be continuing; and (v) the Borrower shall
have delivered to the Agent a certificate demonstrating that the
requirements of subsection 8.1 would be satisfied on a pro forma basis as
at the end of the most recently ended fiscal quarter of the Borrower with
respect to which financial statements have been delivered pursuant to
subsection 7.1 if each such acquisition had occurred on or prior to the
first day of the four fiscal quarter period ended with such most recently
ended fiscal quarter;
(j) acquisitions by the Borrower and its Subsidiaries, for cash
or other consideration exceeding $10,000,000 in the aggregate, of one
or more companies or businesses engaged in the same general type of
business as is conducted by the Borrower and its Subsidiaries;
PROVIDED that (i) any such Acquisition shall be subject to the consent
of the Required Lenders, (ii) each such acquisition and all
transactions related thereto shall be consummated in accordance with
applicable Requirements of Law, (iii) each such acquisition, in the
case of an acquisition of Capital Stock, shall result in such
corporation or Person becoming a Subsidiary, (iv) after giving effect
to any such acquisition, no Default or Event of Default shall have
occurred and be continuing and (v) the requirements of subsection 8.1
would be satisfied on a pro forma basis as at the end of the most
recently ended fiscal quarter of the Borrower with respect to which
financial statements have been delivered pursuant to subsection 7.1 if
each such acquisition had occurred on or prior to the first day of the
four fiscal quarter period ended with such most recently ended fiscal
quarter (it being understood that the information about such
acquisition must be reasonably satisfactory in form and substance to
the Required Lenders);
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(k) investments existing on the Closing Date and set forth on
Schedule 8.10; and
(l) investments not permitted by the foregoing clauses of this
8.10 by the Borrower or its Subsidiaries in a Person which the
Borrower and/or its Subsidiaries owns, or immediately after giving
effect to such investment will own, more than 20% of such Person's
outstanding voting Capital Stock (but which Person is not, and will
not be, after giving effect to such investment, a Subsidiary) in an
aggregate principal amount at any one time not to exceed $3,000,000.
8.11 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT
ISTRUMENTS. (a) Make any optional payment or prepayment on or redemption of any
Senior Subordinated Notes other than (i) the purchase thereof referred to in
subsection 7.11 and (ii) additional such payments in an aggregate amount not to
exceed $5,000,000 after the date hereof or (b) amend, modify or change, or
consent or agree to any amendment, modification or change to any of the terms of
the Senior Subordinated Notes (other than any such amendment, modification or
change which would extend the maturity or reduce the amount of any payment of
principal thereof or which would reduce the rate or extend the date for payment
of interest thereon or make changes relieving the Borrower from compliance with
the terms thereof) PROVIDED that the Borrower and its Subsidiaries may use the
proceeds of any equity offering to pay, prepay or redeem any Senior Subordinated
Notes if the requirements of subsection 8.1 would be satisfied on a pro forma
basis as at the end of the most recently ended fiscal quarter of the Borrower
with respect to which financial statements have been delivered pursuant to
subsection 7.1 if each such payment, prepayment or redemption had occurred on or
prior to the first day of the four fiscal quarter period ended with such most
recently ended fiscal quarter.
8.12 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate (other
than leases of property from Affiliates existing on the date hereof and
employment agreements, directors' fee arrangements, indemnification of
directors, officers and employees and loans to employees permitted hereunder in
the ordinary course of business) unless such transaction is (a) otherwise
permitted under this Agreement, (b) in the ordinary course of the Borrower's or
such Subsidiary's business and (c) upon fair and reasonable terms no less
favorable to the Borrower or such Subsidiary, as the case may be, than it would
obtain in a comparable arm's length transaction with a Person which is not an
Affiliate; PROVIDED that notwithstanding the foregoing, such prohibited
transactions with Affiliates shall not include (a) payments of reasonable and
customary directors' fees and indemnities of directors, officers and employees
(b) payments to Aurora under any management services agreement as in effect on
the Closing Date, (c) transfers of inventory among the Loan Parties in the
ordinary course of business and (d) loans or advances to officers or employees
of the Borrower or any of its Subsidiaries to pay business related travel
expenses or reasonable relocation costs of such officers or employees in
connection with their employment by the Borrower or any of its Subsidiaries.
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8.13 LIMITATION ON SALES AND LEASEBACKS. Enter into any arrangement
with any Person providing for the leasing by the Borrower or any Subsidiary of
real or personal property which has been or is to be sold or transferred by the
Borrower or such Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of such property
or rental obligations of the Borrower or such Subsidiary.
8.14 LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal year of
the Borrower to end on a day other than December 31.
8.15 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into with any
Person any agreement, other than (a) this Agreement, (b) the Senior Subordinated
Note Indenture and (c) any purchase money mortgages or Financing Leases
permitted by this Agreement (in which cases, any prohibition or limitation shall
only be effective against the assets financed thereby), which prohibits or
limits the ability of the Borrower or any of its Subsidiaries to create, incur,
assume or suffer to exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired other than any Lien granted under this
Agreement or to secure purchase money mortgages of Financing Leases.
8.16 LIMITATION ON LINES OF BUSINESS; CREATION OF SUBSIDIARIES. (a)
Enter into any business, either directly or through any Subsidiary, except for
businesses which are of the same general type, and reasonably related to, those
in which the Borrower and its Subsidiaries are engaged on the date of this
Agreement.
(b) Create any new Subsidiaries of the Borrower other than any
Subsidiaries that shall execute and become party to the Guarantee and Collateral
Agreement.
8.17 LIMITATION ON BORROWINGS. Incur any obligations under this
Agreement and the other Loan Documents in an aggregate outstanding amount at any
time in excess of the Borrowing Base (as defined in the Indentures) such that
such aggregate outstanding amount would result in a default under any provision
of the Indentures.
SECTION 9. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan
when due in accordance with the terms thereof or hereof; or the
Borrower shall fail to pay any Reimbursement Obligation within two
days after such amount becomes due in accordance with the terms
thereof or hereof; or the Borrower shall fail to pay any interest on
any Note, or any other amount payable hereunder, within five days
after any such interest or other amount becomes due in accordance with
the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by the
Borrower or any other Loan Party herein or in any other Loan Document
or which is contained in
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any certificate, document or financial or other statement furnished by it
at any time under or in connection with this Agreement or any such other
Loan Document shall prove to have been incorrect in any material respect on
or as of the date made or deemed made; or
(c) The Borrower or any other Loan Party shall default in the
observance or performance of any agreement contained in subsection 7.7(a),
7.11 or Section 8 of this Agreement; or
(d) The Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in
paragraphs (a) through (c) of this Section), and such default shall
continue unremedied for a period of 30 days; or
(e) The Borrower or any of its Subsidiaries shall (i) default in
any payment of principal of or interest of any Indebtedness (other
than the Notes) or in the payment of any Guarantee Obligation, in
either case in an outstanding principal amount in excess of
$2,500,000, beyond the period of grace (not to exceed 30 days), if
any, provided in the instrument or agreement under which such
Indebtedness or Guarantee Obligation was created; or (ii) default in
the observance or performance of any other agreement or condition
relating to any such Indebtedness or Guarantee Obligation or contained
in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, in each
case beyond the cure or grace period applicable thereto (not to exceed
30 days), if any, provided in the instrument or agreement under which
such Indebtedness or Guarantee Obligation was created, the effect of
which default or other event or condition (and such passage of the
cure or grace period, if applicable) is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries
of such Guarantee Obligation (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Indebtedness to become due prior to
its stated maturity or such Guarantee Obligation to become payable; or
(f) (i) The Borrower or any of its Subsidiaries shall commence
any case, proceeding or other action (A) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B) seeking appointment of
a receiver, trustee, custodian, conservator or other similar official
for it or for all or any substantial part of its assets, or the
Borrower or any of its Subsidiaries shall make a general assignment
for the benefit of its creditors; or (ii) there shall be commenced
against the Borrower or any of its Subsidiaries any case, proceeding
or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication
or appointment or (B) remains undismissed, undischarged or unbonded
for a period of 60 days; or (iii) there shall be commenced against the
Borrower or any of its
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Subsidiaries any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all
or any substantial part of its assets which results in the entry of an
order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof; or
(iv) the Borrower or any of its Subsidiaries shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence
in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v)
the Borrower or any of its Subsidiaries shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as
they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Borrower or any
Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan or (vi) any other event or condition shall occur or exist with respect
to a Plan; and in each case in clauses (i) through (vi) above, such event
or condition, together with all other such events or conditions, if any,
could reasonably be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against
the Borrower or any of its Subsidiaries involving in the aggregate a
liability (not paid or fully covered by insurance) of $1,000,000 or
more at any one time, and all such judgments or decrees shall not have
been vacated, discharged, stayed or bonded pending appeal within 60
days from the entry thereof; or
(i) (i) Any material provision of the Security Agreements shall
cease, for any reason, to be in full force and effect, or the Borrower
or any other Loan Party which is a party to any of the Security
Agreements shall so assert or (ii) the Lien created by any of the
Security Agreements shall cease to be enforceable and of the same
effect and priority purported to be created thereby; or
(j) Any guarantee under the Guarantee and Collateral Agreement
shall cease, for any reason, to be in full force and effect or any
Guarantor shall so assert, except in the event of a merger of
Subsidiaries permitted hereunder if the surviving or continuing
Subsidiary is a Guarantor or the Borrower; or
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(k) Any of the subordination provisions in any Senior
Subordinated Note shall cease, for any reason, to be in full force and
effect, or the Borrower or any other party to the Senior Subordinated
Note or any holder of the notes thereunder shall so assert;
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (f) above with respect to the Borrower, automatically the
Commitments shall immediately terminate and the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement (including,
without limitation, all amounts of L/C Obligations, whether or not the
beneficiaries of the then outstanding Letters of Credit shall have presented the
documents required thereunder) and the Notes shall immediately become due and
payable, and (B) if such event is any other Event of Default, either or both of
the following actions may be taken: (i) with the consent of the Required
Lenders, the Agent may, or upon the request of the Required Lenders, the Agent
shall, by notice to the Borrower declare the Commitments to be terminated
forthwith, whereupon the Commitments shall immediately terminate; and (ii) with
the consent of the Required Lenders, the Agent may, or upon the request of the
Required Lenders, the Agent shall, by notice to the Borrower, declare the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement (including, without limitation, all amounts of L/C Obligations,
whether or not the beneficiaries of the then outstanding Letters of Credit shall
have presented the documents required thereunder) and the Notes to be due and
payable forthwith, whereupon the same shall immediately become due and payable.
With respect to all Letters of Credit with respect to which presentment for
honor shall not have occurred at the time of an acceleration pursuant to the
preceding paragraph, the Borrower shall at such time deposit in a cash
collateral account opened by the Agent an amount equal to the aggregate then
undrawn and unexpired amount of such Letters of Credit. The Borrower hereby
grants to the Agent, for the benefit of the Issuing Lender and the L/C
Participants, a security interest in such cash collateral to secure all
obligations of the Borrower under this Agreement and the other Loan Documents.
Amounts held in such cash collateral account shall be applied by the Agent to
the payment of drafts drawn under such Letters of Credit, and the unused portion
thereof after all such Letters of Credit shall have expired or been fully drawn
upon, if any, shall be applied to repay other obligations of the Borrower
hereunder and under the Notes. After all such Letters of Credit shall have
expired or been fully drawn upon, all Reimbursement Obligations shall have been
satisfied and all other obligations of the Borrower hereunder and under the
Notes shall have been paid in full, the balance, if any, in such cash collateral
account shall be returned to the Borrower. The Borrower shall execute and
deliver to the Agent, for the account of the Issuing Lender and the L/C
Participants, such further documents and instruments as the Agent may request to
evidence the creation and perfection of the within security interest in such
cash collateral account.
Except as expressly provided above in this Section 9, presentment, demand,
protest and all other notices of any kind are hereby expressly waived to the
fullest extent permitted by applicable law.
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SECTION 10. THE AGENT
10.1 APPOINTMENT. Each Lender hereby irrevocably designates and
appoints the Agent as the agent of such Lender under this Agreement and the
other Loan Documents, and each such Lender irrevocably authorizes the Agent, in
such capacity, to take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
10.2 DELEGATION OF DUTIES. The Agent may execute any of its duties
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys in-fact selected by it with
reasonable care.
10.3 EXCULPATORY PROVISIONS. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement or any other Loan Document
(except for its or such Person's own gross negligence or willful misconduct) or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by the Borrower or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or the Notes or any other Loan
Document or for any failure of the Borrower to perform its obligations hereunder
or thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower.
10.4 RELIANCE BY AGENT. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), independent accountants and other experts
selected by the Agent. The Agent may deem and treat the payee of any Note as
the owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Agent. The Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such
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advice or concurrence of the Required Lenders as it deems appropriate or it
shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
Notes and the other Loan Documents in accordance with a request of the Required
Lenders, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future holders of the
Notes.
10.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender or the Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall give notice thereof to the Lenders. The
Agent shall take such action with respect to such Default or Event of Default as
shall be reasonably directed by the Required Lenders; PROVIDED that unless and
until the Agent shall have received such directions, the Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Lenders.
10.6 NONRELIANCE ON AGENT AND OTHER LENDERS. Each Lender expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Borrower, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents
to the Agent that it has, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of the Borrower which may come into
the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates.
10.7 INDEMNIFICATION. The Lenders agree to indemnify the Agent in
its capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to their
respective Commitment Percentages in effect on the date on which indemnification
is sought under this subsection (or, if indemnification is sought after the date
upon which the Commitments shall have terminated
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and the Loans shall have been paid in full, ratably in accordance with their
Commitment Percentages immediately prior to such date), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at any
time (including, without limitation, at any time following the payment of the
Notes) be imposed on, incurred by or asserted against the Agent in any way
relating to or arising out of, the Commitments, this Agreement, any of the other
Loan Documents or any documents contemplated by or referred to herein or therein
or the transactions contemplated hereby or thereby or any action taken or
omitted by the Agent under or in connection with any of the foregoing; PROVIDED
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Agent's gross
negligence or willful misconduct. The agreements in this subsection shall
survive the payment of the Notes and all other amounts payable hereunder.
10.8 AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its Affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrower as though the Agent were not the Agent hereunder and
under the other Loan Documents. With respect to its Loans made or renewed by it
and any Note issued to it, the Agent shall have the same rights and powers under
this Agreement and the other Loan Documents as any Lender and may exercise the
same as though it were not the Agent, and the terms "Lender" and "Lenders" shall
include the Agent in its individual capacity.
10.9 SUCCESSOR AGENT. The Agent may resign as Agent upon 30 days'
notice to the Lenders. If the Agent shall resign as Agent under this Agreement
and the other Loan Documents, then the Required Lenders shall appoint from among
the Lenders a successor agent for the Lenders, subject to the approval by the
Borrower (which approval shall not be unreasonably withheld), whereupon such
successor agent shall succeed to the rights, powers and duties of the Agent, and
the term "Agent" shall mean such successor agent effective upon such appointment
and approval, and the former Agent's rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent or any of the parties to this Agreement or any holders of the Notes.
After any retiring Agent's resignation as Agent, the provisions of this Section
10 shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement and the other Loan Documents.
SECTION 11. MISCELLANEOUS
11.1 AMENDMENTS AND WAIVERS. Neither this Agreement, any Note or any
other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
subsection. The Required Lenders may, or, with the written consent of the
Required Lenders, the Agent may, from time to time, (a) enter into with the
Borrower written amendments, supplements or modifications hereto and to the
Notes and the other Loan Documents for the purpose of adding any provisions to
this Agreement, the Notes or the other Loan Documents or changing in any manner
the rights of the Lenders or of the Borrower or any of its Subsidiaries
hereunder or thereunder or (b)
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waive, on such terms and conditions as the Required Lenders or the Agent, as the
case may be, may specify in such instrument, any of the requirements of this
Agreement, the Notes or the other Loan Documents or any Default or Event of
Default and its consequences; PROVIDED, HOWEVER, that no such waiver and no such
amendment, supplement or modification shall (i) reduce the amount or extend the
scheduled date of maturity of any Loan or Reimbursement Obligation or of any
installment thereof, or reduce the stated rate of any interest or fee payable
hereunder or extend the scheduled date of any payment thereof or increase the
amount or extend the expiration date of any Lender's Commitments, in each case
without the consent of each affected Lender, or (ii) amend, modify or waive any
provision of this subsection or reduce the percentage specified in the
definition of Required Lenders, or consent to the assignment or transfer by the
Borrower of any of its rights and obligations under this Agreement and the other
Loan Documents or release all or substantially all of the Collateral, in each
case without the written consent of all the Lenders, or (iii) amend, modify or
waive any provision of Section 10 without the written consent of the then Agent
or (iv) amend, modify or waive any provision of Section 3 without the written
consent of the then Issuing Lender. Any such waiver and any such amendment,
supplement or modification shall apply equally to each of the Lenders and shall
be binding upon the Borrower, the Lenders, the Agent and all future holders of
the Notes. In the case of any waiver, the Borrower, the Lenders and the Agent
shall be restored to their former position and rights hereunder and under the
outstanding Notes and any other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
11.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three days after being deposited
in the mail, postage prepaid, return receipt requested or, in the case of
telecopy notice, when received, addressed as follows in the case of the Borrower
and the Agent, and as set forth in Schedule 1.1 in the case of the other parties
hereto, or to such other address as may be hereafter notified by the respective
parties hereto and any future holders of the Notes:
The Borrower: Aftermarket Technology Corp.
33309 1st Way South
Suite A-206
Federal Way, WA 98003
Attention: Chief Financial Officer
with a copy to: Gibson, Dunn & Crutcher LLP
2029 Century Park East, 40th Floor
Los Angeles, CA 90067
Attention: Bruce D. Meyer
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The Agent: The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: Julie Long
Telecopy: 212-972-9854
with a copy to: The Chase Manhattan Bank
One Chase Manhattan Plaza
8th Floor
Agent Bank Service Group
New York, New York 10081
Attention: Sandra Miklave
Telecopy: 212-552-5658
The Issuing Bank: The Chase Manhattan Bank Delaware
1201 Market Street, 9th Floor
Wilmington, DE 19801
Attention: Michael Handago, Corp. Banking Dept.
Telecopy: 302-428-3390
PROVIDED that any notice, request or demand to or upon the Agent or the Lenders
pursuant to subsection 2.2, 2.3, 4.3 or 4.4 shall not be effective until
received.
11.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Agent or any Lender, any right, remedy,
power or privilege hereunder or under the other Loan Documents shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.
11.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the Notes and the
making of the Loans hereunder.
11.5 PAYMENT OF EXPENSES AND TAXES. The Borrower agrees (a) to pay
or reimburse the Agent for all its reasonable out-of-pocket costs and expenses
incurred in connection with the development, preparation and execution of, and
any amendment, supplement or modification to, this Agreement, the Notes and the
other Loan Documents and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Agent in connection with the foregoing,
(b) to pay or reimburse each Lender and the Agent for all its reasonable out-of-
pocket costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the Notes, the other Loan
Documents and any such other
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documents, including, without limitation, the reasonable fees and disbursements
of counsel to each Lender and of counsel to the Agent in connection with the
foregoing, (c) to pay, indemnify, and hold each Lender and the Agent harmless
from, any and all recording and filing fees and any and all liabilities with
respect to, or resulting from any delay in paying, stamp, excise and other
similar taxes (other than withholding taxes), if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, the Notes, the other Loan Documents and any such
other documents, and (d) to pay, indemnify, and hold each Lender and the Agent
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement, the Notes, the
other Loan Documents, and any such other documents, including, without
limitation, any of the foregoing relating to the violation of, noncompliance
with or liability under, any Environmental Law applicable to the operations of
the Borrower, any of its Subsidiaries or any of the Properties (all the
foregoing in this clause (d), collectively, the "indemnified liabilities"),
PROVIDED, that the Borrower shall have no obligation hereunder to the Agent or
any Lender with respect to indemnified liabilities arising from (i) the gross
negligence or willful misconduct of the Agent or any such Lender or (ii) legal
proceedings commenced against the Agent or any such Lender by any security
holder or creditor thereof arising out of and based upon rights afforded any
such security holder or creditor solely in its capacity as such. The agreements
in this subsection 11.5 shall survive repayment of the Notes and all other
amounts payable hereunder.
11.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS. (a)
This Agreement shall be binding upon and inure to the benefit of the Borrower,
the Lenders, the Agent and their respective successors and assigns, except that
the Borrower may not assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its business or
investment activities and in accordance with applicable law, at any time sell
(with the consent of the Borrower, which shall not be unreasonably withheld or
delayed) to one or more banks or other entities ("PARTICIPANTS") participating
interests in any Loan owing to such Lender, any Commitment of such Lender or any
other interest of such Lender hereunder and under the other Loan Documents. In
the event of any such sale by a Lender of a participating interest to a
Participant, such Lender's obligations under this Agreement to the other parties
to this Agreement shall remain unchanged, such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
any such Loan for all purposes under this Agreement and the other Loan
Documents, and the Borrower and the Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. No Lender shall
be entitled to create in favor of any Participant, in the participation
agreement pursuant to which such Participant's participating interest shall be
created or otherwise, any right to vote on, consent to or approve any matter
relating to this Agreement or any other Loan Document
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except for those matters specified in clauses (i) and (ii) of the proviso to
subsection 11.1. The Borrower agrees that if amounts outstanding under this
Agreement are due or unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall, to the maximum extent permitted by applicable law, be deemed to have the
right of setoff in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement, PROVIDED that, in
purchasing such participating interest, such Participant shall be deemed to have
agreed to share with the Lenders the proceeds thereof as provided in subsection
11.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees
that each Participant shall be entitled to the benefits of subsections 4.11,
4.12 and 4.13 with respect to its participation in the Commitments and the Loans
outstanding from time to time as if it was a Lender; PROVIDED that, in the case
of subsection 4.12, such Participant shall have complied with the requirements
of said subsection and PROVIDED, FURTHER that no Participant shall be entitled
to receive any greater amount pursuant to any such subsection than the
transferor Lender would have been entitled to receive in respect of the amount
of the participation transferred by such transferor Lender to such Participant
had no such transfer occurred.
(c) Any Lender may, in the ordinary course of its business or
investment activities and in accordance with applicable law, at any time and
from time to time assign to any Lender or any branch or affiliate thereof or,
with the consent of the Borrower and the Agent (which in each case shall not be
unreasonably withheld or delayed), to an additional bank or financial
institution (an "ASSIGNEE") all or any part of its rights and obligations under
this Agreement and the other Loan Documents pursuant to an Assignment and
Acceptance, substantially in the form of Exhibit E, executed by such Assignee
and such assigning Lender (and, in the case of an Assignee that is not then a
Lender or a branch or an affiliate thereof, by the Borrower and the Agent) and
delivered to the Agent for its acceptance and recording in the Register,
PROVIDED that, in the case of any such assignment to an additional bank or
financial institution, if such assignment is of less than all of the rights and
obligations of the assigning Lender, the sum of the aggregate principal amount
of the Loans, the aggregate amount of the L/C Obligations and the aggregate
amount of the Available Revolving Credit Commitment being assigned shall not be
less than $5,000,000 (or such lesser amount as may be agreed to by the Borrower
and the Agent). Upon such execution, delivery, acceptance and recording, from
and after the effective date determined pursuant to such Assignment and
Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the
extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Commitment as set forth therein, and
(y) the assigning Lender thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such assigning Lender shall cease to be a party hereto but shall nonetheless
continue to be entitled to the benefits of subsections 4.11, 4.12, 4.13 and
11.5). Notwithstanding any provision of this paragraph (c) and paragraph (e) of
this subsection, the consent of the Borrower shall not be required, and, unless
requested by the Assignee and/or the assigning Lender, new Notes shall not be
required to be executed and delivered by the Borrower, for any assignment which
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occurs at any time when any of the Events of Default described in Section 9(f)
shall have occurred and be continuing.
(d) The Agent on behalf of the Borrower shall maintain at its address
referred to in subsection 11.2 a copy of each Assignment and Acceptance
delivered to it and a register (the "REGISTER") for the recordation of the names
and addresses of the Lenders and the Commitment of, and principal amount of the
Loans owing to, each Lender from time to time and the registered owners of the
Obligation(s) evidenced by the Note(s). Notes and the obligations evidenced
thereby may be assigned or otherwise transferred in whole or in part only by
registration of such assignment or transfer on the Register (and each Note shall
expressly so provide). Any assignment or transfer of all or part of such
obligation(s) and the Note(s) evidencing the same shall be registered on the
Register only upon surrender for registration of assignment or transfer of the
Note(s) evidencing such Obligation(s), duly endorsed by (or accompanied by a
written instrument of assignment or transfer duly executed by) the Noteholder
thereof, and thereupon one or more new Note(s) in the same aggregate principal
amount shall be issued to the designated Assignee(s) and the old Note(s) shall
be returned by the Agent to the Borrower marked "cancelled". No assignment of
any Note or obligations shall be effective unless it has been recorded in the
Register as provided in this subsection 11.6(f). The entries in the Register
shall be conclusive and the Borrower, the Agent and the Lenders shall treat each
Person whose name is recorded in the Register as the owner of the Loan or the
obligation evidenced by a Note recorded therein for the purpose of receiving all
payments thereon and for all other purposes of this Agreement, notwithstanding
any notice to the contrary. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by the Agent) together with payment to
the Agent of a registration and processing fee of $3,500, the Agent shall (i)
promptly accept such Assignment and Acceptance and (ii) on the effective date
determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the Lenders and
the Borrower. No assignment shall be effective unless it has been recorded in
the Register as provided in this subsection 11.6(g).
(f) Each Lender agrees to use reasonable efforts to protect the
confidentiality of any confidential information with respect to the Borrower and
its Subsidiaries and Affiliates thereof. Notwithstanding the foregoing, the
Borrower authorizes each Lender to disclose to any Participant or Assignee
(each, a "TRANSFEREE") and any prospective Transferee any and all financial
information in such Lender's possession concerning the Borrower and its
Affiliates which has been delivered to such Lender by or on behalf of the
Borrower pursuant to this Agreement or which has been delivered to such Lender
by or on behalf of the Borrower in connection with such Lender's credit
evaluation of the Borrower and its Affiliates prior to becoming a party to this
Agreement.
(g) Nothing herein shall prohibit any Lender from pledging or
assigning any Note to any Federal Reserve Bank in accordance with applicable
law.
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11.7 ADJUSTMENTS; SETOFF. (a) If any Lender (a "BENEFITTED LENDER")
shall at any time receive any payment of all or part of its Loans, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 10(f), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender's Loans, or interest thereon, such benefitted Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loan, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such benefitted Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders;
PROVIDED, HOWEVER, that if all or any portion of such excess payment or benefits
is thereafter recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Borrower, any
such notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the Borrower
hereunder or under the Notes (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency
thereof to or for the credit or the account of the Borrower. Each Lender agrees
promptly to notify the Borrower and the Agent after any such set-off and
application made by such Lender, PROVIDED that the failure to give such notice
shall not affect the validity of such set-off and application.
11.8 COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Agreement
signed by all the parties shall be lodged with the Borrower and the Agent.
11.9 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.10 INTEGRATION. This Agreement and the other Loan Documents
represent the agreement of the Borrower, any Guarantor, the Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Borrower, the Agent or any
Lender relative to subject matter hereof not expressly set forth or referred to
herein or in the other Loan Documents. Each of the parties hereto agrees that,
with the consent of the Agent, names of Lenders on the signature pages hereto
may be added, and the information regarding the Commitments of Lenders set forth
on Schedule 1.1
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may be changed, without affecting the validity of the signature for any party
hereto, and such new Lender shall be a Lender hereunder and Schedule 1.1 shall
be replaced with a new Schedule 1.1 reflecting such changes, PROVIDED that the
aggregate amount of the Commitments set forth in Schedule 1.1 hereto may not be
changed.
11.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
11.12 SUBMISSION TO JURISDICTION; WAIVERS. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any
judgement in respect thereof, to the non-exclusive general
jurisdiction of the Courts of the State of New York, the courts of the
United States of America for the Southern District of New York, and
appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court
or that such action or proceeding was brought in an inconvenient court
and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Borrower at its address set forth in subsection 11.2
or at such other address of which the Agent shall have been notified
pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or
proceeding referred to in this subsection any special, exemplary,
punitive or consequential damages.
11.13 ACKNOWLEDGEMENTS. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement and the Notes and the other Loan
Documents;
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(b) neither the Agent nor any Lender has any fiduciary
relationship with or duty to the Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and
the relationship between Agent and Lenders, on one hand, and the
Borrower, on the other hand, in connection herewith or therewith is
solely that of creditor and debtor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrower and the
Lenders.
11.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENT AND THE LENDERS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OTHER LOAN DOCUMENT
AND FOR ANY COUNTERCLAIM THEREIN.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
AFTERMARKET TECHNOLOGY CORP.
By:___________________________________
Title:
THE CHASE MANHATTAN BANK, as Agent and as a Lender
By:___________________________________
THE FIRST NATIONAL BANK OF CHICAGO
By:___________________________________
Title:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By:___________________________________
HARRIS TRUST & SAVINGS
By:___________________________________
Title:
LASALLE NATIONAL BANK
By:___________________________________
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, D/B/A SEAFIRST BANK
By:___________________________________
Title:
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WELLS FARGO
By:____________________________________
Title:
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EXECUTION COPY
GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of February 14,
1997, made by each of the signatories hereto (together with any other entity
that may become a party hereto as provided herein, the "GRANTORS"), in favor of
THE CHASE MANHATTAN BANK, as Agent (in such capacity, the "AGENT") for the banks
and other financial institutions (the "LENDERS") from time to time parties to
the Credit Agreement, dated as of February 14, 1997 (as amended, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"), among Aftermarket
Technology Corp. (the "BORROWER"), the Lenders and the Agent.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make extensions of credit to the Borrower upon the terms and
subject to the conditions set forth therein;
WHEREAS, the Borrower is a member of an affiliated group of
companies that includes each other Grantor;
WHEREAS, the proceeds of the extensions of credit under the
Credit Agreement will be used in part to enable the Borrower to make valuable
transfers to one or more of the other Grantors in connection with the operation
of their respective businesses;
WHEREAS, the Borrower and the other Grantors are engaged in
related businesses, and each Grantor will derive substantial direct and indirect
benefit from the making of the extensions of credit under the Credit Agreement;
and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective extensions of credit to the Borrower under the
Credit Agreement that the Grantors shall have executed and delivered this
Agreement to the Agent for the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce
the Agent and the Lenders to enter into the Credit Agreement and to induce the
Lenders to make their respective extensions of credit to the Borrower
thereunder, each Grantor hereby agrees with the Agent, for the ratable benefit
of the Lenders, as follows:
SECTION 1. DEFINED TERMS
1.1 DEFINITIONS. (a) Unless otherwise defined herein, terms defined in
the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement, and the following terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Accounts, Chattel Paper, Documents, Equipment, Farm
Products, Instruments and Inventory.
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(b) The following terms shall have the following meanings:
"AGREEMENT": this Guarantee and Collateral Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
"BORROWER OBLIGATIONS": the collective reference to the unpaid principal
of and interest on the Loans and Reimbursement Obligations and all other
obligations and liabilities of the Borrower (including, without limitation,
interest accruing at the then applicable rate provided in the Credit Agreement
after the maturity of the Loans and Reimbursement Obligations and interest
accruing at the then applicable rate provided in the Credit Agreement after the
filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding)
to the Agent or any Lender (or, in the case of any Hedge Agreement referred to
below, any Affiliate of any Lender), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, the Credit Agreement, this
Agreement, the other Loan Documents, any Letter of Credit or any Hedge Agreement
entered into by the Borrower with any Lender (or any Affiliate of any Lender) or
any other document made, delivered or given in connection therewith, in each
case whether on account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation, all
fees and disbursements of counsel to the Agent or to the Lenders that are
required to be paid by the Borrower pursuant to the terms of any of the
foregoing agreements).
"COLLATERAL": as defined in Section 3.
"COLLATERAL ACCOUNT": any collateral account established by the Agent as
provided in Section 6.1 or 6.4.
"COPYRIGHTS": (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished (including,
without limitation, those listed in SCHEDULE 6), all registrations and
recordings thereof, and all applications in connection therewith, including,
without limitation, all registrations, recordings and applications in the United
States Copyright Office, and (ii) the right to obtain all renewals thereof.
"COPYRIGHT LICENSES": any written agreement naming any Grantor as
licensor or licensee (including, without limitation, those listed in SCHEDULE
6), granting any right under any Copyright, including, without limitation, the
grant of rights to manufacture, distribute, exploit and sell materials derived
from any Copyright.
"GENERAL INTANGIBLES": all "general intangibles" as such term is defined
in Section 9-106 of the Uniform Commercial Code in effect in the State of New
York on the date hereof and, in any event, including, without limitation, with
respect to any Grantor, all contracts, agreements, instruments and indentures in
any form, and portions thereof, to which such Grantor is a party or under which
such Grantor has any right, title or interest or to which such Grantor or any
property of such Grantor is subject, as the same may from time to time be
amended, supplemented or otherwise modified, including, without limitation, (i)
all rights of
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such Grantor to receive moneys due and to become due to it thereunder or in
connection therewith, (ii) all rights of such Grantor to damages arising
thereunder and (iii) all rights of such Grantor to perform and to exercise all
remedies thereunder, in each case to the extent the grant by such Grantor of a
security interest pursuant to this Agreement in its right, title and interest in
such contract, agreement, instrument or indenture is not prohibited by such
contract, agreement, instrument or indenture without the consent of any other
party thereto, would not give any other party to such contract, agreement,
instrument or indenture the right to terminate its obligations thereunder, or is
permitted with consent if all necessary consents to such grant of a security
interest have been obtained from the other parties thereto (it being understood
that the foregoing shall not be deemed to obligate such Grantor to obtain such
consents); PROVIDED, that the foregoing limitation shall not affect, limit,
restrict or impair the grant by such Grantor of a security interest pursuant to
this Agreement in any Receivable or any money or other amounts due or to become
due under any such contract, agreement, instrument or indenture.
"GUARANTOR OBLIGATIONS": with respect to any Guarantor, the collective
reference to (i) the Borrower Obligations and (ii) all obligations and
liabilities of such Guarantor which may arise under or in connection with this
Agreement or any other Loan Document to which such Guarantor is a party, in each
case whether on account of guarantee obligations, reimbursement obligations,
fees, indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel to the Agent or to the Lenders that are
required to be paid by such Guarantor pursuant to the terms of this Agreement or
any other Loan Document).
"GUARANTORS": the collective reference to each Grantor other than the
Borrower.
"HEDGE AGREEMENTS": as to any Person, all interest rate swaps, caps or
collar agreements or similar arrangements entered into by such Person providing
for protection against fluctuations in interest rates or currency exchange rates
or the exchange of nominal interest obligations, either generally or under
specific contingencies.
"INTELLECTUAL PROPERTY": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including,
without limitation, the Copyrights, the Copyright Licenses, the Patents, the
Patent Licenses, the Trademarks and the Trademark Licenses, and all rights to
sue at law or in equity for any infringement or other impairment thereof,
including the right to receive all proceeds and damages therefrom.
"INTERCOMPANY NOTE": any promissory note evidencing loans made by any
Grantor to another Grantor or to any Subsidiary of the Borrower which is not a
Grantor.
"ISSUERS": the collective reference to each issuer of a Pledged
Security.
"NEW YORK UCC": the Uniform Commercial Code as from time to time in
effect in the State of New York.
"OBLIGATIONS": (i) in the case of the Borrower, the Borrower
Obligations, and (ii) in the case of each Guarantor, its Guarantor Obligations.
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"PATENTS": (i) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions
thereof and all goodwill associated therewith, including, without limitation,
any of the foregoing referred to in SCHEDULE 6, (ii) all applications for
letters patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof, including, without limitation,
any of the foregoing referred to in SCHEDULE 6, and (iii) all rights to obtain
any reissues or extensions of the foregoing.
"PATENT LICENSE": all agreements, whether written or oral, providing for
the grant by or to any Grantor of any right to manufacture, use or sell any
invention covered in whole or in part by a Patent, including, without
limitation, any of the foregoing referred to in SCHEDULE 6.
"PLEDGED NOTES": all promissory notes listed on SCHEDULE 2, all
Intercompany Notes at any time issued to any Grantor and all other promissory
notes issued to or held by any Grantor (other than promissory notes issued in
connection with extensions of trade credit by any Grantor in the ordinary course
of business).
"PLEDGED SECURITIES": the collective reference to the Pledged Notes and
the Pledged Stock.
"PLEDGED STOCK": the shares of Capital Stock listed on SCHEDULE 2,
together with any other shares, stock certificates, options or rights of any
nature whatsoever in respect of the Capital Stock of any Person that may be
issued or granted to, or held by, any Grantor while this Agreement is in effect.
"PROCEEDS": all "proceeds" as such term is defined in Section 9-306(1)
of the Uniform Commercial Code in effect in the State of New York on the date
hereof and, in any event, shall include, without limitation, all dividends or
other income from the Pledged Securities, collections thereon or distributions
or payments with respect thereto.
"RECEIVABLE": any right to payment for goods sold or leased or for
services rendered, whether or not such right is evidenced by an Instrument or
Chattel Paper and whether or not it has been earned by performance (including,
without limitation, any Account).
"SECURITIES ACT": the Securities Act of 1933, as amended.
"TRADEMARKS": (i) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service marks,
logos and other source or business identifiers, and all goodwill associated
therewith, now existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all applications in connection therewith, whether in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof or any other country or any political
subdivision thereof, or otherwise, and all common-law rights related thereto,
including, without limitation, any of the foregoing referred to in SCHEDULE 6,
and (ii) the right to obtain all renewals thereof.
"TRADEMARK LICENSE": any agreement, whether written or oral, providing
for the grant by or to any Grantor of any right to use any Trademark, including,
without limitation, any of the foregoing referred to in SCHEDULE 6.
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1.2 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof,"
"herein", "hereto" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Section and Schedule references are to this
Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the
Collateral or any part thereof, when used in relation to a Grantor, shall refer
to such Grantor's Collateral or the relevant part thereof.
SECTION 2. GUARANTEE
2.1 GUARANTEE. (a) Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to the Agent, for the
ratable benefit of the Lenders and their respective successors, indorsees,
transferees and assigns, the prompt and complete payment and performance by the
Borrower when due (whether at the stated maturity, by acceleration or otherwise)
of the Borrower Obligations.
(b) Anything herein or in any other Loan Document to the
contrary notwithstanding, the maximum liability of each Guarantor hereunder and
under the other Loan Documents shall in no event exceed the amount which can be
guaranteed by such Guarantor under applicable federal and state laws relating to
the insolvency of debtors (after giving effect to the right of contribution
established in Section 2.2).
(c) Each Guarantor agrees that the Borrower Obligations may at
any time and from time to time exceed the amount of the liability of such
Guarantor hereunder without impairing the guarantee contained in this Section 2
or affecting the rights and remedies of the Agent or any Lender hereunder.
(d) The guarantee contained in this Section 2 shall remain in
full force and effect until all the Borrower Obligations and the obligations of
each Guarantor under the guarantee contained in this Section 2 shall have been
satisfied by payment in full, no Letter of Credit shall be outstanding and the
Commitments shall be terminated, notwithstanding that from time to time during
the term of the Credit Agreement the Borrower may be free from any Borrower
Obligations.
(e) No payment made by the Borrower, any of the Guarantors, any
other guarantor or any other Person or received or collected by the Agent or any
Lender from the Borrower, any of the Guarantors, any other guarantor or any
other Person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of or
in payment of the Borrower Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of any Guarantor hereunder which
shall, notwithstanding any such payment (other than any payment made by such
Guarantor in respect of the Borrower Obligations or any payment received or
collected from such Guarantor in respect of the Borrower Obligations), remain
liable for the Borrower Obligations up to the maximum liability of such
Guarantor hereunder until the Borrower Obligations are paid in full, no Letter
of Credit shall be outstanding and the Commitments are terminated.
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2.2 RIGHT OF CONTRIBUTION. Each Guarantor hereby agrees that
to the extent that a Guarantor shall have paid more than its proportionate share
of any payment made hereunder, such Guarantor shall be entitled to seek and
receive contribution from and against any other Guarantor hereunder which has
not paid its proportionate share of such payment. Each Guarantor's right of
contribution shall be subject to the terms and conditions of Section 2.3. The
provisions of this Section 2.2 shall in no respect limit the obligations and
liabilities of any Guarantor to the Agent and the Lenders, and each Guarantor
shall remain liable to the Agent and the Lenders for the full amount guaranteed
by such Guarantor hereunder.
2.3 NO SUBROGATION. Notwithstanding any payment made by any
Guarantor hereunder or any set-off or application of funds of any Guarantor by
the Agent or any Lender, no Guarantor shall be entitled to be subrogated to any
of the rights of the Agent or any Lender against the Borrower or any other
Guarantor or any collateral security or guarantee or right of offset held by the
Agent or any Lender for the payment of the Borrower Obligations, nor shall any
Guarantor seek or be entitled to seek any contribution or reimbursement from the
Borrower or any other Guarantor in respect of payments made by such Guarantor
hereunder, until all amounts owing to the Agent and the Lenders by the Borrower
on account of the Borrower Obligations are paid in full, no Letter of Credit
shall be outstanding and the Commitments are terminated. If any amount shall be
paid to any Guarantor on account of such subrogation rights at any time when all
of the Borrower Obligations shall not have been paid in full, such amount shall
be held by such Guarantor in trust for the Agent and the Lenders, segregated
from other funds of such Guarantor, and shall, forthwith upon receipt by such
Guarantor, be turned over to the Agent in the exact form received by such
Guarantor (duly indorsed by such Guarantor to the Agent, if required), to be
applied against the Borrower Obligations, whether matured or unmatured, in such
order as the Agent, with the consent of the Required Lenders, may determine.
2.4 AMENDMENTS, ETC. WITH RESPECT TO THE BORROWER OBLIGATIONS.
Each Guarantor shall remain obligated hereunder notwithstanding that, without
any reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Borrower
Obligations made by the Agent or any Lender may be rescinded by the Agent or
such Lender and any of the Borrower Obligations continued, and the Borrower
Obligations, or the liability of any other Person upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered or released by
the Agent or any Lender, and the Credit Agreement and the other Loan Documents
and any other documents executed and delivered in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, as the Agent
(or the Required Lenders or all Lenders, as the case may be) may deem advisable
from time to time, and any collateral security, guarantee or right of offset at
any time held by the Agent or any Lender for the payment of the Borrower
Obligations may be sold, exchanged, waived, surrendered or released. Neither
the Agent nor any Lender shall have any obligation to protect, secure, perfect
or insure any Lien at any time held by it as security for the Borrower
Obligations or for the guarantee contained in this Section 2 or any property
subject thereto.
2.5 GUARANTEE ABSOLUTE AND UNCONDITIONAL. Each Guarantor
waives any and all notice of the creation, renewal, extension or accrual of any
of the Borrower Obligations and notice of or proof of reliance by the Agent or
any Lender upon the guarantee contained in this Section 2 or acceptance of the
guarantee contained in this Section 2; the Borrower Obligations, and any of
them, shall conclusively be deemed to have been created, contracted or incurred,
or renewed, extended, amended or waived, in reliance upon the guarantee
contained in this Section 2; and all dealings
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between the Borrower and any of the Guarantors, on the one hand, and the Agent
and the Lenders, on the other hand, likewise shall be conclusively presumed to
have been had or consummated in reliance upon the guarantee contained in this
Section 2. Each Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Borrower or any of
the Guarantors with respect to the Borrower Obligations. Each Guarantor
understands and agrees that the guarantee contained in this Section 2 shall be
construed as a continuing, absolute and unconditional guarantee of payment
without regard to (a) the validity or enforceability of the Credit Agreement or
any other Loan Document, any of the Borrower Obligations or any other collateral
security therefor or guarantee or right of offset with respect thereto at any
time or from time to time held by the Agent or any Lender, (b) any defense,
set-off or counterclaim (other than a defense of payment or performance) which
may at any time be available to or be asserted by the Borrower or any other
Person against the Agent or any Lender, or (c) any other circumstance whatsoever
(with or without notice to or knowledge of the Borrower or such Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of the Borrower for the Borrower Obligations, or of such Guarantor
under the guarantee contained in this Section 2, in bankruptcy or in any other
instance. When making any demand hereunder or otherwise pursuing its rights and
remedies hereunder against any Guarantor, the Agent or any Lender may, but shall
be under no obligation to, make a similar demand on or otherwise pursue such
rights and remedies as it may have against the Borrower, any other Guarantor or
any other Person or against any collateral security or guarantee for the
Borrower Obligations or any right of offset with respect thereto, and any
failure by the Agent or any Lender to make any such demand, to pursue such other
rights or remedies or to collect any payments from the Borrower, any other
Guarantor or any other Person or to realize upon any such collateral security or
guarantee or to exercise any such right of offset, or any release of the
Borrower, any other Guarantor or any other Person or any such collateral
security, guarantee or right of offset, shall not relieve any Guarantor of any
obligation or liability hereunder, and shall not impair or affect the rights and
remedies, whether express, implied or available as a matter of law, of the Agent
or any Lender against any Guarantor. For the purposes hereof "demand" shall
include the commencement and continuance of any legal proceedings.
2.6 REINSTATEMENT. The guarantee contained in this Section 2
shall continue to be effective, or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any of the Borrower Obligations is
rescinded or must otherwise be restored or returned by the Agent or any Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
the Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.
2.7 PAYMENTS. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Agent without set-off or counterclaim in Dollars
at the office of the Agent located at 270 Park Avenue, New York, New York 10017.
SECTION 3. GRANT OF SECURITY INTEREST
Each Grantor hereby assigns and transfers to the Agent, and
hereby grants to the Agent, for the ratable benefit of the Lenders, a security
interest in, all of the following property now owned or at any time hereafter
acquired by such Grantor or in which such Grantor now has or at any time in the
future may acquire any right, title or interest (collectively, the
"COLLATERAL"), as collateral
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security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of such Grantor's
Obligations:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Documents;
(d) all Equipment;
(e) all General Intangibles;
(f) all Instruments;
(g) all Intellectual Property;
(h) all Inventory;
(i) all Pledged Securities;
(j) all books and records pertaining to the Collateral; and
(k) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing and all collateral security and
guarantees given by any Person with respect to any of the foregoing.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrower thereunder, each Grantor hereby represents and warrants
to the Agent and each Lender that:
4.1 REPRESENTATIONS IN CREDIT AGREEMENT. In the case of each
Guarantor, the representations and warranties set forth in Section 5 of the
Credit Agreement as they relate to such Guarantor or to the Loan Documents to
which such Guarantor is a party, each of which is hereby incorporated herein by
reference, are true and correct, and the Agent and each Lender shall be entitled
to rely on each of them as if they were fully set forth herein, PROVIDED that
each reference in each such representation and warranty to the Borrower's
knowledge shall, for the purposes of this Section 4.1, be deemed to be a
reference to such Guarantor's knowledge.
4.2 TITLE; NO OTHER LIENS. Except for the security interest
granted to the Agent for the ratable benefit of the Lenders pursuant to this
Agreement and the other Liens permitted to exist on the Collateral by the Credit
Agreement, such Grantor owns each item of the Collateral free and clear of any
and all Liens or claims of others. No financing statement or other public
notice with respect to all or any part of the Collateral is on file or of record
in any public office, except such as have been
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filed in favor of the Agent, for the ratable benefit of the Lenders, pursuant to
this Agreement or as are permitted by the Credit Agreement.
4.3 PERFECTED FIRST PRIORITY LIENS. The security interests
granted pursuant to this Agreement (a) upon completion of the filings and other
actions specified on SCHEDULE 3 (which, in the case of all filings and other
documents referred to on said Schedule, have been delivered to the Agent in
completed and duly executed form) will constitute valid perfected security
interests in all of the Collateral in favor of the Agent, for the ratable
benefit of the Lenders as collateral security for such Grantor's Obligations,
enforceable in accordance with the terms hereof against all creditors of such
Grantor and any Persons purporting to purchase any Collateral from such Grantor
and (b) are prior to all other Liens on the Collateral in existence on the date
hereof except for (i) unrecorded Liens permitted by the Credit Agreement which
have priority over the Liens on the Collateral by operation of law and (ii)
Liens described on SCHEDULE 7.
4.4 CHIEF EXECUTIVE OFFICE. On the date hereof, such Grantor's
jurisdiction of organization and the location of such Grantor's chief executive
office or sole place of business are specified on SCHEDULE 4.
4.5 INVENTORY AND EQUIPMENT. On the date hereof, the Inventory
and the Equipment (other than mobile goods) are kept at the locations listed on
SCHEDULE 5.
4.6 FARM PRODUCTS. None of the Collateral constitutes, or is
the Proceeds of, Farm Products.
4.7 PLEDGED SECURITIES. (a) The shares of Pledged Stock
pledged by such Grantor hereunder constitute (i) in the case of each domestic
Issuer, all the issued and outstanding shares of all classes of the Capital
Stock of each such domestic Issuer owned by such Grantor and (ii) in the case of
each foreign Issuer, such percentage (not more than 65%) as is specified on
SCHEDULE 2 of all the issued and outstanding shares of all classes of the
Capital Stock of each such foreign Issuer.
(b) All the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable.
(c) Each of the Pledged Notes constitutes the legal, valid and
binding obligation of the obligor with respect thereto, enforceable in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and has
good and marketable title to, the Pledged Securities pledged by it hereunder,
free of any and all Liens or options in favor of, or claims of, any other
Person, except the security interest created by this Agreement.
4.8 RECEIVABLES. (a) No amount payable to such Grantor under
or in connection with any Receivable is evidenced by any Instrument or Chattel
Paper which has not been delivered to the Agent.
(b) None of the obligors on any Receivables is a Governmental
Authority.
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(c) The amounts represented by such Grantor to the Lenders from
time to time as owing to such Grantor in respect of the Receivables will at such
times be accurate.
4.9 INTELLECTUAL PROPERTY. (a) SCHEDULE 6 lists all
Intellectual Property owned by such Grantor in its own name on the date hereof.
(b) On the date hereof, all material Intellectual Property is
valid, subsisting, unexpired and enforceable, has not been abandoned and does
not infringe the intellectual property rights of any other Person.
(c) Except as set forth in SCHEDULE 6, on the date hereof, none
of the Intellectual Property is the subject of any licensing or franchise
agreement pursuant to which such Grantor is the licensor or franchisor.
(d) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of, or
such Grantor's rights in, any Intellectual Property in any respect that could
reasonably be expected to have a Material Adverse Effect.
(e) No action or proceeding is pending, or, to the knowledge of
such Grantor, threatened, on the date hereof (i) seeking to limit, cancel or
question the validity of any Intellectual Property or such Grantor's ownership
interest therein, or (ii) which, if adversely determined, would have a material
adverse effect on the value of any Intellectual Property.
SECTION 5. COVENANTS
Each Grantor covenants and agrees with the Agent and the Lenders
that, from and after the date of this Agreement until the Obligations shall have
been paid in full, no Letter of Credit shall be outstanding and the Commitments
shall have terminated:
5.1 COVENANTS IN CREDIT AGREEMENT. In the case of each
Guarantor, such Guarantor shall take, or shall refrain from taking, as the case
may be, each action that is necessary to be taken or not taken, as the case may
be, so that no Default or Event of Default is caused by the failure to take such
action or to refrain from taking such action by such Guarantor or any of its
Subsidiaries.
5.2 DELIVERY OF INSTRUMENTS AND CHATTEL PAPER. If any amount
payable under or in connection with any of the Collateral shall be or become
evidenced by any Instrument or Chattel Paper, such Instrument or Chattel Paper
shall be immediately delivered to the Agent, duly indorsed in a manner
satisfactory to the Agent, to be held as Collateral pursuant to this Agreement.
5.3 MAINTENANCE OF INSURANCE. (a) Such Grantor will maintain,
with financially sound and reputable companies, insurance policies (i) insuring
the Inventory and Equipment against loss by fire, explosion, theft and such
other casualties as may be reasonably satisfactory to the Agent and (ii) to the
extent requested by the Agent, insuring such Grantor, the Agent and the Lenders
against liability for personal injury and property damage relating to such
Inventory and Equipment, such policies to be in such form and amounts and having
such coverage as may be reasonably satisfactory to the Agent and the Lenders.
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(b) All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Agent of written notice
thereof, (ii) name the Agent as insured party or loss payee, (iii) if reasonably
requested by the Agent, include a breach of warranty clause and (iv) be
reasonably satisfactory in all other respects to the Agent.
(c) The Borrower shall deliver to the Agent and the Lenders a
report of a reputable insurance broker with respect to such insurance during the
month of March, or such other month as the Agent and the Borrower shall
reasonably agree upon, in each calendar year and such supplemental reports with
respect thereto as the Agent may from time to time reasonably request.
5.4 PAYMENT OF OBLIGATIONS. Such Grantor will pay and
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all taxes, assessments and governmental charges
or levies imposed upon the Collateral or in respect of income or profits
therefrom, as well as all claims of any kind (including, without limitation,
claims for labor, materials and supplies) against or with respect to the
Collateral, except that no such charge need be paid if the amount or validity
thereof is currently being contested in good faith by appropriate proceedings,
reserves in conformity with GAAP with respect thereto have been provided on the
books of such Grantor and such proceedings could not reasonably be expected to
result in the sale, forfeiture or loss of any material portion of the Collateral
or any interest therein.
5.5 MAINTENANCE OF PERFECTED SECURITY INTEREST; FURTHER
DOCUMENTTION. (a) Such Grantor shall maintain the security interest created by
this Agreement as a perfected security interest having at least the priority
described in Section 4.3 and shall defend such security interest against the
claims and demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Agent and the Lenders from
time to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the Agent
may reasonably request, all in reasonable detail.
(c) At any time and from time to time, upon the written request
of the Agent, and at the sole expense of such Grantor, such Grantor will
promptly and duly execute and deliver, and have recorded, such further
instruments and documents and take such further actions as the Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted, including,
without limitation, the filing of any financing or continuation statements under
the Uniform Commercial Code (or other similar laws) in effect in any
jurisdiction with respect to the security interests created hereby.
5.6 CHANGES IN LOCATIONS, NAME, ETC. Such Grantor will not,
except upon 15 days' prior written notice to the Agent and delivery to the Agent
of (a) all additional executed financing statements and other documents
reasonably requested by the Agent to maintain the validity, perfection and
priority of the security interests provided for herein and (b) if applicable, a
written supplement to SCHEDULE 5 showing any additional location at which
Inventory or Equipment shall be kept:
(i) permit any of the Inventory or Equipment to be kept at a
location other than those listed on SCHEDULE 5;
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(ii) change the location of its chief executive office or sole
place of business from that referred to in Section 4.4; or
(iii) change its name, identity or corporate structure to such
an extent that any financing statement filed by the Agent in connection
with this Agreement would become misleading.
5.7 NOTICES. Such Grantor will advise the Agent and the
Lenders promptly, in reasonable detail, of:
(a) any Lien (other than security interests created hereby or
Liens permitted under the Credit Agreement) on any of the Collateral which would
adversely affect the ability of the Agent to exercise any of its remedies
hereunder; and
(b) the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
5.8 PLEDGED SECURITIES. (a) If such Grantor shall become
entitled to receive or shall receive any stock certificate (including, without
limitation, any certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of capital or any
certificate issued in connection with any reorganization), option or rights in
respect of the Capital Stock of any Issuer, whether in addition to, in
substitution of, as a conversion of, or in exchange for, any shares of the
Pledged Stock, or otherwise in respect thereof, such Grantor shall accept the
same as the agent of the Agent and the Lenders, hold the same in trust for the
Agent and the Lenders and deliver the same forthwith to the Agent in the exact
form received, duly indorsed by such Grantor to the Agent, if required, together
with an undated stock power covering such certificate duly executed in blank by
such Grantor and with, if the Agent so requests, signature guaranteed, to be
held by the Agent, subject to the terms hereof, as additional collateral
security for the Obligations. Any sums paid upon or in respect of the Pledged
Securities upon the liquidation or dissolution of any Issuer shall be paid over
to the Agent to be held by it hereunder as additional collateral security for
the Obligations, and in case any distribution of capital shall be made on or in
respect of the Pledged Securities or any property shall be distributed upon or
with respect to the Pledged Securities pursuant to the recapitalization or
reclassification of the capital of any Issuer or pursuant to the reorganization
thereof, the property so distributed shall, unless otherwise subject to a
perfected security interest in favor of the Agent, be delivered to the Agent to
be held by it hereunder as additional collateral security for the Obligations.
If any sums of money or property so paid or distributed in respect of the
Pledged Securities shall be received by such Grantor, such Grantor shall, until
such money or property is paid or delivered to the Agent, hold such money or
property in trust for the Lenders, segregated from other funds of such Grantor,
as additional collateral security for the Obligations.
(b) Without the prior written consent of the Agent, such
Grantor will not (i) vote to enable, or take any other action to permit, any
Issuer to issue any stock or other equity securities of any nature or to issue
any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of any Issuer,
(ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Pledged Securities or Proceeds thereof (except
pursuant to a transaction expressly permitted by the Credit Agreement), (iii)
create, incur or permit to exist any Lien or option in favor of, or any claim of
any Person with respect
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to, any of the Pledged Securities or Proceeds thereof, or any interest therein,
except for the security interests created by this Agreement or (iv) enter into
any agreement or undertaking restricting the right or ability of such Grantor or
the Agent to sell, assign or transfer any of the Pledged Securities or Proceeds
thereof.
(c) In the case of each Grantor which is an Issuer, such Issuer
agrees that (i) it will be bound by the terms of this Agreement relating to the
Pledged Securities issued by it and will comply with such terms insofar as such
terms are applicable to it, (ii) it will notify the Agent promptly in writing of
the occurrence of any of the events described in Section 5.8(a) with respect to
the Pledged Securities issued by it and (iii) the terms of Sections 6.3(c) and
6.7 shall apply to it, MUTATIS MUTANDIS, with respect to all actions that may be
required of it pursuant to Section 6.3(c) or 6.7 with respect to the Pledged
Securities issued by it.
5.9 RECEIVABLES. (a) Other than in the ordinary course of
business consistent with its past practice, such Grantor will not (i) grant any
extension of the time of payment of any Receivable, (ii) compromise or settle
any Receivable for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any Receivable, (iv) allow any
credit or discount whatsoever on any Receivable or (v) amend, supplement or
modify any Receivable in any manner that could adversely affect the value
thereof.
(b) Such Grantor will deliver to the Agent a copy of each
material demand, notice or document received by it that questions or calls into
doubt the validity or enforceability of more than 5% of the aggregate amount of
the then outstanding Receivables.
5.10 INTELLECTUAL PROPERTY. (a) Such Grantor (either itself
or through licensees) will (i) continue to use each material Trademark on each
and every trademark class of goods applicable to its current line as reflected
in its current catalogs, brochures and price lists in order to maintain such
Trademark in full force free from any claim of abandonment for non-use, (ii)
maintain as in the past the quality of products and services offered under such
Trademark, (iii) use such Trademark with the appropriate notice of registration
and all other notices and legends required by applicable Requirements of Law,
(iv) not adopt or use any mark which is confusingly similar or a colorable
imitation of such Trademark unless the Agent, for the ratable benefit of the
Lenders, shall obtain a perfected security interest in such mark pursuant to
this Agreement, and (v) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby such Trademark may become
invalidated or impaired in any way.
(b) Such Grantor (either itself or through licensees) will not
do any act, or omit to do any act, whereby any material Patent may become
forfeited, abandoned or dedicated to the public.
(c) Such Grantor (either itself or through licensees) (i) will
employ each material Copyright and (ii) will not (and will not permit any
licensee or sublicensee thereof to) do any act or knowingly omit to do any act
whereby any material portion of the Copyrights may become invalidated or
otherwise impaired. Such Grantor will not (either itself or through licensees)
do any act whereby any material portion of the Copyrights may fall into the
public domain.
(d) Such Grantor (either itself or through licensees) will not
do any act that knowingly uses any material Intellectual Property to infringe
the intellectual property rights of any other Person.
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(e) Such Grantor will notify the Agent and the Lenders
immediately if it knows, or has reason to know, that any application or
registration relating to any material Intellectual Property may become
forfeited, abandoned or dedicated to the public, or of any adverse determination
or development (including, without limitation, the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any court or tribunal in
any country) regarding such Grantor's ownership of, or the validity of, any
material Intellectual Property or such Grantor's right to register the same or
to own and maintain the same.
(f) Whenever such Grantor, either by itself or through any
agent, employee, licensee or designee, shall file an application for the
registration of any Intellectual Property with the United States Patent and
Trademark Office, the United States Copyright Office or any similar office or
agency in any other country or any political subdivision thereof, such Grantor
shall report such filing to the Agent within five Business Days after the last
day of the fiscal quarter in which such filing occurs. Upon request of the
Agent, such Grantor shall execute and deliver, and have recorded, any and all
agreements, instruments, documents, and papers as the Agent may request to
evidence the Agent's and the Lenders' security interest in any Copyright, Patent
or Trademark and the goodwill and general intangibles of such Grantor relating
thereto or represented thereby.
(g) Such Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the material Intellectual Property, including,
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(h) In the event that any material Intellectual Property is
infringed, misappropriated or diluted by a third party, such Grantor shall (i)
take such actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the Agent
after it learns thereof and sue for infringement, misappropriation or dilution,
to seek injunctive relief where appropriate and to recover any and all damages
for such infringement, misappropriation or dilution.
SECTION 6. REMEDIAL PROVISIONS
6.1 CERTAIN MATTERS RELATING TO RECEIVABLES. (a) The Agent
shall have the right to make test verifications of the Receivables in any manner
and through any medium that it reasonably considers advisable, and each Grantor
shall furnish all such assistance and information as the Agent may require in
connection with such test verifications. At any time and from time to time,
upon the Agent's request and at the expense of the relevant Grantor, such
Grantor shall cause independent public accountants or others satisfactory to the
Agent to furnish to the Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, the Receivables.
(b) The Agent hereby authorizes each Grantor to collect such
Grantor's Receivables, subject to the Agent's direction and control, and the
Agent may curtail or terminate said authority at any time after the occurrence
and during the continuance of an Event of Default. If required by the Agent at
any time after the occurrence and during the continuance of an Event of Default,
any
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payments of Receivables, when collected by any Grantor, (i) shall be forthwith
(and, in any event, within two Business Days) deposited by such Grantor in the
exact form received, duly indorsed by such Grantor to the Agent if required, in
a Collateral Account maintained under the sole dominion and control of the
Agent, subject to withdrawal by the Agent for the account of the Lenders only as
provided in Section , and (ii) until so turned over, shall be held by such
Grantor in trust for the Agent and the Lenders, segregated from other funds of
such Grantor. Each such deposit of Proceeds of Receivables shall be accompanied
by a report identifying in reasonable detail the nature and source of the
payments included in the deposit.
(c) At the Agent's request, each Grantor shall deliver to the
Agent all original and other documents evidencing, and relating to, the
agreements and transactions which gave rise to the Receivables, including,
without limitation, all original orders, invoices and shipping receipts.
6.2 COMMUNICATIONS WITH OBLIGORS; GRANTORS REMAIN LIABLE. (a)
The Agent in its own name or in the name of others may at any time communicate
with obligors under the Receivables to verify with them to the Agent's
satisfaction the existence, amount and terms of any Receivables.
(b) Upon the request of the Agent at any time after the
occurrence and during the continuance of an Event of Default, each Grantor shall
notify obligors on the Receivables that the Receivables and the Contracts have
been assigned to the Agent for the ratable benefit of the Lenders and that
payments in respect thereof shall be made directly to the Agent.
(c) Anything herein to the contrary notwithstanding, each
Grantor shall remain liable under each of the Receivables to observe and perform
all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. Neither the Agent nor any Lender shall have any obligation or liability
under any Receivable (or any agreement giving rise thereto), by reason of or
arising out of this Agreement or the receipt by the Agent or any Lender of any
payment relating thereto, nor shall the Agent or any Lender be obligated in any
manner to perform any of the obligations of any Grantor under or pursuant to any
Receivable (or any agreement giving rise thereto) to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party thereunder, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
6.3 PLEDGED STOCK. (a) Unless an Event of Default shall have
occurred and be continuing and the Agent shall have given notice to the relevant
Grantor of the Agent's intent to exercise its corresponding rights pursuant to
Section 6.3(b), each Grantor shall be permitted to receive all cash dividends
paid in respect of the Pledged Stock and all payments made in respect of the
Pledged Notes, in each case paid in the normal course of business of the
relevant Issuer and consistent with past practice and to exercise all voting and
corporate rights with respect to the Pledged Securities; PROVIDED, HOWEVER, that
no vote shall be cast or corporate right exercised or other action taken which,
in the Agent's reasonable judgment, would impair the Collateral or which would
be inconsistent with or result in any violation of any provision of the Credit
Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing and
the Agent shall give notice of its intent to exercise such rights to the
relevant Grantor or Grantors, (i) the Agent shall have
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the right to receive any and all cash dividends, payments or other Proceeds paid
in respect of the Pledged Securities and make application thereof to the
Obligations in such order as the Agent may determine, and (ii) any or all of the
Pledged Securities shall be registered in the name of the Agent or its nominee,
and the Agent or its nominee may thereafter exercise (x) all voting, corporate
and other rights pertaining to such Pledged Securities at any meeting of
shareholders of the relevant Issuer or Issuers or otherwise and (y) any and all
rights of conversion, exchange and subscription and any other rights, privileges
or options pertaining to such Pledged Securities as if it were the absolute
owner thereof (including, without limitation, the right to exchange at its
discretion any and all of the Pledged Securities upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of any Issuer, or upon the exercise by any Grantor or the Agent of any
right, privilege or option pertaining to such Pledged Securities, and in
connection therewith, the right to deposit and deliver any and all of the
Pledged Securities with any committee, depositary, transfer agent, registrar or
other designated agency upon such terms and conditions as the Agent may
determine), all without liability except to account for property actually
received by it, but the Agent shall have no duty to any Grantor to exercise any
such right, privilege or option and shall not be responsible for any failure to
do so or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each Issuer of
any Pledged Securities pledged by such Grantor hereunder to (i) comply with any
instruction received by it from the Agent in writing that (x) states that an
Event of Default has occurred and is continuing and (y) is otherwise in
accordance with the terms of this Agreement, without any other or further
instructions from such Grantor, and each Grantor agrees that each Issuer shall
be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Pledged Securities directly to the Agent.
6.4 PROCEEDS TO BE TURNED OVER TO AGENT. In addition to the
rights of the Agent and the Lenders specified in Section 6.1 with respect to
payments of Receivables, if an Event of Default shall occur and be continuing
and the Agent shall give notice of its intent to exercise such rights to the
relevant Grantor or Grantors, all Proceeds received by any Grantor consisting of
cash, checks and Cash Equivalents shall be held by such Grantor in trust for the
Agent and the Lenders, segregated from other funds of such Grantor, and shall,
forthwith upon receipt by such Grantor, be turned over to the Agent in the exact
form received by such Grantor (duly indorsed by such Grantor to the Agent, if
required). All Proceeds received by the Agent hereunder shall be held by the
Agent in a Collateral Account maintained under its sole dominion and control.
All Proceeds while held by the Agent in a Collateral Account (or by such Grantor
in trust for the Agent and the Lenders) shall continue to be held as collateral
security for all the Obligations and shall not constitute payment thereof until
applied as provided in Section .
6.5 APPLICATION OF PROCEEDS. At such intervals as may be
agreed upon by the Borrower and the Agent, or, if an Event of Default shall have
occurred and be continuing, at any time at the Agent's election, the Agent may
apply all or any part of Proceeds held in any Collateral Account in payment of
the Obligations in such order as the Agent, with the consent of the Required
Lenders, may elect, and any part of such funds which the Agent, with the consent
of the Required Lenders, elects not so to apply and deems not required as
collateral security for the Obligations shall be paid over from time to time by
the Agent to the Borrower or to whomsoever may be lawfully entitled to receive
the same. Any balance of such Proceeds remaining after the Obligations shall
have been paid in full, no Letters of Credit shall be outstanding and the
Commitments shall have terminated shall be paid over to the Borrower or to
whomsoever may be lawfully entitled to receive the same.
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6.6 CODE AND OTHER REMEDIES. If an Event of Default shall
occur and be continuing, the Agent, on behalf of the Lenders, may exercise, in
addition to all other rights and remedies granted to them in this Agreement and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the New York UCC
or any other applicable law. Without limiting the generality of the foregoing,
the Agent, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon any Grantor or any other Person (all and each of which
demands, defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Agent or any Lender or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Agent or any Lender shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in any Grantor, which right or equity is hereby waived and
released. Each Grantor further agrees, at the Agent's request, to assemble the
Collateral and make it available to the Agent at places which the Agent shall
reasonably select, whether at such Grantor's premises or elsewhere. The Agent
shall apply the net proceeds of any action taken by it pursuant to this Section
6.6, after deducting all reasonable costs and expenses of every kind incurred in
connection therewith or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Agent
and the Lenders hereunder, including, without limitation, reasonable attorneys'
fees and disbursements, to the payment in whole or in part of the Obligations,
in such order as the Agent, with the consent of the Required Lenders, may elect,
and only after such application and after the payment by the Agent of any other
amount required by any provision of law, including, without limitation, Section
9-504(1)(c) of the New York UCC, need the Agent account for the surplus, if any,
to any Grantor. To the extent permitted by applicable law, each Grantor waives
all claims, damages and demands it may acquire against the Agent or any Lender
arising out of the exercise by them of any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least 10 days before
such sale or other disposition.
6.7 REGISTRATION RIGHTS. (a) If the Agent shall determine to
exercise its right to sell any or all of the Pledged Stock pursuant to Section
6.6, and if in the opinion of the Agent it is necessary or advisable to have the
Pledged Stock, or that portion thereof to be sold, registered under the
provisions of the Securities Act, the relevant Grantor will cause the Issuer
thereof to (i) execute and deliver, and cause the directors and officers of such
Issuer to execute and deliver, all such instruments and documents, and do or
cause to be done all such other acts as may be, in the opinion of the Agent,
necessary or advisable to register the Pledged Stock, or that portion thereof to
be sold, under the provisions of the Securities Act, (ii) use its best efforts
to cause the registration statement relating thereto to become effective and to
remain effective for a period of one year from the date of the first public
offering of the Pledged Stock, or that portion thereof to be sold, and (iii)
make all amendments thereto and/or to the related prospectus which, in the
opinion of the Agent, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Grantor agrees to
cause such Issuer to comply with the provisions of the securities or "Blue Sky"
laws of any and all jurisdictions which the Agent shall designate and to make
available to its security holders, as soon as
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practicable, an earnings statement (which need not be audited) which will
satisfy the provisions of Section 11(a) of the Securities Act.
(b) Each Grantor recognizes that the Agent may be unable to
effect a public sale of any or all the Pledged Stock, by reason of certain
prohibitions contained in the Securities Act and applicable state securities
laws or otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The Agent shall
be under no obligation to delay a sale of any of the Pledged Stock for the
period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of the Pledged Stock pursuant to this Section 6.7 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Each Grantor further agrees that a breach of any of the covenants contained in
this Section 6.7 will cause irreparable injury to the Agent and the Lenders,
that the Agent and the Lenders have no adequate remedy at law in respect of such
breach and, as a consequence, that each and every covenant contained in this
Section 6.7 shall be specifically enforceable against such Grantor, and such
Grantor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no Event of
Default has occurred under the Credit Agreement.
6.8 WAIVER; DEFICIENCY. Each Grantor waives and agrees not to
assert any rights or privileges which it may acquire under Section 9-112 of the
New York UCC. Each Grantor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay its Obligations and the fees and disbursements of any attorneys employed by
the Agent or any Lender to collect such deficiency.
SECTION 7. THE AGENT
7.1 AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT, ETC. (a) Each
Grantor hereby irrevocably constitutes and appoints the Agent and any officer or
agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of such Grantor and in the name of such Grantor or in its own name, for
the purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, each Grantor hereby gives the
Agent the power and right, on behalf of such Grantor, without notice to or
assent by such Grantor, to do any or all of the following:
(i) in the name of such Grantor or its own name, or otherwise,
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment
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of moneys due under any Receivable or with respect to any other Collateral
and file any claim or take any other action or proceeding in any court of
law or equity or otherwise deemed appropriate by the Agent for the purpose
of collecting any and all such moneys due under any Receivable or with
respect to any other Collateral whenever payable;
(ii) in the case of any Intellectual Property, execute and
deliver, and have recorded, any and all agreements, instruments, documents
and papers as the Agent may request to evidence the Agent's and the
Lenders' security interest in such Intellectual Property and the goodwill
and general intangibles of such Grantor relating thereto or represented
thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in
Section 6.6 or 6.7, any indorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral; and
(v) (1) direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Agent or as the Agent shall direct; (2) ask or
demand for, collect, and receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (3) sign and indorse any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications, notices and
other documents in connection with any of the Collateral; (4) commence and
prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any portion
thereof and to enforce any other right in respect of any Collateral; (5)
defend any suit, action or proceeding brought against such Grantor with
respect to any Collateral; (6) settle, compromise or adjust any such suit,
action or proceeding and, in connection therewith, give such discharges or
releases as the Agent may deem appropriate; (7) assign any Copyright,
Patent or Trademark (along with the goodwill of the business to which any
such Copyright, Patent or Trademark pertains), throughout the world for
such term or terms, on such conditions, and in such manner, as the Agent
shall in its sole discretion determine; and (8) generally, sell, transfer,
pledge and make any agreement with respect to or otherwise deal with any of
the Collateral as fully and completely as though the Agent were the
absolute owner thereof for all purposes, and do, at the Agent's option and
such Grantor's expense, at any time, or from time to time, all acts and
things which the Agent deems necessary to protect, preserve or realize upon
the Collateral and the Agent's and the Lenders' security interests therein
and to effect the intent of this Agreement, all as fully and effectively as
such Grantor might do.
Anything in this Section 7.1(a) to the contrary notwithstanding,
the Agent agrees that it will not exercise any rights under the power of
attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Agent, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement.
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(c) The expenses of the Agent incurred in connection with
actions undertaken as provided in this Section 7.1, together with interest
thereon at a rate per annum equal to the rate per annum at which interest would
then be payable on past due ABR Loans under the Credit Agreement, from the date
of payment by the Agent to the date reimbursed by the relevant Grantor, shall be
payable by such Grantor to the Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations
and agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released.
7.2 DUTY OF AGENT. The Agent's sole duty with respect to the
custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the New York UCC or otherwise, shall be to
deal with it in the same manner as the Agent deals with similar property for its
own account. Neither the Agent, any Lender nor any of their respective
officers, directors, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Agent and the Lenders hereunder are solely to protect the
Agent's and the Lenders' interests in the Collateral and shall not impose any
duty upon the Agent or any Lender to exercise any such powers. The Agent and
the Lenders shall be accountable only for amounts that they actually receive as
a result of the exercise of such powers, and neither they nor any of their
officers, directors, employees or agents shall be responsible to any Grantor for
any act or failure to act hereunder, except for their own gross negligence or
willful misconduct.
7.3 EXECUTION OF FINANCING STATEMENTS. Pursuant to Section
9-402 of the New York UCC and any other applicable law, each Grantor authorizes
the Agent to file or record financing statements and other filing or recording
documents or instruments with respect to the Collateral without the signature of
such Grantor in such form and in such offices as the Agent reasonably determines
appropriate to perfect the security interests of the Agent under this Agreement.
A photographic or other reproduction of this Agreement shall be sufficient as a
financing statement or other filing or recording document or instrument for
filing or recording in any jurisdiction.
7.4 AUTHORITY OF AGENT. Each Grantor acknowledges that the
rights and responsibilities of the Agent under this Agreement with respect to
any action taken by the Agent or the exercise or non-exercise by the Agent of
any option, voting right, request, judgment or other right or remedy provided
for herein or resulting or arising out of this Agreement shall, as between the
Agent and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Agent and the Grantors, the Agent shall be conclusively presumed
to be acting as agent for the Lenders with full and valid authority so to act or
refrain from acting, and no Grantor shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
SECTION 8. MISCELLANEOUS
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8.1 AMENDMENTS IN WRITING. None of the terms or provisions of
this Agreement may be waived, amended, supplemented or otherwise modified except
in accordance with subsection 11.1 of the Credit Agreement.
8.2 NOTICES. All notices, requests and demands to or upon the
Agent or any Grantor hereunder shall be effected in the manner provided for in
subsection 11.2 of the Credit Agreement; PROVIDED that any such notice, request
or demand to or upon any Guarantor shall be addressed to such Guarantor at its
notice address set forth on SCHEDULE 1.
8.3 NO WAIVER BY COURSE OF CONDUCT; CUMULATIVE REMEDIES.
Neither the Agent nor any Lender shall by any act (except by a written
instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Agent or any Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Agent or any Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the Agent
or such Lender would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any other rights or remedies provided by law.
8.4 ENFORCEMENT EXPENSES; INDEMNIFICATION. (a) Each Guarantor
agrees to pay or reimburse each Lender and the Agent for all its costs and
expenses incurred in collecting against such Guarantor under the guarantee
contained in Section 2 or otherwise enforcing or preserving any rights under
this Agreement and the other Loan Documents to which such Guarantor is a party,
including, without limitation, the reasonable fees and disbursements of counsel
(including the allocated fees and expenses of in-house counsel) to each Lender
and of counsel to the Agent.
(b) Each Guarantor agrees to pay, and to save the Agent and the
Lenders harmless from, any and all liabilities with respect to, or resulting
from any delay in paying, any and all stamp, excise, sales or other taxes which
may be payable or determined to be payable with respect to any of the Collateral
or in connection with any of the transactions contemplated by this Agreement.
(c) Each Guarantor agrees to pay, and to save the Agent and the
Lenders harmless from, any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement to the extent the Borrower
would be required to do so pursuant to subsection 11.5 of the Credit Agreement.
(d) The agreements in this Section 8.4 shall survive repayment
of the Obligations and all other amounts payable under the Credit Agreement and
the other Loan Documents.
8.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the successors and assigns of each Grantor and shall inure to the benefit
of the Agent and the Lenders and their successors and assigns; PROVIDED that no
Grantor may assign, transfer or delegate any of its rights or obligations under
this Agreement without the prior written consent of the Agent.
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8.6 SET-OFF. Each Grantor hereby irrevocably authorizes the
Agent and each Lender at any time and from time to time while an Event of
Default pursuant to subsection 9(a) of the Credit Agreement shall have occurred
and be continuing, without notice to such Grantor or any other Grantor, any such
notice being expressly waived by each Grantor, to set-off and appropriate and
apply any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by the Agent or such Lender to
or for the credit or the account of such Grantor, or any part thereof in such
amounts as the Agent or such Lender may elect, against and on account of the
obligations and liabilities of such Grantor to the Agent or such Lender
hereunder and claims of every nature and description of the Agent or such Lender
against such Grantor, in any currency, whether arising hereunder, under the
Credit Agreement, any other Loan Document or otherwise, as the Agent or such
Lender may elect, whether or not the Agent or any Lender has made any demand for
payment and although such obligations, liabilities and claims may be contingent
or unmatured. The Agent and each Lender shall notify such Grantor promptly of
any such set-off and the application made by the Agent or such Lender of the
proceeds thereof, PROVIDED that the failure to give such notice shall not affect
the validity of such set-off and application. The rights of the Agent and each
Lender under this Section 8.6 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the Agent or such
Lender may have.
8.7 COUNTERPARTS. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
8.8 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.9 SECTION HEADINGS. The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
8.10 INTEGRATION. This Agreement and the other Loan Documents
represent the agreement of the Grantors, the Agent and the Lenders with respect
to the subject matter hereof and thereof, and there are no promises,
undertakings, representations or warranties by the Agent or any Lender relative
to subject matter hereof and thereof not expressly set forth or referred to
herein or in the other Loan Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.12 SUBMISSION TO JURISDICTION; WAIVERS. Each Grantor hereby
irrevocably and unconditionally:
22
<PAGE>
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in an inconvenient court and agrees
not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such Grantor at its address referred to in Section 8.2 or at
such other address of which the Agent shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section any special, exemplary, punitive or
consequential damages.
8.13 ACKNOWLEDGEMENTS. Each Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents to
which it is a party;
(b) neither the Agent nor any Lender has any fiduciary
relationship with or duty to any Grantor arising out of or in connection
with this Agreement or any of the other Loan Documents, and the
relationship between the Grantors, on the one hand, and the Agent and
Lenders, on the other hand, in connection herewith or therewith is solely
that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Grantors and the Lenders.
8.14 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
8.15 ADDITIONAL GRANTORS. Each Subsidiary of the Borrower that
is required to become a party to this Agreement pursuant to subsection 7.9 of
the Credit Agreement shall become a Grantor for all purposes of this Agreement
upon execution and delivery by such Subsidiary of an Assumption Agreement in the
form of Annex 1 hereto.
23
<PAGE>
8.16 RELEASES. (a) At such time as the Loans, the
Reimbursement Obligations and the other Obligations shall have been paid in
full, the Commitments have been terminated and no Letters of Credit shall be
outstanding, the Collateral shall be released from the Liens created hereby, and
this Agreement and all obligations (other than those expressly stated to survive
such termination) of the Agent and each Grantor hereunder shall terminate, all
without delivery of any instrument or performance of any act by any party, and
all rights to the Collateral shall revert to the Grantors. At the request and
sole expense of any Grantor following any such termination, the Agent shall
deliver to such Grantor any Collateral held by the Agent hereunder, and execute
and deliver to such Grantor such documents as such Grantor shall reasonably
request to evidence such termination.
(b) If any of the Collateral shall be sold, transferred or
otherwise disposed of by any Grantor in a transaction permitted by the Credit
Agreement, then the Agent, at the request and sole expense of such Grantor,
shall execute and deliver to such Grantor all releases or other documents
reasonably necessary or desirable for the release of the Liens created hereby on
such Collateral. At the request and sole expense of the Borrower, a Guarantor
shall be released from its obligations hereunder in the event that all the
Capital Stock of such Guarantor shall be sold, transferred or otherwise disposed
of in a transaction permitted by the Credit Agreement; PROVIDED that the
Borrower shall have delivered to the Agent, at least ten Business Days prior to
the date of the proposed release, a written request for release identifying the
relevant Guarantor and the terms of the sale or other disposition in reasonable
detail, including the price thereof and any expenses in connection therewith,
together with a certification by the Borrower stating that such transaction is
in compliance with the Credit Agreement and the other Loan Documents.
24
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Guarantee and
Collateral Agreement to be duly executed and delivered as of the date first
above written.
AFTERMARKET TECHNOLOGY CORP.
By:
-----------------------------------------------
Stephen J. Perkins, Chief Executive Officer
RPM MERIT, INC.
By:
-----------------------------------------------
Stephen J. Perkins, Chief Executive Officer
AARON'S AUTOMOTIVE PRODUCTS, INC.
By:
-----------------------------------------------
Stephen J. Perkins, Chief Executive Officer
MAMCO CONVERTERS, INC.
By:
-----------------------------------------------
Stephen J. Perkins, Chief Executive Officer
H.T.P., INC.
By:
-----------------------------------------------
Stephen J. Perkins, Chief Executive Officer
CRS HOLDINGS CORP.
By:
-----------------------------------------------
Stephen J. Perkins, Chief Executive Officer
COMPONENT REMANUFACTURING SPECIALISTS, INC.
By:
-----------------------------------------------
Stephen J. Perkins, Chief Executive Officer
TRANZPARTS, INC.
By:
-----------------------------------------------
Stephen J. Perkins, Chief Executive Officer
25
<PAGE>
DIVERCO ACQUISITION CORP.
By:
-----------------------------------------------
Stephen J. Perkins, Chief Executive Officer
DIVERCO, INC.
By:
-----------------------------------------------
Stephen J. Perkins, Chief Executive Officer
ATC COMPONENTS, INC.
By:
-----------------------------------------------
Stephen J. Perkins, Chief Executive Officer
REPCO ACQUISITION CORP.
By:
-----------------------------------------------
Stephen J. Perkins, Chief Executive Officer
REPLACEMENT AND EXCHANGE PARTS
CO., INC.
By:
-----------------------------------------------
Stephen J. Perkins, Chief Executive Officer
TRANZPARTS ACQUISITION CORP.
By:
-----------------------------------------------
Stephen J. Perkins, Chief Executive Officer
26
<PAGE>
AMENDED AND RESTATED TAX SHARING AGREEMENT
This agreement (this "Agreement"), entered into as of December 20, 1996,
amends and restates that certain Tax Sharing Agreement (the "Initial
Agreement") dated as of July 19, 1994, among Aftermarket Technology Holdings
Corp. ("Holdings") and Aftermarket Technology Corp. ("ATC") to reflect the
merger of Holdings into ATC. Prior to the merger, Holdings, ATC and ATC's
direct subsidiaries (the "Subsidiaries") filed a consolidated return for
federal income tax purposes and after the merger, ATC and the Subsidiaries
will continue to file consolidated returns for federal income tax purposes.
ATC and the Subsidiaries are members ("Members") of an affiliated group
within the meaning of Section 1504 of the Internal Revenue Code of 1986 (the
"Code") of which ATC will be the common parent (the "ATC Group"). References
herein to "Regulations" shall be to the Treasury Regulations under the Code.
References herein to "tax liabilities" are to current tax liabilities, and
not deferred tax liabilities.
The parties hereto agree as follows:
1. The parties intend to file consolidated federal income tax returns
in accordance with the provisions of Sections 1501, 1502 and 1504 of the Code
and the Regulations thereunder.
2. For each taxable year for which a consolidated federal income tax
return is filed for the ATC Group, each Subsidiary shall pay to ATC an amount
(the "Hypothetical Amount") equal to the federal income tax liability of such
Subsidiary that would be payable to the Internal Revenue Service (the
"Service") if the Subsidiary were filing a separate tax return for federal
income tax purposes. In computing the federal income taxes payable by a
Subsidiary on the basis of such separate return, the Subsidiary shall be
entitled to those deductions, credits, and similar items to which it would
have been entitled if it were filing a separate return in such year and it
were not a member of the ATC Group for that year. In calculating the
Hypothetical Amount, each item of income, gain, loss, deduction or credit of
the members of each Subsidiary shall be determined in a manner consistent
with the treatment of such item for purposes of the ATC Group consolidated
federal income tax return, to the extent permitted under the Code to a
corporation filing on the basis set forth in this Paragraph 2. The
Hypothetical Amount shall be computed using the highest marginal rates of tax
applicable to domestic corporations with respect to the types of income
derived in such year and shall include interest, penalties, additions to the
tax, or additional amounts (as provided for in Chapter 67 and 68 of the Code).
3. Each Subsidiary will allocate the Hypothetical Amount among its
direct and indirect subsidiaries that are members of the ATC Group based on
the ratio that the separate return tax liability ("Separate Tax Liability")
of each such member for the taxable year bears to the sum of the Separate Tax
Liabilities of all the members of the Subsidiary Group. Moreover, each
Subsidiary Group expects to reimburse any such member which has tax losses or
credits in an amount equal to 100% of the tax benefits realized by the
Subsidiary Group as a result of the utilization of such Member's tax losses
or credits for purposes of the computation of the Hypothetical Amount.
Accordingly, the ATC Group and each Subsidiary Group expects to allocate tax
liability of the ATC Group in accordance with Sections 1.1552-1(a)(2) and
1.1502-33(d)(2)(ii) of the Regulations, and for this purpose the percentage
referred to in Section 1.1502-33(d)(2)(ii)(b) shall be 100%.
<PAGE>
4. Under Treasury Regulations Section 1.1502-77(a), ATC is the agent
for all the Members and is required to act for the ATC Group in connection
with matters relating to the consolidated federal tax liability of the ATC
Group. In particular, ATC shall be responsible for filing returns with the
Service, making elections, receiving all correspondence, filing claims for
refund, contesting proposed adjustments and performing such other acts and
deeds as ATC may deem necessary and desirable in connection with the
foregoing.
5. The parties agree that ATC shall be responsible for making tax
payments to the Service. At such time as ATC makes payments to the Service
for any taxes (including estimated taxes), each Subsidiary shall pay to ATC
the Hypothetical Amount (or applicable portion thereof for estimated tax
purposes) as determined under Paragraph 3. Any overpayment of tax of the ATC
Group shall be paid or credited by the Service to ATC and ATC shall pay to
its Subsidiaries any portion of such overpayment and any interest thereon
paid by the Service to which such Group is entitled. Any adjustment made by
the Service which affects either the consolidated tax liability or the
Hypothetical Amount shall be made among the Members immediately after the
amount of the adjustment is determined.
6. In the event of any adjustment of tax returns of the ATC Group as
filed by reason of filing an amended return or claim for refund, or arising
out of an audit by the Service, the Hypothetical Amount shall be recomputed
for any period covered by this Agreement after fully giving effect to any
such adjustments as if such adjustments had been made as part of original
computations. Payments or credits arising out of the foregoing adjustments
shall be made at the time of any payment of tax or receipt of refund or
credit from the Service with respect to such adjustments, and such payments
or credits shall include any interest attributable to such adjustments.
7. The parties expect to file single combined reports or consolidated
reports for purposes of various state corporate franchise and income tax
filing obligations where such returns are required or allowed. The parties
agree to a comparable tax allocation method for any state for which a
combined or consolidated report is filed. The parties agree to use a
reasonable common-sense approach to the allocation of the state franchise and
income tax liability consistent with the allocation method for federal income
tax purposes.
8. This Agreement supersedes the Initial Agreement.
9. This Agreement is governed by the laws of the State of California.
10. This Agreement shall be binding on and inure to the benefits of any
successors to any of the parties hereto.
11. This Agreement shall remain in effect with respect to any party
hereto for any taxable year or part thereof for which consolidated returns
are filed by ATC as a common parent corporation and such party is an
includible corporation in such consolidated return.
12. This Agreement may not be amended, supplemented or discharged,
except by an instrument in writing signed by all parties hereto.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
AFTERMARKET TECHNOLOGY CORP.
---------------------------------------------
Stephen J. Perkins, Chief Executive Officer
AARON'S AUTOMOTIVE PRODUCTS, INC.
---------------------------------------------
Stephen J. Perkins, Chief Executive Officer
ATC COMPONENTS, INC.
---------------------------------------------
Stephen J. Perkins, Chief Executive Officer
CRS HOLDINGS CORP.
---------------------------------------------
Stephen J. Perkins, Chief Executive Officer
DIVERCO ACQUISITION CORP.
---------------------------------------------
Stephen J. Perkins, Chief Executive Officer
H.T.P., INC.
---------------------------------------------
Stephen J. Perkins, Chief Executive Officer
MAMCO CONVERTERS, INC.
---------------------------------------------
Stephen J. Perkins, Chief Executive Officer
3
<PAGE>
R.P.M. MERIT, INC.
---------------------------------------------
Stephen J. Perkins, Chief Executive Officer
TRANZPARTS ACQUISITION CORP.
---------------------------------------------
Stephen J. Perkins, Chief Executive Officer
4
<PAGE>
AFTERMARKET TECHNOLOGY CORP.
1996 STOCK INCENTIVE PLAN
SECTION 1. HISTORY AND PURPOSE OF PLAN
Upon the merger of Aftermarket Technology Holdings Corp., a
Delaware corporation ("Holdings"), into Aftermarket Technology Corp., a
Delaware corporation (the "Company"), the Amended and Restated 1994 Stock
Incentive Plan of Holdings, as amended, became the stock incentive plan of
the Company and is hereby renamed as the 1996 Stock Incentive Plan (this
"Plan").
The purpose of this Plan is to enable the Company to attract,
retain and motivate its employees, non-employee directors, and independent
contractors by providing for or increasing the proprietary interests of such
employees, non-employee directors, and independent contractors in the Company.
SECTION 2. PERSONS ELIGIBLE UNDER PLAN
Any employee, non-employee director, or independent contractor of
the Company or any of its subsidiaries (each, a "Participant"), shall be
eligible to be considered for the grant of Awards (as hereinafter defined)
hereunder.
SECTION 3. AWARDS
(a) The Committee (as hereinafter defined), on behalf of the
Company, is authorized under this Plan to enter into any type of arrangement
with a Participant that is not inconsistent with the provisions of this Plan
and that, by its terms, involves or might involve the issuance of (i) shares
of common stock, par value $.01, of the Company ("Common Shares") or (ii) a
Derivative Security (as such term is defined in Rule 16a-1 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as such
rule may be amended from time to time) with an exercise or conversion
privilege at a price related to the Common Shares or with a value derived
from the value of the Common Shares. The entering into of any such
arrangement is referred to herein as the "grant" of an "Award."
(b) Awards are not restricted to any specified form or structure
and may include, without limitation, sales or bonuses of stock, restricted
stock, stock options, reload stock options, stock purchase warrants, other
rights to acquire stock, securities convertible into or redeemable for stock,
stock appreciation rights, phantom stock, dividend equivalents, performance
units or performance shares, and an Award may consist of one such security or
benefit, or two or more of them in tandem or in the alternative.
(c) Awards may be issued, and Common Shares may be issued pursuant
to an Award, for any lawful consideration as determined by the Committee,
including, without limitation, services rendered by the recipient of such
Award.
(d) Subject to the provisions of this Plan, the Committee, in its
sole and absolute discretion, shall determine all of the terms and conditions
of each Award granted under this Plan, which terms and conditions may
include, among other things:
<PAGE>
(i) a provision permitting the recipient of such Award,
including any recipient who is a director or officer of the Company, to
pay the purchase price of the Common Shares or other property issuable
pursuant to such Award, or such recipient's tax withholding obligation
with respect to such issuance, in whole or in part, by any one or more
of the following:
(A) the delivery of cash;
(B) the delivery of other property deemed acceptable by the
Committee;
(C) the delivery of previously owned shares of capital stock
of the Company (including "pyramiding") or other property; or
(D) a reduction in the amount of Common Shares or other property
otherwise issuable pursuant to such Award.
(ii) a provision conditioning or accelerating the receipt of
benefits pursuant to such Award, either automatically or in the
discretion of the Committee, upon the occurrence of specified events,
including, without limitation, a change of control of the Company (as
defined by the Committee), an acquisition of a specified percentage of
the voting power of the Company, the dissolution or liquidation of the
Company, a sale of substantially all of the property and assets of the
Company or an event of the type described in Section 7 hereof; or
(iii) a provision required in order for such Award to qualify as
an incentive stock option under Section 422 of the Internal Revenue Code
(an "Incentive Stock Option").
(e) For purposes of any Award under this Plan, unless provided
otherwise in the grant of such Award, the "Fair Market Value" of a Common
Share or other security on any date (the "Determination Date") shall be equal
to the closing price per Common Share or unit of such other security on the
business day immediately preceding the Determination Date, as reported in The
Wall Street Journal, Western Edition, or, if no closing price was so reported
for such immediately preceding business day, the closing price for the next
preceding business day for which a closing price was so reported, or, if no
closing price was so reported for any of the 30 business days immediately
preceding the Determination Date, the average of the high bid and low asked
prices per Common Share or unit of such other security on the business day
immediately preceding the Determination Date in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotations System or such other system then in use, or, if the Common Shares
or such other security were not quoted by any such organization on such
immediately preceding business day, the average of the closing bid and asked
prices on such day as furnished by a professional market maker making a
market in the Common Shares or such other security selected by the Board of
Directors of the Company (the "Board").
2
<PAGE>
SECTION 4. STOCK SUBJECT TO PLAN
(a) The aggregate number of Common Shares that may be issued
pursuant to all Incentive Stock Options granted under this Plan shall not
exceed 1,800,000 subject to adjustment as provided in Section 7 hereof.
(b) At any time, the aggregate number of Common Shares issued and
issuable pursuant to all Awards (including all Incentive Stock Options)
granted under this Plan shall not exceed 2,400,000 subject to adjustment as
provided in Section 7 hereof.
(c) For purposes of Section 4(b) hereof, the aggregate number of
Common Shares issued and issuable pursuant to Awards granted under this Plan
shall at any time be deemed to be equal to the sum of the following:
(i) the number of Common Shares that were issued prior to such time
pursuant to Awards granted under this Plan, other than Common Shares
that were subsequently reacquired by the Company pursuant to the terms
and conditions of such Awards and with respect to which the holder
thereof received no benefits of ownership such as dividends; plus
(ii) the number of Common Shares that were otherwise issuable prior
to such time pursuant to Awards granted under this Plan, but that were
withheld by the Company as payment of the purchase price of the Common
Shares issued pursuant to such Awards or as payment of the recipient's
tax withholding obligation with respect to such issuance; plus
(iii) the maximum number of Common Shares that are or may be
issuable at or after such time pursuant to Awards granted under this
Plan prior to such time.
(d) Subject to adjustment as provided in Section 7 hereof, the
aggregate number of Common Shares subject to Awards granted during any
calendar year to any one Participant (including the number of shares involved
in Awards having a value derived from the value of Common Shares) shall not
exceed 1,800,000 shares.
SECTION 5. DURATION OF PLAN
No Awards shall be made under this Plan after July 29, 2004.
Although Common Shares may be issued after July 29, 2004 pursuant to Awards
made prior to such date, no Common Shares shall be issued under this Plan
after July 29, 2014.
SECTION 6. ADMINISTRATION OF PLAN
(a) This Plan shall be administered by a committee (the
"Committee") of directors appointed by the Board.
(b) Subject to the provisions of this Plan, the Committee shall be
authorized and empowered to do all things necessary or desirable in
connection with the administration of this Plan, including, without
limitation, the following:
(i) adopt, amend and rescind rules and regulations relating to this
Plan;
3
<PAGE>
(ii) determine which persons are eligible to participate in this
Plan and to which of such persons, if any, Awards shall be granted
hereunder;
(iii) grant Awards to Participants and determine the terms and
conditions thereof, including the number of Common Shares issuable
pursuant thereto;
(iv) determine whether, and the extent to which adjustments are
required pursuant to Section 7 hereof; and
(v) interpret and construe this Plan and the terms and conditions
of any Award granted hereunder.
SECTION 7. ADJUSTMENTS
If the outstanding securities of the class then subject to this
Plan are increased, decreased or exchanged for or converted into cash,
property or a different number or kind of securities, or if cash, property or
securities are distributed in respect of such outstanding securities, in
either case as a result of a reorganization, merger, consolidation,
recapitalization, restructuring, reclassification, dividend (other than a
regular, quarterly cash dividend) or other distribution, stock split, reverse
stock split or the like, or if substantially all of the property and assets
of the Company are sold, then, unless the terms of such transaction shall
provide otherwise, the Committee shall make appropriate and proportionate
adjustments in (a) the number and type of shares or other securities or cash
or other property that may be acquired pursuant to Incentive Stock Options
and other Awards theretofore granted under this Plan and (b) the maximum
number and type of shares or other securities that may be issued pursuant to
Incentive Stock Options and other Awards thereafter granted under this Plan.
SECTION 8. AMENDMENT AND TERMINATION OF PLAN
The Board may amend or terminate this Plan at any time and in any
manner, PROVIDED, HOWEVER, that no such amendment or termination shall
deprive the recipient of any Award theretofore granted under this Plan,
without the consent of such recipient, of any of his or her rights thereunder
or with respect thereto.
SECTION 9. EFFECTIVE DATE OF PLAN
This Plan shall be effective as of July 29, 1994 the date upon
which it was approved by the Board; PROVIDED, HOWEVER, that no Common Shares
may be issued under this Plan until it has been approved, directly or
indirectly, by the affirmative votes of the holders of a majority of the
securities of the Company present, or represented, and entitled to vote at a
meeting duly held in accordance with the laws of the State of Delaware.
4
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
AN OPINION OF COUNSEL DELIVERED TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED
UNDER SUCH ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER
COMPLIES WITH THE PROVISIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF AUGUST 2,
1994 AMONG THE COMPANY AND THE STOCKHOLDERS, OPTIONHOLDERS AND WARRANTHOLDERS
SIGNATORY THERETO, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE COMPANY. SUCH AGREEMENT PROVIDES THAT ALL PERSONS WHO
ACQUIRE THESE SECURITIES ARE BOUND BY THE TERMS OF SUCH AGREEMENT.
AFTERMARKET TECHNOLOGY CORP.
WARRANT
Dated as of December 20, 1996
WARRANTS TO PURCHASE COMMON STOCK
Certificate for 280,704 Warrants
ISSUED TO WILLIAM E. MYERS, JR. ("HOLDER")
This Warrant is entered into as of December 20, 1996 by and between
Aftermarket Technology Corp., a Delaware corporation (the "COMPANY"), and the
person named above as Holder.
WHEREAS, Aftermarket Technology Holdings Corp., a Delaware corporation
("HOLDINGS"), issued Warrants to Holder on August 2, 1994 (the "ORIGINAL
ISSUANCE DATE") to purchase 46,784 shares of Common Stock, $0.01 par value per
share, of Holdings (the "HOLDINGS COMMON STOCK"), that, prior to the date
hereof, were evidenced by that certain Warrant certificate dated August 2, 1994
(the "PRIOR CERTIFICATE");
WHEREAS, on December 13, 1996, Holdings consummated a six-for-one
stock split (the "STOCK SPLIT");
<PAGE>
WHEREAS, upon the consummation of the Stock Split and pursuant to
Section 7 of the Prior Certificate, the number of shares of Holdings Common
Stock that Holder was entitled to purchase immediately prior to the Stock Split
was proportionately increased to 280,704 shares of Holdings Common Stock, and
the exercise price was likewise adjusted proportionately;
WHEREAS, Holdings was merged into the Company, effective December 20,
1996 (the "REORGANIZATION"); and
WHEREAS, pursuant to the Agreement and Plan of Reorganization, dated
as of December 13, 1996, between the Company and Holdings, and upon consummation
of the Reorganization, each outstanding warrant that was issued by Holdings was
converted into a warrant to purchase the Common Stock of the Company;
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein, the parties hereto agree as follows:
The Company hereby certifies that the Holder is the registered owner
of the number of Warrants set forth above.
Each Warrant entitles the Holder to purchase one (1) share (each such
share being referred to herein as a "WARRANT SHARE" and all such shares being
referred to herein, collectively, as the "WARRANT SHARES"), as adjusted from
time to time as provided in Section 7 hereof, of the Common Stock, $0.01 par
value per share, of the Company (the "COMMON STOCK") at the exercise price of
One Dollar and Sixty-Seven Cents ($1.67) per Warrant Share (the "EXERCISE
PRICE"), subject to the following terms and conditions.
1. REGISTRATION. The Company shall register each Warrant, upon
records to be maintained by the Company for such purpose (such records being
referred to herein as the "REGISTER"), in the name of the record holder of such
Warrant from time to time. The Company may deem and treat the registered holder
of each Warrant as the absolute owner thereof for the purpose of any exercise
thereof or any distribution to the holder thereof, and for all other purposes,
and the Company shall not be affected by any notice to the contrary.
2. TRANSFERS AND EXCHANGES.
(a) REGISTRATION; ISSUANCE OF NEW WARRANT CERTIFICATES. The
Company shall reflect in the Register the transfer of any Warrant represented
hereby upon the surrender of this Warrant Certificate, with the Form of
Assignment attached as Annex A hereto duly completed and signed (and with a
signature guarantee for the transfer of any Warrants by a registered holder
other than the initial registered holder of this Warrant Certificate), to the
Company at the office of the Company set forth in Section 11 hereof; PROVIDED,
HOWEVER, that unless (i) such transfer relates to Warrants that have been or are
being transferred pursuant to an effective registration under the Securities Act
of 1933, as amended (the "SECURITIES ACT"), or Rule 144 or any successor rule
thereunder, or (ii) such transfer is being made solely to "accredited
investors," as such term is defined in Regulation D under the Securities Act,
each of which
WARRANT
2
<PAGE>
accredited investors (A) represents in writing to the Company that it is such an
"accredited investor," and is acquiring such Warrants for investment and not
with a view to the distribution thereof within the meaning of the Securities Act
(subject to any requirement of law that the disposition thereof shall at all
times be within the control of such holder) and (B) agrees in writing to be
bound by the terms of this Section 2(a) with respect to subsequent dispositions,
then the Company may require, as a condition to the Company's registration of
the transfer of any Warrant, an opinion of counsel (the fees and disbursements
of which shall be paid by the Holder) reasonably satisfactory to the Company to
the effect that such transfer may be effected without registration under the
Securities Act. Upon any such registration of transfer, a new Warrant
Certificate, in substantially the form of this Warrant Certificate, evidencing
the Warrants so transferred shall be issued to the transferee of such Warrants
and a new Warrant Certificate, in substantially the form of this Warrant
Certificate, evidencing the remaining Warrants, if any, not so transferred,
shall be issued to the Holder. The Company shall at no time close the Register
against the transfer of any Warrant or Warrant Share in any manner that
materially interferes with the timely exercise of such Warrant.
(b) WARRANTS EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This
Warrant Certificate is exchangeable, upon the surrender hereof by the Holder at
the office of the Company set forth in Section 11 hereof, for new Warrant
Certificates, in substantially the form of this Warrant Certificate, evidencing
in the aggregate the right to purchase the number of Warrant Shares that may
then be purchased under this Warrant Certificate. Each such new Warrant
Certificate shall be dated the date of such exchange and represent the right to
purchase such number of Warrant Shares as shall be designated by the Holder at
the time of such surrender.
3. DURATION AND EXERCISE OF WARRANTS.
(a) Subject to all the terms and conditions hereinafter set
forth (including, without limitation, the terms and conditions in Section 16),
the Warrants may be exercised by the holder at any time from the date hereof
until 5:00 p.m., Los Angeles time, on the tenth (10th) anniversary of the
Original Issuance Date (the "EXPIRATION TIME"). At the Expiration Time, each
Warrant not exercised prior thereto shall be and become void and of no value.
(b) Subject to the provisions of this Warrant Certificate,
including adjustments to the Exercise Price and to the number of Warrant Shares
issuable upon the exercise of each Warrant pursuant to Section 7 hereof, each
holder of a Warrant on or prior to the Expiration Time shall have the right to
purchase from the Company (and the Company shall be obligated to issue and sell
to such holder of a Warrant) at the Exercise Price one fully-paid Warrant Share,
which shall be nonassessable upon issuance.
(c) Subject to Sections 4, 9 and 10(a) hereof, upon (i)
surrender of this Warrant Certificate, together with the Form of Election to
Purchase attached as Annex B hereto (the "FORM OF ELECTION TO PURCHASE") duly
completed and signed, to the Company at the address provided in Section 11, and
(ii) payment of the Exercise Price, multiplied by the number of Warrant Shares
then issuable upon exercise of the Warrants being so exercised in immediately
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<PAGE>
available lawful money of the United States of America, the Company shall
promptly, but in any event within five (5) days of its receipt of the Form of
Election to Purchase, together with the Warrant Certificate and receipt of
payment of the Exercise Price, issue and cause to be delivered to or upon the
written order of the Holder, and in such name or names as such Holder may
designate (subject to Section 4 hereof), a certificate for the Warrant Shares
issued upon such exercise of such Warrants. Any person so designated to be
named in such certificate for such Warrant Shares shall be deemed to have become
the holder of record of such Warrant Shares as of the Date of Election to
Purchase such Warrants. The "DATE OF ELECTION TO PURCHASE" any Warrant means
the date on which the Company shall have received (l) this Warrant Certificate,
with the Form of Election to Purchase duly filed in and signed, and (2) payment
of the Exercise Price for such Warrant.
(d) Any part of the Warrants evidenced by this Warrant
Certificate shall be exercisable from time to time. If fewer than all the
Warrants evidenced by this Warrant Certificate are exercised at any time, the
Company, at its expense, shall issue to the registered holder a new Warrant
Certificate, in substantially the form of this Warrant Certificate, for the
remaining number of Warrants evidenced by this Warrant Certificate.
(e) In lieu of the payment of the Exercise Price in cash, the
Holder may request that the Company accept the net value of shares issuable upon
payment of the Exercise Price. In such event the Company shall issue to the
Holder the number of shares of Common Stock equal to (i) the product of (x) the
number of Warrants being exercised and (y) the amount by which the fair market
value of one share of Common Stock exceeds the Exercise Price for such share,
divided by (ii) the fair market value of one share of Common Stock. For
purposes of this Section 3(e), the "FAIR MARKET VALUE" of one share of Common
Stock shall be the value as agreed by the Company and the Holder, provided that
the Holder shall not have the option to pay any part of the Exercise Price as
aforesaid if the Company and the Holder are unable to agree upon the "fair
market value" of one share of Common Stock. This Section 3(e) shall not affect
the Holder's obligations under Section 4(b).
4. PAYMENT OF TAXES.
(a) The Company shall pay all issuance and transfer taxes and
charges that may be imposed on the Company or on the Warrants or the Warrant
Shares in respect of the transfer of Warrants, or the issuance or delivery of
the Certificates for Warrant Shares or other Securities in respect of the
Warrant Shares upon the exercise or conversion of Warrants; PROVIDED, HOWEVER,
that the Company shall not be required to pay any such tax or other charge
imposed in respect of the transfer of Warrants, or the issuance or delivery of
certificates for Warrant Shares or other Securities in respect of the Warrant
Shares upon the exercise of Warrants, to a person or entity other than a
then-existing registered holder of Warrants.
(b) Upon exercise of the Warrant in whole or in part, the holder
shall be required to pay to the Company (by cashier's or certified check) an
amount equal to all applicable federal and state withholding taxes that may
become payable by reason of such exercise.
WARRANT
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<PAGE>
5. MUTILATED OR MISSING WARRANT CERTIFICATE. If this Warrant
Certificate shall be mutilated, lost, stolen or destroyed, upon request by the
registered holder of the Warrants, the Company shall issue, in exchange for and
upon cancellation of the mutilated Warrant Certificate, or in substitution for
the lost, stolen or destroyed Warrant Certificate, a new Warrant Certificate, in
substantially the form of this Warrant Certificate, of like tenor and
representing the equivalent number of Warrants, but, in the case of loss, theft
or destruction, only upon receipt of evidence satisfactory to the Company of
such loss, theft or destruction of this Warrant Certificate and, if requested by
the Company, indemnity also satisfactory to it.
6. RESERVATION AND ISSUANCE OF WARRANT SHARES.
(a) The Company shall at all times have authorized, and reserve
and keep available, exclusively for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon the exercise of the Warrants, the number
of Warrant Shares deliverable upon exercise of the Warrants. The Company shall
take all corporate action necessary to enable the Company to validly and legally
issue, at the Exercise Price, Warrant Shares that are fully paid and
nonassessable.
(b) The Company covenants that all Warrant Shares will, upon
issuance in accordance with the terms of this Warrant Certificate, be (i) duly
authorized, validly issued, fully paid and nonassessable and (ii) free from all
taxes or other governmental charges with respect to the issuance thereof (not
including income taxes payable by the holders of Warrants being exercised in
respect of gains thereon) and from all liens, charges and security interests
created by the Company.
(c) If any Warrant Shares required to be reserved pursuant to
paragraph (a) of this Section 6 require registration with or approval of any
governmental authority under any Federal or state law (other than the Securities
Act, registration under which is governed by Section 10 hereof) before such
Warrant Shares may be issued upon the exercise thereof, the Company shall, at
the Holder's expense and as expeditiously as possible, use its best efforts to
cause such Warrant Shares to be duly registered or approved, as the case may be;
PROVIDED, HOWEVER, that the Company will not be required to qualify generally to
do business in any jurisdiction in which it is not then so qualified, to subject
itself to taxation in any jurisdiction in which it is not then subject to
taxation, or to take any action that would subject it to general service of
process in any jurisdiction in which it is not then so subject.
7. ADJUSTMENTS. If the Company shall at any time subdivide the
outstanding shares of Common Stock into a greater number of shares, or pay to
holders of Common Stock any dividend payable in shares of Common Stock, the
number of Warrant Shares in effect immediately prior to such subdivision or
dividend shall be proportionately increased, and conversely, if the outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
number of Warrant Shares in effect immediately prior to such combination shall
be proportionately reduced; and, in either case the Exercise Price shall be
adjusted proportionately.
8. NO STOCK RIGHTS. No holder of this Warrant Certificate, as such,
shall be entitled to vote or be deemed the holder of Common Stock or any other
securities of the
WARRANT
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<PAGE>
Company which may at any time be issuable on the exercise hereof, nor shall
anything contained herein be construed to confer upon the holder of this Warrant
Certificate, as such, the rights of a stockholder of the Company or the right to
vote for the election of directors or upon any matter submitted to stockholders
at any meeting thereof, or to give or withhold consent to any corporate action,
to exercise any preemptive right, to receive notice of meetings or other actions
affecting stockholders (except as provided herein), or to receive dividends or
subscription rights or otherwise, until the Date of Election to Purchase
Warrants shall have occurred.
9. FRACTIONAL WARRANTS AND FRACTIONAL WARRANT SHARES. The Company
may, but shall not be required to, issue fractional Warrant Shares. If any
fraction of a Warrant Share would, except for the provisions of this Section 9,
be issuable to the holder of this Warrant Certificate upon exercise of any
Warrants, the Company may, at its election, pay to such holder an amount in cash
equal to the difference between (a) the fair market value of one share of Common
Stock and (b) the Exercise Price, multiplied by such fraction. The holder of a
Warrant Certificate, by the acceptance of the Warrant Certificate, expressly
waives the right to receive any fractional Warrant Shares upon exercise of a
Warrant. The holder of a Warrant Certificate shall be entitled to receive
fractional Warrants and fractional Warrant Shares at the election of the
Company.
10. REPRESENTATIONS OF HOLDER. Neither the Warrants nor the Warrant
Shares have been registered under the Securities Act. The holder of this
Warrant Certificate, by acceptance hereof, represents that:
(a) such holder is acquiring the Warrants, and will acquire the
Warrant Shares, to be issued to such holder for such holder's own account and
not with a view to the distribution thereof;
(b) has had the opportunity to ask questions of, and has received
answers satisfactory thereto from, the officers and directors of, and has had
access to information concerning, the Company and the terms and conditions of
this Warrant and the Warrant Shares, and all information requested by holder
concerning this Warrant and the Warrant Shares and the Company has been provided
by the Company;
(c) such holder has such knowledge and experience in financial
affairs that such holder is capable of evaluating the merits and risks of
acquiring and holding this Warrant and the Warrant Shares;
(d) such holder has not relied, in connection with the decision to
accept or to provide consideration for this Warrant and the Warrant Shares, upon
the identity or advice of any other Person or upon any representations,
warranties or agreements other than those set forth in this Warrant;
(e) such holder's financial situation is such that such holder can
afford to suffer the complete loss of the consideration given in exchange for
this Warrant and the Warrant Shares;
WARRANT
6
<PAGE>
(f) such holder is an "accredited investor" as defined in
Regulation D promulgated under the Securities Act; and
(g) if such holder is an individual, such holder's net worth with
such holder's spouse exceeds $1,000,000, or such holder's individual income was
in excess of $200,000 in each of the two most recent years or was in excess of
$300,000 in each of the two most recent years, and such holder reasonably
expects to reach the same income level in the current year.
Holder agrees not to sell, transfer, pledge or hypothecate any
Warrants or any Warrant Shares except in compliance with the provisions of the
Securities Act, or pursuant to an exemption from the requirements of the
Securities Act.
The Company shall use its best efforts to comply with all reporting
requirements of the Securities and Exchange Commission (such Commission or any
successor to any or all of its functions being the "COMMISSION"), including,
without limitation, Rule 144 under the Securities Act, from time to time in
effect and relating to the availability of an exemption from the Securities Act
for the sale of restricted securities. The Company also shall cooperate with
the holder of this Warrant Certificate and with each holder of any Warrant
Shares in supplying such information as may be necessary for any such holder to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from the Securities Act for the sale of restricted securities.
11. NOTICES. All notices, requests, demands and other communications
relating to this Warrant Certificate shall be in writing, including by
telecopier, telex, telegram or cable, addressed, if to the registered holder
hereof, to it at the address furnished by the registered holder to the Company,
and if to the Company, at its office at 33309 1st Way South, Suite A-206,
Federal Way, Washington, 98003, Attention: President, or to such other address
as any party shall notify the other party in writing, and shall be effective, in
the case of written notice by mail, three days after placement into the mails
(first class, postage prepaid), and in the case of notice by telex, telecopier,
telegram or cable, on the same day as sent.
12. BINDING EFFECT. This Warrant Certificate shall be binding upon
and inure to the sole and exclusive benefit of the Company, its permitted
successors and permitted assigns, and the registered holder or holders from time
to time of the Warrants and the Warrant Shares.
13. SURVIVAL OF RIGHTS AND DUTIES. Unless earlier terminated or
cancelled in whole or in part pursuant to Section 16 of this Warrant
Certificate, this Warrant Certificate and unexercised Warrants represented
hereby shall terminate and be of no further force and effect on the earlier of
the Expiration Time or the date on which all the Warrants shall have been
exercised, except that the provisions of Sections 4, 6(b) and 10 of this Warrant
Certificate shall continue in full force and effect after any such termination
or cancellation.
14. GOVERNING LAW. This Warrant Certificate shall be construed in
accordance with and governed by the internal laws of the State of Delaware
applicable to contracts executed and to be performed wholly within such state,
without regard to the principles of conflicts or choice of law.
WARRANT
7
<PAGE>
15. MODIFICATION AND WAIVER. This Warrant Certificate and any term
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought.
16. STOCKHOLDERS AGREEMENT. The Holder acknowledges that he is a
party to that certain Stockholders Agreement dated August 2, 1994 among the
Company and certain of its stockholders, optionholders and warrantholders, as
amended from time to time, and that the Holder is bound by all the terms and
conditions of such agreement just as if the Warrants were shares of Common Stock
(as defined in the Stockholders Agreement), MUTATIS MUTANDIS.
17. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
If any capital reorganization or reclassification of the capital stock of the
Company, any consolidation or merger of the Company with another entity, or the
sale of all or substantially all of the Company's assets to another entity shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger of sale, lawful and adequate provisions shall be made
whereby the Holder shall thereafter have the right to purchase and receive upon
the basis and the terms and conditions specified in this Warrant and in lieu of
the shares of Common Stock immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby, such shares of stock,
securities or assets as may be issued or payable in such reorganization,
reclassification, consolidation, merger or sale with respect to or in exchange
for the number of shares of Common Stock purchasable and receivable upon the
exercise of the rights represented hereby had such rights been exercised
immediately prior thereto, and in any such case appropriate provision shall be
made with respect to the rights and interests of the Holder to the end that the
provisions hereof (including without limitation provisions for adjustments of
the Exercise Price and of the number of shares of Common Stock purchasable and
receivable upon the exercise of this Warrant) shall thereafter be applicable, as
nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof. The Company will not effect
any such consolidation, merger or sale, unless prior to the consummation thereof
the successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall assume
by written instrument, executed and mailed or delivered to the Holder at the
last address thereof appearing in the Register, the obligation to deliver to
such Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such Holder may be entitled to purchase. This
Section 17 shall not apply to any consolidation, merger or sale following which
the Aurora Equity Partners L.P. and Aurora Overseas Equity Partners I, L.P.
(together, the "AURORA ENTITIES") and their respective Affiliates collectively
no longer control the Company. As used herein, the term "AFFILIATE" shall mean,
with reference to any person or entity, any other person or entity directly or
indirectly, through one or more intermediaries, controlling, controlled by or
under common control with such first person or entity.
18. ISSUANCE OF CERTAIN ADDITIONAL SHARES.
(a) If the Company shall sell or issue to either of the Aurora
Entities or their Affiliates any shares of Common Stock (collectively, a "SHARE
ISSUANCE") at a price per
WARRANT
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<PAGE>
share of Common Stock that is less than the Fair Market Value of Common Stock on
the date of the Share Issuance (such shares being referred to as the "BELOW
MARKET SHARES"), the Exercise Price shall be adjusted on and after the date of
such Share Issuance by multiplying the Exercise Price in effect immediately
prior to such adjustment by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding on such date plus the number of
shares of Common Stock that the aggregate purchase price of such Below Market
Shares would purchase at the Fair Market Value, and of which the denominator
shall be the number of shares of Common Stock outstanding on such date plus the
number of Below Market Shares. The adjustment to the Exercise Price set forth
in this Section (a) shall be made successively whenever a sale or issuance of
Below Market Shares occurs.
(b) If the Company shall sell or issue to either of the Aurora
Entities or their Affiliates any options, warrants or rights entitling the
Aurora Entities or their Affiliates to subscribe for, purchase or convert or
exchange shares of Common Stock (collectively, an "OPTION ISSUANCE") having an
exercise price per share of Common Stock that is less than the Fair Market Value
of Common Stock on the date of the Option Issuance (such options, warrants or
rights being referred to as the "BELOW MARKET OPTIONS"), the Exercise Price
shall be adjusted on and after the date of such Option Issuance by multiplying
the Exercise Price in effect immediately prior to such adjustment by a fraction,
of which the numerator shall be the number of shares of Common Stock outstanding
on such date plus the number of shares of Common Stock that the aggregate
purchase price of such Below Market Options plus any additional amounts payable
to the Company upon the exercise thereof would purchase at the Fair Market
Value, and of which the denominator shall be the number of shares of Common
Stock outstanding on such date plus the number of Below Market Shares. The
adjustment to the Exercise Price set forth in this Section 18(b) shall be made
successively whenever a sale or issuance of Below Market Options occurs;
PROVIDED, HOWEVER, that, if any such Below Market Options expire without the
issuance of shares of Common Stock, then the Exercise Price shall again be
adjusted to equal the Exercise Price in effect had such issuance of Below Market
Options not occurred.
(c) As used in this Section 18, "FAIR MARKET VALUE" of shares of
Common Stock as of a particular date shall mean the average value of the shares
of such class for the 10-business day period immediately preceding such date.
Such average value shall be the average of the last reported sales price of the
shares of such class on the New York Stock Exchange for each of such 10 days,
or, if not reported on such Exchange, on the Composite Tape, or, in case no such
reported sales take place for each of such 10 days, the average of the reported
closing bid and asked quotations on the New York Stock Exchange for each of such
10 days, or if no such quotations are available, the last reported sale prices
for such 10 days on the principal national securities exchange on which such
class of shares is listed, or if not listed on any national securities exchange,
the last reported sales prices for such 10 days in the over-the-counter market
as reported by the National Quotation Bureau, Incorporated or similar
organization, or if none of such sale prices are available for each day in such
10 days, the average of the high bid and low asked quotations in the
over-the-counter market as so reported for such 10 days, or if no such
quotations are available, the fair market value per share as determined in good
faith by the Company's Board of Directors, whose determination shall be
conclusive.
WARRANT
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<PAGE>
(d) Upon each adjustment of the Exercise Price pursuant to
Section 18(a) or 18(b), the Holder shall thereafter be entitled to purchase at
the Exercise Price resulting from such adjustment, the number of Warrant Shares
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior
to such adjustment, and dividing the product thereof by the Exercise Price
resulting from such adjustment.
19. NOTICES AND INFORMATION TO HOLDER.
(a) FINANCIAL STATEMENTS AND DOCUMENTS. The Company shall
provide to the Holder upon request a copy of monthly, quarterly and annual
financial statements for the Company and, if any, its subsidiaries. The Holder
shall accept, and the Company shall deliver, such financial statements in
whatever form and at whatever times such financial statements are provided to
the Company's debt holders, lenders or board of directors. The Company shall
also provide to Holder upon request at no cost to Holder a copy of any material
agreements relating to the Company's (or any subsidiary's) capital structure or
debt and equity financing arrangements. If requested by the Company, the Holder
shall execute such confidentiality agreements as the Company may reasonably
require. The Company's obligations to deliver financial statements and other
documents under this Section 19 shall terminate on the date on which the Company
becomes a reporting company under Section 12 or Section 15 of the Securities
Exchange Act of 1934, as amended.
(b) NOTICES OF CERTAIN EVENTS. In case: (a) the Company shall
authorize the issuance to all holders of shares of Common Stock of rights,
options or warrants to subscribe for or purchase shares of Common Stock or of
any other subscription rights or warrants; (b) the Company shall authorize the
distribution to all holders of shares of Common Stock of assets, including cash,
evidences of its indebtedness or other securities; (c) of any consolidation or
merger to which the Company is a party and for which approval of any
stockholders of the Company is required, or of the conveyance or transfer of the
properties and assets of the Company substantially as an entirety, or of any
reclassification or change of Common Stock issuable upon exercise of the
Warrants, or of the commencement of a tender offer or exchange offer for shares
of Common Stock; or (d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; THEN the Company shall cause to be given to the
Holder at least 10 days prior to the applicable record date hereinafter
specified, or the date of the event in the case of events for which there is no
record date, notice stating (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such rights, options,
warrants or distribution are to be determined, or (ii) the initial expiration
date set forth in any tender offer or exchange offer for shares of Common Stock,
or (iii) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which it is expected that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities
or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up.
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<PAGE>
(c) INFORMATION REGARDING ADJUSTMENTS. The Company shall keep a
record of any adjustment to the Warrant Shares or the Exercise Price pursuant
hereto, together with a record as to the method of calculation and the facts
upon which such calculations are based. Such information shall be provided to
the Holder upon request. To the extent practicable, the Company will include
such information in the notices given pursuant to Section 20(b).
WARRANT
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be executed under its corporate seal by its officers thereunto duly authorized
as of the date hereof, and the Holder has caused this Warrant Certificate to be
executed and delivered by its duly authorized representative.
AFTERMARKET TECHNOLOGY CORP.
[CORPORATE SEAL]
By:
-------------------------------------
Stephen J. Perkins, Chief Executive
Officer
----------------------------------------
WILLIAM E. MYERS, JR.
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ANNEX A
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, __________________________ hereby sells, assigns and
transfers to each assignee set forth below all the rights of the undersigned in
and to the number of Warrants (as deemed in and evidenced by the foregoing
Warrant Certificate) set opposite the name of such assignee below and in and to
the foregoing Warrant Certificate with respect to such Warrants and the shares
of common stock, $0.01 par value per share, of Aftermarket Technology Corp.
issuable upon exercise of such Warrants:
NAME OF ASSIGNEE ADDRESS NUMBER OF WARRANTS
If the aggregate number of such Warrants shall not constitute all the Warrants
evidenced by the foregoing Warrant Certificate, the undersigned requests that a
new Warrant Certificate evidencing the Warrants not so assigned be issued in the
name of and delivered to the undersigned.
Dated: ______________, ____ Name of Holder (Print):
--------------------------
(By:)
--------------------------
(Title:)
--------------------------
[SIGNATURE GUARANTEE] ATTEST:
(Not Required for Initial
Registered Holder)
--------------------------
[Assistant] Secretary
ANNEX A
A-1
<PAGE>
ANNEX B
FORM OF ELECTION TO PURCHASE
(To Be Executed by the Holder if the
Holder Desires to Exercise Warrants
Evidenced by the foregoing Warrant Certificate)
To Aftermarket Technology Corp.:
The undersigned hereby irrevocably elects to exercise ________ Warrants (as
deemed in and evidenced by the foregoing Warrant Certificates) for, and to
purchase thereunder, ___________ full shares of common stock, $0.01 par value
per share, of Aftermarket Technology Corp., issuable upon exercise of such
Warrants and delivery of $_________ in cash and any applicable taxes payable by
the undersigned pursuant to such Warrant Certificate.
The undersigned requests that certificates for such shares be issued in the name
of the following:
Printed Name:
--------------------------------------------------------------
Social security or tax identification number:
------------------------------
Printed Address:
-----------------------------------------------------------
-----------------------------------------------------------
If such number of Warrants shall not constitute all the Warrants evidenced by
the foregoing Warrant Certificate, the undersigned request that a new Warrant
Certificate evidencing the Warrants not so exercised be issued in the name of
and delivered to the following:
Printed Name:
--------------------------------------------------------------
Printed Address:
-----------------------------------------------------------
-----------------------------------------------------------
Dated: ______________, ____ Name of Holder (Print):
---------------------------
(By:)
---------------------------
(Title:)
---------------------------
[SIGNATURE GUARANTEE]
(Not Required for Initial Registered Holder)
ANNEX B
B-1
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
AN OPINION OF COUNSEL DELIVERED TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED
UNDER SUCH ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER
COMPLIES WITH THE PROVISIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF AUGUST 2,
1994 AMONG THE COMPANY AND THE STOCKHOLDERS, OPTIONHOLDERS AND WARRANTHOLDERS
SIGNATORY THERETO, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE COMPANY. SUCH AGREEMENT PROVIDES THAT ALL PERSONS WHO
ACQUIRE THESE SECURITIES ARE BOUND BY THE TERMS OF SUCH AGREEMENT.
AFTERMARKET TECHNOLOGY CORP.
WARRANT
Dated as of December 20, 1996
WARRANTS TO PURCHASE COMMON STOCK
Certificate for 70,176 Warrants
ISSUED TO BRIAN E. SANDERSON ("HOLDER")
This Warrant is entered into as of December 20, 1996 by and between
Aftermarket Technology Corp., a Delaware corporation (the "COMPANY"), and the
person named above as Holder.
WHEREAS, Aftermarket Technology Holdings Corp., a Delaware corporation
("HOLDINGS"), issued Warrants to Holder on August 2, 1994 (the "ORIGINAL
ISSUANCE DATE") to purchase 11,696 shares of Common Stock, $0.01 par value per
share, of Holdings (the "HOLDINGS COMMON STOCK"), that, prior to the date
hereof, were evidenced by that certain Warrant certificate dated August 2, 1994
(the "PRIOR CERTIFICATE");
WHEREAS, on December 13, 1996, Holdings consummated a six-for-one
stock split (the "STOCK SPLIT");
<PAGE>
WHEREAS, upon the consummation of the Stock Split and pursuant to
Section 7 of the Prior Certificate, the number of shares of Holdings Common
Stock that Holder was entitled to purchase immediately prior to the Stock Split
was proportionately increased to 70,176 shares of Holdings Common Stock, and the
exercise price was likewise adjusted proportionately;
WHEREAS, Holdings was merged into the Company, effective December 20,
1996 (the "REORGANIZATION"); and
WHEREAS, pursuant to the Agreement and Plan of Reorganization, dated
as of December 13, 1996, between the Company and Holdings, and upon consummation
of the Reorganization, each outstanding warrant that was issued by Holdings was
converted into a warrant to purchase the Common Stock of the Company;
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein, the parties hereto agree as follows:
The Company hereby certifies that the Holder is the registered owner
of the number of Warrants set forth above.
Each Warrant entitles the Holder to purchase one (l) share (each such
share being referred to herein as a "WARRANT SHARE" and all such shares being
referred to herein, collectively, as the "WARRANT SHARES"), as adjusted from
time to time as provided in Section 7 hereof, of the Common Stock, $0.01 par
value per share, of the Company (the "COMMON STOCK") at the exercise price of
One Dollar and Sixty-Seven Cents ($1.67) per Warrant Share (the "EXERCISE
PRICE"), subject to the following terms and conditions.
1. REGISTRATION. The Company shall register each Warrant, upon
records to be maintained by the Company for such purpose (such records being
referred to herein as the "REGISTER"), in the name of the record holder of such
Warrant from time to time. The Company may deem and treat the registered holder
of each Warrant as the absolute owner thereof for the purpose of any exercise
thereof or any distribution to the holder thereof, and for all other purposes,
and the Company shall not be affected by any notice to the contrary.
2. TRANSFERS AND EXCHANGES.
(a) REGISTRATION; ISSUANCE OF NEW WARRANT CERTIFICATES. The
Company shall reflect in the Register the transfer of any Warrant represented
hereby upon the surrender of this Warrant Certificate, with the Form of
Assignment attached as Annex A hereto duly completed and signed (and with a
signature guarantee for the transfer of any Warrants by a registered holder
other than the initial registered holder of this Warrant Certificate), to the
Company at the office of the Company set forth in Section 11 hereof; PROVIDED,
HOWEVER, that unless (i) such transfer relates to Warrants that have been or are
being transferred pursuant to an effective registration under the Securities Act
of 1933, as amended (the "SECURITIES ACT"), or Rule 144 or any successor rule
thereunder, or (ii) such transfer is being made solely to "accredited
investors," as such term is defined in Regulation D under the Securities Act,
each of which accredited investors (A) represents in writing to the Company that
it is such an "accredited
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<PAGE>
investor," and is acquiring such Warrants for investment and not with a view to
the distribution thereof within the meaning of the Securities Act (subject to
any requirement of law that the disposition thereof shall at all times be within
the control of such holder) and (B) agrees in writing to be bound by the terms
of this Section 2(a) with respect to subsequent dispositions, then the Company
may require, as a condition to the Company's registration of the transfer of any
Warrant, an opinion of counsel (the fees and disbursements of which shall be
paid by the Holder) reasonably satisfactory to the Company to the effect that
such transfer may be effected without registration under the Securities Act.
Upon any such registration of transfer, a new Warrant Certificate, in
substantially the form of this Warrant Certificate, evidencing the Warrants so
transferred shall be issued to the transferee of such Warrants and a new Warrant
Certificate, in substantially the form of this Warrant Certificate, evidencing
the remaining Warrants, if any, not so transferred, shall be issued to the
Holder. The Company shall at no time close the Register against the transfer of
any Warrant or Warrant Share in any manner that materially interferes with the
timely exercise of such Warrant.
(b) WARRANTS EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This
Warrant Certificate is exchangeable, upon the surrender hereof by the Holder at
the office of the Company set forth in Section 11 hereof, for new Warrant
Certificates, in substantially the form of this Warrant Certificate, evidencing
in the aggregate the right to purchase the number of Warrant Shares that may
then be purchased under this Warrant Certificate. Each such new Warrant
Certificate shall be dated the date of such exchange and represent the right to
purchase such number of Warrant Shares as shall be designated by the Holder at
the time of such surrender.
3. DURATION AND EXERCISE OF WARRANTS.
(a) Subject to all the terms and conditions hereinafter set
forth (including, without limitation, the terms and conditions in Section 16),
the Warrants may be exercised by the holder at any time from the date hereof
until 5:00 p.m., Los Angeles time, on the tenth (10th) anniversary of the
Original Issuance Date (the "EXPIRATION TIME"). At the Expiration Time, each
Warrant not exercised prior thereto shall be and become void and of no value.
(b) Subject to the provisions of this Warrant Certificate,
including adjustments to the Exercise Price and to the number of Warrant Shares
issuable upon the exercise of each Warrant pursuant to Section 7 hereof, each
holder of a Warrant on or prior to the Expiration Time shall have the right to
purchase from the Company (and the Company shall be obligated to issue and sell
to such holder of a Warrant) at the Exercise Price one fully-paid Warrant Share,
which shall be nonassessable upon issuance.
(c) Subject to Sections 4, 9 and 10(a) hereof, upon (i)
surrender of this Warrant Certificate, together with the Form of Election to
Purchase attached as Annex B hereto (the "FORM OF ELECTION TO PURCHASE") duly
completed and signed, to the Company at the address provided in Section 11, and
(ii) payment of the Exercise Price, multiplied by the number of Warrant Shares
then issuable upon exercise of the Warrants being so exercised in immediately
available lawful money of the United States of America, the Company shall
promptly, but in any
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<PAGE>
event within five (5) days of its receipt of the Form of Election to Purchase,
together with the Warrant Certificate and receipt of payment of the Exercise
Price, issue and cause to be delivered to or upon the written order of the
Holder, and in such name or names as such Holder may designate (subject to
Section 4 hereof), a certificate for the Warrant Shares issued upon such
exercise of such Warrants. Any person so designated to be named in such
certificate for such Warrant Shares shall be deemed to have become the holder of
record of such Warrant Shares as of the Date of Election to Purchase such
Warrants. The "DATE OF ELECTION TO PURCHASE" any Warrant means the date on
which the Company shall have received (l) this Warrant Certificate, with the
Form of Election to Purchase duly filed in and signed, and (2) payment of the
Exercise Price for such Warrant.
(d) Any part of the Warrants evidenced by this Warrant
Certificate shall be exercisable from time to time. If fewer than all the
Warrants evidenced by this Warrant Certificate are exercised at any time, the
Company, at its expense, shall issue to the registered holder a new Warrant
Certificate, in substantially the form of this Warrant Certificate, for the
remaining number of Warrants evidenced by this Warrant Certificate.
(e) In lieu of the payment of the Exercise Price in cash, the
Holder may request that the Company accept the net value of shares issuable upon
payment of the Exercise Price. In such event the Company shall issue to the
Holder the number of shares of Common Stock equal to (i) the product of (x) the
number of Warrants being exercised and (y) the amount by which the fair market
value of one share of Common Stock exceeds the Exercise Price for such share,
divided by (ii) the fair market value of one share of Common Stock. For
purposes of this Section 3(e), the "FAIR MARKET VALUE" of one share of Common
Stock shall be the value as agreed by the Company and the Holder, provided that
the Holder shall not have the option to pay any part of the Exercise Price as
aforesaid if the Company and the Holder are unable to agree upon the "fair
market value" of one share of Common Stock. This Section 3(e) shall not affect
the Holder's obligations under Section 4(b).
4. PAYMENT OF TAXES.
(a) The Company shall pay all issuance and transfer taxes and
charges that may be imposed on the Company or on the Warrants or the Warrant
Shares in respect of the transfer of Warrants, or the issuance or delivery of
the Certificates for Warrant Shares or other Securities in respect of the
Warrant Shares upon the exercise or conversion of Warrants; PROVIDED, HOWEVER,
that the Company shall not be required to pay any such tax or other charge
imposed in respect of the transfer of Warrants, or the issuance or delivery of
certificates for Warrant Shares or other Securities in respect of the Warrant
Shares upon the exercise of Warrants, to a person or entity other than a
then-existing registered holder of Warrants.
(b) Upon exercise of the Warrant in whole or in part, the holder
shall be required to pay to the Company (by cashier's or certified check) an
amount equal to all applicable federal and state withholding taxes that may
become payable by reason of such exercise.
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<PAGE>
5. MUTILATED OR MISSING WARRANT CERTIFICATE. If this Warrant
Certificate shall be mutilated, lost, stolen or destroyed, upon request by the
registered holder of the Warrants, the Company shall issue, in exchange for and
upon cancellation of the mutilated Warrant Certificate, or in substitution for
the lost, stolen or destroyed Warrant Certificate, a new Warrant Certificate, in
substantially the form of this Warrant Certificate, of like tenor and
representing the equivalent number of Warrants, but, in the case of loss, theft
or destruction, only upon receipt of evidence satisfactory to the Company of
such loss, theft or destruction of this Warrant Certificate and, if requested by
the Company, indemnity also satisfactory to it.
6. RESERVATION AND ISSUANCE OF WARRANT SHARES.
(a) The Company shall at all times have authorized, and reserve
and keep available, exclusively for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon the exercise of the Warrants, the number
of Warrant Shares deliverable upon exercise of the Warrants. The Company shall
take all corporate action necessary to enable the Company to validly and legally
issue, at the Exercise Price, Warrant Shares that are fully paid and
nonassessable.
(b) The Company covenants that all Warrant Shares will, upon
issuance in accordance with the terms of this Warrant Certificate, be (i) duly
authorized, validly issued, fully paid and nonassessable and (ii) free from all
taxes or other governmental charges with respect to the issuance thereof (not
including income taxes payable by the holders of Warrants being exercised in
respect of gains thereon) and from all liens, charges and security interests
created by the Company.
(c) If any Warrant Shares required to be reserved pursuant to
paragraph (a) of this Section 6 require registration with or approval of any
governmental authority under any Federal or state law (other than the Securities
Act, registration under which is governed by Section 10 hereof) before such
Warrant Shares may be issued upon the exercise thereof, the Company shall, at
the Holder's expense and as expeditiously as possible, use its best efforts to
cause such Warrant Shares to be duly registered or approved, as the case may be;
PROVIDED, HOWEVER, that the Company will not be required to qualify generally to
do business in any jurisdiction in which it is not then so qualified, to subject
itself to taxation in any jurisdiction in which it is not then subject to
taxation, or to take any action that would subject it to general service of
process in any jurisdiction in which it is not then so subject.
7. ADJUSTMENTS. If the Company shall at any time subdivide the
outstanding shares of Common Stock into a greater number of shares, or pay to
holders of Common Stock any dividend payable in shares of Common Stock, the
number of Warrant Shares in effect immediately prior to such subdivision or
dividend shall be proportionately increased, and conversely, if the outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
number of Warrant Shares in effect immediately prior to such combination shall
be proportionately reduced; and, in either case the Exercise Price shall be
adjusted proportionately.
8. NO STOCK RIGHTS. No holder of this Warrant Certificate, as such,
shall be entitled to vote or be deemed the holder of Common Stock or any other
securities of the
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<PAGE>
Company which may at any time be issuable on the exercise hereof, nor shall
anything contained herein be construed to confer upon the holder of this Warrant
Certificate, as such, the rights of a stockholder of the Company or the right to
vote for the election of directors or upon any matter submitted to stockholders
at any meeting thereof, or to give or withhold consent to any corporate action,
to exercise any preemptive right, to receive notice of meetings or other actions
affecting stockholders (except as provided herein), or to receive dividends or
subscription rights or otherwise, until the Date of Election to Purchase
Warrants shall have occurred.
9. FRACTIONAL WARRANTS AND FRACTIONAL WARRANT SHARES. The Company
may, but shall not be required to, issue fractional Warrant Shares. If any
fraction of a Warrant Share would, except for the provisions of this Section 9,
be issuable to the holder of this Warrant Certificate upon exercise of any
Warrants, the Company may, at its election, pay to such holder an amount in cash
equal to the difference between (a) the fair market value of one share of Common
Stock and (b) the Exercise Price, multiplied by such fraction. The holder of a
Warrant Certificate, by the acceptance of the Warrant Certificate, expressly
waives the right to receive any fractional Warrant Shares upon exercise of a
Warrant. The holder of a Warrant Certificate shall be entitled to receive
fractional Warrants and fractional Warrant Shares at the election of the
Company.
10. REPRESENTATIONS OF HOLDER. Neither the Warrants nor the Warrant
Shares have been registered under the Securities Act. The holder of this
Warrant Certificate, by acceptance hereof, represents that:
(a) such holder is acquiring the Warrants, and will acquire the
Warrant Shares, to be issued to such holder for such holder's own account and
not with a view to the distribution thereof;
(b) has had the opportunity to ask questions of, and has received
answers satisfactory thereto from, the officers and directors of, and has had
access to information concerning, the Company and the terms and conditions of
this Warrant and the Warrant Shares, and all information requested by holder
concerning this Warrant and the Warrant Shares and the Company has been provided
by the Company;
(c) such holder has such knowledge and experience in financial
affairs that such holder is capable of evaluating the merits and risks of
acquiring and holding this Warrant and the Warrant Shares;
(d) such holder has not relied, in connection with the decision to
accept or to provide consideration for this Warrant and the Warrant Shares, upon
the identity or advice of any other Person or upon any representations,
warranties or agreements other than those set forth in this Warrant; and
(e) such holder's financial situation is such that such holder can
afford to suffer the complete loss of the consideration given in exchange for
this Warrant and the Warrant Shares.
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<PAGE>
Holder agrees not to sell, transfer, pledge or hypothecate any
Warrants or any Warrant Shares except in compliance with the provisions of the
Securities Act, or pursuant to an exemption from the requirements of the
Securities Act.
The Company shall use its best efforts to comply with all reporting
requirements of the Securities and Exchange Commission (such Commission or any
successor to any or all of its functions being the "COMMISSION"), including,
without limitation, Rule 144 under the Securities Act, from time to time in
effect and relating to the availability of an exemption from the Securities Act
for the sale of restricted securities. The Company also shall cooperate with
the holder of this Warrant Certificate and with each holder of any Warrant
Shares in supplying such information as may be necessary for any such holder to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from the Securities Act for the sale of restricted securities.
11. NOTICES. All notices, requests, demands and other communications
relating to this Warrant Certificate shall be in writing, including by
telecopier, telex, telegram or cable, addressed, if to the registered holder
hereof, to it at the address furnished by the registered holder to the Company,
and if to the Company, at its office at 33309 1st Way South, Suite A-206,
Federal Way, Washington, 98003, Attention: President, or to such other address
as any party shall notify the other party in writing, and shall be effective, in
the case of written notice by mail, three days after placement into the mails
(first class, postage prepaid), and in the case of notice by telex, telecopier,
telegram or cable, on the same day as sent.
12. BINDING EFFECT. This Warrant Certificate shall be binding upon
and inure to the sole and exclusive benefit of the Company, its permitted
successors and permitted assigns, and the registered holder or holders from time
to time of the Warrants and the Warrant Shares.
13. SURVIVAL OF RIGHTS AND DUTIES. Unless earlier terminated or
cancelled in whole or in part pursuant to Section 16 of this Warrant
Certificate, this Warrant Certificate and unexercised Warrants represented
hereby shall terminate and be of no further force and effect on the earlier of
the Expiration Time or the date on which all the Warrants shall have been
exercised, except that the provisions of Sections 4, 6(b) and 10 of this Warrant
Certificate shall continue in full force and effect after any such termination
or cancellation.
14. GOVERNING LAW. This Warrant Certificate shall be construed in
accordance with and governed by the internal laws of the State of Delaware
applicable to contracts executed and to be performed wholly within such state,
without regard to the principles of conflicts or choice of law.
15. MODIFICATION AND WAIVER. This Warrant Certificate and any term
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought.
16. STOCKHOLDERS AGREEMENT. The Holder acknowledges that he is a
party to that certain Stockholders Agreement dated August 2, 1994 among the
Company and certain of its stockholders, optionholders and warrantholders, as
amended from time to time, and that the
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<PAGE>
Holder is bound by all the terms and conditions of such agreement just as if the
Warrants were shares of Common Stock (as defined in the Stockholders Agreement),
MUTATIS MUTANDIS.
17. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
If any capital reorganization or reclassification of the capital stock of the
Company, any consolidation or merger of the Company with another entity, or the
sale of all or substantially all of the Company's assets to another entity shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger of sale, lawful and adequate provisions shall be made
whereby the Holder shall thereafter have the right to purchase and receive upon
the basis and the terms and conditions specified in this Warrant and in lieu of
the shares of Common Stock immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby, such shares of stock,
securities or assets as may be issued or payable in such reorganization,
reclassification, consolidation, merger or sale with respect to or in exchange
for the number of shares of Common Stock purchasable and receivable upon the
exercise of the rights represented hereby had such rights been exercised
immediately prior thereto, and in any such case appropriate provision shall be
made with respect to the rights and interests of the Holder to the end that the
provisions hereof (including without limitation provisions for adjustments of
the Exercise Price and of the number of shares of Common Stock purchasable and
receivable upon the exercise of this Warrant) shall thereafter be applicable, as
nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof. The Company will not effect
any such consolidation, merger or sale, unless prior to the consummation thereof
the successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall assume
by written instrument, executed and mailed or delivered to the Holder at the
last address thereof appearing in the Register, the obligation to deliver to
such Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such Holder may be entitled to purchase. This
Section 17 shall not apply to any consolidation, merger or sale following which
the Aurora Equity Partners L.P. and Aurora Overseas Equity Partners I, L.P.
(together, the "AURORA ENTITIES") and their respective Affiliates collectively
no longer control the Company. As used herein, the term "AFFILIATE" shall mean,
with reference to any person or entity, any other person or entity directly or
indirectly, through one or more intermediaries, controlling, controlled by or
under common control with such first person or entity.
18. ISSUANCE OF CERTAIN ADDITIONAL SHARES.
(a) If the Company shall sell or issue to either of the Aurora
Entities or their Affiliates any shares of Common Stock (collectively, a "SHARE
ISSUANCE") at a price per share of Common Stock that is less than the Fair
Market Value of Common Stock on the date of the Share Issuance (such shares
being referred to as the "BELOW MARKET SHARES"), the Exercise Price shall be
adjusted on and after the date of such Share Issuance by multiplying the
Exercise Price in effect immediately prior to such adjustment by a fraction, of
which the numerator shall be the number of shares of Common Stock outstanding on
such date plus the number of shares of Common Stock that the aggregate purchase
price of such Below Market Shares would purchase at the Fair Market Value, and
of which the denominator shall be the number of shares of
WARRANT
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<PAGE>
Common Stock outstanding on such date plus the number of Below Market Shares.
The adjustment to the Exercise Price set forth in this Section (a) shall be made
successively whenever a sale or issuance of Below Market Shares occurs.
(b) If the Company shall sell or issue to either of the Aurora
Entities or their Affiliates any options, warrants or rights entitling the
Aurora Entities or their Affiliates to subscribe for, purchase or convert or
exchange shares of Common Stock (collectively, an "OPTION ISSUANCE") having an
exercise price per share of Common Stock that is less than the Fair Market Value
of Common Stock on the date of the Option Issuance (such options, warrants or
rights being referred to as the "BELOW MARKET OPTIONS"), the Exercise Price
shall be adjusted on and after the date of such Option Issuance by multiplying
the Exercise Price in effect immediately prior to such adjustment by a fraction,
of which the numerator shall be the number of shares of Common Stock outstanding
on such date plus the number of shares of Common Stock that the aggregate
purchase price of such Below Market Options plus any additional amounts payable
to the Company upon the exercise thereof would purchase at the Fair Market
Value, and of which the denominator shall be the number of shares of Common
Stock outstanding on such date plus the number of Below Market Shares. The
adjustment to the Exercise Price set forth in this Section 18(b) shall be made
successively whenever a sale or issuance of Below Market Options occurs;
PROVIDED, HOWEVER, that, if any such Below Market Options expire without the
issuance of shares of Common Stock, then the Exercise Price shall again be
adjusted to equal the Exercise Price in effect had such issuance of Below Market
Options not occurred.
(c) As used in this Section 18, "FAIR MARKET VALUE" of shares of
Common Stock as of a particular date shall mean the average value of the shares
of such class for the 10-business day period immediately preceding such date.
Such average value shall be the average of the last reported sales price of the
shares of such class on the New York Stock Exchange for each of such 10 days,
or, if not reported on such Exchange, on the Composite Tape, or, in case no such
reported sales take place for each of such 10 days, the average of the reported
closing bid and asked quotations on the New York Stock Exchange for each of such
10 days, or if no such quotations are available, the last reported sale prices
for such 10 days on the principal national securities exchange on which such
class of shares is listed, or if not listed on any national securities exchange,
the last reported sales prices for such 10 days in the over-the-counter market
as reported by the National Quotation Bureau, Incorporated or similar
organization, or if none of such sale prices are available for each day in such
10 days, the average of the high bid and low asked quotations in the
over-the-counter market as so reported for such 10 days, or if no such
quotations are available, the fair market value per share as determined in good
faith by the Company's Board of Directors, whose determination shall be
conclusive.
(d) Upon each adjustment of the Exercise Price pursuant to
Section 18(a) or 18(b), the Holder shall thereafter be entitled to purchase at
the Exercise Price resulting from such adjustment, the number of Warrant Shares
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior
to such adjustment, and dividing the product thereof by the Exercise Price
resulting from such adjustment.
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<PAGE>
19. NOTICES AND INFORMATION TO HOLDER.
(a) FINANCIAL STATEMENTS AND DOCUMENTS. The Company shall
provide to the Holder upon request a copy of monthly, quarterly and annual
financial statements for the Company and, if any, its subsidiaries. The Holder
shall accept, and the Company shall deliver, such financial statements in
whatever form and at whatever times such financial statements are provided to
the Company's debt holders, lenders or board of directors. The Company shall
also provide to Holder upon request at no cost to Holder a copy of any material
agreements relating to the Company's (or any subsidiary's) capital structure or
debt and equity financing arrangements. If requested by the Company, the Holder
shall execute such confidentiality agreements as the Company may reasonably
require. The Company's obligations to deliver financial statements and other
documents under this Section 19 shall terminate on the date on which the Company
becomes a reporting company under Section 12 or Section 15 of the Securities
Exchange Act of 1934, as amended.
(b) NOTICES OF CERTAIN EVENTS. In case: (a) the Company shall
authorize the issuance to all holders of shares of Common Stock of rights,
options or warrants to subscribe for or purchase shares of Common Stock or of
any other subscription rights or warrants; (b) the Company shall authorize the
distribution to all holders of shares of Common Stock of assets, including cash,
evidences of its indebtedness or other securities; (c) of any consolidation or
merger to which the Company is a party and for which approval of any
stockholders of the Company is required, or of the conveyance or transfer of the
properties and assets of the Company substantially as an entirety, or of any
reclassification or change of Common Stock issuable upon exercise of the
Warrants, or of the commencement of a tender offer or exchange offer for shares
of Common Stock; or (d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; THEN the Company shall cause to be given to the
Holder at least 10 days prior to the applicable record date hereinafter
specified, or the date of the event in the case of events for which there is no
record date, notice stating (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such rights, options,
warrants or distribution are to be determined, or (ii) the initial expiration
date set forth in any tender offer or exchange offer for shares of Common Stock,
or (iii) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which it is expected that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities
or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up.
(c) INFORMATION REGARDING ADJUSTMENTS. The Company shall keep a
record of any adjustment to the Warrant Shares or the Exercise Price pursuant
hereto, together with a record as to the method of calculation and the facts
upon which such calculations are based. Such information shall be provided to
the Holder upon request. To the extent practicable, the Company will include
such information in the notices given pursuant to Section 20(b).
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IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be executed under its corporate seal by its officers thereunto duly authorized
as of the date hereof, and the Holder has caused this Warrant Certificate to be
executed and delivered by its duly authorized representative.
AFTERMARKET TECHNOLOGY CORP.
[CORPORATE SEAL]
By:
-------------------------------------
Stephen J. Perkins, Chief Executive
Officer
----------------------------------------
BRIAN E. SANDERSON
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ANNEX A
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, __________________________ hereby sells, assigns and
transfers to each assignee set forth below all the rights of the undersigned in
and to the number of Warrants (as deemed in and evidenced by the foregoing
Warrant Certificate) set opposite the name of such assignee below and in and to
the foregoing Warrant Certificate with respect to such Warrants and the shares
of common stock, $0.01 par value per share, of Aftermarket Technology Corp.
issuable upon exercise of such Warrants:
NAME OF ASSIGNEE ADDRESS NUMBER OF WARRANTS
If the aggregate number of such Warrants shall not constitute all the Warrants
evidenced by the foregoing Warrant Certificate, the undersigned requests that a
new Warrant Certificate evidencing the Warrants not so assigned be issued in the
name of and delivered to the undersigned.
Dated: , Name of Holder (Print):
-------------- ---- ---------------------------
(By:)
----------------------------
(Title:)
----------------------------
[SIGNATURE GUARANTEE] ATTEST:
(Not Required for Initial
Registered Holder)
------------------------------
[Assistant] Secretary
ANNEX A
A-1
<PAGE>
ANNEX B
FORM OF ELECTION TO PURCHASE
(To Be Executed by the Holder if the
Holder Desires to Exercise Warrants
Evidenced by the foregoing Warrant Certificate)
To Aftermarket Technology Corp.:
The undersigned hereby irrevocably elects to exercise ________ Warrants (as
deemed in and evidenced by the foregoing Warrant Certificates) for, and to
purchase thereunder, ___________ full shares of common stock, $0.01 par value
per share, of Aftermarket Technology Corp., issuable upon exercise of such
Warrants and delivery of $_________ in cash and any applicable taxes payable by
the undersigned pursuant to such Warrant Certificate.
The undersigned requests that certificates for such shares be issued in the name
of the following:
Printed Name:
---------------------------------------------------------
Social security or tax identification number:
-------------------------
Printed Address:
------------------------------------------------------
------------------------------------------------------
If such number of Warrants shall not constitute all the Warrants evidenced by
the foregoing Warrant Certificate, the undersigned request that a new Warrant
Certificate evidencing the Warrants not so exercised be issued in the name of
and delivered to the following:
Printed Name:
---------------------------------------------------------
Printed Address:
------------------------------------------------------
------------------------------------------------------
Dated: , Name of Holder (Print):
-------------- ---- ---------------------------
(By:)
----------------------------
(Title:)
----------------------------
[SIGNATURE GUARANTEE]
(Not Required for Initial Registered Holder)
ANNEX B
B-1
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
AN OPINION OF COUNSEL DELIVERED TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED
UNDER SUCH ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER
COMPLIES WITH THE PROVISIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF AUGUST 2,
1994 AMONG THE COMPANY AND THE STOCKHOLDERS, OPTIONHOLDERS AND WARRANTHOLDERS
SIGNATORY THERETO, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE COMPANY. SUCH AGREEMENT PROVIDES THAT ALL PERSONS WHO
ACQUIRE THESE SECURITIES ARE BOUND BY THE TERMS OF SUCH AGREEMENT.
AFTERMARKET TECHNOLOGY CORP.
WARRANT
Dated as of December 20, 1996
WARRANTS TO PURCHASE COMMON STOCK
Certificate for 70,176 Warrants
ISSUED TO MICHAEL J. HARTNETT ("HOLDER")
This Warrant is entered into as of December 20, 1996 by and between
Aftermarket Technology Corp., a Delaware corporation (the "COMPANY"), and the
person named above as Holder.
WHEREAS, Aftermarket Technology Holdings Corp., a Delaware corporation
("HOLDINGS"), issued Warrants to Holder on December 1, 1994 (the "ORIGINAL
ISSUANCE DATE") to purchase 11,696 shares of Common Stock, $0.01 par value per
share, of Holdings (the "HOLDINGS COMMON STOCK"), that, prior to the date
hereof, were evidenced by that certain Warrant certificate dated December 1,
1994 (the "ORIGINAL CERTIFICATE");
WHEREAS, the Original Certificate was amended and restated on June 24,
1996, to delete a provision that was unintentionally included in the Original
Certificate (the "PRIOR CERTIFICATE").
<PAGE>
WHEREAS, on December 13, 1996, Holdings consummated a six-for-one
stock split (the "STOCK SPLIT");
WHEREAS, upon the consummation of the Stock Split and pursuant to
Section 7 of the Prior Certificate, the number of shares of Holdings Common
Stock that Holder was entitled to purchase immediately prior to the Stock Split
was proportionately increased to 70,176 shares of Holdings Common Stock, and the
exercise price was likewise adjusted proportionately;
WHEREAS, Holdings was merged into the Company, effective December 20,
1996 (the "REORGANIZATION"); and
WHEREAS, pursuant to the Agreement and Plan of Reorganization, dated
as of December 13, 1996, between the Company and Holdings, and upon consummation
of the Reorganization, each outstanding warrant that was issued by Holdings was
converted into a warrant to purchase the Common Stock of the Company;
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein, the parties hereto agree as follows:
The Company hereby certifies that the Holder is the registered owner
of the number of Warrants set forth above.
Each Warrant entitles the Holder to purchase one (l) share (each such
share being referred to herein as a "WARRANT SHARE" and all such shares being
referred to herein, collectively, as the "WARRANT SHARES"), as adjusted from
time to time as provided in Section 7 hereof, of the Common Stock, $0.01 par
value per share, of the Company (the "COMMON STOCK") at the exercise price of
One Dollar and Sixty-Seven Cents ($1.67) per Warrant Share (the "EXERCISE
PRICE"), subject to the following terms and conditions.
1. REGISTRATION. The Company shall register each Warrant, upon
records to be maintained by the Company for such purpose (such records being
referred to herein as the "REGISTER"), in the name of the record holder of such
Warrant from time to time. The Company may deem and treat the registered holder
of each Warrant as the absolute owner thereof for the purpose of any exercise
thereof or any distribution to the holder thereof, and for all other purposes,
and the Company shall not be affected by any notice to the contrary.
2. TRANSFERS AND EXCHANGES.
(a) REGISTRATION; ISSUANCE OF NEW WARRANT CERTIFICATES. The
Company shall reflect in the Register the transfer of any Warrant represented
hereby upon the surrender of this Warrant Certificate, with the Form of
Assignment attached as Annex A hereto duly completed and signed (and with a
signature guarantee for the transfer of any Warrants by a registered holder
other than the initial registered holder of this Warrant Certificate), to the
Company at the office of the Company set forth in Section 11 hereof; PROVIDED,
HOWEVER, that unless (i) such transfer relates to Warrants that have been or are
being transferred pursuant to an effective registration under the Securities Act
of 1933, as amended (the "SECURITIES ACT"), or Rule
WARRANT
2
<PAGE>
144 or any successor rule thereunder, or (ii) such transfer is being made solely
to "accredited investors," as such term is defined in Regulation D under the
Securities Act, each of which accredited investors (A) represents in writing to
the Company that it is such an "accredited investor," and is acquiring such
Warrants for investment and not with a view to the distribution thereof within
the meaning of the Securities Act (subject to any requirement of law that the
disposition thereof shall at all times be within the control of such holder) and
(B) agrees in writing to be bound by the terms of this Section 2(a) with respect
to subsequent dispositions, then the Company may require, as a condition to the
Company's registration of the transfer of any Warrant, an opinion of counsel
(the fees and disbursements of which shall be paid by the Holder) reasonably
satisfactory to the Company to the effect that such transfer may be effected
without registration under the Securities Act. Upon any such registration of
transfer, a new Warrant Certificate, in substantially the form of this Warrant
Certificate, evidencing the Warrants so transferred shall be issued to the
transferee of such Warrants and a new Warrant Certificate, in substantially the
form of this Warrant Certificate, evidencing the remaining Warrants, if any, not
so transferred, shall be issued to the Holder. The Company shall at no time
close the Register against the transfer of any Warrant or Warrant Share in any
manner that materially interferes with the timely exercise of such Warrant.
(b) WARRANTS EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This
Warrant Certificate is exchangeable, upon the surrender hereof by the Holder at
the office of the Company set forth in Section 11 hereof, for new Warrant
Certificates, in substantially the form of this Warrant Certificate, evidencing
in the aggregate the right to purchase the number of Warrant Shares that may
then be purchased under this Warrant Certificate. Each such new Warrant
Certificate shall be dated the date of such exchange and represent the right to
purchase such number of Warrant Shares as shall be designated by the Holder at
the time of such surrender.
3. DURATION AND EXERCISE OF WARRANTS.
(a) Subject to all the terms and conditions hereinafter set
forth (including, without limitation, the terms and conditions in Section 16),
the Warrants may be exercised by the holder at any time from the date hereof
until 5:00 p.m., Los Angeles time, on the tenth (10th) anniversary of the
Original Issuance Date (the "EXPIRATION TIME").
33% of the Warrants may be exercised beginning on December 31, 1994;
33% of the Warrants may be exercised beginning on December 31, 1995;
and
33% of the Warrants may be exercised beginning on December 31, 1996.
At the Expiration Time, each Warrant not exercised prior thereto shall be and
become void and of no value.
(b) Subject to the provisions of this Warrant Certificate,
including adjustments to the Exercise Price and to the number of Warrant Shares
issuable upon the exercise of each Warrant pursuant to Section 7 hereof, each
holder of a Warrant on or prior to the
WARRANT
3
<PAGE>
Expiration Time shall have the right to purchase from the Company (and the
Company shall be obligated to issue and sell to such holder of a Warrant) at the
Exercise Price one fully-paid Warrant Share, which shall be nonassessable upon
issuance.
(c) Subject to Sections 4, 9 and 10(a) hereof, upon (i)
surrender of this Warrant Certificate, together with the Form of Election to
Purchase attached as Annex B hereto (the "FORM OF ELECTION TO PURCHASE") duly
completed and signed, to the Company at the address provided in Section 11, and
(ii) payment of the Exercise Price, multiplied by the number of Warrant Shares
then issuable upon exercise of the Warrants being so exercised in immediately
available lawful money of the United States of America, the Company shall
promptly, but in any event within five (5) days of its receipt of the Form of
Election to Purchase, together with the Warrant Certificate and receipt of
payment of the Exercise Price, issue and cause to be delivered to or upon the
written order of the Holder, and in such name or names as such Holder may
designate (subject to Section 4 hereof), a certificate for the Warrant Shares
issued upon such exercise of such Warrants. Any person so designated to be
named in such certificate for such Warrant Shares shall be deemed to have become
the holder of record of such Warrant Shares as of the Date of Election to
Purchase such Warrants. The "DATE OF ELECTION TO PURCHASE" any Warrant means
the date on which the Company shall have received (l) this Warrant Certificate,
with the Form of Election to Purchase duly filed in and signed, and (2) payment
of the Exercise Price for such Warrant.
(d) Any part of the Warrants evidenced by this Warrant
Certificate shall be exercisable from time to time. If fewer than all the
Warrants evidenced by this Warrant Certificate are exercised at any time, the
Company, at its expense, shall issue to the registered holder a new Warrant
Certificate, in substantially the form of this Warrant Certificate, for the
remaining number of Warrants evidenced by this Warrant Certificate.
(e) In lieu of the payment of the Exercise Price in cash, the
Holder may request that the Company accept the net value of shares issuable upon
payment of the Exercise Price. In such event the Company shall issue to the
Holder the number of shares of Common Stock equal to (i) the product of (x) the
number of Warrants being exercised and (y) the amount by which the fair market
value of one share of Common Stock exceeds the Exercise Price for such share,
divided by (ii) the fair market value of one share of Common Stock. For
purposes of this Section 3(e), the "FAIR MARKET VALUE" of one share of Common
Stock shall be the value as agreed by the Company and the Holder, provided that
the Holder shall not have the option to pay any part of the Exercise Price as
aforesaid if the Company and the Holder are unable to agree upon the "fair
market value" of one share of Common Stock. This Section 3(e) shall not affect
the Holder's obligations under Section 4(b).
4. PAYMENT OF TAXES.
(a) The Company shall pay all issuance and transfer taxes and
charges that may be imposed on the Company or on the Warrants or the Warrant
Shares in respect of the transfer of Warrants, or the issuance or delivery of
the Certificates for Warrant Shares or other Securities in respect of the
Warrant Shares upon the exercise or conversion of Warrants;
WARRANT
4
<PAGE>
PROVIDED, HOWEVER, that the Company shall not be required to pay any such tax or
other charge imposed in respect of the transfer of Warrants, or the issuance or
delivery of certificates for Warrant Shares or other Securities in respect of
the Warrant Shares upon the exercise of Warrants, to a person or entity other
than a then-existing registered holder of Warrants.
(b) Upon exercise of the Warrant in whole or in part, the holder
shall be required to pay to the Company (by cashier's or certified check) an
amount equal to all applicable federal and state withholding taxes that may
become payable by reason of such exercise.
5. MUTILATED OR MISSING WARRANT CERTIFICATE. If this Warrant
Certificate shall be mutilated, lost, stolen or destroyed, upon request by the
registered holder of the Warrants, the Company shall issue, in exchange for and
upon cancellation of the mutilated Warrant Certificate, or in substitution for
the lost, stolen or destroyed Warrant Certificate, a new Warrant Certificate, in
substantially the form of this Warrant Certificate, of like tenor and
representing the equivalent number of Warrants, but, in the case of loss, theft
or destruction, only upon receipt of evidence satisfactory to the Company of
such loss, theft or destruction of this Warrant Certificate and, if requested by
the Company, indemnity also satisfactory to it.
6. RESERVATION AND ISSUANCE OF WARRANT SHARES.
(a) The Company shall at all times have authorized, and reserve
and keep available, exclusively for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon the exercise of the Warrants, the number
of Warrant Shares deliverable upon exercise of the Warrants. The Company shall
take all corporate action necessary to enable the Company to validly and legally
issue, at the Exercise Price, Warrant Shares that are fully paid and
nonassessable.
(b) The Company covenants that all Warrant Shares will, upon
issuance in accordance with the terms of this Warrant Certificate, be (i) duly
authorized, validly issued, fully paid and nonassessable and (ii) free from all
taxes or other governmental charges with respect to the issuance thereof (not
including income taxes payable by the holders of Warrants being exercised in
respect of gains thereon) and from all liens, charges and security interests
created by the Company.
(c) If any Warrant Shares required to be reserved pursuant to
paragraph (a) of this Section 6 require registration with or approval of any
governmental authority under any Federal or state law (other than the Securities
Act, registration under which is governed by Section 10 hereof) before such
Warrant Shares may be issued upon the exercise thereof, the Company shall, at
the Holder's expense and as expeditiously as possible, use its best efforts to
cause such Warrant Shares to be duly registered or approved, as the case may be;
PROVIDED, HOWEVER, that the Company will not be required to qualify generally to
do business in any jurisdiction in which it is not then so qualified, to subject
itself to taxation in any jurisdiction in which it is not then subject to
taxation, or to take any action that would subject it to general service of
process in any jurisdiction in which it is not then so subject.
WARRANT
5
<PAGE>
7. ADJUSTMENTS. If the Company shall at any time subdivide the
outstanding shares of Common Stock into a greater number of shares, or pay to
holders of Common Stock any dividend payable in shares of Common Stock, the
number of Warrant Shares in effect immediately prior to such subdivision or
dividend shall be proportionately increased, and conversely, if the outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
number of Warrant Shares in effect immediately prior to such combination shall
be proportionately reduced; and, in either case the Exercise Price shall be
adjusted proportionately.
8. NO STOCK RIGHTS. No holder of this Warrant Certificate, as such,
shall be entitled to vote or be deemed the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise
hereof, nor shall anything contained herein be construed to confer upon the
holder of this Warrant Certificate, as such, the rights of a stockholder of the
Company or the right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action, to exercise any preemptive right, to receive notice of
meetings or other actions affecting stockholders (except as provided herein), or
to receive dividends or subscription rights or otherwise, until the Date of
Election to Purchase Warrants shall have occurred.
9. FRACTIONAL WARRANTS AND FRACTIONAL WARRANT SHARES. The Company
may, but shall not be required to, issue fractional Warrant Shares. If any
fraction of a Warrant Share would, except for the provisions of this Section 9,
be issuable to the holder of this Warrant Certificate upon exercise of any
Warrants, the Company may, at its election, pay to such holder an amount in cash
equal to the difference between (a) the fair market value of one share of Common
Stock and (b) the Exercise Price, multiplied by such fraction. The holder of a
Warrant Certificate, by the acceptance of the Warrant Certificate, expressly
waives the right to receive any fractional Warrant Shares upon exercise of a
Warrant. The holder of a Warrant Certificate shall be entitled to receive
fractional Warrants and fractional Warrant Shares at the election of the
Company.
10. REPRESENTATIONS OF HOLDER. Neither the Warrants nor the Warrant
Shares have been registered under the Securities Act. The holder of this
Warrant Certificate, by acceptance hereof, represents that:
(a) such holder is acquiring the Warrants, and will acquire the
Warrant Shares, to be issued to such holder for such holder's own account and
not with a view to the distribution thereof;
(b) has had the opportunity to ask questions of, and has received
answers satisfactory thereto from, the officers and directors of, and has had
access to information concerning, the Company and the terms and conditions of
this Warrant and the Warrant Shares, and all information requested by holder
concerning this Warrant and the Warrant Shares and the Company has been provided
by the Company;
(c) such holder has such knowledge and experience in financial
affairs that such holder is capable of evaluating the merits and risks of
acquiring and holding this Warrant and the Warrant Shares;
WARRANT
6
<PAGE>
(d) such holder has not relied, in connection with the decision to
accept or to provide consideration for this Warrant and the Warrant Shares, upon
the identity or advice of any other Person or upon any representations,
warranties or agreements other than those set forth in this Warrant; and
(e) such holder's financial situation is such that such holder can
afford to suffer the complete loss of the consideration given in exchange for
this Warrant and the Warrant Shares;
(f) such holder is an "accredited investor" as defined in
Regulation D promulgated under the Securities Act; and
(g) if such holder is an individual, such holder's net worth with
such holder's spouse exceeds $1,000,000, or such holder's individual income was
in excess of $200,000 in each of the two most recent years or was in excess of
$300,000 in each of the two most recent years, and such holder reasonably
expects to reach the same income level in the current year.
Holder agrees not to sell, transfer, pledge or hypothecate any
Warrants or any Warrant Shares except in compliance with the provisions of the
Securities Act, or pursuant to an exemption from the requirements of the
Securities Act.
The Company shall use its best efforts to comply with all reporting
requirements of the Securities and Exchange Commission (such Commission or any
successor to any or all of its functions being the "COMMISSION"), including,
without limitation, Rule 144 under the Securities Act, from time to time in
effect and relating to the availability of an exemption from the Securities Act
for the sale of restricted securities. The Company also shall cooperate with
the holder of this Warrant Certificate and with each holder of any Warrant
Shares in supplying such information as may be necessary for any such holder to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from the Securities Act for the sale of restricted securities.
11. NOTICES. All notices, requests, demands and other communications
relating to this Warrant Certificate shall be in writing, including by
telecopier, telex, telegram or cable, addressed, if to the registered holder
hereof, to it at the address furnished by the registered holder to the Company,
and if to the Company, at its office at 33309 1st Way South, Suite A-206,
Federal Way, Washington, 98003, Attention: President, or to such other address
as any party shall notify the other party in writing, and shall be effective, in
the case of written notice by mail, three days after placement into the mails
(first class, postage prepaid), and in the case of notice by telex, telecopier,
telegram or cable, on the same day as sent.
12. BINDING EFFECT. This Warrant Certificate shall be binding upon
and inure to the sole and exclusive benefit of the Company, its permitted
successors and permitted assigns, and the registered holder or holders from time
to time of the Warrants and the Warrant Shares.
13. SURVIVAL OF RIGHTS AND DUTIES. Unless earlier terminated or
cancelled in whole or in part pursuant to Section 16 of this Warrant
Certificate, this Warrant Certificate and
WARRANT
7
<PAGE>
unexercised Warrants represented hereby shall terminate and be of no further
force and effect on the earlier of the Expiration Time or the date on which all
the Warrants shall have been exercised, except that the provisions of Sections
4, 6(b) and 10 of this Warrant Certificate shall continue in full force and
effect after any such termination or cancellation.
14. GOVERNING LAW. This Warrant Certificate shall be construed in
accordance with and governed by the internal laws of the State of Delaware
applicable to contracts executed and to be performed wholly within such state,
without regard to the principles of conflicts or choice of law.
15. MODIFICATION AND WAIVER. This Warrant Certificate and any term
hereof may be changed, waived, discharged or terminated only by an instrument in
writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought.
16. AGREEMENT TO BE BOUND. The Holder acknowledges and hereby agrees
to become a party to and be bound by the terms and conditions of that certain
Stockholders Agreement dated August 2, 1994 among the Company and certain of its
stockholders, optionholders and warrantholders, as amended from time to time,
and that the Holder is bound by all the terms and conditions of such agreement
just as if the Warrants were shares of Common Stock (as defined in the
Stockholders Agreement), MUTATIS MUTANDIS.
17. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
If any capital reorganization or reclassification of the capital stock of the
Company, any consolidation or merger of the Company with another entity, or the
sale of all or substantially all of the Company's assets to another entity shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger of sale, lawful and adequate provisions shall be made
whereby the Holder shall thereafter have the right to purchase and receive upon
the basis and the terms and conditions specified in this Warrant and in lieu of
the shares of Common Stock immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby, such shares of stock,
securities or assets as may be issued or payable in such reorganization,
reclassification, consolidation, merger or sale with respect to or in exchange
for the number of shares of Common Stock purchasable and receivable upon the
exercise of the rights represented hereby had such rights been exercised
immediately prior thereto, and in any such case appropriate provision shall be
made with respect to the rights and interests of the Holder to the end that the
provisions hereof (including without limitation provisions for adjustments of
the Exercise Price and of the number of shares of Common Stock purchasable and
receivable upon the exercise of this Warrant) shall thereafter be applicable, as
nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise hereof. The Company will not effect
any such consolidation, merger or sale, unless prior to the consummation thereof
the successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall assume
by written instrument, executed and mailed or delivered to the Holder at the
last address thereof appearing in the Register, the obligation to deliver to
such Holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such Holder may be entitled
WARRANT
8
<PAGE>
to purchase. This Section 17 shall not apply to any consolidation, merger or
sale following which the Aurora Equity Partners L.P. and Aurora Overseas Equity
Partners I, L.P. (together, the "AURORA ENTITIES") and their respective
Affiliates collectively no longer control the Company. As used herein, the term
"AFFILIATE" shall mean, with reference to any person or entity, any other person
or entity directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with such first person or
entity.
18. [INTENTIONALLY LEFT BLANK]
19. NOTICES AND INFORMATION TO HOLDER.
(a) FINANCIAL STATEMENTS AND DOCUMENTS. The Company shall
provide to the Holder upon request a copy of monthly, quarterly and annual
financial statements for the Company and, if any, its subsidiaries. The Holder
shall accept, and the Company shall deliver, such financial statements in
whatever form and at whatever times such financial statements are provided to
the Company's debt holders, lenders or board of directors. The Company shall
also provide to Holder upon request at no cost to Holder a copy of any material
agreements relating to the Company's (or any subsidiary's) capital structure or
debt and equity financing arrangements. If requested by the Company, the Holder
shall execute such confidentiality agreements as the Company may reasonably
require. The Company's obligations to deliver financial statements and other
documents under this Section 19 shall terminate on the date on which the Company
becomes a reporting company under Section 12 or Section 15 of the Securities
Exchange Act of 1934, as amended.
(b) NOTICES OF CERTAIN EVENTS. In case: (a) the Company shall
authorize the issuance to all holders of shares of Common Stock of rights,
options or warrants to subscribe for or purchase shares of Common Stock or of
any other subscription rights or warrants; (b) the Company shall authorize the
distribution to all holders of shares of Common Stock of assets, including cash,
evidences of its indebtedness or other securities; (c) of any consolidation or
merger to which the Company is a party and for which approval of any
stockholders of the Company is required, or of the conveyance or transfer of the
properties and assets of the Company substantially as an entirety, or of any
reclassification or change of Common Stock issuable upon exercise of the
Warrants, or of the commencement of a tender offer or exchange offer for shares
of Common Stock; or (d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; THEN the Company shall cause to be given to the
Holder at least 10 days prior to the applicable record date hereinafter
specified, or the date of the event in the case of events for which there is no
record date, notice stating (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such rights, options,
warrants or distribution are to be determined, or (ii) the initial expiration
date set forth in any tender offer or exchange offer for shares of Common Stock,
or (iii) the date on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
consummated, and the date as of which it is expected that holders of record of
shares of Common Stock shall be entitled to exchange such shares for securities
or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up.
WARRANT
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<PAGE>
(c) INFORMATION REGARDING ADJUSTMENTS. The Company shall keep a
record of any adjustment to the Warrant Shares or the Exercise Price pursuant
hereto, together with a record as to the method of calculation and the facts
upon which such calculations are based. Such information shall be provided to
the Holder upon request. To the extent practicable, the Company will include
such information in the notices given pursuant to Section 20(b).
WARRANT
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be executed under its corporate seal by its officers thereunto duly authorized
as of the date hereof, and the Holder has caused this Warrant Certificate to be
executed and delivered by its duly authorized representative.
AFTERMARKET TECHNOLOGY CORP.
[CORPORATE SEAL]
By:
-------------------------------------
Stephen J. Perkins, Chief Executive
Officer
----------------------------------------
MICHAEL J. HARTNETT
WARRANT
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<PAGE>
ANNEX A
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, __________________________ hereby sells, assigns and
transfers to each assignee set forth below all the rights of the undersigned in
and to the number of Warrants (as deemed in and evidenced by the foregoing
Warrant Certificate) set opposite the name of such assignee below and in and to
the foregoing Warrant Certificate with respect to such Warrants and the shares
of common stock, $0.01 par value per share, of Aftermarket Technology Corp.
issuable upon exercise of such Warrants:
Name of Assignee Address Number of Warrants
- ---------------- ------- ------------------
If the aggregate number of such Warrants shall not constitute all the Warrants
evidenced by the foregoing Warrant Certificate, the undersigned requests that a
new Warrant Certificate evidencing the Warrants not so assigned be issued in the
name of and delivered to the undersigned.
Dated: , Name of Holder (Print):
-------------- ---- ---------------------------
(By:)
----------------------------
(Title:)
----------------------------
[SIGNATURE GUARANTEE] ATTEST:
(Not Required for Initial
Registered Holder)
------------------------------
[Assistant] Secretary
ANNEX A
A-1
<PAGE>
ANNEX B
FORM OF ELECTION TO PURCHASE
(To Be Executed by the Holder if the
Holder Desires to Exercise Warrants
Evidenced by the foregoing Warrant Certificate)
To Aftermarket Technology Corp.:
The undersigned hereby irrevocably elects to exercise ________ Warrants (as
deemed in and evidenced by the foregoing Warrant Certificates) for, and to
purchase thereunder, ___________ full shares of common stock, $0.01 par value
per share, of Aftermarket Technology Corp., issuable upon exercise of such
Warrants and delivery of $_________ in cash and any applicable taxes payable by
the undersigned pursuant to such Warrant Certificate.
The undersigned requests that certificates for such shares be issued in the name
of the following:
Printed Name:
---------------------------------------------------------
Social security or tax identification number:
-------------------------
Printed Address:
------------------------------------------------------
------------------------------------------------------
If such number of Warrants shall not constitute all the Warrants evidenced by
the foregoing Warrant Certificate, the undersigned request that a new Warrant
Certificate evidencing the Warrants not so exercised be issued in the name of
and delivered to the following:
Printed Name:
---------------------------------------------------------
Printed Address:
------------------------------------------------------
------------------------------------------------------
Dated: , Name of Holder (Print):
-------------- ---- ---------------------------
(By:)
----------------------------
(Title:)
----------------------------
[SIGNATURE GUARANTEE]
(Not Required for Initial Registered Holder)
ANNEX B
B-1
<PAGE>
STOCK PURCHASE AGREEMENT
BY AND AMONG
S. JAY WILEMON,
RICKI J. WILEMON,
BRADLEY J. WILEMON,
CORBY L. WILEMON,
REPLACEMENT & EXCHANGE PARTS CO., INC.,
AFTERMARKET TECHNOLOGY CORP.,
AND
REPCO ACQUISITION CORP.
DATED AS OF JANUARY 31, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS.................................................. 1
1.01. Definitions.................................................. 1
ARTICLE II. PURCHASE AND SALE............................................ 5
2.01. Purchase of Shares from Shareholders......................... 5
2.02. Closing...................................................... 6
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS............... 6
3.01. Representations Regarding the Shares......................... 6
3.02. Shareholder Prohibitions..................................... 6
3.03. Corporate Existence and Power................................ 7
3.04. Authorization................................................ 7
3.05. Subsidiaries................................................. 7
3.06. Capital Stock................................................ 7
3.07. Governmental Authorization................................... 7
3.08. Non-Contravention............................................ 7
3.09. Financial Statements; Undisclosed Liabilities................ 8
3.10. Absence of Certain Changes................................... 8
3.11. Properties; Leases; Tangible Assets.......................... 9
3.12. Affiliates................................................... 10
3.13. Inventories.................................................. 10
3.14. Litigation................................................... 10
3.15. Contracts.................................................... 11
3.16. Permits; Required Consents................................... 12
3.17. Compliance with Applicable Laws.............................. 12
3.18. Employment Agreements; Change in Control; and Employee
Benefits..................................................... 12
3.19. Labor and Employment Matters................................. 13
3.20. Intellectual Property........................................ 14
3.21. Advisory Fees................................................ 14
3.22. Environmental Compliance..................................... 14
3.23. Insurance.................................................... 15
3.24. Tax Matters.................................................. 15
3.25. Material Disclosures......................................... 16
3.26. Sufficiency of and Title to Assets........................... 16
3.27. Long-Term Debt............................................... 16
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF ATC AND BUYER.............. 17
4.01. Organization and Existence................................... 17
4.02. Corporate Authorization...................................... 17
4.03. Governmental Authorization................................... 17
4.04. Non-Contravention............................................ 17
4.05. Advisory Fees................................................ 17
4.06. Litigation................................................... 17
ARTICLE V. COVENANTS OF SHAREHOLDERS AND REPCO.......................... 17
5.01. Conduct of the Business; Distributions....................... 17
5.02. Access to Information........................................ 19
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5.03. Compliance with Terms of Required Governmental Approvals and
Required Contractual Consents................................ 20
5.04. Maintenance of Insurance Policies............................ 20
5.05. Confidentiality.............................................. 20
5.06. Transactions Affecting the Shares............................ 21
ARTICLE VI. COVENANTS OF BUYER........................................... 21
6.01. Confidentiality.............................................. 21
6.02. Access to Information........................................ 22
ARTICLE VII. COVENANTS OF ALL PARTIES..................................... 22
7.01. Further Assurances........................................... 22
7.02. Certain Filings.............................................. 22
7.03. Public Announcements......................................... 23
7.04. Administration of Accounts................................... 23
7.05. Taxes and Section 338(h)(10) Election........................ 23
ARTICLE VIII. CONDITIONS TO CLOSING........................................ 25
8.01. Conditions to Obligation of Buyer............................ 25
8.02. Conditions to Obligation of Shareholders..................... 27
ARTICLE IX. INDEMNIFICATION.............................................. 28
9.01. Agreement to Indemnify....................................... 28
9.02. Survival of Representation and Warranties.................... 29
9.03. Claims for Indemnification................................... 30
9.04. Defense of Claims............................................ 31
ARTICLE X. TERMINATION.................................................. 32
10.01. Grounds for Termination...................................... 32
10.02. Effect of Termination........................................ 33
10.03. Payment of Deposit........................................... 33
ARTICLE XI. MISCELLANEOUS................................................ 33
11.01. Notices...................................................... 33
11.02. Amendments; No Waivers....................................... 35
11.03. Expenses..................................................... 35
11.04. Successors and Assigns....................................... 35
11.05. Governing Law................................................ 35
11.06. Counterparts; Effectiveness.................................. 35
11.07. Entire Agreement............................................. 35
11.08. Captions..................................................... 35
11.09. Severability................................................. 36
11.10. Construction................................................. 36
11.11. Arbitration of Claims........................................ 36
11.12. Cumulative Remedies.......................................... 37
11.13. Third Party Beneficiaries.................................... 37
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DEFINED TERMS
"1996 Balance Sheet"................................Section 3.09...............8
"AAA Rules".....................................Section 11.11(a)..............36
"Allocation Statement"......................Section 7.05(b)(iii)..............24
"Annual Statements".................................Section 3.09...............8
"ATC"...................................................Preamble...............1
"BJW"...................................................Preamble...............1
"Business"..............................................Recitals...............1
"Buyer Indemnitees"..............................Section 9.01(a)..............28
"Buyer".................................................Preamble...............1
"Closing Date"...................................Section 2.02(a)...............6
"Closing"........................................Section 2.02(a)...............6
"CLW"...................................................Preamble...............1
"Common Stock"..........................................Recitals...............1
"Deposit Holder".................................Section 2.02(c)...............6
"Distributions"..................................Section 3.09(h)...............9
"Encumbrances"...................................Section 3.10(a)...............9
"Financial Statements"..............................Section 3.09...............8
"Insurance Policies"................................Section 3.23..............15
"Intellectual Property Rights"...................Section 3.20(a)..............14
"Interim Statements"................................Section 3.09...............8
"Leased Real Property"...........................Section 3.11(a)...............9
"Leases".........................................Section 3.10(b)...............9
"Outside Date"..................................Section 10.01(f)..............33
"Permits"........................................Section 3.15(a)..............12
"Personal Property Leases".......................Section 3.10(b)...............9
"Purchase Price"....................................Section 2.01...............5
"Real Property Leases"...........................Section 3.10(b)...............9
"Repco".................................................Preamble...............1
"Required Consents"..............................Section 3.15(b)..............12
"Required Contractual Consent"...................Section 3.15(b)..............12
"Required Governmental Approval".................Section 3.15(b)..............12
"RJW"...................................................Preamble...............1
"S corporation"..................................Section 3.23(k)..............16
"Scheduled Contracts"............................Section 3.14(a)..............11
"Section 338(h)(10) Elections"................Section 7.05(b)(i)..............23
"Share Encumbrances".............................Section 3.01(a)...............6
"Shareholder Indemnitees"........................Section 9.01(b)..............29
"Shareholders"..........................................Preamble...............1
"Shares"................................................Recitals...............1
"SJW"...................................................Preamble...............1
"Subsequent Material Contract"...............Section 5.01(b)(iv)..............18
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EXHIBITS
Exhibit A...................................Ownership of Shares..1, 6, 7, 24, 34
Exhibit B.....................................Annual Statements................8
Exhibit C..............................Noncompetition Agreement...............27
Exhibit D..........Opinion of Counsel to Repco and Shareholders...............27
Exhibit E.....................................San Antonio Lease...............27
Exhibit F.........................................Houston Lease...............27
Exhibit G.........................................Orlando Lease...............27
Exhibit H..........................................Dallas Lease...............27
Exhibit I................Opinion of Gibson, Dunn & Crutcher LLP...............28
SCHEDULES
Schedule 1.01(a)................................Permitted Liens................4
Schedule 3.01(a).............................Share Encumbrances............6, 21
Schedule 3.02........................................Agreements............6, 21
Schedule 3.03......................Qualification to do Business................7
Schedule 3.06(b)........................Shares Held in Treasury................7
Schedule 3.07.......................Governmental Authorizations................7
Schedule 3.10........................Absence of Certain Changes................8
Schedule 3.11(a)...........................Leased Real Property................9
Schedule 3.11(b).......................Personal Property Leases................9
Schedule 3.11(c)............................Land-Use Regulation...............10
Schedule 3.12........................................Affiliates...............10
Schedule 3.13(i)....................................Inventories...............10
Schedule 3.14........................................Litigation...........10, 18
Schedule 3.15(a)............................Scheduled Contracts...............11
Schedule 3.15(b)................Non-Binding Scheduled Contracts...........11, 12
Schedule 3.15(c)................Primary Customers and Suppliers...............11
Schedule 3.16(a)........................................Permits...............12
Schedule 3.16(b)..............................Required Consents...............12
Schedule 3.17...................Compliance with Applicable Laws...........12, 19
Schedule 3.18(a).................Benefit Plans and Arrangements...............12
Schedule 3.18(f)...............................Accrued Benefits...............12
Schedule 3.19......................Labor and Employment Matters...............13
Schedule 3.20(a)..........................Intellectual Property...............14
Schedule 3.20(b).........Proceedings Applicable to Intellectual
Property...............14
Schedule 3.20(c)......Ownership of Intellectual Property Rights...............14
Schedule 3.22(a)..........................Environmental Permits...............14
Schedule 3.22(b).......................Environmental Compliance...............15
Schedule 3.22(c)..Continuing Compliance with Environmental Laws...............15
Schedule 3.23................................Insurance Policies...............15
Schedule 3.24(k)....................S Corporation Election Date...............16
Schedule 3.24.......................................Tax Matters...............15
Schedule 3.27....................................Long-Term Debt...............16
Schedule 5.01(b)(v)........................Capital Expenditures...............19
Schedule 5.01(b)(vii).............................Distributions...............19
Schedule 7.05(b)(iii).......Section 338(b)(10) Election Payable
Amount Calculation Example...............24
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") dated as of
January 31, 1997 is by and among S. Jay Wilemon, an individual ("SJW"), Ricki
J. Wilemon, an individual ("RJW"), Bradley J. Wilemon, an individual ("BJW"),
Corby L. Wilemon, an individual ("CLW" and collectively with SJW, RJW and
BJW, "Shareholders" and individually, each a "Shareholder"), Replacement &
Exchange Parts Co., Inc., a Texas corporation ("Repco"), Aftermarket
Technology Corp., a Delaware corporation ("ATC"), and Repco Acquisition
Corp., a Delaware corporation ("Buyer").
R E C I T A L S
WHEREAS, Repco is engaged in the production, sourcing, distribution
and sale of automotive, light truck and heavy duty truck component parts (the
"Business");
WHEREAS, each Shareholder owns the number of the issued and
outstanding shares (collectively the "Shares") of Repco's Common Stock, $1.00
par value per share (the "Common Stock"), set forth opposite such
Shareholder's name on EXHIBIT A hereto, which Shares in the aggregate
represent all of the issued and outstanding shares of Repco's capital stock;
and
WHEREAS, Buyer, which is a wholly owned subsidiary of ATC, desires
to purchase and Shareholders desire to sell the Shares on the terms and
conditions set forth herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants and agreements hereinafter set forth,
the parties hereto agree as follows.
ARTICLE I
DEFINITIONS
1.01 DEFINITIONS. The following terms, as used herein, have the
following meanings:
"AFFILIATE" means, with respect to any Person, any Person directly
or indirectly controlling, controlled by or under direct or indirect common
control with such other Person. Without limiting the generality of the
foregoing, after the Closing Date the Affiliates of Buyer shall include Repco.
"APPLICABLE LAW" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule,
administrative interpretation, regulation, policy, guidance, order, writ,
injunction, directive, judgment, decree or other requirement of any
Governmental Authority applicable to such Person or any of its Affiliates or
Plan Affiliates or any of their respective properties, assets, officers,
directors, employees, consultants or agents (in connection with such
officer's, director's, employee's, consultant's or agent's activities on
behalf of such Person or any of its Affiliates or Plan Affiliates).
"ASSOCIATE" or "ASSOCIATED WITH" means, when used to indicate a
relationship with any Person, (a) any other Person of which such Person is an
officer or partner or is, directly or indirectly, the beneficial owner of ten
percent or more of any class of equity securities issued by such other
Person,
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(b) any trust or other estate in which such Person has a substantial
beneficial interest or as to which such Person serves as trustee or in a
similar fiduciary capacity, and (c) any relative or spouse of such Person, or
any relative of such spouse who has the same home as such Person or who is a
director or officer of such Person or any Affiliate thereof.
"BENEFIT ARRANGEMENT" means any material benefit arrangement that
is not an Employee Benefit Plan, including, without limitation, (i) each
material employment or consulting agreement, (ii) each arrangement providing
for material insurance coverage for employees or workers' compensation
benefits, (iii) each material incentive bonus or deferred bonus arrangement,
(iv) each arrangement providing material termination allowance, severance or
similar benefits, (v) each material equity compensation plan, (vi) each
material deferred compensation plan and (vii) each material compensation
policy and practice maintained by Repco or any ERISA Affiliate of Repco
covering the employees, former employees, directors and former directors of
Repco and the beneficiaries of any of them.
"BENEFIT PLAN" means an Employee Benefit Plan or Benefit Arrangement.
"BUSINESS DAY" means a day other than a Saturday, Sunday or other day
on which commercial banks in Los Angeles, California are authorized or required
by law to close.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONTRACTS" means all contracts, agreements, options, leases,
licenses, sales and purchase order, commitments and other instruments of any
kind, whether written or oral, to which Repco is a party on the Closing Date,
including the Scheduled Contracts and the Subsequent Material Contracts.
"DAMAGES" means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities, judgments,
awards, fines, sanctions, penalties, charges and amounts paid in settlement
net of insurance proceeds actually received, including without limitation (i)
interest on cash disbursements in respect of any of the foregoing at the
Reference Rate in effect from time to time, compounded quarterly, from the
date each such cash disbursement is made until the Person incurring the same
shall have been indemnified in respect thereof and (ii) reasonable costs,
fees and expenses of attorneys, accountants and other agents of such Person.
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan, as defined
in Section 3(3) of ERISA, that is sponsored or contributed to by Repco or any
ERISA Affiliate thereof covering employees or former employees of Repco.
"EMPLOYEE PENSION BENEFIT PLAN" means any employee pension benefit
plan, as defined in Section 3(2) of ERISA, that is subject to Title IV of
ERISA, including a Multiemployer Plan.
"ENVIRONMENTAL LAWS" means all Applicable Laws relating to toxic
torts, Hazardous Substances, occupational health and safety, or the
environment including, without limitation, (i) all requirements pertaining to
reporting, licensing, permitting, controlling, investigating or remediating
emissions, discharges, releases or threatened releases of Hazardous
Substances, chemical substances, pollutants, contaminants or toxic
substances, materials or wastes, whether solid, liquid or gaseous in nature,
into the air, surface water, groundwater or land, (ii) all requirements
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances, chemical
substances, pollutants, contaminants or toxic substances, materials or
wastes, whether solid, liquid or gaseous in nature; and (iii) the Resource
Conservation and Recovery Act ("RCRA"), the
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Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
the Clean Air Act, the Water Pollution Control Act, the Safe Drinking Water Act,
the Toxic Substance Control Act ("TSCA") and all requirements promulgated
pursuant to any of these or analogous state or local statutes.
"ENVIRONMENTAL LIABILITIES" means Liabilities of a Person that arise
under any Environmental Law.
"EQUIPMENT" means all machinery, equipment, furniture, office
equipment, communications equipment, vehicles, storage tanks, spare and
replacement parts, fuel and other tangible property (and interests in any of
the foregoing) of Repco.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" of any Person means any other Person that,
together with such Person as of the relevant measuring date under ERISA, was
or is required to be treated as a single employer under Section 414(b), (c),
(m) or (o) of the Code.
"GAAP" means generally accepted accounting principles in the United
States applied on a consistent basis.
"GOVERNMENTAL AUTHORITY" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory
organization, commission, tribunal or organization or any regulatory,
administrative or other agency, or any political or other subdivision,
department or branch of any of the foregoing.
"GROUP HEALTH PLAN" means any group health plan, as defined in
Section 5000(b)(1) of the Code.
"HAZARDOUS SUBSTANCE" means any substance or material: (i) the
presence of which in, at or about the air, surface water, groundwater, soil,
land, or any facility requires investigation or remediation under any
Environmental Law; or (ii) that is defined as a "hazardous waste" or
"hazardous substance" under any Environmental Law; or (iii) that is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic or
mutagenic or otherwise hazardous and is regulated by any Governmental
Authority having or asserting legal, regulatory, judicial, administrative or
other authority over Repco; or (iv) the presence of which causes a nuisance
or other tortious condition under any Applicable Law or any Environmental Law
to adjacent properties or poses a hazard to the health or safety of Persons;
or (v) the presence of which on adjacent properties constitutes a trespass or
other tortious condition by Repco; or (vi) without limitation, that contains
gasoline, diesel fuel or other petroleum hydrocarbons, polychlorinated
biphenols (PCBs) or asbestos.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"INDEMNIFYING PARTY" means: (1) Shareholders when any Buyer
Indemnitee is asserting a claim under Sections 9.01(a) or 11.11 or (2) Buyer
or ATC when any Shareholder Indemnitee is asserting a claim under Sections
9.01(b) or 11.11.
"INDEMNITEE" means: (1) each of ATC, Buyer and their Affiliates
with respect to any claim for which any Shareholder is an Indemnifying Party
under Sections 9.01(a) or 11.11; or
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(2) Shareholders and their Affiliates with respect to claims for which ATC or
Buyer is an Indemnifying Party under Sections 9.01(b) or 11.11.
"INVENTORY" means all items of inventory notwithstanding how
classified in the financial records of Repco, including all raw materials,
work-in-process, finished goods, supplies, spare parts, samples, cores and
stores of Repco.
"IRS" means the Internal Revenue Service.
"KNOWLEDGE" means, with respect to any corporation, all things
known to the executive officers of such corporation.
"LIABILITY" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether
known or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, whether
or not the same is required to be accrued on the financial statements of such
Person and whether or not the same is disclosed on any schedule to this
Agreement.
"LIEN" means, with respect to any asset, any mortgage, title defect
or objection, lien, pledge, charge, security interest, hypothecation,
restriction, encumbrance or charge of any kind in respect of such asset.
"MATERIAL ADVERSE EFFECT" means a change in, or effect on, the
operations, affairs, prospects, financial condition, results of operations,
assets, Liabilities, reserves or any other aspect of Repco or the Business
that results in a material adverse effect on, or a material adverse change
in, Repco or the Business taken as a whole.
"MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in
Section 3(37) and 4001(a)(3) of ERISA.
"PERMITTED LIENS" means (i) Liens for Taxes or governmental
assessments, charges or claims the payment of which is not yet due; (ii)
statutory Liens of landlords and Liens of carriers, warehousemen, mechanics,
materialmen and other similar Persons and other Liens imposed by Applicable
Law incurred in the ordinary course of business for sums not yet delinquent;
(iii) Liens relating to deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types
of social security or to secure the performance of leases, trade contracts or
other similar agreements; (iv) Liens securing executory obligations under any
Lease that constitutes an "operating lease" under GAAP; and (v) other Liens
set forth on SCHEDULE 1.01(a) hereto; PROVIDED, HOWEVER, that, with respect
to each of clauses (i) through (v), to the extent that any such Encumbrance
or Lien arose prior to the date of the 1996 Balance Sheet and relates to, or
secures the payment of, a Liability that is required to be accrued under
GAAP, such Encumbrance or Lien shall not be a Permitted Lien unless adequate
accruals for such Liability have been established therefor on such 1996
Balance Sheet in conformity with GAAP. Notwithstanding the foregoing, no
Lien arising under the Code or ERISA with respect to the operation,
termination, restoration or funding of any Benefit Plan sponsored by,
maintained by or contributed to by Repco or any of its ERISA Affiliates or
arising in connection with any excise tax or penalty tax with respect to such
Benefit Plan shall be a Permitted Lien.
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"PERSON" means an individual, corporation, partnership, association,
trust, estate or other entity or organization, including a Governmental
Authority.
"PLAN AFFILIATE" means, with respect to any Person, any Benefit
Plan sponsored by, maintained by or contributed to by such Person, and with
respect to any Benefit Plan, any Person sponsoring, maintaining or
contributing to such Benefit Plan.
"PROCEEDINGS" means any action, suit, hearing, arbitration,
proceeding (public or private) or governmental investigation that is brought
by or against any Governmental Authority or any other Person.
"PROHIBITED TRANSACTION" means a transaction that is prohibited
under Section 4975 of the Code or Section 406 of ERISA and not exempt under
Section 4975 of the Code or Section 408 of ERISA, respectively.
"REFERENCE RATE" means the per annum rate of interest publicly
announced from time to time by Bank of America, N.T. & S.A. as its prime rate
(or reference rate). Any change in the Reference Rate shall take effect at
the opening of business on the day specified in the public announcement of
such change.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation
as to which more than 10% of the outstanding stock having ordinary voting
rights or power (and excluding stock having voting rights only upon the
occurrence of a contingency unless and until such contingency occurs and such
rights may be exercised) is owned or controlled, directly or indirectly, by
such Person and/or by one or more of such Person's Subsidiaries, and (ii) any
partnership, joint venture or other similar relationship between such Person
(or any Subsidiary thereof) and any other Person (whether pursuant to a
written agreement or otherwise).
"TAX" means all taxes imposed of any nature including federal,
state, local or foreign net income tax, alternative or add-on minimum tax,
profits or excess profits tax, franchise tax, gross income, adjusted gross
income or gross receipts tax, employment related tax (including employee
withholding or employer payroll tax, FICA or FUTA), real or personal property
tax or ad valorem tax, sales or use tax, excise tax, stamp tax or duty, any
withholding or back up withholding tax, value added tax, severance tax,
prohibited transaction tax, premiums tax, occupation tax, together with any
interest or any penalty, addition to tax or additional amount imposed by any
governmental authority (domestic or foreign) responsible for the imposition
of any such tax.
"TAX RETURN" means all returns, reports, forms or other information
required to be filed with respect to any Tax.
ARTICLE II
PURCHASE AND SALE
2.01 PURCHASE OF SHARES FROM SHAREHOLDERS. On the terms and subject
to the conditions set forth herein, at the Closing each Shareholder shall sell,
transfer, convey, assign and deliver to Buyer, free and clear of all Share
Encumbrances, and Buyer shall purchase, acquire and accept from each
Shareholder, all the Shares owned by such Shareholder. At the Closing, each
Shareholder shall deliver to Buyer certificates evidencing the Shares owned by
such Shareholder duly endorsed for transfer and such other instruments as may
be reasonably requested by Buyer to transfer full legal and beneficial
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ownership of the Shares to Buyer, free and clear of all Share Encumbrances.
Buyer shall pay $9,250,000 (the "Purchase Price") for the Shares in
accordance with the terms of Section 2.02.
2.02 CLOSING.
(a) The closing (the "Closing") of the transactions contemplated
by this Agreement shall take place at the offices of Gibson, Dunn & Crutcher
LLP, 1717 Main Street, Suite 5400, Dallas, Texas 75201-7390 on the date on which
the last of the conditions to Closing set forth in Sections 8.01 and 8.02 have
been satisfied or waived by the party or parties entitled to waive the same or
such other date as to which Buyer and Shareholders may agree (the "Closing
Date"); PROVIDED, HOWEVER, that, as provided in Section 10.01(f), Shareholders
or Buyer may terminate this Agreement if the Closing shall not have been
consummated by the Outside Date.
(b) At the Closing, Buyer shall pay the Purchase Price, other
than the portion thereof paid pursuant to Section 2.02(c), to Shareholders in
cash by wire transfer of immediately available funds to a bank account or
bank accounts designated in writing by Shareholders. The payment shall be
allocated among Shareholders as set forth in EXHIBIT A, taking into account
the portion of the Purchase Price paid to SJW pursuant to Section 2.02(c).
(c) Prior to the date hereof, Buyer has deposited with Dines,
Wilson & Gross, P.C., counsel to Repco (the "Deposit Holder"), cash in the
amount of $50,000. At the Closing, the parties shall cause Deposit Holder to
pay the $50,000 in cash to SJW by wire transfer. Such payment shall,
together with the payment called for by Section 2.02(b), constitute payment
in full of the Purchase Price.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated herein, Repco and Shareholders jointly
and severally represent and warrant to Buyer as follows:
3.01 REPRESENTATIONS REGARDING THE SHARES.
(a) Each Shareholder has good and marketable title to the Shares
that are to be transferred to Buyer by such Shareholder pursuant hereto as set
forth in EXHIBIT A free and clear of any and all covenants, conditions,
restrictions, voting trust arrangements, rights of first refusal, options, Liens
and adverse claims or rights whatsoever (collectively, "Share Encumbrances"),
except as set forth in SCHEDULE 3.01(a).
(b) Each Shareholder has the full right, power and authority
to enter into this Agreement and to transfer, convey and sell to Buyer at the
Closing the Shares to be sold to Buyer by such Shareholder hereunder, and
upon consummation of the purchase contemplated hereby, Buyer will acquire
from such Shareholder good and marketable title to the Shares to be sold to
Buyer by such Shareholder, free and clear of all Share Encumbrances
(including without limitation those set forth in SCHEDULE 3.01(a)).
3.02 SHAREHOLDER PROHIBITIONS. No Shareholder is a party to,
subject to or bound by any judgment, order, writ, prohibition, injunction or
decree of any court or other governmental body, or,
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except as set forth on SCHEDULE 3.02, any agreement, that would prevent the
execution or delivery of this Agreement by such Shareholder to Buyer or the
transfer, conveyance and sale of the Shares to be sold by such Shareholder to
Buyer pursuant to the terms hereof.
3.03 CORPORATE EXISTENCE AND POWER. Repco is a corporation duly
organized and validly existing and in good standing under the laws of the
state of its incorporation, and has all corporate power and all governmental
licenses, authorizations, consents and approvals required to carry on the
Business as now conducted and to own and operate its assets as now owned and
operated except where, in the aggregate, the failure to have such licenses,
authorizations, consents and approvals would not have a Material Adverse
Effect. Repco is not required to be qualified to conduct the Business in any
state other than Florida. Except as set forth in SCHEDULE 3.03, Repco is
duly qualified to do business and is in good standing in the state of Florida.
3.04 AUTHORIZATION. The execution, delivery and performance by
Repco and Shareholders of this Agreement and the consummation thereby of the
transactions contemplated hereby are within each of Repco's and Shareholders'
powers and have been duly authorized by all necessary corporate action on the
part of Repco. This Agreement has been duly and validly executed by Repco
and Shareholders and constitutes the legal, valid and binding agreement of
Repco and Shareholders, enforceable against each of them in accordance with
its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and subject to general principles of equity.
3.05 SUBSIDIARIES. Repco does not have any Subsidiaries.
3.06 CAPITAL STOCK.
(a) The authorized capital stock of Repco consists solely of
100,000 shares of Common Stock, 10,520 shares of which are issued and
outstanding on the date hereof.
(b) All such issued and outstanding shares of Common Stock
have been validly authorized and issued and are validly outstanding, fully
paid and nonassessable. The Shares represent all of the issued and
outstanding shares of Repco's capital stock and are held as set forth on
EXHIBIT A. Except as set forth in SCHEDULE 3.06(b), Repco does not hold any
of the issued and outstanding shares of Common Stock in the treasury of
Repco, and there are not, and on the Closing Date there will not be,
outstanding (i) any options, warrants or other rights to purchase from Repco
or any of the Shareholders any capital stock of Repco, (ii) any securities
convertible into or exchangeable for shares of such stock or (iii) any other
commitments of any kind for the issuance of additional shares of capital
stock or options, warrants or other securities of Repco.
3.07 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Repco and Shareholders of this Agreement require no action by,
consent or approval of, or filing with, any Governmental Authority other than
any actions, consents, approvals or filings (i) otherwise expressly referred
to in this Agreement, (ii) set forth on SCHEDULE 3.07 OR 3.16(b) or (iii) the
failure of which to perform, obtain or make would not have a Material Adverse
Effect or make the consummation of the transactions contemplated hereby
unduly burdensome or illegal. To the Knowledge of Repco and Shareholders,
there are no facts relating to the identity or circumstances of Repco or
Shareholders that would prevent or materially delay obtaining any of the
Required Consents.
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3.08 NON-CONTRAVENTION. The execution, delivery and performance by
Repco and Shareholders of this Agreement do not and will not (a) contravene
or conflict with the Articles of Incorporation or Bylaws of Repco, true and
correct copies of which have been delivered to Buyer by Repco, (b) assuming
receipt of the Required Consents, contravene or conflict with or constitute a
violation of any provision of any Applicable Law binding upon or applicable
to Repco, Shareholders, the Business or the Shares, (c) assuming receipt of
the Required Consents, constitute a default under or give rise to any right
of termination, cancellation or acceleration of, or to a loss of any benefit
to which Repco is entitled, under any material Contract or any Permit or
similar authorization relating to Repco, the Business or the Shares by which
Repco, the Business or the Shares may be bound, or (d) result in the creation
or imposition of any Lien on any assets of Repco, other than Permitted Liens,
or any Share Encumbrance.
3.09 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. Attached
hereto as EXHIBIT B are true and complete copies of the balance sheet and
related statement of operations and retained earnings for Repco for the
fiscal years ended June 30, 1994, 1995 and 1996 (the "Annual Statements") and
the balance sheets and statements of operations for each of July, August,
September and October of 1996 (collectively, the "Interim Statements" and,
together with the Annual Statements, the "Financial Statements"). The June
30, 1996 balance sheet is referred to herein as the "1996 Balance Sheet."
Each of the Financial Statements (i) has been prepared based on the books and
records of Repco in accordance with GAAP (except for the omission of footnote
disclosure required by GAAP in the case of Interim Financials and except that
the Interim Financials omit and are subject to normal year-end accruals) and
Repco's normal accounting practices, consistent with past practice and with
each other, and present fairly the financial condition and results of
operations of Repco as of the dates or periods indicated.
3.10 ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE
3.10, since the date of the 1996 Balance Sheet, the Business has been
conducted in the ordinary course, and there has not been:
(a) any event, occurrence, development or state of
circumstances or facts or change in Repco or the Business (including any
damage, destruction or other casualty loss (but excluding any event,
occurrence, development or state of circumstances or facts or change
resulting from changes in general economic conditions or the conduct of the
business of any third party)) affecting Repco or the Business that has had or
that may be reasonably expected to have, either alone or together with all
such events, occurrences, developments, states of circumstances or facts or
changes, a Material Adverse Effect;
(b) (i) any incurrence, assumption or guarantee of any
indebtedness for borrowed money by Repco, (ii) any incurrence of any
Liability relating to a documentary or standby letter of credit by Repco or
(iii) any change in any Liability other than in the ordinary course of
business, or (iv) any incurrence of any other Liability by Repco, other than
in the ordinary course of business;
(c) any creation, assumption or sufferance of the existence
of any Lien on any of Repco's assets, other than Permitted Liens;
(d) any transaction or commitment made, or any Contract
entered into, by Repco, or any waiver, amendment, termination or cancellation
of any Contract by Repco, or any relinquishment of any rights thereunder by
Repco, or of any other right or debt owed to Repco, other than in each such
case actions taken in the ordinary course of business consistent with past
practice;
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(e) except for actions taken in the ordinary course of
business consistent with the past practice of Repco that are not, in the
aggregate, material, any (i) grant of any severance, continuation or
termination pay to any director, officer, stockholder or employee of Repco or
any Associate of any of the foregoing, (ii) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to any
such existing agreement) with any director, officer, stockholder or employee
of Repco or any Associate of any of the foregoing, (iii) increase in benefits
payable or potentially payable under any severance, continuation or
termination pay policies or employment agreements with any director, officer,
stockholder or employee of Repco or any Associate of any of the foregoing,
(iv) increase in compensation, bonus or other benefits payable or potentially
payable to directors, officers, stockholders or employees of Repco or any
Associate of any of the foregoing, (v) change in the terms of any bonus,
pension, insurance, health or other Benefit Plan of Repco, or (vi)
representation of Repco to any employee or former employee of Repco that
Buyer would assume, continue to maintain or implement any Benefit Plan after
the Closing Date;
(f) any loan to or guarantee or assumption of any loan or
obligation on behalf of any stockholder, director, officer or employee of
Repco or to any Associate of any of the foregoing, except travel advances
occurring in the ordinary course of business consistent with past practice;
(g) any material change by Repco in its accounting
principles, methods or practices or in the manner it keeps its books and
records or any material change by Repco of its current practices with regards
to sales, receivables, payables or accrued expenses that would affect the
timing of collection of receivables or the payment of payables;
(h) any distribution, dividend, bonus or other payment by
Repco to any officer, director, stockholder or Affiliate of Repco or any of
their respective Affiliates or Associates, (collectively, "Distributions");
(i) the entering into of any Contract or other arrangement
between Repco and any officer, director, stockholder or Affiliate of Repco of
any of their respective Affiliates or Associates; or
(j) any payment, discharge or satisfaction of any Liabilities
of Repco, other than payments, discharges or satisfactions in the ordinary
course of business.
3.11 PROPERTIES; LEASES; TANGIBLE ASSETS.
(a) Repco does not own any real property and does not have a
leasehold interest in any real property other than the real property
identified on SCHEDULE 3.11(a) (the "Leased Real Property"), which
constitutes all of the real property used in the Business. Repco has a good
and valid leasehold interest in the Leased Real Property and the property
subject to the Personal Property Leases and has good and valid title to its
other tangible assets. Repco holds title to each such property and asset
free and clear of all Liens, adverse claims, easements, rights of way,
servitudes, zoning or building restrictions, or any other rights of others or
other adverse interests of any kind, including chattel mortgages, conditional
sales contracts, collateral security arrangements and other title or interest
retention arrangements (collectively, "Encumbrances"), except the Leases and
Permitted Liens.
(b) SCHEDULE 3.11(b) sets forth a true and complete list of
all personal property leases or licenses (i) to which Repco is a party or by
which Repco is bound and (ii) that provide
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for annual payments by Repco in excess of $10,000 or that contain other
affirmative material obligations that cannot be terminated by Repco within 30
days (the "Personal Property Leases") and all leases or licenses of Leased
Real Property that provide for annual payments by Repco in excess of $10,000
or that cannot be terminated by Repco within 30 days (the "Real Property
Leases" and collectively with the Personal Property Leases, the "Leases")
entered into in connection with the Business. With respect to the Leases,
except as set forth on SCHEDULE 3.11(b), there exist no defaults by Repco,
or, to the Knowledge of Repco or Shareholders, any default or threatened
default by any lessor or third party thereunder, that has affected or could
reasonably be expected to materially affect the rights and privileges
thereunder of Repco. Assuming the Required Consents are obtained, all Leases
may be assigned, transferred and conveyed to Buyer without default, penalty
or modification thereof.
(c) Except as disclosed in SCHEDULE 3.11(c) or SCHEDULE
3.22(c), Repco has not received notice of any pending zoning or other
land-use regulation proceedings or any proposed change in any Applicable Laws
that could reasonably be expected to detrimentally affect the use or
operation of any Leased Real Property, nor has Repco received notice of any
special assessment proceedings affecting the Leased Real Property, or applied
for any change to the zoning or land use status of the Leased Real Property.
3.12 AFFILIATES. Except as set forth in SCHEDULE 3.12, no
Shareholder, Affiliate of Repco or any officer or director of Repco (or any
immediate family member of any such Shareholder, officer or director):
(a) now has or at any time subsequent to December 31, 1993,
had, either directly or indirectly, an equity or debt interest in any Person
which furnishes or sells or during such period furnished or sold services or
products to Repco or purchases or during such period purchased from Repco any
goods or services, or otherwise does or during such period did business with
Repco of a material nature or amount; PROVIDED, HOWEVER, that no Shareholder
nor any of Repco's officers and directors or other Affiliates shall be deemed
to have such an interest solely by virtue of the ownership of less than five
percent of the outstanding voting stock or debt securities of any publicly
held company, the stock or debt securities of which are traded on a national
stock exchange or quoted on the National Association of Securities Dealers
Automated Quotation System; or
(b) now is or at any time subsequent to December 31, 1993,
was, a party to any contract, commitment or agreement to which Repco is or
during such period was a party or under which Repco is or was obligated or
bound or to which any of its properties may be or may have been subject.
3.13 INVENTORIES. Subject to any reserve therefor that is included
in the 1996 Balance Sheet and except as disclosed in SCHEDULE 3.13(i); all
Inventories of Repco (a) have been acquired or manufactured in the ordinary
course of business, in accordance with Repco's normal inventory practices;
(b) are of a quality usable (including processing into merchantable finished
inventories for sale in the ordinary course of business), free of any
material defect or deficiency; (c) are in merchantable and undamaged
condition and meet customer specifications; and (d) are not obsolete.
3.14 LITIGATION. Except as disclosed on SCHEDULE 3.14, (i) there
are no Proceedings (x) pending against Repco, Shareholders or the Shares, (y)
to the Knowledge of Repco or Shareholders, pending against any Person (other
than Repco or Shareholders) affecting Repco, Shareholders, the Shares or the
Business or which seek to enjoin or rescind the transactions contemplated by
this Agreement or otherwise prevent Repco or Shareholders from complying with
the terms and provisions of this
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Agreement, or (z) to the Knowledge of Repco or Shareholders, threatened against
any Person (including Repco or Shareholders) affecting Repco, the Business,
Shareholders or the Shares or which seek to enjoin or rescind the transactions
contemplated by this Agreement or otherwise prevent Repco or Shareholders from
complying with the terms and provisions of this Agreement; and (ii) there are
no existing orders, judgments or decrees of any Governmental Authority affecting
any of Repco, the Business, Shareholders or the Shares.
3.15 CONTRACTS.
(a) SCHEDULE 3.15(a) sets forth a complete list of the
following contracts, commitments and obligations (whether written or oral) of
Repco (collectively with the Leases and the Employment Agreements, the
"Scheduled Contracts"):
(i) each Contract between Repco and (A) each present or
former director, officer or other member of management or other personnel of
Repco, (B) any supplier of services or products to Repco whose dollar volume
of sales to Repco exceeded $10,000 in the fiscal year ended June 30, 1996 or
is expected to exceed $10,000 in the fiscal year ending June 30, 1997, and
(C) any Person in which the aggregate payments made to Repco under such
Contract exceeded $10,000 in the fiscal year ended June 30, 1996 or is
expected to exceed $10,000 in the fiscal year ending June 30, 1997;
(ii) each other agreement or arrangement of Repco that (y)
requires the payment or incurrence of Liabilities or the rendering of
services by Repco, subsequent to the date of this Agreement of more than
$10,000 and (z) cannot be terminated by Repco within 30 days;
(iii) all Contracts relating to, and evidences of or
guarantees of, or providing security for, indebtedness for borrowed money or
the deferred purchase price of property (whether incurred, assumed,
guaranteed or secured by any asset);
(iv) all partnership, joint venture or other similar
Contracts, arrangements or agreements;
(v) to the extent that any of the following provide for
annual payments by Repco in excess of $10,000 and cannot be terminated by
Repco within 30 days, all license, distribution, commission, marketing,
agent, franchise, technical assistance or similar agreements relating to or
providing for the marketing and/or sale of the products or services to which
Repco is a party or by which Repco is otherwise bound; and
(vi) all other contracts, commitments and obligations that
are not in the ordinary course of the Business.
(b) Except as disclosed in SCHEDULE 3.15(b), each Scheduled
Contract and Subsequent Material Contract is a legal, valid and binding
obligation of Repco and, to the Knowledge of Repco and Shareholders, each
other party thereto, enforceable (except to the extent such enforceability
may be limited by bankruptcy, equity and creditors' rights generally) against
Repco and, to the Knowledge of Repco and Shareholders, each such other party
in accordance with its terms, and neither Repco nor, to the Knowledge of
Repco and Shareholders, any other party thereto is in material default or has
failed to perform any material obligation thereunder. Complete and correct
copies of each Scheduled Contract have been delivered to Buyer.
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(c) SCHEDULE 3.15(c) shall be delivered to Buyer at the
Closing, and shall set forth a list (by name, address and persons to contact)
of the 10 largest customers of and the five primary vendors providing
services to Repco for each of the fiscal years ended June 30, 1996 and the
three-month period ended December 31, 1996 together with the approximate
dollar amount of sales or services provided to Repco during said periods and
a summary description of the services provided by such vendors.
3.16 PERMITS; REQUIRED CONSENTS.
(a) SCHEDULE 3.16(a) sets forth all material approvals,
authorizations, certificates, consents, licenses, orders and permits or other
similar authorizations of all Governmental Authorities and all other Persons
necessary for the operation of the Business or Repco's assets or affecting or
relating in any way to the Business or such assets (the "Permits").
(b) SCHEDULE 3.16(b) lists (i) each governmental or other
registration, filing, application, notice, transfer, consent, approval,
order, qualification and waiver (each, a "Required Governmental Approval")
required under Applicable Law to be obtained by Repco or Shareholders by
virtue of the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby to avoid the loss of any material Permit
or otherwise, and (ii) each Scheduled Contract with respect to which the
consent of the other party or parties thereto must be obtained by Repco or
Shareholders by virtue of the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby to avoid the invalidity
of the transfer of such Contract, the termination thereof, a breach or
default thereunder or any other change or modification to the terms thereof
(each, a "Required Contractual Consent" and collectively with the Required
Governmental Approvals, the "Required Consents"). Except as set forth in
SCHEDULE 3.16(a) OR (b), each Permit is valid and in full force and effect in
all material respects and, assuming the related Required Consents have been
obtained prior to the Closing Date, none of the Permits will be terminated or
become terminable or impaired in any material respect as a result of the
transactions contemplated hereby.
3.17 COMPLIANCE WITH APPLICABLE LAWS. Except as set forth in
SCHEDULE 3.17, the operation of the Business has not violated or infringed,
and does not violate or infringe, any material Applicable Law, or any order,
writ, injunction or decree of any Governmental Authority.
3.18 EMPLOYMENT AGREEMENTS; CHANGE IN CONTROL; AND EMPLOYEE BENEFITS.
(a) SCHEDULE 3.18(a) sets forth all Benefit Plans and Benefit
Arrangements of Repco used in connection with the Business. Repco has made
true and correct copies of all governing instruments and related agreements
pertaining to such Benefit Plans and Benefit Arrangements available to Buyer.
Repco has made available to Buyer a copy of the three (3) most recently
filed Federal Form 5500 series and accountant's opinion, if applicable, for
each Employee Benefit Plan.
(b) Neither Repco nor any ERISA Affiliates of Repco sponsors
or has ever sponsored, maintained, contributed to, or incurred an obligation
to contribute to, any Employee Pension Benefit Plan.
(c) Except as set forth in SCHEDULE 3.18(f), no individual
shall accrue or receive additional benefits, service or accelerated rights to
payments of benefits under any Benefit Plan, including the right to receive
any parachute payment, as defined in Section 280G of the Code, or become
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entitled to severance, termination allowance or similar payments as a direct
result of the transactions contemplated by this Agreement.
(d) No Employee Benefit Plan has participated in, engaged in
or been a party to any non-exempt Prohibited Transaction, and neither Repco
nor any ERISA Affiliates of Repco has had asserted against it any claim for
taxes under Chapter 43 of Subtitle D of the Code and Sections 5000 of the
Code, or for penalties under ERISA Section 502(c), (i) or (l), with respect
to any Employee Benefit Plan nor, to the Knowledge of Repco or Shareholders,
is there a basis for any such claim. No officer, director or employee of
Repco has committed a material breach of any responsibility or obligation
imposed upon fiduciaries by Title I of ERISA with respect to any Employee
Benefit Plan.
(e) Other than routine claims for benefits, there is no claim
pending or to the Knowledge of Repco threatened, involving any Benefit Plan
by any Person against such plan or Repco or any ERISA Affiliate. There is no
pending or to the Knowledge of Repco or Shareholders threatened proceeding
involving any Employee Benefit Plan before the IRS, the United States
Department of Labor or any other Governmental Authority.
(f) Except as set forth on SCHEDULE 3.18(f), each Benefit
Plan has at all times prior hereto been maintained in all material respects,
by its terms and in operation, in accordance with ERISA and the Code
including, but not limited to, all applicable reporting and disclosure
requirements. Repco and each ERISA Affiliate have made full and timely
payment of all amounts required to be contributed under the terms of each
Benefit Plan and Applicable Law or required to be paid as expenses under such
Benefit Plan, and Repco and each ERISA Affiliate shall continue to do so
through the Closing.
(g) With respect to any Group Health Plans maintained by
Repco or its ERISA Affiliate, whether or not for the benefit of Repco and its
ERISA Affiliate, Repco and its ERISA Affiliates have complied in all material
respects with the provisions of Part 6 of Title I of ERISA and Section 4980B
of the Code. Repco is not obligated to provide health care benefits of any
kind to its retired employees pursuant to any Employee Benefit Plan,
including without limitation any Group Health Plan, or pursuant to any
agreement or understanding.
3.19 LABOR AND EMPLOYMENT MATTERS.
(a) Except as set forth on SCHEDULE 3.19, no collective
bargaining agreement exists that is binding on Repco and, except as described
on SCHEDULE 3.19, no petition has been filed or proceedings instituted by an
employee or group of employees with any labor relations board seeking
recognition of a bargaining representative. SCHEDULE 3.19 describes any
organizational effort currently being made or, to the Knowledge of Repco or
Shareholders, threatened by or on behalf of any labor union to organize any
employees of Repco.
(b) Except as set forth on SCHEDULE 3.19, (i) there is no
labor strike, dispute, slow down or stoppage pending or, to the Knowledge of
Repco or Shareholders, threatened against or directly affecting the Business,
(ii) no grievance or arbitration proceeding arising out of or under any
collective bargaining agreement is pending, and no claims therefor exist; and
(iii) neither Repco nor Shareholders, nor any of their Affiliates has
received any notice or has any Knowledge of any threatened labor or civil
rights dispute, controversy or grievance or any other unfair labor practice
proceeding or breach of contract claim or action with respect to claims of,
or obligations to, any employee or group of employees of Repco.
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(c) Repco and its Affiliates have complied and are currently
complying, in all material respects, in respect of all employees of Repco,
with all Applicable Laws respecting employment and employment practices and
the protection of the health and safety of employees, from whatever source
such law may be derived, including, without limitation, statutes, ordinances,
laws, rules, regulations, policies, standards, judicial or administrative
precedents, judgments, orders, decrees, awards, citations, licenses, official
interpretations and guidelines.
(d) All individuals who are performing or have performed
services for Repco, or any Affiliate thereof and are or were classified by
Repco or any Affiliate as "independent contractors" qualify for such
classification under Section 530 of the Revenue Act of 1978 or Section 1706
of the Tax Reform Act of 1986, as applicable, except for such instances which
are not, in the aggregate, material.
3.20 INTELLECTUAL PROPERTY.
(a) SCHEDULE 3.20(a) sets forth a complete and correct list
of each patent, patent application and docketed invention, trademark, trade
name, trademark or tradename registration or application, copyright or
copyright registration or application for copyright registration, and each
license or licensing agreement for any of the foregoing relating to the
Business or held by Repco (the "Intellectual Property Rights").
(b) Except as disclosed in SCHEDULE 3.20(b), Repco has not
during the three years preceding the date of this Agreement been a party to
any Proceeding, nor to the Knowledge of Repco or Shareholders is any
Proceeding threatened as to which there is a reasonable possibility of a
determination adverse to Repco that involved or may involve a claim of
infringement by any Person (including any Governmental Authority) of any
Intellectual Property Right. Except as disclosed in SCHEDULE 3.20(b), no
Intellectual Property Right is subject to any outstanding order, judgment,
decree, stipulation or agreement restricting the use thereof by Repco, or
restricting the licensing thereof by Repco to any Person. The use of the
Intellectual Property Rights does not conflict with, infringe upon or violate
any patent, patent license, patent application, trademark, tradename,
trademark or tradename registration, copyright, copyright registration,
service mark, brand mark or brand name or any pending application relating
thereto, or any trade secret, know-how, programs or processes, or any similar
rights, of any Person.
(c) Except as set forth in SCHEDULE 3.20(c), Repco either
owns the entire right, title and interest in, to and under, or has acquired
in connection with the acquisition of Equipment or Inventory an express or
implied license to use, any and all inventions, processes, computer programs,
know-how, formulae, trade secrets, patents, chip designs, mask works,
trademarks, tradenames, brand names and copyrights which are necessary for
the conduct of the Business in the manner that the Business has heretofore
been conducted. No other inventions, processes, computer programs, know-how,
formulae, trade secrets, patents, chip designs, mask works, trademarks,
tradenames, brand names, copyrights, licenses or applications for any of the
foregoing are necessary for the unimpaired continued operation of the
Business in the manner that the Business has heretofore been conducted.
3.21 ADVISORY FEES. There is no investment banker, broker, finder
or other intermediary or advisor that has been retained by or is authorized
to act on behalf of Repco, Shareholders or their Affiliates who might be
entitled to any fee, commission or reimbursement of expenses from Buyer or
any of its Affiliates or any of their respective Associates upon consummation
of the transactions contemplated by this Agreement.
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3.22 ENVIRONMENTAL COMPLIANCE.
(a) Except as disclosed in SCHEDULE 3.22(a), Repco has
obtained all approvals, authorizations, certificates, consents, licenses,
orders and permits or other similar authorizations of all Governmental
Authorities, or from any other Person, that are required under any
Environmental Law. SCHEDULE 3.22(a) sets forth all permits, licenses and
other authorizations issued under any Environmental Law to Repco.
(b) Except as disclosed in SCHEDULE 3.22(b), Repco is in
compliance in all respects with all terms and conditions of all approvals,
authorizations, certificates, consents, licenses, orders and permits or other
similar authorizations of all Governmental Authorities (and all other
Persons) required under all Environmental Laws and is also in compliance in
all respects with all other limitations, restrictions, conditions, standards,
requirements, schedules and timetables required or imposed under all
Environmental Laws.
(c) Except as disclosed in SCHEDULE 3.22(c), Shareholders
know of no past or present events, conditions, circumstances, activities,
practices, incidents, actions, omissions or plans relating to or in any way
affecting Repco or the Business that could reasonably be expected to prevent,
or make more expensive, continued compliance with any Environmental Law by
Buyer or Repco after the Closing, or that may give rise to any Environmental
Liability, or otherwise form the basis of any claim, action, demand, suit,
Proceeding, hearing, study or investigation (i) under any Environmental Law,
(ii) based on or related to the manufacture, processing, distribution, use,
treatment, storage (including without limitation underground storage tanks),
disposal, transport or handling, or the emission, discharge, release or
threatened release of any Hazardous Substance, or (iii) resulting from
exposure to workplace hazards.
3.23 INSURANCE. SCHEDULE 3.23 sets forth a complete and correct
list of all material insurance policies of any kind currently in force with
respect to Repco (the "Insurance Policies"), including all "occurrence based"
liability policies regardless of the periods to which they relate. SCHEDULE
3.23 sets forth for each Insurance Policy the type of coverage, the name of
the insureds, the insurer, the premium, the expiration date, the period to
which it relates, the deductibles and loss retention amounts and the amounts
of coverage. The Insurance Policies insure Repco and the Business in
reasonably sufficient amounts against all risks usually insured against by
Persons operating similar businesses or properties in comparable localities.
3.24 TAX MATTERS. Except as set forth on SCHEDULE 3.24:
(a) Repco has timely filed all Tax Returns required to have
been filed by it, and has paid or accrued all Taxes due to any taxing
authority (whether or not shown on any Tax Return) with respect to all
taxable periods ending on or prior to the Closing Date, or otherwise
attributable to all periods prior to the Closing Date; and all such Tax
Returns are true, correct and complete in all respects. Repco is not
currently the beneficiary of any extension of time within which to file any
Tax Return.
(b) Repco has not received notice that the IRS or any other
taxing authority has asserted against Repco any deficiency in Taxes or claim
for additional Taxes in connection with any tax period. Except for liens
arising from Taxes which are due but not yet payable, there are no liens for
Taxes on any of Repco' assets.
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(c) Repco is not a party to an agreement extending the time
within which to file any Tax Return or extending the statute of limitations
for any period with respect to any Tax to which Repco may be subject. No
claim has ever been made by any Taxing Authority in a jurisdiction in which
Repco does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction.
(d) Repco has withheld and paid over all Taxes required to
have been withheld and paid over in connection with amounts paid or owing to
any employee, independent contractor, creditor, stockholder, or other third
party;
(e) Repco has not been included in any consolidated, combined
or unitary Tax Return provided for under the laws of the United States, any
state or locality with respect to Taxes for any taxable period for which the
statute of limitations has not expired.
(f) Repco has not made any payments, is not obligated to make
any payments, and is not a party to any agreement that under certain
circumstances could require it to make any payments, that are not deductible
under Section 280G of the Code.
(g) None of the assets of Repco constitutes tax-exempt bond
financed property or tax-exempt use property, with the meaning of Section 168
of the Code. Repco is not a party to any "safe harbor lease" that is subject
to the provisions of Section 168(f)(8) of the Internal Revenue Code as in
effect prior to the Tax Reform Act of 1986.
(h) Repco is not a party to any joint venture, partnership or
other arrangement that is treated as a partnership for federal income Tax
purposes.
(i) Repco does not have any liability for Taxes of any person
(1) under Section 1.1502-6 of the Treasury Regulations (or any similar
provision of state, local or foreign law), (2) as a transferee or successor,
(3) by contract or (4) otherwise.
(j) Repco is not a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during any
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(k) Repco made and continues to have in effect a valid and
timely election to be treated as an "S corporation" under Section 1361 ET.
SEQ. of the Code (and any corresponding provisions of all applicable state
and local income tax laws) for all taxable years since the date set forth in
SCHEDULE 3.24(k) (which is the date Repco elected to be treated as an S
corporation), and Repco will be treated as an S corporation under the Code
and all such state and local tax laws for all taxable years or portions
thereof ending on or prior to the Closing Date.
(l) Repco does not have any unpaid liability for Taxes under
Sections 1363(d), 1374, or 1375 of the Code (or any successor or predecessor
provision) or any similar provision of state or local law for any period on
or prior to or including the Closing Date.
3.25 MATERIAL DISCLOSURES. No statement, representation or
warranty made by Repco or Shareholders in this Agreement or in any
certificate, statement, list, schedule or other document furnished or to be
furnished to Buyer hereunder contains, or when so furnished will contain, any
untrue statement of a material fact, or fails to state, or when so furnished
will fail to state, a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they are
made, not misleading.
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3.26 SUFFICIENCY OF AND TITLE TO ASSETS. Repco has, and as of the
Closing Date will have, title to, or the right to use, all assets, whether
tangible or intangible, necessary to operate the Business as a going concern
with all operations of the Business unimpaired in any material respect
immediately after the Closing Date, with the exception of a security interest
owned by Comerica Bank-Texas.
3.27 LONG-TERM DEBT. Except as set forth on SCHEDULE 3.27 or the
1996 Balance Sheet, Repco has, and as of the Closing Date will have, no
long-term debt.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ATC AND BUYER
As an inducement to Shareholders to enter into this Agreement and
to consummate the transactions contemplated herein, ATC and Buyer hereby
jointly and severally represent and warrant to Shareholders that:
4.01 ORGANIZATION AND EXISTENCE. Each of ATC and Buyer is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware and has all corporate power and authority
to enter into this Agreement and consummate the transactions contemplated
hereby. Each of ATC and Buyer is duly qualified to do business as a foreign
corporation in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification
necessary to carry on its business as now conducted, except for those
jurisdictions where the failure to be so qualified has not been, and may not
reasonably be expected to be, material.
4.02 CORPORATE AUTHORIZATION. The execution, delivery and
performance by each of ATC and Buyer of this Agreement and the consummation
by it of the transactions contemplated hereby are within its corporate powers
and have been duly authorized by all necessary corporate action on its part.
This Agreement constitutes a legal, valid and binding agreement of each of
ATC and Buyer, enforceable in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally and subject to general
principles of equity.
4.03 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by each of ATC and Buyer of this Agreement require no action by,
consent or approval of, or filing with, any Governmental Authority other than
as set forth in this Agreement.
4.04 NON-CONTRAVENTION. The execution, delivery and performance by
each of ATC and Buyer of this Agreement does not (a) contravene or conflict
with its Certificate of Incorporation or Bylaws, or (b) assuming compliance
with the matters referred to in Section 4.03, contravene or conflict with or
constitute a violation of any provision of any Applicable Law binding upon or
applicable to it.
4.05 ADVISORY FEES. Except for Aurora Capital Partners L.P. (whose
fees and expenses will be paid by Buyer), there is no investment banker,
broker, finder or other intermediary or advisor that has been retained by or
is authorized to act on behalf of ATC or Buyer who might be entitled to any
fee, commission or reimbursement of expenses from Repco or any of its
Affiliates upon consummation of the transactions contemplated by this
Agreement.
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4.06 LITIGATION. There is no Proceeding pending against, or to the
Knowledge of ATC or Buyer, threatened against or affecting, ATC or Buyer
before any court or arbitrators or any governmental body, agency or official
that in any matter challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS OF SHAREHOLDERS AND REPCO
5.01 CONDUCT OF THE BUSINESS; DISTRIBUTIONS. From the date hereof
until the Closing Date, Repco shall, and Shareholders shall cause Repco to,
conduct the Business in the ordinary course and in substantially in the same
manner as it has prior to the date of this Agreement and agrees, with respect
to the Business and other than in the ordinary course of business, not to
enter into any material agreements or take any other significant actions
without the prior written consent of Buyer, which shall not be unreasonably
withheld. Repco shall use its reasonable efforts to preserve intact the
Business and the business organizations and relationships and goodwill of
Repco with third parties and keep available the services of the present
officers, employees, agents and other personnel of Repco. Without limiting
the generality of the foregoing and except as otherwise expressly provided in
this Agreement, from the date hereof until the Closing Date:
(a) Repco will, and Shareholders will cause Repco to:
(i) (A) maintain the assets of Repco in the ordinary
course of business consistent with past practice in good operating order and
condition, reasonable wear and tear excepted, (B) promptly repair, restore or
replace any assets of Repco in the ordinary course of business consistent
with past practice, (C) upon any damage, destruction or loss to any of the
assets of Repco, apply any and all insurance proceeds received with respect
thereto to the prompt repair, replacement and restoration thereof to the
condition of the assets of Repco before such event, (D) use its best efforts
to obtain, prior to the Closing Date, all Required Consents, and (E) take all
actions necessary to be in compliance with, and to maintain the effectiveness
of, all material Permits;
(ii) comply with all material Applicable Laws;
(iii) promptly notify Buyer in writing of (A) any action,
event, condition or circumstance, or group of actions, events, conditions or
circumstances, that results in, or could reasonably be expected to result in,
a Material Adverse Effect, other than changes in general economic conditions,
(B) the commencement of any by or against Repco or Shareholders, or Repco or
Shareholders becoming aware of any threat, claim, action, suit, inquiry,
proceeding, notice of violation, demand letter, subpoena, government audit or
disallowance that could reasonably be expected to result in a Proceeding, and
(C) the occurrence of any breach by Repco or Shareholders of any
representation or warranty, or any covenant or agreement, contained in this
Agreement.
(b) without Buyer's prior consent, Repco will not, and
Shareholders shall not permit Repco to, do or agree to do any of the
following:
(i) purchase or otherwise acquire assets from any other
Person other than in the ordinary course of the Business;
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(ii) sell, assign, lease, license, transfer or otherwise
dispose of, or mortgage, pledge or encumber (other than with Permitted
Liens), any of the assets of Repco, including Leased Real Property, except in
the ordinary course of the Business;
(iii) enter any agreement or arrangement that requires or
allows payment, acceleration of payment or incurrence of Liabilities, or the
rendering of services by Repco outside the ordinary course of the Business;
(iv) amend or modify in any material respect or terminate
any Scheduled Contract or any other Contract entered into by Repco after the
date hereof which, if in existence on the date hereof, would be required to
be set forth in the SCHEDULE 3.14 as a Scheduled Contract (each, a
"Subsequent Material Contract");
(v) make or commit to make any capital expenditure, or
group of related capital expenditures, in excess of $25,000, other than (A)
capital expenditures set forth on SCHEDULE 5.01(b)(v) and (B) capital
expenditures expressly required under any Scheduled Contract;
(vi) enter into or commit or propose to enter into any
Subsequent Material Contract;
(vii) except as set forth on SCHEDULE 5.01(b)(vii), make
any distribution, dividend, bonus or other payment to any officer, director,
stockholder or Affiliate of Repco or any of their respective Affiliates or
Associates except for (A) salary, benefit or lease payments in the ordinary
course and due or to become due under arrangements in existence prior to
January 1, 1996 and (B) distributions to Shareholders in amounts not to
exceed their federal and state income tax liability attributable to the
operations of Repco;
(viii) (A) create, incur, assume, or guarantee any
indebtedness for borrowed money or (B) incur any Liability relating to a
documentary or standby letter of credit, other than in each such case
referred to in this clause (viii) in the ordinary course of the Business
where the aggregate dollar amount of all of the foregoing by Repco does not
exceed $10,000; and
(ix) (A) increase the rate or terms of compensation
payable or to become payable to its employees except in the ordinary course
of business, (B) pay or agree to pay any pension, retirement allowance or
other employee benefit not provided for by any Employee Plan, Benefit
Arrangement or Employment Agreement set forth in the Schedules hereto, (C)
commit itself to any additional pension, profit sharing, bonus, incentive,
deferred compensation, stock purchase, stock option, stock appreciation
right, group insurance, severance pay, continuation pay, termination pay,
retirement or other employee benefit plan, agreement or arrangement, or
increase the rate or terms of any Employee Plan or Benefit Arrangement, (D)
enter into any employment agreement with or for the benefit of any Person, or
(E) increase the rate of compensation under or otherwise change the terms of
any Employment Agreement set forth in SCHEDULE 3.17(a); and
(x) repay any long-term debt other than scheduled
payments that are required to be made during such period so as not to be in
default with respect to such indebtedness.
5.02 ACCESS TO INFORMATION. Subject to compliance with Applicable
Laws, from the date hereof until the Closing Date, Repco will, and
Shareholders will cause Repco to, and Shareholders will, promptly: (a) give
Buyer and its counsel, financial advisors, auditors and other authorized
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representatives reasonable access to the offices, properties, books and
records relating to Repco or the Business upon reasonable prior notice, (b)
furnish to Buyer and its counsel, financial advisors, auditors and other
authorized representatives such information relating to Repco or the Business
as Buyer may reasonably request and (c) instruct the directors, officers,
employees, counsel, auditors and financial advisors of Repco and Shareholders
to cooperate with Buyer and its counsel, financial advisors, auditors and
other authorized representatives in their investigation of Repco or the
Business. Such investigation shall include, but shall not be limited to:
(i) A business and financial performance review of the
Business;
(ii) A review of the financial statements and tax
returns of Repco;
(iii) An environmental review as to the presence and
nature of any hazardous materials in or on any real property owned
or leased by Repco; and
(iv) A standard legal due diligence examination
relating to Repco and the Business.
5.03 COMPLIANCE WITH TERMS OF REQUIRED GOVERNMENTAL APPROVALS AND
REQUIRED CONTRACTUAL CONSENTS. On and after the Closing Date, Shareholders
shall comply at their own expense with all conditions and requirements
affecting Repco set forth in (a) all Required Governmental Approvals as
necessary to keep the same in full force and effect assuming continued
compliance with the terms thereof by Buyer and Repco and (b) all Required
Contractual Consents as necessary to keep the same effective and enforceable
against the Persons giving such Required Contractual Consents assuming
continued compliance with the terms thereof by Buyer and Repco.
5.04 MAINTENANCE OF INSURANCE POLICIES. Between the date hereof
and the Closing Date, Repco shall not, and Shareholders shall cause Repco to
not, and Shareholders shall not, take or fail to take any action if such
action or inaction, as the case may be, would adversely affect the
applicability of any insurance in effect on the date hereof that covers all
or any part of the assets of Repco or the Business with respect to the period
of time ending on the Closing Date.
5.05 CONFIDENTIALITY.
(a) Repco and Shareholders will, and will cause their
representatives to, treat any data and information obtained with respect to
ATC, Buyer or any of their Affiliates from any representative, officer,
director, or employee of ATC or Buyer, or from any books or records of ATC or
Buyer in connection with this Agreement, confidentially and with commercially
reasonable care and discretion, and will not disclose any such information to
third parties; PROVIDED, HOWEVER, that the foregoing shall not apply to (i)
information in the public domain or that becomes public through disclosure by
any party other than Repco, Shareholders or their Affiliates or
representatives, so long as such other party is not in breach of a
confidentiality obligation, (ii) information that is required to be disclosed
by Applicable Law or (iii) information required to be disclosed to obtain any
Required Consents, or (iv) any disclosure of such information in litigation
between the parties hereto in the course of such litigation.
(b) In the event that the Closing fails to take place and
this Agreement is terminated, Repco and Shareholders, upon the written
request of Buyer, will, and will cause their representatives to, promptly
deliver to Buyer any and all documents or other materials furnished by ATC
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or Buyer or any of their Affiliates to Repco or Shareholders in connection
with this Agreement without retaining any copy thereof. In the event of such
request, all other documents, whether analyses, compilations or studies, that
contain or otherwise reflect the information furnished by ATC or Buyer to
Repco or Shareholders, shall be destroyed by Repco and Shareholders or shall
be returned to Buyer, and Repco and Shareholders shall confirm to Buyer in
writing that all such materials have been returned or destroyed. No failure
or delay by Buyer in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any right,
power or privilege hereunder.
(c) The parties hereto recognize and agree that in the event
of a breach of this Section 5.05, money damages would not be an adequate
remedy to ATC, Buyer and their Affiliates for such breach and, even if money
damages were adequate, it would be impossible to ascertain or measure with
any degree of accuracy the damages sustained therefrom. Accordingly, if
there should be a breach or threatened breach of provisions of this Section
5.05, ATC, Buyer and their Affiliates shall be entitled to an injunction
restraining Repco and Shareholders from any breach without showing or proving
actual damage sustained by ATC, Buyer or their Affiliates, as the case may
be. Nothing in the preceding sentence shall limit or otherwise affect any
remedies that ATC, Buyer and their Affiliates may otherwise have under
Applicable Law.
5.06 TRANSACTIONS AFFECTING THE SHARES. From the date hereof until
the Closing Date, Shareholders will:
(a) take all action necessary so that the Share
Encumbrances set forth in SCHEDULE 3.01(a) and the agreements set forth in
SCHEDULE 3.02 are eliminated prior to the Closing Date; and
(b) not (whether voluntarily or involuntarily, and whether
currently or prospectively) sell, transfer or otherwise dispose of any of the
Shares, or create (or permit the creation of) any Share Encumbrance on any of
the Shares.
ARTICLE VI
COVENANTS OF ATC AND BUYER
6.01 CONFIDENTIALITY.
(a) ATC and Buyer will, and will cause their representatives
to, treat any data and information obtained with respect to Repco or
Shareholders from any representative, officer, director or employee of Repco
or Shareholders, or from any books or records of Repco or Shareholders in
connection with this Agreement, confidentially and with commercially
reasonable care and discretion, and will not disclose any such information to
third parties; PROVIDED, HOWEVER, that the foregoing shall not apply to (i)
information in the public domain or that becomes public through disclosure by
any party other than ATC, Buyer or their Affiliates or representatives, so
long as such other party is not in breach of a confidentiality obligation,
(ii) information that is required to be disclosed by Applicable Law, (iii)
information required to be disclosed to obtain any Required Consents; (iv)
any information that is disclosed by ATC, Buyer or their Affiliates to any of
their actual or prospective lenders or investors in connection with financing
the transactions contemplated by this Agreement; or (v) any information that
is disclosed by ATC or Buyer after the Closing shall have occurred; PROVIDED,
HOWEVER, that in the event the Closing has occurred, this Section 6.01(a)
shall cease to be effective with respect to any data and information obtained
with respect to Repco.
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(b) In the event that the Closing fails to take place and
this Agreement is terminated, ATC and Buyer, upon the written request of
Repco, will, and will cause their representatives to, promptly deliver to
Repco any and all documents or other materials furnished by Repco or
Shareholders to ATC or Buyer in connection with this Agreement without
retaining any copy thereof. In event of such request, all other documents,
whether analyses, compilations or studies, that contain or otherwise reflect
the information furnished by Repco or Shareholders to ATC or Buyer, shall be
destroyed by ATC or Buyer or shall be returned to Repco, and Buyer shall
confirm to Repco and Shareholders in writing that all such materials have
been returned or destroyed. No failure or delay by Repco and Shareholders in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other
or further exercise thereof or the exercise of any right, power or privilege
hereunder.
(c) The parties hereto recognize and agree that in the event
of a breach of this Section 6.01, money damages would not be an adequate
remedy to Repco and Shareholders for such breach and, even if money damages
were adequate, it would be impossible to ascertain or measure with any degree
of accuracy the damages sustained by Repco and Shareholders therefrom.
Accordingly, if there should be a breach or threatened breach of provisions
of this Section 6.01, Repco and Shareholders shall be entitled to an
injunction restraining ATC and Buyer from any breach without showing or
proving actual damage sustained by Repco and Shareholders. Nothing in the
preceding sentence shall limit or otherwise affect any remedies that Repco
and Shareholders may otherwise have under Applicable Law.
6.02 ACCESS TO INFORMATION. Subject to compliance with Applicable
Laws, from the Closing Date until December 31, 2001, Repco will, and ATC and
Buyer will cause Repco to, and Buyer will, promptly: (a) furnish to
Shareholders and their counsel, financial advisors, auditors and other
authorized representatives such information relating to Repco or the Business
as Shareholders may reasonably request in connection with the preparation of
Tax Returns and (b) instruct the directors, officers, employees, counsel,
auditors and financial advisors of Repco, ATC and Buyer to cooperate in all
reasonable respects with Shareholders and their counsel, financial advisors,
auditors and other authorized representatives in connection with the
preparation of Tax Returns. After the Closing Date, in the event that Repco
intends to destroy any documents that contain or otherwise reflect
information in connection with the Business for any period prior to the
Closing Date, Repco will provide written notice to Shareholders of its
intention to destroy such documents and provide Shareholders with the
opportunity to request that such documents instead be delivered to
Shareholders. Any documents delivered to Shareholders pursuant to the
preceding sentence shall be held by Shareholders pursuant to Section 5.05.
ARTICLE VII
COVENANTS OF ALL PARTIES
7.01 FURTHER ASSURANCES. Subject to the terms and conditions of
this Agreement, each party will use all reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary
or desirable under Applicable Law to consummate the transactions contemplated
by this Agreement. ATC, Buyer, Repco and Shareholders agree to execute and
deliver such other documents, certificates, agreements and other writings and
to take such other actions as may be reasonably necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated
by this Agreement. Following the Closing, Buyer shall cause Repco to make
the employees and records of Repco reasonably available to Shareholders, at
no charge to Shareholders other than for out of pocket expenses incurred by
Buyer or Repco for items such as photocopying or travel, for the purposes of
providing accounting information reasonably required by Shareholders,
providing
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testimony or information in connection with any legal proceeding or for any
other appropriate purpose arising out of Shareholders' ownership of the
Shares.
7.02 CERTAIN FILINGS. The parties hereto shall cooperate with one
another in determining whether any action by or in respect of, or filing
with, any Governmental Authority is required or reasonably appropriate, or
any action, consent, approval or waiver from any party to any Contract is
required or reasonably appropriate, in connection with the consummation of
the transactions contemplated by this Agreement. Subject to the terms and
conditions of this Agreement, in taking such actions or making any such
filings, the parties hereto shall furnish information required in connection
therewith and seek timely to obtain any such actions, consents, approvals or
waivers. Without limiting the foregoing, the parties hereto shall each
promptly complete and file all reports and forms, and respond to all requests
or further requests for additional information, if any, as may be required or
authorized under the HSR Act.
7.03 PUBLIC ANNOUNCEMENTS. The parties hereto agree that they will
not make any disclosures about the existence or contents of this Agreement or
the transactions contemplated hereby or cause to be publicized in any manner
whatsoever, by way of interviews, responses to questions or inquiries, press
releases or otherwise, any aspect of this Agreement or the transactions
contemplated hereby without prior written notice to and approval of the other
parties hereto, unless such party reasonably concludes that such release of
information is required by Applicable Law and the parties hereto cannot reach
agreement upon a mutually acceptable form of release. Notwithstanding the
foregoing, the parties may, on a confidential basis, advise and release
information regarding the existence and content of this Agreement or the
transactions contemplated hereby to their respective Affiliates or any of
their agents, accountants, attorneys and prospective lenders or investors in
connection with or related to the transactions contemplated by this
Agreement, including without limitation the financing of such transactions.
7.04 ADMINISTRATION OF ACCOUNTS. All payments and reimbursements
received by Shareholders after the Closing Date from any third party in the
name of or to Repco shall be held by Shareholders in trust for the benefit of
Repco and, immediately upon receipt by Shareholders of any such payment or
reimbursement, Shareholders shall pay, or cause to be paid, over to Repco the
amount of such payment or reimbursement without right of set off.
7.05 TAXES AND SECTION 338(h)(10) ELECTION.
(a) All sales, value added, use, registration, stamp and
similar Taxes imposed in connection with the sale of the Shares shall be
borne by Buyer and all transfer and similar Taxes imposed in connection with
the sale of the Shares shall be borne by Shareholders.
(b)(i) If Buyer, in Buyer's sole discretion, shall request,
Shareholders shall (A) join Buyer in making the election permitted to be made
under Section 338(h)(10) of the Code and any corresponding or similar
provisions of state or local law (the "Section 338(h)(10) Elections"), (B)
cooperate with Buyer to take all actions necessary to effect and preserve
timely such Section 338(h)(10) Elections in accordance with Treasury
Regulation Section 1.338(h)(10) (and any comparable provisions of state and
local law and any successor provisions thereto) and (C) take no position
inconsistent with treating the purchase of the capital stock of Repco as a
Section 338(h)(10) Election. Shareholders shall assist Buyer in the
preparation of Form 8023-A and any accompanying schedules required under
Section 338(h)(10) of the Code and any corresponding or similar provisions of
state or local law and Shareholders agree that Buyer may make any
determination or election required or
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permitted to be made in connection with the Section 338(h)(10) Elections.
Shareholders shall execute Form 8023-A and any accompanying schedules and
such other documents or forms at the Closing or at such other time as Buyer
may request or as required by the Code in order to effectuate the Section
338(h)(10) Elections. Buyer and Shareholders shall file all Tax Returns in a
manner consistent with the Section 338(h)(10) Elections, Form 8023-A and any
accompanying schedules and such other documents and forms as are requested by
Buyer to effectuate the Section 338(h)(10) Elections.
(ii) Except as provided in Section 7.05(b)(iii),
Shareholders will severally pay any federal Tax attributable to the making of
the Section 338(h)(10) Elections and will severally indemnify Buyer and Repco
for any Damages arising out of the failure to pay such Tax. Except as
provided in Section 7.05(b)(iii), Shareholders will also pay any state, local
or foreign Tax (and severally indemnify Buyer and Repco against any Damages
arising out of any failure to pay such Tax) attributable to the Section
338(h)(10) Elections or to an election or deemed election under state, local
or foreign law similar to the election under Section 338(g) of the Code which
results from the making of the Section 338(h)(10) Elections. Shareholders
shall severally indemnify and hold harmless Buyer and its Affiliates in
respect of Damages resulting from the Section 338(h)(10) Elections being
finally determined, or agreed by the parties, to be invalid or unavailable
due to Repco not being treated as an S corporation. All payments pursuant to
this Section 7.05(b)(ii) shall be allocated among Shareholders as set forth
in EXHIBIT A.
(iii) Buyer agrees that if the Section 338(h)(10)
Elections are made, Buyer will pay Shareholders an amount equal to the excess
of (i) all federal and state income taxes payable solely as a result of the
transactions contemplated by this Agreement including the making of the
Section 338(h)(10) Elections and an additional amount necessary to make the
Shareholders whole as a result of the taxes created by this Section
7.05(b)(iii) over (ii) the federal and state income taxes that would be
payable by Shareholders solely as a result of the transactions contemplated
by this Agreement, assuming no Section 338(h)(10) Elections are made,
determined in a manner consistent with the Company's prior tax accounting
practice. An example of the additional amount necessary to make the
Shareholders whole is included on Schedule 7.05(b)(iii). The amount payable
pursuant to this Section 7.05(b)(iii) shall be allocated among Shareholders
as set forth in EXHIBIT A.
(iv) Prior to the Closing or as soon thereafter as
practicable, Buyer and Shareholders shall agree upon the allocation of the
purchase price among the assets of Repco for purposes of preparing a properly
completed Form 8023-A and any comparable form required under state or local
law and shall set forth such allocation on a statement (the "Allocation
Statement"). Buyer and Shareholders shall report the tax consequences of the
transactions contemplated by this Agreement in a manner consistent with the
Allocation Statement, and shall not take any position inconsistent therewith.
(v) In the event that there are any adjustments by a
taxing authority with respect to periods ending on or before the Closing Date
that are finally determined or agreed to by Shareholders and Buyer and that
result in an increase in the amount originally computed under Section
7.05(b)(iii), Buyer shall pay to Shareholders the amount of such increase.
In the event that there are any adjustments by a taxing authority with
respect to periods ending on or before the Closing Date that are finally
determined or agreed to by Shareholders and Buyer and such changes result in
a decrease in the amount originally computed under Section 7.05(b)(iii),
Shareholders shall repay to Buyer the amount of such decrease.
(c) (i) Shareholders shall have the exclusive authority and
obligation and shall be responsible for the correct and timely filing of all
Tax Returns of Repco with respect to
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income taxes imposed by the Federal government or any state or political
subdivision thereof for all periods ending on or prior to the Closing Date,
and, after the Closing Date, Repco shall, and Buyer shall cause Repco to,
provide reasonable access to such books and records of Repco as necessary to
prepare such Tax Returns which may be reviewed and copied at Shareholder's
sole expense. Such authority shall include, but not be limited to, the
determination of the manner in which any items of income, gain, deduction,
loss or credit arising out of the income, properties and operations of Repco
shall be reported or disclosed on such Tax Returns; PROVIDED, HOWEVER, that
Shareholders shall provide Buyers with draft Tax Returns of Repco with
respect to income taxes imposed by the Federal government or any state or any
political subdivision thereof for the short taxable year ending on the
Closing Date at least 20 days prior to the due date including extensions for
filing such Tax Returns. In the event Buyer has any objection to any items
set forth on such draft Tax Returns, Buyer and Shareholders agree to consult
and resolve in good faith any such objections, it being understood and agreed
that in the absence of any such resolution, any and all such objections shall
be resolved in a manner consistent with the past practices with respect to
such items.
(ii) Buyer shall have the exclusive authority and
obligation and shall be responsible for the correct and timely filing of all
Tax Returns of Repco for any taxable period beginning after the Closing Date.
Such authority shall include, but not be limited to, the determination of
the manner in which any items of income, gain, deduction, loss or credit
arising out of the income, properties and operations of Repco shall be
reported or disclosed on such Tax Returns.
(d) (i) After giving effect to all payments in respect
thereof which have been made prior to the Closing Date, Shareholders shall be
responsible and liable for the timely payment of any unpaid Taxes imposed on
or with respect to the properties, income and operations of Repco for all
periods ending on or prior to the Closing Date.
(ii) Buyer shall be responsible and liable for the timely
payment (y) of all Taxes imposed on or with respect to the properties, income
and operations of Repco for all periods beginning after the Closing Date.
(e) (i) Shareholders, at their sole expense, shall have the
exclusive authority to represent Repco before any taxing authority or any
court regarding the Tax consequences of the operations of Repco for all
periods ending on or prior to the Closing Date; PROVIDED, HOWEVER, that
Shareholders shall not enter into any settlement of any contest or otherwise
compromise any issue that affects or may affect the Tax Liability of Repco
for any period beginning after the Closing Date without the prior written
consent of Buyer which shall not be unreasonably withheld. Shareholders
shall keep Buyer fully and timely informed with respect to the commencement,
status and nature of any administrative or judicial proceedings involving any
Tax Liability of Repco for all taxable periods. Repco will, and ATC and
Buyer will cause Repco to, promptly furnish to Shareholders and their
counsel, financial advisors, auditors, and other authorized representatives
such information relating to Repco or the Business as Shareholders may
reasonably request in connection with any notice or examination before any
taxing authority or any court regarding the tax consequences of the
operations of Repco for all periods ending on or prior to the Closing Date.
(ii) Except as provided in Section 7.05(e)(i), Buyer
shall have the sole right to control any audit or examination by any taxing
authority, initial any claim for refund or amend any Tax Return, and contest,
resolve and defend against any assessment for additional Taxes, notice of Tax
deficiency or other adjustment of Taxes of, or relating to, Repco; PROVIDED,
HOWEVER, that with respect to any audit or examination by any taxing
authority regarding the Tax consequences of the
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operations of Repco for all periods ending on or prior to the Closing Date,
Repco shall, and Buyer shall cause Repco to, notify Shareholders immediately
upon receiving any notice of any type, whether by phone, fax, or mail, that
an audit is pending or will be started for any period prior to the Closing
Date. In addition, Buyer will notify the IRS that Shareholders have
exclusive authority to represent Repco for the periods prior to the Closing
Date. This applies to all notices, notices of examination, or any type of
other assessment or action taken by the IRS or any other taxing authority
that would affect the periods ending on or prior to Closing Date.
ARTICLE VIII
CONDITIONS TO CLOSING
8.01 CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the transactions contemplated hereby is subject to the
satisfaction of each of the following conditions:
(a) (i) Repco and Shareholders shall each have performed and
satisfied in all material respects each of its material obligations hereunder
required to be performed and satisfied by any of them on or prior to the
Closing Date, (ii) each of the representations and warranties of Repco and
Shareholders contained in this Agreement shall have been true and correct in
all material respects when made and shall contain no misstatement or omission
that would make any such representation or warranty materially misleading
when made and shall be true and correct in all material respects, and shall
not contain any misstatement or omission that would make any such
representation or warranty materially misleading, at and as of the Closing
Date with the same force and effect as if made as of the Closing Date and
(iii) Buyer shall have received certificates signed by Shareholders and a
duly authorized executive officer of Repco to the foregoing effect and to the
effect that to the Knowledge of such officer the conditions specified within
this Section 8.01 have been satisfied.
(b) All Required Governmental Approvals for the transactions
contemplated by this Agreement shall have been obtained without the
imposition of any conditions that are or would become applicable to Repco,
the Business, the Shares or Buyer (or any of its Affiliates) after the
Closing that Buyer in good faith reasonably determines would be materially
burdensome upon Repco, the Business, the Shares or Buyer (or any of its
Affiliates) or their respective businesses substantially as such businesses
have been conducted prior to the Closing Date or as said businesses, as of
the date hereof, would be reasonably expected to be conducted after the
Closing Date. All such Required Governmental Approvals shall be in effect,
and no Proceedings shall have been instituted or threatened by any
Governmental Authority with respect thereto as to which, in Buyer's good
faith opinion, there is a material risk of a determination that would
terminate the effectiveness of, or otherwise materially and adversely modify
the terms of, any such Required Governmental Approval; all applicable waiting
periods with respect to such Required Governmental Approvals shall have
expired; and all conditions and requirements prescribed by Applicable Law or
by such Required Governmental Approvals to be satisfied on or prior to the
Closing Date shall have been satisfied to the extent necessary such that all
such Required Governmental Approvals are, and will remain, in full force and
effect assuming continued compliance with the terms thereof after the Closing.
(c) All Required Contractual Consents shall have been
obtained without the imposition of any conditions that are or would become
applicable to Repco, the Business, the Shares, Buyer or any of its Affiliates
after the Closing that Buyer in good faith determines would be materially
burdensome upon Repco, the Business, the Shares, Buyer or any of its
Affiliates or their respective businesses substantially as such businesses
have been conducted prior to the Closing Date or as said
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businesses, as of the date hereof, would be reasonably expected to be
conducted after the Closing Date. All such Required Contractual Consents
(and with respect to the Subsequent Material Contracts, such other consents
as may be required) shall be in effect. All conditions and requirements
prescribed by any Required Contractual Consent (or any such other consent) to
be satisfied on or prior to the Closing Date shall have been satisfied to the
extent necessary such that all such Required Contractual Consents (and all
such other consents) are effective and enforceable, and will remain effective
and enforceable against the Persons giving such Required Contractual Consents
(and such other consents) assuming continued compliance with the terms
thereof.
(d) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable Law. No
temporary restraining order, preliminary or permanent injunction, cease and
desist order or other order issued by any court of competent jurisdiction or
any competent Governmental Authority or any other legal restraint or
prohibition preventing the transfer and exchange contemplated hereby or the
consummation of the Closing, or imposing Damages in respect thereto, shall be
in effect, and there shall be no pending or threatened actions or proceedings
by any Governmental Authority (or determinations by any Governmental
Authority) or by any other Person (i) challenging or in any manner seeking to
restrict or prohibit the transfer and exchange contemplated hereby or the
consummation of the Closing, or to impose conditions that Buyer in good faith
determines would be materially burdensome upon Repco, the Business, the
Shares, Buyer or any of its Affiliates or their respective businesses
substantially as such businesses have been conducted prior to the Closing
Date or as said businesses, as of the date hereof, would be reasonably
expected to be conducted after the Closing Date.
(e) Since the date hereof, there shall not have been any
event, occurrence, development or state of circumstances or facts or change
in Repco or the Business (including any damage, destruction or other casualty
loss (but excluding any event, occurrence, development or state of
circumstances or facts or change resulting from changes in general economic
conditions)) affecting Repco or the Business that has had or that may be
reasonably expected to have, either alone or together with all such events,
occurrences, developments, states of circumstances or facts or changes, a
Material Adverse Effect.
(f) SJW shall have executed and delivered to Buyer a
Noncompetition Agreement in substantially the form attached hereto as EXHIBIT C.
(g) Buyer shall have received an opinion of counsel to Repco
and Shareholders in substantially the form attached hereto as EXHIBIT D.
(h) Buyer shall be reasonably satisfied that there has been
no material degradation of the assets of Repco since the completion by Buyer
of its inspection of the assets of Repco.
(i) Wilemon & Enterprises Ltd., as lessor, shall have entered
into operating lease agreements for Repco's facilities in San Antonio,
Houston, Orlando and Dallas in substantially the forms attached hereto as
EXHIBITS E, F, G AND H.
(j) ATC shall have obtained all necessary and appropriate
approvals from its commercial bank lenders so that Buyer may borrow an amount
sufficient to pay the Preliminary Purchase Price.
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(k) As of the Closing Date, there shall exist no Liens on any
assets of Repco, other than Permitted Liens, nor any Share Encumbrances on
the Shares.
8.02 CONDITIONS TO OBLIGATION OF SHAREHOLDERS. The obligation of
Shareholders to consummate the transactions contemplated hereby is subject to
the satisfaction of each of the following conditions:
(a) (i) Buyer shall have performed and satisfied in all
material respects each of its material obligations hereunder required to be
performed and satisfied by it on or prior to the Closing Date, and the
aggregate effect of all failures to perform or satisfy all obligations of
Buyer on or prior to the Closing Date shall not be materially adverse to
Shareholders; (ii) the representations and warranties of ATC and Buyer
contained in this Agreement shall be true, complete and accurate in all
material respects at and as of the Closing Date, as if made at and as of such
date and (iii) Shareholders shall have received a certificate signed by a
duly authorized executive officer of ATC and Buyer to the foregoing effect
and to the effect that to such officer's Knowledge the conditions specified
within this Section 8.02 have been satisfied.
(b) All material Required Governmental Approvals for the
transactions contemplated by this Agreement shall have been obtained without
the imposition of any conditions that are or would become applicable to
Shareholders or any of their respective Affiliates after the Closing that
Shareholders in good faith reasonably determine would be materially
burdensome upon such Person. All such Required Governmental Approvals that
relate to Shareholders' sale of the Shares shall be in effect, and no
Proceedings shall have been instituted or threatened by any Governmental
Authority with respect thereto as to which, in Shareholders' good faith
opinion, there is a material risk of a determination that would terminate the
effectiveness of, or otherwise materially and adversely modify the terms of,
any such Required Governmental Approval. All applicable waiting periods with
respect to such Required Governmental Approvals shall have expired, and all
conditions and requirements prescribed by Applicable Law or by such Required
Governmental Approvals to be satisfied on or prior to the Closing Date shall
have been satisfied to the extent necessary such that all such Required
Governmental Approvals are, and will remain, in full force and effect
assuming continued compliance with the terms thereof after the Closing.
(c) All Required Contractual Consents shall have been
obtained without the imposition of any conditions that are or would become
applicable to Shareholders or any of their respective Affiliates after the
Closing that would be materially burdensome upon such Person. All such
Required Contractual Consents (and with respect to the Subsequent Material
Contracts, such other consents) shall be in effect to the extent that the
failure thereof to be in effect would impose material liability on
Shareholders or their respective Affiliates, and no Proceeding shall have
been instituted or threatened with respect thereto. All conditions and
requirements prescribed by any Required Contractual Consent (or any such
other consent) to be satisfied on or prior to the Closing Date shall have
been satisfied to the extent necessary such that no material Liability will
be imposed on Shareholders or their respective Affiliates.
(d) The sale and transfer contemplated by this Agreement and
the consummation of the Closing shall not violate any Applicable Law. No
temporary restraining order, preliminary or permanent injunction, cease and
desist order or other order issued by any court of competent jurisdiction or
any competent Governmental Authority or any other legal restraint or
prohibition preventing the transfer and exchange contemplated hereby or the
consummation of the Closing, or imposing Damages in respect thereto, shall be
in effect, and there shall be no pending or
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threatened actions or proceedings by any Governmental Authority (or
determinations by any Governmental Authority) or by any other Person
challenging or in any manner seeking to restrict or prohibit the transfer and
exchange contemplated hereby or the consummation of the Closing.
(e) Shareholders shall have received an opinion of counsel
from Gibson, Dunn & Crutcher LLP in substantially the form attached hereto as
EXHIBIT I.
(f) Repco shall have executed and delivered to Wilemon
Enterprises, Inc. the operating leases for Repco's facilities in San Antonio,
Houston, Orlando and Dallas referred to in Section 8.01(i).
ARTICLE IX
INDEMNIFICATION
9.01 AGREEMENT TO INDEMNIFY.
(a) Subject to the limitations provided herein, ATC, Buyer
and their Affiliates (collectively, the "Buyer Indemnitees") shall each be
indemnified and held harmless to the extent set forth in this Article IX on a
joint and several basis by Shareholders in respect of any Damages reasonably
and proximately incurred by any Buyer Indemnitee (i) as a result of any
inaccuracy or misrepresentation in or breach of any representation or
warranty contained in Article III or any certificate delivered pursuant to
Section 8.01, (ii) as a result of any breach of or failure to perform any
covenant, agreement or obligation of Repco or Shareholders in this Agreement,
(iii) in connection with any Environmental Liability that arises from Repco's
operation prior to or on the Closing Date, or from occurrences in or on the
premises occupied, leased, owned or operated by Repco that occurred on or
before the Closing Date or (iv) in connection with any Liability that arises
from the failure by Repco to be duly qualified to do business, and in good
standing, in the state of Florida. The aggregate liability of Shareholders
collectively under this Section 9.01(a) shall not exceed the Purchase Price
and the liability of any Shareholder under this Section 9.01(a) shall not
exceed the portion of the Purchase Price allocated to such Shareholder,
except in the case of Damages due to a Shareholder's fraud or willful
misconduct.
(b) Shareholders and their Affiliates (collectively the
"Shareholder Indemnitees") shall each be indemnified and held harmless to the
extent set forth in this Article IX by ATC and Buyer in respect of any and
all Damages reasonably and proximately incurred by any Shareholder Indemnitee
as a result of (i) any knowing inaccuracy or misrepresentation in or breach
of or failure to perform any representation, warranty, covenant, agreement or
obligation of ATC or Buyer in this Agreement or (ii) Repco's conduct of the
Business after the Closing, including any Environmental Liability that arises
from Repco's operations after the Closing Date, or from occurrences in or on
the premises occupied, leased, owned or operated by Repco that may occur
after the Closing Date and during the period in which Repco conducts the
Business on such premises.
(c) It is not intended by the parties hereto to indemnify or
defend each other from any claim or administrative action which may be
asserted against any or all parties hereto pursuant to any Environmental Law,
unless such claims result from any Environmental Liability caused by, or
originating from, Repco's operation or premises. By way of example and not
limitation, the parties do not intend to indemnify each other against
administrative claims brought by or on behalf of the Environmental Protection
Agency naming as Potentially Responsible Parties all owners and
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operators of real property in the vicinity of a known or suspected
environmental hazard, unless and until such hazard is shown to have
originated from or caused by Repco's premises or operation.
(d) Notwithstanding the foregoing, Buyer Indemnitees may not
seek indemnification hereunder from Shareholders unless and until the claims
in the aggregate exceed $25,000, PROVIDED that if such threshold is exceeded,
Buyer Indemnitees may seek indemnification hereunder for any and all claims.
This Section 9.01(c) shall not apply to indemnification claims relating to
Sections 3.01, 3.06 or 3.21, which will be fully indemnified by Shareholders.
(e) From and after the Closing Date, Repco shall have no
liability to Shareholders for contribution or reimbursement due to, or other
Damages arising out of, liability incurred by Shareholders pursuant to
Section 9.01(a) notwithstanding the fact that the representations and
warranties of Repco and Shareholders in Article III and the covenants of
Repco and Shareholders in Article V are joint and several.
9.02 SURVIVAL OF REPRESENTATION AND WARRANTIES.
(a) Except as hereinafter provided in this Section 9.02, all
representations and warranties of each Indemnifying Party contained herein
and all claims of any Indemnitee in respect of the breach of any
representation or warranty shall survive the Closing and shall expire on the
third anniversary of the Closing Date.
(b) Notwithstanding Section 9.02(a) the representations and
warranties of Shareholders as Indemnifying Parties shall survive the Closing
Date until the expiration of 60 days following any applicable statute of
limitations, including extensions thereof, with respect to: (i) the
inaccuracy or misrepresentation in or breach of any representation or
warranty made by Repco or Shareholders in this Agreement arising out of fraud
or willful misconduct; and (ii) any inaccuracy or misrepresentation in or
breach of any representation or warranty made in any of Sections 3.01, 3.02,
3.04, 3.06, 3.17, 3.22 and 3.24 regardless of whether such inaccuracy or
misrepresentation or breach arises out of fraud or willful misconduct.
(c) Notwithstanding Section 9.02(a), each of the following
representations and warranties of ATC and Buyer as Indemnifying Parties shall
survive the Closing Date until the expiration of 60 days following the
applicable statute of limitations, including extensions thereof, with respect
to: (i) any inaccuracy or misrepresentation in or breach of any
representation or warranty made by ATC or Buyer in this Agreement arising out
of fraud or willful misconduct; and (ii) any inaccuracy or misrepresentation
in or breach of any representation or warranty in Section 4.02 regardless of
whether such inaccuracy or misrepresentation or breach arises out of fraud or
willful misconduct.
9.03 CLAIMS FOR INDEMNIFICATION.
(a) Buyer or Shareholders, as the case may be, shall notify
the other of any claim, investigation or inquiry regarding any potential
liability that may be subject to indemnification under this Article IX as
soon as practicable after learning of same, and shall afford the other access
to any records or locations as may be reasonably required to evaluate and, if
necessary, respond to or defend any claim, inquiry or investigation. The
failure of Buyer or Shareholders, as the case may be, to provide the
notification required by the preceding sentence shall constitute a waiver of
such party's right to indemnification with respect to the claim,
investigation or inquiry in question if such failure (i) continues for at
least 180 days after such party's first knowledge of such claim,
investigation or
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inquiry or (ii) such failure materially adversely affects the right of the
other party to assert any reasonable defense against such claim,
investigation or inquiry.
(b) If any Indemnitee shall believe that such Indemnitee is
entitled to indemnification pursuant to this Article IX in respect of any
Damages, such Indemnitee shall give the appropriate Indemnifying Party prompt
written notice thereof (to the extent that the Indemnitee has not already
done so pursuant to Section 9.03(a)). Any such notice shall set forth in
reasonable detail and to the extent then known the basis for such claim for
indemnification. Each such claim for indemnity shall expressly state that
the Indemnifying Party shall have only the 30-day period referred to in the
next sentence to dispute or deny such claim. The Indemnifying Party shall
have 30 days following its receipt of such notice either (i) to acquiesce in
such claim by giving such Indemnitee written notice of such acquiescence or
(ii) to object to the claim by giving such Indemnitee written notice of the
objection. If the Indemnifying Party does not object thereto within such
30-day period, such Indemnitee shall be entitled to be indemnified for all
Damages reasonably and proximately incurred by such Indemnitee in respect of
such claim. If the Indemnifying Party objects to such claim in a timely
manner, and such Indemnitee and the Indemnifying Party are unable to resolve
their dispute within 30 days following such objection (or such additional
period of time as may be mutually agreed to by such Persons), the claim shall
be submitted immediately to arbitration pursuant to Section 11.11.
9.04 DEFENSE OF CLAIMS.
(a) In connection with any claim which may give rise to
indemnity under this Article IX resulting from or arising out of any claim or
Proceeding against an Indemnitee by a Person that is not a party hereto, the
Indemnifying Party may, subject to Section 9.04(b), assume the defense of any
such claim or Proceeding (unless such Indemnitee elects not to seek indemnity
hereunder for such claim), upon written notice to the relevant Indemnitee, if
all Indemnifying Parties with respect to such claim or Proceeding jointly
acknowledge to the Indemnitee its right to indemnity pursuant hereto in
respect of the entirety of such claim (as such claim may have been modified
through written agreement of the parties or arbitration hereunder) and
provides assurances, reasonably satisfactory to such Indemnitee, that the
Indemnifying Parties will be financially able to satisfy such claim in full
if such claim or Proceeding is decided adversely. Prior to the assumption by
an Indemnifying Party of the defense of any claim or Proceeding, the
Indemnitee may make such appearances and filings with respect thereto as the
Indemnitee reasonably determines to be necessary or appropriate. If the
Indemnifying Parties assume the defense of any such claim or Proceeding, the
Indemnifying Parties shall select counsel reasonably acceptable to such
Indemnitee to conduct the defense of such claim or Proceeding, shall take all
steps necessary in the defense or settlement thereof and shall at all times
diligently and promptly pursue the resolution thereof. If the Indemnifying
Parties shall have assumed the defense of any claim or Proceeding in
accordance with this Section 9.04, the Indemnifying Parties shall be
authorized to consent to a settlement of, or the entry of any judgment
arising from, any such claim or Proceeding, without the prior written consent
of such Indemnitee; PROVIDED, HOWEVER, that the Indemnifying Parties shall
pay or cause to be paid all amounts arising out of such settlement or
judgment concurrently with the effectiveness thereof; PROVIDED, FURTHER, that
the Indemnifying Parties shall not be authorized to encumber any of the
assets of any Indemnitee or to agree to any restriction that would apply to
any Indemnitee or to its conduct of business; and PROVIDED, FURTHER, that a
condition to any such settlement shall be a complete release of such
Indemnitee and its Affiliates, officers, employees, consultants and agents
with respect to such claim. Subject to Section 9.04(b), such Indemnitee
shall be entitled to participate in (but not control) the defense of any such
action, with its own counsel and at its own expense. Each Indemnitee shall,
and shall cause each of its Affiliates, officers, employees, consultants and
agents to, cooperate fully with the Indemnifying Parties in the defense of
any claim or Proceeding
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being defended by the Indemnifying Parties pursuant to this Section 9.04. If
the Indemnifying Parties do not assume the defense of any claim or Proceeding
resulting therefrom in accordance with the terms of this Section 9.04(a),
such Indemnitee may defend against such claim or Proceeding.
(b) Notwithstanding Section 9.04(a), the Indemnifying Parties
may not assume the defense of any claim or Proceeding and the Indemnitee may
assume such defense if, in the reasonable opinion of the Indemnitee, (i) such
claim or Proceeding involves an issue or matter that, if determined adversely
to the Indemnitee, is likely to have a material adverse effect on the
business, operations, assets, properties or prospects of the Indemnitee, or
(ii) there is one or more legal defenses available to the Indemnitee that
conflict with those available to an Indemnifying Party. If the Indemnitee
assumes defense of any such claim or Proceeding, (A) the Indemnifying Parties
may participate in, but not control, the defense of such claim or Proceeding,
and (B) if the Indemnitee receives a settlement proposal from the Person
asserting such claim or instituting such Proceeding and is notified by an
Indemnifying Party that such Indemnifying Party wants to accept such
settlement proposal, the liability of the Indemnifying Parties with respect
to such claim or Proceeding shall equal the lesser of (x) the amount offered
in such settlement proposal, (y) the amount of actual Damages of the
Indemnitee with respect to such claim or Proceeding or (z) the maximum
liability of the Indemnifying Parties pursuant to Section 9.01(a).
(c) If the Indemnitee elects to defend any claim or
Proceeding pursuant to the last sentence of Section 9.04(a) or pursuant to
Section 9.04(b), the Indemnitee shall conduct such defense in such manner as
it shall deem appropriate, including settling such claim or Proceeding after
giving notice of the same to the Indemnifying Parties, on such terms as such
Indemnitee shall deem appropriate. If the Indemnifying Parties seek to
question the manner in which such Indemnitee defended such claim or
Proceeding or the amount of or nature of any such settlement, the
Indemnifying Parties shall have the burden to prove by a preponderance of the
evidence that such Indemnitee did not defend such claim or Proceeding in a
reasonably prudent manner.
ARTICLE X
TERMINATION
10.01 GROUNDS FOR TERMINATION. This Agreement may be terminated
at any time prior to the Closing:
(a) by mutual written agreement of all of the parties hereto;
(b) by Buyer at any time following the expiration of 15 days
from the date that Buyer has given notice to Shareholders of any one or more
inaccuracies or misrepresentations in or breaches of the representations or
warranties made by Repco or Shareholders contained herein that, if not cured
prior to the Closing Date, would give Buyer grounds not to close under
Section 8.01 when taken into account with all other uncured inaccuracies or
misrepresentations in or breaches of such representations or warranties as to
which Buyer shall have given notice to Shareholders as provided in this
clause (b); PROVIDED, HOWEVER, that no termination under this clause (b)
shall take effect if such inaccuracies, misrepresentations or breaches shall
have been cured in all material respects within such 15-day period;
(c) by Buyer at any time following the expiration of 15 days
from the date that Buyer has given written notice to Shareholders of the
failure by Repco or Shareholders to perform and satisfy in any material
respect any of their respective material obligations under this Agreement
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required to be performed and satisfied by Repco or Shareholders on or prior
to the Closing Date, or the failure to perform and satisfy any other
obligations of Repco or Shareholders under this Agreement if the aggregate of
all such other failures shall be material; PROVIDED, HOWEVER, that no
termination under this clause (c) shall take effect if such breaches or
failures shall have been cured in all material respects within such 15-day
period;
(d) by Shareholders at any time following the expiration of
15 days from the date that Shareholders have given written notice to Buyer of
any one or more material inaccuracies or material misrepresentations in or
material breaches of the representations or warranties made by ATC or Buyer
herein which, if not cured prior to the Closing Date, have had or could be
reasonably expected to give Shareholders grounds not to close under Section
8.02 when taken into account with all other uncured inaccuracies or
misrepresentations in or breaches of such representations or warranties as to
which Shareholders shall have given notice to Buyer as provided in this
clause (d); PROVIDED, HOWEVER, that no termination under this clause (d)
shall take effect if such breaches shall have been cured in all material
respects within such 15-day period;
(e) by Shareholders at any time following the expiration of
15 days from the date that Shareholders have given written notice to Buyer of
Buyer's failure to perform and satisfy in any material respect any of its
material obligations under this Agreement required to be performed and
satisfied by Buyer on or prior to the Closing Date, or the failure to perform
and satisfy any other obligations of Buyer under this Agreement if the
aggregate of all such other failures shall be material; PROVIDED, HOWEVER,
that no termination under this clause (e) shall take effect if Buyer shall
have cured such breaches or failures in all material respects within such
15-day period;
(f) by any party hereto, if the Closing shall not have been
consummated by February 28, 1997 (the "Outside Date"); PROVIDED, HOWEVER,
that no party may terminate this Agreement pursuant to this clause (f) if the
Closing shall not have been consummated within such time period by reason of
such party or any of its Affiliates having made a misrepresentation in this
Agreement or any document delivered pursuant hereto or having failed to
perform any covenants or agreements contained in this Agreement; and
(g) by any party hereto if any Federal, state or foreign law
or regulation thereunder shall hereafter be enacted or become applicable that
makes the transactions contemplated hereby or the consummation of the Closing
illegal or otherwise prohibited, or if any judgment, injunction, order or
decree enjoining either party hereto from consummating the transactions
contemplated hereby is entered, and such judgment, injunction, order or
decree shall become final and nonappealable.
The party desiring to terminate this Agreement pursuant to clauses
(b) through (g) shall give written notice of such termination to the other
party.
10.02 EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by Section 10.01, such termination shall be without liability of
any party to any other party to this Agreement; PROVIDED, HOWEVER, that if
such termination shall result from the breach by any party of its
representations, warranties or covenants contained in this Agreement, such
party shall be fully liable for any and all Damages incurred or suffered by
the other parties as a result of such failure or breach notwithstanding such
termination. The provisions of Sections 5.05, 6.01, 10.02, 11.03, 11.05
11.07, 11.08, 11.09, 11.10, 11.11 and 11.12 shall survive any termination of
this Agreement pursuant to Article X.
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10.03 PAYMENT OF DEPOSIT. If this Agreement is terminated pursuant
to Section 10.01, the parties shall cause the Deposit Holder to immediately
pay all amounts deposited with it on or before the date hereof by Buyer
pursuant to Section 2.02(c) to (i) Buyer if this Agreement is terminated by
Buyer pursuant to Section 10.01(b) or (c) or (ii) Seller if this Agreement is
terminated for any other reason.
ARTICLE XI
MISCELLANEOUS
11.01 NOTICES. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) if
personally delivered, when so delivered, (ii) if mailed, two Business Days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid and addressed to the intended recipient as set
forth below, (iii) if given by telex or telecopier, once such notice or other
communication is transmitted to the telex or telecopier number specified
below and the appropriate answer back or telephonic confirmation is received,
PROVIDED that such notice or other communication is promptly thereafter
mailed in accordance with the provisions of clause (ii) above or (iv) if sent
through an overnight delivery service in circumstances to which such service
guarantees next day delivery, the day following being so sent:
If to any Shareholder:
The address set forth on EXHIBIT A
with a copy to:
Richard W. Clowe
5700 Harper Drive, N.E.
Suite 300
Albuquerque, NM 87109
Telecopier No.: (505) 823-1557
and
DINES, WILSON & GROSS, P.C.
6301 Indian School Road, N.E.
Suite 900
Albuquerque, NM 87110
Attn: Allen R. Wilson, Esq.
Telephone No.: (505) 889-4049
If to Repco:
REPLACEMENT & EXCHANGE PARTS CO., INC.
2425 Irving Boulevard
Dallas, Texas 75207
Attn: Chief Executive Officer
Telecopier No.: (214) 920-7020
34
<PAGE>
If to ATC or Buyer:
REPCO ACQUISITION CORP.
c/o Aurora Capital Partners L.P.
10th Floor
1800 Century Park East
Los Angeles, California 90067
Attn: Mark C. Hardy
Telecopier No: (310) 277-5591
with a copy to:
Gibson, Dunn & Crutcher
333 South Grand Avenue, Suite 5018
Los Angeles, California 90071
Attn: Bruce D. Meyer, Esq.
Telecopier No: (213) 229-7520
Any party may give any notice, request, demand, claim or other communication
hereunder using any other means (including ordinary mail or electronic mail),
but no such notice, request, demand, claim or other communication shall be
deemed to have been duly given unless and until it actually is received by
the individual for whom it is intended. Any party may change the address to
which notices, requests, demands, claims and other communications hereunder
are to be delivered by giving the other parties notice in the manner herein
set forth.
11.02 AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived
if, and only if, such amendment or waiver is in writing and signed, in the
case of an amendment, by all parties hereto, or in the case of a waiver, by
the party against whom the waiver is to be effective.
(b) No waiver by a party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent occurrence. No failure or delay
by a party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
11.03 EXPENSES. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the
party incurring such cost or expense. Without limiting the generality of the
foregoing, the Shareholders shall pay all legal, accounting and other fees
and expenses incurred by the Shareholders and/or Repco prior to the Closing
Date in connection with the negotiation, execution, delivery and performance
of this Agreement.
11.04 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. No party hereto may
35
<PAGE>
assign either this Agreement or any of its rights, interests or obligations
hereunder without the prior written approval of each other party, which
approval shall not be unreasonably withheld.
11.05 GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the internal laws (without reference to
choice or conflict of laws) of the State of Delaware.
11.06 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have
received a counterpart hereof signed by the other parties hereto.
11.07 ENTIRE AGREEMENT. This Agreement (including the Schedules
and Exhibits referred to herein which are hereby incorporated by reference)
constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter of this Agreement. Neither this Agreement nor any provision
hereof is intended to confer upon any Person other than the parties hereto
any rights or remedies hereunder.
11.08 CAPTIONS. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof. All references to an Article or Section include all subparts thereof.
11.09 SEVERABILITY. If any provision of this Agreement, or the
application thereof to any Person, place or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other Persons,
places and circumstances shall remain in full force and effect only if, after
excluding the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated hereby in
substantially the same manner as originally set forth at the later of the
date this Agreement was executed or last amended.
11.10 CONSTRUCTION.
(a) The language used in this Agreement will 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 either party. Any
reference to any Applicable Law shall be deemed also to refer to all rules
and regulations promulgated thereunder, unless the context requires
otherwise. Whenever required by the context, any gender shall include any
other gender, the singular shall include the plural and the plural shall
include the singular. The words "herein," "hereof," "hereunder," and words
of similar import refer to the Agreement as a whole and not to a particular
section. Whenever the word "including" is used in this Agreement, it shall
be deemed to mean "including, without limitation," "including, but not
limited to" or other words of similar import such that the items following
the word "including" shall be deemed to be a list by way of illustration only
and shall not be deemed to be an exhaustive list of applicable items in the
context thereof.
(b) The parties hereto intend that each representation,
warranty, and covenant contained herein shall have independent significance.
If any party has breached any representation, warranty or covenant contained
herein in any respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter (regardless of the
relative levels
36
<PAGE>
of specificity) that the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
11.11 ARBITRATION OF CLAIMS.
(a) Except as otherwise specifically provided elsewhere in
this Agreement, any dispute or difference between or among the parties
arising out of this Agreement or the transactions contemplated hereby,
including, without limitation, any dispute between any Indemnitee and any
Indemnifying Party under Article IX which the parties are unable to resolve
themselves, shall be submitted to and resolved by arbitration pursuant to and
in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in effect on the date of the initial request that
gave rise to the dispute to be arbitrated (the "AAA Rules").
(b) Such arbitration shall be conducted by a panel of three
arbitrators, which shall be selected from a list of arbitrators pursuant to
and in accordance with the AAA Rules. Such arbitration proceeding shall be
conducted in Dallas, Texas. The arbitrators shall not have the authority to
modify any term or provision of this Agreement. The arbitration proceeding
shall include an opportunity for the parties to conduct discovery in advance
of the proceeding, which discovery may be limited by rules established by the
arbitrators. Notwithstanding the foregoing, the parties agree that they will
attempt, and they intend that they and the arbitrators should use their best
efforts in that attempt, to conclude such arbitration proceeding and have a
final decision from the arbitrators within 90 days from the date of selection
of the arbitrators; PROVIDED, HOWEVER, that the arbitrators shall be entitled
to extend such 90-day period one or more times to the extent necessary for
such arbitrators to place a dollar value on any claim that may be
unliquidated. The arbitrators shall promptly deliver a written decision with
respect to the dispute to each of the parties, which shall promptly act in
accordance therewith. Each party agrees that any decision of the arbitrators
shall be final, conclusive and binding, absent fraud or manifest error, and
that they will not contest any action by any other party hereto in accordance
with a decision of the arbitrators, except on a basis of fraud or manifest
error. It is specifically understood and agreed that any party may enforce
any award rendered pursuant to the arbitration provisions of this Section
11.11 by bringing suit in any court of competent jurisdiction.
(c) All fees, costs and expenses (including attorneys' fees
and expenses) incurred by the party that prevails in any such arbitration
commenced pursuant to this Section 11.11 or any judicial action or proceeding
seeking to enforce the agreement to arbitrate disputes as set forth in this
Section 11.11 or seeking to enforce any order or award of any arbitration
commenced pursuant to this Section 11.11 may be assessed against the party or
parties that do not prevail in such arbitration in such manner as the
arbitrators or the court in such judicial action, as the case may be, may
determine to be appropriate under the circumstances. All costs and expenses
attributable to the arbitrators shall be allocated among the parties to the
arbitration in such manner as the arbitrators shall determine to be
appropriate under the circumstances.
11.12 CUMULATIVE REMEDIES. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
11.13 THIRD PARTY BENEFICIARIES. No provision of this Agreement
shall create any third party beneficiary rights in any Person, including any
employee of Buyer or employee or former employee of Repco or any Affiliate
thereof (including any beneficiary or dependent thereof).
37
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
SHAREHOLDERS:
---------------------------------------
S. Jay Wilemon
---------------------------------------
Ricki J. Wilemon
---------------------------------------
Bradley J. Wilemon
---------------------------------------
Corby L. Wilemon
REPCO:
REPLACEMENT & EXCHANGE PARTS CO., INC.
By: -----------------------------------
S. Jay Wilemon, President
ATC:
AFTERMARKET TECHNOLOGY CORP.
By: -----------------------------------
Mark C. Hardy, Vice President
BUYER:
REPCO ACQUISITION CORP.
By: -----------------------------------
Mark C. Hardy, Vice President
38
<PAGE>
COMPUTATION OF PRO FORMA NET INCOME PER SHARE
Year Ended December 31,
--------------------------
1995 1996
------------ ------------
Net Income $9,498,569 $16,298,660
------------ ------------
------------ ------------
Weighted average common shares outstanding 12,000,000 12,203,021
Net effect of stock options granted during
the twelve months prior to the
Company's filing of its initial
public offering, calculated using the
treasury stock method at an offering
price of $13.50 per share, and
treaded as outstanding for all
periods presented 523,772 523,772
Net effect of stock options and warrants
outstanding, excluding those
discussed above, calculated using the
treasury stock method at the average
price for the period 317,791 1,242,824
Number of shares of common stock assumed
to be issued in the Company's initial
public offering whose net proceeds
would be used to redeem the
outstanding preferred stock including
accrued dividends 1,774,597 1,948,767
------------ ------------
14,616,160 15,918,384
------------ ------------
------------ ------------
Pro forma net income per share $ 0.65 $ 1.02
------------ ------------
------------ ------------
<PAGE>
LIST OF SUBSIDIARIES
(DATED AS OF JANUARY 31, 1997)
SUBSIDIARIES OF AFTERMARKET TECHNOLOGY CORP.:
ATC Components, Inc.
Aaron's Automotive Products, Inc.
CRS Holdings Corp.
Diverco Acquisition Corp.
H.T.P., Inc.
King-O-Matic Industries Limited
Mamco Converters, Inc.
Mascot Truck Parts Inc.
Repco Acquisition Corp.
RPM Merit, Inc.
Tranzparts Acquisition Corp.
10468 Newfoundland Inc.
10469 Newfoundland Inc.
SUBSIDIARIES OF AFTERMARKET TECHNOLOGY HOLDINGS CORP.:
Aftermarket Technology Corp.
SUBSIDIARIES OF CRS HOLDINGS CORP.:
Component Remanufacturing Specialists, Inc.
SUBSIDIARIES OF DIVERCO ACQUISITION CORP.:
Diverco, Inc.
SUBSIDIARIES OF MASCOT TRUCK PARTS INC.:
Aldo's Driveline Inc. (50% owned by Mascot)
SUBSIDIARES OF REPCO ACQUISITION CORP.:
Replacement and Exchange Parts Co., Inc.
SUBSIDIARES OF RPM MERIT, INC.:
Partes Remanufacturadas De Mexico, S.A. De C.V.
SUBSIDIARES OF TRANZPARTS ACQUISITION CORP.:
Tranzparts, Inc.
<PAGE>
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-18495) pertaining to the Aftermarket Technology Corp. 1996 Stock
Incentive Plan of our report dated February 14, 1997, with respect to the
consolidated financial statements and schedule of Aftermarket Technology Corp.
included in the Annual Report (Form 10-K) for the year ended December 31, 1996.
/s/ ERNST & YOUNG LLP
Seattle, Washington
March 14, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 46,498,249
<SECURITIES> 0
<RECEIVABLES> 40,106,014
<ALLOWANCES> 1,326,476
<INVENTORY> 60,586,056
<CURRENT-ASSETS> 151,052,040
<PP&E> 21,056,671
<DEPRECIATION> 3,574,276
<TOTAL-ASSETS> 320,746,624
<CURRENT-LIABILITIES> 47,680,912
<BONDS> 161,981,356
0
0
<COMMON> 81,549,668
<OTHER-SE> 24,282,688
<TOTAL-LIABILITY-AND-EQUITY> 320,746,624
<SALES> 272,878,458
<TOTAL-REVENUES> 274,059,931
<CGS> 166,810,941
<TOTAL-COSTS> 225,390,995
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 667,857
<INTEREST-EXPENSE> 20,287,419
<INCOME-PRETAX> 27,713,660
<INCOME-TAX> 11,415,000
<INCOME-CONTINUING> 16,298,660
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,298,660
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 0
</TABLE>
